business news in context, analysis with attitude

We received an extraordinary email this morning on the subject of Fleming's demise:

As a former employee of Fleming I have several observations. Fleming's demise was not caused by a change in business climate or tougher competition. Fleming's demise was caused by what has become all too common in American business as of late, GREED. I watched as a man, following in his father’s footsteps, spent his life building a retail operation (Rainbow Foods), slowly but surely get pushed out of an operation that he had expanded to the point that it was competing head to head with Cub Foods. He was pushed him out the door, only to replace him with young upstart executives that had only one thought. “How high, and how fast can I climb to the top” “I’m here today but will be gone tomorrow to bigger and better” They possessed very little grocery knowledge, but an abundance of office infighting and backstabbing skills. Anyone that resisted or questioned the “New Business Philosophy “was labeled old school, out of touch and behind the times, and shown the door in short order.

These New Carpetbaggers were only interested in them selves and had moved on long before the day of reckoning arrived for Fleming. In the gutted remains of a once proud operation they left hard working, loyal employees who just wanted to make an honest living in the food industry, serving the customers they had grown to know through the years.

What’s the difference? The old school built a business using tried and true business practices. Building customer loyalty day by day, customer by customer. The old school looked for dedicated workers that cared as much about the dream as the owner did. The employees worked hard not just for themselves but because they knew they were part of the best team around. The future looked bright, even in tough times.

The new school operates on a whole different set of principles, there was no team, even though they claim there was. It’s about one thing, getting a better job and more money. There was very little concern about the customer, the employees, or even the business, it was just a means to get ahead. Many executives stayed in their job just long enough to land a bigger better job somewhere else. The people they laid off, let go or ran out of business, just so much “collateral damage”.

Am I bitter, yes, has it ruined my life, no. I saw many years ago where it was headed and left after 25 years in the business. I was part of the old school. I was very fortunate to have a wife that was very successful and had grown to the point were my business experience was a true asset to her business. It pains me to know that many good friends have lost their livelihood, my heart aches for what has happened to the stores which everyone had such pride in, and I can not imagine the frustration and heart break an owner would have watching their dream be destroyed by a bunch of upstart know it alls. I was very lucky to have the opportunity to work for a man that taught me a lot about groceries but even more about how to run a successful business. There are no fast roads to success if you wish to build a lasting business.

And finally, some of the fault belongs to the stock holders. In their demands for bigger returns on their investment, they helped foster the management attitude for quick returns rather then a stable growing company.

On the matter of Fleming's wholesale business being acquired by C&S, one MNB user wasn't terribly hopeful:

If the deal to acquire Fleming's wholesale business is successful by C&S it will be the beginning of the end for them. C&S is not known for their successful support of independents and really have no programs for independents. They are merely a trucker with a low cost of goods serving companies that have their own merchandising and other support departments.

An independent operator needs more. Also the companies that deal with C&S, like Pathmark, Key Food etc have a nickname for them: Cheat and Steal.

And another MNB user wrote:

If Supervalu can acquire certain divisions from Fleming that are strategically advantageous, Supervalu can become an extremely valuable stock.

On the subject of organic certification, which has been an ongoing subject of discussion here on MNB, one user wrote:

One of my associates in the tea industry is a classic example of this issue. His teas have been rated of the highest quality (gold medals in International competitions) and uses organic practice in all of his estate. However only a small # of acres of his total 4,000 acre estate is certified organic due to the cost of doing so. The organic teas do not bring in a high enough revenue to offset the costs. Also, there are several others of his 'competitors' who are simply in the certification business for the marketing of it, and when tasting products side by side, don't come close to the caliber of's sad.

Also, it brings us back to the times when we may want to consider the concept of buying locally and from who you know. We recently started up a summer farmers' market in our in-city (Seattle) residential community that is based on an alliance of 125 local farmers who have agreed to participate over the course of the summer with 25 produce farmers present each week for the residents of our community. Oddly enough, even though we are within driving distance of the Pike Place Market, many of the residents never shop there as it isn't convenient.

At our community market, over 60% of the farmers are organic, and more than 80% of the products purchased are organic. Most importantly, people are buying produce that was picked within the past 8-12 hours at the most, the farmers are able to get full retail with their produce with consumers paying same or less pricing than their chain grocers for a hug quality and selection difference, and equally important, it is supporting the farmers who represent more than 4,000 acres to not sell their land for development in an area that is full of it. With the personal contact with the farmers, the residents are being more connected and concerned with those who are growing the produce. It's a win for all. If you see a roadside stand or have a farmer's market in your community, please go out of your way to support and encourage them.

Perhaps this is an approach that more mainstream food retailers ought to advocate…

Yesterday we had a story about moves being made by manufacturers and retailers in the anti-obesity area. In response, MNB user Ginny Kemerer wrote:

It isn't surprising to me that Kraft Foods is leading the pack in lightening its product offerings. I think they're reading the trends wisely and will be in the right place at the right time. From the snippet mentioned about the Fun Fuel Lunchables they are also branding wisely.

An offering such as the Hawaiian Punch Lite can cause the consumer to wonder "Just what was wrong with regular Hawaiian Punch?" and eat into the regular Hawaiian Punch sales - not necessarily another diet fruit drink's sales.

Better to give your light line of products a new brand with its own identity.

Except, of course, in this case Wal-Mart is the only retailer carrying the Lite Hawaiian Punch…so maybe it doesn’t care what products it cannibalizes.

We had a story yesterday about Kmart asking a federal judge to dismiss a suit against its former CEO Charles Conaway as well as current executives; the suit has been filed by employees who lost all their stock holdings in the company when it declared bankruptcy. One MNB user wrote:

While holding Conaway & co.'s feet to the fire sounds like a great idea - after all, they were at the helm of Kmart, allegedly dancing and drinking martinis while Kmart foundered on large icebergs - it would set an uncomfortable precedent.

After all, there are companies that go bust through no fault of anyone but an indifferent marketplace. Innocent entrepreneurs who are down on their luck would get a rather unfair kick in the shorts if such a precedent is set.

One would hope, we suppose that the courts could tell the difference between the indifferent and the unlucky. Size, by the way, isn’t always the best distinction to use in determining who is who; we've worked for small companies in which management was perfectly happy to fiddle while Rome burned and inform their employees that the flames were just a barbecue across town…

On the subject of corporations using schools and amateur team sports to sell product, one MNB user wrote:

I doubt any School Board reaches as far down as to selecting sponsors to buy uniforms for grade school age sports teams, and doubt that any Babe Ruth team, or any similar team has any direct connection to the school the kids go to or athletic field they play on, other than granting permission to use the property. Most all of these are an extra-curricular activities I believe.

As to it costing Pepsi, or Coke, or Joe's Sporting Goods; more than likely there's a Father, or Mother, whose child(ren) take part in those activities and are more than willing to help out in that way, or in any way needed. At least, that was my experience when I went looking for financial help. The successful businessman/Father/Mother was always the easiest touch when I needed to buy something for their child's team.

That's the way it used to be; times, we fear, have changed.

We posted an email the other day lamenting the fact that the food industry just isn’t fun anymore. One MNB user agreed:

I agree that the business used to be fun. In my view, category management implemented by consultants has ruined much of the common sense approach. One example to me is the way buying has changed. Years ago buying was done by vendor meaning each buyer bought all items from a particular vendor. As the business evolved, it made more sense to buy by category so that the buyer could manage the category for better sales and profit.

However, now we have category managers whose job it is to manage the category but we also have buyers who buy the products. The problem with the current system is that the buyer now buys several categories under several category managers and up to five buyers buy one truck! How ridiculous and inefficient. Why not scrap the buying systems, which no one likes, and go back to letting buyers buy the most efficient way, by vendor. Obviously this may put a lot of consultants and buying system creators and sellers out of business but it sure makes sense to someone who has followed the business for a lifetime.

On the subject of Supervalu possibly acquiring Dominick's from Safeway, one MNB user wrote:

You hit the nail on the head. This is probably the 3rd of 4 possible scenarios in terms of desirability.

First was for Bob Mariano/Roundy's to acquire, second would be to have Yucaipa acquire and allow existing management (Don Fitzgerald & team) to rebuild Dominick's to it's glory, third (by a great distance) would be the acquisition by Supervalu, last would have been the acquisition by another centralized chain (Kroger, Ahold etc.). Unfortunately the best 2 choices don't look like they will happen.

Hopefully Supervalu will learn something from all the problems they have experienced in their retail group. Cubs are closing in any number of markets, and in Chicago Supervalu failed to significantly increase market share even with the closing/conversions of the OMNI stores several years ago. If Supervalu takes anything away from these experiences it is that here in Chicago another low priced box store isn't what is wanted or needed. What is desired is freshness, broad selection, creativity, unique products and character. If they fail to provide these things, it will just be another chapter in a pretty sad story.

We got an email about a comment we made in a story about Ahold:

Kevin, I cannot believe you care about the worst over for as you stated "for Ahold's Sake". Why should we care about Ahold's sake? These are scum that defrauded American investors and you're feeling sorry for them. Give me a break.

We think "scum" is a little strong. If such things are proven about people like Bill Grize, whom we have met and interviewed numerous times, we will be profoundly disappointed.

And, by the way, Ahold is made up of many people - most of them Americans - who work hard and do their best to behave appropriately and ethically. Not everyone, of course, but most of them are caught in the middle of all these charges.

We simply refuse to relegate them all to a single characterization.


On the subject of Starbucks' new line of iced drinks, one MNB user wrote:

I'm surprised to see that Starbucks would come up with an iced drink that contains 22 grams (nearly 6 teaspoons!!) of sugar in a single drink. The obesity in the U.S. is fed not only by fats but by low and no-fat products with extremely high sugar content. It sounds like Kraft is starting to get the picture....

In the interest of journalistic competence, we went out and ordered one of the new Tazo Iced Tea Lemonade drinks from Starbucks yesterday.

Not bad. A little sweet for us, but refreshing on a hot, hot day.

Regarding Country of Origin Labeling (COOL) legislation, one MNB user wrote:

As a manufacturer, I have to label every package that leaves my factory with the country of origin -- and my product will never, ever be mistaken for food. Why, then, is it such an enormous affront to ask food producers to supply the *exact* information that I have to supply -- especially when my product will never be eaten -- but theirs is?!

On the subject of Dean Foods' acquisition of the Horizon organic dairy business, one MNB user wrote:

I wonder just how much of the Dairy Industry that Dean Foods can control before the FTC decides that a monopolistic situation exists? Dean has been buying up regional dairies and dairies formerly owned by Regional and National Supermarket Chains by the boatload over the past 5 years or so, and controls a tremendous amount of the fluid milk supply throughout the United States. It doesn't take an economics professor to point out that with a lessening of competition, comes higher prices to the consumer, and less advertising support to the retailers that are selling their products.

In much of the grocery industry today (Suppliers, manufacturers, brokers, retailers), we have way too much power in too few hands and that equates to poorer service and higher prices throughout the supply chain.

On the subject of the objections raised by some Oregon communities to Wal-Mart's expansion there, one MNB user wrote:

To quote you - "We know that Wal-Mart didn't get to be Wal-Mart by being a shrinking violet. But we have to wonder if at some point the company's aggressiveness will become distasteful to the American public."

"Will" become distasteful? Why do you suppose Hillsboro, Hood River, Oregon City, and Lebanon and many other communities do everything in their power to keep Wal-Mart out?

Another MNB user had a different opinion:

If it is decided that a market will support a store, Wal-Mart will go the whole nine yards to put one in place. In my opinion, the people opposing their plans are, primarily, those who look down their nose at the store and its shoppers and NIMBYs. Those with legitimate reasons, such as increased traffic, not having sufficient room for the store(such as one in Roswell, GA) are listened to and an effort usually made to accommodate their wants by the Wal-Mart Head Office.

Perhaps. But there is an argument that can be made - and we think a legitimate one - that Wal-Mart's sole purpose is to feed the monster of its own growth projections…and that any adjustments that it makes aren't to satisfy local communities as much as they are to just get the damn stores built.

This is, by the way, a highly American way of doing business. Wal-Mart is just the latest and best practitioner.

But we think that Wal-Mart hires too many lawyers and PR firms to convince us that its motives are anything but selfish. Wal-Mart is a company, and as such is not bringing peace, justice and the American way to communities in the US and abroad. It is bringing a low price image and big category-killer stores to communities while all the while in search of a stronger bottom line and profits. Again, not that there's anything wrong with that. Let’s not pretend it is anything else.

And we're not sure it is fair to imply that many of those who object are snobs. They may just have a different way of looking at the world and a different vision for the their communities. And there's nothing wrong with that, either.

And finally, there appears to be an upside to the enduring enmity between the US and France and the decline in US purchases of French wines, as one MNB user wrote:

It keeps the Bordeaux and Bergerac prices down at the wine shop!

Après la pluie le beau temps!
KC's View: