retail news in context, analysis with attitude

Yesterday, MNB took note of a Wall Street Journal report that "Supervalu managed to secure what it says is the last shipment of Twinkies in the country before the bankrupt bakery Hostess shutters its oven doors. [Supervalu] is selling them at their Jewel-Osco stores in the Chicago area, hopeful, perhaps, that news of the 20,000 boxes of iconic Twinkies will generate traffic to its struggling grocery stores.  [Supervalu's] sales have been lagging, and it has been trying to execute a turnaround while also cutting costs, as it looks for a buyer."

I commented:

I don't mean to be hard-hearted and cynical here, but in some ways this could be a metaphor for many of Supervalu's problems.

Faced with declining sales and profits and desperate to do something to turn the company around, management decides to hitch its competitive wagon to a product being made by a bankrupt company that won't be available for very long, so the best it can get in a short-term, almost momentary, boost. And the thing is, if that bankrupt company announces today or tomorrow - which it could - that it has found a buyer for the Twinkies brand, all the air goes out of even this short-term promotion.

Listen, I don't blame Supervalu for trying. And a short-term boost is better than no boost at all.

But it is hard for me to get excited about 20,000 boxes of Twinkies, especially when the substance and value of what they offer Supervalu is about as substantive and nutritious as a Twinkie itself.


One MNB user was prompted to write:

Kevin, I worked for SV for close to a decade before my position was eliminated earlier this year.  A friend of mine who lost his job a couple of years ago called me after he learned my position was to be eliminated.  In an effort to make me feel better, he told me a story about a client that told him “he’ll take the Supervalu Alumni over the current team any day”.  Therein lies the problem.

The leaders at Supervalu approved poor planning, couldn’t stick to a plan anyway and the ones they did stick to were implemented poorly; which resulted in the company’s poor performance.  Many of those decision makers are still there.  They caused a revolving door for many other executive positions after some very competent people were let go or left the company on their own.  Duncan McNaughten, Pam Knous, Mike Jackson, just to name a few.  These were the people that built a successful Supervalu prior to Craig Herkert.  Yes, in hindsight, the Albertson’s acquisition was probably a bad decision, but good decisions since then could have put the company in a much more competitive position.  The board stood by and let it go on way too long.  They allowed their CEO to deflect blame by throwing others under the bus.  They allowed him to keep the “yes men”, who still appear to be more interested in preserving their positions than for the stockholders or associates.  It cost me my job and countless other good people theirs.  It could have been avoided. 

For the last 3-4 years the company has been most interested in short term strategies that would give it a bump at the next year end report. I understand why companies do this, but SV did it to such an extreme that it cost them their future.  Most of these decisions were transactional in nature, so they really would not be known by anyone outside the company; however, those that were a part of the process know that when you add them all up, they did have a material impact.  During the Craig Herkert era they made countless bad decisions that were made public.  They may not have been short term in nature but bad nevertheless. Following are a few:

• Ignoring their wholesale business that was the bread and butter of their success.  Ironically, some rumors indicate that after they are split up, this may be all that’s left.

• “Project SHE”, an acronym for “Simplify Her Experience. For obvious reasons, It was insulting to both men and women alike.  It was also short lived.

• Their focus on doubling the size of Save A Lot in five years.  They opened them in any vacant location they could find and ended up with more failed locations on the books. Plan scrapped.
 
Other impacts on employee retention and morale were as follows:

• They hired companies to micro manage employee health to a point where it became intrusive.

• In the midst of employee layoffs, they created new positions to manage diversity. 

• They created positions to implement green alternatives that were supposed to save money, but ended up costing the company much more. 
 
I’m all for ethically good alternatives and creating such employee positions when a company is rolling along.  It’s part of giving back.    But they failed to recognize the seriousness of their financial condition – something that was plainly obvious.  They should have put all efforts into solving their declining sales problem and decreasing their expenses.  Instead, these new and unnecessary positions were created and many of the skilled workers were let go.  It’s no wonder that they are beyond recovery.  The board just put too much faith in a few used car salesmen.  Most employees could recognize the bad decisions, we were just told to keep quiet and don’t rock the boat. Perhaps if those leaders had listened to the associates closest to the problems, they could have implemented achievable and effective plans.  Instead, they tossed many of the good employees out the door and hired those that were agreeable. 
 
The week after my employment ended, the friend previously mentioned called me again to welcome me to the alumni team.  It’s sad, but we have a growing bench and a lot of prospects.


Another reader thought I was being unfair to Supervalu:

When someone is lying on the ground being gored by a razor back hog and his buddies it is easy to make a snide comment or perhaps ignore the situation as Kitty Genovese was ignored. SV still has some good people out there trying their hardest to keep the company from dying. I doubt that the Twinkie decision came from the C suite. The promotion has a very good chance of working so I don’t understand why you feel the need to mock the real heroes at SV, the guys and gals who are still giving their all.

We have read the Titanic analogies but remember the crew knew they were going down, the crew knew that they were going to die and yet they helped save lives. They were real heroes. Kevin, stop being a jerk and stop disparaging the real heroes at SV, the ones who have no golden parachute, the ones that know their chances of employment are slim and yet are working for their fellow associates and their company.


Another MNB user wrote:

Your comments are right on regarding Supervalu’s Twinkie promo. Unfortunately, such an effort is way too common in such situations. My career path has taken me to companies on the cusp of spiraling into bankruptcy, indeed running head first into that dark place. I don’t know the particulars with Supervalu, but from what I’ve seen over the years these situations all run a path blazed by many before them.

The symptoms of such situations are usually expressed in dwindling customer counts and compounded by a parallel reduction in Sales Per Customer, or transaction. Although these two measures are only symptoms of much deeper problems, they are easy to identify, so what is the best way to increase sagging customer counts; at least to a company in trouble? Hot Ads, one time promo’s, etc. etc. etc. Anything to drive more feet into the store. The issue with such tactics is that they exacerbate the underlying reasons for those per cap drops and ever shrinking customer counts in the first place, not to mention how they complicate inventory and margin management.

I worked for a company that did seasonal walk-throughs before the holidays……..we would choose a store, bring in folks from area stores, have them work in the “show store” to clean it up and merchandise the heck out of every department, or at least get it to what were supposed to be company standards. Every single time we did this, sales in these show stores increased substantially in every department…with no hot ads; no margin spend. This sales halo, driven by increased per cap numbers would last two to three weeks, or until the store got back to its usual level of condition and customer service. Then the per cap numbers would creep back to pre-show conditions. One would think there would be a lesson in there somewhere.

Customer service basics; defined by great conditions, friendly employees working with a sense of direction, pride, and sense of urgency driven by a keen understanding of who actually butters their bread never goes out of style. Too bad that unlike Twinkies, they don’t have a half-life of 50 years!





Finally, one MNB user wanted to weigh in on the Walmart bribery scandal:

I was in Mexico this weekend, for a very short time.  The 3 hour wait in line to come to the USA was a learning experience. About 95% of the people in the mile long line are workers coming across the border to work a shift or two at a minimum wage job.  They might do this 5 times a week.  A well placed bribe with a police officer gets you moved up the the line.  Perhaps $10 US per quarter mile.  Few do this because $40 is a hefty price to pay for an $8 per hour worker.

Imagine your daughter is picked up by police in Mexico but is totally innocent.  All it will take is a well placed bribe to get her out of jail.  Would you do it?  Is that any different than Walmart, Hilton, McDonalds, Costco, or Holiday Inn just trying to get building permit approved?  Do you think all the stores, hotels, and factories owned by American companies in Mexico all just popped up bribe free?


Yes, I think your daughter example is vastly different from companies paying bribes. It is a ridiculous comparison.

In the scenario you painted about my daughter, she's innocent and caught in a system that has nothing to do with justice ... and I'd do anything to protect my daughter.

As for the corporations, there are allegations that a number of them have systematically engaged in the bribery of foreign officials as a way of growing their businesses and generating profit...and doing so all the while knowing that they are breaking US law.

Now, let's be clear. It may be that the only way to get things done in certain cultures is with a well-placed bribe. That may be simple reality. But that doesn't change the fact that it is against the law, and if you get caught, you have to pay the price.

(The Walmart situation has a whole different level of irony because of what some people might say is a holier-than-thou policy that prevents its people for accepting so much as a soft drink from a vendor for fear that this will lead to widespread bribery.)

But a father trying to rescue an innocent daughter is a completely different situation from a company trying to illegally grease the wheels to make things happen faster so it can grow faster and make more money.
KC's View: