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    Published on: April 15, 2010

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    Hi, I’m Kevin Coupe and this is MNB Radio, available on iTunes and brought to you this week by Webstop, experts in the art of retail website design.

    There was a story the other day from Reuters saying that FreshDirect, the pure-play e-grocer based in New York, was looking for $100 million in funding as it expands further into suburban New York and makes its first foray into Connecticut. I think that’s terrific, and I hope they get their funding and build a prosperous business.

    What bothered me about the story was the implication that somehow FreshDirect was positioned to rescue the troubled e-grocery business, in which few people have been able to make a go of it since companies like Webvan collapsed a decade ago. Now, to be sure, there is nothing in the story to suggest that the folks at FreshDirect were promulgating this point of view; I suspect that the “here we come to save the day” approach is one that FreshDirect would try to avoid, since its chairman, Richard Braddock, also was at Priceline when it made its ill-conceived attempt to get into the supermarket business with a “name your own price” proposition that some retailers thought actually was a turnkey internet strategy. Not so much.

    But there are assertions made in the story, some by the reporter and some by consultants, that suggest that the online grocery business has been dormant for the last 10 years. Nothing could be further from the truth.

    Now, let’s be clear. I actually have a dog in this hunt. Three of them, in fact. Two of my longtime MNB sponsors - MyWebGrocer and Webstop - are in the online grocery business. And my friend Tom Furphy helped to create Amazon.com’s online grocery business.

    But that’s also sort of the point. MyWebGrocer, for example, has been in business since the Webvan days, but it didn’t collapse when a lot of other businesses did, and has been on a steady growth trend as long as I’ve known them, creating innovative online solutions for retailers of all sizes. Webstop also is a longtime player in the category, and continues to expand its operations. And this does not even take into account the fact that Ahold-owned Peapod continues to be an important part of that company’s business model.

    The real point is that internet grocery shopping isn’t dead. Far from it. Sure, we’ve come a long way from the halcyon days when people were predicting that online food shopping would be 20 or 30 percent of the entire business. That probably was never a reasonable expectation, and I plead guilty to having greater expectations for e-grocery than the business model could possibly bear. I was hardly alone.

    I’ve talked to retailers over the years who have waxed rhapsodic about their online businesses. The general sense I get is that most prefer a pickup model to a delivery service - it makes money faster - but that some believe that you have to offer both to shoppers who want options. And I’ve talked to retailers who have told me that a) in some cases their stores offering online shopping can generate as much as 15 percent of total store sales, and b) consumers who use a store’s online services tend to spend as much as 20 percent more when shopping.

    Is the business model for everyone? Of course not. Is everyone going to see the same kinds of numbers? Not likely. But online grocery shopping continues to be a slowly evolving and exciting category. It is a place where companies can try to innovate, to see how far they can push the envelope. Take, for example, Amazon’s Subscribe-and-Save service, which creates persistent and sustainable loyalty in a way that almost no other retailer does.

    For me, however, the primary reason that I believe companies investing in online grocery shopping models are making the right move has to do with generational issues - the fact that the next generation of primary grocery shoppers will be a group of people raised to think of online not just as another option, but as a primary method of obtaining products and information. When they think about books, they think of Amazon, not Barnes & Noble or Borders. When they think about clothes, they often go online first. When they want to watch a TV show, they turn to their computers so they can watch it on their own timetable, not some network’s. And they think of the internet as an organic part of their daily lives...

    (Actually, that’s inaccurate. They don’t think of the internet as an organic part of their daily lives, because they don’t even think about it. It just is an organic part of their lives.)

    Y’think this isn’t going to carry over to food shopping? Y’think that retailers that have invested in this business model won;t have an advantage going forward?

    As Puck says in “A Midsummer Night’s Dream”...”Ah what fools these mortals be!”

    For MNB Radio, I’m Kevin Coupe.
    KC's View:

    Published on: April 15, 2010

    Delhaize-owned Food Lion is launching a new advertising campaign focusing on its “Low Price Heritage” and featuring its president, Cathy Green, speaking directly to shoppers.

    The company says that “the launch of the spots is aimed at complementing Food Lion’s ‘New, Lower Prices’ campaign, which started earlier this year, as well as reinforcing the company’s long-standing history of low prices.” The commercials will air in a number of Food Lion markets beginning April 14.  The fully integrated marketing campaign will also include various print, radio, online and outdoor advertisements. 

    According to Ken Mills, vice president of Marketing at Food Lion, “In today’s economic environment, we know price, more than ever, matters to our customers.  We wanted to send a powerful message to our customers about our lower prices ... Cathy speaks on behalf of Food Lion, and she has a natural ability to resonate with customers and associates alike.  Cathy delivers the message in three commercials highlighting that we have always helped our customers save on their groceries and now we are helping customers save even more through our new, lower prices.”
    KC's View:
    I cannot think of a better spokesperson for the company than Cathy Green, and I’m one of those folks who believes that effectively done, commercials featuring business executives are a great way to personalize the business - give customers a sense that there is a real person, a person like them, behind the banner.

    Published on: April 15, 2010

    The New York Times reports that in a recent speech a conference sponsored by Fortune, Lee Scott - the former CEO and current chairman of Walmart - made the point that “that cutting greenhouse gases should go hand in hand with ending wasteful business practices, especially in the company's massive supply chain.

    “Environmentalism, then, is very much a modern byproduct of sound business, in Scott's view. The architect of the company's well-publicized attempt to foist sustainability on its suppliers said the effort has less to do with environmental altruism than a business-sense commitment to cutting inefficiencies. That core distaste for excess, he said, should be the driver behind getting emitters to see opportunity in greenhouse gas reductions rather than punishment.”
    KC's View:
    This shouldn’t be a surprise to anyone. It also is not as bad thing, not by any means. The whole notion of conservation and sustainability is about husbanding your resources more intelligently, which should in the long run be a smart fiscal strategy.

    Walmart’s dedication to “green” has nothing to do with altruism. The bigger point is that it is actually business-smart to be environmentally smart. Companies concerned about federal regulations in this area should get ahead of the wave, which essentially is what Walmart has done.

    Published on: April 15, 2010

    Unified Grocers announced yesterday that it has extended its lease for five years on a dry grocery warehouse, refrigerated fresh foods distribution center, and headquarters in Seattle. At the same time, the company said, it “remains committed to developing and operating from a new distribution center in the Puget Sound area and has stated that it will continue to pursue all available alternatives to achieve this objective before the expiration of the new agreement.”

    “Our lease extension provides us with more time to carefully analyze new possibilities for a distribution center and also to monitor and evaluate changing economic and marketplace conditions,” said said Al Plamann, president/CEO of Unified. “In the end, we believe these factors will result in a better long-term solution for our business in the Pacific Northwest."
    KC's View:

    Published on: April 15, 2010

    Bloomberg reports that First Lady Michelle Obama’s “lobbying of companies to make products healthier, labels easier to read and limit marketing of unhealthy foods to kids is paying off. A month after she began her campaign, PepsiCo Inc., the world’s second-largest food and beverage company, pledged to stop selling full-sugar soft drinks in schools by 2012. Kraft Foods Inc., the maker of Oreo cookies and Oscar Mayer lunch meats, announced it would further reduce the sodium content of its products.”

    General Mills also has announced that by 2015 it will cut the amount of sodium by 20 percent in roughly 40 percent of its cereals, soups, snacks and other products; it also has promised to cut the sugar in the products it makes that are marketed to children.

    And, the news service, says, the First Lady has a highly placed champion: “Valerie Jarrett, a senior White House adviser, said President Barack Obama has lent his support. After a Feb. 4 White House lunch with business leaders, the president pulled aside Battle Creek, Michigan-based Kellogg Co. Chief Executive Officer David Mackay and Minneapolis based General Mills Inc. CEO Ken Powell and prodded them to take part in his wife’s campaign, Jarrett said.”
    KC's View:
    While some say that companies are only responding to the First Lady because of concerns that resistance will result in greater federal regulation, I’m not sure that this is entirely fair - after all, it is not entirely clear to me what the downside is of making products healthier or at least less deleterious to people’s health.

    Published on: April 15, 2010

    In celebration of Earth Day, Fresh & Easy Neighborhood Market today announced it is bringing back its reusable bag giveaway, which will run this year for a full week from April 14th through April 22nd for customers who spend $20 or more. Customers can find the special Earth Day coupon for the free canvas bag on Fresh & Easy’s Facebook fan page.

    The company said that “the bag giveaway is part of a broader initiative Fresh & Easy is rolling out to increase the use of reusable bags by customers. The company has taken several steps in its stores, including: adding signage reminding customers to use their bags, merchandising reusable bags closer to checkouts and giving away free magnets to customers, reminding them to not forget their reusable bags at home. To ensure reusable bags are available to all customers, stores offer several different bag options, including one for only 99-cents.”

    Fresh & Easy also said that “it has reduced the amount of plastic in its 24-pack fresh&easy Pure water bottles. The new Pure bottles are designed to use 50% less plastic compared to the average plastic ½ liter bottle. The bottle is easy to handle and is designed with a contoured shape to offer a perfect combination of function, design, and environmental consideration.”
    KC's View:

    Published on: April 15, 2010

    Statistics released at the 2010 NACS State of the Industry Summit this week indicate that “convenience store in-store sales grew 4.9 percent in 2009, one of the lone bright spots in a battered U.S. economy that saw overall retail sales drop 7.0 percent.”

    Excerpts from the report:

    • “Overall, convenience store sales in 2009 were $511.1 billion, accounting for 3.5 percent of the total U.S. Gross Domestic Product – one of every 28 dollars spent in 2009. Industry profits fell 7.6 percent to $4.8 billion, but were still the fourth largest in the industry’s history. The importance of foodservice – a category that includes food prepared on site, commissary items and hot, cold and frozen dispensed beverages – continues to grow, with the category now contributing 20.2 percent of overall industry profits.”

    • “While in-store sales rose to $182.4 billion, the sharp decline in gas prices from a record $4.11 per gallon in July 2008 to under $2 per gallon by the beginning of 2009 led to a dramatic drop in motor fuels revenues for the industry that sells an estimated 80 percent of the fuels purchased in the United States. The average price for a gallon of gas dropped 28.5 percent to $2.28 in 2009, and pulled down motor fuels revenues 26.9 percent to $328.7 billion. Still, motor fuels sales continue to dominate industry revenues, accounting for 68.4 percent of all sales dollars.”

    • “Credit card fees continue to be the industry’s top pain point and second largest expense item – behind only labor costs. While overall credit card fees dropped 11.9 percent to $7.4 billion, the drop was significantly less than what would be expected with the drop in the industry’s revenue dollars. As a percentage of overall sales, credit card actually fees increased, from 1.35 percent to 1.45 percent of total industry sales dollars, factoring in all forms of payment, including cash and check. Total credit card fees also surpassed overall convenience store industry profits for the fourth straight year.”

    • “The sour employment outlook was also reflected in the convenience store industry’s employment numbers. Employment dropped 8.7 percent to 1.58 million. Indicative of the tight employment market, turnover dropped to record low levels in 2009. Manager turnover dropped from 29.0 to 21.8 percent and non-manager turnover dropped from 109.0 to 82.4 percent.”
    KC's View:

    Published on: April 15, 2010

    • Walmart reportedly has regained the top spot on the Fortune 500 list of the world’s biggest companies, supplanting Exxon Mobil Corp. Chevron remains in third place.

    • The Chicago Sun Times reports that as the Chicago Plan Commission prepares to vote on a proposal that would allow Walmart to open a new store on the city’s South Side, Alderman Freddrenna Lyle has introduced an ordinance that would require all retailers with more than 50 employees and that benefit from city subsidies to pay a living wage of at least $11.03 an hour.

    Just such an ordinance was vetoed by Mayor Richard Daley in 2006. Walmart has been struggling against some neighborhood and union interests in the city as it tries to open stores within the city limits; it only has one to this point.
    KC's View:

    Published on: April 15, 2010

    A new survey from Shop.org and Forrester Research into internet shopping reveals:

    • Average web retailer sales growth (Q1 2010 vs Q1 2009) was 12.3 percent.
    • Over half of retailers surveyed reported year-on-year sales increases of 10 percent and higher.
    • Almost one fifth of retailers reported year-on-year sales increases of 10 percent or less.
    • Whereas the majority of large and mid-size retailers surveyed experienced sales increases, almost two-thirds of small retailers ($10 million in sales and under) also experienced sales growth.
    KC's View:

    Published on: April 15, 2010

    • The Wall Street Journal reports this morning that “Walgreen Co.'s Take Care Clinic is in ‘deep discussions’ on potential financial partnerships between several hospital systems around the country in a bid to bolster the pharmacy giant's presence in the retail clinic market.” The partnerships reportedly “may take the form of joint ventures, franchises or other business models, where hospitals may take on some of the risks associated with establishing and running a clinic.”

    Such a move is seen as one way of both giving additional credibility to such clinics as well as a way of sharing the economic risk; the general sense is that the growth of in-store medical clinics in the US has stalled because of concerns about profitability.

    • The Wall Street Journal reports that “as wary Americans start to crack open their wallets, household-goods makers like Procter & Gamble Co., Colgate-Palmolive Co., Kimberly-Clark Corp. and Clorox Co. are cranking up their advertising, hoping to coax consumers farther out of their shells ... To lure them back to premium products - and prices - brand-name manufacturers are churning out "new and improved" goods ranging from more-absorbent diapers, to specialized toothpastes to closer-shaving razors. The strategy relies on advertising to get the word out ... That's one reason the industry's ad spending is expected to grow in 2010. So far such spending has been running well ahead of 2009 levels, with year-to-year increases for household products of 15% in January and 11% in February, says ad tracker Kantar Media, a unit of WPP. PLC.”
    KC's View:

    Published on: April 15, 2010

    • The Food Marketing Institute (FMI) announced the appointment of Pamela Stegeman to the newly created position of Vice President, Business Planning and Development. Stegeman joins FMI from the Pet Industry Joint Advisory Council where she served as president. She also served in various roles during her eight years at the Grocery Manufacturers Association, including Vice President, Supply Chain and Technology. 
    KC's View:

    Published on: April 15, 2010

    ...will return. Really.
    KC's View: