It’s not often in the 30 years that I’ve written about Walmart that I’ve defended the world’s largest retailer. And truthfully, before current CEO Doug McMillan’s tenure began in 2014, there were way too many black marks on a company that in my view often deliberately worked along the margins and occasionally beyond them.
Last month, the Bentonville, AR merchant was sued by the U.S. Department of Justice for its role in fueling the opioid crisis which in 2019 caused at least 50,000 deaths. That scourge continues today and there is no doubt Walmart had a role in contributing to the crisis. But based on the evidence and charges that the DOJ has submitted, the claims against the “Behemoth” seem to be too specifically targeted.
The Justice Department’s lawsuit accuses Walmart of attempting to bolster its profits by pressuring its pharmacists to fill prescriptions rapidly and understaffing many of the 5,000 pharmacies it operates nationwide. That made it difficult to reject invalid prescriptions which helped foster opioid abuse. The DOJ added that the big retailer ignored repeated warnings that it was not in compliance.
However, Walmart has a different take on the matter, one that I believe is worth hearing. In October 2020, the company filed a pre-emptive suit against the DOJ claiming it was being “scapegoated” to cover up the agency’s regulatory and enforcement shortcomings in its mostly fruitless efforts to fight the opioid crisis.
“In the shadow of its own profound failures, DOJ and DEA (Drug Enforcement Administration) now seek to retroactively impose on pharmacists and pharmacies unworkable requirements that are not found in any law and go beyond what pharmacists are trained and licensed to perform.” Walmart’s suit stated.
To amplify that point, Walmart made its most significant argument, noting that the DOJ and DEA have identified hundreds of specific doctors as having written questionable prescriptions that Walmart pharmacist allegedly should not have filled, but the retailer argues, nearly 70 percent of those doctors continue to have active DEA registrations.
“In other words, defendants want to blame Walmart for continuing to fill purportedly bad prescriptions written by doctors that DEA and state regulators enabled to write those prescriptions in the first place and continue to stand by today,” according to the lawsuit.
Also contained in the suit was Walmart’s charge that federal prosecutors attempted to use the threat of criminal indictment to pressure the company into paying a massive civil penalty, adding that one U.S. attorney said that the big retailer could afford to pay $1 billion.
That’s not to say that Walmart isn’t at fault to some degree, but to scapegoat the company at the government’s expense, in my view, is too broad and far reaching.
The Justice Department’s and states’ attorneys general should continue to primarily focus on the real bad guys – big pharma companies like Purdue and Johnson & Johnson. I’d opine that large pharmaceutical distributors like McKesson, Cardinal Health and Amerisource are more at fault than Walmart or other large drug retailers.
Currently there are more than two dozen active lawsuits related to opioid abuse against pharmaceutical manufacturers, distributors and retailers. Many of those will likely result in out of court settlements. And that’s where we think this Walmart suit will end.
The problem is that this should never have been a legal action to begin with.
‘Round The Trade
Save A Lot (SAL), the beleaguered limited assortment discount retailer, seems to finally be making progress at it attempts to transform its role as an owner of corporate retail stores to a wholesale grocer and marketing firm. In that shift, the St. Ann, MO-based company has tried to unload about 300 company-owned stores to its more than 200 independent licensees who control more than 600 additional stores. Save A Lot has been through the gauntlet during the past month as it changed ownership (from Canadian hedge fund Onex to a new group of private investors while deploying a group of outside specialists Hilco, PJ Solomon, Cypress Group) to help accelerate the process, and last month concluded a deal to sell 51 Tampa-area units to Fresh Encounter, a diversified regional food chain based in Findlay, OH which operates grocery stores under such banners as Great Scot, Community Markets, Sack ‘N Save and Needler’s Market (Mike Needler Jr. is CEO of the company). Prior to this transaction, Fresh Encounter owned one Save a Lot store. The Tampa stores will retain the Save A Lot name. We hear that corporate stores in the Philadelphia area will soon be sold, and several sources said that other deals are close at hand. However, to date, including the Tampa store deal, SAL has only executed seven sales transactions, comprising 82 stores in almost a year’s time. Despite the sluggish start, SAL still expects to complete its re-licensing program in 2021. Overall, there are about 1,000 stores in 33 states, as well as 14 wholesale distribution centers. If indeed Save A Lot can turn it around, it would be a notable achievement given how much the company has stumbled and bumbled over the past few years. Licensees are telling me that CEO Kenneth McGrath (who was the first Lidl U.S. chief executive in 2014 before the company even opened stores in this country) is taking a more aggressive role with its independent retailers and is showing more decisiveness in his leadership role. In the last 10 days, company CFO (and former Lidl compatriot) Kurt Rosen has left the company. And you have to wonder how much longer McGrath’s closest running mate from Lidl, COO Kevin Proctor, will be around. Even if SAL is successful in peddling most of its corporate stores (21 company-owned stores in the St. Louis area will be kept to develop and launch new innovations as a testing ground to help its independent retailers), Save A Lot has lost so much ground in the last five years to Aldi nationally and in the Mid-Atlantic and Southeast to Lidl, now with more than 100 stores, changing to a new model might prove easier than actually competing against other discount competitors.
