California
NICE GUYS FINISH FIRST PAGE 42
EVERYONE LIKES A GOOD STORY PAGE 48 2016, ISSUE 6
CREATIVITY DRIVES the new
shopping experience PAGE 28
CALIFORNIA GROCERS ASSOCIATION
The power of hugs.
What hugs mean to baby. Over 600 medical studies on the effects of human touch prove what moms have always known: Hugs are important. In fact, more and more hospitals state that they are vital to the healthy development of a child. And the benefits of human touch for babies often extend throughout childhood.
The benefits of hugging. Every hug sets off cascades of hormones that benefit health and help regulate body temperature. Oxytocin, the hormone released by touch, is even nicknamed the “bonding hormone.” A hug can stabilize heart rate, increase oxygen levels, strengthen the
immune system, and reduce crying and stress.
How will you greet your babies? After the first hug, let the second thing that touches baby’s skin feel just as good. New Huggies® Little Snugglers Diapers and Huggies Natural Care® Wipes provide our best care to help keep their skin clean and healthy. And as perfect as the day they were born. Huggies.com/DearBaby ® Registered Trademark and * Trademark of Kimberly-Clark Worldwide, Inc. © KCWW. © Disney. Based on the “Winnie the Pooh” works by A.A. Milne and E.H. Shepard.
extends “HUGS” to our valued
partners.
CGA | BOARD OF DIRECTORS
EXECUTIVE COMMITTEE
CHAIRMAN APPOINTMENTS Independent Operator Committee Chair DIRECTORS
CALIFORNIA GROCERS ASSOCIATION
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Immediate Past Chair Joe Falvey Unified Grocers, Inc.
Chairman of the Board Kevin Konkel Raley’s
Treasurer Bob Parriott Twain Harte Market
Second Vice Chair Jim Wallace Albertsons Companies, Inc.
Secretary Kendra Doyel Ralphs Grocery Company
Kevin Arceneaux Mondelēz International Inc.
Phil Miller C&S Wholesale Grocers
Dave Jones Kellogg Company
Raul Aguilar Anheuser-Busch InBev
Willie Crocker Bimbo Bakeries USA
Eric Lindberg, Jr. Grocery Outlet, Inc.
Nicole Pesco Save Mart Supermarkets
Jon Alden Jelly Belly Candy Co.
Steve Dietz Tony’s Fine Foods
Dave Madden MillerCoors
Renee Amen Super A Foods
Jen Fulton PepsiCo Inc.
Jonathan Mayes Albertsons Companies, Inc.
Chris Podesto Food 4 Less (Stockton)/ Rancho San Miguel Markets
Teresa Anaya Northgate Gonzalez Markets
Ted Gardner Rio Ranch Markets
Joe McDonnell Campbell Soup Company
Joe Angulo El Super (Bodega Latina)
Jon Giannini Nutricion Fundamental, Inc.
Mark McLean CROSSMARK
Rich Arnold Oberto Brands
Dick Gong G & G Supermarket, Inc.
Casey McQuaid E & J Gallo Winery
Denny Belcastro Kimberly-Clark Corp.
Robin Graf Whole Foods Market
Mario Mediati The Clorox Company
Bob Bukovec Tyson Foods, Inc.
Ryan Jost Procter and Gamble
Lynn Melillo Bristol Farms
Paul Cooke Nestlé Purina PetCare
Arthur D. Jackson, Jr. Costco Wholesale
Dan Meyer Stater Bros. Markets
Brent Cotten The Hershey Company
Michel LeClerc North State Grocery Inc.
Hee-Sook Nelson Gelson’s Markets
President/CEO Ronald Fong
Senior Director, Government Relations Aaron Moreno
California Grocer is the official publication of the California Grocers Association.
Dennis Darling Foods Etc.
Senior Vice President, Government Relations and Public Policy Keri Askew Bailey
Senior Director, Events and Sponsorship Beth Wright
Senior Vice President, Business Development and Marketing Doug Scholz
Director, CGA Educational Foundation Brianne Page
Vice President, Communications Dave Heylen
Director, Administration Lesley Hall
Executive Director, CGA Educational Foundation Shiloh London, CFRE
Controller Gary Brewer
1215 K Street, Suite 700 Sacramento, CA 95814 (916) 448-3545 (916) 448-2793 Fax www.cagrocers.com For association members, subscription is included in membership dues. Subscription rate for non-members is $100 and does not include CGA Buyers’ Guide. © 2016 California Grocers Association
Mike Ridenour The Kraft Heinz Company Casey Rodacker Mar-Val Food Stores, Inc. Denny Silva Coca-Cola Refreshments Jim Van Gorkom NuCal Foods Michael Walton Unilever Kevin Young Young’s Payless Market IGA
Publisher Ronald Fong rfong@cagrocers.com Editor Dave Heylen dheylen@cagrocers.com For advertising information contact: Bill Kaprelian bkaprelian@cagrocers.com
CONTENTS | ISSUE 6
FEATURES
42
Meet the new cga chair jim wallace
Nice Guys Finish First
28 Creativity Drives the New Shopping Experience A leading futurist has a word of warning for the grocery industry: start addressing the threat of online competition or you could end up as “Blockbusters in a Netflix world.”
Jim Wallace, Pavilions, was elected 2016-17 CGA Chairman of the Board, during the Association’s recent Annual Meeting. Learn more about this quiet giant who bucks the adage “nice guys finish last”.
COLUMNS President’s Message A David vs. Goliath Victory. . . . . . . . . . . . . 5 Chairman’s Message Accessing Our Accomplishments. . . . . . . . . 7
36 CGASC Wrap-Up California’s grocery industry gathered in Palm Springs in September for CGA’s annual Strategic Conference. Attendees heard from leading forward-thinking experts, participated in more than 1,000 pre-scheduled face-to-face meetings and enjoyed multiple business-building networking events. Review this year’s conference in words and photos.
Viewpoint Hardball Retail Lessons. . . . . . . . . . . . . . . . 8 Capitol Insider Looking Forward. . . . . . . . . . . . . . . . . . . . . 17 Government Relations Finally, It's Over.. . . . . . . . . . . . . . . . . . . . . 20 Inside the Beltway Looking Ahead. . . . . . . . . . . . . . . . . . . . . . 24 Washington Report Good News for Independants. . . . . . . . . . . 27
New Column:
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MOMMY BLOGGER
64
Insights into one of your most important customers: Moms.
Everyone Likes a Good Story Consumers are increasingly being romanced by the stories that products are telling about their origin, ingredients or inspiration. Mintel Global Food & Drink Analyst Patty Johnson explains why everyone loves a good story.
DEPARTMENTS CGA News. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Foundation News... . . . . . . . . . . . . . . . . . . 34 15 Minutes With… Eric Saperston.. . . . . . . . . . . . . . . . . . . . . . . 58 Outside the Box New Retail Perspectives.. . . . . . . . . . . . . . . 62
CAL I FO RNIA GRO CER | 3
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PRESIDENT’S MESSAGE
A David vs. Goliath Victory
RO N F O N G PR ES IDEN T AN D CEO CALIFOR N IA GR OCER S AS SO CIATIO N
We did it! Election Day 2016 gave CGA and our industry a pair of hard fought victories with the passage of Prop. 67 by California voters, as well as a strong rejection of Prop. 65. November’s victories are the culmination of a decade’s worth of work at the state and local levels to enact a pro-business/ environmentally friendly ban on single-use plastic bags. We all thought this fight was over back in 2014. At that time, CGA scored a major political victory when SB 270 (Padilla, De León, Lara) was signed into law by Gov. Jerry Brown. The bill banned the distribution of single-use plastic carryout bags and required use of recycled paper bags or reusable plastic bags for a modest fee. Within three hours of the Governor’s signature, a small group of out-of-state plastic bag manufacturers, under the
auspices of the American Progressive Bag Alliance (APBA), filed a referendum seeking to overturn nearly all of the new statute. Ironically, the only piece of SB 270 they left intact was a provision providing $2 million to in-state manufacturers to retool systems and retrain employees to manufacture compliant reusable bags. That referendum appeared on the ballot as Proposition 67 with a “Yes” vote required to uphold the new law. In addition to filing the referendum on the new statute, those same manufacturers qualified a separate initiative that would have redirected ALL revenue from the sale of reusable or recyclable paper bags to a state environmental fund. Bureaucrats in Sacramento would then distribute funds for designated environmental projects. While proponents publicly stated the initiative was intended to ensure any money consumers spent on the new environmental law (SB 270) went to environmental purposes, the real purpose was to confuse voters into rejecting Prop. 67 and punish California’s grocery retailers for working
toward a solution. That initiative appeared on the ballot as Proposition 65. Overall, the APBA spent more than $6.5 million to qualify and support Props 65 and 67. Meanwhile, CGA members (including in-state reusable bag companies and grocery retailers) raised over $300,000 of the approximately $1.25 million the Yes on 67 campaign raised and spent. While out gunned in this David vs. Goliath battle, we led a coalition that earned the support of elected officials, business and environmental groups, community leaders, and the endorsement of nearly every major newspaper in the state. Not only am I grateful to our member companies who stepped up when it came time to pitch in financially for this fight, but I am also grateful to our Government Relations team here at CGA who provided their expertise to the campaign, ensuring our double win on election day. This victory is a testament to our leadership, political acumen, and willingness to stand up for what is right. Here’s to our continued success in the coming year. ■
CAL I FO RNIA GRO CER | 5
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CHAIRMAN’S MESSAGE
Accessing our Accomplishments
K EV I N KO N K EL S EN IOR V ICE PR ES IDEN T, S TORE O P ERATIO NS R ALE Y’ S
Outgoing Chair Kevin Konkel, Raley’s, reflects on his year at the helm of the California Grocers Association. I set out this year as Chairman really trying to pay attention to CGA’s primary focus, lobbying state and local bills for the benefit of our membership. Secretly, I sincerely hoped that if our lobbying team killed or passed all the bills we put on the agenda, it would be one of our best years yet! It turns out four out of five ain’t bad and one doesn’t count anyway, does it?
Assembly and Senate now enjoy a “super majority” of Democrats. Without exception, our constitutional officers are all Democrats and under these circumstances, a good legislative year from our perspective, is about the best we can do. While government relations is the cover page of the CGA playbook, it is the Association’s diversity that makes us champions.
The morning before our March 30 board meeting, I was really excited that Gov. Jerry Brown was to address our Grocers Day at the Capitol attendees. I was confident he was going to tell us how great CGA is and thought how this will really look good for the Association.
Our CGA Strategic Conference was very successful. We hit all of our key metrics and financial targets, gained futuristic insights into how retail is being reshaped and we were challenged to consider how greater collaboration amongst constituencies would benefit our customers and our businesses.
It turns out he announced to our audience that he was backing a $15 minimum wage proposal by the year 2021. We were the first audience to hear this and 24 hours later, his proposal became law. We had nothing to say about it, there was no debate, no lobbying or negotiating.
Our magazine was improved and updated, and even expanded to three other state associations allowing us to increase CGA’s influence and bring additional revenue to our association.
It was shocking how quickly the new minimum wage legislation was passed. It left us with our heads spinning and knots in our stomachs. Keep in mind that we are red players operating in a blue field. The California
Our Educational Foundation had a banner year. Contributions grew and most importantly scholarships were awarded to the tune of $588,100 and tuition reimbursements of nearly $150,000. Membership grew again this year and our Independent Operators Symposium was a spectacular and relaxing event with
excellent speakers, educational sessions, and a host of fun and friendly industry networking. As I end the year as CGA Chair, I can’t help but look back to where it started. It began with a commitment to serve this association that serves our industry in California. I knew coming in that we could accomplish our objectives because I know the folks who lead CGA, starting with our diverse, talented and committed board of directors. They are a tremendous group of industry leaders. I know Ron Fong and his accomplished management team and support staff. They truly are second to none and work tirelessly to fulfill the mission of the Association. It has been a real pleasure to get to know this team better and to see from an insider’s perspective just how good they truly are. Without this great team, our Association would not be the influential and effective body that it is today. I extend my gratitude to them and to everyone associated in big ways and small, with the California Grocers Association and most of all I look forward to serving our incoming Chair Jim Wallace and know he will have a wonderful and productive year. ■ Sincerely,
Kevin CAL I FO RNIA GRO CER | 7
VIEWPOINT
Hardball Retail Lessons
K EV I N CO U PE FOUN DE R , MOR N IN GN E WS BEAT.CO M
Visiting every MLB ballpark has taught Me a valuable retailing lesson. It's taken me almost a quarter-century to do it, but I recently achieved a long-held dream. I have been to a game in every major league baseball stadium in the country. All 30. A guy has to have goals. In fact, I've done more than just go to every major league ballpark. It has taken me so long to achieve this goal that I've actually visited 49 stadiums – 18 of them in cities (Seattle, San Francisco, San Diego, Houston, Cincinnati, St. Louis, Minneapolis, Detroit, Cleveland, Baltimore, Atlanta, Philadelphia, Pittsburgh, Toronto, Chicago, Milwaukee, and two in New York) that have replaced those ballparks with new ones, and one of them in a city – Montreal – that no longer has major league baseball. When I started on this endeavor, I had as an ancillary goal the idea that I would bring back a cap from every ballpark. But my wife nixed that pretty early on; she was willing to tolerate my going off to see a game somewhere, or staying an extra day on a business trip so I could catch a game. But I had to stop bring home all those caps. (I acquiesced. That's how I've stayed married for 33+ years.)
By the way, this doesn't even count all the minor league parks I've been to. (Like where the Utica Blue Sox used to play when they were a Red Sox affiliate. I wish I still had that cap.) I've had a great time visiting all these games and stadiums. I've consumed an amazing number of hot dogs (like Dodger Dogs and Fenway Franks!) and a lot of beer – much of it craft beer, especially lately – over the years, and lately I've tried other foods at ballparks that have improved their culinary offerings. (More on that below.) Which leads me to the business lesson that I've learned during my baseball quest. When I started on this, one of the things I noticed was that minor league fields tended to be a lot more fun than the major league variety. The big league parks tended to be a little more formal, a little more staid. But minor league fields, in addition to being a lot less expensive, also did a lot more to engage with patrons. There would be ice cream giveaways, dime hot dog nights, handing out of free t-shirts, on-field races for kids –
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all that sort of stuff. All stuff to get people to the ballpark, to get fannies in the seats. Back in the mid-90s, I interviewed Charlie Dowd, a longtime baseball professional who then was the general manager of the New Haven Ravens. He explained it this way: in minor league baseball, you can't market the players because if they're any good, they're going to “The Show.” So you have to market the experience. Which means you have to make it a differentiated experience. These days, it is even more so. The number of options on which to spend one's entertainment budget are far more numerous, and so major league teams have adopted the minor league approach – lots of promotions that help to entice and entertain the customers. There are young people from the promotion staffs wandering through the stands, doing contests and giving away prizes. There are kids racing mascots down the left field lines.
VIEWPOINT
(Sometimes there are too many, to be frank. On a Saturday night at the end of the just-ended season, I was in Miami to see the Marlins play; it was the second-to-last ballpark on my list. But the Marlins had a Star Wars promotion that was way, way over the top. It made me want to take a light saber to whatever genius in marketing thought it up.)
Not just because I'm writing this for California Grocer, I'm happy to say that four of my top-ranked ballparks are on the west coast – AT&T Park in San Francisco, Safeco Field in Seattle, Petco Park in San Diego, and, of course, Dodger Stadium in Los Angeles, which remains one of the best of the lot even though it is the third oldest in the nation.
“retailers have to create enticing, engaging and unique experiences that speak to the customer’s interests and desires.” That's what retailers need to do, now more than ever. They can't just be places that stock other companies' merchandise and promote other companies' brands. They have to create enticing, engaging and unique experiences that speak to the customer's interests and desires. Sometimes, that means having the kind of nimble attitude that characterizes smaller companies. And sometimes it just means being innovative enough to make things fun. Now, before I sign off, I have to answer the question that I've been getting constantly since telling people about my achievement: Which ballparks did I like best? To be honest, I do have biases. I'm partial to craft beer and food that goes beyond the standard hot dogs and peanuts. (I'm big on fish tacos. And the Blue Smoke and Shake Shack stands at Citi Field are a major lure.) I like a little leg room, and I think highdefinition displays and great scoreboards are really, really important. (A stadium without an out-of-town scoreboard that lists every game being played in the majors in real time loses points.)
I'm sorry to report that another west coast ballpark – the Oakland Coliseum – is my least favorite of the current stadiums. But I suspect that a lot of Athletics fans might agree with me, and yearn for something a little more modern. But here's the thing. Next time you go to game (it could even be football, basketball, hockey or soccer), look around. Ask yourself what the team ownership is doing to make it a unique and differentiated experience even beyond what is happening in the game. And then ask yourself if you are doing everything you can do in your store to make it a compelling experience. It is not like in “Field of Dreams”, where the premise is that "if you build it, they will come." These days, you have to do more. A lot more. You have to come ready to play hardball. ■
I dislike domes and artificial turf, and I like stadiums that one can walk to from downtown. (I also hate the designated hitter rule, but that's not a stadium issue...) CAL I FO RNIA GRO CER | 9
I found my
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CGA NEWS
INDUSTRY MOURNS PASSING OF THREE GROCERY ICONS Three California grocery industry icons, all former inductees into the CGA Educational Foundation Hall of Achievement, passed away in late October and November. The three individuals, Byron Allumbaugh, Ralphs Grocery Co.; Jack Brown, Stater Bros. Markets; and Bob Wilson, Dreyer’s Grand Ice Cream, left their mark within their individual companies as well as the California grocery industry. Byron Allumbaugh
Jack Brown
Allumbaugh, 84, who spent 39 years with Ralphs Grocery Co., including nearly 20 years as Chairman and CEO, died of a massive heart attack in late October. The Ralphs executive was lauded as a “leader and mentor” in the Southern California grocery industry. In recognition for his years of service and dedication to both the grocery industry and the communities in which Ralphs operated, Allumbaugh was inducted into the prestigious CGAEF Hall of Achievement in 1995. He also was the recipient of the Food Marketing Institute’s Horatio Alger Award in 1996. Brown, 78, who died November 13, is credited with building Stater Bros. Markets from a regional grocery chain to one of Southern California’s largest supermarket chains with 169 stores and gross sales of $4.5 billion.
Bob Wilson
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The Inland Empire icon began in the grocery business at the age of 13, sparking a 65-year career that included 35 years as President and CEO of Stater Bros. Markets, while also serving more than 30 years as company Chairman. Fiercely patriotic, Brown served in the U.S. Navy during the Vietnam War and in 2011 received the “Patriot Award,” the highest award the Congressional Medal of Honor Society can bestow on an individual.
For his more than 60 years of service to the Southern California grocery industry, and in recognition for his tremendous generosity in giving back to the communities Stater Bros. serves, the CGA Educational Foundation inducted him into its Hall of Achievement in 2001. Wilson, who for more than 30 years worked for Nestlé/Dreyer’s Grand Ice Cream, before retiring in 2015, died in late October, after a long battle with cancer. Known for his quick wit and willingness to serve, Wilson was active in state and national industry groups, including the CGA Educational Foundation Board of Trustees. He was with The Illuminators for more than 30 years, and served as its “Headlite” in 2000. He was also heavily involved in local charitable organizations including City of Hope, Easter Seals, Muscular Dystrophy, Junior Achievement, and Special Olympics. Like Allumbaugh and Brown, Wilson was recognized for his lifetime of service to California’s grocery industry by the CGA Educational Foundation when he was inducted into its Hall of Achievement in 2003.
CGA NEWS
CGA RELEASES FOURTH GROCERY COMPLIANCE TOOLKIT regulations under California’s Proposition 65. The toolkit will help retailers understand the new requirements and how they may have to change how they interact with suppliers and customers. It is now the retailers’ obligation to meet these new and detailed standards.
Continuing its commitment to provide California’s grocery industry with relevant, instructional information related to understanding and managing risks associated with complying with state regulations, CGA released the fourth in a series of grocery compliance toolkits in mid-November.
CGA contracted with the law firm of Rogers Joseph O’Donnell to create the comprehensive, user-friendly manual. The firm also conducted a half-day seminar where the toolkit was released. The seminar was followed up with a webinar on Nov. 10.
This latest toolkit addresses compliance issues related to the state’s recently enacted new Clear and Reasonable Warning
For those CGA members unable to attend the seminar, or participate in the webinar, the toolkit can be downloaded and the
webinar viewed at www.cagrocers.com. The Prop. 65 Grocery Compliance Toolkit is free to all CGA members. This latest toolkit is the fourth in a series created by CGA. Association members can also download compliance manuals and view webinars on the following topics: California Labor and Employment Law; American With Disabilities Act; and Hazardous Waste Disposal. To learn more about these toolkits visit www.cagrocers.com. The Grocery Compliance Toolkit program has been made possible by the generous support of the CGA Educational Foundation and the CGA Independent Operators Committee.
LOSS PREVENTION, SAFETY, RISK MANAGEMENT COMMITTEE MEET IN ANAHEIM Nearly 40 grocery loss prevention directors from throughout California met in early November to discuss a number of pressing industry issues including Proposition 47, safety and awareness branding, anti-shoplifting prevention sharing and operational audits. The one-day committee meeting allowed attendees the opportunity to share information, network, and discuss issues and challenges unique to LPSRM professionals. Under the leadership of Chair Mike Bowers, Northgate Gonzalez Markets, the committee continues to expand its sphere of influence,
creating several new subcommittees to address specific issues facing the industry. Along with its Emergency Management and Professional Development subcommittees, two additional subcommittees were created: Proposition 47 and LPSRM Membership Benefits. At its November meeting, the committee awarded an attendee an LP Foundation
Loss Prevention Certified Prep Course Scholarship, donated by Protos Security. “The LPSRM Committee is open to all CGA member companies,” said Dave Heylen, CGA. “The committee is very robust with significant programs planned for the coming year. Every retail company should be represented on this committee.” Continued on page 14 ▶ CAL I FO RNIA GRO CER | 13
CGA NEWS ◀ Continued from page 13
CGA LAUNCHES NEWS VIDEO CGA has launched a rapid-paced condensed video summary of current industry issues called “CGA News in 2 Minutes.” Featuring a former Sacramento television news broadcaster, this video captures the top issues facing the grocery industry and delivers its message all in just two minutes. Look for it twice a month in CGA’s e-newsletter “Checkout.”
SEC TOURS GENE’S FINE FOODS The CGA Supplier Executive Council conducted its final 2016 store tour with Gene’s Fine Foods in Pleasanton, Calif. Owned and operated by Mar-Val Foods, Lodi, Calif., the tour was led by third generation owners Casey Rodacker and Tyler Kidd. The Pleasanton icon store was purchased and renovated by Mar-Val in 2012.
The tour was the fourth for SEC members in 2016. Previous tours this year included Draeger’s Market, Vallarta Supermarkets and Smart & Final Stores. These executive-led tours are exclusive to CGA Supplier Executive Council members. To learn more about becoming an SEC member, contact Sunny Porter, CGA, at (916) 448-3545.
