Wednesday, April 30, 2008

Supply-Side Memo: Rude Health Organic Foods Might Have Created the 'Healthiest' Breakfast Food on the Planet; and it Tastes Good Too

United Kingdom-based Rude Health Organic Foods just might have created the healthiest breakfast food on the planet?

The British maker and marketer of organic and healthy breakfast cereals has created Rude Health Ultimate Organic Muesli, a wheat-free breakfast cereal blend of 100% organic superfoods, including organic whole grain oats, rye, barley flakes, assorted fruits, nuts, seeds and berries. The berries include blueberries, which are considered a "superfood" and are one of the top antioxidants , along with the Goji Berry, another top superfood.

There are more whole grains, fiber, ruffage, vitamins and antioxidants in a bowl of Rude Health Ultimate Organic Muesli than the average person gets in a week on an average western diet.

The ultimate muesli also is sugar and salt-free, as well has not containing any wheat.

Further, We can count at least 24 different healthy ingredients on the cereal's label. And, we can report, Rude Health's Ultimate Organic Muesli tastes great as well.

The ultimate muesli breakfast cereal isn't Rude Health's only cereal product. In fact, the growing organic foods company is carving a niche out for itself as one of the world's premier makers and marketers of organic, healthy and premium quality tasting breakfast cereals.

The company's line of breakfast cereals includes: various varieties of organic muesli (in addition to the ultimate variety), Organic Flakes, Organic Puffs, and Organic Porridge.

Rude health also markets Goji Berries in various package sizes. The superfood berries, which are high in vitamins, minerals and antioxidants, are becoming increasingly popular with consumers globally.

The idea behind selling the Goji Berries in various package sizes as well as in general, is that a handful can be tossed on top of all of the company's breakfast cereal varieties in order to achieve an even healthier morning fortification.

You can view the complete line of Rude Health brand breakfast cereals here; and even order some online if you choose to.

Rude but sustainable, 'green' and local

The organic foods company buys the ingredients for their cereals from companies which not only produce organic grains, nuts, fruits and the like, but also practice sustainable farming methods. Rude Health also has a policy that it will buy its ingredients from local (United Kingdom) farmers and suppliers whenever possible, or unless impossible.

For example, the company reports at present that 100% of the organic porridge oats and oatmeal used in its breakfast cereals currently is being sourced locally in the UK.

The company also is a member of the UK Soil Association, which certifies100% of the ingredients used in Rude Health brand cereals are organic.

Rude Health Organic Foods also tells Natural~Specialty Foods Memo it has a commitment to "green" or environmental production. Currently, the breakfast cereal bags are made from wood that comes from sustainable forests. The packaging also is 100% recyclable, as are the tubs cereal varieties like the Ultimate Muesli come in.

All of the package labels are made from Biotak, which is biodegradable, according to the company.

More importantly, the cereal maker and marketer says it on a continuous improvement track to make its entire operations--from production to packaging--as environmentally-friendly as possible.

One of Rude Health Organic Ultimate Muesli's biggest fans is that British global Goddess of cuisine Nigella Lawson.

Nigella (forst name only needed) has created a number of recipes on her TV cooking shows, such as "Lazy Loaf," using the healthy and tasty muesli. Nigella also includes that recipe in her cookbook, "Nigella Express," which features quick-to-make healthy, quality meals.

Other fans of the muesli who order it in multiples online include movie star Gwyneth Paltrow and supermodel turned actress Elizabeth Hurley. Both woman have raved about the breakfast--and snack time--cereal in newspapers and on television in the UK.

We exaggerate just a little--but Rude Health Organic Foods might have created the healthiest breakfast food on the planet with its Ultimate Organic Muesli.

The fact it also tastes good adds to its "ultimate" status. That combination--super-healthy and good tasting--leads us to conclude there's absolutely nothing rude about this muesli, except part of its name.

Specialty Foods Business Memo: Unilever is Spinning-Off it's Iconic Specialty Foods Brands Into A Separate Company; The Brands Could Be Sold

Anglo-Dutch mega-food and grocery products marketer Unilever is spinning off a number of its iconic European specialty foods brands into a separate company it's created as part of a corporate restructuring program it calls Project Chrysalis.

The global packaged goods giant will transfer 14 specialty brands produced in the United Kingdom, Germany and France into a new corporate unit based in Rotterdam, Netherlands.

Among the iconic European-produced niche brands the company is spinning off include Marmite, Bovril, Pot Noodle and Peperami spicy salami.

Other iconic European specialty brands owned by Unilever such as Coleman's Mustard, PG Tips and Scottish Blend tea will currently remain where they are under the Unilever corporate brand marketing umbrella.

The 14 specialty foods brands are mainstream lines in Europe but are niche, but strong-selling, brands in the U.S.

These and most of the other Unilever-owned specialty foods brands like Coleman's Mustard and PG Tips tea are managed and marketed in the U.S. by World Finer Foods and its Liberty Richter division, which sells them to specialty foods distributors, which in turn distribute them to supermarkets and specialty stores throughout the United States.

In other words, Unilever outsources the entire brand management, sales and distribution of these brands in the U.S. to a third party--World Finer Foods/Liberty Richter. The arrangement is similar to a franchise agreement of sorts. Unilever still owns the brands but World Finer Foods manages, sells and distributes them for a fee

In explaining the move from the Unilever corporate brand management portfolio to the new company, the food and grocery giant said doing so will provide specialized management for what it calls its "specialty jewels." The company also said the change doesn't mean the brands are for sale.

However, there is some speculation among stock analysts who follow Unilever that a sale of the 14 specialty foods brands might be in the offing.

For example, analysts at Citigroup said they believe the spin off of the niche, specialty brands is the precursor to the sale of the brands by Unilever.

In a memo, Citigroup said: "We believe that an eventual disposal of the brands within Chrysalis (the corporate restructuring program) is likely. Why else transfer a number of smaller and local brands to a separate company? We struggle to think of a reason."

Ironically, and perhaps Citigroup isn't aware of how Unilever outsources the brands' management in the U.S., the move to set-up a separate company for the 14 specialty foods niche brands in Europe is essentially what the Anglo-Dutch food and grocery company does in the U.S., by outsourcing the brand marketing, sales and distribution to World Finer Foods.

The reason Unilever and many other large food companies outsource their specialty brands' management to third-party companies like World Finer Foods in the U.S. is because although the specialty brands often do well, they are different in kind (specialty niche) and in sales volume than a large packaged goods marketer's mainline brands, and thus need a different focus, which companies like Word Finer Foods specialize in.

For example, unlike Unilever's big food and grocery brands, which are distributed directly to self-distributing supermarket chains and mass merchandisers, or directly to grocery wholesalers, the niche specialty foods' brands are distributed through third-party specialty foods' distributors.

Marketing companies like World Finer Foods specialize in this form of third-party distribution. As such, it makes good sense for companies like Unilever to outsource the functions to them, not only to use their expertise, but also to save on the additional costs it would require the company to have in order to service this third-party distribution system.

Companies like Unilever, which owns the Best Foods and Hellman's mayonnaise brands, the Knorr brand, Wish Bone salad dressing and the Lipton tea brand, along with many others, have bigger brand fish to fry than the specialty foods brands. Therefore, outsourcing them is a good arrangement for the company.

Unilever's Project Chrysalis is an ongoing corporate restructuring program within the company, in which various brands, business units and ways of doing business are being evaluated. The goal is to create better efficiencies, reduce costs and increase sales and profits.

Thus far, the restructuring project has resulted in the consumer packaged goods' company's selling of a number of smaller brands such As Boursin Cream Cheese and others, which Unilever decided didn't fit into its core business strategy.

Additionally, Unilever sold its Brazilian margarine business last year, and is currently completing the sale of its U.S. herbs and spices division, and has put its U.S. laundry detergent brands up for sale.

Unilever also recently announced it will cut 20,000 jobs globally over the next four years. That too is a result of the Project Chrysalis corporate restructuring program.

Specialty brands like Marmite and Bovril for example have major brand equity in the United Kingdom, where they are produced, as well as throughout Western Europe.

The two brands and many of the 12 others Unilever is spinning off into the new company also are popular specialty brands in the U.S., and have widespread distribution in major supermarket chains owned by Kroger Co., Safeway Stores, Inc., and SuperValu, Inc., as well as in most regional chains and independents.

Wal-Mart, Target and other mass merchandisers also sell many of the iconic, niche brands in their Supercenters and SuperTarget stores, as do thousands of specialty stores across the U.S. and elsewhere in the world like Australia and Asia.

If the 14 specialty foods brands are put up for sale by Unilever, numerous companies in the specialty foods' space would be interested in acquiring them.

Compared to many specialty foods brands on the market, the iconic Unilever-owned brands have much stronger brand equity, along with widespread distribution and strong sales performance, compared to the category average.

Therefore, although merely small potatoes to Unilever, the 14 iconic specialty foods brands would be a big enchilada to numerous companies should Unilever put the brands' up for sale.

Tuesday, April 29, 2008

Independent Grocer Memo: Utah's 75 Year Old Harmons Combats the Big Chains With Low-Prices; Gets Ready For Whole Foods' By Going Upscale & Natural

Inside the new, 70,000 square foot Harmons' supermarket in Draper, Utah this morning. The store features tons of specialty, natural and organic foods and in-store eating venues. (Photo: by Tim Hussin. Curtesy: Deseret News.)

Multi and single-store independent grocers continue to not only survive but thrive in the United States.

These family or independently-owned food and grocery retailers survive and thrive by finding one or more niches and mining those niches for all they're worth.

U.S. independent grocers also focus on the local: the communities and neighborhoods where their stores are located, local vendors and products, community organizations, and the local community residents themselves. When it comes to food retailing for successful independents in the USA, "everything is local" is always a part of their mission statement.

Service also is job one, job two and job three for successful multi and single-store independent grocers in the U.S., regardless if their stores are located in urban New York City, rural Oregon or suburban Utah.

One of America's most successful multi-store independent grocers is Harmons, a family-owned and operated independent with 13 stores in Utah.

Harmon's has been around for 75 years, and not by accident.

The grocer's stores are known for having a family atmosphere, which is key in Utah, which has the largest per-capita family-size in the U.S. Of course, a family atmosphere is key for independent grocers anywhere in the U.S.--just as are the local and service focuses.

Harmons' has always been famous for its low everyday and weekly advertised prices. In fact, the grocer has huge bulletin boards in all 14 of its stores where it posts the weekly advertising circulars of all its competitors--chain's and independents alike. The food retailer also posts its own weekly advertising circular along with the competitions' ads on the in-store boards.

If any of the advertised prices in the competitors' weekly ads are lower than the same item Harmon's is promoting in its weekly ad circular, the independent grocer gives shoppers that items (or items) at the same price as the lowest-price competitor is promoting the item(s) for. Harmon's seldom has to do this by the way, since it runs some of the hottest ads in the Utah market.

Beginning in the late 1990's, Harmons' also started to add specialty, ethnic, natural and organic grocery and fresh foods items in its stores in a big way.

Since then, it's dramatically increased the number of specialty and gourmet food and grocery items it merchandises throughout it's stores. The grocer also did the same with Asian food and grocery items, expanding the sections in most of its stores considerably.

To cater to the growing Hispanic population in parts of Utah, Harmons' also expanded its Hispanic grocery sections in most of its stores, along with adding specialty produce and meat items used frequently in Latino cuisine.

The family-owned food retailer also expanded its natural and organic grocery, fresh foods, produce and nutritional supplement offerings beginning in the late 1990's and continuing to the present. Harmons' integrated natural and organic grocery items throughout the core of the store, created stand-alone natural foods and supplement departments in its newer, larger stores, added organic perishables, and created organic fresh fruit and vegetable sections in its produce departments.

Lastly, the Utah-based independent grocer has gotten into upscale fresh, prepared foods' merchandising in a big way over the last decade. It's expanded the quality and quantity of the prepared foods offerings it sells in its stores, as well as creating in-store cafes and eating venues in some of its newer supermarkets.

Now, with its newest store, a 70,000 square foot supermarket which opened this morning in the Salt Lake City suburb of Draper, Utah, Harmons' has brought together all of its specialty, natural, organic and upscale offerings in one store in a comprehensive way.

The new Draper supermarket features shelves full of specialty, gourmet, ethnic, natural and organic grocery products.

The produce department is filled with organic fresh fruits and vegetables.

The huge meat department has organic meats and poultry, as well as prime and aged beef and other delights.

In-store, there is an espresso bar/cafe operated by local gourmet coffee roaster Park City Roasters, which is based in nearby Park City, home to Robert Redford's famous annual Sundance Film Festival.

There's also an Italian Gelato bar in the New 70,000 square foot Draper, Utah upscale supermarket, featuring 25 flavors of the popular Italian ice cream.

The large in-store bakery offers fresh-baked breads and pastries made with organic flour and other ingredients.

The new, upscale supermarket also has a gourmet restaurant inside, where professional chefs create white tablecloth-quality prepared meals.

There's also a meat carving station similar to those Whole Foods Market has in its stores, along with other prepared foods departments and venues.

Speaking of Whole Foods Market, the supernatural grocer will open its first Utah store in nearby Salt Lake City early next year.

Unlike the U.S. Federal Trade Commission though--which once again is trying to break-up the Whole Foods' acquisition of Wild Oats Markets even though the Washington D.C. federal court has ruled in Whole Foods' favor three times to date--Harmons' doesn't believe the new Whole Foods' mega-store opening in Salt Lake City next year is a competitive impediment to its going upscale and natural and being successful at it.

Rather, the opposite is the case. The 13-store independent grocer believes it can compete with Whole Foods on the natural, organic, upscale and prepared foods battlefield, while at the same time remaining a competitive, low-price focused supermarket operator.

If history is any guide--and it should be--then the Utah grocer is most likely right. Harmons has been a nimble grocer for 75 years. It's survived--and even thrived--in a market heavy with chain and independent competition.

That competition isn't letting up either. In addition to Whole Foods' opening a store in Salt Lake City next year, fast-growing Sunflower Farmer's Market also plans to open two stores in Utah next year, one in nearby Murray and the other in Orem.

Then there's Wal-Mart Supercenter, SuperTarget, Fred Meyer, Albertson's, and strong local independents Macey's and Dan's Foods, plus a few others--all competing for market share in Utah, which is becoming one of the most-stored grocery markets in the U.S.

For an overview of the new 70,000 square foot Harmons' supermarket which just opened this morning in Draper, Utah, we suggest you read this article in the Deseret News, one of the Salt Lake City Metropolitan region's two major daily newspapers.

Whether its a multi-store independent supermarket operator like Harmons' in Utah, a five store natural foods retailer like My Organic Market, which we wrote about earlier today, or a single store independent grocer like Cross Bros. Grocery in Ashland, Virginia, the independent food and grocery retail segment is not only surviving in the U.S., it's thriving, despite the continued chain growth and consolidation in the marketplace.

Those independents who create a tight niche, market locally, support their communities, and offer customer service as job one, job two and job three, are growing despite the economic downturn in the U.S. and the growing chain competition. This is a lesson any business can learn from.

Global Food Crisis Memo: Point-Counterpoint: Is the Soaring Cost of Food Good or Bad For American Consumers? And What About the Rest of the World?

In a recent New York Times article by writer Kim Severson, two intellectual leaders of the organic, healthy and local foods' movement, writer and Journalism professor Michael Pollan and Alice Waters, the food writer and restaurateur, told the writer that essentially what we've called the "end of the era of cheap food" is good for American and Western consumers and society.

Basically, the Pollan and Waters argument is that because the diet of most Americans and many others in the developed, western world is based on refined, processed foods and grain-fed meats, the costs of which are soaring, these consumers might turn to more healthy, less-refined whole grain-based, fresh and local foods like breads, cereals, fruits and vegetables and grass fed animals, since the costs of both the highly-refined processed foods and grain-based meats and the healthier alternatives will eventually become about equal.

In the Times' piece, Anna Lappe, founder of the Small Planet Institute, which studies food and public policy issues, disagrees with the Pollan and Waters' thesis, arguing that to equate cheap food with bad food is an oversimplification, because food pricing is a complex process.

Ms. Severson's article (nor do Pollan or Waters in the piece) doesn't address the myriad global issues and consequences involved in the soaring costs of basic food commodities such as rice, wheat, corn and soybeans and all the food products, meats and dairy items produced from them.

These consequences have been playing themselves out daily throughout the world in the form of food shortages and food riots in Haiti, Egypt and parts of Africa.

Additionally, as we reported here last week, dozens of countries that normally rely on food exports for income have either temporarily froze their food exports or cut back on the quantity of foodstuffs they export for fear of shortages and dramatic price hikes at home.

Further, even in the developed western world, the soaring costs of basic food items like eggs, milk, bread, rice and other staples are causing problems.

In Italy, consumers are cutting back on pasta--and even staged a one-day pasta boycott recently--because of the national foods' rising cost. The French staged a similar one-day boycott recently to protest the double-digit price increases of the baguette, that nation's bread staple.

In the U.S., lower-income and middle-income shoppers are being seriously pinched by the soaring costs of food, such as the 25% increase in the price of milk, the near 20% rise in the cost of eggs, and the double-digit price hikes in nearly every food product made from corn, wheat rice or soybeans, not to mention meat and poultry due to the soaring cost of grain which is the primary feed for chickens, hogs and cattle.


Tom Philpott, a staff writer for the environmental publication, as well as a professional farmer and cook, agrees with Anna Lappe's anti-Pollan and Waters thesis in a piece he wrote that's published today.

In his piece, "Why Michael Pollan and Alice Waters Should Quit Celebrating Food-Price Hikes," Philpott says Pollan and Waters are grossly simplifying matters when it comes to arguing that the current food-price hikes have a silver lining.

Philpott says in his piece he has a "hard time imagining people who are already struggling to put food on the table rambling off to the farmers' market to fill cloth bags with the sort of fresh, local, organic produce so beloved by Pollan and Waters (and me)." He adds: "Higher food prices are likely to send many time--and cash--strapped people in quite the opposite direction.

We invite you to first read Kim Severson's April 2, 2008 New York Times' piece with Michael Pollan and Alice Waters here. Then read Tom Philpott's counterpoint piece in today's here.

Natural~Specialty Foods Memo Analysis and View

It's our analysis and view that any discussion of rising food prices and health and diet can't be properly conducted unless it's in a global context.

Sure, it's possible that if the cost of grain-fed meat, fast food burgers and fries, processed packaged foods and high-fructose sweetened soft drinks, equal the cost of whole grain-based healthier foods and fresh produce, American and other wealthy nation consumers could find it an economic incentive to make a switch to a more healthier diet.

However, its also just as probable this won't be the case. Further, education should be the prime motivator for eating healthier in our opinion, not forced economic choice--which is just as likely to not work as to work anyway.

For example, rather than eat healthy foods, the growing middle class in fast-developing countries like China and India are eating more like westerners, which is one of the reasons for the soaring prices of foods like meat and dairy products. They are going backwards from a dietary standpoint with their new wealth--from a grain and fruit and vegetable-based diet to a higher-fat animal protein and processed foods diet. Is one reason they are doing so because they have increased economic choice, which they do?

Additionally, although we have much respect for the work of both Pollan and Waters, we think it's myopic to talk about American consumers, food price hikes and eating healthier in isolation from the rest of the world. This way be more because the U.S was the focus of Ms. Severson's article however, in fairness to Pollan and Waters.

After all, it is the price of some of the healthiest foodstuffs that are soaring the most. Rice (in its unrefined state) is one of the healthiest of all grains, yet its cost to consumers globally has increased by over 50% since just January of this year.

Wheat--the stuff that produces whole grain bread--has increased by 30% in just the first four months of this year.

Further, the cost to consumers of organic and locally-produced fresh fruits and vegetables is rising as fast as the less-healthy, processed foods. This is do to such factors as the soaring price of oil, gasoline and energy sources, increased labor costs, and a marketplace in which organic producers, middle men and retailers make a far higher gross margin on organic foods than they do on conventionally produced ones.

Even prices of fresh produce at farmers' markets is soaring. This is do to many of the same factors--especially the increased costs of fuel and energy.

Therefore, in our analysis, any discussion of food price hikes and healthier eating must be discussed in a global context. For example, when China and Japan decide to buy up as much rice as they can globally--which is happening presently--that effects the supply and price of rice throughout the world. It's kind of like oil in that way, isn't it.

Also, when farmers in the USA decide to grow organic produce instead of conventional crops because they can sell it for a higher premium (which we don't object too), that means there's less "cheaper" conventional produce to ship overseas, where many consumers have a budget of less than $1 a day for food.

As we've argued in Natural~Specialty Foods Memo before, we do believe the "era of cheap food" as we've known it in the U.S. and other western nation's is coming to an end. However, the issues of world hunger, diet and health are far from over--including in the U.S. where more people are receiving food stamps at present than at any time in the history of the program.

We have absolutely no argument with the fact that Americans and others in the world need to eat better, healthier foods. Obesity, diabetes, heart disease--these are all illness which can be avoided in many ways by eating a better diet. We also agree with the environmental benefits to global society by increasingly employing sustainable farming methods.

However, lets also not forget that even in this "era of cheap food" billions of people throughout the world have gone hungry and billions more lack food security. Of course, there are political and distribution problems which cause this condition as well as economic ones.

The "era of cheap food" is coming to an end in our analysis. But the issue of domestic hunger in the U.S. and throughout the globe is far from over. The discussion is just beginning on what to do.

Retail Format Innovation Memo: 'My Organic Market' Opens 'Mighty Healthy Pet;' A Natural Product's Store For Man's Best Friends

My Organic Market (known as MOM's), a fast-growing, five-store independent natural foods retailer with markets in Maryland and Virginia, has opened it's sixth natural products' store.

But this particular store has a twist to it unlike the other five MOM's natural foods' markets--it's not for humans but rather is for pets. of course, the human owners are welcome to accompany their pets on shopping trips to the new natural products' pet store.

That store, called Mighty Healthy Pet, is located just a few doors down from a My Organic Market natural foods store (for humans) in a shopping center in College Park, Maryland.

Mighty Healthy Pet sells a wide variety of natural, organic and healthy food for all types of pets, along with an array of pet treats, toys and related goodies. Pet foods span the categories: dry, refrigerated, frozen and even raw.

Among the natural pet products' stores offerings and attributes are:

>All of the pet foods are free from artificial flavors, colors, preservatives and additives.

>All of the pet food items in the store are made from either natural or organic ingredients.

>The pet food varieties include raw foods, freeze-dried products and cooked items, including a range of high protein and hypoallergenic grain-free pet foods for sensitive cats and dogs.

Mighty Healthy Pet merchandises a large selection of premium natural and organic pet food brands including:

>Stella & Chewy's From the Farm
>Aunt Jeni's Homemade
>Halo Purely for Pets
>Ziwi Peak
>Fromm's Four Star
>Wild Kitty Cat Food
>Honest Kitchen
>Country Pet
>Castor & Pollux Organix
>The Raw Advantage

These brands are just the tip of the natural pet emporium's brand list and product selection.

Mightly Healthy Pet also believes in holistic pet remedies. The store stocks a full selection of holistic remedies for pets, ranging from dust-free kitty litter and all-natural flower essences, to Kookamunga brand Catnip Bubbles, which are designed to make even fat cats and lazy dogs jump for joy.

Grooming supplies also are in plentiful supply at the natural pet store. These include natural and organic pet shampoos and conditioners, as well as toxic-free pet wipes. Pet hair brushes, combs and other grooming supplies line Mighty Healthy Pet's shelves as well.

My Organic Market (MOM's) also has extended its "green" and sustainable retailing policy to its natural pet products store. Lisa de Lima, MOM's vice president for grocery, tells Natural~Specialty Foods Memo, the natural products' retailer tries to buy as many pet products made from recycled materials for Mighty Healthy Pet's merchandise selection.

Products made from recycled materials include pet toys and bedding made from 100% recycled materials. The store also carries pet products made from organic cotton and natural hemp.

Lisa de Lima says MOM's sells a wide variety of natural and organic pet foods and products in its five natural foods stores in Baltimore and Virginia. However, the natural products' retailer has noticed an increased demand for the natural and healthy pet products and therefore decided to open its first freestanding natural pet products store next to its My Organic Market natural foods' (human) store in College Park.

The goal of Mighty Healthy Pet: "To keep our customers happy--humans and animals alike," says Ms. de Lima.

My Organic Market (MOM's) was founded in Beltsville, Maryland in 1987 by Scott Nash, who was all of 22 years old at the time. The initial store, called Organic Foods Express, was operated as a home delivery and mail order company by Nash out of his mother's garage, hence the name MOM's.

Nash then expanded operations by renting a 900 square foot warehouse, making MOM very happy to get her garage back, followed by opening his first store in about 1989. That store was a 2,000 square foot natural foods' market in Beltsville, which also then served as the picking warehouse for the mail order and delivery business.

The mail order and delivery business was eventually phased out and Nash put his focus on running the retail store.

In 1996, Nash closed the Beltville store and opened a new 6,000 square foot natural foods' market in nearby Rockville, Maryland, just one half-mile from the previous location. With the opening of that new, bigger market, he also changed the name from Organic Foods Express to My Organic Market, or MOM's.

MOM's opened its second natural foods store in 2000 in College Park, Maryland, followed by a third store in 2002, in Alexandria, Virginia.

The fourth MOM's natural and organic foods market opened in 2006 in Columbia East, Maryland, followed by the opening of the fifth and newest store in Fredrick, Maryland in April, 2007.

My Organic market is currently developing other store locations in Baltimore and Virginia as well as in nearby Washington, D.C.

MOM's says in its corporate mission statement that its number one reason for existing as a retail business is to "restore the environment to the maximum extent it is able to. "Whether taking action as individuals (both employees and customers), as a company, influencing other companies, funding legislative efforts, or supporting environmental advocacy groups, we will work tirelessly towards ensuring a clean and restored environment for our children and many future generations," the grocer's mission statement says.

The independent natural products' grocer is a founding member of the Clean Energy Partnership (CEP), a group in the Washington D.C., Maryland, Virginia tri-state region that's organizing businesses to adopt and promote practical solutions for today's biggest environmental challenges, such as global warming and air pollution.

MOM's powers all of its stores on renewable energy by buying wind power credits. The grocer also builds it's new stores using environmental building guidelines and does things like putting skylights on the stores' roofs as a way to reduce electricity use.

The grocer isn't just a "green" or environmental grocer however. It's also a competitive one. For example, one of MOM's policies is that it guarantees to have the lowest prices on branded dry grocery, frozen, refrigerated, nutritional supplements and health and beauty care product in its stores.

If a customer finds any item in these categories at a cheaper price at another store in the region, My Organic Market will match that price. In fact, the natural products' retailer claims to be 10-20% cheaper on items in these categories than competitors such as Whole Foods Market.

MOM's newest store is scheduled to open either later this year or early next year in Washington D.C., and will be the natural foods' grocer's first store in the nation's capital.

Independent Grocer Memo: 96 Year Old Ashland, Virginia Independent Grocer Cross Bros. Grocery Thrives By Providing Service, Service and More Service

Cross Bros. Grocery co-owner Tom Willis rings up a customer's purchases while son and co-owner David Willis bags her grocery order. Service is all in the family because customers are treated like family at this independent grocery store.

Guest Memo: Richmond Times-Dispatch

Grocery Has Family-Style Approach
After 96 years, Cross Bros. in Ashland still sends get-well cards to customers
By Joan Tuppance, April 28, 2008

Each Thursday, 90-year-old Sarah Wright makes her way to Cross Bros. Grocery to shop for groceries.

When she didn't follow her usual routine one week, she received a call at home.

"I've been shopping there since I set up housekeeping in 1947," she said of the small grocery store along the railroad tracks in the heart of Ashland.

"They called me because they wanted to find out if there was anything wrong with me," she said. "There wasn't anything wrong. I just didn't have to buy anything."

Their immediate concern was welcomed by Wright.

"They are very caring people," she said. "I was in a convalescent home for a couple of months after I broke my leg and they came to see me."

The 96-year-old store has been able to retain its comfortable, family-style approach to business throughout the years despite increasing competition from larger grocery chains.

Brothers Herbert J. and Walter N. Cross opened the store in May 1912. They often delivered groceries to customers who couldn't visit the store. They also set up accounts for their customers and billed them once a month.

Current owners, Catherine and Thomas Willis, along with their children David Willis and Cathy Waldrop and their spouses, have continued to provide those services.

"The store was built on those principles," Thomas Willis said. "I remember we used to deliver groceries and stay [at the house] to change a light bulb or put the groceries in the refrigerator. Whoever delivered the groceries would do things like that."

Willis and his wife purchased the store in 1973 with Ruth Hawthorne and her husband, William, when the Cross family decided to retire. Willis started working at the grocery store as an assistant manager in 1954, following his military service during the Korean War.

"When I came out of the service, it was hard getting a job because there were so many people getting out at the same time," Willis said.

The Cross family had enlarged the store three times before its sale. In 1950, the family purchased the A&P store next door and expanded into that space. After 1958, the store's back section was enlarged twice, taking it to its current 6,750 square feet.

David Willis, now president of Cross Bros., began stocking shelves and bagging groceries for the Cross family when he was 15. He had only been in college for six weeks when his dad asked him to work full-time at the store.

Waldrop started working part-time in 1986 and went full-time in 1992.

Waldrop, treasurer of the company, keeps the store's records but she doesn't rely on technology.

"We don't even have a computer in the office," she said, pulling out a large ledger. "I do everything by hand."

Many of the store's shoppers, such as Wright, rave about the selection of meats, which are hand-cut onsite.

"Meat is what we are known for," Waldrop said. "We sell meats to area restaurants and, at Thanksgiving, we take orders for fresh turkeys."

Shopper Susan Tucker will never forget when she returned home from the hospital after having her second child and found two Delmonico steaks in her refrigerator.

"Beside them was a note from Tom," she recalled. "It said 'These are free but we can't wait until you have to buy four.'

That's one of my favorite stories."

Tucker doesn't think of her trips to the store as shopping excursions but rather visits.

"It's never a chore to go to Cross Bros.," she said. "It's a chore to go to other grocery stores."

Back in the late 1980s Tucker strayed from the store, thinking she would save money by shopping in bulk at a big-box grocery.

"I didn't go into Cross Bros. for 10 days and they sent me a get-well card," she said. "They honestly thought I was sick. I never went into the big-box store again. I went back to Cross Bros."

Until recently, the store's customer base has been steady.

"It may be smaller now because of some big-box stores and some larger markets," David said. "But we still carry some specialty items that other stores don't carry such as specialty cut steaks, fresh ground beef cut in-house and our own house sausage."

The store's walls and shelves are adorned with a collection of farm antiques, knick-knacks and bottles. The shelves in the rear of the store hold dozens of scrapbooks and picture albums, filled with photos of Ashland.

Ninety-year-old Harold Starke reminisces about the days when his mother and father shopped at the store. Starke has been a customer for more than 50 years.

"Everything we need we can get here and the prices are reasonable," he said. "They look out for you. They are part of the family of Ashland. I live only three or four blocks from there so I go chat with them and learn about the news. That's how I find out what's going on."

Natural~Specialty Foods Memo Editor's Note: Ashland, Virginia's Cross Bros'. Grocery is a perfect example of why the multi-store and single store independent grocer segment not only is alive but thriving in the United States.

Unlike in many country's where few if any independent-owned and operated supermarkets and grocery stores exist, independents of all shapes, formats and sizes continue to flourish in the U.S., despite heavy competition not only from mega and regional supermarket chains, but from mass merchandisers like Wal-Mart and Target, drug chains which are increasingly selling more grocery items, and online food retailers like and many others.

These thriving U.S. independents all have a number of things in common. First, the y put service as job one, two and three, like the story above about Cross Bros'. Grocery demonstrates.

Second, the independents carry specialty items other stores might not merchandise for shoppers even if sales of such items are minimal.

Third, everything is local with these successful independents. They respect and reflect their communities' and neighborhoods history, culture and demographics. This includes selling lots of locally-produced foods if that applies, being not only a community food retailer but a "member" of the community as well, supporting local groups, schools and charities, and many other locally-based retailing aspects.

Lastly, independent grocers innovate. Unlike most chains, they can move fast to try something new or to respond rapidly to changes in the economy locally. When organic foods became popular, it was independents in the U.S. who first reflected that trend--and even drove it in many cases.

Independent grocers also have been on the front line in "green" or environmental retailing. Before the concept of selling reusable grocery bags for example even entered the minds of most chain supermarket operators, thousands of independent grocery stores across the USA already were offering the bags for sale in their stores.

The list of firsts for independents goes on and on. Most importantly though, independent grocers in the U.S. continue to thrive because they understand the power of local marketing, superior customer service and being a part of the communities in which they operate.

Monday, April 28, 2008

Retail Memo: Safeway CEO Burd Says Shoppers Buying Store Brands Over National Brands By As Much As Six -to- One in it's North American Supermarkets

Safeway Stores Inc. CEO Steve Burd says he's seeing clear signs, based on the grocery chain's most recent sales numbers of its corporate grocery brands vs. national brands, that consumers are feeling the pinch in the worsening U.S. economy and trading down at the supermarket by switching from national brands to store brands, especially Safeway's value brands like Lucerne dairy products and the retailer's Safeway value brand grocery product line, among other store brands.

Burd says overall sales of Safeway's store brands--even its more upscale Safeway Select brand and its O' Organics organic and Eating Right healthy foods' brands--are outpacing national brand sales by an overall category ratio of 4 -to- 1, and by a whopping 6 -to- 1 in the core-of-the-store dry grocery category.

