Monday, September 29, 2008

Small-Format Food Retailing Memo: Wal-Mart Studying Second Small-Format Grocery Store Concept; Inside Marketside One Week Before the First Stores Open

The Blog Fresh & Easy Buzz, which covers and writes about Tesco's Fresh & Easy Neighborhood Market, small-format food and grocery retailing, and related topics and issues, has two stories today about Wal-Mart, Inc. and small-format food retailing.

The first piece reports on and details comments Wal-Mart, Inc. CEO Lee Scott made earlier this month at the 15th Annual Goldman Sachs Global Retailing Conference in New York City about a second (besides its small-format Marketside) small-format grocery store concept the retailer is studying.

The second piece from Fresh & Easy Buzz provides new information about Wal-Mart's Marketside grocery and fresh foods stores -- the first four of which will open on October 4 in Chandler, Gilbert, Mesa and Tempe, Arizona, in the Phoenix, Arizona Metropolitan market region -- offering a look inside Marketside prior to the stores opening in a week.

The four Marketside stores (which we coined as "Small-Marts" in August, 2007) which are about 15,000 -to- 20,000 square feet will open in just one week.

The combination grocery, fresh and specialty foods stores -- which will feature basic groceries, natural, organic and specialty products, fresh baked goods, fresh produce and meats, craft beers, wines and spirits, and in-store prepared foods -- will herald a new era for Wal-Mart, one in which the world's largest retailer joins the prepared and natural/specialty foods categories in a major way.

The Marketside development also places Wal-Mart square in the center of the small-format food and grocery retailing revolution we've been talking about in Natural~Specialty Foods Memo since we first published the Blog in August, 2007, over a year ago.

The small-format food and grocery retailing revolution -- and small-format competition -- has just started. Stay tuned.

U.S. & Global Economy Memo: U.S., Global Markets in Flux; Wall Street and Main Street Faced With Uncertainty

In a vote that shook the United States government, Wall Street and financial markets around the world, the U.S. House of representatives Monday defeated a $700 billion emergency rescue for the nation's financial system, leaving both political parties and the Bush administration struggling to pick up the pieces. The Dow Jones industrials plunged nearly 800 points, the most ever for a single day.

[Pictured at top: U.S. President George W. Bush, looking less than confident, posed for photographers earlier today after hearing the news his financial bailout proposal, which he says is essential to prevent the U.S. economy from falling into a possible depression, was defeated by the House of Representatives, despite being significantly amended by a bi-partisan group of Democrat and Republican members before the vote.]

Stocks plummet in largest one-day point drop ever (AP)

More (Click on the headline links to read) ...

Financial Bailout Bill: Web site overwhelmed...

Response to Bill's Defeat: BUSH: 'VERY DISAPPOINTED'...


Global Markets...


Former House Speaker: Gingrich: Paulson Should Resign...

Independent Grocer Memo: Same Store, New Name, Same Harold

Guest Memo
By Kristina Jarvis
September 29, 2008

Harold Guy (pictured at left with his son and partner Byron) has seen his fair share of changes since opening his grocery store on 28th Street East 38 years ago.

He's been through several distributor and wholesaler changes. He saw his store burn down in 1992, only to be rebuilt in 1993. He also saw the store through a change of ownership, when his son Byron bought it in 1998.

But one thing has always remained the same - the service.

"We've always been about high service," he says. "The sign is probably less important than the Harold's name, Harold's is the constant"

Harold's recently changed its name from "Harold's IGA" to "Harold's Family Foods," a shift motivated by the need to maintain the store's independence. The move takes Harold's away from the Sobey's brand and towards MacDonalds Consolidated, part of the Safeway grocery company. MacDonalds provides brand and Safeway specific labels to its stores, including the "O" Organics line of groceries.

Harold says there were no hard feelings between the store and Sobey's about the switch, and says that the new wholesaler is one whose values are closer to the store."

In reviewing different flags, or banners, we found that the Family Foods banner suited our independent needs," he says. "The name too, Family Foods, it's kind of who we are. It's a family dealing with families and relationships over the years."

George Marchildon and his wife, Roxanne, don't seem to mind the name change. They've been customers for 20 years, and say their only concern is the service.

"We don't have to agree with it. As long as they're happy and the service stays the same, we're happy," he says. "It's still Harold's as far as I am concerned."

Marchildon works as a distributor for Pepsi to many stores in Prince Albert, including Harold's, and says he appreciates being treated as an ordinary customer when he goes on his days off to shop."

When I shop here, they treat me like a customer," he says. "When I shop somewhere else, they treat me like the Pepsi guy."

"It gets to be a problem," adds Roxanne. "When we're out in a store and just because he works for Pepsi and they're out of Pepsi, they'll come bug him instead of letting us go out and have our family time."

In the end, Harold says that it comes down to what the store needs to survive.

"You have to pay your bills and you're all alone at it so you have to do the best you can to maintain and to employ the people you require to do the best job for your customers," he says. "Everything we do starts and ends here."

Byron says there are plans to host a grand re-opening once the store has completed its renovations.

Natural~Specialty Foods Memo Editor's Note: Safeway Stores, Inc.'s private label relationship with Macdonalds Consolidated in Canada (see italics in the story above) is part of Safeway's strategy to market its O' Organics and other brands -- Eating Right, Safeway, Lucerne -- beyond its own Safeway stores in the U.S. and Canada, as we've reported on and written about in numerous stories. You can read a selection of those pieces from the blog here and here.

Saturday, September 27, 2008

Food Trends Memo: 'Let Them Eat Cupcakes:' Cupcakes Are So Popular They Even Beat Out 'Financial Crisis' Says Google Trends

Think American consumers are focused on the current financial crisis during these dark economic days of September?

You know, the financial crisis President George W. Bush, Secretary of the Treasury Henry Paulson, Presidential candidates Barack Obama and John McCain, and U.S. Congressional leaders of both parties are saying is so serious that if a $700 billion bailout package isn't passed immediately by Congress, signed by the President and implemented right away could, in the less than eloquent phrase uttered by President Bush at the end of the financial crisis summit meeting he held at the White House on Thursday, result in "This sucker (the U.S. economy) going down."

Think again.

Based on data from "Google Trends," the analytical tool provided by, which shows and ranks the most popular searches people are doing on Google, few Americans are "googling" the term "financial crisis" on the popular search engine

Mother Jones magazine was curious if Americans were going to Google in throngs in order to search and find out about the financial crisis which many serious people are saying could be the modern day version of the 1930's Great Depression, which was the most serious economic collapse in U.S. history.

Therefore, last Thursday Jonathan Stein of Mother Jones went to Google Trends and set the function's time period to September, 2008 to see what if anything Americans were searching for more than "financial crisis." By the way, anybody can use Google Trends. We do often.

And guess what writer Stein found Americans were far more interested in learning about in percentages far exceeding searches about the "financial crisis?"

The number one ranked search for September so far isn't the "financial crisis," nor even "economic crisis."

Rather, the overwhelmingly most popular search on Google thus far in September is for "cupcakes," that delicious mouth-sized cake treat that's been becoming one of the hottest food (and more specifically dessert) trends in the U.S. for the last few years.

As you can see in the chart at the top of this story, "cupcakes" (the gold-colored trend line), "sex toys" (green line) and "wizards" (reddish-brown line) are all overwhelmingly far more popular search terms on in September than "financial crisis" is.

In fact, according to Google Trends, Americans also are interested in the following topics, after the top three above, far more than they are in "financial crisis." Those topics are:

"Bristol Palin": searched for 17.5 times more often than "financial crisis" in September; "Puppies": 24.4 times more; "Vacation": 28.6 times more; "Fashion": 44 times more than "financial crisis"; "Fantasy Football": 44 times more "Baseball": 50.5 times more"; and Sex": searched 292 times more than "financial crisis."

If we recall our history correctly, a few century's ago the very aristocratic former Queen of France was reported to have said in response to a question about what her country should do during its time of severe economic crisis -- so severe in fact that the people were on the edge of revolt -- "Let them (the people) Eat Cake."

In the case of cupcakes and Google Trends' analysis, it appears that in this current financial and economic crisis in the United States, the desire to eat -- and learn more about cupcakes -- is a grass roots movement rather than a top-down dictatorial edict like the one given by Marie Antoinette, who met her fate at the receiving end of a guillotine.

This isn't the end of the story though.

Before you (readers) get bent out of shape about the intelligence and priorities of the American people -- cupcakes and wizards over financial crisis for example -- a Mother Jones reader points out in the comments section of the publication his theory for why "cupcakes" is so much more popular of a searched topic than "financial crisis."

Doing a little research on Google Trends himself, Andrew Hires says the reason "financial crisis" rates so far below cupcakes (and all the other topics we listed) is because Americans using Google are using the search term "bailout" to read and learn about the current financial mess instead of "financial crisis. Here's Mr. Hires' comment on Mother Jones:

"It's because they are all searching for the term "bailout". 5x the cupcakes rate."

Posted by: Andrew Hires on 09/25/08 at 3:43 PM Respond

You will notice in his comment he provides a link to his Google Trends analysis, which does show "bailout" having five times the search trend rate than does "cupcakes."

We tend to agree with him on this. After all, most Americans know there is a financial crisis -- they don't need to look it up on Google. But what they are very interested and concerned about is the Bush Administration's proposed $700 billion "bailout" of the Wall-Street financial firms. Like the man once said about government: "Follow the money." For Americans "the money" (Their tax dollars) is in learning more about the proposed "bailout" rather than searching for generic information about the "financial crisis."

But with all this said, the fact American consumers are so interested in cupcakes is in and of itself a very interesting and potentially valuable piece of data.

If you are a supermarket chain vice-president or director of bakery, an in-store bakery category manager at a supermarket chain or independent, a bakery department manager in a supermarket, an executive of a bakery chain or the owner of a single bakery, or in the baked goods manufacturing business, the response to this information should be rather clear -- MORE cupcakes. Make more varieties, build more in-store bakery cupcake displays, cross merchandise cupcakes in other parts of the store, promote cupcakes...and more. Get on the great cupcake bandwagon, in other words.

It's clear Americans are very interested in cupcakes. We suggest those of you in the baked goods business, at whatever segment or level, make it easier for these very interested consumers to buy and eat more cupcakes.

We'll even suggest a sign to go with one of those in-store bakery cupcake displays we suggested above. That sign would have a picture of Democratic candidate for President Barack Obama on the left and a picture of his Republican challenger John McCain on the right; with an American flag pictured between them.

Below the pictures and the American flag, the text would read: "Let Them Eat Cupcakes."

And of course, the cupcakes being featured in the display would have three colors of frosting: red, white and blue.

After all, with a financial crisis in progress and the U.S. Presidential election just a little over a month away, consumers need a little food indulgence. (A little wizard and sex toy indulgence it appears as well, according to Google trends.)

Cupcakes can be a very comforting and affordable indulgence. They're sweet treats that don't do too much damage to either the pocketbook or the waistline.

And, as we now know, cupcakes are currently top-of-mind among many American consumers. In fact, we bet at least one or two of the shoppers among the many who will buy the cupcakes on that "Let Them Eat Cupcakes" in-store display will be among the millions who've searched "cupcakes" on Google.

Wednesday, September 24, 2008

Retail Memo: Whole Foods Market, Inc. CEO John Mackey Named One of the Global-75 Most Influential People For the 21st Century By Esquire Magazine

John Mackey, the 55-year old CEO of Whole Foods Market, Inc., has been named one of the 75 most influential people in the world for the 21st century by Esquire magazine.

Mackey is featured in Esquire's September issue, along with 74 others from throughout the globe, who Esquire says are the pick of the crop of individuals who have been, are, and will be the most influential people of the 21st century.

Here's what Esquire writes about Whole Foods' John Mackey in its entry about him as one of the most influential 75:

September 23, 2008,
John Mackey: Chairman and CEO, Whole Foods Market, 55 · Austin

"John Mackey didn't invent the organic-food movement. He didn't even invent the original Whole Foods Market, which started as a single store in New Orleans in 1974, four years before Mackey and a partner started their own natural-foods store in Austin. We're okay with that. Some people's importance comes from their innovations; others matter because they are popularizers--they take a small idea and make it big and mainstream. And in so doing, they change the world. That's John Mackey.

He took a cult concept embraced primarily by foodies and hippies--that fresh, local, organic food was better for you than the stuff you bought from the Safeway--and turned it into a national religion. Now, of course, the word organic is being stretched well beyond the original definition of pesticide-free produce, Wal-Mart (!) is diving into the business with both feet, and even the Chinese are growing food that is technically organic--which they then ship to the United States. In the coming century, it is not inconceivable that--due to John Mackey--most of the food we eat will be organic and fresh, if not necessarily always local."

[Here is a link to the entry on the Esquire magazine website.]

John Mackey is the only member of the retail food and grocery industry (in the whole world) named by Esquire to its 75 most influential people of the 21st century list. In fact, he's the only one we can find who represents the food and grocery industry in general -- which isn't so bad since after all we are talking a total of 75 "most influential" people from every field and walk out of all the extremely influential people on the planet.

Mackey is listed in Esquire on its first page of the top 75. He shares that first page with the American dynamic duo of politics, Bill and Hillary Clinton; Member of parliament David Cameron, the leader of Britain's Conservative Party and the man many are calling the next Prime Minister; the California-based novelist and writer Michael Chabon; and former Russian President and current Prime Minister Vladimir Putin.

The others, in addition to John Mackey, rounding out the first ten listed are: Ratan Tata, the chairman of Tata group, India's largest corporation; theoretical physicist Lisa Randall; microbiologist and entrepreneur Greg Ventner; Tony Hayward, the CEO of British Petroleum Co.; and the collective "The Future of the World," which Esquire describes in that entry in this way: "Think we're all going to hell in a handbasket? Think things can't possibly get any better? The 43-year-old political economist and environmental activist begs to differ. You can find out who that 43-year old political economist and environmental activist is here. The one Esquire depicts as representing the future of the world.

[You can view the list of all 75 of Esquire's most influential people of the 21rst century here.]

[Additionally, you can view a slideshow of the 75 here.]

Below is what the editor's of Esquire say about there search and naming of the 75 most influential people of the 21st century:

The 75 Most Influential People of the 21st Century

"We set out to find them across every field of endeavor, the people who are bending history right now. It was an impossible task, but the result is a determined, defiant, earnest, brilliant, philanthropic, space-going, smoking-hot group, and together they are writing the first chapter of the rest of our lives."

For Whole Foods' CEO John Mackey, at this point in time in the 21st century, he finds himself and his company recently experiencing (in its latest quarter) a 42% plunge in net income, the lowest stock share price in modern history for Whole Foods, having recently has to fire 40-plus headquarters employees, and with the U.S. Federal Trade Commission continuing to breath down the grocery chain's neck regarding its acquisition last year of rival Wild Oats Markets, a deal Mackey says he wouldn't do again if he had a chance to rewrite history.

Never before in his trail-blazing food retailing career does John Mackey need all that influence more than he does right now.

Ethical Foods Memo: Pro & Con On California's Proposition 2; Which Would Eliminate the Use of Battery Hen Cages in the State's Egg-Farming Industry

This November 4 California voters will vote on the first measure of its kind in the United States that if passed would eliminate the use of small or battery cages for egg-laying hens, like the ones pictured above.

The ballot measure, Proposition 2 ("Standards for Confining Farm Animals"), also would eliminate tiny enclosures for veal calves and pigs. The measure doesn't include eliminating small-cages in the raising of chickens for sale and consumption as a food. It only applies to the raising of egg-laying hens.

Natural~Specialty Foods Memo has written about California's Proposition 2 and related battery cage issues in the Golden State, along with writing about the issue in general as it pertains globally. You can read those pieces here.

Proposition 2 hasn't been receiving much attention in California to date. This is because of a few reasons in our analysis and opinion.

First, it's a law of elections and politics in the U.S. that voters pay little attention to upcoming elections until after Labor Day, which has now ended.

Second, California's state lawmakers, mainstream press and voters have been focused for the last couple months extensively on the multi-month-long battle between the state legislature and Governor to work out a long-overdue state budget compromise. The various parties reached a budget agreement last week, and the budget bill was signed this week by the Governor.

Lastly, this is a big year for elections in the U.S. The Presidential race is the primary focus of both the news media and voters. Therefore, ballot initiatives such as Proposition 2 in California and other measures are getting obvious secondary attention.

However, with the Labor Day holiday ended, summer over and the kids back in school in California, statewide issues like Proposition 2 are beginning to receive more attention in the Golden State. Since the ballot measure if passed will also be the first state law of its specific kind in the U.S., Proposition 2 also is beginning to get more nationwide attention in America.

In today's addition of the newspaper, the San Francisco Chronicle -- which is generally considered a liberal -to- moderate newspaper editorially in what is overall a very liberal city -- ran an editorial in which the paper's editorial board says it's against Proposition 2, the measure which would eliminate the use of battery cages for egg-laying hens and small enclosures for veal calves and pigs in 2015.

The editorial goes into detail regarding the editorial board's position that California voters should vote no on Proposition 2.

Read the editorial against Proposition 2, "Why proposition 2 is a bad idea," from today's San Francisco Chronicle editorial page here.

In the same editorial page section of today's Chronicle, the paper ran a pro-Proposition 2 opinion piece written by Bill Niman, who is well known in the natural foods industry as the founder of the all-natural meat company Niman Ranch, Inc., which is based in Oakland, California.

Bill Niman also is a cattle rancher and farmer in Bolinas, which is north of San Francisco. In addition to being supplied by cattle and hogs raised on Bill Niman's ranch, Niman Ranch, Inc. meat company buys from over 600 family-owned farms and ranches in the United States. Niman Ranch, Inc. markets a variety of fresh, natural meat products to natural foods stores and supermarkets throughout the U.S., as well as selling its products online via its website.

Read Bill Niman's vote yes on Proposition 2 Op-Ed piece, "Prop. 2 brings humane standards to poultry, pork industries," here.

Based on our reporting on Proposition 2 -- which includes talking with members of both the pro and con Proposition 2 coalitions that have been started -- we think today marks the beginning of what is going to be a vigorous debate on the ballot initiative between now and the November 4, 2008 election in the U.S.

The battery cage issue is a global one. The European Union has already passed legislation to outlaw the use of the small cages in its member countries in 2012.

In the United Kingdom (UK) and other European nations, farmers have already started to convert to the use of larger enclosures which permit the birds to stretch their wings and move around in, which are part of the conditions required under the Proposition 2 ballot measure in California.

Supermarket chains and natural foods stores throughout the world -- and particularily in Europe and parts of Asia like Australia and New Zealand, and the U.S. -- are increasingly offering more varieties of eggs raised by hens in a "cage-free" setting, along with selling more broiler chickens raised "free range" outside of the small cages. Selling veal raised in small crates is something numerous food retailers no longer will do even where there are no laws prohibiting it.

The issue is arguably hottest in the UK, where activists like the celebrity chefs Hugh Fearnly- Whittingstall and Jamie Oliver have been conducting campaigns to get Britain's largest supermarket chains such as Tesco and Sainsbury's to stop selling chickens and eggs produced in battery cages.

These chains have increased the varieties of "cage-free" eggs and "free-range" chickens they sell in their stores as a result, along with increasing the promotion of these products. For example, earlier this year Sainsbury's, along with the upscale British supermarket chain Waitrose, both reported that sales of "free-range" chickens in their respective supermarkets for the first time had reached nearly half of total chicken sales.

The battery cage issue has been far less front and center in the U.S. compared to Europe. However, we see California's Proposition 2 as potentially changing that dynamic. California is a legislative trend setter in the U.S. As some say: As California goes the nation -- at least that's often the case when it comes to the origin of new laws.

Therefore, we plan to cover the debate on Proposition 2 between today and the November 4 U.S. general election closely, as we believe the battery cage issue is it not only a California (which with nearly 40 million residents is pretty significant in and of itself) issue, but a national an overall global one as well.

Small-Format Food Retailing Memo: Wal-Mart to Open Small-Format, 'Small-Mart' Marketside Stores in Arizona on October 4

From the Natural~Specialty Foods Memo Editor's Desk: Wal-Mart will open its four small-format grceory and fresh foods Marketside stores in Chandler, Gilbert Mesa and Tempe, Arizona in the Phoenix Metropolitan market on October 4, according to its website and a report in the blog Fresh & Easy Buzz.

As our readers know, we've covered Wal-Mart's Marketside format ('Small-Mart's being a term we coined for the stores) development extensively, beginning in September of 2007.

The Arizona stores are the first for Marketside units for Wal-Mart. Wal-Mart thus far plans to open two Marketside stores in Southern California, one in San Diego and another in the nearby city of Oceanside, according to our sources. Wal-Mart has not publicly announced the two California locations.

Additionally, we've reported Wal-Mart has plans to open more Marketside stores in Arizona -- besides the first four opening in 11 days -- as well as doing the same in Southern California, along with opening some of the small-format grocery and fresh foods markets in Northern California, particularly in the San Francisco Bay Area. Also, Wal-Mart has looked at opening a Marketside store in the Reno area, in Northern Nevada.

Below is the report from Fresh & Easy Buzz. Natural~Specialty Foods Memo is working on an analysis piece regarding the Marketside stores opening on October 4. We hope to have it published soon.

From Fresh & Easy Buzz: Wednesday, September 24, 2008

Breaking News: Wal-Mart to Open its Four Marketside Food and Grocery Markets in the Phoeniz, AZ Metropolitan Region on October 4

As we've been reporting on Fresh & Easy Buzz for months, Wal-Mart, Inc. has planned an early Fall, 2008 opening of its small-format, combination grocery and in-store fresh, prepared foods Marketside stores in the Phoenix, Arizona Metropolitan region.

Wal-Mart has now announced and confirmed on its website the specific date the four Marketside grocery markets will open in the Phoenix Metropolitan region cities of Gilbert, Mesa, Chandler and Tempe.

All four Marketside stores are set to Open on Saturday, October 4, just 11 days from today, according to the announcement on the Marketside website. [Click here to see the announcement (look in the right corner) on the website. Click here for maps showing the location of each store in the four Arizona cities.

Click here to read the rest of the story from Fresh & Easy Buzz.

[Editor's Note -- the photos: The photograph at the top is of the Wal-Mart Marketside store in Mesa, Arizona. The picture was taken in late August, 2008. The second photograph shows what the inside of a Marketside store looks like (at least a small portion of it). Additionally, the aprons the three clerks in the picture are wearing are the Marketside store employee uniforms. The photo is from the website.]

Monday, September 22, 2008

Small-Format Food Retailing Memo: Two Dozen Florida USA Shoppers Who've Been Waiting Two Years For An Aldi Store to Open Get Their Day On Thursday

For the two dozen shoppers who've been waiting for two years -- and regularly calling a newspaper reporter for update on the estimated date of arrival -- for small-format, no frills deep discount grocery chain Aldi USA to open its first store in the Tampa Bay region in Florida, the wait ends on Thursday.

Aldi, which operates about 850 stores throughout the Midwest, Mid-Atlantic region and parts of the eastern USA, opens its first store in Florida, in Clearwater, this Thursday. An additional eight Aldi markets also will open on the same dayin the region.

The timing seems right in the minds of a number of the area's shoppers, according to a piece in today's St. Petersburg Times newspaper.

The writer of the story, St. Petersburg Times' staff writer Mark Albright, says a Florida consumer named Johana Szokie "is one of two dozen ardent Aldi fans who have called me for two years to learn when their favorite little grocer finally makes landfall in the Tampa Bay area" in Florida, of which Clearwater is a part.

Those are two dozen very dedicated shoppers. The type any grocery chain would be proud to have.

And in the case of Ms. Szokie, she doesn't even live in Clearwater. However, she tells reporter Mark Albright she will be driving to the Aldi store when it opens in the city on Thursday morning.

Aldi USA, which is the Illinois-based U.S. division of German small-format deep discount grocery chain Aldi International, has big plans in Florida, which is one of the top five food and grocery sales markets in the U.S.

The company expects to open from 25 -to- 50 of the no frills, little deep discount markets in Florida by 2010, with many more coming after that.

Aldi also has built a distribution center in Florida to serve its stores in the region. A grocery chain doesn't do that unless it has big (or big-little in the case of Aldi stores) development plans in terms of having a high store count in a given market.

The St. Petersburg Times story offers a nice local angle on the Aldi stores set to open in parts of Florida on Thursday.

In addition to the excited shoppers, Florida's major supermarket chain's like Publix and Winn-Dixie are watching Aldi closely on their respective home turf.

In fact, you can bet both chains, along with nearly every other supermarket chain in the state, will have "undercover representatives" attending Thursday's Aldi store grand openings, along with those dozen excited shoppers and many others.


To read past stories about Aldi in Natural~Specialty Foods Memo just click the links below:

Sunday, September 21, 2008

Food Safety Memo: Number of Chinese Children Sickened By Malamine-Contaminated Milk Doubles to Nearly 13,000...and Probably More

Latest breaking news on the issue

The Chinese government's Health Ministry has just posted on its website that the number of children sickened by baby formula tainted with the banned industrial chemical melamine has doubled to nearly 12,900. We suspect there are or will be far more than that since the Communist run and controlled Health Ministry tends to under-report such data whenever a serious public health incident occurs in the nation.

The Health Ministry's website also is reporting more than 80 percent of the 12,892 children hospitalized in recent weeks were 2 years old or younger. Four children have died, the Chinese governmental agency also says on the website posting.

The first case of sickness from the contaminated milk also was identified over the weekend, according to a report from the Associated Press. A three year old girl in Hong Kong developed Kidney Stones after drinking Chinese milk products from the mainland, the Hong Kong government announced. They said she has been released from the hospital.

You can read (the latest) further details on the Chinese milk contamination food safety issue here.

Natural~Specialty Foods Memo thinks this is an important food safety issue globally. Although very little if any Chinese fluid or powdered milk is exported to the western world, Chinese powdered milk products are exported to other Asian countries and developing countries in Africa. So far the one case in Hong Kong is the only reported one outside of mainline China.

In addition to the health of the thousands of Chinese children, which is our primary concern with this food safety issue, it's also important because it's just another in a long list of food safety issues and problems in the last couple years involving Chinese produced food, grocery, per food and non food products such as children's toys.

If it hasn't been clear to global governmental and industry leaders in the past that there's a real problem with food and other products produced in China in terms of safety and quality standards, it should be clear now, with almost 13,000 Chinese children thus far reported sick from drinking milk laced with malamine.

When added to milk, malamine increases the percentage of proteins detected in the milk when tested by governmental authorities. Chinese milk producers are required to have a certain percentage of protein in the milk they sell. Adding the malamine allows for milk to pass those protein percentage thresholds while at the same time allowing the producer to make a higher profit because the cheap chemical malamine increases the protein content of the milk when added.

Nobody has yet said the malamine was added to the milk intentionally. However, although we don't know how it got there -- whether the farmers put it in intentionally despite knowing its effects or that perhaps chemical companies sold it to them and convinced the farmers it would do no harm, for example -- it's clear to us the malamine likely didn't fall into the milk on its own.

The parties responsible for the malamine getting into the milk need to be prosecuted swiftly. If found guilty they also should be made to pay restitution to every single family who's child gets sick from drinking the malamine-laced milk. And to those families who have or will lose children, like the four children who've died thus far -- those responsible should be made to pay restitution in the millions of dollars to each family.

The most serious charges here are murder, after all.

Our thoughts are with the families of those sick children. Milk is considered the most wholesome of beverages regardless of it source or type. In fact it's viewed as more than a beverage. It's the stuff of life -- produced by human woman and female animals to nourish their offspring. That fact gives milk of any kind very strong real and symbolic meaning.

Lacing such a beverage -- the stuff of life -- with malamine is a cruel and senseless thing to do, even if those who did it had no idea it could make children sick or kill them. Ignorance of biology as is ignorance of the law is no excuse.

New Product Trends Memo: Less is More: Salt & Pepper-Flavored Ready-to-Eat Snacks One of the Hottest New Product Trends in the Snack Foods Category

Sometimes the simple and minimal makes the most since when creating a new food product.

Such is the case with one of the hottest two-ingredient combinations -- salt and pepper --currently being used by numerous snack food product manufacturers in a variety of new ready-to-eat snack products hitting the market in the U.S.

Those simple two ingredients also just happen to be two seasonings no self-respecting chef or cook would even think about not including in the majority of dishes he or she prepares.

Salt (usually sea salt) and pepper (mostly black so far) are becoming all the rage as the primary two flavors in a variety of new snack food products hitting U.S. supermarkets, natural foods stores and retail formats.

For example, natural snack maker Kettle Foods was one of the first manufacturers to introduce a salt and pepper line of potato chips with its "Kettle Salt and Fresh Ground Pepper Crinkle Cut Potato Chips," which is proving to be a strong seller.

Newman's Own Organics also is one of the early players in the salt and pepper variety snack trend, with its "Newman's Own Salt and Pepper Pretzel Rounds."

Numerous other potato chip brands are now introducing salt and pepper varieties as well. These include "Tyrrell's Sea Salt and Black Pepper Potato Chips" and the Popchips brand's new salt and pepper variety of potato chips.

Tyrrell's salt and pepper chips are thicker cut and have a crisp texture to them, with a balance of salt and pepper taste.

On the other hand, Popchips' brand salt and pepper chips are lighter and airier, along with having a slightly more pronounced pepper taste to them. Both brands use balck pepper in them.

Specialty grocery chain Trader Joe's also recently introduced its own line of salt and pepper potato chips under its Trader Joe's store brand. When the 312-store specialty grocery chain introduces a new flavor combination under one of it's own store brands, that's usually a good sign a new food product trend is blooming, in this particular case in the ready-to-eat snack food category.

Discount store chain Target also recently introduced a new line of salt and pepper snack chips under its Archer Farms store brand and is placing it in all of its Target discount stores and Super Target combination grocery and general merchandise Supercenters in the U.S.

It's not just various brands of potato chips and pretzels that are being introduced featuring salt and pepper as their primary taste profile though. Nut snack product marketer Diamond Foods has recently introduced "Sea Salt and Pepper Cashews" under its popular Emerald brand. The snack food company says it likely will soon be introducing other nut varieties seasoned with sea salt and pepper.

It's interesting that when it comes to ready-to-eat snacks like potato chips, pretzels and nuts it seems like nearly every flavor combination has previously been introduced -- ranging from lime, barbeque and mesquite flavors to ranch dressing and even wasabi-flavored. However, sometimes the simplest ingredients like salt and pepper -- those common flavor profiles staring product developers right in the eyes -- are those not thought of until later on in the product development process.

We think simple and basic flavor profiles like salt and pepper fit in with the times. In bad economic times like the present, consumers tend to behave in more minimalistic ways -- less excess and the like -- both out of economic need as well as based on psychological motivations.

Often consumer food preferences in such times also trend more towards the minimal. There's just something about buying and eating a Wasabi and green-chili and lime potato chip that feels a bit over the top when the credit card is maxed out, the job is on the ropes, it's becoming increasingly difficult to pay the utility bill, food costs are soaring, and you just found out little Suzi (or maybe Bristol these days) needs braces and the company dental plan doesn't pay for them.

Minimalistic snacks like salt and pepper chips or nuts fit the more basic mindset, as do comfort foods like macaroni and cheese and meatloaf and traditional snacks like chocolate chip cookies and brownies.

Also, less can often be more -- often the more simple and minimal ingredient profiles end up tasting the best in foods.

We expect to see many more snack manufacturers introduce salt and pepper varieties of chips, pretzels, nuts and other ready-to-eat snack products, both in conventional and natural, organic and gourmet varieties.

Further, we expect to see specialty snack marketers introduce new ready-to-eat salt and pepper variety snack items using more exotic and gourmet varieties of sea salts combined with pepper (along with using different pepper varieties like red pepper and chipotle), since sea salt happens to be an exploding specialty seasoning category on its own.

Lastly, we're also betting on soon seeing a three-ingredient combination develop in the salt and pepper flavor profile. For example, a combination of sea salt, black pepper and garlic for potato chips and other ready-to-eat snack products. Or sea salt, black pepper and lime, along with other three-ingredient combinations.

Friday, September 19, 2008

Small-Format Food Retailing Memo: This Independent Combines C-Store Convenience With Fresh Foods, Groceries and A Secret Weapon -- Lots of Beer

Small-Format Food Retailing Special Report

Another independent, entrepreneurial retailer has decided the small-format hybrid convenience-grocery format might just be the future of food and grocery retailing. And like all good independents, Navid Tony Hoomanrad, who recently opened his Hyde Park Market neighborhood-oriented grocery and convenience-style store at 4429 Duval Street in Austin, Texas has added his own niche element to the format.

Hyde Park Market features a combination of traditional convenience store items, along with fresh produce (including organics), upscale Boars Head brand deli items, a refrigerated case devoted to quality ready-to-eat prepared foods items like Green Cart brand sandwiches, a selection of basic, specialty and organic grocery products, non-foods including a selection of hardware items, and Tony Hoomanrad's secret merchandising weapon -- beer -- and lots of it.

The independent grocer's strategy for his Hyde Park Market was to create a neighborhood store that was neither a traditional convenience store or a typical neighborhood grocery store. His goal: Offer in a small-format what he calls a "one-stop shop for fresh foods and grocery products that rivals anything found in a much larger supermarket. On a limited assortment scale of course.

He also believed offering an incredible variety of beer brands and styles could serve as a unique point of differentiation for his store, along with giving it a reputation for offering something special from day one. It also helps that Austin is a major beer drinking town.

Grocer Hoomanrad says he met with each of his eight beer distributors, ultimately deciding to order every domestic and imported beer brand, variety and packaging option -- single beers, 6-packs, barrels, you name it -- each one of them offered.

The result: currently Hyde Park Market is offering 525 different types of beer -- from Budweiser and Miller to craft beers and imports. In fact, although the store has only been open for a short time, it's believed to offer the second-most varieties of beer for sale than any other store, of any other size, in the city of Austin.

And remember, Austin just happens to be home to two of the biggest and best upscale food retailers (headquartered in Texas), both major beer category players, in the United States: Whole Foods Market, Inc. and upscale HEB Central Market.

No minor beer sellers these two retailers are, especially at their respective flagship stores in Austin. According to a local beer distributor who's in a position to know, Whole Foods' top beer selling store in Austin has about 450 varieties of beer, while Central Market clocks-in at about 360 or so.

The distributor says the only-recently opened Hyde Park Market isn't the number on beer variety retailer in Austin...yet. But it's close. That honor goes to a specialty beverage retailer named Specs, which offers about 550 varieties of beer, he says.

But grocer Hoomanrad is only 25 varieties behind Specs, which has been around for much longer, for the honor of the retailer offering the most varieties of beer in beer-drinking Austin, Texas.

And since the beer distributor says Tony Hoomanrad asks his beer sales reps each time they're in the store if they've got in anything new that his store isn't carrying -- and usually orders whatever beer it is if they do -- we wouldn't be surprised if Hyde Park Market, one of the latest entrants into small-format hybrid grocery and convenience store retailing, very soon becomes the number one beer variety seller in all of Austin -- along with offering lots of fresh foods, groceries (including specialty and natural) and other grocery store products, along with a mix of traditional c-store items (including a fueling station outside), all blended into a hybrid formula in a small-format store.

Thursday, September 18, 2008

Small-Format Food Retailing Memo: Giant Food Stores To Open its First Small-Format, Hybrid Convenience-Grocery Store: 'Giant To Go'

Carlisle, Pennsylvania-based Giant Food Stores (also known as Giant-Carlisle) is planning to join the small-format food and grocery retailing revolution in the U.S. with its first small-format, convenience-oriented grocery market, Natural~Specialty Foods Memo has learned.

Giant Food Stores, which is owned by the the Dutch supermarket company Royal Ahold just as its sister company, Landover, Maryland-based Giant Food is (the chains are operated separately though), plans to build its first Giant To Go combination convenience and grocery store, which will be 4,442 square feet, at a new retail development called Richmond square at the northwest corner of Fruitville Pike Road and route 722 in Landcaster, Pennsylvania.

The small-format hybrid convenience and grocery store will be the first of its kind for Giant Food Stores, which operates about 140 supermarkets under the Giant Food Stores, Martin's Food Markets and Foodsource banners in Pennsylvania, Maryland, Virginia and West Virgina. Royal Ahold owns chains that operate about 700 supermarkets in the U.S.

At 4,422 square feet, the Giant To Go market actually is in part what we define as a micro small-format food and grocery store (under 5,000 square feet), although because it will be part traditional c-store (which at 4,422 would be as large or larger than an average one) and part grocery store, we will call it small-format.

The c-store cum grocery store will feature fresh produce and meats, a deli which will include grab-and-go ready-to-eat and some ready-to-heat prepared foods, an in-store fresh bakery and an assortment of basic shelf-stable food and grocery items, along with some of the food and non-food products typically associated with traditional c-store merchandising.

The 4,422 square foot hybrid convenience and grocery store also will have an 8-pump gasoline fueling station outside.

A Giant Food Stores' spokesperson said the Giant To Go store is a prototype for the chain. If it's successful the company is likely to build more of the stores in its market regions.

Construction of the Giant to Go small-format combination convenience and grocery store at the Richmond Square retail development -- which is a "village -style" designed 30,000 square foot retail and residential mixed-use development featuring stores and offices on the ground level and apartments on top -- hasn't started yet.

However, the Giant Food Stores' spokesperson told Natural~Specialty Foods Memo plans call for construction to start soon, with a target opening date for the store by the end of the first quarter of 2009.

Other retail tenants in the new Richmond Square center will include a bank, two restaurants (Asian and Italian), a dry cleaners and a couple others, along with the office buildings, according to its developer.

The Richmond center is a part of a larger development at the location. That development includes single family homes as well as additional retail and office space.

Giant Food Stores' new Giant To Go combination convenience store-grocery store format fits into what we classify as the "hybrid grocery-convenience store format."

It's a cousin to but different than small-format grocers like Tesco's Fresh & Easy, Safeway's "The Market," Aldi, Sav-A-Lot, Wal-Mart's Marketside, Trader Joe's and Giant Eagle's Giant Eagle Express, for example. It's closet to Giant Eagle Express, which unlike the others listed above adopts some elements of traditional c-store merchandising in its concept. All of the formats listed above are convenience-oriented though, which is an element they too borrow from c-store retailing.

Giant To Go also is different than what we've termed the small-format "eco-convenience" or Econvenience hybrid convenience-grocery stores. These stores which we've written about --such as Green Spot and Conscious Convenience -- combine elements of c-store retailing and grocery retailing but also take major elements from natural products retailing, having a "green" or environmental focus to the stores.

Wawa food stores is a good example of a store we think Giant Foods' Giant To Go is likely to emulate in many ways. As we've written about, Wawa is a hybrid convenience and grocery market which puts a major merchandising emphasis on fresh foods -- produce and prepared foods particularly -- along with selling basic groceries and specialty items. The stores also have fueling stations and sell some traditional c-store items as well. Interestingly, Wawa is based in Pennsylvania just like Giant Foods Stores is.

Another example is Parker's Convenience Stores, which we wrote about earlier this week.

We simply call these chains -- Wawa, Parker's and a few others -- hybrid, upscale convenience and grocery markets or stores. This is where we think Giant to Go will fit in the small-format, convenience-oriented food and grocery retailing revolution happening in the U.S. and elsewhere globally.

Giant Food Stores has developed numerous upscale design and merchandising features for its Martin's Food Markets banner (and its newer Giant banner supermarkets), including attractive upscale-looking departments like produce, deli/prepared foods and bakery, along with top-quality natural-specialty foods, fresh meat, produce and prepared foods merchandiing programs. As a result, it can export this expertise to Giant to Go in whatever doses it thinks are appropriate.

Dutch Royal Ahold-owned Giant Food Stores of Carlisle, Pennsylvania is now joining the other participants in this revolution with its new Giant to Go format. It seems "GIANTS" are even going small (format). Stay tuned, as there will be many more new entrants to the party.

Small-Format Food Retailing Memo: First 'Urban Fresh by Jewel' Small-Format Food and Grocery Market Opens Today in Chicago's Lincoln Park Neighborhood

Small-Format Food Retailing Special Report

The Jewel-Osco supermarket chain, which is owned by Supervalu, Inc., the second-largest U.S.-based food and grocery retail and wholesale company, opened the first store (the interior of which is pictured above) of its small-format Urban Fresh by Jewel start up chain today at 1910 N. Clybourn Avenue in the Lincoln Park neighborhood in Chicago, Illinios USA.

The small-format market is fairly upscale in design. It features an assortment of basic, specialty, natural and organic grocery products, along with fresh meats and produce (including specialty and organic varieties), ready-to-eat and ready-to-heat prepared meals, side dishes and snacks, and gourmet sandwiches and baked goods, along with wine and beer, with an emphasis on specialty wines and craft beers.

The overall focus of the store, even though it carries everyday grocery brands and items, is towards the upscale and specialty, including an emphasis on natural and organic. But the store also is merchandised for shoppers to pick up everyday items offered at about the same price a larger supermarket offers them for.

Urban Fresh by Jewel joins the company of Tesco's Fresh & Easy, Safeway's "The Market," (its one the market by Vons store in Long Beach, California thus far) Giant Eagle's Giant Eagle Express and Wal-Mart's soon to open Marketside, which all have in common that they are small-format, convenience-oriented grocery markets offering a limited assortment of basic groceries, fresh foods like meats and produce, specialty-natural items and fresh, prepared foods.

According to a Natural~Specialty Foods Memo correspondent who visited the Urban Fresh by Jewel store today on its opening day, it's very similar in design and merchandising style to Safeway's "The Market" format.

At 16,000 square feet, Urban Fresh by Jewel also is about the same size as the the market by Vons, which is about 15,000 -to- 18,000 square feet.

Urban Fresh by Jewel also is similar in look and merchandising to Canada's small-format Urban Fresh markets, which are owned an operated by the Canada-based grocery chain Sobeys.

The Canadian Urban Fresh stores have been around for sometime, and it appears Supervalu's Jewell-Osco chain liked the name so much it borrowed it for its small-format start-up chain, which the retailer says it plans to use in a urban-oriented retailing strategy in Illinois and Indiana, where the chain is based and operates about 183 supermarkets.

Food and grocery items at the Urban Fresh by Jewel Chicago store are grouped into pods to make for quick pickings of salads and deli items, for example, according to Miguel Alba, a spokesman for Jewell-Osco. This is the very same merchandising format Safeway rolled out in its the market by Vons store in Long Beach, California, which opened in May of this year.

Safeway plans to open its "The Market" small-format stores on a selective basis throughout the U.S. whenever and wherever it makes sense, CEO Steve Burd told Natural~Specialty Foods Memo early this year.

Safeway Stores, Inc. owns the Dominicks chain based in Illinois, so it's possible we will see a the market by Dominicks doing small-format food retailing battle with Urban Fresh by Jewel, which would be interesting since both chain's formats are so similar in store design and merchandising, including both using the the pod-style displays.

Safeway Stores, Inc. plans to use "the market" as the first part of the name of all of its small-format grocery stores, adding the name of the particular banner it uses in a given market as the ending. Vons is Safeway's banner in Southern California and Southern Nevada, for example. It's Dominicks in Illinios, Safeway in other parts of the U.S., and so on.

Additionally Jewel-Osco's Chicago small-format market has 10 checkout lanes, six of which are self-service. Spokesman Alba says this is designed to appeal to the younger, high-income residents in the Lincoln Park neighborhood, who he said the chain thinks will like the option of having a mix of full-service and self-service checkout lanes. Since four of the ten lanes are still full-service, he says he believes the store is offering both options to shoppers. They can use either full-serve or self-checkout depending on their needs at the time.

Safeway's small-format "The Market" format also uses a mix of full-serve and self-serve checkout lanes.

Tesco's Fresh & Easy Neighborhood Market, the small-format start up chain which now has 82 stores in Southern California, Nevada and Arizona, offers only self-service checkout lanes in its stores, although store clerks will assist customers with checkout and bagging if asked by a shopper to do so.

Trader Joe's on the other hand, the pioneer small-format specialty grocer in the U.S., has stuck to having only full-service checkout lanes in its stores. Clerks bag a shoppers order as well as scan it out in TJ's markets.

Among the upscale, natural, specialty and organic products in the first Urban Fresh by Jewel small-format market are: whole bean gourmet, organic and fair trade coffee beans displayed along with in-store grinders for shoppers to use; specialty, natural and organic food and grocery items across all shelf-stable and perishable categories; gourmet prepared foods items like Lobster and Shrimp Rockefeller and Hazelnut and Currant-Baked Apples (alongside more everyday items like meatloaf and cheescake); and regular and craft beers, along with basic and premium wines (about 400 varieties total, according to Jewel-Osco).

But there's also a limited selection of everyday grocery brands and items, as we mentioned earlier. There's Campbell's canned and packaged soups in the soup section, Kellogs Corn Flakes and Lucky Charms in the cereal aisle, and Wish Bone salad dressing along with numerous gourmet and organic salad dressing brands in the dressings section, for example.

The store does flip-flop a number of things as part of its emphasis on specialty, natural and organic, while at the same time offering basic food and grocery items to the extent any retailer can do so in 16,000 square feet.

For example, instead of national brand candy like Hershey Bars and Snickers at the front checkout stands, which is prime real estate, the store merchandises premium and organic confections like Lindt chocolate bars, New Tree brand Organic candies and Newman's Own organic confection items there, along with Altiods and other specialty and organic mints and related items.

The new Jewel-Osco small-format store sits on the site where there once was another small-format store which was owned and operated by Supervalu, Inc. That store was one of the company's five Sunflower Markets, which was a format it created to experiment with going after the natural foods shopper in a smaller-format store with lower prices than established natural products retailers like Whole Foods Market, Inc.

Supervalu opened five of the stores, which by design were run rather independently by the Sunflower folks hired to do so by the grocery company. In 2007, SuperValu announced its was closing the stores (which it did early this year) and ending what it called its test market of the Sunflower Market natural foods retailing format. [This Sunflower Market isn't to be confused with Sunflower Farmers Market (SFM), which used to happen so much SuperValu-owned Sunflower Market put a link to SFM, which is alive, thriving and growing fast, on its website.

Many people have asked for the last year or so if and what would replace the Sunflower Market natural foods store format, if anything, for Supervalu. They now have their answer. It's likely one or more of the other four closed Sunflower Market natural foods stores will likely end-up as an Urban Fresh by Jewel combination basic grocery, specialty-natural and fresh, prepared foods markets. The five Sunflower Market stores were in Illinios and Indina, in primarily urban locations.

Resources: Learn More:

>The online review site already has two reviews about the Chicago Urban Fresh by Jewel store, which just opened today. There likely will be more. You can view the reviews here.

Wednesday, September 17, 2008

Small-Format Food Retailing Memo: 'USA Today' to Open 'USA Today's' Travel Zone Convenience-Oriented Micro Small-Format Stores in Airports in America

Have you heard the joke going around that the newspaper business is SO bad in America (and it really is having serious problems) that USA Today, the newspaper with the largest circulation in the U.S., has decided to go into the convenience store business?

Well, it's not really a joke that's going around.

In fact, it's not a joke at all. We just made it up for an opening paragraph.

Gannet Company, which owns USA Today (the newspaper), today opened its first USA Today's Travel Zone micro small-format retail store inside the Detroit USA Metropolitan Wayne County Airport.

A second micro-small-format USA Today's Travel Zone store is to open before the end of the year in New York's LaGuardia Airport, along with not one but two stores opening in the Indianapolis, Indiana USA Airport in November of this year, according to Christy Hartsell, who is the director of brand licensing for USA Today. Additional stores are planned in other airports as well.

Hartsell says the airport stores will feature a wide variety of products, including beverages, snacks, candy, sundries, reading materials (lots of display space for USA Today the newspaper we expect), travel-related items and other related goods. The stores also will feature prepared foods items in the form of ready-to-eat grab-and-go-style snacks.

Here's how Ms. Hartsell describes the strategy behind the USA Today's Tavel Zone stores:

"USA Today is synonymous with travel and convenience. Therefore, "USA Today Travel Zone stores create a new opportunity for travelers to get the news and information they need when away from home."

Makes sense. USA Today (the newspaper) is synonymous with travel because it is everywhere travelers go. And it's synonymous with convenience because its editorial style is to feature shorter stories than most newspapers do, along with designing the paper and its website for quicker reading.

USA Today (the newspaper) won't actually operate the stores. Rather, Under a license agreement, HDS Retail, the world’s largest travel retailer with more than 4,000 stores in 18 countries, will operate the stores, says Ms. Hartsell.

She says USA Today wanted to create an extension of its brand and therefore decided the micro small-format convenience-oriented stores located in airports would make a good fit based on the USA Today brand image.

What we think

We certainly see numerous synergies between USA Today (the paper) and the stores, particularly with having them in airport locations.

Additionally, we think the stores offer numerous cross-marketing and merchandising opportunities with the newspaper -- both its online and print additions.

USA Today (the newspaper) has long associated itself with travel. The paper version is available all over America's airports, is left for free in front of the doors in most medium-range to higher-end hotels, and offers lots of content about travel and weather conditions for its readers, including business travelers.

The online edition is full of travel related content as well, along with being involved with numerous travel-related content providers and travel companies.

We think the combination of offering consumables, reading material and sundries, along with other goods, in the stores also is interesting. While numerous airport stores do this already, they don't have the potential tie-ins with a newspaper like USA Today (the store) has the potential to exploit via USA Today (the newspaper).

For example, ads for the micro small-format airport stores can be placed regularly in USA Today (both the paper and online editions), along with coupons for discounts (and introductory free) beverages and related items.

Promotions can be conducted as well using the paper as a marketing venue, especially the online version. For example, how about buy a beverage and snack at the store, get a free copy of USA Today (the paper) promotion to start. Ads and coupons placed in both the print and online editions.

The potential for good marketers is near endless really.

Of course, the success or failure of the stores will depend on executing the retailing fundamentals: location, merchandising and price, along with a few other key variables.

USA Today does have an experienced retail operations partner in HDS Retail North America.

We think it's an interesting development though. It also shows the differentiation and growing fragmentation of retailing in the U.S., particularly when it comes to consumables, even if just a few categories within the larger definition. In other words, consumables are increasingly -- in one form or another -- becoming an overall category that nearly every retail format is taking a bite out of, so to speak.

Be it Target selling perishable and shelf-stable food and grocery products in its discount stores, Cost Plus World market selling wines and craft beers (and specialty foods) in its import format stores along with furniture, or Home Depot selling beverages and some snack items in its big box home stores and Office Max doing the same in its office supply big boxes, there's a whole lot of consumables retailing going on -- and not just in food and grocery stores.

NSFM Editor's note: Please note we've coined a new term: micro small-format retailing. We checked extensively and haven't found it used by any other publications or others to date. If you've seen it used, send us a copy of the publication.

And, stay tuned, we've found some other examples of what we are calling micro small-format retailing, including food and grocery.

Our definition: Since small-format food food and grocery retailing generally is defined as stores from about 5,000 (very small-format) -to- 25,000 (high end) square feet. We define micro small-format in food and grocery retailing as about 5,000 square feet and below.

In other types of retail formats, such as drug stores, its all relative. For example, a 5,000 -to- 15,000 square foot drug store is considered average size today. Therefore a micro small-format drug store would be one less than say about 5,000 square feet in our analysis.

The USA Today travel-oriented airport convenience stores are considerably smaller than 5,000 square feet, by the way.

Small-Format Food Retailing Memo: A Professional Chef Turned Grocer Creates A 'Sub-Urban' Small-Format Fresh Foods and Grocery Store in Maryland USA

Small-Format Food Retailing Special Report

The U.S. economy may be going to hell in a handbasket (or perhaps shopping cart), with banking failure after banking failure, fast-rising unemployment, soaring food and gasoline prices and other assorted economic maladies, but even such tough times aren't stopping entrepreneurs from opening small-format food and grocery stores.

A case in point: Andre Cavallaro, the former executive chef at the popular Addies restaurant in Rockville, Maryland USA, recently opened a small-format food store, Sub*Urban Trading Company, in nearby Kensington, Maryland.

The food store, which is designed to look like a modern version of the old general store, takes a "green" positioning stance, offering organic fresh meats and produce, along with natural, organic and specialty food and grocery items, with a major emphasis on "locally-produced" products.

natural and specialty grocery items include oils, condiments, marinades, salad dressings and items in numerous other categories. Natural and specialty perishable items are sold in themarkets as well.

Here's what Katie R. from Kensington, Maryland recently had to say about the store in a review on the review website:

"The best word I can think of to describe sub*urban trading co. is 'yum'. Then I guess I would use amazingly fresh, organic, and friendly.

But whether I am biting into a warm rustic blackberry tart made with the ripest blackberries for breakfast or a slice of wild mushroom and goat cheese tart for lunch, all I can think of is yum.

How lucky Kensington is to have this new gourmet carryout owned and run by the friendly and knowledge pair, Andre and Alison Cavallaro.

Not only are there fresh pastry items everyday, but produce, dairy, meat, fish, baking items, and a few choice cookbooks. The fresh meats look so inviting - some marinated with fresh herbs; some small portions cooked to go. Many items are supplied by local farmers so it is worth the drive."

Utilizing his experience as a chef, Cavallaro is making fresh, prepared foods a major part of the market, which opened in August. Each day the store features ready-to-eat in-store fresh, prepared food items -- four different selections for lunch and one offering each evening for dinner. All are chef-quality prepared meals made by Cavallaro.

A Natural~Specialty Foods Memo reader who recently talked with Cavallaro tells us the four main statements the small-format food store makes are -- environmentally-friendly, organic, fresh and local.

All paper products used at the store are recycled, all plastic products used in the foodservice operation are corn-based and biodegradable, and all of the fresh produce and meats sold in the store are organic and, when possible, locally sourced.

A central feature of the market are its fresh, prepared foods to go, sales of which our reader says seem to be picking up since the store opened a little over a month ago. Cavallaro hopes to become a destination venue, where shoppers will stop in after work and pick up dinner to take home from his daily rotating menu, along with visiting regularly for take-home or take back to the office lunches.

The market is designed to be a neighborhood store; a store locals will shop daily if possible in the European tradition. Although we doubt if the owner would mind customers from outside the neighborhood.

In fact, our reader says Cavallaro had a strong following when he was executive chef at the restaurant in Rockville, Maryland, saying she expects numerous take-out prepared foods customers will stop in from there and elsewhere once they learn about the small-format combination natural, specialty and fresh, prepared foods market.

For example, Heather C from Rockville, Maryland, another reviewer on offers positive comments about the store's fresh, prepared foods, along with other aspects of the market:

"I absolutely LOVE LOVE LOVE this place!!!!!

I've been in a couple times since they've opened and have been so pleased with the atmosphere, the ambiance, the employees/owners, and obviously the products they sell.

The former chef of Addie's, Andre Cavallaro, and his mother Alison Cavallaro, run this "green" and organic minded market. They focus on all organic, sustainable, and local products. On top of all that, all of their bags, to go containers, cups, "plastic" silverware are made from either corn or recycled products and are all biodegradable!!!

I read Libby's response, and often times I shop at Safeway and organic eggs cost $4.99 and to tell you the truth, don't even know where they come from. So I'm happy to buy my eggs at Sub Urban.

I've been telling everyone I know about this place and highly recommend it to whoever reads this!! Check it out, you won't regret those awesome peach turnovers baked fresh every morning or those kick a** savory tarts!!! (I had the beet and goat cheese one the other day....OMG!)

As we often write about, small-format stores offer much opportunity in terms of geography -- they can be located in urban, suburban or rural area -- and format. Such stores can be more upscale natural-organic-specialty like Sub*Urban Trading Company, no frills, deep disconters like Aldi or Supervalu, Inc.'s Sav-A-Lot, or in-between markets like Tesco's Fresh & Easy Neighborhood Market, Wal-Mart's soon to open Marketside and the hundreds of independently-owned small-format food and grocery stores operated by individuals, family's and partnerships throughout the U.S.

Small-format food stores, because of their smaller size and lower cost to get started, also offer an opportunity to independent and entrepreneurs that otherwise would be unable to open a traditional size supermarket because of the expense of doing so. They also are the perfect fit for natural and specialty foods stores offering a specific focus like fresh, prepared foods.

We're seeing a revolution in the U.S., as we frequently write, in small-format food and grocery stores across all formats -- from hard discount -to- upscale organic, prepared foods and gourmet (or a combination of all those) -- despite the poor economy.

The good news is that if these stores can make it now, they can make it nearly anytime. Additionally, if they do make it now, the stores will be well positioned to thrive once the U.S. economy turns around. This is particularly true for natural and specialty foods'-oriented small-format food and grocery markets.

Monday, September 15, 2008

Small-Format Food Retailing Memo: Savannah, Georgia USA's Parker's Convenience Stores: Taking Hybrid Convenience-Grocery Retailing to Upscale Heights

Small-Format Food Retailing Special Report

From the Natural~Specialty Foods Memo Editor's Desk: On September 13, we wrote this piece, " Small-Format Food Retailing Memo: The 'Eco-Convenience' Hybrid Store Trend Continues to Emerge: 'Locali Conscious Convenience' to Open First Store," about what we've identified as an emerging trend in the convenience-oriented food and grocery retailing industry -- a retail format we call the eco-convenience or Econvenience store.

This format combines some of the traditional elements of convenience store retailing like limited assortments of basic grocery items, fueling stations and foodservice but takes things in a "green" direction, including taking on the format and merchandising elements of a mini natural foods store.

The eco-convenience format also features far more food and grocery products in general, especially healthy, natural and organic items, than the traditional convenience store does. It also doesn't generally offer tobacco products for sale, which are key sales generators in traditional convenience stores. Further, rather than selling basic beer and wine brands, the eco-convenience stores tend to go more upscale and specialty, offer some conventional products but putting an emphasis on craft beers and specialty wines.

The upscale hybrid convenience-grocery store

Long before the emergence of the eco-convenience store trend however -- as well as long before the emergence of hybrid small-format food and grocery stores like Tesco's Fresh & Easy Neighborhood Market, Giant Eagle Express, Safeway Stores' "The Market" format and Wal-Mart's Marketside, the first stores of which are set to open in a few weeks in four cities in the Phoenix, Arizona Metropolitan region -- their was, and continues to be, what we call the upscale hybrid convenience-grocery store.

This format is best typified by Pennsylvania-based Wawa, Inc., which operates about 400 upscale hybrid convenience-grocery stores in the eastern Unites States. Wawa stores offer fueling stations and tobacco products like traditional convenience stores do, along with offering a limited assortment of basic grocery items (Wawa's limited assortment is more extensive than the average C-store).

However, the retailer also sells fresh produce in its stores, including some organic produce, offers a limited selection of natural, organic and specialty food and grocery products, and puts a major emphasis on quality fresh, prepared foods (foodservice) rather than the typical "belly filler" fair the traditional convenience store sells. Premium coffees, quality fresh baked goods and other premium and specialty offerings are a part of the Wawa stores' merchandising mix.

Wawa also does all this in what is a far more upscale designed retail store than that of the traditional convenience store.

Wawa is a pioneer in this niche, having converted its stores to this more upscale hybrid convenience-grocery store format in the 1980's. It's continued to refine the approach, and in the case of many of its newest stores it's going even more upscale in design, look and merchandising.

Parkers Convenience Stores

Wawa isn't alone in pioneering this format. Another pioneer in upscale hybrid convenience-grocery store retailing is Savannah, Georgia-based Parker's Convenience Stores, which we've written about before in Natural~Specialty Foods Memo.

Parker's primary hybrid convenience-grocery store banner is Parker's Convenience Stores (interior pictured above), an upscale version of the traditional convenience store with elements of a specialty foods store tossed in the mix. Quality foodservice is a major emphasis in the stores.

Parker's takes an even more upscale specialty-gourmet retailing approach in one of its banners, Parker's Market Urban Gourmet store (pictured above), which if you've been to or seen interior pictures of Safeway's "the market by Vons" in Long Beach, California, looks similar in many ways.

Parker's opened its first Parker's Gourmet Market convenience-oriented grocery-convenience market in Savannah, Georgia long before Safeway created its "The Market" format. The first and currently only small-format Safeway-owned "The Market" format store opened in Long Beach in May of this year.

Today's edition of Convenience Store News has a well detailed and written piece about Parker's Convenience Stores. The article, written by Barbara Grondin Francella, discusses Parker's format philosophy, operations and future plans, among other things. The story fits into our current "Small-Format Food Retailing Special Report" theme. Therefore we are reprinting the piece about Parker's from today's Convenience Store News for our readers. Read it below:

Twice as Nice
By Barbara Grondin Francella
Convenience Store News
September 15, 2008

Greg Parker's philosophy about convenience marketing took root during his first retailing experience in 1975, when at age 21 he built a c-store in Midway, Ga. -- and installed expensive paneling on the walls and pricey carpet on the floors.

Customers, he said, would walk in and gasp, "Wow! What is this?"

"I knew nothing about retailing back then, but I knew people like to feel special," Parker related. "That has been the differentiating aspect of our company culture. In everything we do, we try to elevate the customer experience."

The flavor of that c-store with auto service bay, which Parker built as an offshoot of his father's small Amoco Oil distributorship, can be found in the upscale, foodservice-driven Parker's Convenience Stores today. Back then, the young entrepreneur equipped the store with a kitchen, where then-teenager Amy Lane, who is now Parker's chief operating officer, made hamburgers and fries, hot dogs, salads, sandwiches and full, made-to-order breakfasts.

"I didn't think it was so novel at the time," Parker recalled. "I just thought I'd need to create alternate profit centers."

After opening that first store in 1975, Parker didn't take a day off, including Christmas, for three and a half years. "I didn't have time to go see what others in the industry were doing. Now, if I hear of something great happening, I don't hesitate to hop on a plane and go visit."

Still, Parker knew instinctively that developing an outstanding experience for the customer was crucial. "When I was opening my fifth store, my brother said, 'You may be making this too nice for this town.' But I thought, 'You can never go wrong delivering more than people expect.'"

That strategy has worked very well for 33 years. Savannah, Ga.-based Parker Companies' 25 Parker's Convenience Stores; Parker's Market gourmet store; Parker Oil Co., a distributor of BP, Chevron and Parker's own Supron brand gasoline; three Spin City Laundromats; an Urban Attic self-storage facility and a real estate business, tallied more than $150 million in sales last year.

Parker's Convenience Stores, a mix of urban, suburban and rural sites each unique in look, offer standard convenience items and a not-so-standard menu of homemade Parker's Market-branded sweets, sandwiches and salads, some made in the store, others at a commissary store and delivered each day. Gourmet coffee, milk shakes, walk-in beer coolers, 79-cent Quench Zone fountain drinks with chewy ice and "the cheapest cigarette carton prices in town" are presented in an upscale environment."

We rationalize our portfolio of stores and spend when we think we need to," said Parker, who noted the company is very good about keeping its stores up to date.

"It's very important to reinvest in your best performers," he added. "You don't want to be just a harvester. There is a time to sow and a time to reap, and you need to be thoughtful when you are doing both. I have an intense desire to sharpen the saw."

Despite the tough economy, Parker has three new locations slated to open this year in Savannah and Blitchton, Ga., and Bluffton, S.C.

Parker appears to be one of the many c-store retailers looking to take advantage of business incentives included with the taxpayer rebates in the government's Economic Stimulus Act of 2008. A recent online poll found that 14 percent of retailers were already benefiting from the incentives and 36 percent were trying to find a way to take advantage of the incentives. Interestingly, despite a lot of publicity, 43 percent of retailers said they were not even aware of the business incentives in the rebate program.

"The Bush 'stimulus package' -- and I try not to laugh when I say that -- gives us a 50-percent bonus depreciation," Parker noted. Assets that would typically depreciate over five years, at 20 percent per year, may now, for example, be depreciated at a rate of 50 percent in the first year, with the other 50 percent spread evenly over the five years, giving retailers a 60-percent depreciation rate in the first year.

"If you build something now, you'll pay little if any taxes on it the first year. Because your tax estimates are based on the previous year," he noted. "The next year, your required tax estimates will also be lower. Plus, if you have a strong balance sheet, money is cheap now. Building costs are coming down, land costs are coming down and unemployment is up, so labor costs are coming down. It is a great time to build."

New Parker's Convenience Stores measure 4,400 square feet. Upscale in appearance, they feature tiled floors and walls, have an extensive foodservice lineup, "and outrageously nice restrooms," Parker said. Outside, eight multi-product dispensers offer Supron motor fuels.

"Our brand starts with the architecture, which I believe is our greatest art form," Parker explained. "We outspend our competition when it comes to building our stores in terms of materials, design, lighting and landscaping. We spend between $2 million and $2.5 million per location, not including the land cost."

Parker also typically outspends other retailers outside the store. Parker's Convenience Stores have won a number of landscaping awards, unusual in the convenience business. Parker, who studied botany in college, personally selects a new site's planting materials, sometimes opting for three times as much as called for by the landscape designer.

He recently prevailed in a very public, heated exchange with a local planning commission, which wanted him to remove a 300-year-old tree on a piece of property that will hold a new store soon. The community backed him in his efforts to save the tree.

Lush landscaping aside, each convenience store looks different, although Parker is giving them a few common elements now, with a specific look for all the urban stores, the suburban stores and the rural locations. For instance, all rural stores will have low-country architecture, wood siding and metal latticework over the entrance.

If Parker sees something he likes, he'll incorporate it into a store. One unit, for example, features cutouts of people hanging at angles from the ceiling rafters. They are the work of an actor/student, who was learning set design at the Savannah College of Art Design while working part time at one of the stores. One figure holds a hot dog; another is shooting ketchup across the room to go on the wiener.

Parker recently completed a $500,000 upgrade of Parker's Market. (For more on Parker's Market, see "Parker's Market: Convenience Meets Gourmet," at"

Before this, my wife and I did all the design work in that store," he said. "But we went to the opening of a new restaurant and loved the design and hired the designer [Joel Snayd, of Re:think Design Studio] that night. We do most ourselves, but solicit many opinions."

The new design opened up the floor plan by relocating a gourmet coffee center, which had split the store in two, and added a crowd-pleasing mix of materials and elements, including granite countertops, custom lighting fixtures, blackboards for signage and a wine display area using reclaimed wood and old iron piping.

"I can't build anything cost effective," Parker laughed. "I always overspend. I love being creative and artistic, and I'm as passionate about architecture as I am about c-stores. Everything we do, I want people to think, 'Wow.'"

Many Happy Returns

Whether he's overspending or not, Parker is getting a return on that investment. Parker's Convenience Stores rank consistently in the top quartile of all industry performance measures, and Parker's Market rings up millions in sales each year.

The retailer credits these results to a disciplined approach to controlling expenses and a keen focus on gross profit dollars.

"We have the lowest cents-per-gallon break-even point of anyone I know in the industry," he said. "We really pay attention to the details, and we train our people before they step into the store so we don't suffer as many mistakes. It helps to reduce turnover too."

The company pays higher-than-industry-average salaries, offering bonuses for catching honest mistakes ($10); catching and prosecuting shoplifters ($50); turning in a co-worker for stealing ($500); and recruiting another employee who stays one year ($500). Managers' bonuses equal up to 21 percent of their quarterly salaries. Additionally, a six-month bonus of $1 per hour worked is offered as an incentive to keep new employees.

Parker's benefit package includes health and dental insurance and a medical pre-tax spending plan, life insurance, 401K, paid vacation and a YMCA membership.

Parker relies on state-of-the-art retail technology, including Dresser Wayne's InSite and PDI's Enterprise, Focal Point, Applicant and Virtual University software, to keep firm tabs on inventory, each SKU's profitability and human resource functions. Products are scanned into inventory and at sale; Parker's team makes assortment and space allocations based on that data. "We analyze our baskets," he said. "We understand there are five traffic-generating areas of the store -- checkout, fountain and frozen carbonated beverages, cold vault, beer caves and coffee counter -- and we focus on having the right products in the path of the consumer to increase the opportunity for adjacency sales."

Brandon Hofmann, our marketing manager, is the best in the industry, and he has us focused on gross margin dollar contribution," said Parker.

He also said he is "constantly preaching" about gross dollar margin (GDM) contribution. "We can see what the top GDM contributors are by item and understand the importance of space-to-sales ratios for planograms," he noted. "But the real issue is space-to-GDM contribution."

For example, he regularly uses GDM contribution to rationalize products in the cooler. "We ask ourselves where high-dollar margin products are in the cooler door. Are they at eye level? In door 1? Door 2?"

You'll never find the words "loss leader" in any of Parker's marketing plans. "Why would anyone want to lose money on something? We position ourselves as a low-cost provider in fountain drinks, but it's still about growing the category and having the most pennies in the bottom line. We have the lowest cost on cigarette cartons. Our pack prices are not the lowest, but our three-pack special is."

Outside the box, all new stores sell Parker's Supron brand gasoline. If a c-store operator goes to market with beautiful stores at superior locations, customers don't care if he is selling a major gasoline brand, he said. "When you look at the top performers in the country, including Wawa, Sheetz, QuikTrip and others, very few are selling branded gasoline."

In 2001, when he created Supron, Parker wanted it to feel "like a major brand." Customers' initially reacted to it with curiosity. "We did radio and TV, billboard and bus advertising, and the consumer got familiar with the brand," Parker said.