California Grocer, Issue 5, 2019

California Predictably Brilliant PAGE 30

the age of disruption PAGE 38 2019, ISSUE 5

CALIFORNIA GROCERS ASSOCIATION

Bring a New Set of Bright Ideas Into 2020 Join your independent grocer family for a week of creative thinking, inspiration and relaxation.

In a world that offers few opportunities to slow down and reset, the New Year marks a time when renewal is possible. Provide yourself with the occasion for fresh thinking by registering for this year’s Symposium. You will come away with a renewed spirit and fresh ideas that will benefit your business for years to come.

Registration includes: 7 nights resort accommodations from January 12-19, 2020 All conference educational sessions and programs Opening and closing night receptions Breakfast functions (Monday, Tuesday, Wednesday & Thursday)

REGISTER TODAY For complete information and to register, visit www.cagrocers.com/events or call (916) 448-3545.

Featured Speakers The Power of Persistence, Creativity, and Respect Matthew Griffin Co-Founder and CEO Combat Flip Flops

Escape Velocity: Extend Beyond Your Orbit to Find New Success Kevin Ervin Kelley Principal and Co-Founder Shook Kelley

Connecting the Workplace and Life Through F.U.N.!

January 12-19, 2020 Fairmont Kea Lani Wailea, Maui, Hawaii

Paul Long Consultant & Motivational Speaker

Event Produced by California Grocers Association Independent Operators Committee

CONTENTS | ISSUE 5

FEATURES About the Cover First introduced in the London

30 Predictably Brilliant More and more, the real disruptors in any category are the ones who are solving the problems the establishment can’t or won’t. Don’t worry, there’s a way out: Creativity.

Underground, this “Mind the Gap” sign was a warning to passengers to take caution of the gap between the train door and station platform. The phrase was the inspiration for this year’s CGA Strategic Conference theme – Minding the Gaps and reflects the grocery industry’s need to identify and bridge the gap between industry legacy structures and the new requirements for success.

38 The Age of Disruption Disruption doesn’t mean the old ways are done, says Scott Stratten, a presenter at this year’s CGA Strategic Conference. It just means exploring other options. What does that mean to the grocery industry?

COLUMNS President’s Message Newsom’s First Nine Months. . . . . . . . . . . . 6 Chair’s Message Don’t Kick the Can Down The Road. . . . . . 8 Viewpoint Filling In The Gaps. . . . . . . . . . . . . . . . . . . 10

44 The Future of Food In the whirlwind that is modern retail, it’s becoming increasingly clear that even the once immovable object of shopping for food is no longer immune from changing consumption habits.

Government Relations Legislature Passes Recycling Relief Bill. . . . . . . . . . . . . . . . . . . 18 Capitol Insider Business Needs Predictability in Government. . . . . . . . . . . . . . . . . . . . . . 22 Washington Report Changing of the Guard. . . . . . . . . . . . . . . . . . 24 Inside the Beltway The One Thing. . . . . . . . . . . . . . . . . . . . . . . 27 Mommy Blogger Subscribing My Way Out of a Food Rut. . . . . . . . . . . . . . . . . . . . . . . . 64

54 Accelerating Sales Growth in Multicultural America Retailers who haven’t caught on to what this growth engine represents to their businesses are being left behind and need to quickly learn about and consider the needs of multicultural consumers.

DEPARTMENTS 15 Minutes With Chip Conley. . . . . . . . . . . . . . . . . . . . . . . . . 14 Outside the Box New Retail Perspectives.. . . . . . . . . . . . . . . 50 Index to Advertisers. . . . . . . . . . . . . . . . . . 63 CAL I FO RNIA GRO CER | 3

CGA | BOARD OF DIRECTORS

EXECUTIVE COMMITTEE

CHAIRMAN APPOINTMENTS

Chair Kendra Doyel Ralphs Grocery Company

Second Vice Chair Hee-Sook Nelson Gelson’s Markets

Secretary Dennis Darling Foods Etc.

First Vice Chair Phil Miller C&S Wholesale Grocers

Treasurer Renee Amen Super A Foods, Inc.

Immediate Past Chair Bob Parriott Twain Harte Market

Kevin Arceneaux Mondelēz International Inc.

Dave Jones Kellogg Company

Lynn Melillo Bristol Farms

Independent Operators Committee Chair

Elliott Stone Mollie Stone’s Markets

DIRECTORS

Mark Arrington Post Consumer Brands

David Higginbotham Stater Bros. Markets

Doug Minor Numero Uno Market

Denny Belcastro Kimberly-Clark Corporation

Saj Khan Nugget Markets

Ken Mueller Raley’s

Jeanne-ette Boshoff MillerCoors

Nancy Krystal Jelly Belly Candy Co.

Tim Murphy Costco Wholesale

Bob Bukovec Tyson Foods, Inc.

Michel LeClerc North State Grocery Inc.

Skip Nugent Best Buy Markets IGA

Pamela Burke Grocery Outlet, Inc.

Hillen Lee Procter & Gamble

Mike Ridenour The Kraft Heinz Company

Brent Cotten The Hershey Company

Hal Levitt The Save Mart Companies

Casey Rodacker Mar-Val Food Stores

Willie Crocker Bimbo Bakeries USA

John Mastropaolo Chobani, Inc.

Jaclyn Rosenberg Nielsen

Steve Dietz United Natural Foods, Inc.

Jonathan Mayes Albertsons Companies, Inc.

Jeff Schmiege Unilever

DJ Deutsch California Fresh Market

Mark McLean CROSSMARK

Jeff Severns PepsiCo Inc.

Jake Fermanian Super King Markets

Casey McQuaid E & J Gallo Winery

Greg Sheldon Anheuser-Busch InBev

Damon Franzia Classic Wines of California

Mario Mediati The Clorox Company

President/CEO Ronald Fong

Senior Director Government Relations Aaron Moreno

CALIFORNIA GROCERS ASSOCIATION

Senior Vice President Marketing & Business Development Doug Scholz Vice President Communications Dave Heylen Vice President Government Relations Kelly Ash Senior Director Events & Sponsorship Beth Wright

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

Director CGA Educational Foundation Brianne Page Director Digital Communications Nate Rose Director Administration & Human Resources Jennifer Gold Controller Gary Brewer

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

1005 12th Street, Suite 200 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. © 2019 California Grocers Association

Jeff Sigmen Reyes Coca-Cola Bottling LLC Scott Silverman KeHE Distributors, LLC Lee Smith Smart & Final Stores Rick Stewart Susanville Supermarket IGA Joe Toscano Nestlé Purina PetCare Jim Van Gorkom NuCal Foods Richard Wardwell Superior Grocers Karl Wissmann C & K Market, Inc. Kevin Young Young’s Payless Market IGA

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

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PRESIDENT’S MESSAGE

Newsom’s First Nine Months

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

While the new governor is forging his own gubernatorial path, where it leads is still uncertain.

When Gavin Newsom was elected as the 40th Governor of California, it seemed pretty certain he had the realization that he would be filling some pretty big shoes. Jerry Brown, his predecessor, will go down in history as one of this state’s political giants.

Though at the time of the writing, Newsom has yet to act on the vast majority of bills being considered by the Legislature, he has still managed to take a number of notable actions that have shed some light on the political path he appears to be taking.

With Brown’s shadow still looming over Sacramento, political observers have been taking note of Newsom’s every move, wondering what he will do to clearly delineate the start of the Newsom era of California politics, as opposed to a continuation of the Brown years.

Knowing that California is seen as a foil to the politics and policies coming out of Washington D.C. at the moment, Newsom has taken pride in speaking up against Federal laws and policies that affect Californians.

Whether it’s speaking against changes to the Public Charge Rule or cutting deals with major automakers to address fuel efficiency standards, Newsom clearly understands the political and economic clout California has and brings to any major national policy discussion.

CGA President Ron Fong joined Gov. Newsom at a press conference announcing the filing of a lawsuit challenging changes to the Public Charge Rule.

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

And he has not shied away from reminding D.C. politicians that California stands second to none on the national stage.

His first round of vetoes and bill signings will help bring more clarity to how his political mind really works, though he has shown signs of openness to hearing divergent views – his willingness to try and work through the concerns of the tech community on AB 5 (independent contractors) and his insistence on changes to vaccination legislation to appease some with more extreme views on the topic – being a couple of the more high-profile examples of this openness.

Newsom is clearly forging his own gubernatorial path. Where that path leads still remains to be seen. One can only hope that wherever the destination, he saves some of his open-mindedness to the benefit of California’s grocers. ■

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CHAIR’S MESSAGE

Don’t Kick the Can Down The Road

K EN DR A DOY EL R ALPHS GR OCERY CO./FOOD 4 LE SS/FO O DSCO

We owe it to our next generation to fix California’s broken beverage container recycling program.

Franklin D. Roosevelt once said, “Competition has been shown to be useful up to a certain point and no further, but cooperation, which is the thing we must strive for today, begins where competition leaves off.”

Competition is always present throughout our lives. We experience it as we grow up, and just when we think things might get easy, we move in to the business world and a whole new level of competition begins.

Nowhere is that more evident than in California’s grocery industry. The best of the best operate incredible stores, while vendor partners provide innovation and products that drive the market.

As an industry, we do all that in one of the most challenging business environments.

The cost of going to market, on many levels, is elevated in California more so than anywhere else in the country.

We face challenges that most can’t fathom in other parts of the U.S. and they seem to come at businesses from every angle. And, it’s growing.

We must be the best of the best just to stay afloat and relevant in this market. With all that said, California is our home and we are proud to provide the remarkable service and products that we do while we feed the communities we serve.

While we are all fierce competitors, just like FDR’s quote, we come together as an industry to do great work that is meaningful to Californians.

Many times, we set aside our competitive nature, and come together, through the California Grocers Association, to ensure that our customers and communities are best served.

“We face challenges that most can’t fathom in other parts of the U.S. and they seem to come at businesses from every angle.

And, it’s growing.”

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Together, we ensure food safety always is a priority, we quickly unite during disasters to provide needed product, and we engage in improving our fragile environmental, including support of legislation to ban single-use plastic bags.

As we continue working together to find the right reforms for recycling in our great state, I look forward to open and honest conversations with lawmakers, other industries and concerned citizens to find real solutions.

Pardon the pun, but we can not kick this can down the road any longer, we owe the next generation meaningful solutions that are real and sustainable. It is time to find solutions that support all and burden none.

As an association, I believe we’ve found the right line between competition and cooperation. We serve as a model for a state that must find more of the cooperation amongst all Californians so we can all grow together. Thank you CGA for helping lead the way to a better tomorrow for California. ■

We are committed to ending hunger in our communities and eliminating food waste in our company by 2025.

Follow our journey at

TheKrogerCo.com and #

CAL I FO RNIA GRO CER | 9

VIEWPOINT

Filling In The Gaps

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

“If change is happening faster on the outside than on the inside, the end is in sight.”

– Jack Welch That’s my definition of a gap – facing a world in which change is happening faster outside my business than it is inside my business.

It also prompts a question that I would pose to my readers (and, in fact, I pose this question to audiences almost every time I give a speech): Can you honestly tell me that change is happening quickly enough inside your company?

Few can. Few do.

Now, I don’t want to make this about Amazon…at least, not just about Amazon.

While it is entirely fair to hold Amazon up as a company that has embraced innovation and disruption and a strategy of building an expanding and all-enveloping ecosystem that is specifically designed to create almost insurmountable gaps between it and its competitors, it also has to be pointed out that there are lots of ways out there to compete with Amazon and to close the gaps that exist.

If you are going to compete against Amazon, best to take a page from “Moneyball,” the Michael Lewis book (and subsequent movie) about how the Oakland Athletics and their General

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

Manager, Billy Beane, had to find a way to compete against teams like the New York Yankees that had payrolls as much as 10 times the size of the A’s. You do it by identifying different strengths than the Yankees do, and by emphasizing elements of the game that exploit the opposition’s weaknesses.

That’s the way to close the gaps.

There are ways to do this.

I do believe that it is incredibly important that every strategic initiative or tactical move begin with one simple question: What does this do to reinforce our brand identity and value proposition?

Now, more than ever, I think retailers that have typically made short-term decisions – like only doing sampling when some vendor is paying for it, or building a business model based on allowances and fees that mean that you are making money on the buy, not the sell – are even more likely to make decisions in the current environment that don’t necessarily serve the business’s longterm prospects.

The wrong thing to do is try to compete directly against Amazon, since its size and valuation gives it access to a lot of cheap

money. My friend Scott Moses, who runs the grocery and restaurant investment banking practice at PJ Solomon, points this out all the time – and that Amazon has such an economic advantage because it is able to borrow money “cheaper than most countries.”

But innovation and imagination don’t have to be costly…it just means being willing to entertain new ideas, test them quickly, and use every one of them as a way to reinforce your connection to and relationship with the shopper. When things don’t work you can drop them, and then try something else. As long as you’re always trying to serve customers better, I think they’ll cut you some slack.

I’m fascinated by Nordstrom’s opening of Nordstrom Local stores (three in Los Angeles, with two opening shortly in New York City) that offer customers a place to try clothes on, get them tailored, obtain expert advice and maybe have a cappuccino or a glass of wine; the only thing it doesn’t have is racks of clothes. The only clothes you’ll find in the relatively small Nordstrom Local stores are those that you’ve picked out online and have had transferred there to be tried on.

It is intriguing that Walmart – which generally does not occupy the same competitive space as Nordstrom – essentially is trying the same thing, with two Walmart Pickup Points

VIEWPOINT

that allow customers to pick up orders they’ve placed online – but they can’t go inside, because even the front room is all backroom. (At 40,000 square-feet, these are sort of expanded versions of the Pickup lockers that Walmart has put in a number of its Supercenters.)

Think about how you as a retailer, by offering similar options to your customers, could establish a presence in places you thought you could not, reaching customers that you may have thought are out of reach, expanding your brand presence in new ways. (If you don’t, someone else is likely to – these concepts, when combined with an effective digital campaign, enable any retailer to come into your backyard and start absorbing sales and market share.

When you think about it, in some ways that is exactly what Amazon has done.)

There are other ways in which retailers can close the gaps that may exist between them and their competitors.

As always, because of my day job (“Content Guy” at MorningNewsBeat.com) and side hustles (host of the “Retail Tomorrow” podcast and adjunct faculty member at Portland State University), I end up bouncing into people and ideas that may be important options to gap-closing strategies and tactics.

For example, I’m impressed with an organization called Trestle, based in Portland, OR, which has developed software that allows consumers to figure out where companies stand on all sorts of social responsibility issues, and companies to be more transparent and proactive about establishing their legitimate ethical bonafides. (I think this will become a lot more important going forward, as the next generation of consumers considers the implications of doing business with purpose-driven companies…which could allow some companies to close some gaps effectively.)

And, I’m interested to see the industry reaction to the Open Voice Network, which has been set up to create an alliance that

iStock

“innovation and imagination don’t have to be costly…it just means being willing to entertain new ideas, test them quickly, and use every one of them as a way to reinforce your connection to and relationship with the shopper.” will allow retailers and suppliers to compete effectively with the AI-voice technology land grab that Amazon has effectively completed with its Alexa-powered devices.

The idea is that if companies come together to create an alternative that is open-source and therefore available for all businesses to use and accessible for consumers who want to order by voice but want an alternative to Alexa.

but a trusted resource for customers.

And they can do that by focusing on both relevance and resonance – because relevance appeals to the head, and resonance appeals to the heart.

That’s the most important gap that needs to be closed. Do that, and suddenly change – the right kinds of change – may start speeding up on the inside. ■

These are gaps that exist, and gaps that can be closed.

In the end, though, the most important gap that retailers need to close is the one between them and their shoppers. They can do that by developing actionable data and then actually acting on it. They can do that by creating in-store cultures that make as a top priority the ability of employees – no matter what their level – to identify by face and name and then greet regular customers.

They can do that by understanding that it is critical to be not just a source of product, CAL I FO RNIA GRO CER | 11

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1 5 MINUTES WITH…

Chip Conley F O UN DER, M O DERN ELDER ACADEMY

Ask yourself this – would you rather be revered or relevant?

It’s harder to separate tech and retailing these days?

The honest answer is both, but intense competition and the rise of the intergenerational workforce means that creative, curious, and open-minded people must work together to achieve strategic success.

“I agree. But we can’t blame the digital age for everything. Like anything in life, there’s an upside and a downside.”

Chip Conley, noted author, founder of the Modern Elder Academy in Baja, Calif., and a featured speaker at this year’s CGA Strategic Conference, believes in developing a free flow of ideas from young to old and vice versa – an inter-generational potluck where everyone brings something to the table.

But is this the norm or the exception in business today?

California Grocer : Are older, more experienced workers sometimes ignored in the workplace.

Conley: “That’s a broad question but generally, yes. The more digitally-focused a business or industry is, the more likely it will be obsessed with younger people – the digital natives who have strong digital intelligence.”

Where is this most prevalent?

“It depends on the industry, the company, and even the geographic area. In Silicon Valley, there’s no doubt that software engineers start feeling old after age 35.”

What’s the general thinking in retail?

“Traditional retail brick and mortar has not been as affected as much. But it’s become more common among companies that have both online and brick and mortar operations.”

Computers, the internet, and social media have been the dominant technology for younger people, and we sometimes resent the competitive advantage it’s given them in the workplace.”

Do younger workers also resent their older counterparts?

Chip Conley is a keynote speaker at the 2019 CGA Strategic Conference.

Some say there’s a lack of communication and more mistrust between generations?

“There’s some truth to that. It’s almost as if we’re separate countries on the same continent with different dialects and different ways of thinking. But when you embrace diversity, the generations learn from each other. It becomes an intergenerational potluck. Everyone brings something to the table.”

Are we seeing a resurgence of the “generation gap” we talked about decades ago?

“I think we are, but we don’t call it that.

Consider the societal stereotype of millennials. Some of it comes from a place of envy and jealousy. Television was the dominant technology when we were growing up, but it didn’t do much for our careers.

“For sure. Especially when older people say things like ‘that’s the way it’s done’ and are not open to new thinking. It’s not about restoring power to the older generation.

You can’t just have the old hierarchy and dispense wisdom based on the way things used to be. That world doesn’t exist anymore.

Young people want to have contact with ‘modern elders’ who have both wisdom and curiosity.”

When inter-generational issues arise, is it because older workers are concerned about losing their jobs?

“Less collaboration between generations results from fear – the fear that younger, less-expensive people will displace them.

But, 40 percent of workers in the U.S. already have bosses that are younger than they are.

We need to get more youth-comfortable and instead of resenting or judging them, learn from them.”

Continued on page 16 ▶ CAL I FO RNIA GRO CER | 15

15 MINUTES WITH… ◀ Continued from page 15

“There’s a lot of wisdom that can be passed down to new generations. But, in industries that are continually evolving, there must be mutual mentoring – from old to young and vice versa.”

Assumedly, that works both ways.

“Well, we can’t expect younger people with a lot of digital knowledge to miraculously have leadership skills that it’s taken others decades to learn. I call this the EQ (emotional intelligence) DQ (digital intelligence) transfer. We’re better off when we have access to both.”

You talked about a new kind of elder emerging in the workplace. What do you mean?

“I spent six years at Airbnb where the average age was 26. I was 52 at the time and realized that being a traditional elder wasn’t going to work out. That kind of person can be regarded with reverence but not relevance.

Should there be a balance between understanding the technology of a situation and actual human interaction?

“Absolutely. Whether you operate B2B or B2C, all companies are H2H – human to human. That connection requires emotional intelligence, which grows as you age and develops pattern recognition about yourself and others. This is a critical piece of wisdom that older workers can offer younger ones.”

How does the Modern Elder Academy fit into all this?

Do younger workers tend to undervalue the idea of context?

“The premise of our teaching is that in a world where change is happening faster than ever people – especially those in midlife – are required to repurpose themselves. We sometimes call ourselves the first midlife wisdom school. We have 500 alumni who are now shifting their mindset to use what they have learned from decades of work.

“That’s why we need leaders who can amplify its importance. A lot of younger people don’t know what they don’t know. If you approach them privately, they ask who they can learn from. However, if someone is old and crotchety and closed off to learning new things, they won’t make good mentors.”

“We want people to understand how to address change and adjust their lives – not just in their company or as a leader – and realize how much is ahead of them.

We want to help people develop a growth mindset based on what they have to offer and be more open to options.”

“The best ones are those that go in both directions. Mentorship and apprenticeship programs are valuable – especially in industries that haven’t changed a lot.

There’s a lot of wisdom that can be passed down to new generations. But, in industries that are continually evolving, there must be mutual mentoring – from old to young and vice versa.”

Who does?

How can this benefit their companies?

Are more companies doing this?

Do more companies recognize this?

“Yes. One recent study found that 75 percent of millennials would like a mentor, yet only about 5 percent have one. More companies realize this is a way to increase employee retention. Inter-generational collaborations should be promoted or profiled in things like company newsletters or internal communications.”

“Technology-driven companies seem more open to change. But, I visited Procter & Gamble headquarters recently. They’re continuing to develop their Brand Mastery Society program that’s based on older workers mentoring younger ones. They’re also figuring out ways to have younger people eventually become the masters.”

Can we eliminate all age discrimination in the workplace?

“It’s as tough as racism and sexism.

These things don’t die quickly. The big difference is that age discrimination goes in both directions. Younger people can be discriminated against in workplaces that are more hierarchical and traditional – what we might call old school. So, age discrimination on both sides is the motivation to figure it out.”

What about the development of mentoring programs?

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The modern elder is appreciated because they can take their wisdom and curiosity and apply them to modern-day programs and give them context.”

“There’s a lot of statistical evidence showing that younger workers make decisions faster but make more mistakes, while older workers take longer to make decisions but make fewer mistakes. This is the argument for age diversity on teams – the intergenerational potluck where each person excels at different things.”

“When you’re younger, the brain is more narrowly focused, but you can miss the forest because you’re focused on the trees.

Older workers have a leg up in corporate strategies because they are more attuned to holistic thinking.” ■

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GOVERNMENT RELATIONS

Legislature Passes Recycling Relief Bill A A RO N M O R EN O S EN IOR DIR ECTOR CGA GOV ER N MEN T R ELATION S

Legislation now heads to Governor’s desk.

First-year session ends with mixed results for grocery industry.

The California Assembly and Senate finished the first year of this legislative session at nearly 3 a.m. on a Saturday morning, capping nearly nine-months of work, and sent hundreds of bills to the desk of first-year Governor Gavin Newsom. CGA’s government relations team was there until the bitter end, tracking the fate of measures important to the state’s grocery industry.

Of particular note is perhaps the most notable bill of the session for CGA members – AB 54 by Assemblymember Phil Ting (D-San Francisco).

Readers of this column are quite aware of the ongoing efforts to get some sort of relief from sanctions resulting from the mass closures of recycling centers that have plagued the industry for the past three years. Last year, a measure passed by legislators providing relief to grocers was vetoed by outgoing Governor Jerry Brown.

Undaunted, CGA’s government relations team worked again with legislators and staff from both legislative houses as well as the Governor’s office to draft and pass a bill, AB 54, that provides a modicum of relief to grocers dealing with the last round of recycling center closures that left nearly 300 recycling convenience zones unserved.

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Without the bill, every grocery store affected by the closures would be subject to sanctions of $100-per-day, or having to take back dirty bottles and cans inside of their store.

The bill does a number of things to help CGA members deal with unserved convenience zones. First and foremost, it would exempt stores whose convenience zone recycler closed in the month of August of their own volition. It would also provide opportunities for recycling centers to receive state subsidies and serve convenience zones without having to be located in a supermarket parking lot.

Finally, the bill provides much needed funds for low-performing recyclers (to, hopefully, prevent more closures) as well as for mobile recycling pilot projects, much like the one in the City of San Francisco, where grocers have partnered with the city’s Department of Environment to create a mobile recycling consortium to finally serve all of the unserved convenience zones within the city limits.

While the final fate (the bill being signed or vetoed) of the measure is unknown as of the time of this writing, CGA remains optimistic

that grocers will finally get some muchneeded relief from recycling center closures they had no part of causing.

Although legislators passed our most important bill, there were several environmental bills supported by CGA that, unfortunately, were not passed by the Legislature during its final day of session.

Assembly Bill 1080 by Assemblymember Lorena Gonzalez (D-San Diego) and SB 54

by Sen. Ben Allen (D-Santa Monica) are twin measures that would call for major reductions in single-use packaging by 2030.

CGA was in support of these measures after working with legislative staff to create a number of off-ramps for food packaging based on food safety, shelf life, and conflicts with federal regulations.

Even more important to grocers in the twin bills are guidelines for local governments seeking to pass food packaging ordinances.

As you may already know, there are about 120 varying local ordinances that limit the kind of food packaging member companies can use for products in their stores.

This patchwork of laws has caused uncertainty for grocers and their supply chains, making it difficult to provide customers with the foods they demand.

And if there’s one thing that businesses don’t like it is uncertainty.

GOVERNMENT RELATIONS

“the bill provides much needed funds for lowperforming recyclers (to, hopefully, prevent more closures) as well as for mobile recycling pilot projects.”

While the bill’s authors opted not to put either bill up for a vote, the measures are eligible to be heard when the Legislature returns in January to start the second year of the legislative session.

iStock

These bills are but a few of the measures being followed and worked on by CGA’s government relations team. The Association was able to achieve a number of favorable

outcomes on measures ranging from the regulation of grocery delivery services to limits on sales of sugar-sweetened beverages to the banning of paper receipts.

Governor Newsom has until October 13 to sign or veto bills on his desk. We will report on the disposition of bills important to CGA members in upcoming issues and on the Association’s website. ■

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Business Needs Predictability in Government LO UI E B ROW N IN T HE S ACR AME N TO OFFICE O F K AHN, S OAR ES AN D CON WAY, L L P

In a state like California, where regions have such different personalities, maintaining uniformity in local policy is a formidable challenge.

This was first made evident on the issue of plastic bags. It started with one local ordinance banning plastic bags and no consideration for the shift to paper that would result.

Brown

We are often asked by members of the Legislature, “if one thing could be fixed to help the grocery industry what would it be?”

They’re not always pleased when we are unable to answer the question with a simple answer. The truth is there is not one single issue that makes it difficult for the grocery industry to compete in California.

Instead, it’s the collective costs of all the issues that create the proverbial death by a thousand cuts.

In addition to the costs imposed by the state, grocery is a neighborhood business and there are more than 400 city governments in California that like to impose their political agenda.

iStock

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

Business needs predictability in government to plan and budget for the future.

When a business, like grocery, operates in multiple municipalities, it also needs uniformity. In a state like California, where regions have such different personalities, maintaining uniformity in local policy is a formidable challenge.

Over the years, we have seen our success at the state level to stop certain policies motivate advocates to take their agenda to the local level, where ordinances can be adopted much quicker. As the number of local ordinances grows, our desire for uniformity forces a reevaluation of historical positions and ultimately results in statewide policy.

It quickly expanded to more than 100 jurisdictions adopting ordinances on the issue.

As other locals engaged, the policy continued to evolve and ultimately resulted in a formula that could work; a ban on plastic and fees on paper.

This policy came about due to a collaborative effort by the grocery industry and environmental groups that preferred to see a statewide solution.

Ultimately, the effort paid off and after multiple attempts at legislation, a statewide solution was signed into law.

“As the number of local ordinances grows, our desire for uniformity forces a reevaluation of historical positions and ultimately results in statewide policy.”

CAPITOL INSIDER

The fact that the industry had to then defend the policy through a statewide referendum initiative is another chapter in this story that we hope is not repeated anytime soon.

In the alternative, the Legislature and Governor are now seeking greater uniformity on land use policies at the local government level to help the state achieve its goal of more affordable housing.

Today, we see this same strategy playing out on food packaging, soda taxes, and, to a lesser degree on labor issues, like predictive scheduling and minimum wage. For one reason or another, none of these issue items have gained the momentum we saw with single-use plastic bags, but that could change at any time based on the action or inaction of the Legislature.

Many communities around the state have adopted slow growth, or no growth, ordinances through ballot measures that are now in direct conflict with the state’s need to build more housing.

Legislation limiting a local government’s ability to place restrictions on affordable housing located near transit hubs stalled earlier this year, but will no doubt be back next session.

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The need for uniformity in policy is generating more conflict today than ever before between local government and the State Capitol. This conflict is exasperated by more and more groups that don’t achieve their desired result at the State Capitol or local government turning to the initiative process to force the Legislature to act on a policy quickly to avoid a ballot fight.

With increased conflict and evolving political strategy, the grocery industry should look for opportunities, like it did with plastic bags, to make policy changes that are crafted by the industry and not piecemeal locally or forced through the Legislature in a condensed timeframe. ■

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CAL I FO RNIA GRO CER | 23

WASHINGTON REPORT

Changing of the Guard

G R EG F ER R A R A N GA PR E S IDE N T AN D CEO

While NGA welcomes a new president, its challenges in Congress remain the same.

Summer vacations have come to an end, children are off to school, and daily routines have become more rigid.

funding solution. As such, there’s never a shortage of issues before Congress that directly impact the supermarket industry.

Fall often serves as a reminder that change is around us, and here at the National Grocers Association change has been notable as Peter Larkin – only the second president and CEO of the organization – and mentor and friend to not just me but many in the industry, transitioned into a well-deserved retirement.

With the closing of one door, another door opens, and following an extensive national search, on September 1, I officially took the helm at NGA.

Below are a few policy issues that the NGA government relations team is actively engaged in on behalf of independent grocers:

While Members of Congress closed the door to August recess, they returned to Washington, D.C. in September with just 13 work days ahead of the end of the fiscal year. Prior to heading home to their constituents for the summer work period, a $2.7 trillion budget deal was passed that prevented impending sequestration cuts and the nation from defaulting on its debt for the next two years.

Although this deal brought a breakthrough in some of the gridlock, at the time of this writing, Congress continues to work to find a path forward for a long-term government

Taxes An important policy debate unfolding in Congress this fall will revolve around taxes.

As previously reported, a drafting error in the Tax Cuts and Jobs Act (TCJA), known as the “retail glitch,” has prevented retailers from being eligible for full and immediate expensing for interior remodels to stores.

Legislation titled “The Restoring Investment in Improvements Act” (H.R. 1869 and S. 803) has been introduced by Representatives Jimmy Panetta (D-CA) and Jackie Walorski (R-IN) and Senators Pat Toomey (R-PA) and Doug Jones (D-AL) to fix this error. While the bill continues to gain bipartisan support, Congressional leaders remain reluctant to quickly advance the bill.

NGA continues to urge lawmakers to fix the retail glitch as soon as possible whether it’s passed as standalone legislation or attached to another “must-pass” legislation, such as a funding bill.

DIR Fee Reform Pharmacy Direct and Indirect Remuneration (DIR) fees, which have had significant negative impacts on independent grocers, are imposed by plan sponsors and their Pharmacy Benefit Managers (PBMs) on pharmacies participating in Medicare Part D networks.

These fees lack transparency as they are assessed well after the point of sale, are unpredictable, and have no connection to performance. NGA members have reported dramatic increases between 87 percent and 250 percent in Pharmacy DIR fees.

Unfortunately, during a final rulemaking process the Centers for Medicare & Medicaid Services (CMS) failed to include necessary reforms in to pharmacy price concessions and the retroactive nature of DIR fees. NGA has joined with several organizations to call the Administration and Congress to act on DIR fee reform.

Currently, this coalition of trade associations is working to gather bipartisan support for legislation, the Pricing Act (H.R. 1034 / S. 640), that would accomplish reforms that help end unpredictable retroactive pharmacy price concessions and deliver savings to patients and to the Medicare program. NGA has met with House Democratic leadership to ensure that DIR reform is in the conversation this fall.

Continued on page 26 ▶

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

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WASHINGTON REPORT

“there’s never a shortage of issues before Congress that directly impact the supermarket industry.” iStock

◀ Continued from page 24

Argus Leader Following a victory in the Supreme Court, a bipartisan group of influential Senators (Sen. Grassley (R-IA), Cornyn (R-TX), Feinstein (D-CA) and Leahy (D-VT) released a bill, S. 2220, the Open and Responsive Government Act of 2019 that would reverse the Argus Leader v. FMI Supreme Court decision.

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

If enacted, the bill would mean that the store-level SNAP redemption data of every SNAP authorized retailer would be available in the public domain. NGA is working with our partners in the retail and business community on an appropriate response to this threat and to educate members of Congress on why we must preserve this important Supreme Court victory.

fight to achieve wins that allow them to grow their business, create jobs, and serve their communities.

As we face changes and disruptions in both Washington, D.C. and the marketplace together, NGA will continue to stand up for Main Street local supermarkets and

To make your voice heard on these and other policy issues impacting the supermarket industry, visit www.grocerstakeaction.org. ■

With such a large economic footprint in the state of California, it is important that grocers engage in the political process.

Your voice and grassroots efforts help to make a difference in our nation’s capital for the entire industry.

INSIDE THE BELTWAY

The One Thing

J EN N I F ER H ATC H ER S EN IOR V ICE PR ES IDEN T, GOVERNMENT AN D PUBLIC AFFAIR S FOOD MARKETING INSTITUTE

In just a minute you could help to defeat two bills that could significantly impact your business and associates.

I picked up a book by Gary Keller, CEO of Keller and Williams. Keller’s premise is that you are much more likely to be successful if you start your day with one thing to accomplish rather than a “to-do” list that is a page long.

With Congress and the President gathering in Washington now for a final effort and hopefully an agreement to fund the federal government – the absence of which we felt last year during the longest ever government shutdown and resulting negative economic impact – it was difficult to narrow an ask of you to just one thing.

So, I come to you with an ask on two issues that have a significant impact on many of your companies and the associates you employ.

First, our industry and the entire business community had a huge Supreme Court victory this summer. Unfortunately, legislation was introduced weeks after this historic win that would overturn this compelling Court decision, a decision in which every Justice – regardless of political philosophy – spoke against the requirement that businesses or entities who want to maintain the confidentiality of their data

must prove in court that disclosure of the data would cause them “substantial competitive harm.”

I am asking you to write to your Senators, one of whom (Senator Feinstein) is already a sponsor of the flawed S. 2220, to express your concern with the erroneously titled Open and Responsive Government Act of 2019.

Instead of promoting government transparency, this bill would allow the release of private sales data to competitors, in particular, those companies without retail locations in California.

This legislation would do nothing to support government transparency; instead it would put companies who submit data to the U.S. government at risk of costly litigation in order to protect it.

Every U.S. brick and mortar store could be scrutinized such that foreign companies not subject to FOIA could utilize the information to their advantage to target both locations and customers, putting companies like yours at a disadvantage.

The U.S. Supreme Court got it right in its 6-3 decision in Food Marketing Institute v. Argus Leader Media on June 24.

Confidential means confidential.

iStock

Continued on page 28 ▶ CAL I FO RNIA GRO CER | 27

INSIDE THE BELTWAY

◀ Continued from page 27

pharmacy benefit managers to claw back millions of dollars in direct and indirect renumeration (DIR) fees from pharmacies retroactively – weeks or even months after customers have filled their prescriptions.

S. 2220 would re-define the word confidential in a vague and unworkable manner that the Supreme Court unanimously agreed was wrong.

The definition S. 2220 proposes would require you to prove in court that your sales information “if disclosed, would likely cause substantial harm to the competitive position” of my business.

This definition has already led to decades of wasteful and unfair litigation because courts could not agree how to apply such an ambiguous standard. The Supreme Court made the correct decision and your confidential data is now protected, unless Congress changes that by passing S. 2220.

My second ask of you, for those of you who operate pharmacies, is to help preserve California pharmacies by eliminating the ability of supply chain intermediaries and

According to the federal government, pharmacy DIR fees grew by more than 45,000 percent between 2010 and 2017, and in an industry that operates on razor thin profit margins, supermarket pharmacies have virtually no ability to absorb these unexpected costs.

DIR fees have amounted to millions this year, which is forcing companies to reconsider whether they can continue to operate pharmacies, potentially leaving many communities without local pharmacists.

Therefore, I ask for you to write your U.S. Senators and House members and ask them to support the inclusion of DIR reform in drug pricing legislation being considered now in the U.S. Congress to help rein in these out of control fees.

The bipartisan Phair Pricing Act of 2019 (S. 640, sponsored by Senator John Kennedy (LA)) would require that all pharmacy DIR fees and price concessions be included at the point of sale, helping to combat the tremendous financial uncertainties pharmacy businesses are facing and ensure pharmacies can continue to serve customers in communities across California.

Grassroots letter on both of these issues can be completed in less than one minute via FMI’s Advocacy Center. Two items that can make a difference in less than one minute, quite an accomplishment! ■

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

Ron Tite is a keynote speaker at the 2019 CGA Strategic Conference.

Should organizations pursue originality through creativity or predictability through analytics?

Yes.

BY RON TITE I’m old enough to remember the days when food was simple.

You could grow it and cook it, buy it and cook it, or order pizza out of the Yellow Pages. Cut to today and the options around food – the brands, the SKUs, the distribution, the innovation, the business models, the platforms, and the disruption – are mind boggling for consumers, nervewracking for producers, and chaotic for distributors.

More and more, the real disruptors in any category are the ones who are solving the problems the establishment can’t or won’t. Let me guess. Many of you reading this are members of the establishment. And you’re feeling the pinch.

Don’t worry, there’s a way out: Creativity.

Yup, with start-ups eating your lunch, technology re-writing fundamentals, contemporary branding that has abandoned the “bite and smile,” and a bevy of new ideas in the VC’s pipeline, prioritizing creativity within your organization certainly has its merits.

But for every Steve-Jobs-quoting, black T-shirt sporting, spoken-word-performing creativity genius, there’s a pocket-protector-wearing, numbers crunching, spreadsheet thriving, data evangelist who gives you another way out: Data.

Yup, with modern analytics producing more timely shopper insights, more personalized promotion, more regionally customized products, significantly better ROI, and a foundation for automation, embracing the predictability has its merits, too.

So which is it? How do you balance the pursuit of originality and predictability? Can they co-exist?

As a founder of a creative agency, a former executive creative director, and the co-author of a book that is literally called, “Everyone’s an Artist”, any attempt to provide a singular definition for creativity gives me a rash. There are enough TEDx talks and Maya Angelouinspired Instagram quotes on creativity without me trotting out one more definition.

But I’ll tell you what creativity isn’t: Predictable.

Continued on page 32 ▶ CAL I FO RNIA GRO CER | 31

◀ Continued from page 31

Oil meet water

No risk, no reward. No problem

Creativity is based in original thought and expression. Creativity defies logic, presents unique perspectives, and results in people thinking, “Wow. That is so unexpected.” Predictability, on the other hand, channels logic, presents repurposed perspectives, and results in people thinking, “Yes. Just as I expected.”

In a recent discussion with Seth Godin, I asked him why marketers choose the safe and predictable route by chasing certain data-centric tactics and the benchmarked metrics they provide. His response: “I don’t think people are lazy, as much as they are afraid.”

Let’s face it. Creativity and predictability can’t work together.

They could never co-exist. And the only place they should be seen side-by-side is in a branded content Youtube renewal of the sitcom, “The Odd Couple.”

Senior executives routinely go to their teams with the directive, “Show me something that has never been done before. And be sure to include some benchmarks on performance.” Sorry, but that’s not how logic works. If something is so creative that it has never been thought of, forecasting reaction is not only impossible, it’s irresponsible.

But I get it.

Yes, our organizations need original thinking and never-before-seen ideas that capture consumers’ attention, fights off disruptors, and sets the company up for the future.

But you can’t swing for the fences without being comfortable that you might strike out. And striking out just isn’t something most organizations are comfortable with. While CEOs can deliver the proverbial, “We need to embrace failure” speech, there is nothing about corporate culture that embraces failure. You’re not encouraged to fail. You’re not compensated to fail. You’re paid to make and then meet (or slightly exceed) forecasts.

I agree with him. To use his words, predictability gets you “off the hook.” No risk means no surprises. No surprises mean no failures.

No failures mean you get to continue feeding your family.

But wait, there’s more.

Be a Rock When Chris Rock performs a televised or Netflixed (?) comedy special, you may laugh at the hilarity and bow down in front of his brilliance. But Chris Rock, or any other professional comedian worth discussing, is more about predictability than they are about creativity. Behind the hour we see are hundreds of hours on the road perfecting the material so that by the time he records it, every line, every beat, every expression, and every step is delivered in the best way possible. Creativity may be at the heart of it, but the creativity becomes predictable.

Creativity isn’t killed by predictability. It becomes it.

Every artist knows you make more money from the print than you do from the original.

It’s just that the most successful prints come from the most brilliant and unique originals.

Continued on page 34 ▶

“How do you balance the pursuit of originality and predictability?

Can they co-exist?”

iStock

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“You can’t swing for the fences without being comfortable that you might strike out. And striking out just isn’t something most organizations are comfortable with.” ◀ Continued from page 32

But how do you do it? How do you use unbridled creativity to lead you to predictable levels of elevated performance? Do you train creative types to use a spreadsheet? Do you get your data scientists to take an improv class?

No. You get everyone some safety glasses and steel-toe boots.

Turn your white collar into a blue collar Car manufacturers can teach those of us in food a lot about how creativity can lead to predictability. You need to adopt the two sides to their manufacturing process.

1. THE ASSEMBLY LINE The assembly line is where the car folks make their money.

Every single ounce of inefficiency has been removed from the assembly line. Everyone on the team has a role that is very clearly defined. Whatever they do, they do it over and over and over.

It’s not only efficient, it’s repeatable behavior. The result is that quality is maintained, costs are contained, and the margin is consistent. Every. Single. Time.

Interestingly, there’s no collaboration on the assembly line.

