‘Round The Trade
Ahold reported less than stellar fourth quarter sales (ended December 28), with its U.S. business being hit the hardest. Company-wide, the Amsterdam-based merchant saw net sales decline 1.1 percent to $10.2 billion (at constant exchange rates). In the U.S., its largest segment, the chain’s volume dropped 2.1 percent to $6 billion and ID sales also decreased 2.1 percent. Ahold’s full earnings report will be issued next month. The big global retailer said that “a contracting food market and the sales effects of Hurricane Sandy” impacted sales. Perhaps the most troubling part of the international retailer’s financial news was that its U.S. share declined, something that I can’t remember occurring in at least 25 years. Ahold also consolidated some of its European business. According to an announcement, Ahold Europe as a business division will no longer exist. The company will refocus its current Ahold Europe operations and its leadership on building the Albert Heijn business in the Netherlands and adjacent markets through its various formats and channels. Executive committee member Sander van der Laan will continue to lead Albert Heijn, and report to CEO Dick Boer. The company’s Czech Republic business will also report directly to Boer. Bol.com (Ahold’s European online offering) will continue to report to executive committee member and chief commercial officer Hanneke Faber and remains an important area of growth for Ahold according to the company. Boer noted: “The food retail industry continues to evolve rapidly and we see significant opportunities for growth to cater for the changes in the way that our customers shop. Today’s decision will bring management closer to running the business. By further strengthening the Albert Heijn brand in both the Netherlands as well as neighboring markets, combined with a growing omni-channel offering via Albert Heijn online, Albert Heijn pick-up points, and Albert Heijn to go, we will be better positioned to meet customer needs and accelerate future growth.” Ahold said it will continue to pursue other important areas of growth within Europe such as further strengthening the market position of Albert in the Czech Republic, the roll-out of Albert Heijn and bol.com in Belgium, and Etos and Gall & Gall in the Netherlands. At the same time, Ahold stated that it is continuing to look for ways to streamline and simplify the organization’s support functions across the company, as part of its Simplicity program. “This will ensure that the company can maintain and strengthen its successful market positions and continually reinvest resources in its customer proposition and organizational capabilities,” Ahold stated. The quick take on Ahold’s European reorg is that former Giant/Carlisle president van der Laan has been stripped of many of his duties and that chief executive Boer is taking a more hands-on approach to improving Ahold’s European business…a couple of thoughts about the recent FMI Midwinter Conference in Scottsdale, AZ: 1) it was the best Midwinter event that I’ve ever attended, with lots of time for business planning and social networking, and 2) for the most part, the business sessions were very strong with a very comprehensive view on how “big data’ is shaping the business and our lives. FMI CEO Leslie Sarasin and her revamped team have done an excellent job of improving the relevance of the large trade association since she was named top dog five years ago. Most of the speakers were good to very good, the notable exception being Dina Howell, worldwide CEO of Saatchi & Saatchi X, who not only bored me with her presentation style (her ears needed a personal sound check), but had the audacity to turn her forum into a long-winded, rambling lovefest for Procter & Gamble and Wal-Mart. Highlighting Wal-Mart at a conference dominated by supermarket executives is a sure way to turn a crowd off quickly. And by the way Ms. Howell, P&G sold its Pringles brand (which was profiled in the Procter portion of her speech) to Kellogg’s in 2012. My favorite speaker was former FBI director Robert Mueller, who provided retailers, wholesalers and suppliers with an update on the state of cyber-security. Mueller’s folksy style belied a very strong message: be concerned and be vigilant. That was my takeaway a few weeks earlier when Target Corp. announced a data breach in which at least 70 million customers who made credit and debit card purchases from November 27 to December 15 may have been affected (since then similar breaches have occurred at Neiman Marcus and Michaels). Barely a week after Mueller’s speech, a story in the Financial Times cautioned retailers that the FBI believes the cyber attacks on their consumer’s financial data will increase.“We believe POS malware crime will continue to grow over the near term, despite law enforcement and security firms’ actions to mitigate it,” the FBI noted. Scary stuff…back to Wal-Mart: the planet’s largest merchant is laying off 2,300 associates at its Sam’s Club unit. Most of the riffs will be in the stores and at the middle management level. Sam’s currently represents about 12 percent of the Bentonville Behemoth’s total annual revenue of $469 billion. And while the next Wal-Mart item is about a month old, it’s still hard for me to “digest” this story. The mass merchant was forced to recall batches of donkey meat in some of its stores in China, after the local delicacy was found to contain the DNA of other animals, including fox. Selling donkey meat is perfectly legal in the world’s most populated country, but selling fox meat is not. If those were my only two choices for dinner, then I definitely “don’t want to work on Maggie’s farm no more.”…at Weis Markets, the Sunbury, PA regional chain announced the launch of its “Three More Ways To Save” program, offering discounts on more than 2,000 products in every store department in all 165 Weis Markets locations in the company’s five state market area. “In January, our customers look to us for ways to stretch their dollars, not just on a weekly basis but over the long-term,” said Kurt Schertle, Weis Markets’ executive VP. “To meet these expectations, we’ve launched Three More Ways to Save, which offers an expanded range of everyday savings throughout every store department. Equally important, these are savings they can depend on over the long haul.” Components of the “Three More Ways to Save” promotion are: Lowest Price Guarantee where Weis is offering the lowest price in the market on four weekly items. If a competitor advertises the same item at a lower price, the customer will receive double the price difference with their purchase; Everyday Lower Prices in which Weis has lowered prices on more than 1,000 products throughout all departments. This program is long-term and has no end date; and Price Freeze, now in its 10th edition, in which the retailer has lowered prices for 90 days on thousands of seasonally relevant