Play It Again, Jack
By George Anderson
We’ve heard that tune before. At least, Michigan consumers have.
Beginning tomorrow, Farmer Jack will bring back an advertising message that it mothballed five years ago, “It’s Always Savings Time at Farmer Jack,” with ads, circulars and radio spots.
The company also plans on making changes to its stores and pricing structure (permanent price cuts on 4,000 items) to bring customers back to its stores after watching its market share erode steadily in recent times. Farmer Jack will also reinstate its Bonus Saving card to provide incentives for frequent shoppers.
Just how effective will the new ad campaign and other changes be in convincing consumers that it makes sense to put Farmer Jack at the top of their shopping destination list for groceries?
David Livingston, principal at DJL Research and a member of the RetailWire BrainTrust, told The Detroit News he was dubious about the announced changes at Farmer Jack.
“It seems like they try to reinvent themselves every six months,” he said.
Thomas Lenkevick, vice president of operations for Farmer Jack, said things are different this time. “Our goal is to turn the company around,” he said. “We’re not closing stores. We’re not for sale.”
Mr. Lenkevick said that, in Michigan, the combination of high gasoline prices and the automotive industry’s problems has pushed price to the top of consumers’ list for reasons to shop at a store.
“Pricing is the main message,” he told The Detroit Free Press.
Phil Lempert, CEO of Consumer Insight, Inc., founder of supermarketguru.com and also a RetailWire BrainTrust member, isn’t sure if Farmer Jack will succeed but he believes he knows what the division of A&P and others operating in the grocery channel have been doing wrong.
“Traditional supermarkets have not had an identity,” he said.
Ultimately, said Mr. Lempert, Farmer Jack’s success will come down to whether the in-store experience matches the marketing message. “You’ve got to deliver on that promise that you set up through the advertising,” he said.
One pressure that Farmer Jack will not have to deal with is a union contract. Last year, the chain negotiated a deal with the United Food and Commercial Workers (UFCW) Local 876 that included a 10 percent wage cut.
The union said it supports the company’s efforts to get its business turned around and to “achieve profitability and to maintain union members’ jobs.”
Moderator’s Comment: Is Farmer Jack headed in the right direction with the changes it is making in pricing, advertising and other areas of its business?
– George Anderson – Moderator
A couple of factors make it very unlikely that Farmer Jack can succeed –
1) If the last potential buyer walked away due to the conditions and likelihood that a turnaround would be impossible, then it’s likely impossible.
2) Kroger’s investment in that sector of Michigan has been strong and remains strong.
3) Meijer remains a dominant force in the market area and shows no signs that it will relent.
4) Independents stand strong in competition against Farmer Jack as equally as the other competitors making it even more difficult to re-create a niche in an already intensely competitive market area.
5) Wal-Mart is successfully entering the Greater Detroit area as well. Enough said.
6) If that isn’t enough, Costco also has several very well located stores in the market taking even more of the food dollar.
Okay, that was more than a few factors. The Greater Detroit market was and remains a place that is not for the feeble. Farmer Jack unfortunately showed weakness and has likely lost. Another reinvention from those that have a history of failure in reinvention (A&P) is likely to have about as much substantial success as any in the past. I don’t put much stake in shifting shoppers. They already told the market they’d rather bail out. Once you do – you’d better bail. The consumers in the Detroit area have likely made their decision. It likely doesn’t involve a guy in overalls and a straw hat.
As the various articles indicate, it is the perfect time to introduce a low-price retail image, especially in an area where the major income producing industry is suffering a downturn. But we have all probably learned that when price is your attraction, the fickle consumer can quickly migrate to another store when the offer there is better. This creates a real quandary for a retailer who chooses price as their attractor. Once they start down that road they must be prepared to remain there. They must figure out ways to minimize their operating costs and encourage customers to make purchases in the less price sensitive categories so the operation remains profitable.
Farmer Jack is no longer self distributing. They must have the cooperation of C&S to ensure deliveries arrive in the most store efficient format. When the choice must be made between warehouse and transportation efficiencies and store operating costs, they need to lean toward reducing store operating costs. This will allow them to maintain the lower prices.
The Unions seem to have already been brought on board. This is a good thing because only by having a strong people presence in the store that gives the customer more experience than just price, will the increase in sales be anything more than ephemeral. Store personnel can also influence customer purchases by steering them to categories which are not price sensitive. The frequent shopper program will also be key to making this work as targeted discounts can influence changes in behavior.
As consumers continue to pinch pennies, private label is another opportunity for both consumer savings and retailer profits. Farmer Jack needs to emphasize the private label offerings that rank high with national brands to cement their relationship with the customer.
So the timing is right and opportunity exists for success, it only takes strong execution for Farmer Jack to succeed. I hope they are up to it.
What else to you do when you can’t sell your chain… or even give it away? I really don’t think Farmer Jack is in this for the long run. Improving sales is not an option since Farmer Jack is totally outclassed by Kroger and Meijer. Plus, Wal-Mart Supercenters keep closing in on Detroit. Low prices and A&P are mutually exclusive and cannot be combined. They tried this with Food Basics a couple of years ago only to see sales head south. Since Farmer Jack will probably not be able to improve on the sales side, perhaps they can make gains on the expense side along with improving their real estate values. I predict they will outsource the warehouse distribution like they did in New Orleans while giving the real estate a fresh coat of paint.
Farmer Jack hasn’t got much credibility with its intended audience. They know the company is troubled. They see the results of the instability. The company needs to be turned over to an empowered management team with an undisputed track record turning around troubled grocers. This is one of the toughest challenges in a very tough industry in a very troubled market. Without the Colin Powells and Allen Questroms of supermarkets they aren’t likely to achieve their objectives.
Is Farmer Jack headed in the right direction? What else can they do when all else is apparently failing? If Farmer Jack’s objective is survival, then getting wage concessions and reducing prices in the “price hungry” Detroit market are necessary albeit prosaic tactics. If they push their prices down low enough many shoppers will return. But they will be coming because of the “price” not any magic on the Brand, Farmer Jack, which has become too tired, lame and limp to win a competitive race otherwise in today’s marketplace.
If Farmer Jack wants to thrive and grow, it should re-invent itself completely with a new concept, new format, new stores, new name and shake the chains that are binding it.
Nostalgia is good and bringing back, “It’s Always Savings Time at Farmer Jack” is one way to make the consumer feel good.
Parent A&P has weeded out underperforming stores and has a wage advantage that Kroger doesn’t.
Farmer Jack’s price promotions are a good starting point. In their corner, they carry probably the most respected “house” brand in America, America’s Choice. Along with great deals on Strohs Ice Cream and locally bottled Faygo soft drinks, and with the cheapest milk prices in town, Farmer Jack can take this cash to the bank, reinvest in stores, perhaps bring gas pumps to their parking lots, and win the hearts and wallets of Southeast Michigan shoppers. I feel that this strategy will turn out to be a win-win situation both for A&P and for the Farmer Jack family of loyal customers.