California Grocer Issue 6, 2017

California the road trip to everywhere Good PAGE 52

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2 0 1 7, I S S U E 6

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CONTENTS | ISSUE 6

FEATURES

46

14

ust for it's not j

Breakfas t anymore

Harnessing Innovation to Fuel Business Results In our turbulent business climate, we all seek new pathways to growth and success.

Yet winning can be elusive in these times of dizzying speed and ruthless competition.

The Road Trip to Everywhere

Good

52

20

COLUMNS President’s Message The Best is Yet to Come.. . . . . . . . . . . . . . . . 7

Striking the Perfect Chord This year’s CGA Strategic Conference struck just the right chord with grocery executives attending this annual event in Palm Springs. Discover why.

G N I T P RU

DIS

38

Disrupting the Wild West

ILD THE W

WEST wis

Le

By Len

The greatest challenge facing California’s grocery marketplace may not be the state’s economy, political atmosphere or even its frosty business climate.

32 58 74

Family (Grocer) Values: Bob Parriott, CGA Chair Meet CGA’s newly elected Chair Bob Parriott, Twain Harte Market, and learn how his concern for his customers and employees will help him in leading the Association in the coming year.

The “Why?” Behind the Dine Consumers spending in the foodservice channel is growing.

The question is why?

Click-and-Collect or Home Delivery? That’s the Question

32 | C A L I FO R N I A G R O C ER

Food retailers using online commerce face a new dilemma, what system works best?

Chairman’s Message An Unforgettable Opportunity. . . . . . . . . . . 9 Viewpoint History Lessons .. . . . . . . . . . . . . . . . . . . . . 10

Government Relations Finding Common Ground. . . . . . . . . . . . . 12 THE GREATEST CHALLENGE FACI Capitol Insider GROCERY MARKETPLACE MAY N 2017 – Anything But Normal .. . . .POLITICAL . . . . . . 26ATMOSPHE ECONOMY, FROSTY BUSINESS CLIMATE. Inside the Beltway Success and Opportunities. . . . . . . . . . . . . 28 This has happened in virtually every

It may very well be the expansion of European-based hard discounters like Aldi and Lidl, and homegrown companies like Dollar General, which have had a tremendous impact on retailing around the world and have now set their respective sights on the Wild West.

market these retailers have entered –

Washington Report especially places like Germany where hard discounter market share has gone from zero The Wheels of Tax Reform to 40 percent.

Move Forward. . . . . . . .Or,. in. .the. U.K. . . .– one . . of. .the. most . . . 31 concentrated grocery markets in the world

– where during an economic downturn they Mommy Blogger built up a combined 12 percent share.

Yet theirKit true impact To Meal Kit or Not to Meal . . . . cannot . . . .be.measured . 80 by

“It’s pretty clear that they are going to disrupt markets as they’ve done in multiple countries,” said George Faigen, Partner, Oliver Wyman North America Retail Practice, noting that some retailers are still in denial due to the mistaken perception that Aldi and Lidl just cater to low-income shoppers and won’t appeal to loyal customers.

price alone and some of the same factors that led to their success in European markets, for example, are starting to show up in the U.S., according to Faigen.

DEPARTMENTS

Martin Mumford, Principal in Oliver Wyman’s San Francisco office, who joined Faigen for a joint presentation on hard discounters at the CGA Strategic Conference, agreed.

“There’s no question that price is an attraction,” he said. “But that alone is not sufficient. Good value for the money is what people are getting at Aldi and Lidl – highquality products at a reasonable price is what’s made a difference to customers.”

CGA News. . . . . . . . . . . . . . . . . . . . . . . . . . 44

Know the Law The same strategy is in play in the U.S. Coffee Debate is Coming to a Close . . . . . 62 “Once you’ve cracked what consumers want

But he noted that their price image is not to be taken lightly.

in the U.S., it will be easier to distribute

Foundation News. . . . .products . . . .since . . .we.have . . one . . language . . . 66 among

“If you’re going from L.A. to Long Beach, Aldi billboards are advertising 40 percent savings,” he said. “That’s the number for you to compete against. It’s the thing you’ll have to disprove. Even if you have customers who don’t care about money, 40 percent is enough to make them take notice.”

But the ch is to locali expectatio Pacific No parts of th accomplis local taste them.

Clearly, lo to Faigen.

“For exam and decid have six b three rasp shows up

“That yog customer lowers ove to what’s p thought o

Nonethele the ability since they more than

350 million potential customers and similar

making it easier to comply,” 15 Minutes With… regulations Faigen noted.

Aaron Montgomery. . . . . . . . . . . . . . . . . . . 70

Outside the Box New Retail Perspectives.. . . . . . . . . . . . . . . 76 Index to Advertisers. . . . . . . . . . . . . . . . . . 79 CAL I FO RNIA GRO CER | 3

CGA | BOARD OF DIRECTORS

EXECUTIVE COMMITTEE

CHAIRMAN APPOINTMENTS Independent Operator Committee Chair DIRECTORS

CALIFORNIA GROCERS ASSOCIATION

Chairman Jim Wallace The Albertsons Companies

Second Vice Chair Kendra Doyel Ralphs Grocery Company

Secretary Hee-Sook Nelson Gelson’s Markets

First Vice Chair Bob Parriott Twain Harte Market

Treasurer Phil Miller C&S Wholesale Grocers

Past Chairman Kevin Konkel Raley’s

Renee Amen Super A Foods

Kevin Arceneaux Mondelēz International Inc.

Dave Jones Kellogg Company

Jon Alden Jelly Belly Candy Co.

Steve Dietz United Natural Foods, Inc.

Mario Mediati The Clorox Company

Denny Silva Reyes Coca-Cola

Teresa Anaya Northgate Gonzalez Markets

Damon Franzia Classic Wines Of California

Lynn Melillo Bristol Farms

Elliott Stone Mollie Stone’s Market

Joe Angulo El Super (Bodega Latina)

Jen Fulton PepsiCo Inc.

Dan Meyer Stater Bros. Markets

Joe Toscano Nestlé Purina PetCare

Denny Belcastro Kimberly-Clark Corp.

Michel LeClerc North State Grocery Inc.

Doug Minor Numero Uno Market

Jim Van Gorkom NuCal Foods

Leon Bergmann SUPERVALU

Hillen Lee Procter & Gamble

Timothy Murphy Costco Wholesale

Michael Walton Unilever

Jeanne-ette Boshoff MillerCoors

Eric Lindberg, Jr. Grocery Outlet, Inc.

Nicole Pesco The Save Mart Companies

Richard Wardwell Superior Grocers

Bob Bukovec Tyson Foods, Inc.

Jonathan Mayes Albertsons Companies, Inc.

Laura Price Nielsen

Kevin Young Young’s Payless Market IGA

Cindy Chikahisa Sprouts Farmers Market

Joe McDonnell Campbell Soup Company

Mike Ridenour The Kraft Heinz Company

Brent Cotten The Hershey Company

Mark McLean CROSSMARK

Casey Rodacker Mar-Val Food Stores, Inc.

Willie Crocker Bimbo Bakeries USA

Casey McQuaid E & J Gallo Winery

Jonathan Samorajski Anheuser-Busch InBev

President/CEO Ronald Fong

Senior Director, Events & Sponsorship Beth Wright

Dennis Darling Foods Etc.

Senior Vice President, Government Relations & Public Policy Keri Askew Bailey Senior Vice President, Marketing & Business Development Doug Scholz

Director, CGA Educational Foundation Brianne Page

Vice President, Communications Dave Heylen

Controller Gary Brewer

Executive Director, CGA Educational Foundation Shiloh London, CFRE

4 | CAL I FOR N I A G R OC E R

Senior Director, Government Relations Aaron Moreno

California Grocer is the official publication of the California Grocers Association.

1215 K Street, Suite 700 Sacramento, CA 95814 (916) 448–3545 (916) 448–2793 Fax www.cagrocers.com For association members, subscription is included in membership dues.

Subscription rate for non-members is $100. © 2017 California Grocers Association

Publisher Ronald Fong rfong@cagrocers.com Editor Dave Heylen dheylen@cagrocers.com For advertising information contact: Dave Heylen dheylen@cagrocers.com

PRESIDENT’S MESSAGE

The Best is Yet to Come

RO N F O N G PR E S IDE N T AN D CEO CALIFOR N IA GR OCE R S AS S O CIATIO N

The end of the year is always a time for reflection.

Too often we fail to pause and take stock of the events that impacted our lives, for the better or the worse.

The California Grocers Association has much to be thankful for this year. As an association, we have continued to improve our level of service in every aspect possible.

Whether expanding our annual convention to include a loss prevention element at the behest of member companies, to providing a record amount of scholarship dollars to employees and their families through the yeoman’s work of the CGA Educational Foundation, to expanding the influence of our association in state and local government – the upward trajectory of our good fortune continues.

I am proud of our staff for not resting on their laurels and for constantly seeking ways to improve the level of service we give to all of our members. And I am just as proud of members whether retail or supplier, large or small. We could not do what we do without your continued support of, and faith in, our efforts. We are fortunate as an association to have a membership that is as engaged as ours.

On behalf of myself and my staff, I want to sincerely thank you for the continuing opportunity to represent your interests across the state.

But as much success we have had this year, I fully expect 2018 to be a hallmark year in its own right. There is much to look forward to as an association. Most notably, the new year will bring CGA a new home.

iStock

purchased a building in downtown Sacramento that will serve not only an association headquarters, but as a learning center for our membership that will provide growth opportunities for companies and their employees. We expect this project to be completed by August 2018. Stay tuned for more updates as we move closer to our grand opening.

Also, look for CGA’s profile to grow in the halls of our statehouse as our Association enters into new partnerships with a diverse number of groups such as law enforcement, labor and environmentalists to tackle issues that affect our industry on variety of different levels. These partnerships will beget more legislative success, which will beget more influence, which will beget more legislative success…and so on.

You get the picture.

So, let’s all take some time during this busy holiday season to pause and be grateful for the year we’ve had knowing the best is yet to come. ■

As many of you know, our fiscal prudence allowed us to make an investment that will pay dividends for years to come. The Association CAL I FO RNIA GRO CER | 7

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CHAIRMAN’S MESSAGE

An unforgettable opportunity

J I M WA L L AC E T HE ALBE R TS ON S COMPAN IES

It has been tremendous and unforgettable opportunity to serve as CGA Chair this past year.

Wallace

Seeing our Association from the vantage point of Chairman gave me a unique perspective on the role CGA plays in our industry. Now as my time as Chair is complete, I would like to reflect on two of CGA’s impactful areas of expertise.

First and foremost is government relations.

CGA’s advocacy team is top notch. I am proud to say that our team performed admirably in navigating through the unique challenges presented by our California government while successfully having a number of unfavorable bills amended or dismissed that would have adversely impacted our industry.

Secondly, our Educational Foundation programming continues to expand.

Our Strategic Conference is one of a kind and may be the best state grocery event in the country. Our committees are providing greater programming and we have launched several compliance toolkits this year. Our Independent Operators Symposium is a hidden gem every independent grocer would greatly benefit from being a part of.

While serving as Chair has many responsibilities and requires time away from work, one is rewarded by having the privilege and opportunity to represent our great industry at a variety of events.

Thanks to CGA and the Educational Foundation’s relationship with Cal Poly San Luis Obispo, I had the unique opportunity to guest lecture at two undergraduate classes. This hopefully opened their eyes to the diverse employment opportunities that await them in the grocery industry.

I would like to thank the CGA Executive Board and the CGA Board of Directors for their tremendous support this past year.

We may be fierce competitors, but we also are able to work closely together on common issues facing our industry.

It’s been a privilege to work with CGA President and CEO Ron Fong and his talented team who really have the industry’s best interest in mind. I wish them continued success as the Association continues to grow and prosper.

I especially want to recognize and thank my wife, Lori, for her tremendous support.

She has been my strongest supporter, confidant, advocate and best friend for the past 33 years. In addition, I would like to thank Albertsons Companies for allowing me the time to serve on the CGA Board and as Chairman this past year.

To our new Chair, Bob Parriott, I wish him all the best. He has a great board, strong committees and a dedicated CGA team to help him succeed in leading this great Association.

During our annual Strategic Conference, I represented grocery retail during a panel discussion that addressed the theme, “Working in Concert.” It was my pleasure to share the stage with Kevin Arceneaux of Mondelēz International, and Brian Cook of Pete’s Living Greens.

In my very first column, I said CGA was a force to be reckoned with. My opinion hasn’t changed. I encourage every CGA member to maximize their membership, get involved and “Make a Difference”. Thank you for allowing me this opportunity to serve you.

I wish every CGA member Happy Holidays and a prosperous New Year. ■

CAL I FO RNIA GRO CER | 9

VIEWPOINT

History Lessons

K EV I N CO U PE FOUN DE R , MOR N IN GN E WS BEAT.CO M

A confession: I’ve worked for three retailers in my life, and all of them went out of business.

While that may not make me the ideal guy from whom to be taking advice and analysis about retailing, I actually think that my longago experiences with these retailers offer some lessons about how to succeed.

I’ve been thinking about those retailers lately as I’ve been pondering some of the events of the past year and trying to prognosticate about what might happen in 2018.

I generally try to stay out of the predictions business lest someone think I’m trying to cast myself as some sort of futurist. (I’m just a guy who has made some pretty good – and lucky – guesses over the years, which is the same as what “futurists” do, but I try to be a little less pretentious about it.)

Two of the retailers I worked for, as it happens, were in Southern California, and have been gone for more than 40 years; my jobs there were not “career jobs,” but rather a way to work myself through college.

(I graduated from Loyola Marymount University in 1977.)

The first was called the British Stock Exchange, and when I started working there in early 1975, it was a men’s clothing store targeted at a group that had not yet been labeled as “yuppies,” or the young urban professionals who lived in Marina del Rey.

10 | CAL I FOR N I A G R OC E R

It was a very cool store; the owner, only a few years older than I, eschewed standard design techniques and instead scattered handsome antiques – tables, desks, even a brass bed – around the store and displayed designer jeans, khakis, sweaters and shirts on them.

The antiques were placed at odd angles that forced people to walk around the store, we were constantly moving pieces so that it rarely looked the same for too long, and the boss cultivated a salon-like atmosphere in which people loved to come in and talk and maybe have a glass of wine while they spent money on clothes.

I think about the British Stock Exchange now and realize that it would have been the kind of store that could’ve competed effectively with online retail (had it existed back then).

The whole point of the store was to create a compelling shopping experience – fueled by my boss’s outsized personality – that people would go out of their way to visit. And it worked, really well.

Until, as often happens in these cases, the owner took his eye off the ball.

