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    Published on: February 16, 2010

    The news over the weekend ended months of speculation about Supervalu’s plans for various divisions now that its new CEO, Craig Herkert, has made clear that he believes the Save-A-Lot business model - stressing reduced SKUs and a strong value proposition - is the company’s retailing future.

    Supervalu announced late Friday that it would be selling all 18 of its Shaw’s stores in Connecticut, with five of them going to Ahold-owned Stop & Shop, and 11 of them to individual owners who are part of the voluntary cooperative that is Wakefern Food Corp. Two stores remain unsold, and the company reportedly will shutter them if it cannot find a buyer by the end of March.

    “While these decisions are always difficult, given the impact on associates and customers, they ultimately allow us to operate more efficiently and effectively within a highly competitive retail environment,” Pete Van Helden, Supervalu’s executive vice president of retail operations, said in a statement.

    Supervalu said it planned to keep operating its 176 remaining Shaw’s stores in in Maine, Massachusetts, New Hampshire, Rhode Island and Vermont.

    Wakefern said that 10 of the Shaw’s locations will be operated as ShopRite stores, the other one will be converted to a PriceRite unit. Currently, there are thirteen ShopRite stores and eight Price Rite stores in the state. “The Connecticut market has been very supportive of ShopRite and PriceRite over the years and the addition of these stores allows us to expand our presence in the market,” said Joseph Colalillo, Chairman/CEO of Wakefern.
    KC's View:
    There is a real sense among the people I talk to that this is just the first shoe dropping when it comes to Shaw’s, that it seems likely that if the right buyer can be found and the right price established, the rest of Shaw’s will be sold as well - its relentlessly middle-of-the-road approach to retailing just may not fit into Supervalu’s immediate strategic plans.

    Since Supervalu was willing to sell the stores piecemeal, it is interesting that Hannaford Bros. and Price Chopper didn’t get any of them; I don’t know if either company was interested, but if they had gotten involved it might have changed the competitive complexion in the state.

    Yesterday, I went to the Shaw’s Supermarket in Darien, Connecticut, not far from where I live and one of the stores being acquired by Stop & Shop. There were very different reactions to the deal from the employees and the customers with whom I chatted informally. The workers at checkout are thrilled - they’ve been through a number of owners (Shaw’s, Albertsons, Supervalu) and they’re just happy that their union has a working relationship with the new owner.

    Customers, on the other hand, seemed to have a different reaction. It so happens that Darien already has a Stop & Shop, at the other end of town, and it is one of the smallest and least impressive stores in the fleet. The Shaw’s is only marginally better - it is bigger, but the so-called “major” renovation that it underwent several years ago was, to say the least, underwhelming...and so the shoppers I spoke with seemed to be worried that the change to Stop & Shop would mean more mediocre food retailing. They are not impressed.

    In this market, however, positive change is coming - with a new Whole Foods opening less than a mile away, and a new Fairway being built in Stamford, one community west of here. (And, of course, there is Stew Leonard’s a few miles away...an excellent Grade A ShopRite up the road, and a strong local independent called Palmer’s with an excellent reputation.) So if Stop & Shop is going to be successful, it had better bring its “A-game,” because things are only going to get tougher...and it doesn’t seem to be starting from a position of strength when it comes to consumer perception.

    Published on: February 16, 2010

    The quarterly American Customer Satisfaction Index (ACSI) is out this morning, suggesting that whatever the state of the US economy, “customer satisfaction with the goods and services that Americans buy remains strong in the fourth quarter of 2009 ... The index is largely unchanged, dipping a mere 0.1 percent from the previous quarter to 75.9 on the ACSI’s 100-point scale, and remains much higher than it was prior to the recession and also slightly higher than this time one year ago.”

    Customer satisfaction with the retail sector, which includes department and discount stores, specialty retail stores, supermarkets, gas stations, and health and personal care stores, gains 1.3 percent to an ACSI score of 76.2.

    Here’s what the ACSIO report had to say about food retailing:

    “The supermarket category remained unchanged for a third straight year, seemingly unaffected by fluctuations in food prices, which fell 2.4% in 2009 - the first annual decline since 1961. By contrast, prices rose 5.7% in 2007 and another 6.6% in 2008, the highest single-year increases in thirty years. Six of the seven largest supermarket chains showed modest to strong improvement in customer satisfaction, with perennial industry leader Publix up 5% to 86, the highest company ACSI score ever recorded in this industry. Publix continues to parlay its success into expansion and innovation, including its Apron’s Simple Meals in-store cooking demonstrations and its GreenWise Markets with an emphasis on natural and organic items.

