Thursday, June 24, 2004

HIGHLIGHTS


SUPERMARKET – U.S.A. MARKET

Consumer Outlook Improving, But Supermarkets Will Lose Share
The economic outlook is improving, but conventional supermarkets will be challenged to reap the benefits, according to economists at Retail Forward here. In a conference call yesterday, the group noted that conventional supermarkets need to develop concepts focusing on upmarket customers because competition from supercenters will continue to gain share of the lower end. “Most of the growth of supermarkets over the past five years was simply a result of climbing food prices,” said Steve Spiwak, an economist with Retail Forward. “Although food inflation this year is benefitting growth, easing inflation thereafter should [put] further pressure on growth in this channel.” The group expects the economy overall to improve: Mortgage rates despite recent rises will remain affordable, and demand for home goods and food will remain steady. “The good news is the general outlook for retailing is very good. The U.S. economy is again going to be among the strongest economies in the world,”
Source; RF, June 04
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TECHNOLOGY – MARKET STRATEGIES

BMW and Apple announce iPod auto promotion
Tightly Integrates Music Unit Into Car Audio System
Following Volkswagen's successful co-promotion of an iPod/vehicle package last year, BMW of North American and Apple Computer yesterday announced a BMW/iPod deal. The automaker will offer an integrated iPod adapter for select 2002 through 2004 models beginning July 12.

Different from VW
Stan Ng, director of product marketing at Apple, said last year's iPod deal with Volkswagen of America differed because it was merely a summer promotion offering Beetle hard-top buyers an iPod and adapter. Jim McDowell, vice president of marketing at BMW, in Woodcliff Lake, N.J., said BMW's iPod adapter will be directly hooked into the vehicle's audio system, allowing owners to use the car's controls for the iPod. The personal music device is plugged into a cable connection in the glove box and stored out of the way there. Control features allow the driver to change tracks, playlists or volume from touch buttons installed in the steering wheel. The iPod adapter for BMWs will cost $149, plus installation costs done at dealerships.

'Lot of car companies'
Mr. Ng pointed out that BMW won't have exclusivity for vehicle-integrated adapters. "I think a lot of car companies are looking at this," he said.
Along with a new Web site, iPodYourBMW.com, BMW will use cable TV and national newspapers and magazine advertising to promote the offer. That campaign launches today, the company said. Publicis Groupe's Fallon, Minneapolis, created the theme - "Control freaks, rejoice" - for the campaign, which also includes outdoor ads in five cities and spot radio. Parts of the media buy continues into August. Spending wasn't disclosed.

Mini Coopers included
BMW will offer the iPod adapters on its 3 Series, Z4 roadster, X3 and X5 sport utility vehicles. Mr. McDowell said the marketer hopes to add more of its models, but started with its highest-volume lines. The adapters will be available in late summer for all BMW-owned Mini Cooper models. Apple has sold more than 3 million iPods since introducing the product in fall 2001. Depending on the model, the suggested retail prices range from $249 to $499.
Source; Crain Communications, June 04

Picture; BMW's integrated system allows the audio, playlist and track shuffling features of an iPod to be operated from a touch-button panel on the steering wheel.

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RETAIL – LEGAL ISSUES

Discrimination Lawsuit Against Wal-Mart Gets Class-Action Status
A federal judge here yesterday granted class-action status to a gender-discrimination lawsuit against Wal-Mart Stores, Bentonville, Ark., that could allow as many as 1.6 million women who have worked for the company to seek damages, according to reports.
The suit alleges that the retailing giant has systematically paid women unfairly and passed them over for promotions. In a prepared statement, Wal-Mart said it would appeal. "Let's keep in mind that today's ruling has absolutely nothing to do with the merits of the case," said Mona Williams, a spokeswoman for Wal-Mart, in a prepared statement. "[The judge] is simply saying he thinks it meets the legal requirements necessary to move forward as a class action. We strongly disagree with his decision and will seek an appeal." No trial date has been set.
Source; RF, June 04
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RETAIL – CORPORATE OVERVIEW

Strike-Lockout Cost Kroger $71.6 Million in Profit
Kroger here said Tuesday net income for the first quarter ended May 22 fell 25.2% to $262.8 million, or 35 cents per share. Results were impacted by the final stages of and recovery from the 141-day Southern California strike-lockout, which Kroger said reduced net income by $71.6 million, or 10 cents per share. Sales for the quarter rose 3.9% to $16.9 billion, while identical-store sales, excluding fuel, increased 0.3% for all stores and 0.5% excluding the chain's Ralphs and Food 4 Less stores in Southern California. The company also said it estimated product-cost inflation, excluding fuel, to be 1.6%
Source; Kroger inside, June 04
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TECNOLOGY CONSUMER – CHINA MARKET

Sony unveils strong China sales, investment plan
Japan's Sony plans to spend $200 million this fiscal year to boost production in China, its third-largest market and top driver of growth, after posting a 70 percent surge in sales last fiscal year.
Sony, now neck and neck with Matsushita Electric Industrial for the mantle of the world's biggest consumer electronics maker, is hoping for brisk sales of its Cybershot digital cameras, Vaio personal computers and camcorders in China.

"China is increasing its strength in the manufacturing world," Sony President Kunitake Ando told a news conference on Wednesday. "As a market, it has very huge potential."
But rivalry in China's $9.8 billion consumer electronics market is heating up, with South Korea's Samsung Electronics Co and domestic players such as Sichuan Changhong slugging it out for consumers' cash.

China accounted for about two percent of global revenue in the last business year, but it is the company's fastest-growing market and already generates more sales for Sony than any other country except the United States and Japan.
Price-based competition from domestic manufacturers, however, will weigh on margins. Rampant software piracy is expected to hinder efforts to market its blockbuster PlayStation 2 console, a key driver of global operating profit.
It has also been criticised recently as slow to market with innovative products such as flat-panel televisions.

Bigger than Japan
Sony posted a 70 percent leap in sales in China to $1.7 billion in the year ended in March 2004, slightly exceeding its own previous forecasts and putting it on track to achieve sales of $8 billion annually by 2008, the company said.
It had forecast China sales of $1.6 billion for the latest business year.
"Mathematically, China, this market, is a few times bigger than Japan," Sony Chief Executive Nobuyuki Idei said, after opening a three-storey showroom in downtown Shanghai displaying the robot dog Aibo and other gadgets.
"We are confident of achieving our goals," Idei said.
Sony's shares closed down 0.7 percent at 4,020 yen on Wednesday, underperforming a flat Tokyo market.

The Japanese company invested some $900 million in China over the past decade.
Its latest investments include plants in Southern China to make components and an expansion of production facilities in Wuxi city, in the country's east.
Sony is joining a wave of Japanese manufacturers building plants in China to capitalise on lower costs, while enhancing its research and development capability and boosting the number of staff.

The consumer electronics giant, which also vies with Japan's Sharp Corp, posted a 23 percent fall in annual net profit in the last financial year due to restructuring charges.

But it forecast better earnings for this year.

Part of that would be driven by China, whose increasingly wealthy consumers have developed a taste for new-fangled digital toys, executives said.
"China will be the main growth driver for Sony," said Kei Kodera, chairman of Sony China. ($1=109.13 Yen) (Additional reporting by Vivian Xiao)
Write: by Lee Chyen Yee in Shanghai, June 04
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RETAIL – RFID/EPC TECHNOLOGIY

Wal-Mart Announces Expansion of RFID/EPC Program
In a series of briefings last week with its top 300 suppliers, Wal-Mart Stores here announced its plans regarding its electronic product code (EPC) initiative using RFID (radio frequency identification) technology.
Wal-Mart launched its initial implementation on April 30 in the north Texas area. Cases and pallets of 21 products from eight suppliers were shipped to Wal-Mart's Sanger, Texas, distribution center, then onward to seven local supercenters with RFID tags. "Over the next 16 months, we also plan to significantly increase the number of Wal-Mart stores and Sam's Clubs where customers can benefit from this revolutionary technology," said Linda Dillman, executive vice president and CEO, Wal-Mart, in a statement. Wal-Mart's top 100 suppliers, plus 37 additional suppliers, are already working on meeting a January 2005 deadline to be live in north Texas in three DCs and about 100 stores. Following that, the retailer said it planned to be live in up to six DCs and up to 250 Wal-Mart stores and Sam's Clubs by June 2005, and up to 13 DCs and 600 Wal-Mart stores and Sam's Clubs by October 2005. Also, the next top 200 suppliers will begin tagging cases and pallets by January 2006, Wal-Mart said in its statement.
Source; LuisB. Corporate official sources. June 04
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RETAIL – EUROPEAN TECHNOLOGY ISSUE

European Retailers Declare Plans to Use WWRE for Global Data Sync
Several European retailers — including Auchan, Casino, Delhaize Group, El Corte Ingles, Royal Ahold and Tesco — last week announced their plans to work with the WorldWide Retail Exchange on global data synchronization. The retailers and WWRE held a meeting here June 17 for 16 of their key suppliers to collaborate on plans to advance global data sync. “Delhaize has selected the WWRE’s Worldwide Item Management solution as our global data pool. Therefore, [it is] the entry point of all information concerning the items sold in our stores," said Pierre-Olivier Beckers, president and CEO of Delhaize Group here, in a statement. "WIM will interconnect with all data pools containing the item information of our suppliers, both global and local. We believe this approach will simplify and accelerate the rollout of data synchronization as it will avoid our global suppliers to deliver the item information directly in each country where we operate.”
Source; LuisB, June 04
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BEVERAGE SECTOR – COMPANY OVERVIEW

Coca-Cola Names New C.M.O.
Look for some new ad campaigns in different media at Coca-Cola Co. now that the world's largest soft drink company has named Chuck Fruit chief marketing officer, succeeding Daniel Palumbo, who has left the company to pursue other interests.

Fruit joined Coca-Cola in 1991 as head of Global Media Services and has held a variety of positions, most recently as s.v.p. of Integrated Marketing, with the responsibility for developing the company's worldwide media and sponsorship strategies, and its investments in all forms of traditional and emerging media platforms. He was also acting c.m.o. in 2003.

"Marketing is clearly evolving, and the emergence of new media and many competitive opportunities for consumer stimuli mean that we need to find new, innovative ways of addressing our consumers and ensuring the relevance of our brands," Neville Isdell, Coca-Cola chairman, said in a memo sent Tuesday to Coca-Cola employees. "In the last 50 years, the 30-second television spot has defined our brands, and while it is still important, I think its impact has diminished."

"Today's consumer and media environments call for a more multifaceted and integrated approach to marketing, from our consumer communications to the point of sale and all the way through to opening a bottle of Coca-Cola," Isdell continued. "Creativity is vital, and so is a broader, holistic view of how to reach our consumers."

Palumbo had only been with Coca-Cola for one year, joining the company last June from Eastman Kodak, where he held several positions, notably s.v.p. of the Consumer Imaging division, which accounts for half of that company's sales. During his career he also held positions with Procter & Gamble.
Source; LB/Yuumei, June 04
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INDUSTRY – MARKETING STRATEGY

P&G Continues Media Innovation Mandate, Hires Gunn Report
Procter & Gamble is giving the ad industry a forum for recognizing media excellence. The award for "best flowchart" can only be so far away.
Yesterday in Cannes, France, the packaged-goods behemoth announced its sponsorship of the newly created Gunn Report for Media.
The Gunn Report, started by Donald Gunn in 1999, is an annual collection of worldwide creative advertising awards. The initial Gunn Report for Media, to be published in October of this year, will be a similar showcase for industry awards honoring media planning and buying. Details on which media awards will be included and how often the Gunn Report for Media will be issued were unavailable.
According to a press release issued by P&G: "The goal of this publication is to put a global spotlight on media innovation and success, and ultimately, inspire a higher quality media around the world."
"Everyday, consumers are bombarded by marketers who are vying for their attention," said Bernhard Glock, P&G's manager of global media, at a press conference yesterday. "As an industry, we need to better understand how to reach our consumers when and where they are most receptive. In order to do this, we have to elevate the importance and quality of our media efforts globally."
The sponsorship by P&G would appear to be in line with an ongoing push by the company to shake up the way its advertising agencies approach media planning. Back in February, P&G Global Marketing Officer Jim Stengel gave a speech at an American Association of Advertising Agencies conference entitled "The Future of Marketing," during which he encouraged marketers to move beyond focusing solely on 30-second TV spots.
Then, in April, P&G also commissioned a complete "communications review," seeking to "redesign its media planning agencies into communication planning agencies."
"By sponsoring the Gunn Report for Media, P&G recognizes that media is as vital to our success as the outstanding creative product we demand from our agencies," Glock said. "We value innovation in media, as well as breakthrough thinking and creativity from our marketing partners."
Source; P&G, June 04
Write; by LuisB
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RETAIL FASHION – INTERNET

Loehmann's Goes Online With SmartBargains
Off-price fashion retailer Loehmann’s Holdings Inc has launched a strategic alliance with online retailer SmartBargains Inc to sell Loehmann’s women’s apparel on the Internet.
Through a co-branded department, Loehmann’s@SmartBargains, customers will be able to purchase Loehmann’s products with the added benefits of 24-hour access and direct-to-home delivery.
It marks the first time Loehmann’s apparel has been available to customers via the Internet.
“We are very pleased to form this alliance with Loehmann’s,” SmartBargains CEO Carl Rosendorf said.
“It joins two like-minded retailers that serve similar audiences, and provides a vehicle for both companies to generate potential growth and meet the interests of their customers.”
Loehmann’s operates 48 ‘real world’ stores throughout the United States.
Source; Juststyle, June 04
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RETAIL FASHION – CORPORATE OVERVIEW

H&M price cuts help drive sales
Volume growth across first half
Swedish fashion retailer Hennes & Mauritz has taken advantage of a weaker dollar to drive down its prices across the past few months.
H&M said that it had lowered its prices by 5 per cent across the three months to May 31, a move which has paid off by lifting sales volumes by around 14 per cent.
The retailer reported an 8 per cent increase in turnover across the six months to the end of May, up to SEK SEK13.2 bn. At comparable currency rates, the increase was 10 per cent.
H&M said sales in its first two stores in Canada, have been well ahead of expectations, and announced plans for further expansion in North America, with a store in San Francisco planned to open next year.
Source; H&M, June 04
Write; LuisB

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FOCUS

RETAIL – CORPORATE OVERVIEW

Dixons holding share in competitive market
£200m to be returned to shareholders
Dixons has grown sales in a highly competitive market, with a strong performance across the group offsetting disappointing sales in the core Dixons chain.
As expected, Europe's leading specialist electrical retailer has announced plans to return £200m to shareholders through a share buyback programme, using the proceeds of the sale of its stake in ISP Wanadoo and European property business Codic.

In the year to May 1, Dixons turnover increased by 13 per cent to £6.5bn, with group like-for-like sales up 3 per cent. UK like-for-likes grew by 2 per cent, with international like-for-likes up 4 per cent. Pre-tax profits rose by 11 per cent to £331.6m, towards the top end of City forecasts.

Overall, the UK Retail division made an operating profit of £254.2m. There was strong growth in new technology products including plasma & LCD TVs, DVD players and digital photography, while sales of games consoles dipped in the absence of new hardware launches, while VCRs and 35mm photography sales fell as consumers moved to new technology. The overall computing market grew by 2 per cent, with PC hardware sales down by 2 per cent as strong unit volume growth was offset by price deflation.

In April, the group announced plans to close 106 under-performing smaller Dixons stores, mainly in town centre locations. Dixons said the costs associated with the closures are now expected to be £44m.
Across the year, the Dixons chain saw total sales fall by 6 per cent to £798m, with like-for-like sales down 5 per cent. A new Dixons management team is focused on improving performance in the core chain. This plan includes revamping store space around growth categories, as well as more effective advertising and aggressive price promotions.

Signalling a move to larger formats, the group said trials of the new Dixons XL format continued, with four new stores opened and two further XL planned for this financial year.

There were stronger performances in the groups other UK chains. Currys sales of £1,752m were up 4 per cent. Like for like sales grew by 4 per cent for the full year, but were up 8 per cent in the second half. Currys continued to relocate to larger out-of-town sites, opening or resiting 14 new stores across the year, taking the total number of stores to 379, with 13 more new stores to open or resite during this financial year.
PC World sales grew by 6 per cent to £1,327m, despite significant price deflation in PC hardware. There was strong growth in sales of laptops, accessories and wireless networks. Twelve new PC World stores opened during the year, taking the total to 138, with similar numbers expected to open or resite in the current year.

Sales at mobile phone retailer The Link grew by 10 per cent to £407m, with like-for-like sales also 10 per cent up. A new concept store format was developed, giving greater prominence to contract connections and more effective display of handsets. The format will be rolled out across the 28 store group this year.

Sales in the International retail division were £1,760, up 47 per cent in total and 4 per cent on like-for-like. Dixons international businesses now accounts for 27 per cent of group sales.

Group chief executive John Clare, said: "The group made good progress during the year. Sales and profits were up and we recorded a strong performance in our four largest chains - Currys, PC World, Elkjop and UniEuro.

"Our investment businesses are progressing well and we agreed the roll-out of PC City in Spain. In the second half, we implemented the first steps of our improvement plan for the Dixons chain."

The group said performance for the first seven weeks of the current financial year has been in line with expectations, with LCD and plasma TVs selling well across Europe ahead of the Euro 2004 tournament

Dixons said it is cautious about growth prospects in the UK, given rising interest rates and the potential for a slowdown in the housing market. However, international outlook is generally more favourable, and all the Group's operations are expected to benefit from demand for new technology products, and Dixons "remains very confident about its abilities to perform well against its competitors".

Clare said: "It is too early to extrapolate this trend for the year as a whole, but I believe the group is well placed for a year of further progress."
Source; General media and corporate sources. June 04
Write; by LB/Yuumei


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