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    Published on: December 21, 2009

    A couple of stories offer a kind of post mortem on last week’s news that Ahold was buying most of the Ukrop’s Super Markets business for $140 million, ending months of speculation about when and to what company the longtime independent icon would finally be sold.

    • The Richmond Times Dispatch has an interview with Rick Herring, president of Ahold’s Giant Carlisle division, who is responsible for the integration of Ukrop’s into the global retailer’s system.

    "Ukrop's is a great company and an institution in Richmond, and we recognize that," Herring tells the paper. "I have great respect for Ukrop's and the Ukrop family. Believe me, I can't be Bobby Ukrop, but I am hoping that we have a connectivity with our customers and our associates here like he does."

    Changes in store for the company, according to the story: “The name on those stores eventually will change -- possibly to the company's Martin's Food Markets banner, though Herring would not say for sure. The division operates 26 stores under the Martin's Food Markets name, including nine in Virginia. The former Ukrop's stores likely will be open Sundays and eventually sell beer and wine,” though Herring says that specifics and timing are still up in the air.

    • The Times Dispatch also had another story examining the facts of the sale, with some notable information:

    1. It was about a year ago that the Ukrop family decided that their business model was not sustainable, because of both competition and economic realities.

    2. In addition, the third generation of family members was largely uninterested in running the business on an ongoing basis (though some were involved in the business).

    3. About a half-dozen companies were approached by Ukrop’s about a possible sale. The sale to Ahold was agreed to because the company said that it would do the most to prevent layoffs and take care of existing employees.

    4. “Not included in the sale is Joe's Market on Libbie Avenue in Richmond's West End and the Ukrop's store in Fredericksburg,” the paper writes. “The (Ukrop) brothers hope to find buyers for the two stores. Some employees have shown some interest in buying the Joe's Market location, they said ... One way to get out of the retail side of the business and still satisfy family members' interests was to create a separate operation under Bobby Ukrop’s leadership that would continue to make and sell the chain's signature lines of baked goods and prepared foods. Those products will be sold to Giant-Carlisle's stores here.”

    And here’s the fascinating coda:

    “The family is selling the grocery chain for about $140 million.

    “But the entire sum is not going to the family, the brothers said. They declined to say how much.

    “Much of the sale proceeds, they said, will go toward paying off liabilities, including debt, taxes, workers' compensation claims, obligations to employees and professional fees.

    “And the brothers want to give some of the money to employees, though they are still working out details to figure out a method that is fair, especially for the chain's career employees.

    "’There's not that much left after that,’ Jim said.”
    KC's View:
    I guess the question that has to be asked - though I do not have the answer - is whether this path was inevitable, or avoidable.

    What, if anything, could Ukrop’s have done do avoid a decline that got the company to the point where its business model was not sustainable? Or in today’s marketplace, is it simply impossible for a company such as Ukrop’s to survive?

    And the corollary is this. If Ukrop’s had taken steps to create a more sustainable business model, would the company - at its cultural core - still have been Ukrop’s?

    It is true that Ukrop’s for many years was an iconic, legendary retailer. But it also is true that you have to earn those titles every day...and that sometimes, that requires not just the nurturing of an image, but the reinvention of a brand.

    Published on: December 21, 2009

    Nice column in the San Diego Union Tribune by Dean Calbreath in which he writes about recently deceased retail pioneer Sol Price, who “kept his prices at rock bottom by such practices as slashing advertising to near zero, eschewing credit cards and limiting executive salaries. He reasoned that even if he lost some customers through some of those steps, he’d attract even more by offering low prices.

    “One thing that Price did not skimp on, however, was his workers.

    “Price Club’s written policy was that workers would be paid at ‘close to the highest prevailing wages in the community.’ Unlike many of his retail competitors, Price maintained good relations with union members - and made sure that nonunion workers got the same benefits as union workers did.”

    Price also took a unique approach to executive salaries, Calbreath writes: “In an age when some of his peers were making 40 or 50 times the median salary of their workers, Price kept his salary at around a 10-1 ratio. (Today, the ratio at America’s top firms is more like 500-1.)”

    “The thing that was remarkable about Sol was not just that he knew what was right,” Costco CEO Jim Sinegal tells Calbreath. “Most people know the right thing to do. But he was able to be creative and had the courage to do what was right in the face of a lot of opposition. It’s not easy to stick to your guns when you have a lot of investors saying that you’re not charging customers enough and you’re paying employees too much.”

    “We think the stockholder comes last,” Price told Wall Street analysts in 1985. “But if you do the other three jobs well, (the stockholder) will be taken care of.”
    KC's View:
    If more executives and boards of directors took such an approach, we might not be in the financial straits that we are in. Instead, too many people are just looking out for themselves and their own bank accounts.

    Published on: December 21, 2009

    Good interview with Whole Foods CEO John Mackey in the Austin American-Statesman. Excerpts:

    The past year... “It was the worst economic environment that I've experienced in my lifetime, at least since I became an adult. Perhaps that downturn in the early '70s was pretty bad, but I was in college then, so it didn't really register with me.

    “We had negative same-store sales for the year. That was the first negative same store sales in our 31-year history. We had been used to having high-single-digit, low-double-digit (same-store sales), really since the company was founded.

    In a lot of ways, our business model has been built upon continuous growth. We sort of adapted everything around that strategy, so it was a major shift.

    “If you're growing very rapidly, it doesn't matter if you make mistakes, in a way, because the growth kind of bails you out. And so having that hot water faucet turned off, we have to learn to live and take cold showers, you might say. I'm really proud of our company, because we were able to make a fairly rapid adaptation to that environment, and even though we had almost no sales growth for the company, we still managed to increase our EBIDTA (earnings before interest, taxes, depreciation and amortization, a key measure of financial performance). I think we were up 16 percent, 16.3 percent for the year, despite the weak sales growth. And we slowed our growth down: We were going to open 25 to 30 stores, and we opened 15 stores.

    “So I'm really proud of how well our company responded because it's not that easy to shift 31 years of continuous growth and all of a sudden have to be watching every penny and managing our expenses and our capital so carefully.”

    On competition... “We have more competition today than we've ever had before. And a lot of that competition takes the form of competing on the basis of price. So in some ways, we're responding to the competitive reality that we face.

    “For most of our history, we didn't have any competitors that were selling the same foods we were selling. Now we do ... we went from flying under the radar to everything we do seems to be broadcast in a larger-than-life sense.”

    The future... “Right now, the thing I'm most excited about is there is so much scientific evidence right now that's linking a Whole Foods, plant-based, nutrient-dense, low-fat diet as a way to prevent most of the diseases that are killing us in America: obesity, heart disease, diabetes, cancer, autoimmune diseases. Things that I sort of knew intuitively when we started the company.

    “I felt like if you ate natural and whole foods, that was a smart thing to do, you'd probably live longer. Now the science is really starting to back it up.

    “And yet even though the science is there, there are so many vested interests that are committed to the status quo, the way people eat. So what I'm most excited about is the educational efforts we're going to be putting in and the research that Whole Foods is going to be funding, to more widely publicize the science and to prove that you can lose weight, keep it off and the diseases that are killing people, you don't need to get those diseases.”
    KC's View:
    There are few things in life more persuasive than a true believer.

    Published on: December 21, 2009

    The Washington Post reports that Sam Kass, who serves as an assistant chef at the White House as well as “food initiative coordinator” for the Obama administration, is now part of a US Department of Agriculture video on YouTube that shows “Kass and Agriculture Department officials readying the South Lawn garden for winter. A group of what appear to be a dozen volunteers set up hoop houses -- a kind of temporary greenhouse -- in which staff members will grow cold-weather greens for the White House table. The group also planted a cover crop of rye, which will help protect and enrich the soil during the cold months.”

    According to the story, “Kass introduces the USDA video. In it, Deputy Secretary Kathleen Merrigan talks up a new agency program called ‘Know Your Farmer, Know Your Food,’ which helps support smaller farmers and local and regional food systems.”
    KC's View:
    Hoop houses on the White House lawn? I wonder what James Hoban would think...

    Published on: December 21, 2009

    • The New York Times over the weekend reported that “Wal-Mart officials are offering to rent space in the lobby of a new Chicago store to neighborhood businesses. Wal-Mart’s tenants already include a dog groomer at a store in north suburban Zion and an Uncle Remus fried chicken outlet in its only Chicago store, on the West Side.

    “The company is promising to expand that practice at a proposed South Side location, inviting aldermen and other leaders to recommend barbers, manicurists, banks, fast-food chains and other businesses that would give the store some local flavor.”

    The moves by Walmart are part of its broader effort to get divergent Chicago constituencies to agree to allow it to open more stores within the city limits.
    KC's View:

    Published on: December 21, 2009

    • The Financial Times reports on how Procter & Gamble is fighting the progress being made by private brands not just by increasing its marketing expenditures, but also by expanding into new markets (both geographic and ethnic) and developing value versions of traditional brands such as Tide and Pampers.

    • Nash-Finch Company said last week that it has acquired a 400,000 square foot warehouse in Columbus, Georgia, that it will use to distribute products to military commissaries and exchanges in Georgia and surrounding states.
    KC's View:

    Published on: December 21, 2009

    • Stater Bros. Markets reports that its annual sales for the just completed fiscal year were $3.77 billion, up 0.7 percent from the previous fiscal year. Net income was down 14 percent from last year, going from $40.6 million to $34.8 million.

    Q4 sales were $947.2 million, up from $940.2 million for the same period of 2008, with earnings of $5 million, down from $7.2 million in last year’s fourth quarter.

    Chairman Jack Brown said that financial results were impacted by an ongoing price war in Southern California, which forced additional discounts; he also noted that the company had managed, even in tough times, to grow its customer base from 1.25 million customer visits in 2008 to 1.29 million in 2009. “Survival is a victory too,” Brown said in an analysts conference call.
    KC's View:

    Published on: December 21, 2009

    Regarding the acquisition of Ukrop’s by Ahold, MNB user Glenn Cantor wrote:

    The $140 Million sale price seems undervalued.  You can bet that Ahold USA will strive to implement efficiencies into Ukrop’s go-to-market processes because it enables Ahold to better align the new acquisition with the rest of the company.  Otherwise, it is not a valuable, strategic acquisition.  Hopefully, they learn from their acquisition of Clemens Markets in Philadelphia.

    MNB user Dan Jones wrote:

    I have had the privilege of working with the Giant Carlisle team for a couple years.  I find the team to be capable, innovative, and very focused on the consumer.  Will there be some issues as the organizations come together?  Of course.  But I think this a great outcome for Ukrop’s – the philosophy of these two teams seems very aligned to me.

    MNB user Chris Dean wrote us from Australia:

    Having taken a group of Australian retailers on a tour of the USA’S preeminent retailers, Ukrop’s was on the top of our list to visit.

    It was not just the groceries but the way they viewed their community that made them special, the integration of products and ideas over time using customer feedback as the key. Also having Joe’s Market as a training ground for staff was unique.

    To be able to sit outside the norm and close on Sundays and not sell liquor meant they had to optimize their opening hours and capture their customers hearts.

    To the Ukrop family and their staff a big thank you for being a leader not a follower.

    We had a story on friday about how the UK Payments Council ruled that the use of written checks will be phased out there, with checks no longer being accepted in the UK as of November 1, 2018. The reason: so many people are using debit and credit cards, and shopping online, that checks have been deemed to be on the road to obsolescence.

    Opponents of the decision say that it is better for big banks and big retailers than for small banks and independent retailers, not to mention charities and schools; the elderly, who may not trust debit and cards, also are seen as being disadvantaged by the initiative. Furthermore, since banks in the UK have gone through a bailout similar to the one in the US, it is argued that they are taking an anti-consumer position at the precise moment when they should be grateful to the public sector for getting them through a difficult period.

