retail news in context, analysis with attitude

Published on: December 13, 2010

The Great Atlantic & Pacific Tea Co. (A&P) filed for bankruptcy protection on Sunday, unable to cope with debt, facing declining sales and profits showing no sign of a turnaround, still adjusting to a game of executive suite musical chairs, dealing with increased competition from the likes of Walmart and Target, and looking for any and all ways to create breathing room that will allow it to survive.

According to the Wall Street Journal, A&P “listed total debts of more than $3.2 billion and assets of about $2.5 billion in a petition filed in bankruptcy court in White Plains, N.Y.
The grocery chain secured $800 million in so-called debtor-in-possession financing from J.P. Morgan Chase & Co. to keep it afloat during bankruptcy proceedings ... A&P also had about $13 million in interest payments due to unsecured creditors Wednesday...and wanted to preserve that money rather than pay it to those that would be lower down in the payment pecking order during bankruptcy proceedings.”

The Journal also writes that “a person familiar with the situation said A&P's inability to negotiate concessions from its main supplier, C&S Wholesale Grocers Inc., contributed to the chain's decision to seek bankruptcy protection.”

A&P was founded in 1859. At one point, in the 1930s, it had 1600 stores..but today it has about 400 stores operating under several banners. The company has been closing and selling stores in recent months, but the efforts seem to have been too little, too late.

“We have taken this difficult but necessary step to enable A&P to fully implement our comprehensive financial and operational restructuring,” said Sam Martin, the company’s current CEO, in a prepared statement.

Jake Brace, a onetime United Airlines executive, has been hired at A&P’s new chief restructuring officer.

Crain’s Detroit Business writes that the bankruptcy filing is like to “hit metro Detroit landlords hard” because of all the A&P-owned Farmer Jack stores that remain closed but under long-term leases, many of which run well into the next decade. “Over the summer, A&P sent landlords letters indicating it will no longer pay rent on the long-term leases,” Crain’s reports. “As a result, there are 25 ongoing lawsuits filed by retail store owners who have not been paid. In addition, a retail broker hired to do work for A&P has also filed suit for not being paid.

“According to a Crain's analysis of the lawsuits, it would cost A&P more than $150 million to pay the total rent owed for the remaining years left on all of the leases.”

And, the New York Post writes that the big winner in all this tumult could be investor Ron Burkle and his Yucaipa Cos., which “has scooped up ‘a lot or most of’ the secured portion of A&P's massive debt load, whose face value now exceeds $1 billion, according to one source close to the situation.

“That puts Burkle in position to take the reins of A&P from the Germany-based Tengelmann family, which has controlled the company for years -- since taking an initial stake more than three decades ago. In July 2009, the Tengelmanns allowed Yucaipa to buy $115 million of A&P's preferred shares, giving it a 27.6 percent equity stake.

“While that investment will likely be wiped out, an A&P bankruptcy filing ‘is not necessarily bad’ for Burkle, said a source close to the situation, who noted that Burkle's recent purchases of A&P's debt, at a steep discount, will give him sway over a bankruptcy process.”

Published on: December 13, 2010

by Kevin Coupe

Information Week reports that “global sales of electronic readers, the portable devices with digital paper displays that appeal to avid book readers, are expected to rise by nearly 80% this year, a market research firm says.

“Sales will total 6.6 million units, compared to 3.6 million units last year, Gartner reported ... While sales will slow a bit next year, e-reader manufacturers are still expected to sell 11 million units, an increase of 68.3%.”

It is worth noting that this technology - and this sales segment - didn’t even exist a couple of years ago. While part of the reason for the enormous percentage increases is the fact that the segment is starting from almost nothing, the growth also reflects not just a business advance, but a cultural/consumer shift nothing short of tectonic.

A couple of notes here.

One, the pricing on the e-book readers has changed dramatically ... and Information Week suggests that it will go down even more “as low-cost devices subsidized by content owners, such as book or magazine publishers, hit the market.”

Two, the segment also will get pressure from the high end ... as products like Apple’s iPad also seems to be having a slight diminishing effect on e-book reader sales.

All of which means that this category is enormously fluid, which lots of change and dynamism remaining.

But let’s repeat one thing, for the benefit of any marketer who believes that change comes slowly.

This sales segment didn’t even exist a couple of years ago.

Published on: December 13, 2010

The Wall Street Journal reports that Walmart “is in advanced discussions” with New York City’s politically powerful construction unions, hoping to get a deal “to construct new stores using unionized construction workers, who would in turn support the retailer's local entry, multiple people familiar with discussions said.”

