There’s a classic Ray Wylie Hubbard song called “Snake Farm” which includes the lyrics: Snake Farm – it just sounds nasty; Snake Farm – well it pretty much is; Snake Farm – it’s a reptile house; Snake Farm – ew, ew, ew…
While I don’t want to totally conflate the connection between Hubbard’s “nasty” reference with visiting a Dollar General (DG) store, the two have become linked in my mind.
That might be because the Goodlettsville, TN-based discounter’s continuing safety issues have placed them in OSHA’s (Occupational Safety and Health Administration) elite (not) “Severe Violator Enforcement Program” (SVEP), which the federal agency said applies to employers and companies that exhibit indifference to their obligations by committing willful, repeated, or failure-to-abate violations.
In addition to the deplorable store conditions, which feature an excess of merchandise being piled up inside and outside its locations, Dollar General apparently can’t or won’t properly staff their stores. If you’ve ever visited a DG store, you’ve come to expect clutter which sometimes blocks emergency exits or might be stacked to heights that are clearly dangerous, but the severe shortage of labor is quickly apparent, too.
With the company under SVEP watch, OSHA and U.S. Labor Department employees can now randomly inspect stores. However, as indifferent as Dollar General has been to creating a safe operating environment for its associates and customers, there’s some twisted logic in which the dollar merchant feels it’s worth the risk.
The core of the problem is that while OSHA’s rules may place safety first, it has little financial leverage to force serial scofflaws to change their behavior. The federal agency can only charge a company up to $15,600 a day for a maximum of 30 days. Since 2017, the Feds have charged DG with more than 100 safety violations but the penalty is akin to a parking ticket – only $15.6 million for a company that earned $2.4 billion last year.
“Dollar General has shown a pattern of alarmingly willful disregard for federal safety standards, choosing to place profits over their employees safety and well being. Neighborhood stores exist to support the needs of their communities – the same communities in which many Dollar General employees live – and that support must include following laws designed to keep workers safe from preventable injuries or worse,” said Doug Parker, OSHA’s assistant secretary.
And you have to give some credit to Dollar General – it’s willing to build stores in urban food deserts and underserved rural communities where other retailers won’t even consider operating.
DG isn’t the only dollar store merchant with safety issues. Remember the Family Dollar distribution center in West Memphis, AR that had to be shuttered last year after the Food & Drug Administration found more than 2,300 rodents at the 850,000 square foot depot? Additionally, approximately 400 stores that were supplied by the Rathouse were also closed.
Is this a dollar store issue or am I a believer in conspiracy issues?
At the end of the day, Dollar General’s actions are inexcusable. Creating a pattern of dangerous store conditions and doing it willingly is truly unconscionable. Doug Parker’s assessment is spot on.
Snake farm or snake pit – take your pick.
‘Round The Trade
I don’t think it’s possible for more than a month to go by without any Amazon news. During the past 30 days we learned that “Godzilla” will lay off an additional 9,000 employees, primarily in its highly profitable Amazon Web Services (AWS) and in its People, Experience and Technology (PXT) units. The new job cuts comprise about 3 percent of Amazon’s workforce. In February, Amazon laid off 18,000 associates. Also revealed this month is the fact that Amazon spent $14.2 million on labor consultants last year, more than three times what it spent on labor consultants in 2021, according to a company filing with the U.S. Department of Labor. The Seattle-based monolith attributed the increased spending as a response to large-scale union organizing efforts.
And this just in from Politico: the Federal Trade Commission (FTC) is preparing to take action soon on several key areas including a potential abuse of power with its overall online marketplace. Also allegedly to be targeted are potential consumer privacy infractions with its Alexa digital assistant and Ring cameras…as has been the case for three consecutive months, overall inflation is mitigating, but food prices remain high. In its latest report, which was released in mid-March, the Bureau of Labor Statistics’ Consumer Price Index (CPI) reported that total year-over-year (YOY) national inflation for February was 6 percent, down from 6.4 percent compared to the prior month. Food price increases followed that declining trend but remained at 9.5 percent YOY. As retailers can attest, that’s not enough of a dip to allay concerns about more difficult economic challenges ahead. And in somewhat of an alarming reversal, five of the six largest food measuring groups showed slight price increases over the past month. Those include: cereal/bakery products (+15.9 percent YOY, a 0.3 percent increase over last month); fruits and vegetables (+7.4 percent YOY, a 0.2 percent increase over last month); dairy (+14.1 percent YOY, a 0.1 percent increase over last month); non-alcoholic beverages (+14.1 percent YOY, a 1 percent increase over last month); and other food at home (+13.6 percent YOY, a 0.3 percent increase over last month). Only one large category declined – meat/poultry/seafood/eggs (+8.0 percent YOY, a decrease of 0.1 percent over last month) – primarily because of a 6.7 percent decrease in egg prices last month. As far as monthly online grocery revenue goes, according to research firm Brick Meets Click/Mercatus, total U.S. online grocery sales increased 1.5 percent in February 2023 to $8.8 billion from a year ago. Another research group, Incisiv, said that digital sales now account for $128 billion (14.4 percent) of the annual retail food pie. The New Jersey-based analytics firm also predicted that digital sales by the end of this year will reach $146 billion, and by 2026, 20 percent of all grocery revenue will be online driven…former Starbucks CEO Howard (“Humble Howie”) Schultz finally appeared before the U.S. Senate’s Health, Education, Labor and Pension Committee to discuss Starbucks’ view on unionization and overall labor relations. After being subpoenaed to testify, his “Humbleness” defended his company’s anti-union stance (while also acknowledging that employees have the right to organize), noting that Starbucks is one of the most generous and benevolent employees in the U.S. Of the nearly 9,300 Starbucks stores in the U.S., only about 3 percent have agreed to become unionized, but that number is slowly increasing. Starbucks also faces more than 80 complaints from the National Labor Relations Board (NLRB) over its anti-union tactics. Much of the more than three-hour hearing was dominated by sparring between committee chairman Bernie Sanders and Schultz, which made for interesting theater but little else. Remember when Schultz threw his hat in the ring four years ago to become the Democratic presidential nominee in 2020, weren’t he and Comrade Sanders supposed to be politically aligned? I guess that ain’t the case no more…ah yes, there’s also Walmart news to report. The planet’s largest merchant said that it has maintained its 2022 pricing for Easter meal ingredients and Easter basket offerings. Walmart will also add 28 healthcare centers to existing Supercenters, primarily in the Dallas and Houston markets, next year. That’s in addition to the 17 new facilities it is opening in Florida in 2023. Included in the new offering will be primary care, dental services, behavioral health and audiology. The “Behemoth” currently operates 32 healthcare facilities within its stores nationally. The Bentonville, AR merchant recently cut more than 1,000 jobs at five of its fulfillment centers due to a reduction or elimination of weekend and evening shifts. Associates at those e-commerce facilities – which are located in Bethlehem, PA; Pedricktown, NJ; Chino, CA; Davenport, FL; and Fort Worth, TX – will be paid for 90 days and can seek employment at other Walmart e-commerce facilities or in its stores…and just before we went to press, Boxed, the e-commerce distributor that served as kind of an online club store merchant, filed for pre-planned Chapter 11 bankruptcy. Boxed’s founder Chieh Huang is a brilliant man, but like many startups, the company relied primarily on investor funding which finally dried up. It also didn’t help that when Boxed launched an IPO in 2021, it went public via the SPAC (Special Purpose Acquisition Company) route, a path that Wall Street now finds generally unfavorable.
Local Notes
Big changes at Giant Eagle as Laura Shapira Karet is no longer CEO of the Pittsburgh-based regional chain. The 470-store merchant (supermarkets and c-stores), which dominates the Pittsburgh and Cleveland market, made no detailed announcement about why Karet is out after 11 years at the helm of the family-owned retailer (she’s been with Giant Eagle since 2000). However, sources have told us that there has been friction brewing between Karet and the board for quite some time. She will be replaced on an interim basis by Bill Artman, who has been with Giant Eagle for 38 years, serving most recently as president of supermarkets. Bart Friedman, who has been Giant Eagle’s lead independent director for the past two years, will now also become chairman. He is the first non-family member to serve as chairman in the company’s 92-year history. The Shapira family legacy is truly one of the greatest in the supermarket industry. The company was founded in 1931 by Joseph Goldstein (along with four other partners). Goldstein’s son-in-law, Saul Shapira, helped transform the company into a regional powerhouse and Saul’s son, David, who is 89, brought the company into the modern era and is one of America’s most notable philanthropists. If I were placing odds on the future of Giant Eagle, I’d bet the retailer will seek to sell the entire enterprise. After all, it issued a prospectus prior to COVID (we heard that Albertsons was very interested) and with no family members currently holding senior positions in the business, the time might be right to revisit the sale option…it’s not often that retail dynamos are forced to close stores, but that’s the case with Walmart and Target which are shuttering units in and around Washington, DC. Nearly a decade ago, when Walmart boldly announced it would open three stores in the District, there were high hopes that the “Behemoth” would change the landscape of food retailing in an underserved market. Those expectations were never realized at any of the three stores and now Walmart has closed its 74,000 square foot SuperCenter located on H Street NW, citing underperformance. The retailer’s other two DC units on Georgia Avenue NW and Riggs Road NE remain open but are hardly doorbusters. The H Street closing is one of 10 lackluster units the uber-retailer has or will be closing shortly across the country. As for Target, it will be closing two small-format stores next month. Those “urbanized units” are located in College Park, MD and Falls Church, VA. The mass merchant will also close stores in Philadelphia and in its hometown of Minneapolis next month. These closures don’t surprise me, primarily because I think there’s a vast operating difference between a large 130,000 square foot conventional Target and its small-format model which ranges from 20,000-30,000 square feet in size. The typical conventional Target is organized, clean and well-merchandised. Of the dozen or so smaller Targets that I’ve visited (mostly in DC, Philly and NYC), I’ve found many of them to be dirty and cluttered, with little sense of continuity for the shopper. I know Target stands fully behind its newer model (and on paper the concept is viable). However, there’s a big difference between operating in a style that’s been successful for many years versus one where demographics are often different and a radically smaller size presents unique challenges…Global Food opened its sixth supermarket last month on Security Boulevard in Woodlawn, MD (Baltimore County). The family-owned specialty and ethnic retailer operates stores in Oxon Hill, MD; Silver Spring, MD; Alexandria, VA; Manassas, VA; and Woodbridge, VA, along with a distribution center in Sterling, VA. The 36,630 square foot unit was most recently a Price Rite store before it closed in 2020…UNFI will build a 1.3 million temperature-controlled distribution center in Manchester, PA (York County) that should be open by next summer. According to Erin Horvath, the Providence, RI-based distributor’s COO: “Our York facility, located less than 15 minutes away, has felt the impact of both new and existing customer growth we’ve experienced in this region over the last 12-18 months. Leasing this facility allows us to best utilize our capital and manage company resources all while delivering on our transformation program, to enhance our distribution network by enabling our multi-echelon re-distribution strategy to effectively support our customer growth. Similar to several other UNFI facilities, this new distribution center will implement technology and automation solutions designed to enable greater network capacity, scalability, and profitability.” UNFI also opened a new DC in Allentown, PA in late 2021 which currently serves one of its largest independent customers, Key Food…closing a warehouse will be Whole Foods, which is shuttering its 45,300 square foot seafood distribution center in Landover, MD (Prince George’s County) on May 23. About 65 employees will be impacted. According to the Washington Business Journal, an Amazon spokesperson said WFM is “adjusting its approach” on how it meets customer demands and will continue to utilize a long-standing third-party distributor to provide service to its stores…Giant Food has partnered with Baltimore-based Nalley Fresh to offer in-store restaurant dining at the grocery chain’s Ellicott City, MD store on Route 40. Nalley Fresh, which has 10 locations in the Baltimore area, was founded in 2011 by chef Greg Nalley and offers healthy and fresh meal options…Wegmans is asking the Virginia Supreme Court to review its recent decision which has put its planned Hanover County distribution center on hold. The court case between the chain and some local residents has been mired in legal bureaucracy almost since the uber-merchant announced its plan to construct a 1.4 million square foot $175 million DC in late 2019. Wegmans was hoping to begin construction this summer…unfortunately, we have two obituaries to report this month, both with ties to the food industry. I was deeply saddened to hear of the passing of Alvin Schwartz, 93, former owner of Schwartz Sales (later Hagerty-Schwartz), one of the largest food brokers in Pennsylvania, who was one of the greatest peddlers I’ve ever known and just a wonderful person. Born in Poland, Alvin came to America at a very young age and worked with his father, Max, establishing Schwartz and Sons, which among other enterprises, sold Krakus Polish Hams to workers at coal mining companies in Northeast PA, many of whom were Polish immigrants or of Polish ancestry. That might not seem so amazing until you consider that Max and Alvin were Orthodox Jews who kept a strictly Kosher diet. There were so many funny stories and adventures with Alvin that are imprinted in my memory. But most of all, Alvin Schwartz was a mensch. He cared deeply about people, loved his country and his religion and silently contributed to many charitable organizations. One of the nicest and most altruistic people I’ve ever met, I’ll miss you, my friend…also leaving us was Ron Sarasin, 88, former U.S. Congressman from Connecticut, who for the past 35 years was the husband of Leslie Sarasin, CEO of the Food Marketing Institute (FMI). Ron also served as the chief lobbyist for the National Restaurant Association and as president and chief executive officer of the National Beer Wholesalers Association. He served as president and chief executive officer of the U.S. Capitol Historical Society from 2000 to 2019 and is credited with establishing a traveling exhibit on the role played by enslaved people in the building of the U.S. Capitol, as well as the initiation of the organization’s popular civics education program. I’d often see Ron at FMI events and always found him gracious, extremely intelligent and very well-dressed. My condolences to Leslie and the Sarasin family.