retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: February 17, 2010

    by Michael Sansolo

    There are weeks when the number of topics presenting us with lessons overwhelms the “in” box. So even though I’m the guy with a non-functional snow thrower and four feet of snow, allow me to take a crack at two recent ones worth thinking about.

    First there was the Super Bowl. It was a great game that for once was way better than the commercials. But for me, a long-time fan of The Who, halftime was a disappointment. All people age and voices age with them, but I prefer to keep my memories of Roger Daltry the way he used to be. Back to the IPod I guess.

    My 23-year-old daughter had a different reaction. While she understands why the networks are skittish about halftime acts since the infamous Janet Jackson “wardrobe malfunction,” she doesn’t understand why all the acts since then fall into the same category: old, white and male. (Somehow she missed the year Prince performed, but that aside from that she has a point.) Much as I love McCartney, Springsteen, the Stones and Tom Petty, they all do fall into the same group of performers and demographics.

    As my daughter put it, having Beyonce instead might actually bring a new audience to the Super Bowl and no performer will make a wardrobe error ever again. And the lesson to us in marketing is clear. Let’s never forget the entire audience isn’t like us, which means we may have to stretch to find a new answer. And sometimes we have to consider those who are very, very different than us.

    Second there is the stunning case of Toyota. As I have written before, I have a long and happy history with my Toyotas so the sudden rash of problems is really stunning. And by that I don’t mean the small number of acceleration or braking accidents. Rather it’s the company’s reaction. It seems stunningly competent, logical and complete, especially the decision to stop production of automobiles, which is no small matter. If you think about it logically, Toyota has done a great job responding.

    So why does it seem so empty?

    Do the words too little, too late mean anything? Once again Toyota is learning the terrible lesson that more problems come from the cover up, not the crime. What’s going to linger with people about Toyota is that they apparently had ample warnings in Japan and the US about the problems and failed to act. Plus once they acted, it seemed unemotional and uncaring.

    The parallel to the food industry is stunning. This industry has the gold standard of lessons thanks to the reaction Tylenol offered the world in the early 1980s. Remember, that Tylenol did nothing wrong back then. The company was victimized by a lunatic intent on using a painkiller to cause pain and death. The lingering memory of that case is that Tylenol understood the reaction had to be swift, the words and feelings had to convey both sympathy and support. Tylenol pulled all its products from the shelves, created a whole new industry of tamper resistant and evident packaging that both annoy and protect us. And when the product returned a year later, its market share soared higher than ever.

    Against that backdrop, Toyota presents a terribly different picture. Its problems are all of its own doing. No one tampered with the brakes or accelerators. And, in truth, the company took dramatic action, shutting down production and working overtime to fix everything.

    But read the messages in Toyota’s ads on the problem. They remain unemotional, sober and completely lacking the compassion that seems so necessary at a time like this.

    Ask yourself, as you always should, what would I do? What would I do if I ran the Super Bowl halftime show? What would I do if I ran Toyota? Odds are, you won’t do either one, but the lessons are guaranteed to come in handy. Sometimes we can pretend to stand in someone else’s shoes to learn a great lesson.


    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His new book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
    KC's View:

    Published on: February 17, 2010

    The Richmond Times-Dispatch reports that Ahold-owned Martin’s Food Markets, which is absorbing the 25 Ukrop’s units acquired by Ahold and its Giant of Carlisle division, will no longer allow local charities and nonprofit organizations to raise money on the sidewalks in front of Ukrop’s stores.

    The decision is in line with a longtime Martin’s policy, but a major shift for Ukrop’s, which enabled the fundraising as part of its much vaunted commitment to the local community. Affected will be organizations like the Salvation Army and the Girl Scouts.

    "Our customers have voiced that they would prefer to shop in our stores without being solicited by other organizations, and we have listened to and respected their wishes," Martin's said in a statement yesterday.

    “What impact Martin's ownership will have on local charities or sponsorships remains unclear,” the Times-Dispatch writes. “For instance, no decision has been made on sponsorship of the Ukrop's Monument Avenue 10K after next month's race, said Jon Lugbill, executive director of the Metropolitan Richmond Sports Backers, which organizes the race.”

    "Our goal is to stay closely connected to the community," Tracy Pawelski, a Martin's spokeswoman, tells the paper. "Since we have a charitable mission around improving the quality of life for children and fighting hunger, you'll see us continue to try to make a difference in these areas."
    KC's View:
    I’m not sure I entirely believe the implication that Ukrop’s wasn’t listening to its customers when it allowed organizations to solicit outside its stores for all those years. It sounds more like Ahold, Giant and Martin’s are focused on their own priorities...which is okay, but it is what it is.

