Fresh & Easy Going Healthier

Supermarket News reports that Fresh & Easy will attempt to correct their retailing missteps with a line of healthier prepared foods.

Launched under the EatWell umbrella, it's a line of 17 ready-to-eat prepared meals and sides, including salads, soups, noodles, and various entrees. The price range is pegged to $3.99. All of the items are supposed to contain fewer than 500 calories, and less than 25% of the U.S.D.A. recommended daily allowance for fat and sodium (based on a 2,000 calorie diet). Such numbers have proven elusive for consumers with regular testing of supermarket products showing a wide variation in actual calories, fat, sodium and other markers.

Fresh & Easy has struggled since opening its smaller footprint stores in the CA, AZ and Nevada markets. Initially the company had too few SKUs and the wrong product mix, as if they had never really studied the American consumer (Fresh & Easy is owned by UK giant Tesco). Then the lousy economy hit those areas especially hard.

But given the goal of making Fresh & Easy a rival for convenience stores (who are pushing for more foods, including healthy options), this new line holds out some hope of turning the chain's fortunes around. The only question is: will 7-Eleven sit still long enough for Fresh & Easy to figure this all out?

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Wal-Mart says "Si!"

With Hispanics the largest-growing segment in the US population, it’s no wonder that grocery retailers continue to chase the Latin consumer.

The latest is Wal-Mart: its Más Club targets recent immigrants who until now have found their familiar foods in local bodegas. A Sam's Club spinoff, the concept is part of the company’s efforts to secure the Hispanic shopper’s food dollars. With Sam’s Club’s share of the parent company’s $401bn sales having slipped from 13.3% in 2005 to 11.7%, the goal is to bring the division more in-line with the domestic market.

Internationally, Sam’s revenue has increased from 18.7% to 24.6% during the same period. Given the amount of small businesses who shop at Sam’s Club, the Bentonville Behemoth has also launched Supermercado de Walmart. While local markets offer personal service, Wal-Mart execs believe they can compete on price, but are moving beyond the Sam’s model of frozens and pre-packaged foods to include a tortilla bakery, 20 varieties of fresh-made Mexican pastries, and a butcher shop selling custom cuts and ethnic delicacies like cow tongue.

Yet despite the firm’s muscle, pitching to Hispanics means entering a crowded marketplace with some established competition not limited to the corner bodega . Additionally the road to Hispanic marketing heaven has been littered with some glitzy failures, including Safeway’s Tianguis. Other retailers have chosen to slant existing stores to Hispanic tastes, rather than open stand-alone stores aimed at the Latin shopper, including both Winn-Dixie and Publix.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Food Retailing in the Next Decade

Supermarket News has published a long, fascinating article about where the retail industry might go in the next decade.

Predicting the future isn't one of the smarter, safer things you can do. Events have a nasty way of turning out very differently than we planned. So let's look at some of the predictions and see where there might be some meat to all this:

1.) Digital Marketing: Just like its kin, Social Networking, digital marketing is now the hot button topic. I suspect that's partly because we don't really understand it! But Social Networking has proved to be a bust in many cases (especially Twitter). Downloading coupons to your loyalty card, sending coupons to cell phones, or even sending text messages about price reductions to shoppers passing a product they've purchased in the past all sound like science fiction, and you know how sexy Sci-Fi can be. It's easy to plan trips to other worlds because we don't have to pay for or actually take the trips. Since few of us understand the technology of digital marketing, we either embrace it blindly or shut up for fear of being classed as a troglodyte.

2.) More Information: There's some thought the push by consumers and the government for more nutritional and sustainability information will dovetail nicely with digital marketing, but again, this is more faith than either science or even "boots on the groud" marketing. Consumers appear to want more information, but delivering it remains the challenge, with information overload a likely outcome.

3.) Niche Stores & Small Footprint Retailers: Oh, yeah, for sure. The idea is that smaller is better for shoppers, that the age of the "crash buy" when mom took home a semi's worth of groceries is over. Then why have all the "small footprint" stores like Tesco's Fresh & Easy, Giant Eagle's Express, Safeway's The Market and Jewel's Urban Fresh all performed middling at best? The problem with the small retail footprint is it limits choices, and that clashes with the biggest development coming out of the retailing channel: Price and the Recession. Consumers want choice, not necessarily 1,000 SKUs of peanut butter, but choice on price, size and mostly, convenience. It's no wonder the most-successful retailer of the past decade has been Walmart. Don't expect that to change anytime soon. It is true that America is running out of space for unlimited store and mall expansion, so optimizing the existing store locations will be a major focus of retail chains. But they will also face continuing competition from club stores, convenience stores, dollar stores and other non-tradtional retailers like Walgreens, who have shifted over to selling more foods, including an expanded line of fresh & frozen products.

4.) The World is Coming: Several of those interviewed in the article think more and more world retailers like France's Carrefour or Germany's Metro-AG will join Tesco here. Don't bet on it. Tesco has taken a bath on its Fresh & Easy stores, combining bad luck with poor management decisions. They opened the majority of their locations in California and Arizona, two of the states hit hardest by the Recession, and limited choices to a small number of SKUs, guessing Americans wanted to eat like Britons by taking home expensive prepared foods. Guess again! A trend that is more likely would be for the larger foreign chains who have a favorable exchange rate helping them to acquire some American firms (the Dutch company Royal Ahold, for example, owns Stop & Shop, Giant, Martin's and Peapod).

5.) Value: Everyone seems to think the Frugal Shopper is here to stay, even once the Recession is over later this year. So they're looking for cash & carry outfits like Aldi, Save-A-Lot and PriceRite to excell. But Americans are notoriously fickle about their buying habits, and I'm unconvinced that indulgence won't come back once times get better. We all know we should eat better, yet how many of us keep our New Year's resolutions?

6.) The Rise of the Ethnic: Here I think the article is dead-on. Americans are more and more interested in ethnic foods, and with the growing population of Hispanics and Asians especially, expect to see more grocers catering to these groups.

7.) Private Label: One of the experts profiled in the article predicts store brands will top 35% of dollar sales, soaring to perhaps 50% of unit sales (two times the current rates). He also says "retailers will become leaders in innovation rather than fast followers." Yeah? Well, one problem is that private label products continue to be co-packed (manufactured) by companies not owned or controlled by the stores. In many cases, the national brands are making the private label versions for stores to soak up excess production capacity. The notion that grocery retailers will lead in product innovation is, I think, mostly wishful thinking. The retailers know retailing, including managing inventory and cash receivables, not developing products.

The article is filled with other observations about the details of the grocery business and its micro-concerns, so I recommend it highly (though disagree with many of its conclusions).

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Marketing Shorts

Quick! Name three date foods—

• According to a Cornell University survey of college students, anything that makes you look healthy, doesn’t stick in your teeth, and doesn’t give you bad breath is OK. Whether habits picked up on college dates will persist into adulthood remains to be seen, but researchers seem to think those habits will morph into the ones married people will have. Right. It turns out women are more likely to pick salad and vegetables “in an attempt to appear more feminine and attractive,” while men didn’t choose the so-called “masculine” foods like proteins, but instead chose foods their dates were eating. Imagine that behaviour continuing past the first few years of marriage? Overall, neat and easy-to-eat foods were preferred, while those thought of as smelly or causing bad breath were out.

• Research from the National Restaurant Association (NRA) reports 69% of quick-service restaurants would eat there more frequently if it offered discounts for frequent dining, 66% said they go more often if offered discounts for dining on less busy days of the week, and 53% said they would eat there more often if kids are for free. Repeat customers account for 75% of QSR sales.

• The latest restaurant trend is the “pop up” eatery that is usually a temporary add-on for an existing restaurant, such as offering pizza in the evenings at a bakery café serving more mundane fare during the day. The trend started with out-of-work chefs, but may stick as diners look for more adventurous fare and different eating options.

• Safeway has expanded its couponLink program to all stores, allowing customers to load online coupons directly to their Safeway Club Card. The program is managed by Shortcuts.com, CellFireand P&G eSaver. Shoppers can log onto www.Safeway.com where there’s a link to the couponLink page with the offerings from the three coupon providers. Once downloaded, the coupons can be organized by product category or product name, and automatically redeemed at checkout. Cell phone users can download coupons from both CellFire and Shortcuts.com, even while shopping in the store. Mike Minasi, Safeway president of marketing, says “Customers don’t even have to remember to bring coupons with them to the store.”

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Food Lion Says ¡Olé!

While many firms talk about catering more to the Hispanic shopper, Food Lion is walking the walk.

