retail news in context, analysis with attitude

Published on: September 22, 2010

It won’t surprise you to learn that we have few rules at MNB. But a big one is “don’t breathe your own exhaust.” Whenever we feel too good about what we do, Kevin and I remember that admonishment from a long-time reader a couple of years back. It’s a reminder that we should never get self-satisfied and it’s a lesson that shouldn’t be limited to us.

A great example came Sept. 14th in the mayoral primary in Washington, DC. Despite polls showing widespread support for his achievements, incumbent Mayor Adrian Fenty lost handily to a veteran city councilman. Rarely does an incumbent whose policies draw strong approval ratings manage to lose and Fenty’s case provides a special lesson.

Months before the primary, Fenty was called to a secret meeting by his political advisors, reported the Washington Post. The mayor was told that he had a problem: he was widely seen as aloof and arrogant, which put his re-election in doubt. Fenty responded to the news by blowing up and leaving the meeting.

No one wants bad news, but frequently there is nothing more important. In Fenty’s case, he could have used the news to address his perceived weakness and might well have easily rolled to re-election. Instead he blew up at the messenger, ignored the news and lost.

Think about how you accept and receive bad news or whether you too like to breathe your own exhaust. No doubt, Adrian Fenty isn’t alone.

And that’s my Wednesday Eye-Opener.

- Michael Sansolo

Published on: September 22, 2010

The New York Times reports this morning on how the recessionary economy - and recessionary attitudes that persist despite the fact that the government has said that the recession officially ended more than a year ago - has created an environment in which “dollar stores have shown the biggest gain in shopper visits over the last year out of all the retailers that sell basic consumer goods, according to market research data. Manufacturers are racing to package more affordable versions of products common at those stores, and other budget retailers, feeling the loss of customers, are trying to duplicate their success.”

According to the story, research by SymphonyIRI Group indicates that not only are dollar stores growing sales among their existing consumers, but also stealing customers from other so-called budget formats, such as Walmart, which now is “adding thousands of items to its shelves, including inexpensive ones, and is asking dollar-store suppliers to create small, under-a-dollar packages for its stores, too,” the Times reports. “In areas with high unemployment, Wal-Mart is grouping together its less than $1 items in a clear challenge to the dollar stores.”

Also critically important - dollar stores are adjusting their mix to the changing times. The Times writes, “The dollar stores have found creative ways to keep their prices low. When commodity costs rose for suppliers, for example, the dollar stores asked them to decrease the number of sandwich bags in a box or pushed them to come up with a cheaper version of the products. To increase their attractiveness to the low-income customer, the dollar stores have also switched out merchandise like trinkets for necessities like food and detergent.”

Published on: September 22, 2010

The New York Times has an interesting piece about Austin J. DeCoster, one of the country’s biggest egg producers, and the man whose companies seem principally implicated not just in the current salmonella outbreak, but in those of the past.

Here’s how the Times frames the story:

“Mr. DeCoster’s frequent run-ins with regulators over labor, environmental and immigration violations have been well cataloged. But the close connections between Mr. DeCoster’s egg empire and the spread of salmonella in the United States have received far less scrutiny.

“While some state regulators took steps to clamp down on tainted eggs, the federal government was much slower to act, despite entreaties from state officials alarmed at the growing toll.

“Farms tied to Mr. DeCoster were a primary source of Salmonella enteritidis in the United States in the 1980s, when some of the first major outbreaks of human illness from the bacteria in eggs occurred, according to health officials and public records. At one point, New York and Maryland regulators believed DeCoster eggs were such a threat that they banned sales of the eggs in their states.”

And, the story goes on:

“By the end of that decade, regulators in New York had forced Mr. DeCoster to allow salmonella testing of his farms and, along with other states, pushed the egg industry in the eastern United States to improve safety, which led to a drop in illness.

“But the efforts were patchwork. For example, Iowa, where Mr. DeCoster has five farms tied to the current outbreak, required no testing.

“And the federal government, at times under pressure from Congress and the industry to limit regulation, spent two decades debating national egg safety standards. New rules finally went into effect in July — too late to prevent the current round of illness.

“Records released by Congressional investigators last week suggest that tougher oversight of Mr. DeCoster’s Iowa operations might have prevented the outbreak, which federal officials say is the largest of its type in the nation’s history, with more than 1,600 reported illnesses and probably tens of thousands more that have gone unreported.”

Published on: September 22, 2010

The Wall Street Journal this morning reports that Majority Leader Sen. Harry Reid (D-Nevada) has “hotlined” the food safety legislation that has been languishing in the Senate, which tells his colleagues that it is ready to be “offered for unanimous consent.”

However, the effort to bring the bill to a vote still faces problems since “Republican Tom Coburn of Oklahoma, reiterated that he opposes the bill and won't agree to any procedural maneuvers that would accelerate a floor vote.”

The Journal writes:

“Reid's move came a day after an unusual coalition of industry groups and consumer safety advocates, including the Grocery Manufacturers Association, the Food Marketing Institute and the Center for Science in the Public Interest, marched on the Senate to push for the bill. Businesses have said they support it because having certainty in food-safety standards is good for their industry as well as for consumers.

“The bill, which passed the House in July 2009, would give the Food and Drug Administration more powers to inspect farms, set higher sanitation standards, and order mandatory recalls of tainted food and suspect products. It has enjoyed bipartisan support, but small farmers have raised concerns that the bill favors large agribusinesses and would impose an excessive burden on smaller competitors. Mr. Coburn has criticized its estimated $1.4 billion cost, and says the FDA may wield its new powers overzealously.”