In fact, according to Burd this shift from national brands to store brands helped increase Safeway's net income for the first quarter, which ended March 22, 2008, to $193.4 million on same store sales of $10 billion for the quarter, which is a 7.3% increase over the same period last year. The sales numbers exclude fuel sales. The first quarter sales numbers also include Easter this year, while last year Easter sales were recorded in the second quarter.

We aren't surprised at the growth in Safeway's store brand food and grocery products, although the magnitude of the ratios, especially in the core-of-the-store grocery categories, are much higher than we anticipated.

However, Safeway has been aggressively promoting all of its store brands in its weekly advertising circulars and in-store, especially for the last six to eight months. This is particularly the case with its value line items like Safeway brand in the dry grocery category and Lucerne brand in the dairy products and perishables categories.

The retailer also has been heavily advertising its premium Safeway Select store brand at lower prices then it normally has in the past. It's also lowered many of the everyday retail prices on its O' Organics brand of organic food and grocery products, especially relative to what similar national brand organic brands are retailing for in the stores, and promoting the products weekly in its store advertising fliers.

Earlier this year, Burd told Natural~Specialty Foods Memo and other industry publications that Safeway planned on implementing its long-planned everyday low-price value program in all of its Lifestyle format stores earlier than originally planned in order to deal with the severe economic downturn in the U.S. and the need for consumers to cut back on their overall spending, which is a trend he said the grocery chain saw coming.

Safeway currently has about 70% of its 1,740 North America stores converted to the Lifestyle format. The grocery chain is in the process of converting the remaining 30% and hopes to be near-completed with the huge project by the end of this year it says.

Although Safeway is still in the midst of fully-implementing its everyday values program, we can see the results of it already, along with the consumer search for values, in the soaring increase in store brand sales relative to national brands just reported by Burd.

Ironically, Burd says sales of its O' Organics organic food and grocery brand and its Eating Right healthy foods brand also are increasing considerably even in the down economy. This tells us Safeway shoppers are likely buying the store brand--which will soon be national and global brand as we reported here--organic and healthy foods items rather than national and regional product brands in the respective categories in greater numbers.

Since Safeway is the fourth largest seller of food and groceries in the U.S.--after Wal-Mart, Kroger Co. and SuperValue, Inc.--the dramatic shift across the board in national brand vs. store brand sales should be a wake-up call for national and regional food and grocery brand marketers.

Both mainstream grocery product marketers and natural and specialty foods manufacturers and marketers need to step-up their marketing and sales promotional activity not only at Safeway but at other chains and independents as well. We doubt this is a Safeway-only trend. In fact, other grocery chains are reporting similar increases in store brand products compared to national brands.

What we know from history is that consumers who switch to store brands during an economic downturn or recession often stick with those brands when the economy--and the status of their pocketbooks--improves.

Further, since store brands are of such a higher quality and even better value today than they were a mere ten years ago, it's likely even more consumers who switch to the proprietary brands during an economic downturn will stick with them when the economy and their personal financial condition improves.

This situation could be extremely troubling for national and regional grocery brand marketers in both the mainstream grocery categories as well as in the natural, organic and specialty segments.

Meanwhile, as we reported earlier today, Safeway is taking its O' Organics and Eating Right brands national in the U.S. and globally. The retailer will sell the brands to other supermarket chains, mass merchandisers and independents, competing directly with national and regional natural, healthy and specialty foods companies and their brands.

This fact is an additional reason those companies in the natural, organic and specialty foods space better ramp-up their marketing and sales promotion efforts and closely examine their everyday pricing on the items they sell to supermarket chains and independents in the U.S. and Canada, in our analysis.
Both the Safeway O' Organics brand and the Eating Right brand are going to exert lots of competition in the natural, organic and healthy foods categories as the alliance Safeway has formed starts rolling out the brands across the U.S. and globally in just a few months.

Marketing Memo: Safeway Stores, Inc. to Market its 'O' Organics' and 'Eating Right' Organic and Healthy Brands to Other Retailers in U.S. and Globally

Safeway Stores, Inc. has formed the "Better Living Brands Alliance," a marketing consortium that will market its O' Organics organic food and grocery brand and its Eating Right health and wellness category brand across all retail channels in the U.S. beginning this year.

Through the "Better Living Brands Alliance," Safeway will market the two natural and organic food and grocery brands to various U.S. retailers, including supermarket chains, mass merchandisers and independent grocers through grocery wholesale houses.
Safeway also will expand its international distribution of the O' Organics brand and include it's Eating Right brand in its expanded international marketing and distribution program.

As we reported in December, 2007, Safeway signed a deal with international retailer Carrefour to distribute the O' Organics brand in its stores in Asia and South America. Carrefour, which is based in France, is the world's second-largest retailer after number one Wal-Mart, Inc.

We've learned Carrefour will not only expand the number of its stores in Asia and Latin America which currently carry the O' Organics brand, but will probably add the Eating Right healthy food and grocery products brand in those stores as well.

Safeway also plans to go beyond its relationship with Carrefour in Asia and Latin America and market both natural and organic foods' brands in Europe and elsewhere around the globe.

Back in the U.S., Safeway has put together a strategic alliance of manufacturing, marketing and distribution firms as the brand licensees in its "Better Living Brands Alliance." Among those partners will be the food and grocery brokerage firm Crossmark, which will handle new item introductions, headquarters' sales calls and retail merchandising for the brand nationally and internationally for Safeway.

EMAK Worldwide will handle U.S. and global consumer marketing and communications for the O' Organics and Eating Right brands for Safeway.

Safeway Stores, Inc.'s Lucerne Foods Inc. subsidiary, which already markets Safeway products to external customers, will manage the overall licensing of the O' Organics and Eating Right brands and is a key member of the "Better Living Brands Alliance."

As we reported before in Natural~Specialty Foods Memo, Safeway's O' Organics brand is a major success story for the retailer. Although the brand has only been in Safeway's 1,740 stores in U.S. and Canada for less than two years, it's already the number one organic food and grocery products brand by total sales volume in the U.S. Sales of the O' Organics brand in the U.S. last year was over $300 million dollars, and that's with distribution in just the 1,740 Safeway-owned supermarkets.

The health and wellness category Eating Right brand has only been in Safeway stores for about a year. However, last December Safeway CEO Steve Burd told analysts that the brand's first year sales were poised to be even higher than the first year sales for the popular O' Organics brand were.

Safeway has been extending both brands throughout all categories, from the dry grocery, perishable and frozen categories, to fresh meat and poultry, fresh produce, prepared foods and deli categories.

In addition to marketing the two brands to food, grocery and other retail formats in the U.S. and internationally, Safeway also will sell items under both brands in the foodservice class of trade domestically and globally through it's "Better Living Brands Alliance," Safeway spokesman Brian Dowling told Natural~Specialty Foods Memo.

We've learned that a number of major U.S. supermarket chains are interested in selling the O' O' Organics and Eating Right brands in their stores. This is particularly the case in those regions in the U.S. where Safeway doesn't operate its supermarkets.

We've also been told numerous large wholesale grocers who distribute to regional chains and independents will take on both the O' Organics and Eating Right brands for distribution to their retailer customers.

Internationally, look for both brands to appear in European supermarkets for the first time before the year is over.

Safeway operates stores in California, Oregon, Washington State, Nevada, Arizona and Colorado in the Western USA. The retailer also operates stores in parts of the Midwestern USA, in Alaska, Texas, the East Coast, and in the Washington D.C/Baltimore/Virginia tri-state area, as well as in Canada.

We expect this U.S. and international mass-marketing of the O' Organics and Eating Right organic and healthy category brands to easily double sales of both brands in the next year.

In terms of the O' Organics brand, the increased number of new skus Safeway has been creating, combined with growing sales and aggressive promotion in its stores, plus the initial international marketing agreement with Carrefour, has led some analysts to predict sales growth in the 30-40% range by the end of this fiscal year compared to last for the organic products' brand.

We knew this move--the mass marketing in the U.S. and globally-- was coming based on the fact we were the first industry publication in the U.S. to report on the Carrefour international licensing deal last year.

Our analysis is that with increased new product development, more aggressive in-store promotions at Safeway stores--both which are coming for both brands--combined with the new U.S. and international mass-market program through the "Better Living Brands Alliance," it's likely that by the end of this year combined sales for the O' Organics and Eating Right brands could easily reach $1 billion in gross sales.

By taking the two proprietary brands national and international and marketing them to competitors--something that's almost unheard of in the U.S. supermarket industry--Safeway is proving its a creative and nimble marketer, which is something we've been arguing is the case for the past nine months or so.

For example, Safeway has built its own in-house natural and specialty foods department over the last few years, the result of which is bringing the retailer gross margins of 50% and higher on category items sold in its stores.

Additionally, Safeway has grown its Blackhawk gift card business into the largest marketer of gift cards to other retailers in the U.S. The business started out a few years ago as an in-house venture designed to market third-party gift cards to Safeway's stores. It's now grown into a full-fledged business far beyond an in-house operation.

Now, Safeway is becoming a brand marketer with its creation of "The Better Living Brands Alliance," which will take its O' Organics and Eating Right brands nationally to various classes of trades and retail formats in the U.S. and internationally.

We also expect to see a couple other Safeway proprietary brands join the alliance down the road a bit. In particular, might be some of the new fresh, prepared foods' brands Safeway is currently working on and testing at a restaurant it owns called Citrine in Redwood City, California, in the San Francisco Bay Area's Silicon Valley region.

If you think about it, Safeway has the perfect national test market for a brand marketer--1,740 supermarkets located across the U.S. If a brand--like O' Organics has done--does well in its stores after a year or two, Safeway can then make it a candidate for the alliance and national and international distribution to other food and grocery retailers and wholesalers.

Some will suggest Safeway could lose its competitive advantage by selling the two brands to other retailers. After all, they might say, that's why they are called proprietary brands, to give a retailer that competitive advantage.

However, we disagree. Number one, Safeway will still maintain a competitive advantage in that it can choose which retailers to license and market the brands to. Number two, Safeway still will be able to sell the branded products for less than other retailers can in its own stores, while also making a higher gross margin while doing so because it's the producer and marketer of the products.

Lastly, we tend to belong to the rising tides lift all brands' boats' school. In other words, the stronger the O' Organics and Eating Right brands become in the marketplace, the more we think Safeway will actually sell in its own stores--not to mention the more of the branded products it will sell to other retailers.

It all about leverage at that point. For example, does Safeway sell less Clorox bleach or Best Foods mayonnaise just because every supermarket, drug store and mass merchandiser in America also sells it? We don't believe that's the case.

While the bulk of Safeway's retail sales will likely always come from it's supermarkets, the company's diversification into also becoming a major third-party gift card marketer and now and organic and health and wellness food and grocery products category brand marketer, is a smart and savvy move in our analysis.

Doing so helps the grocer diversify beyond the volatile food and grocery retailing space. It also gives Safeway synergies which complement its grocery retailing base.

Friday, April 25, 2008

Ethnic Foods Memo: More on the Missing Passover Matzo: Shortage Spreads to More U.S. Regions; The Manischewitz Angle Explained

On Tuesday, April 22, we first reported on and wrote about a shortage of Passover matzo at San Francisco bay Area supermarkets and specialty food stores that specialize in kosher food and grocery products.

We followed that piece up on Wednesday, April 23, when we reported the Passover matzo shortage wasn't just limited to the San Francisco Bay Area. Rather, we reported that supermarkets in Los Angeles, the Reno and Las Vegas, Nevada Metropolitan regions and the Washington D.C/Baltimore Metro area also were near or completely out of the Passover leavened bread products.

Our analysis in that Wednesday piece was that the Passover 2008 matzo shortage looked to be near nationwide, with a few exceptions like New York City, which has the highest per-capita Jewish population in the U.S.

We can report today we've confirmed there are other regions in the U.S. in which supermarkets are out of Passover matzo. Those regions include Oregon and Washington in the Pacific Northwest, the Chicago, Illinois Metro region, Colorado and parts of New England.

In our Wednesday piece we also reported one of the reasons on the supply-side for the passover 2008 matzo shortage was because of a short production run at the Manischewitz food products factory. Manischewitz, which is owned by R.A.B. Foods Group, is one of the top producers of Passover matzo in the U.S.

We can now report further details of that situation.

Construction issues and problems with a new oven at Manischewitz's only U.S. plant in New Jersey caused the kosher foods' producer to announce in January it wouldn't produce various varieties of kosher-for-Passover matzo and other related Passover items like Tam Tams this year.

Among the kosher-for passover matzo items the company decided not to produce this year were it's flavored matzo products, which are very popular for the Passover religious holiday. Instead, Manischewitz only produced its unsalted, whole wheat and egg matzo varieties.

In January, the kosher foods' producer and marketer sent a memo to all of its U.S. retail and distributor customers informing them of the situation with the new oven and the decision to not produce the flavored matzo items.

The memo was issued by R.A.B. Foods Group, Manischewitz's parent company. Until late last year, R.A.B. Foods Group also owned specialty and ethnic foods' distributor Millbrook, which was sold in late 2007 to natural foods distributor United Natural Foods, Inc.

The January, 2008 memo also listed which kosher-for-passover items (and matzo varieties) Manischewitz would produce for passover 2008. The company added in the memo it was cranking up its production of the three types of matzo because it expected to sell more of them since it wouldn't be producing its popular flavored matzo varieties this year.

According to Manischewitz spokesperson Amy Stern, production for kosher-for Passover matzo ended in late March, and retailers and distributors had up until the week before passover to place orders with the company.

Other kosher food makers which produce kosher-for-passover matzo like Streits haven't reported any difficulties or reductions in their matzo production this year that we are aware of.

We believe many retailers and distributors didn't order enough extra Passover matzo from Manischewitz to compensate for the company's not producing the popular flavored matzo varieties this year. The company's flavored matzo varieties and all others tend to be the most popular and best selling brand of matzo among consumers nationally.

Therefore, since there wasn't any flavored matzo varieties on store shelves, it's likely consumers bought more of the whole wheat, unsalted and egg matzo varieties than they normally would, in order to compensate for the lack of the flavored varieties this year.

Of course, this alone isn't enough to explain the widespread shortage of the leavened bread products in our analysis. But it's a significant contributor to the out-of-stocks situation we believe.

Another reason for the shortage we believe is that many more Jews, especially younger members of the faith, are celebrating passover this year and as a result are buying more of the week-long holiday's traditional foods like Passover matzo. We've had two Rabbis based in large U.S. cities tell us this is the case this year.

Based on information from a number of sources, it also appears the matzo shortage is most serious at chain supermarkets rather than specialty kosher food stores. For example, we learned today that two kosher food stores in Los Angeles, Kosher Club and Glatt Mart, have plenty of Passover matzo on the shelves--at least they did this morning.

On the other hand, most Southern California supermarkets have shelves minus the passover matzo.

A store clerk at Glatt Mart said the matzo was flying off the shelves yesterday and today, as did Daryl Schwartz, the owner of Kosher Club. Both store representatives said shoppers had told them they tried a number of supermarkets like Safeway's Vons, Ralph's and Gelsons in Southern California but all were out of Passover matzo.

Based on personal experience, we know chain supermarkets order very carefully--and often times too tightly--when it comes to kosher-for Passover items. This is especially true for those chains which order directly from the manufacturer rather than obtain Passover items like matzo from a distributor.

The reason this is the case, is because there are no longer guaranteed sales on kosher-for-passover items. In other words, whatever a supermarket (or chain) has left over when Passover ends, they eat. Actually, they usually donate it to the food bank. But they eat the financial loss.

Since Passover is only a one week celebration, and there's only about a four week sales period (about 3 weeks before and the week of Passover), retailers are very careful not to order too much Passover matzo and other kosher-for-Passover items least they be stuck with a substantial loss.

We think this fact, coupled with the production limitations at Manischewitz, along with the increased matzo demand this year, is the likely combination of reasons or the primary cause for the Passover 2008 matzo shortage. A decreased supply and increased demand perfect storm if you will.

Passover 2008 ends Sunday.

Matzo isn't just a Passover item by the way. Many Jews buy and use the leavened bread year-round. Non-kosher-for-Passover matzo will be plentiful the rest of the year, according to David Rossi, Manischewitz's vice president of marketing.

The price of Manischewitz's everyday kosher matzo shouldn't increase much for the rest of the year either despite the soaring cost of wheat, according to Rossi. The reason for that he says is because the company already has its contract price for wheat locked-in for the remainder of this year.

However, he says the company will soon start negotiating for its new wheat contracts, and expects the price of matzo will increase like all wheat-based products are, in 2009. About the Passover 2008 situation, Rossi says Manischewitz is "biting the bullet" for Passover but "We'll get though it and come out better."

