business news in context, analysis with attitude

About the current Southern California strike, MNB user Marina Kotsianas wrote:

There is little question that the current supermarket – employee fight is only the beginning manifestation of a larger problem waiting to be addressed: How ARE the large grocery chains planning to compete with Wal-Mart??? This is not a new question to them: they have been seeing it coming for a long time, yet refusing to accept it as a real threat. In most of my conversations with them, all but the most enlightened, seemed to be of the view that “our industry has survived a lot, we will survive Wal-Mart also”, or the very common “we are in a different market than Wal-Mart is”. Dream on. A rather ‘head-in-the-sand’ position towards a problem they pay only lip service too.

No one is looking at how Wal-Mart got the be where it’s at: A superior supply-chain, fueled by technology the other retailers can not even conceive of – and resulting in several percentage points of revenue of additional cash in the bottom line. That cash is used to fuel growth. How can anyone compete with all this cash? It multiplies year-after-year-after-year, and now, it’s unstoppable! True, Wal-Mart also has a non-union policy, that also adds money to the bottom line. But, even if retailers achieve a non-union environment (!!), Wal-Mart will STILL be beating them hands-down in profitability, just because of the incredible efficiencies that their technology (and associated processes) allows them.

When will retailers realize that what happened to other industries because of technology will also happen here? When will the retailers wake up and start working at the difficult problems, like adopting and implementing standards (still a back-burner issue in most companies in this industry!!), revamping, updating and reconfiguring their supply-chains, their connections to their suppliers, their procurement, delivery and forecasting systems and processes? When will they take the deep, painful dive that is the only way to save their businesses? Grocery chains are becoming more and more irrelevant, because, in this complex world of Wal-Mart, Costco, Whole Foods and Trader Joe’s they can not gather information and process it fast enough to satisfy the customer.

Most retailers still can only achieve service levels at about 90% on a good day, while Wal-Mart does not tolerate less than 99.5%. It takes a lot of technology to get there! Who is going to need them in a few years? Only companies that have already invested in all this extensive (and expensive) technology infrastructure can now be keeping their attention sharply focused in the changing consumer needs and be able to actually deliver on them! No need to feel sorry for those retailers: they are still spending only about 2% of revenues on IT, while, for example, the Financial Services industry spends over 3 times that (6.5%). Can you imagine a bank today that does not offer ATMs completely integrated across every banking system on earth, or online banking, or automatic transfer of funds across banks and accounts etc?? No. Well, it took investment to get there, and grocery chains have just refused to do that. Wal-Mart is laughing all the way to the bank…

And another MNB user wrote:

All the worker hears is that the company must cut wages, benefits, new hires starvation entry level wages in order to survive and compete with Wal-Mart and other non-union companies. He then picks up the paper and reads that upper management cashes in options worth millions, receives huge bonus because so-called expenses reduced at the expense of the workers. Who is kidding whom? If the companies wanted to be competitive, they might ask the workers what they really want, by-pass the unions and go ask the workers. They will more than likely be surprised that wages are actually about 4th or 5th on the list, fringe benefits are at the top. I f companies banded together across USA, they might be able to reduce health costs if they would work together, but just slashing them all together will not work, and it should not work. The USA is not a third world country, and the worker shouldn't be forced to accept being treated like one when management gets princely sums for their lifestyles.

And MNB user Kevin Konkel wrote:

I agree that leadership often gets blinded and sometimes short sighted by the constant pressure for everyday results. Long-term success and leaving a legacy as servant leadership is what we all should be about. With that said, I caution anyone who assumes Burd and the others are overly concerned with the bottom line and forsaking relationships with customers and employees in this current labor situation. These leaders are faced with making tough decisions that will insure the survival of their companies, their employees' futures in this industry and ultimately their ability to continue to serve their customers.

It's the labor union leaders who don't seem to give a rip about customers and the ones who are overly concerned with their "bottom line". And as far as caring for employees, the unions only seem to care about their member's dues and fees and the incomes stream these provide for their kingdoms.

This is the showdown! The unions obviously have nothing to offer the employees at Wal-Mart since they have had no takers. It's time for them to now do what is right for their members and our industry employees and lead them down a reasonable path that will ultimately lead to continued long term success.

Last week, we posted an email from an MNB user that read, in part:

Being in the business of monitoring new products for the past 30 plus years, we find that many of the newest things including major branded ones we purchase at the regular stores -- from Tops to Wegman's to P&C and other local independents, we find the quality isn't there. Or the portions in the package are small and not worth the price we paid for the new products. In other words, one of the main differences between Wal-Mart and the other grocery stores is the quality standards Wal-Mart holds it's suppliers to. It is not just the lower prices, but the value for money one gets with most of the Wal-Mart purchased products.

Which prompted an MNB user to respond:

I was crushed when somebody made a comment against Wegman's, how could they?

I'm not sure which Wegman's this guy is going to, but comparing a Wegman's in terms of quality of products to an independent, or even Tops, is like comparing a prepackaged meal to home-cooked. In my opinion, almost every Wegman's Private Label product is more top-notch than most of the branded products out there and I know many of my fellow Rochesterians who agree with me. This is one of the MANY reasons they are one of the few grocers that are still expanding. I have my calendar set for the new store opening on Nov 9 down in Woodbridge, NJ. It will be worth the trip out of NYC.

However, I have to agree in terms of Wal-Mart. Their stores may be an impersonal warehouse shopping experience, many of which that I have seen have products all over the floor, but they don't sell garbage by any means. They could learn a little something from Wegman's, like family values - offering a playpen for children to be in while you shop - and providing scholarships to high school kids. Many of those kids stay on to work every summer during college and I have met few who were not happy working there.

We agree with your assessment of Wegmans, and think the earlier correspondent would, as well. His comments were directed to consumer packaged goods available at all stores, not the items that make Wegmans special.

We had a story last week about how the 15 nations that make up the European Union have voted to permanently ban the import of US and Canadian beef that contain growth hormones, setting up yet another trade dispute with the EU. Our comment: "It's scary to think that these guys actually are our allies…"

One MNB user responded:

Or...maybe they are well informed, or feel the real, long-term science hasn't shown the affects, and are actually doing a service to the US and Canada to raise the question in a bigger way?

And MNB user Jem Welsh wrote:

These allies are not scary, just because they don't want to eat our beef. If they are satisfied with their proof, they should share it with us without the typical association spin filters. If out beef is so safe, why are sales of hormone-free beef the fastest growth area in our country's beef sales? Seems we are not so sure it is safe either.

I might suggest to you that European allies are simply leading the way to a better food supply and perhaps we should not be so hung up on being the world's policemen and policy shapers, rather we should consider following their lead. Are we ourselves really satisfied that hormone-laden beef is safe? Just because trade reps say so? Perhaps the US beef lobby is so powerful it can set health awareness and policy?

As for me, I applaud our alllies' stand and hope we can set aside our machismo ego and follow their lead. Retailers would be well-advised to offer hormone-free products now, as many of our citizens are already eating the drug-free cattle, they are just not buying it from conventional stores.

You misunderstand. We weren't suggesting that the allies are wrong…just that it is amazing to us the extent to which we seem to have divergent opinions on a low of issues.

Couple of funny emails to report on…

We had a piece last week about Hooters selling chicken wings and chicken strips in supermarkets, which prompted one MNB user to write:

Does this mean they'll have barely any dressing?

Probably a good bet…

Regarding the New York Yankees' Defeat of the Boston Red Sox in the American league Championship Series, a member of the MNB community wrote:


See the pattern?

Yep. Bummer.
KC's View: