This year’s All Things Organic conference and expo showcased necessity as the mother of invention.  Slumping sales and a weak economy have forced the industry to innovate just to hold onto customers.

In a 2009 briefing on the organic packaged food market, Euromonitor International said the largest threat to the future growth of organic products is price sensitivity among U.S. consumers in the current economic climate.

“In previous years, many consumers were willing to trade up to premium products,” the briefing said. “However, more consumers are looking to trade down, as they can no longer afford to even try some premium products, much less purchase them on a regular basis.”

The response has been for some companies to expand their product offerings, such as Clorox’s Green Works laundry detergent, hitting store shelves this summer, and Rain Organic Vodka’s new lavender flavor.

Others are expanding their reach as they try to drive sales. Safeway’s O Organics line, for example, is now in other grocery chains, such as Albertsons.

Still, people were all smiles, saying that while their sales were down, their companies had still experienced growth.  In their eyes, weathering the economic storm means that they’re just that much more prepared for the recovery.

Watch the audio slide show below:

(Video by Reuters/Ian Sherr)

Sweethearting (v.) the act of a store employee giving a friend or family member free merchandise by pretending to scan items at the register or by ignoring items in shopping carts.

It is one of the oldest tricks in the book and a big problem for retailers. So big, in fact, that some estimates suggest that “sweethearting” and other types of employee theft account for almost half of all annual retail theft, or $19.5 billion out of $41.6 billion overall.

Massachusetts-based StopLift Inc. says the answer is just waiting to be liberated from all of the security camera tape that retailers typically don’t monitor until something goes really, really wrong.

We’ve all seen the video of outrageous things that can happen in grocery stores, convenience shops, and retail outlets, but the reality is that watching the security feeds from cameras mounted above every register is time-consuming — so most of that video information goes unused.

StopLift’s computer software analyzes camera feeds by reading certain body motions and other signs that tip off sweethearting. From there, it’s up to managers to decide whether training or  termination is the right response.

You can see actual “sweethearting” caught by the software on StopLift’s homepage, here.

StopLift said its clients include Big Y and Safeway grocery stores.

(Picture and video: StopLift.com)

Check Out one analyst’s list of retail names at risk.

Around this time last year, stimulus checks amounting to more than $100 billion started landing in cash-strapped consumers’ bank accounts, giving them a chance to spend and boosting sales for many retailers.

But this year’s stimulus entails lower withholding taxes and not ”hard checks,” which means “the effects of this year’s stimulus on retailers will be a far cry from 2008,” Pali Capital analyst Stacey Widlitz said in a research note to clients.

As retailers already face thrifty consumers, tough comparisons versus a year ago could put some retailers at risk this time around, adding “insult to injury,” she said.

For example, electronics retailer RadioShack offered consumers a 10 percent discount on purchases over $50 when a stimulus check was used between May 4 and July 12 last year.  That along with sales of TV converter boxes helped sales, Widlitz said.  

“Beware of tough comps ahead, lack of stimulus promotions and the end of converter boxes in June,” she said in the note.

Widlitz also mentioned discounting giant Wal-Mart Stores, saying the retailer benefited last year from stimulus checks, and ”on top of increasing expectations, investors are not fully factoring in the headwind for May-June.”

Other companies mentioned include Best Buy, closeout retailer Big Lots, and grocery store chains such as Supervalu, Safeway and Kroger.

Also in the basket:

Energizer to buy SC Johnson shaving cream business

Ackman to tout Target slate at town hall meeting

Benetton Q1 net profit, revenue fall

Nordstrom withdraws from CityNorth project (WWD, subscription required)

(Reuters photo)

Check out consumer-related companies Procter & Gamble, Colgate-Palmolive, OfficeMax, Domino’s Pizza and Sally Beauty Holdings all posting better-than-expected quarterly profits despite weak consumer demand.

P&G and Colgate surprised Wall Street on Thursday, as their efforts to hike prices and cut costs helped offset weaker demand in the recession.  Both companies, which are rolling out new products to entice thrifty consumers back to stores, forecast sales growth for the year, excluding the impact of currency fluctuations, acquisitions and divestitures.

Domino’s Pizza reported a better-than-expected profit, boosted by the performance of its domestic franchisees.
                                                                                                                                                             “Our domestic franchisees outperformed our Team USA stores in same store sales for the first time in many quarters. This is a … a strong indication that our domestic franchise system is starting to regain some positive sales momentum,” Domino’s Chief Executive David Brandon said.
                                                                                                                                                          Domino’s was not the only company to see bright spots.

Furniture maker and retailer Ethan Allen said the economic environment remains difficult, but that the “retail environment seems to show some indications of improvement.”

And beauty supply company Sally Beauty Holdings reported a better-than-expected quarterly profit on higher same-store sales and its “recession-resistant nature.”

Not everyone beat the Street.  Supermarket operator Safeway posted a lower quarterly profit that was below analysts’ expectations, sending its shares down.  Still, it wasn’t all bad news for long-term investors.  Safeway raised its dividend by 21 percent.

Also in the basket:

US citizens take extra precautions over swine flu

Kellogg 1st-qtr profit rises

Revlon posts Q1 profit as expenses fall

(Reuters photo)

Costs for ingredients like rice, wheat and oil are falling, so why are prices for breakfast cereals like Rice Krispies and Special K still rising?

If you want an answer to this question, you aren’t the only one.

Food companies like Kellogg Co, which makes the products mentioned above, say the higher prices are justified because while commodity price inflation has eased amid a global economic downturn, commodity prices remain well above historical averages.

But CEOs of grocery chains like Safeway and Kroger say those higher prices are increasingly out of whack with their own lower-priced private label products.

“We have seen some price declines,” Kroger Chief Executive David Dillon said on a conference call, but he said prices for national brands were not in step with a broader fall in commodity costs.

Dillon said sales of national brands were ho-hum, while sales of Kroger’s store brands are rising enough to hit historic highs.

“That’s going to continue as long as that kind of price differential exists,” said Dillon, who expects national brand sellers to discount via promotions before they cut prices.

Dillon said there is no tug-of-war between grocers and food makers over pricing, but then again, he thinks his company will benefit either way. If national brands keep prices high, consumers buy more store-brand products, which produce higher profits. If national brands lower their prices, the grocer’s overall sales could rise because it would be selling more expensive products.

“We are quite happy in either scenario,” Dillon said.

While store brands result in lower total sales, grocers love them because they generate more profit. At the same time, they are favored by shoppers because they help them lower food costs during a severe recession.

Indeed, private label has become so popular that Safeway is rolling out its own line of seafood and prepared entrees called Waterfront Bistro.

(Picture: Reuters)

Check out Sears results

Sears Holdings beat Wall Street expectations when it reported earnings this morning, helped by cost cuts, and the market sang its praises by sending shares up 8 percent. The streamlining isn’t over either, as the company controlled by Eddie Lampert announced plans to shutter another 24 stores.

We’re wondering about the exuberance of the market’s response, since the results still show marked same-store sales declines for the company’s Kmart and Sears, Roebuck stores and questions remain about whether the company can pull off a real turnaround in the future.

But maybe we should ask the short sellers. As of mid-February, 14.8 million shares of Sears Holdings –about 12 percent of its shares outstanding –were held short. That’s down about 18 percent in the past month, suggesting a decrease in bearish sentiment toward the stock.
 
Also in the basket:

Limited Brands profit falls, sees first-quarter loss

Finlay to exit department stores, cut jobs

Safeway price cut efforts hurt profits

(Photo/Reuters)

Check out Sharper Image Corp — the struggling maker of $240 shavers and $170 toothbrushes — looking to follow in the footsteps of Wendy’s International Inc.

Wendy’s, the No. 3 U.S. hamburger chain behind McDonald’s Corp and Burger King Holdings Inc, sold itself on Thursday to the investment arm of billionaire investor Nelson Peltz in a deal valued at about $2.4 billion.

Sharper Image, whose expensive gadgets have fallen out of favor in a weak economic environment, put itself up for sale in a bid to survive just two months after filing for Chapter 11 bankruptcy protection.

It may be on the block for a while. After Wendy’s put itself on the block in June,  money to finance such deals has dried up as the U.S. housing meltdown and global credit crisis have pinched big banks and other sources of cash.

Also in the basket:

Whirlpool sets new price increases due to higher costs

Coke Enterprises sees ‘08 sales volumes rising

Safeway profit boosted by fuel, Easter

Equity analysts at Citigroup Global Markets decided to conduct a survey to figure out how consumers are making their grocery shopping choices in the current environment. 

Not very surprisingly, it found that consumers are becoming more value conscious and will likely favor retailers with sharp pricing.

So who is the sharpest of them all?

“An overwhelming 72 percent of customers surveyed said that Wal-Mart had the lowest prices. Among the top three traditional supermarkets, Kroger was perceived by more consumers to be the lowest priced,” the Citi note stated. 

Citi conducted its online survey in two markets, Texas and Washington, because it said those are two states are where Kroger, Safeway, Supervalu, Target and Wal-Mart – the  five grocery retailers in its coverage universe – compete. 

The survey found that Kroger had the next best pricing message behind Wal-Mart, with 6.9 percent of customers saying that grocery chain had the lowest prices.

Meanwhile, 26.5 percent of consumers found Safeway to be the most expensive, while 24.5 percent of consumers found Supervalu to have the highest prices, it said.

To offset the tough economy, Citi said consumers are reining in their discretionary food purchases, and it has started to see signs of consumers trading down in terms of where they shop (like moving from Target to Wal-Mart), in terms of what items they buy (switching from steak to chicken), and in terms of choosing between branded and private label (buying more private label).

“We believe that consumers will continue to adjust the way they shop if food inflation remains high,” the report said.

(Photo: Reuters)