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Retail Weekly News
7/23/2012

Week of 7/20/12

MNBBelow is the list of articles you will find for the week ending 7/20/12 edition of Retail Industry News. Thanks to MNB for this selection of articles.

  • Supervalu Goes Hunting For Buyers
  • For People Dying For That Next Latte, A New Convenience
  • Sansolo Speaks: Life Lessons from the Dark
  • Shareholder Vote Complicates Supervalu Board's Ability To Sell Company
  • Food Lion Expands New Branding Strategy In North, South Carolina
  • Amazon May Be Taking Aim At Hardware Business
  • Safeway Enhances Just For U Program
  • Kroger Said To Be Considering Surcharges For Credit Card Users
  • Exclusive: WinCo To Enter Dallas Market
  • FMI Study Says Nutrition Drives Shopping Decisions
  • FastNewsBeat
  • Executive Suite

Supervalu Goes Hunting For Buyers

The Wall Street Journal reports that troubled Supervalu is expected to send out financial information to a wide range of potential buyers, including C&S Wholesale Grocers, which could be interested in acquiring its distribution business, and a number of private equity firms such as Cerberus Capital Management, Kohlberg Kravis Roberts, and TPG Capital.

As previously reported, after a quarter in which Supervalu reached neither its sales nor earnings goals, the company said it would look into selling all or some of its assets.

According to the story, C&S "is interested in buying Supervalu's distribution operations, people familiar with the matter said. C&S distributes groceries to around 3,900 stores around the country, according to the Keene, N.H., company's website. Run as a family business, C&S could look to partner up with a buyout firm to bid jointly for Supervalu and then separate the assets, they added.

"According to people familiar with the matter, buyout firms could be interested in Supervalu's retail store brands, which include Albertsons, Shaw's, Acme, Jewel-Osco and Save-A-Lot. The Save-A-Lot discount chain brings in steady cash flow and, with 1,332 stores in cities such as Detroit and Tampa, could be especially attractive to private equity, they added."

The story goes on to say that "some Wall Street analysts have said Supervalu's debt load of more than $6 billion and operating struggles make a sale of the whole company difficult. The company also had about $1.7 billion of unfunded pension liabilities on a pre-tax basis at the end of its fiscal year in April - a burden that could limit what potential buyers are willing to pay for Supervalu, said the people familiar with the matter."

For People Dying For That Next Latte, A New Convenience

CNN reports on an Easley, North Carolina, funeral home where the owner recently expanded—and added a Starbucks coffee shop.

The Starbucks is not only accessible to mourners; its location in the building also makes it available to the general public, though a new lobby in the funeral home "will lead to an area where baristas ... will discreetly serve Frappuccinos to mourners and the public alike."

Sansolo Speaks: Life Lessons from the Dark

by Michael Sansolo

Fairly late on July 4th, power came back on in my neighborhood—some 105 hours after it shut off. Truckloads of debris disappeared, home repairs started, and just like that, normalcy returned.

But it really didn't.

When I wrote my last column, I was in the midst of recovering from an amazing storm that devastated my suburban Washington, DC, neighborhood. And I’m hoping that both the gratitude and anger that I'm feeling these days, along with many of my neighbors, will offer a life lesson.

Here’s the gratitude: so many of you sent me e-mails offering sympathy and comfort that it was overwhelming and showed the power of a blog like MNB. However, the message that really hit home came from one long-time industry friend who said he watched coverage of the storm as we watch most things on television: with detachment, as if it were fiction. But knowing someone in the middle of it changed his feeling. Suddenly he worried. That touched me and I’m hoping that I keep that in mind next time I see a natural disaster or other event on television. It isn’t fiction. It’s real people, real families.

So I thank you all for the kind wishes.

As for the anger...well, it has nothing to do with the utilities that failed or the damages we suffered. That stuff happens. Life goes on.

During my extended clean up, I had some wonderful encounters. I worked side by side with highway department employees to clear branches. Hotel workers were kind and helpful, as were supermarket employees helping us get needed supplies. And there was my wonderful neighbor, whose family worked with mine to help clear both our homes of damage despite 100-degree heat.

But despite all that - or maybe because of it - I find myself getting angry about the fact that so many people seem to fail to notice the good in each other.

On July 4, the Washington Post ran a front page story about how the U.S. is more divided than ever. I've read stories like this before, but this one made me really angry because I felt no division from all those people working with and around me. When I heard utility crews from Georgia and Oklahoma interviewed on the radio, no one said they regretted coming to a state that voted opposite them in the last election. In fact, one man said he was proud to help us because he knows we will repay the favor.

Not once did anyone ask my position on the budget, health care, Afghanistan, gay marriage, military spending, etc. All we did was work together. (Okay, I protested once: when my neighbor came out of his house drinking a cola that is not made by the company for whom I do significant work. This neighbor works for the Baltimore Ravens and I told him that he turned me into a major Pittsburgh Steelers’ fan.)

All we did was focus on the task at hand. I wish more people would do that.

Our political leaders seem to think that division is what we want because it’s what gets them elected. I’m no Pollyanna and I know there are serious and broad disagreements about issues and politicians. Yet in the middle of a crisis, none of that mattered. It made me think that we are better than what we are getting and I’m hoping the MNB family will agree.

Here’s my thought: we’re in the middle of another ridiculous election campaign where everything gets discussed and nothing gets done. We’ll see constant ads about how bad the “other” guy is, but little talking about what anyone is going to do better. Those ads run because negativity works, unless we tell them no more. I say it’s time.

So here’s my proposal: whenever you see a political ad, Tweet or anything that is negative and nothing more, fire off a quick e-mail to the candidate supported by the ad and tell them “we deserve better - MNB 2012.” It’s not quite a Network moment (rent that film if you don’t get the reference) but it could work.

Just imagine what would happen if a bunch of us started doing that; reminding our “leaders” that we demand better. Working in the dark I got to see the better angels of our nature and I enjoyed it. And what’s the point of a blog if you can’t spread a message like that?

Next week I’m back to business lessons. I promise.

Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com. His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here.

Shareholder Vote Complicates Supervalu Board's Ability To Sell Company

The Wall Street Journal reports that Supervalu's investors yesterday voted to reject a proposal that would have lowered the number of shareholder votes necessary to approve a merger or sale of all or part of the company—a vote that has a lot of meaning for a company that has declared itself on the sales block because of poor sales and earnings, a decision that caused the stock to drop more than 50 percent in one day.

In addition, Reuters reports that Supervalu CEO Craig Herkert says that "bankruptcy is not among the options being weighed at the company hampered by debt from its $12.4 billion acquisition of more than 1,100 Albertsons stores in 2006."

According to the Journal story, Supervalu's board wanted to change the company's rules so that only two-thirds of shareholders needed to approve a sale, down from three-quarters.

The Journal notes that "requiring a higher percentage of shareholder votes essentially puts more control in the hands of the board of directors, because potential buyers will be forced to negotiate pricing with the board, which could be beneficial to shareholders. However, it also gives the board greater ability to reject proposed acquisitions and refuse to sell, which could be detrimental to shareholders."

Among the players likely to be interested in all or part of the company, according to the Journal: C&S Wholesale Grocers, Kroger Co., Cerberus Capital Management and Kohlberg Kravis Roberts & Co.

Food Lion Expands New Branding Strategy In North, South Carolina

Food Lion announced yesterday that it is expanding its "new brand strategy in 269 stores in North Carolina and South Carolina" that it says "is based on customer feedback and continues to position the company for future success." The strategy, the company says, "offers customers lower prices on 6,000 items throughout the store and access to quality store brand products at lower prices, including the company’s My Essentials value tier, as well as enhanced produce and an easy and convenient shopping experience, such as faster checkout."

The new brand strategy first launched in the Raleigh and Fayetteville, N.C., markets, as well as Chattanooga, Tenn., in May 2011, and the company announced an additional 268 rebranded stores on March 28, 2012 in Virginia, West Virginia and the outer banks of North Carolina.