    “Two grocery chains known for discount pricing more than quality also improved. Supervalu and Wal-Mart’s grocery business were up 4% to 77 and 71, respectively. Perhaps this will change the stock performance of these companies for the better. Both have been underperformers over the past year. The increase in customer satisfaction for Supervalu suggests that it may have succeeded in integrating its 2006 acquisition of Albertson’s, a move that nearly doubled its number of stores. Wal-Mart, on the other hand, has focused on productivity improvement through layoffs and store closings, but has nevertheless been able to improve store quality and make employees happier with bonuses and profit-sharing. These efforts have helped Wal-Mart reduce the customer satisfaction gap to its nearest supermarket competitors, but its 4% ACSI jump is still not enough to lift the retailer out of last place in the industry.

    “A year ago, Safeway, the third largest grocery chain, boosted customer satisfaction on the strength of its new Lifestyle store. Now, this appears to have been a short term success or a novelty that has worn out. Safeway fell 4% to an ACSI score of 72. The conversion of existing stores to the Lifestyle format is now almost completed, but will it help? The effort has been expensive and, in view of the shaky economy, perhaps risky. As the stock market rebounded in 2009, Safeway’s stock was left behind and fell 9%.”

    In addition, “the ACSI score for e-commerce is up 1.8 percent to 81.4, nearly matching its all-time high. Internet retail improves 1.2 percent to 83. Netflix leads, rising 2 percent to 87. The online video rental company has seen sizable increases in its subscriber base, revenues and stock price over the past year. Amazon (unchanged) and Newegg (down 2%) are also strong performers with very high scores of 86. Customer satisfaction with eBay is up 1 percent to 79, but the auction site hasn’t improved much over the years and eBay remains at the bottom of the list.”
    KC's View:
    Studies like these are, by their very nature, snapshots in time - it is hard to know how they relate to long-term retailer performance, especially because we don’t know for sure what the economy is going to do.

    Take the comparison between Safeway and Supervalu, for example. If the economy rebounds...Safeway’s Lifestyle approach may end up looking like a much better play than Supervalu’s apparent decision to focus on the value-driven end of the business. But if the economy and consumer confidence remain fragile, then Supervalu’s play will look more prescient.

    I tend to favor Safeway’s approach ... but what do I know? That is probably more a reflection of my general optimism than anything else.

    Published on: February 16, 2010

    The New York Times reports that the US Department of Agriculture (USDA) has issued new rules that govern how much time cows at organic dairies must spend grazing in pastures, clarifying “an older requirement that said only that organically raised livestock had to have access to pasture. That left a loophole for some dairies that would put cows out to pasture only during periods when the animals were not giving milk or would feed their animals almost exclusively on grain or other feeds.

    “The new regulations, which go into effect in June, are much more specific. They say that animals must graze on pasture for the full length of the local grazing season. The season will be determined by local conditions and agriculture authorities, like organic certifiers or county conservation officials, not by the dairy alone. While the grazing season must last at least 120 days, in many areas it will be much longer. The rules also say that animals must get at least 30 percent of their food from pasture during the grazing season.”

    The Organic Trade Association (OTA) said that it welcomed the new rules.

    “It clearly defines access to pasture for organic ruminant livestock and sets a mechanism into place for strict regulation and enforcement. This will help enable producers and certifying agents to consistently implement National Organic Program regulations. As a result, consumers can be assured that the U.S. organic program for organic livestock remains the most stringent in the world,” said OTA’s Executive Director Christine Bushway, adding, “We are thrilled that USDA has issued this final rule and that it goes into effect in 120 days, which means it will be in place for this year’s grazing season. The organic community had been eagerly awaiting this important rule.”
    KC's View:

    Published on: February 16, 2010

    Dow Jones reports that Wal-Mart de Mexico “has completed the acquisition Monday of Wal-Mart Centroamerica from its parent company Wal-Mart Stores and regional investors.” The acquisition has been valued at $2.8 billion (US).

    • Live Nation Entertainment and Walmart have come to an agreement that will create ticket booth locations at some 500 Walmart stores in the US. The deal expands Live Nation’s presence; the company recently merged with Ticketmaster, and already sells tickets at Blockbuster units.
    KC's View:
    The Live Nation deal strikes me as a very smart one for Walmart. It gives a lot of people - including those who might never walk into a Walmart - reason to walk through its front doors.

    Published on: February 16, 2010

    The Chicago Sun Times reports that Roundy’s has confirmed that i will open a new supermarket in Chicago’s Lakeshore East condo and apartment complex. The 56,000 square foot store is scheduled to open in spring 2011 under a banner yet to be decided.

    The story notes that Roundy’s is behind schedule on its Chicago plans: “Three years ago, Roundy's CEO Robert Mariano, a Chicago native and former Dominick's CEO, said he hoped for 13 stores in the Chicago area by now.”
    KC's View:

    Published on: February 16, 2010

    El Bulli, the 60-seat restaurant in Spain that is often said to be the world’s best and that is only open for six months every year with reservations virtually impossible to get, will close as a commercial operation in 2011. El Bulli’s chef, Ferran Adria, announced that El Bulli will be transformed into a non-profit foundation.

    According to Adria, the pressures of innovation and living up to El Bulli’s reputation had become onerous. And, to be fair, while the restaurant may have been a for-profit business, El Bulli reportedly was losing $600,000 a year...and so now the owners can say it is a “non-profit” without any irony.
    KC's View:
    Well, cross that one of my bucket list. I always had having dinner at El Bulli on my ultimate “to do” list, but I guess that just isn’t going to happen.

    Published on: February 16, 2010

    The Washington Post reports that “Cuba has slashed food and agriculture imports from the United States - its largest food supplier despite decades of sour relations - as the communist government tightens its belt in the face of a crippling economic malaise.
    Imports fell 26 percent in 2009 to $528 million, after peaking at $710 million the year before, according to a report Wednesday by the New York-based U.S.-Cuba Economic Trade Council, which provides nonpartisan commercial and economic information about the island and claims to have no position on policy ... Cuba has increasingly turned to other countries like Vietnam that will sell it lower-quality food and not ask for payment for as long as two years.”
    KC's View:
    I don’t know about you, but I was sort of shocked to find out that despite the lousy relationship between the US and Cuba, our country remains the largest exporter of food to Cuba because of a rule change that took place in 2000.

    Published on: February 16, 2010

    Colloquy.com reports that “Kroger and its banner Ralphs have now teamed with Shell as a redemption partner, beginning in Cincinnati (Kroger’s headquarters), Dayton, Nashville, Knoxville, and San Diego. Customers in participating markets can earn points and redeem them for savings on gasoline at Kroger Fuel Centers and participating Shell stations. Customers earn rewards, including a minimum of 10 cents off a gallon of gasoline for every 100 Fuel Points they earn using their free Kroger Plus Card or Ralphs Rewards Card when purchasing products inside Kroger and Ralphs stores. This offer is valid up to 35 gallons per fuel purchase, and offers may vary per market. If the pilot is successful, the program may roll out to other markets.”

    USA Today reports that the US Department of Agriculture (USDA) is looking to enact tougher standards for school lunch programs, beginning this summer with new rules that will affect how federally purchased beef is bought, with similar regulations likely to be applied soon to produce, eggs and poultry. According to the story, “The new standards follow a USA TODAY investigation that revealed that beef bought by the USDA for school lunches is not tested as rigorously for bacteria and pathogens as beef bought by many fast-food chains. The newspaper also reported that some food producers have been allowed to continue supplying the school lunch program despite having poor safety records with their commercial products.”
    KC's View:

    Published on: February 16, 2010

    Weis Markets today announced the appointment of four new Senior Vice Presidents:

    • Rusty Graber, vice president for real estate, has been promoted to Senior Vice President, Real Estate and Development.

    • Jim Marcil, vice president of human resources, has been promoted to Senior Vice President, Human Resources.

    • Jay Ropietski, vice president of operations has been promoted to Senior Vice President, Operations.

    • Kurt Schertle has been promoted to Senior Vice President, Sales and Merchandising. Prior to his promotion, he was vice president, sales and merchandising.
    KC's View:

    Published on: February 16, 2010

    Sansolo Speaks will be posted on Wednesday this week.
    KC's View:

    Published on: February 16, 2010

    Dick Francis, champion steeplechase jockey and best-selling author of more than 40 novels, most of which used horse racing as a theme, died Sunday of natural causes in his home in the Cayman Islands. He was 89.
    KC's View:

    Published on: February 16, 2010

    MNB took note the other day of an interview in Fast Company with Gary Hirshberg, CEO of Stonyfield Farm, in which talked about the need for a more sustainable food culture. It prompted MNB user Susan M. Miller to write:

    Gary presses forward with some good points regarding real food, but the problem encompasses so much more, for example the people who actually work the farms, i.e. migrant workers and illegal aliens.  If this problem was rectified, we would see what the REAL cost of REAL food would be.  As Gary states, “We're not ready to pay for it. We have this illusion that food not only can, but should be, cheap. I call it an illusion because we do end up paying it, through our bodies and also our planet. We really have to restore to help the financial state of our farmers”.