Published on: September 22, 2010

In Syracuse, the Post-Standard has a fascinating story about a Twitter encounter that has not gone well for Price Chopper. Here’s how the paper reports the contretemps:

“Social media became social distortion for the supermarket chain Price Chopper after a representative of Price Chopper’s customer service department got into a personal tweeting dispute with a Syracuse-area customer ... The dispute erupted after the customer posted a tweet on Price Chopper’s Twitter page that criticized the supermarket chain. A Price Chopper employee reacted by contacting the customer’s employer and requesting he be disciplined.”

Price Chopper has said that the employee reacted without authority to do so, has apologizes for the actions, and has said that it will do what is necessary “to repair the trust that has been compromised by this associate.”

Part of the reason the dispute has gotten more play than might be expected is that the customer who complained and then became the subject of the employee’s wrath “is a friend of Anthony J. Rotolo, assistant professor of practice and social media strategist at Syracuse University’s School of Information Studies, who has been blogging about the incident and promises to use it as a “teaching moment.”

Published on: September 22, 2010

A new ShopRite store in West Hartford, Connecticut, seems to be embracing the notion that it has more to sell than just the products on its shelves - it has hired an in-store dietitian that it says will “offer customers nutritional information and guidance that can help influence better food choices.”

Chuck Joseph, president of Joseph Family Markets, owner and operator of the Shop Rite, says that the dietitian will “be available for complimentary in-store consultation with customers effective immediately ... (she) will conduct grocery shopping tours, healthy cooking classes, offer recipe and pantry makeovers and coordinate other health and wellness initiatives and nutritional programs in-store.”

The dietitian, Angela Corcoran, is one of a number of people providing that service at a number of ShopRites in New Jersey, New York and Connecticut.

Published on: September 22, 2010

The San Francisco Examiner reports that the city’s Board of Examiners “voted 7-3 to approve legislation that bans the sale of tobacco products in stores with an on-site pharmacy. It adds to recent efforts to curb smoking, including increasing the number of nonsmoking areas in San Francisco and charging a litter fee on every purchased pack of cigarettes.”

The vote also expands on a law passed two years ago that banned the sale of tobacco by drugstores, but exempted supermarkets with pharmacies. That law was challenged in the courts by Walgreen, which said it wanted a level playing field.

Now it has one.

Published on: September 22, 2010

The Wall Street Journal reports that Walmart-owned Asda Group is investing the equivalent of $155 million (US) “to relaunch its core food range, as the U.K.'s second largest supermarket chain bids to revive flagging sales and steal market share from rivals.

“The chain's revamp affects its mid-tier quality range of 3,500 products, 500 of which are new and being added to the range ... the company said the move is part of a ‘concerted drive to improve product quality.’ The group's three own-label ranges - 'Smart Price', 'Chosen By You' and ‘Extra Special’ - account for just under 50% of group sales, with 85% of that accounted for by the mid-tier range. The group said, 92% of customers pick up an own-label product when shopping in store.”

According to the Journal story, “Analysts say Asda has confused shoppers recently by running short-term promotions alongside its traditional focus on low price and value. In a bid to push the latter, it cut the number of in-store deals five months ago and later launched a price guarantee offering to refund shoppers the difference if they can find their groceries cheaper elsewhere.”

And Bloomberg reports that Asda “enlisted 40,000 customers to undertake ‘blind taste tests’ to determine quality and flavor ... About 500 new products have been added, while 1,000 have been reformulated such as jalapeno hummus, which was previously ‘too spicey’.”

Published on: September 22, 2010

The Wall Street Journal reports this morning that Blockbuster, with $900 million in debt, is likely to file for bankruptcy protection, perhaps as soon as today.

According to the story, “Under the plan, the company wouldn't close its doors, but rather would retreat to a select number of locations while focusing more on digital distribution. Blockbuster recently outlined plans to shutter nearly 1,000 stores, and more closures are on deck. Somewhere between 500 and 800 additional stores could close under Blockbuster's current bankruptcy plan, said the people familiar with the matter.”

Published on: September 22, 2010

• Kroger announced that associates in its Columbus, Ohio, division have ratified an agreement the company reached with United Food and Commercial Workers Local 75.  
The agreement covers approximately 3,000 associates in Toledo and Northwest Ohio working in 26 stores and 12 fuel centers.

• USA Today reports that Anheuser-Busch will use a strategy of sampling in bars and rolling out a new, “hipper” ad campaign designed to make its flagship Budweiser brand more relevant to the 21-30 demographic.

According to the story, “The hype culminates on Sept. 29, when the brand hosts the ‘Budweiser National Happy Hour,’ a bid by Bud to nudge folks to at least try a free brewski. The free samples for those 21 and up range from 6 ounces to 12 ounces, depending on state and local rules.

“At issue: a brand that's lost mojo. Bud unit sales were down 9% last year and are down the same this year, says Beverage Marketing Corp. Beer drinkers have lost loyalty to Bud for the past seven years, research firm Brand Keys reports. Bud's ranking among national product brands slipped from 16th in 2003 to 220th in 2010.”

• Also on the beer front, the Chicago Tribune reports that “while overall beer sales fell by 2 percent last year, the first decline in six years, the craft segment keeps growing. Craft beers still account for just 4.5 percent of U.S. consumption, but sales have increased by about 50 percent over the last five years, according to Beer Marketer's Insights. And that's got big brewers looking for a bigger piece of the action.

“It's particularly evident in Chicago, where Guinness, an import owned by London-based Diageo is testing a craft beer-like specialty brew, Guinness Black Lager in local bars, groceries and liquor stores. Chicago-based MillerCoors, meanwhile, has established an independent division, christened Tenth and Blake Beer Co., to nurture its craft and import beers, including Blue Moon, Leinenkugel, Peroni and Pilsner Urquell.”

Published on: September 22, 2010

...will return.