Question: In the world of social media, what is the third largest country on the planet? Answer: facebook.
OK, it was a trick question, but if facebook were a country it would rank only behind China and India with more than 500 million users world-wide.
St. Joseph’s University’s (SJU) annual Food Industry Summit, held earlier this month at the Haub Business Center in Philadelphia, made it abundantly clear that the digital revolution has more than arrived. And for Old Fat White Guys (OFWG) like me, the lessons learned at the 7 1/2 hour seminar were both fascinating and scary.
First off, the fifth installment of the Summit was the best yet. All six speakers had loads of data to present to the more than 250 people who packed the house and all delivered their messages in a deft and interesting manner.
Two years ago, at the same forum Wakefern executive EVP Joe Sheridan told many of the same OFWG that the industry better get on board with social media, digital marketing and e-commerce. After this year’s Summit, it’s clear that ship is now sailing and those who choose not to get on board are missing tremendous opportunities.
The session began with David Rich, president of ICC/Decision Services (and son of former Weis Markets CEO Norm Rich) overlaying the impact and relevance (a word that was often repeated) of social meeting. He showed a hilarious clip from the “Today” show in 1994 when hosts Bryant Gumbel and Katie Couric were trying to understand what the Internet was all about (they had no clue). To Rich, who runs a successful mystery shopping business, the importance of keeping social media “social” is vital to his company’s success and growth. He added that by using social media outlets such as Ffcebook and Twitter, the opportunity to create very high awareness levels is unprecedented. “Social media makes people feel relevant,” Rich asserted, adding that’s why so many people from different economic sectors and cultures are engaged all over the world.
Tim Hassett, SVP of Campbell’s Sales, told the audience of the importance of understanding the consumer’s “path to purchase” journey. He noted that getting into a consumer’s head is the first leg of the journey, followed by getting on his or her shopping list. After that, the goal was to get the item in the shopping basket and then on the table. Hassett noted the growing power of digital marketing where 71 percent of America is now online and there are more than 90 million tweets daily. He also reviewed his company’s recently updated Campbell’s Kitchen website where the Camden, NJ manufacturer is trying to get into the mind of its consumer by developing insight solutions and leveraging the unique asset of the Campbell’s brand. One of the drivers of that website is the opportunity to use digital coupons, which Hassett claimed have become much more targeted and effective (40-60 percent redemption rate) than the company’s traditional FSI path. And then Hassett demonstrated the mobile application version of campbellskitchen.com. The depth of the site (it’s much more than just recipes) and the ease of usage is clearly why anybody connected to the digital world is all jacked up about mobile (not to mention that before the end of the year there will be more “smart phones” in use than traditional cell phones – currently 91 percent of the U.S. population owns a wireless phone).
And while manufacturers today might own a progressive edge in digital marketing over their retail partners, one supermarket firm that’s among the leaders in the “sellers” column is Ahold USA. Carl Schlicker, CEO of Ahold USA Retail, echoed some of the same points as Hassett, but delivered his message from the retailer’s perspective. Schlicker noted the four key forces that shape shopping behavior: shopping tools, social networking, personalization and access. “Data is the key – the more we know, the more relevant our communication will be,” he stated, while also noting the three legs of the “journey:” planning, shopping and enjoying. Schlicker said Ahold’s goal is to “own” the shopping list of its customers, reinforcing that statement by affirming that more than six million shopping lists were created online by Giant/Carlisle customers alone. That online “shopping list” feature will be rolled out to the other three Ahold divisions by the end of the year. The 25 year Ahold veteran also noted that while his company reaches more than two million shoppers with mail communications annually with “one-to-one” offers, adding that Ahold USA knows the importance of personalization, but must work harder and smarter to make those offers more relevant. As for the shopping experience, Schlicker acknowledged it needed to be easier and more pleasant. He noted several online options that Ahold USA offers to make that goal more achievable. The retailer’s Peapod unit has filled more than 15 million orders since it was founded in 1989 and currently serves more than 500,000 customers a week (the service expanded its geographic footprint to Manhattan on March 20). Even though Peapod is a relatively small star in Ahold’s universe, Schlicker likes its growth potential and the fact that the average transaction is about $155, more than five times the median ring at Ahold’s nearly 750 supermarkets in the U.S. The retailer also offers a service where customers can pick up their online orders at stores close to their homes. Ahold USA is also deploying other pieces of technology to make the shopping experience easier and more pleasant. More than 300 stores (with more to be rolled out each month) are now utilizing the company’s “Scan It!” gun system that allows consumers to scan their purchases during their shopping trips. Not only does Schlicker view this as a point of difference, he is excited customized about the offers that come along with using “Scan It!” Ahold USA also operates a website called smallvictories.com that enables users to interact with the retailers about their shopping experiences or requests. Schlicker said the website is providing the company with a new form of customer research by utilizing the feedback from existing Ahold consumers and sees smallvictories.com as a platform to add new customers, by offering unique rewards and reinforcing existing reward programs like its gas program and its A+ school rewards campaign. So when Carl Schlicker looks into his crystal ball, what does he see? He visualizes a rapidly expanding digital universe. He also sees the end of the traditional printed weekly circular, perhaps within five years. Schlicker believes that Ahold needs to make more connections, with more relevant offerings. “It’s a fast-changing world,” he asserted. “We need to be more customer focused and better utilize our customer’s data in a way that’s consistent with our brand identity. We need to leverage technology to deliver improved content and offers. It’s about how well you listen and then how well you adapt. What do our customers want and how effectively can we deliver it.”
Up next was Rick Chavie, VP-retail marketing for NCR Corp. and a man with a 30 pound brain (he’s got an MBA from Harvard and was a Fulbright Scholar). He shared his global view of “C-tailing” from his current role and also from his previous experience at SAP and Home Depot. He noted four factors that are changing the face of retail today: the consumer is time starved; the consumer is digitally enabled; the consumer is less loyal; and the consumer desires more control. Chavie also emphasized the importance of making their digital experience more personalized, citing the “exploding assortment” of retail interaction which he claimed mostly disappears when the consumer enters a store. He urged the industry to shift its thinking from business-to consumer to consumer-to-business and listen more closely to what customers are saying. The benefits, according to Chavie, will result in increased sales and margins, enhanced loyalty, reduced costs and improved service.
Rick Brindle, VP of Kraft’s eBusiness development and industry relations, gave one of the best presentations of the day. Funny and insightful, the 34 year veteran of the CPG wars illustrated how Kraft has shifted many of its resources into its expanding digital model both in developing new marketing ideas and interacting with its retail partners. He noted that two new Kraft items – Philadelphia Cooking Crème and water enhancer MiO – were both driven and are being supported largely by Kraft’s digital portal. Brindle also offered a few suggestions for retailers to improve their online presence include the need to blog, the importance of online couponing, the interfacing of social networks (Facebook, Twitter, Google, YouTube, etc) and an effort to include email marketing as part of the model. Not only was Brindle’s presentation snappy and fact-filled, he was clearly an example of an OFWG who made the transition from bag carrier to digital wizard. That alone gives me hope.
Another excellent speech was given by Bill Sickles, global business head of consumer products for Google. His presentation centered upon the “moment of truth (MOT)” for the consumer. Specifically, when does the consumer actually make their choices on what to buy? According to Sickles, often times the MOT occurs when the consumer is in the store making his or her product choice. But in reality the seeds are planted well before the customer enters the store, increasingly so in the digital world.
The final speaker of the afternoon was Acme president Dan Sanders. Truthfully, it’s a challenge being the “last man standing” when your cohorts have delivered about five hours worth of facts. However, Sanders pulled it off and did a great job talking about how his own struggling company
(both Acme and parent Supervalu) are utilizing digital media to improve its customers’ image and internal communications. In a funny, self-deprecating style, Sanders told the audience the need to respond to all online criticism from its customers, noting that a quick and honest response is a useful tool to re-engage a frustrated customer. He said that the industry for too long has placed too much reliance on logistics while forgetting about customers needs. “We shouldn’t run away from criticism, this is who we are and the customer is still king.” Sanders noted how quickly the world was changing (“486 baby boomers turn 60 years of age every hour”) and listed five key tools to social media success: listen, talk, energize, support and embrace. And in one of the recurring themes of the day, Sanders touted the potential of mobile applications, noting that consumers are already and will continue to use mobile technology for price comparisons, coupon usage and nutritional information. On a somewhat related note, Sanders was the first Supervalu senior executive I’ve heard in a very long time who delivered a salient and meaningful message while also answering every audience questions in a direct and forthright manner.
It was a great day for the industry that was hosted by the wonderful and caring folks at St. Joe’s -IMO the finest and most proactive academic institution that’s connected to the grocery industry in the country.
And for an OFWG like me, it was a great opportunity to meet new and old friends and learn a lot about a subject that often frightened me.
Jeff Brown Expanding To Baltimore In Deal With Klein Family
With business as tough as it’s ever been, there aren’t nearly as many “feel good” stories as there used to be. But here’s one: two Wakefern member/owners, the Klein family and Jeff Brown, are pooling their talents to build a new store in one of Baltimore City’s most underserved areas.
The two ShopRite retailers, one based in Harford County, MD and the other in the Delaware Valley, will open a new ShopRite in the Howard Park section (Liberty Heights Road) of Baltimore.
The announcement that a new ShopRite is coming to Howard Park is not exactly groundbreaking news (we reported about the possibility almost a year ago). But the effort of both Jeff Brown and the Klein family is both unique and interesting.
Brown (Brown’s Super Stores Inc.) currently operates 10 ShopRites in the Philadelphia area, many of them in areas where the residents are impoverished and the neighborhoods are drug and crime ridden. Not only has Brown dared to be different by opening stores with unique challenges, he has made them successful by hiring local residents and merchandising his stores with products that his customers desire. Beyond that, Brown and his wife, Sandy, operate a non-profit venture called UpLift Solutions (designed to create a model for operating profitable supermarkets in low income communities by listening to and responding to the community’s specific needs. By creating synergies between government agencies, non-profits and businesses, UpLift provides consultation support and technical assistance to utilize all of their various resources for improving “at-risk” communities).
Jeff Brown is not only a successful supermarket operator, he’s a wonderful, caring person whose altruism is truly special.
As for the Klein family, if you are any kind of local food industry historian, you know that Ralph and Shirley Klein are shining examples of independent retailing in the state of Maryland. From their seven stores base primarily in Harford County, the Klein’s have been successful for more than 80 years. Along with Ralph and Shirley, sons Andy, Howard and Michael and grandchildren Marshall, Sarah, Stephen and Jacob are all active in the business.
More than two years ago, the family made the switch to Wakefern, becoming the first Maryland based retailer to join the large New Jersey based co-op. While some in the industry thought the Klein’s operating model might not be an ideal match for Wakefern, the wholesaler was looking for an opportunity to expand into Maryland and the Kleins were seeking an injection of vitality into their business. Yes, there was some retrofitting and customizing, but the arrangement has been a very productive one.
So, while many thought it would be Jeff Brown opening a new “food desert” store in Northwest Baltimore, the “rest of the story” is really about how two productive independent retailers worked together to make the project happen.
It’s been about 18 months since Baltimore City’s Baltimore Development Corp. (BDC) began its efforts to find a supermarket (and other retail development) in an area of the city that’s been without a grocery store since Super Pride departed a decade ago.
While Jeff Brown was first targeted as the city’s retailer of choice (because of his history of success with urban stores), Brown recognized that it would be difficult to operate stores both in the Philadelphia area and one that would be 100 miles away. Besides, Brown had another major project in another food desert on his plate (at the old Tastykake plant in the Hunting Park area of Philadelphia) where another major urban redevelopment plan was further along. Brown had worked with the Klein family, particularly Marshall Klein (Ralph and Shirley’s grandson and Andy’s son), when the Forest Hill, MD retailer first began integrating its business into Wakefern’s systems in 2008. Jeff and Marshall shared a lot of common traits including their passion for the supermarket business (Jeff’s father, Lenny was a well-known independent retailer in Philadelphia).
Brown knew he could lend his urban retailing expertise to the site and felt confident that Marshall and the Klein family could manage the day-to-day operation.
So, when Baltimore Mayor Stephanie Rawlings-Blake approved the BDC recommendation to move the project forward on March 2, the marriage was officially announced.
As for details, the new unit, which should open in about a year, will be 67,659 square foot in size and is projected to cost $13.5 million. It will employ 80 full-time and 200 part-time workers.
And in the end, an area that seemingly was forgotten will be given renewed life with a brand new supermarket operated by people who know how to do it right and care about the details.
Every once in awhile, good things happen to good people.
‘Round The Trade
The mystery of Hank Mullany’s whereabouts is over. Mullany, who was president of Wal-Mart’s largest North Region, before resigning in October to accept the position of president of CVS’ pharmacy division, Wal-Mart blocked that move, challenging the “non compete” clause in Mullany’s contract. A March 15th hearing was scheduled in Delaware Chancery Court, but that won’t be happening as Mullany has accepted a new job as CEO of ServiceMaster, Inc., the Memphis, TN diversified firm which also owns such brands as TruGreen, Terminix and Merry Maids. I bet Hank could tell us a few “off the record” stories if he wanted to…retailers are telling us that the economic issues are still playing a significant role in spending habits and now commodity increases (particularly fuel) have become worrisome. Here’s a brief recap of some of the country’s largest retailers. Wal-Mart’s chief rival, Target is trending in the opposite direction from the Bentonville behemoth. The Minneapolis, MN mass merchant saw its fourth quarter profit increase 10.5 percent for the period ended January 29. Overall sales were up 2.4 percent and comparable store revenue also rose 2.4 percent for the quarter. For its 52 week fiscal year, Target’s sales were $67.4 billion, an increase that was driven in large part by its ongoing conversions of stores to its P-Fresh hybrid food concept. In the supermarket sector, Safeway rebounded from several poor quarters to earn $229.6 million for its fourth quarter ended January 28. Overall sales for the period were $12.8 billion, a slight increase after last year’s corresponding revenue figure of $12.7 billion. However, identical store sales declined 0.8 percent (excluding fuel). “We are pleased with the improving trends in sales in 2010, driven by our price reductions, reinvigorated private label brands and targeted marketing period. These trends have continued into the first quarter of 2011,” said Steve Burd, president and CEO. “We are also encouraged by the results of our efforts to achieve cost reduction, especially in shrink and store level efficiencies, as well as our strong annual free cash flow.” At Kroger, the nation’s largest pure play supermarket operator, its’ fourth quarter profit jumped nine percent to $278.8 and ID revenue (ex-fuel) grew by 3.8 percent. For its fiscal year Kroger posted record sales of $82.1 billion. “We increased identical supermarket sales, gained more loyal customers and strengthened our competitive position among grocery retailers,” said David Dillon, chairman and CEO of the 2,458 store chain. At Ahold, which recently posted mixed results, brand new Royal Ahold CEO Dick Boer said the company expects 2011 to remain challenging for the food retailing industry although there are signs of a gradual economic recovery. The veteran Dutch executive believes consumer will remain focused on value and cautious spending in an inflationary environment. The big retailer reaffirmed its mid-term targets of five percent net sales growth (primarily from ID sales) and an underlying operating margin of five percent, while maintaining an investment grade credit rating. In the club segment, market leader Costco posted a 16 percent earnings increase in its second quarter ended February 13, The Issaquah, WA based company earned $348 million in the quarter while overall sales rose 11 percent. Identical store sales grew 5 percent in the U.S, while membership fees rose 10 percent to $426 million. At BJ’s, fourth quarter earnings were $10.2 million (which includes a $41.1 million impairment charge) and comp store revenue rose 1.7 percent (ex-fuel). Laura Sen, BJ’s president and CEO, said, “I am very pleased with our results for the fourth quarter and full year, which reflect continued margin expansion and excellent cost control. Consistent growth in member visits, membership renewals and sales of perishable food demonstrate that BJ’s is continuing to capture market share from other retail channels.” Also reporting full year and fourth quarter earnings for the first time was Greensboro, NC based The Fresh Market, which went public late last year. The perishables driven merchant reported a net loss of $18.1 million for the period ended December 31, 2010. However, much of that loss was attributed to expenses related to its initial public offering. Sales results were very strong, with overall revenue increasing 13.1 percent and comp store sales rising six percent. On a related note, the company plans to open 12 to 14 new stores in fiscal 2011, including its first New Jersey unit in Montvale. Wakefern is continuing its expansion into Maryland, first with the Klein family, then the Collins’ family’s successful store in Glen Burnie, flowed by the aforementioned news that Jeff Brown and the Kleins will be opening a new store in the City of Baltimore. And on March 13, Wakefern opened its first PriceRite store on Security Blvd. Just before presstime, Village Super Markets, Wakefern’s second largest member, with 26 ShopRite supermarkets in New Jersey and eastern Pennsylvania, posted a 2 percent decrease in net earnings for its 13-week fiscal 2011 second quarter ended January 29. The Springfield, NJ regional supermarket operator said its fiscal 2011 second quarter net income fell to $6.6 million compared to $6.74 million in fiscal 2010’s second quarter. Village Super Market attributed the decrease in earnings primarily to lower gross profit as a percentage of sales, which was “substantially” offset by improved sales and lower operating expenses as a percentage of sales. The company’s second quarter net sales climbed to $329.9 million from $315.31 million in fiscal 2010’s comparable period, an increase of 4.6 percent. Village Super Market said its total revenues increased due to the opening of a Washington, NJ replacement store in February, 2010 and a same-store sales increase of 3.1 percent. This compares to a same-store sales decrease of 1.7 percent in last year’s comparable time frame and flat same store sales in the first quarter of fiscal 2011. According to the retailer, same store sales increased in the recently ended second quarter due to improved sales at its Marmora, NJ location, higher sales in one store due to a store closing by a competitor, a substantial increase in transaction counts and a slight increase in average transaction size. Sales continue to be impacted by changed consumer behavior due to economic weakness which has resulted in increased sale item penetration and trading down, the company noted.
Local Notes
We’ve waited a few weeks to gather some supplier feedback on the recent Supervalu vendor meeting held recently in Eden Prairie. Not surprisingly, the vendors were less than impressed. Several suppliers used the word “gall,” when describing SVU’s attempt to gain stronger promotions and more vendor money. In fact, executive VP Janel Haugarth, who recently added retail merchandising to her list of duties, indicated that SVU was going utilize “requests for proposal” (RFP) in all categories for suppliers to bid their best prices in order to lower Supervalu’s costs. The common sentiment of the approximately 10 sales reps who attended the meeting that I communicated with was: why should suppliers offer SVU lower costs when the return on their investment has been declining for years? The answer is that they shouldn’t. It’s 2011 and performance is based almost exclusively on how many boxes you sell. Maybe Herkert, Haugarth and the rest of the executive team should be offering vendors rebates on what they failed to deliver over the past four years. Vendors today have more discretionary choices on where to spend their promotional dollars. So, would you choose Supervalu over Publix, Wegmans, Ahold, Costco or Target, to name a few of many productive retailers? As one vendor who attended the both the SVU meeting and several Ahold vendor sessions over the past few years, noted, “What a world of difference. Supervalu seemed disorganized and unprepared to deal with the real concerns of their vendor partners. There hasn’t been a ‘partnership’ between both sides in a long time. Supervalu keeps asking for more, when by every measure they are the poorest performing customer in the industry. If we’re going to spend time and money flying to Eden Prairie, why not pattern the meeting after Ahold’s where the program is productive, interactive and respects the contributions its vendor partners have offered over the years.” And speaking of money spent to fly to Eden Prairie, Supervalu earlier this month flew more than 1,500 store managers chain-wide to attend a corporate meeting. Several managers told us the crux of the meeting was talk about local marketing initiatives including pricing, but much of the meeting seemed more like a pep rally (does that shock you?) Gee, I wonder what it cost to transport, house and feed a group that large?…we’ve been hearing reports from several vendors that A&P is dipping back into pre-bankruptcy vendor deals and deducting from those companies after the bankruptcy filing. Vendors have complained that those deals should no longer be relevant (because of the Chapter 11 filing). If that’s the case, as several suppliers have noted to us, that’s a “no-no.” If those deductions are systemic, expect the issue to be brought up at the next bankruptcy hearing late next month…vendors are still barking about the lack of cohesion concerning Ahold USA’s new centralized merchandising shift to Carlisle, but progress is certainly being made as the big retailer has begun to test its “single host” IT platform. Ahold promises that once its new IT system is running smoothly (which should occur in the next two months), many of the execution issues will go away. Vendors certainly hope so, although one constant that we hear from many of the reps and brokers is that, even when flowing smoothly, the new platform will have too many Stop & Shop/Giant-Landover features and not enough of the hallmarks that made Giant/Carlisle so successful. Whole Foods has agreed to build new stores in Closter, NJ; Marlboro, NJ; Yonkers, NY and two in New York City – in Brooklyn and on 57th St. in Manhattan…I’m sorry to report the passing of Frank Gubitose, 72, veteran food broker who plied his skill for more than 30 years primarily in the Scranton/Wilkes-Barre area. Frank was a hard-working guy who was always passionate about the business and his customers. And a posthumous salute to Edwin “Duke” Snider, who passed away last month at the age of 84. “The Duke of Flatbush” was usually thought of as the “third banana” of center fielders who played for the three New York baseball teams in the 1950s. He may not have had the athletic skills of Willie Mays (Giants), or the charisma and power of Mickey Mantle (Yankees), but the Duke was a helluva player. He was underrated defensively in large part because Ebbets Field was such a bandbox. And at the plate, he was as consistent a left-handed power hitter as there was in his era. An eight-time All-Star and a member of the Baseball Hall of Fame, Snider batted .295 and swatted 407 home runs in a career that began the same year as Jackie Robinson’s (1947) and lasted until 1964. During the 1950s, he led all major leaguers in home runs (326) and RBI (1,031). And he was one of the game’s real gentlemen, to boot…as I write this, Giant/Carlisle is cutting the ribbon at its newest store, the former Genuardi’s unit on Bustleton Pike in Feasterville, PA. The other Genuardi’s unit acquired in that deal on Easton Rd. in Warrington, PA, will open later this year.