NEW MEMBERS CGA welcomes the following members:
American Greetings 1 American Blvd Cleveland, OH 44145-8151 Contact Person: Darin Frye, Mgr., Trade Shows and Sales Development E-mail: darin.frye@amgreetings.com Phone: (216) 252-7300 Website: www. corporate.americangreetings.com
The Los Angeles Times 202 W 1st St Los Angeles, CA 90012-4105 Contact Person: Darius Derakshan, Mgr., Advertising – Political, Public Affairs, Grocery E-mail: darius.derakshan@latimes.com Phone: (213) 237-7499 Website: www.latimes.com
QM Power 9680 Marion Ridge Kansas City, MO 64137-1284 Contact Person: Dan Woodrich, Regional Sales Manager E-mail: dwoodrich@qmpower.com Phone: (214) 545-9912 Website: www.qmpower.com
Pacific Compensation Insurance Company 1 Baxter Way Ste 170 Westlake Village, CA 91362-3813 Contact Person: Stephanie Flores, AVP Customer Service & Marketing E-mail: sflores@pacificcomp.com Phone: (818) 575-8500 Website: www.pacificcomp.com
Pleasanton Valley Insurance Brokers, Inc. 6602 Owens Dr Ste 200 Pleasanton, CA 94588-3310 Contact Person: Wayne Ruddick, President E-mail: wayne@pvigroup.com Phone: (925) 462-2111 x111 Website: www.pvigroup.com
Trakref 214 Overlook Cir Ste 270 Brentwood, TN 37027-2702 Contact Person: Roya Payne, Account Executive E-mail: rpayne@trakcef.com Phone: (888) 834-0233 Website: www.trakref.com
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The Illuminators are committed to Spreading the Lite of Good Fellowship throughout your term as we have since 1928 ! We extend a big thanks to Kevin Konkel for his partnership and superior leadership as outgoing CGA Chairman.
Congratulations Congratulations and welcome to Jim Wallace as the chair of the California Grocers Association. And a heartfelt thank you to Kevin Konkel for your dedication and service to the grocery industry as the outgoing chair.
W W W. M O S S A D A M S . C O M /R E TA I L
CAL I FO RNIA GRO CER | 15
CAPITOL INSIDER
Look ing forward LO U I E B ROW N PAR T N E R IN THE S ACR AMEN TO OFFICE OF K AHN, S OAR E S AN D CON WAY, LLP
With the General Elections behind us, it’s time to look to the future and what’s in store for California. Brown
If you are like me, you are enjoying the election being over. At one point, I wasn’t sure it would ever end! Even if your candidate didn’t win, it’s nice to have the noise behind us. Hopefully, the Presidentelect will work towards unifying the country.
likely to grow and could include any number of termed out legislators, local government elected officials, and maybe a hedge fund manager.
In the California Assembly, the transition to the new term limit rules is complete. It will now be a full eight years before we see another major change. While we have a few new faces in the State Senate, the transition will take another election or two before it’s complete in that house.
With the $15 minimum wage, the extension of SB 32, and numerous other laws, California has established itself as the leader of the progressive movement. Many of these were headline grabbing issues that come with a lot of glitz and glamour. Over the next two years, I believe the focus will turn to the more mundane but critical issues that will truly impact the State’s economy for years to come.
The stability and continuity this transition has made in the Legislature is welcomed by most in Sacramento. Hopefully, a new focus on the major issues impacting California will emerge as a result. Jerry Brown is also entering his last two years as governor. In his 2016 budget presentation, Gov. Brown talked about California’s economy and how our recovery is entering unprecedented waters. Top of his agenda for the next two years will be doing what he can to keep the economy healthy. He made it loud and clear, he doesn’t want California to be in the red when he leaves office. The race for the governor’s office has been in high gear for a number of months now but it will definitely intensify. The field is also
No doubt, 2016 was the year of the progressive legislative agenda.
Transportation Our roads are crumbling and cannot handle the current demand. Our bridges cannot handle the weight of today’s truck and trailer combinations. California’s gas tax is no longer able to generate the money needed to maintain or rebuild our transportation infrastructure. Some of this is a result of the unintended consequences of other legislative priorities. As we move toward zero emission vehicles, which run primarily on electricity, hydrogen or other non-petroleum based fuel, the problem will only grow because
these vehicles don’t contribute to road maintenance, yet continue to create wear and tear on the system. Water California’s system of moving water was created by Governor Pat Brown and hasn’t been upgraded since. However, in the intervening years, Congress and the California Legislature have adopted numerous laws that make it more difficult to move water from wet Northern California to the more populated and dry regions of Southern California. The voters passed Proposition 1 two years ago which will begin to make major investments in a number of areas important to enhancing this infrastructure, including the building of surface storage projects. However, a concerted effort needs to be made to find a balance between the needs of the environment, communities and California’s economy. Business Environment The Governor has attempted to make changes to California’s reputation as a bad place for business, especially where litigation is involved. We have seen efforts to amend Proposition 65. We have also seen marginal improvements to the disabilities act. However, more focus needs to be made in these areas to balance the costs shifted to business over the past few years. Continued on page 18 ▶ CAL I FO RNIA GRO CER | 17
CAPITOL INSIDER
◀ Continued from page 17
“No doubt, 2016 was the year of the progressive legislative agenda.”
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Cost of Living California is the sixth largest economy in the world, yet that ranking is downgraded when the cost of living is factored in. We have a serious problem when employees cannot live in the communities where they work, and the problem is growing. This problem
only exacerbates the issues facing our transportation infrastructure and frustrates other infill development policies passed by the Legislature over the years. These are all issues that will take time. The solutions are apparent but finding the votes needed to get to the solution will not be easy.
The Stater Bros.® Supermarket “Family” salutes CGA 2015-2016 outgoing Chair Kevin Konkel, Raley’s
Let’s hope the transition to more consistency in the Legislature allows leaders to emerge that have the fortitude to engage in the tough discussion and the ability to compromise on a pathway to success so that California can lead in these areas as well. ■
Kevin Konkel Raley’s
and welcomes CGA 2016-2017 incoming Chair Jim Wallace, Albertsons
Proudly Serving Southern California Families Since 1936 CGA_JimWallace_2016.indd 1
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®
Jim Wallace Albertsons
12/12/16 12:21 PM
CONGRATULATING
JIM WALLACE as the new
2016-17 CGA CHAIRMAN OF THE BOARD
GOVERNMENT RELATIONS
Finally, It’s Over
A A RO N M O R EN O S E N IOR DIR ECTOR CGA GOV E R N ME N T R E LAT ION S
It’s time to breathe a collective sigh of relief, as election season has finally come to an end. No longer are we bombarded by political ads at every television commercial break. No longer are our social media feeds clogged with factually questionable news articles and memes. And no longer will we be overwhelmed by political campaigns and their mailers and unwanted phone calls. But after all of that, what are we left with? What are the results of all of the millions of political dollars spent over the course of the long trudge to the electoral finish line? Well, for starters, we have our first new President in eight years, the ramifications of which I will leave to the national political pundits to opine on via their talking head appearances on cable news shows and thoughtful think pieces published by various news outlets. There were many more election results that are relevant to our industry which could have more far reaching effects than the next presidential administration. Where to begin? First and foremost, voters passed Proposition 67, the CGA-supported referendum that upholds the statewide ban on single-use plastic bags. This is a huge win for our industry as it marks the 20 | CAL I FOR N I A G R OC E R
end of a nearly decade long fight to pass this pro-business and pro-environment legislation. We thought the fight was finally over in 2014 when CGA partnered with Secretary of State (then Senator) Alex Padilla, Sen. Kevin de León, and Sen. Ricardo Lara to pass SB 270 – the nation’s first statewide ban on single-use plastic bags, but alas the fight wasn’t over. Upon signature by Gov. Jerry Brown, out-of-state interests spent millions of dollars to qualify and run a referendum to overturn SB 270 (Prop. 67) on top of qualifying another initiative (the failed Prop. 65) as a smokescreen meant to deceive voters into voting against Prop. 67. CGA, in partnership with our friends in the environmental community, led the charge to pass Prop. 67. With the financial support of our members assisted by our government relations team, we were able to help put together a campaign team that got the support of hundreds of elected official, business groups, and community leaders; along with the endorsement of nearly every major newspaper editorial board in the state. This win is truly something to celebrate and defies the
conventional wisdom that the business community and environmental community must always be at odds. Beyond ballot initiatives, this year’s many state legislative races were the most important contests of their kind in decades. This election, because of the new term limits regime recently approved by voters, will allow the current crop of new legislators to keep their seats for 12 years. Combine that with last year’s new legislators being the first 12-year members, and you have a legislature that (barring unforeseen events) will not have an open seat for 10 years. So, how does this bode for our industry? Not too bad, all things considered. First the (in the grand scheme not-so) “bad” news. Democrats were able to gain a supermajority in the Assembly. This means that under the state’s constitution, they would be able to unilaterally impose new taxes, among other things. While this is an ominous prospect, it will likely not happen as this year’s class of new Assembly members is viewed as generally more moderate, partly as a result of open primaries. It also bears noting that the Democrats who unseated Republican incumbents will have to walk a fine line in their quest for reelection as presidential Continued on page 23 ▶
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GOVERNMENT RELATIONS
◀ Continued from page 20
“What are the results of all of the millions of political dollars spent over the course of the long trudge to the electoral finish line?” years tend to bring better results for Democrats, while off-year elections tend to favor Republicans. Any newly elected Democrat from a previously Republican-represented seat would be hard pressed to vote for any measure that is viewed as too far to the right, or too far to the left, lest they risk 1
a rematch of this election. And all that aside, the Moderate Caucus of businessfriendly Democrats should wield more clout as their numbers grow in the Assembly. In the Senate, Republicans appear to have prevented a supermajority in their house1. This, along with the election of more moderate Democrats, will make the Senate a check against any overly aggressive legislation that could affect our industry and the business community as a whole. It is quite likely that there will be many battles waged in the Legislature this year as California Democrats look to offset any changes to federal healthcare and environmental laws with the new
presidential administration – something we won’t have a sense of until Donald Trump is sworn in as President in January. On the whole, our industry did okay this election cycle, but any optimism in politics should be a cautious optimism. It will be a few months before we learn the true nature of the new Legislature, but all signs point to a make-up that will be careful to thoughtfully balance competing legislative interests. Then again, as a former legislator once noted, things change in the Legislature once a member has to look another member in the eye and vote against one of their bills. ■ iStock
As of the writing of this article there remains one Senate race where the Republican holds a slight lead.
CAL I FO RNIA GRO CER | 23
INSIDE THE BELTWAY
Looking ahead
J EN N I F ER H ATC H ER S E N IOR V ICE PR E S IDE N T GOV ER N MEN T AN D PUBLIC AFFAIRS FOOD MAR K E TIN G IN S T ITUTE
The elections provide a great opportunity to build relationships with your elected officials. With the negativity of this election cycle occupying the Internet, airwaves, and even the streets – it’s easy to move to complacency. Instead of complacency, now is the perfect time to develop and build relationships with the winners of November’s General Election in order to get them to understand your perspective on votes they will take in the city council, county commission, state legislature or Congress.
3
Send the elected official and the staff member who accompanies them a follow-up note, thanking them for the visit and reiterating those items you discussed at the store.
1 2
Schedule an introductory meeting with the elected official in your store, or distribution center. Show them something new – a new department, a new product, a new section, or a new technology. Discuss issues they might have the opportunity to vote on, or influence with their position (if you need ideas, we are happy to provide them). Introduce them to your associates – especially the store manager. Take photos!
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When you have an “ask,” make sure it’s clear. If you would like them to co-sponsor legislation, sign a letter, or vote in favor or against something, make sure it’s clear and has been communicated to them and their office both in writing and verbally. If you are sending a letter or email, make sure the “ask” or request is in the first sentence.
7
Here are som helpful tips to developing a strong relationship with your elected officials: Send a note congratulating the official on their election or re-election with a brief paragraph about your business.
Then when CGA or FMI lobbyists reach out to officials in Washington, or Sacramento, it allows us to expand your reach on an ongoing basis.
4
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Communicate with the official and the staffer every quarter. Let them know about a new department, remodel, new jobs you have created or a new product or a policy issue. Also, ask what issues they are most interested in.
5
Send materials created by your state or national association. This demonstrates the direct link between your business and your state or national association.
After there is a vote or hearing on an issue that impacts your business, contact the elected official and let them know how much you appreciate their understanding of your business. Or, if they didn’t vote your way, let them know you would like to discuss why you, your associates and your customers are on the other side of the issue. Maybe you can get them next time!
8
Always stay positive, even if the vote did not go your way. ■
WASHINGTON REPORT
Good News For Independents
PET ER L A R K I N PR E S IDE N T AN D CEO N AT ION AL GR OCER S AS S OCIATIO N
The grocery business is not for the faint of heart, due in large part to low profit margins and shifting consumer preferences. These days, the traditional supermarket is undergoing profound change, while also maintaining its place at the heart of the food shopping experience for the vast majority of American consumers. And while the entire food industry is looking to stay ahead of the consumer trend curve, independent supermarket operators are continuing to innovate to meet shifting demands. Despite a tough marketplace, independents grew same-store sales by 2.1 percent – ahead of annualized inflation (1.2%) and well ahead of the prior year’s 1.5 percent gains, according to the results of NGA’s annual “Independent Grocers Financial Survey.” This study, compiled in conjunction with our partner FMS Solutions Holdings LLC, analyzed the financial and operational performance of independent supermarket operators in fiscal year 2015. In addition to benchmarks for financial performance and business strategies, the report provided an in-depth look at the economic, political and competitive landscape in which these retailers operate. Survey respondents represent a wide array of companies throughout the United States and Canada.
Survey “profit leaders” (the top 25% of independents that exceeded three percent in net profits before taxes) outperformed publicly-traded companies by 4.09 percent to 3.52 percent in average net profit before taxes. Interestingly, for the first time in the history of this report, supercenters were not listed as independent's top competitive threat, but instead were replaced by other conventional supermarkets. In a fiercely competitive industry, independents are continuing to differentiate themselves in the marketplace and are doing so with much success. Whether it’s diving into e-commerce platforms, enhancing customer service or increasing focus on the fresh/perishable department, independents are employing tactics to not only meet consumer demand, but become the store of choice.
At the 2017 NGA Show, there will be ample opportunities, including a financial benchmarking workshop, to learn how best in class retailers are able to increase their net profits during challenging times. Visit www.theNGAshow.com. ■
Additional Challenges and Opportunities: Total expenses increased in 2015, driven mainly by labor and benefit costs, which stood above 14 percent of sales, making it the sixth consecutive year the average percentage was above 14 percent. Fiscal year 2015 marked another year of rising healthcare costs as operators saw healthcare costs grow 10.2 percent. With the rising usage of debit and credit cards among shoppers, interchange fees were listed within the top five concerns for independent supermarket operators. Independents adapted their advertising allocation to marketplace demands by shifting funds from printed materials to digital marketing. Profit leaders focused on operational fundamentals, including keeping inventory turns high and implementing programs to track and reduce perishable and theft-related shrink.
CAL I FO RNIA GRO CER | 27
Creat
ivity
DRIVES THE NEW SHOPPING EXPERIENCE ELLIOT ZWIEBACH
Unless supermarkets begin rethinking the way they do business to meet the threat of online competition, they could end up as “Blockbusters in a Netflix world,” according to futurist Douglas Stephens. The key may be transforming their stores to offer shoppers a value-added experience that goes beyond simply distributing groceries, he said in an interview with California Grocer and in a presentation at the recent CGA Strategic Conference. Stephens is the founder of Toronto-based Retail Prophet. “Many consumers today view grocery stores simply as warehouses that hold products they need,” Stephens said. “But with online options growing, what’s to prevent the majority of consumers from passing up the supermarket completely by subscribing to AmazonFresh and getting groceries delivered?” With a growing number of online operators offering ever broader shopping options, retailers need to figure out how to create experiences “that are so amazing that people will pay to come to your store,” he said.
Speaking at the conference, Stephen said retailers will have to re-focus their stores to make the trip an experience if they hope to motivate future consumers to make a physical trip to a supermarket rather than ordering online.
by algorithms – where sellers are making suggestions to consumers about what they may want to buy based on previous purchases – consumers can have a burst of exhilaration going into a store and interacting with sales associates.
“Shopping is both a social and physiological experience,” he explained. “Thinking about going shopping (in general) is similar to taking cocaine for many people – it gives them a dopamine rush.”
“That doesn’t mean retailers have a free pass,” he added. “While brick-and-mortar stores will continue to exist, everything about that space – and how you think about why people go there to shop – will have to change, and rapidly.
However, the prospect of shopping with online operators who add more products and give consumers more certainty about finding what they want offers less of a rush, Stephens told conference attendees. “When people come to a store to shop, that dopamine effect goes through the roof, which works in your favor,” he said. “In a world where people’s lives are being ruled
“You must look beyond simply selling products in order to create such galvanizing experiences that a consumer won’t think of buying what you offer anywhere else.” Continued on page 30 ▶
CAL I FO RNIA GRO CER | 29
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...the major obstacle to creating the right kind of experience is their obsession with four-wall productivity. ◀ Continued from page 29
In his CGA speech, Stephens said retailers will have to shift their thinking beyond being a place to distribute products and focus instead on selling the experience along with the product. “Retail has to become less static,” he said. “The future will be less about dragging things home and more about the value of the experience. “Smart companies will re-deploy employees to become ambassadors – awesome people that add value to the in-store experience as nutritionists, sommeliers or chefs, for example – people who interact one-on-one with customers. People trust other people.” Even millennials, who depend so much on personal devices, “are hungry for physical experiences that do not involve the product itself as much as the brand,” he told conference attendees. Whole Foods’ 365 stores, which are tailored to millennial tastes, “are about the experience,” he pointed out.
For many retailers, however, the major obstacle to creating the right kind of experience is their obsession with four-wall productivity,” which has been the primary operating principle for a century or more, Stephens said. “It’s a hard pill to swallow, but in a world where we can get anything we want with a single click, no one needs what you sell. But what you sell is the only value differentiator left, so you must create a different experience around what you sell by getting innovative, cunning and crafty – not by starting with technology, though leveraging technology could add value to the experience, but by understanding the customer experience in a different, deeper way, then de-constructing that experience.” That may be the only way to meet “the very material threat” posed by Amazon, Stephens said, “but too many retailers will recognize that too late because they are myopically obsessed with the inner workings of the business but unaware or unwilling to see what’s happening outside the walls.
“They remain doubting Thomases, and as a result, they could eventually be replaced by others more eager to figure out how to move product by adopting new ideas,” he added. According to Stephens, too many retailers are still caught in the mindset that they are there to distribute products, “and any value-added experience is simply sprinkled in like garnish. “They don’t energize consumers to make the trip to the market enticing. But to survive, they’ve got to figure out ways to deal with the threat of online sellers who rely on convenience.” According to Stephens there have always been competitive pressures on the industry, but “Amazon doesn’t care if it makes money or not, and as it continues to grow, it will operate at a loss to put other players out of business.” Most operators still think more laterally, he said.
The answer is enhancing the in-store experience, Stephens said. “As good as Amazon and the others are, they are still just digital catalogues. As connectivity becomes more important, the future of retail will be more experiential and immersive,” he said. “But the time for retailers to act is soon because there’s a diminishing window of time.” Figuring out ways to make the shopping experience more appealing to prevent shoppers from opting out is not the way most operators think about their businesses today, Stephens said in the interview. But in an industry with profit margins often at or below 1 percent, the challenge of how to generate revenue over and above selling groceries is daunting, he noted. The future may revolve around reassigning floor space, he said.
“Even if a retail company increases its selection by 10 percent, that will still be only a small facet of what Amazon is able to offer,” Stephens said. “And even if a retailer can improve service by 20 percent, that still pales versus Amazon’s ability to deliver when the consumer wants when he wants it.” E-commerce is continuing to grow in all businesses, posting sales of $1.6 trillion in 2015, with expectations for long-term, highvolume growth, Stephens told conference attendees, “We’re probably just reaching the end of page 1 and turning to page 2.” Supermarkets stand to lose as much as 30 percent of their business to online sellers by 2025, particularly on high replenishment items like diapers, pet food, baby food, detergent and light bulbs, for example, Stephens said. “It will be a matter of ‘say it and get it.’ When someone wants an item, they will click on a technological device and have it delivered. The question for retailers, then, is how will your store, your chain and your brand be heard?”
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“Developing a grocery store that will appeal to future consumers starts with the question, how much space does an operator need to create the kind of experience that’s so compelling and remarkable that people are motivated to return again and again to buy food there? Continued on page 32 ▶
◀ Continued from page 31
“That might mean devoting just 25 percent of space to essential food products and finding ways to devote 75 percent of space to creating amazing food and health experiences,” he said. The traditional ways of thinking about merchandising that worked for decades may no longer be relevant, Stephens added, with supermarkets of the future likely to hold little product while offering new, exciting, customized experiences aimed at meeting specific consumer preferences, he explained. “In a world where home delivery from online businesses is growing, it’s an archaic process for consumers to get into their cars, drive through traffic to a supermarket, handpick items, load them into a cart, unload them at the checkstand, load the bags into a cart and unload them into the car, then unload them again when they get home and put them away,” he said.
other ways to position groceries from a health-and-welfare standpoint or a lifestyle experience,” he said. “For some, the grocery store of the future may be a place for entertainment that creates memorable experiences and builds loyalty and a greater relationship between the supermarket and the public.” One company that’s taken the right steps to meeting the long-term needs of future consumers is Eataly, Stephens noted. “That’s a company that understands that retail as strictly a commodity business is threatened, so it drives its business with spectacular, exciting facilities that combine groceries, restaurants and entertainment. “No one else in the grocery industry that I’m aware of has pressed ahead as much (as Eataly) on this concept that I believe will be a way to guarantee success going forward. No one else has taken such dramatic steps to acknowledge experience should come first and products should be a secondary consideration.”
It starts with designing the experience...break down the consumer’s journey to the store to its most granular components and design each aspect as an experience to be savored. According to Stephens, the only reason future consumers will go through all that is if the retailer isn’t afraid to give them other experience-based options. “What grocers need to consider is how to create incredible expectations for consumers, whether that means offering cooking classes with celebrity chefs, featuring holistic coaches to teach people how to eat better, offering a broader variety of in-store entertainment events or providing
According to Stephens, “It starts with designing the experience. Retailers must break down the consumer’s journey to the store to its most granular components and design each aspect as an experience to be savored.” How long it takes for retailers to figure it all will depend on each individual business, he said.
“Every organization should already be working on a prototype within the next year or so,” he recommended. “But the majority of retailers will probably do nothing in the short term, which is just human nature. They will fail to understand that dramatic things are happening and that their business could be in peril, but still they will do nothing other than ignoring what’s coming because
that’s the easiest thing to do. As a result, most will be disrupted by outside forces and will end up in trouble.” For more than 100 years, consumers relied solely on supermarkets as a source for groceries, Stephens said. “Consumers had very few other options, and they depended on supermarkets to provide access to brands and products,” he added. “And if there was something the local grocer didn’t carry, then the consumer was out of luck.” But with the advent of online shopping options, that approach is unlikely to remain appealing for much longer, Stephens said. “Every supermarket retailer today must look at his business with fresh eyes and ask what value he is bringing to the table or adding from manufacturers. “Selling groceries is a very product-centric business, and companies live and die by tenths of a percent in profits, which is a precarious position to play from because it doesn’t afford much wiggle room to be highly creative. It leaves everyone living on the razor’s edge. “But someone has to step up and say they will create a store that’s more about the experience than the food.” Online selling is a competitive reality that isn’t going to disappear, he pointed out. “Right now it’s Amazon against the world. Amazon’s market capitalization is higher than Walmart’s, and grocery sales are rising 20 percent a year, whiles sales at the average supermarket are up just 1 percent, 2 percent or 3 percent annually. “With 60 percent of every incremental dollar spent online going to Amazon, Amazon is not only massive but dominant, and with consumers willing to buy anything online, its grocery sales will continue to grow rapidly.” Changes in the way most supermarket operators think are likely to occur gradually, if they occur at all, Stephens said.
“I’m talking with some companies that are considering doing new things or working on innovation. Whether or not they can come up with a new grocery model with a strong entertainment value within the next couple of years is debatable, but within five years, most grocers will realize they can’t make money unless they create something unique and different from what they’re doing today.” Companies don’t need to launch experiencefocused stores on a chainwide basis in the short term, Stephens said, “but they should be experimenting at test locations, the same way Amazon is testing brick-and-mortar stores. Innovation matters.” Stephens said the most important skill for any business, particularly grocery stores, is continuity, adding that all companies have creative people within their organizations that are assets and must be utilized. “What supermarkets should be doing is testing innovative stores and understanding who their creative people are because they will need a ton of creativity going into the next decade,” he concluded. ■ Editor’s Note: Elliot Zwiebach was a reporter with Supermarket News for more than 47 years.
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FOUNDATION NEWS
FOUNDATION TO INDUCT STATER BROS. MARKETS EXECUTIVE George Frahm, Stater Bros. Markets, will be inducted into the California Grocers Association Educational Foundation 25th Anniversary Hall of Achievement on April 6, 2017, at the Sheraton Fairplex and Conference Center in Pomona, Calif. As part of the Foundation’s 25th anniversary celebration, former Hall of Achievement inductees will be recognized during the dinner event. “It is with great pleasure that we recognize George during our 25th anniversary celebration, for his lifelong commitment to the grocery industry and his unwavering support of the Foundation,” said Ron Fong, President of CGA Educational Foundation. Proceeds from the event help fund the Foundation’s college scholarship and tuition reimbursement programs. For the 201617 program year, the Foundation awarded 371 scholarships totaling $588,100. The Foundation also disbursed more than $150,000 in tuition reimbursement. The Hall of Achievement was created in 1992, to recognize grocery retailers and suppliers who have contributed substantially
to the advancement of the grocery industry. Well-wishers from throughout the industry will be on hand to recognize these individuals for their contributions to the California food industry. For 25 years the CGA Educational Foundation has provided financial assistance to advance the educational goals of CGA-member company employees and their dependents and offers educational programs for the grocery industry. Since that time, more than $6 million in college scholarships and tuition reimbursement grants has been awarded to grocery employees and their families. About Our Honoree George Frahm is Executive Vice President Administration/Distribution for Stater Bros. Markets – the largest privately-owned supermarket chain in California. Frahm began his grocery career in 1973 at the Stater Bros. Market in Glendora, Calif. as a janitor in the early morning hours and as a courtesy clerk in the evenings, while attending college. In 1977, he was promoted to assistant store manager at the
George Frahm
Stater Bros. store in Azusa, and one year later was promoted to store manager. Frahm continued to be promoted within Stater Bros. culminating with his present position as Executive Vice President Administration/Distribution. In this capacity he oversees both the company’s Administration Division, which includes Human Resources, Labor Relations, Insurance, Workers’ Compensation, Corporate Security Department and Support Services, as well as the company’s Distribution Division. He is a former CGA Board Director, and served as Chair in 2010. He also served as a CGAEF Trustee from 2006 to 2015. ■ For more information on the 2017 Hall of Achievement, visit www.cgaef.org.
College Scholarship Applications Available January 1 The CGA Educational Foundation scholarship application process opens from January 1 – April 1, 2017. CGAEF scholarships are available to high school seniors, undergraduate, and graduate students who are the dependent sons or daughters of employees, or are themselves CGA member company employees. Scholarships are awarded based on academic merit, evidence of outstanding character and 34 | CAL I FOR N I A G R OC E R
leadership potential. Additionally, a number of awards have specific eligibility criteria. By completing one application, students are evaluated for all scholarships for which they are eligible. Undergraduate student applicants must enroll as college students in the fall 2017 and spring 2018 semesters at an accredited college or university in the United States. Graduate student applicants must enroll in
a graduate program during the fall 2017 or spring 2018 semester at an accredited college or university in the United States. All scholarships are one-time awards that are applied toward the recipient’s educational expenses at any accredited college or university in the United States. For more information on applying, visit www.cgaef.org ■
Congratulations to
Jim Wallace From your friends at
© Copyright 2016 Smart & Final Stores LLC
to incoming CGA Chairman Jim Wallace of Albertsons... And Thank You to Kevin Konkel of Raley’s for your dedication and contribution to CGA as Chairman this past year.
CAL I FO RNIA GRO CER | 35
Kevin Konkel
CALIFORNIA’S GROCERY INDUSTRY GATHERS IN PALM SPRINGS TO BINGE ON THE BUSINESS OF GROCERY. How the grocery industry is reshaping itself in response to a rapidly evolving retail environment was the focus of this year’s CGA Strategic Conference in Palm Springs, Calif. More than 800 grocery retailers, wholesalers and suppliers from throughout California and beyond heard from industry veterans, retail thought leaders and research experts who addressed the conference theme, “Reshaping Retail,” in inspiring general session presentations and candid share group discussions. “Our theme this year focused on the significant transformation taking place today in our industry,” says CGA President and CEO Ron Fong. “Attendees saw and heard this theme as it was interwoven into everything we did – from speaker presentations and educational content to event graphics and networking events.”
Jeremy Gutsche
“BOTH RETAILERS AND VENDORS CONTINUE TO SEE TREMENDOUS VALUE IN OUR UNIQUE MEETING FORMAT...” In addition to a strong educational program, the conference continued its signature face-to-face prescheduled retailer/supplier meeting program – this year scheduling more than 1,000 meetings in two days. “Both retailers and vendors continue to see tremendous value in our unique meeting format,” says CGA’s Doug Scholz, Sr. Vice President, Business Development and Marketing. “We extend our thanks to all of this year’s participating retailers and sponsors for their help in making this year’s conference so successful.” Nearly 40 of the top grocery retail companies in California were represented at this year’s conference including many independent operators. Supplier support was strong as well, as evidenced by all sponsorship opportunities being sold well in advance. “The CGA Strategic Conference has proved a valuable resource for brokering new relationships and deals,” said Bear Silber, Selfycart, a first-year conference sponsor. “It has quickly become a must-attend event for our team. With terrific networking opportunities and insightful speakers, we know we’ll be back next year.” For the second year, CGA hosted a half-day Independent Grocers Forum in connection with the conference.
SAVE THE DATE
SEPTEMBER 24 – 26, 2017 MORE PHOTOS ONLINE AT CAGROCERS.COM
The forum included a presentation from Retail Feedback Group CEO Doug Madenberg who addressed the “independent advantage” and explored research that can help independents position themselves as choice destinations to shop and work. “A special thank you goes out to The Illuminators for again providing excellent food and camaraderie,” said Fong. “The Illuminators, led by Headlite Dave Dimond, really knocked it out of the park this year. Their strong support plays an important role in the success of our conference.” Continued on page 38 ▶
◀ Continued from page 37
STRONG EDUCATIONAL PROGRAM The conference educational program kicked off Sunday evening with a presentation on industry collaboration that featured a retailer and supplier industry panel discussion. “We began the conference discussing collaboration which was the underlying message that accompanied the theme throughout the three days,” said Scholz. “The panel and speaker did an excellent job in highlighting the importance of strong retailer-supplier communication.” On Monday, attendees participated in four Whiteboard Sessions that allowed participants to discuss issues and challenges related to market fragmentation, technology’s influence on shopper behavior transparency and sustainability, and merchandizing health and wellness. These whiteboard topics were moderated by industry experts from the MARS Agency, Mintel, The Food Institute and Unified Grocers Market Centre. The General Session featured Jeremy Gutsche, President and CEO of Trendhunter. com, the No. 1 trend-spotting site in the world. Gutsche, who has been labeled an “intellectual can of Red Bull,” delivered a fast-paced, information-packed presentation that received major kudos from session attendees. Eighty percent of attendees said they would be changing something they were doing as a result of the information Gutsche shared.
On delivering his message of helping attendees adapt faster and better to change, Gutsche told the audience of industry retailers, wholesalers and suppliers that their next best great idea “may be closer than you think.”
“But never forget that it’s your own success that can hold you back. So be curious, be insatiable, be willing to overcome and destroy your ego and then you will ultimately get ‘better and faster.’”
“...NEVER FORGET THAT IT’S YOUR OWN SUCCESS THAT CAN HOLD YOU BACK. SO BE CURIOUS, BE INSATIABLE, BE WILLING TO OVERCOME AND DESTROY YOUR EGO AND THEN YOU WILL ULTIMATELY GET BETTER AND FASTER.” “Your challenge,” he said, “is that you have hundreds of choices you can make and each choice can take you to a slightly different version of your potential. So the question becomes, how do you know you’re making the right choices?” Gutsche, author of several best-selling books including “Better & Faster” and “Exploiting Chaos,” shared tactics he had developed by studying tens of thousands of ideas from hundreds of leading CEOs from many of retail’s largest companies and millions of individuals from around the world. “There are patterns and clues pointing you to your next level,” he told attendees.
This year’s annual Retailer Spotlight featured Dave Hirz, President/CEO, Smart & Final, who shared his insight, perspective and strategy that’s shaping the highly successful Southern California-based retailer. With the General Election less than two months from the conference, popular political consultant Rob Stutzman provided an informative, entertaining assessment of the 2016 election at the state and federal level. The conference educational program wrapped up with an insightful presentation on the future of consumerism by one of the world’s foremost retail industry futurists Douglas Stephens.
Rob Stutzman
Stephens opened his presentation by quoting noted tech investor Marc Andreessen who several years ago that “retail is dead,” and went on to highlight major technology advances that have and are changing the retail landscape. “The broader landscape in retail is shifting as a consequence of the forces that are playing on consumers,” Stephens said of today’s technology, “and that ultimately impacts you, the retailer." To illustrate this shift, Stephens highlighted several technological advances being employed by some of the largest online companies in the world, including Amazon’s “Echo,” an in-home wireless speaker and voice command device that, among other things, can order product from Amazon with just a verbal request. That, Stephens said, is putting a tremendous strain on traditional retailers. “The question becomes how are you going to be heard, how is a chain store or brand going to be heard in this post-Echo world where consumers are trained to ask Echo, or whatever device for the things they are looking for. A lot of retailers are struggling with this level of connectiveness.” Yet despite these technological advances, Stephens believes retail is not dead. While our lives are more and more being ruled by algorithms, it cannot be replaced by what he said was “the joy of discovery.”
Because shopping is physiological, the physical shopping space will continue, he said. What will change is the path to purchase. Retailers must now create experiences, rather than just sell products, Stephens said. While for the past 100 years there was only one main path to purchase, today, because of smart devices, the path to purchase “is all over the place.” By 2017, Stephen said, nearly 50 percent of all purchases will have been touched by a mobile device in some way. For more on the “Future of Consumerism,” turn to Page 28. “This is a great conference that’s focused on improving the business of both retailers and suppliers,” said Rich Arnold, Oberto Brands. “The topics for the general sessions are timely, informative and on point. Also, the individual business meetings are productive without being overly formal.” CGA wishes to thank the many sponsors that helped make this year’s event a tremendous success.
Continued on page 40 ▶
Douglas Stephens
Dave Hirz
◀ Continued from page 39
THANK YOU SPONSORS PARTICIPATING RETAILERS
PARTICIPATING SPONSORS
Albertsons/Safeway, LLC Andronico’s Community Markets Big Saver Foods, Inc. Bristol Farms Cardenas Markets, Inc. C & K Market, Inc. Costco Wholesale El Super (Bodega Latina Corp.) Food 4 Less/FoodsCo. Food 4 Less/Rancho San Miguel Foods Etc. IGA Gelson’s Markets Grocery Outlet, inc Holiday/Sav-Mor Foods Mar-Val Food Stores, Inc. Mi Pueblo Food Center Northgate Gonzales Markets Numero Uno Market, Inc. Nutricion Fundamental, Inc. Raley’s Ralphs Grocery Company Rio Ranch Markets Save Mart Supermarkets Smart & Final Stores Stater Bros. Markets Super A Foods Superior Grocers Super King Markets Susanville Supermarket IGA. Times Supermarkets (Hawaii) Twain Harte Market Vallarta Supermarkets Whole Foods Market Young’s Payless IGA
Premium Suite Holders Anheuser-Busch InBev Bimbo Bakeries USA CA Grown C&S Wholesale Grocers Chobani Coca-Cola Refreshments/ Minute Maid General Mills The Hershey Company The Jel Sert Company Jelly Belly Candy Co. Kellogg Company Kimberly-Clark Corporation The Kraft Heinz Company MillerCoors Nestlé Purina PetCare Nestlé Waters North America PepsiCo Procter & Gamble Smithfield Foods, Inc. Tyson Foods, Inc. Tony’s Fine Foods/UNFI Unified Grocers, Inc. Executive Level Sponsors Campbell Soup Company Classic Wines of California The Clorox Company Mondelēz International Progressive Produce Retail Marketing Services Selfycart Unilever WhiteWave Foods President Level Sponsors California Lottery Command Packaging Ferrero USA Frito Lay Hallmark Cards, Inc. Harris Ranch Beef Company Hollandia Produce LP Houweling’s Tomatoes
Kashi Company KeHe Distributors LLC NuCal Foods Mission Produce Mizkan America Nestlé USA EVgo Oberto Brands OK Produce Orchids Paper Products, Inc. ReadyPac Foods The Oppenheimer Group San Miguel Produce Supermarket News Westlake Produce Opening General Session Sponsor Costco Wholesale Opening Reception Sponsors E & J Gallo Winery Alta Dena Certified Dairy LLC Keynote Luncheon Sponsor California Table Grape Commission Networking Lounge Sponsor Tyson Foods, inc. After Hours Social Sponsor Surplus Asset Management Whiteboard Session Sponsor CGA Educational Foundation Registration Sponsor Post Consumer Brands Director Level Sponsors Apio Inc. AppCard Aurantiaca USA LLC BMA USA, Inc. Baloian Farms Bunzl California C & H Sugar – ASR Group Certified Federal Credit Union Ciuti International
Crown Poly Designer Greetings Earth Friendly Products Emerson Grind2Energy F. Gavina & Sons, Inc. FMS Solutions, Inc. Heat Seal LLC Idahoan Foods Itasca Retail The Jel Sert Company Karl Strauss Brewing Company Lone Peak Labeling Systems LWC Brands, Inc. Mettler Packaging LLC Minsa Corporation NewStar Fresh PBI Market Equipment, Inc. PureFit Premium Protein Bars Refrigerator Media Advertising Roplast Industries Inc./ Bring Back Bags Sellers Publishing inc Sioux Honey Association Sparkling ICE Sun Products Corporations Tampico Spice Co. Tony Chachere Creole Foods TruGrocer Federal Credit Union Truno Retail Technology Solutions Worldpay US, Inc.
Congratulations to the new CGA Chairman of the Board
Jim Wallace
VP General Manager, Pavilions Thank you to outgoing Chairman, Kevin Konkel of Raley’s.
Nice Guys FINISH FIRST BY CASSANDRA WALKER PYE
It’s been a pretty charmed ride for CGA incoming Chairman Jim Wallace, Vice President and General Manager of Pavilions. After a steady climb up the retail food industry ladder, he has been elected to lead the Association while taking the reins of one of Southern California’s premier banners. It seems that nice guys really do finish first. “He is really known as the quiet gentleman of the industry,” says CGA President Ron Fong. “When you look at a guy who’s spent 38 years with the same company, it tells you he’s the type of executive the company believes it can send into any situation. He is the consummate utility player. Over and over again, he was dispatched to clean up, fill in or keep things going. His company sent him all over the country to do this. He’s really that good.” Born in Glen Cove, New York, Wallace and his parents moved to Fountain Valley, Calif., in 1965. At 16, he started working for Lucky Stores, sorting bottles and bagging groceries as a box boy. He supervised the night crew right after graduating from high school and steadily worked his way through store level management. After several years in leadership roles, Wallace was offered a special assignment, Front End Supplies and Productivity
Manager, for one of Lucky’s divisions. Plastic bags were coming online for the industry and he led the company’s efforts to roll them out in stores. The assignment also required him to travel to Sacramento, from time to time, and he recalls the opportunity provided an introduction to environmental policy and how Sacramentobased advocacy impacted grocery operations and profitability. Wallace has held a host of titles and, like many senior grocery executives, ascended the corporate ladder logging miles in a variety of geographies, all while witnessing the expansion and growth of his company, mergers and acquisitions and the launch of new banners, brands and formats. His wife, Lori, a California native, is a speech/language pathologist and special education teacher at the Irvine Unified School District. When their children were young, her schedule allowed her to work full-time, but still be home when their children were home.
“We were really blessed,” he recalls. “When Lori went to work, the kids went to school. She was off in the summer months and holidays with them. We were so fortunate.” They are a close-knit clan, Wallace says. “As our family grew, even with my schedule, it was most important to my wife that we have dinners together,” he says. “I was home by 7:30 most nights and dinner time was our family time. Our neighbors used to say ‘Your kids go to bed really late,’ but that worked for our family.” Their son, Ryan, was an Eagle Scout, like his dad, and their daughter, Caitlin played competitive soccer into NCAA Division I college level. “That meant really full weekends,” he muses. “We divided and conquered. The free time we had, we spent with our children.” Their son finished law school and now works for the British Embassy in Washington, D.C. Their daughter is married and works as an occupational therapist for Anaheim Union High School District. Continued on page 44 ▶
CAL I FO RNIA GRO CER | 43
◀ Continued from page 43
While he was able to keep the same home address, Wallace’s career covered a lot of ground. After the plastic bags assignment, he spent five years as an operational specialist, working in grocery and general merchandise departments. Wallace then worked for seven years as a district manager, covering San Diego, Los Angeles and Orange counties. Albertsons purchased Lucky Stores by that time and, in 2004, he took the lead on Albertsons’ Six Sigma Deployment Leader for nine western states. “We delivered benefits to the business with process improvement projects, working for about three years,” he asserts. The program started under the Albertsons banner, and Wallace and his team kept it going even after SuperValu purchased the company.
“I think CGA is a tremendous organization for our industry,” he says. “Our company’s leadership truly understands the value of our membership.” He was rewarded with a promotion to Area Vice President, with responsibility for 120 stores in Los Angeles, Riverside, San Bernardino and Orange counties. Three years later, he was named Vice President of Sales Support. By then, the industry was undergoing significant transformation and the game of retail musical chairs was in full force. Albertsons bought American Stores in 1999, and sold the brands to several companies in 2006. Premier properties were purchased by SuperValu, CVS bought stand-alone drug stores and Cerberus Capital Management took ownership of most of the remaining properties. When the dust settled, Wallace landed as a member of the SuperValu team, where he remained from 2006 to 2013.
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Wallace’s career track allowed him to witness advances in every aspect of operations. “When I started with Lucky, we were using class-five cash registers. In the late 1970s, we moved to scanners and UPC codes. A lot of the changes were around efficiencies, productivity, and item selection,” he recalls. “I would say the biggest change from the early 1990s to now is the transformation from canned and frozen vegetables to where we are today in fresh. Organic was not even on the table. Consumers are more educated. Food experts and explorers are more educated about what they want to eat.” In January 2015, Albertsons completed the purchase of Safeway Company. Wallace served as Vice President of Retail Support for the South Region with a territory that included California, Arizona, Texas, Louisiana and Florida. He logged a lot of miles that year, as well. At the beginning of 2016, Wallace was named Vice President, General Manager for the Pavilions banner, a role he relishes. “I’m so honored to have this job,” he says. “I get to remain in Southern California and get to work with a team of really talented professionals.” He says he is also looking forward to partnering with “Team CGA” this coming year and is a true champion of the Association. “I think CGA is a tremendous organization for our industry,” he says. “Our company’s leadership truly understands the value of our membership.” Wallace recalls a time when, shortly after SuperValu was purchased by Albertsons LLC, the company faced hurdles as it sought approval for its WIC licenses, because the state of California said it was not accepting any new applications from retailers. CGA, he says, helped the company work through the issue and obtain the licenses. “I’m not sure that would have happened if it weren’t for CGA,” Wallace recalls. “Obviously, we saw the value then and we see the value now. As Chair, I would like to
have a year where we continue to provide that kind of value to all the members – legislative, regulatory and supporting our independent members.” In addition, Wallace said, he encourages all CGA members – retailers, wholesalers and suppliers – to engage in the Association’s advocacy efforts. “CGA’s ability to advocate on our industry’s behalf on both the local and state level is enhanced tremendously when we, as members, engage in this process,” Wallace said. The Pavilions executive encourages members to respond when called upon by the Association to contact local and state leaders, host store tours for elected officials, contribute to CGA’s political action committee (GROPAC) and IEC (Independent Expenditures Committee), and most importantly attend CGA Grocers Day at the Capitol. “I think there’s a lot coming up for us – the new labeling law coming online in May 2017, continued membership growth, and with the elections behind us, who knows what else 2017 will bring.” Fong cites Wallace’s deep knowledge of operations – from marketing to private label to opening new markets – as a strength the CGA team will draw on all year. “Jim has a very unique understanding of the operations side of the business and can translate that knowledge in terms that will strengthen our government relations efforts,” Fong says. “We are thrilled to be able to leverage his knowledge in all aspects of our own operations, especially as we begin planning our 2017 Strategic Conference.” Fong reports that Wallace brought the largest retail contingent (17 team members, this year) to the Strategic Conference. Wallace says, “We’re a huge company, but at the CGA conference, we can see a lot of vendors in one space and in two days, we see everyone we need to see.”
Fong says he and the CGA staff will tap their new Chair for input on trends, relevant topics and the hottest speakers on the circuit. They are counting on his expertise to drive another successful conference and another successful year. Wallace says the future, for him, is about prosperity. “Professionally, I would tell you I want to see Pavilions continue to thrive and personally, I just hope to see my family do the same,” he says. After 27 years as a special education preschool teacher, his wife, who is still a handful of years away from retiring, has spent the last three years as a speech therapist at the middle school level, working closely with students with severe autism.
“Jim has a very unique understanding of the operations side of the business and can translate that knowledge in terms that will strengthen our government relations efforts...” “She really enjoys her work,” Wallace says. “She’s got a lot of patience. I’m sure, when she retires from teaching, she will do something to serve the community in some way.” Wallace says he has no plans to retire, but also considers his work as service – to customers, to his colleagues and to the industry. “There are trials and tribulations in this business, but every day brings a new experience. I like the way we serve the needs of the community,” he says. ■
Thank you!
We are proud of Kevin Konkel’s leadership.
Congrats to the new CGA Chairman, Jim Wallace.
EVERYONE LIKES A
Good Story By Patty Johnson
Global Food & Drink Analyst Mintel
HOW STORYTELLING CONNECTS CONSUMERS WITH RETAILERS AND BRANDS
S
ince ancient times, storytelling traditions have provided the foundation for human communication and connection.
Stories about our foods and the people who produce them connect us emotionally to the brands, manufacturers and retailers we choose. Relationships with products are becoming more portable, seamless and honest. Consumers are increasingly being romanced by the stories that products are telling about their origin, ingredients or inspiration. Memorable stories enable consumers to fill in the knowledge gaps they may have about how products are produced, sourced and sold – detailing a product’s journey from the farm to the table. Embracing and highlighting stories about diversity can also forge emotional connections with consumers. For example, advertising and marketing messages featuring models and actors who accurately represent the consumer base will do a better job of reaching more individuals.
