McDonald's to roll out breakfast dollar menu

McDonald's has announced will begin selling a variety of breakfast items for $1 early next month, a spokeswoman for the world's largest hamburger chain released the plan Thursday.

The move to add to its already popular dollar menu comes as McDonald's tries to fight a decline in U.S. sales, which have slipped following months of success when its cheap eats were a big draw for recession-strapped diners. November sales were down, and McDonald’s blamed the high jobless rate and the economy in general for the decline.

Dollar breakfast items added

Breakfast items to be added to the $1 menu, which already includes eight items for lunch and dinner time, are the company's Sausage McMuffin, a sausage burrito, a sausage biscuit, a small coffee and a hash brown. Some of the items are already sold for a dollar or less at some locations, although prices vary. Franchisees can set prices within limits, and McDonald’s will take that into account. For instance, a restaurant already selling a small coffee for 89 cents will substitute a larger beverage for its Dollar Menu.

Fast-food restaurant chains, which spent recent years expand their early morning business, have seen declining breakfast sales figures from business diners as unemployment climbs. It means fewer workers stop in for coffee and a breakfast sandwich on their way to the office. NPD Group’s market research has shown breakfast traffic fell 2 percent this summer at the nation's fast food restaurants.

At McDonald's, breakfast business is continuing to increase, although growth has slowed this year. McDonald’s has not publicly provided specific figures on its breakfast sales. Analysts feel that Thursday's move should McDonald's strengthen its breakfast business, in which it is still dominant among fast-food chains.

Fast food breakfast competition heats up

The dollar breakfast menu move will also put competitive pressure on McDonald's competitors, many of whom are also rushing to slash menu prices to keep customers, who are ever more reluctant to open their wallets, happy.

Dunkin Donuts is trying out a 99-cent breakfast menu in the Chicago area. Burger King's already has a nationwide breakfast value menu that includes hash browns, a ham omelet sandwich and a french toast stick 3-pak for $1 each.

Retailers Face the Ghost of Christmas Present -Big Lots Up, Neiman Marcus Down, Others Hurting

January 2nd, 2009, I posted a blog entry to this Blog titled “The Ghost of Christmas (Just) Past as a little play on the dismal sales season. Click here to Read . At that time, one of the points made was trading down is the reality. I’m following it up now with what the retailers are facing at the moment: The Ghost of Christmas Present.

In the new retailing climate you see that in the last week’s worth of results reporting, Big Lots is up, and Neiman Marcus is down. Closeout retailer Big Lots Inc. posted a better-than-expected quarterly profit, aided by lower freight costs, and raised its outlook for the holiday fourth quarter. The retailer, which specializes in sales of excess inventory from home appliances to toys, also said it would immediately start buying back $150 million of common shares.

Conversely, upscale retailer Neiman Marcus Inc. reported sharply lower quarterly profit as worried consumers continued to avoid luxury items amid a slowdown the company expects will last for some time. Sales at its namesake Neiman Marcus and Bergdorf Goodman stores open for at least a year, or same-store sales, continued to fall, dropping 14.9 percent during the quarter. Overall comparable sales, including its direct marketing segment, declined 13.7 percent.

Neiman Marcus, in a regulatory filing on Wednesday Dec 9th, cited "a challenging economic and retail environment" that it said would likely persist for an "extended period of time." The downward sales trend has continued in the current quarter, it said. Last week the company reported same-store sales at its Neiman Marcus and Bergdorf Goodman stores had fallen 12.7 percent in November, a period that includes the busy holiday shopping weekend following Thanksgiving. Those two store chains account for about 83 percent of the company's revenue. Neiman Marcus said it experienced weak demand across all geographic areas and that its apparel and home decor categories were particularly hard hit.

Value Shopping In

Clearly, the trickle to value shopping has become a stampede.

Big Lots, which shut down its small Internet operation during the third quarter, sells merchandise that others cannot. When manufacturers are left with extra inventory due to a discontinued line or a change in packaging requirements, they call Big Lots, which will buy the merchandise and sell it in its stores at discounted rates. Big Lots has been somewhat insulated from the downturn as shoppers seek its low prices on staples like food or paper towels.

The better-than-expected results came a day after many retailers posted much weaker-than-anticipated November sales as shoppers were keenly focused on bargains. While consumers have been "very stingy" on discretionary purchases, the home category is actually one of the best performers so far in the fourth quarter, according to Big Lots.

Big Lots is reaching out to it’s customers by introducing a loyalty-card program to offer discounts to frequent shoppers during the quarter, which more than 600,000 have already signed up for, Fishman said. Early sales of Christmas seasonal merchandise, such as decorations, were tough in October, but sales of those items are up so far in the current fourth quarter, he said.

Big Lots Profit Jumps
Big Lots net income in the third quarter ended on October 31 rose to $30.3 million, or 37 cents per share, from $12.2 million, or 15 cents per share, a year earlier. Big Lots' third-quarter sales rose 1.3 percent to $1.04 billion, while same-store sales, or sales at its locations open at least two years, fell 0.2 percent.

Big Lots, which has been signing deals to open stores in better locations as other retailers close their doors, said it opened 52 new stores this year -- two more than initially planned for. It is also cutting back on closing stores, and now plans to shut just 30 locations this year instead of 40. Big Lots said it plans to keep opening stores in better spots as such locations are now available and the cost has declined. The company expects to once again open more stores than it closes in fiscal 2010 and beyond.

For the fourth quarter, Big Lots expects earnings per share from continuing operations of $1.09 to $1.14, up from its August forecast of 99 cents to $1.04. The company expects comparable store sales to rise between 1.5 percent and 2.5 percent for the fourth quarter, and said comparable sales rose in that range in November.

Neiman Marcus Experiencing Shrinking Sales and Profits
At the Luxury end of the retailing spectrum, Neiman Marcus said revenue in the fiscal first quarter, ended October 31, fell 11.9 percent to $868.9 million. The privately-held company reported a net profit of $8.5 million, down from $12.9 million a year earlier. Neiman Marcus was acquired by an investor group led by Texas Pacific Group and Warburg Pincus LLC in October 2005.

As has been the case with rival upscale retailers Saks Inc and Nordstrom Inc Neiman Marcus has maintained tighter inventory controls to avoid having to steeply discount merchandise to get it off shelves. Last year it was not uncommon to see luxury stores slash prices by 70 percent. Neiman Marcus said its comparable inventories were 22.5 percent lower in the quarter than a year earlier. Neiman Marcus wasn’t the only retailer feeling the holiday pain, though.

Slow Start to Holidays as Many Retailers Post Weak Sales
U.S. retailers from Macy's to Costco posted much weaker-than-expected sales for November as shoppers focused only on big bargains at the start of the key holiday selling season. Some, like department store operator Macy's also forecast quarterly earnings below analysts' estimates.

Out of 15 retailers that reported by early Thursday December 3rd, 11 missed analyst estimates, including Costco Wholesale, Children's Place, Walgreen and Hot Topic, according to Thomson Reuters data.

Over the U.S. Thanksgiving weekend, consumers focused mostly on promotional deals and made few impulse purchases as concerns about the economy remained top of mind, analysts and executives said. Shoppers Targeted the featured promotional Items and stayed away from impulse purchases on “Black Friday” and Cyber Monday. Store chains also blamed warm November weather, which kept consumers from buying winter clothes.
On December 3rd, Macy's shares fell 2.7 percent in trading before the market opened, while Costco declined 2.8 percent. Teen retailers Aeropostale and Abercrombie & Fitch also saw their shares sink more than 7 percent after disappointing November results. The November sales results include the day after Thanksgiving, traditionally known as "Black Friday," when retailers offer rock-bottom prices to kick off the holiday shopping season.

Early data on weekend shopping from the U.S. Thanksgiving Day on Nov. 26 through Sunday showed only a slight increase in retail sales from the comparable 2008 period, when consumers were hammered by a deepening recession and credit crisis. As of Black Friday, analysts had forecast a 2.5 percent rise in November sales at stores open one year, according to Thomson Reuters data. But estimates shrank since the weekend, and as of Wednesday, analysts expected a 2.1 percent increase. That would still be the best showing since April 2008 and compares with a 7.8 percent decline in 2008, the worst drop since data started being tracked in 2000.

Retailers Protecting Profits by Controlling Inventories
Even if sales are flat or rise modestly during the holiday season, analysts said retailers should report improved profits because they have cut inventories and pared back costs to avoid the huge discounts they were forced into last year. For example, Victoria's Secret owner Limited Brands forecast a low-to-mid-single-digit decline in December same-store sales, but said it planned to be less promotional this month. The company also posted "significantly" higher November margins, "driven by improvements in each main business," Amie Preston, vice president of investor relations at Limited, said in a recorded message.

Retail sales data are closely watched as consumer spending makes up roughly 70 percent of the U.S. economy. But the figures also give an incomplete picture because many of the retailers that are key holiday destinations, including industry leader Wal-Mart, Best Buy and Amazon.com , do not report monthly sales. Macy's said on Thursday that same-store sales fell a worst-than-expected 6.1 percent during the month. It stood by its forecast calling for quarterly earnings of $1.00 to $1.05 a share, excluding one-time items, but that was still below analysts' expectations.

Teen Retailers Mixed
Abercrombie & Fitch's same-store sales fell 17 percent, far worse than the analysts' average view of a 9.3 percent drop. Also on Wednesday the 3rd, teen clothing retailer Hot Topic posted a worse-than-expected 11.7 percent drop. Aeropostale sales came in slightly worse than expected, with a 7 percent increase. The company's quarterly earnings forecast also disappointed some investors.

Results Vary by Retailer
Costco said same-store sales rose 6 percent, missing the analysts' average estimate of 8.1 percent. Same-store sales at U.S. locations rose 2 percent.
Children's Place posted a 13 percent drop in comparable sales, including online sales, compared with analysts' expectations of a 1 percent rise. "Customers gravitated towards the sale merchandise," a company spokeswoman said in a recorded message.

Walgreen, one of the largest retailers that reports monthly same-store sales figures, on Wednesday posted a 3.9 percent rise for November, below analysts' expectations. The drugstore chain also said Thanksgiving weekend was "notably softer."

On the positive side, Limited posted a better-than-expected 3 percent increase and home furnishings retailer Pier 1 Imports cited a strong Thanksgiving weekend as it reported a 13.7 percent increase in same-store sales for its third quarter ended Nov. 28.

Continuous Retail Improvement through the Holidays

This was the feature article in the Nov 3, 2009 Issue of Condevco's "Meter" Newsletter.

As we begin to get ready for the holiday season, hope springs eternal, or it should. It’s time to look at what we can do to make these holidays happy, for our customers, Associates and our businesses bottom lines.

As we have been discussing, this hasn’t been a banner years for business in general. In our specific business, gasoline prices are rising again, and there is always the possibility of a price spike shocking customers into not spending inside the store, like in the summer of 2008.

As of Friday October 30th Retail gasoline was at its highest average price in over a year. (See the article below) Using the “Sports quote of 2004” according to USA Today, which has become ubiquitous and irritating in ALL phases of conversation by now in 2009; “It is what it is” Gasoline Prices are what they are… But that doesn’t mean you need to let that affect how you get ready for and operate through the holidays inside your store and on your store site. In other words, the things you CAN control.

Wikipedia defines Continuous Improvement Process (CIP, or CI) is a management process whereby delivery (customer valued) processes are constantly evaluated and improved in the light of their efficiency, effectiveness and flexibility. In other words, “It is what it is, but it doesn’t have to be!”

With the holidays approaching and the big retailers having been in full holiday mode for weeks, it’s time to look at where your stores are now, and make the decision to continually improve the retail offering (the infamous “Value Proposition”) straight through to January.

That means keeping any seasonal decorations repaired and cleaned and looking fresh, perhaps a store mini-reset halfway through the season with some new items, and getting your customer service associates to “Buy In” to the fact that the next eight weeks can be the best eight weeks of the year.

Should you start selling Blu-ray players or flat screen TV’s? Probably not, but making sure you have the holiday-themed candy and drinks in the foreground is good. This is an excellent time for new uniforms, painting the curbs, and making sure those nozzles and hoses are clean and working well.

This is a chance to really make a positive impression on your customers. It doesn’t cost much to make a big difference in how “Jolly” your customer’s perception of your stores is.

This is a great time of year for ice sales and fill-in party supplies. ATM’s and Money orders are big services.

Let Darcee and Ron, the team from Condevco help you on the way to Continuous Retail Improvement (Click To Inquire)

You Need Customers (and Profits) to Have a Business

Our 1 year Anniversary – The first “Meter” newsletter was published on October 6, 2008, so the one you’re reading now is Volume 2, Issue 1. We’re proud of the fact that we’ve received positive feedback and that you care enough to write us back with comments. We thank everyone for their interest and time. We’ll continue to adjust the format as we move forward.
Darcee and Ron

(This article was the feature in Volume 2 Issue 1 of Condevco's Meter Newsletter)

“You Need Customers (and Profits) to Have a Business”

Well, that seems like a pretty simple statement, doesn’t it? Whether you call it marketing, Sales, Advertising or Promotion, it all comes down to one thing. Getting people to become your customer (purchase from you), and getting them to come in more than once; in other words, customer loyalty and repetitive purchasing. How?

Just cutting price isn’t a competitive strategy

In terms of Convenience Retailing, that means putting customers inside the store. Hopefully they shop there more than one time. In terms of our jobber friends, that means adding dealers to your network, and making sure they want to renew at the end of the Fuel Supply Agreement. In terms of a Refiner/Marketer, that means adding and retaining jobbers, and on and on. But just getting customers by cutting price becomes a losing proposition in the long run, so there’s more to being a good competitor than being low priced.

A simple idea, but a complicated thing to do successfully. Here as we start our second year at the “Meter” we’ve talked about Customer service, we’ve spoken about respecting your customer, and in our two most commented on stories, we’ve spoken about Sprucing up your store and the Value Proposition to your customer. (The Articles are all included in this blog).

In the final analysis, it’s all about getting customers to keep your business going, and retaining them for the long run, whether you’re a multinational refiner or a single store operator. What is the customer looking for? And how do you become the person or business that fulfills that customer need?

Revenue alone isn’t an answer

Just pushing revenue through price cutting and aggressive promotion is NOT the answer to C-Store success. You need to keep margin preservation as a goal when you set your promotional calendar, otherwise, you’re trading dollars for no gain.

In the blog story on Burger King’s new restaurant design, (Article directly below) we discuss the fact that BK hasn’t been a heavy promoter of the “value menu” items, They have them, but BK has always competed on taste -“flame-broiled” and service-“Have it your way” as a primary message, with competitive pricing as a secondary factor. Just driving revenue for revenue’s sake is a feel-good tactic, but in the long run, doesn’t do you any good.

The Future

The NACS (National Association of Convenience Stores) show kicks off in Las Vegas today, where the merchandise and trends for the next year get rolled out. Oil prices are climbing again, and while we’re being told the economy is in recovery, it just isn’t feeling that way to most of us. It’s important to grow top-line revenues, but not at the expense of profit.

A more sophisticated foodservice offering and an emphasis on fresh items is the way to steadily grow revenues in a convenience setting now. Differentiate yourself from the pack in a smart and profitable way, and customers will keep your registers ringing. NPN had a nice article on Loyalty being more than just a Fuel Brand (Click to read) It’s time to think about how to make your business grow in a structured and profitable way. Id like to finish it off with the comment that standing pat is really dropping behind, because everyone else is trying to move ahead!

At Condevco, our business is helping convenience retailers and jobbers grow their business. We develop manuals and administer programs with your staff and provide analysis and input to allow your efforts to become targeted and productive. Contact us TODAY for more information on how we can help your business increase profitability.

Cutting Cost Shouldn’t Mean Cutting Service

Newsflash: Business Has Been Tough

Business has been tough for 12 to 18 months in the convenience store business. While Wall Street imploded just over a year ago, gasoline retailers and distributors had been riding a wild rise in supply cost caused by record high crude oil prices in July of 2008, only to followed by a very rapid drop in prices as the rest of the economy “fell off a cliff” to quote a pundit, reducing demand overnight. Volatility of supply costs pushed a lot of jobbers to the brink, and some went over the edge with the rest of the economy.

So, while our stores and chains were ahead of the curve in starting to feel the pain, we were right there with everyone else as consumer confidence shrank, and maintaining business became very, very tough. When the top-line revenues aren’t growing, but actually shrinking, but the expenses aren’t going down, the obvious place to look to get more benefit from the operation is to cut cost.

Cutting Cost Leads to Better Results

And, everybody looked to cut as much as they could and still stay in business as a viable competitor. Both stories underneath this, on Walgreens and Starbucks, are about cutting cost to keep the profits growing. Howard Schultz, the founder and CEO of Starbucks, was on CNBC this afternoon to tout the national rollout of the “Via” instant coffee product; but what he talked about the most was the cost cutting initiatives within the firm allowing them to keep profits near the levels that were expected. Walgreen Corp also attributed better than anticipated results to cutting cost.

“Abandoned Cart Syndrome”

That being said, about a week ago I read an interesting article on the supermarket sector, where they have been aggressive at reducing cost, as they compete in a very tight margin industry. There is more and more of what they are calling “Abandoned Cart Syndrome” where a customer who came in and shopped the store just leaves the full cart and walks out when they see the lines at the checkouts, lengthened by reduced labor allocations. So the question posed was, when does cutting cost become cutting service? And when does that impact your business negatively in the long run? Does that customer come back?

Well, in the case of a Convenience Store, we might not have abandoned carts, but we very well could have cut cost to the point that we have abandoned sites. Customers who came in, and you were out of stock on the need, or they had to wait in line 3-4 minutes to buy a single item. Take a good hard look as you pare those costs, and make sure it’s not service that’s suffering.

Walgreen’s Beats Forecast, Shares rise

Drugstore operator Walgreen Co. (NYSE: WAG) said prescription drug sales rose in the fiscal fourth quarter, pushing the company's results past Wall Street expectations and lifting shares to an annual high. Shares rose on trading today to close at $37.35, a $3.16 per share rise today, putting the stock price 9.24% higher.

Cost Cutting results in Profits

The Deerfield, Ill., company said its "Rewiring for Growth" expense savings plan started to pay off during the quarter, and also indicated the effects of the recession may be easing. Walgreen shares climbed to an annual high on the results.
For the quarter ended Aug. 31, Walgreen's profit fell 2 percent, to $436 million, or 44 cents per share, down from profit of $443 million, or 45 cents per share, a year prior. Revenue rose 8 percent to $15.7 billion from $14.6 billion.

These latest per-share results attribute 7 cents per share in savings from Rewiring for Growth, offset by 3 cents in costs. Analyst’s consensus forecast profit of 39 cents per share on revenue of $15.68 billion.

Walgreen’s said same-store sales, or sales at stores open for more than a year, rose 2.4 percent. Walgreen opened its 7,000th store in September and currently runs 7,042 drugstores, a few dozen more than main competitor CVS Caremark.

Same Store Sales Rise

Same-pharmacy sales rose 4.5 percent in stores open at least a year, while same-store sales of the "front end", or non-pharmacy items, fell 1.4 percent. The company filled 9 percent more prescriptions than it had a year ago. Even though consumers are actively looking for ways to save, Walgreen’s said fewer customers are skipping medications or stretching the terms of their prescriptions.

Walgreen’s also said that patients who receive 90-day orders of prescription drugs through the mail will now be able to pick up their orders at local Walgreen’s pharmacies, matching the features of the CVS program.

For the full reporting year, Walgreen’s earned $2 billion, or $2.02 per share, down from profit of $2.16 billion, or $2.17 per share, in 2008. Revenue rose to $63.34 billion from $59.03 billion. Walgreen’s expects store growth of 4.5 percent to 5 percent in fiscal 2010, which would give it more than 7,300 stores.

The company stated it is looking to save money by cutting back on store openings and carrying fewer products in inventory. They are going to boost sales by improving the layout of its stores in another new initiative.

Starbucks Rolling Out it’s Instant Coffee Nationwide Today

Eight months after Starbucks Corp. began selling its “Via” brand instant coffee, testing it in Seattle and Chicago, today Starbucks will begin a nationwide rollout, offering the instant coffee drink to the rest of the country and in its Canadian stores.

Starbuck’s is running company's first-ever television ads, and also distributing to roughly 1,500 sites outside its stores; this effort for the Via launch shows just how much Starbucks wants to own a stake in the $21 billion worldwide instant coffee market.

"Based on the success we've had, we feel strongly that we're sitting on a very big opportunity," said Starbucks CEO Howard Schultz said during a conference call with journalists. "What's going to sell Via at the end of the day is that (it) delivers in the cup. Most people will not be able to tell the difference."

Instant coffee is popular in Europe, and through the rest of the world — instant brands account for as much as 80 percent of coffee sales in the U.K., here in the US, instant coffee has not won over coffee drinking Americans. Instant is generally viewed as an inferior product here in the US, a knock-off of drip-brewed beverages.

Starbucks executives want that image to change. They are hoping, and betting on, with this high visibility rollout, that the skinny cylindrical 3-packs and 12-packs of coffee that dissolve in water will eventually be as popular with consumers as its packaged coffee is now. The coffee is available in two flavors now, and Starbucks expects to introduce more varieties in the future.

Starbucks is getting together diverse vendors like outdoors store chain REI and office supply chain Office Depot Inc., hoping it will help the company get the product in hands of new customers. Via also will be sold inside general retailers like Costco and Target. The effort to find new customers is also taking to the air, where passengers onboard certain United flights on Tuesday will be able to sample the drinks. United will sell Via packages onboard later in the year.

Next year, Via will appear on grocery store shelves, already a strong market for Starbucks pre-packaged conventional coffees. Introducing Via in such a high-profile way comes at a particularly tough time for Starbucks. Due to the recession and consumer spending cutbacks, Starbuck’s has seen its revenue slide for the last three consecutive quarters, and profits have fallen in five out of the past six quarters. It could use a big new hit product, maybe Via could provide that “Buzz” to get the chain rolling again.

Eight Ways to Freshen Up your Store and Energize your Employees

This was written by Darcee Santicola and was the feature article in Volume 1, Issue 9 of Condevco's "The Meter" Newsletter, distributed on March 28th.

SPRINGTIME… A time reserved for the renewal of surroundings and spirit.

As a residential and commercial designer/space planner, this time of the year has always played an important role in the energizing of our client’s spirits along with their employees’ and customers’ as well. We all enjoy feeling refreshed after the winter months, especially with the economic times we’re living in. Change no matter how small creates excitement.
Here’s eight ways I feel will help start you on your way to achieving this goal.

STORE
1) Painting. A fresh coat of paint works wonders. Then there’s what I consider “creative painting”. Adding color be it to create customers purchasing excitement, enhancing designated areas of the store including restrooms, or to draw attention to specific promotional displays is always an inexpensive solution. Painting of graphics is one of a designer’s tricks in creating an illusion of spaciousness. Also, a change of scenery for employees has been proven to create an increase in productivity. If budget permits, having a professional work out a schematic especially designed for your store is well worth the investment, however if this is not possible, browsing through the trade publications such as Convenience Store News, CSP or NPN with a keen eye for inspiration can be helpful in achieving your goal.

2) Lighting.

A well lit store and canopy is essential. I’ve also found by adding a few specialty fixtures in featured areas creates warmth and a sense of quality for your customers. A wide range of pricing for these fixtures are readily available in accommodating your needs. It’s a quick way to give a modern update to a space.

3) Floor Rearrangement.

Rearranging shelving and cooler space from time to time is so important. Creating a new traffic pattern engages customer interest while providing longer store visits. It also helps to stimulate employee’s interests as well.

4) Special Promotional Decorating.

It’s all about creating excitement. Take full advantage of this opportunity. Have fun with this and really go for it.

EMPL0YEES

5) Employee Image.

Providing new uniforms or uniform shirts is a great morale booster. Sometimes just a change of color or style modification is all that’s needed.

6) Employee recognition and incentives.

Sometimes it’s very easy to become complacent when it comes to our employees. They are the backbone of the convenience store business and needs to be recognized for their efforts. Also, having “fun“ contests is a good way to achieve this.

Here’s one of our favorites: “Boss for a Day” . A contest using management created criteria for customer service personnel runs for a short period of time. Winner is determined by contest rules. He then switches places with the Manager; in which the employee becomes the manager for the day while the manager works employee’s position. This fosters teamwork and an appreciation of each others positions. A win-win situation.

7) Promotional sales leader.

When putting together a special promotion, having a friendly competition among the staff or the staff of other branch stores is an added production achiever. Many options are available to managers as to what the prize and or award could be.

8) Customer service.

Providing a “paid” training session is extremely productive. In these economic times it’s more important than ever to give exceptional customer service especially with your regulars. Having a staff show a special recognition to them means so much. When a customer was greeted by their name or an having their customary purchase remembered they became loyal customers for a long time to the point of making special trips just to receive such treatment. Employees need a refresher on company policies dealing with customer service. Again, there’s added and updated data and manuals available to owners by Condevco and others for just this purpose.

Let’s make Spring a happy, positive and profitable season by using some or all of the above suggestions.

Darcee Santicola

Starbucks Instant Coffee Move a Curious One

Source Article: Starbucks has high hopes for its instant coffee | www.marketwatch.com (article)

Implications:
1) Is Move to Instant a "Value" Play
2) Detracts from Barista-prepared "Core" premium offering
3) May Cut In-Store Visits if Successful - Reduce retail profitability
4) Is this the beginning of migrating the Starbucks(NAS:SBUX) business model to become a CPG firm?

Analysis:

Starbucks(NAS:SBUX) introduction of it's "Via" instant coffee product is a curious one for a company struggling to improve performance at it's retail stores.

Is bringing "Via" to Costco(NAS:COST) and Target(NYSE:TGT), and eventually Wal-Mart(NYSE:WMT), a shrewd way to increase overall corporate revenues, or a way to begin to migrate the company model from a retail coffeehouse-based chain to a CPG company?

Starbucks(NAS:SBUX) retail locations have been the driving force behind the firm from it's inception. To make a move to deemphasize any focus on retail is a bit of a head scratcher.

If Via is Starbucks(NAS:SBUX) move to a "Value" product in response to the current tough consumer spending environment, then introducing an expensive alternative for a category (Instant Coffee) considered to be an inferior substitute in their primary North American markets is a tough sell to make.

Is this a more strategic and long-term plan to deemphasize retail and become a premium coffee purveyor through traditional retailing channels? That makes more sense, and putting a premium instant in as the transition begins would be a way to expand those channels and get customers looking at Starbucks(NAS:SBUX) products that would have never considered the brand before.

There's no way to know yet if this is the eventual direction of the business, but the new Starbucks(NAS:SBUX) initiatives to bolster the retail side have been underwhelming, up to this point in time.

The Starbucks(NAS:SBUX) experience was and is about good quality brewed coffee or coffee/espresso-based drinks, excellent customer service and ambiance at the sites. With the margin that coffee delivers, it's hard to imagine that they cannot retool margins and still deliver a retail experience that addresses the current consumer sentiment.

Is Via a misstep, or the beginning of Starbucks(NAS:SBUX) migrating to a new business model? Only time will tell.

Don't Just Stand There, Do Something!

Originally published as feature article in "The Meter" Condevco's newsletter in the March 4 Edition

As we have watched the last month unfold in our little corner of the petroleum field, we have seen:

1) Jobbers filing for bankruptcy, of both the chapter 11 and 7 varieties.

2) Store chains being sold either in whole or in part, and

3) Stations going up for sale with prices that do not reflect the reality of the markets, either in real estate or retail convenience and gasoline.

Here’s a recent conversation I had with a friend who shall remain anonymous.

Ron, “Hey, did you get those listings you were talking about from that client?”

Friend, “No, I went and looked at them but the client is in them upside-down. The businesses aren’t making money and poorly managed, and what they need to get won’t work in this market, so I didn’t take the listings.”

Ron, “Well, do they want to fix the businesses so they can get more down the road?” (I had sent them over a consulting proposal at this friend’s request)

Friend, “They don’t want to spend any money on the business right now”

Ron, “OK, so they aren’t breaking even, can’t sell the stations for what they paid for them, and they don’t want to work on fixing the business”

Friend, “That’s right”.

While I find that a hard to believe conversation, but that’s not the only thing I’m seeing that makes me think the “fight” is leaving lots of folks in the business right now.

In a different time, I guess the owners could figure someone would rescue them by “purchasing the problems” before too long. I have to say, I don’t think that’s the case now. If you have assets that aren’t performing, hoping isn’t the way to go. It’s time to become a retailer again.

Jobbers are going into bankruptcy with no apparent plans for coming out. If you want to be broken up, just skip the Chapter 11 step and get yourself dissolved.

That means pricing your motor fuels as competitively as you are able to, keeping your stores clean and stocked with current and timely product, and making sure your Customer Service Associates are doing all they can for your customers as they walk in.

Condevco is the Customer Service Training and Store Merchandising authority, we can help you freshen up your stores and employees without major expenditures. Be sure to watch for Darcee’s first feature article for The Meter, “Eight Easy Ways to Freshen your Store and Energize your Employee’s Customer Service”

To ask Ron and Darcee for Consulting Help, visit our web site! (Click here)

McDonald's Beverage Business a Fountain of Profits

Source Article: McDonald’s Ends Pepsi Test in Victory for Coca-Cola | www.bloomberg.com (view article)

Ramifications:

1) Bottled Drinks would make McDonalds Beverage Business More Complicated, less Profitable.

2) Bottled Drinks would need to be Priced at Premium in order to maintain margins - Away from "Value" Image

3) McDonalds and Coca-Cola Linked in Consumer's minds - Iconic American Consumer Brands.

Analysis:

McDonald's testing Branded Bottled Drinks in Stores is an unnecessary complication to a vital high profit product line.

Being rooted in Convenience Retailing, any store owner will tell you the profit picture and inventory turns between Fountain products and individually packaged beverage portions is night and day. If we could only sell fountain, we would. McDonald's can, and that's what they should do.

An increased selection for the customer means decreased inventory turns for you. The availability of packaged beverages isn't going increase visits to McDonald's in any significant way, but it will reduce the margins in their drink business. To sell a unit of packaged drinks at a competitive price, they will be in the 35% to 40% GM area, versus an 80% plus margin on fountain drinks, even with free refills. Fountain drinks that are received at the drive through are even better. No refills there.

No Inventory to stock and reorder, no additional refrigeration equipment and energy consumed... Fountain is the way to go in McDonald's.

In terms of a Pepsi-Coke fountain competition, which wasn't in play, Coke has a large and dominant presence in the field. To switch to Pepsi doesn't seem to make any sense. What competitive advantage would it give McDonald's?

McDonald's should stick with fountain drinks and keep the profit formula they have used to achieve great operating results over the years.

The free, low-cost, self-service refills fit into the value image very well, and makes for a good complement to the packaged meals with sandwich, fries, and the fountain drink.

How Much Should a Good Cup of Coffee Cost?

Source Article: Starbucks cuts jobs and stores
www.theappointment.co.uk (view article)

Implications:

1) Starbucks overexpanded store count

2) Product quality became spotty as chain grew; service level stayed high

3) Other players "Upped Their Game" in the coffee sector

Commentary:

Starbucks retrenchment is no surprise given the slowdown in consumer spending, but the seeds were sown for a turn in their fortunes, regardless.

Starbucks started as a "boutique" coffee store, nicely appointed with good quality product and well-trained, polite employees.

As the store count grew, the employees stayed remarkably friendly and customer oriented, but the barista's skill level dropped. Sometimes, you didn't get a perfect cup of coffee. That was a break with the "Brand Cache" they have with their base consumer.

Starbucks has that core following that will always give them "X" amount of business out a certain area, but as stores began to be placed more closely together, they needed to reach out to the "casual" coffee drinker, one with whom price and convenience were keys to repeat business, in order to maintain revenue as stores got more tightly packed.

They never really addressed that market successfully.

The rise of the premium coffee programs at McDonalds and Dunkin Donuts addressed the mainstream coffee drinker in a faster turnover model, and the Convenience retailing sector has made an effort to deliver a very good coffee product as time has gone by. ExxonMobil and BP put lots of time and effort into the coffee offerings in their retail operations, and large convenience store operators like WaWa and Sheetz run great coffee programs.

Everyone "Upped their game" to work at getting some of Starbucks revenue. They worked at being more convenient, faster, and more price friendly, even if the product isn't quite to Starbucks level, although many times, it is.

The current slowdown in consumer spending sped up Starbucks store cutback, but it would have happened sooner or later anyhow.

The Ghost of Christmas (Just) Past

The Ghost of Christmas (Just) Past

Implications:
1) Retailers are going into extended period of struggling to survive
2) Consumer credit, the primary spending mechanism for mid and big ticket items, is broken
3) "Trading Down" is the consumer trend for 2009

This analysis was written for Gerson Lerhman Group and published Jan 2, 2009

Source Article: Retailers' holiday sales drop at least 5.5 percent www.msnbc.msn.com (view article)

Analysis:
With a wink and a nod to the esteemed Charles Dickens...

The dismal sales numbers are starting to leak out from Christmas Season 2008, and once the numbers from the major retailers are announced on the 8th, it will be official: The "ghost" of this Christmas just past will be haunting retailers for a long, long time.

There is going to be excess inventory of high-end goods no one will purchase right now, regardless of how desirable they are. Cashmere sweaters are being pushed at a Buy one, get TWO free deal at the Off 5th Saks(NYSE:SKS) Outlets. What do you do to recoup your inventory investment in luxury goods when no one wants them?

Marginal store locations are going to be become cash flow drains on retailers with viable and previously successful business plans. Using Circuit City(NYS:CC) and Office Depot(NYSE:ODP) as examples of this, as the store count comes down, their corporate overhead gets split over fewer and fewer locations, increasing the pressure on each remaining unit to perform while cutting potential ability to advertise and market against their healthier competitors, in these specific cases, Best Buy(NYSE:BBY) and Staples.Pulling out of markets is a short-term and drastic solution if you aspire to be (or continue to be) a nationwide leader in your category. This solution doesn't address how they ended up at a competitive disadvantage to begin with, another "Ghost" that has to have a reckoning with some upper management at various firms.

Linens N Things(NYS:LIN), Mervyns; they are just the beginning of the shake out in retailing specialty and Department store chains. If you aren't nimble and financially strong enough to be able to both pick "Hot" value slanted goods and then price them right, you are in for rocky times with the consumer moving forward in the near term. This next year plus is going to be a "Survival of the Fittest" scenario for retail across the board. Consumers are wary of spending on anything but necessities, and will be until the housing and credit market meltdowns are on the way to being solved, and unemployment, a lag indicator, starts to improve.

Retail won't see things loosen up until the consumer credit mechanism is repaired in a way that allows people to be confident in their ability to spend more than is in the checkbook. Anecdotally, we saw Costco(NAS:COST) cut the price on a 60' Sharp(BSE:523449) LCD HDTV, featured at $3,999 at the beginning of December, to $3,499 the week before Christmas. Under normal circumstances, the $3,999 was a great, almost unbelievable, buy.

Electronics retailers have to be sweating, most people are thinking that 2 year old laptop isn't quite as in need of replacement as they thought it was.

Trading Down is going to be the consumer trend of 2009. Getting the car fixed instead of looking for a new one. If you need a vital appliance like a stove or washer that breaks, maybe taking a "Short-term" contract from a "Rent-to-own" company instead of hitting the local appliance store or Sears.

People are so unsure of the economic climate going forward, even a great retail concept with non-vital goods to market is going to need to work extra hard. Wal-Mart(NYSE:WMT) may be the king for quite some time to come.

Like Jacob Marley warning Scrooge he needs to change his ways, let's hope this season of despair leads to a fresh way of thinking about and solving the challenges ahead for the retail sector.
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