Lina Khan, meet William Tong and Bob Duff. Kahn may not know these two gentlemen but once the introduction is made I’m certain that you all will share the same beliefs about the evils of corporate America, especially retail food operators.
The chairwoman of the FTC, whose office recently released a report largely blaming major food retailers for creating the inflationary environment of the past three years (see story on page 1), can genuinely claim she understands the nuances of the retail food business (even if her conclusions are distorted and erroneous).
I can’t say that about Mr. Tong and Mr. Duff, who currently serve as the Attorney General and Senate Majority Leader for the state of Connecticut respectively, who are both wrong and seemingly clueless about the entire scope of the issue.
After reading the FTC declaration, Duff became outraged by the agency’s conclusions. He immediately took the report to Tong who announced the state would be opening an investigation of grocery prices.
Tong noted that no stone would be unturned in order to find the potential greedy culprits.
During his press conference, Tong stated, “We won’t stop. We will keep going until we have an understanding of this market.” He then added that the increasing prices of almonds and eggs really disturbed him.
“I eat a lot of nuts and almonds are super expensive, and the price is always going up. And basic eggs are several dollars higher than they used to be and that impacts everyone,” the deep-thinking politician exclaimed.
Before you start your inquiry, it wouldn’t take much research to find that almonds have risen in price primarily because of climate-related issues in California and that egg prices continue to roller-coaster because of intermittent outbreaks of avian flu.
Tong’s cohort, Senor Duff, proclaimed that grocery profits in the Nutmeg State are at a 70-year high (where’s the proof?) and that price gouging is responsible for 50 percent of overall inflation (more proof needed, please).
“I have no problem about profits, but it’s the greed,” Duff huffed.
It may not be a coincidence that Duff is up for re-election this November.
Of course, the content of comments made by Khan, Tong and Duff are nothing new. As the end user in the complex farm-to-shelf pathway, food retailers have always been the whipping boys for semi-informed consumer groups and headline-seeking politicos.
It might be helpful for those outsiders who are quick to scapegoat food retailers to know that even the most successful food merchants average an annual net profit of between 1.5 and 2 percent, with the industry at slightly above 1 percent – figures that have changed little over the past 25 years.
Then again, why let a little industry research get in the way of a great headline?
‘Round The Trade
There’s never a shortage of Amazon news and over the last 30 days “Godzilla” CEO Andy Jassy sent a letter to shareholders trumpeting the company’s recent financial successes, including the progress its’s making in the grocery arena, noting, “We have a very large and growing grocery business in organic grocery (Whole Foods) and non-perishable goods. We’ve been working hard on building a mass, physical store offering (Amazon Fresh) that offers a great perishable experience; however, what if we used our same-day facilities to enable customers to easily add milk, eggs or other perishable items to any Amazon order and get same day? It might change how people think about splitting up their weekly grocery shopping and making perishable shopping as convenient as non-perishable shopping already is.”
On one level, Jassy’s idea could be industry changing, but when it comes to perishables execution, Amazon’s performance and perception remain middling at best. Jassy also appeared on CNBC to criticize the FTC over its decision to block Amazon’s proposed acquisition of iRobot and its lawsuit charging Amazon for acting as a monopoly (a case I believe the FTC will lose). As Jassy stated in his letter to shareholders, Amazon’s overall business remains strong.
To wit: last month the company opened one of its largest distribution centers nationally, a five-story, 4 million square foot warehouse in Andover, MA that will employ about 1,500 people. But its brick-and-mortar grocery business continues to struggle but evolve. The juggernaut recently announced that it was abandoning its “just walk out” proprietary checkout-free technology at its Amazon Fresh (AF) stores and replacing it with another software-driven platform that it also using – Dash Carts.
Additionally, after an 18-month pause, Amazon has resumed its efforts to improve its physical grocery stores, revamping some Amazon Fresh units in California and in the Chicago area. The first of its new generation AF stores in the Mid-Atlantic is expected to open later this year in Arlington, VA (Crystal City), the same area where the company is building a large secondary headquarters. That new store (which recently applied for an alcohol license) would replace a recently closed smaller unit in Crystal City. Another smallish AF also closed recently in Logan Circle in Washington, DC.
It’s not just challenging for many retailers in-store, their digital businesses have also struggled. According to the latest online data released by the Brick Meets Click/Mercatus Grocery Shopping (BMCMGS) Survey for March, overall monthly U.S. online sales were $8 billion, flat from a year ago. In fact, digital grocery sales, which peaked in March 2021, have declined or been flat on an annual comparison basis since then.
One paragraph in the BMCMGS) report caught my attention: One challenge for brick brick-and-mortar grocers is “building a mobile app that assists customers as they shop, whether that’s online or in-store. Mass retailers like Walmart and Target have already invested heavily in enhancing the perceived value from using their mobile apps and it shows. The latest research found that 76 percent of households that primarily buy groceries from Walmart and who also buy groceries online completed one or more eGrocery orders with Walmart in March 2024, For the households that primarily shop at a supermarket and buy groceries online, only 60 percent of those households bought groceries online from a supermarket.”
In a somewhat related story, market research firm Circana (formerly called IRI and NPD), noted that private label dollar sales increased 6 percent (unit sales grew 0.9 percent) in 2023. “Private brands are increasingly capturing market share from name brands, experiencing growth in both dollar sales and units,” said Mary Ellen Lynch, principal of center store solutions for the Chicago-based consumer behavior firm. She added the data reflects consumers utilizing a variety of methods to stretch their dollars
Local Notes
Huge opening for Wegmans at its new Yardley, PA store which debuted on March 20. After struggling through COVID with the closure of its in-store dining facilities and hot bars, the Rochester, NY uber-retailer has bounced back sensationally with a modified new store design and the same customer-driven focus. And demographically, the Yardley site may be the in the top 10 percent of any location for the regional chain whose territory stretches from western New York, east to the Boston area and south to the Raleigh-Durham-Chapel Hill region. Correction: make that the Charlotte region.
Just before presstime, we learned that Wegmans would open its first store in the largest city in the Tar Heel state, probably in the third quarter of 2026. The 110,000 square foot unit will be located in the Ballantyne area of the city, one of the Queen City’s toniest neighborhoods. Next on tap for the family-owned privately held retailer are new stores in Lave Grove, NY (its first Long Island unit) in early 2025, followed by other new entries in Rockville, MD and Norwalk, CT, later that same year. Another North Carolina store, which would be the sixth Wegmans supermarket in the state, is slated to open in Holly Springs in 2027.
Other recent store openings in the region include a Grocery Outlet discount unit in Rehoboth Beach, DE and an Aldi in Neptune, NJ. Additionally, Trader Joe’s confirmed that it will open a new store in Middletown Twp., NJ later this year, one of 17 that the “treasure hunt” merchant will debut in 2024.
Ahold Delhaize held its annual shareholders meeting on April 10 in Zaandam, The Netherlands, which was attended by 147 shareholders. CEO Frans Muller summarized the international retailer’s performance over the past 12 months:
“Reflecting on 2023, it’s clear that last year was characterized by constant change, as we faced numerous challenges including high inflation, global conflicts, and increasing societal polarization. Our teams across all brands have shown resilience and agility, and thanks to the unwavering dedication of our associates, we have been able to make a difference for each of our brands 63 million individual customers, and for local communities. I am proud of the remarkable community initiatives undertaken by our great local brands throughout 2023, contributing over 240 million euros ($255.6 million) in charitable cash, product, and food donations. Only a healthy, stable company can continue to invest in local economies, sustainability, innovation, digitalization, and stores. That’s why I’m pleased that we were able to present solid results in 2023, meeting all of our key financial goals for the year. This includes generating over €1.25 billion ($1.33 billion) in cost savings, which is over €250 million ($266 million) more than we had originally planned. This enabled the brands to keep prices as low as possible for customers. 2024 will be an important year for Ahold Delhaize as we enter a phase of new momentum. We are excited to provide more details about our future plans and strategic initiatives to build the next phase of growth and value creation for our company during our Strategy Day in May (23), which will be shared via webcast.” Ahold Delhaize also announced that it has joined four other large multi-national retailers – Tesco (UK, Europe); Woolworths Group (Australia, New Zealand); Empire Co. Limited/Sobeys (Canada); and ShopRite (Africa) – to form W23 Global, a collaborative venture capital initiative that said it will seek to invest $125 million over five years in the world’s most innovative start-ups and scale-ups with the potential to transform grocery retail and address the sector’s sustainability challenges.
W23 Global CEO and Chief Investment Officer Ingrid Maes, a 25-year retail food veteran (mostly with Woolworths) added: “W23 is a potentially game-changing international VC fund with a powerful proposition for both our investors and portfolio companies. We aim to offer our investors incomparable access to transformative innovation in grocery and sustainability worldwide. W23 Global will work with its investors to identify common unaddressed challenges and support entrepreneurs to develop solutions, offering faster pathways to global scale for portfolio companies. With leading grocery CEOs on our investment committee, founders can rapidly develop ideas based on an accelerated understanding of retailers’ needs.
In brokerage news involving two Mid-Atlantic based companies, CA Ferolie, Montvale, NJ, and Integrity Food Marketing, Wayne, PA, have joined forces. Actually, both firms, which were once part of brokerage networks Eastern Sales & Marketing and Beacon United and had previously worked together for many years, have now officially integrated their organizations.
“With nearly 25 years of collaboration and partnership in the Mid-Atlantic and Eastern regions, resulting in a shared portfolio of clients exceeding 70 percent, the time has come to join forces to better serve grocery, convenience stores, clubs, mass retailers, distributors, wholesalers, and alternate channel customers on behalf of our clients,” stated Tom Morrison, CEO of Integrity.
Antony Ferolie, CEO of CA Ferolie added, “This marks a significant milestone, reinforcing our bond and enhancing our collective ability to deliver proven ‘best in class’ resources and results to our esteemed clients.” Industry veteran Ernie Vespole will lead the integration of people, clients and resources to a unified structure, business model platform and shared services, working with the senior leadership teams of both companies. According to the newly formed organization, this strategic alignment further solidifies the expansive market and channel position for the combined entity as a leading sales and marketing agency for customers, uniquely positioned to meet the evolving needs of clients in every CPG category and department.
Maola Local Dairies, owned by the Maryland & Virginia Milk Producers Cooperative, announced that it is expanding into the Delaware Valley market after its acquisition of the old HP Hood milk plant last month. The cooperative also operates other milk plants in Landover, MD (the old Giant Food facility); Laurel, MD; Newport News, VA: Strasburg, VA; and High Point, NC.
In a proposed new law offered by New York State Senator George Borrello, digital-only coupons offered by individual food retailers’ loyalty programs would be automatically applied to bills of senior citizens who reside in the Empire State. Borrello, whose district encompasses the area between Buffalo and Rochester and then southwest to Jamestown, said that his proposed bill would help seniors without smartphones or other devices which are currently needed to access those online coupons.
Another politico seeking to grab a quick headline (see Connecticut AG William Tong and Connecticut Senate Majority Leader Bill Duff). Let’s kill this quickly – this is pure government overreach trying to invade a new playground that they shouldn’t visit…
Iin another example of New York state political overreach, a recently enacted law prohibits retailers in New York from selling to anyone under 18 years old any dietary supplements with ingredients that are labeled, marketed, or otherwise represented for “weight loss” or “muscle building,” even if the product doesn’t explicitly make such claims. Now the Council for Responsible Nutrition (CRN), the leading trade association for the dietary supplement and functional food industry, is fighting back by suing the state on the constitutionality of the new legislation.
“CRN’s board of directors did not reach this decision lightly,” said Steve Mister, president and CEO of CRN. “Our initial strategy was to work with legislators, the governor, and the AG’s office to develop reasonable solutions that address legitimate concerns about the rise in eating disorders. But having exhausted those avenues, we must ask the courts to protect the rights of our members, retailers, and consumers in New York.”
While the stated purpose of the law is to prevent eating disorders in young people, there is no credible scientific evidence demonstrating a causal link between dietary supplements and such disorders. The law’s overly broad and ambiguous definitions of ‘weight loss’ or ‘muscle building’ products will lead retailers and marketers of dietary supplements to restrict sales of a broad range of products containing truthful and otherwise lawful claims for fear of prosecution, with fines up to $500 per violation.
We know that age restrictions on products inevitably lead to restrictions on access for everyone. Faced with potential fines, and without guidance from the state, stores are likely to cast an overly broad net on what is covered, and some retailers will either discontinue those products entirely or remove them from self-service availability, which means behind the counter or in locked cabinets. That prevents all consumers, regardless of age, from having widespread access to beneficial products.
On a human level, the law gives false hope to individuals and families affected by eating disorders, that a measure like this will somehow solve or make better what is widely regarded as a complex, multifaceted problem that the science tells us is not caused by the use of dietary supplements. And on a legal level, it punishes truthful, otherwise lawful communications by imposing age restrictions based on representations communicated about a product, rather than the actual safety of the product itself.”
Call off the car chase, OJ Simpson is dead. The notorious criminal and ex-football great finally met his maker earlier this month at age 76. Despite all the controversy surrounding his life and death, I don’t think there’s any truth to the rumor that one of the gravediggers at the cemetery said, “Dig that pit, to make him fit.” Also likely untrue is the report that a white Ford Bronco was used as a hearse. Good riddance!