Food & Economy Memo USA: It's No April Fools' Day Joke; Brit Paper 'The Independent' Declares 'USA 2008: The Great Depression'

Tuesday, April 1

Natural~Specialty Foods Memo Editor's Note: Yes, today is April Fools' Day, that day when everybody becomes a practical joker for at least a few hours.

However, the banner headline--"USA 2008: The Great Depression"--and the story below which is published in this morning's United Kingdom-based The Independent newspaper is no joke. It's very real, even though the paper chose to publish it on April Fools Day.

USA 2008: The Great Depression

Food stamps are the symbol of poverty in the US. In the era of the credit crunch, a record 28 million Americans are now relying on them to survive – a sure sign the world's richest country faces economic crisis

By David Usborn in New York, The Independent

Tuesday, 1 April, 2008

We knew things were bad on Wall Street, but on Main Street it may be worse. Startling official statistics show that as a new economic recession stalks the United States, a record number of Americans will shortly be depending on food stamps just to feed themselves and their families.

Dismal projections by the Congressional Budget Office in Washington suggest that in the fiscal year starting in October, 28 million people in the US will be using government food stamps to buy essential groceries, the highest level since the food assistance programme was introduced in the 1960s.

The increase – from 26.5 million in 2007 – is due partly to recent efforts to increase public awareness of the programme and also a switch from paper coupons to electronic debit cards. But above all it is the pressures being exerted on ordinary Americans by an economy that is suddenly beset by troubles. Housing foreclosures, accelerating jobs losses and fast-rising prices all add to the squeeze.

Emblematic of the downturn until now has been the parades of houses seized in foreclosure all across the country, and myriad families separated from their homes. But now the crisis is starting to hit the country in its gut. Getting food on the table is a challenge many Americans are finding harder to meet. As a barometer of the country's economic health, food stamp usage may not be perfect, but can certainly tell a story.

Michigan has been in its own mini-recession for years as its collapsing industrial base, particularly in the car industry, has cast more and more out of work. Now, one in eight residents of the state is on food stamps, double the level in 2000. "We have seen a dramatic increase in recent years, but we have also seen it climbing more in recent months," Maureen Sorbet, a spokeswoman for Michigan's programme, said. "It's been increasing steadily. Without the programme, some families and kids would be going without."

But the trend is not restricted to the rust-belt regions. Forty states are reporting increases in applications for the stamps, actually electronic cards that are filled automatically once a month by the government and are swiped by shoppers at the till, in the 12 months from December 2006. At least six states, including Florida, Arizona and Maryland, have had a 10 per cent increase in the past year.

In Rhode Island, the segment of the population on food stamps has risen by 18 per cent in two years. The food programme started 40 years ago when hunger was still a daily fact of life for many Americans. The recent switch from paper coupons to the plastic card system has helped remove some of the stigma associated with the food stamp programme. The card can be swiped as easily as a bank debit card. To qualify for the cards, Americans do not have to be exactly on the breadline. The programme is available to people whose earnings are just above the official poverty line. For Hubert Liepnieks, the card is a lifeline he could never afford to lose. Just out of prison, he sleeps in overnight shelters in Manhattan and uses the card at a Morgan Williams supermarket on East 23rd Street. Yesterday, he and his fiancée, Christine Schultz, who is in a wheelchair, shared one banana and a cup of coffee bought with the 82 cents left on it.

"They should be refilling it in the next three or four days," Liepnieks says. At times, he admits, he and friends bargain with owners of the smaller grocery shops to trade the value of their cards for cash, although it is illegal. "It can be done. I get $7 back on $10."

Richard Enright, the manager at this Morgan Williams, says the numbers of customers on food stamps has been steady but he expects that to rise soon. "In this location, it's still mostly old people and people who have retired from city jobs on stamps," he says. Food stamp money was designed to supplement what people could buy rather than covering all the costs of a family's groceries. But the problem now, Mr Enright says, is that soaring prices are squeezing the value of the benefits.

"Last St Patrick's Day, we were selling Irish soda bread for $1.99. This year it was $2.99. Prices are just spiralling up, because of the cost of gas trucking the food into the city and because of commodity prices. People complain, but I tell them it's not my fault everything is more expensive."

The US Department of Agriculture says the cost of feeding a low-income family of four has risen 6 per cent in 12 months. "The amount of food stamps per household hasn't gone up with the food costs," says Dayna Ballantyne, who runs a food bank in Des Moines, Iowa. "Our clients are finding they aren't able to purchase food like they used to."

And the next monthly job numbers, to be released this Friday, are likely to show 50,000 more jobs were lost nationwide in March, and the unemployment rate is up to perhaps 5 per cent.

Retail Memo: Some Midwest USA Region Consumers Want Their Former Wild Oats Markets to Get More of A 'Whole Foods-Style Treatment'

As our readers know, we've been covering, writing about and analyzing the Whole Foods Market, Inc. acquisition of its once rival Wild Oats Markets, Inc. since the buyout first occurred late last Summer. (2007). [You can read a selection of some of those pieces here. Also, type Whole Foods in the search box at the top of the blog.]

Shortly after Whole Foods announced its intention to acquire Wild Oats--with Wild Oats Markets, Inc.'s blessing (both calling it a merger in fact)--the U.S. Federal Trade Commission (FTC) announced it would oppose the acquisition/merger on the grounds it was anti competitive and would give Whole Foods a monopoly in the supernatural grocery retailing category, allowing the Austin, Texas-based chain to raise prices to consumers at will.

The U.S. Federal Court in Washington, D.C. denied the FTC claim, ruling the merger would neither result in category monopolization or anti-competitiveness primarily because it viewed Whole Foods Market, Inc.'s primary competitors as being higher-end supermarket chains like Safeway Stores, Inc.'s Lifestyle format, Wegmans, Publix, H.E. Butt, Fresh Market and many others with thousands of stores throughout the U.S. in regions where there are both Whole Foods and Wild Oats' banner stores. (This is an argument Whole Foods lawyers made in court, by the way.)

However, the FTC appealed the decision in the late fall, putting a hold on Whole Foods' ability to start integrating the Wild Oats stores into the Whole Foods Market, Inc. operations and retailing system.

Once again, towards the end of 2007, the Federal Appeals Court in Washington, D.C. denied the FTC's anti-competitive and monopolistic claims, upholding the previous U.S. Federal Court's ruling in favor of Whole Foods.

Since the appeal ruling in Whole Foods Market, Inc.'s favor came down at the end of last year, the supernatural grocery chain was only able to really start integrating and re-branding (from the Wild Oats to the Whole Foods banner) the former Wild Oats stores beginning in January of this year.

It's been a big job; some say even bigger than Whole Foods anticipated. The integration process also has been compounded by the fact the FTC filed a second appeal in U.S. Federal Court in late January, attempting to halt the integration process despite the fact Whole Foods was well into the process, having been given the green light by the U.S. Federal Appeals Court.

In fact, when it filed its now third lawsuit regarding the merger and second appeal in less than nine months, the FTC asked the U.S. Federal Court for an immediate halt of the Whole Foods-Wild Oats integration until the court agreed to hear the FTC brief. The court denied the FTC's request. Further, it hasn't heard the second appeal yet, nor set a date for a hearing thus far.

The filing of the FTC's second appeal didn't stop Whole Foods from continuing the Wild Oats store integration process it began in earnest in January. In fact, the chain reports its making progress in its efforts to eventually re-brand all of the the Wild Oats stores (except two or three in Boulder, Colorado, which will carry the Alfalfa's and another local banner) to the Whole Foods banner.

