business news in context, analysis with attitude

Published on: June 18, 2014

by Kevin Coupe

"Fresh Talk" is sponsored by Invatron: Proven Technology.  Innovative Thinking.  Intelligent Solutions for Fresh.

Content Guy's Note: "Fresh Talk" is a new MNB column, scheduled to alternate on Wednesdays with "Kate's Take."  It will examine all aspects of "fresh," in both the broadest and most focused meaning of that term (depending on the whims of the columnist). "Fresh Talk" is sponsored by Invatron...which you can learn more about here…but which has no input into the subjects covered or responsibility for the attitudes taken.

My store of choice, when I'm in Connecticut, has, for 30 years, been Stew Leonard's.

From the first time I went in there, long before I ever started writing about retailing, I was captivated by the experiential nature of the store. While Stew Leonard's has long been referred to as "the Disneyland of dairy stores" (a description that it has long outgrown, since it now has some 2,000 items and dairy products are but a small percentage of sales), there's actually a different show biz reference that I'd make - it actually is the anti-"Wizard of Oz," because instead of keeping the magic behind a curtain, they've long exposed what normally would be going on in the back room for all to see.

That means creating the perception that the baked goods, meat, seafood and produce are, in fact fresher. And it means often creating the illusion that even the products not technically "fresh foods" are, indeed, fresh.

There's a lot to be said for that approach, and a lot of retailers have adopted it. There's an understanding that being an effective "fresh" marketer means creating a sense of theater and magic in those departments. Not only does it have visual appeal, but it implies a strong sense of expertise.

To use a formulation that I've often gone to here on MNB, it means that the store becomes not just a source of product, but a resource for information. And that keeps customers coming back for more.

(Case in point: I've been shopping at Stew's for 30 years. Let's say that I've spent $100 a week there… and that is very conservative … for 50 weeks a year. Well, you do the math…all I know is that it adds up to a vivid example of how fresh and theater can have a multiplier effect on the bottom line.)

Even when they move things around at Stew's, and bring in new and seasonal products to keep things current and relevant, which they do with regularity, I'm not usually surprised. In fact, I'm kind of used to it.

Until about a week ago.

I was midway between the service cut fruit department and the banana display when I saw something I'd never seen at Stew's before … an actual beehive.

And it was supposed to be there.

The company explained on its website:

The hive was home to more than 50,000 honeybees, measures 4 ft. x 5 ft. and "is one of the largest in the world." It was "installed behind a fully enclosed safety glass frame in Stew Leonard’s produce department.  A tube runs from the hive and out of the store’s roof so that the bees can leave the hive to get pollen and nectar, flying within a 2 ½ mile radius of Stew Leonard’s to do so."

According to the site, "an average observation hive is usually just a few 12 in. x 10 in. frames, but Stew Leonard’s observation hive will have 20 frames. To build it, Stew Leonard’s team worked with local, fourth-generation beekeeper Andrew Cote of Andrew’s Local Honey and Silvermine Apiary and Tim Cerniglia, Jr. of Bee Kind Farms."

And, the company says, "Stew’s bees will produce upwards of 100 lbs. of honey this summer – about 100 jars – which will be collected by Andrew’s Local Honey to eventually be sold at Stew Leonard’s!" Not to mention a lot more fresh honey that presumably comes from other bees.

Stew Leonard's used to say that "to get fresher milk, you'd need a cow." Well, I haven't seen the sign yet, but it seems entirely likely that they'll post one saying that "to get fresher honey, you'd need your own beehive." (If those are my two choices, I'd rather own a cow.)

And here's the kicker: Stew's spokesperson Meghan Bell tells me that "sales of Andrew's Local Honey have quadrupled since we introduced the hive."



Once again - theater and magic add up to increased sales, and even turn what usually is a packaged product into a fresh item.

This is the kind of stuff that retailers have to do in fresh, if they are going to create for themselves differential advantages that create new customers and incremental sales.

Postscript: A couple of days ago the beehive was gone…but only temporarily. It ends up, Bell tells me, that "the store was a little too cold for them to thrive, so we're installing a heater in the observation hive."

Carefully, I hope.

Published on: June 18, 2014

by Kevin Coupe

This lead paragraph from Salon.com story says it all…

"When you’re an industry giant and you’re confronted with a potential social media crapstorm thanks to the ignorance of some low-level mouth breather employee, you have a choice. You can distance yourself as quickly as possible from the whole ugly situation with a stilted and terse statement that what happened in no way reflects your corporate policy and you’re a proud supporter and blah blah blah. Or you can take the incident as chance to be a little bit awesome. This week, KFC chose the latter."

