retail news in context, analysis with attitude

Published on: June 8, 2010

Sir Terry Leahy, who has served as CEO of Tesco for more than a dozen years and helped transform it into a global company that is the world’s fourth biggest retailer, announced this morning that he will retire from the company, effective April 2011. Leahy, who is just 54, said that he plans to spend his retirement primarily managing his personal investments.

Leahy will be succeeded by Philip Clarke, who has been running the company’s international operations and group IT. Clarke will become just the sixth Tesco CEO since the company’s founding in 1919.

According to the Financial Times, “As marketing director in the early 1990s, Sir Terry was seen as having been instrumental in giving Tesco the momentum to overtake J Sainsbury as the nation’s biggest grocer. He was particularly credited with much of the success of its innovative Clubcard loyalty scheme.

“After taking over as chief executive in 1997, Sir Terry built on these promising foundations by finding new growth from non-food products such as clothing, diversifying successfully into financial services and expanding overseas.”

The Wall Street Journal notes that part of that overseas expansion has included a move into the US, where Tesco has opened more than 100 small format food stores under the Fresh & Easy neighborhood Market banner, a move that was widely seen as a way of confronting Walmart, the world’s number one retailer, in its home market in much the same way that Walmart’s Asda Group competes with Tesco in the UK. The Journal writes, “Tesco's move into the U.S. has yet to prove a success as its entrance coincided with the start of the credit crisis and ensuing economic downturn, which caused the company to slow its planned store opening program. However, Leahy said he is certain the U.S. operations will turn to profit. ‘The U.S. business has been a success in the eyes of consumers. I am sure it will be a commercial success,’ he said.”

The BBC quotes Leahy as saying, “"When I became chief executive I had a plan to build Tesco around its customers, to make it number one in the UK and to find new long-term growth in non-food, in services and in international expansion. It has taken 14 years but that strategy has become a firm reality now and so I feel my work is almost complete."

The Financial Times reports that “Tesco also announced other senior changes on Tuesday. It said Tim Mason, head of its US Fresh & Easy business, would become deputy chief executive and would take on responsibility for ‘branding, our values and climate change’.

“David Potts, its UK retail and logistics director, will become the first CEO of its Asian business, while Richard Brasher, commercial director, will now run the UK and Irish businesses. Both Mr Potts and Mr Brasher had been widely seen as potential successors to Sir Terry and their new expanded roles were seen by some observers as an attempt to keep them at the group. Andrew Higginson and Laurie McIlwee will stay in the current posts of retail services chief executive and finance director respectively.”

The Journal writes that “Leahy promised that his retirement did not mean a change in strategy, which is centered around entering new products, like financial services and telecoms, in the U.K., and new markets abroad.”

Published on: June 8, 2010

by Michael Sansolo

To be honest, I’m kind of sick of writing and talking about the economy. Yes it is an absolutely pivotal issue that is continually reshaping lives, businesses and more. But too often I (like many of you) find the economic news is becoming like the great scene from the movie Young Frankenstein.

Dr. Frankenstein (Gene Wilder) is moaning about the horrible job of digging up a dead body to use for his experiment. His trusty assistant Igor (Marty Feldman) assures him things could be worse.

“How could it be worse?” Frankenstein asked while digging through the cold mud.

“It could be raining,” Igor replies. Of course, it starts raining on the spot.

Well, get out your umbrellas. Because while the key debate on the consumer reaction to the economy has focused on the lasting power of today’s frugal shopping habits, another issue gets ignored. That is: Are things really getting better? Because if the economic recovery stalls, there’s good reason to believe the price-value equation isn’t going to change for a long time.

Sadly, there are many reasons to believe the recovery could have problems and that means there are reasons for concern. For instance, there is the ongoing issue of unemployment and underemployment, which leaves too many Americans (and citizens of other countries) with less work then they want and the recent employment numbers weren’t inspiring. There are the problems in European economies that threaten to show the teetering global economy in the wrong direction.

And, apparently, there is a problem down the street from many of us. One that we aren’t seeing.

A few weeks back I heard a most unusual insight on the economy while I was moderating a retail panel. A member of the panel, an executive from BJ’s Wholesale Club whose husband is in the mortgage business, raised a point few of us consider: What if a large chunk of the recovery to date is being fueled by consumers simply refusing to pay certain bill - primarily their mortgages? It was a theory her husband heard about from a mortgage industry publication.

Apparently, it’s not such an esoteric concern. The New York Times ran an interesting article last week on the sorry state of mortgage payments and the numbers should scare anyone. In increasing numbers, Americans who cannot pay their bills are simply giving up on their mortgages. Experience has taught them that failure to pay credit card bills or auto loans can hurt, but mortgages…well, those can wait.

In fact, some of the people quoted in the article say the day they stopped paying their mortgages was the day they found some economic freedom to attack other debts, to get lives and businesses in order and even to indulge in purchases on occasion. Only, they aren’t paying one of their key bills.

The reason they can do it is that banks and courts have been overwhelmed by the foreclosure crisis. As of April, the number of days it takes for a bank to foreclose on homeowners who don’t pay their mortgages rose to 438, up form 251 in January 2008. And that’s the national average. In heavily populated states like New York or Florida, homeowners get by for more than 500 days without paying. The average is well over 400 in California, New Mexico, parts of the south and a large portion of the upper Midwest.

Of course, while we are talking about hundreds of thousands of households apparently skipping their payments, they do represent a small minority of the nation’s home owners. While the foreclosure rate is currently running at levels significantly higher than normal, the vast majority (more than 95%) of homeowners continue to pay their bills.

But it has to make us wonder and worry about the fragile state of our recovery and what any sudden slip would mean to sales of autos, homes and supermarket products. The new frugality may be feeling really old soon.

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 .

Published on: June 8, 2010

The Washington Post has a piece this morning about Walmart’s increased reliance on global markets to satisfy its desire for growth. “It built its business in small towns and suburbs across the United States, but now international sales are growing at almost nine times the rate of domestic sales,” the Post writes.

“Wal-Mart already was facing stalled growth at home after saturating the market, and that has been exacerbated by the weak labor market and high gas prices, which have battered the chain's core customers and depressed sales. That means the company has become increasingly reliant on the appetites of international shoppers to pick up the slack and drive growth, mirroring a broader global shift in purchasing power.”

This is, of course, in keeping with broader global trends. The Post reports that “economists have long predicted that consumers in emerging economies would not only manufacture most of the world's goods but also buy them. China has surpassed the United States as the world's largest auto market in number of vehicles sold. Foreign sales account for roughly 30 percent of revenue of S&P 500 companies, up from 20 percent a decade ago. By 2014, the International Monetary Fund forecasts, emerging economies will contribute more to the world economy than developed nations.”

Published on: June 8, 2010

In Minnesota, the Star Tribune reports that “Supervalu Inc. is in a food fight with Wal-Mart in St. Paul, accusing the retailing behemoth's University Avenue store of violating its lease by offering too many grocery items.” Supervalu apparently is “alleging that Wal-Mart is using more than 7,500 square feet of its space at the Midway Marketplace shopping center to sell groceries,” which violates the terms of its lease.

Supervalu is concerned because it has a Cub Foods in the University Avenue center.

Walmart denies the charges.

Published on: June 8, 2010

The Denver Post reports on a new food craze:

“Vegetarians are defined by what they shun — meat. Vegans, who reject all food from animals, take it even further.

“There are flexitarians, who eat a little bit of meat, and pescatarians, who skip meat but consume seafood. Raw foodists don't believe in cooking.

And now come the nutritarians. Central to nutritarianism is the understanding that fruits and vegetables contain thousands of vitamins, minerals and phytochemicals - substances they believe are not found in any other food source ... Nutritarians think diets bereft of phytochemicals contribute to disease and frailty.” And, they believe that “eating foods rich in phytonutrients is a step on the path toward good health. The compounds could be important in the battle against chronic diseases like cancer.”

The Post writes: “‘What you eat matters,’ says Dr. Joel Fuhrman, a Florida physician and author who coined the term nutritarian. ‘It influences the quality of your life. They are predicting children growing up now will have the worst health in human history. There is more mortality and morbidity caused by obesity and poor diets than there are people starving. Overnutrition has now overwhelmed malnutrition.’

“Eating the nutritarian way, he said, ‘is not a religion. It's not forced. It's about improving the quality of people's lives, a disease-free life. Everybody has a right to know this information’.”

So how to become a nutritarian? Or at least market to them?

Nutritarians, the Post reports, “eat the rainbow ... Since phytochemicals and color are linked, eating fruits and vegetables representing a wide range of colors provides a smorgasbord of phytochemicals ... Mustard greens, kale, watercress, turnip greens and collard greens contain more phytochemicals than any other vegetables, and achieve the highest score — 1,000. At a score of 554, radishes perform well, and at 420, so do red peppers.

“Hot dogs? They get an 8. Cola? 0.5.”

Published on: June 8, 2010

The latest research from the Natural Marketing Institute (NMI) about global LOHAS (Lifestyles of Health & Sustainability) trends reveals that:

• Approximately two thirds of consumers care about the environment but their purchases are primarily determined by price.

• Eight in 10 consumers are interested in some type of green product.

• U.S. consumers spent almost $300 billion on LOHAS-related products and services in 2008.

“With ‘green’ products increasingly becoming mainstream through the introduction of price-conscious options from players such as Walmart, Clorox, Safeway and others, consumers no longer feel bound to pay a premium price for environmentally friendly alternatives,” NMI says in a new report. “This underscores the importance of investing in product innovation and continuing to diffuse hurdles to competitive pricing of green products.”

Published on: June 8, 2010

• The Pittsburgh Post-Gazette reports that Right by Nature, an independent supermarket there, has begun offering a new online shopping service that provides access to some 4,500 SKUs and both curbside pickup and home delivery.

Jason Brown, a spokesman for the company, says that Right by Nature “doesn't necessary see delivery as a cornerstone of its business ... It would be more of an amenity that would make grocery shopping easier and more flexible.”

Published on: June 8, 2010

The San Jose Mercury News reports that Stater Bros. CEO Jack Brown has criticized a piece of legislation that, “starting in 2012, would prohibit grocers from providing customers with single-use plastic bags.” The State Assembly has passed the bill, while the State Senate has not yet taken action.

"It seems to me that if the purpose of this bill is to improve the environment, everybody ought to do it," Brown said. "But it does not affect any of the plastic bags used in department stores. ... And it will not affect the bags used at any of the big box stores ... That's the part of this that smells like politics. It smells like one lobbying group has more lobbying influence than another group."

Published on: June 8, 2010

The Wall Street Journal reports this morning that the board of directors at Casey’s General Stores is expected to recommend today that its shareholders reject a hostile acquisition bid of $1.9 billion that has been tendered by Canadian c-store giant Alimentation Couche-Tard, which has itself announced that it has nominated nine people to the Casey’s board.

Casey’s maintains that the Couche-Tard offer is too low.

Published on: June 8, 2010

Walgreen said yesterday that “it will not participate as a provider in any new and renewed prescription drug plans awarded after June 7 to CVS Caremark’s pharmacy benefit manager (PBM). The company said it had concluded that it was no longer in the best interests of its customers, pharmacists and shareholders to grow its future business with CVS Caremark. Current CVS Caremark plans in which Walgreens is already a pharmacy provider will not be affected.”

“Walgreens participates in hundreds of pharmacy benefit networks, which serve an important function in the marketplace by providing comprehensive access to prescription services for patients in prescription drug plans across the country,” said Walgreens President and CEO Greg Wasson. “Unfortunately, as a result of CVS Caremark’s pharmacy benefit management practices toward Walgreens, it no longer makes good business sense for Walgreens to be part of their network for new and renewed plans. We will continue to participate in current CVS Caremark plans to provide continuity of care and service to our pharmacy patients.”

Published on: June 8, 2010

• The Detroit News reports that “a local grocery union's leadership is warning it may strike Kroger Co.'s 133 Metro Detroit stores if the region's largest supermarket chain doesn't soften its demands for concessions.

“Negotiations for a new contract between the grocer and United Food and Commercial Workers Local 876 have focused on economic issues, including wages, pensions and health care. The union's Kroger Advisory Committee on Sunday approved going on strike if necessary after the union's executive board had OK'd the same strategy.”

• Weis Markets has launched its new “Unmistakably Weis” television commercials, saying that they highlight “the company's commitment to being a locally-focused retailer offering a strong combination of value, service and quality.”

• Forbes reports that “Coca-Cola has bought the rights to distribute the product of one of its main competitors, Dr. Pepper Snapple Group.” The deal is valued at $715 million, and is is good for 20 years; it continues and extends an arrangement that existed before bottler Coca-Cola Enterprises was acquired by Coca-Cola.

Published on: June 8, 2010

Lots of reaction to the email yesterday from MNB user David Livingston that reacted to the gender discrimination lawsuit against Walmart and suggested that there is “no such thing as gender discrimination.  We are all free to pick and choose our compensation and career path.  If the women at Wal-Mart earn less, its because they choose to earn less.  Men or women do not have to accept the wages offered and can opt into other employment.  It appears that at Wal-Mart, women opt to earn less, with is pretty much like all other businesses.”

My response, in part:

(This email) is evidence that in an industry that markets primarily to women, that is made up of some of the smartest and most talented women that I have ever met, (that) there remain pockets of dinosaur-like thinking that reflects the very worst of male chauvinism. (To say there is no such thing as gender discrimination seems like the kind of thing that only a guy - and not that many guys - would say. I am not saying here that women don’t have choices, or that they should play the victim when not treated fairly. But that is not the same thing as suggesting that sometimes they do not have choices, and that sometimes they are treated unfairly, and that they have the right to equitable treatment...)

One MNB user wrote:

Kevin, you're a very brave man.  And you've just made yourself the idol of women everywhere!

I think the only tiny bit of what might pass for reality in Mister Livingston's comments is the part about choices.  I have faced at least 2 times in my career where I had to choose between a situation of obvious discrimination (passed over for promotion, asked about my "childbearing plans") and taking the risk of leaving those jobs for better ones.  I can even remember my first summer job in a large corporation when I was in college, and how I felt when I found out that the male summer intern made twice as much as I did.  Oh, and no one ever asked him to type anything.  Never went back to work there.

I have known women who would not make the same choice, over fear of taking risks due to having breadwinner responsibilities.  I'm sure there are women living in rural areas where there just aren't any other employers, and hence no choices.   Or perhaps some women have self worth issues from repeatedly facing situations where they were told they just didn't deserve the same pay as men.    I knew men in the workplace in the past who considered it a good day if they could make the secretary cry.  I've been in supervisory positions and been verbally abused and threatened by male employees with performance issues (no pun intended).  Fortunately that doesn't happen much any more.  I'll stop there, and just summarize by saying that women are not always treated the same as men.  And they're expected to just be quiet and take it.

The problem is that young women entering the workplace today have no idea this ever happened.  And they never expect it to happen to them.  So how will they react, when it does?  Because it certainly will.  Will they be "good girls" and go along with it, just to keep the job?  Will they be feisty and say "no thanks" and go elsewhere?  I have no idea.  But maybe we should be talking to our daughters about it.

Many employers feel the same as Mr. Livingston about hiring women to do work for less.  But how does a woman know how much her male counterparts are making?  I certainly have no clue, and may be underpaid now as well.  Who knows?  Should salaries be public?

Getting back to choices, I think that the only power women have in how they're treated in the workplace is through their choices.  The most effective way for that to happen is through communication across communities of women.  If an employer discriminates, first go elsewhere if you can (and let it be known why!).  If you can't go elsewhere, then network to find other women in the same situation.  Then take action.  Social Networks can be key in this effort.