Nobody halts production to blue sky or spit-ball some crazy idea.

Everyone does their job, they pass it off to the next person, and the line continues with peak efficiency. They have benchmarks for production, forecasts on costs, expected rates of return, clear ROI, and a commitment to quality control.

While they’re doing that, many marketers are arguing over the color of the napkin in the background of a photo of a bowl of soup, drawing out the process by over-analyzing details that have little significance to the overall results.

If it’s assembly line, it’s assembly line. Kill it and bill it. Deliver it in the most efficient way possible and move on so you can save time, money, and brain power on the stuff that will really rock your world. And while you’re at it, remember that the original HP Way, “Management by Walking Around” has been replaced by “Management by Reply All”. You can be far more efficient in how you personally work, too.

2. THE CONCEPT CAR When automotive manufacturers want to explore new ideas to topple their own established ways of thinking, they create a concept car. The concept car is off the assembly line. There’s no hope or 34 | CAL I FOR N I A G R OC E R

expectation that the concept car will ever go into production.

They just do it to do it.

iStock

Sometimes, they’ll discover that one component of the concept car can be integrated into the assembly line. Over time, the assembly line innovates responsibly because of the experimental components that feed it.

The predictable assembly line is where you meet your forecasts, improve your ROI, establish benchmarks, and engage in repeatable behavior that delivers the metrics you cherish.

The concept car is where you remove the handcuffs to play, try things you’ve never done before, integrate new and original perspectives, and create art.

The concept car is where you spend your money. The assembly line is where you make it.

Most start-ups are just building concept cars. Most established organizations are just assembly lines. The best type of organization is the one that can have a healthy balance of the two. Remember, they’re an odd couple. They don’t exist together. One becomes the other.

Some additional thoughts to consider:

1. CHOOSE CAREFULLY With intense pressure to innovate, many organizations are trying to build multiple concept cars in the middle of the assembly line.

(Launch a hashtag challenge on TikTok! Hold a hack-a-thon!

Recruit influencers!!!) The result is chaos. No one is exactly sure what they’re supposed to do or how their success will be evaluated, and morale craters over the uncertainty. There’s no repeatable behavior, so quality goes down, costs go up, and margin is eroded.

The result is that the skeptics take a look at the numbers and grumble, “I told you we should have just done it the old way.”

2. LET BRILLIANCE BUBBLE TO THE TOP In a discussion on harnessing great ideas, a global tech CEO I was with pointed out the difficulty of developing concept cars for established organizations and why start-ups seem to be disrupting the predictable-craving established organizations. When a food startup has a great idea, they can pitch twenty VCs in a row, getting a “no” every time.

Continued on page 36 ▶

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But if the twenty-first VC says yes, they can go to market. Within large organizations, if someone has a great idea, they have to pitch the idea up a long line of bosses and get a “yes” every single time.

The first “no” they encounter kills the idea. All they need is one yes and they can take you down. All you need is one no, and you’re one step closer to taking yourself down. Great ideas and creative brilliance need to bubble to the top.

3. DON’T EMBRACE FAILURE I don’t love the phrase “embrace failure” because there are times when we should definitely not embrace failure. At no point should you embrace failure on the assembly line. There is no room for failure there. And put another way, creative concept cars are experiments.

Experiments, by their very nature, can’t fail. They only fail when we arbitrarily place unrealistic benchmarks for them to meet.

4. DON’T FORGET TO INVEST IN THE ASSEMBLY LINE On a global basis, one beverage organization I’ve consulted with spends about 70% of its marketing dollars on assembly line activities – tactics that meet desired and expected levels of performance. But importantly, 20% of their budget is allocated to improving the assembly line and increasing its efficiency.

Process improvement can deliver work faster. Technology adoption can streamline how you share information. A data ecosystem can customize and personalize creativity for greater impact and better returns. Training and development can help make people smarter and more confident in their abilities. And apparently, an axethrowing party with your partners and vendors can lead to greater understanding and quicker approvals. Regardless how you do it, increasing the efficiency of the assembly line leads to more money, more time, and more energy to create mind-blowing work that will grow your business and build your career.

Look, a simple automotive metaphor may lead to greater understanding but please don’t think there’s anything simple about its implementation. You’re a foodie. Maybe you’re the data driven, analytical professional who loves crunching numbers, and driving engagement within 2 decimals places of your prediction.

Maybe you’re the artistic brand champion grounded in the soul and emotional responses your products generate.

Crossing over isn’t easy. Just put one foot in front of the other.

Creative becomes predictable.

Creative becomes predictable.

Creative becomes predictable. ■

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PET SPECIALTY

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WHEN IT COMES TO CAT LITTER, IT’S TIME TO THINK OUTSIDE THE BOX. Simple Solutions to Unlock the Potential Sales Opportunity in Cat Litter While most believe dogs dominate the pet department, did you know that cat litter is one of the fastest growing segments within the category?

In fact, litter is expected to be a three billion dollar business by the end of 2019. And with more than 33 million U.S. households shopping for litter, the opportunity is ripe for both manufacturers and retailers alike.

Question: Tell me about the latest trends in cat litter, and how Purina is either leading or reacting to those trends.

Answer: In recent years we’ve seen a trend towards the premiumization of cat litter. Cat owners have come to expect basic product performance, and they are constantly on the hunt for added benefits that their litter can deliver. We find that pet owners want a product that’s not only 100 percent safe and effective for their pet to use, but also one that performs in keeping their house tidy and odor and dust-free. And cat owners are willing to pay for these added benefits. Our data shows that litter buyers are spending 11% more per trip than non-litter buyers.

When it comes to innovation within the litter category Purina understands that consumers see litter as a chore, and since Tidy Cats is the leading litter brand (bought by more than 50

percent of litter buyers), it’s our job to provide a product that delivers on solving the most common litter problems cat owners encounter. We start with identifying the consumer tension, i.e. weight, odor or dust, and we design our products to combat these issues. Take for example Tidy Cats Lightweight Free & Clean, which we released in January 2018. With no added dyes or fragrances, Free & Clean is Tidy’s very first unscented litter, and also half the weight of the traditional clumping litter. After a year on the market, it’s now the #1 branded unscented cat litter in the category.

Question: Do you have any suggestions on ways retailers can merchandise their litter section in ways that will let consumers know about the new products in the marketplace?

Answer: There are a number of merchandising and promotional strategies retailers can leverage to win in litter and ultimately lift their overall pet category sales.

• First, make it simple for your shoppers to locate the litter section in your store. Cat litter should anchor one side of your pet department and be adjacent to dry cat food.

• Also ensure you carry the right assortment, with a focus on premium products that

When it comes to innovation within the litter category Purina understands that consumers see litter as a chore, and since Tidy Cats is the leading litter brand (bought by more than 50 percent of litter buyers),

deliver on both form and function. Highlight products that offer multiple benefits and solve common consumer complaints.

• Next, build a promotion strategy around cat litter.

Consider cross-promoting litter and dry cat food at regular intervals, and also aligning cat litter with products in your cleaning category.

• Lastly, ensure that you promote cat litter as part of your ecommerce solutions.

Litter is heavy, and therefore inconvenient to shop. Retailers should promote litter as part of their click & collect or delivery offerings. Capturing the ecommerce sale also will spur repeat purchase.

ADVERTISEM ENT

CAL I FO RNIA GRO CER | 37

THE AGE OF

DIS RUP TION: Everything has Changed and Nothing is Different

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

BY LEN LEWIS

“Don’t throw the past away you might need it some rainy day Dreams can come true again when everything old is new again” So go the lyrics of an old, somewhat sophomoric song. But should it be the manta of 21st century retailing which, faced with disruption from non-traditional retailers, has forgotten the lessons of the past?

“That’s why the title of my session is ‘Everything has changed and nothing is different’,” said Scott Stratten, founder and president of Un-Marketing, and a featured presenter at this year’s CGA Strategic Conference. “It means we’re back to the core of the business which is building trust in products and companies.

“What’s old might be new again, but this time you need to have it on an app,” said Stratten, whose presentation spans a variety of issues from disruption in the marketplace and social media to simply building or rebuilding connections and trust with customers.

“Disruption doesn’t mean the old ways are done,” he said.

“It just means exploring other options. For instance, a lot of marketing that carries more weight is consumer-generated like reviews on Yelp and Google. They can be more powerful in attracting new customers than a print ad.”

Despite inroads by Amazon and others, traditional grocery shopping is not dead.

“Grocery stores and grocery delivery – which has been around for decades can certainly co-exist. You just have to fine tune it,” he said. “I remember the days of going to the grocery store with my mom when they pushed the tubs out on the conveyor belt and a nice young person helped you put the groceries in your trunk. It wasn’t efficient or necessary to have cars idling in front of store. But people loved it.”

None of this has to do with changing demographics, often cited as a root cause of the industry’s ills.

“I don’t think this is the issue,” said Stratten. “Disruption for me is change without time to resist it. Much of that has been brought about by technology in everything from food delivery to monthly subscription boxes that contain all the ingredients and portions to fully cooked prepared foods. I love all the different options and I’m middle age. My mom is approaching her 80s and loves the convenience. So, convenience is not a generational thing. It’s one of the basics of the business.”

A part of this is nostalgia, said Stratten, adding that at the end of the day consumers liked it because the service makes shoppers feel special.

“Over the past decade some of these touches have gone away for the sake of efficiency. It’s understandable given that margins in the industry are so thin,” he said.

The bigger issue for retailers and all businesses is communication.

“To approach that we have to look at changes in society – not just people,” said Stratten. “I’ve read that millennials are killing off everything in the world from soda and beer sales to movie theaters. I’m amazed we’re still walking around.

But they haven’t killed anything. This is progress – just disruptive progress.”

But consumer preference is not necessarily a matter of disruption.

“It’s about things that have been around for a century like price, selection and convenience,” Stratten noted. “And sometimes preference is because a store may be on the side of the street in the direction I’m going, or because there’s a Starbucks inside, or I could be going to Walmart because I also need a car battery.”

Taking this a step further is differentiation, an important and valuable strategy in a world of commodities, but less effective than we think, according to Stratten, adding that if two stores are selling the same staples, then differentiation points don’t have anything to do with formal branding.

“It’s about when I go to the butcher counter and he remembers helping me with a smoked brisket. Now I’ve got a guy!” he said. “So I can say to him, I’m going to try this. What do you think?”

Continued on page 40 ▶

CAL I FO RNIA GRO CER | 39

◀ Continued from page 39

Stratten says consumers all want that connection and to feel special.

When a brand has a marketing budget everyone points to increasing it for digital.

“I’m not talking about feeling that every cashier or person stocking the shelf is your best friend,” Stratten said. “It’s about having a place that makes you feel the best. You can get bread, milk and eggs any place. I’ll go to the store that treats me like a customer, not an interruption.”

“You have to ask if you’re spending the existing budget in the best way possible,” he said. “It’s no longer the old axiom – ‘I know that half my marketing works I just don’t know which half.’ There’s no excuse not to track, test and reconfirm what we’re doing on a daily basis.”

“Consumers all want that connection and to feel special… it’s about having a place that makes you feel the best.”

iStock

Asked whether this means less focus on technology and more on personal communication, he replied: “When I talk about disruption it doesn’t mean that some of the old school, classic marketing strategies don’t work. All marketing works if you do it right.

“Anyone who preaches that certain ways are dead is usually selling something else,” he continued. “We’re not here to tear down billboards and the direct mail industry.

There’s still a place for things like grocery flyers or coupons. We’re in an age of overtracking and we know what drives traffic to the stores.”

But some companies may be guilty of over-messaging.

“We are bombarded with advertising,” Stratten believes. “I was in a bathroom stall last week and there was an ad in there – talk about a monopoly on someone’s attention. Given the location it could be great for an ad on prune juice. Targeting is key.”

But when companies go digital and stories go viral, companies must be prepared.

“When things go wrong, even if it’s just a small complaint on Yelp, people are looking for is validation that they’ve been heard,” he said. “Many people complaining are just saying ‘listen to me.’ The worst type of customer complaint you can have is the one you can’t hear. Then it just festers and grows and nothing is solved.

“Nothing’s changed,” he added. “We do business with brands and businesses we trust. People are pretty forgiving if a business owns up when a mistake is made and just says it will do better.”

However, this doesn’t happen often enough, which Stratten traces to companies with multiple locations run by individuals.

“You may have a corporate or brand voice and style. But with different managers or owners it’s hard to react quickly on a regional level – if at all. It’s important for the corporate side to monitor those things so you can have a common brand voice.

Continued on page 42 ▶

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

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CAL I FO RNIA GRO CER | 41

◀ Continued from page 40

“Customer expectations have reached real time levels…but you have to equip employees with the ability to solve problems.”

iStock

Scott Stratten is a featured speaker at the 2019 CGA Strategic Conference.

“If you tell a customer something will be fixed and it isn’t, you’re making matters worse. You can’t monitor every location all day. You need an air traffic controller for the brand who looks, listens, and delegates appropriately by telling stores to handle issues and follow up with the customer,” said Stratten. “When you run a store you can have a 1,000 things on your plate every day. Having someone with their ear to the ground is very effective.”

Brands like Taco Bell and Zappo’s have done this very well, according to Stratten, adding that some airlines have also been effective. This can be surprising considering that everyone on the planet is bonded by three things – no one likes their cell phone company, their bank or airline.”

In fact, he noted that banks and airlines have been the leaders in receptive responsive to their marketing.

“I walked off an international flight recently when I realized I left my suit hanging on a coat rack in the plane,” Stratten recalls.

“I couldn’t turn around so I sent a note on twitter to American Airlines. Within three minutes they were on the phone with someone on the plane who actually beat me to baggage claim with my suit.”

To Stratten, the worst thing is when someone on a social media account says they’re sorry and gives you a number to call.

Stratten believes an increasing number of companies are into real time problem solving.

“Customer expectations have reached real time levels,” he said. “But you have to equip employees with the ability to solve problems.

A lot of brands have people running social media, but a lot of them still give no power to the people running these accounts.”

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

So, he continued, they tell you to go to the website and file a comment or call another number.

“You want to be able to answer customer issues on the communication platform they originally chose because that’s where they are comfortable,” he said. “You want customers to think they are talking to you – whether you’re Delta Airlines, Kroger or Whole Foods – not Kevin at a customer service center in Dallas. The power to do things is the level a brand ambassador on social media should be given.”

Are companies getting the message?

“I don’t think they are,” he said. “A lot of retail businesses retail would love disruption to go away and go back to the time when the only way to get something was to go get it.

Amazon screwed that up for everyone.”

Stratten shared how he ordered an item online and they said it would take four to six weeks.

“You expected shipping to take that long 15 years ago,” he said. “Now, we won’t buy something if it can’t get here tomorrow.

Humans have a base need for instant gratification.”

You can blame it all on Amazon, but retailers have marketing and branding opportunities every day at their stores, said Stratten.

“Everyone walking the aisles is evaluating us,” he said. “That’s why I find the secret shopper industry interesting. We try to be on our best behavior we know they’re in the store. But in reality everyone’s a secret shopper. However, those people don’t just tell your boss. They tell the world.” ■

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CAL I FO RNIA GRO CER | 43

The following article is based on excerpts from Michael Tchong’s new book, “Ubertrends – How Trends And Innovation Are Transforming Our Future.”

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

THE

FUTURE

OF

FOOD

B Y MIC H AEL TC H ON G In the whirlwind that is modern retail, it’s becoming increasingly clear that even the once immovable object of shopping for food is no longer immune from changing consumption habits. Gone are the days that families would gather around the table to sit down for a communal meal. There is a new guest at the table, the Time Compression Ubertrend.

Ubertrends are massive waves that roil humankind because they reshape consumer behavior in unexpected ways. Time Compression has the most significant impact on consumption patterns because it propels the acceleration of life.

15 min.

Driven by Time Compression, 59 percent of meals are now eaten on the run. And because of Time Compression, Campbell’s Soup at Hand was one of the most successful new product introductions in company history. Soup at Hand, which features Starbucks-like packaging and “sippable soup” positioning, is optimized for a graband-go culture. Campbell’s paid reference to that “eat and run” lifestyle by renaming the product “Soup on the Go.” It was a timely launch. According to an NPD Group National Eating Trends study, 34 percent of lunches are eaten on the run – a trend that has driven many a consumer into the hands of the $210 billion U.S. fast-food business. And the trend is global. In the U.K., the average adult spends just 23 minutes daily eating breakfast, lunch, and dinner.

The Brits, like everyone else, are living a Time Compression lifestyle.

And what better proxy for the acceleration of life than a reduction in cooking time? The James Beard Foundation observed in 2003 that it took 15 minutes to prepare Cream of Wheat back in 1893 when the sticky porridge was invented. By 1939, savvy cooks had whittled that time down to five minutes. Today it takes a mere 30 seconds to cook Cream of Wheat, which may still be too long for many.

5 min.

2.5 min.

1 min.

1893

1939

1947

1957

30 sec.

1966

C re a m o f W h e a t C o o k i ng Time Tr e nd

The acceleration of time is convincingly illustrated by this chart, which shows how the cooking time of cream of wheat has decreased over time.

Source: June 2003 James Beard Foundation/Ubertrends

Continued on page 46 ▶

CAL I FO RNIA GRO CER | 45

◀ Continued from page 45

iStock

Time Compression has ushered in the widespread phenomenon of “TBD” – Too Busy Disorder. The ensuing lack of time for work or leisure has also affected cooking. In 2014, 60 percent of dinners eaten at home were home-cooked, down from 75 percent in 1984. With time so precious, prepared foods have cooked up a $26 billion market. TBD has set the stage for another burgeoning Ubertrend, the Digital Lifestyle.

AN ON-DEMAND WORLD When Amazon.com opened “Earth’s biggest bookstore” in July 1995, it introduced consumers to the e-commerce era, which is part of the Digital Lifestyle Ubertrend, the Marriage of Man and Machine. The convergence of the Digital Lifestyle and Time Compression will revolutionize the future of retailing.

E-commerce and another stalwart of the Digital Lifestyle, Google, represent the leading edge of new, on-demand services that let consumers save time while also providing more precise control over their specific needs.

While e-commerce today represents only 10 percent of total retail spending, or $526 billion, by 2035 as much as 40 percent of U.S. retail sales, or more than $2 trillion, will move through online channels.

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

The distribution of goods, including food and beverage, is being revolutionized by a new wave of technology. The main driving forces behind this trend are AI and industrial robotics, which will optimize how products consumers buy are chosen, warehoused, packed, and delivered…the same day.

“34 PERCENT OF LUNCHES ARE EATEN ON THE RUN – A TREND THAT HAS DRIVEN MANY A CONSUMER INTO THE HANDS OF THE $210 BILLION U.S. FAST-FOOD BUSINESS.” Technologies like that of the Bosch X-Spect will let grocery delivery services offer fruit with the desired level of ripeness, say bananas or watermelons, that are precisely two days from being perfectly ripe.

The avant-garde of this new consumer is the Digital Native, also known as Generation Z. Their proclivity for instant gratification, a by-product of Time Compression, is already evident in the 59 percent who say they

choose to buy online and pick up in-store because they want items quicker than online shopping can deliver, according to eMarketer.

The first permanent shift in consumer shopping patterns is already evident as grocers struggle to lure e-commerceaddicted millennials to shop their aisles.

Consumers ages 25 to 34 spend an average of $3,539 on groceries, about $1,000 less in inflation-adjusted dollars than people their age spent in 1990, government data show.

Millennials, the 75 million Americans born in the 80s and 90s, are also delaying marriage and childbearing – milestones that traditionally lead to big grocery store trips.

Another major shift in shopping habits is being driven by time-starved, yet qualityseeking millennials who are increasingly choosing freshly prepared foods, a less costly alternative to restaurant meals, and far more convenient than laborious packaged foods.

A.T. Kearney predicts that the $26 billion fresh prepared foods segment will increase at a 6 percent – 7 percent compound annual growth rate, more than double the 2 percent – 3 percent CAGR of retail grocery food and beverage.

Continued on page 48 ▶

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Proud Heritage, Compelling Future CAL I FO RNIA GRO CER | 47

◀ Continued from page 46

The smaller households of millennials and Generation Z want healthier, fresh products while keeping an eye on value. “These consumers may lack cooking skills, or may not have the kitchen space for food storage and more elaborate food preparation,” says A.T. Kearney in a white paper jointly produced with Technomic.

FUTURE OF BUSINESS INNOVATION Hyper change is all around us. In this fastevolving world of food retailing, there’s no need to wait for the arrival of pick-and-pack robots or shelf-scanning drones. Know why? Because, believe it or not, according to one study cited in my Ubertrends book, administrative innovation has the greatest impact on company sales.

What is administrative innovation, you ask?

The official definition is “the creation of a new organization design or structure that better supports the creation, production, and delivery of services or products.” What that means is that you have a host of very mundane processes in your business that could benefit from incremental innovation.

