business news in context, analysis with attitude

Published on: February 28, 2012

by Michael Sansolo

There may be no better place to find a clear example of how the global economic calamity has changed retail competition and consumer needs than in Spain. But before contemplating the interesting market shifts on the Iberian Peninsula, consider the following wisdom from a very unlikely source:

“Nobody likes the game that they’ve won over and over again to change.” - Lady Gaga

Gaga apparently knows competition and the status quo because she’s right. When the game is going my way, I have no desire for it to change. Yet sometimes it does change and the challenge is changing with it. That’s where Spain becomes so interesting and important.

Last week I had the good fortune to visit some supermarkets in Barcelona, including Mercadona. Given all the raves I’ve heard about this company, the visit was honestly disappointing. The store, shoe-horned into a crowded neighborhood, was really nothing special. Ordinary merchandising and displays jammed into a less-then charming store and little more. In fact, the displays, especially of perishables, were far better in the other store I toured that day.

Except for this: the Mercadona store easily had more shoppers than the other three stores we visited combined.

Apparently, that’s not an unusual situation. Over the past few years, Mercadona is on fire. Market share is growing rapidly moving the company into a dominant retail position through Spain. While that may be nice, it’s the forces fueling that growth that make this a story worth following. Mercadona’s growth demonstrates the power of a strong supply chain, the clout of private label and a classic study in how the touch economic times are reshaping consumer habits.

The story has to begin with supply chain, long the unsung hero or villain of many retail stories. Logistics is rarely sexy, but always seems at the heart of any story of great growth. Sure, Apple makes cool devices, but as many business analysts have pointed out, the company’s real edge is its supply chain. Likewise for Zara, the Spanish clothing company that is building market share and profits off world class logistics.

Mercadona is doing the same. While details are hard to come by, everyone tells the same story. The company attacked its inventory levels, reduced variety and addressed waste to become a model of lean and mean. In the process, the company’s market share more than doubled to 26% up from 12% in 2002, according to Symphony IRI. The leaner supply chain enabled Mercadona to hold or cut prices - a consumer’s dream - just as Spain was sliding into an economic calamity that makes the US look healthy. (Unemployment nationwide sits at about 25%.)

Mercadona also recognized the need to build brand through an aggressive private label program that now accounts for 50% of sales in many categories. Once again, that’s a difficult strategy, but one that is clearly correct one for a country in such economic difficulty.

However, the last lesson may the most interesting over the long-term. Spain’s economic crisis is changing the way Spaniards shop. With economic pressure, consumers limit the size of their market baskets because they don’t have the money for massive stock up trips. In the process, shoppers are finding smaller local supermarkets much more appealing than the hypermarkets that previous dominated the industry. Today, supermarkets have re-emerged as Spain’s market leaders (led by Mercadona, of course) and hypermarkets are hemorrhaging market share. If global fuel prices continue their recent rise thanks to turmoil in the Middle East and growing demand elsewhere, the return to neighborhood stores might only grow stronger.

Which takes us back to Lady Gaga’s bit of wisdom, recently offered up in an on-line blog about sports of all things. Nobody likes change, especially those winning regularly at the current game. But like it or not, the game is changing and is likely to change more. The challenge is how to change with it like Mercadona, or how to get left in the dust like the Spanish company’s competitors.

After all, would Lady Gaga give you bum advice?

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

Published on: February 28, 2012

The Wall Street Journal reports on a new study released by Forrester Research with some compelling numbers about the US e-commerce business.

The study says that “Americans spent more than $200 billion on online shopping in 2011 and are expected to shell out $327 billion on Internet stores by 2016,” according to the Journal.

Additional - and Eye-Opening - statistics:

The study “also predicts that online sales will make up almost 9% of overall retail sales by 2016, up from 7% today.”

“A majority of the U.S. population, 53%, bought something online in 2011. That figure should grow to 58% by 2016, Forrester said.”

“Online-loyalty programs such as Amazon.com’s Prime shipping service have risen in popularity, with 12% of Web shoppers now belonging to one, up from 9% during the 2010 holiday season.”

“And the rise of tablet computers such as Apple’s iPad have also helped, in part because the layout of tablet-optimized retailing websites spurs impulse purchases, Forrester said.”

Whether your business actually allows for online shopping, the numbers actually suggest that every retail business has to factor in these shifts. You either have to be in the game, or you have to compensate for not being the game by creating an in-store experience that is so compelling that it gets shoppers to act counter-intuitively.

This may not be the case today, or tomorrow, to paraphrase Rick Blaine. But it’ll happen soon....and for the rest of your life....until the next big game change happens.

You have to keep your Eyes Open, and keep moving forward.

Published on: February 28, 2012

The Wall Street Journal reports that eBay-owned PayPal, the online payment service, is expanding a pilot program begun with Home Depot that creates a mobile wallet that allows shoppers to pay for purchases using their PayPal accounts instead of credit cards.

According to the story, the in-store PayPal system will be rolled out chain-wide at Home Depot, and should be available in all 2,000 of its US stores by the end of March.

The Journal notes that “beyond Home Depot, PayPal is expected to be available at about 20 different retailers by the end of this year. PayPal has also been testing its brick and mortar service at Office Depot Inc.”

The story says that PayPal has become eBay’s fastest growing business, and that the move into brick-and-mortar stores is a way for the company to accelerate its growth even more.

Published on: February 28, 2012

The Boston Globe reports that Walgreen is taking over a 24,000 square foot retail space in downtown Boston that formerly was occupied by a Borders store, but it plans to open something there that is hardly a traditional drugstore.

According to the story, the store will resemble units opened by Walgreen in New York and Chicago: “These massive emporiums feature sushi stations with chefs, juice markets with smoothies, eyebrow grooming bars, expanded natural and organic sections containing fresh fruits, vegetables, wraps, sandwiches, and salads made daily. The upscale shops also offer more traditional goods, such as prescription drugs, over-the-counter medicines, and household products.”

Published on: February 28, 2012

• The Financial Times reports that Tesco is cutting its prices yet again, in what is described as “a fourth wave” in a campaign designed to reignite stagnant UK sales.

The retailer said it was slashing prices by the equivalent of almost $800 million (US), calling it “The New Price Drop” on 450 product lines including staples and private brands.

Published on: February 28, 2012

Publix Super Markets announced yesterday that it plans to build a $188.5 million distribution center in Orlando, Florida, that will create 156 new jobs.

It is projected that the facility could be open by the fourth quarter of 2014.

Published on: February 28, 2012

Reuters reports that “a federal judge has ruled in favor of global seed giant Monsanto Co, dismissing a lawsuit brought by a consortium of U.S. organic farmers and seed dealers who said their industry is at risk from Monsanto's growing market strength.

U.S. District Court Judge Naomi Buchwald, for the Southern District of New York, threw out the case brought by the Organic Seed Growers and Trade Association (OSGATA) and dozens of other plaintiff growers and organizations, criticizing the groups for a ‘transparent effort to create a controversy where none exists’.

“The Public Patent Foundation (PUBPAT) filed the suit last March on behalf of more than 50 organizations challenging the agricultural giant's patents on its genetically modified seeds. The group wanted a ruling that would prohibit Monsanto from suing the farmers or dealers if their organic seed becomes contaminated with Monsanto's patented biotech seed germplasm.”

Published on: February 28, 2012

• Thirty-three food industry have sent a letter to US lawmakers objecting to a plan by the Obama administration plan to levy fees on processing plants and warehouses that would generate $220 million that could be applied to new federal food safety initiatives.

The groups - including the American Frozen Food Institute, National Meat Association, International Dairy Foods Association and United Fresh Produce Association - say that a time of economic uncertainty when costs are going up and consumers are looking to cut back on spending, such fees would result in higher prices at store level that would adversely affect both business and shoppers.

• Bloomberg reports that the Great Atlantic & Pacific Tea Co. (A&P) has “won approval for a plan to restructure and exit bankruptcy with financing from an investor group that includes Ron Burkle’s Yucaipa Cos.” The company filed for bankruptcy in December 2010.

• Target Canada said yesterday that it has added 14 locations to its plans to open a wave of new stores north of the border, saying that there now will be 60 units opening in March-April 2013.

Published on: February 28, 2012

• Safeway announced yesterday that Brian Baer has been named the president of Dominick’s Finer Foods, a role he has been occupying on an “interim” basis. He has been with Dominick's parent company Safeway since 2001, when he joined the organization as the Vice President of Finance for Safeway's Phoenix Division. In 2002, Mr. Baer joined the corporate office and was appointed to Group Vice President of Financial Planning and Analysis. In 2008, he was named Chief Financial Officer at Dominick's.

• Walmart-owned Asda Group said yesterday that it has hired Richard Mayfield, the director of the shared-services division at John Lewis Partnership (which owns the Waitrose supermarket chain), to be its new CFO.

• Walmart announced yesterday that Mike Huffaker, Senior Vice President, Global Format Development – Walmart International, plans to retire on May 1 after serving more than 26 years with the company.

Published on: February 28, 2012

MNB yesterday took note of a Bloomberg report that there seems to be a shift in attitude on the part of pet owners, many of whom until recently seemed willing to spend considerable dollars on indulgences for their dogs, cats and other pets. A new sense of economy seems to be taking place, which I suggested equates to some level of sanity, and I added:

Maybe it is just me, but I’ve always wondered about why it is so important to feed gourmet, organic pet food to animals that will, in their spare time, lick their genitals.

One MNB user responded:

Couldn’t the same be said for children who eat their own boogers?  “Why feed them organic carrots and greek yogurt, when they’re just going to go to school and eat glue?”  While I’m not saying that children should necessarily be equated to pets, for many people this IS the case.  For couples who choose not to have children, or are prolonging starting a family…many times “Fido” is your “furbaby”.  I also don’t think the importance is on being “gourmet” or “organic”, but rather just made with real ingredients.

We’re seeing the shift in the way humans buy foods for themselves and their family.  We want to consume real fuel; ingredients that are real meat, real vegetables, real fruits and not just corn fillers and processed foods.  People are beginning to pay more attention to the labels on pet food and are realizing to get “real” food, you have to pay a premium.  I’d also like to note that for many pet owners, they’re realizing and noticing the health benefits of feeding their pets “real” food.  The number one allergy in dogs is wheat.  I wouldn’t be surprised if a lot of this is due to humans introducing this into their diets in the form of processed dog foods.  Dogs with allergies are greatly affected by the symptoms of biting/itching their paws, swollen ears, and “hot spots”.  Your pets’ quality of life is greatly impacted by what you put into their bodies. We know this is true for humans so why would it not be for pets?

If people have the means to do so, I don’t think there’s anything wrong with treating your pet like any other member of the family.

First of all, I would be one of those people who can be a little skeptical when people equate pets to kids.

Secondly, I’d just like to point out that we’ve now had the words “genitals” and “boogers” on MNB. You can’t get that kind of pungent, literate, Noel Coward-esque commentary from my nominal competition.

Another MNB user wrote:

In many cases, especially dogs, they treat and protect man better than man treats and protects them. They are loyal to a fault, become not only a member of the family, but our best friend. That while I agree gourmet food maybe taking it a bit far, these animals look to us for leadership, compassion, and help. At the end of the day, I’d rather take my dog (Hans) to lunch then some people I know, as he has earn it.

And, from another MNB user:

Then again, you can’t get much more organic than licking your own body parts. We have always fed our pets Purina from our local Wal-Mart. I never understood why you would spend more on your pet’s food than on your own. We love our cat, but there is a limit to our resources and as much as she contributes to our mental health, she contributes nothing to our financial health.

Not only is it organic, but you could also say it is local. Really, really local.




On the subject of the continued decline of the US Postal Service, one MNB user wrote:

I’d like to hear some other’s thoughts on why simply eliminating 1-2 days per week mail delivery, does not seem to be on the table for discussion.

My personal perspective is that 70-80% of my mail is junk anyway, so I’d only have to stand over the trash can 4-5 days a week instead of 6.

I receive no checks in the mail, I use as much on-line bill pay as possible… for me, mail once or twice a week would be fine.

I know there are legit reasons why many folks need more frequent service than I, but must it be 6 days? Why not lose a day or two?

Certainly this would be a HUGE savings, and a better option than closing facilities?

People need to adjust their thinking about how we use the Post Office and its services in the future…the not too distant future.

Think about how many people no longer have a “home phone”. We discovered we no longer needed it. Things change.

MNB user Karen Shunk wrote:

I think the real issue with the post office is that they are being forced to act like a private company instead of what they are, a public good.  No one builds roads, lays electric lines or treats water to make a profit (or even to break even).  This is infrastructure designed to make everything else possible.

While I think there are plenty of economies the post office could be pursuing, what really needs to happen is for the government (that’s Congress in this case because they “control” the purse strings), to stop insisting that USPS be self funded much less make a profit, and to really consider what the role of the USPS is in 21st century America.

Only when there is a clear goal for the postal service to pursue, rather than just the bottom line, will they be able to get their house in order.  And let’s stop complaining about front line employees a little and consider what a joyful place to work the post office must be.  A little empathy might be in order.

From another MNB user:

The USPS is committing suicide. Making its service slower and less dependable will drive consumers to pay more bills online rather than risk late fees caused by slow postal delivery. They'll move to paperless billing rather than receive bills late and need to scramble to pay on time. It already takes the USPS two weeks to deliver my weekly newspaper, making the paper irrelevant by the time I get it, and Christmas cards arrive in January. The USPS' inability to deliver efficiently created the opening for Fedex, and now their first class service is becoming unreliable. They will become a junk mail delivery service and therefore irrelevant to most people.




Responding to yesterday’s story about Walmart opening its first Los Angeles Neighborhood Market store in that city’s Chinatown, one MNB user wrote:

I grew up in LA and spent 20 years with Von's working in over 150 stores, many intercity and they are a challenge at best. WM doesn't have talent or expertise to do this as most Neighborhood Market stores don't make money - including the one in Champions (Rogers AR), which senior management drives by daily.




On the subject of labeling of genetically modified ingredients in foods, one MNB user wrote:

It might sound like a snap, but as someone responsible for labeling at a major retailer, I have to  speak up about the complexities of labeling genetically engineered (aka GMO) ingredients.  Genetically engineered (GE) crops are so common that it’s easier to point to where they are not used.  That is, by definition, certified organic foods cannot be grown from genetically engineered seeds.  In order to accurately label for GE content, we would need a mandatory certification system for those higher premium “GE Free” products that are neither organic nor genetically engineered.

Since first introduced in 1995, farmers have become loyal to GE seeds.  This technology saves farmers $$$ on petroleum, labor and agricultural chemicals.  According to the USDA, America’s farmers are now planting 55-95% of the corn, soy, canola and cotton crops with GE seeds, the ingredients of which find their way into an estimated 75% of the products in our stores.

Do food additives like yeast, enzymes and vitamins count if they were produced through genetic engineering? (Many are.)  How about beef, pork, chicken, milk and eggs produced from animals that were fed GE crops?  (That’s almost everything other than organic versions.) Would cosmetics, clothing and drugs need to be labeled?  (Many contain GE ingredients.) It would be a crazy for us to sort out!  And since it’s very difficult to measure the difference in finished products, it would be a nightmare to police.  FDA/USDA would need to set up a system with a paper trail like that of certified organic.  And why, when certified organic already prohibits this?  Seems like a redundancy without a benefit.

If consumers feel that this is important, and the evidence is that some do, maybe we should consider a more manageable strategy.  Based on availability and consumer demand, we already can source and voluntarily label “GE free” products.  I also could imagine a mandatory system to label single ingredient products that are the direct result of genetic engineering.  However, few products would get labeled, since most uses of GE corn, soy, canola and cottonseed are as animal feed or in formulated products.

Not so simple!

Another MNB user wrote:

If we need to label generic medicines, even if they are identical to the original prescription formula, then we should be labeling the origins of our food. And, BTW, if it is genetically modified, then it is not identical to the original.

Published on: February 28, 2012

Last Friday, I responded to a request from an MNB user with a list of “classic” movies that I thought might be good to show 10-year-olds. I mostly was trying to come up with movies that would be accessible to a 10-year-old and expand their frames of references a bit. (Acknowledging that video games have ruined their minds and ability to appreciate pacing.)

You can read my original list here.

Not surprisingly - and this is one of the things I love most about the MNB community - this continues to prompt a ton of emails from people with their own ideas...

One MNB user wrote:

Just wanted to chime with some recommendations of “classic” movies. Like you, I think that “classic” can have many definitions, and it doesn’t even have to include “good”.

Additionally, the interests and thresholds of the kids will make a big difference in the success of certain movies. But, I’m thinking one of the objectives here is to simply expose the kids to older/different movies/media/entertainment. Let’s not forget, these kids were born in the current millennium and even films from the 80’s and 90’s may seem ancient to them. And, despite their age, they are probably capable of appreciating and understanding a lot more that we think...

Back to the Future
Ferris Bueller’s Day Off
Big
Any of the Star Wars trilogy (given the current re-release, I suppose the timing is good)
Wayne’s World
Any of the Sean Connery James Bond films (my personal fav is Thunderball)
Who Framed Roger Rabbit
Tron (the original)
Parent Trap (the original w/ Hayley Mills)
Blue Hawaii (this falls into the “classic” category of not having much redeeming value, but it’s fun to watch and a great representation of an era/genre)
To Kill a Mockingbird (this is great for Halloween time)
Planet of the Apes

In the musical genre:
Bye Bye Birdie
Some Like it Hot
High Society

Specialty/Holiday:
Miracle on 34th Street
Holiday Inn
Meet Me in St. Louis

I would also suggest that she investigate television shows. They are generally available and can be consumed in smaller doses, as it were. I would include in that list the “Twilight Zone,” the Muppet Show (this ranks very high on my list), and the “Dick Van Dyke Show” (other to be considered: “Star Trek,” “Leave it to Beaver,” “I Dream of Jeanie,” “Bewitched,” “Gilligan’s Island”…some of these are painfully hokey, but do fall in to some kind of “classic” category. I’ve recently enjoyed getting more familiar with the series “The Rifleman” and “Peter Gunn”.)

Big is a great one...I should have had it on my list.

And I’d go with From Russia With Love, not Thunderball.

I’d worry that a lot of those TV shows might seem dated...but you never know.




Another MNB user wrote:

How about Mr. Roberts?

Excellent idea.




MNB user Gary Harris wrote:

Ok, you sucked me in. Our 10 year old grandson will be visiting us this summer so we better have our own list.

Hmmm, let’s see:
 
The Sons of Katie Elder
The Quiet Man
The Buccaneer
The Great Escape
How Green Was My Valley (if he can sit still for b/w)
Cape Fear (the original, but pretty intense)
Night of the Hunter (another Mitchum bad guy, also intense!)
Old Yeller
The Biscuit Eater (in the same vein)
Trapeze
Arsenic and Old Lace (zany, LOL funny!)
 
Ok that’s enough. I’ll let you know how it goes!

MNB user Tim Heyman wrote:

I have a 6 year old first grader, my youngest son.

He has learned to love the “grays”, as he calls them, Black and White programs on TV, that him and I watch together.

Reruns of the “Jack Benny Show” and “The Three Stooges”, make the kid belly laugh.

And knowing that on these programs, there will be NOTHING controversial, adult content language that I will have to explain is a very, very nice feeling.

From another MNB user:

Western - Silverado.

Comedy/Mystery- Murder By Death (a Neil Simon classic). Clue would be
a close second.

Bio/History- Patton and And the Band Played On - so many life and business
lessons in each of these.

Action- Raiders of the Lost Ark.

Comedy- Marx Brothers- a great lesson in the use of language along with great sight gags. Try following the conversations of Groucho and Chico. simply brilliant at times. youtube the Viaduct scene. A bit dated at time, but a great peek into life in the 30's.

There's many more, each with their own interpretation and opinion.

BTW...Love the book, when is your Cookbook coming out? You give us detailed reviews of wine and beer and you tell us the meal you cooked, but not the recipe!

Why a duck? Why a no chicken...?

As for recipes...I don't have that many of them, but if I’ve ever mentioned a meal that I’ve cooked and people have asked for the recipe, I’m always happy to post it.