Two more markets in North Carolina focusing on Hispanics will be expanded from the current five, with 10 old Triangle stores being converted to serve this new customer base. Estimates put the Hispanic grocery market currently at $30bn. Besides the usual offerings of dry goods like beans, tortillas and spices, the stores carry meat cuts and produce Hispanic shoppers normally search for at specialty markets. Employees receive Spanish language instruction and training in Hispanic culture so as to avoid gaffes and alienating the new clientele.

Signs announcing “Sabor Latino” (“Latin Flavor”) adorn the stores, and even Food Lion’s other stores are offering more products aimed at Latins. Marketing has relied on word-of-mouth, and the news has traveled quickly with sales up according to the company. When finished, 59 stores (roughly 10% of Food Lion’s 503 North Carolina locations) will have an Hispanic focus. FMI (the Food Marketing Institute, a grocery industry trade association) reports 61.8% of food retailers report increasing their ethnic products as a competitive strategy. While Hispanic products are attracting Hispanics, the foods are also luring in non-Hispanic customers looking for new options.

Food Lion isn’t the only one seeing dollar signs in the growing Hispanic market: homeopathic remedy marketer Hyland’s has launched a social networking site for Latina mothers. ComienzosSaludables.com (“healthy beginnings”) offers fully-bilingual culturally-relevant health information to the 25% of U.S. moms of Hispanic origin. The information includes pregnancy, infant care, raising a family, healthy lifestyle and, of course, treating a family’s health issues with natural medicines. The new venture follows Hyland’s other efforts to reach the growing Hispanic market, first with bilingual packaging, a baby development calendar in Spanish, and sponsorship of a community health worker program called Salud con Hyland’s.

According to eMarketer, 23MM U.S. Hispanics went online last year, with the total expected to reach 29MM by 2012 (though only 32% of Spanish-dominant Hispanic adults go online). Statistics show 70% of Latina mothers are under the age of 30, and the social networking component of Comienzos Saludables will include community forums, photo galleries, blogs, personal profile pages, and monthly newsletters.

According to Information Resources, Inc. Hispanic spending topped $34bn in 2008 and will grow to $52bn by 2015. Spending per household among Hispanic consumers significantly outpaces the national spending averages across nearly every channel. Johnson & Johnson launched a Spanish-language version of its parenting web site BabyCenter (Baby Center en Español), and Procter & Gamble (already one of the largest advertisers in Spanish magazines) directed $1MM of its ad-spend on Pampers Swaddlers against Spanish mothers in 2007. Besides baby care, other strong market opportunities among Hispanics include beauty care, laundry care and food and beverages that are either youth-oriented, offer specific health benefits (e.g., low sugar, high fiber) or are an ingredient or component of ethnic meals.

Clients of Broad Street Licensing Group and subscribers to our weekly newsletter received a free overview of the Hispanic market.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Walgreens Grows the Food Retail Category

Now it's Walgreens.

Steve Johnson reported it on LinkedIn and on his blog, but I could've predicted it.

If I were in the prognostication racket.

But my business is helping restaurants and food brands navigate the rapidly-changing retail grocery business. And it's changing even more rapidly than in the past.

The rise of the "grocerant" has been detailed here and elsewhere. What's new is the embrace of food products by non-grocery retailers. Just as grocery stores are pretending to be restaurants, non-food outlets like CVS, Dollar Stores, and now Walgreens are moving into the food category. They've hired Jim Jensen as divisional merchandise manager in charge of fresh foods. He comes from Tesco's Fresh & Easy Markets, and will be in charge of ramping up Walgreen's "W" lines of prepared and fresh foods. Fresh & Easy was touted when it started out as "a convenience store on steroids," and while Tesco has stumbled here for a variety of reasons, the appeal of convenient food for busy consumers remains a sound one (especially since most c-store customers are males, not your traditional grocery buyer).

Walgreens already sells milk, eggs and other perishables, but they're looking for ways to up that load, citing stats that say 80% of Americans don’t know what they’re going to have for dinner at 4 in the afternoon. It's logical, then, they would be looking at “grab-and-go meals," salads, and sandwiches, along with selling its own private-label foods, especially what the company calls “meal components.”

The reasons are pretty simple for Walgreens' move: in the Great Recession, the only retailers who've thrived are those selling food. Hard goods titans like Target now look like drunken sailors, stumbling from one miscue to the other. The brand experts continue to sing the Minneapolis trendsetter's praises, but the numbers don't lie: food is the reason Walmart has thrived.

Surprisingly, grocery stores seem to think they can sell non-food items, which have a much higher profit margin than food (traditionally in the 1-3% range). We'll see about that.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

The Rise of the Grocerant

One of the smartest guys on the 'Net is Steve Johnson whose blog is called "The Grocerant."

