We continue to get emails regarding my suggestion that supermarket retailers need to play a tougher version of hardball in their stores, and perhaps ought to not carry products that are branded with the names of fast food and restaurant chains that are, in fact, their very real competitors for share of stomach. I got shellacked pretty good yesterday by people who thought I was being short-sighted and ill-informed, but at the risk of further ridicule, I’m sticking to my guns on this one, at least in principle. I wrote yesterday, in part:
“I understand that this seems drastic, and that supermarkets see themselves as providing the broadest possible choices for consumers. But I submit that no consumer will stop shopping at a supermarket that doesn’t carry this sort of stuff, and that instead carries high-quality, high-value food items that reinforce or simply don’t damage a store’s brand image … I understand that what I’m suggesting is fairly radical. And I can appreciate the fact that if my position were adopted, a lot of excellent brands would not be found in supermarkets.
“Let me put it another way.
“Why can’t the supermarket make a better ice cream cake, better mozzarella sticks, better barbecue sauce than the packaged products that carry names licensed out by fast feeders and other restaurant chains?
“See, I do think that supermarkets are losing eating occasions to dining out. Or taking out from other dining establishments. And I’d be surprised if anyone would disagree with me.
“I’m not really suggesting an absolutist approach. What I am suggesting is a complete change of mindset on the part of many supermarket chains, one that identifies all the possible competitors for share of stomach and get aggressive about competing.”
MNB user Frederic Arnal responded:
Supermarkets (in this country) are primarily retailers, not food manufacturers or branding/marketing companies. Distinctly different types of expertise e.g. product development, food technology, brand development & management, manufacturing, marketing, distribution, etc.
Trader Joe’s, Aldi and Stew Leonard's, U.S. food retailers that private label the majority of their products, are limited assortment retailers with a business model developed for this purpose. Even the best conventional private-labeling supermarkets like Wegmans, H.E.B., etc. generate more sales from national, regional and licensed branded items than from their own labels. Their business model (full-service, maximum assortment) requires an optimum mix of private label and branded items for maximum profit.
This is simplistic but essentially it's like you using Webstop for your web development allowing you to concentrate on the things you do best.
Another MNB user wrote:
Grocery retailers will not view (the) new Burger King chips as competition. They already carry TGI Friday's snacks, Claim Jumper foods, Marie Calendars foods, all primarily in the frozen food department.
With the foot traffic and like store sales dropping in the Casual Dining sector for various reasons, grocery retailers have cut into their sales.
The race will be on to be "First to Market" and I expect a fair share of retailers will jump at the chance to sell something new.
You’re right. They probably will, and will be encouraged to do so by the sweet siren song of slotting allowances.
Which actually sort of reinforces my point.
Another MNB user wrote:
One more comment on the co-branding issue. I live in the Twin Cities where we have the Lunds/Byerlys chain of upscale grocery stores. One of their most popular items is their Chicken Wild Rice Soup. You can not only buy it at Lunds/Byerlys, but you can also buy it at their competitor’s stores as well. Why? Because the grocers know that the more customer needs that they can satisfy in one stop, the more loyal that customer will be to doing all of there chopping in that store. Lunds/Byerlys sells more soup (not many people will make a special trip for one item and not every shopper fits into their specific customer demographic) and the competition gets to offer a product that can satisfy more of the shoppers needs and wants in one trip.
Still another MNB user wrote:
Re: restaurant brands -- Many of the brands that appear in my local Publix (White Castle, Skyline Chili, Wolfgang Puck, California Pizza Kitchen, etc.) -- are brands that don't have restaurants anywhere near -- while I don't buy sliders or chili , even though I like them -- they are a 'fix' when you're craving something from another part of the country.
Also -- the name brand is (or at least suggests) a known value -- much as I love Publix store brand, if I see a box that says "Macaroni Grill lasagna" I *know* what that is going to taste like...not so much with a brand I haven't tried before. Now -- that sword cuts both ways -- if I *know* what that product is supposed to taste like, and it doesn't, then I'm gone, and I'll never be back. If that's what it says on the box, then that's what it better taste like.
Another point -- since right now we're in the depths of pre-season football practice, there isn't time to make a whole meal -- I usually cook 5 times a week, or more, but not now -- I just don't have the time. So I rely on heat and eat dishes or grilled sandwiches...going out to eat isn't an option, but I can throw something in the microwave and we can at least have something that resembles real food – without handing it through a window. See above for the caveat of the known value....
Another MNB user seemed to think I had a legitimate point:
Strong brands create leverage...weakening brands loses leverage. (leverage = strategic advantage) Allowing competitors in your stores just because you can sell stuff weakens your brand (albeit in small increments), assuming you have a relatively strong brand to begin with (proven in many studies)...however, I can understand some of the sales mentality I've been reading...they are the same people who blame everyone else but sales, when the chains go out of business (brands become too weak to compete).
And MNB user Randy Aszman wrote:
You and I have bantered back and forth regarding meal solutions and what retailers could be doing to keep the food dollar in the grocery store … which in general is very little. By authorizing and stocking brands associated with meal destinations outside their walls, retailers are taking the easy way out. I understand that the slotting dollars are lucrative. When Taco Bell launched in the late ‘90’s they paid slotting “plus” to the retailers here in SoCal to ensure distribution, not to mention all the other funds they threw around. This just raised the bar for all the other Mexican food manufacturers … thanks a lot!
The daily mission of every retailer should be “how can I keep more of the food dollar in my store?” Damn the torpedoes (and the shellacking) and stay the course, Kevin!
And MNB user Adam Erickson wrote:
Awesome piece on brand equity and competition! Man, I wish more stores looked at it that way, but I guess that just leaves more room for us.
MNB also had a piece yesterday about PepsiCo agreeing to change the label on its Aquafina bottled water to reflect that its “purified drinking water” is, in fact, tap water. The new labels will say that Aquafina comes from a “public water source.”
The decision was made under pressure from a group called Corporate Accountability International, which, among other things, works to get manufacturers to change what it sees as misleading marketing practices.
Coke, however, said that it will not make such a change on the labels of its similarly sourced Dasani water, saying that the information is on its website.
My point is simple – this is more about transparency than anything else (though I had no idea that these waters come from public water sources). And in this case, Pepsi is making a change that I think Coke eventually will be forced to make.
One MNB user wrote:
Re: your comment about Coca Cola owning up to the fact that Dasani is purified tap water -- it's doubly foolish for them to withhold this information, as they got a serious black eye when they introduced Dasani to the UK about 2-1/2 years ago. A good friend of mine was working for the merchandising company that did the store sets -- it had taken them a small army of people and a few weeks to go in and reset every case and rack in the country to hold the Dasani bottles. About 10 days after the rollout, it was widely publicized that Dasani in fact came from the municipal water supplies in Slough -- an industrial suburb of London. There was such an outcry from the public over having had the wool pulled over their eyes that Coca-Cola canceled the rollout of Dasani and recalled every last bottle -- which sent the folks at my friends' company back out to reset all the stores again. (They were happy for the income, but what a pain!)
One would think that after having taken such a public drubbing, they'd be wise enough to not repeat the mistake elsewhere.
I don't buy either Dasani or Aquafina if I have the option, because they taste like tap water to me ... and the tap water in this part of the country just doesn't taste good.
Another MNB user wrote:
Pepsi made the move and a positive statement about their source. It's a shame that Coca-Cola is holding out. With all of the public information and the many news releases about both companies, as well as their competition, I find it hard to believe (as Coca-Cola seems to take their stand) that the "truth in labeling" recommendations did not find their way to the CEO level. Congrats to Pepsi. We’ll vote for Aquafina.
But another MNB user thought it is all much ado about nothing:
The idea is to drink the purest water you can find. The press would like you to believe that there is no difference between bottled water and tap water....wrong!!! Do a simple test on your tap water...test it for TDS (total dissolved solids) That could be stuff like calcium, rust, iron...or it could be mercury and other bad stuff. The EPA says that over 500 ppm (parts per million) is bad. Over 450 should be tested by professionals for other stuff, like bacteria, etc. Our tap water is around 430. Aquafina is 7. It may begin as tap water but that is not the end product. Does the press explain that these guys use hundreds of thousands of dollars in purifying equipment to produce this water?? Nope...that’s because it wouldn't be as good a story. Every copywriter envisions him/herself an investigative reporter but is too damn lazy to investigate. Bottom line...Coke and Pepsi are scrambling to put out fires caused by idiots! That's my take on it, anyway.
