California Diablo Foods Turns 50 PAGE 54
7.5 billion bosses PAGE 60 2018, ISSUE 2
CALIFORNIA GROCERS ASSOCIATION
are we
ready? page 20
rON FONG
A decade of LEADERSHIP page 44
September 23–25, 2018 Palm Springs, California
In today’s fragmented, hypercompetitive and channel-free food industry, businesses are tapping into their sixth sense in order to win over today’s shoppers.
new partnerships and retooling their operations to focus on executional excellence and efficiency in order to drive profitability.
Online and in-store, successful companies are becoming experts at knowing customer preferences and understanding how they engage with employees, stores and brands. Empowered by innovations such as data analytics and artificial intelligence, retailers and brands are using technology to hone their intuitions to anticipate the needs of today’s digital first consumers. Businesses are executing
Simultaneously, retailers are differentiating themselves by creating compelling experiences within the physical store that instill trust and enhance their personal relationships with customers. Leveraging staff expertise and talent, retailers are constructing convenient and appealing environments that please all the senses.
Come listen to top industry speakers, enhance your view of today’s customers, follow the scent of innovation to get a taste of what’s coming next, keep in touch with your most important partners and heighten your sixth sense about today’s customers.
Heighten Your Business Senses Our concierge-level meeting services offer you and your team a highly efficient way to book the business-critical appointments you need to justify the time away from your office. Blend in social events that are relaxed and approachable and you have the perfect recipe for one of the grocery industry’s must-attend events.
Mark Your Calendar Now Make your plans now to join the single largest gathering of California grocery industry executives for three days of knowledge building, face-to-face meetings and networking events.
FOR MORE INFORMATION VISIT: CGASTRATEGICCONFERENCE.COM
Sponsorship – Sounds Right! The CGA Strategic Conference offers a wide variety of sponsorship packages and customized opportunities to promote your company’s products, equipment or services. Capitalize on this unique conference to get in touch with California’s top grocery decision makers. For complete sponsorship information, including a list of participating retailers and a sponsorship prospectus, contact: Beth Wright Senior Director, Events & Sponsorship California Grocers Association (916) 448-3545 | (800) 794-3545 | bwright@cagrocers.com
Loss Prevention Executive Summit The CGA Strategic Conference continues its expansion to professionals in loss prevention, safety and risk management. Understand best practices and collaborate with colleagues through two days of tailored educational programming and top-to-top vendor meetings.
CGA | BOARD OF DIRECTORS
EXECUTIVE COMMITTEE
CHAIRMAN APPOINTMENTS Independent Operator Committee Chair DIRECTORS
CALIFORNIA GROCERS ASSOCIATION
Chairman Bob Parriott Twain Harte Market
Second Vice Chair Phil Miller C&S Wholesale Grocers
Secretary Renee Amen Super A Foods
First Vice Chair Kendra Doyel Ralphs Grocery Company
Treasurer Hee-Sook Nelson Gelson’s Markets
Past Chairman Jim Wallace The Albertsons Companies
Kevin Arceneaux Mondelēz International Inc.
Dave Jones Kellogg Company
Lynn Melillo Bristol Farms
Jon Alden Jelly Belly Candy Co.
Jake Fermanian Super King Markets
Casey McQuaid E & J Gallo Winery
Rick Stewart Susanville Supermarket IGA
Teresa Anaya Northgate Gonzalez Markets
Mark Foley Raley’s
Mario Mediati The Clorox Company
Elliott Stone Mollie Stone’s Market
Joe Angulo El Super (Bodega Latina)
Damon Franzia Classic Wines Of California
Doug Minor Numero Uno Market
Joe Toscano Nestlé Purina PetCare
Mark Arrington Post Consumer Brands
David Higginbotham Stater Bros. Markets
Tim Murphy Costco Wholesale
Rob Twyman Whole Foods Market
Denny Belcastro Kimberly-Clark Corporation
Michel LeClerc North State Grocery Inc.
Nicole Pesco The Save Mart Companies
Jim Van Gorkom NuCal Foods
Leon Bergmann SUPERVALU
Hillen Lee Procter & Gamble
Laura Price Nielsen
Michael Walton Unilever
Jeanne-ette Boshoff MillerCoors
Eric Lindberg, Jr. Grocery Outlet, Inc.
Mike Ridenour The Kraft Heinz Company
Richard Wardwell Superior Grocers
Bob Bukovec Tyson Foods, Inc.
John Mastropaolo Chobani
Casey Rodacker Mar-Val Food Stores
Karl Wissmann C & K Market
Brent Cotten The Hershey Company
Jonathan Mayes Albertsons Companies, Inc.
Jonathan Samorajski Anheuser-Busch InBev
Kevin Young Young’s Payless Market IGA
Willie Crocker Bimbo Bakeries USA
Joe McDonnell Campbell Soup Company
Jeff Sigmen Reyes Coca-Cola
Steve Dietz United Natural Foods, Inc.
Mark McLean CROSSMARK
Lee Smith Smart & Final Stores
President/CEO Ronald Fong
Senior Director Events & Sponsorship Beth Wright
Dennis Darling Foods Etc.
Senior Vice President Government Relations & Public Policy Keri Askew Bailey
Senior Director Government Relations Aaron Moreno
Senior Vice President Marketing & Business Development Doug Scholz
Director CGA Educational Foundation Brianne Page
Vice President Communications Dave Heylen
Controller Gary Brewer
Executive Director CGA Educational Foundation Shiloh London, CFRE
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California Grocer is the official publication of the California Grocers Association. 1215 K Street, Suite 700 Sacramento, CA 95814 (916) 448–3545 (916) 448–2793 Fax www.cagrocers.com For association members, subscription is included in membership dues. Subscription rate for non-members is $100. © 2018 California Grocers Association
Publisher Ronald Fong rfong@cagrocers.com Editor Dave Heylen dheylen@cagrocers.com For advertising information contact: Corey Gerhard cgerhard@cagrocers.com
CONTENTS | ISSUE 2
FEATURES
70
20 In-Depth Look
Are We Ready? Since early 2017, Californians have witnessed one devastating natural disaster after another – from flooding in Oroville, to several wildfires across the state. How prepared are we for the next disaster?
Meet The Illuminators New Headlite Paul Kamholz
74
Dealing with Unwanted Solicitors
COLUMNS
44
President’s Message What Makes CGA Tick?. . . . . . . . . . . . . . . . 5 Chairman’s Message Surprises and Unexpected Events.. . . . . . . . 7
A Decade of Leadership
Viewpoint Connect the Dots. . . . . . . . . . . . . . . . . . . . . . 9
Ten years ago CGA hired a new President & CEO – Ron Fong. A lot has happened in the last decade.
Government Relations Caught in the Immigration Battle.. . . . . . . 12 Local Government Relations Work with Cities to Limit Damaging Regulations. . . . . . . . . . . . . . . . 14
54 Member Profile
Diablo Foods Turns 50 Diablo Foods’ five decades of success has been a family affair – something rare in today’s world of grocery retailing.
On the Local Front Sugar Sweetened Beverage Taxes: A Storm is Brewing. . . . . . . . . . . . . . . . . . . 17 Capitol Insider Conservation: The New Normal. . . . . . . . . 18 Washington Report Snap Shot – Food and Nutrition . . . . . . . . 29 Inside the Beltway Next Steps for Secure Supermarket Payments. . . . . . . . . . . . . . . . 31
DEPARTMENTS
60
CGA News. . . . . . . . . . . . . . . . . . . . . . . . . . 34 Outside the Box New Retail Perspectives.. . . . . . . . . . . . . . . 40
7.5 Billion Bosses
Loss Prevention, Safety & Risk Management
The lines between retailing’s digital and physical world are becoming increasingly blurred. But, are retailers meeting the challenges and opportunities associated with omni-channel and “post-channel” strategies?
Index to Advertisers. . . . . . . . . . . . . . . . . . 80
Violence in Loss Prevention: Dissecting Shoplifter Apprehensions. . . . . 66
CAL I FO RNIA GRO CER | 3
2018
CALIFORNIA COMMUNITY IMPACT REPORT Thanks to generous contributions, we create brighter futures for our neighborhoods.
We support causes that impact our customers’ lives.
$7.1 Million
62,658
given
20 Million
organizations
lives impacted
30 Thousand
OVER
OVER
2,728
Meals served through HUNGER IS®
354
Veterans receiving health care and access OVER
38 Thousand
Children with better test scores or attendance
Patients with cancer provided access to alternative medicine
2,732
People with disabilities received access to care and treatment
Mission Statement Our Foundation supports causes that impact our customers’ lives. The stores provide the opportunity to mobilize funding and create awareness in our neighborhoods through our employees’ passion, partnerships with our vendors and the generous contributions by our customers. We take pride in ensuring that the vast majority of the funds we raise stays in local communities and reflects what is important to our customers and employees.
Data gathered from Foundation accountant and grantees year-end reporting.
Learn more at safewayfoundation.org
4 | CAL I FOR N I A G R OC E R
PRESIDENT’S MESSAGE
What M akes CGA Tick?
RO N F O N G PR E S IDE N T AN D CEO CALIFOR N IA GR OCE R S AS S O CIATIO N
On my 10th anniversary as Association President and CEO, I pause to reflect on this oft asked question. Roughly 500 retail AND supplier members representing $70 billion in annual sales, a robust Educational Foundation, owners of a “for-profit” company, partners in an “LLC”, an enthusiastic and energized staff of 15 (and growing), a political organization and oh…we are landlords! Whew! How does CGA manage all of this and what makes us tick? I’m often asked this question from individuals that are exhausted just reading our list of duties.
(RMS). From a three-dimensional chess standpoint, it works! During my first year as President, our then Board Chair Richie Morgan, owner of North State Grocery, Inc., and I had a heart-toheart discussion with our Board and other key members. If we were to succeed as an association, we needed to change our political mindset, run the Association as a business complete with accountability, and grow the organization.
The secret weapon? Our progressive and active boards and committees.
From that moment with Richie forward, we have not looked back. My other “secret weapon” is the incredible CGA and CGAEF staff, who get little credit and accomplish all of the work behind the scenes. Years ago, staff embraced our adopted culture of “Teamwork, Community, Innovation and Risk.” We look at these words often, place them in our goals and strive to live them. Ten years has flown by and our boards and staff have accomplished so much. I am honored to “quarterback” this progressive group of grocery executives. We take our share of criticism for being the “left coast state” but we manage and have a good thing going on. ■
With a 52-member Board, you would think “real work” is impossible. However, through organization and commitment, our Board stays focused and proactive. For example, they work with staff to organize multiple levels of standing and non-standing committees. They serve on at least two committees, many assuming chair roles. The ideas and recommendations from those committees are presented during our Board meetings and voilà… the magic happens. We also have separate, high-functioning boards that direct our Foundation and forprofit company – Retail Marketing Services
We knew if CGA didn’t adopt the mindset to grow as if its life depended on it, it would collapse like so many others. We took this same approach with the Foundation and RMS boards.
Ron Fong with Richie Morgan; President of North State Grocery Inc. CAL I FO RNIA GRO CER | 5
We are committed to ending hunger in our communities and eliminating food waste in our company by 2025. Follow our journey at
TheKrogerCo.com and #
6 | CAL I FOR N I A G R OC E R
CHAIRMAN’S MESSAGE
Surprises and Unexpected Events
B O B PA R R I OT T T WAIN HAR TE MAR K ET
This month’s California Grocer focuses on emergency management and asks the question, “Are we ready?” Spring was in the air, the daffodils were starting to peak through the ground when all of a sudden Mother Nature reminded those of us who live in the mountains that it was indeed still winter. While we all love a fresh new coat of snow in the Sierra Nevada mountains near Yosemite National Park, it also brings some inconveniences – like not being able to get out of your driveway to go buy groceries.
Have we thought through the processes to take quick action and minimize our exposure to harm?
My neighborhood, here in the middle of nowhere, how can this be, I thought?
Are we as prepared as possible? Do we think it won’t happen in our neighborhood?
In reality, it was a stolen car situation gone bad with one suspect caught and another on the run. Fortunately, no one was hurt, but it had me ask the question about what to do in situations where you have no control. Being surprised by unexpected events now seems a part of our daily lives.
Unfortunately, I don’t have the answer, but I now find myself engaged in conversations and deep-thinking sessions to create a response plan for my business. How about you? ■
At Twain Harte Market we call the few days prior to a storm, the “panic buy days.” Our customers come to shop when they might not regularly to make sure their pantry can handle a few days if they get snowed in. As a store owner, if I’m not paying attention, I could get caught short on those panic buy days. I also need to be prepared for lights out – a few years ago we lost power for a week. The old Boy Scout motto, “Be Prepared” comes to mind. Planning is never a bad decision. Having a strategy in place to handle unforeseen events provides confidence and peace of mind. Life is full of surprises and events that can shatter one’s daily routine. Recently, our neighborhood elementary school across from our store went on lockdown. My first reaction was shock.
iStock
As a business owner, in “surprise” situations I find myself trying to fix, improve, or make the most of it. Our recent “lockdown” event had me asking, what are we doing to protect our employees, customers and vendors?
CAL I FO RNIA GRO CER | 7
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VIEWPOINT
Connect the Dots
K EV I N CO U PE FOUN DE R , MOR N IN GN E WS BEAT.CO M
To remain competitive, you must connect with your shoppers in new ways, every day, and think not just about their lifetime value to you, but your lifetime value to them. Competition used to be so simple. You built a store. You decided whether your primary emphasis is going to be price, convenience, customer service, or fresh food, or some combination thereof, with a clever marketing angle thrown in just to make things interesting. You managed a workforce that was 40 percent full-time, 60 percent part-time. You managed for efficiency, looking for every opportunity to drive costs out of the system, and every couple of years you tried to adopt some industry solution that experts said would help you be better and more competitive. And then, when, inevitably, the economy got tough, you “got back to fundamentals,” because that’s what always worked in the past. Those were the days. Life no longer is that simple as the market evolves in ways that many so-called traditional companies may not be equipped for. They’re used to worrying about transactions, when they should be worried
about creating their own ecosystems in which the lifetime value of a customer is most important. Think about Amazon, which just in the past month or two has made moves, or suggested competitive directions, that tell us a lot about how it sees the competitive landscape. I’ve lately thought about Amazon’s growth this way: On the first day of the digital revolution, Jeff Bezos looked at the landscape and said, let us sell books online. On the second day of the digital revolution, Jeff Bezos looked upon the landscape and said, let us also sell CDs and DVDs and pretty much everything else online. And let us not forget that today is Day One. On the third day, Jeff Bezos looked at the landscape and said, now is the time for us to get into the CPG business, and then build upon that with Amazon Fresh, and in doing so we will never forget that today is Day One. On the fourth day, Jeff Bezos looked upon the landscape and saw that what he had created was both good and disruptive. But, he felt that it was not enough, and so he began to offer greater amounts of private
label items, and even proprietary video programming, in the hope that the landscape might become an ecosystem. And he said to his disciples, let us not forget that today is Day One. On the fifth day, Jeff Bezos saw that there was a last mile for him to conquer, and so he created Amazon Books and Amazon Go and Amazon Pickup sites and invested in trucks of the land and ships of the sea and drones and aircraft of the sky, so that he might get people their products ever faster. And he reminded his followers, let us not forget that today is Day One. On the sixth day, Jeff Bezos bought Whole Foods. And he did so with the firm conviction that today is Day One. On the seventh day, Jeff Bezos looked at everything he had created and proclaimed… we will never rest. Because today is Day One. “Today is Day One,” of course, is one of Amazon’s enduring mantras, it’s their way of reminding people inside and outside the company that it will not be limited by previous actions and positions, and that moving forward in ways that serve the customer is the most important thing. The problem is that we’re running out of days.
Continued on page 10 ▶ CAL I FO RNIA GRO CER | 9
VIEWPOINT ◀ Continued from page 9
“These innovative, progressive companies are trying to connect the dots in ways that I fear traditional companies may not be thinking about…” Because not part of this equation is the various ways in which Amazon is focusing on automatic replenishment – Subscribe & Save and Dash buttons, for example – and voice activated technologies (Alexa-powered Echo smart speakers) that allow customers to simply reorder products by talking. Because not only is Amazon is investing in boats and plans and trucks, but in various approaches to delivery so that it can control more of the “last mile” and own more of this part of the shopping experience and not outsource as much of it to the likes of FedEx, UPS and the U.S. Postal Service. And then, Amazon is working to develop a program that will have its own delivery people not just bring products to your house, but inside your house, and maybe even putting them away for you.
You can count me among the people who are not quite ready to let Amazon employees into my house, especially if I’m not there. But then Amazon goes and buys Ring, which manufactures internet-connected doorbells and cameras, for $1.1 billion. Does Amazon want to make a move into the home security market? Sure…but I’d be willing to bet that buying Ring has a lot more to do with creating a more secure and seamless delivery experience, which could have enormous competitive implications. And then (with Amazon, there always seems to be an “and then…”), the company is reported to be in discussions with a couple of banks so that it can start offering some kinds of financial services via its site, like checking accounts. I haven’t even mentioned Amazon Go. But let’s be clear. This isn’t just Amazon. Walmart, especially since it acquired Jet, also is trying to change the way it does business, and even announced the piloting of an inside-the-home delivery program before Amazon did. Walmart has hit some bumps though, finding out that the road to innovation and disruption has its share of potholes, mostly because sometimes you have to spend money and not see a return right away. Google also is playing in the same space. It supports a system called DoorSense, which is a smart integrated sensor, via its Google Assistant, which means that it isn’t difficult to imagine that at some point, people using Google Assistant will be able to let delivery people into their houses and then make sure they leave.
iStock
These innovative, progressive companies are trying to connect the dots in ways that I fear traditional companies may not be thinking about, and this could end up being a competitive handicap down the road. And here’s the problem. Everything they’re doing – especially Amazon – is aimed at giving shoppers a reason not to go to the store. The question is, how do you compete with this? If your answer is you compete by “getting back to fundamentals,” or by doing what you’ve always done, then you are right on one count. You are done. As in finished, kaput, over and out. There are ways to compete. If I were a retailer, I’d start by looking for ways to get into the replenishment business. Instead of outsourcing as many parts of the customer’s digital experience as possible for fear of the investment costs, I’d try to find ways to own as much of it as is feasible, and making plans for how I could take the rest back down the line. I’d be reaching out to young people in my company who can help me understand and cater to the next generation of shoppers. I’d look for every possible way – through products and services – to make my store compelling and differentiated from all competition. And I’d understand that no matter what I do today, I’ll have to do it all over again tomorrow. Only better. A company like Amazon is looking for ways to connect the dots, luring, seducing and enticing customers to be part of its ecosystem. It won’t be simple or easy, but you’ve got to disconnect those dots… and connect with your shoppers in new ways, every day, and think not just about their lifetime value to you, but your lifetime value to them. ■
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GOVERNMENT RELATIONS
Caught in the Immigration Battle
A A RO N M O R EN O S EN IOR DIR ECTOR CGA GOV ER N MEN T R ELATION S
Whether by the initiative process or by legislative action, the state often confounds observers east of the Sierras and beyond. California has remained on the vanguard of setting the national political conversation with its more liberal ideological tilt. These ideological differences have become even more apparent with a new administration in Washington that has taken a more rightward tilt than any past Republican administration and Congress. This has created a sort of tit-for-tat situation between Sacramento and Washington D.C. What makes this recent squabble notable (at least for California’s grocery industry) is that our member companies have been caught in the middle of this in a negative way as it pertains to immigration. The Governor, Legislature and other constitutional officers see it as their mission to push back against the current administration on numerous issues. It has been immigration, however, that has brought about the most saber-rattling from the conflicting parties. Because our location is an international crossroads between Asia, Central America and South America – and the diversity that has come as a result of it – California does not take a particularly hardline view on undocumented immigration.
12 | CAL I FOR N I A G R OC E R
The State’s position can best be described as sort of “don’t ask/don’t tell.” This has developed an unspoken understanding that if, as an undocumented person, you contribute to our economy and don’t break the law, you will be left alone. But the current administration’s attitude towards undocumented workers has
raids. Ironically, the law’s passage has led to more raids targeting workers and their employers. It was thought when the law was passed it would primarily affect the agricultural industry, but in recent months we have heard from more and more CGA members that they are receiving visits from federal authorities. As an industry we pride ourselves on complying with all laws, but this is a unique situation of being caught in a jurisdictional dispute between the state and federal government.
“…This is a unique situation of being caught in a jurisdictional dispute between the state and federal government.” threatened the sanctity of this unspoken agreement. With the increase of workplace immigration raids and aggressive tactics by federal agents at the direction of Washington D.C., the Legislature passed and Governor signed AB 450. This measure directs employers to not comply for requests to see employment information from federal immigration authorities unless a warrant is presented to the employer. The motive behind this law is to keep that tacit immigration understanding in place by seeking to protect workers targeted by federal
There has been some comfort in knowing California has tried to put employers’ minds at ease by providing guidance in the form of communications from the State Attorney General and Department of Industrial Relations on how to comply with the law that doesn’t leave them subject to federal sanctions. It remains to be seen how many businesses will be affected by state sanctions or Federal sanctions, but it is our hope that number is closer to zero than anything. ■
CONGRATULATES
Kevin Davis
Chairman & CEO, Bristol Farms
Bob Kelly
Executive Vice President, Hidden Villa Ranch
www.supervalu.com CAL I FO RNIA GRO CER | 13
LOCAL GOVERNMENT RELATIONS
Work With Cities to Limit Damaging Regulations T I M JA M ES S EN IOR MAN AGER LOCAL GOV ER N MEN T R ELATIO NS
Taking a broad view, understanding the patterns and identifying the “competitors” will help guide local governments to limiting the impact of costly regulations. California is blessed with 540 individual cities and counties shaping policy to improve our communities. The flip side is that grocers in California are faced with the potential for 540 sources of regulation, creating a costly and confusing regulatory environment. Imagine the chaos if every store you operate had a unique and completely different law for what is acceptable for commonplace activities like packaging food.
Believe it or not, this tendency for repetition by local governments is actually a good thing. We aren’t advocating for more regulation, but if it’s inevitable, dealing with a mandate where the outcome is predictable and can be implemented with minimal impact is
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Without engaging every jurisdiction to mold and influence their decisions, whether they are first or simply the latest, we would have a convoluted jumble of expensive mandates. For example, CGA has witnessed more than 120 local ordinances regulating shopping carts that only require cart retrieval with none simply mandating expensive electronic containment. Local food packaging mandates just crested the 100 jurisdiction mark with nearly every ordinance containing exemptions for raw meat products. A look back at the single-use bag issues shows more than 150 local ordinances nearly identical to each other – which ultimately became the model for statewide law.
Fortunately, most local mandates on grocers don’t change significantly city to city. As food retailers we tend to see the same, or at least similar, policy adopted over and over. This type of consistency is beneficial and hard won. If you think of local government as an “industry” it has many of the same habits the business world contains. Nobody wants to be too far, including being competitive. Nobody wants to be too far ahead and no one wants to be left behind. Tried and true methods accepted by your peers are generally the best route. Learning from others mistakes helps prevent your own. It is this culture that creates the opportunity to limit, if not prevent, damaging regulation on grocers.
preferred. This is why grocery industry engagement with local government across the state is critical.
Recently, CGA encouraged a city to regulate similar to all their surrounding neighbors instead of choosing a new policy path that would have meant dramatic cost increases – a victory by any measure. As California grocers continue to deal with a constant onslaught of local regulation it’s important to take a broad view, understand the patterns, identify the “competitors” and work to guide local governments towards solutions limiting our impacts. ■ iStock
ON THE LOCAL FRONT
Sugar-Sweetened Beverage Taxes: A Storm is Brewing M AT T RO DR I Q U EZ CEO, R ODR IGUE Z S T R ATEGIES
This winter has brought below average levels of rain in California. However, a storm is brewing and it is one that has been years in the making. Matt Rodriquez
California’s local governments are facing massive pension and retiree health care shortfalls. Despite an economy running at near full capacity, poor fiscal management and budgeting have left cities grasping for any revenue measure they can find to paper over long-term obligations.
per ounce tax adding $1.35 to a 99-cent twoliter bottle of soda and $76.80 to a five-gallon bag of syrup for restaurants.
Do not be fooled either by the claim that these taxes go to address public health. Not one beverage tax passed in California has been dedicated to health programs. Each one has been a general fund tax.
How do cities intend to bail out the rickety boats they now inhabit? You guessed it, more local taxes. The tax buckets come in many forms: sales, parcel, transit occupancy (hotels), and real estate taxes to name a few. But one tax is increasingly becoming the flavor of the month for many localities: the sugar-sweetened beverage tax. Taxes of one-cent to two-cent on each fluid ounce of beverages containing caloric sweeteners have gained some traction in upper income enclaves of the Bay Area. Proponents sell these taxes to voters as “victimless” claiming that only large beverage companies pay the tax for the privilege of distributing their products to cities. Jobs are not lost; local businesses do not pay; the city gets its money. The “victimless” beverage tax is a lot more complicated than meets the eye. Let’s look at a recent proposal in the city of Santa Cruz. This proposal would have levied a two-cent
Additionally, beverage taxes represent an unstable source of revenue. Cross-border shopping means less business for the local grocer and less tax revenue for the city. Boulder, Colo., Cook County, Ill., and Philadelphia, Pa., have consistently downgraded revenue projections while shedding local jobs in the food industry.
If you need convincing as to what the real intent is behind these taxes, just look to Oakland and San Francisco. Immediately upon passage, both mayors proposed directing those monies to general fund programs including homelessness, pensions and city deficits.
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Beware of cities looking to beverage taxes to protect themselves from the gathering storm. Local grocers will find that cities ultimately expect them to provide shelter. ■
Only large industries like soda companies pay the tax, right? No. Beverage distributors pass the tax directly to local businesses on their purchase orders. And, since most local grocery stores and restaurants do not contract directly with large distributors, any business large or small buying beverages outside of city limits qualifies as a distributor. That means the local grocer is often the one on the hook for the tax. CAL I FO RNIA GRO CER | 17
CAPITOL INSIDER
Conservation: The New Normal LO UI E B ROW N IN T HE S ACR AME N TO OFFICE O F K HAN, S OAR ES AN D CON WAY, L L P
California’s erratic precipitation pattern prompts demand for greater conservation. Brown
As I sit to finish this article, it is nearing the end of a beautiful March weekend in Northern California. It was the perfect weekend for Opening Day of our local Cal Ripken Baseball League and my son’s team won. Temperatures in the high 60s to low 70s without a cloud in the sky. You couldn’t ask for a better day and yet I find myself disappointed.
According to most polls, more than 60 percent of Californians believe so.
I’m disappointed because the weather forecast had actually predicted rain a few days ago. A rainstorm the State definitely needs.
According to the Board’s monthly water usage report, Californians used more water in January 2018, since January 2014, with a savings of only 0.8 percent over the 2013 baseline. The average statewide residential gallons per capita per day (R-GPCD) for January 2018 was 71.1.
After a terribly dry January and February, March began with some measurable rainfall in Sacramento and considerable snow in the Sierra Nevada’s. Enough snow, to actually move the season total from single digits to just over 30 percent for the season. Last season, at this same time, we had more than 25 inches of precipitation in the Sacramento area. This season we sit at slightly more than 10 inches. Normal precipitation for this time of the year is near 16 inches. However, who can say what normal is anymore? While last’s year’s wet winter definitely seems abnormal, is the five-year drought experienced prior to that the new normal?
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And yet, the water conservation numbers from the State Water Resources Control Board don’t support this finding because the year-to-year water savings don’t reflect a conservation mindset. It seems showers are getting slightly longer and outdoor watering has increased after just one wet winter.
Average hydrologic region R-GPCDs for January 2018 range from 52.8 to 115.6, with use climbing up in nine hydrologic regions compared to January 2017. Many Californians seem to be in the “do as I say, not as I do” state of mind when it comes to conservation. Since June 2014, the State Water Board has been tracking water conservation for each of the state’s larger urban water suppliers (those with more than 3,000 connections) on a monthly basis.
Governor Brown’s April 2017 Executive Order directed the Board to lift some of the provisions of its emergency statewide urban water conservation regulation, but to keep in place the temporary requirements for monthly water use reporting and prohibitions against wasteful water use practices while the Board works to develop permanent reporting and wasteful use regulations. These temporary requirements remained in effect until Nov. 25, 2017, when the emergency regulation expired. However, the Board voted in February to prohibit certain wasteful water use practices permanently. Seemingly a prudent move based on the conservation data. One of the many negative results of the drought was the overuse of groundwater. To remedy that issue, the Legislature passed the Sustainable Groundwater Management Act (SGMA), to require groundwater basins throughout the state to organize and plan for a sustainable future. The next major deadline for that law is Jan. 31, 2020, where each high priority basin will be required to submit plans to the State Department of Water Resources, which will demonstrate how each basin will achieve a sustainable balance of groundwater by 2050. In many areas of the state, this will result in significant reductions in groundwater extractions.
CAPITOL INSIDER
“The urban conservation practices and the focus on groundwater use is a result of less dependence on surface water deliveries made possible by precipitation.” iStock
The urban conservation practices and the focus on groundwater use is a result of less dependence on surface water deliveries made possible by precipitation. Another solution to this issue is to build more storage, both above ground and below ground storage. This was contemplated by the Legislature and the voters with the passage of Proposition 1, in 2014, which included $2.7 billion for storage projects.
The California Water Commission is now approaching the deadline to appropriate those monies. Twelve projects have applied for the money, two of which would provide the largest amount of new surface storage the state has seen in more than a generation. Notwithstanding the drought-like conditions and the questions about future precipitation levels, the decision will not be without controversy.
So, the new normal would seem to be less surface water from precipitation, less of a water bank in the mountains due to reduced snowfall and the need for all Californians to not only talk about conservation but to practice it every day of the year. Many policies and strategies have been put in place to help prepare for the “new normal,” whatever that might be. Only time will tell if we got it right. ■
Congratulations ron Fong on your
10th anniversary
CAL I FO RNIA GRO CER | 19
ARE WE
READY? By Jessica Dumont
20 | CAL I FOR N I A G R OC E R
IN-DEPTH FEATURE
Since early 2017, Californians have witnessed one devastating natural disaster after another – from flooding in Oroville to several wildfires across the state to Southern California mudslides at the beginning of 2018. The string of disasters has left both government entities and private sector companies reeling, and bracing for what could be next. Grocery stores are often in the center of emergency response and recovery, whether a retailer is in the thick of a disaster zone, or on the outskirts with the urge to help. With an increasing number of disasters taking place, emergency preparedness for grocers today is imperative. When there’s a major catastrophic event, grocery stores are on the list of things that need to be open sooner than later. says Abby Browning of the California Governor’s Office of Emergency Services (Cal OES). Browning is the Chief of Office of the Private Sector and NGO Coordination for the agency. “Food is essential,” she says. “That supply chain and making sure everyone gets where they need to go – that is important.” There is much more to responding, however, than loading up a truck and delivering food to a shelter. In fact, there is an intricate network of partnerships and relationships between the public and private sectors that help ensure a smooth emergency response and a sustainable, well-orchestrated recovery. This includes the California Grocers Association. Given the number of government organizations involved in emergency response and the vast public-private network, it can be complicated for the grocery industry to know the proper protocol to follow in order to offer support. For those who find themselves in an emergency zone, it is vital to understand the response and recovery process. Continued on page 22 ▶
CAL I FO RNIA GRO CER | 21
◀ Continued from page 21
“When there’s a major catastrophic event, grocery stores are on the list of things that need to be open sooner than later.” A Look at Grocers’ Response to Emergencies Mike Porras is all-too familiar with responding to emergencies. As Northern California Director of Sales for SUPERVALU, a wholesale supply company that serves more than 400 independent grocers from Kern County to the Oregon border, Porras’ customers have been affected by nearly every wildfire in Northern California. Porras and the SUPERVALU operations teams played an instrumental role in coordinating supply delivery to retailers during the 2015 wildfires in Clear Lake, Calif. One grocer in particular, Hardester’s Markets, was in the heart of the disaster zone. “Once we saw where the fire was headed and how it was escalating, we reached out to the owners at Hardester’s to get an update as to what was going on and what their needs were. We told them we’d help in any way we could,” says Porras.
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At the time, Hardester’s was keeping its doors open for as long as possible, providing free groceries to local residents as well as fire crews that were on the scene. Porras says that the primary request at the time was water. He and his team at SUPERVALU coordinated internally, and also looked at Caltrans reports and worked with local California Highway Patrol officers to determine what the road conditions were like. “Fortunately, we were able to get through, and during that time we were in touch with CGA to let them know what we were doing. Of course there were other agencies involved, and we had to find out what other donations were happening and where the drop-off areas were,” says Porras. Ultimately, working through CGA, Porras got contact information to coordinate with local emergency responders, including the Red Cross and Cal OES. “Once we made contact with the key agency personnel, we waited for emails or phone calls on any directions or needs,” he says.
The Center of California’s Emergency Response: Cal OES Tucked away in a non-descript building in suburban Sacramento, the state Business Operations Center (BOC) at Cal OES is ready to mobilize at any minute if a disaster strikes. This is where Browning springs into action. She fields information, makes calls to member companies to coordinate donation requests and offers, and identifies any needed purchases. The BOC operates on a membership basis, with multiple organizations having signed a Memorandum of Understanding (MOU). In her role, Browning runs the BOC during a disaster, but more importantly, she maintains relationships prior to disasters and in their aftermath. When the BOC mobilizes for emergency response, MOU members will start receiving real-time updates, such as road closures, shelter locations and evacuation orders. They can also reach out to Browning directly to offer assistance or ask questions. “During a disaster, all of our partners know that if I need to call them, they will pick up the phone,” says Browning. Cal OES launched its BOC about 13 years ago, and CGA was a founding member. While individual companies can sign MOUs and become members of the BOC, Browning sees greater value in working directly with
The larger the disaster, the higher it escalates for resources. The key is that smaller entities have to invite larger entities to help. FEMA is the highest level of response. Every county in California and many large cities have their own Emergency Operations Centers. Some of these entities also operate their own BOCs and may even have separate utilities operations centers. Then, there are Regional Operations Centers (ReOC), which coordinate between different counties in the region. Currently, California has an Inland, Coastal and Southern ReOC, which Cal OES staffs.
associations, since they can better reach individual companies and organizations if a crisis hits. The California Resiliency Alliance (CRA) is a nonprofit focused on powering local and regional resiliency through partnerships. CRA’s Executive Director Monika Stoeffl echoes Browning’s sentiments about the importance of public-private sector relationships. “A key thing that’s often overlooked in emergency preparedness are the relationships, and how you get information, and getting that information before a disaster hits,” says Stoeffl. “That way an entity can pick up the phone, call the BOC and tap into that connection and network – but for it to be effective, they need to have that connection and that relationship beforehand.”
local level but they may also expand to state, county and region,” says Michael Cummings, Private Sector Liaison for the Federal Emergency Management Agency’s (FEMA) Region IX Office, which covers California, Nevada, Hawaii, Arizona and all Pacific U.S. territories. He says FEMA constantly monitors events in its own region and when something happens in California, he contacts Cal OES. But the escalation process is very clear. “Depending on impact of the disaster, FEMA’s role is to support local response. At the local level, where the disaster occurs, the county and state are on the resource side and local government is on the operational side. We back up the state at their request,” says Cummings.
“California has probably one of the most mature private sector programs in integrating the various business sectors before, during and after disaster. Many other states are following suit and actually use California as a model for their own programs,” says Cummings. Because of the many entities involved, the community connection is extremely important for retailers to have on their own. Browning says she encourages corporate partners to let their store managers work with local emergency management teams on the ground. Stoeffl from CRA notes that this is where organizations like CGA play a key role. “They’re building those relationships and a lot of those connections that their members can then tap into,” says Stoeffl. “For companies that are spanning multiple counties or regions, that becomes too many relationships to manage.
Stoeffl plays a key role in bridging communication between public sector entities, such as Cal OES, and its private sector partners. CRA regularly shares information before, during and after a disaster so that communication is open and ongoing.
Why Relationships Matter in Emergency Response Every disaster is local, and relationships start from the ground up. “Disasters start at the local level, regardless of how big they are. They may impact only the
“It can be complicated for the grocery industry to know the proper protocol to follow in order to offer support.”
Continued on page 24 ▶
◀ Continued from page 23
“But by strategically partnering and utilizing the networks within organizations, they suddenly get access to those connections that are a lot more sustainable than if they managed them independently.” Porras, with SUPERVALU, can attest that there is a benefit to utilizing the connection that CGA has to government entities, especially Cal OES. “I don’t think people realize the importance of Cal OES and the other agencies that step forward and get involved with the needs when there are fires. I was really impressed with all of it,” says Porras. “I just think it needs more exposure so people know what goes on behind the scenes.”
The Albertsons Company: Best Practices in Emergency Preparedness The Albertsons Company – which operates more than 500 stores in California under the Safeway, Vons, Pavilions and Albertsons banners – puts a heavy emphasis on emergency preparedness and having a plan in place, as well as establishing relationships. Due to its size and the number of disasters the company has experienced in its years of operating, Albertsons established its own Business Continuity Disaster Recovery Program. The company also operates a facility in Boise, Idaho, that constantly monitors natural disasters across the country.
Kathleen Smith, Vice President of Asset Protection for the Albertsons Company, manages the program. She says that every division and location has its own disaster recovery plan, including manufacturing, distribution and local grocery stores. “They’re the ones who will deal with disasters first and foremost,” says Smith. “Because we have stores all around the country, we’ve seen more often than not whatever could come our way. So in a crisis, each division’s plan is a little different – and it has to be that way because they have to be able to move and flex and change.” Smith says that each store has contacts with local law enforcement and Cal OES, but that working with CGA is also helpful in funneling requests and information during emergency response. Albertsons also follows the government model when it comes to crisis response, where disaster response begins at a local level but is elevated to corporate if a division can’t handle it on its own.
Cummings says that although FEMA does distribute water and blue tarps and other critical supplies that meet the needs of survivors, the organization tries to stay out of providing food and water. “Local businesses small, medium and large, do this day in and day out. They’re really good at it. They know the local issues and challenges, but more so, they know that certain areas need more of this and less of that,” says Cummings.
The Challenge to Get Grocery Stores Up-and-Running
Browning also says that Cal OES recognizes it does not want to be in the business of food distribution or sheltering or feeding, and that a primary goal during response and recovery is to get grocery stores, hospitals and schools up and running in a community, because they are the anchors.
Emergencies shake communities to their core, regardless of what form they take. And, emergency response experts say that an essential piece to recovery is to get grocery stores up-and-running to bring a sense of normalcy back to the community.
Yet, despite the belief that grocery stores should be open and serving their communities, Browning says grocers can’t simply load up a truck and drive into an emergency zone. While it can be coordinated in times of serious need,
The Office of Emergency Services State Operations Center
24 | CAL I FOR N I A G R OC E R
“It’s better for the business world and survivors that grocery stores thrive,” says David Passey, External Affairs Director for FEMA’s Region IX Office. “We have the ability to bring in outside resources…but nothing’s better than being able to go to the store,” he says, adding that people want to rely on the routine of buying their food and cooking their own meals.
“Porras, with SUPERVALU, can attest that there is a benefit to utilizing the connection that CGA has to government entities, especially Cal OES.” Cal OES does not like to have anyone selfdeploy. Instead, they should work through their local government contacts. “The most important thing for them to understand is that all decisions are directed from the local level. They should be part of their community and have that relationship with their local emergency management. The disaster zone is no place to be exchanging business cards,” says Browning. Smith with Albertsons sees this as a key challenge in working with government agencies during a disaster, and says that Cal OES and FEMA could do a better job working with local law enforcement so that they can better vet who is allowed to come and go. “The grocery industry is really pretty resilient. We’ll be up and operational very quickly with our own resources,” says Smith. “We don’t need help there as much from the government. Where we run into a problem more often than not is if we need to get trucks into a location and the roads are closed, or being controlled.” Smith says that it is crucial for grocers to quickly get in to assess damage and figure out which stores can be opened, and which should remain closed. “Just let us clean up and get things back up on the shelves,” says Smith. “We are all about getting in and operating so we can serve the community.”
Are you Ready for the Next Emergency? Ultimately, emergency preparedness and understanding of the public-private partnership model is key to successful emergency response. How do you know if you are emergency-ready? “Any work that you can do ahead of time to figure out who you can call and what you will do, that is the most important advice I can give,” says Chris Hacker with Cal OES. Hacker also suggests that businesses subscribe to their local warning system because that is where they can get information most quickly during a disaster. “Whether it’s large-scale retailers or smaller local businesses, having relationships with your local emergency management group and having those connections is critical,” says Hacker. When grocers have a relationship with their local emergency management (EM) team, it makes it easier for EM to plan and coordinate with local grocery stores. For example, EM can more quickly find out what supplies a retailer may have, which streamlines donations and purchases, or whether or not a grocery store has the capabilities to be up-and-running during an emergency.
Here are a few questions to ask within your organization to ensure emergency preparedness, according to Hacker: 1.
Do we know who to call in government during a time of crisis?
2.
Is there a safe plan in place to arrange food removal?
3.
What is our plan if we lose power? Do we have emergency power?
4.
Once evacuations are lifted, how will we get up-and-running?
Hacker also highlights the steps to follow if you find yourself in the path of a disaster. 1.
Follow the directions of local officials – whatever that may be.
She adds that most grocers are also trying to figure out how to provide resources to their communities in times of crisis, and that everyone wants to donate and show they are a good neighbor.
2.
Once you’ve handled that situation, identify any available public information. This may be found in joint press releases from local government entities, Cal OES and CalFire.
3.
If you still want more information, you can visit CalOES.ca.gov or call its hotline, if one has been activated.
Porras with SUPERVALU shares similar sentiments about his experience during the 2015 Clear Lake fire.
4.
Keep up all efforts to reach someone until you find who that person is and until you know what you should be doing.
Continued on page 26 ▶
Refer to the directory of local EM contacts (see Page 27), and remember you can look to official social media accounts for Cal OES, Cal Fire, Caltrans and local emergency departments.
Stoeffl says that while social media can be a good place for information – and one that should not be overlooked – it is essential that retailers know the source of that information and how authoritative it is. She cautions that if there are flaws in a source’s information collection process, people may get false information.
“Stoeffl plays a key role in bridging communication between public sector entities, such as Cal OES, and its private sector partners.” The Oroville Dam Spillway Failure ◀ Continued from page 25
“We wanted to get things up right way, so we automatically started working on our own without contacting government agencies, and we ran into road closures and too much product being sent,” says Porras. “In one case we had to bring back water because they had way too much water already.” While frustrating, Browning reiterates that this is a necessary safety measure. “If the road is closed for a fire, chances are, the road itself is on fire and no one is allowed in. If the road is closed because of an earthquake, chances are, part of the road is gone. It’s not safe. Local law enforcement closes roads when they conclude that those roads are a risk to the public’s safety. Residents can’t get in, so neither can anyone else – in some cases, not even emergency vehicles,” says Browning. When possible, Browning says Cal OES and local emergency management will let people know of alternative routes to get around and to provide food and supplies if they need to get in.
26 | CAL I FOR N I A G R OC E R
The Social Media Factor While phone calls and emails provide direct connection and one-on-one conversation, today people also know they can turn to social media to find information and updates. This is especially true during emergencies, when residents and businesses – including grocers – may turn to social media for immediate answers on road conditions and closures, evacuations and more. Many public agencies have social media accounts, including Cal Fire, Cal OES, FEMA, Caltrans and local emergency management departments in counties throughout the state. “During the wildfires, social media channels had information being put out more frequently by authoritative sources such as Cal Fire and local offices of emergency management, so that information was coming out much more quickly than the once or twice-a-day official reports and press statements,” says Stoeffl, with CRA, about the Napa and Sonoma wildfires in 2017.
Social media accounts for Cal OES are a good source of information during disasters, says Browning, and so are the social channels for the affected county. While Browning communicates regularly via email to BOC members, they can also check the Cal OES official social media accounts, which are managed by its public information officers to ensure clear, consistent messaging.
Oroville Dam Crisis: A Case Study in Collaboration Chris Hacker, Disaster Logistics Unit Lead for Cal OES, was in the State Operations Center during the 2017 winter storms that damaged the Oroville Dam spillway and caused major flooding – and subsequent evacuations of more than 180,000 people. At the time, CGA called Hacker on behalf of member company Raley’s. Raley’s wanted to see if they could take food from the store to donate to the community, and CGA asked Hacker if there was any way Raley’s could send a van through the evacuation zone. “I took the request to the Law Enforcement Operations Center, and let them know that CGA is a great partner for us and asked if there was any way to allow their request,” says Hacker. He adds that while he can coordinate these activities for CGA and member companies, local law enforcement will ultimately decide to allow or deny such a request. The Law Enforcement Operations Center contacted local law enforcement, who then told Hacker that it was safe enough for a Raley’s vehicle to get to its evacuated store – but fortunately, evacuations were lifted before it was necessary, according to Damon Moreno, District Team Lead with Raley’s.
“We were in Yuba City during evacuations, and we begged CHP to let us in because we wanted to see the state of the store,” says Moreno. “If we had perishable goods, we wanted to give them to the community. People were without food. At least if we could get in, and get bread and milk out, we could give that to people. Luckily, after a couple hours, they lifted the evacuations.”
“If there’s a need from a business, we would look at that need the same way we’d look at needs for survivors in a shelter. That’s part of what we call a ‘whole community approach’ in emergency management,” says Hacker.
Around 1 p.m. on February 14, 2017, prior to reopening the Oroville store, Nancy Mille, Raley’s local store team leader, assembled team members and, along with Moreno, they were able to gain access and evaluate the damage. Mille’s main concern was getting the store up-and-running so they could support local residents.
“Some of the big vulnerabilities are understanding the interdependencies and multiple tiers. There’s a lot of that in the supply chain in terms of where is the food and how is it being delivered,” says Stoeffl.
Moreno says that Raley’s was in close communication with local emergency responders, and the team was able to re-open its Oroville store at 3 p.m. that day – after one full day of being evacuated and unable to access the area. Prior to evacuations being lifted, the company did everything it could to help the community and surrounding region during the evacuations. Raley’s provided meals to evacuees and produce for livestock in Grass Valley, water to evacuee camps in Grass Valley and Chico, and even a delivery of flowers to brighten the spirits of evacuees in Chico on Valentine’s Day. Hacker says that during disasters, Cal OES is there to support local government, and local government supports the community. That includes survivors, but also businesses in the community.
Evaluating Your Readiness & Resiliency Stoeffl thinks grocers are more prepared for disaster than they were in the past.
For example, she says there’s not just a need to understand power or water, but also the substation that delivers that power and water. Is that going to be resilient, and is there backup? Having an understanding of those tiers, and not just the immediate supply chain, is important, she says. As retailers look at their own emergency preparedness efforts, Smith from Albertsons has a practical tip from her experience. “If I was giving advice to someone who’s building their plan, it’s that phone numbers are so critical. Not just employee phone numbers, but backstage people.
Passey from FEMA has additional suggestions. He says since grocers play such an important role in people’s lives, they can amplify preparedness messaging for the public. For example, retailers can use Daylight Saving Time as an opportunity to remind the public to buy new batteries for their smoke detectors. Sharing such messages can help consumers take a simple action to be better prepared themselves. “It can flood any time of the year, we can get an earthquake any time of the year. Any day is a good day to be ready,” says Passey. Cummings, with FEMA, says that natural disasters continue to come at a rapid pace, and that helping people understand their increased risk through education is prudent. He says that both public and private organizations, as well as the public, have a responsibility. “It’s our responsibility now as the threats begin to change that we really need to take stock personally and organizationally to be as well-prepared as we can possibly be,” says Cummings. ■
“District managers, construction companies, plumbers. All of them should have this,” says Smith. She also encourages companies to have not just a hard copy in place, but to have a detailed plan and all key phone numbers available on a tablet or through an app – somewhere that can be accessed from various locations.
County Emergency Manager Contact Information The California Office of Emergency Services has divided the state into three regions – Coastal, Inland and Southern California. Each region has a County Emergency Management contact. CGA members are encouraged to contact these individuals and develop relationships that will improve communication between emergency services and our industry. For a complete list of County Emergency Management contacts, visit www.cagrocers.com/county-emergencymanagement-contacts.
CAL I FO RNIA GRO CER | 27
RON, CONGRATULATIONS
ON REACHING YOUR
TEN YEAR
ANNIVERSARY AT CGA!
YOU AND THE ENTIRE CGA TEAM SHOULD BE PROUD OF WHAT YOU’VE ACCOMPLISHED FOR THE SUPERMARKET INDUSTRY.
NATIONALGROCERS.ORG
WASHINGTON REPORT
SNAP Shot – Food and Nutrition Policy inside the Beltway PET ER L A R K I N PR E S IDE N T AN D CEO N AT ION AL GR OCER S AS S OCIATIO N
The Trump administration’s “Harvest Box” proposal has grocers up in arms. A lot has been going on these days in Washington, D.C. regarding food and nutrition policy, especially surrounding the Supplemental Nutrition Assistance Program (SNAP). Here’s a brief “SNAP shot” of the various proposals that are being debated by federal lawmakers and other important stakeholders. In February, the Trump administration released its fiscal year 2019 budget proposal, which included drastic changes to the SNAP program by replacing about 40 percent of household SNAP benefits with a government run commodity box delivery service. Instead of letting households use their SNAP benefits at their local grocery store, SNAP funding would be used to send eligible households a box of non-perishable food items. As soon as this “Harvest Box” proposal was released NGA’s government relations team hit the ground running, meeting with White House policy officials, USDA, and key stakeholders on Capitol Hill to express our opposition to any proposal that cuts out the private sector from food delivery. NGA also organized a letter to Congress signed by nearly 900 independent retail and wholesale grocery companies from all 50 states with the message that any
Congressional efforts to put the government at the center of delivering nutrition benefits fails to recognize the competitive principles that have made the SNAP public-private partnership a successful program. While the President’s budget request officially kicks off the formal process and outlines many of the administration’s priorities, Congress typically creates their own authorization bills. “The Harvest Box" debate comes at a relevant time as Congress is set to reauthorize the Farm Bill this year. At the time of this writing, introduction of both the House and Senate Farm Bill versions are expected this spring, with House Agriculture Committee Chairman Mike Conaway indicating that the committee could release a draft as early as mid-March. As Congress begins the hard work of reauthorizing nutrition programs in the Farm Bill, NGA will be working to ensure the voice of the independent supermarket industry is represented throughout this process. In addition to fighting against the “Harvest Box” proposal, other policy ideas that are being discussed in Washington include SNAP choice restriction and placing additional fees onto retailers. NGA is concerned with policies limiting consumer choice and put new administrative
burdens and fees onto retailers. No clear standard exists for defining foods as healthy or unhealthy. Managing a SNAP eligible foods list presents operational challenges and complexities. This type of undertaking would require identifying, evaluating and tracking the nutritional profile of the hundreds of thousands of food products available for sale – a sizable and costly task for supermarket operators. NGA believes policies designed to promote healthier eating and food choices should focus on providing incentives to low-income populations and expanding access to healthy foods. Rather than further stigmatizing the SNAP program, grocers are working with their customers and communities to incentivize healthier eating through programs such as Double Up Food Bucks, a program that allows SNAP recipients to stretch their benefits further with a one-toone match to buy fruits and vegetables. Further, in addition to paying $70 billion a year in credit card interchange fees, retailers take on large equipment, compliance and training expenses to participate in the SNAP program. Adding further costs would harm the ability of grocers to serve low-income populations. NGA will continue to work with various stakeholders to improve SNAP’s efficiency and effectiveness, and find common-sense solutions to address the lack of food access in rural and urban areas. ■ CAL I FO RNIA GRO CER | 29
30 | CAL I FOR N I A G R OC E R
INSIDE THE BELTWAY
Next Steps for Secure S u p e r m a r k e t Pay m e n t s J EN N I F ER H ATC H ER S E N IOR V ICE PR E S IDE N T GOV ER N MEN T AN D PUBLIC AFFAIRS FOOD MAR K E TIN G IN S T ITUTE
This month, the California Grocers Association will be ably represented in Washington D.C. on Capitol Hill by Ron Fong, Kevin Davis of Bristol Farms and Jonathan Mayes of Albertsons Companies. They join other grocery retailers from across the nation who will also be attending our annual lobbying event. In addition to SNAP and the many issues facing supermarket retailers, we will talk about the next steps for payments. Last month marked my 20th year at the Food Marketing Institute and our work with payment systems. In 1998, only a portion of our country had moved to EBT, with the remaining states still collecting paper coupons. The EBT system was not yet national but was governed by regional coalitions of states. Checks were the most popular payment with more than 45 percent of the payments by value. There were no rewards on credit or debit; on-line debit fees were a maximum of 13 cents and while credit card interchange was annoying at 1.15 percent, it was still only 11 percent of sales. How much has changed in the last 20 years. Yet, in many payment areas, the U.S. is lagging behind the rest of the world, including in both security and innovation.
In 2016, while the nation accounted for 23.9 percent of credit and debit card volume, it shouldered 39.5 percent of global card fraud. FMI, along with several of our retail association partners, have turned the focus to explain and advocate for three marketbased solutions to start addressing the systemic weakness of the U.S. payment card system, while bringing transparency and greater security. Customer Authentication In March, all major card brands lifted their requirement for retailers to collect a signature for any transactions. Retailers cheered this change and welcomed the card brands’ acknowledgment that a signature provides no additional authentication. What is next? Our industry advocating for stronger user authentication. In today’s market that would include changing the card brand rules to allow retailers to require a customer to enter a personal identification number (PIN) to complete either a debit or credit transaction.
PINs are proven to reduce fraud, and retailers would like to be able to require PIN, or other authentication methods that are ubiquitous and adopted for ATMs, on both debit and credit card transactions. While PINs are widely used today, policy should also foster innovation and ensure that all stakeholders have access to and utilize the most secure authentication forms available. Security Standards Credit card security standards are centrally set by the card brand controlled entities PCI and EMV Co. Both entities are closed, and no retailer has a vote on the board to set the standards for payment cards. These entities establish security standards retailers and other stakeholders must accept. All too often these standards are based on business decisions, not true security enhancements without retailer input resulting in stifled innovation and a lack of transparency in the electronic payments market. By establishing an open and fair security standards setting body, all stakeholders will have an opportunity to affect policy and decisions based on what is best for the system, not one business interest over another. Continued on page 32 ▶
CAL I FO RNIA GRO CER | 31
INSIDE THE BELTWAY
â—€ Continued from page 31
Secure Routing In 2010, Congress recognized the dangers of relying on only one or two networks to transmit all debit transactions. The 2010 debit reforms required every debit card issued in the United States have at least two unaffiliated networks enabled on the card. This requirement has been incredibly successful by providing retailers and their customers a contingency if one network goes down. Additionally, the competition from having multiple networks on the card has driven innovation to improve security and reliability across the market. U.S credit cards do not enjoy the same protections of having a second network enabled on a card.
iStock
at best. In a time when we are focused on securing our infrastructure against cyber criminals and state sponsored economic disruptions, it is essential that we also fortify our streams of commerce. By having the credit card market follow the success of the debit card ecosystem and enabling a second network on every card in the U.S. we would increase security, network availability and drive greater innovation. Perhaps we will look back 20 years from now and be proud of the work we were able to do to enhance our payments system efficiency, as well as security and innovation for our customers. â–
Therefore, if that sole network goes down, customers cannot use the card and in a large enough outage, commerce can slow to crawl
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32 | CAL I FOR N I A G R OC E R
Ron, On behalf of the entire North State Grocery family, w e congratulate you on your 10th annive rsary as President and CEO of the California Grocers Associati on, and CGA Educati onal Foundation.
CGA NEWS
Educational Foundation Inducts Two Industry Icons
(L to R) CGAEF Chair Brad Askeland, North State Grocery, Inc.; Bob Kelly, Hidden Villa Ranch; Kevin Davis, Bristol Farms; CGAEF President Ron Fong.
This year’s CGA Educational Foundation Hall of Achievement gala featured the induction of two industry icons who just happen to be best friends. Nearly 500 well-wishers attended the March 21 induction dinner in Costa Mesa, Calif., to honor Kevin Davis, Bristol Farms; and Bob Kelly, Hidden Villa Ranch – this year’s
Andy Pence, Rachael Phillips, Carlos Ayala, Allen Pierce, Subriana Pierce, Scott Legleiter, Hallmark Cards. 34 | CAL I FOR N I A G R OC E R
recipients of the Foundation’s prestigious Hall of Achievement award. Each year the Foundation inducts one or more grocery industry executives into its prestigious Hall of Achievement. Inductees are selected by the Foundation’s Board of Trustees. Nominees are evaluated on their commitment and contributions to the grocery industry, their local communities and their involvement in charitable and other worthwhile causes. “Tonight, we recognize two industry icons for their life-long commitment and dedication to this fantastic industry,” said
Bob Kelly and Kevin Davis.
Foundation President Ron Fong, who presented both inductees with their Hall of Achievement award. “I think you’ll agree that Kevin and Bob certainly meet the requirements.”
CGA NEWS
Hirz shared how his friendship with Davis began when they both worked at Ralphs Grocery Co. in the early 1990s.
(L to R) Drew Ursy, John Countryman, Greg Sheldon, Anheuser-Busch InBev.
Unique to this year’s inductees was the fact that along with their professional association, Davis and Kelly are best friends. Speakers throughout the evening frequently mentioned the two’s strong friendship. This was evident during the question and answer segment where both recipients responded to questions asked by Fong and Foundation Executive Director Shiloh London.
“I was immediately impressed with Kevin,” Hirz recalls. “He was clearly very bright with a quick wit, and of course, he had that Kevin Davis personality. Right away you could see that he was a player and was going to go places in this industry.” He praised Davis for his commitment to education stating that “nobody is involved as Kevin,” adding that the Bristol Farms executive continues to help expand the retail certificate management program at the University of Southern California.
Kevin Davis Chairman and Chief Executive Officer Bristol Farms Kevin Davis is Chairman & CEO of Bristol Farms; Chairman of Lazy Acres, the preeminent specialty food and natural food stores in Southern California; and CEO of Good Food Holdings, their holding company. Kevin started in the food industry in 1970 as a box boy. He joined Ralphs Grocery Company in 1974 and worked all store level jobs through promotion to Store Manager in 1980. In 1985, Kevin was promoted to Assistant District Manager and one year later to District Manager. That same year he was promoted to Director of Sales and Advertising. In 1988, he was promoted to Vice President of Sales and Advertising, and later to Senior Vice President of Marketing. Kevin left Ralphs after 21 years to become Executive Vice President of Bristol Farms. He was promoted by the Board of Directors to President in July of 1996 and less than one year later was promoted to Chairman of the Board, President and CEO. Kevin is a past Chair of the California Grocers Association, President Emeritus of the Western Association of Food Chains and Past Chair of Unified Western Grocers and currently serves as the Chair of Food Marketing Institute. He was also a Director and Past Chair of California Hospital Medical Center Foundation Board, and Past President for the Food Industry Circle at City of Hope.
(L to R) Shiloh London, CGAEF; Bob Kelly; Hidden Villa Ranch; Kevin Davis; Bristol Farms; CGAEF President Ron Fong.
In addition to the Q&A, those in attendance heard from Dave Hirz, President and CEO of Smart & Final Stores. Hirz, also a close personal friend of both inductees, shared insights into the honorees and introduced a video highlighting their professional and personal careers.
Sarah Wright, Gelson's Markets, shared her Foundation success story.
Hirz also recognized Kelly for his years of leadership in the egg industry and his involvement in education. “Bob also gives his time, energy and resources to many non-profit, charitable organizations,” Hirz said. “He is just a quality guy.” Continued on page 36 ▶
Tom Finn, Jim Wakefield, Northgate Gonzalez Markets; Rich Schmidt, Hidden Villa Ranch.
Supported by full scholarships from the food industry’s Western Association of Food Chains, Kevin graduated from the USC Food Industry Management Program in 1978 and later graduated as Class President of the Executive Program in the Graduate School of Business at UCLA. In 1986, Business Week name him one of the 50 “Fast Track Kids” in American business and, in 1998, was named by the Los Angeles Business Journal as one of their 30 “Up and Comers” in Los Angeles business. Kevin was named Alumnus of the Year by the USC Food Industry Management Program in 1999 and Executive of the Year in 2011. Married for 35 years, Kevin and his wife, Cindy, have seven children and three grandchildren.
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CGA NEWS ◀ Continued from page 35
Foundation Board Chair Brad Askeland, North State Grocery, Inc., also praised Davis and Kelly for their commitment to education and thanked those in attendance for supporting the organization’s programs.
Robert (Bob) J. Kelly Executive Vice President Hidden Villa Ranch Robert “Bob” Kelly is Executive Vice President of Hidden Villa Ranch. He grew up in rural San Diego County on a small family poultry farm and graduated in 1975 from San Diego State University with a degree in Microbiology. After graduation, Bob held several positions in different industries. Eventually, he became the Sales Manager with Embly Ranch in San Diego. In 1996, Hidden Villa Ranch bought Embly Ranch and the Pine Hill division was born. Bob is Executive Vice President for the Pine Hill division and is responsible for all operations, sales and marketing. His professional organizations include board position with the Orange County Council Boy Scouts and an officer with the Illuminators, one of the largest industry trade organizations in the retail food business. Past association involvement has included board positions with Pacific Egg and Poultry Association, California Egg Commission, Embly Ranch, Sunshine Foods and Coast Packaging. Bob also devotes a large amount of time to several charitable organizations including City of Hope, Boy Scouts of America, Easter Seals, Illuminators Educational Foundation, CGA Educational Foundation, and Olive Crest, where he has received the “Ambassador for The Children” award. Bob and his wife, Linda, live in Upland, Calif., and have been married for over 26 years. They have one daughter. Bob has a son from a previous marriage and has two grandchildren.
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( L to R) Hall of Achievement Inductee Doug Detherage with Mary Crocker, Alta Dena Certified Dairy; and Willie Crocker, Bimbo Bakeries USA.
“Bob and Kevin have proven throughout their careers that education can come in many forms and valued in many ways,” said Askeland. “Providing and creating similar opportunities to improve our industry through your support of the Foundation is why we are all here tonight.”
Attendees also heard from Sarah Wright, the staff nutritionist at Gelson’s Markets, who shared how receiving Foundation support helped fulfill her dream of graduating with a degree in food and nutrition and obtaining employment in the grocery industry. During her high school and college years, Wright worked for Nugget Markets in Woodland, Calif., and Stump’s Markets in San Diego. “My educational pursuits would not be possible without the generous support from sponsors like this organization,” Wright shared. “Thank you for providing me this opportunity. You truly make dreams come true.”
Kendra Koyel, Ralphs Grocery Co., with Hall of Achievement inductee Dave Hirz and wife, Julie.
According to Askeland, in 2018, the Foundation will offer more than 300 college scholarships, totaling more than $650,000. The tuition reimbursement program will dole out more than $200,000 and benefit hundreds of deserving students. Davis and Kelly are the 43rd and 44th inductees into the CGA Educational Foundation Hall of Achievement since its creation in 1992. The first honorees were Thomas Raley, Raley’s, and Wilfred Von der Ahe, Vons Companies. ■
Rob McDougall, Gelson’s Markets, with Ellyn Gelson and Bill Roulette.
The Hall of Achievement is the Foundation’s marque fundraising event. The March event raised more than $450,000 to help fund the organization’s college scholarship and tuition reimbursement programs. Along with the induction ceremony, the Foundation also conducted its annual Live Auction, allowing attendees the opportunity to bid on donated items, as well as commit to the “Fund-aNeed” scholarship program.
More information on this year’s Hall of Achievement dinner, along with additional photographs from the gala, can be found at www.cagrocers.com. To learn more about the Foundation’s many programs, including its college scholarship and tuition reimbursement programs, visit www.cgaef.org.
CGA NEWS
NEW MEMBERS CGA welcomes the following members:
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OUTSIDE THE BOX N EW RETAIL PERS PECTIV ES
CES Highlights Getting tired of all the tech talk out there? Well, here’s more from the recent Consumer Electronics Show in Las Vegas. Aside from a partially flooded and blacked out convention center thanks to an inordinate amount of rain, the big news was once again the “Smart Home” thanks to the increasing popularity of Alexa and Google Assistant devices both of which have increased the focus on home automation. According to a report on the show from C/NET, Samsung has pledged that all of its devices from TVs to washing machines will be “smart” by the 2020 model year, infused with its Bixby Assistant and linked to its SmartThings cloud. CES 2018 seemed to mark the beginning of the end of “dumb” household products, with everything from light switches to faucets to mirrors and (yes, really) toilets getting some sort of AI upgrade.
Photo by Kevin Bhagat on Unsplash
LOCATION
RE
IS
DRUGSTO
Overhaul
EVERYTHING Remember the Internet of Things? Now it’s the Location of Things thanks to the expansion of smartphones, the market for which is growing 34 percent annually and expected to reach $71.6 billion by 2025, according to Research and Markets. The growth will empower location-based applications so even more data about customers can be obtained.
iStock iStock
HEALTH CARE
DEVELOPMENT iStock
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The failure of Congress to enact meaningful health care reform has resulted in action from the private sector. Amazon, Berkshire Hathaway and JPMorgan Chase have formed a non-profit partnership to improve satisfaction and lower health care costs for its U.S. employees. Initially, the new company will focus on technology solutions to provide simplified, high quality care options.
Walgreens will be introducing a new store format this spring or early summer, a first for the Illinois-based chain since its merger with Alliance Boots in 2014. Details have yet to be released, but officials told the recent J.P. Morgan Healthcare Conference that the format will contain years of consumer learnings about in-store services including instore lab and patient care services and optical centers in partnership with companies like MedExpress. Walgreens services 10 million customers daily.
OUTSIDE THE BOX
BALANCING ACT
DATA
DRIVING
iStock iStock
If you’re wondering where advertising money is going among major retailers, take a look at Sears Holdings. For years the company, which operates Sears and Kmart stores, was one of the biggest advertising spenders on national television. It hasn’t run any of those since last November. Now the money, which totaled $15 million for just the month of December, is being funneled into digital marketing which executives believe is more cost-effective and quantifiable.
l
t
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If you thought retail was fast paced in 2017, you’re in for more of the same this year, according to a trend report from the Fung Global Network. Consumers will increasingly turn to new retailers, marketplaces, channels and technology, and retailers will be looking for collaborations. Overall the company pinpointed five key concerns:
al
r y stal C l B ai
LG Electronics is moving headlong into autonomous vehicle technology, working with mapping provider HERE on a new telematics product for hi-res maps. It’s a big step forward since the system will incorporate the forthcoming 5G standard. Carmakers are ecstatic but it could work to the advantage of any company communicating sensor data.
• Consumers will switch more spending from conventional to new and alternative formats and channels. • Shoppers will value life-improving services. • Brands, retailers and tech firms will have to offer new types of interactions, rewards and experiences. • Rapid industry change will prompt retailers to collaborate with tech giants including Amazon, as well as social media influencers. iStock
iStock
• Retailers will leverage technologies like blockchains and 3D printing to make their supply chains smarter and more competitive.
MERGER MANIA?
If you’re trying to get a sense of the merger climate, take a look at the entertainment industry. Big names like Disney, Fox, Time-Warner and Discovery-Scripps have already made the news. Mergers may accelerate this year with companies like Viacom, CBS, Sony, MGM and Lionsgate looking for new partners. It’s the same story with content distributors. It seems everyone is looking at consolidation in media. It’s only that familiar question – Who’s next? CAL I FO RNIA GRO CER | 41
Congratulations to
Ron Fong
and thank you for your 10 years of leadership!
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A decade Of Leadership Ten years ago,
the average price for a gallon of milk was $3.91. Arnold Schwarzenegger was California’s Governor. Nancy Pelosi was elected the first female Speaker of the U.S. House of Representatives. Jaden Fong was a second-grader and fledgling baseball player. And Jaden’s dad – Ron Fong – was named President and CEO of the California Grocers Association.
Continued on page 46 ▶
CAL I FO RNIA GRO CER | 45
legitimate industry credentials helped him hit the ground running and effectively guide the Association from Day 1.
Ron Fong’s grandfather opened his first store in Carmichael, Calif. in 1941. ◀ Continued from page 45
When he arrived at CGA, it was considered a homecoming of sorts. Fong’s family had owned a Carmichael, California-based grocery business for more than 50 years and was where he worked from childhood through high school and college. Fong had also served for more than a dozen years as chief advocate for the credit union industry in Sacramento. When his appointment was announced the consensus was that his was the perfect resume for the job: extensive political and policy experience combined with genuine grocery pedigree. To say a lot has transpired in a decade would be an understatement. As he reflected on his tenure, there is no question that Fong’s
“I had an idea of what the industry was about. I knew the structure so there were really no surprises,” he recalls. “When I came on board, I wanted to meet the ‘titans’ – like Bob Piccinini, Jack Brown, Darioush Khaledi and others. I spent a year or two forging relationships and went back every year to see them. I wanted to know what they thought of CGA, what direction we should take. Their historical perspectives mattered very much. After all, the Association has endured 120 years and they had a lot to do with it.” “Those were the ‘founding fathers.’ Then you go to the next level of the ones I like to call ‘the thinkers’ – the Kevin Davises, the Jonathan Mayeses, the Kevin Konkels – the leaders who are working on and thinking about the future of the organization,” Fong says. “Getting those perspectives was necessary and I enjoyed it thoroughly. The people in this industry – that’s the fun stuff.” Fong believes the grocery industry is both exceptional and unique.
“I grew up in the business,” he says. “What I’ve learned as the primary attributes are still there. In the end, whether you’re a giant chain or a single-store operation, the rally cry is to serve your community and to serve your customers. They all do it differently, but the core is to serve their community.” CGA Chairman and Twain Harte Market CEO Bob Parriott says leaders of organizations may not look the same but their characteristics are often quite similar. Parriott worked for nearly two years with Fong on a merger between the California Independent Grocers Association (CIGA) and CGA. “During the nearly two years of discussions and negotiations, Ron displayed all the characteristics of a good leader,” Parriott recalls. “He was honest, creative, inclusive and committed. He listened, challenged and inspired our respective members to act.” The CGA-CIGA merger and the list of Fong’s accomplishments (see sidebar for a partial list) in just a decade is impressive – outstanding, when you hold them up against the unique backdrop of running a business association in the nation’s bluest state. He says he knew he had his work cut out for him.
Ron Fong Highlights
PROFESSIONAL CAREER LEGISLATIVE
Appointed
Appointed to Food Marketing Institute Government Relations Committee and Board
President/CEO, California Grocers Association President, CGA Educational Foundation
2008
2010
2012 Appointed National Grocers Association Board
Guest Presenter: Western Association Food Chains (WAFC)
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Defeated Prop. 37 (Mandatory GMO Labeling in California)
Passed SB 270 (Nation’s First Statewide Plastic Bag Ban)
Ron Fong enjoys the Independent Operators Symposium with Richie Morgan, North State Grocery, Inc; Michael Teel, Kevin Konkel, Raley’s.
“The greatest challenge of the job is dealing with a Democratic Legislature and an association full of business-minded people – generally Republican, in their philosophic approach,” Fong says. “I knew, at the outset, I would have to help bridge philosophies between my members and the Legislature. I was honest with our Board: our best move was to engage moderate Democrats.” Fong took the organization’s helm when Arnold Schwarzenegger was still in office and muses that his members were spoiled by that “taste of life with a Republican governor.” When a Democrat took over, coupled with a Democratic Senate and
Assembly, the new CEO had to make a case for leveraging resources and for more progressive thinking. “That took a long time to accomplish – five years, in fact,” Fong recalls. “In those early years, it was important to be honest with our members and not to overpromise. We weren’t going to change the politics of the Legislature. We needed to use our resources in places where we could add to the discussion. This has absolutely been my greatest challenge so far.” The California Legislature is predominantly Democratic but also heavily influenced by organized labor. For Fong and his legislative
Merged with California Independent Grocers Association
Fong says the plastic bag ban bill (which banned the use of single-use plastic bags in grocery stores) was a compromise with organized labor that ultimately helped get the measure across the finish line and signed by Governor Brown.
Purchased Future CGA Headquarters in Sacramento
Appointed to CA State University (CSU) Board of Governors
Guest Lecturer-Cal Poly San Luis Obispo (To Present)
Received FMI Donald MacManus Award– Association Executive of the Year with Keri Bailey
“Our agenda has really been all over the place,” he admits. “There are some instances where we have to put our foot down and take a hard oppose position; there are times when we wind up compromising. We win some and we lose some and we compromise some.”
Continued on page 48 ▶
Appointed Food Industry Association Executives Board (FIAE)
2014
team, that is a reality which calls for multilayered strategies.
2015
2016
2018
Defeated Props 65 and 67 (Ballot Initiative to Overturn SB 270) Merged California Shopping Cart Corp. with Retail Marketing Service
Inducted into the Food Industry Sales Association Hall of Fame CAL I FO RNIA GRO CER | 47
◀ Continued from page 47
“We might have to oppose them at times, but we must always be mindful of the partnership,” he said. “In fact, I’d like to define our relationship with labor as a partnership. Sometimes we agree, sometimes we don’t. But organized labor isn’t moving out of California. So, we have to find ways to work together.” There’s one labor-sponsored issue – the Grocer Worker Retention Ordinance, or GWRO – where Fong really wanted to prevail. The measure provides protections for non-managerial employees when a store is sold to a new owner and applies to only the grocery industry. CGA challenged the ordinance, but it was upheld by California’s Supreme Court.
“Fong says the beauty of CGA is its large supplier membership from whom to draw perspectives.” “That was the biggest issue that got away from us,” Fong laments. “Our lobbying team and membership did everything they could to influence the Governor not to sign that bill. I don’t know what else we could have done, but it was a big one that we couldn’t fight back on. There was no real place for compromise.”
Jaden, Carol and Ron Fong. 48 | CAL I FOR N I A G R OC E R
The last 10 years have also brought sweet victories. Fong’s favorite was Senate Bill 270, the single-use plastic bag recycling bill. “That one has turned out to be good for everyone – for the environment, for business and for consumers,” he says. And, the last decade has brought some important lessons. Fong says he’s learned there are very few differences in perspectives of his large, chain store members and smaller or single store operators. There’s a wider chasm, he argues, between the perspectives of food manufacturers and retailers, particularly on issues like labeling. It’s not a lost cause, however. “It’s possible there could be a bridge,” he suggests. Dave Jones, Vice President for Industry Initiatives for the Kellogg Company, appreciates the fact that Fong remains focused on actions needed to ensure success and positive outcomes for all segments of CGA’s membership. “Ron always brings a high level of passion and enthusiasm to all his endeavors on behalf of CGA,” Jones says. “He practices diverse thinking around the issues and has an inclusive leadership style. As a leader with a consumer packaged goods manufacturer, I consider myself lucky to be able to work with him.” Fong says the beauty of CGA is its large supplier membership from whom to draw perspectives.
Gov. Jerry Brown has addressed CGA audiences on several occasions during Ron Fong’s tenure.
“Ron always brings a high level of passion and enthusiasm to all his endeavors on behalf of CGA.”
“That’s a huge advantage,” he says. “On an issue like labeling, at its core it’s about who’s going to label and who’s going to be liable for it. I’m not sure we’ll ever agree on the answer, but if we didn’t have deep representation from manufacturers in our membership base we wouldn’t have the opportunity to have the conversation.”
“I think it’s a double-edge sword,” Fong responds. “My peers know I have to work alongside a progressive Legislature looking at what may seem like crazy ideas – especially to my friends in more business-friendly states. But they also envy the fact that we have such a large, progressive membership and board.”
Fong believes if both sides build a bridge on that issue, it will be because of the relationships established, adding that by tearing down walls and creating relationships and trust, conversations can happen.
There’s a strong entrepreneurial streak which runs deep in Ron Fong and he credits his grandfather, Dan Fong, with passing on the trait. The result is a very diverse group of entities owned or tied to CGA, including the CGA Educational Foundation, Retail Marketing Services (a for-profit company) and Aisle 3 Concepts, LLC.
“And,” he’s quick to add, “Our supplier members are the first to support CGA, the first to sponsor events and be there for us 100 percent of the time. It’s a really unique dynamic that many of my colleagues don’t have.” The strong support CGA receives from the food manufacturing community is one of many reasons the Association remains the “gold-standard” for grocery trade associations in the nation. Fong’s peers, particularly those who lead food associations around the country, admire his professionalism and creativity. “Ron is one of those unique professionals who exudes a passion for the industry he serves,” says Beverly Lynch, Food Industry Association Executives (FIAE) President. “He is tapped time and time again for his knowledge of state association best practices, and freely gives of his expertise to his colleagues. FIAE is stronger, and grateful, for his involvement."
The senior Fong opened his West Sacramento market in 1941 and operated several stores until the early 1990s.
Ron with Gov. Arnold Schwarzenegger.
“I learned from my grandad and dad that personality counts in this business,” he says. “The people skills and the ability to build community is essential to success. It’s a people-business. You get far more done by talking than by fighting.” “I’m also influenced by our members,” he shares. “If you look at our successful members, they’re always growing, always looking forward, always pushing, always buying new formats. They look for merger opportunities with an eye towards growth. “That’s how I want us to operate as an association. Whenever my run ends, I’ll be handing this off to someone with the Association in growth mode. We don’t want to remain in the same place.” Continued on page 50 ▶
(L to R) Eric Lindberg, Grocery Outlet; Jim Wallace, Albertsons Companies; Mary Kasper, 99-Cent Only Stores; Kendra Doyel, Ralphs Grocery Company and Kevin Konkel, Raleys, join Ron Fong on the California Assembly Floor. CAL I FO RNIA GRO CER | 49
Ron Fong addressed media during a SB 270 press conference.
◀ Continued from page 49
CGA’s financial ledger has grown by 50 percent in the last 10 years and Fong credits the Association’s Board and “exceptional” senior management team with this outcome. “When you have a progressive board and a team who have bought into the philosophy you can’t help but be successful,” Fong says. The CGA Educational Foundation has also witnessed unprecedented growth during Fong’s tenure. In addition to his CGA title, Fong also serves as CGAEF President.
“They asked about the letter and I talked about why I thought he was great for the job,” Nunez recalls. “Back then, he was the No. 2 guy with the credit unions – who weren’t huge political contributors. Despite that, he always figured out a way to get into my office. He was crafty and lovable. I told the search guys ‘if you get him, you’ll be well served.’ He’s going to take you to another level.” Nunez’s Republican counterpart, Mike Villines, also gave Fong high marks as he was about to assume the CEO role.
“One of the great surprises I’ve experienced during my 10 years at CGA is the genuine goodness and generosity of those who support our Educational Foundation,” he states. “Encouraging higher education opportunities for grocery employees and their families through scholarships represents very unique programming among associations. I am so proud that our Foundation makes such a difference in the lives of working families.”
“I had known Ron from the [Governor Pete] Wilson years, but really got to know him in my work when I was Leader,” recalls the then-Assembly Republican Leader. “Working with him went so well. You get the sense that he’s a straight-shooter and I became a fan of his early on. I remember telling the exec who called that I was happy to help. If there were more people like Ron in associations and organizations, we’d all be better off. I bet his next 10 years will be as good as the last.”
“I was so pleased that the Foundation Board recognized the potential of our Foundation and allowed me to hire its first Executive Director,” he adds. “The Foundation is well-positioned to grow and expand our scholarship and educational programming for future generations of industry leaders.”
What makes Ron Fong tick? Probably that “you-get-more-done-by-talking-than-byfighting lesson.”
Fabian Nunez was Speaker of the Assembly when a member of the CGA’s CEO Search Committee rang him up for follow-up comments to a recommendation letter he authored on Fong’s behalf.
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“That’s what I remember most,” Fong says. “My dad knew everybody. I watched him lend money to customers. He wouldn’t write it down. No script, no agreement; it was all in his head. That level of human kindness really sat with me. That’s how I conduct business.”
Ron Fong and Keri Askew-Bailey received FMI’s top association award.
CGA members, leaders in the industry themselves, call out his many attributes with ease. Raley’s Kevin Konkel, who served as CGA Chair in 2016, says Fong is the consummate gentleman who instills trust, compassion, stability and hope to the CGA and its members. “Ron leads with purpose and passion,” asserts Konkel. “He has a clear vision and deliberate strategy for CGA and executes this strategy with patience, balanced with tenacity, and finds a way to consistently improve the results of the Association.” “It’s clear to see that Ron loves the food industry by the way he approaches his responsibilities and the many challenges we face,” he adds. “He perseveres and finds a way even when the path forward is fraught with obstacles.” Jonathan Mayes, Senior Vice President of External Affairs and Chief Diversity Officer for the Albertsons Companies, likely speaks for the entire California food industry when he calls Fong a highly-skilled, visionary leader, who doesn’t rest on his laurels. “Ron is laser focused on ensuring that CGA is well-positioned for continuous growth and future success,” says Mayes, who also served as CGA Chair in 2012. “We are extremely fortunate to have him as CGA’s President & CEO, and I’m even more blessed to call him my friend.” Ten years ago, then-Speaker Nunez told the CEO Search Committee “When you hire Ron Fong, you get his smarts, but he throws in his heart for free. You can’t quantify that.” ■
CONGRATULATES RON FONG’S 10TH ANNIVERSARY AS CALIFORNIA GROCER ASSOCIATION PRESIDENT
We thank CGA and Ron Fong for their many years of support and dedicated service to the grocery industry. Your leadership and many contributions to the success to independent retailers are greatly appreciated.
www.supervalu.com
Congratulations
CGA President & CEO
Ron Fong
on your successful 10 years at CGA! We are glad to be your partner.
52 | CAL I FOR N I A G R OC E R
Ron Fong
President of CGA
Congratulations Congratulations to our good friends Diablo Foods for 50 years of serving the Lafayette community. Your dedication to excellence and quality is an inspiration to all independent grocery operators.
CAL I FO RNIA GRO CER | 53
D i abl o Foods
Tu r ns 50 By Len L ew i s
(L to R) Dan Stokes , Betty Stokes, Ed Stokes, Connie Collier & Daniel Collier
54 | CAL I FOR N I A G R OC E R
Diablo Foods’ five decades
Of success has been a
Family affair. Diablo Foods is something of a rarity in the world of grocery retailing. The Lafayette, Calif., independent, which is celebrating its 50th anniversary, boasts three generations working together – in harmony – and possibly a fourth generation waiting in the wings. However, this close relationship goes much deeper than multi-generational management within one family. It includes generations of associates and consumers who may not have the same last name as the owners but are just as much a part of the Diablo family. “Our customers consider this their store and we like that because they are all really part of the community we’ve built over the last five decades,” says Dan Stokes, Diablo Foods President.
“They often know what people had for dinner last night and what they might want tonight,” she says. “Our butchers, for example, talk to them every day and take a hands-on approach in making this a store that’s really involved with our shoppers.
Ed had a solid job opportunity in freeway construction waiting for him in the San Francisco Bay Area. “He also wanted to continue his education. So in 1955, he attended the University of California at Berkeley to study business,”
“Our customers consider this their store and we like that because they are all really part of the community we’ve built over the last five decades.” “We have a lot of employees that have daughters, sons, or sisters working with us. They all give great customer service because they care,” she says.
“This is the place where they run into everyone else in town,” he adds. “They meet their neighbors, teachers and kids who are on the same Little League team as their own. We’ve evolved into a real meeting place for our town.”
This is the attitude that has driven Diablo from the beginning when Ed Stokes, now age 95, and his wife Betty, 90, started the company in 1968 after traveling west in the early 1950s from the Carolinas in search of the American Dream.
Stokes’ sister Connie Collier, who is Vice President, said the customer relationships – and by extension customer service – includes Diablo’s employees who also have very strong relationships with customers.
Ed didn’t start out in the grocery business. He had a singing and acting career on the East Coast and thought about heading west to give Hollywood a try. But, Dan and Connie were young kids at the time and
Dan recalls, noting that his father also worked at a U-Save Markets store at night. “My brother and I were in school during the day and he’d be checking groceries at night at the 24-hour supermarket,” Connie remembers. That’s when he decided to quit show business and focus on his family and a career in retail. He worked his way up to manager of U-Save Markets, which was bought by Lee Brothers in the late 1960s.
Continued on page 56 ▶
CAL I FO RNIA GRO CER | 55
◀ Continued from page 55
However, Lee Brothers expanded too quickly and began closing some stores including the one in Lafayette. At the time, Ed and the family were living in Hayward, Calif., and he was managing about 50 stores from the Central Valley up to the Oregon border. Ed loved the Lafayette area and decided it was time to strike out on his own. Business back then was no less competitive then it is today. “We had a Lewis store on one side and a Safeway on the other when we opened in 1968,” says Dan. “At first we didn’t do much business. After school, Connie and I would stock the store and mom would cook dinner on an old electric skillet. After dinner we’d sit on milk crates and do our homework.”
“Our greatest strength as an independent in this market is listening to our customers’ needs and always striving for greater customer service.” However, it didn’t take too long for the store to catch on among residents of what was a burgeoning community which, today, is actually made of three cities grouped together – Lafayette, Orinda and Moraga. Over the years, Diablo has evolved into an “upscale” retailer known for its specialties. “Word on the street is that if you’re looking for something special, go to Diablo Foods,” Connie says. “And if we don’t have it, we’ll get it for you.” The store is 25,000 square feet with approximately 15,000 square feet of selling area. “The original store burned to the ground in 1975, but we
reopened a year later and have done two or three major remodels since then,” Dan says. “We’re really remodeling and fixing up interior departments every year.” Last year the focus was on building an outdoor pavilion for farmer’s marketstyle produce. This year, the store has installed a new salad bar and floral department and is in the process of replacing all the checkouts. “You’ve got to keep things fresh. No one can afford to be stagnant,” says Connie. Daniel Collier, Connie’s son and Dan’s nephew, is manager of the Lafayette store and well aware of the legacy he has inherited. “Our greatest strength as an independent in this market is listening to our customers’ needs and always striving for greater customer service,” Daniel says. “The personal attention we provide is something that’s difficult to find in an internet-crazed world.” However, the company is eyeing ways to enhance customer service even further. “We’re looking into a number of things,” Daniel shares. “This is a family area and people’s lives are getting busier. We haven’t yet filled the void in things like delivery service, or phone and internet orders. That may be the next step we take.” But because of the company’s handson approach from the time a customer walks through the door, employees are concentrating on in-store traffic. “We don’t want to sacrifice that for a phone or internet order that can get screwed up,” he says. “We’ve set the bar very high in service and we won’t go into other areas unless we feel we can do them well.” Clearly, what Diablo does best is to fill its niche in areas like an international deli, prepared foods, meat, produce and graband-go sections. “Our meat department has dry and aged beef and we have 18 butchers on staff,” he says. “In our deli, fresh food is made daily from scratch. We don’t open a box
of anything. The farmer’s market style produce department focuses on product from local farmers in a 50-mile radius of the store.”
“Selection is very seasonal,” Dan says. “Right now we have all the stews, pot roasts and winter greens, but we’ll be changing it up for spring.”
The entire “local movement” is something that Connie is passionate about as well.
As attuned as the store is to food trends throughout the industry, listening to its customers is what makes it unique, Daniel notes.
“Since Amazon bought Whole Foods they are getting rid of many items from small vendors,” she says. “That’s bringing more people to us, since we still have things like honey from Walnut Creek, jams from Chico and pies from a vendor in San Rafael. We want to keep that local flair and items that the big guys don’t have.” “I recently went to the Fancy Food Show in San Francisco and they devoted one entire room to mom-and-pop startups. Twenty years ago you’d go to the show looking for olive oils from Italy. Today, we prefer to have olive oil from the Napa Valley.” Prepared foods are also featured at Diablo.
Looking ahead, might there be a fourth generation coming up at Diablo? “We have a few possibilities,” says Daniel, who has three children. The oldest is only seven, so as Daniel put it: “We have a ways to go.” ■
“We follow nationwide and statewide trends by going to places like San Francisco, Los Angeles or Chicago,” he says. “But we also follow trends by being here and listening to our customers. We pride ourselves on having our finger on the pulse of the community. “We don’t think we’re about setting trends. We live in a food savvy community and we learn more from them then they do from us,” he says. “Plus, we can put things into action quickly. Basically, we want to keep our employees and customers happy.”
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YOUR FULL SERVICE PACKAGING SOLUTION SPECIALIST
Proudly serving Diablo Foods since 2007. We appreciate their partnership and support of Moresco Distributing Company. Congrats on 50 years of business, looking forward to the next 50! MORESCO DISTRIBUTING COMPANY (707) 773-2500 www.moresco.biz 58 | CAL I FOR N I A G R OC E R
CONGRATULATES DIABLO FOODS ON THEIR
50TH ANNIVERSARY
We proudly salute Diablo Foods on 50 years of providing value, quality and superior service to their shoppers.
www.supervalu.com
CAL I FO RNIA GRO CER | 59
By Len Lewis
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The lines between retailing’s digital and physical world are becoming increasingly blurred. But are retailers meeting the challenges and opportunities associated with omnichannel and “post-channel” strategies and humanizing the retail experience in the face of new technologies? James Mullan, Senior Vice President, GDR Creative Intelligence, a retail focused trends and strategy consultancy based in New York and London discussed these and other issues with California Grocer and the impact on shopper behavior. Continued on page 62 ▶
◀ Continued from page 61
CG: Your talk at the recent National Grocers Association convention was entitled “7.5 billion bosses: Consumers are in charge now.” However, how widespread is a consumer-first strategy among retailers? “The modern benchmarks for convenience across multiple sectors are, whether we like it or not, being set by Amazon – whose mantra is to be customer-obsessed in every decision they make. “However, while most large legacy retailers realize they need to adopt this approach as they devise their omni-channel strategies, the siloed nature of these businesses makes getting the right people in the same room to talk about it very difficult. “My impression is that, while many independents don’t have the same budgets, they are often more agile, which is definitely a strength.”
Is progress being made in blending digital and physical operations? “Probably not as much as there should be. One indication that retailers are recognizing that the boundaries between online and offline life are increasingly blurred is the diminishment of the Chief Digital Officer. Increasingly, the fashionable role to recruit instead is a Chief Customer Officer. “However, while there’s a good argument that it no longer makes sense to think of digital as something distinct from any other form of retail, by the same token it feels odd to me that a company would allocate customer-centric thinking to one area of any given business – surely that’s what everyone should be focused on.”
What happens when digital and physical are kept separate? “Setting up individual functions dedicated to each might sound smart, but is actually usually counter productive – because people then assume those two things are separate. The problem for most retailers is that changing operations is like turning a very large ship around in a very small harbor.
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iStock
“However, take a look around – modern customers don’t ‘go online.’ Quite simply, they live online.”
So the goal is to be an omni-channel retailer. How does that compare with a multi-channel strategy? “Multi-channel is the ability to connect with a retailer and shop through different channels. Most companies offer that by now. Omni-channel is joining those things so they’re unified. “However, today, GDR Creative Intelligence is increasingly talking to our clients about adopting a ‘post-channel’ strategy.”
What does that mean? “The idea is that talking about channels at all is not particularly helpful. It relies on people having certain expectations of each channel. Basically, customers don’t care. They expect a good experience no matter where they interact with you. So you have to stop thinking about channels altogether. A store is a store. But that doesn’t mean it can’t be part of the digital shopping journey.”
Who do you think is melding the two successfully? “IKEA has developed an AR (augmented reality) app that enables customers to see what items will look like in their home. General Motors has a new dashboard app that enables people to order and pay for featured brands like Shell, Starbucks and Dunkin Donuts before they even arrive at the gas station or drive-thru.”
What about re-humanizing retail? Has technology dehumanized it, and how do you balance the two? “Amazon is functionally brilliantly. It is the shortest distance between wanting a product and getting it. They’re amazing at the supply chain part, but not good at eliciting emotion. It’s fundamentally a company with a cardboard box for a personality. Humanizing is a space where independents can win – not only in the physical store but also digitally.”
What’s the future for the human factor? “Over the next 10 years, we’re going to see a diversification. One end will be absolute convenience where replenishment happens without realizing it. For instance, washing machines that reorder detergent when it’s running out – anticipatory automation. At the other end of the spectrum there is increasing nostalgia for person-to-person interaction, community, a sense of belonging and localism. As we continue to spend our lives on social media, faceto-face interactions in the real world will become more valuable.”
How is this going to manifest itself? “We’re already seeing the digital-first companies like Amazon and Warby Parker shifting into physical footprints. “As I was saying earlier about digital, there’s rarely such a thing as pure e-commerce anymore – it’s just commerce. In the same way, a lot of evidence points to the fact that having a physical store doesn’t cannibalize online sales – it actually boosts it. I understand why Macy’s decided to shed a whole bunch of stores, but the reality is that, when some stores close,
"Retailers
are recognizing that the boundaries between online and offline life are increasingly blurred is the diminishment of the Chief Digital Officer.” e-commerce in the local geographies has tailed off as much as 30 percent in some cases.”
That’s a significant loss. “It’s what I said about lines getting blurred. Having a physical footprint can boost your digital sales, but digital also boosts physical store sales. Many companies feel they cannibalize each other. That’s almost always wrong.”
You’ve also talked about retailers forming partnerships. How far has this gone? “In general, collaborations are a smart way to operate. They make for a better customer experience. A collaboration like the one between retailer REWE in Germany and Lufthansa can boost both brands significantly by enabling passengers to order groceries in mid-air before they land. Continued on page 64 ▶ CAL I FO RNIA GRO CER | 63
◀ Continued from page 63
Rather than one plus one equals two, sometimes a good partnership adds up to much more for both firms, perhaps such that one plus one equals 10.”
place to place, rather than using regular taxis. A couple of years later, it was the new normality for millions of us all over the world.”
Are there other partnerships that are successful?
You discuss differentiation. Is being hyper-local and giving stores more individual authority the key?
“There are lots of examples. Amazon has been brilliant pivoting from its initial offering as an online book retailer. Everything they’ve done comes from thinking about the customer experience, either by developing it themselves or acquiring it. However, other companies are not in a position to do that. The next best thing is to collaborate with someone who can improve the customer experience.”
We’ve heard a lot about direct-to-home delivery and subscription boxes for foods. Is it a trend or fad? “A couple of years ago everyone was very excited about them. There are a lot of them out there in food and beauty products. But they really haven’t grown as much as we might have anticipated – though I’ll never say never.”
What’s the issue? “People don’t always plan that far ahead. You might feel like having eggs today, but grocery subscriptions require you to decide what you want far in advance. Or some other services just supply products on spec. Neither of these propositions feels quite right when it comes to how most consumers actually shop.”
How widespread is direct-to-refrigerator delivery right now? “The Swedish retailer ICA and Walmart are both testing it. Customers can install smart locks and drivers are given a one-time use code to enter the house and put packages away. Security cameras are used to monitor the process. “It sounds like a freaky invasion of privacy and a crossing of traditional boundaries – but, then again, how crazy might it have sounded a few years ago when a young Travis Kalanick (Founder of Uber) promised we’d all be jumping into strangers’ cars to travel from 64 | CAL I FOR N I A G R OC E R
“It shouldn’t be that difficult if you hire good store managers and let them merchandise the store for their audience. Clearly there is more agility among independents to do that. “One example I pointed out is Waterstones – a United Kingdom book chain. They have 300 stores, which is quite a lot for the UK. Yet, their CEO has been very clear about wanting 300 independent book retailers not 300 Waterstones stores. “They’ve done subtle things like having a handwritten chalkboard with a terrible joke on it, and individual Twitter handles for each store. It’s these little things that move them away from being this big corporation with big top-down values and no personality, and it has definitely resonated with customers, as the more recent numbers bear out.”
functional. Companies can certainly win by creating a shopping experience that’s more convenient than another, but that will only persist as long as you remain the most convenient. “Amazon wins because it’s convenient and, for the most part, does well on price. But, if someone else comes in and does it better, people won’t be particularly loyal to Amazon. “When someone has an emotional connection to a brand or retailer, they’re prepared to sacrifice your offering on convenience, price or assortment. That’s why the purpose-driven companies like Patagonia are doing very well. “If you don’t stand for something and your proposition is not clear to consumers, then it’s not reasonable to expect a lot of loyalty in such a saturated and competitive market. That’s just common sense.” ■
“There’s rarely such a thing as pure e-commerce anymore – it’s just
commerce
.”
With differentiation being the watchword, you have to wonder if customer loyalty is becoming a somewhat obsolete concept. “People are loyal to the companies that they have an emotional connection with. They are less loyal when it’s just
CONGRATULATIONS President & CEO
Ron Fong on 10 years of leadership from your friends at
MillerCoors.
LOSS PREVENTION, SAFET Y & RISK MANAGEMENT
Violence in Loss Prevention Dissecting Shoplifter Apprehensio ns BY DAV ID GEO RGE
Everyone has direct or indirect experience with shoplifting – either by being a shoplifter, knowing a shoplifter, or by witnessing a shoplifting event. The Shoplifting Epidemic According to “The Steal: A Cultural History of Shoplifting,” by Rachel Shteir, there are an estimated 27 million shoplifters in America alone. This is an astonishing number, and one that deserves perspective: • There are more shoplifters than there are people with pension plans. • There are more shoplifters than there are students enrolled in college. • There are more shoplifters than the entire population of Florida. • There are nearly eight times more shoplifters than teachers. • There are nearly 20 times more shoplifters than Americans serving in the Armed Forces. Over the years, many different approaches were developed by loss prevention professionals to initiate an all-out assault on the shoplifting epidemic. But like most everything else, changes in culture, risk and laws have forced the former strategies to run their course. To add to the complexity of the situation, shoplifters have steadily become more violent toward employees who try to apprehend them. What is left are thousands of retail organizations, each with unique policies and procedures for apprehending shoplifters. Are any of them successful? One may argue that the death of even one loss prevention (LP) professional at the hands of a shoplifter is enough evidence to suggest the retail industry should regroup and find a unified approach to address this problem. Should retailers simply prohibit employees, including internal LP professionals, from apprehending shoplifters?
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The Shoplifting Quandary Retailers believe that apprehending shoplifters decreases inventory losses. However, apprehending shoplifters has never been more dangerous. In the “D&D Daily’s Retail Violent Death Report” (August 2017), it was reported that retail deaths attributed to violence increased by 13 percent in the second quarter, and by 15 percent in the first half of 2017. The report also indicated the victims were “predominately shot and killed.” In 2016, five loss prevention/security officers and four police officers were killed during incidents involving retail crimes. Faced with these statistics, what are retailers to do? If they just let their merchandise leave the store in the hands of shoplifters, their businesses will struggle to survive. However, if they continue to allow employees (including internal LP staff) to apprehend shoplifters, then retailers will not only continue to bear the costs associated with the injuries that are commonplace with shoplifter confrontations, but additional lives will be lost.
LPSRM
Before an answer can be determined, the true value of apprehending shoplifters must be explored. The question is, “Does apprehending shoplifters really prevent losses and deter future shoplifting?� For retailers, finding accurate statistical data to formulate a credible answer would be extremely difficult. One reason for the difficulty is that company policies vary. Some companies expect managers to apprehend shoplifters, some allow only LP professionals to make such apprehensions, and some do not allow shoplifter apprehensions at all. This variation in policies and approaches make it impossible to determine the true impact of shoplifting apprehensions. Although there may not be enough statistical data to determine the true financial impact, a review of survey results compiled within the 2016 National Retail Security Survey (NRSS) indicates a pattern that is counterintuitive to conventional thinking. Retailers who participated in the most recent NRSS provided startling information. Consider these survey results: 2015 Avg.
2016 Avg.
2017 Avg.
Apprehensions
3455.1
3322.7
1440.7
Prosecutions
2738.7
1934.6
741.9
Civil Demand Actions
1216.3
2201.4
308.9
*Source: 2017 National Retail Security Survey
According to the information above, survey respondents decreased shoplifting apprehensions by more than half when compared to each of the 2015 and 2016 reported apprehension figures. If the apprehensions truly reduce and deter losses, then one would expect that because apprehensions decreased so drastically in the last year, then the average loss per shoplifting incident would have drastically increased within that same period. Well, the NRSS does report that losses-per-incident doubled over the last year. However, this huge increase in losses per shoplifting incident does not prove that apprehensions reduce and deter losses. Further analysis is needed to determine exactly why the cost per shoplifting incident had doubled over the last year. Was the large increase due to less apprehensions or was it because the retailers who responded to this particular survey were significantly different than those of previous years? Assuming the loss per shoplifting incident numbers garnered from the survey respondents were calculated from actual shoplifting loss dollars, then a simple calculation can determine the answer to this question.
Since the NRSS has provided us with both the average loss per incident and the number of reported apprehensions, we can use the chart below to show the total dollar value that the apprehensions yielded the retailers who participated in the survey: 2015 Avg.