    Expect competitors to try to step into the breach and suggest that they are more local and community-focused than Ukrop’s/Martin’s. While Ukrop’s has seen its market share decline in recent years, it still was a powerful player in the market...and for the moment, at least, there is a window for other players to start delivering body blows. An uppercut here, a left hook there, and maybe a couple of quick jabs to the gut...and maybe the balance of power starts to shift.

    Published on: February 17, 2010

    The Wall Street Journal reports that Campbell Soup is set to announce changes to its labels and shelf displays today, using what is called “neuromarketing” - described as the study of “microscopic changes in skin moisture, heart rate and other biometrics to see how consumers react to everything from pictures of bowls of soup to logo design” - to figure out how to sell more soup.

    According to the story, “The researchers found that warmth and other positive attributes people associated with Campbell's soup at home evaporated when they faced store shelves ... The Campbell team figured it could boost sales by triggering more emotional responses in stores and prompting more people to focus on more soups.”

    Research showed, for example, “that Campbell's large logo at the top of shelf displays draws more attention than necessary. At first glance, the logo's bright red background makes all varieties of soups—from the classic chicken noodle to the jazzier Italian Wedding Soup—seem to blend together ... In interviews, participants also said the soup pictured on the can and shelf labels didn't look warm. And the big spoon holding a sample of soup on each label provoked little emotional response.

    “Shoppers will begin seeing changes in the Campbell section of supermarkets this fall. Among them: Condensed-soup varieties will be sectioned into four, color-coded categories such as ‘taste sensations’ in orange and ‘classic favorites’ in light brown. The company's logo will be smaller and moved lower so it's not as prominent. Campbell's three biggest sellers—chicken noodle, tomato and cream of mushroom, the soup can labels immortalized by Andy Warhol—will remain the same. But on other labels, steam will rise from larger, more vibrant pictures of soup in more modern, white bowls.” And the spoons will be gone, because they weren’t doing any good anyway.
    KC's View:
    Certainly there is a risk in changing something so iconic as the Campbell Soup label. Just ask Pepsi, which changed its Tropicana carton design only to find that people hated the new one so much that it had to go back to the old version.

    But the advantage that Campbell may have here is that it does not seem to have farmed the whole project out to some hotshot designer with his eye on prizes rather than sales.

    Published on: February 17, 2010

    The Chicago Tribune reports that while companies such as Sara Lee, ConAgra and Unilever have made public statements about their plans to reduce the amount of salt in their processed foods - which have “come at a time when food-makers are increasingly being pressured by health advocacy groups to cut back on sodium” - consumers should not expect to see this fact reflected on labels.

    According to the story, “they'd rather practice stealth health, for fear of driving away customers worried about taste ... Yes, there's a market for overtly labeled low-sodium products, particularly as baby boomers age and worry increases about hypertension and heart disease. But that market is relatively small: Less than 3 percent of food products introduced each year make low-sodium claims, according to Mintel.”

    Here’s the problem. As the Tribune writes, “Sodium is one of the most important ingredients in food, and not just for imparting taste. It helps bind together various elements of meat and cheese; it acts as a component in leavening systems, helping make bread rise, for instance; and, of course, it serves as the original food preservative.” But it also can be deadly: “If typical Americans cut a modest amount of salt from their daily diet, there would be an estimated 155,000 fewer heart attacks and strokes annually, according to a study published last month in the New England Journal of Medicine.”

    The Tribune gives an example of how one company has been dealing with salt:

    “Campbell Soup Co. has a put a particular premium over the last five years on the science of salt reduction. Cutting salt, without sacrificing taste, has been a ‘top strategic priority,’ said Sean Connolly, president of Campbell USA. ‘There's been a tremendous amount of progress in research and development on flavor technology’. “At Campbell, sea salt has played an important role in significant sodium cuts throughout its product line ... Last year, using sea salt, Campbell cut 32 percent of the sodium from its flagship condensed tomato soup, Connolly said. And the company shouted out the accomplishment in a newspaper ad. The can itself also mentions the soup contains less salt yet still tastes good.

    “But that claim is not seen on the front label of the tomato soup can, where it would be most visible to consumers as they shop. It's located around back. And it doesn't refer specifically to the impressive 32 percent figure, as if that would be too much information for salt-loving consumers.”
    KC's View:

    Published on: February 17, 2010

    The Charlotte Observer reports that Walmart has become the dominant grocer in that market, with a 29 percent market share. “That's up from 25.7 percent a year earlier, and way up from 16.2 percent in 2004,” the paper writes. “Harris Teeter, the previous No. 1, ranked second, with 26.5 percent, down from 29 percent in 2008, according to market and consumer research firm the Nielsen Company. Food Lion remained third, with 19.7 percent.”