And MNB user Dustin Stinett wrote:
When the Aquafina story was reported late last week, a local news reporter did a story on the various waters and their sources (including the difference between "drinking," "spring," "mineral," and even "seltzer").
The only thing I found remarkable about the story was the fact that this guy was making it sound as if he'd discovered the location of Jimmy Hoffa's body. And the anchor woman's amazement at the "revelations" was even more absurd.
The question I would love to ask these "news" people, as well as those at "Stop Corporate Abuse" is, where the hell did they think the water came from?
So what's next on their list? Labeling the source of the water in Pepsi, Coke, Budweiser, Miller, Jack Daniels, and every other product that contains water? I suppose they believe that the water in wine or reconstituted orange juice (apple juice, etc. etc.) comes from the same magical place they must have thought drinking came from until--horrors—they "discovered" the facts.
I think the folks at Coca-Cola are correct about this one. Apparently only those in the "Pepsi Generation" need to be told something so plainly clear to everyone else.
We’ll agree to disagree.
MNB user Elizabeth Archerd had some thoughts about Country of Origin Labeling (COOL) and the FDA’s embracing of cloning technology and apparent distrust of genetically modified organisms in food:
The industry fears Country of Origin Label regulations because once consumers see the origins of some products they will stop buying them. Imagine the nightmare of Species of Origin Labels: "This beef contains genes from flounder, pig, tobacco mosaic virus and tse-tse fly."
No matter how many regs the FDA, USDA or EPA (in case some of the resulting creatures qualify as pesticides) come up with, our store would not carry such products. As a food cooperative our relationship with our shoppers could not be closer - they own us. They want transparency at every level. Besides religious, health and allergy reasons for needing to know everything about a food product, people just plain have the right to know about the food they eat- regardless of what any government agency decides we "need" to know.
If investors hesitate to wade into transgenic waters, perhaps it is because there is no consumer demand for transgenic products. Get the customer what the customer wants, not what a group of investors think they should want.
PS. The idea of trans-genic meat should be much scarier to you than cloning - and for the record, we won't carry cloned-animal meat, either.
MNB reported yesterday that Waitrose has filed an official complaint against Whole Foods in the UK, saying that the natural/organic chain is deceptively defining local produce as food grown anywhere in England.
Whole Foods spokesman David Doctorow responded: “Part of our mission and core culture is to support local agriculture. But we don't have a strict definition of local … that is up to our customers. We give them the name of the product and where it is from so they can make their own decisions … From my perspective there are degrees of local … produce sourced from Britain is more local than produce sourced from Italy or Spain.”
My comment: Britain isn’t that big. The Whole Foods’ definition of local, in this case, seems entirely reasonable.
MNB user Anthony Wysome disagreed:
I’m a regular reader from the UK who loves the website and your views on the world of retail. However, today’s comment about Whole Foods local policy in the UK is a real exception.
The Whole Foods store over here has had a far more mixed reception than it would have had if they’d done their homework properly. Their ranging, display and messaging are far too American for this market. The impression given in store is that your big brash American cousin has come to visit – great fun for a day or two but not something you’d want to deal with every day.
The specific issue of local labelling clearly demonstrates this point. UK people are proud of our regions, proud of our farming communities and are in the midst of a major environmental debate on how to minimise food miles. All of these issues have put local sourcing to the top of many customers’ agendas. Most UK retailers apply definitions of local as being produced within as little as 30 or 50 miles from the store because that’s what local means to our customers. When Whole Foods define local as within 600 miles or so and put maps of the UK up in store to demonstrate this they re-enforce every single American stereotype and invite ridicule from customers and retailers alike.
When you comment in their support you do likewise – a rare departure from your usual focus on what matters to the customer.
By the way, I’m from Wales which for any American reading this, isn’t in England!
When you put it that way … I bow to your greater expertise and knowledge of the UK market. I was being glib at the expense of being thoughtful, which generally is a recipe for being wrong.
“I understand that this seems drastic, and that supermarkets see themselves as providing the broadest possible choices for consumers. But I submit that no consumer will stop shopping at a supermarket that doesn’t carry this sort of stuff, and that instead carries high-quality, high-value food items that reinforce or simply don’t damage a store’s brand image … I understand that what I’m suggesting is fairly radical. And I can appreciate the fact that if my position were adopted, a lot of excellent brands would not be found in supermarkets.
“Let me put it another way.
“Why can’t the supermarket make a better ice cream cake, better mozzarella sticks, better barbecue sauce than the packaged products that carry names licensed out by fast feeders and other restaurant chains?
“See, I do think that supermarkets are losing eating occasions to dining out. Or taking out from other dining establishments. And I’d be surprised if anyone would disagree with me.
“I’m not really suggesting an absolutist approach. What I am suggesting is a complete change of mindset on the part of many supermarket chains, one that identifies all the possible competitors for share of stomach and get aggressive about competing.”
MNB user Frederic Arnal responded:
Supermarkets (in this country) are primarily retailers, not food manufacturers or branding/marketing companies. Distinctly different types of expertise e.g. product development, food technology, brand development & management, manufacturing, marketing, distribution, etc.
Trader Joe’s, Aldi and Stew Leonard's, U.S. food retailers that private label the majority of their products, are limited assortment retailers with a business model developed for this purpose. Even the best conventional private-labeling supermarkets like Wegmans, H.E.B., etc. generate more sales from national, regional and licensed branded items than from their own labels. Their business model (full-service, maximum assortment) requires an optimum mix of private label and branded items for maximum profit.
This is simplistic but essentially it's like you using Webstop for your web development allowing you to concentrate on the things you do best.
Another MNB user wrote:
Grocery retailers will not view (the) new Burger King chips as competition. They already carry TGI Friday's snacks, Claim Jumper foods, Marie Calendars foods, all primarily in the frozen food department.
With the foot traffic and like store sales dropping in the Casual Dining sector for various reasons, grocery retailers have cut into their sales.
The race will be on to be "First to Market" and I expect a fair share of retailers will jump at the chance to sell something new.
You’re right. They probably will, and will be encouraged to do so by the sweet siren song of slotting allowances.
Which actually sort of reinforces my point.
Another MNB user wrote:
One more comment on the co-branding issue. I live in the Twin Cities where we have the Lunds/Byerlys chain of upscale grocery stores. One of their most popular items is their Chicken Wild Rice Soup. You can not only buy it at Lunds/Byerlys, but you can also buy it at their competitor’s stores as well. Why? Because the grocers know that the more customer needs that they can satisfy in one stop, the more loyal that customer will be to doing all of there chopping in that store. Lunds/Byerlys sells more soup (not many people will make a special trip for one item and not every shopper fits into their specific customer demographic) and the competition gets to offer a product that can satisfy more of the shoppers needs and wants in one trip.
Still another MNB user wrote:
Re: restaurant brands -- Many of the brands that appear in my local Publix (White Castle, Skyline Chili, Wolfgang Puck, California Pizza Kitchen, etc.) -- are brands that don't have restaurants anywhere near -- while I don't buy sliders or chili , even though I like them -- they are a 'fix' when you're craving something from another part of the country.
Also -- the name brand is (or at least suggests) a known value -- much as I love Publix store brand, if I see a box that says "Macaroni Grill lasagna" I *know* what that is going to taste like...not so much with a brand I haven't tried before. Now -- that sword cuts both ways -- if I *know* what that product is supposed to taste like, and it doesn't, then I'm gone, and I'll never be back. If that's what it says on the box, then that's what it better taste like.
Another point -- since right now we're in the depths of pre-season football practice, there isn't time to make a whole meal -- I usually cook 5 times a week, or more, but not now -- I just don't have the time. So I rely on heat and eat dishes or grilled sandwiches...going out to eat isn't an option, but I can throw something in the microwave and we can at least have something that resembles real food – without handing it through a window. See above for the caveat of the known value....
Another MNB user seemed to think I had a legitimate point:
Strong brands create leverage...weakening brands loses leverage. (leverage = strategic advantage) Allowing competitors in your stores just because you can sell stuff weakens your brand (albeit in small increments), assuming you have a relatively strong brand to begin with (proven in many studies)...however, I can understand some of the sales mentality I've been reading...they are the same people who blame everyone else but sales, when the chains go out of business (brands become too weak to compete).
And MNB user Randy Aszman wrote:
You and I have bantered back and forth regarding meal solutions and what retailers could be doing to keep the food dollar in the grocery store … which in general is very little. By authorizing and stocking brands associated with meal destinations outside their walls, retailers are taking the easy way out. I understand that the slotting dollars are lucrative. When Taco Bell launched in the late ‘90’s they paid slotting “plus” to the retailers here in SoCal to ensure distribution, not to mention all the other funds they threw around. This just raised the bar for all the other Mexican food manufacturers … thanks a lot!
The daily mission of every retailer should be “how can I keep more of the food dollar in my store?” Damn the torpedoes (and the shellacking) and stay the course, Kevin!
And MNB user Adam Erickson wrote:
Awesome piece on brand equity and competition! Man, I wish more stores looked at it that way, but I guess that just leaves more room for us.
MNB also had a piece yesterday about PepsiCo agreeing to change the label on its Aquafina bottled water to reflect that its “purified drinking water” is, in fact, tap water. The new labels will say that Aquafina comes from a “public water source.”
The decision was made under pressure from a group called Corporate Accountability International, which, among other things, works to get manufacturers to change what it sees as misleading marketing practices.
Coke, however, said that it will not make such a change on the labels of its similarly sourced Dasani water, saying that the information is on its website.
My point is simple – this is more about transparency than anything else (though I had no idea that these waters come from public water sources). And in this case, Pepsi is making a change that I think Coke eventually will be forced to make.
One MNB user wrote:
Re: your comment about Coca Cola owning up to the fact that Dasani is purified tap water -- it's doubly foolish for them to withhold this information, as they got a serious black eye when they introduced Dasani to the UK about 2-1/2 years ago. A good friend of mine was working for the merchandising company that did the store sets -- it had taken them a small army of people and a few weeks to go in and reset every case and rack in the country to hold the Dasani bottles. About 10 days after the rollout, it was widely publicized that Dasani in fact came from the municipal water supplies in Slough -- an industrial suburb of London. There was such an outcry from the public over having had the wool pulled over their eyes that Coca-Cola canceled the rollout of Dasani and recalled every last bottle -- which sent the folks at my friends' company back out to reset all the stores again. (They were happy for the income, but what a pain!)
One would think that after having taken such a public drubbing, they'd be wise enough to not repeat the mistake elsewhere.
I don't buy either Dasani or Aquafina if I have the option, because they taste like tap water to me ... and the tap water in this part of the country just doesn't taste good.
Another MNB user wrote:
Pepsi made the move and a positive statement about their source. It's a shame that Coca-Cola is holding out. With all of the public information and the many news releases about both companies, as well as their competition, I find it hard to believe (as Coca-Cola seems to take their stand) that the "truth in labeling" recommendations did not find their way to the CEO level. Congrats to Pepsi. We’ll vote for Aquafina.
But another MNB user thought it is all much ado about nothing:
The idea is to drink the purest water you can find. The press would like you to believe that there is no difference between bottled water and tap water....wrong!!! Do a simple test on your tap water...test it for TDS (total dissolved solids) That could be stuff like calcium, rust, iron...or it could be mercury and other bad stuff. The EPA says that over 500 ppm (parts per million) is bad. Over 450 should be tested by professionals for other stuff, like bacteria, etc. Our tap water is around 430. Aquafina is 7. It may begin as tap water but that is not the end product. Does the press explain that these guys use hundreds of thousands of dollars in purifying equipment to produce this water?? Nope...that’s because it wouldn't be as good a story. Every copywriter envisions him/herself an investigative reporter but is too damn lazy to investigate. Bottom line...Coke and Pepsi are scrambling to put out fires caused by idiots! That's my take on it, anyway.
And MNB user Dustin Stinett wrote:
When the Aquafina story was reported late last week, a local news reporter did a story on the various waters and their sources (including the difference between "drinking," "spring," "mineral," and even "seltzer").
The only thing I found remarkable about the story was the fact that this guy was making it sound as if he'd discovered the location of Jimmy Hoffa's body. And the anchor woman's amazement at the "revelations" was even more absurd.
The question I would love to ask these "news" people, as well as those at "Stop Corporate Abuse" is, where the hell did they think the water came from?
So what's next on their list? Labeling the source of the water in Pepsi, Coke, Budweiser, Miller, Jack Daniels, and every other product that contains water? I suppose they believe that the water in wine or reconstituted orange juice (apple juice, etc. etc.) comes from the same magical place they must have thought drinking came from until--horrors—they "discovered" the facts.
I think the folks at Coca-Cola are correct about this one. Apparently only those in the "Pepsi Generation" need to be told something so plainly clear to everyone else.
We’ll agree to disagree.
MNB user Elizabeth Archerd had some thoughts about Country of Origin Labeling (COOL) and the FDA’s embracing of cloning technology and apparent distrust of genetically modified organisms in food:
The industry fears Country of Origin Label regulations because once consumers see the origins of some products they will stop buying them. Imagine the nightmare of Species of Origin Labels: "This beef contains genes from flounder, pig, tobacco mosaic virus and tse-tse fly."
No matter how many regs the FDA, USDA or EPA (in case some of the resulting creatures qualify as pesticides) come up with, our store would not carry such products. As a food cooperative our relationship with our shoppers could not be closer - they own us. They want transparency at every level. Besides religious, health and allergy reasons for needing to know everything about a food product, people just plain have the right to know about the food they eat- regardless of what any government agency decides we "need" to know.
If investors hesitate to wade into transgenic waters, perhaps it is because there is no consumer demand for transgenic products. Get the customer what the customer wants, not what a group of investors think they should want.
PS. The idea of trans-genic meat should be much scarier to you than cloning - and for the record, we won't carry cloned-animal meat, either.
MNB reported yesterday that Waitrose has filed an official complaint against Whole Foods in the UK, saying that the natural/organic chain is deceptively defining local produce as food grown anywhere in England.
Whole Foods spokesman David Doctorow responded: “Part of our mission and core culture is to support local agriculture. But we don't have a strict definition of local … that is up to our customers. We give them the name of the product and where it is from so they can make their own decisions … From my perspective there are degrees of local … produce sourced from Britain is more local than produce sourced from Italy or Spain.”
My comment: Britain isn’t that big. The Whole Foods’ definition of local, in this case, seems entirely reasonable.
MNB user Anthony Wysome disagreed:
I’m a regular reader from the UK who loves the website and your views on the world of retail. However, today’s comment about Whole Foods local policy in the UK is a real exception.
The Whole Foods store over here has had a far more mixed reception than it would have had if they’d done their homework properly. Their ranging, display and messaging are far too American for this market. The impression given in store is that your big brash American cousin has come to visit – great fun for a day or two but not something you’d want to deal with every day.
The specific issue of local labelling clearly demonstrates this point. UK people are proud of our regions, proud of our farming communities and are in the midst of a major environmental debate on how to minimise food miles. All of these issues have put local sourcing to the top of many customers’ agendas. Most UK retailers apply definitions of local as being produced within as little as 30 or 50 miles from the store because that’s what local means to our customers. When Whole Foods define local as within 600 miles or so and put maps of the UK up in store to demonstrate this they re-enforce every single American stereotype and invite ridicule from customers and retailers alike.
When you comment in their support you do likewise – a rare departure from your usual focus on what matters to the customer.
By the way, I’m from Wales which for any American reading this, isn’t in England!
When you put it that way … I bow to your greater expertise and knowledge of the UK market. I was being glib at the expense of being thoughtful, which generally is a recipe for being wrong.
- KC's View:
