Friday Foodie Feature Memo: Brand Emeril (Lagasse) to the Rescue

Emeril Lagasse is a one man tour-de-force in the food world. He's a successful restaurant owner and chef, cookbook author, television cooking show host, appears on ABC's Good Morning America as the show's resident foodie, speaks to groups throughout the world about food and cooking, and is a specialty foods and gourmet cookware entrepreneur, who markets his Emeril's brand of specialty food products, which includes sauces, marinades, coffee, cooking spray, mustard, salad dressings, salsas, seasonings, spices, rubs, and his Emeril line of cookware and related kitchen gadgets.

He also has a line of Emeril brand food-related apparel, plus a corporate and consumer gift item line in which he includes bits and pieces of all of the branded products in his empire.

The Emeril brand of specialty foods are sold online, at supermarkets, and at specialty and natural foods stores.

Emeril's cookware and kitchen gadget line-cooking tools line,which has been one of his fastest-growing product line extensions, also is sold online, as well as at numerous medium-range -to- higher-end department and home-centered stores.

When it comes to the world of food and cooking, it's safe to say Emeril understands the term "line extensions." He's got the home kitchen -- from pantry, stove top and counter top to what the home chef wears to cook, and the recipes she uses to cook from -- covered.

But even Emeril and his marketing staff likely couldn't have thought about the latest line extension in the Emeril brand portfolio, or rather the new use a woman found for one of the celebrity chef and specialty foods entrepreneurs gourmet cookware line cooking pans.

A woman who is a big fan of everything Emeril, from his cookbooks and television shows to his branded specialty foods products -- and especially his cookware -- created a brand new use for one of those Emeril frying or saute pans recently -- and it was a spur of the moment brain storm.

You see, an intruder broke into her home and surprised her. But she in turn surprised him back by taking one of Emeril's cooking pans and beating the intruder over the head with it, thereby proving not only that cooking pans have more than one use, but also that Emeril's pan meets the stress test -- the handle did not fall off when she used it to club the intruder.

But enough said: A picture, as they say, is worth a thousand words. So feel free to view a video of the woman using one of Emeril's pans to fend off her household intruder. It's Friday after all, we can lighten up a bit.

Click her to watch the video.

We bet the woman is now one of Emeril's best customers. But we wonder: When she used the Emeril brand cooking pan on the intruder, did she also used the celebrity chef's famous tagline? That famous tagline -- "BAM!" of course.

Retail Memo - Specialty Foods: Balducci's Creates Some Value On the High-End With 'Balducci's Own' Specialty Store Brand, Now Including Caviar

Pictured above: The Balducci's store in Manhattan's Chelsea neighborhood, one of the 10 upscale specialty and epicurean foods markets operated by the gourmet grocer. The Chelsea Balducci's is an urban store. The specialty foods retailer's store's in other places like Maryland and Virginia has a more suburban look to them however.

Upscale Food Retailing in the Recession: Let Them Eat (Balducci's Own Store Brand) Caviar

Bethesda, Maryland USA-based specialty and epicurean foods retailer Balducci's is sticking a gold-plated fork in the eye of the current economic recession as well as adapting in its own unique way by creating a value proposition around its Balducci's Own store brand specialty and gourmet products, which now includes caviar.

The storied specialty foods retailer, which has survived many an economic recession, has introduced a line of caviar under its own store brand -- the "Balducci's Own Brand."

"In this economy, Americans everywhere are scaling back on their holiday menus," says John Coleman, Balducci's wine, cheese and coffee merchant. "However, many party planners, food connoisseurs and epicureans alike are still looking for ways to enjoy their annual holiday luxuries."

There you go. Balducci's is a perfect example of what we've been saying -- that regardless of format or income-level consumer catered to, retailers must create their own unique value propositions in this serious economic recession.

Granted, this is an interesting and rather high-end value proposition in general. But that's Balducci's niche, and always has been. But even the wealthy can use a little relief, even when it comes to caviar prices.

The most value-priced Balducci's Own brand caviar is Farmed California White Sturgeon. It retails for $55 to $299 per ounce through New Year's Day. The caviar regularly goes for $80-$475 per ounce, according to John Coleman.

The caviar comes in three different types: Wild Caspian, which comprises the Sevruga ($199-$1,175 per ounce) and Royal Osetra ($249-$1,500 per ounce) varieties; Farmed International, which consists of the Farmed California White Sturgeon and the first true Russian Sturgeon to be successfully cultivated in Germany for the production of genuine Osetra caviar ($120-$725 per ounce); and Domestic, which consists of salmon caviar from Alaska and paddlefish caviar from the Tennessee and Mississippi rivers (($9.99-$29.99 per ounce and $35-$199 per ounce, respectively).

"With the new line of Balducci's Own caviar, you can still indulge, and very often under $100," says Coleman. "And with the Balducci's brand, you can rest assured that you are getting -- or giving -- the highest in quality."

The 10-store specialty and epicurean foods retailer has been beefing up its Balducci's Own store brand over the last year. The line includes numerous varieties of products in the cracker, cookie, oil, vinegars, condiment, coffee, sauces and others categories. All are priced below comparable domestic and imported manufacturers' specialty and gourmet brands.

Balducci's also offers a second store brand line -- Balducci's Premium -- which offers numerous epicurean food and grocery items across numerous categories. It's priced higher than its Balducci's Own brand.

In addition to operating 10 specialty-gourmet foods markets on the east coast, Balducci's has a significant online shopping and mail order delivery business via its Web site here.

The Balducci's stores are smaller-sized markets but are packed full of fresh and shelf-stable specialty food and grocery products across all categories, including fresh produce, meats, deli-prepared foods, dairy and grocery. The are best described as neighborhood-sized stores packed to the ceiling with specialty foods of all types, in an upscale setting.

Specialty Foods Retailing Memo: A Love of Good Italian Olive Oil Leads to A Thriving Business For Two Specialty Foods Entrepreneurs

Natural~Specialty Foods Memo Editor's Note: Lea Ann Vessels, a former employee of consumer packaged goods giant Proctor & Gamble, and Marta Miranda, a University professor, have turned a love of good Italian olive oils and good food in general into a thriving specialty foods store, along with their own brand of award-winning premium Italian olive oil that has developed a cult following, and a line of Italian tomato and pesto sauces.

The partners operate the Abbondanza specialty foods store in Lexington, Kentucky USA, where they also bottle their Oliva Bella brand (which means beautiful olive) olive oil and a recently introduced line of Italian tomato and pesto sauces.

The two specialty foods entrepreneurs started out in 2004 bottling some olive oil they imported from Italy and then selling it at the local farmers market. They built a customer following, then opened their specialty foods store. They added additional varieties of olive oil under their own brand, then expanded the inventory in the store into other specialty and gourmet foods categories, along with creating their own line of Italian tomato and pesto sauces.

Business is booming. But they are keeping the store small and niche-oriented by design. It's their point of differentiation, along with marketing and selling their own brand of Italian olive oils.

The food-loving partners are branching out into offering food education classes and seminars through the store, allowing them to not only put a focus on their olive oil line and the other products they offer for sale in the store, but to also further explore and share with customers their love of good food and the good food lifestyle.

Writer Cynthia L. Jones has a profile of the two owners of Lexington, Kentucky's Abbondanza specialty foods store in Southsider Magazine, a publication that focuses on lifestyle and other topics in the Lexington region. Read Ms. Jones' feature article below:

A Bottled Bounty

Abbondanza owners know how to keep customers coming back

By Cynthia L. Jones

Southsider Magazine, Lexington, Kentucky USA

October 30, 2008

When Abbondanza co-owners Lea Ann Vessels (at left in the photo) and Marta Miranda began peddling their extra virgin olive oils at the Lexington Farmers' Market in 2004, they dreamed of its success, but never expected the cult following it has acquired.

Today, the savvy co-owners have customers calling them at home after hours for oil. "One customer called and said she had an olive oil emergency," Vessels said. "She said even if I could put some in a mason jar that she would pay whatever." Vessels sent the customer home with olive oil in an empty wine bottle.

Vessels, who has even received calls on New Year's Day from customers, says she tries to be accommodating. Another customer who was having a dinner party called on a Sunday asking for oil. "She apologized for the Sunday call," Vessels said. "And I told her to meet me down at the shop."

The two began their venture by importing 200 liters of olive oil, which they sold in two months time. With a growing customer base from the farmers' market, Vessels and Miranda opened a tasting room, located at 406 S. Broadway, for their Oliva Bella oils imported from farms in southern Italy. Since opening last summer, the owners have expanded their products to include fine balsamic, pastas and specialty cheeses. Last year, the company began selling their homemade pomodori agrodolce (slow roasted tomato sauce), cipollini (roasted onion) and pesto sauces that have also become wildly successful.

The idea for bringing olive oil to Lexington began when Vessels' work with Proctor & Gamble took her to Italy. She began tasting oils that her colleagues would bring to her from their own family groves. Vessels explained that the difference in quality was striking. "I had always loved olive oil," she said. "But I realized I had never really tasted fresh olive oil until then." As Vessels began tasting fine oils, she began to realize there was a need in Lexington for oil of this caliber.

Vessels then joined with Miranda, a friend and partner in other business ventures. "We are people who are passionate about good food," Miranda said. "We love to put things together in a healthier way." Miranda is an associate professor and director of the Office of Multicultural Affairs and Women and Gender Studies at Eastern Kentucky University. Miranda grew up cooking with her father in his restaurants' kitchens. At age 5 she had a special stool in order to be tall enough to stir the pots.

The owners have purposely kept the shop small and quaint to give it that corner store feel. "People are starving for the old fashioned way of the community or neighborhood market where they can visit and talk about food," Vessels said. She explained that the customer base is very diverse. "It's not just high end," she said and explained that the store attracts everyone from cancer patients looking for the medicinal benefits of fresh olive oil to retirees and college students.

Vessels and Miranda came up with the name, Abbondanza, because it means "abundance" in Italian. Vessels said the idea of fullness or having enough for everyone at the table fits perfectly in description, value and name for the company. "Since we were importing olive oil from Italy," Vessels said, "we wanted to weave in the beautiful Italian language as well." The two named the oil Oliva Bella, which means "beautiful olive"–a name they feel is easy for customers to remember.

Miranda and Vessels believe it's important to teach their customers about the differences their fresh olive oils provide not only in taste, but also in healthful benefits. "A big part of our business is educating people," Vessels said. "Once people taste it, they can't go back to their supermarket bottles."

Anyone who wanders inside the tasting room will be invited to try their products and learn about the advantages of using oils made from hand-harvested olives. The nutritive benefits of the olive oils remain in their high antioxidants and low acidity levels. As a result, each bottle has the harvest date on the back to help customers understand the importance of keeping it fresh. To ensure their commitment to selling fresh oils, the owners keep the oil shipments to a minimum and bottle the oils themselves. Loyal customers, however, have been disappointed when the supply was gone. Ralph Brown, a Lexington customer, said he ran out of oil before the next shipment. "I came into the store every day asking, 'Okay, where's the oil?'"

The oils recently won the 2007 silver medal award at the Los Angeles International Extra Virgin Olive Oil Competition. Oliva Bella competed against over 400 oils, most of which came from outside the United States.

Vessels said that the company does very little advertising and added that most of their business is from word of mouth. Many new customers also stop in as a result of seeing displays on white butcher paper. Each day, Vessels writes catchy, hand-written signs inviting them to stop into the store. After taste testing their products, customers will be offered a small cup of Miranda's Cuban coffee.

The most recent venture of Abbondanza is their cooking parties that take place in the tasting room kitchen. "The idea is to teach people how to creatively put things together," Miranda explained. "Cooking for people is one of the most important ways to love and nurture them."

Miranda explained that the secret is having few ingredients and putting them together in a way in which most people hadn't thought. For instance, Vessels came up with the idea of using peaches wrapped in prosciutto or adding a tablespoon of cream cheese into their tomato sauce to make a very rich and creamy rosato (pink) sauce.

Before opening Abbondanza, Vessels says she would spend her Sundays cooking all day and delivering food to friends. "Food is my therapy," she said. "It's what I think about all the time, it's how I de-stress; it's my nightly entertainment."

She says she loves reading food magazines and cookbooks and watching the Food Network; the food is what she wants to talk about most of the time. "When I greet friends," Vessels said, "I am more likely to ask, 'What did you eat last night' than 'How are you?'"

Several Kentucky restaurants are already using the oil in their recipes. Holly Hill Inn, in Midway, and several others in Louisville are among them

[Photo Credit: Photograph above by Robbie Clark for Southsider Magazine.]

Supply Side Memo: Current Credit Crunch and Financial Crisis Beginning to Have Negative Impact on Smaller Specialty and Natural Foods Companies

The current credit crunch and financial crisis in the U.S. is starting to have a negative impact on smaller specialty foods manufacturing companies, particularly those who had embarked on growing their product lines and distribution prior to the crisis emerging so strongly in September to the present.

Yesterday's San Francisco Chronicle profiles one such specialty foods company in a credit jam, Napa, California-based The Perfect Pear, which produces and markets homemade specialty pear sauces, oils, marinades and jams.

The Napa specialty foods company was founded in 2003 by former corporate marketing executive Susan Knapp, who left her corporate job to live her dream, to become a specialty foods industry entrepreneur.

Today The Perfect Pair produces 19 different pear-based specialty foods products and has annual sales of $700,000.

Not bad for a self-funded,start-up niche specialty foods company that's not yet five years old.

But that's the good news.

The not so good news is that Susan Knapp needs $200,000 right now to fill current orders from customers like Whole Foods Market, Inc. and others, as well as to meet the increased demand from retail customers for her products, she tells the San Francisco Chronicle staff writer Julian Guthrie in the story.

Normally that wouldn't be a big problem for the specialty foods industry entrepreneur, since her company has good credit, she has fairly strong sales, and has an existing retail customer base, along with new customers wanting to buy her pear-based specialty products.

But because of the frozen credit markets Susan Knapp has been unable to obtain a working capital loan. In order to hold on, she is using her credit cards, asking friends and associates for loans or to invest in the company and searching out private investors who if the deal is right she is willing to sell a stake of her self-funded specialty foods company to in return for working capital so she can fulfill her orders. Investors in small companies like hers are very hard to find in good times let alone now though.

Read the story, "Successful pear products firm in a credit jam," from yesterday's San Francisco Chronicle here.

Susan Knapp's specialty foods company is far from alone in experiencing the freeze in the credit markets, even for short-term, working capital loans. In recent weeks we've spoken to a number of smaller, entrepreneurial specialty, natural and artisan foods manufacturing companies facing the same issue.

Most of these companies are doing well. They just need short-term loans to produce inventory. In most of the cases we've come into contact with there are orders from distributors and retail customers for this to be produced inventory. It's cash flow that's lacking. And crdit is tight.

Unlike larger manufacturing companies, these entrepreneurial specialty companies don't have the sales or cash flow to always fund production. This is expecially true if they get a new customer like a Whole Foods Market, Inc., who's initial order of such a product for all of its U.S. stores can easilty be 400 -to- 1,000 cases. or more Most of these smaller firms don't keep that much extra inventory on hand since doing so isn't financially prudent.

Another difficulty is in the current poor economic climate distributors and retailers often hold back their payables a bit longer than normal. Going say just an extra 30 days without being paid by a couple major customers can play havock on the cash flow of these smaller specialty producers.

Another problem many smaller specialty, natural and artisan foods manufacturers have is they may not have noticed the coming economic downturn like bigger companies did. Therefore they didn't cut expenses or make other preparations soon enough. Of course in the case of the current credit crisis, not even the largest U.S. banks and corporations, let alone the Bush Administration and Congress, appeared to have had any idea it was on the way. And despite the $700 billion taxpayer bailout of financial institutions we have yet to see any thawing in the credit markets.

Unfortunately for these smaller, entrepreneurial companies the current credit crisis is just the tip of the iceberg. Most U.S. economists believe the country has now fallen into recession, and that things are going to get far worse before they turn around.

As a result, for smaller specialty foods companies this not only means a continued period of frozen credit markets. It also means the possibillity of decreased sales to retail customers because the demand for more expensive specialty and natural products is decreasing. There is across the board evidence of this, as consumers are trading down to lessor-quality, cheaper food and grocery products -- and shopping more at discount rather than natural and specialty stores -- in significant numbers all across America.

This means less sales, cash flow and resources for these smaller specialty foods companies. It also means those who are going to survive need to look at their operations from stem to stern and cut costs whereever they can -- from procurement and production to administrative and operations.

This week's Newsweek magazine has an informative article suggesting small businesses of all kinds need to do just that now -- to shift into cost-cutting mode.

Read the Newsweek article, "Shifting into Cost-Cutting Mode," here.

Now is the time for smaller specialty, natural and artisinal food companies to cut costs. The longer and deeper into a recession it gets the harder it becomes to realize proper savings. And to survive.

Below are a few suggestions we have for smaller specialty companies looking to and needing to cut costs now:

>If you use a co-packer sit down with him or her and talk costs. Also talk to one or two competing co-packers and find out what they would charge you compared to what you currently are paying. There is usually money to be saved by doing this exercise.

>Cut any extra administrative costs to the bone. Do you really need those two company vehicles? Can you pay yourself a smaller salary for a while? What are you paying for office supplies? Probably too much. Lastly, can you afford the current number of employees you have working for you?

>Cut back on travel. Do you really need to attend the number of food shows you have been? Coudn't you cut back to two or three key shows and still be fine? Do you really need to travel to the number of customer calls out of the region you have been? Can you cut back on this expense -- air fair, hotels, meals when on the road -- a bit in order to save big dollars without hurting sales.

>Look at packaging. Packaging is one of the biggest money wasters smaller specialty companies neglect. Talk with your suppliers. Get estimates from competitors. Could you save by say going from glass to plastic, for example. Maybe you should reduce the size of your package from say 16oz to 14oz so you can make a bit better margin per unit of sale. Notice how the traditional gallon of bleach is now a few ounces less than an actual gallon? That's because Clorox and the other big guys have reduced package sizes in order to gain a few extra pennies per unit in gross margin. It's the same with various food products from numerous major manufacturers. They've been reducing package sizes by small increments since last year.

These are just a few examples of places smaller specialty, natural and artisan food companies can look to cut costs.

Generally speaking, cost-cutting isn't going to solve the need for cash that Susan Knapp and her The Perfect Pear has, although cutting costs to the bone without harming sales is the first thing she needs to do if she hasn't already done so.

However, we've never seen one smaller-size (under $10 million in annual sales say) specialty or natural foods company that couldn't cut costs, be it cutting back on excess travel, trimming administrative costs, doing better with marketing and sales, shopping around for better deals on co-packers and packaging, and other key operational, production and related expenses.

It's also important that along with cutting costs right now these companies make sure they are collecting receivables on time. There is a time-honored practice by some customers to hold their accounts payable for as long as possible in recessionary times. Even an extra week can be negative to the cash flow of a smaller specialty foods company.

Therefore, keep on top of receivables. Also, if things get real bad check into factoring companies. These companies will advance you cash on your unpaid customer receivables, taking a percentage cut of course, which in the case of seriously outstanding accounts can mean the difference between surviving and folding up the tent in terms of needed cash flow.

Now is the time for smaller specialty and natural foods manufacturing and marketing companies to take a comprehensive, rational look at every aspect of production and operations. Doing so will allow you to whether the current recessionary storm.

Also such companies should be all over their Congressional representatives about the $700 billion bailout's not yet having even a minimal affect on thawing the credit markets. After all, its is small business, such as specialty and natural foods companies, that provide the majority of new jobs in America, as is said by both Presidential candidates multiple times a day on the campaign trail. These very same small businesses need access to the credit markets in order to create these jobs.

[Photo credit: Credit Crunch Cereal graphic courtesy: lewrockwell.com. That's Federal Reserve Bank Chairman Ben Bernanke pictured on the front of the cereal box.]

Retail Memo: Washington D.C's Famous Georgetown Neighborhood Could Finally Get its Long-Desired 'Social Safeway' Supermarket

From the Natural~Specialty Foods Editor's Desk: Nearly three years ago Pleasanton, California USA-based Safeway Stores, Inc. embarked on the huge task of converting what are now about 1,755 supermarkets under numerous retail banners in the United States into what it calls its "Lifestyle" format.

Safeway's "Lifestyle" format is a fairly upscale store design package which features soft colors inside the store, hardwood flooring in departments like produce and wine, and spot lighting instead of bright lights, along with numerous other attractive design elements.

The "Lifestyle" format combines Safeway's traditional value-oriented style of food and grocery retailing with a greater focus on natural, organic, premium and specialty products merchandising across all store categories.

This merchandising emphasis includes expanded selections of natural, healthy and organic food and grocery products like Safeway's own popular O' Organics and Eating Right store brands, along with manufacturers' brands.

The "Lifestyle" merchandising focus also includes store branding of Safeway's fresh, prepared foods offerings, including its premium Signature Cafe brand of ready-to-eat and ready-to-heat items. Additionally, under the "Lifestyle" format Safeway has dramatically expanded the number of premium, specialty, ethnic and gourmet food and grocery items it carries in its supermarkets.

Perhaps the most interesting and important aspect of the "Lifestyle" format is that with it Safeway has tried to create a much more social supermarket. The retailer has used design features like outdoor patios and terraces in some cases, farmers market-style produce departments, wine cellars and old fashion butcher shop-style meat departments in both its new and remodeled supermarkets as ways to create a more social and enjoyable shopping experience for customers.

By and large the "Lifestyle" format has been a big success for Safeway, which has thus far converted about 70% of its U.S. supermarkets--which operate under such banners as Safeway (Northern California, Oregon, Washington state, Arizona, Colorado, Washington D.C., Maryland and Virginia); Vons (Southern California and Nevada); Carrs (Alaska); Dominicks (Illinios and Indiana) and others--into the "Lifestyle" format, according to CEO Steve Burd. Plans call for all of the supermarket chain's stores (except the handful of Pak-N-Sav warehouse stores it operates in Northern California) to be converted to the "Lifestyle" format by the end of 2009, Burd told Natural~Specialty Foods Memo earlier this year.

One strategy Safeway has been using during its three year "Lifestyle" conversion format is to expand the size of certain stores and upscale them considerably in neighborhoods in which the shopper demographics are strong for food stores offering a lifestyle experience along with expanded selections of natural, organic, premium and specialty foods.

The supermarket chain has a number of stores that were opened long ago that sit in such premium demographic neighborhoods. Many of those stores, such a one currently being proposed (a remodel) in Oakland, California's upscale College neighborhood, another in Berkeley, California and yet another in the upscale Georgetown district in Washington D.C., are older, small supermarkets that once fit well in these neighborhoods but have long outgrown the gentrification and upscaling that's gone on in them. These stores and others present a huge sales opportunity (at least a doubling of annual gross sales) if expanded and remodeled based on the respective neighborhoods' demographic profiles.

Washington D.C's Georgetown, home to Senators, lobbyists and the well known Georgetown University, has long wanted Safeway to grow and upscale the Safeway supermarket that's been in the neighborhood for decades.

This has particularly been the desire of Georgetown University students and faculty who like most university communities are on the cutting edge of the natural and organic foods trend. Additionally, the wealthy political and business movers and shakers of Washington D.C., many who reside in Georgetown, have wanted a Safeway supermarket in the neighborhood like the ones ("Lifestyle" format) in nearby Alexandria, Virginia, which is one of the more wealthier suburbs of the nation's capital city.

This desire for a more "social" Safeway has been discussed in the Washington Post newspaper, on numerous area online food forums, and in the pages of the Hoya, the student newspaper of Georgetown University.

Well, it looks like Georgetown University students and the Georgetown neighborhood's who's who of political and corporate residents and their frequently entertaining spouses are going to get their long-desired "social Safeway", according to a story in today's edition of the Hoya, the Georgetown University student newspaper that was founded in 1920.

And, according to the article reprinted below, it looks like Safeway plans to serve up a "Lifestyle" format supermarket for Washington D.C.'s Georgetown neighborhood (where former President John F. Kennedy lived before being elected to office) befitting the areas demographics, love of food and desire for a more social grocery shopping experience.

Perhaps the new Georgetown "Social Safeway" will be ready for the new U.S. President and his family when he--either Barack Obama or John McCain--takes office next year?

Safeway to Get a Little More 'Social'
The Hoya--Georgetown University
By Kaitlyn Gallagher Sep 01 2008

Who would have thought that a mundane trip to Safeway could turn into a social event?

In an effort to create a more welcoming atmosphere, owners of the Wisconsin Avenue Safeway are planning extensive renovations to turn the current grocery store into a “Social Safeway” shopping center almost 50 percent larger.

The new establishment is envisioned as a curbside, two-level shopping complex complete with an outdoor terrace and two parking levels.

Craig Muckle, a Safeway public affairs manager, said the renovation plans are still in the developmental stages. “We are still working with the Advisory Neighborhood Committee and the District government, so the start date hasn’t been identified yet,” Muckle said.

The building would be moved curbside to make it more accessible and inviting than its current spot behind a large parking lot. It would also be turned into a two-level complex, with the lower level occupied by separate businesses and the grocery store on the top. Safeway administrators are currently unsure which businesses would occupy the downstairs level, according to Muckle.

Muckle also said the terrace would be added to give weary shoppers a place to rest. “It essentially will be like an indoor/outdoor café setup where you can purchase food, sit and overlook the store.”

The enormous parking lot will be scaled down, but according to the renovations, parking won’t become scarce: There will be two levels of parking behind and below the store. As a result, there will also be two entrances.

The Georgetown store’s redevelopment is part of Safeway’s long-term rebranding strategy announced in 2004 in which existing stores in North America will get hardwood floors, muted lighting and improved produce, delicatessen, bakery and floral sections.

The renovations specific to the Wisconsin Avenue Safeway, though, such as the shopping area and outdoor terrace, were designed to suit the Georgetown community.

“Every store is different in and of itself, but this plan is strictly for Georgetown,” he said.

The square footage of the new store would be approximately 65,000 square feet, which will be nearly 45 percent larger than the existing store.

“I definitely think it will make the shopping experience more enjoyable, and it will definitely be a way for more people to meet,” said local resident and frequent Safeway customer Elizabeth Williams. “This already is considered the ‘social Safeway’ in D.C., but these changes will only make it that much more social.”

The closure of the current store during construction is projected to be an issue for local customers, but Muckle said he hopes customers will remain loyal to Safeway and use its home delivery service or visit nearby grocery stores in the interim.

Retail Field Report Memo: Specialty Retailer Cost Plus World Market Is At A Serious Crossroads: We Offer Analysis and Suggestions For Moving Forward

On June 9, the import housewares and gift retail chain Pier 1 Imports made an offer to acquire specialty foods, wine and imported housewares, furniture and gift retailer Cost Plus World Market in an all-stock acquisition deal, offering Cost Plus' board of directors $4 per-share of Pier 1 Imports' stock for the company.

Under the terms of the proposal, Pier 1 Imports, Inc. would have issued 0.6000 shares of its common stock for each share of Cost Plus common stock. Pier 1 Imports currently operates 1,034 stores in the U.S.

Based on the closing stock share prices of Pier 1 Imports and Cost Plus on June 6, 2008, three days before the offer was made, the proposed exchange ratio of the deal implied a value of $4.00 for each share of Cost Plus World Market common stock. The offer represented a premium of approximately 31% over the Cost Plus closing stock share price on June 6, 2008, and a premium of approximately 34% over the average closing price of Cost Plus shares for the last 30 trading days.

The total all-stock acquisition price of the Pier 1 Imports proposal for Cost Plus was about $88 million.

Here's what Pier 1 Imports' CEO Alex W. Smith said on June 9 when making the offer:

"We believe that the combination of Pier 1 Imports and Cost Plus is extremely compelling and would create significant value for the stakeholders of both companies.

"Given our similar customer bases and broadly similar business models, but distinct market positions, we believe Cost Plus is an excellent fit with Pier 1 Imports. We are confident that combining our two companies would create a stronger and more competitive company that is better positioned for future growth.

"Furthermore, we believe the combination will result in improvements in Cost Plus' operating margins and significant synergies, anticipated to come from organizational efficiencies in the supply chain management, shared services, store operations and other general administrative costs. Cost Plus shareholders will enjoy significant benefits from the combination, including improved operational liquidity of the combined company as well as a more active trading market for their shares."

Sounds good so far.

About a week after Pier 1 Imports sent a letter to the retail chain's board of directors offering to acquire Cost Plus in the all stock $88 million buy, Cost Plus World Market told Pier 1 Imports it wasn't interested in its offer, saying essentially not only was the offer too low (not to mention there being zero cash involved) but that it made very little business sense for Cost Plus and its shareholders to allow Pier 1 to acquire the retail chain.

Can't blame Cost Plus for saying no thanks; it was a desperation offer by Pier 1 Imports, which was searching for a way to jump start its sales and expand its offering by being able to get into the food and beverage categories by virtue of that fact both categories contribute the most in sales overall to Cost Plus' sales top line and profits bottom line. Of course, right now Cost Plus World Market is a desperation stock. Therefore we can't fault Pier 1 Imports for making the offer it did.

Pier 1 Imports apparently agreed with our analysis. Just a little over a week after the Cost Plus Board of Directors rejected the offer, on June 25, Pier 1 withdrew its all-stock $88 million acquisition offer saying in a prepared statement that the change of plans was due to an inability to acquire a majority interest in Cost Plus at a price that would make sense for its shareholders.

The primary reason for Pier 1 doing so though was that after it announced it intention to acquire Cost Plus it's own fledgling stock drop even further, thereby making the cost of even the original $88 million acquisition offer prohibitive. Pier 1 Imports also announced a substantial sales loss about that same time, which combined with its sinking stock put it in no position to acquire Cost Plus or any other retailer for that matter.

Both Pier 1 Imports, which sells only durable goods, and Cost Plus, which sells consumables like domestic and imported specialty and natural foods and beverages, wines and craft beers, confections and premium coffees, along with durables like furniture, housewares and gift items, are performing poorly, reporting losses in their respective most recent quarters.

We agree with Cost Plus World Market's decision not to be acquired by Pier 1. Why? Although Cost Plus is performing poorly, its due primarily by the durable goods side of the business, which is about 50% of the retailer's total sales, consumables making about approximately the other half.

On the other hand, Pier 1 Imports sells only durable goods such as furniture, household items, gifts and other similar items, the majority of which are imported.

The poor state of the U.S. economy has consumers cutting way back on purchases of durable goods like those Pier 1 sells (100%) and Cost Plus (about 50% of inventory) sells, which is the primary reason sales and profits are down so much for both retailers.

In addition, the sad state of the U.S. dollar is making the imported goods both retailers buy to sell in there stores far more expensive, which combined with the consumer retreat on durable goods purchasing is a perfect store of bad sales news for both Pier 1 Imports and Cost Plus.

However, the silver lining for Cost Plus is that because specialty-natural foods, beverages, wines and craft beers, items consumers will still by in a down economy even though in reduced amounts, comprise about 50% of its revenues, along with being its top sales category, it has the potential to adjust its merchandising practices---devoting more store square feet to consumables and taking away some square feet say from furniture for example--as a way to increase sales and potentially profits.

On the other hand, since Pier 1 has no current system or supply chain for food and beverage merchandising--distribution centers, buying staff and the like--it's pretty much stuck in the durable goods-only retailing business, which means in our analysis it faces a far greater chance of filing for bankruptcy if its sales and stock share price continues to drop, than does Cost Plus, which has the flexibility to focus more on consumables as a way to ride out the poor U.S. economy.

It is important to note though that unless Cost Plus makes some serious changes that improve its sales and cash-flow, it will likely face a serious liquidity crunch, as its sales and profits continue to drop along with its stock share price. Our analysis is that Cost-Plus World Market is in a better position (if it makes changes) than Pier 1 Imports in the short and medium run because of its consumables category to improve its position considerably. However, the fact is thus far it has failed to do so.

Conversely, Pier 1 is currently in a better liquidity position than Cost Plus. However, with its sole focus on durable goods, our analysis is that the retailer, unlike Cost Plus, is all things being equal, in a worse short -to- medium range position due to its merchandising reliance on only the durables. (Note: Pier 1 Imports announced last week it will close about 30 -to- 40 of its most underperforming stores, out of the 1,034 stores it operates in the U.S.)

In fact, it's our analysis Cost Plus should be putting a far greater focus on consumables in its stores right now than it is doing. This should include taking some of the space devoted to merchandising furniture and gifts in its nearly 300 stores across the U.S. and giving that space over to more consumables like discounted natural and specialty foods and related products.

The retailer already has been growing its World Market store brand of natural and gourmet foods, and has started to promote those items, along with branded specialty food and beverage items, more aggressively in its weekly ad circulars and in-store. Even in down economies consumers will buy affordable indulgences like natural and gourmet foods, especially if priced right and merchandised well.

What Cost Plus calls the "gourmet" category--its offerings of natural, specialty and related foods--has historically been a good one for the retailer. Cost Plus generally takes about a 43% gross margin on all the branded specialty and natural foods items it sells in its stores and takes a gross margin of about 50% on its store brand items.

Of course, it takes less margin on some items, but those tend to be the highest volume products such as the Knorr brand of specialty foods items and similar well-known brands. The same with its store brands--fast moving skus can be priced to return a lower than 50% gross margin.

Cost-Plus also has historically been very aggressive in getting deals from suppliers. In fact, branded specialty food and beverage suppliers that sell to Cost-Plus tell Natural~Specialty Foods Memo that Cost-Plus buyers have been negotiating for even deeper deals with vendors because they know sales by specialty foods companies are down significantly in the current poor U.S. economy.

In our analysis, it only makes sense for Cost-Plus to expand the percentage of square feet it devotes to specialty-natural foods, beverages and wines in its stores, at least for the next couple years, until their is improvement in the U.S. economy.

Additionally, with its buying power in the categories, we suggest the retailer look at coming up with some creative value-based specialty food and beverage marketing and merchandising schemes designed to position it as the "value leader" in specialty foods retailing, which ironically was a reputation the retailer had many years ago before numerous new retailers selling specialty foods came on the scene.

Natural~Specialty Foods Memo recently asked a team member, who has 20 years food and grocery retailing and category management and merchandising experience, to visit a Cost-Plus World Market store and do a field analysis of the consumables category--specialty-natural foods and beverages, wines, craft beers and related items--and offer an analysis of what the field researcher found, also including suggestions regarding the category in the stores.

The store where the field report was conducted in one of the retailer's newest, and thus has one of the larger consumables sections, stores located in the Southern California city of El Segundo.

Below (in italics) is the Cost Plus store field report by the member of the Natural~Specialty Foods Memo team:

Cost Plus World Market "One World. One Store."

El Segundo, California store: Open about 1 year.

Merchandising:
Overall the store is very difficult to maneuver. The layouts and planograms seem odd and the aisles feel cluttered. There isn't a straight line to anything. You pretty much have to zig-zag around the store.

I believe the store needs better aisle signs too. Other than just basic overhead signs for the different departments that says "Food", you really don't know what section you are in. Maybe this is their intention, forcing you to wander up and down each aisle but to me it's frustrating.

I also feel they can improve on the shelf price tags, there are so many different sku's on the shelf that it's very difficult to match the price to the product. This is especially true on the products that don't look like they have a permanent location. Sometimes they have priced the products individually, sometimes they have 1 small price tag shown on the outside of the displayable case, sometimes there is a sign reflecting the price but the worst is sometimes there is no price anywhere at all. When there is no price at all, that's when I believe most people just put the item down and pass on purchasing it all together, which is a lost sale.

I think Cost Plus could also benefit from doing some more cross merchandising. They do it well with wine by stacking it in other departments, and they also have wine bags in the wine department, but I think they could do it with a lot more categories...

Suggested Cross-Merchandising Examples:
Coffee and Tea (with mugs and tea cups)
Small food components (with gift basket, clear wrap, bows, etc)

Products:
I used to think of Cost Plus as a place to go to for unique imported items, from rugs from India to imported biscuits from the UK . Now, it appears they are going more mainstream because they have quite a bit of domestic products, such as Sourdough Pretzels and Chewy Caramels. But the message they are sending to the public is we are selling 'Gourmet Foods.' Even in their advertising flyer the say "Discover World Market Gourmet" and the tag line is : " When you see our name on any of our gourmet offerings you can count on three things, great taste, superior quality and incredible value."

I suppose that advertising lends itself to a even bigger discussion, and that's, "What's Gourmet" anymore?" I think the word "gourmet" may have been dumbed down or let's say has gone mainstream because anything and everything is called gourmet. I think all the food categories are being crossed these days, so who can really tell the difference between gourmet, speciality, natural, ethnic, etc.

I suppose I was confused because they did have everything from natural, imports, organic, and run of the mill products--and dare I say, they also had "gourmet." Even their own private label runs the gambit. Some of it was Natural (Tortilla Chips), Imported (Extra Virgin Olive Oil), Run of the Mill (Sourdough Pretzel Nuggets), and "Gourmet" (Legend BBQ Sauces and Brix chocolates for example).

Store Brands-Private Label

I really like their World Market store brand label and their packaging, but the range is a little odd. I feel they were heavy in certain categories but completely ignored others. For example..They have a nice range of snacks (i.e. nuts and chips but no salsa, in private label).

They also have huge amount of sku's in spices and Extra Virgin Olive Oil - Organic and regular (but no private label pasta). They also had a nice range of Chocolate Bars with some unique flavors such as pomegranate. Again, all their private label products were either natural and/or organic (most of the chips for example).

Pricing: The pricing on the store brand (World Market brand) pricing was all over the place. Some items seemed extremely expensive (a small little tub of private label M&M type candy for 6.99) but other items seemed very much in line (private label 3 oz candy bars 1.99 to 2.99). So there didn't seem to be any consistency.

There's that word ...consistency. There didn't seem to appear to be any consistency in the way they operating in the consumables categories. That goes from the way they are merchandising, pricing and ranging.

I think Cost Plus as it is currently is a great treasure hunt type store, but not a store where you go frequently because it's just not convenient or easy. If they want to do food and beverages better, I think they need to figure out a way to make it a destination point.

Cost Plus used to be a destination point for "imports" but I believe they have gotten somewhat away from that. There are just too many stores where you can buy the different types of product they are selling these days, and those stores specialize in those categories (whole Foods Market ) or beat them in price (Trader Joes), are two examples.

Why not online consumables sales: It's my analysis Cost Plus has an opportunity to sell their food products online. They have a very nice website but it looks like food is one of the only categories you can't order online. For now you just have to be satisfied looking at the pictures and reading that it's available only in the stores. The nice thing is they do list some of their food with their retail prices online.

Conclusion:

After visiting and analyzing the El Segundo Cost Plus store, I just can't figure out where "in the world" they wanted to go. However, Cost Plus has the opportunity to better define its retailing world--and positioning with consumers--by making some basic changes, improvements and additions.

Mine is only the ethnographic field reporting and analysis of one person. However, many of the suggestions I make in this report come from years of working in and observing retail across all formats.

With better focus on the basics--simple things like store layout, shelving, shelf price tags--along with more precise merchandising, better and more consistent pricing, a little creativity like using more cross-merchandising and in-store displays, Cost Plus could improve its positioning--and probably its sales in the consumables category--significantly.

While the field report presented above is only that of one person, albeit and experienced one, Natural~Specialty Foods Memo suggests the key theme to take away from the ethnographic analysis is two-fold: that Cost Plus has the potential to improve its sales and profits by focusing more and better on its consumables category, and that the retailer has many areas of product, merchandising and pricing issues in which it can dramatically improve on.

There was a time, up until about the late 1980's, in which Cost Plus was arguably the "best" natural foods specialty foods retailing chain in the U.S. However, like the Natural~Specialty Foods Memo field reporter suggests in the analysis, since then numerous specialty players like Whole Foods Market and Trader Joe's--along with many others--have dramatically grown the number of stores they operate, along with greatly improving on their natural and specialty foods merchandising

Additionally, numerous new specialty and natural foods retailers, chain and independent alike, have come on the U.S. retailing scene in the last 20 years. Many of these newer retailers are cutting edge.

Further, numerous previously more mainstream conventional supermarket chains--Safeway Stores, Publix, even Kroger are a mere three examples of the many--have moved dramatically into the natural and specialty foods retailing space, including creating their own natural, organic and gourmet store brands.

Meanwhile, over the last 20 years Cost Plus has essentially remained static. The specialty food and beverage and specialty wines departments in the stores have changed little since the late 1980's. In fact, one could reasonably argue they've gone downhill since then.

In our analysis, part of the reason for this is that Cost Plus historically burns through category managers and buyers at its corporate offices in Oakland, California. It often seems that just when a Cost Plus buyer is just getting into his or her groove, they leave.

This lack of often not first finding good talent and of properly nurturing talented buyers and merchandisers when it has them, is in our analysis a key contributor to Cost Plus' lackluster performance in the consumables, as well as the durable goods, categories. In other words, it is a senior management issue and problem in the main.

The good news is that Cost Plus is in our analysis on to something with its current expansion of its World Market store brand, focusing on combining natural and organic ingredients with premium ones in many of the new items.

The retailer also has started to promote its World Market brands more, both in its weekly advertising circulars and in-store. It needs to do more of that.

We suggest a greater focus on both store brand and manufacturer brand specialty-natural foods items will help Cost Plus gain its footing back. The retailer, which once was the premiere seller of dicsounted specialty wines in the U.S., also needs to review and revamp it's wine departments.

There are currently opportunities we think the retailer is missing to generate increased sales in the category. How about more wine tasting events? Meet the winemakers events in the stores? Make some better buys; and offer some blowout deals that are heavily promoted as events in-store.

Cost Plus World Market needs to create some excitement around its specialty-natural foods and wine departments. Poor sales performance should be the mother of marketing and merchandising creativity. But that's yet to happen at Cost Plus in our analysis.

Perhaps its time to bring in some new creative merchandising and promotional blood, with a focus on the consumables category. After all, sometimes bringing in people who come from outside the box (the Cost Plus structure in this case) leads to thinking, ideas and programs that are outside the box (but good ones).

Right now, Cost Plus could benefit from some new, imaginative and creative marketing and merchandising thinking for its consumables category, regardless if that thinking comes from within the chain or outside of it.

The question is: Why isn't the retailer's top management realizing that fact? And, even more so: Why isn't the company's Board of Directors demanding it? If the Cost Plus board doesn't demand, along with becoming an active part of the solution, some changes and improvements, we suggest it might want to call Pier 1 Imports' CEO up and restart acquisition talks; if it isn't too late of course.

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.

Small-Format Grocery Retailing Memo: Stretching the Boundaries of Convenience Store Retailing; Some Say Japan's Natural Lawson is Awesome

Convenience stores are as ubiquitous in Japan as grains of white rice and packages of Ramon noodles are. There are about 40,000 combini, as convenience stores are called in Japan, in the nation, or one for every 3,200 residents.

One of the largest combini operators in Japan--in addition to market share leader Seven-Eleven Japan, Circle K Sunkus (number two) and number three FamilyMart,--is Lawson, which operates 8,400 convenience stores in all 47 of the nation's prefectures.

If the name Lawson sounds American that's because it is. The origin of the Lawson name originated in the U.S. state of Ohio in 1939. A man named J.J. Lawson started up a milk business there called Lawson's Milk, and opened a chain of store's in the state to sell his milk. The milk stores evolved into convenience-type stores and in 1959 Consolidated Foods Co. bought out Lawson.

In 1974, Consolidated Foods partnered with Japanese food retailer Daiei to open the first Lawson branded convenience store in Osaka in 1975. Daiei opened many more Lawson stores throughout the 1970's and 1980's. In 1989, Daiei merged another chain called Sun Chain which it operated in Japan, with Lawson and created Daiei Convenience stores. In 1996, the combined operation was renamed Lawson, Inc., with all the stores getting the Lawson banner.

The Lawson banner is long gone in the U.S. Its stores all became Dairy Mart convenience stores in the states over a decade ago.

The majority of the 8,400 Lawson combini (c-stores) in Japan are conventional convenience stores similar to those in the U.S. and Europe. However, Lawson also operates two other formats in Japan. The first is called Lawson Store 100, a 20-store chain which sells various items for 100 yen each. It's similar to a dollar or 99-cents store in the U.S.

Lawson's other format, and the one of interest in this piece, is called Natural Lawson. It's an upscale, high-end convenience store format positioned to serve Japanese women and the nation's seniors rather than salarymen. Salarymen are working men in Japan. Like their counterpart convenience stores in the U.S. and Europe, which traditionally target men, the majority of Japan's c-stores still do the same.

There currently are about 24 Natural Lawson small-format convenience stores in Japan, with 12 located in Tokyo. The stores' offer a broad selection of foods and other items for shoppers. The focus is on health and wellness, and increasingly on upscale, fresh prepared foods, along with natural and specialty groceries and non-foods.

Specialty foods brands line Natural Lawson's shelves and perishable cases. There's locally-grown produce, including organic, provided by a local Japanese farming collective. Organic groceries, coffee, teas and other foods and beverages are plentiful in the stores. High-end, all natural cosmetics for woman are offered for sale along with other natural health and wellness-oriented items, including those for pets.

An area Natural Lawson is moving further into is offering a diverse selection of healthy, upscale-quality fresh prepared foods, breads and related items. For example, the natural c-store retailer sells an all-natural healthier version of the popular bento lunchbox, which is a staple of Japan's working class. Basic bento boxes are sold in all of the nation's conventional convenience stores.

Natural Lawson recently entered into an alliance with NaturalBeat, which operates a chain of high-end sandwich and delicatessen stores in Japan. The stores' prepared food items are all homemade, using natural ingredients with no food additives, preservatives or artificial colors. NaturalBeat also has a subsidiary called Wholesome Co. Ltd. which produces all natural healthy fresh breads and other baked goods.

All Natural Lawson convenience stores are now selling NaturalBeat's healthy, upscale-quality prepared foods, including sandwiches, salads, entrees and other grab-and-go items. The stores also are featuring the healthy fresh breads and baked goods produced by Wholesome Co. Ltd. Fresh, prepared foods--especially all natural and upscale--are a rarity in Japan's combini, so natural Lawson is blazing a new trail in the category for convenience stores in the nation.

In addition to focusing on its product selection, Natural Lawson is taking great care in how its stores look, something that wasn't evident at all when its first stores opened in 2001.

Today's stores reflect the retailer's target market and positioning. Soft colors and natural woods are used inside the stores, appealing to the retailer's prime target shopper--women. There's no neon lighting like in Japan's typical conventional combini. Instead, soft, recessed lighting is used throughout the stores, complementing the natural woods and pastel colors. Many of the stores have a bar area where shoppers can lounge, and where trained staff members give out health, wellness and beauty tips. Additionally, Natural Lawson uses an upscale, attractive font-style and natural motif graphic for its logo on the signs outside each store, inviting shoppers to come inside.

The stores' brand--via its design, merchandising and product offerings--says Natural Lawson is the place to shop for premium, natural and healthy merchandise in a convenient format. This is still new to Japanese shoppers who are used to going to a combini to get coffee, tea, soft drinks, pastries and other basic convenience items. Conventional c-stores in Japan also are popular for offering mobile phones, fax services, ticket sales, photocopies and other similar service-type offerings.

There's a space in Japan's huge convenience store market for something other than traditional combini retailing, which is what Seven-Eleven Japan, Circle K and in the main Lawson itself does with all but its 24 Natural Lawson and 20 100 yen format stores. This is especially true when it comes to quality fresh prepared food and meals merchandising. It's nearly non-existent in the nation's c-stores. You can get a sandwich, standard bento box and other very basic grab-and-go prepared foods' items, but that's about it.

In fact, Natural Lawson is getting some competition in Japan in this yet to be proven merchandising niche of fresh prepared foods from British retailer Tesco. Tesco is opening a Japanese version of its popular and successful Tesco Express format stores in the nation that loves convenience stores. Tesco Express stores are a mix of convenience store and small supermarket, typically selling high-quality fresh foods, prepared meals and other offerings found in Tesco supermarkets but offered in convenience store-sized urban settings.

The British retailer, parent company of small-format Fresh & Easy Neighborhood Market in the U.S., is opening 25 of these Express stores to start in Japan. The stores will sell basic grocery and other items along with lots of fresh prepared foods, meal solutions and quality grab-and-go items, as well as some other fresh and specialty grocery items. Tesco already has some of its Express format stores in Thailand through its Tesco Lotus division in that country.

Meanwhile, Natural Lawson is in the process of perfecting its merchandising mix, positioning itself not only as a higher-end combini for fresh, natural and quality foods, but also as a destination for busy urban Japanese women who want quality natural health and beauty items in an attractive and comfortable setting designed with them in mind.

There's no question Japanese consumers love their combini. After all there's one convenience store for every 3,200 Japanese. In Tokyo, there's literally a combini on every corner. And a joke in Japan says the only difference in the more rural areas is that there's a combini on every other corner. To put it in perspective, the U.S. has about 24 times more land mass than Japan does--but it has only half as many 7-Eleven's.

Natural Lawson is stretching the definition of "convenience store" not only just in the c-store capital of the world Japan but internationally as well. Just as Tesco is importing its brand of "Express" convenience retailing to places like Eastern Europe, Japan and the USA, it will be interesting to see if retailers in these western countries pick up on what Natural Lawson is doing with its 24 stores in Japan and try a similar format at home, in the U.S. or Europe.

To a degree it's happening in the U.S. already. In addition to Tesco's Fresh & Easy stores, 60 of which have thus far opened in California, Arizona and Nevada, there's Trader Joe's (a somewhat similar format to Natural Lawson), Wawa, an upscale convenience store operator in the Eastern U.S. which puts a major focus on fresh prepared foods, Giant Eagle Express and a couple others.

Additionally, as we've reported, Wal-Mart plans to open it's own version (4-5 stores) of a small-format, hybrid basic grocery and fresh and specialty foods market called Marketside in the Phoenix, Arizona region this summer. Safeway Stores, Inc. also plans to open 4-5 new, small-format hybrid grocery markets in the San Francisco Bay Area as well this summer.

Further, Whole Foods Market, Inc. is in the process of opening its own upscale, all natural convenience-type store in Boulder Colorado. The store, called Whole Foods Express, will be a prototype for the supernatural foods retailer in terms of natural products retailing in a smaller, convenience-oriented format. The store will be about 14,000 square feet. In Japan that's considered a big store, especially in Tokyo. For Whole Foods its radically small, especially since the grocer's average new lifestyle natural supermarkets range from about 55,000 to 80,000 square feet.

In Western Europe, Tesco pioneered the Express convenience format. There are a few other players who've joined the market niche as well, with more considering doing so. Tesco's also taken it's Express format creation to Eastern Europe, especially Poland, where its small-format, hybrid Express stores are doing extremely well. And, of course, Tesco Express was the inspiration for the retailers small-format, combination basic grocery and fresh and specialty foods Fresh & Easy Neighborhood Market grocery stores in the U.S.

None though are doing quite what Natural Lawson is doing in Japan, with it's combination of quality natural-organic foods, non-foods and health, wellness and beauty offerings. If Natural Lawson can bring a new definition to convenience retailing in Japan--or at least add to the current definition--it could create a solid niche for itself among those its targeting--busy women and seniors who many think aren't currently being fully-served by the nation's conventional combini.

Men like natural products offerings too, even if they aren't the primary target market. And in Japan, like elsewhere, men buy lots of gifts for the women in their lives. That's another market Natural Lawson should look at.

Supply-Side Memo: Sweet Success With Organic Honey

For 25 years Richard Spiegel has been producing and marketing organic specialty honey from his company headquarters--a converted hog barn--in Hamakua, on Hawaii's Big Island.

Spiegel, who refers to himself as a retired hippie, owns Volcano Island Honey Co., where he produces award-winning organic kiawe honey using sustainable farming and production methods.

Spiegel recently told writer Karin Stanton in an article by the Associated Press, and published in the Honolulu Advertiser, that sales of his organic honey are so good he's having trouble keeping up with the demand. However, he added, he doesn't consider that his real success. Rather, Spiegel says, his goal is to "inspire other farmers to look for creative, eco-friendly and sustainable methods to produce good food."

"I've been trying to change the world since forever," he told Stanton. "I started as a lawyer, but that wasn't doing it." he added.

It seems Spiegel found his calling not in the law, but rather with the bees, producing and marketing organic honey.

Volcano Island Honey Co. produces and sells what it calls Rare Hawaiian Organic White Honey. Honey varieties include: Organic White Honey, Organic Winter Honey, White Honey With Organic Ginger, Organic White Honey With Hawaiian Lilikoi and others. (See a complete list here.) The sweet nectar has won numerous specialty product awards including a Silver Sofi in 2007 for outstanding new product from the National Association for the Specialty Foods Trade (NASFT).

Richard Spiegel (left) explains the fine points of how he produces his organic honey and farms sustainably to a group touring his farm and production facility.

Spiegel also uses his honey company as an educational laboratory to educate individuals and groups about sustainable and organic farming. He offers tours of his farm and of the production facility, located in the converted hog barn, to students, community groups, neighbors, farmers and agriculture groups--and just about anybody who cares to see what he's up to.

The company also publishes a newsletter which talks about the comings and goings on at the organic farm as well as sustainable and organic farming in general.

We suggest you read more about Spiegel, his award-winning honey, his views on sustainable farming methods, and what he thinks about farming and food production in general, in this short piece from the AP, published in the Honolulu Advertiser (December 31, 2007). It's a sweet story about a natural and specialty foods entrepreneur who's on to a sweet idea. (Full story here.)

The Friday Fishwrap: Week-ending news, analysis and insight

India's largest publicly-owned retailer says the country is ready for a gourmet retail format and international specialty foods product revolution

India's largest publicly-owned retailer, Pantaloon Retail (India) Ltd., this week opened its very first upscale, gourmet food store or bazaar in Select Citywalk mall, a new upscale shopping mall in south Delhi.

The new market is called Gourmet Food Bazaar. It's 4,500 square feet and is packed with gourmet, specialty and natural foods and groceries from all over the world. the format is targeting consumers' who've developed a global palate, and who can afford to indulge that palate because they have relatively high-paying jobs.

India has the second-fastest growing economy in the world after China. However, it has a far-higher percentage of college educated professionals than China, including millions of professionals who work in the country's high-tech industries. India has the fastest growing high-tech sector in the world. High education level is a key consumer variable in specialty foods purchasing and consumption.

With its first Gourmet Food Bazaar store (other new stores in the format are planned for Bangalore and Mumbai, plus more stores in New Delhi), Pantaloon Retail (India) Ltd. is betting the fast developing country is ready for a chain of upscale, high-end gourmet/specialty foods stores.

"We believe in food. And there is a customer (in India) that is ready for more lifestyle shopping, more branded items and more international cuisine," says Damodar Mall, the retailer's director of new business ventures, in explaining the creation of the company's gourmet food store format.

Pantaloon Retail (India) Ltd. is a huge, multi-format retailer. The company operates more than 1,000 stores in 51 cities in India. The company's retail formats include Food Bazaar, a supermarket chain (and now Gourmet Food Bazaar, the upscale division), Big Bazaar, a chain of hypermarkets, Pantaloons, a fashion outlet chain, and many more formats, including the home store and electronics categories. (You can read more about the company and its many retail formats here.)

Mall said the company doesn't presently now know the total number of Gourmet Food Bazaar stores it will open. However, he says there will be numerous gourmet stores opened over time, based on when and where the retailer feels they will do well. In other words, the gourmet stores are a venture, rather than a mere experiment.

Gourmet Food Bazaar is a division of Food Bazaar, which is a chain of supermarkets that offer a wide selection of products at discount prices. The Food Bazaar supermarkets are a unique blend of India's retail bazaar tradition and the modern western supermarket.

The gourmet and specialty foods' format stores will be a bit more western in their design and merchandising than the supermarkets. But the stores' will still retain such Indian food traditions as displaying assortments of bulk food products out in the open in a "touch-and-feel," "bazaar-like" manner. This tradition will be offered side-by-side with numerous packaged goods and other foods from all over the globe.

In addition to its numerous retail formats, Pantaloon Retail (India) Ltd. also operates a number of food-service type formats. These include: Brew Bar, a bar/pub with a neighborhood feel, Cafe Bollywood, which offers Indian street food with an upscale twist, Chamosa, a restaurant chain that specializes in the Indian snack combinations of tea and samosas, and Sports Bar, a sports-themed bistro. These retail operations are part of the company's foods group, along with the Food Bazaar supermarket chain and now Gourmet Food Bazaar.

India and its fast-growing economy, prospering upper class, and growing middle class, is ripe for new food retailing innovations and formats, ranging from the the upscale, small format-style of Gourmet Food Bazaar, to the hypermarkets of France's Carrefour and the supercenters Wal-Mart is building with an Indian partner.

A recent report released by consulting firm Ernst & Young says food and grocery products account for around 54%, or about $152 billion (U.S.) of India's total retail sales. However, modern style supermarkets, hypermarkets, supercenters, gourmet stores, natural-specialty stores and other western-style formats, account for only a tiny 1% of that total, according to the report.

Obviously, Pantaloon Retail (India) Ltd, along with dozens of other retailers based in India and throughout the world (like Wal-Mart and Carrefour) see this huge market and are moving on the opportunity.

In fact, Pantaloon Retail (India) Ltd. won't be all by itself for long in terms of building a chain of upscale, gourmet food stores in India. Another Indian retailer, Mumbai-based HyperCity Retail Pvt. (India) Ltd., which operates a chain of hypermarkets, is planning to launch its own gourmet and specialty foods format food store in 2008.

Hypercity's format, called GourmetCity, is based on the success the retailer has had with a gourmet kiosk it runs in one of its hypermarkets in Mumbai's western suburb of Malad. The gourmet kiosk or counter offers imported cheeses, handmade chocolates, upscale deli goods, fresh baked breads and sweets, marinated meats, and stocks gourmet and natural groceries from upscale British grocer Waitrose's store branded line specialty, gourmet and natural products.

The popularity and success of the gourmet kiosk encouraged HyperCity to create the GourmetCity format, and launch the first store in the chain next year. it plans to merchandise an extensive line of imported groceries in the gourmet markets, along with fresh foods, meats, fresh bakery and other upscale features. The stores' also will stock natural and organic foods from throughout the world.

India offers a huge opportunity for European and U.S. specialty and natural foods manufacturers and marketers. It's especially the case since those brands that get in on the ground floor of this "quiet gourmet food store revolution" will reap the dividends of brand loyalty as the format booms in India, which it will.

Along with its fast growing economy, superlative higher-education attainment levels, prospering upper class and growing middle class, India also is a democracy. And unlike China, it has a much longer history of doing business deals with western democracies, based on its years as part of the British Empire.

The peoples of India also are traveling more and more. In fact, there's a large international class in India. It includes numerous business people and academics who spend lots of time in the west. It also includes many residents who have family living in Europe or the U.S., attending school or working. These people are well-exposed to the west, and bring back ideas about different foods and products they've tried in their travels, and want to be able to buy regularly in India.

India is positioned perfectly for both retailers to launch their respective upscale, international gourmet food store formats--Gourmet Food Bazaar and CityGourmet. Blending the new--international gourmet, specialty and natural foods and groceries--with the old--India's "retail bazaar" merchandising tradition--will allow these retailers to appeal to India's consumers with a local as well as global approach as they grow these formats into regional and perhaps even national chains over time.

Friday Fishwrap

End-of-the week news, ideas, analysis and opinion

Food and beverage trends 2008: A Natural~Specialty year is on the way
Natural, organic, specialty, gourmet, premium, fresh, healthy, green and sustainable top the list

If the various market and consumer researchers, prognosticators and analysts (including us) are right, 2008 will be a natural~specialty year in terms of the top hot trends in food and beverage marketing and consumption in the U.S. and Western Europe.

For example, a just released report by market research firm Datamonitor predicts the following top ten food and beverage trends for 2008.

>Probiotics, healthy foods
>Natural and organic foods and beverages, especially for kids
>Fresh foods, especially premium quality prepared foods
>High-nutrient Superfruits
>Exotic foods, especially foods from Africa
>Specialty foods that promote sleep and stress relief
>Healthy and natural foods with "crunchy" and "crispy" taste profiles
>Bold, hot and spicy foods
>Increased use of caffeine in beverages and foods
>Green, "eco-friendly" foods, beverages and grocery products

You can read a detailed summary describing these top 10 food and beverage trends for 2008 here, along with examples of numerous food and beverage products in these categories introduced this year that Datamonitor has tracked, and which point to strong growth for next year. You also can read a short piece summarizing Datamonitor's top ten food and beverage trends for 2008 published yesterday in Beverage Daily here.

As the Datamonitor report shows, the top ten food and beverage trends for next year all center around the natural/organic, specialty/premium, healthy/environmental sector. As we suggest here often, these categories (an consumer movements) are related and have strong synergies between them They're also increasingly converging together.

For example, natural and organic foods consumers tend to also be "greener" consumers. They also focus more on healthy eating and are most likely to be early adapters to foods and beverages like probiotics and superfruits, for example. Additionally, there's a growing convergence between specialty and premium foods and natural/organic foods consumers--and marketing. These consumers share a concern for quality. More and more, quality in terms of food and beverage products is meaning all-natural or organic as well, in addition to the elimination of food additives, preservatives and artificial coloring.

This "healthy" convergence is demonstrated by an emphasis on the part of specialty foods manufacturers and retailers (store brands) to introduce more and more new products that have natural or organic attributes as well as being premium quality. By the same token, natural foods manufacturers and retailers are increasingly going premium with their new natural and organic food and beverage products.

In fact, a new study from market researcher Mintel says the top food and beverage trend for 2008 will be "getting the junk out of food and beverage products." In other words it's the elimination of preservatives, additives, artificial flavorings and colorings and other such ingredients in their existing products, as well as not putting them in new products introduced in the majority of cases that will be a key event in the food industry beginning next year. This isn't to say food and beverages with these artificial ingredients are going away anytime soon. Rather, Mintel says there will be a rapid decline in their use beginning in 2008.

This junk-free food and beverage movement has been picking up steam in the U.S. and Western Europe, and dovetails with the natural, organic, green and sustainable consumer movements. The definition of healthy is being expanded we believe to include not only what is in food but how and where it's grown, packaged and tastes. In other words, healthy not only means a healthy person, but a healthy environment as well. It's becoming an external as well as internal definition. You can read about the Mintel 2008 food and beverage trend study in more detail here.

As we mentioned above, taste is a key factor--and premium taste is one of the hottest trends for 2008, according to a new study from Packaged Facts and Trendwatching.com.

A new study from market research firm packaged facts says sales of specialty and gourmet foods are predicted to grow by a whopping 63% over the next five years. This consumer flight to premium quality foods is being driven by a number of factors, according to the researcher. These factors include consumers' becoming more sophisticated via travel and multiculturalism, retailers carrying expanded selections of specialty, gourmet and ethnic foods, and a convergence between specialty, natural and organic foods.

This growing consumer sophistication and the availabilty of a wide variety of specialty, gourmet and ethnic foods, not only in specialty stores and supermarkets, but in natural foods stores, mass merchandisers like Wal-Mart and Target, online, and even in drug stores, is growing the premium foods market to the point that Packaged Facts predicts it will grow to $96 billion annually in five years, compared to the categories current sales of $59 billion. (You can read more about the Packaged Facts' specialty and gourmet food and beverage report here.)

Packaged Facts isn't the only consumer research firm to predict this huge growth in the specialty, gourmet and premium food and beverage categories. (We use all three of these terms because each has certain distinctions. However, from a sales standpoint, they are one category.) Trendwatching.com, a consumer products trend analysis firm and website, is predicting 2008 will be the year for the "premiumization" of nearly everything and anything, including food, grocery and beverage products. By this, the firm means virtually no product category will escape having some sort of premium version.

"Premiumization" is one of the consumer research firm's top 8 trends for 2008, along with what it calls status spheres, snack culture, online oxygen, brand butlers, crowd mining, MIY (make it yourself) and eco-iconic. (you can read more about these seven other trends here.)

In terms of the food and beverage industries, "premiumization" means an increasing trading up by consumers to more premium-quality products. It also means food and beverage manufacturers, marketers and retailers will not only continue their current rapid pace of premium specialty and gourmet foods new product introductions, but will excellerate it even more.

Trendwatching.com also says we'll see niche "premiumization" in the food and beverage sectors. For example, limited addition super-premium food and beverage products like deserts and bottled waters, will be introduced in very upscale packaging and for a limited period of time.

As examples, they sight Evian's new, limited release Palace bottled water. Set to be introduced either at the end of this year or early in 2008, the water will only be available for sale at high-end bars and restaurants. The sleek bottle features a specially designed pouring top and comes with a stainless steel coaster. It will sell for between $15-$20 (USA) per bottle.

Other super-premium bottled waters include Bling H20. Bling water comes in a frosted glass-bottle with a cork that's embellished with crystals. The water is a much a personal accessory as it is a beverage. It's big with the Hollywood crowd, and was featured backstage at the MTV awards and the Emmy's this year.

If the first two bottled waters aren't premium enough for you, there's Tasmanian Rain. This utra-premium water comes from the pristine north coast of the Australian island of Tasmania. According to the bottlers, the water comes from a spot where the World Meteorological Organization records the world's purest air.

Beer also is getting "premiumization" treatment. This summer, Carlsburg launched its Carlsburg 900 in a limited number of bars in Stockholm, Sweden. The brew is made with refined virgin hops, selected crystal malt, and is triple filtered in a special process that ensures a pure, delicate taste, the brewer says. Carlsberg 900 also is priced at the premium end of the price range. A bottle costs about the same as a class of quality champagne.

Trendwatching.com also sights some premium foods as an example of niche categories that are undergoing the "premiumization" process. Chief among these are marshmallows. Dean & Delucca's gourmet Boule' Marshmallows come in such flavors as passion fruit, lemon chiffon, pure vanilla and rose petal. They retail for $28 a bag--and it's not a very big bag. Another gourmet foods maker, Pete's Gourmet, sells premium flavored and dipped marshmallows for $1 each. Dean & Delucca recently reported that in its stores and on its website the pricey gourmet marshmallows are selling out.

Honey's and chocolates are two other categories the consumer research firm says also are getting "premiumized" in a big way. Foods and beverages lead this "premiumization" trend, according to Trendwatching.com. Of course, we see this daily in nearly every food category in the supermarket. Retailers are aiding this trend by creating store brand specialty, gourmet and premium foods and pricing them more reasonably than manufacturer brands, thus expanding the market for these goods into the moderate income sector.

Fresh foods also are getting the "premiumization" treatment. Whether it's in-store fresh prepared foods at grocers like Whole Foods, Wegman's, Safeway Stores and others, or manufacturer-produced fresh and frozen entrees, the trend is towards premium quality. Tesco's entry into the U.S. market with it's Fresh & Easy Neighborhood Markets also is fueling the growth of fresh, prepared foods marketing and sales. The retailer is offering scores of fresh, prepared foods at its Fresh & Easy stores in California and Nevada (13 open so far). The grocer plans to have at least 200 stores open in the next two years, and all will offer extensive selections of premium prepared foods.

As we end 2007 and move into 2008, our analysis tells us the hot button trends and consumer movements will be: natural and organics. The categories will continue their rapid growth. However, we see retail prices on organics coming down at least 5% as retailers like Safeway, Kroger and others continue to expand and grow their store brand organic grocery lines.

Specialty, gourmet and ethnic foods. As the research discussed in this piece demonstrates, category growth will be huge. We also see an increasing number of large, multi-national packaged goods companies getting deeper into specialty foods marketing. Major companies like Kraft, Heinz, General Mills and others will move upscale with line extensions and even new brands.

Ethical consumers and marketing is a growing trend, and it will continue to grow in the years ahead. Consumers increasingly want to know how and where their foods are produced. They also want to know the corporate behavior of the companies that produce their foods. It's a small movement at present, but will grow bigger in the next five years.

Local food sourcing also will continue to grow. However, consumers love imported foods too much to give them up. Therefore, in the main, locavores (those who only eat foods produced within a 100 miles of where they live) will remain a small, minority movement. However, more and more consumers will buy local foods whenever they can, making it an important movement and marketing concept for food marketers, retailers, consumers and small farmers.

Green issues will begin to move into the mainstream in a big way in 2008. More and more consumers will demand sustainability from food producers, marketers and retailers. The industry will respond, led by key players like Wal-Mart, Whole Foods, Safeway, Tesco and others on the retail end. On the supply side, companies like Proctor & Gamble, Clorox, Hain-Celestial and others will move further with their green initiatives, setting an example for others in their industry to follow.

Healthy foods, especially foods containing new natural ingredient innovations, will continue to be a major hot button. We are beginning to see healthier foods positioning throughout the supermarket, from the dairy case to the snack aisle. This will intensify, and grocers will get more involved in their customers health issues by putting health and wellness clinics in-store, increasing the quality and quantity of health labeling information, and even demanding their suppliers produce healthier products.

As we said at the beginning of this piece, there's a synergy between these top trends for 2008. That synergy is the growing convergence between the natural and specialty foods industries, and the growing consumer movement towards eating healthier and defining healthy as not only something internal but external (the environment). Within this mix, taste is key. Consumers won't trade off healthy and "green" for quality anymore. In fact, they want premium quality taste along with the natural, organic, healthy and green attributes in their foods---and from their food producers and retailers.