Published on: November 7, 2014
Got the following email from MNB reader Bob Warzecha:I have to disagree with you that CVS is not feeling any effects from their decision to end tobacco sales. Looking at the earnings report, CVS reported a 4.5% decline in front-end sales and 480 basis points (4.8%) was due to the loss of tobacco related sales. In addition, 4th quarter EPS projections from the company are now below consensus. Listening to the earnings conference call, management appears to be unable to tell us how they will get these front-end sales back.
Today Walgreen’s earnings saw an increase in front-end sales of 2.7%, even taking in effect some loss sales due to a calendar shift. Is CVS throwing their front-end under the bus with their tobacco decision?
My sense of the situation is that CVS thinks it can more than make up the sales and margin through sales of health-related products that won't addict or kill you. I suppose that remains to be seen … but I still think that it was a smart and differentiating branding decision by CVS.
MNB reader Jeff Folloder wrote:I read your piece regarding retailers and their decisions about tobacco sales. And while I wholly support any retailers' decision to sell or not sell a given item for any valid reason, I refuse to believe that the CVS decision was anything but a PR stunt. I recently stopped by the local CVS to pick up some bandage tape. I walked to the register and witness the reset in progress of the premium front end space that formerly held the tobacco and decided to treat myself to a candy bar (I'm weak). The cashier cheerfully informed me that I could get a second candy bar for only 50 cents. All I could say was "So, you don't want me to hurt my health by way of tobacco but you have no problem helping me increase my risk for diabetes and obesity?" The cashier sheepishly told me that I did not have to buy a second candy bar and I let her know that I was quite appreciative of being given that choice. For some things.
CVS is not interested in my health. They are interested in their brand, their brand image and sales. Increased pharmacy sales and services? That only happens with more people being... in need of pharmacy products and services. Some would say that the sicker the customers are, the more CVS will make. The decision to eliminate tobacco was a PR move. An effective one since we are still talking about it.
Regarding plans by the plastics industry to force a referendum that would repeal California's ban on free single-use plastic bags, MNB user Scott Roseman wrote:Is is not obvious that the plastics industry is simply running a campaign of deception to reverse the good works of people in CA?
First, the fact that less than 5% of the money already contributed to this campaign is from outside our state says that it is about a special interest trying to brainwash our populace that continuing to encourage the use of plastic bags in grocery stores is a good idea, when, in fact, it is not.
Second, the ridiculous assertion that the ban was a “big grocers cash grab” is simply preposterous, and shows the level of deception that these plastic manufacturers are going to use to try to fool us to support their initiative. In fact, big grocers have repeatedly opposed bag bans, and it has only been small, independent, mostly natural food grocers like myself, who are sincerely concerned about the environmental effects of not only plastic bags, but new paper bags, and who have encouraged our customers for years to re-use bags, who supported this ban, along with the general populace who see the environmental effects of both plastic and paper bags.
The cash grab is solely owned by the plastic industry.
On the subject of Delhaize's decision to sell its Bottom Dollar chain to Aldi, one MNB user wrote:Funny, I recently left the grocery industry for an alternative energy startup, yet I still catch your blog.
My view, having worked in both Salisbury and Scarborough up until recently is that Bottom Dollar was always going to have a tough time. It was saddled with the Food Lion distribution model and the category and merch teams at corporate weren't able to pull the trigger and make it a true Aldi competitor. Not to mention the category and merch teams were all Delhaize people, so all you got was sort of Food Lion. Bloom wasn't any different, it was a sort of Hannaford for the south. I ran so many analysis on BDF, trying to wring out costs, but it was impossible to actually make an impact because leadership refused to move closer to Aldi in terms of operations, selection. It's ironic that is who bought them in the end.... I think culturally, legacy grocery companies have a very difficult time giving leadership to "outsiders", most people who didn't start bagging groceries and work their way up don't last long because they seek other opportunities.
I already know some friends down south who will be out of work come December. I'm hoping they land in other roles, Delhaize has been good about that in the past The sad part is the people who set the strategy, which the foot soldiers followed, will land somewhere nice I'm sure. Plenty of excuses on why it didn't work.
MNB reader Glenn Cantor wrote:All of the Bottom Dollar stores in PA were opened within recent years. Delhaize penetrated the Philadelphia market quickly.
What is astounding is that Delhaize is selling them for a mere $15 Million. Although $15 Million is more money than I will see in my lifetime, $15 Million is a bargain for 66 thriving retail stores. Additionally, they’ve noted that the sale will result in an “asset impairment” (whatever that means) of $180 Million. Clearly the Bottom Dollar concept was an unsuccessful and expensive test to serve lower income consumers.
Additionally, without fanfare Walmart expanded their stores in Philadelphia to Supercenters which include large grocery sections. When you visit these stores, it is apparent that Walmart has figured out how to meet the grocery shopping needs of lower income consumers. They beat Bottom Dollar.
This demonstrates that the existing supermarket brands operating in Philadelphia are able to nicely meet the grocery needs for lower income shoppers. For example, the Brown Shop Rite group has a beautiful, full-service Shop Rite store on the outskirts of Camden. There is no compromise to the shopping experience. However, I am sure that the food prices are comparable to anything Bottom Dollar offered. In my opinion, lower income shoppers don’t want to compromise on the shopping experience and quality of perishables. They just want lower prices.
Responding to our story about generational disjoints in the workplace between millennials and gen-Xers, one MNB reader wrote:I’m a (young) boomer, so maybe my memory isn’t what it used to be … but didn’t this report come out a generation ago? Only the name “gen X” was replaced by “boomer,” and “millennial” was replaced by “gen x”?
The various generations have had different life experiences that shape them – the depression shaped my grandmother’s view of money, my mother tried to be a working woman in a stay-at-home-mom world, my nephew grew up with 9/11 and terrorism – but overall, the generations are not all that different.
What hasn’t changed as much as it should have in many organizations is the management style. Millennials want to be part of a team, work on exciting projects, and receive equal pay for equal work no matter the gender. Hmmm, I must be a gray-haired millennial! I think if management teams would ask, they would find that ALL their employees, no matter their age, want to be recognized for their talents, challenged to stretch those talents, and excited to work on the next assignment.
The question isn’t “does the environment need to change for the millennials, or do they?” The question is, “how can we change the environment to empower, inspire, and develop everyone?”
And, regarding our story about the Kantar Retail report saying that Amazon Prime Pantry is not a threat to membership club stores, MNB reader Patrick Miller wrote:The idea that Pantry has anything to do with club stores was created by the media and that people are still comparing Pantry to club shows a fundamental misunderstanding of Prime Pantry. Club items do great on regular Amazon.com: the higher average selling price typically allows more margin for Amazon, keeping the items CP+. If one looks the actual selection in Pantry, these are everyday FDM items, not club items.
Here the Average Selling Price is $22.13--much closer to what the average ring would be in a Club Store and 7.5x Pantry ASP. Prime Pantry is much closer to traditional FDM and Amazon Grocery is much closer to club.
Additionally, to the point that Amazon has done nothing to promote the program, ignores the output Amazon is seeking, which is steady, (not too quickly or there would be recurring OOS issues like at launch) customer adoption. Seeing as that Prime Pantry is already in the top quarter of all significant search terms on Amazon, I think they are achieving the desired output.
The bigger questions for the vendor community, is what do your shoppers want, where are they shopping/researching, and how do you adapt to meet their needs?
I got a lot of email yesterday regarding my FaceTime video about the aging process, which was prompted by my turning 60 this week. Here are some of them…
MNB reader Art Ruder wrote:You mention doing MNB for at least another seven, and maybe another 12. Or more. (I hope it is the third option.)
Just so you know, there was an article in the Minneapolis Star Tribune (as well as local TV news reports) that Sid Hartman was celebrating 70 years at the paper as a sportswriter and columnist . He is now in his mid-90s...still writes a column several times a week as well as TV and radio shows.
Good for him.
MNB reader Rich Heiland wrote:Happy 60th. I just turned 68 and have not plans to retire because I have been blessed to never having had a career - first journalism and now consulting, training, speaking - that I really consider work. I plan on working as long as it's fun and as long as folks want me to spend time with them. When that ends, I will find something else. In the end, we are all sharks - without motion, we die.
Extra credit for working in the Woody Allen line from Annie Hall
MNB reader Bob Vereen wrote:Congrats on reaching 60, but that’s only the start. I’m now 90 and, like you, still writing—about the hardware/home center industry.
We’re lucky in that our professions keep forcing us to stay abreast of new trends, new ideas, new challenges.
From another reader:As I inch towards 60 I try to look for ways to enjoy everyday at work, at play, at home. I try to play more and reflect on the beauty of nature, how lucky I am, with family, friends, job ,health and happiness.
MNB reader Jamie Liebich wrote:I just want to thank you for the stories and perspectives you share with your followers on a daily basis. My boss turned me onto your daily e-mail shortly after I joined the company, and I have to tell you that I truly look forward to my daily e-mail from you. You are so right about keeping moving, I’m watching it right now with my grandmother. As soon as she stopped being active she aged 20 years in a matter of less than 5. It’s sad, so keep moving!
And MNB reader Larree Renda wrote:Of all the many years I have been reading Morning News Beat and enjoying your take on our industry, business in general and LIFE, this morning’s FaceTime with the Content Guy was my absolute favorite. Maybe because it comes at a time in my life where I am about to embark on some pretty major change (leaving Safeway after 40 years of my life) or maybe because what you wrote rang such a familiar bell with me. I lost my father to cancer when he was 36, my mother at 63, my husband to cancer at 56 and it’s very hard not to let those things weigh heavy on your mind when milestones like 60th birthdays come around. Not that I should know of course as I’m FAR from 60 . . . well, okay, maybe not that far.
I could not agree with your message more. Numbers don’t matter. And “getting your money’s worth” out of life IS what matters. There is a church I pass every day on my commute to the office that has a sign board in front. Yesterday’s message I think was fitting for this moment. It read; “Life is short, Eternity is not”. So . . . . you gave great advice again; Staying in gear, in motion and keeping momentum. I know it’s a cliché to say “live each day as if it were your last” but can you imagine the possibilities if we actually did? Maybe that goal is always illusive, but I do know this, I do intend to make this day better than the one before in some way and in this case, I think I should get some credit for at least trying.
Happy belated birthday, my friend and thanks for giving ME a gift in the words you have written.
Thanks to everyone who wrote.
I am reminded of the Steve Jobs line:“If you live each day as it was your last, someday you'll most certainly be right."