Retail & Hospitality

St. Paul Coffee Shop: Pay $1K and Get Free Beer, Wine for Life


Groundswell-280

Groundswell Coffee owners Seth McCoy (left) and Tim Gilbert

Groundswell Coffee is looking to expand and offering a glass of free beer or wine each day for life to those who help pay for it.

Groundswell Coffee in St. Paul is turning to its customers to raise money for an expansion—and offering a unique incentive in return.

Owners Seth McCoy and Tim Gilbert are asking customers to buy $1,000 shares that will help nearly double the size of the 1,300-square-foot coffee shop. But instead of owning part of the business, investors will be entitled to a free glass of beer or wine each day for the rest of their lives, or until Groundswell is no longer in business, whichever comes first.

Groundswell is located at the corner of Thomas and Hamline avenues in St. Paul’s Midway neighborhood. The expansion is expected to cost between $125,000 and $150,000, and the owners hope to sell about 75 shares starting this week.

McCoy told Twin Cities Business on Wednesday that the plan is to expand into the adjacent vacant space that used to be a yarn shop; this will increase Groundswell’s seating capacity from 15 to about 55. The owners also want to expand their food and baked goods offerings and plan to start selling wine and local craft beer, including those made by Surly Brewing Company, Harriet Brewing, and Indeed Brewing Company. Additionally, the expanded location will contain space dedicated to selling arts and craft items from local artists.

McCoy said the coffee shop currently has a staff of four but plans to hire at least six more people after the expansion.

Groundswell has already taken over the lease of the former yarn shop and has hired a designer and contractor to renovate the new space. The owners hope to complete the expansion by March and start selling beer and wine by April, after Groundswell receives a liquor license.

McCoy and Gilbert got the idea to raise money from its customers from Northbound Smokehouse, a Minneapolis brewpub that also sold $1,000 shares in exchange for a free glass of beer each day for life. McCoy said that the fundraising effort will be a good way for the business to immerse itself in the community.

Groundswell’s coffee beans come from Minneapolis-based roaster Dogwood Coffee Company. It uses milk that comes from grass-fed cows at Autumnwood Farm in Forest Lake and honey provided by Bare Honey in St. Paul. Meanwhile, its chai is crafted by St. Paul-based Gray Duck Chai.

—Nataleeya Boss
(nboss@tcbmag.com)

Target Hires New E-Commerce, Mobile Head

Jason Goldberger, the company’s new senior vice president of target.com and mobile, has a history of working in online retail.

Target Corporation announced Tuesday that it has hired Jason Goldberger as senior vice president of target.com and mobile, effective February 11.

In his new position, Goldberger—who has a background in online retail—will oversee Target’s e-commerce operations, including sales through mobile channels.

Goldberger most recently served as executive vice president for New York-based online retailer Gilt Groupe, where he was responsible for its home, gourmet food, and kids businesses, as well as companywide business development. During his time at Gilt, he led the launch of a new website for the retailer’s home products business and grew that business by more than 40 percent, according to Target.

Prior to that, Goldberger was senior vice president of marketing and merchandising at Hayneedle, an Omaha, Nebraska-based online retailer that sells home decor and outdoor products. He has also worked at Seattle-based e-commerce giant Amazon.com, where he spent eight years.

“We are very excited that Jason has agreed to join the Target team,” Casey Carl, president of Target’s multichannel division, said in a statement. “Jason’s leadership, experience, and skills in merchandising, marketing, and online channels will help us on our journey towards providing guests a seamless and integrated Target experience.”

Goldberger joins Target at a time when the discount retailer is ramping up its e-commerce operations. The company last week unveiled a number of online-only brands, including one that was developed by Minneapolis-based furniture maker Blu Dot, in an effort to set itself apart from other online retailers.

The company also announced earlier this month that it will match prices with select online competitors year-round. The move extends its holiday season price-matching policy that ran from November 1 through December 16.

Target is Minnesota’s second-largest public company based on revenue, which totaled $68.5 billion in its fiscal year that ended in January 2012. The company plans to release financials for its new fiscal year in February.

—Nataleeya Boss
(nboss@tcbmag.com)

Buffalo Wild Wings to Become NCAA Corporate Partner

The partnership will give the restaurant chain marketing and promotional rights to all 89 of the NCAA championships.

Golden Valley-based Buffalo Wild Wings will soon become a corporate partner for the National Collegiate Athletic Association (NCAA) in the casual dining category, according to a recent SportsBusiness Daily report.

NCAA corporate partners have exclusive marketing and promotional rights in their category to all 89 of the NCAA championships, including the NCAA Division 1 men’s basketball tournament often referred to as March Madness, according to the NCAA website. These rights include the use of all NCAA trademarks and logos.

The NCAA currently has 14 corporate partners, including Coca-Cola, UPS, LG, Buick, and AT&T. The corporate partners sublicense NCAA trademarks and marketing rights from CBS Sports and Turner Sports.

The NCAA partnership will represent Buffalo Wild Wings’ latest effort to strengthen its ties with sporting events and enhance its reputation as being a sports bar and restaurant. The company announced last summer that it would be the title sponsor of an annual college football game held in Tempe, Arizona, now dubbed the “Buffalo Wild Wings Bowl.”

Also last summer, the company redesigned its logo, replacing its old “Grill and Bar” tagline with the words “Wings,” “Beer,” and “Sports.” At the same time, the company revealed plans to alter the look and feel of its future restaurants to feature a more sports-centric design and “create an atmosphere that feels more like being in a stadium.” Most restaurants opening in 2013 will feature the new design, the company said.

Buffalo Wild Wings has about 900 locations in the United States and Canada and is one of Minnesota’s 35-largest public companies based on revenue, which totaled $784.4 million in 2011.

—Nataleeya Boss
(nboss@tcbmag.com)

Supervalu Lays Off 85 IT Employees, 50 in MN

The cuts are part of the struggling grocer’s plans to restructure its technology department in an effort to reduce costs and increase efficiency.

Supervalu, Inc., is laying off 85 IT employees nationwide, including about 50 who work at its Eden Prairie headquarters, spokesman Jeff Swanson confirmed Wednesday.

The layoffs are part of the struggling grocer’s plans to restructure its technology department in order to cut costs. The company will also redefine the roles of approximately 300 IT employees to make the department more efficient, Swanson said.

In addition to the 50 laid-off Twin Cities employees, about 20 workers in Idaho and roughly 15 in Utah will lose their jobs. There are also a few open positions that will not be filled, Swanson said. Affected employees were notified during the past week, and they will be laid off within about a month.

In recent months, Supervalu has been closing stores, cutting jobs, selling off some businesses, and lowering its debts in an effort to turn itself around. In June, the company announced plans to cut between 2,200 and 2,500 jobs at its Albertsons supermarkets in California and Nevada. Last month, it said it plans to eliminate 39 marketing positions across the country, and in February, the company announced plans to cut about 800 positions from its corporate and regional offices, including roughly 200 jobs in Minnesota.

Just this week, the company’s board dismissed Craig Herkert—its chief executive for the past three years—and replaced him with Chairman Wayne Sales. Following the announcement on Monday, Swanson told Twin Cities Business that the board decided “this change would be important to the company’s efforts to improve our sales and earnings trajectory and generate long-term shareholder value.”

Meanwhile, Supervalu said last month that it has begun reviewing “strategic alternatives” and is considering a sale. That announcement was made in conjunction with the company’s dismal first-quarter earnings results, which prompted it to suspend its quarterly dividend.

The Eden Prairie-based grocer earned $41 million, or 19 cents per share, for the quarter that ended June 16—a year-over-year drop of about 45 percent and significantly shy of the 38 cents per share that analysts were expecting. Revenue, meanwhile, totaled $10.6 billion, down 4.7 percent from the same period a year ago and less than the $10.8 billion that analysts expected.

Supervalu is among Minnesota’s five largest public companies based on revenue. It has approximately 4,400 stores and employs roughly 130,000. The company reported a net loss of $1 billion on net sales of $36.1 billion in its most recently completed fiscal year.

—Nataleeya Boss
(nboss@tcbmag.com)

Surly Selects HGA Architects for $20M “Destination Brewery”

Surly sought applicants “with a strong local presence”—and it has chosen Minneapolis-based HGA Architects for its brewery project.

6a00e54ee37ce38833017742987a6a970d-800wiSurly Brewing Company on Tuesday announced that it has selected HGA Architects and Engineers to design its proposed $20 million “destination brewery”—representing the latest of several steps that the company has taken since first announcing its plans for the project more than a year ago.

Brooklyn Center-based Surly in March began seeking requests for qualifications from architecture firms, and it said at the time that it was seeking firms “with a strong local presence.”

“I have had a picture of what our ‘destination brewery’ will look like in my head for more than a year now, and we’re sure HGA can make that vision a reality,” Surly founder and President Omar Ansari said in a statement. “HGA’s unique designs are helping shape the Twin Cities, and we want our project to have a positive, lasting impression.”

Surly called attention to several of Minneapolis-based HGA’s local projects, including the General Mills headquarters in Golden Valley, The American Swedish Institute in Minneapolis, and the Lakewood Cemetery Garden Mausoleum in Minneapolis. HGA also renovated the Ford Center in Minneapolis’ Warehouse District, and its headquarters are now located in that building.

Following Surly’s February 2011 announcement that it would build a $20 million brewery—complete with a bar, restaurant, event center, beer garden, and roof terrace—the company helped spearhead a change in state liquor laws to allow Minnesota brewers to sell pints of beer from on-site “taprooms.”

While many other breweries—including Fulton Beer, Lift Bridge Brewery, and most recently, Summit Brewing—have opened or announced plans to open taprooms, Surly has yet to take advantage of the law.

But it has taken several steps toward building its new brewery. Surly in August hired Minneapolis-based real estate advisory firm Tegra Group—which was involved in several iconic local projects, including the Walker Art Center and Target Field—to help in its site-selection process.

Surly and Tegra in June narrowed the list of possible locations to four—two in Minneapolis, one in Brooklyn Center, and a fourth in an unnamed “inner-suburban” location. A Surly spokesman said Tuesday that the brewery is not yet releasing additional details about the site-selection process.

HGA has offices in Minneapolis; Rochester; Milwaukee, Wisconsin; Washington, D.C.; and Los Angeles, San Francisco, and Sacramento, California. It is Minnesota’s third-largest architectural firm based on architectural billings from offices within the state.

—Jake Anderson
(janderson@tcbmag.com)

Report: Best Buy Founder Schulze Taps Former Execs for Buyout

Former CEO Brad Anderson and former President and Chief Operating Officer Al Lenzmeier are reportedly among those Richard Schulze is recruiting for his executive team as he attempts a private takeover.

Best Buy Company, Inc., founder Richard Schulze is reportedly recruiting executives to lead the electronics retailer in the event that his private takeover attempt proves successful—and two former Best Buy executives are among them.

Citing unnamed sources, both Bloomberg and the Star Tribune reported on Schulze’s recruitment efforts. The Star Tribune reported that he has tapped former CEO Brad Anderson and former President and Chief Operating Officer Al Lenzmeier to serve on his executive team—and according to a Bloomberg report, Anderson has told other former Best Buy executives that he is interested in joining Schulze’s effort.

Meanwhile, Bloomberg indicated that Schulze has reached out to executives currently working at Best Buy as well.

“He’s talking to people he trusts,” J.D. Wilson, Best Buy’s senior vice president of enterprise capabilities, told Bloomberg. “There is a small group he’d like to have with him in righting the ship. He is serious as a heart attack.”

Wilson told the national news service that his position is being eliminated as part of Best Buy’s recent job cuts. Schulze approached him in June, and he agreed to work for the company if Schulze completes a buyout.

Schulze has reportedly been looking into a private takeover since he resigned from Best Buy’s board in June, about three weeks after he stepped down as chairman. His resignation came after a Best Buy investigation determined that Schulze failed to notify Best Buy’s audit committee after learning about allegations that former CEO Brian Dunn was having an inappropriate relationship with a female subordinate. When announcing his resignation, Schulze also said he was exploring options for his 20.1 percent ownership stake. (Entities that he controls own another 1.1 percent.)

Meanwhile, Dunn abruptly resigned in April, a month before Best Buy’s investigation determined that he violated company policy by engaging in “an extremely close personal relationship with a female employee that negatively impacted the work environment.”

Anthony Chukumba, an analyst at BB&T Capital Markets, told Bloomberg that Schulze would need to raise $1 billion to $2 billion from a private-equity firm and $7 billion to $8 billion in debt in order to stage a takeover. “Lenders are wary in this macroeconomic environment,” he said, adding that a takeover of Best Buy would cost at least $30 a share, for a total value of about $11 billion including net debt, to persuade long-time investors to sell.

—Christa Meland
(cmeland@tcbmag.com)

Supervalu CEO Craig Herkert Ousted, Replaced by Chairman

Following disappointing quarterly financial results and amid a review of “strategic alternatives,” including a possible sale, Supervalu has dismissed its CEO.

Struggling Supervalu, Inc., has dismissed Craig Herkert—its chief executive for the past three years—and replaced him with Chairman Wayne Sales.

Company spokesman Jeff Swanson told Twin Cities Business on Monday that Supervalu’s board made the decision to terminate Herkert’s employment and that his abrupt exit was not of his own choosing.

“After careful deliberation, the board decided that this change would be important to the company’s efforts to improve our sales and earnings trajectory and generate long-term shareholder value,” Swanson said.

Sales will serve as president and CEO, effective immediately, in addition to retaining his duties as chairman. Sales has been a Supervalu director since 2006 and has served as chairman of the board since 2010.

The board’s move to oust Herkert comes less than a week after it approved issuing non-qualified stock options and retention agreements to several Supervalu executives in order to encourage them to stay put. Herkert was awarded 346,875 shares with an exercise price of $2.28 per share, and the shares were set to vest in three equal installments over the next three years; however, he was not offered a retention agreement.

Supervalu announced earlier this month that it has begun reviewing “strategic alternatives” and is considering a sale. That announcement was made in conjunction with the company’s dismal first-quarter earnings results, which prompted it to suspend its quarterly dividend.

The Eden Prairie-based grocer earned $41 million, or 19 cents per share, for the quarter that ended June 16—a year-over-year drop of about 45 percent and significantly shy of the 38 cents per share that analysts were expecting. Revenue, meanwhile, totaled $10.6 billion, down 4.7 percent from the same period a year ago and less than the $10.8 billion that analysts expected.

“As we execute our business plan, the board will continue its review of strategic alternatives, and I am still leading that process,” Sales said Monday in a prepared statement.

Sales has held executive positions at retail companies for more than 35 years and most recently served as vice chairman of Canadian Tire Corporation. Prior to joining Canadian Tire in 1991, he served in several senior leadership positions with Kmart Corporation.

Sales said that in his new capacity, he will focus on “identifying factors that will drive meaningful improvements in our strategy execution and overall performance.” He added that the company will “take significant cost out of the business, and move with urgency in our retail food business to lower prices and create points of sustainable differentiation for our customers.”

Sales also vowed to work with Save-A-Lot licensees to try to grow the discount grocery chain, which has performed better than some of the company’s other chains, which include Cub Foods, Albertsons, Jewel-Osco, and Shaw’s.

The Supervalu board elected Philip Francis as its lead director, a position that the board is required to fill in cases when the chairman is not an independent director.

Supervalu is among Minnesota’s five largest public companies based on revenue. It has approximately 4,400 stores and employs roughly 130,000. The company reported a net loss of $1 billion on net sales of $36.1 billion in its most recently completed fiscal year.

Shares of the company's stock were trading up 9.5 percent at $2.18 per share mid-day on Monday.

—Nataleeya Boss
(nboss@tcbmag.com)

Christopher & Banks Says Turnaround Plan Is Working

The retailer released preliminary second-quarter financial results showing year-over-year improvement, a move that’s presumably in response to recent criticism from an investor and would-be buyer.

Less than two weeks after being blasted by a minority investor and would-be buyer, Christopher & Banks Corporation released preliminary second-quarter financial results in an attempt to demonstrate that its turnaround strategy is working.

The Plymouth-based women’s clothing retailer said late Wednesday that same-store sales—sales at stores open for at least 13 months and a key measure of a retailer’s health—will increase between 5 percent and 5.5 percent for the three-month period that ends Saturday. Sales for the quarter, meanwhile, are expected to total between $102 million and $103 million, down slightly from $105.6 million for the second quarter of last year.

The company also said that it expects cash and cash equivalents to be in the range of $39 million to $40 million at the end of the second quarter—up from $33.7 million at the end of the first quarter.

Full financial results will be released August 29.

“While we remain in the early stages of our turnaround plan, our initiatives are gaining traction,” President and CEO Joel Waller said in a prepared statement. “Our new merchandising and marketing strategies are beginning to show progress. Meanwhile, strategic initiatives underway to reinvigorate sales through in-store merchandise presentation and optimization of our selling staff are also yielding improved performance.”

Christopher & Banks has closed at least 100 stores within the past year and cut hundreds of jobs. Its Wednesday announcement appears to be in response to criticism it has received from Boston-based investment management firm Aria Partners, which owns a 4 percent stake in the company.

On July 3, Aria extended an unsolicited, $64 million buyout offer, offering to pay $1.75 per share—which represented a 51 percent premium over the previous day’s closing price.

But six days later, Christopher & Banks’ board rejected the offer, saying that it wasn’t in the best interest of stockholders and that the best course of action was to stick with the company’s own turnaround strategy. The company also adopted a shareholder rights plan, better known as a “poison pill”—a measure that corporations take to discourage hostile takeovers. The plan will essentially dilute the stock of an investor that acquires 15 percent or more of the company’s shares.

Aria Partner Edward Latessa then sent a sharply worded letter of ridicule to Christopher & Banks’ non-executive Chairman Paul Snyder. In it, he said the board’s credibility in terms of turning the company around was “worthless based on its record thus far” and questioned the compensation of Snyder and another board member.

Christopher & Banks’ new strategy involves reducing the number of styles offered this fall and “rebalancing” its assortment; lowering prices and reducing the variety of prices; improving inventory flow by reducing the number of major floor sets by half; and developing a promotional strategy that features more targeted, unique promotions and fewer storewide events.

The company operates 658 stores in 44 states. For the fiscal year that ended January 28, it reported a net loss of $71.8 million, which included $9.8 million in charges related to restructuring efforts.

For the first quarter that ended April 28, Christopher & Banks reported a net loss of $13.4 million. Same-store sales fell 15 percent during the period.

—Christa Meland
(cmeland@tcbmag.com)

Mpls. Concert Venue The Brick Renamed, Renovated

The venue, which is now called Mill City Nights, said that it has renovated the club to create a “smaller, more intimate venue that is certain to deliver on customer expectations.”

About four months after music venue The Brick debuted in downtown Minneapolis, it has a new layout and a new name, and it’s set to take a second run at the local market.

MillCityNightsLogoRFWThe Brick, which is owned by Los Angeles–based AEG Live, opened in March but received backlash from patrons at its inaugural concert and subsequently reimbursed concertgoers who complained of poor sightlines, congestion, and other issues.

The revamped venue, called Mill City Nights, said Monday that it has completed “extensive” renovations that will result in a “smaller, more intimate venue that is certain to deliver on customer expectations.”

The stage has been raised by a foot to improve sightlines from the main level, speakers were added under a balcony overhang to enhance sound quality, risers were added to the balcony to improve views of the stage, and “a new audio package” was installed in the club’s lower-level bar, which has been dubbed The Nether Bar.

The venue also said that additional doors were added at the front entrance “to ensure faster guest entry,” and a new stairway was added to alleviate congestion.

More than 20 new high-definition monitors were installed as well “to ensure an incredible close-up view of the performance from any location in the venue,” according to Mill City Nights. The venue also added local craft beer offerings from Summit, Fulton, and Finnegan’s.

“With three months of ongoing improvements behind us now and many successful shows under our belts, we felt it was the appropriate time to give ourselves a fresh launch in the marketplace,” General Manager Jeff Kehr said in a statement. “A new look and feel should bring a new identity, and Mill City Nights is that new identity.”

Mill City Nights is located in the former home of Christian concert venue Club 3 Degrees, just blocks from the Target Center, which is owned by the city and managed by AEG.

Prior to the club’s March debut as The Brick, AEG Live Senior Vice President Joe Litvag told Twin Cities Business that the goal was to fill a gap in the local marketplace between independent nightclub First Avenue, which accommodates about 1,700 concertgoers, and the much larger Target Center.

Litvag said at the time that The Brick would accomodate 2,000. The renovated Mill City Nights, however, has a capacity of about 1,200.

Litvag also said earlier this year that The Brick would strive to attract corporate and private events, and Mill City Nights confirmed Monday that it will continue to focus on that portion of its business. The venue said that its full-service kitchen, state-of-the-art audio and video equipment, and event planners will make it “unlike anything else in downtown Minneapolis for all types of parties, product launches, and conferences.”

Upcoming concerts at Mill City Nights include acts by Chiddy Bang, Citizen Cope, and Theory of a Deadman.

—Jake Anderson
(janderson@tcbmag.com)

Target Objects to $7.25B Settlement with Credit Card Cos.

Target said that a recently announced interchange fee settlement “would perpetuate a broken system, restrict retailers from any future legal action, and offer no long-term relief for retailers or consumers.”

About a week after a local law firm said it reached a $7.25 billion settlement in a class-action lawsuit against Visa, MasterCard, and some of the nation’s largest banks, Target Corporation has joined the list of retailers who are objecting to the deal.

The proposed deal would settle a seven-year case in which merchants accused Visa and MasterCard of engaging in anti-competitive practices and of fixing prices when setting interchange fees—the fees retailers pay to banks to process the credit card transactions made by their customers.

Minneapolis-based Robins, Kaplan, Miller & Ciresi L.L.P., which represents a class of about 7 million retailers in the case, announced earlier this month that it had reached a deal with the banks and credit card companies, and the $7.25 billion settlement is believed to be the largest-ever settlement in a private, class-action antitrust case.

But not all retailers view the settlement as a clear victory. The National Association of Convenience Stores (NACS), one of the plaintiffs, was reportedly the first to reject the settlement, saying that it doesn’t go far enough.

Minneapolis-based Target joined the opposition, issuing the following statement on Friday: “Target believes the proposed interchange fee settlement is bad for both retailers and consumers. The proposed settlement would perpetuate a broken system, restrict retailers from any future legal action, and offer no long-term relief for retailers or consumers. In addition, Target has no interest in surcharging guests who use credit and debit cards in order to allow Visa and MasterCard to continue charging unfair fees. We will continue to explore our options while working toward a solution that represents true reform.”

And Target isn’t alone in its opposition: More than two dozen merchants have joined the NACS in opposition to the proposal, according to a report by the Star Tribune.

The proposed settlement comprises $6.05 billion in damages, as well as about $1.2 billion in relief that retailers will experience as the credit card companies are required to temporarily reduce their interchange fees.

The settlement also requires the defendants to modify their practices. For example, Visa and MasterCard must negotiate with groups of retailers to establish interchange fees—a move that enables businesses to pressure them to reduce fees, according to Robins, Kaplan, Miller & Ciresi.

The 113-page settlement can be downloaded here.

—Jake Anderson
(janderson@tcbmag.com)