"Today’s launch is a pivotal turning point for our company as we have implemented our new strategy in more than 700 stores," says Cathy Green Burns, president of Food Lion. "We are committed to being recognized as a price leader, making our stores easier to shop, offering the greatest value in store brands and providing the freshest produce. We are pleased to bring the strategy to our hometown markets, where we have served Food Lion customers for 55 years."

Amazon May Be Taking Aim At Hardware Business

Forbes reports that Amazon.com may be "gunning to be the store of choice for contractors and the DIY set," a development that is less than optimal for a retail segment that already has been suffering because of the recession's impact on the housing market.

According to the story, Amazon's plan to offer same-day or next-day delivery in many markets "could deliver the death blow to some home improvement retailers. Home Depot, Lowe’s, Menard — is there room for everyone? Probably not ... Amazon’s new online fulfillment goals are set to deal the weaker of the chains a near death blow. Already, Amazon has an advantage in inventory and service. Anyone looking to remodel a bathroom, install new light fixtures or build a deck is likely to do a good amount of online research first. Home Depot and Lowe’s have tutorials and sell product, but once in the store, things fall apart. Out of stocks, hard to find sales people and misinformation abounds. Weekend traffic and difficult to maneuver parking lots just add to the inconvenience. The 'need it now' nature of home improvement goods has helped insulate the channel from online predators.

"Until now."

Safeway Enhances Just For U Program

Safeway announced that it has "enhanced its Just for U program for Northern California shoppers. The first-of-its-kind mobile and online shopping tool now gives shoppers a simpler and faster way to save on groceries. The Just for U enhancements personalize the shopping experience even more—providing shoppers with savings of 10 to 20 percent more than using their Safeway Club Card alone."

The company said that by using Just for U before a shopping trip, shoppers can "access hundreds of digital coupons," with new savings added every week; "download Personalized Deals based on personal shopping history," with deals updated weekly; "view filtered and sorted Safeway weekly Club Card Specials on items a shopper buys regularly"; and "create a personalized Savings List on a mobile device or on the Just for U website."

“Gone are the days where shoppers have to clip coupons or browse through ads and promotional flyers for the best savings. With Just for U, our Safeway shoppers are able to more easily save time and money,” said Karl Schroeder, president of Safeway’s Northern California Division.

Kroger Said To Be Considering Surcharges For Credit Card Users

In Detroit, WXYZ-TV News reports that Kroger Co. is considering charging customers using credit cards more for groceries than if they spend cash or use checks.

According to the story, "This could be the first major change after the recent settlement between Visa and MasterCard with retailers.  Under the agreement, stores would be allowed to pass along 'swipe fees' to consumers for the first time.

"Kroger says it is exploring the possibility of giving cash users a discount at the register, or posting two prices for everything: one being the cash price, the other the credit card price. The store has not yet said if it would also charge this higher price to debit card users as well, though it does not appear likely, as debit cards are not part of the settlement. Also, the company has not yet said if stores would charge the higher price for American Express and Discover cards, as they were not part of the settlement."

Exclusive: WinCo To Enter Dallas Market

MNB is reporting exclusively this morning that WinCo Foods, currently with 85 stores in seven western states, plans to open stores in Dallas, making Texas the eighth state in which it operates.

WinCo president/CEO Steven Goddard told the company's employees about the plan in a newsletter now being circulated, saying that WinCo has "completed an in-depth study of the market," and expects to open its first stores there in about two years.

"We have never been in a better position than now to take that plunge," Goddard says.

Sources tell MNB that while WinCo has four distribution centers, none of them are positioned to serve the Dallas market, which makes it probable that the company will use Associated Wholesale Grocers as its supplier there, at least in the beginning.

FMI Study Says Nutrition Drives Shopping Decisions

The Food Marketing Institute (FMI) and Rodale's Prevention are out with their annual "Shopping for Health" study, and this year's 20th edition concludes that "nutrition continues to drive decision making in supermarket aisles across the country."

Some excerpts:

• "For the past few years, shoppers have recognized and increased their purchases of foods containing desirable ingredients including whole grains, fiber, and protein. That number continues to grow, with 32 percent of shoppers reporting that they are buying more foods based on nutritional components versus last year."

• "Customers are attempting to make more of their calories count for better overall health, with 55 percent of shoppers switching to whole grain bread, 33 percent showing an interest in protein on the label (up 10 points since 2009), and 30 percent switching to Greek yogurt (up 9 points versus 2011)."

• "The desire to eat healthier and the stagnant economy appear to be two drivers that have led consumers to do more cooking at home, with 57 percent of people reporting having tried a new healthy recipe in the last year, an increase of five points from 2009. Shoppers recognize and use a variety of reliable sources when it comes to healthy meal ideas, with shoppers finding recipes through a variety of sources including the Internet (39 percent), cooking shows (37 percent), magazines (34 percent), cookbooks (33 percent), word-of-mouth (31 percent), recipes on labels (26 percent), culinary magazines (12 percent), and supermarket recipes (11 percent)."

• "With the economy still in a slow growth mode, many of the tactics shoppers started using in 2008 are still in place, with 63 percent of shoppers reported only buying what they need (down 1 point from last year), and 60 percent switching to store brands (up 6 points from last year). While switching to store brands began as a money-saving tactic, improvements to quality, labeling and promotion have strengthened their position versus national brands."

• "Consumers are aware of their options at the grocery store, as 54 percent of respondents recognized the effort of food manufacturers to reduce sodium levels in their foods. Sixty-seven percent of shoppers say that sodium is important to them, with 32 percent of shoppers saying that they are buying more low-sodium products versus 2011.”

FastNewsBeat

Forbes reports that Costco has launched a mobile application, available for use on Apple's iOS and Android phones, that it says "will not only make shopping easier, but also integrates a social experience – which is critical as Costco itself is a very social experience for most customers."

• The Seattle Times reports that not only has Seattle-based Metropolitan Market arranged for a private equity firm to take a stake in the company, but it is using at least some of the new investment money to acquire Magnolia Thriftway there.

According to the story, Magnolia's owners are retiring and were looking to sell: "The deal is expected to close in September. Metropolitan plans to remodel the store next year, and will keep it open during that work. Financial terms were not disclosed on the acquisition or on last week's investment by West Coast-based Endeavour Capital."

• Tops Friendly Markets, the grocery retailer with stores in Western New York, Central New York, including Rochester, and Northern Pennsylvania, announced that the company will expand into the City of Syracuse by opening a new store on the city’s south side. The unit is on the site of an old P&C store that is now vacant; Tops says it plans to renovate the location and have it open by the end of the year.

• It was reported last week that in Portland, Oregon, the "2012 Safeway Waterfront Blues Festival raised a record $902,000 to feed hungry Oregonians, easily smashing the previous record of $748,000 set in 2011 ... Organizers said the 120,000 attendees contributed an additional 104,000 pounds of food, beating the goal of 100,000 pounds."

• Los Angeles-based Unified Grocers announced that it has partnered with Guiding Stars and Vestcom's healthyAisles to give shoppers of independent grocery stores what it says is "a quick and easy way to make informed decisions about healthy food choices. This convenient and easy-to-use shelf tag program allows shoppers to see at a glance foods that offer the most nutrition for the calories and identify the key health benefits of each item.

"The Guiding Stars and healthyAisles program debuted at Granite Falls Market Fresh IGA, Granite Falls, Washington and Lamb's Garden Home Market, Portland, Oregon earlier this year. Unified is planning to roll out the program at more independent retailers' stores throughout the West in the coming months."

Bloomberg reports that Walgreens is spending $438 million to acquire the owner of the USA Drug chain, a move that gives it "144 stores under brands including Super D Drug and May’s Drug, as well as corporate offices and a distribution center in Arkansas. It’s Walgreens’ second deal in about two weeks, after the Deerfield, Illinois based company agreed to buy a 45 percent stake in Alliance Boots GmbH for $6.7 billion last month to expand globally."

• Weis Markets announced it has lowered the prices on over 1,000 staple items and that it will freeze the prices of these products for 100 days in recognition of its 100 year anniversary this year.

The company said that this is its ninth Price Freeze since 2009.

• The Chicago Tribune reports that "Ace Hardware has launched a scaled-down version of itself in nearly 400 locations ... The new format, designed for 5,000 square feet or less, stocks more than 11,000 of the retailer's most popular and profitable products, the company said in a statement."

According to the story, "Ace is following the footsteps of big box retailers such as Walmart, Target and Meijer, which are also shrinking their physical footprint as they seek to continue growing in markets that aren't able to accommodate full-size retail locations."

Dow Jones reports that Target plans to extend its summer "online-only 'Bonus Black Friday' sale to two full days and will hold its first-ever 'Summer Cyber Week' sale" as a way of combating lagging sales in a still-stagnant economy.

The story says that "the summer Black Friday sale, which Target started two years ago, is scheduled for Friday and Saturday, and the Cyber Week sale will go on all next week. The retailer said customers will find 'Black Friday-like' deals on more than 2,000 items on Target.com, including toys, movies and apparel."

• The Associated Press reports that Costco has "joined a growing list of retailers and restaurants in asking suppliers to phase out the use of small pens for pregnant sows, as an animal welfare group prepared to release an undercover video showing conditions at one of its suppliers.

According to the story, "National restaurant chains that have asked their suppliers to stop using gestation stalls include McDonald's, Burger King, Wendy's and Hardee's. Joining the list this week were Sears Holding Corp., which owns Kmart Corp. and its 25 Super Kmart stores that sell groceries, and ketchup maker H.J. Heinz Co., which also makes a variety of frozen foods and sauces that contain pork."

• Standard & Poors said yesterday that it expects Supervalu's "sales and profitability to erode more than we anticipated in fiscal 2013 and 2014 due to intense competition and the rollout of its more aggressive pricing strategy." The S&P said that the outlook for Supervalu is negative, and that this "reflects our view that execution risks related to its new pricing strategy could result in a greater-than-expected fall in profitability if sales improvement does not materialize; or a transaction to enhance shareholder value could further erode Supervalu's credit protection measures."

• Western New York-based Tops Friendly Markets announced that it is acquiring 21 supermarkets in upstate New York and Vermont from GU Markets LLC, an affiliate of C&S Wholesale Grocers. Terms of the deal were not disclosed.

According to the announcement, "This acquisition will bring the number of Tops stores to 153 and will expand Tops’ footprint further into areas of northern and eastern New York State and neighboring northern Vermont. The planned acquisition of the 21 stores follows up on the 2010 acquisition of the Penn Traffic stores."

• The Chicago Sun Times reports that Target Corp. "will open slimmed-down stores in the Chicago loop, Seattle and Los Angeles on Wednesday in its attempt to woo urbanites, a path already being charted by Wal-Mart with its smaller Neighborhood Market and Express stores. Two additional scaled-back Target stores will open later this year.

"Called CityTarget, the new stores are about two-thirds the size of a typical Target — there’s also no parking — but the merchandise mix isn’t that different. There are fewer strollers, no sofas on display and a downsized children’s and toy section. Still, city dwellers will find the staples that Target is known for: home goods, apparel, beauty supplies and groceries."

• The Chicago Sun Times also reports that "Walgreens agreed to rejoin the Express Scripts pharmacy network.  Deerfield-based Walgreens Co. and Express Scripts Holding Co. said they signed a multiyear contract. The nation’s largest drugstore chain said it will start filling Express Scripts prescriptions Sept. 15. Terms were not disclosed.  Walgreens has been out of the network since January."

Executive Suite

• Wegmans announced last week that Don Reeve, its senior vice president/CIO, is retiring after 42 years with the company.

Dave DeLaus, previously senior vice president and division manager of Wegmans’ New Jersey stores, will succeed Reeve as CIO.

• Stater Bros. announced that David Harris has been promoted from senior VP finance to be senior VP finance/CFO/principal accounting officer.