FINANCE

Mistrial Denied to Former CVS Execs

BY CSA STAFF

Woonsocket, R.I. A judge has denied a mistrial for two former CVS executives, the company said on Tuesday. The judge, presiding in the federal corruption trial of Carlos Ortiz and John R. Kramer—former VPs who are accused of paying former state senator John Celona to advance CVS’s legislative agenda—formally denied the mistrial but will allow defense lawyers to question the government’s star witness again about what they believe were his lies under oath.

Lawyers for Ortiz and Kramer have argued that Celona offered false testimony last week that contradicted previous statements he made before a grand jury investigating the case and at an earlier corruption trial.

They said prosecutors did not confront Celona about his inconsistent statements and did not alert them that Celona would change his story about critical elements of the case.

U.S. Attorney Robert Clark Corrente said that while Celona’s testimony before grand juries and at trial has routinely changed, making it difficult for prosecutors to discern the truth, Celona’s inconsistent statements didn’t constitute perjury.

Celona, who pleaded guilty to federal corruption charges and is serving a two-and-a-half year prison sentence, testified for four days last week as the government’s star witness against Kramer and Ortiz.

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Supermarket supremacy continues to slip in food retailing

BY CSA STAFF

LAS VEGAS —Long-term and recent trends are shaking up food retailing to the extent that the market could be going through its most significant realignment since the supermarket’s invention more than half a century ago. The FMI Show, held May 4 to 7 at the Mandalay Bay Convention Center in Las Vegas demonstrated that the edibles business has come under even more pressure over the past year because of the economy, a factor that could accelerate the already frantic pace of change.

Trouble in the housing, credit and fuel sectors was exacerbated by increasing food-at-home inflation that rose 4.2% in 2008, a year that ended for purposes of the Food Marketing Institute’s U.S. Grocery Shopper Trends study, in January 2008. Even worse, prices of key commodities such as milk, bread, eggs and meat suffered even more pronounced increases. The result has been a consumer focus on value and finding the right balance of price and satisfaction.

While that may be a challenge to food retailers, it presents an opportunity as well, because even a store focusing on gourmet products can benefit if it can pace trends in cuisine and maintain a quality level that makes it an alternative to dining out. In fact, even though economic and fuel woes have been growing for months, grocery spending went up, reaching an average of $97.80 this year, versus $93.20 last year.

Consumers have embraced the range of choice food retailing offers them today as they’ve sought value. Among Trends survey respondents, 86% said they had shopped at least one supermarket for food in the prior 30 days. However, at one time, that proportion was close to 100% and was 93% as late as 2005. Full-service supermarkets continue to be the place 60% of consumers make their primary food purchases, but that’s also down from 67% in 2005. Supercenters are benefiting, with 45% of respondents saying they had recently shopped one, up from 35% in 2005. As a primary purchasing destination, supercenters and warehouse clubs are tied at 5%, suggesting they have established themselves with a significant proportion of consumers and also that they continue to have abundant opportunity.

As for why consumers pick a store, value has become more important, with 37% saying it’s the overriding factor, versus 31% in 2007. Convenience remained as important, with 13% citing it as most important factor, as did sales at 9%, fruit and vegetable quality at 7%, friendly employees at 3% and fast checkout at 1%. Store cleanliness was of primary importance to fewer consumers, 6% versus 10% last year, as was meat quality, 4% versus 6%. The importance of organic and natural products also slipped, mattering most to 2% of consumers, compared with 4% a year ago.

While macroeconomic trends are certainly influencing consumer preferences, the reason for the slip in organic product preference may be more complex. Laurie Demeritt, president of market research firm The Hartman Group, told the FMI Show “Sustainability in Action” seminar that organics and sustainability had, for the mainstream consumer, become part of one overriding issue along with general health concerns that can best be defined as wellness. “The mainstream consumer has a value system that is starting to change,” she said, something that presents a challenge because some parties are misreading that change.

The food industry, activists and regulators often view organics, sustainability and health as separate issues, but most consumers don’t. Even with a hot-button issue like sustainability, a disconnect exists. Hartman Group research indicated only about 54% of consumers say they have any familiarity with the word and only 5% can name, unaided, companies that are leading sustainability efforts. The food industry, environmentalists and regulators might more closely associate terms such as authenticity and transparency with sustainability, but mainstream consumers associate words such as health, support of local institutions and simplicity with the concept.

Wellness was a defining trend at the latest FMI Show. Kraft unveiled probiotic granola bars under its LiveActive label, while Nestle distributed a smaller version of its Haagen-Dazs premium ice cream pops, sized to address portion control priorities at under 200 calories per serving.

Flavor still remains critical in all studies of consumer food and beverage preferences. Anheuser-Busch provided evidence of flavor’s importance by featuring Bud Light Lime at the show. Coca-Cola served up a new version of its Simply Orange juices that featured a splash of either pineapple as a change of pace.

As traditional discount store retailers have gotten into edibles, licensing has become more prevalent in food and drink, a trend that continued as Garden Fresh introduced Margaritaville, a line of salsas, hummus, dips, guacamole and chips that already is rolling out in Wal-Mart and hits Target next month, a company spokesman stated.

Making life easier for mom also has been a trend in food retailing and vendor Betty Lou’s has kept the tendency going with new Organic Harmony bars in Happy Apple and Cranberry Crave varieties. They provide 11 grams and 16 grams of whole grains, respectively, and use brown rice as a sweetener for those moms who are particularly wellness conscious.

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HIRI: Home market will rebound in 2009

BY CSA STAFF

NEW YORK —A leading research firm says home improvement retailers should expect sales to jump 3% in 2009 as the housing industry finally begins to recover. But until then, they’re going to have to rough it for several more months.

The Home Improvement Research Institute delivered the hopeful news at a “Future Trends in Home Improvement” seminar at the National Hardware Show in Las Vegas. HIRI managing director Fred Miller said he expects the housing market to bottom out this fall and start recovering before the end of the year. But even with a late rebound, total sales are expected to drop 1.5% this year to $302 billion, following a 2% decline to $307 billion in 2007.

The 2007 decline in sales was the first recorded by HIRI since 1991 and a down year in 2008 will be another first for a firm that’s been tracking the industry since 1981. “It will mark the first time we’ve seen sales decline in back-to-back years,” said Miller.

He acknowledged that it’s difficult to predict when a recovery will begin in earnest since the industry is dependent mainly on the movement of a volatile housing market, and current trends are keeping home improvement sales down. “It’s no secret that housing turnover increases the size of the industry,” said Miller. “And with existing housing sales down, the industry is hurting.

He said the 2009 rebound would be followed by more “normalized growth trends” in 2010 and 2011, with sales climbing 5% to 6%. And he noted that future sales trends are going to be driven by aging baby boomers and Hispanics, who will make up 15% of the U.S. population by 2010.

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