This is seen as a divide-and-conquer political ploy, since Walmart’s “effort is still being fiercely resisted by unions that represent retail and grocery store workers, among others, who protest Wal-Mart's low wages. The plan will be the subject of a City Council hearing scheduled for January.”

No specific locations have been identified, but Brooklyn is seen as a likely point of New York entry for Walmart.

Published on: December 13, 2010

The Denver Post has a piece about Smart & Final’s aborted expansion into the Mile High City with its SmartCo Foods discount format, noting that the “failed expansion into the Denver area cost an estimated $40 million to $70 million and was plagued by poor planning, a misreading of the local market and cost overruns, according to a source familiar with the grocery company's operation and finances.

“Coupled with dismal sales, those problems persuaded private-equity firm Apollo Global
Management, owner of SmartCo parent Smart & Final Inc., to pull out of Colorado before year's end, putting more than 500 people out of jobs, said the source, a high-level company employee who spoke on condition of anonymity to avoid retribution from Smart & Final.”

The story suggests that there were tax advantages for Apollo to close the Denver operation down before the end of the year, a move that “stunned employees who lost jobs, vendors who were building business with the company, local officials who had welcomed SmartCo to their communities this summer and even some customers who had begun to warm to the new chain.”

Published on: December 13, 2010

The Dietary Guidelines Alliance is out with a new study saying that “most parents don't fully understand the impact of caloric intake on weight and only 14 percent of parents say they consistently pay attention to the amount of calories that their family consumes each day. Even more alarming, only 9 percent say that tracking their family's calorie consumption would be easy for them to do.

“Just over half of parents, 52 percent, believed that paying attention to calorie intake could impact the health of their family's diet. However, most parents, 82 percent, believe that serving nutrient-rich foods, like fruits and vegetables, can have a positive effect on the health of their family's diet.”

Elizabeth Pivonka, Ph.D., R.D., president and CEO of the Produce for Better Health Foundation (PBH) - a member of the Alliance - said in a statement that "the fact that most people don't know what a calorie is or how many they're supposed to have in a day tells me that consumers still need a lot of information about how to eat healthfully. People are getting the message that fruits and vegetables are healthy foods, but we still need to make the effort to educate consumers on basic health concepts like calorie intake, its effect on weight control, and even how fruits and vegetables factor into the equation ... This presents grocery retailers with the opportunity to connect with their customers by providing the healthy eating messages they really need in an environment where they are willing to pay attention."

Published on: December 13, 2010

The Wall Street Journal reports that the Obama administration will convene on Wednesday a meeting of CEOs - including executives from PepsiCo, Google and American Express - designed “to discuss trade, tax, regulatory issues and the deficit.”

According to the story, President Obama hopes that he will be able to use the session as a way to persuade business leaders to begin hiring and investing, which would be positive for a struggling economy.

“Mr. Obama has met with chief executives since the start of his administration, but some who attended those meetings have complained that he didn't take their views into account in policies that resulted,” the Journal writes. “Corporate leaders have expressed dismay at Mr. Obama's sometimes sharp criticism of multi-national corporations, and his administration's regulatory and tax policies, such as a proposal to raise taxes on income corporations earn overseas.

“Business executives say they sense a difference in the approach taken by Mr. Obama since Democrats got trounced in the November congressional elections. Recent administration compromises on trade and taxes have encouraged business leaders.”

Published on: December 13, 2010

• Tesco announced that its US-based Fresh & Easy Neighborhood Markets division has established “a partnership with REC Solar, a leading solar electric system provider in the United States, to install roof-mounted solar systems on nine stores. The systems will generate more than 410 kW of solar energy. In total, the systems will produce an estimated 620,000 kilowatt-hours (kWh) annually, the equivalent of reducing 22 million pounds of CO2 emissions – or removing 28 million car-driven miles – over the next 25 years. Fresh & Easy stores already use 30% less energy than a typical supermarket.”

Published on: December 13, 2010

• The Indianapolis Business Journal reports that “the National Labor Relations Board has scheduled a February hearing to present details of unfair labor practices charges levied against Fishers-based Marsh Supermarkets Inc.

“NLRB staff investigated complaints filed by United Food and Commercial Workers Local 700 earlier this year alleging that Marsh violated federal law by threatening and intimidating employees to discourage them from forming a union. The grocery chain also allegedly fired an employee for supporting the union. The federal agency has filed a formal complaint as a result of that inquiry, the union said in a statement released Thursday.”

Marsh has “vehemently” denied the charges and pledged to defend itself aggressively.
• In Minnesota, the Star Tribune reports that General Mills announced “that it has cut sugar in cereals advertised to children by 8 percent on average in 2010.