    Figures  would be very interesting if we could get a true read on how many farmers employ illegals, and then take the action that is needed, to pay them a fair wage.  THEN we would see the REAL cost of food.  Being in CA 30 years, I don’t have a lot of sympathy for the financial state of the farmers—I have seen and read too much.





    Regarding the current trend toward editing SKU counts in stores, one MNB user wrote:

    Isn’t it interesting how today retailers are stating the reason they are cutting back on SKUs, assortment and inventory is “that there just to many of all of these and they confuse the customer.” But only a few years ago retailers couldn’t get enough of SKUs or brands..

    Why? They wanted all the money that taking them all got them and not what the customer wanted. In fact buyers were helping, suggesting and visiting companies to create items, as if new items also meant new sales and new sale were driving the retailers business. Even with a 99% failure rate for new items...


    What you seem to be suggesting is that retailers often can be accused of making decisions for short-term tactical reasons as opposed to long-term strategic goals. I’m shocked.




    We wrote the other day about the death of Fred Morrison, which led MNB user Joyce Mann to recall:

    "Making Frisbees" is the phrase that brings back bittersweet personal memories.  The primary security question on any secured software program is usually "What was your first job?".  And my first job (in 1971, the height of Frisbee mania) was making Frisbees in a California factory, $1.91 per hour on the swing shift, 6 days a week.  Cheap Frisbees, expensive Frisbees, tournament Frisbees - we made them all in that hot, dirty, loud factory environment.

    I quickly learned that I needed an education and better job skills, because I didn't want jobs like that for the rest of my life.  Every time I answer that question I can remind myself of a successful journey out of that factory.


    Thanks for sharing your story.




    We continue to get email about the debate about Audi’s ‘Green Police” commercial, which turned into an impassioned discussion about government regulation and personal freedoms.

    MNB user Ray Wolfson wrote:

    I do understand the fear of privacy and freedom, however the other side of the coin is that without regulation and boundaries to many people take short cuts that are harmful to our society. Prior to regulations meat plants were so dangerous that human body parts (from employees) were found in our meat supply. I could go on with many other examples of an unfettered society…it is called anarchy. It seems to me that as a society we to often want freedom without responsibility. Until we as a society exhibit that level of responsibility we need to establish boundaries to protect us against those who have no internal set of boundaries or regard for the safety of all.

    There was much discussion about whether the assertions of one writer about government interference were “B.S.,” or if the refutations of those assertions were “B.S.” Another MNB user weighed in:

    I have two issues to take up with you:

    First, the BS issue was handled oddly, in my opinion.  The first BS writer had it about 80% wrong (the writer brought up about 5 points and was right about the light bulbs as the third wave pointed out).  The second BS writer had it about 80% right, as the third wave pointed out.  The third wave was 100% right, but on only 1 point when they stick to light bulb legislation.  It seems to me that there is not so much evidence of a government takeover of our lives, and this should be reflected in the balance of unsolicited commentary.

    Second, the statement that "Government's purpose is to provide infrastructure and protect our borders. Period,"  seems to be possibly true, possibly false.  One of government's roles, at all levels, is to balance the rights of individuals against the rights of communities.  We have a right to own property, and we have limited rights to do what we want with the property.  Rights are limited because "government" has decided that the rights of an individual or corporation to enjoy their property should not impinge upon the rights of others to enjoy their own property.  Pollution is a prime example where multiple decisions have been made whereby property owners can pollute - no one using air, water, or land is required to return it to pristine conditions - and in exchange, communities get some economic/social benefit that offsets the environmental degradation.  Some governments do a better job than others at measuring the externalities - the costs that are not priced into an economic transaction (which pollution is) in setting the right balance between allowable pollution and economic/social benefit. 

    Governments also enforce legal contracts which are explicit agreements between private parties (who are competent, have come together for a legal purpose, have agreed to consideration,...) that the government has decided have the force of law.  Why?  Because the social cost of not enforcing contracts is greater than the social benefit of having a smaller legal infrastructure.  Similarly with torts - at some level, I have a duty of care (not to produce for sale to the public, for example, tainted milk or contaminated meat) to the public that may not be enshrined in law or in a formal contract.  What I'm getting at is "infrastructure" rightly includes more than roads, rails, bridges, tunnels, canals, and airways.  Infrastructure also includes the social, legal, and, yes, regulatory fabric that makes advances in society possible.

    Finally, where is the evidence that "we have the best health care in the world."   Who is "we?"  I would expect the best health care in the world to provide the best life expectancy per dollar spent relative to any other system - but systems are defined by the boundaries drawn.  Depending on how you measure the dollars spent, you probably get different results.  The US has a great system for acute illnesses and end-of-life care, maybe the best.  If you look at overall life expectancy per dollar of health care spending including chronic illnesses, the US doesn't do so well.  If you includes all the money spent on farm subsidies, food, supplements, vitamins, and exercise, the US does even worse because so much of our spending is on things that harm health, the US fares even worse.





    I mentioned the other day that it was interesting that Walmart and Procter & Gamble are teaming up to produce a family-friendly TV movie for NBC to air this spring, especially because the network TV movie is a dying breed.

    MNB user Chris Connolly observed:

    As the parents of two teenagers, we watch virtually no network television in our home.   If it wasn't for the fact that we are devoted followers of the local news offerings, we would not even bother having local channels available to us.   Your observations about the two-hour network produced movie being a dying breed are interesting; the one remaining example that we look forward to are the quarterly productions of the "Hallmark Hall of Fame" that are still appearing on CBS.   If we can't watch them in person, they always get recorded on the DVR.  
     
    Needless to say, we are avid supporters of our local PBS station and the Food Network!


    Which explains why network TV ratings are generally down. Though I also think we have to redefine what “network” means.

    The industry may differentiate between the broadcast TV networks (ABC, CBS, Fox, NBC) and the cable networks (TNT, Lifetime, USA, etc...), but viewers do not. Aided by technology (iTunes, Hulu, etc...), we watch what we want, when we want, where we want. And from my POV, it seems like the cable networks are both more interesting (“Men of a Certain Age,” “Damages”), quirky (“Burn Notice,” “White Collar”) and more intelligently programmed because they produce fewer episodes each year, thus keeping concepts fresher longer. (I would make the same argument about morning television, where it seems to me that MSNBC’s “Morning Joe” is far smarter and more provocative than “Today” or any of its broadcast network brethren.)

    And what is NBC’s definition of programming innovation? Putting “The Jay Leno” Show” on at 10 pm five nights a week, which really was a financial rather than creative decision. And nobody watched.

    This is a classic example of how entrenched businesses ignore changing realities and evolving customer needs. And it can be seen as a metaphor for other industries where entrenched players do business as usual, making decisions for the wrong reasons.




    On the subject of governmental initiatives, led by First Lady Michelle Obama, to fight childhood obesity trends, one MNB user wrote:

    I wonder how our forefathers ever made it without some people telling them how and when to eat. You think it is bad to eat at a fast food restaurant 10 times a month, but I wish everybody would let me decide that for myself.

    See, this is where the discussion goes off the rails.

    You can eat anywhere you want. You want to have McDonald’s 10, 20, 30 times a month...go crazy. Last time I checked, there is absolutely no legislation out there that would regulate how, when or where you eat.

    However, it strikes me as entirely fair that, in the interest of full disclosure, those fast food restaurants ought to be required to inform you about the nutritional values - or lack thereof - of the products you order. It also strikes me as the basic role of the educational system to teach kids how to make intelligent eating and exercising decisions. (Nobody is going to force people to adhere to these principles as adults, but the lessons ought to be taught.)

    It is hyperbole of the worst kind to suggest that certain kinds of rules and regulations governing the food industry will automatically lead to you being forced to eat salads and not Big Macs. Ain’t gonna happen. (Of course, your employer may quite reasonable want you to pay higher health insurance premiums based on your eating habits ... which opens up another debate.)




    Finally, I got the following nice email from MNB user John R. Hurguy:

    Years ago, I followed your recommendation to check out a new Spenser book and ended up reading the entire series…a belated thanks for the original suggestion.  Please continue to mix in entertainment, (books, TV, film), reviews with retail news, etc. because many of us in the MNB community, (old & new readers), find it to be what makes your “daily” so special.

    Thanks. I appreciate that more than you know.
    KC's View:

    Published on: February 16, 2010

    No coverage of the 2010 Winter Olympics here...there are simply too many medals and games to report in this short space.

    However,...it is worth noting that the BMW Oracle team won the America’s Cup yachting races off Valencia, Spain - returning the Cup to the US after a 15 year absence, the longest time the Cup has been away from the US since a schooner called America beat a fleet of British sailboats off the Isle of Wight in 1851.
    KC's View:
    Which, quite naturally, reminds me of a lyric from my favorite troubadour...

    We ain't stealin' we're just takin' back
    Very simple plan of attack
    It's our job and a labor of love
    Take it home to the up above...