Remember, 100 years ago women could not vote.  Women did not gain the right to vote in this country by being "good girls".  They earned it by being strong, being consistent, and never ever believing that they didn't deserve exactly the same rights as men.
 
And don't forget, there are also wonderful employers who treat employees fairly.  Find them, work for them, do a great job and help them prosper.  They deserve to.

Another MNB user wrote:

David Livingston never fails to entertain.  I look forward to reading his commentary in MNB.  Please don't stop.   As Livingston said, “Women have had to do it for less” because insecure, chauvinistic men, like him, have been in the decision making roles controlling salary allocations and been threatened by anyone who may be smarter than they…..no matter gender, color, religious affiliation, etc.

And another MNB user chimed in:

David Livingston starts his statement with: There is no such thing as gender discrimination. And then proceeds to show how deeply ingrained gender discrimination is by writing two paragraphs chock full of misogynistic gender bashing...and he doesn't even see it! The point kind of makes itself.

MNB user Geoff Harper wrote:

I do not know him (don’t care to) but it seems to me that the appropriate type of discrimination is to discriminate against hiring David Livingston.  Unbelievable!

MNB user Karen Labenz wrote:

As a professional, MBA-educated woman, I found Mr. Livingston’s comments completely ridiculous.  Throughout my 20+ year career, I have accepted positions in the food industry for what I considered fair wages, having no knowledge of what my male counterparts were making.  How would I know?  If the companies I have worked for chose to offer and pay me a lesser wage than my male counterparts, shame on them.  I’d like to think that I have been fairly compensated over the years for my talent, regardless of being a female.

Another MNB user offered:

My point of view on David Livingston is:  Complete cave man with no clue - probably spends his day listening to Glenn Beck or something...

MNB user Robert J. Wheaton wrote:

Oh my God.  Did he really write that?

Nice reflective, perspective reply on your part.

Good job.

Still another MNB user wrote:

I am highly offended by David Livingston's comments about gender discrimination in the workplace, and I thank you for sharing his point of view with us. 

As a woman is the CPG industry for the last 25+ years I've seen and received discrimination because of my gender, and it can come in the most subtle of forms, but there's no need to hold a pity party for me.  I am fortunate enough to have received a good education and good training from top drawer companies that I believe have made me a good manager, in spite of inequities in pay and other rewards.  As a manager I try to mentor all of my staff to try for, and achieve more as there should be no glass ceiling for anyone.

Mr. Livingston's point of view is short sighted at best as he assumes that we all have the luxury to "pick and choose our compensation and career path" Really?  While I believe that everyone should try and better themselves not everyone thinks that way, or has the means to do so.  Not everyone is lucky enough to have parents who push their children to go to college or receive scholarships and a means to pay for the education so they can get better paying jobs, and not everyone has the opportunity to choose between multiple job offers - if they are lucky enough to receive more than one - especially during this current economic downturn.  Not everyone has the ability to be self employed as Mr. Livingston suggests, but I'd love to be part of that 1/10th of 1% or whatever the statistic is that can become a professional athlete (hey, even at 49 I'm entitled to have a dream!), so I too can be self employed.

If I were one of those women currently working for Mr. Livingston I hope they heed his own advice and go looking for a better paying opportunity than what he offers since clearly he has no problem sharing his "dirty little secret" about hiring for less, and shouldn't be surprised to see these bright, talented women, who do "outstanding work", do it somewhere else.

MNB user Tom Reilly asked:

I have been a Morning News Beat Reader since 2003. It's a great source of information and insight; and enjoyable to boot. I have to ask though; is David Livingston a real person, or just your homage to Norman Lear's Archie Bunker???

I get this question a lot.

He’s real.

From yet another MNB user:

What rock has this guy been living under? Does he have a wife or daughters that he wants to work and get ahead or see them held back with low pay by dated inane attitudes like his?

And, from another MNB user:

If you hadn’t posted his name, long time readers would have known who said it anyways.  Whenever there is a need for the caveman point of view, we can count on David for supplying the comments.

