David Merrefield

About David Merrefield

David Merrefield is principal of DRM Initiatives, Inc., a retailer consulting group. He is the former Vice President and Editor of trade publication Supermarket News. He is based in New York City.

Supermarket Disruption and Dissolution

RR_Supermarket Disruption and DissolutionA&P’s Long Goodbye

For the second time in less than five years, A&P has filed for Chapter 11 bankruptcy. Two Chapter 11s in close sequence like that are sometimes cynically called a “Chapter 22.” But this is no joke. By the time it’s all over, a stalwart retailing name that started in 1859 on the site of what is now the One World Trade Center building in lower Manhattan will be gone forever.

A&P — once the nation’s largest retailer, spanning from the Atlantic to the Pacific — already has buyers in place to take over a third of its 300 stores. These buyers include Acme (Albertsons), Ahold and Key Food. Another 25 stores will be closed outright. So roughly half its store fleet, which spreads from Delaware to upstate New York, will be rebranded immediately. A&P operates stores under the A&P, Pathmark, Waldbaums, Food Emporium, Superfresh and Food Basics banners, all of which will be involved in the sale or closure process — and already are. [Read more…]

Disruptors at the Door

blue_apronAnother batch of disrupters is eyeing the retail food industry. And, strange to say, they’re knocking on your door in a cardboard box.

These disrupters are meal kits. The meal-kit business is a fledgling form of retail food distribution that features the direct-to-home delivery of the precise measure of raw ingredients needed to prepare home-cooked meals. Each shipment contains the makings for several meals, generally six or more.

Meal kits are not to be confused with the home delivery of groceries available from providers such as Peapod, Amazon or Fresh Direct. Nor are they deliveries of prepared meals that are ready to heat and eat. Meal kits require that meal components be chopped, mixed, cooked and composed. Each meal kit includes detailed recipes replete with photos of ingredients and step-by-step preparation, making them all but foolproof. [Read more…]

Target Canada’s Ill-Fated Adventure

target_canadaIn what has to be one of the biggest retailing fiascos of all time, mass merchandiser Target has closed its 133-store Canadian division less than two years after it opened. Billions of dollars were lost.

Target’s misadventure in Canada holds many lessons for all retailers, including the very simple lesson that catastrophe invariably comes close on the heels of a retailer’s failure to offer consumers products they want at the price they’re willing to pay.

How could a retailer as big as Target is in the United States fail to grasp such an obvious concept as it moved across the border to Canada?

The answer is that pressures of competition and real estate forced hasty and ruinous decisions. [Read more…]

Stampede to Organics Awakens Sleeping Giants

wholefoodsWhole Foods has succeeded beyond all expectations, but, strangely, that’s not all good for Whole Foods.

Whole Foods was founded 35 years ago in Texas based on the premise that there had to be a safer way to produce food than the mass-manufactured and over-processed approach. (Deep background: Whole Foods was originally named Saferway, a poke at supermarket chain Safeway.)

The Whole Foods concept was to leave conventionally manufactured food behind wherever possible in favor of natural and organic food, and to put a heavy emphasis on fresh. The concept also was that consumers would warm to the idea and pay a premium for such products. Development came slowly to Whole Foods because at the time, there was little consumer buy-in for such an idea. [Read more…]

Did Tesco Get Hooked on Drugs?

Under-the-table transactions...That’s a strange question, and the answer is even stranger: “yes,” at least figuratively speaking.

It all has to do with vendor allowances and the revenue bump they give retailers. These allowances are intended to incentivize retailers to better promote or better display a manufacturer’s product, and there’s generally a lot of money left over for retailers after that’s done.

For a long time, supermarket insiders have cloaked vendor allowances in secrecy, privately referring to them as the “drug” supermarkets just can’t kick. The metaphorical drugs caused supermarkets to become almost entirely dependent on them for profitability, despite the fact that they fostered grotesque retailer inefficiencies in the long run.

Now a day of reckoning may be at hand, because Tesco has blurted out the dark truth. Tesco, a huge UK supermarket chain, is being battered by newly disclosed accounting irregularities that were used to puff up financial reports by hundreds of millions of dollars.

Tesco stated: “[Irregularities] are principally due to the accelerated recognition of commercial income and delayed accrual of costs. Work is ongoing to establish whether this was due to error or an aggressive accounting policy.” Commercial income, by another name, means vendor allowances. [Read more…]

Price Chopper’s Name Game

PriceChopperAlthough it doesn’t happen often, one of the most momentous decisions a company’s board and top executives can make is to change the customer-facing name of the company.

Sometimes, such a change can go well, for example when Macy’s changed the disparate department-store banners it had acquired over time to the Macy’s name itself. Now only Bloomingdale’s remains as a separate banner. There was some initial consumer pushback, especially concerning changing the name of Marshall Field’s in Chicago, but that settled down and now Macy’s enjoys the benefit of being able to stage company-wide, national promotions and advertising campaigns.

In the supermarket space, several companies have changed store banners for various reasons; some went well, some didn’t. Years ago, Food Town changed to Food Lion, which went well. The name change of Lucky supermarkets to Albertson’s went less well.

After 40 years, there’s a name change in the offing for Price Chopper supermarkets in upstate New York and New England that seems to be premised on some especially dubious reasoning. [Read more…]

Walmart Collateral Damage

iStock_000043854262LargeWhat if Walmart opened a big fleet of new-format stores and no one came?

We might find out really soon. After years of tinkering with its small-format, food driven Neighborhood Market model, Walmart has started to roll them out in earnest. There are now about 350 Neighborhood Markets and Walmart expects to open them at the rate of about 200 per year, ultimately achieving about 2,000 stores.

At about 40,000 square feet each, Neighborhood Markets are integral to Walmart’s strategy for future growth. Its main store model, the huge food and nonfood supercenter, needs a boost since it has just about reached market saturation and is facing dwindling consumer engagement.

And in an unexpected twist, Neighborhood Markets in many areas are pulling dollars from the pockets of the same supercenters shoppers, so net sales increases aren’t growing at the anticipated rate. In fact, Walmart’s net sales are actually dropping in some areas. And guess what? Local supermarket operators are starting to relax about the competitive threat Neighborhood Markets pose. [Read more…]

Target’s Big Leap of Faith

targetNot long ago, Brian Cornell was appointed Target’s CEO, becoming the retailer’s first CEO hired from the outside instead of being appointed from within the company’s hierarchy.

At any company, when a long-standing practice concerning the appointment of the top-level executive is changed, it usually means there is a lot of repair work to be done at the company. Target is no exception to that.

Let’s take a quick look at four key issues at Target and then see how — or if — Cornell’s experience addresses them. [Read more…]

Supermarket Disrupters Rattle the Industry

Amazon Expands Grocery Delivery Service To Los Angeles AreaConventional supermarkets — those mid-tier retailing behemoths — are beset on all sides by disrupters. Some of those disrupters are cloaked in technology, some aren’t; others are self-inflicted and emerging from within.

Let’s take a look at what the disrupters are doing to the biggest retailing industry of all.

To begin: the greatest disruption traditional supermarkets have faced in the 60 years or so they’ve been feeding America came a generation ago when Walmart got into the grocery business. Walmart’s go-to-market strategy changed everything, particularly how product was acquired and distributed. For the longest time, even as the threat grew, Walmart was ignored by the supermarket industry, largely because Walmart wasn’t — and isn’t — much of a marketer and had difficulty at the time with presenting quality perishables and still does.

But none of that really mattered because Walmart swamped supermarkets with such a significantly better pricing offer that it soon became the country’s dominant grocer. [Read more…]

Tiffany Sues Costco! What’s Up?

Brands_in_Danger_FinalIn the land of the brand, the Holy Grail, surely, is building a brand that’s universally known and is in constant mention by consumers.

Or is it?

There’s such a thing as too much familiarity. There are more than a few instances of brand owners losing legal possession of their own brand because they became generic descriptors of the product, sometimes with dire consequences for its erstwhile owner.

Now, in an interesting lawsuit filed in US district court of the Southern District of New York, Tiffany is in legal battle with membership retailer Costco about the appropriation of the Tiffany name by Costco. There’s some reason to believe that while the facts would seem to strongly favor Tiffany & Co, it may not be the victor, at least not in a narrow legal sense.

But first, let’s take a look at how brands can evolve into popular vernacular, to the degree that their ownership is snatched from their creators.

Among a number of examples of brands lost in legal action are thermos, escalator, linoleum, videotape, and yo-yo. In the last instance, the Duncan Toys Co. went bankrupt when it lost control of its trademark. Also in the litany of lost brands is aspirin. That brand was once owned by Bayer, a German company, but it was awarded as war spoil after World War I. So it became a generic term in the US, the UK and France. In other parts of the world, Bayer still defends the use of its Aspirin brand. Curiously, Bayer also lost the right to its Heroin brand under the same circumstances. It hasn’t seen fit to defend it. Yet.

Numerous other brands are teetering perilously close to becoming generic terms, brands such as Scotch Tape, AstroTurf, Jacuzzi, Band-Aid, Frisbee, Hoover, Taser and Rollerblade. [Read more…]

The Breakfast Champion Goes Down for the Count

BreakfastWhat Happens When an Entire Consumer Segment Suddenly Loses Interest in a Brand or Product Category?

Ugly results happen, that’s what. Just take a look at Abercrombie & Fitch, the retailer of upscale apparel to teens. Over the space of a year or so, teens have been abandoning A&F in droves as the retailer lost its design edge and cash-strapped teens found cheaper and more fashion-forward alternatives at other retailers. Maybe also, teens now self define status more by the mobiles they carry than the jeans they wear.

That’s powered sharp declines in A&F’s same-store sales, its net sales volume, and the fortunes of Michael Jeffries, its autocratic and gaff-prone chairman and chief executive — or to be more precise, its former chairman who is now chief executive only.

What that retailer experienced in a comparatively short period of time has been happening in slow motion in the food industry for a long time. For a decade or more, a huge consumer segment shifted away from a core supermarket category: breakfast. And the component of the breakfast category that’s taking the biggest hit is its former champion, cold cereal.

Let’s take a look at what’s going on. [Read more…]

Water Sales Swirl Brands Down the Drain

waterbottleIs water washing full-price mega brands down the drain? Well, maybe so, given that major bottlers have lost consumer credibility to the degree that they can’t market product under their own brand names.

But let’s start at the beginning. As has been postulated in the Robin Report lately, harbingers of the “death of mega brands” are on the horizon. Chief among them is the slippage of Tide laundry detergent at the previously unassailable “high performance, high price” end of the category.

How so? Procter & Gamble is poised to introduce “Tide Simply Clear” detergent. Simply put, it’s a Tide entry into the lower-price end of the market. It’s reminiscent of P&G’s introduction of Charmin Basics and Bounty Basics a few years ago as an off-price version of its high-end paper products.

These price moves are intended to fend off the increasing popularity of off-price products that consumers perceive as performing just as well, or well enough, in product categories that aren’t edible. Increasingly, many consumers now see no reason to pay full price. [Read more…]