You can visit it here.

Grocerants are hybrid grocery stores and restaurants. After all, grocery stores and supermarkets have changed a lot since the jump by Wal-Mart into the category. And now the Recession is powering the move towards the "grocerant." Oh, food retailers have always had their roasted chickens and fresh salad bars, but now they're offering sushi, Asian noodles (not really Chinese or Thai per se), hot & cold appetizers and more. Take-home meals have been commonplace with grocers, but increasingly they're replacing "take out" with "eat in" for some upscale retailers. Barnes & Noble-style cafes are no longer the rarity.

Grocers are seeing 7-10% growth in sales of prepared items, largely at the expense of restaurants. In the past, grocery stores had been losing out steadily to restaurants, with 48.5% of total food expenditures in 2008 spent away from home. Now things have shifted, with the National Restaurant Assoc. estimating restaurant sales will be off 1% in 2009 (conservative if you ask me).

In order to attract the restaurant customer, Albertsons has pegged their in-store prepared foods to the slogan “Simply Good Meals,” grouping foods together for easy menu combos and placed in the “4:15” sections in line with the time busy shoppers are looking to put together dinner.

Southern California chain Stater Bros. is adding two kinds of meatloaf for those wanting “comfort food,” but also offers carnitas and chicken teriyaki.

With trips to the supermarket steadily declining, the challenge for retailers is to keep value and not resort solely to price cuts. Chains like Stater Bros. and Albertsons have slashed prices 20% on many items, and have reported lowered earnings as a result, though some chains like Kroger report profits up. The leader in providing prepared meal innovations is Tesco-owned Fresh & Easy who features a line of meals intended to feed a family of four costing just $8. While the category can be popular and lucrative, retailers are sometimes unsure how to capitalize. Consumers think the foods are prepared on-premises (they aren’t), and some shoppers resist paying premium prices for no-name or store-branded prepared foods, so moving beyond five varieties of egg or potato salad can be a strain on supermarket supply lines.

Finally, attracting good food prep talent to work in a supermarket has been an uphill battle.

But expect more market share and "share of stomach" to go to the grocerants.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Aldi

German retailer Aldi plans to make an impact in the US market.

Unlike most American grocers, Aldi has a smaller footprint (10K square feet), with fewer SKUs, it charges for bags (5-99¢ depending on the size) and requires a deposit on shopping carts (25¢). It carries few national brand-name products, and doesn’t accept either checks or credit cards. It relies on prices “up to 50%” below other supermarket chains. The company achieves its value proposition by skipping the other services its competitors offer like banking, pharmacies, bagging clerks, check cashing, or photo processing.

Like a good German retailer, it isn’t open 24 hours a day, and doesn’t redeem manufacturers’ coupons. About 40% of its selling space is devoted to fresh, refrigerated or frozen foods highlighting 1,400 “fast-moving” items (95% Private Label). It’s no surprise customer loyalty cards are nowhere to be found (Whole Foods also eschews loyalty programs). Aldi currently has 1,000 U.S. stores and plans to add 80 more in 2009.This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Why Local Isn’t Always Possible

There’s a term for everything and those who want to buy local produce and foods are a locavore.

And right now, “local” is the new “organic.”

Indeed, the problems with the organics movement our newsletter (and this blog) have documented mean that “local” trumps “organic” in the minds of most shoppers.

The reasons cited for buying local include concerns about the environment, a desire to support local farmers, and a conviction that locally-grown produce and meats are fresher and likely “better.” Retailers are striving to stress their local products, though the food distribution system often makes it cheaper and easier to source produce from around the world than across the county. As with the rise of organics, the food industry is struggling to find enough local produce. Consumers are just as likely to see a sticker in French (“Aubergine”) on an eggplant imported from Europe as they are to discover asparagus from Peru.

The federal government even allows stores to describe as “local” anything grown within a 400 mile radius. Advocacy groups like Food and Water Watch are complaining that marketers are stretching the “local” label beyond the point of any meaning. Stores insist American insistence on “cheap” and “available all year round” favors large, industrial farms and distribution centers. Just as it is sometimes cheaper for FedEx to ship a parcel between Washington and Atlanta via a hub in Tennessee, grocers can often secure better, cheaper fresh foods from offshore instead of nearby. Grocers are also under pressure to conform to national promotional campaigns: stressing local foods in California in June is realistic, but not in New Jersey where the growing season is different.

Whole Foods is trying to capitalize on the locavore movement not only by highlighting local produce, but even telling shoppers which farms it comes from and how far away from the store they are. But overall chains simply aren’t set up to deal with many local sources, preferring to buy from distributors or large cooperatives. Sunny Valley International in Glassboro, NJ, for example, pools the produce from nearly 20 blueberry and peach farmers. The company can then market the product to large chains like Safeway, though the retailer has been chided for promoting “Jersey peaches” before the crop is picked. Retailers insist this isn’t deliberate.

This blog includes excerpts from a weekly round-up of food industry & food licensing news provided free to Broad Street Licensing Group's clients, and as a paid subscription service (6 months $695; 1 year $1,125).

Too busy to keep up with the news wires & publications about the food business? If you or your company would like to subscribe to our news service, call Danielle Foley at Broad Street Licensing Group (tel. 973-655-0598) and ask for your free sample or click on our website.

Supermarkets Innovate

With margins in the retail grocery business thin despite soaring sales as consumers eat more at home (1.84% in the $547.1bn channel according to the Food Marketing Institute), it’s no surprise the chains are looking to innovate, mostly as a means of attracting and keeping the other’s guys customers.

With an average supermarket carrying almost 47K items, offering unique products remains a challenge. Analysts say the average grocery store loses or gains 10% of its customer base in the course of 12 months, so turnover is key. New ideas for wowing shoppers without just cutting prices include “smart” shopping carts that help them find what they want or flash a product review, mobile coupons beamed to your email or cell phone, and self-checkout lanes that give shoppers a sense of empowerment for doing what traditionally a pimply-faced teenager was paid to do for them. let consumers help themselves. Smaller “footprint” stores may be a thing of the future, though so far neither Wal-Mart’s “Marketside” nor Tesco’s “Fresh & Easy” have exactly torn up the channel. In fact, Wal-Mart is rebranding its small footprint operations in Arizona with a new name (“Marketside by Wal-Mart) and a new logo.

Despite the lack of a breakthrough in that format, imitators are poised in the wings, including, Safeway’s “Market,” and Supervalu’s “Urban Fresh.” Not just smaller than the full-sized supermarket, the smaller stores offer more ready-made meals, along with extras like in-store baby-sitting. Profits are supposed to come from repeat business over large bulk buying, though Tesco especially is still struggling to find a winning combination of products and marketing. Minority shoppers are attracting more attention, too, with Wal-Mart’s “Supermercado” and Publix’s “Sabor” catering to Latinos, the largest American minority. Other potential innovations are less about helping the shopper and more for the store’s bottom line: Wal-Mart invested $10MM whipping up “Smart Network,” an in-store television system providing product information and ads on the viewing screens of carts, and Kroger is painting its black checkout conveyor belts with ads. The back-of-the-store hasn’t escaped the innovation trend, either. Wal-Mart was an early adaptor to RFID technology for tracking inventory, and is now using embedded microchips in goods to alert employees when supplies on the shelves are running low, or to tip off the in-store ads to work in tandem with the right products, especially when supported by national TV campaigns. A recent test of the system with Proctor & Gamble kicked sales up almost 20%. Future projects include more private label products (especially in organics) and in-store restaurants at Whole Foods and Wegmans.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Changes in "Targeted Marketing"

Everyone knows consumers are big on coupons and saving money in the current economy, but A.C. Nielsen has studied it all and reports that targeted, mostly digital programs are doing the best.

The 200 digital ad campaigns they studied averaged a 32% sales increase translating to $1.1MM in incremental retail sales. That worked out to be a whopping 157% return on investment (ROI), including a 14% upswing in the buying rate. “Dollar stores” once thought of as the place brands went to die are leading the marketing changes: Dollar General focuses on three areas on their website— pets, easy meals and store brands. According to Nielsen, the dollar store is now like Motel 6 (which hasn’t rented rooms for $6 in a generation): less than ¼ of the items sold at so-called “dollar stores” go for a buck or less. Not surprisingly, high- and middle-income shoppers are flocking there looking for bargains, and brands that once scorned the outlet or refused to allow their products to be carried there are courting these stripped-down outlets.

Walgreen has a monthly online newsletter called “Wellness” that mixes information like drug interactions, seasonal health issues and a caregiver support forum with promotions. But the next wave of digital marketing is coming from experts: Amazon.com and AOL. But grocery stores are no slouches in the digital revolution as experts predict the end of paper coupons within 5 years, with cost reductions rendered at checkout. Food Lion’s “Bloom” program uses kiosks with handheld scanners that let customers scan prices and bag as they show, bringing their final total to the checkout aisle. The kiosks aren’t just for ringing up items, they allow customers to check prices, retrieve a stored shopping list, print out recipes and even generate their own bar coded stickers from produce and other items requiring weighing.

Ahold’s Stop & Shop has the same scanner set-up but allows shoppers to place deli orders at the kiosks for pick-up after they’ve finished. Ukrop’s Super Markets uses kiosks to entice loyalty card customers to insert their card and print up to eight coupons based on their preferences and previous shopping habits. Scanners won’t be enough, though, now that the iPhone’s 25K applications are moving into areas like shopping and online banking/bill paying. With 800MM downloads and counting, Apple is rewriting how marketers reach customers.

The plethora of data coming out is also changing the way marketers look at things. For example, Nielsen’s study showed an endcap for carbonated sodas generated 32K exposures, while one for household cleaners drew a pale 5K. Displays are also not created equal: one in-store flyer lifted sales by 18%, while a slat/wall display kicked things up 17%, a case stacker display 16%, a shelf coupon dispenser 14%, and the average endcap 13%. The lowest results came from power wing displays (12%), freestanding displays (8%) and shelftalkers (4%). The wide fluctuation in results would indicate a shakeout is coming for in-store marketing techniques as what’s effective and what’s not emerge more clearly. Will Twitter and other social media offering recipes and blog recommendations replace simple “cents off” coupons as friends and family drive marketing? Skeptics question whether shoppers will want to give up the tactile sensation of coupons, or the human interaction of staffing.

Indeed, Whole Foods has ditched the loyalty card path and drenches its departments in staff when most other businesses are looking for lower labor costs.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Tasty Tidbits

• Ocean Spray is planning to auction off its cranberry concentrates eBay-style. Its Ingredient Technology Group wants to avoid the speculation that has plagued the commodity markets.

• To wit, the G8 group of government ministers is looking at ways to curb speculation in the commodities market. Prices for oil, wheat and other vital products have shot up over the past year not because of demand, but due to hedge funds, retirement trusts, universities and other large capital-controlling entities taking speculative positions in commodities. The result has been a nightmare for the food industry in particular.

• The acquisition of George Weston Bakeries in the U.S. by Mexican baking giant Grupo Bimbo S.A.B (reported in Broad Street Licensing Group's subscription newsletter service when it happened) led to a tripling of the company’s reported sales this past quarter ($960MM vs. $360MM last year).

• Citing economics, Acme Markets is cancelling its home delivery service in favor of in-store pickup at 40 locations in Pennsylvania, New Jersey and Delaware.

• In the “drink and feel good about it” category, Modern Spirits claims producing each bottle of Tru vodka absorbs 760x more carbon than it emits. The secret? The company plants a tree for every bottle sold.

• Also on the alcoholic beverage front, Prime Star Group is bucking the recession and launching six new wines from Northern California’s coast.

• And finally, grocery retailer Giant Eagle is expanding into Columbus, OH with its Market District store concept that is upscale in focus, with gourmet sections, cooking demos, live music, themed events and a farmers’ market.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Grocery Retailing Trends

While the food business continues to be a bright spot in the economy, not all grocers are doing equally well.

SuperValu, the #5 American grocery retailer, reported stiff losses of $2.9bn on net sales of $44.6bn for its fiscal year ending February 28th. Year-to-date net cash flow from operating activities was $1.5bn, compared with $1.7bn previously. SuperValu purchased most of the Albertson’s chain in 2006 for $17bn, and subsequently undertook an extensive remodeling and modernization program on over 200 stores. The Albertson’s deal vaulted the Eden Prairie, MN-based firm to the third-largest grocery chain in number of stores with 2,510 supermarkets and 792 c-stores. In addition to the Albertson’s brand, SuperValu already owned the Acme, Bristol Farms, Jewel-Osco, Shaw’s Supermarkets and Star Markets chains. That makes Supervalu the second-biggest grocer behind Kroger.

In contrast, the Penn Traffic Co., owner and operator of the P&C, Quality and BiLo supermarket chains in the Northeast, reported revenues of $872.3MM, up modestly from $896MM in the previous fiscal year. The firm accounted for the improved numbers through a reduction in the number of its stores, and blamed the soft improvement on lower volume and traffic.

One bright spot in retailing is the growth of online selling. Frozen food marketer Schwan’s has stumbled at brick & mortar retailing (saved largely by their frozen pizza lines), but it’s online business is booming. Sales to online visits (called “conversions”) from its website reached 50.5% in March according to Nielsen Online Mega View. The next-closest conversion rate was 27% by floral marketer FTD.com. Consumers spent an average of $75 online for food during the month, with the highest category spend at $252 (event & movie tickets). The other categories included Computer Hardware ($188.76), Automotive ($121.39), Consumer Electronics ($120.86), Child/Baby Care ($78.34), Sporting Goods & Outdoor Activities ($75.36), Home & Garden ($75.13), Office Supplies ($75.08) and Computer Software ($65.69). The sites tracked had a least 500K unique visitors.

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Private Label Hysteria

The Private Label people are sure the world will never end.

It's the same thing that we heard during the last run-up in gas prices: Americans would switch to more fuel-efficient cars and would slow down. The next time you're driving on the highway, check the speed of the cars rushing past.

Check your own speed.

The truth is that Americans LIKE the profligate lifestyle we've come to know from decades of plenty. Whether its overeating or overspending. So when I head claims that a "paradigm shift" in retail habits will mean the continued expansion of Private Label goods, I smile.

Cooler heads think a bit different. This study sees a flattening-out of PL purchasing. For one reason, brands produce intense consumer loyalty. For another, simple greed will play a part. It's true stores COULD use the savings from sustainable practices and using local commodities to keep their house brands much cheaper than national ones. After all, the large CPG houses have to ship their products all over creation, while the regional grocer can use a local co-packer. But we all know that isn't going to happen. The cost savings will end up in the P/L under a big, fat PLUS.

And don't think the brands are taking this lying down, either.
Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Why Aren't Consumers Eating Healthier?

A question by Mary Boltz Chapman, Editor-in-Chief of Chain Leader, got me to thinking. Mary asks:

Technomic research shows consumers are choosing less-expensive food over healthy food. Is the industry not doing a good job of marketing that the two are not mutually exclusive?

1.) The failure of the organics movement: many consumers are either confused or suspicious of the high prices of most organic products. Recent surveys show the TOTALLY unregulated "all natural" category resonates more with shoppers than organic. Without boring you with the details, many manufacturers and retailers are hedging their bets and switching from organic to natural, including Hood, the largest organic dairy supplier.

2.) The Great Recession: Consumers have less money to spend, so they're falling back on cheaper alternatives. Most of them are processed foods that are made with too much salt, sugar, fats and other bad-for-you ingredients. That's not a marketing issue: minimally-processed foods are better for you. Some CPG houses like Campbell's have been reformulating their products to include more veggies, less salt and MSG, and lower fat.

3.) I'm going to tell you one thing and do another: Consumers will often tell a survey one thing, then do something different. We all know we SHOULD eat better, but when standing in the supermarket aisle, that 30K calorie frozen cheesy sandwich looks good, and we buy it. Comfort foods that taste really good and which are often bad for us (Mac & Cheese, for example, is loaded with simple carbs, fat, salt and sugar) are usually cheaper than healthy foods. And frankly, we're probably in denial about our health. Don't take my jaded word for it: a new survey from Mintel says 70% of us think we're in good or excellent health, while the Deloitte Center for Health Solutions’ Connected Care estimates 100MM Americans have heart disease, diabetes or hypertension. Weight? Only 25% of those surveyed admitted to being overweight, while the Centers for Disease Control and Prevention puts the percentage at 67%. Those surveyed did concede more exercise would be good for them (70%), but less than 37% actually do so regularly (50% work out 2x a week or less). Nearly two thirds insisted they try to eat healthy foods, but 59% conceded they eat whatever they like "regardless of the calories."

4.) Retailer greed: I know I will annoy some retailers by saying this, but with all the demand last year for organics and "better-for-you" products, prices were high, profit margins were enjoyable, and that's what Capitalism is all about. But the consumer associates "good for you" with $$$$.

What's the solution? Some retailers like Safeway are trying to push healthier products and protecting their margins by stressing Private Label products. It's one area where PL can excel and be more than just "the cheaper alternative."

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Meijer: Part 2

Meijer's strategy in its struggles with Wal-Mart and the changing food business has been to promote its private label brands, and impress shoppers with the quality of its perishables, which experts say equal or even exceed Kroger’s (the darling of the grocery channel). Critics say Meijer has further to go with its non-food products, which compare unfavorably with those from non-grocery retailers like Kohl’s or Target. Indeed Meijer’s perishables are credited with saving the chain when Wal-Mart moved into its Michigan home turf in the 1990s. Wal-Mart had an insurmountable edge in distribution, which Meijer could only counter by slashing expenses. Wal-Mart on the other hand couldn’t deliver perishables through its enormous distribution system that competed with the local company.

Despite lacking the capital or the ability to expand with new stores, the company has actually grown stronger from the competition, at least according to observers. The Wal-Mart business model is driven primarily by its non-foods model, allowing the two stores to compete in the same world. Another reason cited for Meijer’s success has been its relationship with its vendors. While many retailers dictate terms to their suppliers, Meijer gets high marks for working cooperatively with them, ensuring their financial goals and needs are met. The company says this results not only in better performance for its vendors, but in increased resources to suppliers and better product selection and options.

Meijer is controlled and run by a third generation of the founding family members: Hendrik “Hank” Meijer is co-chairman and CEO, while brother Doug Meijer is co-chair; and Mark Meijer serves on the board. Talks about selling the company are just rumors insiders say, with the family showing no signs of giving up control or cashing in their investment. In a striking change from many family-owned empires, Meijer has been run from the past three decades by outsiders in the role of president. The current president is Mark Murray (since 2006) who did not come out of the retail grocery business, but instead was a former budget director for Michigan’s government, state treasurer, VP for finance and administration at Michigan State University, and then president of Grand Valley State University outside Grand Rapids. The Meijer family picked Murray after conversations with people they respected and not because of his business resume. Instead of seeking retail experience, the family wanted someone to help them focus on core values and executing their strategic vision. Speculation around the state has Murray on a short list of candidates with the right stuff for being Michigan’s next governor.

To read Part One, click here

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)

Meijer: Part 1

Unless you’re from the Midwest, you might never have heard of Meijer (pronounced “MY-ER”). But in the Rust Belt, the store has thrived while other businesses have gone elsewhere, so much so it’s now considered a “major” player in the grocery retailing channel and a strong competitor against the Beast of Bentonville. Meijer operates 188 stores across a five-state area: 98 in Michigan, 40 in Ohio, 27 in Indiana, 15 in Illinois and 8 in Kentucky, opening around 10 stores each year. The privately-held company does not release data, but sales are estimated at $14bn. While that's barely a rounding error for Wal-Mart, the largest food retailer, Meijer is showing others how to compete with chain discounters. And at a time when many are looking to reduce their footprint and cut back expansion, the company continues to pin its strategy on 200,000-square-foot behemoths that it pioneered with the Thrifty Access format in 1962, almost 25 years before WM did its first Super Center.

The company is celebrating its 75th anniversary this year, and industry analysts say it is well-positioned to ride out the recession, though the large-footprint stores make securing expansion locations tougher, except in rural areas. Price has been the key driver for Meijer’s success, with theirs running 8-10% lower than competitors. Promotions are the other key to driving sales.
One advantage for the Grand Rapids, MI-based firm is that it’s privately-held and doesn’t answer to Wall Street or private equity investors demanding quick results or fat margins. While small stores have a lower break-even point, larger ones generate higher profits due to economies of scale. And since Meijer doesn’t compete in most urban markets, it’s insulated from the problems of finding the right store property.

Currently Meijer is growing most rapidly in the suburbs of Chicago, Cleveland, Detroit, Cincinnati and Louisville. Targeted areas include Wisconsin and Missouri. Staying close to the Great Lakes region has allowed Meijer to build its brand with consumers. Expansion in the prime Chicago market, for example, has been by slashing prices and stressing selection in produce and meats in competition with established chains like Jewel and Dominick's, and hasn’t been shy about going head-to-head in commercials touting Meijer’s as "a better store than the other guys." Wal-Mart has not been a factor in the Chicago food retailing marketplace, so Meijer has the low-price white spaces to itself currently. Given their reliance on large stores, this may change over time, as options closer-in to Chicago will likely prove too expensive. The rapid expansion of the suburban housing market fit nicely with Meijer’s growth plans, but the downturn in the economy may keep more shoppers in the city and out-of-reach.

To read Part Two, click here

Excerpted from BSLG's weekly subscription news reader service Food Business News. To subscribe or for information about licensing, contact Broad Street Licensing Group (tel. 973-655-0598)