business news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: September 11, 2013

    In case you missed yesterday's breaking news alert, with additions and amplifications...

    The Yucaipa Companies, the private investment firm, announced today that it is acquiring Fresh & Easy Neighborhood Markets from Tesco, the British retailer that launched the chain six years ago to great fanfare but never was able to gain enough competitive traction to make it a worthwhile investment.

    While the official announcement said that "term of the deal were not disclosed," the Wall Street Journal reports that "under the transaction, U.K.-based Tesco not only won't receive any money, it is essentially paying Mr. Burkle's Yucaipa Cos. to take on the liabilities," to the tune of about $235 million (US).

    The Sacramento Bee is reporting that among the stores scheduled to be closed are the five in Sacramento and the one in Modesto, though there is no explanation for why some stores are being shuttered.

    The Bee also reports that "Lloyd Greif, a Los Angeles investment banker who knows Burkle, said the tycoon plans to use the Fresh & Easy stores to revive the Wild Oats brand ... Burkle made his original fortune in the supermarket business, taking over chains like Ralphs and Food4Less. He began exiting the industry about 15 years ago but was still major investor in the Wild Oats chain until it was sold to Whole Foods in 2007." Burkle still owns the Wild Oats banner, and reportedly has been looking for a way to bring it back.

    The BBC reports that "if Yucaipa is successful and the business becomes profitable, Tesco has the option to buy a stake."

    The Washington Post notes that Tesco said in April it planned to sell its U.S. stores, which were based in Arizona, California and Nevada. At the time, the company said its U.S. foray had lost it some 1.2 billion pounds ($1.8 billion)."

    The deal is expected to close within three months.

    Philip Clarke, CEO of Tesco, released the following statement: “The decision we are announcing today represents the best outcome for Tesco shareholders and Fresh & Easy’s stakeholders. It offers us an orderly and efficient exit from the US market, while protecting the jobs of more than 4,000 colleagues at Fresh & Easy.”

    Ron Burkle, Managing Partner of Yucaipa, made the following prepared statement: “Fresh & Easy is a tremendous foundation. Tesco should be applauded for giving their customers an affordable, healthy, convenient shopping experience.  Its dedicated employees and great base of customers give us a solid starting point to complete Tesco's vision with some changes that we think will make it even more relevant to today's consumer.  We plan on continuing to build Fresh & Easy into a 'next-generation convenience retail experience,' providing busy consumers with more local and healthy access for their daily needs."

    According to Bloomberg Businessweek, "Yucaipa will acquire more than 150 of Fresh & Easy’s near 200 stores as well as distribution and production facilities ... Those outlets not included in the transaction will be closed in the coming weeks, though Tesco reportedly can continue to try to sell them to other companies.

    "Fresh & Easy has never made a profit since it was built from scratch in 2007. Tesco has invested about 1 billion pounds ($1.6 billion) in the business in that period. Many analysts saw it as a drag on resources at a time when Tesco is struggling to maintain its dominant share of the U.K. grocery market."
    KC's View:
    Fresh & Easy, despite the expectations of many people (including me) that it would provide a unique and differentiated shopping experience to shoppers, in retrospect seems doomed from the beginning since Tesco totally misread the market and the desires of US shoppers - remarkable since the company's research abilities always have been highly respected, and it said it spent an enormous amount of time and money researching the California marketplace.

    While this won't been seen as a high point in Clarke's tenure, he'll at least get credit for getting Tesco out of a bad situation. Not so lucky will be the reputation of his predecessor, Sir Terry Leahy, who has to take the blame for the whole fiasco.

    What remains to be seen is what Yucaipa will do with the chain. But it seems to me that if they just try to be another small-store shopping experience, it won;t be worth the effort. On the other hand, if they try to do something unique - finding ways to differentiate themselves from the likes of Trader Joe's and Whole Foods and all the other bricks-and-mortar competitors in the western US, at the same time as Amazon is looking to make inroads with e-grocery there, then maybe Fresh & Easy will be worthy of the name.

    And by the way ... y'think it is possible that Burkle is chatting with Jeff Bezos, looking to see if there are ways in which Fresh & Easy's real estate can be turned to Amazon's advantage? It certainly might be worth a phone call...

    Published on: September 11, 2013

    by Kevin Coupe

    I find myself this morning wondering if there will ever be a 9-11 on which I won't feel obligated to write about the events that took place on that date in 2001.

    I hope so. But I'm dubious.

    Somehow, whenever I hear those numbers together, I can't help but think back on that day. Whenever, in September, we have a crisp and gorgeous morning, I can't help but remember.

    That's probably a good thing.

    But it probably also makes sense to recall the words of British Prime Minister Winston Churchill, when addressing the students at the Harrow School in October 1941:

    “The pessimist sees the problems in every opportunity. Whereas the optimist sees the opportunity in every problem ... Never give in, never give in, never; never; never; never - in nothing, great or small, large or petty - never give in except to convictions of honor and good sense."
    KC's View:

    Published on: September 11, 2013

    Love this piece in the Washington Post, about Duke's Grocery in Dupont Circle, a new store described as a sandwich shop and market that features "a melting pot of a menu, with classic deli sandwiches mingling with Italian subs, Vietnamese banh mi, tandoori chicken and classic British fare ... When you pick up your sandwiches, you can grab groceries or a coffee, too. Duke’s will feature produce for sale from Potomac Farm Market, which also supplies the restaurant with its ingredients. A vintage espresso machine will keep guests caffeinated when they stop in for an English breakfast or pastry — breakfast and brunch service will be coming soon after opening."

    But here's where it gets really different: "Duke’s is a sandwich shop and market by day and a bar by night. Expect concoctions like a Dark and Stormy made with house-made ginger-chili syrup, and a citrusy Shoreditch Fizz, with citron vodka, prosecco, limoncello fresh lemon and basil. There will also be local craft beers and a wine list featuring varietals from around the globe."
    KC's View:
    Y'know how I'm always talking about differentiation?

    Well, this is what I'm talking about!

    Published on: September 11, 2013

    Acosta Sales & Marketing is out with a new market research report called "Four Generations in the Aisle," which looks at how generational differences impact shopper behavior, analyzing the Silent Generation (born 1925-1942,), Baby Boomers, Gen X, and Millennials.

    Among the conclusions:

    • "Gen Xers spend more on groceries than any other generation, with an average monthly spend of $323.10, while Millennials spend the least with an average monthly spend of $252.60."

    • "Millennials shop most frequently, making an average of 4.1 routine trips per month. Baby Boomers and the Silent Generation both average 3.6 routine shopping trips while Gen X frequents stores an average of 3.9 times."

    • "Millennials are heavily influenced by friends and social/community and shop the store perimeter" ... "Gen Xers are knowledgeable shoppers who use information to guide their decisions" ... "Boomers are fairly brand loyal, and respond to products and retailers that address the 'What’s in it for me?' question" ... and "Silents are brand loyalists who buy what they have bought before."

    • "Millennials are making more trips to club and drug channels ... Gen Xers are frequenting grocery and dollar channels most often ... Baby Boomers are shopping more at grocery and club channels ... (and) Silents are going to drug and dollar channels most frequently."
    KC's View:
    A lot of this makes sense, but I also think it is advisable to remember that none of these groups are homogeneous. Not all the people within any of these groups are the same, and so while observations like these may be a start in understanding the customer, they are just that. A start. Savvy retailers have to drill down a lot deeper if they are to have actionable intelligence with which they can effectively market to shoppers.

    Published on: September 11, 2013

    Fresh Direct, the NYC-based pure-play e-grocer, said this week that it is expanding its service into 123 new zip codes in Rockland County, NY ... Pennsylvania ... New Jersey ... and, for the first time, into Delaware.

    Jason Ackerman, FreshDirect Co-Founder and CEO, said in a prepared statement that the expansion was based on demand, and that the company already has "thousands of residents in our new expansion areas pre-registered to be future customers."

    Meanwhile, Crain's New York Business reports that "FreshDirect has entered into a venture with Denihan Hospitality Group, which owns and manages 14 properties, including five Affinia hotels in Manhattan. Most of Affinia's rooms come with kitchens. Guests of the Affinia properties will be able to stock their refrigerators with microwaveable gourmet meals, snacks, fruit and other items from FreshDirect upon their arrival."

    "It's a smart way to offer room service," Lisa Zandee, senior vice president of brand management for Affinia Hotels, tells CNYB. "It wasn't like we had to budget for this, because FreshDirect already had the business model."

    This synchs up with a broader trend in the hotel business, according to the story: "The initiative comes on the heels of a decision by the Hilton New York, the largest hotel in the city, to eliminate room service altogether starting this month, because the amenity cost the property too much money. Other hotels are downscaling room service, offering delivery of food in paper bags."
    KC's View:
    Love the hotel idea ... it has a kind of ingenuity to it, as long as the hotel room has the space to put stuff that's been ordered.

    And I think it is very smart for FreshDirect to continue expanding ... after all, the competitive pressures in e-grocery are only going to get greater, and it needs to lock in as much business as it can. Except, of course, there's no such thing as "locked in."

    Published on: September 11, 2013

    Advertising Age reports that on Monday, September 9, Kmart made the "unprecedented move" of airing its first Christmas commercial, "which promotes the retailer's layaway program, features a gingerbread man sneaking up on a woman working in an office cubicle. A voiceover says: 'Don't let the holidays sneak up on you. Shop early with Kmart free layaway. … Kmart. Get in, get more Christmas'."

    The ad came almost two months earlier than Kmart's first holiday ad in 2012.

    Ad Age notes that "almost immediately consumers took to Kmart's Facebook page to complain about the early arrival of a Christmas ad. The brand has been thanking people for their feedback and noting, 'We're just really excited for the holidays and layaway'."

    The story goes on to say that "in years past, it's not been unusual for retailers to begin digital promotions or social media efforts well in advance of the holidays. But TV ads have typically been kept under wraps until late October. One notable exception: A year ago Target aired its first holiday ad on Oct. 7, more than three weeks before Halloween."
    KC's View:
    I'll answer the question in the headline.

    Yes, it is way, way too soon.

    Published on: September 11, 2013

    • The Associated Press reports that Walmart is launching a smartphone trade-in program that will allow consumers to "receive a credit from $50 to $300 when they trade in their working, undamaged phone. The credit can be used toward the purchase of a new phone, with a selection of more than 100 devices to choose from. This includes some smartphones with prepaid plans. Wal-Mart said that consumers can receive $300 credit for an Apple iPhone 5, $175 for a Samsung Galaxy SIII and $52 for a Samsung Galaxy S2.

    "Phones can be traded in at the electronics departments of more than 3,600 participating Walmart stores and Sam’s Club locations in the U.S. Consumers will need to enter a two-year contract for the new phone with AT&T, Verizon Wireless or Sprint."
    KC's View:

    Published on: September 11, 2013 reports that "is now selling flowers via the Amazon Curated Flower Collection under the “Grocery and Gourmet Food” department." Options are said to be limited to six combinations, priced from $28.92 to $41.02, deliverable Tuesday through Friday.
    KC's View:

    Published on: September 11, 2013

    • The Philadelphia Inquirer has a story about the closing of three A&P-owned Pathmark stores - in Camden, Cherry Hill, and Edgewater Park - because of underperformance.

    The story notes that Camden residents now have a neighborhood without a full-service supermarket, and they "will have to wait two years to get another - a ShopRite expected to open in East Camden in 2015. That will provide some relief in a city many parts of which are considered 'food deserts' under federal standards."

    • Kroger said yesterday that employees in western Virginia represented by the United Food and Commercial Workers (UFCW) have ratified a new three-year labor agreement that "covers approximately 4,800 associates working in 41 stores from Charlottesville and Lynchburg west to Bristol, in the Princeton area of West Virginia, and in Kingsport/Johnson City, Tennessee.

    • The Chicago Tribune reports that Walgreen Co. has acquired Kerr Drug, a North Carolina-based chain of 76 drugstores. Terms of the deal were not disclosed. According to the story,"the deal is expected to close this year, pending regulatory approval ... The companies are expected to operate separately until the acquisition closes. Kerr will keep its name until Walgreen decides 'the best, most effective way' to integrate the chain into its business."

    Advertising Age reports that Time Inc. is acquiring American Express's publishing business, which includes such titles as Food & Wine and Travel & Leisure.

    Financial terms were not disclosed, but published reports say that the cost was south of $100 million.

    American Express said that it is selling the division because banking regulations prevent it from engaging in non-banking activities. The titles are seen as an important edition to a roster of magazines that will be Time Inc.'s core business when it is spun off from Time Warner Inc., a move expected place in early 2014.

    • The Los Angeles Times reports that as expected, Ares Management and Canadian Pension Plan Investment Board are buying the luxury chain Neiman Marcus for $6 billion from TPG Capital and Warburg Pincus.

    The story notes that, "like other upscale retailers, Neiman Marcus is trying to reinvent its shopping experience for its customers, who are increasingly using their tablets and smartphones to research and buy their designer goods."
    KC's View:

    Published on: September 11, 2013

    • The Retail Industry Leaders Association (RILA) announced that Annette Guarisco will join the association as Executive Vice President for Public Affairs, effective October 1. She joins the association following more than 11 years as a senior executive at General Motors, most recently serving as Executive Director of Global Public Policy. Earlier in her career, Guarisco served as Counsel to Senate Majority Leaders Bob Dole (R-KS) and Trent Lott (R-MS).

    Guarisco replaces Katherine Lugar, who left RILA earlier this year to become President and CEO of the American Hotel and Lodging Association.
    KC's View:

    Published on: September 11, 2013

    Responding to the story the other day about the Los Angeles seafood monger who is finding that doing business with Amazon Fresh there is a good thing for business, one MNB user wrote:

    Interesting that the seafood supplier found the extra sales to be a positive so far for his business.  I always find the more interesting and elusive number to be whether he found it profitable to have those extra sales after netting out the share of his margin that Amazon Fresh has to charge him and the difficult to determine factor of how much of the new sales (presumably a minority, but not necessarily negligible) is from his own cannibalized volume (the sales that would have made it to his shop without the delivery option and paid full price to him).

    The more geographically distant the new sales, the more likely they’ll be incremental new sales, of course, though still at a significantly lowered margin.  Hope it works for him long term.

    Yesterday, MNB took note of a Seattle Times report on the ongoing battle in Washington, DC, over the Marketplace Fairness Act, which would require the charging of sales taxes on all internet purchases. The Times reported that the battle has turned into a multi-million dollar conflict between special interests and highly paid lobbyists. Those in favor of the bill say that it will level the playing field between online and bricks-and-mortar retailers, and would like the exemption level to be set a lot lower ... The bill is supported by the likes of, Walmart and Best Buy, and opposed by eBay, the Heritage Foundation and other organizations.

    And, I wrote:

    The people opposed to the bill appear to be reflexively anti-tax, and at the very least feel that it ought not apply to any retailer doing less than $10 million in annual sales ... Those in favor of the bill say that it will level the playing field between online and bricks-and-mortar retailers, and would like the exemption level to be set a lot lower.

    Which prompted MNB reader Ron Rash to write:

    It is interesting that those opposed to the tax are painted as being "reflexively anti-tax", but those for the bill are not described in the same article as being "reflexively pro-tax."

    If that is the prevailing attitude it sounds like the lobbyists for the tax are beating up the lobbyists against the tax.

    Point taken. I may have allowed my own bias to slip into that characterization.

    I do think that a lot of the folks opposing the tax are "reflexively anti-tax," believing that pretty much all taxes are anti-growth. I think the bill probably makes sense, but I'm certainly not reflexively pro-tax. I just try to keep an open mind.

    I got an email yesterday posing the following question:

    Can you help me understand why we cannot have our comments posted on your site at our discretion? We can leave a comment but it has to be accepted by yo to be posted.
    You are the proprietor so you can do as you please – but you speak of transparency all of the time and I am curious where transparency fits in to your model?

    I've always been very transparent about the fact that "Your Views" is moderated….I get to choose the topics that get discussed and which emails get posted.  I try to be fair to all opinions, especially the people who disagree with me, but I also retain the right to not run emails that I think are gratuitous, overly personal (except against me, in which case I don't much care how personal they get), or don't move the conversation forward in a way that I think is helpful.  This is the way it has been for almost 12 years, and I get few complaints.  Mostly, people seem to like the idea that it isn't a bulletin board where people can say what they want, something that many people find to be a waste of their time.

    Speaking of moderated discussions ... I'm not quite sure why I'm allowing this to go on, except that I find it kind of perversely amusing.

    We've had an email exchange the last couple of days that goes back to a video we ran that spotlighted how sad it is that people have allowed cell phones to dominate their lives, even to the point of inhibiting actual human contact.

    A lot of people liked the video, but one reader decided to use it to explain his "rules" for anyone who goes out with him, with no negotiation allowed. And yesterday, challenged by me on being so dictatorial, he wrote:

    There are plenty of desperate single moms looking for a meal ticket who will lower themselves to going out with me.  I make it very clear beforehand phones are to be turned off or left in the car.  They know this going in and have plenty of opportunity to opt out.   It might be 2013 but when someone is with me its 1963.  Oddly I've found the worst offenders are the women over 50.  The women under 25 are actually the most obedient.

    Lots of reaction to this, as you might expect.

    Normally, I would think this guy was putting you on.  Your comments are spot on.  He sure is smug about his lack of class, grace, or appreciation of others.  I feel for any woman who would debase themselves enough to be in his company—if there really are any.  Once people get as delusional as he seems to be, reality isn’t quite as real any more.

    This guy doesn’t need a woman in his life.  He’d be lucky to have a dog. 
    And I thought all the Neanderthal men lived in DC.  Then again, maybe he does too!

    Wow, I’m a single mom, farthest from desperate, never looked for a meal ticket and one who would personally tell Moron, “My son is the most important thing I’ve ever created in life, his cellphone, my cellphone – lifelines!”.  Oh, yah, I’m over 50 and obedient should never be used for a partner in a relationship, it is not a dictatorship, MORON.

    Unfortunately there’s nothing to be done about men like David Livingston (good guess?).  They make me physically ill.  But there’s no changing their world view.  And some of them are young, too.
    The best we can do is show this to our daughters.  Warn them that men like this exist.  And advise them never ever to befriend, date, work for, marry or in any way associate with these disturbed individuals.

    As a former “single mom”, the reason I became single is because I found life desperately better for both myself and my child away from idiots like him. Whatever is popping up on the date’s phone is obviously way more enticing than anything he has to offer.

    I happen to be one of those single moms he described.  I will categorically submit that a) I am not "desperate" (a dog can be much better companion, ask Harry Truman) and b)  I do not need a meal ticket, since I provide that for myself and my children.   
    I agree that it is rude to check your cellphone constantly during a date.  I know, it's been done to me.  However, I humbly submit that as the single mother of a 16 year old, I would not turn off my cellphone for him or anyone.  I don't know of any single father that would do so either.  
    I can only hope that he does not inflict his misery (for surely he is a miserable person) on those he works with and/or for.

    Just thought I would provide some perspective after the typical comments from User X.  If you’re not familiar with the phenomenon of internet “trolls”, then I would look it up.  I suspect you have one living under your metaphorical bridge – that last comment from him seems so absurd that I question its very basis in ever happening.  It’s also likely he actually acts nothing like this in ‘real life’ nor really believes this nonsense – it’s all for the thrill in the land of the internet.  While frustrating to deal with, I try to keep in mind most of these people are smoke and mirrors and few exist in the business world as they may depict themselves online.  Thank goodness.  Keep smiling and don’t let trolls get you down!

    “Women under 25 are actually the most OBEDIENT”!!?? Maybe this guy should be dating dogs if he thinks his dates should be obedient. WOW.

    Regarding the reader’s comments about cell phones and dating, he said “It might be 2013 but when someone is with me its 1963.” He may wonder why he is still single and dating – because he thinks in 1963 terms. I, for one, wouldn’t tolerate this thinking and I know a great many other women who wouldn’t either. I’m in my mid-30s and dating. On occasion I do look at my phone while on a date, as does my date. Get over it.

    Finally, the fellow who wrote the original email (and yes, those of you who guessed his name were right on the money), got back to me one more time:

    Maybe we on on two different planets but I just don't think its polite to talk or text in church, at funeral, at family dinners, on dates.   Or worst of all, during a passionate moment.  If someone is that addicted to their electronics, its not going to work.  A person cannot serve two masters.  Do the math.  Your video you posted a few days ago was very eye opening.  The phone has become an idol that people worship, taking their focus off of more important things.    My time is important and I don't want it wasted listening to someone trying to tell their kids how to make macaroni and cheese.

    I think you probably got yourself in trouble with "obedient." And probably with "desperate single moms."  Nobody is arguing with the notion that turning off one's cellphone from time to time is a good idea, nor with the idea that common courtesy ought to be observed by everyone, in business as well as in personal relationships.  Where I think - and the vast majority of MNB readers, if the email so far is to be believed - you went too far was in the way you decided that you were going to dictate iron-clad rules.  Consideration cuts both ways … and being available to one's kids is not necessarily the same thing as being addicted.

    Imagine, if you will, that you are dating a single parent who has not gone out a lot, and his/her kids are not yet comfortable with the idea of he or she going out.  (i'm using both male and female pronouns on purpose.  I don;t think this is a gender-specific issue … though I suspect there are more men who are morons about this stuff than women.  Just a guess.)   That kid may call to find out how to make macaroni and cheese, but really that kid needs to be reassured about something else entirely.  The ideal response might not only be to welcome the idea that the mom would take the call - I think single parents probably worry a lot about how their kids and dates are going to get along - but to quickly schedule a time when the parent, the date and the kid could get together to make macaroni and cheese from scratch.

    I also think that if your dates are using their cell phones during passionate moments, it clearly indicates that you are doing something wrong.

    Okay, I think we're done with this. Like I said, I find it perversely amusing. But even perverse amusements have to end sometime.
    KC's View: