retail news in context, analysis with attitude

Got the following email the other day from MNB fave Glen Terbeek:

If the chart in today's WSJ article re the Ahold/Delhaize merger is true, what does that say about all of the ECR efforts in the nineties?

The chart says that from 2000 to 2014 the supermarket share of U S grocery retail spending went from 46% to 36%.  Wow!  The "alternate formats” enemies continue to take share!

The ECR focus should have been on demand side productivity first, i.e., maximizing the market potential of each store, then supported/enabled by an appropriate supply chain.  ECR got this backwards in my opinion.   It just tried to streamline an outdated “buy for resale” logistics model.  Is this merger just another case of central efficiencies and supply side efficiencies mentality? 

Remember, the shopper doesn’t care about how big the retailer is, they only care about “their” real and virtual shopping experience.

As always, Glen nails it.

Whether it is the potential Ahold-Delhaize merger, the Haggen absorption of 150+ stores, or the Albertsons-Safeway merger, the risk always is that they will be so focused on efficiency that they mistake it for being effective.

Had a story the other day citing Uber and Airbnb as disruptive influences, and one MNB user responded:

Kevin - your article about Airbnb is so on point.  My niece got married in Austin last month, and everyone that came in from out of town booked a room via Airbnb and relied 100% on Uber for rides.  It is the future...

A reaction from an MNB user to Whole Foods' announcement that it plans to launch a new, lower-cost chain with the same sort of organic/natural orientation:

They are smart. One thing that’s always impressed me is that they have no qualms about trying new things then tossing them quickly if they don’t pay off. I think you’ve said before - don’t underestimate them!

On the same subject, from another reader:

Whole Foods is the dominant player in growing organic foods segment of food retailing.  Numerous small discount organic operators have been gaining market share over the last few years; Sprouts, Fresh Thyme, The Fresh Market et al.  The best way for Whole Foods to respond is by competing directly with competitors’ business models.   I suspect that’s what is occurring here.  Whole Foods has just thrown down the gauntlet, regardless of the lofty aspirations avowed in their press release.

And another:

The idea to compete at a lower priced level, as you say, isn’t anything new.  But if they can convey some of the mojo that made Whole Foods special in the first place, it might work, if not, that we’ll be saying about that gluten free spaghetti on the wall:  “now it’s garbage”.   (Or is it really linguini on the wall?).

Regarding the possible Ahold-Delhaize merger, one MNB user wrote:

Kevin -- as in most cases, your comments on the potential driver behind the merger are spot on, in my view.  Both of these companies have struggled a great deal in America and they would benefit from a focus centric to the U.S. There is also a benefit of scale on the European level, due to the origin of both parent companies.

To your comment on the decentralization of the U.S. model, I can speak from experience that it's not to make it easier to sell the brands. It's a failure of the original concept to centralize shared services that limped along for several years at a glacial speed. That and the continued shifting and shuffling of the executive teams of both Hannaford and Food Lion has stalled both of those banners. 
In the process, Sweetbay and the Bottom Dollar formats failed and have been sold.

Now, the new America CEO Kevin Holt is making more changes. His background ground with Sears has more than a fair share of people concerned. He's appeared to have ousted two successful leaders of the two banners left, Food Lion and Hannaford; Beth Newlands Campbell and Brad Wise, respectively. They were people that knew the markets and had very successful track records.

They have now been replaced by the two presidents that ran the failed banners of Sweetbay and Bottom Dollar (Mike Vail and Meg Ham).

Hannaford and Food Lion have become better at creating change than creating outcomes.  Ahold and Delhaize are two mediocre organizations that will create one larger entity of the same caliber.

Most recently, the initiative was declared at Hannaford to become "a selling organization". That is a bit like General Motors having an epiphany and declaration they are interested in selling automobiles. They would be better advised to become a retail driven organization.  Sources inside the company report that while doing this, they have changed their retail field support to be substantially less robust while adding several jobs to the corporate office. To the retail people in trenches, this feels out of alignment with the strategic intentions of the organization. 

If this merger goes through,  let's hope you are right on the spin-off of the U.S. banners to someone who can unlock the true value.

I expressed some skepticism the other day about a survey saying that Trader Joe's is the nation's best supermarket, leading one MNB reader to write:

I’m with you on Trader Joe’s—I can see people ranking it high in certain areas, but the best grocer in the country…no.  Quick check-outlines, sure…but I’d say the average cart is a fraction of a ‘traditional’ supermarket’s cart.  For one thing, the footprint of a TJ is (at least the few I’ve been to)  tiny in comparison to even a mid-sized Stop & Shop or Kroger.  Another thing, one can’t rely on what will be available to buy.  Between product being wiped out of stock (go early in the day, or don’t bother.  Especially on the weekend, which is the only time I can make the drive to the only store in the area.) and the constantly changing product mix—yes, it’s a “fun adventure”, but I for one hate falling in love with a product (or being elated at finding a more affordable version of a product) and never seeing it again.  All that said, if they opened a store on my side of the river, I might feel differently, and I for sure would shop there more often.  Right now, the only location in my area is just not worth the hassles.

And from another:

Thank you for today’s observations on Trader Joe’s produce and prepared foods. I was beginning to think that I was alone in that view. I’ve never purchased produce at their stores that didn’t have to be pitched within a couple of days. I do make certain purchases at Trader Joe’s, but it’s a discreet list of items. Frankly, I preferred their LA area stores of 30+ years ago to today’s stores and products.

Regarding the layoffs at Blue Bell, and the CEO's stated dismay at having to cut so many jobs, one MNB user wrote:

Hollow words at best – “we did everything we could.” If they did everything they could, they wouldn’t have found themselves in this position.

And, in response to another story, one MNB user wrote:

I agree with you about the “sightseeing” aspect of FAO Schwarz, but it shouldn’t be ignored that the quality of employees and training at the Fifth Avenue store was no better or worse than at many Toys R Us or other retailers, with the same lack of motivation from the top and inadequate results. Meanwhile the Starbucks across the street and Apple Store a few dozen feet away from them create a completely different experience. What’s that thing you say about 'compete' being a verb?

And finally, regarding Target's decision to focus less on certain CPG brands in favor of fresh foods and own label, MNB user Lyle Walker wrote:

The issues that Target is trying to address are the issues of all traditional grocers.  The center store is becoming less shopped, as consumers become better educated about processed food, and seek out what they consider are fresher, more healthy options.  If you look at the strong growth in the industry, it's coming from retailers like Sprouts, Whole Foods, Lucky's, Fresh Market and Trader Joe's, as well as the new upstarts like Fresh Thyme.

The challenge is still that most of these CPG companies are public, and have mastered the science of ingredient manipulation (i.e.. salt, sugar, fat).  These are the products that fill the center store, and are the products that Target will decrease focus on, in an effort to differentiate. It's a smart move by Target and can't help but provide an improved, unique value proposition for them.  Ultimately, the customer will decide if this works, but based off the growth of the retailers above, the future should be bright for Target.
KC's View: