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From The MNB Archives
Monday, July 30, 2012
Craig Herkert, the former Walmart executive hired by Supervalu in 2009 to reshape the company as a low price retailer, has been fired, effective immediately.
He will be replaced for the time being by Wayne Sales, the Supervalu chairman, who will now take on the additional titles of president/CEO. Sales has been non-executive chairman of the company since 2010 and on the board since 2006.
The change comes after a tumultuous few weeks for Supervalu, highlighted by underwhelming quarterly sales and profit numbers, the announcement that all or part of the company was for sale, and then last week's revelation that Herkert and three other senior executives were being given retention bonuses and stock options.
The sighs of relief you are hearing come from Supervalu front line employees all over the country who are thrilled that Herkert has been shown the door, who have been worried for a long time that he had very little sense of the company's front lines, and who have been convinced of this fact by the company's behaviors over the past couple of weeks.
I know this because I'm already getting the emails from people who are happy about the change, though I do not get the sense that they are persuaded that the ironically named Sales is the answer.
Nor should they be. I have no idea if Sales is a long-term response to Supervalu's problems, or if he is just keeping the chair warm until they find another answer. (My guess would be the latter, but I am guessing. I also have gotten several emails this morning asking if somehow Jim Donald could be persuaded to return to the supermarket business and run the company. I can't imagine that this is remotely possible ... and as his friend, I can't imagine that this would be a good thing for him to do.)
But here's what we have to remember in the wake of the Herkert firing. He was hired by the company's board of directors, the same board that gave him a retention bonus just a week ago, the same board that - I presume - knew about and approved every move he made.
Maybe they did not know about every move. He probably did not have to tell them when he told staffers that they would henceforth have to pay for their coffee and would not have access to free plastic utensils in the cafeteria. But they probably did know that Herkert had told the employees, when he said that there would be no bonuses, that he maintained that bonuses were an ineffective way of getting better performance. A contention he conveniently forgot when he took the retention bonus, a move that earned him utter disdain from front line personnel and middle management.
I come not to bury Craig Herkert, nor to praise him. I just think that when the chairman of the board rides into town, suggesting people he's on a white horse and he's going to save them, one has to be cognizant of the fact that he was complicit in getting the company to where it is.
Sales is quoted this morning as saying: "In my new role, I will work closely with our leadership team to improve our sales and earnings trajectory and generate long-term shareholder value, focusing relentlessly on identifying factors that will drive meaningful improvements in our strategy execution and overall performance."
Tell you what he ought to do first. bring back free coffee and free plastic utensils. Just as a starter. And then, he better make clear to the people on the front lines that he understands that Supervalu is only as strong as their performance, that he is there to support them, and that he has seen the light through the residue of a horrific storm that has left company morale in shambles.
Though based on his statements this morning, I have little confidence that he will do any of this. The prepared comments sound as if they could have come from Herkert, and a lot of people seem to feel that the only reason the change was made is that Herkert became radioactive.
Maybe the change will be enough. I hope so, for the sake of all the people who work for Supervalu or are served by it.
Vending Times has a fascinating story, passed along by an MNB user, about a "computerized system that will allow parents of students in schools across New York City to have the final say in what drinks their children purchase.
"The Drink Accountability Program (DAP) allows a parent to create an online account for a child, funded with a debit or credit card, and specify what drinks the child can buy and how often. The parent can choose to allow his or her child to purchase one 'pre-elected' drink every day, every other day, once a week, or at whatever interval he or she determines to be the best choice. Once a profile is enabled the DAP, a student can enter a PIN at a vending machine to retrieve the permitted drink.
"CC Vending said it will install its DAP free of charge in all 1,400-plus schools in the New York City school system, pending approval from the New York Department of Education. The vending operation will also provide information and training for school personnel who can inform parents through written materials, school assemblies or parent-teacher meetings."
Now, this seems like a smarter way to control what kids consume - just put the responsibility squarely on the parents. The Health Department and the school districts can make recommendations, even create a little peer pressure on parents to pay more attention to nutrition and obesity issues. But in the end, the responsibility rests where it should.
This totally cool.
BTW...there is a terrific NPR interview show called "Here's The Thing," hosted by Alec Baldwin. (Now, I know a whole bunch of people just decided not to ever listen to the show simply because they hate Baldwin. But the thing is, this is the smart Baldwin - engaged, curious, not particularly political, and most of all interested in talking to smart people.)
Recently, Baldwin interviewed Dr. Robert Lustig, a pediatric endocrinologist at UC San Francisco, about our country’s addiction to sugar. It is a fascinating discussion, and one worth listening to, and you can check it out here. If you can get over your anti-Baldwin bias.
In Minnesota, the Star Tribune reports that US District Judge Ann Montgomery has ruled that a "group of independent grocers will not get class-action status to press their antitrust cases against Supervalu Inc. and C&S Wholesale Grocers Inc. over a deal to divide up markets in the Midwest and New England," saying that "the plaintiffs had failed to establish a case that an agreement between Eden Prairie-based Supervalu and C&S, based in Keene, N.H., had caused a common injury to the myriad potential plaintiffs in the class.
The case dates back to 2003, when "Supervalu was looking to divest itself of underperforming retail stores, customer agreements and operating warehouses in New England," and negotiated a deal "in which C&S assigned to Supervalu certain Fleming assets for its Midwest wholesale operations, and Supervalu assigned to C&S its New England wholesale assets and certain retail assets." While the deal did include "a non-compete provision that barred Supervalu and C&S from supplying former customers served from a certain distribution center for two years, and each agreed not to solicit those customers for five years," the two companies maintained that there was no common harm to independent retailers affected by the deal.
A number of retailers disagreed, and filed suit, hoping to get class action status.
The irony, of course, is that, as the story makes clear, one of the things that prompted the deal was rival wholesaler Fleming filing for bankruptcy in 2003 and C&S acquiring some of its assets, which put it in a position to make the deal with Supervalu. And now,, almost a decade later, Supervalu is on the ropes and C&S is said to be one of the companies interested in buying - wait for it - Supervalu's wholesale business.
So Supervalu gets a small win in that it does not have to defend a class action suit. It is a small win, but these days, it'll probably take any wins it can get.
Man, it is like reading one of Ross Macdonald wonderful novels, in which detective Lew Archer generally finds that the mysteries of the present are inextricably linked to the hidden secrets of the past.
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ABC News is reporting this morning that two Kansas Walmart stores, in Leavenworth and Lawrence, had to be evacuated after bomb threats.
Police searched for explosive devices but found nothing.
This is not an isolated case. Indeed, published reports say that at least seven different Walmart stores in Missouri had to be evacuated last week because of bomb threats,
And, according to various stories, two Walmarts in Tulsa, Oklahoma, had to be evacuated because of a bomb threat last June, and two Georgia Walmart stores got a similar threat that caused evacuations during June.
Almost hate to say it out loud, but it always has seemed to me that if you want to go after America, you go after institutions like Walmart. Maybe, since nothing has actually happened, these are just weirdly coincidental events. But I don't really believe in coincidence.
Walmart has to be getting nervous that there is something else going on here.
In Ohio, the Daily Standard reports that Kroger plans to open "a small concept store" in the town of Celina sometime early next year.
"We are in the process of determining how to bring the best value and the right store format to Celina," Kroger spokesman Keith Dailey tells the paper.
The store would be competing with a Walmart Supercenter across the street; Walmart used to operate a discount store in the location, but moved to larger digs in 2005, though it held the least until last year and would not permit retail development until its rights lapsed.
In drawing my attention to this story, one MNB user noted that Celina is not a place that is seeing a lot of growth - that it has about 10,400 people, "about the same as it has been for the past 50 years." And, he said, "Kroger was in Celina years ago but It has probably been 50 years since Kroger closed that store."
Be interesting to see what Kroger puts there.
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The Washington Post reports that the Centers for Disease Control and Prevention (CDC) says that "the rates of infections linked to four out of five key pathogens it tracks — salmonella, vibrio, campylobacter and listeria — remained relatively steady or increased from 2007 through 2011. The exception is a strain of E. coli, which has been tied to fewer illnesses in the same time
"The statistics also show that the government did not meet the goals it set for reducing illnesses tied to salmonella, the top cause of food-related infections resulting in hospitalizations and death. The goal was seven infections per 100,000 people by 2010. Instead, the state laboratories involved in producing statistics for the CDC confirmed 17 infections that year and about 16 last year."
The numbers, the Post writes, have prompted food safety advocates to push for faster adoption of new rules that were enabled by legislation signed into law by President Obama in 2011, but that have not yet been drafted or implemented by the US Food and Drug Administration (FDA).
Minnesota-based Coborn's Inc. said last week that it plans to open five new stores in North Dakota by 2014, in the cities of Stanley, Tioga, Watford City, Dickinson and Minot.
The move is part of a broader move into the state. The Minneapolis /St. Paul Business Journal notes that Coborn's open a store in Jamestown, ND, last May, and also has partnered with JK Foods to co-own three stores in what is described as "the oil-rich and fast-growing Bakken region of the state."
Nothing like opening stores in places that have black gold, texas tea, bubblin' crude.
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Interesting story in the San Francisco Chronicle about how the US Congress, by beginning a series of hearings, " is preparing itself for the next big thing when it comes to money - a future in which payments are made with a wandlike wave of a phone rather than the exchange of wrinkled pieces of paper."
Since the mid-1990s, the story says, "cash has been in decline, according to a Federal Reserve estimate. It now faces stiff competition not only from credit cards but also from smart phones that promise businesses a way to advertise to customers before they pay or to offer them coupons, sort of like printing a little ad next to George Washington's face or bumping up the value of a dollar bill to a dollar and 15 cents."
And here is an some interesting statistic: "The Federal Reserve found in March that 12 percent of cell phone users had already made a payment through their phones," the Chronicle writes. "The same month, almost two-thirds of technology experts surveyed by the Pew Center on Internet and American Life said they expected mobile payments to eclipse cash and credit cards by 2020."
Hard to imagine going completely cashless, at least not in my lifetime, but at the very least I hope that the government asks the right questions and tries to get ahead of this curve, as opposed to the way it has handled the US Postal Service.
In the UK, This Is Money reports that "Tesco's rivals and suppliers fear the supermarket giant may be planning a major price war if chief executive Phil Clarke’s recovery strategy does not take hold.
"The prospect that Tesco might be forced into dramatic action is being referred to as its ‘nuclear option’ and senior executives in some rival chains say this is a bigger cause for concern than the continued failure of the consumer recovery to begin." The sense, the story says, is that Tesco "has far more firepower than any of its rivals and could cut prices to a much deeper level.
...with brief, occasional, italicized and sometimes gratuitous commentary...
• The Virginian-Pilot reports that in the Hampton Roads market, Kroger "will cut prices, in some instances by more than half, on more than 10,000 items in its seven local supermarkets beginning today, an executive said Friday.
"That represents more than one-third of the 28,000 items in Kroger's grocery, drug and general merchandise sections, said Carl York, the advertising and public affairs manager for Kroger Mid-Atlantic. The discounts, he said, will cover popular items such as produce, peanut butter, eggs, laundry detergent and frozen pizza."
The initiative is limited for the moment to the Hampton Roads area, and is aimed at increasing Kroger's market share there.
• Bloomberg reports that Walgreen and General Motors are the latest companies to cancel their memberships in the American Legislative Exchange Council (ALEC), joining companies like Kraft and Coca-Cola is bailing out of a group that they said would be focused on economic growth and tax policy issues, but has lately been focused on supporting "Stand Your Ground" gun laws controversial voter ID legislative efforts.
• Amazon founder and CEO Jeff Bezos and his wife MacKenzie have donated $2.5 million to support a ballot measure in Washington State that would uphold a law legalizing same-sex marriage.
According to USA Today, "The donation from the Bezoses doubles the amount raised by the group supporting the ballot initiative. Microsoft founder Bill Gates and CEO Steve Ballmer have each donated $100,000 to the pro-Referendum 74 effort ... the Bezos joins some prominent members of the financial world, all of them Republicans, in backing gay marriage. Paul Singer, the billionaire behind Elliott Management, recently contributed $150,000 to Freedom to Marry, which fights for gay marriage across the nation."
Just thought this was interesting in view of the dialogue that has taken place here on MNB over the past few weeks.
The Los Angeles Times reports that Donald Perry, who had worked for the Chick-fil-A chain for 29 years and was its vice president for public relations, dealing with both the backlash from and support of the company CEO's statements opposing gay marriage, died Friday from a heart attack. He was 60.
This isn't karma. It isn't fate. It is a tragedy, especially for his family, and nobody on either side should make any more of it than that.
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Regarding the decision by Tesco's Fresh & Easy operation in the US to cut back on HQ staff as it seeks elusive profitability, one MNB user wrote:
It's always been a losing proposition from the moment it washed ashore. It offered nothing of relevance to the US consumer aside from the fact that it was dreamed up on a white-board by some arrogant C-suite folks who thought they could do no wrong. But one of the main problems also makes it a tough sell. Namely, the footprint. At 10,000-15,000 sq feet, the only existing retailer that makes a good fit (size wise) would be Trader Joe's. Only a smattering of Dollar stores come close to 10,000 sq ft. And Walmart's attempt at "small" with their "Neighborhood Market" concept still comes in at a whopping 42,000 sq ft. Given Fresh & Easy's frequent proximity to existing Trader Joe's, not to mention the fact that Trader Joe's is far too smart to try to expand with such reckless abandon, I don't see any kind of existing match. And the only thing more foolish than F&E's failed concept would be to try and force an existing successful concept into their poorly designed formats. It's going to be very interesting to see what happens to these shells.
On the subject of Supervalu's continuing woes, one reader wrote:
I'm sure you and the readers are probably hitting max capacity on all news and opinion on SVU these days, but I thought I'd throw my two cents in the ring as a first time contributor. First of all, I loved your reaction to the retention bonus announcement - brilliant, spot on and refreshing to read such clarity of thought and point-blankness.
Perhaps you've heard by now, while our "leaders" receive their parachutes and "incentives", any other bonus eligible store support center employee has been stripped of their "incentive" for the year. Yep, bonus eligible employees aka managers/directors are no longer to receive a bonus. While admittedly those have been scarce to non-existent in the last 3-5 years (along with salary freezes for those minions), it is at this point where the lid of frustration and anger has been blown for many. What kind of message are you sending to your employees? Oh, it's clear - you are not valuable - and yet we expect more than ever of you and please always look over your shoulder because you may be the next one axed by the corporate grim reaper. But don't worry, as Mr. Herkert said recently, this is a "great" moment for Supervalu. Perhaps that was a Freudian slip as he was relishing in his own future wealth and mentally counting the options slot machine funds in his mind. At least they've made it clear that if you haven't been looking to jump ship, you better now because there's not enough bodies or buckets to keep the tidal waves from sinking the ship and definitely not enough life jackets aboard.
I wrote last week about how Wall Street often penalizes companies for not hitting certain expectations, even when these companies are doing perfectly well, which led on MNB user to write:
Wall Street is like a kid in the ice cream parlor. As a wise CFO ex-boss of mine told me years ago: “When the Street is asked which do you want – ID sales or profits? They will invariably reply with: We’ll have both please.”
This is why you have to focus on running your business and not let the “nattering nabobs of negativism”, to quote Spiro Agnew, that inhabit Wall Street dictate your actions – they aren’t interested in the same things.
I always worry when I see Agnew being quoted that we may be at the beginning of some misguided attempt to rehabilitate his reputation. But I get your point.
On Friday, MNB took note of a New York Post report that the Westside Market on Manhattan's Upper West Side has unveiled what it is calling a "Man Isle," a place where men can get pretty much everything they need within a couple of feet of shelf space.
Included in the "everything men need" list, according to the story, are beer, barbecue sauce, chips, steak sauce and condoms.
This is pretty funny and obviously a good attention-getter ... though I have to admit that I have a slight issue with them appearing to cater to every possible stereotype about men in their selection.
To which MNB user Rick Brindle responded:
And another MNB user offered:
What, no porn?? Seriously, it sounds like the marketing decisions there are being made by a 15-year-old stock boy with <100 IQ. Sad and lame…
Finally, thanks to the folks who wrote in on Friday to say that they thought I'd been measured and on-target with my Chick-fil-A comments and growing disgust with people on both sides of the aisle who seem to be pandering for political advantage. I'll just post one of them:
Amen, amen, amen, amen. Your comments will be unlikely to be broadly supported as you obviously have no principles and stand in that muddy middle ground of decency, respect for others and a search for intelligent compromise.
Welcome to our small and mostly ineffective group of citizens!
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