    Backers of the move, however, say that it simply formalizes something that was happening anyway.

    In my commentary, I wrote:

    Hand in hand with this decision, banks also ought to be simplifying their rates and fees, making them more transparent and, quite frankly, lower. That way, the savings that are seen by going to a completely electronic system are actually seen by consumers, and not just in the dividends earned by shareholders and the bonuses awarded to fat cat senior executives.

    On the face of it, though, I have no problem with this change, especially because it is nine years out - it isn’t like people are being forced to adjust their habits overnight. And I wouldn’t worry so much about the elderly...because nine years from now, some of the people who would hate the change may not be around anymore, and the “elderly” demographic will made up of people who are more used to the use of cards rather than checks.

    There is a word for this kind of shift. It’s called “change.”

    Resistance is futile.

    One MNB user disagreed:

    It is definitely NOT a good thing for consumers. Checks give “us consumers” the hard paper evidence of a transaction. Without that the consumer really has nothing to show as evidence.

    As it stands now in this country, banks are doing all they can to NOT send customers their cancelled checks and instead, want us to rely on a printed statement. That’s works as long at there aren’t any problems with your account...but without the hard paper evidence, I for one am not sure I couldn’t easily overlook a problem.

    Another MNB user thought I was a little callous in my analysis:

    Normally you state opinions that are controversial or unpopular, in a way that is logical and respectful.  But “… nine years from now.. … will not be around...” sounds remarkably harsh and simply out of character.  Surely you know people in their 70’s, 80’s, 90’s and older and understand their abilities vary. Similarly, I know you understand many people are not wealthy enough to own a computer, do not have the ability to transact business on line. While not at the forefront, not all people have the education, energy, physical stamina or luxury to make changes like ceasing using checks that are simple for you (and me).

    As far as concerns about road blocks to giving, at my little Lutheran church here in MN, it is those who are 80 and above who give – almost exclusively check form, despite entreaties to consider electronic giving- a vastly disproportionate amount of the church’s donations.  I suspect charities may have similarly interesting statistics.

    Quick- revise your comments to have a bit more heart and empathy.  Remember how you were 18 only yesterday?  Too soon you and I will be 80, and we will appreciate society cutting us some slack.

    I certainly didn’t mean to be callous. But on the other hand, since I almost never write checks now, it is hard to imagine that I’ll be writing more of them in 10, 15 or 25 years.

    Certainly there have to be safety measures built into the system, and I think that there has to be compassion for people with long-held habits.

    On the other hand, we can’t let such habits impede progress like this that could make people and institutions both more efficient and effective.

    That’s what MNB user Ben Gochnauer thought:

    I agree with your view. Putting the date 9 years out seems like abundant time for adaptation. I think I've written one check personally in the past year. We pay the vast majority of our bills through online banking anymore and will likely carry those habits into our senior years.

    Will be interesting to see how this moves forward.

    Finally, on another subject, MNB user Ken Wagar hoisted me on my own petard:

    I, too, am sorry to see the Orient Express shutting down but in the words of a wise man:   There is a word for this kind of shift. It’s called “change.” “Resistance is futile.”


    But while accepting change as inevitable, it doesn’t mean that I cannot mourn.
    KC's View:

    Published on: December 21, 2009

    In Week 15 of National Football League action...

    Cleveland 41
    Kansas City 34

    Miami 24
    Tennessee 27

    Arizona 31
    Detroit 24

    Oakland 20
    Denver 19

    Chicago 7
    Baltimore 31

    Green Bay 36
    Pittsburgh 37

    Atlanta 10
    NY Jets 7

    New England 17
    Buffalo 10

    Houston 16
    St. Louis 13

    Cincinnati 24
    San Diego 27

    San Francisco 13
    Philadelphia 27

    Tampa Bay 24
    Seattle 7

    Minnesota 7
    Carolina 26
    KC's View: