business news in context, analysis with attitude

We continue to get comments from the MNB community about the Safeway situation in California and our coverage of it.

One MNB user wrote:

I think Burd has Safeway in some sort of gridlock. KC, you are correct when you said "after all, service and perishables are always what retailers point to as a priority when they‚re trying to get their act together." With Burd stumbling though one investor conference after another and bragging on how they will get 90% of their savings through lower wages and benefits must have CEOs at the privately held regional chains laughing their tails off.

Does Mr. Burd ever stay home and run his company? When I hear him talk about what needs to be done to get Safeway back on track - well that would be like me telling people what I need to do in order to become a starting quarterback in the NFL. Safeway, like me, is too slow and too fat. If they try to get back in the game they are just going to hurt themselves worse. They are like Midas in reverse.

And another MNB user wrote:

Sounds like an EDLP strategy...which isn't new, and hasn't really worked in any other grocery accounts (that I can recall), and which (I think) Safeway has no experience with. Either that, or it's a "I'll take your best cost, take a 50% margin everyday and promote your products down at my whim on timing and depth" type strategy. Given my (admittedly jaded) experience with Safeway, it's probably the latter.

Maybe they'd be better off just trying to work with manufacturers on improving promotional programs for the consumer. In my previous company, we promoted less frequently and with less depth, because they would only pass through 70% of a promotional allowance. And since their margins were already high, the shelf price was high and trying to get to a compelling promotional price was so difficult we couldn't get there as often as we could in other accounts even though we were spending at similar levels.

It'll be interesting to see if this really happens.

And regarding the ongoing labor negotiations there, another MNB user wrote:

In your story, you noted that the chains claim that labor "concessions are necessary to be competitive". It's the same line we heard in LA. My question to the chains is how would you be competitive? It's certainly not price...after enduring four months of "hassle" in the Los Angeles area, I haven't noticed any big concession on prices at the "big three" or even an attempt at holding the line. And it's certainly not with friendly, attentive employees. Employee service, attitude and willingness to help hasn't changed much from the "surly" days of the strike. Could it be that these companies are really talking about being "competitive" on the bottom line? After 30 years of working in middle management for one of these guys, that's where I'll put my money. Higher profits and lower standards.

I really enjoy your morning briefing. It's the first thing I read before anything, even my coffee! Keep up the good work.

And regarding the fact that the three major chains in Southern California have recouped the sales they lost during the Southern California strike, one MNB user wrote:

The length of the strike, 3 months, forced consumers to “adapt” to the situation. Once the consumer adapted and settled in there was no compelling reason to return to old ways. Anything that closes a store for three months will cause consumers to adapt and change their shopping habits. The striking chains have done nothing in Southern California, where I live, to win back the customers! Therefore they will never cause the customers to “adapt” once again. Blaming Wal-Mart perhaps gives Wal-Mart more credit than they deserve.

And MNB user Dan Jones wrote:

The volume lost by the striking chains has not gone to Wal-Mart Supercenters. In Southern California, there is currently only one Supercenter, out in La Quinta (Palm Springs area). There is not yet a Supercenter in LA, Orange, or San Diego counties, the epicenter of the strike.

The business has gone to Trader Joes, Stater Brothers, and Costco. When the Supercenters come, and the very high retail prices of Southern California are challenged, another cohort of shoppers will leave the chains. If times are tough for the big three here now, it will get far, far tougher when Wal-Mart is established.

We reported last Friday about The Apprentice and noted that Procter & Gamble’s Crest toothpaste is going to be playing a supporting role on NBC’s hit show when contestants design a new marketing plan for the venerable brand – a deal for which P&F reportedly paid millions.

Last week, both Toys R Us and Mattel got plugs, as the contestants were challenged to design a new toy for the manufacturing company.

Our comment: As always, The Apprentice was an over-the-top, compelling celebration of excess, ego and extraordinary narcissism. It was ironic, somehow, to see Trump – who has been suffering his own financial setbacks lately – applauding Toys R Us as an impressive US corporation at a time when the company is thinking of getting out of the toy business.

The biggest problem with designing a toy for Mattel was that virtually none of the contestants seemed to have any feel for kids or toy stores. It’ll be interesting to see how these overachievers do with Crest…they may not know much about consumer packaged goods, but they almost certainly all have sharp teeth.

One MNB user responded:

And I was secretly feeling guilty for watching reality TV! The Apprentice is great entertainment. It was strange that the Donald, supposedly a savvy businessman, did not bother to learn anything about Toys R-Us before featuring them and speaking so highly of them on camera. He seems to think they are still successful. The real fun was watching people who clearly have no prior interaction with children trying to come up with ideas for kids’ toys. The man who headed the women's team was basically an annoying jerk, but he was right about what little boys would like. Did you hear some of the women's early proposals: an EZ-Bake Oven type toy for boys, and a dress up kit to help little boys experiment with drag? My wife and I never laughed so hard as when one of the contestants put forth her scholarly sounding opinion that "children today really desire more sophisticated toys." No, actually it's people who want to sell sophisticated toys to parents with big toy budgets who desire more sophisticated toys. We have six children between age 1 and 11, and I can tell you that the winners in our house are never the sophisticated, expensive toys. Those are ignored from December 28th onward, and the simpler things get the most playtime. I'll definitely keep watching to see what happens with P&G, a company about which many of us in the industry probably have mixed opinions.

Another MNB user wrote:

That show simply celebrates the old autocratic style of management from years ago. Like Trump's hair style, his tactics haven't changed much over the years, and one has to wonder how much that has impacted his success as of late. It's hard to burn, pillage and plunder and not have that catch up with you or your organization over time.

Kindness doesn't always have to be taken as weakness.

And MNB user Denise Remark-Lundell wrote:

Considering that these shows were probably taped well before the Toys-R Us decision was made to get out of the toy biz, it makes sense that DT would have made such a comment. Or perhaps his hair is just so damn awful, information simply circulates around the outside of his head looking for safe entry into his ears.

You’re right that the segment was shot months ago, before Toys R Us talked about getting out of the toy business.

But almost everyone realized that Toys R Us was suffering big time at the hands of the Bentonville Behemoth…you didn’t have to be an egocentric millionaire real estate developer to know that.

We certainly were writing about it. Maybe Trump needs to start reading MNB
KC's View: