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CAPS Video Pitch: RDK - Maverick at Work

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September 11, 2007 – Comments (6)

Hey Fools,

Check out our latest player pitch. I'll let the video and Eileen "Maverick at Work" Sullivan do the talking. Thanks to Paul "Selzhanik" Hooper for adding the graphics. Fool On!

6 Comments – Post Your Own

#1) On September 11, 2007 at 6:27 PM, darkflame (95.32) wrote:

Hey there,

Everything sounds great, but I have a comment :)) Well, here in Europe better products and organic products got popular much before the USA, what happened here was that in the beginning those shops had a lot of success, but nowadays it doesnt pay off anymore to go there because every normal grocery store already sells what the customers were looking for somewhere else.

I used to make all my shopping in a organic grocery and it took me a bit longer to get there, nowadays I go there just to get something I really cant find somewhere else because most of the things can be found everywhere. Well, I'm a vegan and so I'm sort of an expert in looking for better quality products, if I don't bother anymore to go that often to the organic grocery, who will ?

Great video, but think about my warning :)) Most of everything that one shop sells, if it doesnt have a strong moat, can also be sold by everyone else.

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#2) On September 12, 2007 at 9:01 PM, LeanieBean (57.56) wrote:

Hiya darkflame --

Thanks for popping in and dropping a line! I hear you loud and clear and definitely soak in your sentiment -- I'm with you!

I think partly why I like Harris Teeter for the short to medium term (and am a bit more hesitant to say I'm whole heart "long" on it) is exactly for the reason you mention...but indeed, you said it with more Foolish hutspa :) !-- their "moat" is not that big :)! (I forgot about that great word "moat"-- soo true.)

I just like where Harris Teeter (Ruddick) is right now in camparison to the other guys. 2 -3 years out from now...I'm not so confident. I think the ones (Safeway/Giant being other US examples) who haven't concentrated as hard on offering organics & stepping up service are finding they have to raise the bar a bit to compete...whereas our Whole Foods Market chain (WFMI) is perhaps at the very top...all may come together to offer the same -- a newer middle ground within a few years...and I've just been thinking that Harris Teeter (of RDK) is perhaps already there -- so there might (?) just be something to gain from that....we shall see I guess...

Cheers and thanks,

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#3) On September 12, 2007 at 9:59 PM, TDRH (99.85) wrote:

Maverick, Your pitch was very professional, and the detail you provided was great. Especially liked the maps. That being said I have never been a big fan of grocery chains. They typically operate on low margins, and when the are expanding as you describe they are usually taking on a large amount of debt. I have not looked into this particular chain, but that is one of the things I would be looking at. Darkflame brings up a good point about the growing "organic" spread through grocery chains. I have seen it in St. Louis as well, though Whole Foods, Trader Joe's and Wild Oats have locations, quality and features that none of the regional chains have been able to duplicate. A "tweener" store, might do well here. That being said, how do you see the company fairing in an economic downturn? I mention this as it appears that the real estate market is beginning a slow and possibly long correction that is undermining consumer confidence. Maybe I misread, but I believe I read somewhere that Washing your area was one that had had a huge run up in real estate value relaive to real incomes. Energy prices continue to rise with the barrell of oil at or near $80 a barrell. When consumer confidence drops they "go to the mattresses", they try to conserve where possible and reduce discretionary spending. In my mind this does not bode well for high end grocery chains. Anyway, I definitely will look at the company, and appreciate you presenting it.
Best Regards,
James

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#4) On September 14, 2007 at 12:05 AM, LeanieBean (57.56) wrote:

Hi James --

Thanks for your note and comments :)

Understood on the margins piece, at the end of the day it's commodites with food and it's not going to be super high returns, so you do indeed make a good point on grocery chains in general.

I haven't yet been to a "tweener"...what do you think about them? Anything in particular over or under others out there by comparison?

Harris Teeter (Ruddick) may not be a bad place to go in a down turn...I think Whole Foods for instance would feel the hurt first...e.g. if you are a family making multiple trips, you might knock it down to going to one grocer like Harris Teeter instead, and you may also save more on cost of items, but not have to sacrifice much in quality.

Also, there are those that think folks may dine out less and grocery shop more/cook for themselves in a downturn...so perhaps it could be more of a "safe harbor" for investment dollars...just more food for thought :)...plus we all still need to eat, right?

This little article in Forbes notes a similar line of thinking...

It's true too (you did not misread at all!) Washington DC has had some ridiculous run up in real estate prices and some are taking a hit in the area. The thing is though as much as the prices went to semi-unrealistic levels relative to income in some parts (I looked at a studio condo 724 sq ft for $424,000 ---but they were "willing to negotiate" -- ha!! ), the population is still growing here (think gov't, defense contracting, high tech, etc.) and there is demand for housing...though now it'll be more "affordable housing". So it's sort of an interesting catch...one that I guess I don't think will hurt the demand for groceries at the relative HT stores...unless of course folks stop coming to the area...that would be a hit.

I like the "go to the mattresses" reference...The Godfather, right? I know it too from You've got Mail...when Meg Ryan's character talks about losing her "Shop Around the Corner" :)

As much as I wince a bit to be bearish on the beloved Whole Foods in Fooldom, I think they'll feel the hurt before Harris Teeter, since they have a bit of a more affluent market appeal. I think the Harris Teeter market, but nature of their goods, etc. is broader and perhaps not a bad place to be for a bit...

But, who knows...I could be wrong...we shall see what the future holds, eh?

Cheers & all the best to you & your investments,

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#5) On September 20, 2007 at 10:13 PM, TDRH (99.85) wrote:

Maverick, When I wrote about a Tweener I was referring to something in between Whole Foods and the local chains, maybe offering a discount on premium organic foods. This is what I interpreted your pick to be. Going to the mattresses was made popular by Sleepless. A lot of males though would give credit to the movie the Godfather which does not appear to everyone. Personally I prefer Sleepless, but in my former line of work The Godfather and Scarface break life lessons down very clearly and simply. Great pitch. I have not picked this stock, but I am watching it with interest. There is a very strong recent current in investments pointing towards inflation hedges. I do not believe the productivity levels/growth in the US economy can keep up with an inflationary surge. I am assuming that the people moving into these areas are much smarter than me. I am not following them, but I am avoiding exposure in discetionary areas. Will track, all the best for your investmens.
James

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#6) On September 28, 2007 at 11:47 AM, n1ckels (94.85) wrote:

I don't buy that this will be a better growth story than WFMI. As I've said before children are now growing up shopping at Whole Foods Market, creating a loyalty that will last a lifetime. Everyone always complains about the prices at Whole Foods, but I think this is a minor concern. First, you pay a premium because usually the products are better quality. Secondly, you watch as WFMI's prices continue to drop. I can guarantee this, especially as they continue to replace many in store products with their own branded 365 ones. I don't think anyone can compete...and have little doubt this "niche" will soon become mainstream.
nick

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