In Mr. Livingston’s defense, I happen to find his commentary helpful every time he provides it.  His bravery in saying what millions of people probably still believe helps remind me that the world is not made up of homogeneous millions who believe what I believe.  As a marketer, it is critical to keep that in mind when creating and positioning products.  As a human, it reminds me that diversity is everywhere and I should consider that before I open my gob and blurt since I may hurt someone’s feelings.

As a thinking person…I have enough sense to ask that I be kept anonymous (should you feel my opinion worth sharing).

I think that’s enough. More than enough, probably.

My point here is not to pick on anyone. Everybody has a right to their own point of view. Even if they’re as flat-out wrong as David Livingston.

When I read these emails, I thought of my mom, my sisters, my daughter, and of course, my wife. And it is, quite frankly, hard to imagine countenancing the lower payment of women ... especially if you have any women in your life. (Which most of us do. Though, to be honest, I can’t imagine holding such an opinion even if you didn’t know any women at all...simply because it seems wrong on so many levels.)

Guys who say there is no such thing as gender discrimination, in my view, have zero credibility.

Let’s move on.




Responding to my coverage yesterday of Walmart’s annual meeting, one MNB user wrote:

While I have taken you to task many times about your unabated adulation of Wal-Mart I have to ask at what size does a company have to become to worry you? When a company the size of Wal-Mart can make or break any vendor that does business with them is scary. They force many if not all companies that service them, and their competition to have multiple playing fields. Since I have a personal stake in this I find it unnerving.

And another MNB user wrote:

I can’t help but believe that you have taken a drink of the Walmart kool-aid … sure they may add 500,000 jobs to Walmart’s payroll, but this will not add 500,000 jobs to the economy. These jobs will simple replace higher paid positions elsewhere, for a net loss in payroll earnings for the economy as a whole…

I have to admit that I am at a loss to understand when exactly I began to demonstrate “unabated adulation” of the company that I frequently refer to in this space as the “Bentonville Behemoth” - hardly the most generous moniker I could have come up with.

Let me be clear. I am not a fan of all things Walmart. I don’t shop there very often, and hate what their expansion can do to a Main Street. I think communities have the right to limit big box expansion within their borders. If I had to guess, I’d be willing to bet that they’ll have to settle the gender discrimination suit rather than take it in front of a jury. I worry that a price-driven, lowest common denominator and sometime even predatory approach to marketing is not good for retailing diversity, consumer choice, or even the economy in general. And my inner cynicism means I’d rather have a proctology exam than give the Walmart cheer.,

However, I also believe that Walmart is not evil incarnate. I believe that Walmart is in many ways the very reflection of an intrinsically American dream. I believe that while a lot of people profess horror when they look at Walmart, many of them feel at least a few pangs of jealousy. I think that the company has done a lot of things right, from its focus on environmental issues to the ability to drive costs out of a distribution system that is often bloated and inefficient. I’m not sure that the Chicago situation isn’t as much about politics and power as it is about jobs.

And I think that to look at Walmart and see only black-and-white is a mistake. The Bentonville Behemoth does some things well, and some things badly. Of course, that pretty much describes every person and every company...but when you are behemoth, the scales are bigger, the spotlight brighter...and the responsibilities greater.

Finally, I believe that the only thing unabated that I feel for Walmart is curiosity.

(I also believe in the small of a woman's back, the hanging curve ball, high fiber, good scotch, and that there ought to be a constitutional amendment outlawing Astroturf and the designated hitter. But that’s another narrative...)




MNB user Randy Aszman had a thought about the wisdom of the late John Wooden:

I think the line that made the most impact on me (besides “use the backboard!”) is “We make a living by what we got. We make a life by what we give.”

The most remarkable thing that Wooden’s players all seem to say about him is that he didn’t just coach them in basketball, but also prepared them for life.

Thanks for sharing.




Finally, thanks to MNB user Ken Hillman, who was kind enough to write:

You Rock!!! Best morning reading around!!!

Couldn’t do it without you all.