business news in context, analysis with attitude

We had a piece yesterday on Chipotle and an interview with Steve Ells, the fast food chain’s boss. We reacted to the emphasis on high quality food at the company…but MNB user Steve Johnson Sr. thought we missed some important points.

Interesting reading Steve Ells' comments regarding the detail underlying his fast-casual concept. Yet I beg to differ with KC's view "In other words, it's the food, stupid."

If you look carefully at Ells' comments, they regard

* The category of food ("not authentic Mexican, not Tex-Mex...")
* The ambient experience of the restaurant ("good music, sympathetic environment")
* the ingredients which comprise the food (note: despite what you may believe, consumers do not eat ingredients, they eat food)
* The ideologies behind the ingredients ("you have to know how the animals were raised and what they were fed")
* The ideology behind the name ("Everyone told me that it was a bad name to use...")

My point being that Chipotle's success is in large part attributable to the fact that Ells understood precisely how to go beyond the food. What you dismiss so casually ("it's the food, stupid") is actually a level of complexity which goes unnoticed by many, if not most, in this business.

Excellent point, and well-made. Thanks for keeping us honest.

One MNB user yesterday said that he felt that we were entirely too enamored with Wal-Mart, were unfair in our treatment of Kmart, and said he only reads MNB because it is “slanted and put(s) a different perspective on reality and common sense.” (Which we’re pretty sure wasn’t a compliment…)

To which another MNB user responded:

This person obviously has a warped and extreme agenda that will not tolerate any comment even slightly in opposition to his own. I went back and reread your commentaries on these 2 issues and found them to be very balanced.

The reality here is that Wal-Mart does tick off individuals in the community when they bypass the local legislative body but once they finally force the store in, there are still enough shoppers to fill up the parking lot. At Kmart, their parking lots are anything but full and they can’t afford to do anything that will diminish their existing customer base. A store-level person at Kmart knows this but Kevin is commenting on the top management decision-making that disregards this “common sense”.

If Wal-Mart did the same thing that Kmart has done on the taxes,(and they probably have, just not 500 communities at a shot) it would generate the same ill feelings in the community but because shoppers vote with their wallets, they could get away with it - mostly unscathed.

We continue to get email about our many stories and commentaries about Safeway. To be honest, there have been a number from Safeway employees, who have been brief and pointed in their assessment of our opinion: they think we’re full of it.

But to be fair, we’re not alone in our assessments. That doesn’t mean we’re right…it just means that these opinions have a certain momentum and need to be addressed. (It also doesn’t mean these opinions are wrong…)

MNB user Frank Brewer had a thought:

Safeway could be one of the best corporations in the country, but why have they gone to alienating their once loyal shoppers? I enjoy their Private label selections they have done great strides with R&D in this area. Most of their PL items are a step better than the Brand by far. I really think their PL frozen fruit selections as well as their Safeway Select frozens have put an end to most consumers that Frozen is as good as Fresh, if not better.

But, why do they insist on gouging the consumer with prices that are ridiculous. Most of their problems would be solved if they got into the real world. They must mark up products 50 to 60% or more? I do still go to the local store for necessities but have to go to the club for savings.

In response to concerns about Safeway management raised by pension funds, one MNB user wrote:

I doubt if any of the Pension Fund managers ever got out in the stores to see what exiting things are happening in Safeway stores. It's probably true that they paid too much for acquisitions. Remember back, these same managers were advising companies to increase sales through acquisitions. Safeway bought at the high.

Safeway has to lower labor costs and the stand in Southern California was necessary to begin the fight. I'm sure Burd realized the consequences, significant losses, but had the "guts" to start down the long range plan. He is getting the heat now and may loose his job, but it had to be done for the future of the Company.

And MNB user Ron Kelleher wrote:

I have two thoughts regarding CalPers continued attempts to remove Mr. Burd at Safeway;

1) The purpose of a public employee pension system is to invest in companies that will provide long term-security and growth for its constituents. Safeway's desire to control labor costs and improve long term productivity seems like a perfectly reasonable goal for a company facing increasing price pressures from multiple channel fronts. So if CalPers doesn't like the way Safeway is attempting to meet their goals they should pull their money out and invest in something else.

2) Having lived in California for 20 years it would be far more productive a use of our state executive's time to fix their own house. We have significant infrastructure issues and a budget deficit that would bankrupt most other states. "First take the plank out of your own eye and you will see more clearly to remove the speck from your brother's eye."

Actually, we think that there’s a pretty good argument that pension funds shouldn’t be investing in companies that have to negotiate with unions. Isn’t there a conflict of interest there?

Regarding Wal-Mart’s ballot initiative loss in Inglewood, California, one member of the MNB community wrote:

Wally's big mistake in Inglewood was publicizing the fact that they spent 1 million dollars on the effort to by pass Inglewood zoning goods.

Now every alderman, city inspector, influential minister, city hall mover and shaker and municipal bureaucrat in Chicago knows what the graft bar is set to when Wally moves into Chicago. Look for Wally to hire a small army of "governmental relations managers" - otherwise known as bagmen- nationwide as they proceed on their expansion into urban markets.
KC's View: