Green Retailing Memo: Wal-Mart Stores, Inc. to Make Major Purchase of Renewable Wind-Power to Supply 15% of the Power For its 360 Stores in Texas, USA

As we wrote about in this piece yesterday, "Retail Memo: Wal-Mart CEO Steps Down; Head of International Operations Mike Duke to Lead Retail Giant; USA Chief Castro-Wright Promoted," current Wal-Mart Stores, Inc. CEO Lee Scott stepped down on Friday, deciding to retire after three decades with the world's largest corporation and global retailer, including serving in the top spot as CEO for the last nine years.

Scott isn't leaving Wal-Mart completely however; or right away: He will be head of the company's executive board and serve as a consultant to Duke and the board until 2011, according to the company.

Wal-Mart's head of global operations, Mike Duke, will take over as the company's CEO in February, 2009, Wal-Mart announced yesterday. In addition, current Wal-Mart USA CEO Eduardo Castro-Wright was promoted on Friday to the position of vice chairman of Wal-Mart Stores, Inc., which is a strong indication he is in line to be CEO as part of the retailer's internal succession planning process.

On Thursday we wrote about two major corporate social policy initiatives outgoing (nobody knew he was outgoing on Thursday by the way) CEO Lee Scott made and Wal-Mart announced that day. Those two major initiatives are:

>A $2.5 billion donation to Feeding America (formerly America's Second Harvest Food Bank), along with a promise by Wal-Mart to donate 90,000 pounds (70 million meals) each year to the group that supplies food to organizations assisting the hungry throughout the United States for the next couple years;

>Guaranteeing a $12.5 million letter of credit to the group planning to build a memorial to the late civil rights leader martin Luther King Jr. on the National Mall in Washington DC USA.

Read our two stories from Thursday, November 20 at the links below:

~November 20, 2008: Food Retailing & Society Memo: Wal-Mart Steps in; Gives $12.5 Million Line of Credit to Group Trying to Secure Funding to Build King Memorial

~November 20, 2008: Food Retailing & Society Memo: Wal-Mart Donates $2.5 Million to 'Feeding America;' Will Also Give 90 Million Pounds of Food A Year to the Organization

Also on Thursday, Wal-Mart Stores, Inc. announced it would make the single-largest purchase of renewable wind energy by any U.S. corporation.

Wal-Mart said it will buy enough wind power from Duke Energy Co. to supply up to 15% of the retailer's total energy load in approximately 360 Texas stores and other facilities. The renewable energy will come from a Duke Energy wind farm under construction in Notrees, Texas, and is expected to begin producing electricity for Wal-Mart by April of 2009.

The project will provide roughly 226 million kilowatt-hours (kWh) of renewable power each year or the energy equivalent of washing 108 million loads of laundry -- enough for every household in Austin, Texas to do laundry for a year, the company said.

Texas currently is the leading wind power-producing state in the U.S. The new project by Duke Energy will solidify the state's position. Additionally, former oil barron T. Boone Pickens is planning a multi-billion dollar wind farm initiative, which would include major wind farms in Texas, as part of his "Pickens Plan" renewable energy initiative for the U.S.

One of Lee Scott's major initiatives during his nine years as head of Wal-Mart has been environmental sustainability. He's pushed suppliers to decrease product packaging sizes, launched "green" retailing initiatives across Wal-Mart's logistics system and stores, introduced "green" products under the retailer's store brands, pushed energy efficiency initiatives and numerous other programs that fall under the sustainability category.

It appears he wants to go out with a "green retailing" bang between now and when he leaves his CEO's office at the end of January, 2009.

Wal-Mart's wind power buy from Duke Energy is important in the larger, macro scale for wind power because its an endorsement in the U.S. of the renewable energy source by the nation's and world's largest corporation and retailer. The company's move will likely result in other corporations and retailers in Texas buying into the huge wind farm project being built by Duke Energy in the state.

A number of publications have written about Wal-Mart's major, new wind power initiative in Texas. Below is a sampling of those stories:

[CNN-Money: Wal-Mart To Buy Wind Power From Duke Energy For Texas Stores...Dallas, Morning News, Dallas, Texas: Wal-Mart buying power from wind farm...Associated Press: Wal-Mart buys wind energy supply...Wall Street Journal Business Blog: Wal-Mart: Wind Power’s Good for the Bottom Line, Even With Cheaper Gas ...Austin-American Statesman, Austin, Texas: Wal-Mart buying wind power for Texas stores...Houston Press, Houston, Texas: Wal-Mart Turns To Wind Power, A Little...

The Morning News-Arkansas: Wal-Mart Pushes Wind Power...Energy Matters, Australia: Wal-Mart Gets Into Wind Power...Clean Energy Update, New York, NY: Wal-Mart Makes Major Commitment to Renewable Wind Power...Environmental Leader: Wal-Mart To Buy 226 M kWh Wind Energy To Help Power 350+ Stores...Wal-Mart Stores, Inc. press release: Texas Wal-Marts go green with wind power.]

Our sources tell us CEO Lee Scott has a few more corporate social policy and environmental retailing surprises up his sleeve, which the company will announce before he turns over his CEO's office to Mike Duke at the end of January, 2009. If they are on the order of the three announcements we've written about -- all three announced by the company on Thursday, November 20 -- it should be an interesting remaining two months in 'Wal-Mart World.'