There is some trouble in paradise however. We've heard comments of disappointment from a few readers about the treatment some of the former Wild Oats stores are getting. It seems many shoppers, and perhaps rightly so, expect that when Whole Foods comes in and converts a former Wild Oats grocery market, which have generally always been much more "bare bones" than a typical Whole Foods superstore, that the supernatural grocer is going to give that store the "Whole Foods treatment."

What's the "Whole Foods treatment?" That would include adding a wider-variety of natural and organic grocery products, more specialty and gourmet fresh foods and grocery products, additional premium food items which Whole Foods is famous for, and a general up-scaling of the store's product selection.

We've talked to consumers in some areas of the U.S. where Whole Foods Market has made these additions to Wild Oats stores it's already converted. However, people in other parts of the country say it isn't, or hasn't yet happened. One region where we've particularly heard this complaint is in the Midwestern U.S.--specifically in the Chicago, Illinois Metro region--and now in Indiana.

Indianapolis, Indiana is the home of the food blogger Braingirl, who writes a popular food and drink blog called: "Feed Me/Drink Me: Indianapolis food, wine and commentary." Food blogger Braingirl is an advocate and promoter of quality food and drink in Indianapolis and the surrounding region, including writing about food and grocery stores, restaurants and much more.

Indy-based gourmet Braingirl shopped at the Wild Oats market in Indianapolis before the chain was acquired last year by Whole Foods Market, Inc., despite the fact she says it offered a rather poor selection of specialty foods and specialty ingredient items. Therefore, she was rather pleased when she heard the natural foods' grocery chain would be converting the store from a "Wild Oats" into a "Whole Foods" store.

However, in a piece in her blog today, she reports the "assimilation" of the former Wild Oats market is near-complete--and the store essentially hasn't up-scaled and added specialty, gourmet and premium items, which the chain is famous for, as of yet.

As you can imagine, food blogger Braingirl isn't pleased at this development. Read her essay in today's edition of Feed Me/Drink Me to get her report on what's happening at the former Wild Oats' store, what she is being told about the conversion and integration process regarding that store, and how she feels about the natural foods' market's not getting the "Whole Foods treatment" as it relates to enhanced specialty product selection.

Since we've heard comments from more than one other person about their hoping that a former Wild Oats store in their area would become more like a Whole Foods store in terms of expanded specialty and premium product selections once that store was converted to the Whole Foods system and banner, we think Whole Foods Market, Inc. executives might want to listen to what Braingirl has to say.

Perhaps there are near-future plans to make the former Wild Oats grocery markets like the one in Indianapolis described by food blogger Braingirl more specialty and premium product-inclusive like existing Whole Foods banner stores. (If so, somebody might want to shoot her an email to that effect.) If such current plans don't exist, it's something the grocer should consider, as it appears there's added sales potential for such former Wild Oats stores in Whole Foods' doing so.

Food Trends Memo: 'Green' Consumerism, the 'Greening' of the Food and Grocery Industry, and the Impending End of the Era of 'Cheap Food'

For the eight months or so we've been publishing Natural~Specialty Foods Memo (NSFM), we have suggested a number of overall themes in our writings as they relate to the natural and specialty foods (and general food and grocery) industries globally, and more particularly in the developed western world.

Two of these themes are that there's a "green" or environmental trend or movement coming from consumers from the bottom-up (grassroots), as well as from the private sector food and grocery industry, which is way ahead of the world's (especially the U.S.) respective national and local governments' environmental policies.

In terms of the consumer "green" movement or trend, it's evidenced by the perhaps slow but progressive changes we're observing in people, ranging from middle-class and upper middle-class consumers, to the more affluent. These environmental changes folks are making also are do in part to harsh economic realities, ranging from the soaring costs of gasoline and home energy fuels, to rising food prices.

For example, we've been observing a change in consumer car buying habits which include a shift from gas-guzzling SUV's to smaller, more energy efficient automobiles. This shift is most apparent in Western Europe (where smaller cars have always been more generally popular anyway) but also is occurring in the U.S., home of the SUV and muscle car.

Evidence of this purchasing behavior shift in the U.S. can be seen in automaker sales numbers: smaller car companies like Toyota and Honda are thriving for example, while SUV and big car makers GM and Ford are losing billions of dollars annually, and trying to retool their vehicle designs to smaller, more gas efficient car and truck models.

We also see a consumer "green" trend at the supermarket. Sales of organic and local food products are up by double-digits. Additionally, more and more shoppers are bringing their own reusable shopping bags with them to the store, rather than having their grocery purchases packed in single-use plastic or paper carrier bags. Further, surveys in Western Europe and the USA show more than 50% of consumers are for outright bans on the use of free plastic carrier bags at the supermarket, as well as packaging like disposable styrofoam take-out containers at in-store foodservice venues and at restaurants.

Other examples of this grassroots consumer "greening" include an increased concern by shoppers about the carbon footprints of the retail stores where they shop and of the manufacturers' who's products they buy. Increasingly, consumers are factoring in companies' environmental policies, as well as price and quality, when choosing a brand and spending their money for food, groceries and non-foods items.

The 'greening' of the food and grocery industry

Food and grocery manufacturers, marketers and retailers are increasingly noticing this gradual bottom-up consumer "greening," and responding to it. They're "greening" product packaging, food manufacturing plants and supply chains, among other environmentally responsible efforts.

Food and grocery retailers also are increasingly adding environmental improvements to their operations; some more so than others of course.

Among the "greening" trend at retail we're obviously seeing more and more retailers, including mid-range grocers, increasing the variety of natural, organic, sustainable and local food and grocery products they sell. The reason for their doing this isn't just do to increased consumer concern about eating healthier products, although that's key. It also has much to do with sustainability and other "green" consumer concerns as well.

Food and grocery retailers also are moving towards a stronger conservation and energy-reduction mind-set. Numerous U.S. retailers such as Wal-Mart, Target, Safeway Stores, Inc. and others are installing solar panels on the roofs of their stores and distribution centers. Others like Whole Foods Market, Inc. are combining solar panel installations with other energy-saving innovations like fuel cells. Still, others like Sainsbury's and Tesco in the UK are installing wind turbines in store parking lots as a way of providing 30 -to- 40% of a store's energy needs from a sustainable source.

The retail "greening" trend, which is in its infancy, is towards using more and more sustainable sources of energy like solar, wind and fuel cell technology to provide a percentage of power to supermarkets and distribution facilities.

Other green practices among food and grocery retailers include charging customers for free plastic grocery bags if they want one, like Marks & Spencer in the UK will soon begin doing, and like small-format discount grocer Aldi does in its stores throughout the world, including the nearly 900 it operates in the U.S.

Some retailers are going even further. Austin, Texas-based Whole Foods Market will stop using plastic grocery bags at its 270-plus stores in the U.S., Canada and the UK beginning on April 22, Earth Day.

Others, such as U.S. specialty grocer Trader Joe's, which is owned by Germany's Aldi, doesn't use plastic grocery bags at all in the majority of its 300-plus grocery markets in the U.S. Rather, Trader Joe's uses paper grocery sacks made from 100% post-consumer recycled paper only in the majority of its U.S. grocery stores, as well as selling reusable shopping totes for 99-cents each.

In fact, nearly every supermarket, from the most upscale to the most downscale, in the developed western world is selling reusable shopping carriers in its stores. Many grocery retailers also give shoppers a discount of anywhere from 5-cents -to- 10-cents-off per-reusable shopping bag they use at the store rather than having the store provide a free plastic or paper bag for the grocery orders.

Era of cheap food on the way out

The second theme we sound frequently in NSFM is that for the developed western world, and particularly for the U.S., the long, post World War II era of relatively "cheap" food is coming to an end.

As we mentioned, this is especially true for the United States, which has experienced about 60 years of relatively cheap food compared to the rest of the developed world. This era of cheap food, which Western Europe has experienced but to a lessor degree than the U.S., is do to three primary factors.

First, as part of the reforms to get the U.S. out of the Great Depression in the 1930's, the U.S. Federal Government enacted a serious of farm and crop subsidiary programs that would give taxpayer money to farmers, encouraging them to plant certain crops (wheat, corn, soybeans and rice, for example) for which they would be compensated for producing. These farm subsidies also lowered the retail prices of certain foodstuffs by tinkering with the market in a way that allowed products made with corn and wheat for example to sell for much less than they otherwise would without the government price guarantees.

These farm subsidy policies were stalled in the U.S. in the 1940's do to America's involvement in World War II. The costs of the war required food and fuel rationing in the U.S. because so much of the agricultural products and oil being produced at home was being sent abroad to fight the two wars in Europe and Asia.

However, the end of World War II signalled a new era in government crop and farm policy and subsidies in the U.S. And, as a result, Americans have been able to purchase and eat most food and grocery products for far lower prices than would be the case if these farm subsidies didn't exist.

Of course, not all foods are subsidized in the U.S. Fresh fruit and vegetable crop farmers receive very little if any government subsidy money for example. In fact, nearly 90% of all U.S. government farm payments go to growers of four crops: corn, rice, soybeans, cotton and wheat. In other words, it's no accident that the cheapest processed and packaged food and grocery products in U.S. supermarkets have three of these four farm commodities as their primary ingredients.

However, the U.S. and Western Europe are experiencing the highest levels of food inflation in decades. Commodities like corn, rice, soybeans and wheat are up by double-digit percentages this year, compared to last--and are continuing to increase. Milk, eggs and butter are up 20% this year over 2007. And, processed and packaged goods are up at retail ranging from 6 -to-15% this year over last.

Natural, sustainable, cruelty-free and organic food and grocery products have and are increasing at an even higher percentage rate. For example, free-range, organic eggs are up nearly 30% this year, compared to last. Organic Milk has seen a 30% rise in the last two years alone.

While it's true much of these dramatic increases in food costs across the board--from basic commodities, to upscale and organic foods--is do to the current economic downturn or recession in the U.S. and increasingly in Europe--that's far from the only cause. Nor, are increasing food and grocery costs a temporary phenomenon.

Rather, do to a number of factors--an increasing world population, diminishing farm land acreage, a growing movement to trim government crop subsidies, the use of commodities like corn in ethanol fuel production, and a few others--the era of "cheap" food is coming to an end.

Natural foods industry vets agree with both of our trend assessments

We aren't the only experienced food and grocery industry folks who make these two arguments: that there's a bottom-up "green" trend among consumers, as well as a "greening" trend occurring in the food and grocery industry which is ahead of government environmental policies; and that the era of "cheap" food in the developed, western world, especially in the U.S., is coming to an end.

Last week, Walter Robb, co-president of supernatural foods' retailer Whole Foods Market, Inc. and Gary Hirshberg, the president of organic foods' company Stonyfield Farms, echoed our themes about the grassroots and food industry "green" trends and that the era of "cheap" food is over, in talks they gave together to students at Iowa State University and Drake University, in the U.S. farm belt state of Iowa.

In terms of the impending end of the era of "cheap" food, Hirshberg said: "Every assumption we've made about agricultural policy, industrial policy, is now irrelevant." Robb was even stronger in his comments, saying: "The era of cheap food is over," according to David Elbert, the business editor for the Des Moines Register newspaper, who interviewed both natural products' industry veterans after their talks to the agriculture students.

Robb said the cost of food is rising on average at a rate of about 5-6% a year, and will continue to do so at those levels or higher. Both men said higher-priced oil is the cause in part of these soaring food costs. However, it's not the only reason.

Robb sighted another key factor (in agreement with us basically), which is the historic levels of farm crop subsidies for conventional food products and commodity crops. "Conventional food has been heavily subsidized with price supports to farmers and government research," he said. Robb believes, like we do, that will end. His argument primarily is that consumers will realize the benefits to them of such subsidies aren't what they expected and aren't worth it to them personally as taxpayers and consumers.

Regarding the costs versus the benefits of these government subsidy programs, both Hirshberg and Robb offer their analysis.

Hirshberg says many of the packaged food products made from the subsidised commodity crops are "empty calories." He adds: "Instead of building up the nutrients in the soil (because of the conventional commodity crop farming methods), we've synthesized nutrition from the soil."

Focusing on the U.S., Robb said: "Americans have been eating more but getting less, which is causing more obesity, juvenile diabetes and other health problems." His argument is empirically sound based on the soaring rates of obesity and diabetes in the U.S., which doctors and nutritionists attribute primarily to dietary factors.

Least you think Both natural foods industry veterans (or us) believe the ending of the era of "cheap" food means doom for the natural and organic foods industry, think again.

Both Robb and Hirshberg believe it actually will help the industry to grow. In addition, they both suggest the "greening" trend among consumers and by food and grocery industry companies is evidence in part of that fact.

They argue the two trends we've identified go hand-in-hand; that the consumer trend towards more healthier and environmentally sustainable foods and the impending ending of the era of "cheap" foods will serve the natural foods industry well. Both men say consumers are driving the green revolution and that will force corporations to be more sustainable. The natural products industry therefore is in the position to be the driving force in this change because its long been, and continues to be, the leader in sustainability and healthy foods.

Conclusion

The two themes we sound here often--the "greening" among consumers and in the food and grocery industry, along with the impending end of the era of "cheap" food--aren't just ours alone, or merely shared by Mr. Robb and Mr. Hirshberg.

For example, we just finished reading a transcript of a recent symposium held by the Agricultural Policy Issues Center at the University of California at Davis, which is one of the top agricultural and food research centers in the world. A major theme of the participants' in that conference was that the era of "cheap" food is coming to an end, especially in the developed western world, and particularly in the U.S.

Additionally, this topic is currently high on the agenda at meetings of farmers and policy makers at farm and agricultural trade associations throughout the world. It's also a hot topic of discussion in the executive suites of global agriculture and food corporations like Monsanto and Archer Daniels Midland Corp., as well as in the offices of medium-sized and small natural and organic foods' companies.

We agree with Robb and Hirshberg that the natural foods industry could benefit--and certainly won't be hurt by--the era of "cheap" foods' impending end. However, "cheap" is a relative term. The fact is, current retail prices of many natural and organic foods products are just out of reach for the average family to purchase primarily or regularly.

We also don't believe government crop subsidies in the U.S. will go away anytime soon, although we suggest the cost of food will continue to go up at far-higher than historic average rates even with these subsidies in place. (Imagine the increases if they were removed?) In fact, the current U.S. farm bill, which looks like it will pass with a few changes, actually increases commodity subsidies, and for the first time gives some fresh fruit, vegetable and nut growers subsidies on certain crops.

However, we do agree that the long-term trend will be to decrease such subsidies, especially in the land of debt, the U.S. If not, in order to pay for them--along with a host of other things like war, Medicare, Social Security and other social programs and financial institution bailouts--the future U.S President and Congress will have to raise taxes, which doesn't seem politically tenable at the present time. There's really no other solution under current U.S. government spending levels.

In terms of the natural foods industry, we suggest it needs to try to reduce the current retail costs of natural and organic food products--or at least contain the increases--if the industry is going to truly benefit (many) consumers. [Keep in mind that many consumers already are having a difficult time being able to pay for that "cheap," subsidized food which is currently increasing at double-digit rates.]

A key goal of the natural foods industry--in addition to its already laudable ones of producing and selling cleaner, healthier and more sustainably-grown foods--needs to be attempting to be more inclusive as well. By this we mean doing everything economically possible (including perhaps a bit of retail margin reduction) to make natural and organic food and grocery products more affordable so that more lower -to- middle-income consumers can afford to regularly buy natural and organic food and grocery products.

We realize this isn't easy, especially in today's food inflation climate. We do argue however that it's a worthy goal, right alongside of the healthier and more sustainable ones, that the industry should work hard to achieve, from the organic farm to the supernatural food store.

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.

Food & Grocery Trends Memo: The 99-Cent Store Gourmets

As we've recently written here, retail food and grocery prices are going up through the roof at supermarkets in the U.S. as one element of the nation's serious economic downturn, which some experts say is already in recession. As Steve Burd, the longtime CEO of Safeway Stores, Inc. the third-largest grocery chain in the U.S., recently told a group of industry analysts: "Food inflation is the highest I've seen in my 15 years as (Safeway) CEO."

For example, wheat, which is used in everything from bread to cereals, is up at least 20% over last year, according to the U.S. Department of Food and Agriculture's Economic Research Service.

Further, it's the same case with corn, the commodity price of which has increased by double-digits in just the last year alone, do in large part to the fact an increasing amount of corn crops are being planted for ethanol fuel rather than for foodstuffs. Wheat and corn are used in such a wide-variety of foods, this has meant near or actual double-digit price increases on nearly every packaged and prepared foods item in the last 12 months.

Dairy product prices also are soaring. Milk is up over 10% from last year, as is butter, yogurt and cottage cheese. The price of eggs has soared by nearly 20%, compared to the same time last year.

Specialty, premium, natural and organic food and grocery products are increasing at an even higher rate do to a number of factors, including higher commodity costs for premium and organic food ingredients, the poor dollar, soaring costs of gasoline and energy, and in the case of organic, the fact that high demand for the pesticide, synthetic fertilizer and fungicide-free foods has been so strong the last few years it's created a supply and demand imbalance in the market. (Increased demand but not enough organic crops to meet it.)

At retail, grocery chain product category buyers have been telling us they can't remember getting so many (and so frequent) price changes in categories across the board--from dairy and bread to gourmet and organic grocery products and fresh foods.

The major decision in buying offices today is how much of the penny value (and how often) of these frequent price changes can the retailers pass along in the form of higher prices (retail price increases) on grocery items in their respective stores.

For example, grocers have been getting price increases for fresh eggs every two -to- three weeks since January, 2008. These changes range anywhere from five -to- ten cents a dozen each time. Despite asking their suppliers to change the wholesale prices less frequently, even if the price increases have to be higher, the changes keep coming at these frequent intervals.

The problem is, eggs are a commodity item subject to increasing feed (corn and grain), transportation (gas) and energy (natural gas, electricity) costs, which have been rising so frequently egg farmers have had to increase their wholesale prices in some cases bi-weekly, which in turn means wholesale suppliers have to raise there's as well at the same frequency.

The rapidly escalating cost of food and grocery products at retail is beginning to cause some shifts in consumer shopping behavior. For example, recently released sales numbers show Wal-Mart (its Supercenters primarily) substantially increasing its same-store sales for the last quarter, in addition to increasing its national grocery sales market share in the U.S.

Further, discount warehouse chains like Costco Wholesale, BJ's and Wal-Mart's Sam's Club had excellent same-store sales numbers overall last quarter. Retail analysts attribute the positive results primarily to more consumers shopping the club stores for food and grocery items.

Another class of trade experiencing increased shopping traffic in its food aisles are the dollar, or 99-cent stores. These include chains like 99-Cent Only, Dollar Tree, Dollar General and others, along with the tens of thousands of independent dollar or 99-cent stores located in the U.S. For example, in New York City alone, there are hundreds of the independent dollar stores, ranging from tiny mom and pop shops, to large 99-cent discount marts like Jack's

Jack's has three 99-cent stores in New York City. It's flagship discount mart is at 110 West 32nd Street, near Herald Square. The other two Jack's stores are located at 16 East 40th Street and 45 West 44th Street in the Big Apple.

Jack's three-store, independent 99-cent store mini-chain puts a major emphasis on food and grocery products, along with the huge variety of general merchandise items it sells just like every other dollar store does.

For example, the Herald Square flagship Jack's has five full aisles of food and grocery products, many of them specialty, gourmet and organic, all priced at 99-cents. It also has refrigerated and freezer cases where it sells discounted fresh, perishable and frozen foods. Jack's even has an upstairs "gourmet loft" where it merchandises domestic and imported specialty and gourmet food and grocery products, priced in many cases at 50-75% less than the same items found in upscale supermarkets.

Of course, like all dollar stores, Jack's inventory depends on what it can buy for a song at a particular point in time. the discount marts might have Lindt premium chocolate bars one week for 75% less than normal retail, then not have them again for months. Jack's also might have a few hundred cases of imported Italian pasta at two 16oz boxes for 99 cents this week, and be out completely for weeks after it sells that inventory out. Shoppers buy what's there for cheap. It's not "buy what you want" name brand grocery list shopping like at an upscale supermarket or specialty store.

The three Jack's discount stores are seeing more and more shoppers, especially those buying upscale specialty and gourmet foods offerings, as well as natural and organic products. A regular Jack's shopper told us last week, "it's like New York suddenly discovered my discount oasis."

The New York Times has even discovered Jack's. Yesterday, Times food writer Henry Alford published an article in the paper titled: "How to survive in New York on 99 cents." In his piece, Alford chronicles how he successfully made a high-quality dinner every night for a week using ingredients and grocery products he bought at 99-cent stores, including Jack's.

Alford used the flagship Jack's 99-cent store as his shopping base of operations, eventually visiting 21 different 99-cent stores in New York City over the course of his week of 99-cent store cuisine dinners. At the end of the week, the writer even prepared a gourmet dinner for friends, using ingredients and items bought primarily from the New York City 99-cent stores.

Specialty and gourmet foods' fans in Los Angeles also are discovering that 99-cent stores can be a good source of upscale food ingredients and products. On the food bulletin board Chowhound, for example, a number of posters are discussing their 99-cent store finds. In particular are the food and grocery items--both basic and upscale, including wines--they are finding at the various 99-Cent Only chain's discount stores in the region.

Among their finds are upscale Australian wines for 99 cents a bottle, fresh herbs for a buck a bunch, a bunch of fresh white Asparagus for 99 cents (that poster says he later saw the same white asparagus at upscale Bristol Farms for $5.99 bunch), fresh salami chubs and gourmet cheeses, and even that all-American spread, number-one selling Best Foods mayonnaise.

As consumers search out 99-cent stores as a way to save on their grocery bills, they also need a guide to this 99-cent store upscale cuisine. Not to worry, on April 5 a new cookbook by food writer Christine Jory, titled, "99-Cent Stores Only Cookbook: Gourmet Recipes at Discount Prices," hits the bookstore shelves just in time for the 99-cent gourmet trend.

Jory calls herself a 99-cent store evangelist, and shows in her new book how consumers can prepare gourmet meals with products bought on the cheap at the discount stores. Many of the recipes in her book are even variations on recipes from such famous cook books as the Joy of Cooking and the Moosewood (famous restaurant) Cookbook, using 99-cent store ingredients and food products.

National Public Radio (NPR) recently aired an interview with 99-cent cuisine evangelist and cook book writer Jory about the growing (which she hopes grows further) trend towards consumers shopping 99-cent stores for everyday and more upscale groceries. The idea for doing the segment was NPR producer Martina Castro's. Ms. Castro got the idea because a friend of hers, Sheila Dvorak, is a 99-cent store convert who insists on buying all of her food from the dollar-discount stores.

The New York Times recently tested the theory and claim that consumers can cook upscale or gourmet meals using ingredients and grocery product purchases at 99-cent stores. The paper's food section gave multi-star professional chef Eric Ripert $40, with instructions to make five gourmet meals and three desserts using ingredients and food products purchased only at 99-cent stores such as Jack's in New York City. Ripert's results are rather impressive

We're smelling--and tasting--a new consumer shopping trend here. We call it (and those doing it) the 99-cent store gourmets.

Remember, middle income consumers who currently are stretched economically, are still used to eating quality foods in most cases. Indulgence has become the norm rather than the exception. Therefore, even though they're seriously pinched in their wallets and purses by the credit crisis, rapidly-rising cost of gasoline at the pump, soaring food prices and other economic negatives, these middle income (and in many cases pinched upper income) consumers are finding ways to keep indulging.

Our analysis is that many of these economically-stressed consumers are discovering the 99-cent stores for premium specialty and natural foods and groceries, along with basic grocery items and non-foods products.

We think this is primarily an economic-driven trend, and that its just beginning. However, we do know based on studies of consumer shopping behavior, that when shoppers do try a new class of trade and like it, they return again and again even when the economy improves.

Further, since many shoppers from all income levels have been shopping dollar stores for non-foods bargains for years, buying food and grocery products at the stores becomes a logical extension, especially during an economic downturn like the one currently going on in the U.S. Lastly, in the U.S. where shopping is a social event, consumers are having fun shopping the 99-cent stores to see how much of a bargain they can get.

The recent spate of publicity--the New York Times articles, online discussions on Chowhound, the NPR feature and many other mentions--also will serve to encourage consumers who haven't already done so to try 99-cent stores for food and grocery purchases.

In today's food and grocery retailing landscape we all know its all about getting a "share of the stomach" for retailers rather than one-stop shopping.

For example, in a place like the Los Angeles Metropolitan region, consumers can not only buy food and grocery products (including specialty and natural foods) at the regions thousands of supermarkets, natural and specialty stores, they also can buy the goods at Wal-Mart, Target and K-Mart; drug chains like Rite-Aid, Long's, CVS and others; as well as at convenience stores, farmers' markets, public markets, thousands of independent mom and pop stores and even online, through internet grocery delivery sites and Amazon.com's online grocery store.

All of these different classes of trade also have been increasing the variety of premium specialty, natural and organic food and grocery products they sell, as well as basic category items. The drug chains sell bread, eggs and dairy products, limited assortments of refrigerated and frozen foods, and even premium and organic confections, canned and packaged goods and other items.

As we wrote in this piece on March 20, our analysis suggests upscale supermarket chains and independents could be the retail operators most hurt by the current economic slowdown or possibly even recession in the U.S.

The empirical evidence for this argument includes the following: increased same-store sales and foot traffic in discount (Wal-Mart) food retailing stores and club stores (Costco); reports from numerous upscale food companies that they are seeing a drop in product orders by distributors who's highest percentage sales volume is to the upscale grocer segment; and a dramatic upsurge in sales and foot traffic at "salvage" grocers who sell near out-of-code and slightly-blemished grocery products.

Further, we've recently had conversations with a number of store managers at various upscale supermarkets who've told us sales are down, especially on higher-ticket gourmet and prepared foods items. Couple the above facts with this surge of consumer interest in finding upscale food and grocery product bargains by shopping the 99-cent or dollar stores, and we believe there's ample evidence for upscale grocers, including higher-end natural foods retailers, to be concerned.

Representatives for both Jack's 99-Cent store in New York City and a 99-Cents Only outlet in Southern California, told us in phone conversations they are seeing many new faces daily in their respective stores. Further, they said food items, including specialty and natural products, have recently been flying off the shelves, along with wines.

These direct store-level reports are similar to many we've been hearing from others throughout the U.S., including food company managers who are involved in selling surplus (or selling at a discount because they need the cash-flow), near out-of-code or slightly blemished grocery products to discount stores like 99-cent and salvage grocers. They tell us they're getting more frequent calls from the 99-cent retailers looking for deals on food and grocery products across the board, including gourmet and natural foods category items.

Good upscale and natural foods grocers have much to offer; items and services shoppers can't get at 99-cent stores or at other classes of trade. These include extensive selections of specialty, gourmet, ethnic, natural and organic foods and groceries that are always in stock. These grocers also offer extensive selections of fresh produce and meats (including hard to find specialty items), in-store prepared foods and many other offerings which make them special.

As such,, we aren't suggesting extinction for the upscale retail class of trade anytime soon. Rather, we suggest the opposite: that good, innovative and adaptive upscale grocery retailers can thrive in bad economic times, despite the discount bargain hunters and 99-cent store gourmets. To do so, however, these upscale grocers must continue to add and create value, including looking at their everyday pricing and margin structure, and when needed adjust it downward during these tough economic times.

Retail Innovation Memo: Piggly Wiggly Carolina's Innovative, New 'Consumer Intuitive' Format Pilot Store to Open on April 3

Piggly Wiggly Carolina Co., the South Carolina-based grocery company which is one of Piggly Wiggly LLC's largest franchisees, is set to introduce an innovative new grocery retailing format when it opens a pilot supermarket on April 3 in Myrtle Beach, South Carolina.

Piggly Wiggly Carolina Co. is a wholesale and retail grocery company. It currently operates about 100 Piggly Wiggly banner supermarkets. About 60% of the stores are company owned. The other 40% are owned by independents, who have a franchise agreement with the company, and buy all of their grocery products from the wholesale division.

The 100 Piggly Wiggly banner supermarkets are located across South Carolina and into South Georgia. Piggly Wiggly Carolina Co. is the largest privately-owned, family-operated company in South Carolina. It had sales of about $700 million in 2007 and currently has 5,000 employees. The grocery company also owns a real estate firm, a printing company and a couple of other related enterprises.


Piggly Wiggly LLC is a supermarket franchise, retail support service and marketing company. It's affiliated with C&S Wholesale Grocery Company. Piggly Wiggly LLC licenses the Piggly Wiggly banner to over 600 supermarkets in the U.S. and provides retail, marketing and advertising support to the franchisee stores (or groups like Piggly Wiggly Carolina Co).


Piggly Wiggly is calling its new, pilot format, the first completely restructured grocery store format designed to fit how people intuitively shop. The focus of the "shopper intuitive" format is to make shopping easier for customers and to...well, make the shopping experience more like it is in the mind of the shopper (intuitive).


The premise of the new format store's interior is to create a natural flow rather than use the conventional strategies common in most stores today which are thought to make shoppers stay longer in the store and as a result spend more money.


For example, similar or "like" grocery products will be grouped together in the new-format store--cereal and milk, fresh, frozen and canned fruits and vegetables, coffee and creamers, breakfast items like eggs, bacon and butter, for example--rather than in the common supermarket merchandising scheme in which these various categories and items are spread throughout the core and perimeter of the store on grocery shelves and in refrigerated cases.


The innovative, new Piggly Wiggly supermarket format also will have a large, open kitchen in the center of the store as its focal point. Professional chefs will prepare recipes throughout the day and evening for store shoppers, who can watch and linger in the store kitchen as often and as much as they desire.


Another innovative feature of the pilot store format are what the grocer is calling "one-stop meal stations." This merchandising element--which is a companion to the "logical" or intuitive merchandising plan mentioned above, in which like products are merchandised together--will feature "meal solution" stations in which items like hamburger, hamburger buns, chips, soda pop, beer, pickles and condiments will be grouped together on a regular basis.


Supermarkets have built "meal solution" displays like this for decades. However, what makes it somewhat different and innovative in the new Piggly Wiggly format is that the "one stop meal solution stations" will be numerous and permanent--and are part of the store's entire "like product" merchandising philosophy rather than the common practice of grouping items by category and how they are packaged and sold (eg: dry grocery, frozen, refrigerated, fresh and the like).


The store will look much different to shoppers and others in that unlike the majority of U.S. supermarkets which tend to have all the fresh (produce, meat, bakery, deli) and perishable categories around the store perimeter, and dry grocery in the core of the store, the new format Piggly Wiggly will mix dry grocery and fresh and perishable categories throughout the store. It's all based on the premise of shopper flow rather than perimeter/core of the store theory and practice.


In fact, the store's design and decor will be different than the common U.S. supermarket model as well. There are so many different formats and store designs in the U.S. today--from zero-frills warehouse stores to European Market Hall style upscale food emporiums and more--that using the term "common" is best defined as the standard box, which still is the majority design element for American grocery stores.


The Myrtle Beach pilot format Piggly Wiggly supermarket will be very "homelike inside". The store's floors will be all hardwood, the center-store demonstration kitchen is designed to look upscale yet homey, and soft lighting and residential-like accent colors will be used throughout the store's interior. The supermarket's exterior will reflect this theme as well. We call it sort of an "Upscale Homescape" design.


The store's location in the seaside city of Myrtle Beach should be a good test for the pilot intuitive supermarket format. The city is fairly upscale in its demographics but also includes a substantial middle-class population. The city also is a major tourist area which draws visitors from throughout the U.S. (especially the south and the east coast) and many from overseas as well.


Piggly Wiggly Carolina Co. tells us they plan to use the pilot, new format supermarket in two ways. First, they want to see which design and merchandising elements work the best in it and use them when they remodel existing supermarkets. Second, they want to study the "intuitive" format, make changes if and as needed, and then be able to use it as a model format for new supermarkets. If it works as well as the grocer thinks, and is successful, they plan on building more supermarkets using the new format and merchandising scheme.


There are a number of grocery chains--Whole Foods Market, H.E. Butt in Texas and others--that have built stores using a similar intuitive design and merchandising approach to varying degrees. For example, last October Whole Foods' opened its European Market Hall-style food store in Oakland, California, which uses a similar intuitive and natural traffic flow-based, rather than traditional, design and merchandising philosophy in it.


What makes the Piggly Wiggly Carolina Co. format prototype innovative though are two things: First, it's an attempt to redesign the conventional (albeit in this store's case a somewhat upscale format) supermarket format and merchandising scheme completely; to turn it on its head if you will. This is the case because the pilot store changes the central conventional supermatket merchandising premise--which is fresh and perishable products on the perimeter, dry grocery in the core of the store--entirely with its "like product" grouping merchandising scheme throughout the store.


Look at it this way: Since Piggly Wiggly Carolina Co. is not known as a trail-blazing specialty grocer like Whole Foods Market, Wegmans or H.E. Butt, for example, its designing and opening a supermarket with such a paradigm-shifting format and merchandising scheme could actually have more influence than the format innovations these cutting-edge grocers do because Piggly Wiggly is considered more in the mainstream of traditional supermarket retailing than the others are.


The argument might go something like this: (Conventional grocery chain executive): "Well, of course Whole Foods Market, H.E. Butt and Wegmans Food Markets' create these innovative formats...But we aren't Whole Foods, H.E. Butt or Wegmans; we're a more mainstream grocery chain."


However, perhaps if a more mainstream grocery chain like Piggly Wiggly Carolina Co. makes such a format paradigm shift, these majority retailers will take notice. (Conventional grocery chain executive now): "A chain like us did what? Grouping together similar or 'like' items regardless of whether or not they are in cans, frozen or refrigerated? Well... if Piggly Wiggly did it, maybe we should take a look at it."


Further, it's the grocer's goal--if the format is a success and even if it needs some tweaking after the first store opens--to use the new format for most if not all of its future new stores. Doing this would represent an interesting change in basic supermarket design, format development and merchandising in the U.S. It also could lead to other mainstream (rather than specialty grocers which Piggly Wiggly is not) grocery chains adopting the format innovation completely or in parts.


Readers shouldn't be too surprised that its a Piggly Wiggly franchisee--Piggly Wiggly Carolina Co.-- that's being so innovative. Why?


A little supermarket industry history: the first Piggly Wiggly grocery store was founded in Memphis, Tennessee on September 6, 1916 by a man named Clarence Saunders. This was the pre-self service supermarket era. In fact, the term supermarket had yet to be coined in 1916.


In those days, customers handed their handwritten grocery order to a store clerk who then filled the order, added it up, and put it in a cardboard box for the shopper to take home. Full-service was not only the norm, it was the only option.


Saunders was a rather innovative, flamboyant and restless grocer according to accounts of his life. One day he decided the full-service system was a waste of time and man hours, so he developed what today (with some modifications) is the self-service system of supermarket retailing. To this day, nobody knows why Saunders chose the name Piggly Wiggly for his store, which became a grocery chain, by the way.


{Note: Michael Kullen, founder of the New York-based King Kullen supermarket chain, also shares credit for inventing the first supermarket and self-service scheme, although most believe Saunders was first in terms of actual self-service.}


So, as you can see, Piggly Wiggly does have some historic claim to innovation. Piggly Wiggly also is generally credited with coming up with the first supermarket checkstand to go with that self-service system creation. The grocer also generally gets credit for introducing the first supermarket shopping cart on wheels


Other innovations for Piggly Wiggly include being one of the first (if not the first) grocers to merchandise some fresh produce items in refrigerated cases to prolong the products' freshness. Prior to this innovation it was commonplace to merchandise all produce items on a dry rack.


Piggly Wiggly also is credited as being one of the first grocers to: introduce uniforms for store clerks, create a high-volume/lower-profit margin retailing scheme, offer a full line of nationally advertised grocery brands, and franchise independent grocers to operate under the self-service supermarket model that's so common today.


Therefore, as you can see, Piggly Wiggly Carolina Co. is following in the well-proven Piggly Wiggly history of grocery retailing innovation by creating its new, "intuitive-style" supermarket format.


Even though the grocery chain Charles Sounders founded and used as a format and merchandising innovation incubator is now an independent grocer franchisee, retail support and marketing company rather than a company-owned supermarket chain like it used to be, we think he would be pleased to hear about the new, innovative retail supermarket format and merchandising scheme that franchisee Piggly Wiggly Carolina Co. is set to open on April 3.

Food Industry & Entrepreneurialism Memo: Homeboy Bakery & Enterprises and Kinh Do Foods Show That Entrepreneurialism and Innovation Continue to Thrive

We recently read two articles which describe two food industry enterprises that despite being very different in kind and thousands of miles apart geographically, embody the spirit of entrepreneurialism that's alive and thriving in the global food industry despite the current poor international economy.

Twenty years ago, The Rev. Gregory Boyle, who is a Jesuit Priest currently assigned to Dolores Mission Church, the poorest Catholic parish in the Archdiosese of Los Angeles, California, got an idea to try using employment as a means to help the city's gang members stop their vicious cycle of committing crimes, being imprisoned and then released, only to once again return to jail.

Father Boyle launched a campaign at the time in an attempt to get local businesses to take a chance on hiring the "reformed" gang members. However, he couldn't get enough business owners to take a chance on the "homeboys," (gang members) so had to give up on the plan.

The good Jesuit Priest then had a brainstorm: Why not create a business himself and employ the "homeboys" to run it. Rev. Boyle did just that with the financial backing of the famous Hollywood movie producer Ray Stark, according to a story in the March 20, 2008 New York Times by James Flanigan.

The Jesuit Priest bought an abandoned bakery in 1992, which he named Homebay Bakery, and hired six former gang members to work at the business, making tortillas and doing routine maintainance and janitorial work.

Homeboy Industries, Inc. was born. Today, Homeboy Bakery, which bakes bread and pastries as well as makes tortillas, employees 25 former gang members, recently purchased $3 million worth of start-of-the-art ovens and tortilla making equipment, and is close to inking a "major" contract with a large cafe/coffee house chain to supply the retail operation with fresh breads and pastries.

The "homeboys" are in a growth mode. In fact, somebody at the bakery suggested to Father Boyle he should buy an automatic dough mixing machine to help keep up with all of its new business rather than having the workers continue to hand-knead the bread and pastry dough. The good--and smart--Jesuit nixed that idea however--explaining not only is hand-kneading dough therapeutic--but increased business means he can hire more gang members to hand-knead the dough so he can reach and rehabilitate more "homeboys."

Homebay Industries has diversified in its 16 years in business, according to the Times' article. Today, in addition to Homeboy Bakery, there's a silkscreening business, a maintainance company and a retail store.

There's also the Homegirl Cafe, which is run by a staff of 27 girls who were involved in various ways with neighborhood gangs. The cafe is located in the city's Boyle Heights neighborhood. It features Latino cuisine and flavors prepared with a contemperary California twist. The cafe has recieved positive reviews from the Los Angeles Times, as well as being featured on the Oprah Show.

In addition to their salary, ongoing training and the ability to advance, the "homeboys" and "homegirls" who work for Homeboy Industries get free mental health counseling services, medical care, housing assistance and free tattoo removal, which is important because the former gang members are "tagged" with their previous gangs' insignias and other related body art which makes employment and living in non-gang related society difficult for them.

According to the Los Angeles Police Department's research bureau, there are 250 gangs and 26,000 gang members in Southern California. Father Gregory Boyle, who is writing a book about Homeboy Industries and his experiences and wants to take his program nationally, is working to solve that gang problem one "homeboy" and one "homegirl" at a time.

>Read the full March 20 New York Times article about Homeboy Industries and Bakery here.

>View a slideshow of the inside of Homeboy Bakery here.

>Visit the Homeboy Bakery website here, the Homeboy Enterprises website here, and the Homegirl Cafe website here. You can learn more about Homeboy Enterprises and its the bakery and cafe businesses, as well as future plans, on the websites. You also can order shirts, sweaters, hats and other "homeboy" and "homegirl merchandise on the websites, in addition to learning how you can get involved with the enterprises.

It's been 33 years since North Vietnamese troops marched into the city of Saigon. The city fell to the North, as eventually did the rest of the then divided country of Vietnam.

After Saigon fell, a 21 year-old named Tran Kim Thanh was ordered by the North Vietnamese to stop working at his family's baking-supplies store and sent to work making bread and buns at a new, state run bakery in the unified Communist nation of Vietnam, according to a March 12 story by James Hookway in the Wall Street Journal

As we said, that was 33 years ago. Today, Vietnam remains one, unified country. But it's embracing Capitalism with a frenzy. And Mr. Thanh, who's now closing in on his mid-fifties, is one of the nation's leading entrepreneurs.

The former state-run bakery worker's Kinh Do Foods is one of Vietnam's biggest consumer companies. It has a market cap of $400 million, is publicly traded, and is backed by the U.S. investment house Citicorp, Inc., along with Britain's Prudential Insurance PLC. The country of Singapore's sovereign wealth funds are even major investors in the food company, according to the Journal article.

The iconic red and yellow Kinh Do Foods' stores, which are located all over Vietnam, are basically retail bakery/cafe type shops that carry a wide variety of native baked goods like breads and pastries, along with such local specialty items as dried-squid buns and other Vietnamese consumer favorities. In some ways, the stores are to Vietnam what McDonlads and Starbucks are to U.S. consumers in terms of their ubiquity and popularity.

Vietnam has one of the world's fastest-growing economies. It's drawing U.S. and European investment capital at about the same (per-capita) rapid clip as China and India are.--However, unlike China, Vietnam is far more liberal in terms of encouraging overseas investment. Further, the country welcomes and incourages investment from America, a country it battled in war for far too long on both sides.

Kinh Do Foods' owner Thanh, who also goes by an Americanized version of his name, Paul Tan, launched the fast food-style retail bakery chain in 1993. He has big growth plans for the food chain, backed by the investment houses mentioned above. The food industry entrepreneur is even thinking about expanding outside Vietnam.

From clerk at his parents' tiny bakery supply store, to forced worker at a Communist-run state bakery, to capitalist, Tran Kim Thanh proves entrepreneurs can come from varied--as well as oppressed--backgrounds. It's an idea, combined with a sense and spirit of adventure, a desire to succeed on ones own (and yes, at times become wealthy), along with lots of hard work that are its primary ingredients.

Out of the ashes of war and the rigidity of Communism, Vietnam is becoming reborn as a free-market economy and integrating itself with the rest of the world. It's entrepreneurs like Tran Kim Thanh (aka Paul Tan) who are leading the way. And in Paul Tan's case, one dozen dried-squid buns to-go at a time.

>Read the full Wall Street Journal article here.

>Visit the Kinh Do Foods website here.

Retail Memo Breaking News: Waitrose Chief and "Chubby Grocer" Mark Price Acheives Half of His Weight-Loss Goal By Easter Sunday Deadline

News Flash: He didn't reach his own goal of losing 20 centimeters (nearly eight inches) from his girth by Easter Sunday. But Mark Price, the Managing Director (MD) and self-named "Chubby Grocer" of upscale United Kingdom grocery chain Waitrose, did lose half that amount when he held his own weigh-in and waist measurement in his hotel room yesterday while on holiday.

Price reports on his blog he lost 10 centimeters (3.937 inches) from his now a little bit less-ample waistline. [Read our piece on Price from yesterday here.]

Three months ago, the Waitrose MD (like CEO) promised himself--and his wife--he would begin a program of improved eating and exercise to reduce his girth. He also shared his plan and goal with his blog's readers on the Waitrose website. The "chubby grocer" also set a date--which he mentioned almost daily in his blog--of Easter Sunday 2008, in which he would measure his waistline using an industrial-strength measuring tape and report the results.

Well, the results from the big weigh-in and waist measuring are in. And, as we said, Price says he lost 10 centimeters--half of his three-month goal--as of yesterday, Easter Sunday.

Of course, this is self-report data, which can be suspect by serious researchers. However, since Price reported only a 50% girth reduction and has shown candor throughout the last three months on his blog, we will give him--and his self-report data--the benefit of the doubt. As such, we issue a firm congratulations to the now "not as chubby" grocer and Waitrose MD.

In fact, we're just the slight bit pleased that Price didn't lose the entire 20 centimeters, as we wouldn't want him to completely lose his fun "chubby grocer" persona. Although, they do say a once "chubby grocer" who becomes a "lean grocer" is still a chubby grocer inside. In price's case, we hope so.

Only reaching 50% of his goal also gives Price a reason to keep writing his blog, which we think makes him happy...it does us. Now, about all those organic, Fair Trade, premium dark chocolate Easter Eggs?

Read what Waitrose Managing Director and self-named "chubby grocer" Mark Price has to say about the big Easter Sunday weigh-in and waist measuring event here on his blog. It's a good first of the week read.

Will Price be able to approximate the svelt body of rival CEO Andy Bond of Asda? If so, the "chubby grocer" will have to at least double his efforts. Is he up to it? Stay tuned.

Retail Memo: Waitrose's 'Chubby Grocer' Mark Price 'Weighs-In' on His Rival; Marks & Spencer CEO and 'The King of Pants' Sir Stuart Rose

Let's face a cold, hard fact: When it comes to comparing grocery retailing in the United States and the United Kingdom, on thing is perfectly clear: The Brits just have a whole lot more fun with the business than their American counterparts, especially at the CEO or Managing Director level.

Sure, there are the occasional bursts of wonderment and mirth among U.S. grocery retailing CEO's, like the news last year that Whole Foods' chief John Mackey had been posting anti-Wild Oats Markets and pro-Whole Foods acquisition comments on various online financial bulletin boards during the run up to the Austin, Texas-based grocer's buyout of natural foods chain Wild Oats. The incident was good for lots of press--and some fun headlines such as "Wacky Mackey." We can't recall one U.S. supermarket chain CEO commenting on it though, although others from all walks of life did.

In the main though, U.S. retail grocery chain CEO's are pretty staid folks, no disrespect intended. Further, the retail grocery industry in the U.S. has very little prestige for some reason among the corporate and business community, as well as with the American news media.

On the other hand, the UK press has elevated its reporting and writing about that nation's grocery retailing industry to a high art form. The country's newspapers, tabloids and other media outlets report on the UK's top grocery chains daily. And, it's not just business stories these scribes write about either. UK Retail grocery industry CEO's often are covered and written about at near-celebrity levels. The good, the bad and the ugly are reported regarding the supermarket chains and their leaders.

For example, there's Sir Terry (Leahy) of Tesco, who appears in the British press more often than rock star Paul McCartney (pre-divorce of course). There's reports on the comings and goings of Wal-Mart, which owns the UK's number two retail chain, Asda, at least daily. Further, there's what we call the "Daily Sainsbury's," news all about the UK's third-largest grocery retailer. And, that's just the tip of the UK grocery industry and CEO media coverage iceberg.

Britain also holds its supermarket CEO's in rather high esteem. As such it gives them major props when they are up--and feels free to kick them when they are down.

United Kingdom CEO's or Managing Directors are a royal bunch as well. Sir Terry of Tesco has been knighted (hence the Sir in Terry), as has Stuart Rose, CEO of Marks & Spencer. Add to that list Sir Morrison, the just-retired CEO of the grocery chain Morrisons', which is the fourth-largest in the UK. There's even a Lord in the group, Lord Sainsbury.

Then there's Mark Price, the Managing Director (essentially the same as CEO) of upscale grocery chain Waitrose. Price, who calls himself the "chubby" and "jolly" grocer in honor of his slight girth, which he's in the process of reducing--an effort he chronicles daily in his blog by reporting what he ate for lunch and dinner the day before and breakfast that morning--daily in his own blog on the Waitrose corporate website.

Price may not have achieved "Sir" status yet like the others, but he is without peer in UK grocery retailing executive circles in terms of having fun with and loving his job as the head of Waitrose. Price also is the only supermarket CEO in the UK to write his own daily blog--and in the words of many readers tell them way too much about his personal eating habits.

We love Price's blog--and read it often. Another thing the "jolly grocer" uses his blog for is to have some fun with his UK retail grocery chain CEO peers. He especially likes to dig (slight, British digs mind you) Sir Terry Leahy of Tesco over this issue or that when the mood--and the issue--strikes him. The blog's digs on Sir Terry are all in jest mind you--but they do often have some larger meaning behind them as well.

Right now Waitrose (and its parent John Lewis) and Tesco are a bit at odds with each other competitively speaking. Waitrose, which also owns the online UK grocery-retailer and home delivery service Ocado, recently announced it would beat Tesco's retail prices on a couple thousand basic, everyday grocery items at the online supermarket. On its website, Ocado has a banner promotional ad which reads: 'Tesco Prices, Waitrose Quality, Ocado Delivery.'

Tesco shot back--and the battle has been enjoined--with some harsh words by both retailers and talks of lawsuits by Tesco. As a result, we expect the "chubby grocer" to either lay off writing about Sir Terry and Tesco for a while on the advice of legal council, or to do the complete opposite, and perhaps sharpen the nature of his digs just slightly.

But, it's Price's latest friendly dig at his friend and collegue Sir Richard Rose, CEO (and now Chairman as well) of Marks & Spencer, we want you to know about today.

First, a little background: Unlike is the case in the U.S., the top-three UK supermarket chains--Tesco, Asda and Sainsbury's-- and a number of others near the top like Marks & Spencer, sell soft goods like clothes and hard goods like electronics and appliances, in most of their stores in addition to food and grocery products. (Waitrose stores just sell food and groceries in the main, including the best of the best in terms of quality, but it's parent company, John Lewis, operates department stores.)

Additionally, all four of these retailers sell men's and woman's clothing as part of their soft goods' merchandising, including producing and selling pants, shorts and other garments under their own store brands. The retailers' are as competitive in the soft goods category in many ways as they are in the food and grocery category.

There are even awards for the best store brand clothing, as there are in the UK for best store brand grocery products. And, Mark's & Spencer was just recently named this year's best purveyor of own-brand pants out of all the UK soft goods (and those that sell groceries as well) retailers.

Lastly, Marks & Spencer CEO Sir Stuart Rose recently became the Chairman of M&S as well as its CEO. He also signed a new 10-year contract as Chairman and CEO of the popular UK retail chain.

Back to Waitrose Managing Director/blogger Price. Last week the "jolly grocer" used his blog to write about--and offer a gentle dig to--M&S CEO Rose. Price and Sir Stuart had dinner together last week at a male only event called the Solus Club, which was held in London's posh Dorchester Hotel.

Price used the occasion of being with Rose at the dinner, following the Chairman and CEO's inking his new 10-year contract, as well as Marks & Spencer's getting its "best pants' retailer nod," to try out some new nicknames or "official titles" on Rose, whom he calls "The King of Pants," (among other titles) in honor of the "best pants retailer" honor.

Among the "official titles" Price says in his blog he offered to Chairman and CEO Rose (which Sir Stuart confirms) were: El Presidente, Grand Formage, Defender of the Universe, the Silver Foxy Overlord of the High Street and--as a nod to the combined Chairman and CEO roles rolled in with the "best pants" honor--First Lord of the Knicker Drawer.

Price also can't resist commenting on Rose's dual positions at M&S in his blog, saying he (Rose)agreed on the new, 10-year contract between himself (the Chairman) and himself (the CEO). [Read the "chubby grocer's" post about his dinner with Rose here.]

Rose seems to be taking it all in stride. He says he takes all of Price's comments, in the blog and verbally, "in the spirit in which they are intended." That's a very Chairman-like comment, we must say.

Meanwhile, today is a big day for Price, the "chubby grocer." Today, Easter Sunday, is the day for his big weigh-in to see if his efforts over the last three months to lose weight will give him the new nickname, the "not-so chubby" grocer.

Price is spending the Easter weekend on holiday with his family. He did make a blog post today but there was nothing about the weigh-in because it was an early morning pre-weigh-in post. But the signs look ominous as evidenced by this mornings post.. In that post, Price mentions a huge breakfast he just finished at his hotel restaurant in Breton, where he is on holiday. The morning meal sounds huge.

We bet he waited until tonight for the weigh-in so he could digest that breakfast spread a bit. But, what about Easter lunch...and dinner? The calories, the carbs of it all. We will be checking the "chubby grocer's" blog first thing in the morning for a new, post weigh-in post...and the results. We won't be disappointed though if Price has only lost a couple pounds. After all, we kind of like his "chubby grocer" persona.