    According to the story, “The shift makes Charlotte the latest market to join a tide that has swept across much of the nation's grocery terrain during the last decade, with mainstream supermarkets losing share to discount stores and other nontraditional food sellers. Leading the charge has been Walmart, whose estimated U.S. supermarket sales are about equal to those generated by the next three largest U.S. food retailers, combined.”

    The recession, of course, has played a role in Walmart’s ascension. “A new frugality has put higher-end chains on the defensive. Matthews-based Harris Teeter, for instance, wooed shoppers and led in local market share through most of the past decade by bringing upscale stores to affluent, often fast-growing areas in south Charlotte and Union County. But recently, the chain has focused more of its advertising and in-store signage on highlighting low prices and discounts. Walmart, meanwhile, has been working to repair its image after being battered by criticism over its business practices. And it has continued to increase its presence at a time when many traditional grocers are adding few stores, if any.”
    KC's View:

    Published on: February 17, 2010

    The Austin Business Journal reports that the US Environmental Protection Agency (EPA) has confirmed that “natural foods grocer Sprouts Farmers Market in Round Rock received the second-highest level of certification, gold, through the GreenChill program. A Whole Foods Market store in Lakewood near Beaumont has been certified as a silver-level store by the EPA.”

    The two-year-old GreenChill partnership program, which the paper notes “certifies stores for their type of refrigerants as well as the environmental soundness of their refrigerant systems,” has thus far certified just 26 stores nationally.

    The Journal writes that “at Sprouts Farmers, the certified systems add about 10 percent to the systems’ cost.” However, here’s the upside: “If every supermarket in the country reduced its emissions to the GreenChill average, the United States would save the equivalent of more than 22,000,000 metric tons of carbon dioxide. Also, the industry would save more than $108 million in annual refrigerant replacement costs.”
    KC's View:

    Published on: February 17, 2010

    The Greenville News reports that Bi-Lo’s latest reorganization plan would leave its fleet of stores virtually intact, operating “more than 200 supermarkets in the Southeast and continue its relationships with vendors and landlords ‘in substantially the same manner’ as the company did before it filed under Chapter 11 last year, the court filing said.

    “It said Bi-Lo operated 214 stores under leases and maintained three leases related to its South Carolina headquarters. Bi-Lo said its projections call for 207 stores coming out of bankruptcy proceedings ... Under the company’s amended plan, filed after Bi-Lo’s creditors withdrew a competing proposal, Lone Star would retain ownership of the grocery chain by paying term-loan lenders $260 million and giving unsecured creditors $30 million to $35 million to divide. The reorganization plan would be funded by a combination of $150 million of new equity from a Lone Star affiliate and a new $200 million term loan, Bi-Lo said.”

    Approval both by creditors and a bankruptcy judge before the plan can move forward.

    Bi-Lo filed for Chapter 11 protection in March 2009.
    KC's View:

    Published on: February 17, 2010

    The National Association of Convenience Stores (NACS) announced yesterday that it has established an ongoing internship program honoring Teri Richman, a former executive with the association who passed away last December at age 54 after a long battle with cancer.

    According to the announcement, “Richman joined NACS in 1982 as its first in-house federal lobbyist and played a critical role growing not just NACS’ advocacy efforts, but also reshaping and growing the industry’s research and technology base. Over the course of her 20-plus years at NACS, she was involved in nearly every major industry issue and initiative, from defeating beer-gas bans in the mid-1980s, to improving store security in the late 1980s and early 1990s, to introducing technology standards in the mid-1990s, to fighting outrageous credit card fees with the founding of the Merchants Payments Coalition in 2005 ... Even more significant than her impact on the industry was Richman’s interest in mentoring and growing people within the industry. To celebrate that spirit, NACS established the NACS Teri Richman Internship Program. This self-sustaining internship program is open to deserving undergraduate or graduate students, with a particular emphasis on advocacy and research.”
    KC's View:

    Published on: February 17, 2010

    • In Baltimore, WJZ-TV News reports that legislators in the birthplace of Babe Ruth are considering banning the use of non-reusable plastic bags there, or charging a 25 cent fee for every plastic bag used.

    The City Council is only in the early stages of considering the legislation, and there promises to be considerable resistance from the retail business community to any new regulation, arguing that such a move will hurt business at an inopportune time.

    • The Palm Beach Post reports that “over the weekend, grocery store chain Albertsons LLC closed eight of its underperforming stores in Florida, including its stores in Boca Raton, Delray Beach, Loxahatchee and Lake Worth. The company now only has 20 stores left in Florida, including its Port St. Lucie and Vero Beach locations.”

    • The Chicago Tribune reports that ten Maine dairy farmers who found their contracts terminated by HP Hood last year, have banded together to create a new organic milk brand, MOOMilk, which they hope will be their shot at sustainable success by appealing to New England shoppers looking for local products. While the product sells for more than regular milk, sales at stores like Hannaford and IGA seem to doing well - people like the idea of knowing where the milk is coming from, and that they are keeping local farmers in business.
    KC's View:

    Published on: February 17, 2010

    • Whole Foods reports that its first quarter sales were up seven percent to $2.6 billion, on same-store sales that were up 3.5 percent. Q1 profits were $49.7 million, up 79 percent compared with $27.8 million during the same period a year ago - an increase that the company suggests points to the success of its strategy of lowering prices and becoming more focused than ever on natural foods.

    • Winn-Dixie reported that its second quarter net income dropped 87 percent to $2.1 million, from $16.1 million during the same period a year ago. Q2 sales dropped three percent to $2.2 billion, on same-store sales that were down almost three percent.

    “The challenging economic environment and deflationary pressures continue to impact sales for the entire supermarket industry,” said Winn-Dixie’s chairman, CEO and president, Peter Lynch. “It is clear that consumers remain very cautious with their spending, which has influenced our sales across the chain, primarily with respect to overall basket size. However, we increased transactions by 4.1 percent in our first-year offensive remodels compared to last year, and our customers are continuing to respond positively to the changes we are making.”

    • Kraft Foods announced that its fourth quarter profit more than tripled, to $710 million from $178 million during the same period a year earlier. Q4 sales rose three percent, to $11.03 billion from $10.68 billion.
    KC's View:
    Several savvy and perceptive MNB users pointed out that in recent days, this section has been called the Department of Perpetual Financial Anxiety, and wondered why.

    Simple. I got bored. So I tried something different.

    Published on: February 17, 2010

    Interesting email from an MNB user named Gary Silverman regarding last week’s story about how a Tim Horton’s doughnut shop banned a customer who has perceived as being abusive to employees when he complained about the coffee:

    I started a Bagel company back in 1988, which I operated until I sold my stores in 2003 and my commissary in 2004.  At my original store, we used to have a woman that came in almost every day for her bagel and coffee.  When I wasn’t around, she apparently always found an issue to get ugly about with someone from my staff.  It got to the point where they would see her coming, and the staff would disappear to the kitchen area, as no one wanted to help her.  As an owner, of course we want to make new customers, and keep the ones we have.  However, I also learned early in my career as an owner (I was 28 when I opened my first store) that you need to take care of your employees, and they in turn will treat your business as if it’s their own.

    I decided to call an older friend who owned a café up the street to seek advice on how to handle this unruly “customer”.  When I told her about what had been transpiring, she said, oh, I know who you are talking about.  I said YOU DO??!!  She said, yes and she is here right now.  She told me she likes to be bitchy to your staff, and kind of laughs about it!  I was pretty upset after hearing this.  So, the very next morning when this woman came in, I pulled her aside and quietly told her that her behavior towards my staff was unacceptable.  I said I appreciated the fact that she came in almost every day and chose to spend her money at my establishment.  I also told her that if she ever had an issue with any of our products or with any of my staff, that she should come to me directly and if I was at another store, she should call me.  And then I told her if she was ever abusive with anyone on my staff again, she would no longer be welcome at any of my stores.  These are mostly young people who try very hard, and for the most part care about what they are doing.

    Well, we did not see her at our store for more than a couple of weeks.  But when she did come back, she was quiet, and ALMOST pleasant with my staff.  She stopped being rude, and we never again had an issue with her.  Best of all, it made a HUGE impression on my staff that I would have their backs, and risk losing a customer, and perhaps have her tell others not to come to my stores. 
     
    Good lesson for me, and for my employees.  Many of the best ideas came from my staff.  Treat them well, listen to them, and give them the tools and authority to do what is right.  And,… if necessary, fire a customer!


    Excellent point.
    KC's View:

    Published on: February 17, 2010

    Crain’s Chicago Business reports that Walgreen Co. will acquire New York City-based Duane Reade Holdings for $1.07 billion, giving it 257 stores in the New York metropolitan area and add annual sales of around $1.8 billion to its bottom line.

    The story says that the Duane Reade stores are likely to keep their brand name, though Walgreen will look for available efficiencies.

    “Walgreens expects to retain Duane Reade’s store, pharmacy and distribution center employees and many members of Duane Reade’s senior management team following the acquisition,” the release says. “Over time, consolidation of core functions at the corporate offices will occur.”

    Walgreen already has 70 stores in Duane Reade’s market area, according to Crain’s, so this acquisition is a significant move for the Chicago-based company.
    KC's View:
    his is an ongoing game of “can you top this?”, so it will be interesting to see what deal CVS pulls off in response to the Duane Reade acquisition.

    It also is worth considering whether this gives us a preview of the kind of acquisitions that could take place in other retail categories. The betting here is that this is just one of a bunch of deals that we are going to see go down.