California Grocer Issue 1, 2016 by California Grocers Association

2016, ISSUE 1

C ALIFORNIA GROCERS A SSOCIATION

CONNECTING ON T DOTS DO O THE

IN THIS ISSUE You Win Some, You Lose Some 2016’s Special Election

For the latest industry news visit www.cagrocers.com

A Tip From Grandma

Discover More

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YO U R D AY. YO U R S TO R Y.

For over a decade, CGA Grocers Day at the Capitol has built bridges between the grocery industry and policy makers. Grocers Day provides a forum for legislators and CGA members to discuss policies and legislation impacting the grocery industry.

TUESDAY, MARCH 29, 2016 SACRAMENTO, CA For additional information, contact Aaron Moreno, CGA, at (916) 448-3545. Sponsorship opportunities available. Please visit our website at www.cagrocers.com, or contact Beth Wright (916) 448-3545.

CGA

| Board of Directors

EXECUTIVE COMMITTEE

CHAIRMAN APPOINTMENTS

C A L I F OR N I A G R OC E R

DIRECTORS

Chairman of the Board Kevin Konkel Raley’s

Second Vice Chair Bob Parriott Twain Harte Market

Secretary Kendra Doyel Ralphs Grocery Company

First Vice Chair Diana Godfrey Smart & Final Stores

Treasurer Jim Wallace Albertsons Companies, Inc.

Immediate Past Chair Joe Falvey Unified Grocers, Inc.

Kevin Arceneaux Mondelez International Inc.

Phil Miller C&S Wholesale Grocers

Dave Jones Kellogg Company

Dennis Darling Foods Etc.

Raul Aguilar Anheuser-Busch InBev

Willie Crocker Bimbo Bakeries, USA

Dave Madden MillerCoors

Bob Richardson The Clorox Company

Jon Alden Jelly Belly Candy Co.

Steve Dietz Tony’s Fine Foods

Jonathan Mayes Albertsons Companies, Inc.

Mike Ridenour The Kraft Heinz Company

Renee Amen Super A Foods

Ted Gardner Rio Ranch Markets

Joe McDonnell Campbell Soup Company

Casey Rodacker Mar-Val Food Stores, Inc.

Teresa Anaya Northgate Gonzalez Markets

Jon Giannini Nutricion Fundamental, Inc.

Mark McLean CROSSMARK

Dean Ryan Tops Fresh Market

Joe Angulo El Super (Bodega Latina)

Dick Gong G & G Supermarket, Inc.

Casey McQuaid E & J Gallo Winery

Denny Silva Coca-Cola Refreshments

Rich Arnold Oberto Brands

Robin Graf Whole Foods Market

Lynn Melillo Bristol Farms

Kim Stokes Unilever

Denny Belcastro Kimberly-Clark Corp.

Ryan Jost Procter & Gamble

Dan Meyer Stater Bros. Markets

Doug Todd PepsiCo Inc.

Bob Bukovec Tyson Foods, Inc.

Arthur D. Jackson, Jr. Costco Wholesale

Hee-Sook Nelson Gelson’s Markets

Jim Van Gorkom NuCal Foods

Paul Cooke Nestlé Purina PetCare

Michel LeClerc North State Grocery Inc.

Nicole Pesco Save Mart Supermarkets

Kevin Young Young’s Payless Market IGA

Brent Cotten The Hershey Company

Eric Lindberg, Jr. Grocery Outlet, Inc.

Chris Podesto Food 4 Less (Stockton)/ Rancho San Miguel Markets

CORRECTION In the article “A Conversation with Bryan Silbermann” (2015, Issue 6) it was incorrectly reported that the produce industry “has already committed $6 million towards a five-year goal of $29 million needed to fund research on fresh produce safety.” The correct goal is $20 million.

CONTENTS

F E AT U R ES

COLU M NS

2016’s Special Election

President’s Message Hail to the Chief....................................................4

This November’s General Election ballot may be the longest on record, due in large part to the growing number of initiatives and referenda qualifying for the ballot. That may not bode well for CGA. Find out why.

CONNECTING ON T DOTS DO O THE

Politics in California’s Capital can leave you scratching your head. Wander the halls of the Capitol for a day or so and you quickly learn that there are procedural moves, acronyms, buzzwords and a language that is unique to the business of legislative advocacy.

Connecting the Dots

Are the benefits of collaboration being explored to their fullest? California Grocer asked three industry leaders to give their views on the state of industry collaboration and how it can move forward.

A Tip From Grandma

From The Chair At Your Service......................................................6 Viewpoint – Kevin Coupe Guessing Game.....................................................8

You Win Some, You Lose Some

| Issue 1

Sometimes your best ideas come from the most unlikely sources. Just ask Jeremy Cullifer and James Terrell who heeded some wise counsel and now operate a bustling supermarket in La Quinta, Calif.

Capitol Insider Meet the Leaders............................................... 22 California Politics Solving Problems or Chasing Solutions................ 24 Washington Report Cut Red Tape? There’s Little Hope...................... 28 Inside the Beltway Finding a Silver Lining for a “Lackluster” Year – Food Safety.............................................. 30 Perspective Update: California’s Unemployment Insurance Program............................................. 55

DEPA RT M EN TS CGA News..........................................................10 Know the Law.....................................................18 15 Minutes With.................................................50 Advertiser Index .................................................56

CALIFORNIA GROCERS ASSOCIATION President/CEO Ronald Fong

Senior Vice President, Business Development & Marketing Doug Scholz Vice President, Communications Dave Heylen

Director, Events & Sponsorship Beth Wright Director CGA Educational Foundation Brianne Page California Grocer is the official publication of the California Grocers Association.

Publisher Ronald Fong E-mail: rfong@cagrocers.com Editor Dave Heylen E-mail: dheylen@cagrocers.com Associate Editor Tony Ortega E-mail: tortega@cagrocers.com For advertising information contact: Tony Ortega E-mail: tortega@cagrocers.com

Controller Gary Brewer

Senior Director Government Relations Aaron Moreno

1215 K Street, Suite 700 Sacramento, CA 95814 (916) 448-3545 (916) 448-2793 Fax www.cagrocers.com

C A L I F OR N I A G R OC E R

Senior Vice President, Government Relations and Public Policy Keri Askew Bailey

Executive Director CGA Educational Foundation Shiloh London

PRESIDENT’S MESSAGE

Hail to the Chief RO N ALD F ONG President/CEO

This November, Californians will go to the polls to elect lawmakers who will play a significant role in how we do business. Throughout this year, I will address the various national, state and local races that will profoundly impact our industry. The first of this series focuses on the presidential election. This is a pivotal time for our industry. Our industry is being crushed by over regulation. Regardless of size retail grocers are feeling the impact of overreaching lawmakers, especially in California. And although the President doesn’t make laws, whomever occupies the White House this January will have a significant impact on our industry. With President Obama terming out, there is no obvious frontrunner for the world’s most powerful position. That’s not good news for Democrats. Since the modern two-party era (beginning in 1856), the party of a termed-out president typically loses the next election. Now predicting who will win in November is a waste of time and editorial space. And it would be foolish to even try. I believe there is more uncertainty in this year’s race, at this point in time, then in any previous presidential election.

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iStock

Obviously, another four years of the same won’t be good for our industry. Eight years of the Obama Administration has tipped the balance between labor and management so far to labor’s advantage that another Democratic president will have an extremely negative impact on our industry and will likely hamper future growth. The 114th Congress (2015-2017) gave the Republicans control of both the Senate and the House for the first time since 2007. However, bipartisan politics remains in full play as the president continues to push his own agenda with little getting accomplished. In sizing up the frontrunners it’s clear Donald Trump will be pro business. Some believe if he’s successful in the early races he may try to move back to a more sane, for lack of a better word, position than he has been advocating.

Hillary Clinton on the other hand seems more like a mainstream politician. She will be liberal, prolabor, and push a strong domestic agenda which means more of the same for our industry. It will be very interesting to see how business legislation will move (or not move) if we have a Republican Congress and President. What will happen to the Affordable Care Act? What about tax reform, swipe fees, country of origin and menu labeling, and the Food Safety Modernization Act? What about the president appointed National Labor Relations Board? While both Trump and Clinton are considered the popular favorites, at press time, both candidates were feeling significant heat from their nearest rivals. What is interesting is that both the far right and far left appear tired of “political correctness” and seem to be gravitating toward a Trump or Bernie Sanders because they say what others won’t. And then there is the latest wild card – Millennials. It will be interesting to see how they vote in the two early caucuses – Iowa and New Hampshire. The point is, despite the fact that many say California’s vote won’t matter because of the timing of the electoral process, we should care about the presidential election. Could it be that with a Republican sweep, pro business legislation and reform just might stand a chance? No matter who enters the Oval Office, they are going to have to be willing to compromise with Congress to get it done. Hang on because you can be assured it’s going to be a wild ride! n

FROM THE CHAIR

At Your Service KEV IN KONK E L CGA Chair of the Board, Senior Vice President, Store Operations Raley’s Family of Fine Stores

It’s an age old question regarding leaders, are they born or are they made? Soothsayers, sages, professors and business teachers have spent a great deal of time and have even made careers out of exploring the depths of this question in an attempt to find it’s answer.

Thinks “you” not “me.” There’s a selfless quality about a servant leader. Someone who is thinking only “how does this benefit me?” is disqualified.

I, however, will make no such attempt.

Thinks long-term. A servant leader is thinking about the next generation, the next leader, the next opportunity.

As to whether leaders are born or made I will spare you my point of view, yet I do believe there is a style of leadership that stands the test of time in it’s effectiveness. It is the style of “servant leadership” and is expressed in the way one cares, serves and supports the individuals they lead. Now I know that this is not a new concept and servant leadership has many different and personal meanings to leaders everywhere. I like the following 10 characteristics that define a servant leader. A servant leader: Values diverse opinions. A servant leader values everyone’s contributions and regularly seeks input. Cultivates a culture of trust. People don’t meet at the water cooler to gossip. Pocket vetos are rejected.

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Develops other leaders. Teaching others to lead, providing opportunities for growth and demonstrating by example are key for servant leaders. That means the leader is not always leading, but allowing and encouraging others to do so.

Helps people with life issues (not just work issues). A servant leader supports team members beyond the job. They show care, compassion and genuine concern for their team members. Encourages collaboration. The hallmark of a servant leader is encouragement. They say “let’s go do it,” not “you go do it.” Sells instead of tells. A servant leader is the opposite of a dictator – persuading, not commanding.

Prioritizes with purpose. By thinking broadly, a servant leader understands what is important today, verses, tomorrow and prioritizes accordingly. Acts with humility. Doesn’t wear a title as a way to show who’s in charge, doesn’t think they’re better than everyone else, and acts in a way to care for others. Setting an example of serving, the servant leader understands that it is not about the leader but about others. Your CGA Board of Directors is comprised of a diverse group of servant leaders who happily devote their time and their company’s time, talent and resources to serve you without any monetary compensation (unless you call the CGA Pin we all wear with pride, compensation.). The same can be said for those volunteers on CGA’s many committees and share groups. They too serve the Association without compensation. So our plate is full and we are prepared to serve and make our voices and those of our customers heard at State and local government levels. We are prepared to give our resources in order to train new and existing leaders in our industry and we are ready to facilitate business between retailers, manufacturers and suppliers. So whether leaders are born, made, or both, CGA’s leadership is equipped and ready to serve as servant leaders and to do it with excellence in this new year. We are at your service! n

VIEWPOINT

Guessing Game KEV IN C OU PE Founder MorningNewsBeat.com

As the new year starts, I thought I’d offer some thoughts about what I think some of the major stories will be this year. Or, to be more accurate, the five stories that I think I’m going to find most interesting... and on which I likely will spend focused on most of this year. Clearly, this is not an all-encompassing list. Obviously lots of other stuff will happen this year. But these are the things that are likely to provide the year’s themes... at least if I’m guessing right. By the way, I need to be clear about that. I’m guessing here. They are reasonably informed guesses, based on the fact that I write about big themes and ideas five days a week, 46 weeks a year on MorningNewsBeat. But they are guesses nonetheless. (I am often asked if I can be described as a futurist, but I run far and fast from that particular description. Futurists will charge you a lot of money for their informed judgements, while I’m more of a good guesser who doesn’t charge readers anything. They may have a better bank balance, but I think my batting average is just as good.)

stock in Amazon and never have. Though, to be honest, I wish I’d bought stock in both Amazon and Apple about 15 years ago. If I’d spent as much on shares in those companies as I’ve spent on products they sell, my financial profile would look considerably different.).

And yes, I think we’ll see Amazon drones actually delivering stuff at least on a test basis by the end of the year. But that’ll be the least provocative move that Amazon will make in 2016. I continue to believe that Amazon’s innate talent for disruption will continue to provide challenges to more traditional retailers. And not just retailers; the news that Amazon continues to make moves into the package delivery business suggests that the likes of FedEx and UPS may have something to worry about as well. But the fact is that Amazon’s “today is day one” approach to business, not allowing itself to get bogged down in legacy issues that could hamper its growth, will continue to serve it well. And yes, I think we’ll see Amazon drones actually delivering stuff at least on a test basis by the end of the year. But that’ll be the least provocative move that Amazon will make in 2016. Transparency

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iStock

Here goes... Amazon Okay, this one almost goes without saying... especially because I am occasionally accused of being a shill for the company (I’m not. I own no

This is a biggie. The continued growth of social media – fueled not just by companies we know but likely also by a couple of startups that will capture people’s attention and imagination – means that more and more consumers will be talking to each other, exchanging information about... well, pretty much everything, including the companies with which they do business.

VIEWPOINT

Some of the information will be accurate and some won’t, but this will only increase the pressure on retailers and suppliers to be as transparent as possible about their business practices, investments, employment policies and approach to social responsibility.

It just seems to me that this kind of price value activity has the ability to roil the marketplace and have some impact on how your customers shop and think, even if you’re not catering to people you think of as being price-sensitive.

This especially includes food safety. The experiences that Chipotle continues to have in trying not just to make things right, but in convincing people that it is a company to be trusted, ought to serve as a warning sign for every company in the food business.

A&P once was the Walmart of an earlier era. Haggen had a thriving independent business in the Pacific Northwest. Crazy Eddie and Circuit City thought they really understood the electronics business. Borders was one of the big two book chains. And there was a Blockbuster in pretty much every decent-sized community in America.

What makes it even more troubling is that Chipotle was not a lowest-common-denominator food purveyor. And what this makes me believe – fervently – is that this can happen to everyone and anyone. Transparency won’t solve serious food safety issues, but it can at least establish a base level of trust between the shopper and the store. Discounters The stage seems to be set for an invasion and expansion of retailers in the value side of the business; anyone interested in how this can play out should just go to the United Kingdom, where the top four food retailers have seen their market shares nibbled away at by the likes of discounters Aldi and Lidl. (Including, by the way, Walmart-owned Asda, where the CEO pretty much concedes that they did not take the threat seriously enough or move fast enough.)

Transparency won’t solve serious food safety issues, but it can at least establish a base level of trust between the shopper and the store. Aldi is expanding in the United States, and Lidl is coming. At the same time, we know that Save-A-Lot has a new CEO and, with its planned spin-off from Supervalu, is likely to be looking to make more of a splash in the marketplace. And, you’ve got Grocery Outlet, which is growing, as well as Jet, which is looking to compete with Amazon by offering lower prices (or at least the perception of lower prices).

The Threat of Obsolescence

So, which company (or companies) will get added to this ignominious list in 2016? And which of them will look to blame anyone other than themselves? And what will you do to avoid your company’s name being added to the list? The Great Unknown The biggest thing you should think about is the person or business you’ve never heard of, that isn’t even on the radar yet... but that, before the year is over, will have figured something out that totally changes assumptions you’ve made about your business, your shoppers, your stores, and your fundamental business practices. Note I said “think about.” Not “fear.” Not “worry about.” Because I believe that the understanding that nothing will forever be what it is, and that change happens faster and is accepted more quickly, ought to fuel companies’ willingness and even their ability to think differently about the kinds of people they hire, and how they wire innovation into their organizations. Those are my guesses. Let’s see what my 2016 battering average ends up being. Or shouldn’t be. n

C GA N EWS

Raley’s Exec Elected CGA Chair Nine New Members Elected to CGA Board

Nine grocery retailers and suppliers were elected to the CGA Board of Directors during the 2015 CGA Annual Meeting last December in San Francisco, Calif. Kevin Konkel, Senior Vice President, Store Operations, for Raley’s Family of Fine Stores, was elected the 2015-2016 California Grocers Association Chairman of the Board of Directors at the Association’s Annual Meeting on December 4. Kevin Konkel

As Chair, Konkel will lead the Board’s strategy regarding CGA’s numerous legislative, educational, communications and industryrelated programs. The Association is comprised of more than 300 retail companies operating more than 6,000 stores in California and Nevada. The chair serves for one year. He succeeds Immediate Past Chair Joe Falvey, Unified Grocers, Inc. “Kevin is known in our industry not only as a stellar and experienced grocery executive, but also as a connector and facilitator,” says CGA President Ron Fong. “You are just as likely to find him meeting with a new industry start-up as you would running a strategy and marketing meeting with a roomful of industry veterans. We are fortunate to have him as our Chair this coming year.”

In addition to Konkel, the following individuals were elected to the 2015-2016 CGA Board of Directors Executive Committee: First Vice Chair, Diana Godfrey, Smart & Final Stores; Second Vice Chair, Jim Wallace, Albertsons Companies Inc.; Treasurer, Bob Parriott, Twain Harte Market; Secretary, Kendra Doyel, Ralphs Grocery Co.; and Immediate Past Chair, Joe Falvey, Unified Grocers, Inc. Chairman’s appointments to the Executive Committee include: Dave Jones, Kellogg Company; Phil Miller, C&S Wholesale Grocers, Inc., and Kevin Arceneaux, Mondelez International Inc. Dennis Darling, Foods Etc., was appointed as a non-voting committee member. Directors elected to their second three-year term include: Jon Alden, Jelly Belly Candy Co.; Renee Amen, Super A Foods, Inc.; Teresa Anaya, Northgate Gonzalez Markets; Joe Angulo, El Super (Bodega Latina Corp.); Eric Lindberg, Grocery Outlet, Inc.; David Madden, MillerCoors; Hee-Sook Nelson, Gelson’s Markets; and Bob Richardson, The Clorox Company. Former CGA Chair Mary Kasper, Unified Grocers Inc., was elected an honorary board member.

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LEARN MORE ABOUT YOUR NEWEST CGA BOARD MEMBERS:

Robert S. Bukovec Director Grocery Sales, Tyson Foods Robert (Bob) Bukovec began his career at Tyson Foods (formerly Hillshire Brands and Sara Lee) in 1990. Over the next 25 years, Bob has advanced through several leadership roles. His management accomplishments has netted him eight President’s Club distinctions.

As Director Grocery Sales, his team manages business for Stater Bros., HEB, Albertsons/Safeway (Boise, Denver and Southwest Divisions), as well as numerous independent grocery stores in the West. He is a Life Member of the Phoenix Thunderbirds, a non-profit organization highly recognized for its charitable donations, and a member of Sun Devil Family Charities. Bob and his wife Jennifer have two sons, Cole and Cameron.

CGA NEWS

Willie Crocker Director of Retail Customers, South Bimbo Bakeries, USA Willie Crocker is Director of Retail Customers, South with Bimbo Bakeries, USA, managing the Customer Management Teams in Southern California. He began his food industry career in 1990 working for Lever Bros. Company for 14 years holding various positions before its merging with Unilever in their Home & Personal Care Division. In 2004, Willie joined the Sara Lee Bakery Group which was acquired by Grupo Bimbo. Willie is a member of The Illuminators, a graduate of the USC Food Industry Executive Program, a California Conference for Equality & Justice Humanitarian Award recipient and is involved with several charitable organizations. Willie and his wife Mary have five children between them. Denny Belcastro Industry and Customer Collaboration Kimberly-Clark, North America Denny Belcastro is Vice President, Industry and Customer Collaboration for Kimberly-Clark, North America, where he is responsible for leading the company’s efforts with business and industry initiatives in developing strategic retailer collaborative partnerships.

Mark McLean has been employed with CROSSMARK for the past 16 years, currently serving as division manager for California. Throughout his career with the company he has worked in every role from retail representative to analytics to sales. Mark is a graduate of the University of Southern California’s Food Industry Management program and has served on numerous boards and industry trade organizations. He serves on the board of the City of Hope Northern California and with The Illuminators. In 2011, Mark was awarded the Dole Packaged Foods Broker of the Year. Mark is married with twin seven-year-old boys and resides in Livermore, Calif.

Joseph McDonnell Regional Vice President-West Campbell’s Soup Company Joe McDonnell was appointed Regional Vice President-West for Campbell’s Soup Company in November 2014 He joined Campbell as Category Development Manager – Chunky in January 2007. Joe spent a total of five years in the Customer Development Function, partnering with various Sales Teams and Brand Marketing eventually serving as Director-Customer Development-Simple Meals. In 2012, he served as the Sales Team Leader-Value Channel partnering with retailers such as Dollar General, Family Dollar and Dollar Tree. Prior to Campbell’s, Joe was Trade Marketing Manager for Lysol at Reckitt Benckiser. He spent the first six years of his career at Kraft Foods in Regional Category Sales Planning, Customer Business Management partnering with Wakefern and Albertsons, and Retail Sales Operations.

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Most recently, Denny served as Senior Vice President, Government Affairs and Industry Collaboration with Hillshire Brands. Prior to that, Denny was Executive Vice President, Industry Affairs and Collaboration at the Grocery Manufacturers Association (GMA) and responsible for strategic industry collaboration platforms and key initiatives. Prior to GMA, Denny was Vice President, Customer Development and Industry Affairs for Kraft Foods North America. Denny and his wife Marsha make their home in a Chicago suburb where they are involved in many community and service related events and charities.

Mark McLean Division Manager – California CROSSMARK

Continued on p. 13

BIMBO BAKERIES USA

Congratulations to our own

WILLIE CROCKER

on your nomination to the CGA Board of Directors.

BimboBakeriesUSA.com

Ryan S. Jost Associate Director, West Region Grocery North American Sales, Procter & Gamble Ryan Jost is Associate Director, West Region Grocery Leader for Procter & Gamble. Ryan joined P&G after graduating from the University of Missouri-Columbia in 2003. Since joining the company, Ryan has been an account manager, account executive, senior account executive, Go To Market Leader and Associate Director. In addition to his work, Ryan is a volunteer for the Make-A-Wish Foundation, Delta Sigma Phi National Foundation, Special Olympics and United Way. He enjoys outdoor activities including fishing, biking, running and skiing and spending time with his family.

Steve Dietz Senior Vice President, Tony’s Fine Foods Steve Dietz is Senior Vice President for Tony’s Fine Foods and is responsible for marketing, procurement and sales. He started his professional career as a consultant for Arthur Andersen in San Francisco. From there he moved into the world of technology and worked for both Intel and Dell Computer in the area of product marketing. His passion for food ultimately landed him in the food business. He has been with Tony’s Fine Foods for more than 18 years and has served in management roles in purchasing, customer service, marketing and sales. Steve and his wife Kim have been married for 22 years and live in Sacramento, Calif. with their two children Taylor and Matthew.

Ted Gardner President & CEO Rio Ranch Markets Ted Gardner is President and CEO of Rio Ranch Markets – a six-store Hispanic format grocery chain in Southern California. He has more than 35 years of industry experience that spans the food distribution system.

C GA N EWS

Continued from p. 11

Prior to Rio Ranch, Ted was with Riba Foods, Inc. a three generation family owned business. At CREO Capital Partners he led the operational due diligence of an acquired company and acted as interim CEO in two organizations. He also has worked for La Victoria/Embasa and Unified Grocers, Inc. In addition, he served in marketing, sales and general management roles at General Mills, Heinz, Con-Agra and Herdez.

Douglas C. Todd Senior Director, Retail Sales, California Region Pepsi Beverages Company (PBC) Doug Todd is the Senior Director of Retail Sales for Pepsi Beverages California Region based in Aliso Viejo, Calif. He has been in the industry more than 25 years, beginning with Hershey Foods Corporation where he held various sales positions nationwide. Doug joined Pepsi’s Mid Atlantic Business Unit in 2004 and moved to California in 2008 where he has held various sales leader roles. Today he leads the selling organization responsible for Pepsi DSD portfolio across all retail channels spanning California and Nevada.

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Additionally, he is actively involved with City of Hope, Olive Crest and is the Executive Sponsor for Adelante, a PBC Employee Resource Group. Doug lives in Southern California with his wife and daughters. n

| 13

C GA N EWS

CGA Hires Capitol Veteran as Senior Director, State Government Relations The California Grocers Association is pleased to announce the hiring of Aaron Moreno, as Senior Director, State Government Relations, effective immediately. In this position, Moreno is responsible for advocating, managing and coordinating CGA’s state, regulatory and local government relations programs. He will develop and implement strategies to coordinate state and local policy priorities and engage pro-actively to identify emerging policy issues. His duties will also include managing CGA’s external advocacy team and the Association’s PAC and IEC programs. Moreno will report to Keri Askew Bailey, senior vice president, Government Relations and Public Policy. “Aaron has worked inside the State Capitol for the past 10 years and has strong relationships with key legislators,” said Bailey. “CGA continues to strengthen its advocacy program and Aaron’s

extensive experience is a tremendous plus for the Association.” Prior to joining CGA, Moreno was Legislative Director for California Assemblymember Mike Gatto and was responsible for the oversight of the legislator’s legislative package, as well as staffing individual pieces of legislation. He has also served as Legislative Director for Assemblymember Joe Canciamilla and a Legislative Assistant for both Assembly Majority Leader Charles Calderon and Assemblymember Canciamilla. “Aaron is a seasoned veteran in the Capitol,” said Bailey. “His understanding of how the Legislature operates and his vast professional relationships with legislators and their staff will greatly enhance our government relations program.” n Contact information: Aaron Moreno California Grocers Association 1215 K Street, Suite 700 Sacramento,CA E-mail:amoreno@cagrocers.com

New Members

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CGA WELCOMES THE FOLLOWING NEW MEMBERS.

California Grown 1521 I Street Sacramento, CA 95814 -2016 Contact: N ick Matteis Executive Director E-mail: nmatteis@agamsi.com Tel: (916) 651-7265 Website: www.californiagrown.org

Emerson | Grind2Energy 4700 21st St Racine, WI 53406 -5031 Contact person: Heather Dougherty Food Waste Specialist E-mail: heather.dougherty@emerson.com Tel: (216) 200 -9439 Website: www.grind2energy.com

Chobani 200 Lafayette St New York, NY 10012- 4079 Contact person: Beau Mainous Chief Customer Officer E-mail: beau.mainous@chobani.com Tel: (817) 233-3715 Website: www.chobani.com

Susanville Supermarket IGA 50 Grand Ave Susanville, CA 96130 - 4443 Contact: Rick Stewart, President E-mail: susuper@citilink.net Tel: (530) 257-5136 Website: www.susanville.iga.com

The Essential (HAVE-TO-BE-THERE)

Seminar and Expo

For Dairy, Deli and Bakery Professionals

NETWORKING • 9,000 Professionals • 700 Exhibitors • 1,900 Booths SHOW & SELL CENTER

CAKE DECORATING CHALLENGE

MERCHANDISING

NEW PRODUCT SHOWCASE

June 5 - 7 | Houston

INDUSTRY RESEARCH

WORLD-CLASS SPEAKERS

AND PRESENTATIONS SIMON SINEK

JJ WATT

HAROLD LLOYD

EXPANDED EXPO HOURS

608.310.5000

MIKE EARDLEY

FOCUS ON ALLERGENS

CMYK Topical educational sessions and resources!

C GA N EWS

Symposium Focuses on Independent Operators INDEPENDENT OPERATORS STEPPED AWAY FROM THEIR BUSY DAY-TO-DAY OPERATIONS RECENTLY TO RENEW, REVITALIZE AND REIMAGINE THEIR BUSINESS APPROACH AT THE 2016 INDEPENDENT OPERATORS SYMPOSIUM. Independent grocers and their supplier partners from around the state gathered on the Big Island of Hawaii for a week of inspiration, relaxation and education while attending the 2nd Annual CGA Independent Operators Symposium.

“Expected a great presentation and was not disappointed.”

Inspirational speaker Alex Sheen shared the importance of making and keeping promises.

“This year’s Symposium really knocked it out of the park,” said CGA President Ron Fong. “The educational program was very inspiring. We wanted to create an atmosphere conducive to stepping away from a company’s day-to-day operation to relax, recharge and gain important perspective on building a successful business strategy for the coming year. I think the Symposium did just that.”

“So many great ideas. Loved donating volunteer time.”

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Immediate Past Chair Joe Falvey, Unified Grocers, welcomes Symposium attendees

The annual mid-winter event created the perfect blend of relaxation and education – all on the warm and welcoming shores of the Big Island. Along with an impressive line-up of knowledgeable and respected experts that addressed the attendees on Tuesday, Wednesday and Thursday, the Symposium allowed for plenty of entertaining activities and social events, along with ample time to enjoy the island’s natural beauty. (l to r) Ron Fong, CGA; Sal and Amal Qaqundah, Arguello Market; Dan and Laurie Ryan, Tops Super Foods.

CGA NEWS

“Opened my eyes to opportunity to work with Millennials vs. complain of how difficult they are!”

(l to r) Ron Fong, CGA; Richie Morgan, North State Grocery; Michael Teel and CGA Chair Kevin Konkel, Raley’s.

“So many great ideas. Loved donating volunteer time.” Those attending the Symposium learned new ways of achieving maximum collaboration with their retail and supplier partners, gained new insights into understanding the generational changes occurring with their customers, and were inspired by a social

The “Connecting the Dots” panel included (l to r) Denny Belcastro, Kimberly-Clark; Mike McLean, CROSSMARK; and Chris Coborn, Coborn Markets.

movement dedicated to the betterment of humanity through promises made and kept. On Friday, attendees participated in a historical dinner cruise down the Kona Coast that was led by an island historian. “The Independent Operators Committee is extremely grateful to this year’s sponsors,” Fong said. “Their support helped make this year’s event a tremendous success.” n

Generation expert Paul Moya shared his insights on motivating Millennial employees.

“Useful in many ways – Great exercise and reminder about what is important.”

CGA THANKS THIS YEAR’S SYMPOSIUM SPONSORS

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KN O W T HE L AW

Is Your Insurance Company Really “On Your Side”? IN THE GROCERY INDUSTRY, MANY UNFORTUNATE EVENTS – FROM PRODUCT LIABILITY ISSUES TO SLIP-AND-FALLS TO ACCIDENTS INVOLVING COMPANY VEHICLES – CAN OCCUR. SOME BELIEVE INSURANCE PROVIDES PROTECTION FROM ALL OF THESE OCCURRENCES. This belief can be reinforced by insurance advertisements providing assurances that you are “in good hands” or that your carrier is “on your side.” Based upon my experience, having worked both for and against insurance companies, nothing could be further from the truth. Sure, some insurance companies are better than others when it comes to rates, claims handling and customer service. But at the end of the day the issue of whether there is coverage for your particular loss will turn solely upon the terms of your insurance policy – which is a legally binding contract between you and your carrier setting forth the rights and duties of the parties in such a convoluted manner that even many lawyers are left baffled. Even when an insurance policy provides “coverage” for a particular loss, one or more of the numerous “exclusions” in the policy will often eliminate coverage.

You will then receive a lengthy “denial of coverage” letter, which to most people is as incomprehensible as the insurance policy itself. The unfortunate reality is that many people simply tuck this letter away in their file cabinet and absorb the loss themselves – after all, your insurance company is “on your side” and would not say there is no coverage if in fact coverage exists, right?

Not all insurance companies go out of their way to deny coverage, but it is important to remember that insurance companies in general are running a business for one sole purpose – profit. Some play fairly, while others – as evidenced by the thousands of published legal decisions in which insureds have prevailed in lawsuits for wrongfully denying coverage – employ aggressive or questionable strategies designed to increase their bottom line to the detriment of their unwitting insureds.

Like any other contract, terms of an insurance policy are often susceptible to different interpretations. If you were in a contract dispute with a former business partner, you would never agree to be bound by whatever interpretation your adversary gave to the contract terms. Nor would you agree to allow your adversary to decide whether you will win or lose the case. Be sure to use the same logic when dealing with a claim submitted to your insurance company. Having witnessed the common and costly mistakes that could have been avoided by insureds, consider these tips when dealing with your insurance: • Work closely with your insurance broker and select a reputable insurance company. Ensure that you have the type of coverage you need for your particular business and appropriate limits of insurance to sufficiently cover your risk exposure. Inquire into the reputation of the insurance company proposed by your broker.

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Anthony L. Vignolo Partner at Downey Brand LLP

Like any other contract, terms of an insurance policy are often susceptible to different interpretations. For those insurance companies willing to sacrifice reputation and ethical business practices for profits, it is not uncommon to deviate from the plain meaning of an unambiguous policy term, or resort to an absurd interpretation, to come up with some specious reason why your particular loss is not covered (or is excluded from coverage) under your policy.

As this cycle continues, the advertisements through which some of those insurance companies gain their customers’ trust and confidence continue to pay for themselves several times over.

18 Continued on p. 20

K N O W T H E L AW

Continued from p. 18

Have your insurance policies reviewed thoroughly prior to each renewal to ensure they continue to meet any changing needs of your business. Your insurance broker should fully understand your business so that appropriate coverage can be procured. For example, you do not want to find out after you get served with a lawsuit arising from a foodborne illness that you do not have products liability coverage. Modifications to standard form policy provisions can often be negotiated with insurance companies through policy endorsements, so there is no “one size fits all” when it comes to insurance. In taking the time to explain your insurance needs to your broker, avoid any confusion by providing a summary of your business, along with what you need and want, in writing. In the event a future claim reveals that your broker failed to procure the requested or appropriate coverage, the written communications will make it much easier to have any gap in coverage filled by your broker’s own errors and omissions insurance policy. • Avoid pitfalls by consulting with your own coverage counsel immediately upon learning of any potential claim.

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First, many insurance policies provide a short time period by which the insured must provide notice of a “claim” to its insurer, and those policies broadly define the term “claim” to include demand letters and events other than lawsuits. Thus, if you wait until you receive a lawsuit before notifying your insurer, you may give your insurer an additional basis to deny coverage.

Second, insurers often respond to notice of a claim with a “reservation of rights” letter – a fancy phrase for letting you know that the insurer will appoint insurance defense counsel to represent you in the underlying lawsuit while it continues to investigate the facts and is otherwise able to confirm or deny the existence of coverage. Sometimes, the facts relevant to the issue of coverage can be developed by insurance defense counsel in the underlying lawsuit through the discovery process, thereby creating a conflict of interest between you and your insurer. To ensure that insurance defense counsel proceeds through the

discovery process in a manner that is unbiased on the issue of coverage, your own coverage counsel will advise you as to whether the insurer is obligated to provide you with separate counsel (known as “Cumis counsel”) at the insurer’s expense and, if so, will make the demand upon the insurer.

Your insurance broker should fully understand your business so that appropriate coverage can be procured. Finally, even in those situations in which your insurer agrees to provide coverage, you will want your own coverage counsel if your exposure in the lawsuit may potentially exceed your policy limits. Imagine that you are a defendant in a lawsuit in which $3 million in damages is sought by the plaintiff, and your policy has coverage limits of only $1 million, leaving you personally exposed to an excess judgment. Although California law obligates insurance companies to accept “reasonable” settlement demands within policy limits in order to avoid exposing their insureds to personal liability in excess of those limits, there is often a dispute as to what is “reasonable.” Retaining personal counsel to continue placing pressure on the insurer to settle in these situations is usually money well spent. If there is one thing to remember, it is this – insurance companies are not always “on your side,” so every step of the way you should watch out for yourself. Expenses incurred by insurers in paying losses and/or defending their insureds in lawsuits – the exact reasons why we obtain insurance – cut directly into their bottom line and pose an unavoidable conflict of interest. While many people in the insurance industry will candidly tell you that insurance policies often exclude more losses than they actually cover, following these tips will help you maximize the benefits of your insurance. n Author Anthony L. Vignolo is a partner at Downey Brand LLP specializing in insurance coverage and litigation (representing policy holders), as well as general commercial litigation.

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CAPITOL INSIDER

Meet the Leaders LO UIE B R OW N Partner in the Sacramento office of Kahn, Soares and Conway, LLP.

Much has been written about how three of the four caucus leaders in the Capitol are new. But what do you really know about them? Leadership in the California Legislature rests in the hands of a select few individuals chosen by their peers from the ranks of the Senate and Assembly. These are powerful positions and their actions have significant impact on the state’s legislative

Leadership in the California Legislature rests in the hands of a select few individuals chosen by their peers from the ranks of the Senate and Assembly. process. The Senate President pro Tem and Assembly Speaker control the flow of legislation and determine committee assignments. In this article, we introduce you to these leaders – borrowing from their own biographies – to provide insight on who they are and what makes them tick. We also introduce what each has indicated will be top policy priorities for the coming year. Senate President pro Tem Kevin de Leon

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Senate President pro Tem Kevin de Leon was elected to the Legislature in 2006, serving in the State Assembly for four years before being elected to the Senate in 2010. He is the first Latino elected President pro Tempore of the Senate in more than 130 years. With nearly a decade of legislative service, he is one of the most seasoned legislative leaders we have this session.

The senator credits his immigrant mother for teaching him the nobility of a hard day’s work and belief in a shared obligation to build a brighter future for the next generation. He was the first in his family to graduate from high school, later earning a degree with honors from Pitzer College.

His policy priorities have demonstrated a commitment to immigrant communities and other underserved populations. In 2012, de Leon authored the “Secure Choice Act” (SB 1234) that aims to establish retirement savings security for millions of low-income workers. In 2016, he joined with a handful of senators to spearhead a major effort to address California’s homeless issues including a proposed $2 billion for housing. The senator represents the 24th Senate District which incorporates portions of the City of Los Angeles. He will term out of the Legislature in 2018. Senate Republican Minority Leader Jean Fuller Senate Republican Minority Leader Jean Fuller has a few things in common with Senator de Leon. Like him, she was first elected to the Legislature in 2006 and moved to the State Senate in 2010. Similar to de Leon she is a trailblazer in that she is the first female elected to a Senate leadership post in California. Prior to 2006, Fuller served as superintendent for the largest K-8 school district in the state, enhancing the educational opportunities for 28,000 students, managing 3,500 staff, and administering annual budgets of more than $100 million. Fuller earned her Ph.D. from the University of California, Santa Barbara, participating in seminars and course work at the University of Southern California, Harvard University, and Exeter College at Oxford University in England. Fuller’s legislative career has been focused on improving California’s economy through common

CAPITOL INSIDER

sense reforms and smart fiscal policies. In addition, education remains a top priority. She is focused on not only educational access but ensuring the economy is thriving so jobs are available for students upon graduating. As the Senator for California’s 16th State Senate District, Fuller represents parts of the San Joaquin Valley, Indian Wells Valley, Morongo Basin and the Antelope Valley. She will term out in 2018. Assembly Speaker-Elect Anthony Rendon Assembly SpeakerElect Anthony Rendon was elected to the Assembly in 2012. He was recently unanimously elected by the full Assembly and will formally assume the Speakership on March 7. His election represents the first time both the sitting Senate President Pro Tem and Assembly Speaker have represented districts in Los Angeles. Rendon holds Bachelors and Masters of Arts degrees from CSU Fullerton and a Ph.D. from University of California, Riverside. In addition, he completed postdoctoral work at Boston University. He arrived in the Assembly with a commitment to clean, transparent, and open government. During his first term in office, Rendon chaired the Water, Parks and Wildlife Committee and authored Proposition 1, the $7.5 billion state water bond, which voters passed

by a 67 to 33 percent margin in the 2014 election. As Speaker, he has publicly stated his priorities include alleviating poverty and providing funding for early childhood education efforts. Rendon represents the 63rd Assembly District which includes nine cities – Bell, Cudahy, Hawaiian Gardens, Lakewood, Lynwood, Maywood, Paramount, South Gate and a northern portion of Long Beach. He could ultimately serve in the Speaker’s post for nearly a decade given he does not term out until 2024. Assembly Republican Leader Chad Mayes Assembly Republican Leader Chad Mayes is the most recent arrival of the four new leaders, having been elected to the Assembly in 2014. Mayes is a small business owner having worked as a tax preparer and financial advisor. He is a graduate of Liberty University. In addition to focusing on policy priorities that include bolstering California’s “innovation economy” and reducing the state’s high poverty rate, Mayes has set a goal of working outside the Capitol to help reinvigorate the caucus’ electoral fortunes. Mayes represents the 42nd District which includes Beaumont, Yucca Valley, Twentynine Palms, and Palm Desert. Like Rendon, he could ultimately serve in a leadership post for a decade given he does not term out until 2026. n

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CALIFORNIA POLITICS

Solving Problems or Chasing Solutions The saying goes that imitation is the highest form of flattery. If so, Californiaâ&#x20AC;&#x2122;s local governments must feel pretty good about themselves.

TIM JAM E S Senior Manager Local Government Relations Northern California & Regulatory Affairs

Our industry has witnessed a steady increase in the amount of cities and counties copying their peersâ&#x20AC;&#x2122; actions on new policy proposals. While this is not always a bad thing, it does beg the question of motivations. Do copycat jurisdictions genuinely need a fix to a policy dilemma or are they simply excited by the solutions? In many cases the answer is both. Some consider local government the last great experiment in democracy. While precluded from engaging in numerous issues by the state and federal governments, cities and counties have a wide berth in deciding if and how to regulate our daily lives.

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iStock

Looking at the issues the grocery industry is locally engaged tells the story. Areas that are being regulated frequently include how food can be packaged, where recycling may occur, how much an employee is paid, how you develop their schedule, and if you must dispose of consumersâ&#x20AC;&#x2122; waste, such as unwanted pharmaceuticals. One regulation that is spreading like wildfire is the question of a local minimum wage. Traditionally left to the federal and state government, California is now home to nearly 20 municipal minimum wage mandates. Passing a local minimum wage is now considered a political and policy must-have by many local jurisdictions.

However, some of the communities which are hastily passing wage ordinances have put minimal effort into encouraging affordable housing or a broad scale of job opportunities. They also maintain reputations for regularly increasing costs of doing business or instituting policies which make daily life more expensive. There are times when it is not clear if they are making policy decisions to provide a sound solution or are simply chasing the next new thing. While some local decision makers regard their neighbors as competition for who can be first to pass a law, they rarely think about unintended consequences and the impact on competiveness. When cities and counties were passing carryout bag ordinances at a break-neck speed, a competitive gap grew between regulated and unregulated grocery stores competing across jurisdictional borders. As an industry we are beginning to experience similar competitive challenges with local minimum wage ordinances. Grocers operating stores in multiple jurisdictions which have varying levels of regulation are facing questions of paying similar workers different wages, or increasing pay across the board. Regardless of grocers reaction to the mandates, a web of confusing and expensive compliance is created. As an industry and association we must constantly evaluate and challenge our local decision makers to think beyond popular policies and mandates. We must encourage them to remain focused on creating vibrant communities for citizens and businesses alike. There are times when a new and emerging policy solution may help a city or county genuinely thrive. But as grocers we must insist they only solve genuine problems, not simply promote solutions adopted by others. n Tim James is a senior manager at California Grocers Association and is responsible for local government relations in Northern California and state regulatory affairs.

2016’S SPECIAL ELECTION

BY KER I ASK E W B AILE Y

2016’S SPECIAL ELECTION by Keri Askew Bailey iStock

California voters have in many ways become accustomed to frequent elections with long ballots. The past decade has seen more than 35 “special” elections called around the State to fill vacancies in Congressional and State Legislative offices alone with additional trickle-down effects of special local elections.

However, a whopping 72 had been cleared for circulation, meaning they were in the process of gathering the required number of signatures to qualify for the ballot. Another 22 remained at the Attorney General’s office awaiting pro forma drafting of the required title and summary needed before being cleared for circulation.

In addition, they have faced nearly 60 initiatives in that time on issues as diverse as public employee union dues, prescription drug costs, taxes, abortion and marijuana legalization to name but a few. Even against that backdrop, the statewide General Election scheduled for November 8, will be special in many ways.

Those numbers mean proponents from various special interests had proposed nearly 100 separate items they hoped voters would be asked to cast votes on in November. Estimates that as many as 19 could actually make it through the process and appear before voters seem quite realistic given the sheer volume of activity and low signature threshold now required to qualify an initiative or referendum.

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The most-discussed piece of the ballot has thus far been initiatives and referenda.

Changes to California election law, enacted by the Legislature in 2011, require initiatives qualified iStock by voter signature to appear only on statewide General Election ballots. That relatively new requirement will force a full two years of pent up initiative activity onto a single ballot. According to the California Secretary of State’s office, as of the first week of January, 18 proposed initiatives and referenda failed to qualify and four were already slated to appear on the ballot.

These “down ballot” issues will be important for CGA and its member companies. Out-of-state plastic bag manufacturers poured more than $3 million into their efforts to qualify a referendum (see side bar) for the ballot to overturn SB 270 (Padilla). The measure in question created a uniform, statewide standard for carryout bag regulation and the referendum is part of the plastics industry’s ongoing effort to thwart standardization of the growing local patchwork of regulation.

2016’S SPECIAL ELECTION

In addition, several initiatives likely to qualify could directly impact our industry. Proponents, backed this year by one of California’s biggest environmental benefactors, are once again pushing to increase California’s tobacco tax – this time by $2 per pack. Multiple minimum wage increase proposals are in circulation with rumors a third measure, representing a compromise between competing proponents, is in the works. Competing proposals to extend some of the temporary tax increases approved by voters in 2012 (Proposition 30) are also in the mix. But the bottom of the ballot, where initiatives and referenda appear, is not the only unique thing about the contest in November. Voter-approved changes to California’s term limits law make the election significant, essentially picking a State Legislature that will remain largely unchanged for a full decade. In 2012, Proposition 28 was approved to modify term limits rules. The aggregate maximum years of service for State Legislators was reduced from 14 years to 12, but unlike the previous longer overall terms lawmakers can now serve those years in one house. That means rather than being forced to leave the Assembly after six years or the Senate after eight years as the prior rules required, lawmakers can serve in either house for the full 12 years. The effects of those changes have been interesting indeed. While many argue that the change is beginning to bring stability to the Statehouse and will soon force lawmakers to face the impacts of legislation they approve, they also have created some interesting election dynamics. In 2014, the first year the new term limit rules were in effect, 25 legislative seats were “open” due to term limits. That meant in all those seats, there was no incumbent eligible to run. In 2016, that number will be 33. In 2018, that number drops to 11 and in 2020 it shrinks further to just 10. What those numbers mean is that over two election cycles nearly a half of the Legislature was forced from office due to term limits. And the lawmakers elected in those two elections will generally not begin to term out until 2026.

Under the prior term limits law, and the “revolving door” it tended to create, lawmakers often left office just a few years after voting to create new requirements or restrictions in law. There was no concern about having to confront unintended consequences or overreach of proposals. With a 10-year horizon, however, policy action will come home to roost much more often. This kind of longevity presents challenges and opportunities for the California Grocers Association as well. It will be incumbent on our organization and individual members to put in the time and effort needed to develop relationships with lawmakers that can stand the test of time. That doesn’t mean we will agree with lawmakers on every decision they make, but we need to be very intentional about opening lines of communication and helping policymakers understand our industry. It will be to our own peril if we ignore that important task.

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It also creates a fantastic opportunity to roost much more often. to work collaboratively with lawmakers to address real and perceived issues in California’s complex food system. The grocery industry is unique in its diversity and its reach. We operate in literally every Legislative district, employing and serving Californians in a way other industries do not. We are fundamental to the lives of every Californian and can be a powerful partner in efforts to address diverse issues that go far beyond food. n Keri Askew Bailey is Senior Vice President, Government Relations and Public Policy for the California Grocers Association.

It is very likely that more consistent policy priorities, philosophies and temperaments will emerge over the decade, which can be positive if moderation rules the day.

There could be a silver lining, though, no matter what philosophies prevail in November. Longer-term stability will allow lawmakers to develop expertise in favored policy areas. And equally important, they will also be more likely to face the consequences of policies they enact.

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As a practical matter, those numbers mean fully half of the Legislature elected in November of 2016 will be set for a full decade. The power of incumbency is strong indeed, with California voters almost uniformly re-electing incumbents. Only those in one of the very few truly competitive districts left in the state need to worry about their fate on election night.

However, it could also be quite detrimental if traditional liberal Democratic constituencies become confident in control of their favored candidates.

WASHIN GT O N R EP O RT |

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Peter J. Larkin President and CEO National Grocers Association

Cut Red Tape? There’s Little Hope DESPITE PRESIDENT OBAMA’S ACKNOWLEDGMENT IN HIS FINAL STATE OF THE UNION ADDRESS THAT BUREAUCRATIC RED TAPE NEEDS TO BE REDUCED, THERE IS LITTLE HOPE AS THE FEDERAL GOVERNMENT SEEKS NEW WAYS TO MOVE POLICY. The supermarket business is not for the faint of heart. Low profit margins and constantly changing consumer preferences makes it challenging even for the best operators. Uncertain economic conditions and an explosion of new store formats have caused many to speculate about the demise of the supermarket as we know it. Yet despite challenges and headwinds, the grocery store is not just alive and well – it’s kicking! 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 2015 was a challenging year for many in the industry, independent supermarket operators – nimble in their nature – continue to find innovative ways to differentiate themselves in the marketplace. Whether it’s a change in store format, more engagement on social media, investment in their workforce, or a focus on the fresh/perishable department, independents are employing tactics to not only meet consumer demand, but become the store of choice. Despite this unique ability to adapt to changes in the marketplace, there are other challenges for independent grocers presented by way of legislation and regulations. Last month, President Obama delivered his eighth and final State of the Union address, where he touched on the unprecedented change faced by our nation and often referred to a “new” economy throughout his speech. Although much of the President’s speech focused on his administration’s accomplishments, as well as his long-term vision for the country rather than specific policies, there was a section within his speech that was dedicated broadly to regulations: “I think there are outdated regulations that need to be changed. There is red tape that needs to be cut. The

point is, I believe that in this new economy, workers and start-ups and small businesses need more of a voice, not less. The rules should work for them.” The National Grocers Association was pleased to hear the President acknowledge there needs to be less red tape. Our organization has been working alongside Members of Congress and Administration officials to reduce over burdensome and duplicative regulations so that independent supermarket operators can continue to innovate in ways that allow them to face changes and challenges in the marketplace head on while growing their businesses and creating jobs in their communities. For example, in December 2015, the U.S. Department of Agriculture (USDA) finalized its regulation regarding grinding logs for in-store grinding of raw beef. While NGA still has a number of concerns with the final rule, we were pleased to see the USDA incorporate many of the recommendations NGA made in our comments and during meetings with the agency that will greatly reduce the burden for independent grocers. NGA will work with USDA regarding our outstanding concerns. From labeling to health care to labor and employment issues, there are a plethora of regulations that directly impact independent supermarket operators on a daily basis. I do not have a crystal ball, but as we approach the 2016 elections, I anticipate that despite the President’s sentiment on the need to cut red tape, federal agencies will be looking for ways to move policy, especially with lack of congressional action. NGA will continue to work closely with Congress and the Administration to ensure commonsense decisions are made that address challenges while not inhibiting the ability of retailers and wholesalers to grow their businesses. n

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INSIDE T HE B ELT WAY |

C A L I F OR N I A G R OC E R

Jennifer Hatcher Senior Vice President Government and Public Affairs, Food Marketing Institute

Finding a Silver Lining for a “Lackluster” Year – Food Safety THE HILL NEWSPAPER CALLED 2015, “A LEGISLATIVE LACKLUSTER YEAR,” AND MY BET IS THAT MANY OF YOU WOULD CALL 2015 A “LACKLUSTER” SALES YEAR TOO. IF 2015 WAS “LACKLUSTER” LEGISLATIVELY, 2016 IS LIKELY TO BE MUCH OF THE SAME. So how can we identify opportunities to squeak out a win legislatively or in the regulatory arena that will translate into enhancing sales or solidifying customers? First, because the hyper-political focus of the 2016 general elections for both the presidential primary wannabes and the growing list of open congressional seats, 2016 is likely to be just as “lackluster” on the legislative side, with a huge focus on the regulatory side. It is year eight in the Obama Administration, which means we are likely to see not only more attempts to govern via the executive order but also attempts by the President to finalize rules designed to expand on his legacy issues. Several of those have only peripheral impact on our industry, like immigration reform and criminal justice reform; but others like food safety, transparency and adjustments to overtime pay are at the heart of our priorities list. I am going to drill down into one that can define our industry. While the industry supported the Food Safety Modernization Act when the legislation was passed and signed into law in 2011, and have worked to refine the rules to reflect those areas we see as truly critical to a safe food supply, there are a lot of details. Each of the rules is several hundred pages long and there are at least seven significant rules finalized, or in the process of being finalized this year. This is a lot of work, but it is also a real opportunity to showcase our commitment to our customers at a time when consumers are ready to listen.

Because of the Chipotle-linked illnesses, customers now have e. coli, salmonella, norovirus and listeria in their mainstream vocabulary. The work our industry has done collaboratively, even with our fiercest competitors and some of the best universities like Cornell and Purdue, will help make sure we are ahead of the pathogens and should be shared with consumers and touted. We have worked on food safety, not just the safety of particular foods in the store, but the culture of food safety so that all associates feel empowered to speak up when they have a concern or suggestion regarding food safety. We communicate with our experts on FMI’s Food Protection Committee on a regular basis to gather input and share best practices. At the same time, iStock we have CEOs on FMI’s Food Safety Committee working to identify pilots or tests of better ways and then sharing results with their colleagues. Safemark® is a comprehensive food safety training program for the retail food industry. Safemark® and the Center for Retail Food Safety and Defense is run by Dr. Hilary Thesmar, a Ph.D. in food technology with two decades of industry experience. The Safe Quality Food Institute was developed to deliver consistent, globally recognized food safety and quality certification programs based on sound scientific principles, consistently applied across all industry sectors, and valued by all stakeholders. SQFI is run by Robert Garfield, who has a Master’s degree in Agriculture and three decades in the industry.

I N S I D E T H E B E LT WAY

The Center for Food Safety and Defense is housed at FMI and enjoys wide-scale industry support. The Center provides retailers and wholesalers the information and tools they need to ensure they are

We need to share our commitment to food safety. My bet is that customers will see your commitment to food safety as anything but “lackluster.” properly protecting consumers by selling safe and wholesome food and operating within the scope of regulatory requirements and best practices. All of these programs are supported by legal counsel, Stephanie Barnes, our internal regulatory counsel, with a background in food safety and past work with the Food and Drug Law Institute, in addition to relationships with two of the best outside firms so that we can constantly get a second opinion. Each of these experts are available to you should you have a crisis.

We also want to highlight associates who have completed the Safemark® training and publicly applaud those facilities who are SQF-certified to show our customers what it means to have a culture of food safety – where it is not a single lesson on a single day that will make the difference, but a complete commitment to food safety supported from the c-suite to the delivery door that is always looking for a potential mistake or a better way that will be valued by customers. The supermarket industry commitment to food safety and implementing the Food Safety Modernization Act is one of the silver linings to all those complex legislative and regulatory requirements that the supermarket industry has tried to shape and embrace in order to ensure a safer food supply. We need to share our commitment to food safety. My bet is that customers will see your commitment to food safety as anything but “lackluster.” n

Share this issue of California Grocer with your company associates. It’s just a click away.

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Continue the conversation.

YOU WIN SOME, YOU LOSE SOME

B Y CASSANDR A P Y E

You Win Some,

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You Lose Some The truth about lobbying in Sacramento’s Capitol By Cassandra Pye

Politics in California’s Capitol can often leave you scratching your head. It’s not all that complicated, but one has to ask – when a legislator tells you, “I know this bill is a bad idea, but I’ve got to vote for it,” – wait, what?

The small group of Capitol veterans interviewed said that, these days, it’s rare to hear a legisator

One of CGA’s priorities last year was the Grocery Worker Retention Act. Sponsored by union advocates, the law requires a successor grocery employer to retain eligible workers for a 90-day transitional period and, upon completion of that period, require the successor grocery employer to consider offering continued employment to those workers. The new law applies to retail stores in California that are over 15,000 sq. ft. “Any number of Democrats said to me, ‘this is crazy – only grocery stores? – but, I’m sorry, I can’t be with you,’” one lobbyist recalled.

Continued on p. 35

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Let’s start here. Veteran lobbyists – quoted anonymously in this story – all agree: the process isn’t perfect but it’s about as good as it gets. And, while that may not be all that comforting to CGA members working diligently to serve consumers and communities for pennies on the dollar, as one lobbyist suggests, “It’s always a good idea to educate CGA members so we can manage their expectations.”

say, “I understand your position but this isn’t good for my district.” In fact, on just about any bill that has to do with organized labor, the response is quite the opposite.

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Congratulations to the New CGA Board Members Denny Belcastro

Ryan Jost

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Joseph McDonnell

Willie Crocker

Mark McLean

Steve Dietz

Doug Todd

Kimberly-Clark Corporation

Tyson Foods, Inc.

Bimbo Bakeries USA

Tonyâ&#x20AC;&#x2122;s Fine Foods

Ted Gardner

Rio Ranch Markets

Procter & Gamble

Campbell Soup Company

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YOU WIN SOME, YOU LOSE SOME

Continued from p. 33

Says another advocate: “Looking at last year, labor introduced a dozen bills that would increase costs on employers through litigation and other ways – just to get a few of them through. Members say, ‘I can’t vote against all of them.’ So what a lot of business groups do is prioritize their bills. Of course, every bill is labor’s top priority.”

Wander the halls of the Capitol for a day or so and you quickly learn that there are procedural moves, acronyms, buzzwords and a language that is unique to the business of legislative advocacy. Playing the Game In spite of it all, most practitioners actually believe the system works, for the most part. “It’s not perfect but it’s the best one we got,” says one advocate. “California has a fulltime Legislature, it’s a diverse state with a host of complex issues. I think we have one of the most transparent processes in the country – definitely more transparent than Washington, D.C.,” says another Capitol veteran. iStock

Campaign finance laws in California, for example, call for transparency on where and how political dollars flow; in fact, the state probably leads the nation in that regard. But the process, these experts say, isn’t driven solely by money. “Often, labor beats business out because they play the entire campaign game – money, campaign signs, boots-on-the-ground, endorsements, get-out-the-vote efforts – and, that’s why they win,” says one advocate

Another shares a tale from last year’s session where environmental groups blanketed legislators’ districts with mail criticizing their votes on a priority issue. “The ‘enviro’ community has thousands of members who can email district offices, send letters to the editor – they can be very influential at the district level,” says the same lobbyist. Social media platforms are also used against members who, in her words, don’t’ toe the line. “Frankly, a lot of groups can’t compete with that,” the lobbyist says. “Businesses can’t always do that; they have to make payroll. So that’s what a legislator is faced with. It can be intimidating. I can see why Members are frightened.” Fear is bi-partisan, according to one advocate. “The Republicans are no better. They live in fear of being attacked by the Howard Jarvis activists,” he states. “For example, four or five years ago, the Investor Owned Utilities’ public goods charge – which is a small percentage fee paid by every rate payer – was going to expire and we needed a two-thirds vote to raise it. We could not get Senate Republicans to go up on the charge even though it would have helped many in business, agriculture, etc, because they were worried about the Jarvis people.” Tricks of the Trade Wander the halls of the Capitol for a day or so and you quickly learn that there are procedural moves, acronyms, buzzwords and a language that is unique to the business of legislative advocacy. And, as one lobbyist put it, “There is also the process part that people find abhorrent. I have to tell clients everyone hates the gut and amend process until you need it.” According to the California State Legislature’s Glossary of Legislative Terms, “gut and amend” refers to the act of making amendments to a bill remove the current contents in their entirety and replace them with different provisions.

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Another advocacy expert echoes that sentiment: “Labor’s ground game is the best. They have an advantage over other interest groups because they have foot-soldiers,” one advicate says. “So, if you’re a legislator and you’re thinking about your district, you’re worried about how they [labor] are going to tell voters what you’ve done.”

“The last thing legislators are thinking is ‘is SEIU going to give me at $4,200 check?’ No, it’s all the other things that come along with SEIU’s support,” says one lobbyist.

Continued on p. 36

YOU WIN SOME, YOU LOSE SOME

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Continued from p. 35

Not a terribly nefarious notion until it happens in the closing hours of a legislative session, very much behind-closed doors. Don’t be too quick to judge, warn our Capital sources. Sometimes, they say, it’s for the best. Last year, a bill dealing with “piece-rate” compensation was introduced. Car dealers, trucking companies, agriculture and auto repair industries sometimes pay employees by the “piece” instead of by the hour. According to one business lobbyist, the Governor’s office, Democrats and house leaders worked to gut and amend the bill and moved it through committee in four or five days. “A deal was cut by interested employers and an offthe-floor hearing was set,” he recalls. “In the last two weeks of session, lawmakers should only be voting on bills that are on the floor (committee deadlines will have passed). The Rules Committee or a majority vote on the Floor in either house can waive the rules, allow members to leave the floor to hear one bill and return to the floor. “Those committee hearings never show up in a daily file (which requires four-days’ notice) so, again, the rules are waived,” he says. “The truth is, the more scrutiny the bill received, the worse it would have been for industry.” The plastic bag bill, which ultimately passed, was a gut and amend bill.

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“Our bill was stalled at the beginning of session, we didn’t have the votes on the Senate floor and the Legislature went to recess. When they returned, we didn’t want to face the Senate fight again,” he remembers. “Sen. Alex Padilla had a bill (SB 270) sitting in Assembly Labor Committee, which he referred back to the Rules Committee because the subject matter changed. It was then referred to Assembly Natural Resources.”

The consensus is that beverage container recyclingrelated bills – for example – almost always come together during the last few weeks of session. Historically, these advocates say, where CRV is concerned, that’s how things get done. Tracking bills, near the end of session is apparently both an art and a science. “People don’t understand what function a lobbyist plays – to track what’s going on – particularly, at the end of session,” he states. “Often we know when to expect it, but we’re monitoring it closely.”

Senate Bill 270 is a perfect example of how legislators hold a few bill numbers “in their hip pockets” and keep them in committee for any number of reasons. Even the worker retention measure, ultimately benefited from the process. “Because of our ability to negotiate some language we liked, utilizing a gut and amend procedure, we might have an opportunity to make that thing more workable,” he asserts. “I tell clients everyone hates the gut and amend process until you need it.” Will Longer Terms Favor Business? California’s Proposition 28 was approved by voters in June 2012 and extended legislative terms to a total of 12 years. One school of thought says that perhaps longer terms will allow legislators to push back on their constituencies a little more. But, there’s that age-old question: what are the three most important things to a legislator? Answer: re-election, re-election and re-election.

Senate Bill 270 is a perfect example of how legislators hold a few bill numbers “in their hip pockets” and keep them in committee for any number of reasons.

This year, all 80 Assembly members are up for reelection. While most are incumbents, according to one lobbyist there is already talk of well-funded interests targeting even incumbents – especially moderate Democrats.

“They introduce a few ‘spot bills’ each year and move them to the second house in case they’re needed,” he says. “Oftentimes, we can’t reach deals until late in the session. Then, everyone’s scrambling for a vehicle – so there’s something to work with.”

“As a result of their loss on Senate Bill 350 (a priority for environmentalists) we’ve heard that [billionaire environmental activist Tom] Steyer and others are actively seeking candidates to replace Mod Dem Caucus Members,” he shares.

YOU WIN SOME, YOU LOSE SOME

The last thing any legislator wants is a primary challenge which means things could get tougher, not easier, for business interests. The political environment, several believe, makes it easier for legislators to “walk away” from pro-business measures. What about the Governor? Ultimately, the fate of any and all legislative proposals lies in the hands of Gov. Jerry Brown, Jr. Unpredictable, seasoned, smart, disciplined. He is pro-labor, but also fiscally prudent. It’s the unpredictable piece that keeps grocery and other business advocates on their toes. “He’s a brilliant politician,” says one veteran. “He’s committed to his legacy and tends to just focus on a few things – not trying to be everything to everybody. And, he finishes things, because he’s able to focus. He’s been able to get things through that I never thought would happen. Look at how he was able to get Democrats when he was first elected to cut health and welfare to balance the budget.” Says another advocate: “You will also hear members say ‘oh, the Governor will veto this one…’ so they’ll vote for it; or ‘I don’t need to pick a fight with labor, go see the Governor.’ The problem is he’s unpredictable and doesn’t show his cards. Gov. Schwarzenegger would let you know, often saying ‘don’t even send it to me.’ You won’t know until you see the press release what this governor is going to do.”

ourselves that we were providing the right arguments, etc. We set ourselves up which led to disappointment. We lose on the big stuff and – if you’re keeping score – I can understand how frustrating that gets. “With GWR, the governor had already vetoed a few labor bills that had broader impact. This one was only hitting the grocery industry – so it was easy for the governor to sign. And, we had no friends to help us.” Should the industry do what labor does and put a few more bills on his desk? “We can try,” is one answer. “But, that’s hard to do in a Dem-heavy legislature.” A lost cause? Absolutely not, these advocates claim. Though in the minority, Republicans are still relevant, pro-business and – each has a vote.

iStock

The problem is he’s unpredictable and doesn’t show his cards.

The group we interviewed was surprised at the Governor’s signing of the grocery worker retention measure.

It’s hard for a business person to appreciate that we win some and we lose some, one lobbyist concludes. “It’s still – as ugly as it seems – a pretty good process,” he says. “We still win a few things, too.” n Cassandra Pye, is CEO of 3.14 Communications, LLC, a regular contributor to California Grocer and a former lobbyist for CGA.

“It seems like it’s the big ones that we lose,” says one lobbyist. “What was frustrating about GWR is we thought we were there and had already convinced

“Listen, this is hard stuff,” says one. “People forget, most of these folks have only been here for 13 months. It’s unrealistic to think they’re going to master this ‘stuff ’ very quickly. My hope is that term limits will allow Members to take the time to find policy areas where they can specialize – then, they can be relied upon as advisors to their caucus. You can’t learn every issue.” C A L I F OR N I A G R OC E R

“The only so-called ‘job-killer’ he signed last year was the grocery bill. What was lost in the debate was the job loss. It wasn’t about Safeway and Albertsons – it was about jobs in small communities – food deserts, poor, urban areas – and consumers in those areas finding fresh food. I was really surprised he signed it.”

“You can’t use Mod Dems without a Republican Caucus – there aren’t enough votes,” asserts one advocate. “I believe Republicans understand that, now more than ever and they’re working their voting blocs more effectively. They strengthen the Mod Caucus. They help us raise issues in hearings on policy – so that the right issues are raised. The new legislators are more collegial, not as adversarial and they’re making more of an effort to work with Democrats where they can.”

CONNECTING THE DOTS

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CONNECTING ON T DOTS THE DO

For years, phrases like customer-centric, best practices, CPFR, supply chain collaboration have been buzzwords throughout the retail industry. As competition for the consumer dollar increases among brick and mortar and online stores, these factors and relationships between independents, manufacturers and brokers have never been more urgent.

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But are the benefits of collaboration being explored to their fullest?

California Grocer asked three industry leaders – Chris Coborn, chairman and CEO, Coborn’s, Inc.; Denny Belcastro, vice president, customer and industry collaboration, Kimberly-Clark Corp.; and Mark McLean, division manager, CROSSMARK, Inc. – to give their views on the state of industry collaboration and how it can move forward.

CONNECTING THE DOTS

CG: We’ve been talking about better collaboration between trading partners for decades. Are we making progress?” McLean: “We are. It seems that all parties appreciate that we can accomplish more together vs. running in our own directions. Admittedly, it’s easier said than done. The challenge is working together throughout the year to stay on the right path.” Belcastro: “There’s been a lot of progress. But it’s somewhat like a Tale of Two Cities – the best of times and the worst of times. Our industry has developed and utilized some of the finest technology delivering point-of-sale information, consumer trends and shopper insights. However, some manufacturers are still trying to figure out how to use the information in the best way retailer-by-retailer and it takes time building the needed trust.” CG: How so? Belcastro: “When I was a sales rep, either calling on stores or at their buying headquarters, I met with retailers to explain our company and our brand marketing approach, our strategy and the tactics we were using to drive awareness and velocity. In today’s marketplace, you would hope that a digital approach, especially with media and consumer promotions, would enable us to take information to the marketplace quicker, faster and better. “It’s getting to consumers quicker, but, in some cases, CPG manufacturers are still missing a beat getting to all retailers on a timely basis. It may be that connectivity to retailers needs to be re-worked.” Coborn: “I think the move away from direct sales force coverage to store coverage with brokers is increasing the quality of service we see. But some CPG companies are going back to direct sales forces to get a higher quality store call. We’re relying on both sales teams to collaborate closely on all supply chain issues with retailers.”

McLean: “Honesty. Everyone has to take a step back and be honest with themselves and their partners. If we all have similar expectations and are aligned going into planning, the chances for success increase.

McLean: “Everyone wants efficiency and simplicity. You can see retailers’ eyes glaze over when you walk in with a 50-page presentation – paralysis by analysis. All of this information may not be applicable to the way they go to market. “Boil down the information to key takeaways on how it all applies to their business. We need to avoid overcomplicating the routine tasks.” CG: How tough is it convincing independents that they are on a level playing field with the chains?

“Connecting the Dots” was a featured panel discussion at the 2016 Independent Operators Symposium in Hawaii.

McLean: “We all win when we sell more cases. We have to do everything we can to balance the needs of retailers with our clients. Finding that middle ground means everyone wins. Let’s find that common ground, build a plan and then execute the plan that push cases through the door.” CG: How do independents fit into the picture? McLean: “They know their customers better than anyone else and have the agility to be quicker to respond and implement to capitalize on the opportunity for growth. Right now these retailers don’t have a lot of excess cash to waste on learning on their own. “They’re looking to the industry for best practices and to follow the lead of larger retailers in category management and shopper marketing. Some may be at a slight disadvantage because they’re not getting all the pertinent information on a timely basis.” Coborn: “Well, the second half of the year was challenging for independents because chains were doing a bit better. As a result, CPG dollars went where they generated the most results and sold the most cases. It’s a strategic spend. At the end of the day, if they [manufacturers] offer us more dollars to drive business they expect results.”

“We’re in the relationship business and you have to build those relationships with trust.”

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CG: What’s most important?

CG: Specifically, what are retailers looking for?

Continued on p. 42

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Continued from p. 41

CG: Driving business is more complicated now with everyone selling groceries. What should be done?

CG: What does efficiency and innovation mean to you?

Belcastro: “I think Kroger is still the best model for the independents to emulate. While they have become larger through acquisitions, Kroger never lost sight of their local operational and executional focus. For them, centralization isn’t only about efficiency but also coordinating learning and best practices and sharing within their network.

Coborn: “Well for one thing, e-commerce is not the end all, but to ignore it would be a mistake. It has to be on your radar. We also have to pay more attention to the discount channel this year. Households are still under a lot of stress and we need to pay greater attention to what goods and services are selling.”

“While they coordinate procurement and a game plan for their divisions, they don’t script or write all the plays. The divisions find a way to adapt to what their local customers need and want.” CG: How can independents emulate Kroger with vendors? Belcastro: “By being more visible at various industry events and opportunities to engage with their suppliers and CPG manufacturers. The best way to get attention is through industry associations like the California Grocers Association, National Grocers Association or Food Marketing Institute as well as their wholesaler or co-op where they can gain access to some of the best practices and successful approaches to take. Sometimes, they will learn some valuable lessons on what not to do.” CG: Maybe the first step is to use technology like webinars or podcasts? McLean: “It could work better than retailers waiting for that information. A half-hour webinar for a group of retailers can get the ball rolling.”

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Coborn: “Independents have to stay innovative. Kroger’s good at acquiring customers and selling up to the customer base. They know how to use data and we [independents] have to be smarter about leveraging that intelligence.

“The old traditional ROP still works. Price and value customers especially want more incentives to be loyal to your store. It’s about retailers and manufacturers leveraging each other’s strengths.”

CG: Being more customer-centric? Coborn: “Exactly. Millennials are not the same as boomers. Their capacity to spend is growing but they don’t shop like their predecessors because of access to technology like mobile marketing and electronic coupons. We have to play into that. “Going about your business the same way as before means missing the bull’s-eye. If you want to be around another generation you have to adapt to a rapidly changing market.” CG: The phrase “best practices” is also thrown around a lot. What does that really mean?” Belcastro: “Throughout the industry, there are valuable knowledge partners and suppliers that work collaboratively with manufacturers to test or pilot new ways on working together for growth, efficiency and effectiveness. It could be in several key areas of promotion activation, shelving, or incremental merchandising. “It starts with matching strategies with common goals using shopper insights with their primary or targeted shoppers. They may have kids in local schools and are engaged actively in the community. You have to find out which categories are the sweet spot for them. “Maybe it’s baby-oriented categories or nutritional products like protein shakes. In either cases, using methodology and key learning from other case studies, independents can serve as a ‘field laboratory’ to create what may be the best way to approach these shoppers are as loyal customers.”

Continued on p. 44

Tyson Foods Congratulates Bob Bukovec as a New CGA Board Member

ÂŠ2016 Tyson Foods, Inc. Trademarks and registered trademarks are owned by Tyson Foods, Inc. 11477429

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Continued from p. 42

Coborn: “As a group we need to leverage our relationships across the entire supply chain and stay engaged. Our stores are very close to our consumers and that’s why CPG companies listen to what we have to say. I think we’re unique in the market.”

Coborn: “Well, we all have the numbers. Those aren’t difficult to get. We need manufacturer partners at the table that will help us use the information. In order to influence the outcome they have to be part of that process or else you’re just swimming alone. On the other hand, I agree that retailers have to be more engaged and participate in the process. You can’t just sit down at the table and wait for things to happen.”

Belcastro:“One of the things we’re doing at Kimberly-Clark is finding out in which categories independents need help – whether it’s baby care, adult care or the paper category. Retailers have to look at five or six key categories and work with vendors to get the information they need to start the process.”

McLean: “With the amount of brokers and vendors calling on independent retailers, they are pulled in a million different directions. We all can bring certain knowledge and expertise to the table that can help build the best plan possible. And when we do agree on a plan, we all need to make sure we are sticking to it.

CG: How can collaborative efforts be improved?

“I think there is an opportunity to get information more quickly to the independent class of trade. A better way might be a collaboration call with a group of independents with similar interests to cover major initiatives, like a new item launch or a strategic shift. Then, we can follow up with specifics for individual accounts that are most pertinent to their business.”

CG: How can independents play a larger role in all this?

Coborn: “Brokers represent a lot of companies but are not necessarily the decision-makers who can move the dime. “Associations have given us a forum for improving category performance through top-to-top meetings with CPG partners who can make decisions. Those meetings are a big step forward.” McLean: “It’s tough getting the decision makers to the table all the time. The prep work is equally, if not more important than the conversation itself. If we know what’s expected before we go into a meeting – for example, five questions that retailers need answered – then the right decisions can be made. “There’s always a lot of discovery that often requires people to get back together at a later date. The problem is that a day can turn into a month and then a quarter.”

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CG: What I’m hearing is that collaboration is a two-way street?

Belcastro: “Absolutely. I do a lot of one-on-one meetings where we try to find out what retailers need. Many independents, especially those that cater to multi-cultural locations, have a wealth of knowledge.

Belcastro: “We’re working with Unified Grocers to better understand their customer base and look for unique ways to mutually grow our businesses. For example, gaining the right products for distribution that appeals to their multi-cultural retailer base is critical. “In addition, taking the understanding of their information on urban stores to build programs that are specific to those retailers that may have limited shelving or space to merchandise. CG: In general, how can these collaborative efforts move along quicker? Belcastro: “Basically, I want to hear the retailer perspective on what they need. If you’re a one store operator, it may be time to think about redesigning your store format to serve the demographics of their marketplace and capture the unique and special place you have with shoppers with your format.” n

M c em no olle Ov be ge er w rs 30 . L ava sc 0 ea ila ho la bl rn r s m ef or hip or s e a t CG CG A A EF .o rg

By providing access to education for your employees, you are investing in your most valuable assets - the people who produce your goods, haul your freight, stock your shelves, and connect with your customers.” JEREMY CULLIFER CGAEF SCHOLARSHIP AND TUITION REIMBURSEMENT RECIPIENT CEO & OWNER JULE’S MARKET

The California Grocers Association Educational Foundation provides financial assistance to advance the educational goals of CGA member employees and their dependents and offers educational programs for the grocery industry.

California Grocers Association Educational Foundation 1215 K Street, #700 Sacramento, CA 95814 (916) 448-3545 foundation@cagrocers.com

A TIP FROM GRANDMA

B Y CASSANDR A P Y E

A Tip from

Grandma By Cassandra Pye

JEREMY CULLIFER AND JAMES TERRELL MET 21 YEARS AGO ON A SUBURBAN SACRAMENTO POOL

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DECK. THEY WERE TEAMMATES ON THE ARDEN

MANOR SEAWOLVES SUMMER LEAGUE SWIM TEAM, COACHED THE SEAWOLVES TOGETHER THE FOLLOWING YEAR AND HAVE BEEN BEST FRIENDS EVER SINCE. JIMMY’S GRANDPARENTS LIVED IN THE LA QUINTA AREA SEASONALLY FOR 20 YEARS AND MOVED THERE, FULL TIME, NEARLY 10 YEARS AGO. HIS PARENTS NOW ALSO RESIDE IN THE LA QUINTA AREA. TO JEREMY, JIMMY’S MOM AND GRANDMA WERE ALSO LIKE, WELL… FAMILY.

A TIP FROM GRANDMA

So, when Jimmy’s mom suddenly took ill last January, it’s no surprise that Jeremy dropped everything and drove overnight from Sacramento to a La Quinta hospital (she’s back in good health, thankfully). It was during that visit that Grandma Terrell put a bug in the boys’ ears: La Quinta could really use a decent grocery store.

In his twelth year with the company, Jeremy was promoted to, then, a newly created position – managing visual merchandiser. He says the role was essentially that of a grocery manger but the concept behind it was to spend more time on creating attractive environments to keep customers shopping and in the store.

In fact, nearly 9,000 residents of South La Quinta – within a mile or so of Jule’s Market – were without a food retailer. Grandma was right, as usual.

“I got to work with a lot of really talented people,” he says. “I learned that customers like cleanliness – clean floors and clean lines – and they are drawn to attractive displays.”

La Quinta, Calif. – “the gem of the desert” – is a resort town in Riverside County, set in the Coachella Valley between Indio and Indian Wells. Known for its historic La Quinta Resort and Club, it’s considered a major golf destination and has been home to several high-profile tournaments. There are more than 20 courses in the area.

Experience indeed. His story begins in 1994, like so many, with Jeremy working as a courtesy clerk at a Bel Air store in Carmichael. He was promoted to checker in just over four years, then went on to work as a pharmacy clerk and pharmacy technician.

The merchandiser role led to a special assignment in the human resources division, where he was asked to revamp the employee handbook and, subsequently, landed a role in the employee benefits department. Simply put, Jeremy loved working in HR.

Continued on p. 48

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“Jimmy and I had talked for years about working together,” Jeremy recalls. “We’d never talked about opening a grocery store but – well, I did have experience.”

Jeremy spent eight years in the visual merchandiser role, soaking up experience he’s applied to his own enterprise.

A TIP FROM GRANDMA

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Continued from p. 47

“It was the best professional experience I’ve ever had,” Jeremy says. “Team environment. Not competitive at all and a fantastic team of people who just wanted to serve our employees and customers.” Jeremy says working in retail allowed him the flexibility to obtain both his BA (business management with a concentration in human resources) and, later, an MBA – both from the University of Phoenix and both funded with tuition reimbursement and two scholarships from the California Grocers Association Educational Foundation. “I wouldn’t have been able to get my education without them!” he exclaims. Jeremy gave Raley’s his two-week notice, after 21 years with the company and a little over a month after the “tip” from Jimmy’s Grandma. The two friends conducted market research, developed a business plan and, with starting capital from Jimmy’s family, pulled the trigger.

construction, some days all I could wonder was ‘what in the world were we thinking?’” The former visual merchandiser took responsibility for the store design and relished the opportunity to start with the blank slate the former Fresh & Easy site offered.

“We hired an interior designer to flush out our ideas and, with help from Unified Grocers, get things going,” Jeremy says. “Visually, the store is bold but friendly – it reflects the community – and is just what we were looking for.” Jeremy’s and James’ hard work and determination did not go unnoticed by Unified. “Jeremy and James are true visionaries,” said David Mumphrey, sales manager for the Neighborhood Market division of Unified Grocers. “The men set goals, established a plan and executed that plan. They were ready for any and every challenge.

OPENING DAY, SORT OF August rolled around, faster than anyone could have imagined, and Team Jule’s was in panic mode.

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With an August 13 date for the soft-opening looming, absolutely nothing was going right: the check stands weren’t in place and the POS system couldn’t be installed which meant the two partners couldn’t bring in product.

“A lot of things came together at just the right time,” Jeremy says. His last day at Raley’s Family of Fine Stores was the end of February. They signed a lease in April, on a retired Fresh & Easy Neighborhood Market site, and were off to the races – with ambitious plans to open in early August. Then reality set in.

“August 13 came and went and we were still installing shelving,” Jeremy recalls. On August 18, products began arriving and store shelves filled. Then, on August 20, the good people who installed the overhead sound system caused the POS system to crash – wiping out every single item and price which had been entered. What to do?

“As much as I knew about the business, the months that followed were very humbling,” Jeremy recalls. “All I did was eat, sleep and drink. Between the logistics, suppliers and all the work involved with

“We couldn’t open, so we threw a party,” Jeremy remembers. “The Mayor was already coming, our area’s state senator was enroute – so we went ahead and opened and didn’t sell anything.”

A TIP FROM GRANDMA

Jule’s Market hosted a community meet-and-greet and was welcomed with open arms. The store officially opened on August 22 to a steady stream of customers. “We wanted to open and get the bugs out,” Jeremy says. “August is slow in the desert – it was the right time to open.” By September, things began to gel. “The fun thing about this project is it was supposed to be a community market,” Jeremy reveals. “We wanted to react to the needs of the community and continue to change things. We did a survey when we opened – asking customers if they wanted gourmet and organic items. “But, we learned very quickly that our everyday shoppers were interested in value items,” he adds. “So, we’re phasing the gourmet stuff out. We’re very agile.” What does he like most about running his own operation? “The direct community impact is the best thing for me,” Jeremy declares. “We have 31 employees who are treated well and earn a good wage and we’re improving the quality of their lives.”

an 8 percent growth trend every week,” he says. “It takes the average market about 18 months to turn a profit and we think we’ll be early.” Food is something everyone needs all the time, Jeremy says. “It’s such a central part of everyone’s life every single day and yet the industry continues to change, to fluctuate,” he says. “It’s so different than it was twenty years ago, when I entered the industry. I’m excited to be a part of the changes.” Jeremy and James expect to open another grocery store, in Indio or Palm Desert. After that, Jeremy has dreams of diversifying the operation. He’s already learned a few lessons, however, that will help the duo to remain on track. He says it’s important to stay on top of your vendors and to learn to trust, “but verify.” Unified’s Mumphrey said Jeremy and James “exemplify the ‘can do’ spirit. While working with them, I learned that if you have a dream, act on it. Take a risk, but be calculated and determined. These men truly represent what the American spirit is all about.”

What else? “In this area, many people don’t have transportation and this is the only way they get their groceries. I like that we’re able to be here and be close.” Inside Jule’s Market, there are five store managers for a reason. “That way,” Jeremy says, “…people always feel like they’re being taken care of by someone in charge. Outside the store, I’m the CEO and James is the Secretary. Our corporate structure requires three officers, so I’m CEO and CFO.”

Cassandra Pye, is CEO of 3.14 Communications, LLC, a regular contributor to California Grocer and a former lobbyist for CGA.

At this moment, the Jule’s team is working on costcontainment. Jeremy is optimistic that they’ll strike equilibrium ahead of schedule. “We’re experiencing

“We don’t get hung up on titles,” he says. “We meet every night in the hot tub to talk things through.” And, they check in with Grandma as often as possible. n

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The best friends are also terrific partners. James was in the check stands on the day we chatted with Jeremy. Apparently, the week before, James was “throwing freight,” according to Jeremy. “James is a jack-of-all-trades,” he says. “Whatever needs to be done, he steps in and does it.”

Community-focused, flexible and good to their employees. And, a working relationship built upon two decades of trust. Very little has changed since the early days of their friendship, according to Jeremy.

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15 MIN UT ES WIT H…

15 MINUTES WITH…

BY LEN LEW IS

Dana Frasz

B Y L E N L E W IS

The big issue for Dana Frasz is not so much what gets on the shelves of the nation’s supermarkets – but what doesn’t. Frasz is founder and director of FoodShift, an Oakland-based organization that’s working with communities, retailers and processors on solutions that could reduce the nation’s massive amount of food waste. In fact, estimates are that 40 percent of food in the U.S. goes uneaten, or about $160 billion based on retail pricing. California Grocer spent 15 minutes with Frasz to discuss the big picture and what FoodShift is hoping to accomplish.

California Grocer: Everyone recognizes food waste as a big issue. But are we making headway? Frasz: “Absolutely. When I started FoodShift in 2012 there wasn’t much talk about the problem and that’s one reason it’s gotten so out of hand. More recently there’s been a lot of discussion in the mainstream media, more entrepreneurs are getting into it and more institutions are committing to coming up with solutions.”

In the past, supermarkets have always been a bit reticent about food donations. Is this changing? “The main thing is fear of liability if someone gets sick. The Samaritan Food Act is in place specifically to encourage food donations as long as they are being made to nonprofits. The problem is that it’s a federal law that few people know about.”

What about government initiatives? “The USDA’s goal to reduce food waste by 50 percent by 2030 is a step in the right direction. Locally, we’re seeing a lot of momentum in places like Santa Clara County. We did a comprehensive report for them on food waste in the region and what can be done about it.

What were some of the conclusions? “For one thing, we recommended hiring a full-time food recovery coordinator to design and execute solutions. They are moving forward with that.”

So fears are unfounded? “The University of Arkansas did a two-year study and failed to find one case in which someone was held liable because of a donation. The problem is that this fear is passed from managers to staffers and the myth gets out of control.”

C A L I F OR N I A G R OC E R

“We also recommended launching a food recovery working group to facilitate cross sector collaboration which we are kicking off with a summit in March. Every county needs to take this action.”

Continued on p. 52

15 MINUTES WITH…

Continued from p. 51

Is that the case in retail? “It varies. For example, you might find one grocer that’s very strict about donations and another with a very liberal policy. There are a lot of complexities around what infrastructures are in place in different communities to assist with food recovery.” How so? “We’ve heard from businesses that they don’t know who to donate to. Or, they might feel it takes the staff too much extra time to put the food aside, or it takes up too much space in the back room or refrigerators.” Are more local donation programs available to companies? “There’s a big gap in the food recovery system. More people acknowledge the issues of food waste and hunger. I’ve been doing food recovery for over 13 years and I really question the ability of all volunteer charity models to tackle important issues like distribution. “We’re not talking about a box or two of pastries or produce. We’re talking about massive amounts. There’s a big difference between the infrastructure that gets food to stores and the infrastructure that has to capture that 40 percent of food being thrown away.”

We are interested in developing a more effective and sustainable infrastructure that makes sure food is professionally, safely recovered and redistributed. “Many of the challenges can be traced to the fact that the food recovery world doesn’t have adequate infrastructure and capacity due to limited resources. We want to build a food recovery service center as an extension of our current waste management system – and as a way to create jobs. “So if we truly value food the way we value bottles and cans, we can pay people to be part of the recycling industry – to drive around routes and give them the tools to make sure the job is done efficiently.”

How can retailers get involved? “We set up a partnership with Andronico’s Community Markets that goes a step further than just collecting food. We looked at their waste disposal bins while they were doing their food donations. After a few weeks it was clear that their donations were saving them $27,000 per year in reduced waste disposal costs.” That is significant. “We believe every grocer should be donating food because it’s the right thing to do socially and environmentally. At Andronico’s we proved there was a cost cutting potential.” How do you get to that level? “In order for this system to work, we can’t rely on nonprofit charities and volunteers to do the work. We need to make investments in vehicles, staff, refrigeration and kitchen facilities in order to handle a higher level of donations. We propose that some of the savings that take place could be redirected and reinvested in the food recovery system’s infrastructure.”

Continued on p. 54

C A L I F OR N I A G R OC E R

Is that 40 percent from operators or consumers? “It’s both. We’re losing about six billion pounds of food at the farm level simply because it has cosmetic imperfections. We are losing even more in transportation and at retail. About 25 percent of food waste is in the home.

How does FoodShift fit in? “We are interested in developing a more effective and sustainable infrastructure that makes sure food is professionally, safely recovered and redistributed. And in some cases, repurposed.

“To some extent everyone is to blame, but everyone also has an opportunity to be part of the solution.”

15 MINUTES WITH…

Continued from p. 52

Tell me about the Alameda Kitchen project. “We’ve spent the last several months planning and fundraising. We’re looking for an operations director and chef. And we’re hoping to open the kitchen in April.” How much food could be processed there? “Tons. Over the course of three months we recovered 50,000 pounds of food from Andronico’s. This summer we had a pallet of 1,600 pounds of peaches that were perfect but wouldn’t be sold in stores because they were soft. That’s exactly the kind of product we could bring into the kitchen and process into products like frozen peach slices, jam or juice.

“One of the partners we’re working with is Hope Collaborative in Oakland. They’re doing a corner store conversion program. The products we produce including soups, salads and dried fruit, will be placed in their corner stores to give customers more nutritious options at affordable prices.”

“The Alameda Kitchen will transform fruits and vegetables that would otherwise be wasted into nutritious, affordable food products for low-income populations.”

Are you going to be doing prepared meals at Alameda? “I hesitate to say there will be full meals in the beginning. We want to create a facility that will disrupt the way local institutions are feeding students, seniors and hospital patients. Instead of mass produced food from out of state, we want a facility that allows us to process nutritious and affordable food grown locally.”

C A L I F OR N I A G R OC E R

So you don’t consider yourself a food bank per se? “Absolutely not! As a nation we are spending $160 billion annually on hunger related expenses and thousands of organizations to address food waste and hunger. Yet, 49 million Americans still don’t have enough food. Too many people are falling through the cracks because the current models addressing these issues are falling short.

“It’s not about food alone. We need to create jobs and opportunity. That’s why the Alameda Kitchen won’t just give out free food. We’re going to be selling food but providing jobs and job training.”

But food is at the center of it? “The question is how we can be effective and financially sustainable in shifting more food out of the waste stream and redirecting it toward communities that have limited access to nutritious foods.

So there’s the shift too? “Right. We’re shifting food from one place to another, but also shifting the deeply-rooted paradigm that food recovery has to be a free service run by a food bank, a church or student group. “It’s what has limited the ability of food recovery and redistribution to do the job in the most effective way possible. Because of financial constraints the system can only focus on picking up food and feeding people.”

We believe every grocer should be donating food because it’s the right thing to do socially and environmentally. What more is there? “What’s lost in that transaction is the incredible potential for food to be used as a revolutionary tool for change that can uplift, empower and engage people in the process and not just cultivate dependency.” n To learn more about FoodShift, logon to www.foodshift.net. To discover more about Alameda Kitchen, visit https://www. indiegogo.com/projects/food-shift-s-alameda-kitchen#/

PERSPECTIVE

Update: Californiaâ&#x20AC;&#x2122;s Unemployment Insurance Program Now only $6.7 billion is owed to the feds - an update on Californiaâ&#x20AC;&#x2122;s UI Program The Employment Development Department (EDD) administers the Unemployment Insurance (UI) program, which is financed by unemployment taxes that California employers pay. California employers pay close to $6 billion annually to fund the UI program, which is intended to provide temporary financial assistance to unemployed workers who meet certain requirements. The UI fund deficit was $9.9 billion at the end of 2012, $10.2 billion at the end of 2013, $8.7 billion at the end of 2014, and is projected to be $6.7 billion at the end of 2015. The UI trust fund has been insolvent since 2009 and California has been in debt to the federal government ever since then when the State received a $10 billion federal loan to pay benefits. Beginning in January 2009, UI benefit payments to unemployed Californians exceeded available funds and, as a result, the State was required to obtain federal loans to continue the payment of UI benefits to recipients without any disruption. California is one of only four states that continues to owe the federal government for such loans. The current federal balance is $6.7 billion which is owed by the State â&#x20AC;&#x201C; and ultimately the employer community. Employees do not pay into this fund. As explained by the California Legislative Analyst, for each year that the State carries a federal loan balance, the federal UI quarterly tax payments increase on employers, with those proceeds from these federal UI taxes being used to pay down the principal loan balance.

According to the LAO, the federal loan balance is steadily declining and it estimates full repayment to the federal government by 2019. Federal law requires that the interest payment come from state funds. The federal loan balance only began to decrease two years ago as revenues to the UI trust fund finally exceeded the benefits being paid out to recipients. This decrease in the loan balance is primarily due to a decrease in benefits being paid out as the economy has improved and there are fewer unemployed persons in this state, as well as the substantial increase in federal UI taxes being paid by California employers. These federal UI taxes per employee will continue to increase each year until the federal loan is paid back.

According to a report by the LAO to the Legislature in March, absent structural changes to the financing of the UI Program and benefits payable to recipients, the UI trust fund runs a high risk of becoming insolvent the next time a major recession hits the California economy. Basically, more money has to be paid into the fund, benefits paid out to unemployed persons have to be reduced, or a combination of the two must occur in order to prop up the UI trust fund. Continued on p. 56

iStock

In addition, the State of California must make annual interest payments to the federal government on the balance of the loan. During the current fiscal year, the annual interest

Legislative Advocate Aprea & Micheli, Inc.

payment exceeds $215 million of General Fund monies. California has now paid more than $1 billion in interest since 2011.

C A L I F OR N I A G R OC E R

According to the Legislative Analyst Office, these federal tax credit reductions have results in almost $2 billion of additional federal employment taxes during the past three years.

CHRIS MICHELI

PERSPECTIVE

Continued from p. 55

The Administration convened a working group to examine proposals to address problems with the UI fund, but these stakeholder group meetings did not produce any reforms in either the financing or the benefits provisions of the UI program. It is noteworthy that the federal government estimates California has an improper payment rate of almost 6 percent and a fraud rate of 3.7 percent, resulting in hundreds of millions of dollars annually in unjustified benefit payments.

C A L I F OR N I A G R OC E R

ADV ERTIS ER INDEX

The employer community looked at a number of potential reforms to the UI program to address its solvency. These proposals would attempt to address

benefit payouts and improve the integrity of the UI program. The goals of the proposals that were reviewed are to minimize the UI tax increases on the employer community, as well as to align the tax and employee benefit provisions in a manner so as to build a reasonable balance in the trust fund. In addition, the employer community wants to adopt changes to reflect the best practices from surrounding states in order for California to not be placed at a competitive disadvantage. n Chris Micheli is a Principal with Aprea & Micheli, Inc. He can be contacted at (916) 448-3075 or cmicheli@apreamicheli.com.

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COMPANY

PHONE

FAX

WEBSITE

Albertsons Companies, Inc.

925-467-3000

925-467-3323

Bimbo Bakeries USA

916-456-3863

916-732-4780

rducharme@bbumail.com

www.bimbobakeriesusa.com

IBC

C&S Wholesale Grocers, Inc.

916-373-4396

916-373-4296

pmiller@cswg.com

www.cswg.com

Certified Federal Credit Union

909-261-4065

626-246-3111

ghurd@vonscu.com

www.vonsefcu.org

Coca-Cola Refreshments

213-746-5555

213-744-8765

mikanderson@coca-cola.com

www.cokecce.com

Gelsonâ&#x20AC;&#x2122;s Markets

818-906-5709

818-990-7877

International Dairy Deli Bakery Association

608-310-5000

608-238-6330

iddba@iddba.org

www.iddba.org

Natural Products Expo West

866-458-4935

303-939-9559

tradeshows@newhope.com

www.expowest.com

Nestle Purina PetCare

800-421-1721 x9 314-982-4876

314-982-2860

paul.cooke@purina.nestle.com

www.purina.com

PepsiCo Inc.

949-330-5804

949-643-5765

douglas.todd@pepsico.com

www.pepsico.com

TruGrocer Federal Credit Union

208-385-5273

208-385-5290

cdemaray@trugrocer.com

www.trugrocer.com

Tyson Foods, Inc.

480-949-6700

480-948-0755

robert.bukovec@tyson.com

www.tysonfoods.com

IFC

Unified Grocers, Inc.

323-264-5200

323-729-6619

customercare@unifiedgrocers.com

www.unifiedgrocers.com

www.albertsons.com

www.gelsons.com

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