Local Notes
It is with bittersweet feeling that I’ve learned that Jerry Gordon, owner of Eddie’s Market of Charles Village, has retired. One of the really good guys in the biz, Jerry, 73, had been involved in his one-store operation, located near Johns Hopkins, since he was 15. Jerry’s dad, Edwin B. Gordon, acquired the Charles Village store in 1962. Gordon made it clear that the store is still profitable, but after unsuccessfully searching for a potential new owner for a couple of years, he sold the property to MCB Real Estate and decided to retire. We wish him all the best in his future endeavors and, beyond food retailing, I’m going to miss his wit and wisdom about sports and music.
Village ShopRite will be closing its Silver Spring, MD unit on February 28, leaving Wakefern’s second largest member with only one store in Maryland (Timonium) and wondering if the Sumas family is considering pulling out of a marketing area where its next closest store is more than 100 miles away. Both the Silver Spring and Lutherville stores were originally Super Fresh (A&P) units which were acquired at auction in 2011. Neither store performed poorly (Timonium’s volume was slightly higher) but sales in no way resembled many of Village’s other stores that are primarily located in New Jersey. And over the past two years, the Sumas family, now being powered by third generation leadership, has focused on Metro New York expansion, adding a conventional ShopRite in the Bronx, acquiring three Gourmet Garage units in Manhattan and most recently adding five Fairway stores to its roster…not far from ShopRite’s Timonium unit, on one of the most competitive and overstored five-mile corridors in the entire Baltimore market, Lidl opened its sixth Baltimore area store on Padonia and York Roads, also in Timonium. At 31,000 square feet, the newest Lidl is also one of its largest. This is the third supermarket to inhabit that space – it first housed a Mars (which shuttered its operations in 2016), then as a short-lived Green Valley Marketplace which closed in February 2020. Lidl has four other locations planned for the Greater Baltimore market including sites in Annapolis, Columbia and two in Baltimore City (Reisterstown Plaza and Northwood Commons).
Congratulations to our friends at Ukrop’s who last month opened their first “Market Hall,” a 6,000 square foot food hall on Patterson Avenue in Richmond which features many items manufactured by Ukrop’s Homestyle Foods, the iconic family’s primary business since it sold its grocery stores to Ahold in 2010. Customers can choose from a wide variety of prepared foods, bakery and deli items including Ukrop’s famous fried chicken (which alone has created waits as long as two hours). Much like its grocery stores which began in 1937, the Market Hall is truly a family operation with chairman and CEO Bobby Ukrop, and his two sons-in-law Scott Aronson and Chris Kanter, running the show. I asked Bobby if he’s got a yen to get back into a more diverse retail operation in the future and his response was cheery (in his typical manner) but firm: “The Market Hall is one in a series of one. We have no desire to compete against other retailers which are supplied by Ukrop’s Homestyle Foods. This is a unique opportunity to showcase the items we produce. This is a space for gathering, nourishing and sharing.”
Kroger has vaulted into the “top 10” for all U.S. e-commerce retailers according to eMarketer. The research firm posted its 2020 survey and Kroger is now the ninth largest online retail firm in the country with $11.3 billion in annual revenue. That’s far behind perennial leader Amazon ($309.6 billion in annual sales). Other merchants that sell groceries on the list include number two Walmart ($46.2 billion sales); number seven Target ($13.8 billion in annual revenue); and number 10 Costco ($11.2 billion in annual e-commerce volume). The nation’s largest pure-play grocery chain also released its top 10 trending foods of 2020 – based on annual sales growth and heading the list was zero-calorie soft drinks. Many of the other entries weren’t quite as health/calorie conscious as the number one item. Those “couch potato” items included heavy whipping cream, party size bags of variety chocolates, flavored potato chips, four-cheese Mexican blend shredded cheese. The Cincinnati-based merchant also unveiled its top food trends for this year and leading the pack was “future-proof foods” – products that aid immune health, energy levels and stress management. Other items to make the top seven trenders include “Ketorian” foods – items that offer low-carb and high-fat guidelines but are plant-based. Another interesting prediction was that consumers will continue to seek more products that are more international and those that replicate some of their restaurant favorites.
Several sources have told us that Shoppers Food is reducing its space at its corporate headquarters in Bowie, MD. That makes sense after the unit of UNFI has closed or sold nearly half of its stores over the past 18 months. And while UNFI outgoing CEO Steve “the Spinmeister” Spinner said that Shoppers is no longer on the sales block, I might not be alone in thinking that decision will be rescinded once the COVID-19 sales gains return to more normal levels.
Giant Food has introduced shelf labels at all of its 164 supermarkets that feature unique shelf labels, informing shoppers of products offered by businesses that are women, Black, Asian-Indian, Hispanic, LGBT, Asian-Pacific, or veteran owned. More than 3,100 products in Giant stores will feature the updated shelf labels, owned by 218 businesses in Giant’s network of vendor partnerships. The Ahold Delhaize USA brand said that this new initiative comes as part of Giant’s supplier diversity efforts in developing strong relationships with businesses that offer quality products, excellent customer service and competitive prices to shoppers. “Giant Food is proud to better highlight our diverse suppliers,” said Ira Kress, president. “We’re committed to making it easier for customers to identify product attributes that are important to them by fostering a diverse and inclusive network of suppliers that reflects the unique backgrounds and experiences of our Giant family, our customers and our communities.” Also at the Landover, MD-based merchant: a tip of the hat to Diane Couchman on her recent promotion to VP-category management/non-perishables. She replaces Michael Weinstock who left several months ago to accept a position with Mars, Inc. Diane is a great pick – not only is she an internal choice but with her many years at Giant and parent firm Ahold in category management and planning, she is well prepared for her new role. Additionally, Diane has experience on the vendor side after spending several years with E & J Gallo.
We have a few obits to report. It is with great sadness that I report the passing of Pat Ferguson, 82, former VP of grocery/frozen dairy/ merchandising for Redner’s Markets. “Ferg” was actually Redner’s first employee when he became the Reading, PA-based regional chain’s first store manager at the company’s Red Hill in 1970, shortly after Earl “The Chief’ Redner founded the company. He rose through the ranks to head the company’s merchandising department before his retirement in 2004. Eric White, Redner’s director of marketing best summarized Pat’s contributions and persona when he noted: “It is with sadness that we must say goodbye to our dear friend, Patrick Ferguson. Forever known simply as ‘Ferg’ he was Redner’s first ‘official’ employee! Throughout his 34-year career with Redner’s, ‘Ferg’ touched the lives of thousands of guests as a store manager, vendors/business partners as a vice president and associates as a beloved mentor. His laughter was contagious, his love for his family/friends knew no bounds and his gift for singing was unmatched. The Redner Family forever thanks you ‘Ferg.’ We are all lucky to have called you a friend and in the end…you did it your way!” An old school grocery warrior, Pat Ferguson will be greatly missed.
Another industry “personality” has also left us. Alvin Akman, former president of UFCW Local 692 (now Local 27) died last month. When we began Food World in 1978, Al Akman was already a powerful labor leader, not afraid to take on management while also staunchly protecting his many Baltimore area UFCW members. Akman, who left his job as dairy manager at a Pantry Pride in Edmondson Village to join Local 692 in 1955, became part of Baltimore grocery history when it (Food Fair) declared Chapter 11 bankruptcy in 1978. In July 1981, the now defunct Philadelphia-based chain, which was a pioneer in the history of supermarketing, asked for $16.5 million in concessions over a two-year period from four Baltimore unions, including Akman’s group. A week later, Pantry Pride retracted its demand saying that $16.5 million would not be sufficient to allow its Maryland stores to remain operational. Within 30 days, Pantry Pride began closing its stores, creating a huge void in the Baltimore market that was ultimately filled by several independent retail groups that acquired most of those stores at auction (many became unionized). That transition changed a large part of the Baltimore supermarket landscape. Akman was also a pioneer in crafting health and benefit packages for his members which served as a blueprint for other UFCW Locals to follow. He was 89.
Dawn Wells, the actress who played the wholesome brunette on the iconic sit-com “Gilligan’s Island” (1964-1967), died late last month of COVID-19 related causes. A 1960 Miss America entrant from Washington, Wells made her debut on the TV show “The Roaring Twenties” a year later and appeared in about two dozen other TV series as a character actress over the next few years. In 1964, she auditioned and won the role as the down-to-earth, midwestern farm girl whose character was a sharp contrast to the more sophisticated and red-headed Ginger (Tina Louise, who remains the only living member of the original seven-person cast). And, during my teenager years, I can attest that fantasizing about the possibilities with either Ginger or Mary Ann would have taken far longer than a three-hour tour.