As the CEO of a $400,000 billion a year global corporation and retail empire, it appears Lee Scott, like a President or head of state does, also wants to leave a legacy. It appears he also wants to set a tone for the new, incoming CEO of a Wal-Mart Stores, Inc. that maintains its heavy involvement in corporate social programs and "green retailing" initiatives, both of which are needed even more strongly now in the current global recession and environmental and energy crisis than they were even before.

Retail Memo: Wal-Mart CEO Steps Down; Head of International Operations Mike Duke to Lead Retail Giant; USA Chief Castro-Wright Promoted

In a move today that took nearly everybody by surprise, Wal-Mart Stores, Inc. replaced CEO Lee Scott with Mike Duke (pictured at left), the head of the mega-retailer's international operations. Duke will take over as CEO of Wal-Mart in February, 2009. Wal-Mart's investors responded to Duke's appointment by sending the stock up $2.26, or 4.5%, to $52.92 on Friday. The consensus among analysts is that Duke is a good retailer and deserved the CEO's job.

Duke, a former department store executive, only joined Wal-Mart in 1995. he was named to head the company's international division in 2005, making his three year rise from that key position to CEO a meteoric one. Prior to joining Wal-Mart, Duke's 23-year retail career included work for Federated Department Stores and May Department Stores.

When he joined Wal-Mart in 1995 Duke first led the company's logistics divisions and U.S. Wal-Mart stores before being named international chief in 2005.

Wal-Mart also today promoted the CEO of its Wal-Mart USA operations, 53-year-old Eduardo Castro-Wright, to vice chairman of the corporation, effective immediately. He's slated to take on additional responsibility in global procurement.

The announcement paved the way for what some say is his eventual ascension to the top job at Wal-Mart Stores, Inc. Many believe Castro-Wright, who is considered an extremely excellent retailer, is ready now to be CEO. However, his promotion is a pretty clear sign he's next in line for the position if he wants it whenever Mike Duke leaves. Duke held the same vice chairman position Castro-Wright was just promoted to, as did Lee Scott, before being named CEO. Duke and Scott were responsible for different aspects of Wal-Mart's business though as vice chairman.

Current CEO Lee Scott, who has worked at Wal-Mart for three decades and served as CEO for the last nine years, isn't going away anytime soon though. He will continue as chairman of the executive committee of the board and as an adviser to Mike Duke through January 2011, Wal-Mart spokesman David Tovar said today.

The timing of the announcement caught most people in the retail industry and on Wall Street by surprise. Changes at the top for huge corporations like Wal-Mart generally don't come towards the end of the year or before the holiday season. Additionally, such changes are usually made at the beginning of a major corporation's fiscal year, which isn't the current case at Wal-Mart.

"Lee (CEO Scott) decided the time was right for him to retire and approached the board about doing so," Tovar said. "The board has an ongoing and rigorous succession plan process. We think the right time is now. It's a time of strength for us."

Wal-Mart didn't name a successor to Mike Duke today as part of the changes at the top for the world's largest corporation and retailer. Duke is Wal-Mart's most senior international executive, which is a key post. Some are suggesting the fact a replacement wasn't named today for Duke could mean Wal-Mart might make an outside hire to replace Duke for its most senior global executive position.

Lee Scott's nine years as the head of Wal-Mart Stores, Inc. has been overall a very successful tenure.

Under Scott's leadership, Wal-Mart has put a relentless strategic and operational focus on value that has clicked with shoppers facing myriad economic concerns. He has also put a major emphasis on revamping merchandise assortment, improved store layouts and shored up Wal-Mart's environmental and labor image, positioning the chain as a Wall Street darling after a prior streak of criticism by the media, labor and environmental groups. Wal-Mart currently is the only company on the Dow Jones listing that's up for the year, for example.

Additionally, Wal-Mart has also become the number one seller of food and grocery products in the United States in terms of overall national market share. Prior to Scott's taking the helm as CEO nine years ago Wal-Mart wasn't even close to achieving that distinction.

As CEO Lee Scott launched a massive new store opening program in the U.S. and internationally, focusing mostly on the retailer's mega-Supercenters and Sam's Club warehouse format club stores, but also on its discount stores and Wal-Mart Neighborhood Market supermarkets.

The CEO also has led an aggressive new format development program at Wal-Mart. All of the new Wal-Mart formats in the United States for example -- the small-format Marketside grocery and fresh foods stores; the "Community Market" Hispanic prototype store, the first of which opened in Texas earlier this year, the new smaller (100,000 square feet) Sam's Club prototype; the new Supercenter prototype design, and the new hybrid, smaller Supercenter located in vacant buildings (the first one, at 100,000 square feet located in a former big box supermarket building, opened in Modesto, California on November 12 -- have one basic thing in common: They all offer lots fresh foods and groceries for sale in them.

That all these new formats sell food and groceries as a primary or key feature isn't an accident. What likely could be seen historically as one of the two most important contributions Scott has made during his nine year run as CEO at Wal-Mart could very well be his decision to put the retailer on the path to becoming the dominant seller of food and grocery products in the United States -- and eventually the world. In fact it's this ficus on consumables that most analysts attribute to Wal-Mart's current success in the U.S. and globally during the severe economic recession and financial meltdown.

Scott's relentless pursuit of consumers' food and grocery dollars also led to a decision earlier this year at Wal-Mart USA to start converting scores of its Wal-Mart discount format stores throughout the U.S. in hybrid Supercenters by adding 15,000 -to- 50,000 (depending on the available space) square feet to the discount stores, all of it and then some being devoted to consumables, including fresh produce and meats.

Most of these ideas and concepts for the U.S. came from Eduardo Castro-Wright, who yesterday was the CEO of Wal-Mart USA and today is the company's new vice chairman. However Lee Scott gets CEO credit just like he gets faulted for the negatives, as it should be.

Lee Scott's other major historic contribution has been push as CEO to make Wal-Mart an even bigger global retailer than it was when he took over the head office eleven years ago.

Under Scott's leadership Wal-Mart acquired the Asda chain in the United Kingdom, making it that nation's second-largest retailer after Tesco.

The company grew business in Latin and Central America dramatically.He did a joint venture deal bringing Wal-Mart into India, which has the world's second-fastest growing economy after China.

Scott grew Wal-Mart-China in a huge way, even saying it will someday in the not too distant future become the retailer's largest market, eventually surpassing the United States in terms of sales.

Most recently Scott inked a deal to bring Wal-Mart stores to Russia, which also has one of the world's fastest-growing economies, although that growth has slowed considerably since oil dropped from $142 per-barrel to $50 a barrel in just the last couple months. But it will rise once again -- the price of oil that is.

By naming Mike Duke, the head of its global business, as the new CEO, Wal-Mart is clearly sending a message that it plans on becoming an even bigger international retailer. The retailer's international division, which Duke heads, accounts for more than a quarter of Wal-Mart's $400 billion in annual sales. The company's future growth is globally. Although there's still room to grow sales in the U.S., it's the retailer's most mature market and pales in comparison to the opportunities internationally.

During his tenure as head of international operations, Duke had some hits, but also some big misses. For example, In 2006, Wal-Mart withdrew from Germany and Korea, two big setbacks for the company. And despite taking control of its Japanese business in 2007, Wal-Mart continues to struggle there.

Successes though include Brazil, which has experienced phenomenal growth and serves as a model for Latin America, and India, where Wal-Mart scored a coup by forming a partnership with Bharti Enterprises to expand in that country despite local opposition from mom-and-pop retailers. Add China to the list as well.

And Asda in the United Kingdom is doing extremely well despite that country's economic recession and its position as a distant number two to Tesco. Tesco has a 31% UK market share to Asda's about 17% share. But Asda has consolidated its lead over number three Sainsbury's, which was neck-to-neck with Wal-Mart-owned Asda just two years ago for number two, but now has about a 14.5% share to Asda's about 17%.

Beginning next year when he takes over Mike Duke will have a much different political agenda to contend with as CEO than Lee Scott did during the last eight years of the Republican Bush Administration. With a new Democratic President, Barack Obama, and a Democratic majority in both the U.S. house of Representatives and U.S. Senate, issues such as unionization, which Wal-Mart has been able to keep at bay, are going to become much more pressing for the company -- and for the new CEO.

If organized labor can get the Employee Free Choice Act passed, a provision of which ("quick check") allows workers to merely check a box if they want to be represented by a union rather than going through the current and sometimes elaborate secret ballot voting process, it will make it much easier for unions like the United Food & Commercial Workers (UFCW) to organize store-level Wal-Mart employees, something the union has failed to do for decades. President-Elect Obama and a majority of House and Senate Democrats support the Employee Free Choice Act. Therefore its prospects for passage in 2009 currently look strong.

New CEO Duke also will have some political fences to mend globally; fences he has yet to mend as head of Wal-Mart's international operations.

For example, in September, Mexico's Supreme Court chastised Wal-Mart for paying employees partially in vouchers that could only be used at company stores. The court compared Wal-Mart to the Mexican dictator Porfirio Diaz, who ruled the country from the late 1880s to 1911.

Wal-Mart is now Mexico's number one retailer of food and grocery products. As such it can't afford to get on the wrong side of the government.

Other global issues include its Asda chain in the United Kingdom. That nation's top three retailers -- Tesco, Wal-Mart's Asda and Sainsbury's -- have been involved in a multi-year battle with the British government involving charges of anti-competition and price fixing. Earlier this year Asda CEO Andy Bond directed executives of the chain to cooperate with British government authorities against competing chains in return for a promise that the retailer wouldn't be prosecuted or fined. The issue is still taking shape but Asda isn't completely in the clear yet either.

It will be extremely interesting to see who Wal-Mart names to replace Mike Duke in the key position of head of international operations.

Additionally, with Eduardo Castro-Wright moving from CEO of Wal-Mart USA to his new position as vice chairman of Wal-Mart, that opens up the key position of head of U.S. retailing, which remains Wal-Mart's single-largest division in terms of annual gross sales.

We will be watching this closely because since so much of Wal-Mart USA's strategy is focused on selling consumables, and developing new formats that feature food and grocery products, we would expect a person with a food and grocery retailing background perhaps to assume Castro-Wright's position.

Of course that's far from a given since Wal-Mart is fairly deep with food and grocery sector talent below the USA CEO position. However, naming a person with extensive food and grocery retailing experience, either from inside or from outside Wal-Mart Stores, Inc., would send a strong signal that Wal-Mart is even more serious than ever before about becoming the dominant force in food and grocery retailing in the U.S.

[Photo Credit: Wal-Mart Stores, Inc.]

Food Retailing & Society Memo: Wal-Mart Steps in; Gives $12.5 Million Line of Credit to Group Trying to Secure Funding to Build King Memorial

Wal-Mart Stores' Wal-Mart charitable foundation stepped in today to help the group planning to build a memorial to the late civil rights leader Rev. Martin Luther King Jr. on the National Mall in Washington DC by creating a $12.5 million letter of credit to help complete the financing of the Martin Luther King Jr. National Memorial.

A disagreement between the U.S. National Park Service, which controls what gets built on the national Mall, and the group has delayed the start of the memorial to the late civil rights leader as well as added costs to the project.

The National Park Service has insisted that the King Memorial's design include security measures, identifying an unspecified security threat by extremist groups "spouting racist ideologies." But other agencies with authority over the capital's architecture have resisted security barriers, calling them an embarrassment to King's legacy of inclusiveness.

"It appears to us that we're the one caught in the middle, and that's an uncomfortable position," Ed Jackson Jr., executive architect of the King memorial project said today. "From our point of view, we are positioned and ready to initiate construction."

Organizers with the foundation working to build the memorial are asking for help from the Bush administration and Congress to get past the stalemate over security, Jackson said.

The financial backing from the Wal-Mart Foundation will help the memorial foundation submit required documents to the National Park Service to obtain a construction permit, a spokeswoman for the project said. Wal-Mart Stores, Inc. officials said they wanted to help jump-start the memorial building effort, in announcing the $12.5 million line of credit today.

In 2005, when the organization kicked off its fund raising drive to build the memorial to Dr. King, Wal Mart Stores, Inc. gave the group a $1 million donation.

"Our plan is to see them through to completion," Esther Silver-Parker, a senior vice president at Wal-Mart said today in a statement. "We thought that given that this is the 45th year since the 'I Have a Dream' speech, that this would be an appropriate time to start construction."

Silver-Parker added that the African American community is an important customer base for Wal-Mart, and that the contribution also is on behalf of more than 250,000 black employees among the retailer's U.S. work force of more than 1.4 million.

The organizers of the King Memorial said today they have raised $100 million of the needed $120 million to built the memorial. The Wal-Mart line of credit will get them about 50% of the way to raising the final $20 million. The group also said today former President Bill Clinton has committed to helping raise the remaining millions needed to built the memorial on the National Mall.

Since there's a severe credit crisis in the U.S., as well as globally, it's not likely the group could have received a line of credit from a bank, particularly one with the generous terms Wal-Mart has offered.

Ironically, in 2006 Wal-Mart Stores, Inc. began plans to enter the banking industry. However, after opposition was voiced by some members of Congress, the Bush Administration and anti-Wal-Mart groups, last year Wal-Mart announced it no longer had any intentions of getting into retail banking but would instead merely form its own credit card services company similar to what retailers like Target Corp. and Sears already have.

In the United Kingdom where Wal-Mart owns and operates the Asda retail chain, which is the UK's second-largest retailer after Tesco, it's common for retailers to be in the consumer banking business. For example, the nation's top-three retailers -- Tesco, Wal-mart's Asda and Sainsbury's all operate consumer banking and finance, as well as insurance, companies.

Perhaps in light of what's happened to the U.S. banking and financial services industry since Septemebr, the meltdown and resulting $700 billion bailout package, Treasury Secretary Hank Paulson and Senate banking Committee Chairman Chris Dodd should call Wal-Mart Stores, Inc. CEO Lee Scott and invite him to change his mind and get into the U.S. banking industry.

What a difference a mere year makes. Today one would think most reasonable people would welcome Wal-Mart into the banking and financial services sector. There are numerous failed and failing banks to acquire after all. Would it not be better for Wal-Mart to buy a couple of them rather than for the U.S. taxpayers to give more money to the Treasury Department to continue bailing out these institutions? We certainly think so. We also think the group planning the Memorial to Dr. King would support it as well.

In fact, we bet if Wal-Mart were to enter the banking industry on whatever level, and applied its retailing and logistics model to the banking industry, it would be a vast improvement over much of what is a banking today in the U.S.

Hank Paulson, Chris Dodd, if you're reading this we suggest making that call. What do you have to loose -- except more taxpayers money.

Food Retailing & Society Memo: Wal-Mart Donates $2.5 Million to 'Feeding America;' Will Also Give 90 Million Pounds of Food A Year to the Organization

America's banks and financial institutions, many of which are run by members of the "greed is good crowd," asked for and received their $700 billion bailout courtesy of former Goldman Sachs CEO and now Secretary of the Treasury Hank Paulson, the U.S. Congress and President George W. Bush.

Yesterday the CEO's of America's big three auto makers, General Motors, Ford and Chrysler LLC, spend hours with their financial hats in hand (but not letting the hats cover their tin cups) before the banking committee in the U.S. Senate and its counterpart committee in the U.S. House of Representatives, pleading for $25 billion of U.S. taxpayer money as a bridge loan to keep their respective companies, each which is burning through a couple billion dollars a month in cash, operating.

Many think the insurance industry will be the next in line asking for a bailout. AIG,which insures financial instruments for investment banks and other financial institutions already has set the stage for that, receiving something in the neighborhood of $120 billion of U.S. taxpayer's money thus far. In return the federal government now owns a big chunk of AIG. Does anybody wonder how soon that investment is going to pay off for the average American taxpayer and consumer?

All this charity being requested by banks, financial institutions and the auto industry makes the retail industry, particularly the food and grocery retailing industry seem like a quaint bunch of business people. The kind of folks who reply on the marketplace for profit and loss.

It's true economic times aren't near as tough for food and grocery retailers (they are for all other retailers though) as they are for the big three auto companies (the banks are a different matter all together), but some are struggling big time.

Why not a little bailout money for Whole Foods Market, for example, it could use it. Instead, despite a 40% drop in income and a stock worth 70% less than it was just a year ago, the U.S. Federal Trade Commission (FTC) still argues Whole Foods holds a monopolist position in the supernatural foods retailing segment.

The FTC is still planning a hearing on the issue in February, 2009. We suggest President-Elect Barack Obama, who along with his wife are known to be Whole Foods Market-Chicago shoppers, put an end to that shortly after he takes office in late January, 2009. It is the height of absurdity for the FTC to continue this matter in light of where Whole Foods Market is financially and operationally currently, and will be for some time.

If anything, Whole Foods needs life support, which it recently got by selling 17% of the company to an investment group.

No, the food and grocery and related retail industries aren't asking for bailouts. Instead they are adapting to the current financial crisis and economic recession, something America's banking and auto industries have failed to do. Of course the failures of those two industries, greed in the case of most of the banks that have gone under and a failure to be consumer-driven by the automakers, are largely self-inflicted.

America's food and grocery retailers in fact are giving rather than taking -- donating tons of food and cash to the poor and hungry at this pre-holiday time. Compare that to Wall-Street and Detroit, where the company CEO's literally fly into Washington D.C. in private jets that cost $20,000 per trip, enter the capital, take out a 50-cent tin cup, beg Congress for billions, put the tin cup back in their expensive briefcases, and jump back into their private corporate jets for the return trip home, which costs another $20,000. Who said hubris is fading away in these struggling industries?

Meanwhile the world's and America's largest corporation and retailer, Wal-Mart Stores, Inc., is giving big time to groups that assist the hungry and the soon to be hungry in the USA.

Yesterday the giant retailer, which is based in Bentonville, Arkansas, said its Wal-Mart Supercenters and Wal-Mart Neighborhood Markets will partner with Feeding America (formerly known as the Second Harvest Food Bank system), a nationwide charitable hunger-relief organization, to provide about 90 million pounds of food each year to needy families by the end of 2009. Yes, 90 million pounds.


Wal-Mart said it will donating produce, deli meat, beef, chicken, dairy and other groceries directly from its stores. The groups said the 90 million pounds of food is the equivalent of 70 million meals.

Also, the Wal-Mart Foundation announced a $2.5 million cash donation to Feeding America, which will help its food banks improve warehouse capacity and purchase 20 new refrigerated trucks.

"We are pleased to partner with Feeding America during a time of nearly unprecedented need and provide nutritious meals for their families," said Bill Simon, executive vice president and chief operating officer of Wal-Mart U.S. "Given the current state of the economy and the increased burden on neighborhood food pantries and soup kitchens, we are enlisting our entire network of stores and clubs to participate in this food donation program to provide relief to communities throughout the country."

Wal-Mart Supercenters and Neighborhood Markets in Bentonville, Fayetteville and Fort Smith, Ark.; Denver; Ft. Wayne, Ind.; Springfield, Mo.; and Houston, as well as 450 Sam's Club locations across the U.S., are participating in the food donation program.

By the end of 2009, Feeding America expects its affiliated community food banks across the U.S. to be connected with each of Wal-Mart's 2,724 Supercenters and Neighborhood Markets, and its 594 Sam's Club locations.

This isn't a one-time donation for Wal-Mart, nor is it the only one. For example, as we reported in this October 22, 2008 piece, "Food Retailing & Society Memo: Wal-Mart Foundation Gives New York USA Food Bank System Over Half Million Dollar Cash Donation," Wal-Mart donated over half a million dollars last month to New York state-area food banks and pantry's feeding the hungry.

The retailer also made a number of similar donations in October, less than half a million but in the six figures in other states in the U.S. where it does business.

And on top of the $2.5 million national commitment to Feeding America Wal-Mart announced yesterday, it also donated $250,000 on the same day to a variety of programs that feed the hungry in its home state of Arkansas

Wal-Mart also is holding food drives for the holidays at most of its Supercenters and Sam's Club stores in the U.S. The retailer will match the donations customers make with product from the stores.

Add these donations to the one announced yesterday -- but the many more to come -- and unlike the banking and auto industries that are begging for taxpayer money, Wal-Mart is actually filling a void by donating serious sums of money to groups feeding America's hungry and food insecure. That void is the one created by the near-bankrupting of the U.S. federal government by President George W. Bush and the U.S. Congress over the last eight years.

Despite the severe recession, the U.S. federal government is giving less aid to programs to help the hungry than ever before. Enter Wal-Mart, which is donating millions of dollars to these groups.

Wal-Mart has lots of haters out there. But compare what its doing to the banking and auto industries, along with those industries who you can be certain will soon be next in line with their tin cups out asking for a bailout.

Love them, hate them or have no opinion at all, the fact is Wal-Mart is walking the walk when it comes to donating real money to help feed Americans in need, which is increasingly including more middle class people.

The mega-retailer is giving while huge companies in other industries are taking. Of course the issues involving the financial crisis are more complex than just handouts -- but the fact is if America's banks had stuck to the fundamentals of their business like Wal-Mart sticks to the fundamentals of retailing, those banks, and the U.S. economy, likely would not be in the mess it is in.

Independent Grocer Memo: Specialty Supermarket Hubbell & Hudson in Houston Texas' The Woodlands Defies Current Economic Recession

The Hubbell & Hudson upscale, specialty supermarket in the wealthy The Woodlands communtiy in Texas. [Photo credit: Gary Fountain for the Houston Chronicle.

Natural & Specialty Foods Retailing in Troubled Times

Despite the financial meltdown, credit crisis and recession, there still are plenty of rich folks in the United States. You know, the old saying: "The rich get richer." Over the last eight years that saying has been true as the U.S. has seen the greatest redistribution of wealth from the middle class to those Americans who comprise the top 5% of income earners and wealth holders in the country in recent history. Old sayings tend to become "old sayings" because they are true.

Many of the rich -- both the old rich and the new rich -- live in suburban enclaves in the U.S. These communities always seem to have names to them, which is a part of the developers' marketing scheme. Give a neighborhood a fancy name, brand it as exclusive, and those with money will follow, the thinking goes. And it most often works, assuming the community being branded as such isn't located on top of a landfill or next door to a former toxic waste site.

One of those wealthy U.S. enclaves we speak of is The Woodlands in suburban Houston, Texas USA. See, doesn't the name scream of wealth and exclusivity?

America's wealthy also need upscale, specialty-oriented grocery stores, of course. And right now the wealthy are just about the only ones shopping at such stores. The masses are jumping ship at Whole Foods Market and Dean & Delucca and sneaking over to Wal-Mart and Aldi for most of their food and grocery purchases. For example, Wal-Mart Stores, Inc.'s profits reported on Tuesday increased by 10%. Conversely, Whole Foods Market, Inc. experienced a 40% drop in quarterly profits.

We kid a bit -- just a bit -- about the rich and upscale, specialty supermarkets. Upscale supermarkets, such as Hubbell & Hudson in The Woodlands, are for everybody -- assuming "everybody" is willing to spend a higher portion of their income for food and groceries, which right now is difficult to do for many and impossible for an increasing number of American consumers.

But of course, you can still do 85% or 90% of your shopping at a Wal-Mart Supercenter or Sam's Club, Costco, Aldi, Sav-A-Lot and other discount food stores (the basics), then do 10%-15% (the gourmet stuff) of your shopping at a specialty food store or supermarket.

After all, indulgent, premium foods are far cheaper than shopping for clothes, consumer electronics or cars right now. Its also much easier on consumers' credit cards, assuming they have any credit left. And, a human has to have at least a tiny indulgence or two in this short life.

The folks who live in The Woodlands in Texas though aren't feeling the economic pains directly in our pocketbooks like the rest of us are. It's more like stock portfolio pains for most of them. If they are feeling the pains like the average American who is wondering how to make ends meet at the end of the month, they should sell their home and pocket the difference, allowing them to live a grand lifestyle in a less expensive community. Housing values remain high in The Woodlands, by the way.

The folks in The Woodlands aren't in the main trading down when it comes to food and grocery shopping either, although we bet some of them should be. And most residents of The Woodlands are still doing lots of entertaining, offering specialty, gourmet and premium prepared foods and beverages.

The Houston Chronicle has a story about the independent specialty supermarket in The Woodlands, Hubbell & Hudson, which we mentioned above.

According to the founder and CEO of Hubbell & Hudson, Cary Attar, the company is doing fine despite the current financial crisis and recession because of a number of factors, including the location of the store in the wealthy community as well as what he says is his neighborhood grocery store approach, along with stocking such a varied selection of specialty delights in the store that even the less than wealthy can't resist buying a few premium food indulgences.

Read the story, "Specialty grocer defies downturn," from the Houston Chronicle here.

As we write about often in Natural~Specialty Foods Memo, the independent supermarket sector continues to survive and thrive in the United States because smart, savvy and successful independents create niches, like Hubbell & Hudson has done, rather than attempt generally to go head-to-head with the big and even smaller chains.

For example, Hubbell & Hudson's Cary Attar says his research shows many of the stores customers make only one trip to his store for every for trips they make to a more discount-oriented supermarket. However, because he sells lots of specialty products and value-added prepared foods, all which allow for a higher market basket, he is fine with this frequency among a segment of store shoppers.

They also seek out the right locations for their niche, whether its a community like The Woodlands in Texas for Hubbell & Hudson's well-designed, attractive and well- merchandised specialty supermarket or a particular neighborhood in need of say a small-format discount-oriented neighborhood market.

Customer service is job one among successful independents. Notice in the Houston Chronicle piece how Hubbell & Hudson's founder Cary Attar talks about the importance of being a "neighborhood" market. He isn't counting on the fact he's created a wonderful specialty food emporium to carry the store through. He knows customer service with a neighborhood touch is a must for his store to succeed. We call that independent grocer humility and good horse sense.

Of course in these times it helps if you're in the upscale, specialty supermarket business to have your store or stores in a community or in communities where wealthy people live. Lots of consumers with lots of disposable income is a good thing when selling specialty, organic and gourmet food products priced at the upper end.

But to survive in this downturn a grocer must do far more than that. Without the three simple basics outlined above -- and they are far from the only elements needed to succeed -- even the finest specialty food market in the wealthiest neighborhood has no guarantee of success.

Retail Memo: Here Comes Wal-Mart USA -- Again and Again and Again

Mega-retailer Wal-Mart Stores, Inc.'s Wal-Mart USA division (it's largest in terms of annual sales), which now is the number one seller of food and groceries nationally in the United States, has big plans for its 2009 and 2010 fiscal years despite the current financial crisis and recession. We detail those plans below in a special report...

Eduardo Castro-Wright, CEO of Wal-Mart USA, was feeling his retailing oats a bit on Tuesday at the Morgan Stanley retail conference in New York City. He also made news at the conference, which is something Castro-Wright seems to enjoy doing despite Wal-Mart's generally tight-lipped culture. Tuesday's Morgan Stanley retail conference was broadcast over the Internet.

"I've read and heard most of the (retail) industry is struggling," Castro-Wright said to a few laughs from attendees during his presentation at yesterday's retail conference.

"But Wal-Mart is seeing positive trends," the head of Wal-Mart Stores, Inc.'s North American operations told analysts and others attending his presentation . "Customers now are shopping more frequently (primarily because of cheaper gasoline) and there hasn't been a significant change in how much they spend during each visit," he said.

Earlier this month Wal-Mart reported a nearly 10% rise in quarterly profits as consumers appear to have flocked to the discounter's stores. This despite the severe economic recession, and despite the fact other combination grocery and general merchandise mass merchandise retailers like Target and Costco are struggling. Target Corp reported a near-24% drop in income on Tuesday and Costco reported a 1% quarterly loss a couple weeks ago.

Holiday food and grocery price reductions every week

Castro Wright said Wal-Mart is rolling back prices on many food and grocery items for the Thanksgiving and Christmas holidays, meaning numerous (particularly holiday-related and staple items) grocery prices in all of the retailer's stores beginning this week are even lower overall than they were last week, he said. The rollbacks will remain in place for the Christmas holidays as well, Castro-Wright said.

In addition, every week between now and Christmas Wal-Mart will do additional price rollbacks on food, grocery, general merchandise and holiday-oriented items and products, Castro-Wright said.

Addressing the current cutback in consumer spending across the board in the U.S., including on food and groceries, the Wal-Mart USA CEO said: "The consumer will spend when you have the right prices and offerings. So with Christmas coming, I thought I would give you a little confidence."

More new formats

Eduardo Castro-Wright also talked about Wal-Mart's expansion in the U.S. for the company's 2009 (current) and 2010 fiscal years at yesterday's Morgan Stanley retail conference.Breaking a little news he said the mega-retailer is currently working on developing a new "high efficiency" retail format that would have higher sales per square foot than some of its current stores. According to our sources this is a smaller version of the Supercenter.

The executive said Wal-Mart also is looking at using smaller-sized stores to enter markets where it does not have a presence today, this includes its new 100,000 square foot smaller Sam's Club prototype store it's been testing, along with its new small-format Marketside fresh foods and grocery stores (four open so far in the Phoenix, Arizona region as we've reported), its 43,000 square foot Wal-Mart Neighborhood Market supermarkets, and its new hybrid Wal-Mart Supercenters, the first of which opened in Modesto, California last week.

We've been suggesting most of this year that Wal-Mart will use its new small-format Marketside and other new, smaller-format stores to penetrate market regions such as the San Francisco Bay Area in California, as well as urban regions in the state like Los Angeles and San Diego, where it has little opportunity to locate mega-Supercenters because of both geographical limitations and objections by city governments and community groups to the giant stores.

At about 100,000 square feet that Supercenters, which is in a remodeled vacant retail building, is about 80,000 square feet smaller than the average-size Wal-Mart Supercenter. It's "hybrid" because it's in a formerly vacant building rather than being built from the ground up which is what Wal-Mart historically does with its Supercenters. Despite the smaller size the Modesto hybrid Supercenter has a full supermarket inside, offering a complete assortment of fresh foods and groceries. About 40,000 square feet of the total 100,000 square feet of the store is devoted to food and grocery items. The remaining 60,000 square feet contains general merchandise products just like a larger Supercenter.

Adding food and grocery items to Walmart.com

Castro-Wright didn't address it during the conference on Tuesday but Natural~Specialty Foods Memo has noticed Wal-Mart has listed thousands of food, grocery and non-foods items on its Walmart.com Web site, indicating the retailer will soon be offering food and groceries at its online store, along with all of the other products it sells there.

There are no prices on the food and grocery items at Walmart.com as of yet. However we're told by a good source the prices are coming soon. Our source also tells us Wal-Mart will ship the items via UPS and Federal Express, just like it ships all of the general merchandise products it sells via its Web site. Amazon.com sells a huge selection of food, grocery and beverage products on its Web site, and ships them via these same carriers as well, for example.

Add another national format -- actually more of a product line extension to Walmart.com -- to the mega-retailers multi-format food and grocery retailing empire: online grocery retailing. Its cheap -- no stores, cheaper marketing costs and the like -- and its national. More importantly it will provide Wal-Mart with yet another niche or piece of the multi-format puzzle in its all out battle to dominate food and grocery retailing in the U.S., where it now is the national market share leader.

Hundreds of new U.S. stores in FY 2009 and FY 2010

The Wal-Mart USA CEO also said on Tuesday that despite the fact the company has cut back the number of new stores across all formats it plans to open in the U.S. in its 2009 (current) and 2010 fiscal years, it doesn't mean the retailer plans to be merely playing around the edges in terms of new store openings.

In fiscal year 2009 (the current fiscal year) Wal-Mart plans to launch 191 new stores of various formats -- Supercenters, Sam's Club stores, Neighborhood Market supermarkets, Marketside small-format food stores and others -- according to Castro-Wright. That compares to the 218 new units Wal-Mart opened last fiscal year (2008).

In fiscal year 2010, Castro-Wright said Wal-Mart will launch between 142 -to- 157 new units in the U.S.

Considering the size of most of the Wal-Mart format stores, particularly Supercenters and Sam's Club stores, that's still a whole lots of retail square footage for the 2009 and 2010 fiscal years. Additionally, that's a whole lot of new square footage in what many say is a mature retail market, the United States.

Castro-Wright said Wal-Mart would focus the majority of these new stores on what he called 15 "opportunity markets" in the U.S. that the retailer has identified and says account for nearly 40% of total retail sales. He didn't detail these 15 regions on Tuesday. However, we are working on our sources to find out the 15 market regions and will report the information when we get it.

Retail Memo: Target Corp. Launching Major Expansion of Food and Grocery Products in its Target Discount Format Stores

At least you can say Target Corp. CEO Gregg Steinhafel is a man with a plan -- or two.

Steinhafel, the CEO of the extremely popular until the U.S. financial meltdown and recession hit Target Corp., which operates mostly target discount stores but also a number of Super Target Supercenters that feature a complete selection of fresh, perishable and shelf-stable food and grocery products along with general merchandise items, was ready with two key strategies on Tuesday when he announced the company's nearly 24% drop in its quarterly profits, which was the retailer's fifth consecutive drop in quarterly profits. The good news for Target is that the nearly 24% drop in profits was actually less than analysts had estimated it would be for the quarter.

In a conference call on Tuesday, November 18 with analysts and the press, Steinhafel said Target is already in the process of doing two things -- lowering the prices across the board on the food, grocery, non-food and general merchandise products it sell in its Target discount stores and Super Target combination grocery and general merchandise Supercenters and, even more interesting for the retail grocery industry (and consumers), is preparing to launch an "aggressive test" of a substantially expanded food and grocery product offering in all of its U.S. Target discount stores.

Target discount stores currently carry a limited assortment of food and grocery products, both national brands and many under the retailer's Market Pantry (price store brand) and Archer Farms (natural, organic and specialty line) private label lines. The majority of the food and grocery items are shelf-stable, with an emphasis on staples and the snack, beverage and household supplies categories.

Target discount stores also sell milk, eggs and a limited assortment of dairy, deli, frozen and refrigerated items in the perishables segment.

The Super Target stores, which for those who aren't familiar with them are sort of an upscale version of a Wal-Mart Supercenter, carry everything a supermarket carries and more.

"We are going to continue to push and test aggressively a multitude of food expansions in remodels and other test stores to make sure that we fairly understand where it works and where it doesn't work," Target Corp. president and chief executive officer Steinhafel said in a conference call discussing third-quarter results yesterday. He added it was too early to assess the results of a small test of the expanded food offering near the company's headquarters near Minneapolis, Minnesota.

To put it simply, Target Corp. is looking to the Wal-Mart model -- lots of consumables at discount prices -- to help it hold off any serious decreases in profit like the near-24% drop-off reported yesterday. Just a year ago this was not something target was considering. But severe financial crisis and economic recessions tend to focus all retailers on price -- and consumables if they are able to offer them or expand a current offering. Target is the second-largest U.S. discount chain in terms of annual sales. Wal-Mart Stores, Inc. is number one.

Wal-Mart and Target are competitors but prior to the severe economic downturn in the U.S. upper-middle income and higher earning consumers tended to favor Target over Wal-Mart. However, many of those shoppers have been traded off to Wal-mart over the last couple months.

Additionally, unlike Wal-Mart which operates thousands of combination food and general merchandise Wal-Mart Supercenters, Target doesn't operate many Super Target stores nationally, which therefore doesn't allow it the advantage of selling consumables in the same volume Wal-Mart can.

But that's only a part of the picture. The fact is Target has never had much of a success with its Super Target grocery and general merchandise Supercenters. In fact, in the mid-to-late 1990's the retailer seriously considered selling the Super Target stores and getting out of the Supercenter format business completely. But it ultimately decided to keep the format and stores. It did very little with the Super Target format until about five years ago when it began building and opening new stores, including targeting new markets like California with the combination food and general merchandise stores.

Wherever there's a Wal-Mart Supercenter nearby though, the Super Target store almost always comes in second place. Perhaps a new focus on food and grocery products at discount prices in its discount stores will focus Target better on the food and grocery segment, thereby also having a positive effect on the Super target stores.

The new Super target stores opened this year are attractive and well merchandised, including the fresh foods and grocery departments and offerings. The retailer also has remodeled a number of its existing Super Target units, improving them greatly.

Target also has made much improvement in just the last two years on its Market Pantry (conventional and price line) and Archer Farms (natural, organic and specialty) store brands. The retailer has been offering 15% off line item promotions on the Archer Farms store brand items regularly over the last three months. However, in the current economic climate our analysis is sales and profit lies in the Market Pantry price line, offering it at prices below supermarket store brands if possible. Over the last month Target has been featuring an increasing amount of Market Pantry food items in its weekly full-color advertising book.

Food and HBC continue to be fast-growing areas for Target, which should be good news for the retailer's plans to expand the categories in its discount stores. The two sectors combined had sales growth of about 10% in the quarter, said Douglas Scovanner, executive vice president and chief financial officer. The company said the increased consumables mix put pressure on margins, although overall gross margins were still up 52 basis points.

Target's new, expanded focus on food, groceries, HBC and household consumer packaged goods in its discount stores is going to add competition to the current mix already out there for sure. target has discount stores throughout the U.S. Therefore from a location standpoint one can find a store nearly everywhere in the country near a supermarket or two. This will particularly be the case if target can get its pricing a bit lower overall than it currently is in both the discount and Super Target format stores.

The numbers: Target Corp.'s Net income fell 23.8% in the quarter, which ended Nov. 1, to $369 million, on revenue growth of 1.9%, to $15.11 billion. Same-store sales were down 3.3%. Year to date, net income fell 11.9%, to $1.6 billion, on revenue gains of 4.4%, to $45.39 billion.