Brands and businesses can take note and benefit from continuing to develop diversity in communication efforts. As the notion of diversity becomes one that marketers and companies are embracing and using more often when showing visual representations of consumers, the very definition of diversity seems to widen. For example, the Female Farmer Project is a photography series by Audra Mulkern that aims to give a more authentic face to the U.S. farming community. The project began as a “farm-to-table documentation” aimed at countering the “white men in overalls and straw hats” farmer cliché by showing who is actually behind people's produce (hint: it’s often women). This is bound to speak to consumers, especially because many people are sensitive to whether or not models and actors in ads look like them or look “authentic.” Continued on page 50 ▶
Attitudes Towards Food, by Demographics,U.S., February 2015 All
iGeneration Millennials Generation X Baby Boomers (1946-1964) (1995 - 2007) (1977-1994) (1965-1976) (51-69) (39-50) (21-38) (18-20)
Swing Generation/ World War II (1945 or before) (70+)
There are probably more harmful or excess ingredients in foods than manufacturers are telling us
71%
80%
70%
71%
71%
73%
I want to see more transparency in food product ingredients
69%
62%
68%
67%
70%
72%
I worry quite a bit about potentially harmful ingredients in the food I buy
53%
60%
60%
55%
46%
35%
Base: 2,000 internet users aged 18+
Source: Lightspeed GMI/Mintel
Source: Mintel Reports: Free-from Food Trends – U.S., May 2015
◀ Continued from page 49
Now More Than Ever, True Stories are Important Storytelling is more important now because the necessity for retailers and brands to be transparent has never been higher. Product recalls, questionable claims and shady business practices have made us more suspicious shoppers and worried about the foods we buy. In fact, nearly three-quarters of U.S. consumers show a high level of skepticism towards food integrity, according to Mintel research. Younger U.S. adults aged 18-38 are the most worried about harmful ingredients, while demand for transparency in food product ingredients increases with age. Food worries are often multifaceted; consumers often express concern over the impact on their own health as well as what’s good for the planet. (The recession made Americans more conscientious shoppers. Now consumers are examining every purchase because we can; the rise in price and product tracking tools has made it easy for us to be more informed and savvy shoppers.) Attitudes Toward Store Brand Products, U.S., November 2015 Agree I want to see more transparency about who makes them
81%
I want to see more transparency about where they are produced
79%
I would trust a store brand more if it listed the product’s origin
76%
I would buy more store brand products if they used locally-sourced ingredients
69%
National brand products share more information about their origins than store brands
56%
Base: 1,864 internet users aged 18+ who purchase any private label Source: Lightspeed GMI/Mintel Source: Mintel Reports: Private Label Food Trends – U.S., February 201
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According to Mintel research, 70 percent of U.S. shoppers say they like to know where their food and drink comes from. Further, about 75 percent of U.S. consumers with internet access have conducted online research for purchases in the last week. In short, today’s consumers are equal parts skeptic and sleuth.
Consumers Want Transparency from Retailers Besides the obvious drivers of convenience, price and familiarity, grocers have many other “stories” to tell in marketing communications. At the store level, one asset to prioritize and invest in is human capital. The role of the employee can be elevated beyond just telling customers which aisle items are in, and/ or ringing up items efficiently. Informed and knowledgeable employees can assist consumers who are seeking more detailed information regarding the origin of the foods they buy. Highlighting fresh produce and the stories of the farmers that grow it is especially relevant for baby boomers and swing generation consumers who are most likely to choose a retailer based on its fresh produce selection, according to Mintel research. Meanwhile, stories about unique and exclusive items including organic and natural food selections offer maximum appeal to millennials. Demand for transparency is especially pronounced for private label products. According to Mintel research, U.S. store brand buyers overwhelmingly agree that store brands should provide more transparency about who makes them, where they are produced, and their origins. As retailers continue to expand their store brand offerings with many making organic and BFY (better-for-you) claims, consumers appear to be skeptical about whether they can trust these claims. This presents retailers with an opportunity to tell a stronger story about the origin of their products as a way to connect with buyers and quell any concerns about how they are made, especially since more than half of buyers agree that national brands do a better job of providing this information.
The Impact of Social Media Consumers are more powerful than ever. They have the ability to thoroughly research a brand or a retailer and its practices (and increasingly do so in real time, thanks to smartphones), while social media gives consumers an interconnected platform to convey any feelings of distrust. Never has it been easier to rail about bad business practices, thanks to Twitter, Yelp, Angie’s List and the like. And while a handful of brands may have earned a consistent level of trust, many will probably always be seen through a veneer of suspicion, with every move analyzed for signs of an ulterior motive. That means unbiased peer and third-party reviews are likely to continue influencing decisions. Can we expect to see every item on the shelf in our supermarkets labelled with a rating from reviewers like Which? or Consumer Reports? Companies that can show their human side through storytelling and acknowledge their failings with grace will appeal to shoppers who can see through bombastic claims. Creating platforms that give customers a voice to shout about their experiences will help brands position themselves as transparent – an attractive trait in today’s climate. In the UK, supermarket retailer Iceland has announced it will be moving on from the celebrity mother spokespeople it has previously used to instead harness the power of vloggers who are real mothers. Iceland has partnered with Channel Mum, a network of vlogger parents. These parents will then upload videos of themselves to Channel Mum’s YouTube channel and website as they make meals using Iceland products. Celebrities are no longer the sole option when it comes to hiring a famous face to front a campaign; in recent years we’ve seen bloggers and vloggers rise up to take their place thanks to the rise in popularity of social media. This approach will present the retailer as interested in getting real – rather than manufactured – reactions to its food. This approach has the potential to backfire, but it may also attract skeptical consumers who are looking for brands to be more truthful.
Ethics Provide a Framework For Storytelling
C
onsumers are increasingly being romanced by the stories that brands and retailers are telling about product origin, ingredients and inspiration.
While the notion of “corporate transparency” has become something of a cliché in recent years, its ethos is as relevant as ever. Consumers have become cynical toward the claims of manufacturers, retailers and advertisers and acknowledge a lack of information on product labels. Above all, retailers and brands must be truthful and stay true to their stated core values. Stories must align with these core values or they will be viewed with suspicion. Company and product ethics matter to consumers. In fact, about 70 percent of consumers claim to give at least some consideration to a company’s ethics when making purchases, according to Mintel research. Moreover, company ethical behavior has gained importance over the past few years; less than half of consumers said they considered corporate ethical behavior in their purchasing decisions when surveyed in 2012. Somewhat surprisingly, men are significantly more likely than women to say they are often/always influenced by company ethics (29 percent vs. 16 percent). Millennials tend to place more emphasis on ethics than older generations, which supports commonly held beliefs about millennials: 78 percent of millennials at least sometimes consider ethics in their purchasing decisions, compared to 61 percent of baby boomers. Continued on page 52 ▶
Factors Considered to Determine How Ethical a Company is, U.S., April 2015 “Which of the following factors, if any, do you consider when deciding how ethical a company is?”
Employee treatment Where products are made Environmentally friendly Animal treatment Advertising practices Food transparency Stance on controversial issues Outreach in local community Outreach in U.S. Charitable donations Outreach globally Employees volunteering None of the above Other Base: 2,000 internet users aged 18+
48% 34% 33% 31% 27% 27% 27%
22% 18% 17% 13% 9% 16% 2% Source: Lightspeed GMI/Mintel
Source: Mintel Reports: The Ethical Consumer – U.S., July 2015
◀ Continued from page 51
Among millennials, older millennials appear to be more influenced by ethics, likely because they are more likely to have children (parents tend to be more impacted by ethics) and because they have higher incomes. Along those same lines, respondents from higher income households are more likely to be influenced by a company’s ethical track record.
C
onsumers are expecting a higher level of engagement with retailers and brands than ever before.
Those aged 18-34 who live in $75,000-plus households are among the most influenced by ethics (86 percent are sometimes influenced). Retailers and brands targeting high-income or young, affluent millennials should consider how their ethical track record will be perceived with their audience. Mintel’s research suggests that the primary driver for purchasing from ethical companies is the “feel good factor” associated with the purchase. Consumers want brands to act ethically on their behalf and they reward these brands with loyalty.
How companies treat their employees is the factor most likely considered by consumers in their determination of how ethical a company is. This is likely because most people have been employed at some point and can empathize with fellow workers. Employee treatment outranks factors such as being environmentally friendly, treatment of animals, and stances taken on controversial issues – which often receive wide media coverage. When it comes to employee treatment, consumers likely consider fairness of wages, benefits, and even policies around time off and holiday hours. For example, some retailers have faced pressure from consumers, watchdog groups, and striking employees due to company policies. In some instances, even when companies make improvements, some consumers feel it is too little, too late. Here the lesson to be learned is that companies need to be proactive in getting the story out about their efforts, rather than reactive.
Rethink the way you dispose of something as simple as an orange peel.
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Ethical & Environmental Claims on Food & Drink Introductions, U.S., 2011-15 2011 2012 2013 2014 2015
35%
Environmentally Friendly Package
13.7
14.4
20.4
21.8
24.7
20%
Environmentally Friendly Product
2.4
2.3
5.9
6.7
7.9
15%
Charity
2.4
2.3
3.5
3.5
3.5
10%
Ethical – Human
1.7
1.4
2.5
2.7
4.0
5%
Ethical – Animal
0.6
0.5
0.9
1.3
2.0
0%
Carbon Neutral
0.2
0.1
0.3
0.2
0.2
Total Ethical & Environmental
17.6
18.1
26.8
29.0
33.0
30% 25%
2011
2012
2013
2014
2015
Source: Mintel GNPD
Tabular view of same data shown in chart above
Total Ethical & Environmental
Ethical – Human
Environmentally Friendly Package
Ethical – Animal
Environmentally Friendly Product
Carbon Neutral
Charity
Ethical Product Claims are on the Rise According to Mintel research, about a third of food and drink products introduced in 2015 carried ethical or environmental claims. This is a significant increase since 2011 when just 18 percent of products carried similar claims.
While the availability of food and drink products with ethical claims is rising in the U.S., retailers and brands have to be careful about how the stories they tell about them as skepticism regarding motivations remains rife. In fact, 52 percent of consumers say that marketing products as ‘ethical’ is just a way for companies to manipulate consumers, according to Mintel research.
Continued on page 54 ▶
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CAL I FO RNIA GRO CER | 53
◀ Continued from page 53
When it comes to marketing organic products, both brands and retailers recognize that there is consumer confusion, potentially leading to apathy and skepticism. Indeed, only 42 percent of U.S. consumers trust that organic-labeled products are actually organic, while half think that labeling something organic is an excuse to charge more, according to Mintel research.
(Peanut Butter World and Blondie Ambition) and an aloe water drink for children. The program allows Target to elevate its reputation in terms of health and wellness, while also offering it notable and exclusive organic options.
‘Real’ Stories Build Trust — Warts and All
Consequently, more retailers and their related brands are taking a proactive approach to organics and green products, in general. Walmart recently has updated its Sustainability Index, which includes five key sustainability initiatives over 700 Walmart categories.
Realness is a quality that applies to both a product and the marketing that surrounds a product. In the case of the latter, it seems that a “warts and all” approach is starting to be more appealing than the airbrushed or otherwise edited alternative. Minor blemishes or shortcomings can have a positive impact as they can make brands seem more genuine.
Target is expanding its “Made to Matter” program, which showcases new sustainable, organic, and natural products. Companies have to agree to sell their new organic or natural product exclusively to Target for six months, and the retailer is expanding the program (now in its second year) to include more than 200 products, including new exclusive ice cream flavors from Ben & Jerry’s
All brands have an opportunity to explore and share the heritage of their own products, especially those with a compelling narrative. One needn’t be off the beaten path to be genuine. Moreover, the movement towards a more “warts-and-all” approach to advertising provides another way for brands to be authentic without necessarily having to be exotic.
Consumers are expecting a higher level of engagement with retailers and brands than ever before. Retailers and brands that provide truthful, authentic and compelling stories about products — including the places they come from and the people that make them — have an opportunity to connect consumers to an experience that is more than just buying groceries and leaving, but one of building trust, confidence and shopper loyalty. ■ Patty Johnson is a global food & drink analyst for Mintel and leverages her in-depth knowledge of consumer trends to bring keen, insightful and forward-thinking strategies and tactics to Mintel’s client base. She moderated a Whiteboard Session at this year’s CGA Strategic Conference.
Kevin Konkel Thank you for your leadership, dedication and hard work to the Association and the California grocery industry. From your friends at...
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CONGRATULATIONS Jim Wallace the New CGA Chairman of the Board
And, Thank You Kevin Konkel, for your Tenure as CGA Chair.
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NuCal Foods
Kevin, Thank you for your hard work for a very successful 2016. Best of luck in the future.
C O N G R AT UL AT I O N S
Jim Wallace the new CGA chairman of the board
Jim, Congratulations! We wish you success in your new role.
and, thank you
Kevin Konkel on an amazing year of service and a job well done.
KEVIN, Thank you for all your efforts and a very successful 2016 and best of luck in the future.
JIM, Congratulations and we wish you success in your new role.
CAL I FO RNIA GRO CER | 57
1 5 MINUTES WITH...
Eric Saperston C H I EF CREATIV E O FFICER LIV E IN WON DER
BY LEN L E W IS
Eric Saperston isn’t your conventional consultant. He’s more at home in a Volkswagen van than a chauffeured limo, or at a tacqueria on the beach in Mexico than a Michelin-starred restaurant. But conventional isn’t what you always want in a world and retail industry that’s anything but conventional. And the lessons he’s learned from interviewing the famous, near-famous and just regular folk in his travels, offer valuable lessons for living life and doing business. CG: You talk about resourcefulness, tenacity and courage. Are we seeing enough of it in business and elsewhere today or less so than in the past?
and innovative you have to be willing to do that. It enables you to be in motion. Too many people won’t jump in and learn on the way. They want to reduce risk by having all these reports and analyses before they do anything.
“THE IMPORTANT THING IS TO LIVE AN EXTRAORDINARY LIFE – EVERYDAY PEOPLE PRODUCING EXTRAORDINARY RESULTS.” Doesn’t everyone want to reduce risk? I’m not advocating foolish risks, but be an educated risk taker. Life is a journey, an adventure that’s to be lived and experienced. Resources will come along the way. They’re not all there at the beginning of the journey.
Saperston: There are many people who exhibit these qualities and a lot who don’t. The important thing is to live an extraordinary life – everyday people producing extraordinary results.
Tenacity and resourcefulness is what people pack to go on an adventure. You can’t anticipate that everything will line up. You’ve got to do with what you have and be persistent.
What prevents people from doing that?
Does that fear factor stifle innovative thought?
It’s the need to reduce or eliminate fear. Venturing into the unknown is frightening. People don’t like being judged, looking foolish, ostracized or have egg on their face. In order to succeed immediately, they try to minimize risk. That fear just cripples and paralyzes people. There’s a great quote by Theodore Roosevelt that goes, “Do what you can with what you have where you are.” To do something bold
It depends on the culture, but generally that’s true. I was just in Tulum, Mexico, where a friend of mine has a taqueria right on the beach – a nice blend between business and the environment. You can’t do that here because we seem to have a fear-based culture where everything is contained. It’s made us a little soft as a culture.
Eric Sapperston is speaking at the Independant Operators Symposiom in January.
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15 MINUTES WITH...
◀ Continued from page 59
I’ll give you an example. When I was a kid we climbed trees. I’ve seen statistics that 70 percent of kids haven’t climbed a tree because their parents are afraid they’ll fall. The media also make us fear-based by running the same stories over and over. It makes people afraid to explore the world. As corporations and organizations, we’re often spending too much time focused on fear and less on what’s possible and what to create. Those companies that rise to the top buck the system and create a culture of innovation.
“WE SHOULD BE GIVING PEOPLE THE COURAGE TO FINISH WHAT THEY STARTED BY DISCOVERING THE RIGHT WAY TO DO THINGS ALONG THE WAY. THAT’S MAXIMIZING HUMAN POTENTIAL.” A lot of people look at Silicon Valley as the epitome of innovative culture. That’s true for some people there. But there are pioneers in every field breaking the rules in innovation and creativity – boldly going where no one has gone. My favorite analogy about staying safe and conservative is the trapeze artist. If you’re in midair, you can’t reach the bar you want to grab unless you let go of the one you’re holding. What people have you met who have these qualities? I’ve met a wide variety of amazing people over the past 20 years who have produced extraordinary results. And success is not just about people who made a lot of money. These are people doing non-profit work, or people in politics, music art and literature. These are people who radiate delight. They wake up excited and love what they’re doing. That’s the common factor. These are people who live extraordinary lives with a sense of wonder and curiosity. They’re not coming from a place of entitlement or apathy with the attitude that “this is the way we’ve always done things.” They see life as adventure – not live it as a victim. 60 | CAL I FOR N I A G R OC E R
Are these the people who eliminate the fear factor? Well, everyone’s afraid. No one is immune. If I’ve discovered anything it’s that we are more alike than different. At the end of the day we all put our pants on the same way and trying to find our way in the world. People would be better served by looking at others and being intrigued, not fearful. We have to confront fear all the time. The question is whether we allow that to stop self-expression. In what way? We spend too much time telling people they can’t do things and it stops them in their tracks. People will say you’re not qualified to do something, or you won’t make money at it, or that its already been done. Basically, they tell you why you’ll fail. Were a culture of starters, but that’s the easy part. The real challenge is to finish something. It’s that last three outs in a ballgame, the last mile. We should be giving people the courage to finish what they started by discovering the right way to do things along the way. That’s maximizing human potential. I guess it all gets back to coping with the fear of failure? Everyone has fear. The question is whether you allow it to stifle self-expression. You have to be willing to make mistakes and handle rejection. No one writes a hit song or movie out of the gate. ■
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OUTSIDE THE BOX
Let’s Eat!
N EW RETAIL PERS PECTIV ES
Foodies & Furniture
LET’S EAT!
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If you’re really interested in the concepts and formats that disrupted the food business, then look beyond the supermarkets to the iconic restaurants that really changed the way people eat.
That’s the subject of a new book entitled “Ten Restaurants that Changed America” by Paul Freedman, who readily points out that these may not have been the best restaurants, but certainly the most influential. Who were these influencers? There was the late Howard Johnson’s the “Host of the Highway” which invented standardization and whose orangetiled roof was a beacon to travelers; Schrafft’s, the choice of budget minded secretaries and stenographers who pioneered the “middle class restaurant experience”; Antoine’s in New Orleans and even chef Alice Waters’ Chez Panisse.
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Seems everyone loves IKEA meatballs but the Swedish home decor retailer is taking its do-it-yourself ethos into culinary with “The Dining Club” a pop-up restaurant and cooking workshop at its store in Shoreditch, London. Diners build meals by preparing food for groups of up to 20 friends or family. The experimental restaurant openned for two weeks in mid-September and feature a variety of cooking sessions – brunch, lunch, or dinner – where different trained head chefs supervise preparation. If you’re able to snag one of the limited cooking sessions, the food, alcohol, and wait staff is free.
SmartSkin
Researchers at MIT have introduced DuoSkin, a smart tattoo printed on gold leaf – fashionable but also able to conduct electricity, which can also be turned into an on-skin interface. Sounds like a new fashion statement, or a great place to put loyalty or credit cards.
Even more fun is looking at some of the menus and prices like 1971’s set menu at Chez Panisse for $3.95 per person, or chateaubriand for two at Le Pavillon for $6 – in 1941.
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OUTSIDE THE BOX
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If you think you’ve heard the last word about millennials – think again! Iconic cosmetic brand Estee Lauder mentioned the term 19 times in its latest annual report. Recent acquisitions like Glamglow and Smashbox means bumping up marketing efforts. You may be doing the same. Estee Lauder says 60% of its sales come from millennials, much of it at Ulta and Sephora stores. One interesting thing we can learn from this is if you want to capture this group’s attention – Sample!
MILLENNIAL FEVER SNEAKER SWAP Everyone’s heard about the runaway success of the Rent The Runway site for women’s fashions. Now the guys don’t have to feel left out. LSwop, or Luxury Swop, rents European designer sneakers from designers like Tom Ford, Christian Louboutin and Pierre Hardy which typically sell for $800 to $1,000. Pay a monthly subscription and LSwop will rent you sneakers from one to four days. For a mere $150, customers can rent one sneaker monthly, two for $250 and three for $350. Well, they do send them in a wooden shoe box with a free pair of socks! iStock
BETTING THE LINE
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ULTIMATE CUSTOMIZATION Google and Germany’s highly popular Zalando e-commerce platform, have teamed up on Project Muze that enables users to create their own 3-D fashion designs using artificial intelligence. Rudimentary AI technology is already being used in some areas of retailing. Could this be the next step for supermarkets? Customized 3D foods?
Sometimes you’ve got to double down even when the odds are stacked against you. That’s what Under Armour, the sports clothing manufacturer, is doing with the introduction of a high-end apparel line at the recent Fashion Week in New York. It’s a bold move considering fashion collections from competitors Nike, Adidas and Puma were introduced years ago and are firmly entrenched in retail.The line called UAS is aimed at “ambitious Millennials” who may or may not be willing to fork over $1,500 for a trench coat.
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CAL I FO RNIA GRO CER | 63
MOMMY BLOGGER
i’d rather drop than shop L A R A B A L DW I N BLOGGE R
California Grocer introduces a new column with a unique perspective – a mommy blogger. Lara Baldwin is a Millennial mother of two who, with the help of her online community, will provide insights into one of your most important customer demographics. I have a confession: I want to go to the grocery store right now about as much as I want to scrub my shower. That is to say, at this particular period in my life, pulling off an enjoyable shopping trip with my fouryear-old and infant in tow takes roughly the coordination of a low-level CIA operation. It wasn’t always this way. As a childless 20-something, grocery shopping was once a near-sacred ritual: poring over cookbooks to compile a handwritten list, divided into categories and organized in order of department. Just a few years and a couple kids later, buying food has shifted from fun to frantic. Here are a few reasons why.
1
The child-sized mini carts. Survey any group of parents (I did!) about these little pieces of hell and you will hear overwhelmingly that we all wish they would disappear. No good can come of these carts. No reasonable grocery haul can fit in one. No self-respecting toddler steers one without testing the laws of physics by running it into a display case.
2
The giant shopping carts. Those double-wide, racecar/fire truck/ pink Cadillac themed monstrosities require superhuman strength to maneuver through the aisles. They may have more seating than my college dorm room but are about as productive as one for actual shopping.
When I ask my mom squad for help with these challenges, the solution is usually a mix of avoidance (one friend gets up at 5 a.m. to go grocery shopping alone before her husband leaves for work) and bribery (another says she has no qualms with ripping open a bag of popcorn and paying for it at checkout). Personally, I am determined to find some solutions that are not quite so desperate. Just as soon as I scrub this shower. ■
3
The snacks. No matter how much I feed and water them before we go to the store, my kids are suddenly starving and begging me to buy and open (not necessarily in that order) the boxes and bags of goodies they can see from their throne.
4
The parking lot. Safely getting from store to car with grocery bags and children all in one piece resembles a game of Frogger. Not to mention the moral predicament that inevitably follows regarding the return of the cart (do I leave the kids alone in the car to run it back, or leave it stranded in the parking lot like a jerk?).
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