The "crapstorm," as Salon so elegantly put it, had to do with a three-year-old girl who last April was mauled by three pit bulls, suffered enormous facial damage, including a broken jaw and nose, the loss of her right eye and paralysis of the entire right side of her face. The family has been struggling to pay the medical bills and then, late last week, insult was added to injury. The girl's grandmother took her to the doctor and then to KFC, where she hoped the girl would be able to eat the mashed potatoes. Unbelievably, the grandmother was asked by management to take the child out of the restaurant because the condition of her face was upsetting other customers.

The grandmother took to Facebook to complain about the treatment, promising never to set foot in a KFC ever again. Her complaints went viral, quickly getting the attention of KFC corporate management, which investigated the incident and quickly apologized and sent the family a $30,000 check to put toward medical expenses.

Salon writes:

"The company, in its social media response and in its stepping up and pledging the money, has demonstrated that it understands that a brand can be made or broken by its customer perceptions of it. KFC cannily recognized that an apology is nice, but when you are a big company and you’re talking about a family that’s hurting emotionally and financially, that specifically chose your establishment as a treat after a child’s doctor appointment, you have a chance there to go big. Others can be cynical about that, but if you want to be cynical about a little girl who’s been through hell getting help with her medical expenses, you can be cynical on your own … And though a check and an apology can’t eradicate the trauma of what happened to that girl in April or one person’s recent cruelty, it can inspire others to acts of kindness. It can give a family a happier outcome to a story that started out horribly."

Published on: June 18, 2014

The New York Times reports that Agriculture Secretary Tom Vilsack has gone to Brussels in an attempt to convince European Union officials "to do more to ease restrictions on gene-altered food and feed crops."

Vilsack is saying that if some sort of accommodation on GMOs cannot be reached, it will make it difficult to reach a trans-Atlantic trade agreement.

According to the story, "There continues to be deep resistance to bioengineered agricultural products in the European Union — or to easing many other agricultural trade protections, for that matter. The fight over food, in fact, is a big impediment to progress in talks that are already moving more slowly than officials on both sides had wanted when President Obama announced them last year.

"Negotiators are trying to reach a Trans-Atlantic Trade and Investment Partnership, an agreement that goes far beyond cutting import duties by creating a more uniform market and by synchronizing regulations for products like automobiles and medicines. But after five rounds of meetings, the negotiators are at odds in important areas, including how to lower tariffs, whether to include financial services in any deal, and how to create freer trade in food and farming."

US regulators insist that there is no difference between traditional foods and those containing GMOs, but Europeans remain skeptical, referring to them as 'Frankenfoods" and insisting that the long term impact is unknown.

Another issue being debated is the European demand that American companies "curb use of so-called geographical indications like Feta, meant to protect products like the Greek cheese of the same name."

Published on: June 18, 2014

Reuters reports that private equity group Berkshire Partners is expected to put its 180-unit Grocery Outlet chain on the market, and that the retailer is likely to fetch a price in excess of $1 billion.

Berkshire reportedly has hired Barclays and Goldman to explore sale options for the chain.

"Grocery Outlet bets on U.S. consumer frugality in lean economic times," Reuters writes, "offering about half off traditional supermarket prices by selling manufacturers' excess inventory. Founded by Jim Read in San Francisco in 1946, the chain initially sold government-surplus canned goods … In the past decade, Grocery Outlet has evolved into carrying a full line of groceries, including fresh items including produce, meat and milk. Organic goods and beer and wine are fast-growing categories within the retailer."

Published on: June 18, 2014

Seeking Alpha has an analysis suggesting that grocery is an area in which Walmart can blunt the impact that Amazon has been having in the retail sector.

The story notes that Amazon has not yet gained significant market share in the food business, and argues that this is a place where Walmart - which is spending millions to protect its grocery market share both online and offline - can effectively do battle with Amazon.