Rather than remaining focused on what worked and expanding in a strategic way, he decided to make an enormous investment in a women’s line of clothing; the problem was, it was cut so small that it would only

fit the many flight attendants (then called “stewardesses”) who lived in Marina del Rey and Playa del Rey, and upon whom he was fixated.

It didn’t help that he’d often go off for afternoon-long “lunches” with some of these women, leaving me to run the place by myself. I was good at my job, but I didn’t have the secret sauce that he’d used to make the place so successful. Eventually, the place died.

But I still had college to pay for, so I got another retail job at the Brookside Winery and Tasting Room, also in Marina del Rey. The one where I worked was one of a network of several dozen facilities that operated mostly in California; Brookside was a Southern California vintner, and its operating strategy was not just to sell wine, but provide a tasting room in which anyone could taste any of the winery’s products for free while making a purchase decision.

And I got to run the tasting room (Great job for a college senior!).

I didn’t know all that much about wine, but I learned fast, and I was pretty good at socializing with the customers, who often would come in knowing what they were having for dinner but not sure what they wanted to drink. They’d taste some stuff, make a decision, and we’d send them out the door happy and with a couple bottles of wine.

VIEWPOINT

“Now malls seem irrelevant, with many made marginal in their appeal by e-commerce.”

iStock

Again, a great lesson. Offering tastes of whatever it is you are selling is an enormously effective way to get people to buy stuff. And I’m not talking about just relying on manufacturers to underwrite tasting programs, which is nice but doesn’t go nearly far enough.

I’m talking about retailers getting their own people out from behind service counters, or into the aisles and ripping open packages, and funding its own aggressive tasting stations. If it smells good and tastes good, people are far more likely to buy it.

Alas, Brookside ended up closing down several years later, though I think it has been reborn several times under different ownership. I just don’t think the wine was good enough at a time when Northern California wines were getting better and better, and often less-than-premium locations became even less so in the mid-70s when gasoline was getting very expensive.

But the lesson stuck.

Finally, the other retailer I worked for was back east, in the suburbs of New York City where I grew up.

I started working at County Boys’ and Men’s Shop before my 14th birthday – I had a private, Catholic prep school to pay for, I was the oldest of seven children, and my father was a schoolteacher who wanted me to go there, but couldn’t afford to pay for it.

I ended up working again for County Boys’ after college, when I returned east and got a $6,500-a-year job as a newspaper reporter and needed to supplement my income.

County Boys’ was a classic clothing store that existed for decades in several locations – the kind of place where moms would bring their sons for everything from navy blazers to Levi jeans to underwear, and where fathers would come in Saturdays to buy a suit or dress shirt to wear to work in Manhattan.

We knew all the customers, and they knew us, and they wouldn’t think of shopping anywhere else. We had fair prices – not high, but not discount – and ran just two sales a year, and never opened at night or on Sundays. It was a different time, and we were both convenient and a known entity.

And then malls happened.

County Boys’ had its stores either in standalone locations or in strip shopping centers, and the building of enormous malls nearby put enormous pressure on sales. Kids didn’t want to get their jeans at County Boys’, but wanted to go to The Gap instead.

County Boys’ held on until the late 80s, but I think it’s fair to say that a lack of competitive response, and a willingness to continue doing things the way we’d always done them because that’s the way things were done, killed the business. It was a long, slow death, but it taught me a lot. Complacency is as sure a killer of businesses as pretty much anything else.

Times have changed.

Now it’s malls that seem irrelevant, with many made marginal in their appeal by e-commerce. But certain competitive tenets seem like they are worth adhering to creating compelling, unorthodox, loaded-withpersonality shopping experiences wherever possible… offering people the ability to sample the merchandise whenever possible… maintaining a vigilance that lets no threat go unanswered, ever… and never allowing oneself to be complacent.

Of course, I learned something else from all these experiences – that I’d rather write about the business of retailing than actually do it.

But that’s another story. ■

Moms could take their kids to the mall and have a wide range of choices, as could fathers looking for new suits. As hair got longer, sales receipts got shorter, and we never really figured out a response.

CAL I FO RNIA GRO CER | 11

GOVERNMENT RELATIONS

Finding Common Ground

A A RO N M O R EN O S EN IOR DIR ECTOR CGA GOV ER N MEN T R ELATION S

There is a long-held assumption, especially in politics, that a “state of war” is inevitable and constant.

Human nature seems to thrive on conflict and drama, be it in the form of gossip (political gossip can often be worse and more rampant than high school gossip) or some form of combat.

There comes a point, though, when it simply becomes impossible to sustain a conflict due to the material costs of doing so.

At that point diplomacy becomes the ideal tool, because sometimes a battle is won by not having to fight it in the first place.

And avoiding battle also allows you to save your powder to fight a more serious battle in the future.

For a long time there has been political conflict between business interests and labor unions over a number of issues. In the grocery sector, that conflict (or “state of war”) has existed between grocery companies (or CGA collectively) and the United Food and Commercial Workers Union (UFCW).

The first thing that comes to mind are the sometimes stressful conflicts that occur at the bargaining table when various contracts between grocery companies and union locals expire, and need to be renegotiated.

12 | CAL I FOR N I A G R OC E R

The other venue where this conflict manifests itself is in the halls of the State Capitol. Over the years, we have disagreed with UFCW on a number of legislative measures that either we have supported and they have opposed, or vice versa. Inevitably, when the dust clears at the end of every legislative session, we each end up with a number of wins and a couple of losses at each other’s expense.

This legislative year we decided to try something different, because it occurred to us as well as to the UFCW that we have much more in common than not. At the end of the day, we are all in the business of selling groceries. We both benefit from each other’s success. When CGA companies do well, employees represented by UFCW generally do well. When employees represented by UFCW do well, the CGA companies they work for generally do well.

With that in mind, we asked ourselves the question at the beginning of the legislative year: Was it possible to find a broader common ground with the folks at UFCW that would allow both of our organizations to achieve mutually beneficial success?

The answer for this legislative session (and hopefully for legislative sessions to come) was a resounding yes.

This was the first year anyone could remember where UFCW supported all of CGA’s legislative proposals (from legislation dealing with theft run amok to legislation dealing with recycling) and CGA supported all of UFCW’s legislative proposals (from legislation to regulate meal delivery companies to legislation dealing with online grocery delivery to CalFresh recipients).

Suffice to say the sight of our lobbying teams working side-by-side raised some eyebrows around the Capitol, but the results were extremely positive. Not only were both able to save powder for other fights, but it laid the groundwork for more open communication and the trust that comes out of that.

Now, we are under no illusion that this means we will always be on the same side of issues as labor. In fact, it would be completely unrealistic to think we will never be on opposite sides of an issue in the future.

What we do know is that when that does happen, the “state of war” may not be as severe as it was in years past, and that we may be able to find room for compromises that may never had existed before. ■

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HARNESSING Innovation to fuel

BUSINESS RESULTS

By Josh Linkner

14 | CAL I FOR N I A G R OC E R

In our turbulent business climate, we all seek new pathways to growth and success.

Yes winning can be elusive in these times of dizzying speed and ruthless competition.

Companies like Tesla, Amazon, Netflix and JetBlue soar while their respective counterparts – Oldsmobile, Borders Books, Blockbuster, and PanAm – are merely tombstones in the business graveyard.

Cultivating creativity and innovation is leadership job No. 1 if we want to enjoy sustainable growth and progress.

But how do innovators think and act? How can we build a culture that fosters innovation rather than restricts it?

Too often, once great companies become intoxicated by their own success. They fail to adapt, fail to innovation, and then simply fail.

As human beings, we are hard-wired to be creative, but many of us have lost our imagination over the years. The good news is that we can all tap into a giant reservoir of creativity, which can fuel our businesses and lives.

To avoid this trap in times of massive upheaval and change, we must exploit our most powerful weapon: human creativity. It is the one thing that can’t be outsourced or automated, and has become the currency of success.

Luckily, you don’t have to be a mad scientist in a lab coat, or an eccentric billionaire to embrace them. You just need an open mind and an open heart, a willingness to inject fresh approaches into everyday situations.

Continued on page 16 ▶

CAL I FO RNIA GRO CER | 15

◀ Continued from page 15

Having studied hundreds of the most innovative people in history, I’ve discovered five core beliefs that transcend industry, geography and upbringing. These patterns are easy to understand and can be implemented directly into your daily work to drive growth and success:

1. Get Curious

4. Get Scrappy

It turns out that curiosity is very much the building block of creativity. The more curious you are, the more creative you’ll become. The best way to tap into your natural curious state is to ask a lot more questions instead of making fast decisions.

Too often, we make decisions (big and small) based on what worked or what didn’t work in the past. If we lived a static world, that would be great. But today we live in a rate of change like none other in history.

We often believe our ability to innovate is tied to external resources such money, headcount or raw materials. The truth is, the real DNA of innovation has nothing to do with outside resources and everything do to with grit. Determination.

Tenacity. Resilience.

As a result, your instincts based on previous results can be misleading. Instead, pause whenever possible and ask more questions about the problem at hand or your proposed solution. Try questions that begin with “why”, “what if ”, or “why not?” When you ask these questions, it forces you to imagine the possibilities and explore fresh approaches.

2. Crave What’s Next It’s easy to think success is a permanent condition, yet that has been the downfall for far too many organizations. Instead, we must lean into change, embracing new approaches rather than clinging to old ones.

Too often, we overestimate the risk of trying something new but underestimate the risk of standing still. Innovators have an insatiable appetite for new tech, products, trends, concepts, etc. They want to be first, on the bleeding edge of change.

They also embrace a willingness to let go of what was in favor of what can be.

3. Defy Tradition Family traditions can be wonderful, but traditions in our professional lives can be deadly. Blindly doing things in a traditional way has been the downfall or far too many companies and careers.

Instead, when you find yourself approaching your work in a traditional way, examine the tradition carefully and see if you can flip it upside down. What would the polar opposite move look like?

Don’t change just for the sake of it, but at least put your traditions under a microscope to explore if they are still relevant and optimized. Or, perhaps there’s an oppositional approach that could yield a better outcome. This is the point where breakthroughs occur.

16 | CAL I FOR N I A G R OC E R

Internal resources fuel creative approaches, which is why startups are able to upend industry giants. Getting scrappy is about doing more with less; finding elegant and more creative ways to solve everyday problems. Instead of blindly throwing money at a problem, try throwing your imagination at it instead. You may enjoy a far better result.

5. Adapt Fast It’s easy to believe that innovation occurs as a single lightning bolt of an inspiration, followed by mindless execution. In fact, initial ideas are usually flawed. Only through a series of setbacks and mistakes, failures and pivots, tweaks and microinnovations, does an idea gain any real merit.

Take the weight of the world off your shoulders… you don’t have to invent some game-changing concept. Instead, apply your creative energy to small, fast, creative bursts. Rapid-fire creativity, practiced as a daily habit, can be far more important than the potency of an initial ideal. Experiment, learn, adapt.

Rinse and repeat.

While many adults don’t feel creative, the research shows otherwise. Creativity, in fact, is 85 percent learned behavior.

In other words, it is a skill, a muscle, that each of us can build and use to drive our companies and careers to the next level.

Embrace the five obsessions of innovators, and you’ll be well on your way to unprecedented achievement. Push the boundaries, shake it up, explore what’s possible. Inject innovative approaches into your everyday work and the results will be stunning.

MICROINNOVATIONS The concept of innovation can be completely overwhelming. Images of Edison inventing the light bulb, or Henry Ford revolutionizing manufacturing push the idea of innovation outside the reach of us mere mortals.

If we define innovation as a gigantic, changethe-world, cure-cancer type breakthrough, the concept is relegated to a select few: billionaires, mad scientist inventors, CEOs, and super-geniuses.

With that kind of pressure, it’s no wonder that most of us restrict our creative output.

On the other hand, micro-innovations are accessible to us all. Each of us – regardless of role, tenure, age, or title – has the ability to develop creative solutions that lead to real progress. In this sense, innovation becomes a daily habit rather than a big, scary, overwhelming phenomenon. We all can be innovators, not just those in lab coats or with fancy degrees.

“While game-changing breakthroughs are glamorous, small acts of “everyday innovation” are the stuff of greatness.”

Yet the vast majority of human progress is crafted differently. In fact, it’s the little creative shifts – what I refer to as microinnovations – that most often carry the day.

These mini innovations can be subtle, but add up to significant results en masse. Maybe it’s implementing a fresh way of conducting your weekly sales meeting, or reimagining the physical layout of your shop floor. It could be a modern twist to the format you use to conduct job interviews, a novel way to manage a customer complaint, or a new item on the menu.

The folks at Procter & Gamble were fighting hard to gain share of the $7 billion detergent marketing. Instead of inventing some revolutionary magic serum, they used a small packaging change to win big.

Tide Pods were launched to allow customers to drop a small pod in the wash rather than pour from a messy bottle. This microinnovation led to stunning success – over $500 million of revenue in the product’s first year.

Josh Linkner was a featured presenter at this year’s CGA Strategic Conference in Palm Springs, Calif.

While game-changing breakthroughs are glamorous, small acts of “everyday innovation” are the stuff of greatness.

Too often, we put the weight of the world on our shoulders and believe we only have two choices – world-shifting innovation, or do nothing.

Take a look at your daily work, whatever it may be. While totally disrupting your entire industry may be daunting, ask yourself what little creative twists could make a small difference. Apply creative wonder to your product or service, production, culture, sales and marketing, recruiting, customer experience, and internal processes.

While micro-innovations may not land you on the cover of a magazine, they can absolutely fuel your performance. Not to mention, they’re tremendously fun.

View your work through the lens of an artist, looking to add just a little splash of creativity to even the most mundane tasks. Remove the burden to develop gigantic a-ha moments of brilliance, and focus on a high output of micro-innovations.

Each change or twist may be small, but your results over time will be anything but puny. ■ Editor’s Note: Josh Linkner is a five-time tech entrepreneur, New York Times best-selling author, and venture capitalist. He is a soughtafter keynote speaker on innovation, creativity, and hyper-growth leadership. He’s also a proud Detroiter and professional-level jazz guitarist.

For more info, visit JoshLinkner.com.

CAL I FO RNIA GRO CER | 17

Jim Wallace of Albertsons Companies for his dedication & service as the CGA Chairman of the Board.

Welcome

Bob Parriott of Twain Harte Market as the incoming CGA Chairman of the Board.

Thank You to Jim Wallace for your service and leadership as the California Grocers Association Chair this past year.

Congratulations to the incoming CGA Chair Bob Parriott We wish you great success in your new role.

ca.grocer.jim.wallace17.indd 1

11/8/17 8:13 AM

d r o h c t c e f r e p e h t g n i Strik

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The 2017 CGA Strategic Conference struck just the right chord this year with more than 700 grocery retailers, suppliers, wholesalers and brokers attending this annual event in Palm Springs, Calif.

T

his year’s theme – Working in Concert – featured a symphony of educational programming, networking events and social gatherings designed to reinforce the conference’s collaboration message.

“Our goal was to have our attendees focus their peer-to-peer discussions around the need for greater collaboration,” said CGA President/CEO Ron Fong. “I think we accomplished that goal.”

Attendees heard from industry experts and several “non-traditional” voices, participated in CGA’s signature face-to-face business meetings and enjoyed relaxing after hours networking events.

Keynote speaker Josh Linkner

New this year was the addition of the Loss Prevention Executive Summit, featuring six hours of targeted loss prevention, safety and risk management educational programming.

The conference also created a “Morning Jam Session,” patterned after the popular Ted-style presentations and featuring three unique speakers.

“Both these additions were tremendous hits,” said Fong. “We hope to expand the loss prevention program next year and draw an even greater number of LP professionals and vendors. The Morning Jam Session was also a huge success and the format will probably return next year.”

Continued on page 22 ▶

CAL I FO RNIA GRO CER | 21

◀ Continued from page 21

Also new this year was a special PreConference Succession Planning Seminar featuring noted intergenerational wealth expert Dr. Tom Deans and Sid Tobiason, Moss Adams, that discussed steps to create a viable succession plan for businesses.

The seminar and Illuminators Golf Tournament kicked off the conference on Sunday and was followed by “The Opening Experience” featuring Sekou Andrews, the world’s leading “Poetic Voice.” His powerful message blended poetry with the stories of

“Our goal was to have our attendees focus their peer-to-peer discussions around the need for greater collaboration.” our grocery industry while capturing the conference theme message of collaboration, connecting and working in concert.

Monday’s programming started early with CGA’s Whiteboard Sessions – roundtable discussion groups focused on some of today’s most pressing industry issues. This was followed by the General Session that began with an industry panel discussion focused on this year’s theme and its potential impact on the industry’s entire supply chain.

Panelists included CGA Chair Jim Wallace, Vice President & General Manager, Pavilions; Kevin Arceneaux, Regional Vice President, West Area Sales, Mondelēz International; and Brian Cook, Vice President of Sales, Pete’s Living Greens.

Keynoting Monday’s General Session was Josh Linkner, a four-time entrepreneur, hyper-growth CEO, New York Times best-selling author and venture capitalist.

(L to R) CGA Chair Jim Wallace, Albertsons Companies and Kevin Arceneaux, Mondelēz International.

CGA President Ron Fong welcomes attendees.

22 | CAL I FOR N I A G R OC E R

It was all fun and games for Kendra Doyel, Ralphs Grocery Co., at the Illuminators Special Event.

Attendees heard from top industry experts.

Illuminators Headlite Mark Olenjik

The conference also featured numerous networking opportunities

New this year was the Loss Prevention Executive Summit.

In a fast-moving one-hour presentation, Linkner explored harnessing innovation through turning raw ideas into powerful results.

featured three 15-minute presentations by Payman Nejati, Handpick; John Foraker, former president of Annie’s Inc.; and Tracie Maffei, Google. Inc.

Mandzy, Director, Strategic Insights Health & Wellness, who discussed the impact of health and wellness, transparency and personalization on California consumers.

Monday’s offerings also included the highly popular Independent Grocers Forum that featured a founder and the Chief Operating Office of My Cloud Grocer, Dan Dashevsky, who provided five easy steps for independent grocers to achieve e-commerce success.

Forum attendees also heard customized presentations from major manufacturers.

“We fashioned the Jam Session after the popular TED-style format,” said Doug Scholz, CGA Senior Vice President, Marketing & Business Development.

“Our goal was to present innovative approaches being developed outside the traditional grocery sector that challenged our thinking about established practices.”

Both presenters provided insights into how a strong omnichannel strategy paired with unique products consumers want will help ensure that the right products are being delivered at the right time in the right place.

Highlighting Tuesday’s program was the Morning Jam Session and the Keynote Luncheon presentation. The Jam Session

The Luncheon Keynote Address closed the conference’s educational program and featured two Nielsen executives, Laurie Rains, Group Vice President, and Andrew

In addition to the conference’s strong educational programming, attendees also participated in the conference’s signature face-to-face prescheduled business meetings.

Paymen Nejati

Continued on page 24 ▶

◀ Continued from page 23

“Our team scheduled more than 1,100 meetings over the course of two days,” Fong said. “We typically call it speed dating for grocery and that’s a pretty accurate description.

Along with the educational programming and pre-scheduled meetings, CGA also served up strong networking and social events, thanks in large part to its supplier partners, The Illuminators.

“The Illuminators continue to provide great meal functions and social events in support of the conference,” Fong said. “This dedicated group of industry suppliers are an intricate part of our success. Thank you once again for your tremendous support.”

Fong wished to thank the many sponsors that made this year’s conference a tremendous success.

“We could not produce such a quality event without the generous support of our sponsors,” Fong said. “I encourage companies looking to grow their business in California’s expanding grocery market to consider sponsoring at our 2018 conference. It will be money and time well spent.” ■

CGA's signature face-to-face business meetings.

Whiteboard Sessions allowed suppliers and retailers to discuss key industry issues.

Mark Your Calendar!

The 2018 CGA Strategic Conference will be September 23–25, at the Palm Springs Conference Center.

Laurie Rains, Nielsen 24 | CAL I FOR N I A G R OC E R

2017 CGA Strategic Conference Sponsors

“We could not produce such a quality event without the generous support of our sponsors.”

– Ron Fong

Premium Suite Holders

President Level

Anheuser-Busch InBev Bimbo Bakeries USA CA Grown C & S Wholesale Grocers Chobani Coca-Cola North America The Hershey Company The Jel Sert Company Jelly Belly Candy Company Kellogg Company Kimberly-Clark Corporation The Kraft Heinz Company MillerCoors Nestlé Purina PetCare Nestlé Waters North America PepsiCo Inc. Procter & Gamble Retail Marketing Services Starbucks Coffee Company SUPERVALU Tyson Foods, Inc.

Alkaline 88 Altierre The CALIBRATION GROUP, LLC California Lottery Command Packaging EVgo F & S Gourmet Foods Ferrero USA Flowers Baking Company Frito Lay Front Line Safety GateKeeper Systems Grocery Headquarters Hallmark Cards, Inc. Harris Ranch Beef Company Houweling’s Group Huntington Security Idahoan Foods Kashi Company Melissa’s / World Variety Produce Mettler Packaging LLC Mizkan America NewStar Fresh NuCal Foods Oberto Brands Ocean Mist Farms OK Produce The Oppenheimer Group Orchids Paper Products, Inc. Ready Pac Foods San Miguel Produce Select Systems Technology

Executive Level Campbell Soup Company Classic Wines of California The Clorox Company DanoneWave Foods General Mills Mondelez International, Inc. Snack Factory Unata Inc. Unilever

Shelby Report Smithfield Foods, Inc. Supermarket News Tier 1 Westlake Produce Co.

Opening Experience Costco Wholesale United Natural Foods Inc.

Opening Reception E. & J. Gallo Winery Alta Dena Certified Dairy

Keynote Luncheon California Table Grape Commission

Networking Lounge Tyson Foods, Inc.

After Hours Social buzzbox beverages, Inc.

Registration Post Consumer Brands

Whiteboard Sessions CGA Educational Foundation

CAL I FO RNIA GRO CER | 25

CAPITOL INSIDER

2017 – Anything But Normal LO UI E B ROW N IN T HE S ACR AME N TO OFFICE O F K HAN, S OAR ES AN D CON WAY, L L P

It was a busy legislative session with plenty of twists and turns, and there’s still plenty to come in 2018.

Brown

Normally, the recess between the first and second year of the legislative session is quiet, and even restful. It’s a time to reflect, regroup and plan. However, this year has been anything but normal, which has many of us who live this excited and scared at the same time for 2018.

According to legislative leaders, the 2017 Legislative Session was one of the most successful and progressive in recent memory.

In the Governor’s State of the State Address in January he made climate change and transportation funding top priorities for his Administration. In addition to those issues, progressives in the Legislature added affordable housing to the mix. In the end, all three were addressed and celebration ensued.

While the activity level was extraordinary the session ended in an anti-climactic manner due to the new 72-hour rule. Thanks to voters, all measures must be in print for 72 hours before they can be brought for a vote on the Assembly or Senate Floor.

While there were interpretation issues earlier in the year about what “final form” actually meant, everyone agreed at the end of session there could be no changes within 72 hours of the recess commencing. With this being

26 | CAL I FOR N I A G R OC E R

in place, everyone knew what to expect in the waning days of the session creating a calmness, like I have never seen before.

Notwithstanding the presence of calmness, below the surface differences between the two houses resulted in other major, primarily Senate-born, issues to be placed on hold by the Assembly. Issues like bail reform and expansion of the State’s renewable energy goals ran into union opposition.

While the effort to create a single payer health care system was parked in the Rules Committee by the Speaker after determining the fiscal issues with the measure had not been adequately vetted by the Senate.

Coming off the final weeks of the session, staff and lobbyists were looking forward to some peace and quiet. However, that was not to be the case.

The first major announcement was the decision by Sen. Kevin de Leon to challenge U.S. Sen. Dianne Feinstein’s bid for reelection. For months people had speculated about de Leon’s next step. He’s termed out in 2018 and most other statewide elections already have a long list of candidates who have been campaigning and fundraising for quite a while.

At the same time, it’s no secret that the next generation of democratic leaders have been patiently waiting for Feinstein to announce her retirement. When instead, she announced her intent to run for reelection, de Leon seemed to be the most poised to make the challenge.

While de Leon was expected to step down as President Pro Tem sometime during the 2018 legislative session, his announcement to run for the U.S. Senate will likely hasten the change in command. For months, rumors have spread about potential candidates for the position because as they say in this business – there are no secrets.

At the end of the session, one member had formally announced her candidacy with at least three others working behind the scenes to secure their own votes. This year’s holiday season will be a busy one for those seeking to be the next leader of the Senate.

The real bombshell to hit during the interim was the letter signed by more than 150 female staff members, lobbyists and elected officials making public the sexual harassment that takes place in and around the Capitol.

The subsequent articles and allegations identifying specific legislators created calls for resignation and legislative action to provide protection for those working in “the building.”

The Senate hired outside consultants and the Assembly held hearings to analyze and evaluate existing processes and procedures.

iStock

Multiple bills will be introduced early in the session seeking to provide real and public recourse for victims of harassment in the Capitol.

Finally, 2018 will be the last year of Governor Brown’s tenure. He is the first and last Governor to serve four terms. His legislative accomplishments will be considered second to none. He has spent the last year leading the international charge for climate change

“According to legislative leaders, the 2017 Legislative Session was one of the most successful and progressive in recent memory.” which has elevated him on that scene well above any other sitting Governor and above many international leaders. Whether one agrees with him on policy, it is tough not to admire his tenacity and ability to lead.

The Governor will no doubt have an aggressive legislative agenda for 2018. It would be foolish to bet against his ability for successfully moving that agenda through the Legislature, but stranger things have and just might happen.

MOS SADAMS.COM/RETAIL

POTENTIAL RISES IN THE WEST

The Legislature is never void of politics.

However, 2017 seemed to rise above with the number of high level issues addressed. It is hard to see how 2018 will be anything but the inverse with all that has occurred during this not so normal recess. ■

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CAL I FO RNIA GRO CER | 27

INSIDE THE BELTWAY

Success and Opportunities

J EN N I F ER H ATC H ER S EN IOR V ICE PR ES IDEN T GOV E R N ME N T AN D PUBLIC AFFAIRS FOOD MAR K ET IN G IN S TIT UTE

New York from prematurely enforcing the FDA’s menu labeling rule prior to the May 2018 federal compliance date. A settlement was reached that both protects the industry from fines prior to the federal compliance date and also serves as a strong deterrent for other states and localities from prematurely enforcing the federal rule.

Steve Jobs once said, “If you really look closely, most overnight successes took a long time.”

With three-quarters of 2017 in the books, this is a time of reflection for many businesses and for us at the Food Marketing Institute (FMI). It gives us a chance to analyze our successes and look at opportunities for even more victories.

With all the talk of Congress not being able to get anything done legislatively, we have a number of successes to be proud of so far this year – a testament to laying the groundwork and continuing down a path in spite of whether you believe at the moment that you will succeed.

Many of these victories took a lot of work but would not have been considered possible just a year ago. Here’s what we accomplished: • A one-year delay on the menu labeling rule with FDA reopening it for comments and promising new guidance before the end of 2017.

• In August, a court ruling that the Department of Labor’s Overtime Rule with a $47,476 salary threshold requirement is invalid and would not go into effect as had been announced.

• FMI and other interested parties, worked to protect and preserve the debit card reforms placed in 28 | CAL I FOR N I A G R OC E R

protection of debit reforms.

House Financial Services. Committee Chairman Jeb Hensarling (R-Texas) decided not to include the repeal language in his legislation.

• Border Adjustment Tax (BAT), which would have imposed a 20 percent tax on all imported items from being included in the tax reform framework, was defeated.

• Full repeal of the estate tax is included in the White House “Big Six” framework – a policy FMI has long advocated.

• FMI was included in White House meetings on the tax reform discussion.

• FDA extended compliance for an updated Nutrition Facts Panel to 2020 to align with other changes.

• FMI submitted comments on biotech disclosure to help inform USDA’s forthcoming rulemaking.

• FMI and other industry groups filed a lawsuit in the U.S. District Court for the Southern District of New York attempting to prevent the City of

•

Department of Labor issued a proposed rulemaking to rescind the persuader rule, which would have broadened reporting requirements and made it difficult for attorneys to maintain confidentiality when discussing labor matters.

•

The Equal Employment Opportunity Commission (EEOC) announced last year that private employers with 100 or more employees would be required to report summary pay data starting March 2018, designed to improve investigations of possible pay discrimination. Specifically, employers would be required to submit pay data by race, ethnicity and gender on the EEO-1 that they’re already required to submit.

On August 30, 2017, Office of Management and Budget's Office of Information and Regulatory Affairs suspended the new EEO-1 report.

INSIDE THE BELTWAY

•

FMI and GMA launched from its Trading Partner Alliance a voluntary date labeling initiative to bring consistency to the marketplace after more than a year of discussions; drawing praise from several members of Congress, including the Chairman of the House Agriculture Committee.

•

National Council on Weights and Measures Conference rejects tare on receipts proposal. If passed, this item would have required front-end equipment to print the tare on the register receipt for each item weighed on the front-end scale at the point of sale.

We hope you agree there is a lot to be proud of this year and a great opportunity for a few more victories in the final weeks of 2017. ■ iStock

CAL I FO RNIA GRO CER | 29

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WASHINGTON REPORT

WASHINGTON REPORT

The Wheels of Tax Reform Move Forward

PET ER L A R K I N PR E S IDE N T AN D CEO N AT ION AL GR OCER S AS S OCIATIO N

The past 11 months in Washington have been some of the most chaotic we’ve seen in many years.

For a Republican-controlled Congress and White House that came into office with high hopes passing major legislative victories, disorganization, distraction, and in-fighting have dominated the process. Hopefully, the tide is beginning to change as tax reform begins to formally move forward with the release of the House GOP draft legislation.

Ideological struggles between a divided GOP conference in the House (ultra conservative vs. main stream Republicans) and a Republican-controlled Senate that has had an increasingly difficult time getting to 51 votes, much less 60, has doomed many an effort this year.

Let’s hope tax reform takes a different path.

The House Ways and Means Committee released their tax reform legislation, H.R. 1. The Tax Cuts and Jobs Act, on November 2. The legislation lowers the corporate rate to 20 percent for C-corps and 25 percent for pass-through entities.

The pass-through changes create a number of hurdles, such as taxing 70 percent of income at the higher individual rate and 30 percent at the lower, 25 percent rate.

This “70/30” test is a point of frustration and it remains to be seen whether it will be modified before the bill passes out of the House. The bill also makes changes to

personal rates by collapsing tax brackets from the current seven down to four, but also leaves in place the 39.6 percent bracket for individuals with income over $1 million.

The legislation modifies or eliminates many tax deductions such as allowing 100 percent immediate expensing of the cost of qualified property and increasing the section 179 expensing limit to $5 million. Other deductions, such as interest expense are phased out for larger companies, while the Work Opportunity Tax Credit (WOTC) and New Market Tax Credit (NMTC) would be eliminated.

One controversial issue, and one important to California, is the State and Local Tax Deduction. The current modification would allow individuals to write off up to $10,000 in state and local property taxes.

An important win for the supermarket industry was the preservation of the Last In, First Out (LIFO) accounting method.

NGA has lobbied in favor of maintaining this important accounting method. The bill also addressed the Estate Tax, increasing the exemption for individuals to $11 million with a complete phase-out of the tax by 2024, while also maintain stepped-up basis.

The Ways and Means Committee is expected to “mark-up” or pass their legislation out

of Committee the week of November 6 and party leaders are planning to continue fast-tracking the legislation with a goal bring the measure to a vote on the floor before Thanksgiving.

The Senate Finance Committee is planning to release their own tax reform legislation during this time as well. It’s likely the wheels will turn a bit slower in the Senate as leaders work to shore up at least 50 votes (Vice President Pence could cast a tie breaking vote).

Leaders are hopeful they can pass legislation before the end of the year, but that could wind up being a bit too ambitious for the Senate and the timeline may slip into early 2018. We’ll have to wait and see how things play out and if any major surprises or “Tweets”, knock things off course.

NGA will continue to advocate for sensible tax reform that helps Main Street businesses succeed. Members of our Government Relations Committee raised a number of important issues in an extensive meeting with White House officials in September and have continued to do so with Congressional offices.

We are hopeful, that as the legislative process continues to play out, Congress will pass a final product that reduces tax burdens on independent supermarkets, provides relief to family-owned businesses, and simplifies a tax code that has ballooned out of control. ■

CAL I FO RNIA GRO CER | 31

r e c o r Family G Values:

Bob Parriott, CGA Chairman You might be surprised to learn that CGA’s Incoming Chair started his career in the grocery industry as a service salesman to independent grocers.

“During my time serving the stores I discovered that selling groceries was a stable business,” says Bob Parriott, Owner of Twain Harte Market in Twain Harte, Calif., and 2017-2018 CGA Chairman of the Board.

“And the people working in the business possessed the integrity and family values that I could embrace.”

As fate would have it, his father-in-law presented him with an opportunity that he couldn’t refuse and he became the general manager of Deluxe Foods of Aptos in 1989.

This was an exciting time in the grocery business and really the beginning of the specialty food movement. After almost 20 years, he got the itch to own his own operation.

“I’m not a guy that is easy to hire; I always thought I should be in charge, whether I should have been or not,” he admits.

By the time his brother-in-law came on board at Deluxe, Parriott had already been scouting around for something to call his

own. He had a really strong hankering for a store in the Sonora area after he and his wife purchased a second home there.

Again, fate had a say and he was the last man standing the day the former owner of Twain Harte Market called and said he was ready to sell. They sealed the deal on the store with a handshake in 2006. After painfully negotiating a new lease and wholesaler supply agreement, the escrow for the store closed January 2007.

“And today, I’m still living my dream,” he beams.

Parriott credits grocery store designer John Sutti with helping guide his success.

“John was a kind of visionary for independent grocers in the 1990s,” says Parriott. “He made many independent grocers wealthy and successful by designing renovations that moved many of us up to that top-notch level. He’s renowned for his capabilities.”

It was Sutti, Parriott says, who believed Northern California-based independent grocery stores could be strong and exceptional, more than anyplace else in the nation. Sutti formed a trade association called Raise the Bar, with about 35 independent grocers to help direct their efforts to be more successful. The association no longer exists but Parriott says the relationships remain intact. They still learn and borrow great ideas from one another.

“I’d rather be lucky than good,” says Parriott.

“And, I was lucky enough to follow the success train that Sutti was driving. It wasn’t my vision, I just followed the guru.”

Parriott remains in contact with Sutti and expects to engage his creativity again.

“I’m still in touch with him and want to put that final piece in place to complete the master plan that I’ve always dreamed of at Twain Harte Market,” he says.

Parriott seems to still value all aspects of the grocery business. The best part, he says, is that it’s multifaceted.

“It’s like a coin, always two sides,” he quips.

“It can be easy, warm and fuzzy. Then, not so easy and full of challenges. You’re always dealing with both sides, but every side that pops up is an opportunity.”

Continued on page 34 ▶ CAL I FO RNIA GRO CER | 33

◀ Continued from page 33

According to Parriott, learning leadership is never done, adding that it’s not about a title or position, but will and conviction and gathering unlikely groups of people to work toward a common goal.

“I heard the CEO of Starbucks, Howard Schultz, once say, ‘the currency of leadership has to be truth,’” he recalls. “I do think that being open and authentic in business translates to success. Developing the team is most rewarding when the results validate the goals.”

It’s no surprise that Parriott got involved with the California Independent Grocers Association (CIGA) early in his career and served on its board, off and on, since 1993.

He is credited with bringing his peers to the table in conversations which ultimately led to the CIGA merger with CGA. “In 2014, Bob led the charge in merging our two organizations,” recalls Ron Fong, CGA President and CEO. “His instincts

that independent operators and chain store executives would have more in common than not, have proven to be absolutely spot on.”

Now, Parriott has the distinction of serving as the first CIGA director to Chair the CGA Board.

“I take great pride in the conversation Ron Fong and I had seven years ago to discuss a merger and the benefit to both organizations,” he says. “To see that conversation come to fruition is great. I’ll stick a feather in my cap for that one.”

Parriott says what attracted him to CGA was the Association’s ability to blend the industry’s chain and vendor communities with independent operators into a forum where all parties can share information.

“We’re all in it together, all looking to make a modest profit, to appreciate our staff, to think through how we develop them,” he says. “I’ve had people share incredible things with me that I wouldn’t have learned had

Rethink the way you dispose of something as simple as an orange peel.

34 | CAL I FOR N I A G R OC E R

“He’s a pillar in his community and has a deep bond with his customers which is just incredible to witness.”

I stayed only on the independent side.

To the degree we can improve and march down that road of shared knowledge and shared satisfaction, I’m thrilled.”

Fong says Parriott demonstrates the diversity of California’s grocery industry and its membership.

“His voice is just as powerful and relevant as that of a CEO for a large-banner, multi-state chain,” says Fong. “I’ve visited Bob’s operation several times. He’s a pillar in his community and has a deep bond with his customers which is just incredible to witness.”

The pride Parriott has in his community is palpable. He cited customer response to the spate of recent natural disasters in Texas, the Caribbean, and more recently, in Northern California, and says he’s overwhelmed by his customers and staff and their generosity ($5,300) so far.

“We have customers and staff who are caring, sharing and giving,” he beams.

“It’s just unbelievable.”

And, he takes pride in his people.

“I don’t hold the CGA Chair position as king,” he shares. “It’s about giving recognition to those we lead. In many cases, we are the first jobs for a lot of young people. There are so many young people who have come

to work for me and have gone on to stellar things in their lives – it doesn’t get any better than that.

“They’re the future leaders of America,” Parriott adds. “Local families say, ‘you were an important part of our family because you introduced our kids to reality and responsibility.’”

Now that he’s in the “fourth quarter” of life, Parriott says he can look back at his grocery career and say that, “for the most part, this has been a good, honest, satisfying working experience where you live with integrity and contribute to many others along the way.

“Those of us who have been more fortunate do a lot to help those who aren’t as lucky,” he adds. “We cover back rent, car payments, propane bills – every owner I know fills in the gaps for their staff.”

Continued on page 36 ▶

And you’re helping recycle food waste into energy.

An alternative to landfills and traditional compost programs, Grind2Energy™ food waste recycling system efficiently converts food waste to renewable energy. Our non-sewer based technology enables you to dispose of all types of food waste — including kitchen fats, oils and grease — faster, cleaner and easier. Reduce odors, pests, emissions and labor costs, all while generating renewable energy and protecting the environment. Learn more at www.Grind2Energy.com

CAL I FO RNIA GRO CER | 35

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“This has been a good, honest, satisfying working experience where you live with integrity and contribute to many others along the way.”

Bob and his wife Linda are the proud grandparents of four and they have found their new favorite job (“the best job ever…

Grand Pa and GaGa”).

“It’s paradise up here in Twain Harte and we love to have the kids visit,” he proudly states.

“I don’t even think about going back to the Bay Area.”

And what does he expect to accomplish as CGA Chair?

36 | CAL I FOR N I A G R OC E R

Like his company’s mission statement, Parriott wants CGA to “contribute to the quality of life in our (grocery) community.”

“You know, I’ve watched so many of our prior CGA Chairs and they’ve blown me away with their talent and commitment,” Parriott shares. “I think, ‘gosh, how do I measure up to that?’”

He adds that he knows he’s walking in giant footsteps and hopes he can live up to the task.

“I guarantee that we’ll have fun,” he says.

“I like having fun while I work, to the point that my HR people (and his wife) tell me to take it down a notch, or two.

“Heck with that,” he says. “Let’s live, laugh, and enjoy each day.” ■

The ONLY Federal Credit Union in the United States chartered to serve grocery industry employees and their families www.trugrocer.com

DIS

G N I T P RU D L I W THE

T S E W

By Len

Lewis

THE GREATEST CHALLENGE FACING CALIFORNIA’S GROCERY MARKETPLACE MAY NOT BE THE STATE’S ECONOMY, POLITICAL ATMOSPHERE, OR EVEN ITS FROSTY BUSINESS CLIMATE. It may very well be the expansion of European-based hard discounters like Aldi and Lidl, and homegrown companies like Dollar General, which have had a tremendous impact on retailing around the world and have now set their respective sights on the Wild West.

“It’s pretty clear that they are going to disrupt markets as they’ve done in multiple countries,” said George Faigen, Partner, Oliver Wyman North America Retail Practice, noting that some retailers are still in denial due to the mistaken perception that Aldi and Lidl just cater to low-income shoppers and won’t appeal to loyal customers.

Martin Mumford, Principal in Oliver Wyman’s San Francisco office, who joined Faigen for a joint presentation on hard discounters at the CGA Strategic Conference, agreed.

But he noted that their price image is not to be taken lightly.

“If you’re going from L.A. to Long Beach, Aldi billboards are advertising 40 percent savings,” he said. “That’s the number for you to compete against. It’s the thing you’ll have to disprove. Even if you have customers who don’t care about money, 40 percent is enough to make them take notice.”

This has happened in virtually every market these retailers have entered – especially places like Germany where hard discounter market share has gone from zero to 40 percent.

Or, in the U.K. – one of the most concentrated grocery markets in the world – where during an economic downturn they built up a combined 12 percent share.

Yet their true impact cannot be measured by price alone and some of the same factors that led to their success in European markets, for example, are starting to show up in the U.S., according to Faigen.

“There’s no question that price is an attraction,” he said. “But that alone is not sufficient. Good value for the money is what people are getting at Aldi and Lidl – high-quality products at a reasonable price is what’s made a difference to customers.”

The same strategy is in play in the U.S. “Once you’ve cracked what consumers want in the U.S., it will be easier to distribute products since we have one language among 350 million potential customers and similar regulations making it easier to comply,” Faigen noted.

But the challenge for hard discounters is to localize the stores since consumer expectations can be far different in the Pacific Northwest than they are in other parts of the country. Much of this is accomplished by focusing on identifying local tastes and using local suppliers to fulfill them.

Clearly, localization is their forte, according to Faigen.

“For example, they can look at an analysis and decide that a 12-pack of yogurt should have six blueberry, three strawberry and three raspberry and that’s how the pallet shows up on the shelf,” he said.

“That yogurt split is designed to match customer demand in that market. This also lowers overall labor costs so the flow through to what’s picked up by consumer is a well thought out idea.”

Nonetheless, hard discounters chains have the ability to exploit markets like the U.S. since they’ve successfully entered markets in more than 20 countries with their format.

Continued on page 40 ▶

CAL I FO RNIA GRO CER | 39

◀ Continued from page 39

“I think we’ve seen Lidl’s opening gambit with stores that are bigger than their traditional format,” Faigen said. “The U.S. stores are 20,000-square-feet, plus. They still represent quick in and out experiences. It’s unlikely they’ll operate 50,000-square-feet stores because they’re not in the business of overwhelming consumers with choice.

They believe in a highly edited approach.”

But, he said, if you can curate that list and find the connection with the consumer, it’s an advantage format with higher returns and margins than traditional supermarkets.

While hard discounters tend to start market penetration with barebones stores, somewhat upscale formats are part of the mix, said Mumford.

“That’s been their M.O. from entry onward and we’ve seen it in the U.S. and elsewhere,” he said. “They tend to start with barebones stores and as they learn about their customers they make the stores more visually appealing.”

Faigen added: ”We’re now seeing Lidl’s first stores with inviting outdoor facades, nicer in-store fixtures, and bakeries that not only offer the look of freshly prepared product but an appetizing smell. They’re making the case that the store is cheap and cheerful and betting people will come back as long as the store meets their needs.”

iStock

While other discounters like Amazon are making inroads, when it comes to storefronts, Aldi and Lidl are in a class by themselves, Mumford noted, emphasizing their strong private label offerings.

This has created a real passion among shoppers overseas.

ALDI AND LIDL ARE IN A CLASS BY THEMSELVES, MUMFORD NOTED, EMPHASIZING THEIR STRONG PRIVATE LABEL OFFERINGS. THIS HAS CREATED A REAL PASSION AMONG SHOPPERS. 40 | CAL I FOR N I A G R OC E R

“These are not just discounted versions of national brands, or off brands you’d buy because they’re cheap,” Faigen said. “Lidl, Aldi, and Aldi’s Trader Joe’s, have found a way to offer private brands that people really love. That’s a strong driver in getting people to come back.”

For most hard discounters, the biggest challenge may be the initial trial, getting people to pick a product off the shelf and like it enough to come back.

“Lidl has done an admirable job in this area by getting people excited through social networking,” Faigen said. “We’ll see if that’s successful here.”

Social media is useful for attracting a certain demographic and certainly less expensive than TV advertising, but Lidl will probably use print circulars a lot less than U.S. grocers.

“For one thing they run everyday low prices so there’s less to promote,” he said.

“Also (circulars) are old school and not the best way to go to market if there are other alternatives.”

This is something hard discounters have already figured out in 26 other countries.

Their expertise is entering a country and finding a way to connect with consumers.

“Lidl especially has done a good job of tailoring their offerings and getting people into the stores,” Faigen said. “Their products are award winners in many categories and the value is hard to argue. They turn people into savvy shoppers who are happy to share their experiences with friends and that’s the fundamental lever to play.”

Mumford and Faigen said that retailers are wondering if these chains can sustain a higher quality offering given their low-cost business model.

“Incumbent grocers in an area are hoping they’ll fail as they try to move upscale,” Faigen said. “Hard discounters are making a calculated play to grab a large share of the market by improving their offer and bringing in a new wave of customers for value.”

At this point, no one knows exactly how these chains are planning to expand. But the probability of them both being national chains is very high, given that they are not running into opposition that would negate their cross-country plans.

“It means volume is fundamental,” he said.

“Then if hard discounters come in and start taking your volume, it’s a death by 1,000 cuts.”

“California is an underpenetrated market from a hard discounter point of view,” said Mumford. “Aldi came to Orange County a year ago and a lot of grocers have not played defense to the extent they should against these hard discounters. That’s going to be a shock to California’s system.”

“A company like Kroger has developed private brands they can compete with,” he said. “But as a rule, small stores do not have strong private brands. They can get private label, but it’s not a private brand.”

Nonetheless California offers some significant challenges to these hard discounters the biggest being the very specific food tastes of the Latino population that would require more local sourcing.

As noted, this is where private label comes into play, Mumford said.

As Faigen noted: “American consumers have expressed their interest in private brands.

Kroger has surpassed analysts’ expectations and Trader Joe’s has proven that an unknown brand can connect across an entire store.

Hard discounters don’t have to pioneer the idea. They just have to execute very well.”

WHILE NO ONE LIKES TO THINK ABOUT THE PROSPECTS FOR A PRICE WAR IN CALIFORNIA, HARD DISCOUNTERS CAN CHANGE THE RETAIL DYNAMICS. On the other hand, Mumford pointed out that expanding into an area like Texas has given hard discounters insight into the Hispanic audience and, as a result, will refine their offer.

Meanwhile they’re going to pick locations that fit their needs and ignore some states where consumer traffic volumes are less attractive, Faigen said. He thinks North and South Dakota might be low on their list.

But places like California, Texas or Chicago, that offer high volume will likely get higher priority.

While no one likes to think about the prospects for a price war in California, hard discounters can change the retail dynamics.

“There are a lot of smaller chains here that would not be able to withstand the loss of customer traffic and volume,” said Faigen, noting that higher labor and healthcare costs, combined with low commodity price increases and no inflation will put a strain on how retailers run their business.

Overall, Mumford and Faigen see defense against hard discounters taking place on several fronts.

First, retailers differentiating themselves on fresh products and banking on consumers doing the rest of their shopping while they’re in the store. Second would be the online offerings like click-and-collect and competitive pricing on private brands.

“We also recommend that grocers radically change their cost structure,” said Faigen.

“You have to invest in some products so the gap between you and these hard discounters is reasonable,” he said, “Anything above 15 percent becomes noticeable and 20 percent gets customers to wonder why. High-low retailers will say they sometimes have lower prices than hard discounters when things are on promotion.

“That may be true but consumers clearly believe that whoever makes an EDLP offer is playing fair and makes them feel more comfortable than a high-low offer where they win on some days and not others,” he added. ■

CAL I FO RNIA GRO CER | 41

C O N G R A T U L A T I O N S .

BRISTOL FARMS WOULD LIKE TO WELCOME THE IN COMING CGA CHAIRMAN

B O B PA R R I O T T Twain Harte Markets

T H A N K

Y O U .

WE WOULD ALSO LIKE TO THANK THE OUTGOING CHAIRMAN FOR HIS DEDICATION AND CONTRIBUTION

JIM WALLACE Albertsons Companies

CGA NEWS

SEC TOURS SUPER A FOODS The CGA Supplier Executive Council hosted its final store tour of 2017 with a trip to Super A Foods in Temple City. President and Chief Operating Officer Jim Amen, and Chief Financial Officer and Controller Renee Amen, led the group through their store as they shared their insights of how they are dealing with the changing climate of how people shop. After the walk around the store, the Amens continued their conversations and treated the group to lunch from their delicious deli bar.

The tour was the fourth in 2017. Previously, SEC members toured Mollie Stone's Market, Pavilions and Save Mart. Tours are exclusive to SEC members.

To learn more about the Association's SEC program, contact Sunny Porter, CGA, at (916) 448-3545.

RMS EXECUTIVE RETIRES, INTERIM PRESIDENT SELECTED

Retail Marketing Services Inc. President and Chief Executive Officer David Reid retired on Nov. 17, 2017. Matthew Dodson, Executive Vice President for RMS, has been named the company’s Interim President and CEO. Reid was appointed President and CEO of the CGA holding company for-profit businesses after its acquisition by the Association following a merger with the California Independent Grocers Association in 2016. The company operates the California Shopping Cart Retrieval Corp. (CSCRC) and the California Coupon Redemption Center (CCRC). It also operates a shopping cart repair and maintenance business line. RMS is headquartered in Burbank, Calif.

Dodson joined CSCRC in 2009 as Executive Vice President and was responsible for managing all business lines, implementing strategic growth plans, budgeting and supervising department directors. He also oversaw the restructuring of a business line for coupon processing.

David Reid

44 | CAL I FOR N I A G R OC E R

Matthew Dodson

Prior to that, Dodson served as Director, Local Government Relations, for the California Grocers Association. His responsibilities included representing the grocery industry before city and county government throughout Southern California.

CGA NEWS

Hall of Achievement Inductee Passes Away Joseph “Joie� Gordon Scolari died on September 2, 2017, at his home in Pismo Beach.

He was 86 years old. Joie and his two sons, Joey and Jerry Scolari, were inducted into the CGA Educational Foundation Hall of Achievement in 2003.

Joie was born on Dec. 12, 1930 in Santa Maria, Calif. and was a lifelong resident of the Central Coast. He started working when he left high school as a sophomore in 1947 to join his father, Joseph, in the original Scolari and Son Market in Orcutt, Calif.

Later Joie, along with his wife, Eldeen, opened and operated the original Scolari's supermarket chain on the Central Coast, which grew to 12 stores prior to being sold to the Lucky supermarket chain in 1979.

The Scolari family remains in the grocery business. Joie was partner in a chain of stores in the Central Valley right up to his death, while his sons, Joey and Jerry, continue to run eight stores in Northern Nevada. Joie's daughter, Kristie, and sonin-law Rudy, also reside on the Central Coast where they own and operate several commercial properties.

Joie Scolari

NEW MEMBERS CGA welcomes the following members:

Agilence, Inc. 1020 Briggs Rd Mount Laurel, NJ 08054-4101 Contact: Brian Donnelly, Dir., Marketing Email: bdonnelly@agilenceinc.com Tel: (856) 366-1200 Website: www.alto.us

Cozzini Cutting Supplies, LLC 3135 MacArthur Blvd Northbrook, IL 60062-1903 Contact: Cindy Maganzini, Sales Email: cfmaganzini@cozzinicuttingsupplies.com Tel: (781) 983-1888 Website: www.cozzinicuttingsupplies.com

The Market at Edgewood 2170 W Bayshore Rd Palo Alto, CA 94303 Contact: Emel Mutlu, Owner Email: emel@marketatedgewood.com Tel: (650) 665-7592 Website: www.marketatedgewood.com

NGB Markets, Inc. 555 Bryant St # 237 Palo Alto, CA 94301-1704 Contact: Rock L. Clapper, Chief Executive Officer Email: rclapper@ngbmarkets.com Tel: (650) 646-4931 Website: www.ngbmarkets.com

La Croix Sparkling Water 14405 E Artesia Blvd La Mirada, CA 90638-5804 Contact: Tony Mucci, Regional Sales Manager Email: tmucci@shastabeverages.com Tel: (626) 841-1810 Website: www.lacroix.com

CAL I FO RNIA GRO CER | 45

r o f t s u j t o It's n

t s a f k a Bre e r o m Any

46 | CAL I FOR N I A G R OC E R

ams, e t d n a ip h s r e d t on lea r e p to x e g d in t n t a e r g e , k s a n e io p t s a ganiz “As a r o h it w g in k r o iated w c s o y s a s d a y s e m g d n n e e ll p a Is and ch s ic m a n y d e h t see firsthand anuele .” m s E s e n in le s a u G b y a B g in Shift Yes with runn Founder,

founder, Shift Yes

And in my experience, no matter the industry, business model, or size, from grocery retail to manufacturing to hospitals; there is one commonality that determines success over struggle: organizations that prioritize culture are winning.

For the most part, companies spend their time and energy focused on developing and executing business strategy. For many, company culture is just something they hope to get right, often waiting to address it until it’s broken and the consequences become too costly to keep ignoring.

Business visionary and author, Peter Drucker, famously said, “Culture eats strategy for breakfast.”

This quote couldn’t be more on the money.

Continued on page 48 ▶

CAL I FO RNIA GRO CER | 47

◀ Continued from page 47

The Case for Culture The most critical mistake an organization can make is to overlook the importance of culture and simply leave it up to chance.

Culture is less visible and tangible on the surface than things like sales numbers, which makes it easy to slip down the ladder of priority.

resulting in highly engaged employees outperformed their peers by 147 percent in earnings per share.

the tab – which is typically 100-300 percent the cost of the employee’s annual base salary, according to Gallup).

Similarly, the Workplace Research Foundation proclaims that increasing investment in culture and engagement by just 10 percent can increase profits by $2,400 per employee on an annual basis.

So the question is, how can you actually create and effectively drive culture in an organization?

There is a way. Just know this with absolute certainty: hanging a poster on the wall expressing your company’s core values does nothing to actually impact culture. As you may have heard, the values displayed in the lobby of Enron, the company bankrupted by fraud and whose leaders went to jail, were Integrity, Communication, Respect and Excellence. So there’s that.

“Flat out, culture is good for business. And companies that still need convincing are being left in the dust.”

The actual answer here is simple and indisputable: You must treat culture as a strategic priority.

You must create a plan.

But make no mistake, the negative impact of poor company culture is destructive to every aspect of an organization and its bottom line, including employee engagement, job performance, turnover, quality control, customer experience and loyalty, just to name a few.

I’m not just speaking from the heart, there’s unlimited data to support this reality.

According to a Gallup Report on the State of the American Workplace, companies that made a concerted effort to focus on culture and employee engagement outperformed companies that didn’t by 10 percent in customer ratings, 22 percent in profitability and 21 percent in productivity. Those companies also saw a 25 percent decrease in turnover and shrinkage, and saw almost a 50 percent decrease in safety incidents throughout the year.

If that’s not enough to convince you, the same report shared that companies who dedicated time and resources to building and cultivating a positive company culture

48 | CAL I FOR N I A G R OC E R

Flat out, culture is good for business. And companies that still need convincing are being left in the dust.

Where Companies Fail The fact is that even though companies may be aware of this reality, only about 25 percent of organizations today have an employee engagement and culture strategy in place, and toxic work culture is rampant. We have all either experienced it, left a job because of it, or know someone who's life is miserable due to it.

While things like great compensation go a long way to move the needle and improve workplace environment, it’s not enough to just throw money at people and stick a ping pong table in the break room. The hard truth is that you can’t pay someone enough to stay at a job they hate. When it comes down to it, culture matters more.

So yes, it’s important. Yes, you’re leaving money on the table if you don’t address it.

And yes, your employees will leave if they don’t feel engaged (and you’ll be stuck with

No company in the world leaves anything critical to the business up to chance. When faced with having to successfully market a brand, we develop a sophisticated marketing strategy.

We define an executable plan based on desired outcomes and then put that plan into action. We don’t rely on hope for great sales results, we make sales a strategic priority.

Same with finance, operations, IT, customer service, etc.

For the love of all that’s good in the world, do not risk banking your company culture on hope. We have to approach culture the same way we approach any goal where we want to achieve success: define it, create an action plan against it, and execute it. To create and drive an awesome culture you have to ask the right questions and get clear answers.

I created the following guide as a resource for teams I work with to build a strategic culture plan to drive workforce engagement and team performance. The questions included are by no means comprehensive, but they are a jumping off point to define what culture means to your organization.

Continued on page 50 ▶

salesfrom a

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◀ Continued from page 48

8 Steps

te gic a r t S y n a p m o C to a ure Plan Cult

Step One Define your driving story.

What is your company story? Why are you in business? Why do you do what you do? When people show up every day at work, what are they contributing to? Where are you headed as an organization? If everyone in the organization is holding an oar, this is why they row and what they are rowing towards.

Step Two Articulate your values.

What are the ideals that drive your behavior as a company? Use action words. Integrity is a noun, which is fine, but also find the actions and verbs. If you say integrity, answer the question of how do you execute integrity? Get specific and clear. What five actions exemplify integrity? These are your ground rules. This is a guide to how you behave, not merely what you believe.

Step Three Describe how it feels to be here.

What is the experience of people operating inside your company?

What five adjectives accurately describe what it feels like to part of the team? What will employees tell their friends and family about how it feels to work at your company?

Step Four Establish traditions.

Identify what systems, extra steps and traditions you will implement to support the success and execution of the plan. This can include hiring practices (be specific about hiring), company events, reward and recognition programs, the way you start meetings, everyone slapping the exit sign on your way out the door, and whatever else you can dream up.

So, What Next?

You’ve done the work to build your strategic culture plan, now what? The best place to start is with your employees. Share your culture plan with them. Get them involved as early and often as you can in the process.

Making sure they feel like they have a hand in creating it is a recipe for buy-in. Ask them for feedback.

Does what you’ve created resonate with their experience? Do they live it every day? And if not, what could be better? What needs to change for employees to feel engaged, bought in, and excited to come to work every day?

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Step Five Specify what success looks like.

What does it look like throughout the organization when you are successfully living your culture? How will employees at every level know they are positively and productively contributing to your company culture? What do you expect of your leaders in acting as stewards of culture and employee engagement? Define the results.

Step Six Get clear on how you measure success.

What are the metrics you use to gauge how successful you are at implementing your culture plan? How do you rate yourselves? How often do you revisit those results? How do you share them with leaders and the broader employee population? This could include employee surveys, exit interviews, productivity metrics, tracking turnover, conducting interviews to gather data, implementing focus groups, and/or tracking customer experience and feedback.

Step Seven Establish accountability.

What is your commitment as a team when it comes to culture?

What is expected of leaders and employees in acting in line with your culture? Who holds the cards, and how do you hold each other accountable to live this culture? What language and processes do you use to address it when you need to call each other on the carpet?

What are the repercussions for outliers who behave out of alignment with your values and ground rules?

Step Eight Capture the beating heart.

Now that you’ve outlined it in detail, define the essence of your culture in one sentence or idea. Do you have a name for it? Brand it. What is the heart of it? How would you describe your culture to someone outside of the organization?

And don’t just ask for that feedback once.

Have the courage to ask for it regularly and be willing to make changes based on what you hear.

Prioritizing culture is not a nice-to-have, it’s a must have. It is your competitive advantage and your way forward as a business. Ultimately, your focus on culture as a strategic priority will set you on a path to success, and those efforts will be felt throughout your organization. Your employees will be happier, your customers will be happier, your bottom line will be happier. ■

Editor’s note: International speaker Galen Emanuele is a featured speaker at the 2018 CGA Independent Operators Symposium on Jan. 7-14 in Kauai, Hawaii. Galen is an expert in human behavior and has worked with Fortune 500 management teams to create a radical shift in how people interact and communicate in business.

Thank you for your support of Kellogg products.

Congratulations to incoming CGA Chairman Bob Parriott and Thank you to Jim Wallace for your Dedication and Contribution to CGA as Chairman this past year.

The

Road Trip to Everywhere

Good

By Ronald Fong

President & CEO California Grocers Association

My Road Trip Through Central California to Visit “One Customer at a Time” Back in the 1960s there was an airline commercial where the CEO announced to his team that they were going back to doing business the “old fashioned way, visiting their customers face-to-face, one person at a time.”

Jyoti Singh, Aldee Market

I was probably eight-years old at the time but somehow in the back recesses of my mind, the message must have stuck with me.

Some 40 years later, I am the CEO of a large trade association with hundreds of members doing billions of dollars in business and an immeasurable amount of goodwill for their communities.

This past summer, I asked my team to put together a road trip where I could visit some of the smaller, family grocery store members down the Interstate 5 corridor. Little did I know that the trip would pepper me with the kind of rich, dedicated and heart warming stories that I will never be able to forget.

I loaded up the silver cowboy Cadillac full of association “S.W.A.G” (stuff we all get), thinking that surely my small-town members

would get a kick out of the latest logo golf balls or leather portfolios. I even decided to dress down for the part, replacing the standard issue “lobbyist special” business suit for nice jeans and a vest jacket.

My strategic thought process was that my members would identify with me more if I dressed more like them. My first stop was Lodi to visit Aldee Market, a single-store independent that has been an association member for over a decade. Lodi has been skipped over as a town where one gasses up on the way to Stockton. I drove up to the small gravel driveway and was greeted by the local taco truck in the parking lot.

The food must have been fantastic as the local construction workers lined up eight deep for their daily lunch.

I entered the shoe-box size, dimly lit store where I was greeted with the brightest smile from the store's owner, Jyoti Singh, who was pulling double duty that day, waiting on customers at the checkstand and ordering the only other employee in the store to take care of a customer looking for ice.

Mr. Singh has been in the grocery business for 28 years, immigrating from Punjab, India to America for a better life. His brother-inlaw worked in a convenience store in San Jose. Not having any other leads for work, he followed in his footsteps and therein started his journey in the grocery business.

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Business boomed for many years for Mr. Singh and his wife until competition moved in down the other end of the dusty road.

Since then, it has been survival of the fittest for him but he manages to keep busy enough for he and his wife Satbir to live the American dream. I’ve heard the American dream story many times, but it really rang through as I left Jyoti happily waiting on his customers and holding an animated conversation about the special at the taco truck.

dilemma has reared its head in generational family-owned grocery stores – who will take over the business when the elder generation decides it is time to retire?

In Tom’s case, his success has allowed his children to pursue professional interests.

Tom’s son is finishing medical school and his daughter is a successful accountant for a large firm. I learned that success in the Gong’s case was a different kind of stress – who would continue the blood, sweat and tears it took to build this empire?

“The grocery business for many of these families was not about making as much money as humanly possible, but rather about starting a business known for first chances and opportunities.”

Skip Nugent, Best Buy Markets IGA

The barren I-5 freeway has left me hypnotized in my thoughts. Why did people settle in the Central Valley? What were the family or life circumstances that brought them to Lodi, to Stockton and to my next stop in Visalia. Like many California communities, Visalia's early growth came from the miners seeking gold in the mid1800s. And like many other Central California communities, its main economic driver is agriculture.

For Tom Gong and his family, it was simply opportunity. One store turned into many and now the family has amassed a grocery empire – Gongco Foods/Food 4 Less – in the Central Valley. Tom, the patriarch and founder of the company, dutifully does his rounds at the store each morning.

The day I visited, his sister, Mary, was at one of the stores diligently stocking the candy aisle as she has done for decades.

However, a growing

My own family went through a similar situation in the early 1990s. My grandfather started our family grocery in 1941 near Sacramento. My dad and my uncles expanded the business to a nice sized family business into the 90s. But competition was tough.

The big box stores were filling their parking lots, literally a half of a mile from our best store. Decades-long customer loyalty gave way to the sharp pricing the big box stores were able to offer and soon our customer base dwindled with it. Not having the stomach to fight, my dad sold it all in the early 90s.

When is it time to walk away and when is it time to dig deep, fight and survive? This has been the age-old question in family grocery stores since the beginning of time.

On my way back north on my favorite interstate, I stopped in the tiny Swiss town of Kingsburg. Kingsburg? As many times as I’ve driven north and south on I-5 on the way to more popular destinations like Monterey or Sacramento, I have never even noticed Kingsburg.

Rob and Billy Gong, Kingsburg Market

Once there I pulled into the military neatness of tree-lined streets and manicured, working-class homes. There was great pride in the effort of maintaining these residential properties, almost as if they were to prove the point that this particular community would not become abandoned and irrelevant.

For all intents and purposes, Rob was already the store’s operating manager, doing his best to keep up with modernizing, remodeling, advertising and dealing with the competition. But the task is daunting and Rob wonders how much energy he has left to keep his dad’s legacy alive.

There was a real sense of small Americana and community here. Signs and banners waved, proudly advertising the largest community picnic and cook-off that was coming over the weekend.

Should he sell the landmark business while he still can? Or would selling break his father’s spirit and drown his legacy?

I meet Billy Gong and his son Rob (no relation to Tom) at the only Chinese restaurant in the two signal light town. They all know Billy, of course, and ask him if he wanted to order his usual lunch to share with his new friend.

Saying our goodbyes, Billy asks me to linger for a few minutes so he could run to his house to retrieve a gift for my mother, a woman that he had never met.

Over lunch, I discover that at 88, Billy still dutifully works at Kingsburg Market in the morning to count the previous day’s receipts.

He explains that over the years, he has been going in later and later, after his yoga, tai chi or exercise class. Of course, yoga for an 88-year-old, why didn’t I think of that?

We talk about the good times, when Chinese families really owned a good part of the independent grocery space. Through sheer determination and hard work, Chinese families made a good run at operating successful family businesses. But unlike families like Tom Gong, many of us didn't keep up with the marketing, technology and trends necessary for survival. Billy's succession plan was to leave the family business to his dutiful son, Rob. Peter Lau

When is the right time to get out and pursue a career that he had not inherited?

Moments later, he brought two bags full of colorful “Hoong Jook,” a bright red thumb-size bean, popularly used in Asian soups. Billy had grown the Hoong Jook in his backyard and wanted to share it with my family. I was so touched that our hours long visit had bonded us in that way. I couldn’t stop thinking about Billy and Rob and the impact that he has left in the tiny town of Kingsburg.

I made four more stops on my "road to everywhere." I had tremendous visits with Greg and Teresa King of California Fresh Market, Skig Nugent of Best Buy IGA, Peter Lau with R-N Markets and John Spencer of Spencer's Fresh Markets. Each of these independent grocers had equally unique and inspirational stories of success.

It was Monday morning at 9:35 a.m. and the Senior Management Team meeting was running late, I was keeping track.

After all, I was bursting at the seams to tell my team what the road trip to everywhere good had uncovered.

Mary Gong and Tom Gong, Gongco Foods/Food 4 Less

The grocery business for many of these families was not about making as much money as humanly possible, but rather about starting a business known for first chances and opportunities. The grocers I visited started their businesses for the sake of keeping their families and communities together.

Necessity and quality of life presided over dreams of golden profits and healthy stock symbols. I only outlined three stories, but all the stories from my trip were equally touching.

From an association management standpoint, I learned more from my members than they could learn from me.

I passed the idea of this road tip to my management team and hope they are inspired to take the same journey, one customer at a time. ■

Teresa Becker-King and Greg King, California Fresh Market

John Spencer

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Congratulations to incoming chair

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Eric Pearlman, Sr. Director Independent Sales Eric Pearlman, Dir Independent Sales WC

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www.cswg.com www.cswg.com

The

“WHY?” Behind the

Dine

By John Cleavenger

58 | CAL I FOR N I A G R OC E R

Since 2011, consumer spending in the foodservice channel has seen significant growth, with U.S. diners now spending on average, $144 per month on food prepared outside the home – $25 more than two years prior – according to new research published in the third edition of “The Why? Behind the Dine.”

This annual report released by Acosta Sales & Marketing, a leading provider of integrated sales and marketing solutions for major food and non-food manufacturers, distributors and operators across all away-from-home meal channels, and Technomic, a fact-based research and consulting firm in the food industry, reveals this spend represents 35 percent of U.S. diners’ total monthly food budget, a jump of five percentage points from last year.

“Along with an increase in spending on food prepared outside the home, the market is also seeing a surge in the variety of dining options available, from different types of cuisine to new ways to eat off-premise, such as ordering delivery from sit-down restaurants,” said Colin Stewart, Senior Vice President at Acosta.

“More than anything, our research makes it clear that dining out is more than just a meal. It’s an experience for diners – and a growth opportunity for foodservice operators.”

“The rate of consumers dining at restaurants over the last year has leveled off, but look beyond face value and you will see diners’ dollars are now being spread across various out-of-home channels, not only concentrated at dine-in establishments,” said Jennifer Passmore, Regional Vice President at Technomic.

“In fact, many diners anticipate spending even more on food prepared outside the home in the coming year, and they will have a full menu of dining options to choose from regularly.”

In addition to this growth in spending on food prepared outside the home, Acosta and Technomic’s “The Why? Behind the Dine” also unveiled the following foodservice trends:

More Than a Meal Total U.S. diners surveyed agreed that time spent dining out is both valuable and enjoyable, even more so than the year prior, illustrating how experiential factors frequently drive dining decisions.

• Sixty-six percent of diners agree they view mealtime as a valuable time to connect with family or friends.

• Sixty-four percent of diners say they love trying new restaurants.

• Sixty-three percent of diners agree that visiting restaurants is a form of entertainment for them.

• Forty-five percent of diners consider themselves adventurous eaters.

The Rise in Groceraurants Surveyed U.S. diners agreed that they have increased the number of times that have eaten prepared foods in the store dining area of a store that sells groceries (like Walmart, Target, Sam’s Club, Kroger, Whole Foods).

• Thirty-five of diner respondents indicated consuming food/beverages by this method in the past three months in the 2016 study, as compared to just 25 percent of diner respondents using this method in the past three months in 2015.

• Growth for 2016 was driven by the 54 percent of millennial diners (ages 18-35) and 40 percent of Gen X diners (ages 36-51) who said that they ate prepared foods in the grocery store dining area.

Off Premise Dining Survey respondents indicated an increased trend that they often get new ideas for home cooked meals when visiting restaurants.

• Forty-seven percent of diners respondents in 2016 agreed with this statement, as compared to 40 percent of diners who agreed with this statement in 2015.

• Fifty-eight percent of millennial diners and 53 percent of Gen X diners agreed with this statement in 2016 (versus 50 percent of millennial diners and 44 percent of Gen X diners who agreed in 2015).

Continued on page 60 ▶

CAL I FO RNIA GRO CER | 59

“Dining out is more than just a meal. It’s an experience for diners – and a growth opportunity for foodservice operators.” ◀ Continued from page 59

Today’s Diner Spending on food prepared outside the home varies greatly across generations, with millennial and Gen X diners taking the lead.

• Forty-two percent of millennials’ monthly food budget is spent on food prepared outside the home, more than any other generation. This is seven percentage points above the percent of the monthly food budget spent by total U.S. diners on food prepared outside the home.

• Thirty-five percent of Gen Xers’ monthly food budget is spent on food prepared outside the home.

• Over the next year, 53 percent of millennial diners plan to eat more meals outside the home.

Options Abound Dining at restaurants remains the most popular format for eating out, but compared to the year prior, more diners report using carryout, delivery and drive-thru options, with convenience being a primary motivator.

• Forty-six percent of diners often read restaurant menus online before going there to eat.

• Sixty-one percent of diners on Facebook follow restaurants to learn about new menu items and for coupons/offers.

• Twenty-eight percent of diners with kids indicate they often tell family and friends about their restaurant experiences on social media with many including photos of their meals.

“There’s no question that dining out is in,” added Stewart.

“However, restaurant owners and foodservice operators need to consider what they can offer diners beyond good food. This can include focusing on factors that create a unique dining experience by differentiating elements such as the atmosphere, convenience and ways to connect with others.”

The third edition of “The Why? Behind the Dine” study was fielded in December 2016 in partnership with Technomic Inc., using a random sample of 1,500 U.S. diners. To access the full report, visit www.acosta.com/thewhybehindthedine. ■

• The rate of U.S. diners who ate in at a restaurant’s dining area in the past three months has remained steady yearover-year at 82 percent.

• Seventy percent of diners ordered carryout from a restaurant over the past three months, while 67 percent ordered from a drive-thru, and 50 percent ordered delivery food in that same time period.

• Fifty-six percent of millennial and Gen X foodservice dollars are being spent “off-premise” (such as through carryout or delivery).

Social Influencers The digital world serves as a catalyst for dining decisions as U.S. diners research options online and continue the conversation on social media by posting reviews of their experiences.

• Forty-nine percent of diners look for coupons/offers online for restaurants.

60 | CAL I FOR N I A G R OC E R

John Cleavenger is Senior Vice President & Managing Director, Strategic Advisors for Acosta Sales & Marketing and moderated a Whiteboard Session at this year’s CGA Strategic Conference entitled, “The Why Behind the Dine.”

KNOW THE LAW

Coffee Debate is Coming to a Close

BY: LEIL A BRU D E R ER & PAT R I C K V EA S Y, DOWNE Y BR AND L L P

A Prop. 65 legal battle that has been brewing for years may finally be resolved.

For the past six years, a collection of coffee brewers and retailers have been embroiled in a legal battle with Council for Education and Research on Toxics (CERT) over whether certain coffee products must include a Proposition 65 warning.

The litigation, which proceeded to trial in September 2017 before Judge Elihu Berle in the Superior Court for the County of Los Angeles, is expected to finally resolve that very question in the next few months.

Needless to say, the coffee industry, including grocers and other retailers that sell coffee and that are not directly involved in the litigation have been following the case closely. As explained in greater detail below, the outcome could have a far-reaching impact on coffee manufacturers and retailers, including potential exposure to Proposition 65 litigation and penalties, and a clear obligation to provide warnings.

California’s Proposition 65, also known as the Safe Drinking Water and Toxic Enforcement Act of 1986 prohibits businesses from exposing people to chemicals on the Proposition 65 list without providing “clear and reasonable” warnings.

Proposition 65 violations carry substantial legal implications as it authorizes monetary penalties of up to $2,500 per day per

62 | CAL I FOR N I A G R OC E R

violation. In the consumer product context, each sale or each exposure to a Prop. 65-listed chemical in a product can be considered a violation. In addition, alleged violators are also required to pay the reasonable attorney’s fees of private plaintiffs who bring Prop. 65 actions on behalf of the general public.

The chemical involved in the coffee litigation is acrylamide, which California’s Office of Environmental Health Hazard Assessment (OEHHA) originally added to the Proposition 65 list in 1990 as carcinogenic.

Later, in 2011, OEHHA identified developmental toxicity and male reproductive toxicity as endpoints for acrylamide. Acrylamide forms in certain plant-based foods when they are cooked or roasted under high temperatures. Apart from coffee beans, acrylamide is also commonly found in starchy foods such as french fries and some potato chips.

CERT filed a Proposition 65 action against several representative coffee merchants including Starbucks Corp., 7-Eleven Inc. and Peet’s Coffee & Tea Inc. in 2010. CERT argued that the defendants failed to provide Proposition 65 warnings when selling “ready-to-drink” coffee to consumers in California.

In addition, CERT contended that the defendants committed a Prop. 65 violation “every moment” an individual consumed ready-to-drink coffee without first receiving a Prop. 65 warning.

Thus, according to CERT, the defendants are liable for a civil penalty of $2,500 for each and every sip of or exposure to coffee of an individual in California without first providing a Prop. 65 warning. CERT’s allegations amount to many millions of violations, and likewise, potentially millions of dollars in civil penalties.

Because of the substantial financial penalties at stake, some of the named defendants have opted to negotiate a settlement with CERT rather than fight the allegations. For example, in October 2017, 7-Eleven agreed to a settlement in the amount of $900,000 and to post Prop. 65 warnings at stores throughout California.

The company’s monetary settlement amounted to $545,185.19 in civil penalties and $354,814.81 for CERT’s attorney’s fees and costs.

The remaining defendants are continuing to fight. Initially, they argued that coffee’s health benefits are not undermined by the presence of acrylamide, but the Judge found that the mere presence of acrylamide triggers a duty to warn consumers under Prop. 65.

KNOW THE LAW

iStock

“the defendants are liable for a civil penalty of $2,500 for each and every sip of or exposure to coffee of an individual in California without first providing a Prop. 65 warning. ” In the second phase of the trial, the defendants are arguing that Prop. 65 warnings are not required for the ready-todrink coffee products the defendants sell in California because there is a Prop. 65 exemption for chemicals such as acrylamide, that are produced in the process of cooking foods to make them palatable and to avoid microbiological contamination.

Although CERT’s complaint in the current litigation is limited to “ready-to-drink” coffee, it is likely that future 60-day notices and civil actions against manufacturers, grocers and retailers will extend to the sale of packaged coffee products such as coffee beans, ground coffee and instant coffee without a warning because acrylamide is produced when coffee beans are roasted.

The Judge is expected to rule on the defendants’ arguments in the coming months, and if he rejects the defense, the next phase of the trial will focus on remedies.

California grocers should determine the universe of coffee products they sell, and ensure that the manufacturers and/or distributors of those products retain any Prop. 65 liability for those products, either via agreements with those manufacturers/ distributors or through other mechanisms that make clear that the manufacturer/ distributor is responsible for giving any required Proposition 65 warnings.

Unless the Judge sides with the defendants in finding an exemption exists, coffee retailers will be required to provide a Prop.

65 warning when selling ready-to-drink coffee, and those grocers and retailers not involved in the litigation could face Proposition 65 enforcement actions for past and future sales of ready-to-drink coffee without a warning.

Editor’s Note: Leila Bruderer is a counsel and Patrick Veasy is an Associate in the Sacramento offices of Downey Brand LLP. Both attorneys practice in the areas of environmental litigation, environmental compliance and Proposition 65.

In addition, grocers should determine whether they sell any private label coffee products, and ensure that those products include a Proposition 65 warning where required. ■

CAL I FO RNIA GRO CER | 63

CONGRATULATIONS Bob Parriott the New CGA Chairman of the Board

And, Thank You Jim Wallace, for your Tenure as CGA Chair.

ASR-Group.com

FOUNDATION NEWS

BRISTOL FARMS & HIDDEN VILLA RANCH EXECS TO BE HONORED Kevin Davis

Bob Kelly

The award dinner provides the grocery industry the opportunity to recognize the achievements of those individuals who, through their foresight and dedication, have enhanced California’s grocery industry.

Kevin Davis, Chief Executive Officer, Bristol Farms, and Bob Kelly, Executive Vice President, Hidden Villa Ranch, will be inducted into the CGA Educational Foundation Hall of Achievement at a gala dinner on March 21, 2018, at the Hilton Costa Mesa in Costa Mesa, Calif.

More than 600 industry peers are expected to attend. Registration and sponsorship information for the dinner and live auction can be found at www.cgaef.org, or by calling (916) 448-3545. Proceeds from the dinner help fund the Foundation’s college scholarship and tuition reimbursement programs.

The CGAEF Hall of Achievement is a prestigious award program developed to honor those who have contributed substantially to the benefit and advancement of the California grocery industry.

FOUNDATION UNVEILS $10,000 INDUSTRY SCHOLARSHIP In honor of all past and future Hall of Achievement Inductees, the CGA Educational Foundation established the Legends of the Industry Scholarship – an annual $10,000 award given to a single applicant pursuing a career in the grocery or grocery-related manufacturing industries. To be eligible for this award, applicants must:

• Be an employee or the dependent of an employee of a CGA member company for a minimum of one year,

• Be enrolled as a full-time or part-time undergraduate or graduate student during the 2018/19 academic term,

• Be pursuing a career in the grocery or grocery-related manufacturing industries, and

• Complete two essay questions related to the applicant’s career aspirations and personal hardship.

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Applicants not selected for the Legends of the Industry scholarship are eligible for other Foundation scholarships.

To learn more about this scholarship, or to submit an application, visit www.cgaef.org/college-scholarships.

66 | CAL I FOR N I A G R OC E R

FOUNDATION NEWS

2018 –19 COLLEGE SCHOLARSHIP APPLICATION PROCESS OPENS JANUARY 1 The CGA Educational Foundation will launch its annual College Scholarship Program for CGA-member company employees and their college-bound dependents on Jan. 1, 2018.

High school seniors, college undergraduates and graduate students employed by a CGA-member company, or have a parent employed by a CGA-member company, for a minimum of one year may apply online for more than $500,000 of scholarship funds. Selection criteria includes past and current academic performance, participation in school, community and extracurricular activities, and for some awards, financial need. Visit www.cgaef.org to submit an application.

RECORD YEAR FOR TUITION REIMBURSEMENT Through October 2017, the Foundation has awarded $186,085 of reimbursement grants for more than 1,100 completed individual courses; the highest award amount in a single year in the Foundation’s 25-year history.

In August, the CGAEF Board of Trustees increased the Tuition Reimbursement Program budget for 2017 from $150,000 to $225,000. To learn more about how the reimbursement program can offset your employee’s education costs, visit www.cgaef.org/career-development-tuition-reimbursement/.

myfood4less.com ranchosanmiguelmarkets.com

CAL I FO RNIA GRO CER | 67

The Stater Bros.® Supermarket “Family” salutes CGA 2016-2017 outgoing Chair Jim Wallace, Albertsons

Jim Wallace Albertsons

and welcomes CGA 2017-2018 incoming Chair Bob Parriott, Twain Harte Market

Proudly Serving Southern California Families Since 1936 CGA_JimWallace_2017.indd 1

®

Bob Parriott Twain Harte Market

11/10/17 10:48 AM

Congratulations to Bob Parriott on being nominated CGA’s new Chairman of the Board. We know you will do a great job!

1 5 MINUTES WITH…

Aaron Montgomery CO -F O UN DER AN D CO O O F CARLOTZ, A DJ UN C T PRO F ES S O R AT V IRG IN IA COM M O N WEALTH U N IV ERS IT Y

BY LEN L E W IS

Think about it! What was the most complex, time consuming and dissatisfying shopping experience of your life?

Most people would say buying a car. The problem is that the process hasn’t changed much since Model T’s first rolled off assembly lines in the Motor City. But Aaron Montgomery, Co-Founder and COO of CarLotz and an adjunct professor at Virginia Commonwealth University, thinks there’s a better way.

CarLotz, launched in 2011, is out to change the industry’s negative image with online and brick-and-mortar showrooms that take used car sales and consignments, pricing and customer service to a new level of simplicity and satisfaction – and the retail parallels are undeniable.

California Grocer: Were you raised in the car business?

Montgomery: “I had a good start. I was born and raised in Detroit. My grandfather retired from Cadillac after 40 or 50 years, my uncle worked for Chrysler and another one for Ford. I guess that’s how I got the bug.”

How did CarLotz start?

“At first, we wanted to raise $10-$15 million in financing for megastores that would compete with the big guys. But the funds warned us it was too big a bet with no room for error. We whittled it down to a $500,000 prototype that we could run day-to-day.

We discovered that our principal was right.

People wanted a place to sell their cars and a better way to buy them.”

People always say that buying a car is usually a terrible experience.

“Absolutely. It’s very painful. It takes about four hours to buy a car from the point you find what you want to the time you leave.

That includes all the negotiating or haggling.

In reality, it should boil down to two steps; ‘That’s the car I want, if you have it in red, I’ll take it.’”

Saturn tried to do that. Why did they fail?

“If you decide to disrupt things you have to go full on separate and keep it that way. Once Saturn had some early success, GM decided to bring back into the traditional fold. That’s when things started to fall apart. It would have been better if GM moved towards Saturn’s model.

“When you start from scratch like Saturn did, you have a lot of opportunity that an incumbent business doesn’t. Legacy setups aren’t as conducive to new ways of doing business.”

So big companies spinning off something different and innovative should keep things separate?

Hands off?

“Circuit City a great example. They spun off Carmax and in the end, Carmax is still here and Circuit City isn’t. You have to set up your organization to embrace disruption and fuel the fire or your core culture can end up snuffing it out.”

How did your business evolve?

“We thought our biggest customers would be the ones dissatisfied with the big dealers and tired of the hassle of doing it themselves. So we reached out and started calling the do-ityourselfers that were selling on Craigslist.”

Did that work?

“No. It turned out that do-it-yourselfers didn’t see it as a problem. They liked the process. The people who had problems were those that would never consider selling a car on their own and felt their only option was to go to a dealer. They were the ones who came to us in droves. If we went with our original plan, we would have spent millions on marketing only to find out that no one cared about our message.”

How else did the business model change?

“For one thing, we didn’t think about financing. We figured that people would finance with their banks and bring a check to us. But we found that 50-60 percent of people financed their purchase – even less expensive cars. They didn’t want to spent hours at their bank on financing. They wanted CatLotz to provide a turnkey service.

“Traditional dealers have dozens of banks on their roster. So we had to double down and build them too. And every time we go into a new market we look for new partners among local banks and credit unions. It was a long haul but now we finance 50-60 percent of our deals just like everyone else and we picked up a ton of incremental business we didn’t get before.”

Continued on page 72 ▶ CAL I FO RNIA GRO CER | 71

15 MINUTES WITH…

◀ Continued from page 71

How else did the business change?

“One of the businesses we ignored for the first six years was reconditioning and repairs.

Cleaning up the reputation of the used car business and getting people to trust you was hard enough. Service was another can of worms.”

What made you change your mind?

“We were missing a big opportunity. We outsourced that work and trusted our partners to tell us if a car was good. And we stood behind their work. We started doing it ourselves six months ago and it’s been a slam dunk. We’ve learned a lot about quality standards, where consumers have been overcharged and which cars we shouldn’t even bother selling.”

From your perspective, what can retailers learn from how dealerships operate? Are they dinosaurs?

“Not the dealerships themselves, but the system has to rethink itself in terms of what’s best for consumers. Airlines and cable companies are going through this. There’s a lot of inertia rather than pressure to change the business model. Eventually, companies will catch on to the fact that there’s opportunity in disruption – like Carvana selling cars online. In the long run if you don’t adapt, you will die. And it will be death by 1,000 cuts not one incident.”

Has the Internet been largely responsible?

“Twenty years ago people said it would be great to buy cars online. But the technology wasn’t there and dealers didn’t believe it would take off. It’s a different world.

Amazon can drone a box to your house in 30 minutes. I can order a car on my phone.

If you didn’t see the tea leaves 20 years ago you were probably in the majority. But if you don’t see the transition now you’ll be caught flatfooted. Now, you have to look at what will happen over the next 20 years.”

72 | CAL I FOR N I A G R OC E R

“If you don’t see the transition now you’ll be caught flatfooted. Now, you have to look at what will happen over the next 20 years.”

So everyone’s rushing to partner up with Amazon?

But not every marketing area is the same.

“Funny you should say that. Now that the company is making big purchases, everyone has a new thesis on how they could disrupt business. If they bought Whole Foods, what can’t they do? Who knows? The sky’s the limit.”

“There are things you can’t just cut and paste from a national playbook. For example, doing business in Texas is different from Florida or California. You need to be flexible enough to be married to your core business model and smart enough to know which parts don’t offer new opportunities.”

You talk about lean startups. Does that mean lower operating costs and less inventory?

“When you’re just starting to grow, everything feels like an all-in bet. The issue is how to move forward without just making the big bets?”

And simplifying the business for customers?

“By selling a car on consignment, we shorten the supply chain. We simplify the transaction. You bring a car to me, I list it and sell it to someone else. I’m more like a real estate agent for cars than a traditional merchant buying in bulk.

“This means higher premiums for the seller and better pricing for buyer. And we significantly reduce overhead and inventory costs. It’s an operation that’s easier to run than a traditional model because it’s not weighed down by a legacy structure.”

Does that also mean faster growth?

“Right now, we have six physical dealerships in the Southeast where our salespeople are salaried not on commission. It’s more like a Starbucks or Panera than a traditional car dealership.”

Basically, the business you started with is not the same as it is now.

“That’s true. In five years it might not be the same business we have now.”

What’s next on your agenda?

“We have to decide how finely honed the service offering should be whether we should offer pick-up and drop off service or broker car deals for customers through auctions.”

Does that mean expanding the size of your facilities?

“We started with small, boutique size locations that were only a couple thousand square feet and didn’t look like car dealerships. We found that managing smaller footprints is a lot harder and they are more vulnerable than larger stores.

“You have to see where the market’s taking you and keep making those small bets.” ■

Congratulations to

Bob Parriott From your friends at

Š Copyright 2017 Smart & Final Stores LLC

C L I C K-A N D -

COLLECT OR

H O M E D E L I V E R Y. . . ...that’s the Question

By Dan Dashevsky

F

ood retailers who already use online commerce, or are planning to enter the field, are faced with a dilemma: They now have to decide what delivery options to offer their customers.

Supermarkets must evaluate capital and labor investments associated with each option, as well as how much to charge for the service.

While click-and-collect may seem like a good, inexpensive option, our client’s data suggests that in-store pick up represents less than 10 percent of all online orders. Young shoppers living hectic lives are looking to save time.

While click-and collect saves a customer the time it takes to roam supermarket aisles, it still requires a trip to the store.

If you really want to make your customers happy, then go the extra mile and bring fresh groceries straight to their door. Thanks to you, they can spend that extra time with family and friends, and they will love you for that.

They will be your loyal and grateful customers for as long as you continue to provide them with good service and convenience.

As with grocery delivery, cost is an important factor when it comes to consumer interest in click-and-collect services. Almost a third of respondents (33 percent) would be willing to pay for the convenience of having their grocery order picked and packed by a personal shopper, ready for pick-up at their favorite store location.

When asked how much they would consider paying for this service, nearly 70 percent would pay at least $5. The results of the survey directly correlate with our clients’ data, and both show that fewer people are interested in and willing to pay for click-and-collect services than they are for home delivery.

Here’s What it Will Take Click-and-collect can be arranged by supermarket management with minimal cost and effort. Creating designated pick-up areas and establishing business processes where perishable items are kept refrigerated while awaiting the customer’s arrival are usually sufficient.

What Will Customers Pay to Play?

Setting up home deliveries, on the other hand, can turn out to be a costly and difficult to manage option. Managing vehicles and deliveries will require a serious commitment and strong operational skills.

A survey was recently conducted to determine if customers were interested in online grocery shopping. When asked how interested respondents were in having orders delivered to an address of their choice, more than 70 percent expressed interest.

Nevertheless, many of our clients have decided to manage their deliveries internally, explaining that it is very important for them to have full control of customer experience. As a result, they have been rewarded with customer loyalty and higher online basket sizes.

Sixty-three percent of those surveyed said they would pay a delivery fee between $0 and $10; 27 percent said they would be willing to pay a fee of between $10 and $15; 8 percent would consider paying between $15 to $20, and 3 percent said they would pay between $20 to $25 for the convenience.

“A fleet of supermarket-branded vehicles driving around neighborhoods brings online traffic and in-store customers,” says Solomon Gelbstein, General Manager of The Market Place supermarket in Brooklyn, New York.

The store has seen overall store sales increased by as much as 15 percent just

a year after launching online shopping – results that compare very favorably with Walmart’s 2.8 percent reported increase in 2016.

If you wish to reap the full benefit of offering e-commerce but are not yet ready to manage deliveries in-house, there are other options such as Shipt, Uber, Lyft, and other companies with which we integrate our services.

These delivery services will pick up the order from your store and deliver it straight to your customer, offering live driver tracking information that shows exactly how long the order will take to arrive. Some of these delivery services offer white label solutions, which may be a good compromise for many supermarkets.

While everyone is trying to figure out the right model and decide between click-and-collect and home delivery, it appears that the right model is to offer both. ■

Dan Dashevsky is Founder and Chief Operating Officer at My Cloud Grocer. Dan was the Independent Forum featured presenter at this year’s CGA Strategic Conference.

CAL I FO RNIA GRO CER | 75

!

OUTSIDE THE BOX N EW RETAIL PERS PECTIV ES

Don’t let anyone tell you there are no differences between men and women – at least when it comes to retail loyalty programs, according to research by Kantar TNS. For example, approximately 54 percent of men use the in store navigation feature on their smartphones compared with only 36 percent of women. And while nearly 90 percent of women are members of at least one loyalty program, only 71 percent of men have it.

GENDER LOYALTIES

Men and women also respond differently to what they want from a loyalty program. Fifty-five per cent of women say offers and promotions to be quite important and are more interested in the quality and quantity of the rewards. Men find digital achievements and games more important.

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The Show Must Go On Everyone thought circus was dead when Ringling Bros., and Barnum & Bailey folded up its tent earlier this year. No so! It just needed a format change.

The 150-year-old tradition is alive and well at the Eastern States Exposition, a New England fair also called the Big E, which has seen attendance double to 1.4 million visitors annually.

The new format is more financially manageable since there are no touring costs and only one ring so it’s less expensive to produce. It’s become so popular that the format might be expanded nationally. iStock

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OUT OF THE BAG

TALKING BACK If you think smart speakers like Amazon’s Echo are just another fad or toy – think again.

The market is growing quickly and the item stands to become as common in the home as a toaster. About 10.7 million Amazon customers in the U.S. owned the Echo at the end of this year’s first quarter, compared with three million a year ago. Gartner market research believes spending on smart speakers will be $3.5 billion globally by 2021.

Photo by Piotr Cichosz on Unsplash 76 | CAL I FOR N I A G R OC E R

Fewer laws have been more divisive in retail than the ones that regulate paper bags.

Tesco in the U.K. may have found a solution by offering its “Bag for Life”, a reusable carrier priced at roughly 10 cents who sales will be used to fund community projects across the U.K. As of late August, the chain said it had given out 1.5 million fewer single use bags since 2015 due to government regulations but still sells over 700 million of them annually. The Bags for Life are replaced free of charge if damaged.

OUTSIDE THE BOX

PAW-sivitely Comfy

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IKEA, the iconic Swedish furniture and home goods chain that is a master at getting consumers to buy things they never knew they needed, is going barking mad. As if they weren’t already a one-stop shop, the retailer is filling another void with a line of furniture specifically designed for pets. The new collection called Lurvig, Swedish for “hairy”, has everything from dog beds to couch covers cat tunnels and scratching posts. It’s now being introduced at stores in the U.S., Canada, France and Japan, and will be rolled out to other areas by March 2018. iStock

If you happen to be looking for a way to create disloyal customers, just take a cue from our ridiculously complex airline industry where the rift between “basic” and “standard” is widening.

Delta, United and American sell discounted fares at $30 to $50 less than standard coach. The catch is you lose the ability to make advance seat assignments and get overhead bin space. To get basic economy, you know have to stay over a Saturday night. If you’re a frequent flier you have to pay more to get the same amenities you used to get for free.

Time to revisit retail loyalty programs.

DISCOUNT

DILEMMA

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TV Dinners Frozen TV dinners became popular in the 1950s because they were convenient and let people sit down on time to watch their favorite TV shows. But with the rise of subscription video on demand (SVOD) services they can sit down and watch any time – and may even have more time to cook. About 64 percent of consumers now have at least one SVOD service compared with only 47 percent 3 years ago. Additionally, more adults are streaming shows on non-TV devices like laptops smartphones and iPads, indicating new opportunities for convenience-oriented on-the-go foods.

MUSCLES

VS.

Mussels

Despite the Trump administration’s fascination with brawn jobs like coal miners, steel and factory workers, the most promising sector of the economy is in restaurants.

Restaurant jobs are growing faster than health care, construction, or manufacturing, according to the Bureau of Labor Statistics. Most of the jobs are at sit-down restaurants. But fast-food eateries are the next largest employer in the category. iStock

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u o kY

n a h T

California Grocers Association

We greatly value your TRUST AND CONFIDENCE and sincerely appreciate your loyalty to our businesses.

ramprintforus@gmail.com

ING 9 1 INT PR 52.92 4 .

6 91

ADVERTISER INDEX PAGE COMPANY

PHONE

EMAIL

WEBSITE

bdonnelly@agilenceinc.com

agilenceinc.com

8

Agilence

856-366-1200

19

Albertsons Companies

925-467-3000

64

ASR Group

510-7874419

bpedrotti@asr-group.com

asr-group.com

43

BFBA

916-924-0800

dboyce@bfba.com

bfba.com

43

Bristol Farms

310-233-4715

kdavis@bristolfarms.com

bristolfarms.com

57

C&S Wholesale Grocers, Inc.

916-373-4396

pmiller@cswg.com

cswg.com

69

Cardiff

760-753-5445

BC

Certified Federal Credit Union

909-261-4065

65

Carts&Parts

405-495-9800

56

ECOS

800-335-3267

craig@ecos.com

ecos.com

36

Foods Etc/Susanville Supermarket

707-994-6423

foodsetc@mchsi.com

foodsetc.iga.com

ramprintforus@gmail.com

fruitridgeprinting.com

doug@emerson.com / heather.doughtery@emerson.com

grind2energy.com

78

Fruitridge/ RAM Printing

34– 35

Emerson Grind2Energy

800-845-8345

albertsons.com

seasidemarket.com ghurd@vonscu.com

vonsefcu.com cartsandparts.com

18

Gelson’s Markets

818-906-5709

gelsons.com

68

Illuminators

78

The Investor's Caddie, Inc.

916-296-9019

51

Kellogg Company

269-961-2000

5

Kimberly-Clark Corp.

847–781–3730

dennis.j.belcastro@kcc.com

kimberly–clark.com

27

Moss Adams

916-503-8206

marci.reynolds@mossadams.com

mossadams.com

30

Natural Products

6

Nestlé Purina PetCare

314-982-4876

karen.doggendorf@purina.nestle.com

purina.com

65

Nielsen

208-340-6598

laura.price@nielsen.com

nielsen.com

29

NuCal Foods

209-254-2225

skoch@nucalfoods.com

nucalfoods.com

67

PAQ

209-957-4917

myfood4less.com

73

Raley’s

916-373-3333

raleys.com

64

Ralphs Grocery Company

310-884-9000

ralphs.com

IFC Retail Marketing Services

800-252-4613

info@cscrc.net

73

Smart & Final

323-869-7500

smartandfinal.com

68

Stater Bros.

909-783-5000

staterbros.com

42

Sugar Bowl Bakery

510-782-2118

42

Super A Foods, Inc.

323-869-0600

illuminators.org investorscaddie@gmail.com kelloggs.com

expowest.com

mark_ly@sugarbowlbakery.com

sugarbowlbakery.com superafoods.com

tmarks@marketcentre.com

supervalu.com marketcentre.com

208-385-5273

cdemaray@trugrocer.com

trugrocer.com

2, 49 Tyson

480-949-6700

robert.bukovec@tyson.com

tysonfoods.com

13

201-894-4000

michael.walton@unilever.com

unilever.com

IBC SUPERVALU 37

TruGrocer Federal Credit Union Unilever

CAL I FO RNIA GRO CER | 79

MOMMY BLOGGER

To Meal Kit or Not To Meal Kit L A R A F O N G B A L DW I N BLOGGER

Grocers can learn a valuable lesson from meal kit services.

I remember the moment I first heard about the concept of a meal kit subscription service. Chef-designed recipes with step-bystep, foolproof instructions, delivered to my doorstep with precise portions of prepared ingredients? The idea was irresistible.

That was about three years ago. Since then, countless brands have entered the market.

And I’ve tried, well, almost all of them.

At their best, meal kits make me feel like a Top Chef winner. They have helped me out of a cooking rut by inspiring me to get more creative in the kitchen when my family couldn’t take one more Taco Tuesday or Pizza Friday.

The more upscale or exotic ingredients (sunchokes, anyone?) are great for an impressive “date night in” restaurant-grade meal at home. There is also the intrigue of so many choices: low carb, low calorie, all organic and local, vegetarian. In theory, meal kits are a busy foodie’s dream.

At their worst, meal kits stress me out. They are expensive; on par with takeout, and takeout doesn’t involve dirty pots and pans.

With meals typically delivered three to six at a time, I feel obligated to cook them whether I like what’s on the menu or not (sunchokes, anyone?). Should I want to skip a week, there is the issue of remembering to manage my subscription online.

I am also seriously skeptical that these more intricate recipes save me time in the kitchen.

Finally, recipes are rarely what I would call kid-friendly (sunchokes, anyone?).

At the grocery store recently, I had what Oprah would call an “Ah ha” moment. Right next to the skirt steak sat a packet of fajita seasoning, pre-chopped peppers and onions, and bags of tortillas. Another case featured peeled shrimp, precut, premixed stir-fried veggies, and bottles of teriyaki sauce. Ah ha!

All the convenience of prepared, curated ingredients, but for recipes my family actually eats, in portions I get to gauge, without the markup and hassle of a delivery subscription.

I would love to see this trend of grouping meal ingredients together continue in my local grocery stores. Though a delivery service is irrefutably convenient, a little time added to my regular grocery trip is worth it to retain total control over my weekly meal plan.

With the easy pairing suggestions of simple ingredients, I am positive I can whip up something tasty in about as long as one episode of Sesame Street. Best of all, there’s not a sunchoke in sight. ■

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JIM WALLACE

Albertsons Companies

BOB PARRIOTT Twain Harte Market

THANK YOU JIM WALLACE

& CONGRATULATIONS BOB PARRIOTT

for your service with the CALIFORNIA GROCERS ASSOCIATION We are honored to serve the Grocery Industry!