2016 Avg.
2017 Avg.
Apprehensions
3455.1
3322.7
1440.7
Avg. $/Incident
$317.84
$376.80
$798.48
Total Loss Dollars
$1,098,168.98 $1,251,993.36 $1,150,370.14
*Calculated by the Calibration Group from survey information released in the 2017 National Retail Security Survey
The chart above indicates that although shoplifting losses-perincident have doubled over the last year, the overall total loss incurred by those retailers who participated in the survey did not. In fact, the total losses reported in 2017 are actually just slightly less than the average for the previous two years ($1,150,370.14 vs. $1,175,081.17). Because of this, apprehending shoplifters may not yield the return many have come to believe. This may be hard to accept, especially since there are shoplifters who steal from retailers nearly every day. To better understand this, a closer examination is needed. Statistics vary, but the National Association for Shoplifting Prevention (NASP) reports that habitual shoplifters steal between one and six times per week, and that 3 percent of all shoplifters are considered professionals, meaning they shoplift for a living. Apprehending either of these types of thieves does nothing to decrease shoplifting because even after being apprehended multiple times, these people continue to commit these crimes. NASP also reports that 57 percent of adult shoplifters and 33 percent of juvenile shoplifters say it is hard to stop shoplifting even after being caught. Another point to consider is that the NRSS continues to report that Organized Retail Crime (ORC) has outpaced employee theft as a leading cause of shrink. Therefore, something other than apprehensions must be done to successfully reduce losses attributed to shoplifting. The Theory of Retail Technology Retailers continue to implement technology that counts customers, reorders stock and improves customer conversion rates. Although technology can be used to solve most retail problems, many retailers are behind the curve when it comes to using technology to solve their shoplifting woes. The lack of large-scale anti-shoplifting technology implementations becomes easier to understand if retail executives are unaware of all the losses and risks the modern shoplifter community poses. Continued on page 68 â–ś CAL I FO RNIA GRO CER | 67
LPSRM
◀ Continued from page 67
For example, if every retail CEO was asked how many retail LP and security personnel were killed last year in the line of duty, would they be shocked to learn the answer is five? If these same CEOs were told that retail deaths attributed to violence had increased by 15 percent in the first half of 2017, would they be surprised?
As soon as they attempt to exit the store, the wheels on the shopping carts lock up, causing the shoplifter to abandon the merchandise and flee without the need for an employee confrontation. According to PushoutTheft.com, pushout thefts cause an average loss of $562 per incident.
If the answer is “yes” to either of these questions, then it is not surprising that retailers are not implementing technological solutions to shoplifting at a high rate of speed.
“Apprehending shoplifters continues to be a risky business,” said Robert Harling, President of Gatekeeper Systems. “As stated in one of Gatekeeper’s recent blogs, the frequency of violent confrontations during the act of apprehending shoplifters appears to be increasing with no end in sight.
“Apprehending shoplifters continues to be a risky business.” Using Technology, Not Employees, to Reduce Shoplifting There are several technologies on the market today that reduce shoplifting. Improvements in RFID technology is certainly one of the premier advancements being adopted by retailers for reasons other than shoplifting prevention, but LP executives are riding that wave. With RFID technology, retailers can track inventory in realtime, providing early alerts to order more stock. This is giving these retailers an incredible advantage over their competitors, as better stock levels translate to increased sales and customer loyalty. LP executives are jumping on the bandwagon by installing RFID-capable EAS systems, even if their respective organizations are not yet fully integrated with RFID. Even fraud return diminishes with RFID technology because cashiers are immediately alerted when an item is being returned that had not been previously purchased. Another technology solution helping to reduce shoplifting, as well as shoplifter/employee confrontations, has to do with shopping cart management and control. Pushout Theft, a term used to describe the use of shopping carts to steal large quantities of merchandise in a single incident, is easily eliminated with this technology. When a cart control system is implemented, even the most prolific professional shoplifters who fill shopping carts with high theft items such as Tide Pods, beer, meat, and over-the-counter medicines, cannot leave with the unpaid merchandise.
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“Using shopping cart management and control technology to recover stolen merchandise at the door, rather than confronting shoplifters, is arguably the safest way to protect a retailers’ employees and their merchandise,” said Harling. Where Do We Go From Here? The information analyzed prior to writing this article comes from credible sources who make positive impacts on the retail industry. Much of their information comes from retailers partaking in surveys. Although much of the available data within the LP industry are opinion-based (surveys) and not necessarily fact-based (investigative case files), it does not mean we should not be aggressively acting on the information. The information within this article is to inspire retailers to put more thought into shoplifting prevention strategies. Times have changed, and some LP strategies have not progressively changed at the same rate. Every time an employee, security officer or police officer is injured or killed at the hands of a shoplifter, the same question is always asked: “What could have been done to have prevented this from occurring?” There is no need to wait for another tragedy to start searching for the answer. The answers have been in front of us all along. ■ Editor’s Note: The Calibration Group, LLC is a full-service marketing, communications, and consulting firm specializing in providing relevant, educational content for the loss prevention, asset protection, and safety professions. For more information about The Calibration Group, visit www.calibrationgroup.com.
BIMBO BAKERIES USA
Congratulations to
Ron Fong on your 10th anniversary!
BimboBakeriesUSA.com
©2017 Bimbo Bakeries USA, Inc. All rights reserved.
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Incoming Headlite to Focus on Building Relationships By len lewis
After 30 years in the business, Paul Kamholz knows that effective communication, and the relationships it develops, are among the most important factors in success. As incoming Illuminator Headlite – the 90th in the organization’s history – both will be at the top of his agenda for 2018-19 and the foundation for the organization’s continued growth. Kamholz, Vice President of Sales and Marketing for Baswood, a solutions provider of wastewater treatment, spent his career in packaging and supply chain, selling to consumer goods companies. Since being lured by one of his customers to run business development at Baswood two years ago he has worked with several CPG manufacturers and grocery chains, including Albertsons and Publix, among others, that have their own manufacturing facilities. He joined the Illuminators 10 years ago when his previous company needed to develop stronger relationships with retailers. Since then, it has become a big part of his work and personal life. “It’s such a unique organization at every level,” Kamhloz notes. “The friends you make and the respect given by the retail decision makers is unparalleled in the industry. “Building those networks has been an immensely positive step in growing my and many Illuminator members businesses.”
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First and foremost, Kamholz says, his basic responsibility as Headlite is to continue the groundbreaking work started by his predecessors in inclusiveness and diversity. “Going to recent meetings reinforced my view that communication is essential,” he says. “Hearing people like Karl Schroeder, who is now President of the Seattle Division at Albertsons Companies, talk about how he started out as courtesy clerk in Phoenix and how being exposed to different things helped his career got me wondering how many courtesy clerks out there don’t have the same exposure of all our industry has to offer.” This means formulating a communication strategy that lets everyone know the value of being associated with the California Grocers Association, Western Association of Food Chains and the Illuminators, he says. “We’ve prioritized developing a social media presence on Facebook, Twitter, LinkedIn and Instagram,” Kamholz says. “But, it’s also going to involve exposing more people, at every level of an organization, to functions like our Illuminator diversity luncheon held in February, that highlighted the inclusive nature of our business so others have the opportunity to achieve, like Karl Schroeder and so many others have in this industry.”
The Illuminators fosters strong supplier/retailer relationships.
Kamholz and his colleagues have expanded the Guidelites program which assigns a mentor to new members. The goal is to help them meet the people that will help them grow their business. “It would be great if we could broaden our reach to those ‘courtesy clerks’ out there and communicate just how great this industry is,” he says, adding that the Illuminators Foundation is centered around education, leadership and partnering.
Paul and Lorraine Kamholz.
The reality is that the millennial generation prefer experience and tend to have a different mindset as it relates to a career, he shares. If they can sit down with grocery industry executives who cite real-life experiences, the industry will lure superstars that might otherwise find jobs in high-tech or other fields perceived to be better. “Our membership has been steady for the last couple of years,” Kamholz says. “We want to grow, and the only way to reach young up-and-comers is by using the vehicles they use. We’ve even employed a company that specializes in this communication strategy to broadcast what the Illuminators do and the value of membership.”
Paul Kamholz and Illuminators Special Event teammate Kendra Doyel, Ralphs Grocery Co.
Kamholz says the strategy seems to be gaining traction and he hopes by the end of this fiscal year it will increase membership. The organization’s goal is to get to 300 members by the end of his term.
Kamholz concedes that “in the decade I’ve been involved many consumer goods companies are so busy they don’t have, or take the time to recognize the value the Illuminators provide. We have earned the respect and have very strong relationships with our retail partners thanks to 90 years of hard working volunteers.” He adds that this mutual respect opens doors and creates opportunity not always seen outside of the Illuminators. “We don’t take this respect for granted,” he says. “The Illuminators strives to be recognized as the most admired grocery industry organization in North America.” Kamholz says he has been successful in bringing new members into the organization, which proved beneficial for those companies. “The ones that took the advice to be active grew their business,” he shares. “They saw the value and what we projected would happen did happen.” Continued on page 72 ▶ CAL I FO RNIA GRO CER | 71
◀ Continued from page 71
Asked whether this means more industry events, Kamholz replied, “It’s a fine line. We want to make sure events are meaningful. We have to make sure we’re not overdoing it.” The key, according to Kamholz, is to make events substantive and of value. “We have to make sure we communicate that value and the benefits of membership far outweigh the investment of time or cost,” he adds.
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To Kamholz this means taking baby steps rather than huge leaps. “We don’t want to fix something that’s not broken,” he says. “The Illuminators is a welloiled machine, thanks to those that came before me.”
Kamholz says he’s not going to change the world in one year, but “I would like to reinforce the foundation built by the Illuminators before me. I’m truly humbled to be the 90th Illuminator Headlite.” ■
Congratulations Ron Fong on your 10th anniversary as California Grocers Association President and Chief Executive Officer John B. Kelly, MPA, CFP The Investor’s Caddie, Inc. “Values Based Financial Planning Advisor” 916-296-9019 Investorscaddie@gmail.com
CAL I FO RNIA GRO CER | 73
DEALING WITH
UNWANTED SOLICITORS BY LEN LEWIS Do you chase away the Girl Scouts selling cookies in front of your store? How about calling the police to arrest the lady collecting for the Salvation Army, or the group gathering signatures to save the whales? This might sound like a no-brainer. But it’s not. And the wrong move might get a retailer embroiled in an ugly and unnecessary legal situation.
This was the message presented at a webinar by John McCarron, Senior Partner, with the Sacramento law firm of Downey Brand, LLC, and hosted by the CGA Educational Foundation. In his presentation, McCarron discussed the rights of retailers, non-union signature gatherers and police reluctance to get involved in these disputes. Over time, state law has evolved to a point where retailers are protected from unwanted solicitors outside their stores. And while the law also protects peaceful union picketing, unwanted non-union solicitors outside of most store entrances are not covered by the First Amendment. “If you’re not already inundated with signature gatherers you may see an uptick in activity,” McCarron said. “This always happens during peak political cycles. There are currently about 20 campaigns going on for different ballot measures. “I want to make this very clear. Non-union solicitation is generally not a free speech issue and signature gatherers have no right to solicit customers in front of your store. But the devil’s in the details,” he remarked.
“Over time, state law has evolved to a point where retailers are protected from unwanted solicitors outside their stores.” Freedom of speech issues in California dates back to the Pruneyard Shopping Center case in 1980 when the court determined that it only applies to public forums. For example, a regional mall that has public amenities which are the equivalent of a town square or public forum – even if it is on private property. “In this situation there’s a right to free speech,” he said. To be a public forum, a shopping center must be “designed and furnished in such a way that induces shoppers to congregate for purposes of relaxation, entertainment or conversation.”
In other words, if a retailer’s intention is to create a gathering place with tables and chairs, then everyone has the right to free speech with only reasonable time and manner restrictions, according to McCarron. However, a private sidewalk that lacks the amenities of a gathering place in front of a customer entrance is not a public forum, according to the 2012 court decision in the case of Ralphs v. UFCW Local 8. That was further clarified in 2017 by the Fourth Circuit Court of Appeals in California in Ralphs v. Victory Consultants, which stated that landowners and tenants could have people removed from trespassing on private property that is not a public forum. “The court found that Ralphs had exclusive control of the store entrance and exits, as well as the surrounding sidewalk and apron areas,” he said. “But again, it depends on how your store’s entrance is configured.” Another question is who controls the parking lot. “You have to know what your lease says,” McCarron counseled. “If it doesn’t extend to the parking area, then you need the cooperation of the landlord to remove people.” Moreover, in an urban area where the public sidewalk is an entrance to a store, signature gatherers can’t be prohibited. In order to avoid confrontation, a copy of the lease should be at the manager’s disposal. If the police are called, a manager can produce a copy of the lease showing what areas the store controls. This will tell law enforcement what is and is not the store’s private property. Most stores prefer not to put their managers in the middle of this situation. If it is a company’s policy to involve their managers, McCarron suggested the manager retain a written store policy on company letterhead, rather than just verbally telling people the policy. Even then, police may not do anything. “They may believe it’s a civil matter and don’t want to trample on anyone’s rights,” he said. “Additionally, municipalities are reluctant to remove solicitors in order to avoid a civil lawsuit.”
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said McCarron. In Ralphs v. Victory Consultants, the Court of Appeal overruled the trial court and found that the signature gatherers were agents and not independent contractors, but this was a close question and the facts of any particular case could result in a different ruling.
One alternative is to put together a packet of information for local District Attorney’s and law enforcement. “It gives some comfort that they won’t get sued for violating anyone’s First Amendment rights,” McCarron said. “But even here, the law can be unclear.”
“If you’re going to take civil action, I urge you to sue not only the company but also the people collecting signatures,” McCarron said. “If it turns out they are independent contractors and not agents you can’t prevent them from coming back.”
Another option, albeit not an ideal one, is for the store manager to make a citizens arrest of signature gatherers. “You still have to call the police to make the formal arrest. They will probably honor your request since it protects them from a civil lawsuit by the solicitor,” he said. Overall, McCarron urged retailers to create a clear company policy on solicitors and enforce it uniformly. “You have to think things through,” he said. “If your store policy lets the Salvation Army do fundraising, it could mean you’ve created a public forum. Signature gatherers are aware of that and it could be a problem in removing them. You have to judge for yourself if allowing some groups and not others is
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To eliminate problems entirely he again urged retailers to make sure their storefront doesn’t constitute a public forum. iStock
a slippery slope. You can’t differentiate between one group and another. You may have to deny access to all of them.” Retailers who decide to file a civil suit and seek injunctive relief against solicitors, must make sure to sue the right people,
“There are some gray areas like stores with one or two tables,” he said. “That doesn't necessarily create a public forum unless you have a bunch of tables that offer other amenities and create a gathering area that functions as a public forum.” ■
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