According to the piece, "Wal-Mart isn't going to allow Amazon to dominate the grocery delivery business. In some markets, Wal-Mart has rolled out a service called To Go. To Go customers can order food online and pick up their groceries or have them delivered. Wal-Mart requires only a $30 minimum order and charges $5-$7 per order. If ordering weekly, Wal-Mart's $5-$7 is similar to Amazon's $299 a year subscription ($5.75 per week). Wal-Mart has pushed into the online realm, but is also pushing to increase physical stores. Wal-Mart has opened, and plans to open, many smaller, more focused stores called Wal-Mart Markets. These stores resemble more traditional supermarkets and allow Wal-Mart to craft a better customer experience for grocery shoppers. Wal-Mart appears determined to keep their grocery industry market share by investing heavily in online and offline ventures."

Published on: June 18, 2014

In Minnesota, the Pioneer Press reports that Target is testing a new Rush Delivery service in three metro areas - Minneapolis/St. Paul, Boston and Miami - that allows consumers to get same-day delivery of products ordered online for an extra $10.

According to the story, "Rush Delivery orders placed by 1:30 p.m. will be delivered between 6 and 9 p.m. that same day, except on Sundays and holidays. Rush Delivery orders that don't qualify for same-day service will be delivered the next business day.

"The service also comes with a few other limitations. For example, shoppers hoping to take advantage of the service will be limited to a selection of about 30,000 products -- roughly one-third of what is available in Target stores, and a fraction of the 1 million products the retailer sells online."

Published on: June 18, 2014

Bloomberg reports that Sprouts Framers Market CEO Doug Sanders is saying that the retailer may exceed its goal of opening 1,200 stores in the US over the next 15 years, and could open as many as 1,500.

“That was the low end, the most conservative estimate,” he says. “We’re able to appeal to a much broader customer … Because we have such a broad appeal, we’re able to open more stores in a market than your typical natural-foods store,” Sanders says.

Sanders says that the growth will come organically, rather than through acquisition.

Sprouts now has 170 stores. Its strategic approach is to undercut chains such as Whole Foods on price by as much as 25 percent.

Published on: June 18, 2014

CBS News reports on a new Consumer Reports survey saying that almost six out of ten people look for the word "natural" on food labels, and almost two-thirds say they believe that "natural" means that the item has no artificial ingredients, pesticides or genetically modified organisms (GMOs).

Of course, the problem is that "natural" actually doesn't mean anything - federal regulators have no official or formal definition for what it means, and say they won't object to its use as long as the product as no artificial ingredients.

Another result from the survey: "nine out of 10 Americans said that foods containing GMOs should be labeled and meet safety standards established by the government."

Published on: June 18, 2014

• The Wire reports that Walmart Labs has acquired Stylr, described as "a location based mobile app that allows users to find clothes at the stores they are closest to … This is Walmart Labs thirteenth acquisition in the last three years. While the terms of the deal were not disclosed, the motive was likely to expand Walmart's mobile app presence."


• The Washington Post reports that "Wal-Mart plans to triple spending on food safety in China, where fox meat was found in packages labelled as “Five Spice” donkey meat in January … Wal-Mart is increasing spending on food safety to $48.2 million between 2013 and 2015, three times the $16 million it had previously committed to spending during that period."

The story notes that "the masquerading meat came from a local supplier. After the discovery, the company said it would increase checks on vendors to ensure they have the necessary permits and do DNA testing of meat sold in China."

Published on: June 18, 2014

• Reuters reports that two private equity firms, Leonard Green & Partners and CVC Capitals Partners, are close to a deal that would have them acquiring Advantage Sales & Marketing for a price of more than $4 billion.

Advantage provides sales, marketing and merchandising services to suppliers and manufacturers. It currently is owned by Apax, which acquired it in 2010 for less than $2 billion.

The story notes that "Leonard Green and CVC have worked together on deals before. They jointly acquired warehouse club chain BJ’s Wholesale Club Inc in 2011 for $2.8 billion."


• In Maine, the Portland City Council has approved the imposition of a nickel fee for single use disposable shopping bags. According to the story, "The paper and plastic bag fee applies at stores where food constitutes at least 2 percent of gross sales, but exempts dry cleaners, restaurants and farmers’ markets."

The fee takes effect next April 15.


• The New York Times reports that a new study from Nanjing University's School of Medicine in China suggests that people with "the highest consumption of protein had a 20 percent decreased risk for stroke compared with those with the lowest. Each increase of 20 grams per day in protein — about the amount in a 3-ounce serving of chicken or fish or a cup of beans — was associated with a 26 percent decrease in risk, a dose-response relationship that further strengthens the association."

Red meat, however, is not included in the study, since it has been shown to increase the likelihood of stroke.


• IGD Retail Analysis reports that Tesco is creating a new health-and-wellness team that "will be headed up by marketing director David Wood and will start with a trial of a new range of healthier foods that will be available in 50 London stores and on Tesco.com. The My Fit Lifestyle range will consist of 130 lines that are colour coded to show calorie content," and there also will be an app that will allow them to track their progress.


• The New York Times reports that a New York State Supreme Court judge has ruled that JC Penney "unlawfully interfered with an exclusive merchandising agreement between Macy’s and Martha Stewart Living Omnimedia … At the root of the dispute was a December 2011 agreement between Penney and Martha Stewart Living Omnimedia to sell an array of her home products, like rugs and bath towels, in Penney’s stores. Macy’s sued both companies, contending that the pact violated a five-year-old deal it already had to sell many of the same housewares exclusively."

The judge described JC Penney's behavior as “adolescent behavior in the worst form,” but did not award damages to Macy's, but rather "ordered that those issues be decided by a special judicial officer or referee."

Published on: June 18, 2014

Yesterday, an MNB reader expressed some dissatisfaction with the recent Food Marketing Institute (FMI) trade show in Chicago, and wondered how other exhibitors felt.

One reader responded:

I want to first communicate that we were an exhibitor in the latest 2014 FMI Show in Chicago last week.  I can honestly tell you moving the format back to Chicago, limiting it to only 2 days and extending the hours from 10 AM to 5 PM was a success from our perspective.  We saw more customers at this FMI show that the last 2 FMI’s (Las Vegas & Dallas) combined.  I did not see every one of our retail and wholesale customers, but we saw a large significant number of them and most were on the first day.  We not only saw domestic retailers and customers, but possible export customers.  Some customers came back to our booth for the second time to confirm programs and opportunities.  We are considering a larger booth next year and are already laying out 2015 plans.

You are correct that many CPG companies have left the FMI, but I would say to all CPG companies, you may want to re-consider your opportunities.  With all of the continued consolidations especially for us small cooperatives and/or companies we must utilize every cost effective manner to meet and establish opportunities in every venue and this FMI was a return to the FMI’s of the past.  I had a long conversation with one of the FMI board members on the move back to Chicago, the 2 day format and extended hours where he outlined plans the FMI Board is doing to better create retailer and wholesaler participation.

Another reader wrote:

For me the best show is the Natural Food Expo each spring in Anaheim California. Here is where I see innovations and startup companies. Years before Acai or Chia were mainstream there were companies doing creative things with these products. GMO Free? Old news. FMI,  IDDBA, NFRA, etc. seem to be an anachronism relying on their past relevance. The idea of trotting out a couple of industry talking heads and schmoozing with your customers is simply passé. I would much rather walk Fancy Foods, SIAL, Anuga or PLMA than walk around a show and see a bunch of suppliers that I already have a relationship with. I have never seen something new from a national CPG at FMI that I was not already aware of, and if I did I would really question my current relationship and quality of the company’s level of service.

And from another:

Not all of our retail industry trade shows are declining. If you follow the growing trends in the industry you will find growing trade shows serving them. For example, Natural Products Expo West is bigger and bigger every year, and so is the Biofach international organic trade show in Nuremberg, Germany.

And still another:

We haven't been to the show in years. The type of info we need can now be easily obtained online and working one on one with our reps. I figured it was a little different for us because we're not a conventional grocer, so the big international companies that are usually at the show aren't the ones we carry anyway. We mostly used the show to find new equipment. 

That said, I just attended a cooperative management conference this last weekend. Each year, since it's inception 25 years ago, it's seen increased attendance. Yes, our sector is growing BUT conferences like this are about relationship building, crucial conversations and connection all done in real time with real people. 

It would be interesting to see if a monolith like FMI could recreate their trade show into something more meaningful. I think people are looking for that. Break it apart into regional shows that focus more on improving as retailers and allowing space for real conversations and learning. 

We're all tired of being shouted at and 'sold' to. Trade shows make me weary.  And I used to be the person in the booth selling so I've seen it from both sides.

So I guess my question would be this: What would an organization like FMI have to do in order to make its show more relevant to people who are dissatisfied with it? Dissatisfaction is fine … but I would think it'd be more helpful if we all could come up with some ideas to help improve the show and make it relevant to the modern retailer and manufacturer.