retail news in context, analysis with attitude

Published on: October 19, 2015

by Kevin Coupe

I kind of like it when companies decide to embrace new challenges ... even on those occasions when I don't completely understand the rationales.

Two such cases have come to my attention in recent days...

CNBC reports that "Domino's Pizza is taking a shot at opening a store in the birthplace of pizza: Italy.

"No stranger to international expansion, the chain has more than 12,100 stores in more than 80 international markets but had shied away from Italy until now. On Monday, the chain opened its first Italian location in Milan as part of a master franchise agreement with ePizza S.p.A. ... (and) plans to open three locations in Milan by year end."

Domino's says that it plays to source all of its ingredients locally.

At the same time, the Daily Meal reports that Eataly, the chain of Italian gourmet markets with 28 stores in places like 28 locations around the world, including outposts in Italy New York, Chicago, Dubai, and Tokyo, has its eye on a new location - Paris. France. To open by 2018.

Founder Oscar Farinetti says that Paris is a little intimidating, but, "for me the French are the most competent nation when it comes to food. We decided to leave Paris until last because we can't afford to make a mistake there. Entering the French food market is no easy feat."

Now, I have to admit that I find the Eataly move a lot easier to understand than the Domino's venture. After all, the French do love food - probably even Italian food - and so a high-class Italian food store might well be a success.

But bringing Domino's pizza to Italy? That sounds more like a crime against humanity to me. or, at the very least, a crime against gastronomy. Which is almost as bad.

Still, as I say, I have to admire it when retailers do into the belly of the beast, even when it seems possible - or even likely - that the beast might eat them.

It is an Eye-Opener.

Published on: October 19, 2015

The Wall Street Journal is reporting this morning that the three-year federal investigation into alleged systemic and systematic bribery by Walmart of foreign officials as a way of greasing the wheels of expansion has had mixed results, with India replacing Mexico as a place where Walmart's money apparently bought the most influence.

In Mexico, the story says, the probe "has found little in the way of major offenses, and is likely to result in a much smaller case than investigators first expected ... The three-year investigation isn’t over, but most of the work has been completed, and it is possible the case could be resolved with a fine and no criminal charges leveled against individual Wal-Mart executives."

In India, however, "investigators found evidence of bribery ... centering on widespread but relatively small payments made to local officials there ... Wal-Mart is likely to face U.S. foreign-bribery charges under the Foreign Corrupt Practices Act over those payments," the story says.

The investigation was launched after a New York Times article charged that the widespread bribery had taken place, but the Journal story says that some of the evidence found by investigators contradicted what the Times reported. Indeed, the Journal also writes that "the federal findings so far largely match up with the results of an internal probe Wal-Mart launched in the wake of questions from the New York Times."

Still, the Journal also notes that the probes have not been completed, and that it remains a possibility that additional infractions and crimes could be uncovered. But the general tenor of the story is that things are not nearly as bad for Walmart as some expected.

Neither federal investigators or Walmart are commenting on the report.

Published on: October 19, 2015

Bloomberg reports that "Fresh & Easy Neighborhood Market Inc., the former Tesco Plc-owned grocery chain that billionaire Ron Burkle bought in 2013, is preparing its second bankruptcy filing in two years, according to people familiar with the situation."

The story says that the filing could come as soon as this week, though it could be stalled if Burkle's Yucaipa Cos. finds a buyer for all or part of the 100-store chain, which he acquired a majority interest in after Tesco's efforts to establish a US beachhead turned into a competitive debacle.

Bloomberg also notes that it hasn't been a great few months for Burkle's supermarket operations. A Fresh & Easy bankruptcy "would follow the bankruptcy of Great Atlantic & Pacific Tea Co. in July, also for the second time. That company, once the nation’s largest grocery chain, had struggled with labor costs and more demanding vendors in recent years. Yucaipa owned part of that company as well."

Published on: October 19, 2015

The Arkansas Democrat-Gazette reports that "even as Wal-Mart Stores Inc. closes in on $500 billion in annual sales, CEO Doug McMillon wants the company to rethink how it measures success." telling analysts last week that "the company needs to shift its focus away from sheer size. Simply having eye-popping revenue numbers and a larger stockpile of stores and employees than its competitors isn't enough as the 53-year-old company fights for relevance in today's retail marketplace.

"'Being the biggest and being the best are not the same thing,' McMillon said. 'We've got to be the best. ... It's meaningful to me personally that the company crossed the 50-year mark a couple years ago. Mentally, I'd like to know the company will be here in 50 years and be relevant. To manage that, we've got to manage the next five well'." Which includes, he added, being willing to get smaller, even if that means spinning off its Sam's Club division and/or selling any of its operations in 24 international markets.

Bloomberg writes that Sam’s Club "has been dragging on Wal-Mart’s earnings, and some investors think the company could perform better as a stand-alone business. Earlier this year, Sam’s Club posted its worst first-quarter sales in years. While the chain improved in the most recent quarter, investors aren’t convinced the company can get back on track in the face of stiff competition from Costco Wholesale Corp."

The Democrat-Gazette story goes on to say that "agility is more important to the Wal-Mart CEO over the next three years than sheer size. McMillon views being more nimble as key to the retailer fending off challenges from general merchandise stores, grocery chains and pure e-commerce businesses."

Published on: October 19, 2015

The Seattle Times reports on a new startup there, Gatheredtable, described as "a subscription service that provides customized weekly menus and grocery lists to make cooking homemade meals easier ... . Entering food preferences into the Gatheredtable software results in recipes, a menu and a grocery list for the week."

The basic concept is to use the mobile application easily convert menus and recipes into a grocery list that people can use when shopping; an e-commerce component reportedly is available in some, but not all, of the markets that Gatheredtable serves.

The service costs is $86 a year or $10 a month.

CEO/founder Mary Egan, a former Starbucks executive, says that the company has raised $4 million in venture capital - Starbucks CEO Howard Schultz is an investor - and, with more than 100,000 users, is close to profitability.

Published on: October 19, 2015

Interesting piece in the Washington Post that uses the recent announcement that C&S Wholesale Grocers plans to close two Maryland distribution centers that have been serving Safeway stores in the region and move those operations to other facilities.

According to the story, "C&S planned to shift operations to non-union facilities in Pennsylvania, where any displaced Maryland union workers lucky enough to snag an opening would almost certainly be paid less ... C&S declined to say whether its pay is lower at non-union facilities, only that its compensation varies based on location and is often incentive-based. Still, the move to shutter warehouses in Maryland is another blow to a once-strong union sector that has bled members and forfeited benefits in recent years with the entry of non-union grocery competitors such as Wal-Mart, Whole Foods, Harris Teeter and Wegman's.

"The latest losses highlight the role privately held C&S — which bills itself as the biggest grocery distributor in the country, with $28 billion in revenue — has played in the shift. The company has expanded rapidly in recent years by assuming the warehousing and shipping operations of large grocery chains, and then working with the grocers to lower labor costs, even if it means moving operations elsewhere."

The story makes two overarching points - that many of these moves seem absolutely necessary if retailers are to compete, and that they have an enormous toll on people's lives. You can read the entire story here.

Published on: October 19, 2015

The Chicago Tribune has a profile of Ryan LaRoche, the new executive chef at Mariano's, a job he took last August after a tenure as head chef at the Blue Duck Tavern in Washington, DC.

LaRoche's hiring, the story says, "signals that Mariano's is attempting to stay ahead of the trends in a changing grocery store industry, one that increasingly values in-store experience and healthy prepared foods. Gone are the days when a grocery store could be simply that and succeed. Differentiation is the name of the game now, particularly in the Chicago market where high-end grocers are rapidly expanding."

In his new role, the Tribune writes, "LaRoche will develop recipes for prepared food and for the existing in-store dining options, as well as new concepts for restaurants in future stores." But it won't just be the Mariano's stores; the story also notes that LaRoche will be working with parent company Roundy's commissary, looking to upgrade the foodservice offerings at those stores as well.

"You can't be in the middle," says Bob Mariano, chairman and CEO of Roundy's. "You have to differentiate yourself."

Published on: October 19, 2015

• Bloomberg reports on how Mexico is becoming a hot market for online retailers.

"In June," the story says, "Amazon.com Inc. began operating in Latin America’s second-largest economy -- where online retail sales, excluding travel and event tickets, are seen growing 30 percent to $5.7 billion this year, according to eMarketer. While Web-based sales from Wal-Mart de Mexico SAB, El Puerto de Liverpool SAB and others represent less than 2 percent of all purchases, more than 15 million more Mexicans will gain Internet access by 2018, eMarketer said.

"As the middle class grows and has more access to consumer loans, retailers are starting to test modified delivery options, circumventing payment obstacles that had prevented them from offering online shopping. Customers without credit cards now have options to pay in cash at delivery or even pick up packages at local convenience stores ... Millennials, people currently 15 to 34 years of age, are expected to swell the pool of digital buyers to 18 million next year from 14 million last year, according to Osbaldo Franco, a research analyst at eMarketer. Millennials already make up for more than half of Internet and smartphone users in Mexico, he said."

At the same time, Bloomberg writes, "E-commerce is part of the strategy to double Wal-Mart de Mexico’s size in the next 10 years, Antonio Ocaranza, a Walmex spokesman, said in an interview. The company is currently leading online sales in the country, accounting for 2 percent of the total, according to Euromonitor data. Walmex gives consumers the option to place orders online and pay at stores to take advantage of exclusive Internet discounts."

Published on: October 19, 2015

• Bloomberg reports that Ray Berry, the founder and chairman of Fresh Market, "is working with Apollo Global Management LLC to explore a possible buyout of the grocery chain."

According to the story, "Fresh Market shares jumped 7.8 percent on Friday after Reuters first reported on the discussions, saying that Berry was also seeking support from additional private-equity firms. Berry, who owns 4.1 percent of the company, also may team up on a deal with son-in-law Michael Barry, who has a 6.4 percent stake."


• European Supermarket reports that "Ahold-owned Albert Heijn has announced the opening of a 100 per cent self-scanning and pin supermarket on the Weteringschans in Amsterdam. The new supermarket is complete with hand scanners and the self-scanning checkout 'Scan & Go' ... According to the supermarket, the store will allow ... employees to take on different roles such as greeting visitors and answering customer queries."

Published on: October 19, 2015

Last week, I wondered about the series of 25 cent promotions that Whole Foods is doing, asking if they were consistent with the company's brand image.

Which led MNB reader Jessica Duffy to write:

What the promotions do is create conversation and pull in people who would not otherwise come to Whole Foods, perhaps because of perceptions that it is too expensive or snooty. Once they come in, they will hopefully explore a little, see some other fun products even if they don’t get farther than a pastry to go with their coffee, and come away with a new place shop. It’s a valid strategy for generating new foot traffic.
 



We also got a number of emails responding to Chelsea Ware's "Millennial Mind" column in which she wrote about targeted marketing, and suggested that when Target gives her a Rogaine coupon - which she most assuredly does not need - it is missing an opportunity.

One MNB user wrote:

I’m guessing Chelsea would appreciate the coupon if her balding husband used the product. Just as she will the coupon for diapers if she has a child. Sometimes ME-llennials just need to think it through.

But she doesn't have a balding husband. That's the point. This is not about millennials being self-centered. It is about marketers not wasting time and money sending out irrelevant messages.

From another reader:

This is Drake Ellingboe, also a 23 year old, from Minnesota (Target’s homeland as I’m sure you know). I completely agree with Chelsea on the point she makes about Coke’s effective marketing to millennials, I would however bring up the classic story of when Target accidentally broke the news to a father that his young daughter was pregnant by sending extremely targeted coupons based on her buying behavior.
 
My point in bringing this up is to simply say that there is a broader struggle at hand. These retailers know the data on their consumers - as a marketer in the CPG industry I can attest to that. They must however, constantly balance the creepy factor with the convenience factor and therein lies the issue. One incident like the above article discusses and they pull back on targeted ads purposefully. It’s almost like the Imitation Games (there ya go I even worked in a movie reference this morning!)
 
Again, totally agree with Chelsea but would caution against condemning Target too much.




On the subject of Walmart's profit warning and planned investments, MNB reader Tom Murphy wrote:

Retailers should be afraid…very afraid!  When was the last time any of them suggested to Wall Street that they would “give up short-term profits for long-term benefit…so be patient”!  Let’s remember the bear story, “you don’t have to be faster than the bear, just faster than someone else who is also running away from the bear”!  That said, Walmart can make pretty good profits by outrunning a number of their national, regional and local competitors.  And this will be harder to replicate than just fancier displays or lower prices…better to start running faster.

And another reader:

You suggested that Walmart has to “improve the store experience” to be successful.  Is it as simple as having fewer or no “out of stocks”?  Every Walmart I visit has more “out of stocks” than the previous store.  One way to increase the size of market basket is to be in stock.  I don’t think this is just a Walmart problem.  As retailers carry more skus, they need to make sure that the basic “blocking and tackling” is executed every day.  I believe this refers back to your familiar themes: recruiting, training, keeping experienced employees and NOT cutting store hours just to satisfy Wall Street.  I think the retail industry will have serious issues in the future because they are not able to recruit and keep valued employees.  How many of your marketing students are headed to the retail industry?




On another subject, MNB reader Mike Nichols wrote:

I liked your article about Starbucks trying to improve the drive-thru experience by installing video screens. But, as you know, it’s not just about the idea, but also the execution. We have a newly built Starbucks near my home, which I visit on my way to work most mornings. It features the new drive thru video. However, the baristas almost never use it. They used it quite frequently during the first few weeks when the store was built, but now I only see them using it about one trip out of every 10 to 20. Whether it’s Starbucks or anyone else, corporate can have all the great ideas in the world. But, if they can’t get the front lines to execute consistently and effectively, then those ideas are bound to fall flat.

Agreed.
 


Regarding last week's faceTime about LL Bean, one MNB user wrote:

Kevin how did you manage to do a FaceTime in front of LL Bean's Freeport Mothership, talk about their ubiquitous duck boots, and not get their giant Duck-Boot-Mobile into the background of your video??!  A missed opportunity for sure.

I tucked myself out of the way to do that piece. There were a lot of customer sneed the Big Boot.




Last week I was critical of a new FMI website designed to expose some supermarket myths ... and my problem was some of these weren't myths at all.

Like the idea that sometimes fresh food isn't fresh. One MNB reader had a thought about this:

I work at a large Northeast retailer and we get 3 perishable deliveries a week, which does not get it done!

Exactly.

Or the idea that retailers manipulate customers into buying more, which is absolutely the case. Except, as MNB reader Pete Deeb writes, sometimes they don't call it manipulation:

Having spent over 40 years in the grocery business on both the Retail and manufacturer sides of the business, I find the use of the term “manipulating customers” into buying more goods a “politically correct” statement!  This assertion demeans the highly effective practice  that all facets of the business use called MERCHANDISING! What business does not want customers to make impulse purchases or display related products (i.e. pasta and sauce) together to sell more stuff? How about offering complete meals in the Deli or utilizing recipe promotions to sell more ingredients.  Do we think consumers are so naïve that they are being manipulated by the industry? If so then people like Wegmans and Publix are doing a darn good job of it.

From another reader:

I agree completely with your take regarding the article about FMI dispelling food shopper “Myths.”  I am an industry insider working very closely with one of this nation’s largest retailers, and we often merchandise in ways that encourage the customer to purchase the next size up in efforts to increase basket rings.  We also work to create “speed bumps” designed to get the impulse buys as customers walk through different departments throughout the store.  Everything from department plan-o-grams and display merchandising to the physical layout of the building is designed to increase the basket size in every retailer I have ever worked with or for.  I understand what FMI is trying to do, but your take is absolutely spot on.

And another:

Why would the FMI want to publicize possible myths about the food retailing business when many of the readers might not, initially, perceive the problem?
Why tell people about a problem, and then write an article to dispel the issue, when the readers don’t perceive an issue?  If they did not know about the problem before the article, they will after reading about it.

And still another:

I agree with you.  As presented all FMI will do is to perpetuate the “Myths”.  Instead why don’t they make an informational site that concentrates on the behind the scenes processes that supermarket retailers and manufacturers and producers go through as supplied by the respective entities.  They have avoided the concept of “myths” because examples like you pointed out and water spray on produce do have dual purposes and one of them is to sell.  The whole store is designed to sell products stocked.  That is the purpose of the store and the customers are there to buy.  The store wants the customer to be exposed to all its’ sales and non-sale merchandise and the customer can also benefit from their efforts.  It is up to the customer to take or leave the sale device whether it is location within the store or a sign advertising the sale, POS.




Finally, responding to all my baseball coverage, MNB reader Jesse Ehlen wrote:

I realized the other night, as I watched my wife's hometown Royals send the Astros packing, that I've tuned into more of the MLB playoffs this year than the last ten years combined and it has a lot to do with one of MNB's favorite themes: Disruption.  The Cardinals, Dodgers, Giants, Yankees, Red Sox, Angels, all the 'usual [big payroll] suspects', are sitting at home watching four teams that haven't been to the World Series in a combined 152 years compete for a title.  I'm obviously not a huge baseball fan, but the product offering is decidedly different this year, with new and different storylines, and it's brought me into the fold.  I wonder how many others...

Maybe with a salary cap, MLB could generate this kind of excitement every year?...

Good luck to your Mets!  (But go Royals!)

From another reader:

It would be nice to see the Cubs win if only so Steve Goodman can finally rest in peace. (I'm betting that you know who Steve Goodman is!)

I most certainly do ... he's the singer/songwriter behind "Go, Cubs, Go" and lots of other songs ... including one of my favorite songs of all time, "City of New Orleans."

Another MNB reader wrote:

Who says baseball is dull or boring?

Not me.

Of course, you can't please all the people all the time:

In today’s edition, you forgot to mention that last night the Minnesota Lynx clinching the WNBA championship for the third time in the last five years on their home court in the 5th game of a 5 game series……and they celebrated post game at a private party hosted by Prince.

I'm neither a big basketball fan nor a big Prince fan ... so that's probably why I missed it. Thanks for filling in the blanks.

Published on: October 19, 2015

In Week Six of National Football League play...

Bengals 34
Bills 21

Broncos 26
Browns 23

Bears 34
Lions 37

Texans 31
Jaguars 20

Chiefs 10
Vikings 16

Dolphins 38
Titans 10

Redskins 20
Jets 34

Cardinals 13
Steelers 25

Panthers 27
Seahawks 23

Ravens 20
49ers 25

Chargers 20
Packers 27

Patriots 34
Colts 27




In the best-of-seven American League Divisional Championship Series, the Kansas City Royals hold a 2-0 game lead with 6-3 and 5-0 wins over the Toronto Blue Jays.

And in the National League Divisional Championship Series, the New York Mets also took a 2-0 game lead, as they defeated the Chicago Cubs 4-2 and 4-1.

Published on: October 19, 2015

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