It seems the next story in the matzo chronicles might be similar to many other stories we're all reading of late. That story: The soaring cost of food due to the rapidly-rising commodity prices of wheat, corn, rice and other farm products.

Perhaps it's a good time to stock up on some pre-2009 matzo. But shoppers will have to wait until after Passover 2008 and the supermarket shelves are once again stocked with the leavened bread product to do so.

Related Stories in the Passover 2008 Matzo Chronicles:

April 22: "Matzo Shortage at San Francisco Bay Area Supermarkets For Passover Has Area's Jewish Consumers Fuming and Grocers Searching." [Click here to read.]

April 23: "More on Matzo: The Passover Matzo Shortage Isn't Limited Only to San Francisco Bay Area in California USA; Looks to Be Nationwide." [CLick here to read.]

Retail Memo Special Feature: Wal-Mart, Inc. Might have Found A Solution or Two to Much of the Opposition to its Mega-Supercenter Stores in the USA

Mega-retailer Wal-Mart may have found a solution (or two) to all the community-based opposition in many parts of the U.S. to the retailer's building of its Supercenter stores.

Last month, the brawny big-box bruiser from Bentonville (Arkansas) decided to kill 47 new Supercenter store projects it had on the books for a variety of reasons, all having to do with either opposition to the stores from city and country governments or community-based groups in the cities and neighborhoods where the respective stores were to be built.

Don't feel sorry for Wal-Mart though. The world's and United States' largest retailer will still open at least that many (47) new Supercenters in the U.S. this year, plus a handful more.

The municipal government and community-based group oppostion is a serious impediment to Wal-Mart's Supercenter growth plan in the U.S. however. But it's not a new problem. It's been going for for years.

However, what is new is Wal-Mart's response to the oppostion, which historically has only been one-dimensional: To lobby city governments and community groups, trying to change their minds, or to fight the oppostion in court.

Until now, that is.

The Modesto Supercenter Strategy

In the Central Valley city of Modesto in Northern California, Wal-Mart is gutting an old 105,000 square foot long-empty big-box retail building, which most recently was divided in half and housed a store belonging to the now gone local discount warehouse grocery chain SavMax in one half of the building and a Rite-Aid drug store in the other half.

Wal-Mart is turning the 105,000 square foot building into a scaled-down version of its Supercenter format store. The Modesto Supercenter, which is located at 3848 McHenry Blvd. a popular shopping street in the city of about 210,000, will have all the departments--fresh produce, meat, perishables, dry grocery and the like--that its larger Supercenters have, which average about 185,000 square feet and run as big as 225,000 square feet.

The only difference between the more petite Modesto Supercenter and nearly all of the retailer's other, larger Supercenters, is that those departments will be scaled down and the store's overall product selection will be a bit less expansive than in the traditional Supercenters.

To compare the size difference of this new Supercenter in Modesto to Wal-Mart's other stores of the same format, lets compare it to the retailer's Wal-Mart discount store format stores, one of which the retailer has in Modesto. That store, like all the Wal-Mart disount format stores', carries only a limited assortment of grocery products in a few aisles plus some basic frozen and perishable foods. However, it's still 115,000 square feet without the supermarket inside, which is 10,000 square feet larger than the new full food and grocery Supercenter set to open early next year on Modesto's McHenry Avenue.

The Modesto Supercenter scheduled to open early next year isn't the first smaller-size Supercenter Wal-Mart has opened, nor the first it's located in an old big-box building it's gutted and completely remodeled. Last year, the retailer opened a Supercenter in Sanger, California that's just a bit larger than the Modesto store. Sanger is a suburb of Fresno and is about 100 miles south of Modesto in the southern Central Valley.

The main reason Wal-Mart is doing this Supercenter scaling-down in California, and especially in the Central Valley, is because the state as a whole and the region particularly, has been one of the most difficult places in the U.S. for the mega-retailer to get approval to build it's 185,000 -to- 225,000 square foot new, from the ground-up Supercenters.

For example, Wal-Mart planned to build a roughly 200,000 square foot Supercenter in a shopping center in Modesto in 2001. However, after a couple years' of rangling with the city planning commission and city council, as well as opposition from numerous small business groups, it abandoned those plans.

In 2004, Wal-Mart proposed building a brand new 225,000 Supercenter in Turlock, which is a city of about 75,000 residents located just 10 miles from Modesto. The Turlock City Council not only rejected Wal-Mart's proposal--even though the retailer already had a Wal-Mart discount store in the city and promised to keep it open along with the new Supercenter--it ended up passing a big-box ordinance which prohibited any retailer from opening a store of at least 100,000 square feet that devoted at least 5% of its floor space to grocery items.

The Supercenter ban was specifically designed to prevent Wal-Mart from locating a Supercenter in the city. However, through its language it left the door open for big box retailers like Costco Wholesale and even Wal-Mart's Sam's Club.

Wal-Mart filed a law suit against the city of Turlock in February 2004, one month after the city council passed the ban legislation. The case was in the courts for two years. In 2006 the court ruled in favor of the city and Wal-Mart announced it would no longer try to build a Supercenter in the city.

Big box bans like Turlock's are common in California. Two other cities in the area, Oakdale which is next door to Modesto, and Patterson, which is about 25 minutes away from Modesto, have both passed laws similar to Turlock's, designed specifically to keep Wal-Mart Supercenters out of their respective cities.

Wal-Mart pulled the plug on a Supercenter in another nearby city in 2006, when the city of Ripon, just a few miles from Modesto, fought against the retailer's proposal to locate a Supercenter in the community. At the time the issue of contention was over where the Supercenter would be located in Ripon. Wal-Mart announced it would not build on the site but would look for a more suitable location in the city. That was two years ago and the retailer is yet to announce a site in Ripon.

Last year, Wal-Mart did get approval to build a 225,000 square foot Supercenter in Ceres, which is right next door to Modesto. However, the community of about 45,000 was far from the retailer's first or second choice in the region. But since the city is aggressively seeking retail and streamlines the permit process, Wal-Mart went forward with the proposal. The Ceres, California Supercenter is currently being built--not without community protest of sorts--and is scheduled to open later this year or early next year.

Bay Area and SoCal also tough for Supercenters

Its not just the Central Valley that opposes Wal-Mart Supercenters so strongly. In fact, the nine county San Francisco Bay Area, which is about 90 minutes from Modesto, opposes the mega-stores as much or even more than the Valley's municipalites and communty groups.

Wal-Mart has only a couple Supercenters in the 7-million population-strong Bay Area. Those stores are out in the fringes of the region where opposition and the need for tax dollars of any kind are far more desired than in the major Bay Area cities and suburbs. As a result, opposition to the Supercenters is less intense.

Try as it might, Wal-Mart has failed to build numerous new Supercenters its proposed in many of the most desirable Bay Area cities; cities where it wants to be with that format.

Wal-Mart hasn't had much better luck in the Southern California region, where more than half of California's residents live. It has some Supercenters in the region, but nowhere near the number it wants--or has tried to get approval for.

In fact, it's in Southern California where Wal-Mart has come up with phase two of its plan to open more Supercenters in the Golden State, albeit somewhat smaller than average like the Modesto and Sanger stores, and of a somewhat hybrid nature

The retailer just announced plans to add an additional 25,000 -to- 50,000 square feet on to a number of its Wal-Mart discount stores in Orange County, therby turning them into hybrid Supercenters.

According to John Mendez of Wal-Mart, the stores--like the Modesto Supercenter--will have all the same departments and sell the same food and grocery products that a standard, larger Supercenter does. The departments will just be scaled-back and have a more limited overall product assortment.

Wal-Mart's discount stores sell perishable items like milk, juice and eggs, have some frozen foods, and contain aisles where a limited assortment of grocery products is offered.

The expanded discount stores would still retain all the non-foods departments they currently have but would add a smaller-version of a full-fledged Wal-Mart Supercenter supermarket inside.

Wal-Mart becoming more agile

These two developments, along with Wal-Mart's new, small format (about 15,000 -to- 20,000 square feet) Marketside grocery markets, which will make their debut this summer in the Phoenix, Arizona Metropolitan region, are showing that a mega-retailer can also be a nimble one when it comes to format adjustments and creations.

By choosing a Supercenter strategy which includes remodeling existing, smaller buildings like in Modesto and Sanger, and adding on square footage to Wal-Mart discount stores like the retailer plans to do in Orange County, Wal-Mart is showing a new adaptability after years of sticking with the single Supercenter mind set and format.

As a result, the retailer will be able to garner much more of the grocery dollar market share in states like California where the opportunity is there but the jumbo sized singular Supercenter format has proven a barrier to entry.

Additionally, the small-format Marketside stores will give Wal-Mart an urban strategy for city's like San Francisco, Oakland, San Jose and Sacramento in Northern California, and Los Angeles and San Diego in Southern California, if it chooses that strategy.

For example, it's impossible for Wal-Mart to get approval, even if it found the space, to built a Supercenter in politically-charged San Francisco. However, it's likely it could get approval--with a bit of a fight still--to buildl a 15,000 -to- 20,000 square foot Marketside store, or two or four in the highly dense city.

The same is the case in urban Los Angeles and San Diego. In terms of the Modesto model of locating a Supercenter in a smaller, existing building, doing so makes it difficult for a city to stop Wal-Mart because the application and permiting process is much different than when building a new store from the ground up. Essentially, a city like Modesto can't prevent Wal-Mart from putting whatever type of store it desires in an existing building like the 105,000 square foot former combined supermarket and drug store location on McHenry Avenue, as long as it files the proper paperwork and meets existing city laws.

It's the same for the square footage additions the retailer plans to do with some of its Orange County Wal-Mart discount stores. Should the respective cities in Orange County try to hold up or prevent Wal-Mart from adding the additional square footage to those stores, the retailer would easily win in court, since such additions are done by retailers of all types regularly, and preventing Wal-Mart alone from doing it would likely be ruled descriminatory.

Localizing and shrinking new Supercenters

Another strategy Wal-Mart is employing is to design its Supercenter to fit in with a local city's geographic location, setting, culture and history. For example, the brand new Wal-Mart Supercenter in Austin, Texas pictured at the top of this piece, sure looks different than the typical Wal-Mart square, big box Supercenter, doesn't it? It's designed to fit into the more hip, upscale style that is Austin.

The retailer has designed similar "local" Supercenters in Colorado that fit in with the regions rugged mountains and woods, using different roofing and siding on the buildings, in addition to numerous other local touches. One Supercenter in Colorado even has a complete bicycle shop in the store, and Wal-Mart built and paid for bike paths and bike racks on land around the store because the communtiy is a major bicycling area.

These localization design strategies also include shrinking the Supercenters a bit if need be. Wal Mart has built a couple of brand new Supercenters so far that are in the 130,000 square foot range rather than the average 185,000 size.

Marketshare is key regardless of format

Last year, Wal-Mart overtook Kroger Co. as the number one grocery sales market share leader in the U.S. It's a close race between the two retailers though.

What Wal-Mart seems to have finally figured out with its new format flexibility as detailed in this piece, is that grocery marketshare is king, and it doesn't have to just come from a 185,000 -to- 225,000 square foot Supercenter.

In addition to putting the scaled-down Supercenters in the old big-box buildings like the retailer is doing in Modesto and Sanger, adding the additional square footage for groceries onto the existing discount Wal-Marts in Orange County, and introducing the new, small-format Marketside grocery stores this summer in Arizona, Wal-Mart also is building more of its average 45,000 square foot Neighborhood Market supermarkets this year and next than it has in many years.

This new, muti Supercenter and multi grocery store format strategy should give Wal-Mart additional market share, allowing it to increase its lead over Kroger. The main reason this should be the case is because these strategies will allow it to increase its grocery sales square footage in places like California where it currently has a minimal food and grocery retailing presence because of the inability to open any where near the number of traditional, new Supercenters it has wanted to for over a decade.

The mega-retailer plans to use its hybrid Modesto Supercenter strategy and the Orange County add-on discount store strategy in other parts of the U.S. in which gaining approval for new, built from the ground up Supercenters is a problem.

The Modesto Supercenter strategy also will be used in places like urban areas, where space is of a premium and the idea of acquiring an empty big box building and turning it into a Superstore is a good option.

Further, expect to see Wal-Mart add additional square feet on to other discount stores in other parts of the U.S. this year and beyond. Food and grocery sales are what's allowing the retailer to post strong sales and profit gains like its recently released quarterly profits.

Wal-Mart wants to be able to sell more food and grocery products in all categories in all of its stores--as well as in more places in the USA. As a result, the strategies detailed in this piece will be implemented, along with the building of new Supercenters, wherever the brawny big box retailer from Bentonville thinks they make sense.

Thursday, April 24, 2008

Food & Society Memo Global Food Crisis Special Feature: Bloomberg: Bill & Melinda Gates Foundation Will Double Global Farm Aid as Food Crisis Worsens

Gates Foundation to Boost Farm Aid 50% as Food Crisis Deepens
By Christopher Swann

April 24 (Bloomberg) -- The Bill & Melinda Gates Foundation will increase spending on farming projects by 50 percent this year as surging food prices threaten starvation and social unrest in poor countries.

The world's largest charitable foundation will give grants for agricultural programs totaling about $240 million this year, up from $160 million last year, said Rajiv Shah, the foundation's director of agricultural development and a former adviser to 2000 Democratic presidential candidate Al Gore.

``We are ramping up activity,'' Shah said in a telephone interview yesterday from Seattle, where the foundation is based. ``The focus will be on encouraging extra supply, which is one reason global food prices have climbed so high.''

New funding from Gates for agriculture in poverty-stricken countries comes as food prices soar around the world. The Gates programs aim to increase farm productivity, a task that has received less attention from larger aid institutions.

The proportion of global development aid devoted to agriculture is 4 percent, according to figures from the World Bank. The share of World Bank financing devoted to farming dropped to 12 percent in 2007, from 30 percent in 1980.

``The strength of the foundation is that because it is not constrained by politics, it can afford to take a longer view on food supply,'' said Ruth Levine, a senior fellow at the Center for Global Development, an aid research group in Washington. ``They are working on research and activities that have been very under-funded'' by other groups, she said.

Boosting Output

The foundation plans to plow the additional funds into existing projects, including developing more resilient crops, training farmers and helping small producers gain greater access to markets for their goods, Shah said.

For the past two years, the group has invested in seeds that better resist disease and drought, particularly in Africa, where productivity lags behind other developing nations. The effort has already led to more disease-resistant maize varieties for East Africa and sweet potatoes fortified with extra vitamin A, Shah said.

As the global economy accelerated in the past five years, the number of people living on $1 or less a day declined by 150 million, according to the World Bank. Those gains may be reversed unless rich countries step up their donations, officials said.

Global food prices surged 57 percent last month from a year earlier, according to the United Nations, and the World Bank warns civil disturbances may be triggered in 33 countries.

Farm Subsidies

Governments from Guatemala to the Philippines to Indonesia are seeking to combat food inflation by curbing exports or removing import duties on basic food staples such as rice. Brazil called for an end to farm subsidies in developed countries that create price distortions and leave millions of agricultural producers in poorer nations unable to compete.

African countries are expected to be among the most vulnerable to rising food prices. About 70 percent of the continent's population works in farming, according to World Bank figures. Even so, Africa is dependent on foreign producers, importing a net $12.7 billion a year in food.

According to the Gates Foundation, 16 of the 18 most undernourished countries are in Africa.

``The challenge is to ensure that they can sell enough of their goods so that they have an economic incentive to use better techniques,'' Shah said. ``We are helping them to meet formal food standards demanded by bigger food producing firms and also talking to these companies in order to link them up with smaller farmers.''

He declined to say which food companies the foundation is negotiating with.

Radio Waves

The Gates crop-improvement program encompasses 16 African countries that aim to give farmers access to better-quality seeds through a network of 9,000 seed dealers.

Gates is also funding projects to provide information through radio broadcasts to help train farmers in Mali, Ghana, Malawi, Uganda and Tanzania. The foundation is funding the development of hermetic storage technology to protect cowpea -- one of the most important crops in West and Central Africa.

``Almost no country has achieved a rapid ascent from hunger and poverty without raising agricultural productivity,'' the foundation says on its Web site.

The charity, created in 1994 by the founder of Microsoft Corp. and his wife, focused initially on health and education. In May 2006 it created launched a drive for a ``Green Revolution'' in Africa, in partnership with the Rockefeller Foundation.

The Gates Foundation's agriculture staff has only about 35 employees, compared with about 250 staff working on agriculture at the World Bank, the Washington-based lender and grant-maker that's owned by its 185 member countries.

Last year the World Bank devoted $3 billion to agriculture projects.

``The sums of money might be small compared to the World Bank but they get a very big bang for their buck because they are focusing on long neglected areas,'' Peter Timmer, a visiting professor at Stanford University's Program on Food Security and the Environment. ``They have chosen a perfect time to focus on this area.''