“The Golden Valley-based company said that since 2007, it has achieved average sugar reductions of 14 percent on cereals advertised to children, while some cereals have seen sugar cuts of as much as 28 percent during that period.

“General Mills, maker of Lucky Charms, Trix and Count Chocula, also said that by Dec. 31, shipments of all its cereals advertised to children will have 10 grams of sugar or less, with some already at 9 grams. That compares with 11 grams of sugar a year ago.”

• The Chicago Tribune reports that McDonald’s - following the lead of Starbucks and Jamba Juice - will begin selling oatmeal as part of its morning offering.

According to the story, “apple-flavored oatmeal jazzed up with diced red and green apples, a mix of raisins and cranberries and cream will be available at McDonald's 14,000 restaurants nationwide by the end of this week. The product, served in a small cardboard cup, will cost $1.99.”

Published on: December 13, 2010

• Kroger Co. said Friday that Geoffrey Covert, the president of the company's Cincinnati/Dayton Division for the past six years, has been named Senior Vice President of Retail Operations, effective January 1, 2011.

• Schnuck Markets reportedly has hired Robert J. Howard, a CPG company veteran, to be its new vice president of marketing.

Published on: December 13, 2010

Got the following email following up on the discussion about child nutrition education and all the debate that’s been taking place here on MNB:

I want to chime in as one of those nasty food manufacturers who are trying to find ways to chemically addict people to our food…

The company I work for has a large portion of our business dedicated to selling the public school systems in the US.  We call them K-12 and every year we host a roundtable event working together with legislators, school nutritionists and distributors to find win-win solutions.  The issues that public schools face trying to feed our children are very complex and very daunting.  Every district has different rules, different contracts and different problems.  School districts that include poverty level areas are often providing the only meals that these children get in a day!  In urban areas schools almost never close due to snow because they know that without going to school, these children will not eat.  That is not an obesity problem, it’s a survival problem.

The federal government has created several different programs over the years to find ways to subsidize funding these meals and then state/local government adds more ideas.  Did you know that in thousands of school districts book/computer/arts funding is tied to the number of kids that eat breakfast at school?  That’s correct your child’s education depends on whether or not they eat breakfast at school.  So at the roundtable event, school feeders asked us to help them find a product that meets nutritional standards, are at least 51% whole grain, can be made with unskilled labor in seconds, works for breakfast, costs less than 40cents a serving AND tastes good (so kids will eat it, participation will increase and the school can buy books).  How hard can that be?  We created a solution that has become our company’s most successful product launch in 20 years…but this is not a product plug.  This is a story of the kind of dedication, resources and transparency required to solve the problem.

The federal solution has been based on funding and commodity processing.  Every school in the United States of America is allocated a certain amount of commodities (flour, meat, cheese, produce etc.).  Since most schools no longer have skilled labor (some don’t even have ovens) how are they supposed to use these commodities?  Greedy manufacturers like us have found a solution…we take possession of their commodities and process them into more fully finished goods like meatballs, bread and fruit cups (plus a host of other things that parents would be shocked to know was funded by the federal government).  We sell these processed foods back to the same schools with a mark-up that barely covers the cost of additional ingredients, manufacturing and transportation. Companies must be licensed and audited to process commodities.  If you think that government subsidies of agriculture is only about protecting farmers…then think again.

So the next time your child asks for a $1.00 for lunch money you should ask yourself what it takes to provide a “meal” for $1.00.  Can you do it without skill? Can you do it for 2,000 kids in one hour?  Oh and without an oven? If someone said you could have an extra 8 cents per meal…would it be enough? Think again before you mock the school lunch-lady!

The government subsidies of meals impacts every household in America with or without kids, brown-baggers or buyers, rural or urban.  It is all linked together into a system that is life and death for some, quality of education for others and just plain crazy for everyone involved.

I know it’s a long one, but this is a point of passion for my company and I got a little offended by the accusation that we are trying make addicts out of children.

There was an MNB user from Walpole, NH, last week who objected to schools putting restrictions on foods that can be brought by parents into the classroom. (He blamed the Obama administration.)

MNB user Elizabeth Archerd responded:

It has been against policy to bring in home-made food to classrooms in our local school system for longer than I can recall. Fresh baked goods must come from licensed bakeries, or else you have to bring in packaged food.

Nothing to do with Obama or food police, just basic public health.

And another MNB user wrote:

Has the gentleman from Walpole, NH ever stopped long enough to think that maybe other parents in his child’s classroom don’t want him or his wife bringing in unhealthy snacks? NO – because he’s only thinking of himself and his “rights being violated”……  My wife and I work diligently teaching our daughter about healthy food choices.  We limit her snacking options at home to fruits and vegetables. We limit her food options at school as we prepare her lunches four days a week and allow her to get the school hot lunch one day a week selecting only the healthy option. So why would we want Mr Walpole tempting her by providing unhealthy snacks to her entire class and doing so against our wishes or without our permission?

This isn’t a government intrusion issue, this is a personal intrusion issue.  Mr. Walpole demands that the government respect his rights and wishes but doesn’t have a problem with violating other parents rights and wishes in the process of satisfying his own self interest of “bringing snacks to the kids”.

Our teachers already have a tough time with budget deficits and funding cutbacks leading to larger class sizes. School is for learning and not wasting time trying to corral a bunch of kids hopped up on sugary snacks brought by “well intentioned parents” which may seem “special” but is ultimately counter-productive to the learning environment.  At the end of the day, if Mr. Walpole brings “healthy snacks” then parents like myself and my wife won’t mind, and if it takes the schools or the government to monitor what is considered a “healthy snack” than I want that protection in place so that “well intentioned” parents like Mr Walpole don’t overstep their bounds and violate my child’s nutritional plan without my personal approval.

It reeks of hypocrisy when Mr. Walpole complains about the government violating his right to bring any snack he chooses to school which in turn would place him in a position of violating other people’s rights to monitor and protect their children from unhealthy food choices that may lead to premature diabetes in a child from a family with a severe history of diabetes.  Mr. Walpole needs to dismiss all the conspiracy theories he hears from the likes of Palin, Beck & Limbaugh and open his mind to think that maybe the government isn’t trying to limit HIS freedoms, but protect those of EVERYONE around HIM……

Published on: December 13, 2010

On Friday, in OffBeat, I criticized William Bennett, the author, radio host, gambler and former US Secretary of Education, for saying on “Morning Joe” that he thinks the best American movie ever made is “Independence Day.”

He was on the show to promote his book, “The American Patriot’s Almanac,” which features a chapter on movies that reflect the American experience; but that’s not what he said on “Morning Joe.” He said, very clearly, that “Independence Day” is his idea of the great American movie.

As I said on Friday, I have no problem with liking, even loving “Independence Day.” I don’t even have a problem if “Independence Day” is your favorite movie.

But the “great American movie”? Give me a break.

So I offered my own off-the-top-of-my-head list ....without benefit of even IMDB...in alphabetical order...of 50 American movies that I certainly think are better than “Independence Day.” I wrote:

It is a highly personal list ... it reflects all of my biases, both in terms of era and genre, and I concede from the start that there are tons of great movies left out. But it would be my guess that these American movies will be remembered far longer than “Independence Day,” and maybe even longer than William Bennett.

You can read my list here.

Needless to say, this prompted some disagreements...creating my favorite kind of discussion.

MNB user Michael Freese wrote:

Of course, you will now get a ton of emails asking why you didn't include.......whatever movie?
 
This is mine.....I think Patton is certainly one of the best dang movies of all time.

MNB user Lou Scudere offered:

Twelve Angry Men.

MNB user Dan Jones wrote:

Oh the emails you will get on this one – your web server will be working overtime. 
 
At least one Rob Reiner film should make your list.  In alphabetical order, without IMDB...

Best in Show, This Is Spinal Tap, The Princess Bride, and Waiting for Guffman.

Except that Best in Show and were directed by Christopher Guest, who starred in Spinal Tap. All good stuff...though I’m not sure they are top-50 material.

MNB user Jeff Davis wrote:

Great list of movies. I was surprised that Oh Brother Where Art Thou and October Sky didn't make it. 

MNB user Gary Harris had his own additions to the list:

Gone With the Wind
How the West Was Won
The Patriot
Last of the Mohicans
Glory
Memphis Belle
The Sons of Katie Elder
The Magnificent Seven
The Great Escape
A Face in the Crowd
Apollo 13

MNB user David Burgess wrote:

The list should begin and end with Apocalypse Now.

It must include The Manchurian Candidate.

Almost all Hitchcock could be on it, but really Vertigo and Rear Window are mandatory.

Ever hear of Frank Capra?  Four or five of his films should be on this list.

You have The Big Sleep, but Howard Hawks’ screwball comedies are worthy of consideration.

I’d take Bringing Up Baby or His Girl Friday over Tootsie any day.

You’re right - I should included Apocalypse Now and the original “Manchurian Candidate on the list...though I’m not sure which two I would knock off. I’ll have to think about that.