items that will remain at these prices through April 13, 2014. By the way, Schertle, who last September assumed some of the duties of departed former CEO Dave Hepfinger, is getting high marks from both Weis associates and the vendor community. Weis also received conditional approval to build a new supermarket in Martinsburg, WV on an 18.5 acre site that would be part of a new 151,000 square foot shopping center…as many of our readers know, Safeway’s recent sweeping budget cutting initiative included the elimination of charitable events including its hugely popular and successful Easter Seals annual golf tournament and fundraiser. Despite Safeway’s withdrawal from what was considered the Eastern division’s major charitable effort, the “show will go on.” This year, the committee has decided to expand the event to include the entire food industry including multiple supermarket VIPs so that participants will have the opportunity to network more broadly and they can raise more funds for Easter Seals. The mission of the tournament remains the same – to raise funds that enable Easter Seals serving Maryland, Virginia and Washington, DC to provide urgent, direct services that support veterans searching for meaningful employment, lay the foundation so at-risk young children succeed in school and life, and enable seniors to stay in the community and out of institutions…and there was a lot of chatter out at FMI Midwinter about Cerberus Capital Management’s possible interest in Safeway. And that chatter was only exacerbated by Safeway’s last minute “no show” at the conference where CEO Robert Edwards was supposed to be part of a panel discussion about “Big Data” and several senior executives were scheduled to have individual sessions with top level CPG vendors. And don’t you think that the resignation of Supervalu chairman Bob Miller (who still serves as chief executive at sister firm New Albertsons/Cerberus) might be tied to that PE company’s heightening interest in the Pleasanton, CA chain?…the “on again/off again” status of a prospective new Whole Foods store in University Park, MD is “on” again as construction officially began last month on the $250 million mixed use development that will be built at the intersection of US-1 and East-West Highway. The Whole Foods unit will serve as the anchor of the project and will open late next year. It will be WFM’s first Prince George’s county store…if you listened to President Obama’s State of the Union address on January 28, you probably weren’t surprised to hear his “we must raise the minimum wage” rhetoric. As a follow up the next day, the Commander in Chief continued his income inequality message at a Costco store in Lanham, MD. President Obama stated that “profitable corporations like Costco see higher wages as the smart way to boost productivity and reduce turnover. We should too.” The president wants to raise the minimum wage to $10.10. He added: “I guarantee you if workers have a little more money in their pocket, they’ll spend more at Costco,” noting entry-level Costco employees start at $11.50 an hour, with average wages more than $20 an hour before overtime. The current federal minimum wage is $7.25. I’m not certain that most other retailers would agree with Barack Obama’s assessment…up north a bit, it’s no wonder that competitors fear Market Basket (Demoulas). The uber high-volume family-owned regional chain announced that it will offer a 4 percent discount on all purchases until December 27, 2014 as a strategy to increase sales and gain new customers. And we’re talking about a supermarket merchant which may already have the lowest everyday retails in the country. As one of its New England competitors noted: “Our best hope when dealing with Market Basket on a head-to-head basis is that we hope the family keeps on quarrelling which will further delay new stores from being built.” Apparently, that won’t happen either, as the company’s board of directors announced that it is not seeking to replace its embattled president Arthur T. Demoulas, who has been at odds with his first cousin Arthur S. Demoulas (who controls the board) and that several new store projects which were put on hold while the family conflict became more heated, are back on track..The Market Basket machine is indeed a powerful entity…we sadly report several deaths this past month, all from outside the industry. Passing on at the age of 106 (that’s not a typo), was Run Run Shaw, the legendary Hong Kong movie executive who practically invented the genre of Kung Fu movies and television shows. In addition to nurturing local talent including actor Chow Yun-fat and producer John Woo, legendary American director Quentin Tarantino has often cited Shaw as an inspiration (he used the Shaw Brothers logo in his two “Kill Bill” flicks). In their heyday, Shaw’s films were reportedly seen by 1.5 million people per week in movie houses in Southeast Asia many of which were owned by Shaw and his family. And just before presstime, the great Pete Seeger died. Not only was Seeger one of the early inspirational folk singers in the pre and post-World War II era (he was a disciple of the legendary Woody Guthrie), he was one of the most important public figures in raising social consciousness about racial and economic inequalities in America. Musically, his beanpole physique and 5-string banjo skills made him an unmistakable presence among his musical peers. He was inducted in the Rock and Roll Hall of Fame in 1996 and either wrote or co-wrote such classic folk songs as “If I Had a Hammer;” “Turn, Turn, Turn;” “Where Have All The Flowers Gone;” and “Kisses Sweeter Than Wine.” Politically, Seeger was involved in so many important causes, beginning with helping migrant workers in the 1930s to marching in support of the “Occupy Movement” in 2011. “Be wary of great leaders,” he often said. “Hope that there are many, many small leaders.” Seeger, who was chopping wood 10 days prior to his death, was 94. And two supporting actors from classic 1960s-1970s TV sitcoms have entered the gates of Nickelodeon-land. Dave Madden, 82, who played Reuben Kinkaid, the on-screen manager of the Partridge Family (1970-1974) band, died last month. Madden’s career spanned 35 years and also included major roles in “Laugh In” and “Alice.” Also passing through those gates was veteran character actor Russell Johnson, 89. Johnson’s career began in 1950 and he appeared in more than 160 TV shows and movies. However, by far his most famous role was as “The Professor” in “Gilligan’s Island (1964-1967).” With Johnson’s passing and the earlier deaths of other cast members Bob Denver (Gilligan); Alan Hale Jr. (The Skipper); Jim Backus (Thurston Howell III); and Natalie Schafer (Lovey), that leaves Dawn Wells (Mary Anne) and Tina Louise (Ginger) as the only surviving cast members from the corny but iconic series. And as many an aging male baby boomer might still ask: Ginger or Mary Anne?