That explains why RPA is taking off like a rocket. What is RPA? It’s an abbreviation of Robotic Process Automation – automating formerly manual procedures. In July, Gartner reported that the RPA market grew 63 percent in 2018, making it the fastest-growing category of enterprise software at $846 million.

iStock

“THE SMALLER HOUSEHOLDS OF MILLENNIALS AND GENERATION Z WANT HEALTHIER, FRESH PRODUCTS WHILE KEEPING AN EYE ON VALUE.” Need ideas? Apply administrative innovation to such activities as facilitating relationships between team members to accomplish innovation goals; driving effective systemwide implementation of policies and procedures; creating innovative leadership, communication and peer coaching systems; plus introducing structural changes, like elegantly simplified online touchpoints, optimized for mobile browsing.

The urgency of continuous reinvention or, better yet, disruptive innovation is clearcut.

Innovation is part of a ceaseless Darwinian struggle for existence. Of the original 12 Dow Jones companies only one still survives.

And that company was just removed from the Dow Jones Industrials index. To ensure success, practice relentless innovation.

The future is here. Carpe diem! ■ Editor’s Note: Michael Tchong is an author, adjunct professor, and a Las Vegas-based innovation crusader. For more information about his latest book, please visit www.ubertrends.com.

The Bosch X-spect scanner represents a new wave of Digital Lifestyle devices that, following the pattern of BYOD, will eventually find their way into businesses, allowing grocery stores to determine the ripeness of food for improved food delivery services.

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

Michael Tchong is a speaker at the Independent Grocers Forum at the 2019 CGA Strategic Conference.

CAL I FO RNIA GRO CER | 49

!

OUTSIDE THE BOX N EW RETAIL PERS PECTIV ES

Apparel New Look, the fashion retailer has launched a line of apparel including shoes, accessories and handbags that have been certified by The Vegan Society. The registered products are free of animal-derived components, including any that might be found in fabrics, threads, glues, dyes and treatments. The items are all labeled with the Society’s Vegan trademark, according to Ad Age. iStock

DELIVERY RETURNS &

If you don’t like what you ordered from the department store you can return it to the grocery delivery guy. That’s what John Lewis is doing by allowing customers to return online purchases to Waitrose & Partners delivery drivers. The strategy is the result of a company survey that found that consumers want multiple ways to return goods.

iStock

WATER, WATER EVERYWHERE iStock

UK-based Sainsbury is quenching the thirst of environmentally-aware customers by installing fresh water stands at in-store cafes so customers can refill their own reusable bottles. The cafes already offer a discount on hot drinks to people bringing their own cups and customers can bring their own containers for fish, cheese and deli purchases.

THE NEW DISRUPTOR As legalization of cannabis spreads across the country, iStock this new category is turning into one of the biggest disruptors in the food and beverage industries.

Over the next 10 years, it’s estimated that everything from beauty products to food and drinks will contain CBD. At present, the U.S. market for legal cannabis is about $10 billion, rising to an estimated $166 billion by 2025.

Life

after

death

The now defunct Toys ‘R’ Us chain is getting a new, but limited, lease on life. The brand’s owners, Tru Kids Brands, is opening two new stores in Paramus, N.J. and Houston, Texas, by the 2019 holiday season with 10 locations by the end of 2020. But the new units will be smaller and focus on a curated selection and “Instagramable” experiences like birthday party events and photo ops. iStock

Bottoms Up

Mirror, Mirror Beauty, grooming and personal care products, once the domain of drug and specialty stores is evolving. A survey by Coresight Research found that Walmart is now the most popular destination for these products, with Amazon and Target far behind, but fighting for second place. iStock

Amazon, whose presence sends shivers down the spine of all retailers, has now applied for a liquor store license in San Francisco to sell beer, wine and spirits.

The store would give the company the ability to deliver these products to Prime customers in San Francisco. iStock

Spuds Again? iStock

Spuds MacKenzie, the 80’s icon for Budweiser beer is being reincarnated by the owner of the trademark, Spuds Ventures, to pitch a planned line of pet products infused with hemp seed, hemp oil and CBD. But due to a trademark suit, the company won’t be able to use images of the famed bull terrier and will instead use a mixed breed rescue dog.

iStock

ABANDONING SHIP

OR SHOP?

The retail exodus from malls is continuing unabated with an estimated 7,400 stores like Sears and Victoria’s Secret closing stores this year, according to the Financial Times, citing continued inroads by online shopping. But the trend is going strong with an estimated 75,000 stores closing their doors by 2026. Desperate for tenants, mall owners are allowing several brands to share space on a rotating basis and adding things like co-working spaces, gyms, hotels and apartments.

CAL I FO RNIA GRO CER | 51

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CAL I FO RNIA GRO CER | 53

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

BY TERRY SOTO

The multicultural consumer market represents 40 percent of the U.S. population and number 125 million people. Growth continues at a quick pace due to births and immigration.

To put this in real-time terms, between 2017 and 2022, the multicultural population is growing by 2.7 million people per year, 221,000 people per month, 7,300 people every day, and 300 people every hour and it is projected to become the majority population by 2044.

But, in California 2044 is already here.

The multicultural population is larger than the top five states in the country and 21 of the 25 most populated counties are already majority multicultural. For most business landscapes this means that 2044 is already here for 84 percent of companies’ most important markets.

Making these consumers an important part of Terry Soto is a Whiteboard Sessions speaker strategy implementation at the 2019 CGA Strategic Conference. is critical to food retailers not someday, but now.

What should matter most to you is that their buying power as of 2018 was $3.8 trillion dollars – just over one-fourth of all buying power in the country. If this multicultural market were a separate country, they would have the fifth largest GDP in the world after the U.S., China, Japan and Germany and larger than Great Britain, India, France, Brazil, Italy and Canada. I cannot imagine any retailer willingly ready to leave one out of four consumer dollars on the table.

Retailers who haven’t caught on to what this growth engine represents to their businesses are being left behind and need to quickly learn about and consider the needs of multicultural consumers in their assortment, merchandising an overall customer experience or risk becoming irrelevant.

Continued on page 56 ▶ CAL I FO RNIA GRO CER | 55

◀ Continued from page 55

“Attracting and retaining multicultural shoppers requires culturally nuanced and authentic engagement.” iStock

Not only are multicultural families larger translating into larger basket rings, they are also much younger which translates into longer life expectancy than non-Hispanic white consumers. This translates into an effective buying power as consumers of about 15 years longer.

Because of their youth they are also in their prime consumption years – they are buying for themselves, for their children, for their parents and for other members of their households.

Don’t hesitate because you think there’s an inherent risk in targeting an unfamiliar market or because you might get it wrong. And don’t reason that you don’t have the time or budget given your many priorities. This line of thinking is counterproductive. The first step is to adopt a future-oriented leadership mindset and ask, how much more business would my stores generate if we catered effectively to multicultural America?

The recently released Bureau of Labor Statistics Consumer Expenditure Survey for Q.3 2017 – Q.2 2018 indicates that Hispanics spend 8.4 percent of their total yearly expenditures on groceries compared to 7.3 percent for all consumers. This translates into an annual grocery spend of $76 Billion during this period.

Not considering inflation, their effective buying power over an 15 additional years can be estimated at $1.14 trillion. This same report indicates that Hispanics, Asian Americans ($33.2 billion) and African Americans ($56.3 billion) spent a combined total of $165.6 billion of groceries during this period.

A few years ago, I interviewed many future-minded supermarket presidents and CEOs and they made it clear that sales growth in their stores was directly attributed to multicultural sales.

The numbers are irrefutable. So, how to get started? The answer is quite simple. Approach these consumers in the same methodical manner utilized to target any new opportunity segment. Attracting and retaining multicultural shoppers requires culturally nuanced and authentic engagement. Data and insights are essential for ensuring that assortment choices, merchandising plans and marketing resonate and connect them to their store brand of choice.

As I traveled the country for four months visiting stores and meeting with everyone from CEOs to store directors, some common themes surfaced which were synthesized into six best practices for a report called “Grow with America – Best Practices in Ethnic Marketing and Merchandising.”

On the surface, it may seem like unfamiliar territory to think about growing sales in a market that is outside one’s comfort level but think about it – most of target consumer segments are new at some point.

Look at how long the food industry has been working at getting to know Millennials and guess what? By 2020 46 percent of Millennials will be multicultural. This one fact alone should put an interesting spin on efforts to win over this segment.

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

One supermarket president said: “I think that most supermarkets don’t realize the power of these markets and they want to target the middle class. Well, we’ll take all the fall out you want because when I look at some of our stores that are up 15 – 8 percent, I think it’s strictly because of the impact that the ethnic business is having… a lot of our increases are coming from urban areas from Hispanic and Asian groups.”

Much of them are common sense. But it is this commonsense approach that allows retailers to see double-digit growth in their stores. The following are excerpts of the six best practices successful retailers are applying today.

Continued on page 58 ▶

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◀ Continued from page 56

1

Learn about your multicultural customers so you can serve them better.

Define their needs and preferences – Successful retailers proactively seek a deeper understanding of the culture of the most prevalent segments in their trade areas by: 1) Exploring the restaurants with employees who can explain the dishes, how they are prepared, when they are eaten, and the ingredients used in the preparation.

2) Looking through recipes from those countries and noting staple ingredients that surface often including condiments, herbs, produce, meats and other grocery items.

3) Visiting ethnic supermarkets and observing the shopping experience, asking questions about products and brands and preferences.

4) Observing the interaction between customers and employees in service departments and observing how categories and departments are merchandised.

5) Hiring external expertise to guide them.

Define your delivery model according to your target profile – Successful retailers always learn about the acculturation level of their target customers to help shape their implementation approach.

For example, “Newly Arrived” shoppers tend to be more traditional cooks, prefer fresh ingredients, ethnic brands, shop frequently and shop both neighborhood and chain stores. “Newly Established” shoppers will have a greater orientation to convenience, prefer fresh but may also be buying some packaged items, include national brands along with ethnic brands and will shop ethnic and chains one to two times per week. And “Firmly Established” shoppers will be much more convenience-oriented and include more packaged

items from mostly national brands, but also a few ethnic brands. They will shop less often, about once per week, and will shop mostly chain stores.

2

Define your multicultural merchandising “look” and organize to execute it.

Organize to support the strategy – Successful retailers assign the multicultural implementation plan to a senior executive who can speak across operational areas at corporate and store level. This person has P&L responsibility and can make decisions. They know that while store personnel can provide critical firsthand input about these customers, they don’t have the view of the whole business and therefore will not be as effective leading the organization.

Position products strategically – Successful retailers demonstrate commitment to their multicultural base by having the right assortment and merchandising.

For example, key products and brands, especially staples should be immediately visible to customers entering the store.

Define store clusters to help customize offerings – Best in class retailers customize offerings based on store groups or clusters. Clusters can be defined based on demographics including acculturation based on cluster mentioned above. In some cases, stores are clustered according to shopping behavior.

Align customer segments and category management – While successful retailers use traditional category management as a foundation, they also develop filters that help assess product turn relative to these targets. Manufacturer and broker relationships and leveraged to define category development and share data to refine assortment.

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“Include a relevant assortment of fresh items, produce and meats at prices that align with buying velocity. Cooking staples should be highlighted in visible and relevant areas of the store.”

Successful retailers don’t rely on sales data alone. They get out into the stores to talk to department managers and local vendors to gauge relative success of their multicultural assortment and new product opportunities. They track competitive assortment shifts and changes as an indicator that they’re on the right track.

“Successful retailers make it part of the store managers’ goals to develop local relationships with diverse communities and stores are provided appropriate training, tools and funding to do so.”

3

Cultivate distributor relationships – Successful retailers know that ensuring a broader base of distributor relationships can assure ready access to the items and brands multicultural consumers favor. While it’s time consuming to develop and nurture new vendor relationships, they stress that changing demographics make it a requirement.

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Tailor your offering to appeal to your target multicultural customers.

Use key assortment and merchandising triggers – Successful retailers know that developing the right assortment is an evolutionary process and that flexibility is a requirement.

They are willing to try new items, evaluate their effectiveness and refine again and again. They would say that while product assortment is key, merchandising is just as important in communicating an understanding of their multicultural targets’ shopping needs.

Some triggers include a relevant assortment of fresh items, produce and meats at prices that align with buying velocity.

Cooking staples should be highlighted in visible and relevant areas of the store.

Lead with key categories and brands – Successful retailers know ethnic brands typically satisfy a flavor or aroma from a customer’s home country or tradition of cuisine that may not otherwise be available to them in the U.S. so they lead with ethnic brands for staple items. They also know how to strike a balance between ethnic brands and relevant multinational brands which are household names in countries around the world.

Execute the plan holistically at store level – Successful retailers assess each department for relevance in assortment and merchandising.

1) Produce is perhaps one of the most important department to ethnic consumers – relevance, abundant displays, peak freshness and staple pricing convey value and are key success factors.

2) The meat and seafood departments which cater to multicultural consumers do significantly more business in this department. Service counters, different cuts and offal, seasonal selections, marination and seasoning options, staple pricing, and space and containers for fresh and live seafood are critical success factors.

One Vice President of Marketing put it this way: “The incremental sales we’ve gained in our meat department alone plus the total store as a result, far outweigh the profit loss of staffing a service department. We have seen an increase of 70 – 80 percent in our meat department just by opening a “carniceria” (service meat department). We get instant double digit growth when we open one.”

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Find leftover recipe ideas at www.MakeMealsThatDoMore.com

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◀ Continued from page 59

3) Relevant bakery and tortilla assortments are essential in stores catering to multicultural customers. Authentic assortments of bakery products are a big draw among Hispanics and African Americans. Sweet breads and cakes do very well among Hispanics while African Americans tend to buy cakes and pies, often by the piece. Authentic assortment, freshness and pricing are key differentiators and success factors.

4) Service deli and hot foods are visited by most Hispanics and African Americans on almost every shopping trip according to best in class retailers. Hot foods are particularly popular on weekends, but the offerings must be authentic so having cooks familiar with the cuisines as well as counter personnel who can answer question in languages other than English is critical. Pricing hot foods by the pound is considered to offer the greatest value.

One store president said: “We offer fried catfish on Fridays and we can’t cook it fast enough – the wait is as long as two hours sometimes and our customers drive over 10 miles to our stores to buy it.”

4

Enhance the in-store experience and connect with the community.

Develop and implement a community relations strategy – Successful retailers develop relationships with the communities in which they operate, and they take important steps to make multicultural shoppers feel welcomed in their stores.

Use In-Language communication where and when appropriate – Some of the ways best in class retailers make their customer feel appreciated include bilingual signage, bilingual employees wearing badges indicating other languages they speak, playlist with a mix of music to please the diverse consumers, and announcements repeated in different languages. Retailers would say that while these steps show appreciation and enhance the customer experience, they also work to accelerate sales growth.

One Vice President of Human Resources said: “There are retailers out there that tell their employees, ‘Don’t speak any other language other than English.’ We don’t have that practice.

We recognize that significant number of our customers are going to be more comfortable with their own language.”

Develop and implement an ethnic community relations strategy – Successful retailers make it part of the store managers’ goals to develop local relationships with diverse communities and stores are provided appropriate training, tools and funding to do so. Successful retailers also invest in educating their employees about their customers’ cultural values so they can identify and partner with community base organizations and establish relationships with multicultural community leaders and members of local churches and schools.

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“Successful retailers know ethnic brands typically satisfy a flavor or aroma from a customer ’s home country or tradition of cuisine that may not otherwise be available to them in the U.S.”

5

Recruit and retain a diverse staff to help you serve multicultural target customers relevantly.

Create a culture of diversity and inclusion – Best in class retailers say that a diverse staff helps them think like their multicultural customers – not just think about them.

The benefits cited are numerous and include: 1) invaluable real-time customer feedback, 2) an authentic understanding of relevant product assortment and customer needs, 3) an understanding of what makes for a familiar and comfortable shopping experience, and 4) stronger credibility as a member of the community and an effective connection to the community.

Be flexible and adaptive – Successful retailers recognize that many multicultural job candidates may not have food retail backgrounds – they must be developed. They’ve adopted progressive hiring practices that consider bright people regardless of their origin, language abilities, industry experience and educational background. They invest in training, sponsor ESL classes or are lenient with schedules so employees can go to classes.

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◀ Continued from page 61

6

Develop a marketing plan that relevant value at all customer touch points Ensure your messages and your execution are relevant – Successful retailers know it’s not enough to create a multicultural assortment and merchandising plan and hire a diverse staff. It’s also important that multicultural shoppers are aware of the “value” associated with shopping a store. They ensure their ad departments can support the stores’ and district managers’ brand’s value proposition in a way that will be compelling to multicultural shoppers’ point of view.

Create promotions that will resonate and connect – Successful retailers develop promotions that engage and connect with multicultural shoppers. They strive for promotions that play into these shoppers’ everyday lives – including daily routines, family dynamics, the types of activities in which they participate, and they insert themselves into their brands into this context.

One VP of Marketing said: “Just because African Americans speak English, it’s a mistake to believe that general market efforts engage them effectively. In fact, because African American have a rich culture and many unique traditions that are very different from those of other cultures, it’s important to consider these distinctions when targeting them through advertising.”

The multicultural population’s size and growth in the United States undoubtedly represents one of the most significant sales growth opportunities of the 21st century. So, successful retailers make multicultural marketing and merchandising part of their organization’s philosophy and they consistently reinforce and allocate the necessary resources.

This consistent commitment can position any retailer for incremental sales growth, enhanced customer experiences and heightened loyalty.

Importantly, it will position any retailer to grow with America as the marketplace continues to transform. ■ Editor’s Note: Terry Soto is one of the country’s foremost experts on top-line growth in multicultural markets and has advised a myriad of Fortune 500 executives in the U.S. and Internationally on how to accelerate growth and gain competitive advantage in multicultural markets. Soto’s newest book, “The 3.5 Trillion Advantage – A Marketer’s Guide to Revenue Growth In Today’s America” shows executives in charge of topline growth how to “quick start” or “step up” success in the most economically viable consumer market of the 21st century.

Please visit us at Booth #418 at the 2019 CGA Strategic Conference (September 29 – October 1).

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cswg.com californiagrown.org

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Community Reinvestment Associates, LLC

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Danone North America

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ECOS by Earth Friendly Products

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F. Gavina & Sons, Inc.

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FMS Solutions

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Harris Ranch Beef Company

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Unilever

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danonenorthamerica.com

pepsico.com joe.toscano@nestle.purina.com

purina.com ralphs.com

CAL I FO RNIA GRO CER | 63

MOMMY BLOGGER

Subscribing my way out of a food rut K I M B ER LY M I L L ER WR ITER , ACTR ES S

Novelty services don’t take the place of my regular shopping – in fact, they often encourage me to buy more than I normally would.

There was a time when I considered myself a bit of a gourmand. I read food blogs and cookbooks for fun, watched the Food Network religiously, followed celebrity chefs on social media, and read their memoirs to live vicariously through their escapades.

Each week I spent half my weekend (and paycheck) hopping from shop to shop in search of the perfect ingredients for the complicated, restaurant-worthy dishes I’d make during the week ahead. Making beautiful food was what I did to relax after a long day of work.

Dinner these days is the opposite of relaxing.

Each night I make three different meals: one that’s meatless, high in protein and low in carbs for my bodybuilder/vegetarian husband; something “not yucky” for my toddler who considers dinner time a battle royale; and for myself I make something without soy or dairy since I’m nursing a baby with food allergies. Needless to say I’m just making the same easy to prepare stuff night after night after night.

Insert yawn here.

It’s because of this food rut that I decided to take a chance on a mystery produce delivery subscription. Fruits and vegetables are the

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only foods everyone in my family can eat at the same time, and I desperately needed to shake things up.

The first box did not disappoint. Garlic scapes! Swiss chard! Teeny tiny sweeter than sweet mangoes! Everything included was stuff that was either too small or too misshapen to sell well in a regular market.

with a beautiful fillet of salmon, make a mango lassi to go along with the aloo gobi I’d make from the potatoes and fresh cauliflower in the box.

Hooked, I immediately signed up for a weekly subscription to the service, but after about a month realized that while I loved the novelty and the inspiration it provided me, I also craved control over the contents of my fridge. We’re a family with two working parents and two kids – I need to plan! So now I get a box every two months instead, enough to revive my zeal for cooking, but not so much that it goes to waste because we just don’t have the time to get creative every night.

Novelty services like this one don’t take the place of my regular shopping – in fact, they often encourage me to buy more than I normally would – what they do is break up the monotony of a yawnworthy grocery list.

But to me, it was the inspiration I needed to enjoy cooking again. Something I hadn’t done in a long time. I could make my own compound butter with the garlic scapes.

Steam and sauté the Swiss chard and serve

While I only get a surprise produce box on my doorstep iStock every couple of months, I’m now taking more chances when I roam the aisles of my regular store each week. Sure, my toddler may not like kabocha squash, but he won’t know unless he tries it. ■

California Grocer Online Read California Grocer on your mobile device, or share with an associate.

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