I think a very good argument could be made that instead of North by Northwest and Psycho, I should have included Vertigo and Rear Window.

I love Capra. (His autobiography is terrific ... I can remember reading it three decades ago, and it cemented my love affair with the movies.) I would include Mr. Deeds Goes To Town and Mr. Smith Goes To Washington ... but not It Happened One Night, which I’m not as fond of, I’m afraid.

And not including Bringing Up Baby or His Girl Fridaywas regrettable...though I do think Tootsie is a top-50 US movie.

Along these lines, one MNB user made an interesting series of observations:

I've read too many contentious best film debates over the years to get involved in another one but I did find something about your list that I did find interesting and revealing. Sorting your choices by decade we find:

There is only one (!) film on the list made prior to 1940 with 1939's Wizard of Oz just making the cut.

Continuing by decade:

1940s: 6 films

1950s: 4 films

1960s: 8 films

1970s: (Wait for it) 21 films

1980s: 9 films

The decade of the 1990s is represented solely by 1990's Good Fellas. There's nothing from the ensuing 20 years.

Viewed from this perspective, it's clear that what you have isn't really a list of the 50 best American movies so much as it is the wistful memories of a Man of a Certain Age.

Well, I did say that the list reflects all of my biases, both in terms of era and genre.

I did have Buster Keaton’s The General - the great American silent movie - on my first draft. But I decided to draw the line at 50, so it fell off.

You are right on the money about the generational issue, though I should note that as a film student at Loyola Marymount University in the late seventies, I probably had the privilege of being exposed to more films from more eras than most people my age. That said, I would agree with the school that says that the 1970s was the last great golden age of American cinema, a time when boundaries got pushed and creativity was at an all-time high ... which sort of explains my list.

But your point is certainly legitimate.

Another MNB user wrote:

I was saddened to see so few movies on your list dating from pre-1960.  Take a movie like The Sweet Smell of Success, for example; just the late-50s NYC scenery itself is enough to propel it onto my Top 50 list, to say nothing of the bleak, gritty existences of the characters portrayed by Tony Curtis & Burt Lancaster.  Hepburn & Tracy movies like Woman of the Year, another incredible look at real life from an age gone by.  I've gotten to where I can barely stand to watch a movie that doesn't have at least 50 years of dust on it; I'll make an exception for '60s offerings like The Manchurian Candidate and Dr. Strangelove, but there aren't many beyond that.

By the way, I think you threw the baby that is Bill Bennett out with the bathwater that is his view of Independence Day. Bennett is a fabulous & powerful speaker in person.  Thought provoking like few people I have ever heard.

Different strokes for different folks.

Another MNB user wrote:

Just for the sake of debate: 
 
I feel like you assumed “great” to be purely a measure of a film’s cinematic qualities (not an unreasonable assumption, and if made, your list is certainly, well, great, and Independence Day is probably deservingly left off the list).

But, perhaps Mr. Bennett was also taking into account financial success as well (box office, licensing, DVD sales, etc).  In which case, Independence Day certainly moves way up the list. 
 
I can think of many walls that are better examples of fine construction than the Great Wall of China, but it’s still “great”…

Except that’s not what he said. And clearly not what he meant. “Great” and “financially successful” are not mutually exclusive...but they also don’t mean the same thing.

Gone With The Wind is one of the most financially successful films of all time ... but in my view, not even one of best 100 American movies ever made. But that’s just me...

(I really love this line of discussion...)

Published on: December 13, 2010

In Week Fourteen of the National Football League...

Cincinnati Bengals 7
Pittsburgh Steelers 23

Tampa Bay Buccaneers 17
Washington Redskins 16

Atlanta Falcons 31
Carolina Panthers 10

St. Louis Rams 13
New Orleans Saints 31

Seattle Seahawks 21
San Francisco 49ers 40

Denver Broncos 13
Arizona Cardinals 43

Kansas City Chiefs 0
San Diego Chargers 31

Miami Dolphins 10
NY Jets 6

New England Patriots 36
Chicago Bears 7

Green Bay Packers 3
Detroit Lions 7

Oakland Raiders 31
Jacksonville Jaguars 38

Cleveland Browns 6
Buffalo Bills 13

Philadelphia Eagles 30
Dallas Cowboys 27

The New York Giants - Minnesota Vikings, scheduled to be played on Sunday afternoon, was postponed to Monday night when a major snowstorm blew through Minnesota, making it impossible for the Giants to get there; the game was then moved to Detroit’s Ford Field when snow that accumulated on the roof of Minnesota’s Metrodome caused a leak that made the field unplayable.