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    Published on: February 3, 2010

    Crain’s Chicago Business reports that Craig Herkert, the new Supervalu CEO, “sees more growth potential in the Save-A-Lot discount chain than in the grocery giant's local flagship, Jewel-Osco,” and plans to “ bulk up Supervalu's presence in the increasingly crowded Chicago-area grocery business” by building Save-A-Lots - not Jewel stores.

    “With prices 20% to 40% lower than traditional grocers',” Crain’s writes, “Save-A-Lot would take on growing discount-style competition from Aldi and Wal-Mart, which are expanding in and around Chicago.

    “The strategy is a major shift for Eden Prairie, Minn.-based Supervalu, which in the past few years has remodeled Jewel stores to highlight quality and selection. Now, Mr. Herkert wants to rein in costs by reducing the selection of items at Jewel by as much as 20%. And by expanding Save-A-Lot rather than the longtime local market leader, Mr. Herkert, 50, is betting on a nameplate that's relatively unknown in Chicago.”
    KC's View:
    It is a retailing truism that it is less expensive to retain a customer than to attract a new one.

    So the question that occurs to me is whether it is more expensive to re-train Jewel customers to be Save-A-Lot shoppers, or to reorient Jewel’s focus to be more price competitive and with less selection.

    I don’t know the answer to this. It may be that the changes that would have to be made at Jewel in order to fulfill Herkert’s vision would be so dramatic that people wouldn’t think of it as Jewel anymore...and so Supervalu might as well focus on a different banner. But it also makes me wonder whether Jewel’s connection to its shoppers is so tenuous that in the end, it really doesn’t matter.

    Think about it. For a while, Jewel was broadening its selection to appeal to more shoppers. Then, it edited its selection to appeal to more value-oriented shoppers. Then, it started talking a lot about lowering prices, but got smacked around in the local media (and by some of its suppliers) for doing more talking than actual lowering. At the same time, the company brings in a Walmart veteran to run the company, and he has to blame Supervalu’s current travails on moves made by the previous administration in much the same way that the Obama White House blames the Bushies. And of course Herkert is focused on low prices because we are, after all, in a recession...but on the other hand, if all you have is a hammer, isn’t every problem going to look like a nail?

    So this is where Supervalu finds itself. When you think about it, the company has every possible arrow in its quiver....stores like Save-A-Lot for value shoppers, Bristol Farms for the high end, and lots of formats for the middle. And yet the quiver doesn’t seem nearly full enough at the moment...and it is hard to tell whether the company is acting tactically or strategically.

    Published on: February 3, 2010

    The Hartford Courant reports that Ahold-owned Stop & Shop is “playing hardball” with some 15,000 Connecticut employees working under a contract that expires in about two weeks. But the United Food and Commercial Workers (UFCW) union argues that Stop & Shop is taking advantage of the recession to get roll-backs in current pay scales and benefits.

    According to the story, “The chain has been advertising for temporary replacements at $12 an hour for part-time workers and $15 an hour for full-time workers.

    “The company, which has about 90 stores in the state, ran similar ads three years ago but waited until after the contract had expired. The workers were not used, as there was no strike.”

    "As our negotiations continue, we are mindful of our commitment to our customers," Stop & Shop spokeswoman Faith Weiner tells the Courant. "We are making contingency plans. These plans include placing ads in local newspapers for temporary workers in order to continue business operations in the event there is a work stoppage."
    KC's View:

    Published on: February 3, 2010

    It is likely that not everybody found it funny, but the annual National Grocers Association (NGA) convention found itself being mentioned on “The Daily Show with Jon Stewart” on Monday night.

    (Sorry I didn’t have this yesterday, but to be honest I fell asleep and missed it...though I got a bunch of emails from MNB users who clearly found it to be hysterical.)

    The bit was about what former President George Bush is doing now that he has left office, and Stewart mentioned that he was speaking to the NGA show...and then joked about “Best Bagger Contests” and “Asparagus Luncheons.”

    To see the whole bit,
    click here.

    (The routine is about nine minutes into the show. Watch for it. It’s a stitch.)
    KC's View:

    Published on: February 3, 2010

    The Washington Post reports that food industry companies will be helping to foot the bill in the Obama Administration’s proposed 2011 budget, with much of the money going to fund food safety initiatives.

    According to the story, “The Food and Drug Administration would see a 6 percent jump in its budget to $2.51 billion. The agency's total resources would reach about $4 billion because of user fees it expects to collect from food, tobacco and drug industries. The agency would hire 1,251 additional full-time employees, bringing the workforce total to 13,586.

    “A large chunk of the additional funds would be spent on food safety, which has been flagged by Obama as a domestic priority. The FDA is reorganizing the way it monitors the production of food, with plans to step up inspections of domestic and foreign food suppliers, expand its laboratory capacity, and improve its ability to trace the source of an outbreak of food illness, among other things.”

    However, the Post notes that counting on the user fees could be problematic, since the US Congress has not yet approved their imposition.
    KC's View:
    Nobody wants higher fees - especially at a time when the economy continues to be fragile - but it is hard to argue with the idea that the country needs to spend more money on food safety initiatives. The system has not been working, it has to be fixed, and someone has to pay for it.

    Published on: February 3, 2010

    You may find friendly aisles at Safeway, but no longer will shoppers find friendly skies there.

    The San Francisco Business Times reports that Safeway is cutting its ties with United Airlines’ Mileage Plus rewards program, saying that it prefers to focus more on cutting prices for customers. “We have decided to refocus the value previously offered through our airline partnership into lower prices on the items all customers need,” said Safeway president Karl Schroeder in a letter to program participants.

    According to a story, “Safeway for years has offered its Club Card holders signing up for the United Mileage Rewards program 125 miles for every $250 spent on qualifying groceries. The Pleasanton company recently had shoppers renew their participation in the program, perhaps as a means of cutting the cost of the program before deciding to eliminate the program altogether on Feb. 28.”
    KC's View:

    Published on: February 3, 2010

    Bloomberg Business Week reports that Walmart is following Target’s lead and imposing a strict limit on the number of DVDs that customers can buy at one time; the new policy puts a five-DVD cap on new releases.

    The reason? According to the story, DVD kiosk operators such as Redbox andNCR get about 40 percent of their new DVDs from retailers such as Walmart, in part because the prices are so low and in part because they have been unable to reach an agreement with some movie studios that would allow them to directly buy new releases. And so they’ve been bypassing the studios and shopping retail, since they do enough volume with new releases to justify the price that they pay.

    Target reportedly put a limit on new release DVD sales last December.
    KC's View:
    This reminds me of what a friend of mine once told me about his kids’ camp supply business. He was having a hard time getting the bath towels he needed in a timely fashion and at an appropriate price from manufacturers...and discovered that he could actually do better by shopping at Walmart for towels and sheets that he’d resell with a markup.

    In fact, it got to the point where he developed a relationship with the manager of his local Walmart, with whom he would essentially place orders for what he needed...and then, when the sheets and towels came in, he’d literally back his truck up to the store’s back door, where Walmart employees would load them into his truck. The store got the sales, the manager got the credit, and the boxes that came in the back door from the manufacturer never even got unpacked.

    Just goes to show you what kind of buying power - and selling power - Walmart has.

    Published on: February 3, 2010

    The Wall Street Journal reports that food bank network Feeding America is out with a study saying that “37 million Americans—or one in eight people—turned to food pantries and soup kitchens during the 2009 recession, forcing some sites to cut meal portions and turn away people.” The study also says that “46% more people visited a hunger-relief charity at least once in 2009 than did in 2005.”
    KC's View:

    Published on: February 3, 2010

    USA Today reports that Cadbury shareholders have voted overwhelmingly to accept Kraft Foods’ $19.5 billion bid for the company, a move that closes the deal and combines the two in a colossus with $50 billion in annual sales and with operations in 160 countries.

    Now, the paper writes, the focus shifts “to how Kraft will combine the American and British companies and prove it was worth the often-bitter fight.”

    Kraft has said that it anticipates $675 million in savings from the acquisition, though some experts believe that there could be a major culture clash between the two companies that could lead to layoffs at Cadbury. However, Kraft CEO Irene Rosenfeld has said that she is “interested in this company for its brands and its people.”
    KC's View:
    I’m glad that this story has moved onto the next stage. Because writing about the back-and-forth battle during the acquisition process was sort of boring. The integration process should be a lot more interesting.

    Published on: February 3, 2010

    • Winn-Dixie has announced the completion of its first new store in six years, a “55,000-square-foot, state-of-the-art supermarket, located at 70431 Highway 21 north of New Orleans (that) features a 24-foot tall open entranceway highlighted by an outdoor farmer’s market featuring fresh produce from local growers ... The store showcases Winn-Dixie’s latest design concepts, including 21,000 square feet of polished wood flooring, 34,000 square feet of stained concrete flooring, and an exposed beam ceiling. At the entrance, a sleek, modern glass-front exterior overarches a covered walkway.” In addition, the store “is the first grocery store in Louisiana to receive the Environmental Protection Agency’s (EPA) GreenChill certification.”

    • In the UK, This Is Money reports that William Morrison Supermarkets is suing the former chairman of Safeway there, which it acquired in 2004.

    The suit, which also includes other former Safeway senior executives, is riding on the back of a recent fine for the equivalent of $17 million (US) against Morrison’s for illegally colluding to set dairy prices. The suit charges that David Webster, the former chairman, and other execs entered into the illegal agreement while still in charge of the company, and seeks to recoup the fine amount.
    KC's View:

    Published on: February 3, 2010

    ...will return.
    KC's View: