Mkgrocer 2016 issue1 by California Grocers Association

KANSAS FOOD DEALERS ASSOCIATION

Celebrating 150 Years of Service to Kansas & Missouri

Supporting Members in Missouri and Kansas since 1895

Retail Grocers Association Kansas Food Dealers Association

Food Industry Services, Inc. Market Smart

• Education • Support • Government Relations • Legislative Representation

• Money Orders • Coupon Processing • On-Site Support • IT Solutions

Become a RGA and a KFDA member and along with representation in both Kansas and Missouri state capitols and Washington D.C., receive discounts on quality products and services provided by Food Industry Services, Market Smart, and our trusted Strategic Partners. Call me directly at 913.601.3630 or Ellen Koehler at 913.601.3634 to process your application today! Jon McCormick President, CEO

RGA

RGA Strategic Partners Trustwave

PC Compliance, Management, Log Monitoring, Security Solutions Protecting over 130 member stores and growing.

Supermarket Insurance Group

Supermarket Specific Approach to Property Casualty Insurance for Over 30 Years

The Miller Group

established health insurance which helps manage an RGA funded environment for member companies with 50 or more employees.

CBK Collections

Bad Check Collection Representment Conversion CBK has collected over $250,000 in bad checks for members since 2014.

Networking with Senator Roy Blunt

Mail-Sort, Inc.

Printing Services, Direct Mail, Shelf-Labels, In-Store Signage

Titan Security Group

Providing trained and experienced in-store security personnel, high tech video surveillance and monitoring. Titan also holds seminars for management security training.

WorldPay

Credit Card Services/Processing

ServiceMaster Recovery Management

Disaster Planning and Emergency Management Services Do you have a plan?

Government Relations

WS Communications

In-store radio solutions representing kenwood radios, increasing productivity and customer service

BGS Energy

LED lighting design consulting and funding on projects. Currently working with KCP&L on their 50% energy rebate. Kansas Rebate coming in 2016!

Red Carpet Software

provides transactional reconciliation services helping to analyze credit and debit bank fees, network fees, chargebacks, and discrepancies on the front end. This includes remote deposit capture of checks.

Polsinelli Law Firm

Networking with Speaker Ray Merrick

Labor Counseling, Human Resource Advice, Seminars, Podcast Coming Soon

2809 W. 47th Street • Shawnee Mission, Kansas 66205 • 913.384.3830 • fax 913.384.3868

CONTENTS | ISSUE 1

COLUMNS

FEATURES

Editor's Note Welcome to Missour-Kansas Grocer. . . . 5 President’s Message Your Number One Benefit. . . . . . . . . . . . . . 6

AR YO

Government Relations From Bugs to Windshields. . . . . . . . . . . . . . 8

Big Data, Big Opportunities Collecting consumer data for detailed analysis has never been more critical, yet some retailers still underestimate its importance. The challenge lies in transforming data into useable information.

Inside the Beltway Legislative Look-Ahead 2017. . . . . . . . . . . 14 From The Hill Why Involvement Matters. . . . . . . . . . . . . 16

HUN FAR

Washington Report Overtime Rule Significantly Impacts Grocers. . . . . . . . . . . . . . . . . . . . . . . 19 Viewpoint DIY Earthquakes. . . . . . . . . . . . . . . . . . . . . . 24

Are You a Hunter or a Farmer?

Trust

Listening

Growth

Are you a hunter or a farmer? In this fast paced world of retailing, it may be the difference between success and failure. A noted author and researcher explains how being better and faster may keep your company doors open.

Government Relations. . . . . . . . . . . . . . . . 10

RGA News. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Do you have the instinc adapting to whatever env 15 Minutes With… Tom Stenzel a farmer, toiling in the f United Fresh Produce Assn... . . . . . . . . . . 54 year-after-year and Outside the Box. . . . . . . . . . . . . . . . . . . . . . . 26

Alignment

Why Collaboration Matters Working more closely with your trading partners builds the kind of relationships will lead to better sales, better service and better overall results, reports one of the country’s largest research firms. So what’s the problem?

DEPARTMENTS

Supermarkets Battle for Share of Stomach Competition has always been a part of the retail food business but the battle for share of stomach has never been more intense, according to the Food Institute.

M ISSOUR I – KA NS A S GRO CER | 3

RGA | BOARD OF DIRECTORS

Retail Grocers Association of Greater Kansas City Executive Committee

DIRECTORS

Kansas Food Dealers Association Executive Committee

DIRECTORS

retail grocers ASSOCIATION of Greater Kansas City

Chairman of the Board Don Gipson Sunfresh, Apple, Thriftway

Barry Queen Queen's Price Chopper

Past Chairman Gary Jones, Past Sunfresh, Apple, Thriftway

President/CEO, Secretary Jon McCormick Retail Grocers Association Treasurer/CFO Candy Taloney Retail Grocers Association

David Ball Ball Food Stores, Price Chopper-HenHouse

David Cosentino Cosentino's Food Stores Pricechopper

Jim Coddington Sunfresh, Apple Thriftway

Larry Good Bob's Super Saver Country Mart-Price Chopper

Chairman of the Board Mike Floersch Ray's Apple Markets

President/CEO, Secretary Jon McCormick Retail Grocers Association

President Larry Good Bob's Super Saver Country Mart-Price Chopper

Treasurer/CFO Candy Taloney Retail Grocers Association

Jon Birky Apple Market

Mike Moon Moon's Market

John McKeever McKeever's Price Chopper

Pat White White's Foodliners

President/CEO/Secretary Jon McCormick

Missouri-Kansas Grocer For association members, is the official publication of the subscription is included Retail Grocers Association of in membership dues. Greater Kansas City.

Treasurer/CFO Candy Taloney Retail Grocers Association

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2809 W. 47th Street Westwood, KS 66205 (913) 384-3830 (913) 384-3868 Fax www.rgakc.com

Larry Heng Festival Foods

Alan McKeever McKeever's Price Chopper

George Lipari Lipari's Sunfresh

Jeff Pedersen Associated Wholesale Grocers

Publisher Jon McCormick jmccormick@rgakc.com Editor Jon McCormick jmccormick@rgakc.com For advertising information contact: Jon McCormick jmccormick@rgakc.com

FROM THE EDITOR

Welcome to Missouri – Kansas Grocer J O N M CCO R M I C K E DITOR PR ES IDEN T AN D CEO R E TAIL GR OCER S AS S OCIAT ION O F G REATER KANSAS CIT Y

This is the inaugural edition of the missouri-kansas food & retail magazine.. I am excited about being able to bring you and all of our members cogent and timely articles and consumable information that will educate, inform and occasionally add some levity to your day. In this first edition there are updates on Kansas and Missouri legislative activity, and some timely issues in Washington. With a new President-Elect Trump, I am sure we will be stepping up the Federal section of this magazine. I expect to be informing you of some good news out of DC for a change. We also have some good articles on “Big Data”, collaborating with your trading partners and will continue to inform you of ways to benefit your operations. You will hear more about data soon. I am starting a “Retail News” section. We’ve had some recent grand openings and I highlight them along with some pictures. If you could help me keep up with any newsworthy items in your store or your trade area, I would greatly appreciate it. Take a picture… write

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a note… I will follow up from there. Thanks. There is a real great article on “Share of Stomach.” Many of you are experiencing sales decline and have contacted me to share your thoughts. I appreciate that immensely. The fact of the matter, it isn’t one or two things affecting your sales, it’s a baker’s dozen. As an example, I have ordered dinners from Blue Apron. If you haven’t done it, I would recommend it. You will see expansion into this type of food delivery going forward. Amazon, Walmart, reduction of SNAP benefits… many forces are putting pressure on your business. We’ll be reporting and writing on ways to help your operations going forward. One of the ways you can help your business is look into the services offered through your association. I hope you enjoy the magazine. All the best, God Bless and make it a great day! ■

M ISSOUR I – KA NS A S GRO CER | 5

PRESIDENT’S MESSAGE

your number 1 benefit

J O N M CCO R M I C K PR E S IDE N T AN D CEO R ETAIL GR OCE R S AS S OCIATIO N O F G REATER KANSAS CIT Y

sometimes the benefits of association membership isn't always easy to see. But take a deeper look and you'll understand why you are a member. Your Association, whether it is The Retail Grocers of Greater Kansas City or the Kansas Food Dealers, provides many valuable benefits designed to help you and your business succeed in this tough business environment. It is not only the money orders, coupon processing, PCI Compliance program or the other business services we provide… it is the legislative representation that maybe in the end may be the most important benefit of your membership. I’ve often been asked… "what do you do for the Association?" My response is first

and foremost and always, "our legislative and regulatory efforts." That was never more true last fall when we were in weekly meetings with the Mayor of Kansas City debating with the “Organizers” and the Mayor over minimum wage. This issue would have bled over to all of Kansas and Missouri! And it will be back in the future. It was a year ago at this time when the KCMO City Council decide to take up the minimum wage raise as an issue, following the lead of St. Louis’ city government – both governments calling for an eventual $15 wage over a short period of time. The collaboration of RGA, KFDA, MGA, OEGA, AWG’s Jimmy Holland, Dave Overfelt of the Missouri Retail Association and Missouri Representative Dan Shaul (MGA), helped bring together the forces needed to forestall the legislation.

Former Massachusetts Sen. Scott Brown with RGA's Jon McCormick.

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Meanwhile, many thanks needs to go to Dan Shaul who presented and ultimately passed legislation in Missouri that will prevent local governments passing any

legislation that preempts Missouri state law. If you see Dan make sure you thank him for his good work on this issue. (Other threatening issues are being presented for the 2017 Missouri and Kansas as I write.) These “behind the scenes” efforts by your Associations are so important to your business, and go relatively unnoticed by you the member. I’m not sure what the increase in your labor cost would have ultimately meant to your business, but it would have been significant. Based on just this one effort alone, the pennies per day cost of your Association membership is “priceless” (as the commercial says) compared to the labor and tax burden, let alone the turmoil in scheduling it would have cost your business. (Think… worse than Obamacare’s “30 hour work week”) There is no way, without your Association, you could fight the legislative onslaught being put upon your business today. Those of you that have been receiving my newsletters certainly know the impact of the onerous regulations being concocted and thrown at your business. The problem is… there is more to come. If you have not joined the Retail Grocers Association, the Kansas Food Dealers, or MGA, OEGA or MRA yet, please consider

PRESIDENT’S MESSAGE

“WE ARE ALL IN THE BUSINESS TOGETHER TO SERVE OUR EMPLOYEES, CUSTOMERS, AND OUR FAMILIES AND TRY TO HAVE SOME REWARDING TIMES AS WELL.”

Non-members, I invite you to join. For pennies a day you will receive what I believe to be at minimum a 10-fold value in return. This “eMagazine” is just the beginning of a new look and future for RGA and KFDA. Along with the RGA/KFDA newsletters, this magazine will provide more in-depth articles relevant to the Midwest and you as a Kansas and/or Missouri retailer.

Jon McCormick, RGA, with Kansas Gov. Sam Brownback.

doing so. Going forward, there will be legislative issues that need addressed on your behalf. You can’t do it alone. In addition to legislative representation, RGA’s Food Industry Services Corporation provides money orders, coupon processing, PCI compliance support and management, check collection, security support, cameras, radios, insurance programs and more… all at or below market costs. Thanks to you, the members, for supporting your Association.

We will highlight retailers, grand openings and general community news in the Midwest Food Industry. I look forward to the support of all members of the food industry community. Retailers, vendors, suppliers and service providers to the industry will be highlighted from time to time as well. We are all in this business together to serve our employees, customers, and our families and try to have some rewarding times as well. One of my goals is to bring back a sense of community to our industry here in the Midwest. Something I think has been lost in the hustle, bustle and grind of our business. I look forward to seeing you in 2017. ■ Jon McCormick with Sen. Roy Blunt (R-Missouri)”

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GOVERNMENT RELATIONS

from bug s to windshields

J O N M CCO R M I C K PR ES IDEN T & CEO R E TAIL GR OCER S AS S OCIAT ION

We may not always be the windshield, but know that because of the work we do behind the scenes, we will continue to be more windshield than bug. Beyond the practical lesson this age-old adage provides on the almost pendulumlike and fleeting nature of success, it serves as a caveat to maintaining humility in the wake of success. No matter how many times you may find yourself as the windshield plowing through bugs, it is a near certainty that at one point you will find yourself a bug on the wrong end of the adage. I have found this wisdom useful as a way of keeping things in perspective when maneuvering in the State Capitol, and it is something we ought to remember as we look back on this legislative session.

As an industry, we found ourselves in the path of many windshields at the start of the year – from legislation to mandate predictive scheduling, to legislation that would ban the sale of Mylar balloons, to legislation that would have required products to be priced based on their perceived gender, along with other measures. However, looking back at the end of the session, RGA’s Government Relations team managed to turn the tables on these precarious situations and become the windshield with persistence, hard work and humility.

In many cases, the approach taken with a legislator is crucial to success. Too often, it seems, legislative advocates take a binary view on legislation. Either the bill is bad, or good. And a bill that is bad is reflexively shuffled to a list of bills to oppose for the purposes of defeating it. It’s not enough to simply say “no”. People sometimes forget that working in the Legislature is a marathon, not a sprint. One year a legislator who is an adversary, can become an ally the next. But that doesn’t happen without garnering good will, even when opposing a member’s bill. While there are some instances where a bill can clearly not be fixed, providing assistance to a legislator on a bill you oppose is always the right move, especially when there is truly a way to fix it. This is extremely important to keep in mind in the new era of term limits where a member can stay in one house for 12 years. Making an enemy for short-term gain is particularly unwise, since they are likely not going anywhere for a long time. Relationships are also a key to RGA’s success. Our team benefits from having spent combined decades working in the Legislature. With that comes a legitimacy and trust when dealing with colleagues in the Capitol. That experience also provides knowledge of the fluid political dynamics

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GOVERNMENT RELATIONS

within “the building,” which is an asset when working to defeat or fix a piece of legislation we oppose. It’s not enough to make a good case.

“RGA’s Government Relations team managed to turn the tables on these precarious situations and become the windshield with persistence, hard work and humility.”

What really matters is who you make the case to. Sometimes the case is made to an influential personal staffer. Sometimes the case is made to an influential committee consultant. Sometimes the case is made to a legislator who has a little more sway than they let on.

This is not to say that RGA avoided being the bug in the path of the windshield altogether this year.

It is impossible to know these things without having developed those relationships. And even if someone knows where the right pressure point might be, it’s relationships and reputation that get you in the door to see these influential people.

Even with the conservative tilt in both Kansas or Missouri Legislatures, it is rare for business groups such as ours to have everything fall in our favor. Government relations is, after all a marathon, not a sprint. When you play the long game, there are bound to be setbacks.

The key to long term success in Jefferson City or Topeka is maintaining the good reputation that our Government Relations team has worked so hard at building and sticking to our core working principles: persistence, hard work, and humility. We may not always be the windshield, but know that because of the work we do behind the scenes, we will continue to be more windshield than bug. ■

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GOVERNMENT RELATIONS

kansas legislative review Legislators were again busy looking for ways to increase the money coming into the state coffers. Some amendments and bills were actually in favor of business and two in particular were aimed at lowering the food sales tax. A good issue to back in the future. Lowering food sales tax would not only help the supermarket and convenience store retailer but will focus on helping those in the state that have the least amount of money. You will note that HB 2576 is aimed at preempting local governments from enacting or enforcing policies regarding compensation and benefits. All in all, we had a fair year especially when comparing Kansas to most states on either coast. Governor Brownback still is struggling to keep his vision intact as the economy hasn’t cooperated with the scheme. The beer issue will again be addressed in 2017. 2016 saw no real action except for lobbying activity by Uncork Kansas. There most likely be many new faces in the House and Senate after the Primary election. The Kansas Food Dealers will be surveying the members and taking a position based on that survey. Colorado passed legislation that allows grocery stores to purchase liquor stores and C-stores can sell strong beer. That should

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influence Kansas legislators in their decisions. In addition to Colorado, Oklahoma was also very active during the 2016 legislative session with efforts to allow beer sales in c-stores and cold beer in liquor stores. The legislation that eventually passed would allow the Oklahoma voters to decide if c-stores can sell strong beer and wine with liquor stores being permitted to sell cold beer. It is called an initiative Referendum (vote of the people). A question will place on the ballot in a few weeks. Based on preliminary discussions with our friends at QuikTrip, the polling has 70% of people surveyed supporting c-stores. The KFDA has not been active with Uncork due to their position with adding spirits and wine to a bill. The survey will address selling strong beer only in supermarkets and c-stores. The 2016 Legislature was dominated by school funding and the continued decline in tax revenue resulting in significant budget cuts and transfers of funds from other sources such as the Kansas Department of Transportation and delays in payments to the Kansas Public Employees Retirement Fund to make ends meet.

The Kansas Supreme Court ruled unconstitutional the school finance bill passed by the Legislature to address the “equity of funding” issue between poorer and wealthier districts. The Court threatened to close school on July 1 if the Legislature did not resolve the issue in a Special Session. The Legislature did act and the Court agreed, so school closures were averted. These issues combined with the Governor’s tax policy, specifically the LLC tax exemption, to defeat many incumbent Republicans who had supported the Governor in his “march to zero” tax policy. The impact the election will have on the contests for House and Senate Leadership is obvious, and there will be new leaders in several positions. House Speaker Ray Merrick did not seek re-election nor did House Speaker Pro Tem Peggy Mast. Senate Vice President Jeff King did not seek re-election and Senate Majority Leader Terry Bruce was defeated in the Primary.

bills impacting retail Below are the bills that affect retail and general business for the 2016 legislative session and their status. SB 366 contains HB 2595 regarding nutrition labeling and consumer incentive programs. This is the legislation that came to our attention and was of concern to Both Associations RGA

GOVERNMENT RELATIONS

“The composition and philosophy of the 2017 Legislature will be decidedly more moderate. School funding, Medicaid expansion and repeal of the LLC tax exemption will be priorities for the new Legislature.” and KFDA. Mike Beal, Ball Foods COO, was a big help in giving the Legislators a good explanation of how the Double-Up program works in the stores utilizing it. Loosely interpreted it could have been eliminated. The bill provides that regulation of food nutrition information and consumer incentive items served with food or nonalcoholic beverages sold at restaurants, retail food establishments, or vending machines is reserved to the Legislature. According to the legislators involved, the Double-Up program is not impacted by the provisions of the bill. SB 280 - Property Tax Appeal provisions. The bill allows a taxpayer to appeal a negative decision by the Board of Tax Appeals to the Court of Appeals or to the District Court. Appeals to the District Court are a de novo review and new evidence can be presented. The bill passed unanimously, but was vetoed by the Governor. On June 1, a sine die adjournment, the Legislature overrode the Governor’s veto. The bill also contained numerous other tax provisions dealing with removal of appraisers, delinquent property taxes, tax liens, delinquent tax list checks valuation of oil and gas property, bed and breakfast property, recreation commission budget, airport property tax exemption, property valuation procedure, agricultural use, mass appraisal, inspection of parcels, fee-simple appraisal option, study result presentations, and market study analysis publication.

SB 316 - Property tax lid; effective date; exemptions. 316 was introduced and referred to Senate Taxation committee where it received a favorable committee. In Veto Session is was then placed into Sen. Sub for HB 2088 often referred to as a “gut and go.” Sub for HB 2088 was passed by both chambers and was signed into law by the Governor. SB 349 - Hazardous materials endorsement exemption. SB 349 was passed by both chambers, it also included favorable language offered by Tom Palace, President of PMCA. It was signed into law by Gov. Brownback and will be enrolled in the statute book. SB 508 - Partial repeal of small business (LLC) income tax exemption. Would have taxed 70% of small business income leaving 30% untaxed. Did not make it out of the Senate Assessment and Taxation Committee. HB 2676 - Prohibiting cities or counties from adopting employee scheduling policies for private employers. HB 2676 was passed favorably by the House Commerce Committee and the full House of Representatives. In Veto Session it was placed in SB 366 and passed by the full Senate. It was then approved by Governor Brownback. HB 2617- Workers Compensation. The bill was proposed by the Kansas Department of Labor. It would allow the Department to contract for the position of medical director and would allow workers compensation claims to be filed

electronically. The bill also would allow federal or state agencies access to medical records and accident reports for the purpose of child support enforcement

2017 Forecast After the election, the political landscape will change. It could be 50-60 new faces in Topeka running our State. The composition and philosophy of the 2017 Legislature will be decidedly more moderate. School funding, Medicaid expansion and repeal of the LLC tax exemption will be priorities for the new Legislature. In addition, the Kansas Supreme Court ruled in favor of several school districts challenging the “adequacy of funding”. In a 47-page ruling, the court rejected the bill, saying the Legislature’s formula “creates intolerable, and simply unfair, wealth-based disparities among the districts.” The 2017 Legislative activity will be focused on the school funding issue and recouping money that was deferred from the State when Governor Brownback’s tax cuts did not produce more jobs (and more tax revenues.) All this is to say that business tax policy in general likely will be under attack. Exemptions, credits and incentives could be threatened and business tax increases could be proposed

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GOVERNMENT RELATIONS

missouri legislative review governor increases veto record by july 14 consideration deadline. Democratic Governor Nixon ended up signing 115 bills while letting three become law without a signature by his constitutional deadline to take action, July 14. He vetoed 23 bills making his overall veto of bills, since elected, 159. He already holds the record for most overrides at 34. Here’s a recap of pertinent bills.

food, alcohol & tobacco SB 919 Schmitt R –Allows brewers to lease coolers to retailers and allows retailers to sell growlers of draft beer Below are the bills that affect retail and general business for the 2016 legislative session and their status.

general & crime SB 590 Dixon R – Omnibus crime bill allows certain offenses to be prosecuted in the county in which the victim resides or conducts business or where stolen property was located et.al. SB 624 Libla R –Modifies fraudulent procurement of a credit or debit device, businesses cannot be held criminally liable if they are not involved.

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Pharmacy & health SB 865 Sater R – Modifies provisions regarding licenses issued by the Board of Pharmacy and covered prescription benefits, delineates procedures for PBMs with regards to MAC lists, prohibits co-pays from being higher than usual & customary charges and requires health carriers to offer medication synchronization services, amended to add 90 day fill, SB 973 SB 875 Schaefer R – Allows a pharmacist to select an interchangeable biological product when filling a biological product prescription, BISOSIMILARS SB 973 Wasson R – Pharmacist may dispense up to a 90 day supply of maintenance medication. HB 1534 Flanigan, Tom R – Extends the expiration date on various federal reimbursement allowances for two years HB 1568 Lynch R – Allows pharmacists and technicians to dispense opioid antagonists. HCS HB 2029 Hoskins, Denny R – Further regulates step therapy for prescription drugs

taxation HB 1435 Koenig R – Limitations for sales tax refunds apply only to a final assessment.

tort & labor SB 700 Schatz R – Modifies the law relating to workers' compensation premium rates Governor would not sign so it becomes law anyway. SB 702 Munzlinger R – Permits recovery of overpaid unemployment benefits. HB 1718 Corlew, Kevin R –Modifies arbitration agreements between employers. HB 1763 Shull R –Changes the laws regarding workers' compensation large deductible policies.

2017 Forecast With a new Republican Governor in Eric Greitens, the business environment should be improved upon from previous years. Because of the new Governor and some changes in the House and Senate a forecast will be provided in the next edition.

DRIVING CATEGORY GROWTH

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hersheys.com M ISSOUR I â&#x20AC;&#x201C; KA NS A S GRO CER | 13

INSIDE THE BELTWAY

Legislative look-ahead for 2017

G R EG F ER R A R A SEN IOR V ICE PR ES IDEN T G OV ER N MEN T R ELATION S & PUBLIC AFFAIRS NAT ION AL GR OCER S AS S OCIAT ION

With a new president-elect trump there will be significant changes in washington, dc. along with a new president and administration, and the control of the U.s Senate and House, it should be a good environment for business. Although there is never a shortage of issues impacting the supermarket industry, the following are anticipated to be on the Congressional agenda and closely monitored by the National Grocers Association (NGA).

Tax Reform While there is much uncertainty on the likelihood for the passage of comprehensive tax reform, House Ways and Means Chairman Kevin Brady (RTX) put forth a blueprint for tax reform in June of 2016 and has indicated that he will move forward on it during the 115th Congress. NGA has weighed in with both Chairman Brady and Chairman Hatch, the current Senate Finance Committee Chairman, advocating for a tax reform package that provides relief for both C-Corps and passthrough businesses. 14 | M I S S OU R I - K A N SA S G R OC E R

Health Care Similar to comprehensive tax reform, policy surrounding health care reform in the next Congress remains unclear. Who lands in the White House and what party controls the Senate will determine the future of the Affordable Care Act (ACA). For the most part, Democrats remain committed to tweaking and improving the ACA while Republicans continue to push for a replacement.

SNAP and federal feeding programs In 2016 the House Agriculture Committee held over a dozen hearings on the Supplemental Nutrition Assistance Program (SNAP) program, including a hearing in May in which NGA Board member, Jimmy Wright, owner of Wright’s Market in Opelika, Alabama, testified before the Committee.

Given the interest in the House on SNAP and some of the heated rhetoric on the campaign trail, anticipate to see more pressure in 2017 to bring about “reform” of this program. NGA will remain focused on ensuring any proposals, including ones that limit what items SNAP recipients can purchase, do not add new costs or administrative burdens on independent supermarkets. In addition, the House and Senate Agriculture Committees are likely to begin the process of drafting a new farm bill next year. Farm bills are large bills that package together several different agriculture priorities, including crop insurance, livestock issues, and nutrition policies. Traditionally, legislation encompassing nutrition programs (including SNAP) are included as a part of the farm bill in order to receive urban support for the farm programs that often only appeal to Members of Congress from rural districts. These bills are large and expensive, and usually result in tough fights as both Chambers look to pass a product that pleases several different constituencies.

INSIDE THE BELTWAY

iStock

GMOs After a year of intense debate and legislative jockeying, President Obama signed into law a biotechnology labeling bill that created a national labeling standard for food products made with genetically engineered (GE) ingredients and genetically modified organisms (GMOs). The action now shifts to the U.S. Department of Agriculture (USDA), where the agency will begin the rulemaking process that will decide how the law is implemented across the country. NGA will be monitoring the rulemaking process on this bill very carefully, and will continue our engagement with USDA.

Through this coordinated effort, supermarket operators from around the nation come to Washington for face-to-face meetings with Members of Congress and their staffs. NGA encourages independent supermarket operators to attend this event and to make their voice heard on Capitol Hill. For more information, visit http:// grocersdayinwashington.com/.

As you can see, the rest of 2016 will remain very busy, but we’re already focusing on what opportunities and challenges a new President and Congress may bring in 2017. Given these changes, we will have much work to do to educate lawmakers and regulators about the positive impacts the independent supermarket industry has on the economy and local communities. That's why the NGA cohosts the annual Supermarket Industry Fly-in Day in Washington, DC. The upcoming flyin will be held from May 2 – 4, 2017. M ISSOUR I – KA NS A S GRO CER | 15

FROM THE HILL

why involvement matters G R EG F ER R A R A S E N IOR V ICE PR E S IDE N T GOV ER N MEN T R ELATION S & PUBL IC AFFAIRS N ATION AL GR OCE R S AS S OCIATIO N

With so much at stake, how can the specific issues confronting the independent supermarket industry be adequately addressed? The answer can be found by understanding the nature of the independent grocery channel. By and large, independent supermarket operators are family owned, private enterprises with deep local roots. They are important – very important – constituents for Kansas and Missouri Representatives and Senators in Washington, not only as major employers and economic drivers, but also as indicators of economic, political and demographic trends affecting households, families, and of course, voters. Grassroots involvement from trade associations, such as the National Grocers Association (NGA) and Retail Grocers Association of Greater Kansas City and the Kansas Food Dealers, is the most effective way for grocers to be heard in the halls of Congress and at the state and local levels of government. As former Congressman John Linder (GA7) noted, “We listen way more often to our constituents than the lobbyists. And the grassroots are going to have to do it.”

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There are a number of ways to get involved in the political process – reach out to your Member of Congress through NGA’s Take Action portal at www.grocerstakeaction. org. Supporters of the independent supermarket industry are able to connect with elected officials and regulators on the many important issues affecting the independent supermarket industry. Store tours are another effective way to connect with Members of Congress to give them a firsthand look at how the laws they pass directly impact your business. NGA is happy to assist RGA or KFDA and

RGA's Jon McCormick meets with Sen Pat Roberts (R-Kansas) during the FMI and NGA annual Day on the Hill in Washington, DC.

you with setting up these tours – just give Jon McCormick, 913-226-8020 or our government relations team a call at (703) 516-0700. A collective, unified voice from independent grocers will make a significant difference in legislation that helps the local grocer remain successful and independent. NGA appreciates the strong relationship that we have had with the Retail Grocers Association of Greater Kansas City and the Kansas Food Dealers and its members over the years. Your grassroots efforts and support of NGA’s initiatives help to make a difference for the entire industry.

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* Time Magazine, Time 100 Pioneers, By Anthony Bourdain, April 21, 2016. ** Huffington Post 2014. *** Source: Nielsen US Food 2015

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IRRESISTIBLY ORGANIC Our expanding line of certified USDA Organic treats gives you everything you need to take advantage of the growing consumer demand for organic foods. Featuring Organic Jelly Beans and Organic Fruit Flavored snacks, each is made with non-GMO ingredients, real fruit juices and are fat free, gluten free, peanut free, vegetarian and contain no gelatin or dairy. Jelly bean flavors include 10 Assorted Flavors and 5 Sours Flavors. Fruit Snacks come in convenient bags of 6 Assorted Flavors, as well as boxes of three great flavor assortments: Strawberry Apple, Berry Cherry and Assorted.

Kosher Certified 18 | M I S S OU R I - K A N SA S G R OC E R

Visit us at Booth BCSP

WASHINGTON REPORT

Overtime Rule Significantly Impacts Grocers PET ER L A R K I N PR E S IDE N T, CEO N AT ION AL GR OCER S AS S OCIATIO N

Following an executive order issued in 2014, the U.S. Dept. of Labor finalized and released a pending rule on overtime pay for salaried workers. This new rule addresses the “white collar” exemption for executive, professional and outside sales workers under the Fair Labor Standards Act. The finalized rule did not make any changes to the duties test, but it does raise the exempt salary threshold from the previous $23,660 ($455 per week) to $47,476 ($913 per week). The 100 percent increase will also be coupled with an automatic increase which will be tied to changes in the 40th percentile in full-time salaried wages in the lowest-wage region of the United States (currently the southeast). Additionally, automatic increases will take place every three years, not on an annual basis as previously expected. This rule is set to go into effect on Dec. 1, 2016. The National Grocers Association has worked tirelessly to combat the changes made to the overtime rule since it was initially published as a proposal in July of 2015. Along with filing comments that outlined the concerns of the independent supermarket industry, NGA met with the Office of Management and Budget Office of Information and Regulatory Affairs (OMB, OIRA) during the required

rule review process to advocate against the rule on the grounds that it would have a significant negative impact on independent grocers, employees, and the communities they serve.

Workplace Opportunity and other allied trade associations to push for a legislative solution that prevents the rule from going into effect. Though NGA maintains that the 100 percent increase of the salary threshold will place a significant burden on the independent supermarket industry, the changes made to the final rule fully reflect the arguments that NGA made in our comments to DOL and OMB. We strongly advocated for: no changes to be made to the duties test, a longer implementation period, no automatic annual updates, and a significantly lower salary threshold based on geographic differences in salaried wages. ■ For more information on this, or any other policy issue, visit NGA online at www. nationalgrocers.org/government-relations.

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While the December 1 implementation date is a substantially longer period than the 60-day implementation period that had been rumored, it is still far short of the desired 12 to 18-month implementation timetable NGA laid out to OMB.

We appreciate the strong relationship that we have had with the California Grocers Association and its members over the years.

In the interim, NGA will continue to work with the Partnership to Protect M ISSOUR I – KA NS A S GRO CER | 19

RGA NEWS A S SOCI ATED WHOLESALE GROCERS AND A F F ILI ATED FOODS MI DWEST MERGE Celebrating its 90th year anniversary in 2016, Associated Wholesale Grocers (AWG) has a rich history of supporting the independent grocers that collectively own the company.

David Smith AWG President/CEO

Barry Queen AWG Board Chair

Martin Arter AFM President/CEO.

John Clarke AFM Chairman

Beginning in 1926, a group of 20 Kansas City businessmen knew they would be stronger if they could work together for the common good. They came together as a collective buying force and weathered the mighty storms of competition that have entered and exited the markets through the past nine decades. This tested and true belief of “stronger together” continued in 2016 as AWG and Affiliated Foods Midwest (AFM) combined, creating the largest retailerowned food cooperative in the United States. “From the moment Barry Queen (AWG’s Chairman of the Board) and I started our discussions with AFM President and CEO Martin Arter and its Chairman John Clarke, we knew our companies were a great fit,” said David Smith, AWG President and CEO. “From the histories of our companies, our cultures, and our core values, we were aligned,” he added. “We identified significant financial benefits for the members of AFM due to reduced cost of goods, expanded service offerings, and a benefit for the overall cooperative due to sharing a common sell plan, IT platform, and implementing the best practices from each of the companies.”

He added that they also believe this unification will bring great benefit to their valued vendor partners as it will be much easier and more efficient than ever for them to do business with a much broader share of the market that is aligned to sell more competitively. “This unification with AFM provided us with two new full-line divisions within our network; our new Nebraska Division, in Norfolk, Neb., and our new Great Lakes Division in Kenosha, Wis., located between Milwaukee and Chicago,” Smith said. This new region will be led by a new senior executive Martin Arter, former president and CEO of AFM. “Marty is an extraordinary individual and grocery veteran with which I became acquainted during our discussions, and he is the perfect leader for this new endeavor,” said Smith. “He has built a great organization, one which we want to continue to see grow and flourish as a part of our new, larger company.” Of the new endeavor, Arter said:“This is exactly what we need to allow our retailers to compete, grow and be profitable. The synergies between our joint cooperatives will help our retailers thrive.” Arter credited the vision of the AWG and AFM Boards of Directors to see the possibilities of the unification. “I’m also very enthusiastic about the future of AWG, our newly expanded membership, and the new role I will now

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RGA NEWS S T OR E O P E N I NG S : H E N H OU S E I N LEAWOOD, GRANDVI EW PRI CE C H O P P E R , C O S E NT INO'S F OOD STORES, HARP'S FOOD STORES Not too many retailers have the fortitude to close a store for almost a year to remodel, but that’s exactly what David Ball and Mike Beal did last year to the Balls Food Stores’ Hen House Market in Leawood, Kan.

Hen House Market In order to get done what they wanted to do, associates were told at that time the store was going to have to close, and close for a long time. Most retailers take small bites at a major remodel and keep the store open. During the remodel. David’s vision and Mike’s plans were such that it would be too disruptive for the customers.

Nearly eight months after closing its doors, the remodeled store reopened for business in early August and the results were dramatic. The Leawood store is now the flagship for Hen House Markets. Customers were excited to see the new store that for all intent and purpose had been rebuilt. New improvements included an expanded perishables department, and a fresh food expansion area that encompasses 20,00 square feet. This includes a “Mongolian Grill” style offering, sandwich bar, specialty salad bar and an international cheese shop. In addition Hen House also includes a service meat department that features dry-aged beef, one of the largest seafood departments in the area, expanded Kosher offerings and a produce department that features a juice andsSmoothie bar. The pictures tell the story. Congrats to David Ball and Mike Beal in putting these stores among the top in the Metro area.

Grandview Price Chopper The Grandview Price Chopper was also due for a remodel but in keeping this store open during construction, customers every week saw what was to become another great Price Chopper in the Metro. The store features a new bakery, deli, floral, HBC/GM, meat and seafood departments. The produce department garnered special attention and has over 400 varieties of fruits and vegetables as well as a new organic section.

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Other features include a new Starbucks, Harry’s Liquor Store, and a consultation room for its new pharmacy.

RGA NEWS Cosentino's Food stores Refinement, consistency in quality presentations and expansion of perishables all encompass descriptions of the brand new Price Chopper in St. Joseph Mo. David, John, and Jamie Cosentino along with Robert Vigliaturo and a cast of hundreds put together a premiere Price Chopper again in the State of Missouri.

venience. The Meat Department includes a smokehouse and expanded service Meat. The store is big, modern and exudes freshness and quality. The people of St. Joseph came out the night before the Grand Opening to get a taste of the new store as well as the great food prepared by the Deli’s catering Staff which includes a fullfledged Chef.

The St. Joe Price Chopper embodies the excellence in merchandising and layout of the Belton, Liberty and Kearney Price Choppers all relatively new stores built by the Cosentino family.

The St. Joe store takes it to the next level. Store Manager Debbie Kempf, a long-time resident of St, Joe and a veteran in the supermarket business acquired a great team and will make it a great future for their store.

Prepared foods, expanded Deli all situated in the front corner of the store that includes a large seating area for eat in con-

Congrats to the Cosentino’s and their great management team on another great store added to their family of great stores!

L to R: Jamie Cosentino, David Cosentino, Debbie Kempf, Robert Vigilaturo, John Cosentino.

harp's food stores Harps Food Stores, based in Springdale, Ark., has come to Desoto, Kan. in a big way. The new ground up 32,000 sq. ft. store is located off K-10 Highway on Commerce Drive. Congratulations to Roger Collins, CEO, and Kim Eskew, President, and their team on another great store! Harp's was founded in 1930 and in 2001 become an employee-owned company. Harp's will be supplied by Associated Wholesale Grocers. Store Manager Johnny Chapman has been managing in multiple locations and has

done a great job with his Grand Opening on November 9. As you can see by the pictures, it is a beautiful store and the people of Desoto are extremely happy to have a store in their town. M ISSOUR I – KA NS A S GRO CER | 23

VIEWPOINT

D-I-Y EARTHQUAKES

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

I was in San Francisco recently, enjoying a bike ride near the Ferry Building, and couldn’t help but think of my first visit there back in the summer of 1973. A lot was different back then. My hair was longer and thicker and, to be honest, a lot redder. I was thinner. And when I first stood at the end of Market Street, there was an enormous elevated highway that served to, in many ways, block the city from one of its most distinctive and differentiated features. That elevated highway isn’t there anymore. Much of it got knocked down after the earthquake of 1989, which allowed the city to do what it should’ve done years earlier, if only for aesthetic reasons – pull the rest of it down, and integrate the waterfront into the city’s daily life in a way that was not possible when the highway stood. Ironically, they’re doing the same thing in Seattle these days, pulling down a viaduct that stands between the city and the waterfront and replacing it, at enormous expenses, with a tunnel. I’d be willing to bet that they would’ve preferred it if an earthquake had come along and made the decision for them – it is a lot easier to decide to reshape a city’s

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infrastructure when an act of God gets the ball rolling. But that’s rarely how things work out. Most of the time, if you are going to be relevant to your community and achieve your potential, you have to do it on your own. You have to be ambitious, you have to have a vision, you have to be willing to take chances, and you have to be aggressive in the pursuit of your goals. That’s the way it works with planning the city of the future. And that’s how it works with retailing – especially these days, when competition is coming from all different directions and consumer desires and needs are shifting as new generations begin to occupy the center of the retail target. Let’s face it. Amazon, with its desire to create a kind of ecosystem in which it is the first, best choice for practically everything, has changed the retailing landscape in fundamental ways, affecting both consumers and sellers. And now, with the acquisition of Jet.com by Walmart for $3.3 billion, there is certainly the probability that e-grocery competition

is going to get a lot tougher and a lot louder – even people who have no desire to shop for groceries online are going to be influenced by the inevitable marketing cacophony created by Amazon and Walmart. So how should traditional grocers respond and react? Well, to begin with, I think that companies shouldn’t think of themselves as being “traditional,” and have to do their best not to respond and react to anything. As retailers consider the future, it seems to me that they have to reshape their stores by compiling and analyzing data about their customers, thinking creatively about how their visions need to evolve, and then, taking risks, explore new possibilities. We already can see this happening in the marketplace. Look at Kroger’s Main and Vine store, in Gig Harbor, Wash., just south of Seattle. This is a store that is roughly two-thirds devoted to fresh foods, with an open floor plan that creates a far more integrated feel than many stores. Packaged grocery has been pushed over to one side of the store, and my suspicion is that they could actually close much of that off and simply make all that available online.

VIEWPOINT

Meanwhile, Kroger has acquired Roundy’s, which gives it the upmarket, fresh food-driven Mariano’s format to play with. It has made an investment in Colorado-based Lucky’s Market, which has been expanding around the country

of the considerable infrastructure and bureaucracy. I’m sure that this was an enormous and uneasy leap of faith for the company, but I think it was the only way to really innovate. Massachusetts-based Roche

“You have to be ambitious, you have to have a vision, you have to be willing to take chances…” and describes its stores as “organic for the 99 percent.” Kroger already has Harris Teeter in its stable of chains, and reportedly tried to acquire The Fresh Market. And, it has been rolling out its ClickList click-andcollect e-commerce service. It seems clear that Kroger is placing lots of bets, and it is impossible to say that one of these formats or another will be the company’s future. It’s likely to be some combination of all of the above, or maybe something else completely. On the east coast, where I live most of the year, Ahold (now Ahold Delhaize) created a skunkworks to develop a small urban format called bfresh, which has been performing well in Boston – and it has been doing so by being independent

Bros., which traditionally has been as suburban a company as one can imagine, opened a downtown Boston store that has been performing like gangbusters. In both cases, it was a matter of going way outside their comfort zones. I think we’re going to see a lot more of that... and the retailers that do not do this will be the ones who will find themselves flirting with irrelevance and potential obsolescence.

covers facing out, reader reviews posted under each one, and with a fair amount of space devoted to the various tech products – Kindles, Echo’s, Fire TVs – that ultimately have been created to make it easier for people to buy stuff on Amazon.) My friend said that the most interesting thing about this store is that it establishes a kind of template that could also be used to sell toys, office supplies or even groceries. In the latter case, he said, the physical store could be used to sell fresh food, with an easily accessible loading dock where people could pick up packaged groceries that have been ordered online. All this could happen. Or, something else could... because the notion of reshaping retail isn’t a concept with an end point. It is an ongoing effort, that never will end. It can’t. Essentially, companies have to create their own earthquakes. ■

I was talking to a friend of mine about this subject the other day; it is someone who has been in retailing for a long time and has shaped and reshaped his share of companies. He told me that one of the most innovative retail stores he’s seen in a long time is the new Amazon Books store in Seattle…and not just because of how it sells books. (The store sells only bestsellers as rated on Amazon’s website, with book

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OUTSIDE THE BOX N EW RETAIL PERS PECTIV ES

S C DAH ZOE OL

The big prizes are sophomores, juniors and graduating seniors, who may be setting up their first apartments. Retailers like Target and Bed, Bath and Beyond are enabling students to set up graduation wish lists – like a wedding registry – and Best Buy is offering special promotions for all college kids year-round.

BR EA KFA S T B Y T E S 1 1 0 0011 11 1 1 0101 11 0101 10 1 1 0 1 010 0 0 0 0 1 1 1 101 1 0 0 10 0 1

If you’re wondering how to approach Generation Z, it’s time you went back to school. While many retailers are trying to sell college-age kids laptops and mini-fridges for dorm rooms, others want to make them lifelong repeat customers.

0 1 1 11 11 0 0 0 01 1 0

Remember when breakfast was the most important meal of the day – now it’s the most technologically advanced. Researchers at Columbia University have developed a 3D food printer capable of cooking and printing multiple ingredients. Food is considered the “killer app” of 3D printing and researchers started using things like cookie dough, cheese, eggs, flour, chocolate and other materials. The printer uses syringes to extrude food gels or pastes in specific locations depending on the software’s “recipe.” Then, an infrared cooking element cooks different parts at different times. No need to make space in the cereal aisle for a 3D printer just yet.

Target even has "college stylists" that create YouTube videos on dorm design and is using the messaging app Kik for chatbots that suggest products.

BRAND DISLOYALTY Thanks to Millennial shoppers, brand loyalty is no longer the endgame. Department store operator Lord and Taylor decided to take advantage of this group’s disloyalty by working with vendors to create “curated” spaces in stores that are flexible, easily changed and less brand specific.

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SHOPPING ISN’T WHAT IT USED TO BE– just ask department store operators who are wrestling with how to turn stores into more of a destination. The latest include pampering guests with spas, restaurants and exclusive selections. As Saks Fifth Avenue President Marc Metrick points out: They’ll shop here, eat here, get their hair done here and meet their friends here.” The venerable Macy’s is also reemphasizing the beauty business since Amazon is expected to unseat the chain next year as the largest online clothing seller.

OUTSIDE THE BOX

BOLDLY GOING...

Turns out that problems in the hotel business aren’t that different from retailing. Just ask CitizenM, which operates hotels in New York and Europe and was looking for simple, affordable luxury and to eliminate frustrating problems like long check-in lines, hidden costs, low water pressure in the showers and even finding the right light switch. In short, everything that irritates customers.

BE GU O ES UR T!

If you want a glimpse of the future of interactive advertising and marketing, consider heading to Comic-Con International, the pop culture, comic book, sci-fi and fantasy event that draws over 130,000 visitors annually to San Diego. Aside from the usual array of costumed characters and rabid fans, this year’s show featured large scale advertising displays called “Activations” to promote shows and movies and a glimpse of the future of marketing featuring virtual reality gear. The idea is to merge the virtual and physical environment.

What the hotelier came up with was: One room type with one price; one-minute self check-in; luxury beds; rain showers and a tablet that controls everything in the room. But don’t expect to find chocolates on the pillow.

FEELING BLUE? Just when you thought there was nothing new, along comes “new blue” the hot new color for food and beverages. The new pigment called YInMn Blue (named after its key elements, Yttrium, Indium and Manganese), was discovered by researchers at Oregon State University and is now commercially available from the Shepherd Colour Company. A Spanish company called Gik has introduced a bright blue wine that sells for about $11 a bottle. Then there’s the “Smurf Latte”, a blue coffee-free drink at the Matcha Mylkbar in Melbourne, Australia. It contains algae, lemon, ginger agave and coconut milk and supposedly tastes like seaweed. All this for a mere $8.

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If it works for Star Trek why not Deli Trek?

KILLER APP The digital world’s becoming more complex but the key is still to keep things simple. That’s what Walgreens has done by taking advantage of the basics of mobile devices. Now, customers can scan in a photo of the bar codes on prescription drug bottles for refilling. It actually made the process enjoyable for customers, according to Walgreens.

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Big Data BIG OPPORTUNITIES 28 | M I S S OU R I - K A N SA S G R OC E R

At a time when people barely stray a few feet from their computers or smartphones and are rarely disconnected from social media, collecting consumer data for detailed analysis has never been more critical.

“They are not fully aware of big data’s impact on everything from logistics and assortment to pricing, promotion and other forms of personalization,” he quipped “Sometimes I can see their eyes glaze over because there’s so much for them to see.”

But some retailers still underestimate, or even ignore the value of the information they have at their fingertips, according to David Cianco, senior customer strategist for dunnhumby, the global customer science company, whose work with retailers and CPG companies like Kroger, Tesco, Macy’s, Coca Cola, ConAgra and Unilever has raised the bar on consumer insights.

However, he said, many independents are starting to understand the wealth of information they can obtain just from transactional data regardless of whether loyalty cards or some other loyalty program is used.

The challenge lies in transforming data into useable information. “The possibilities for applying big data to change the customer experience are enormous – bigger than any time I can remember,” Cianco said. “The customer relationship marketing is being done extensively, but it’s not the end for big data at retail.” To many, the era of big data began in 1995 when Tesco introduced its highly successful Clubcard loyalty program in the United Kingdom to gain insights into shopping behaviors, segment customers into different groups and introduce new product lines – notably in private label – in order to get a leg up on intensifying competition. The strategy worked so well and so much data was mined that the chain eventually bought a majority interest in dunnhumby. Moreover, Tesco has abandoned plans to sell its dunnhumby data and loyalty operation. Meanwhile, Kroger, which already had a joint venture partnership with dunnhumby in the U.S., has set up a new one called 84 51° under which Kroger acquired most of the firm’s technology assets. This underscores the importance of data analysis in the face of increased competition from discounters, convenience, dollar stores and a rising tide of online retailers. As such, data collection is essential for identifying profitable items, reducing out-of-stocks on promoted products and increasing sales by tracking customers in store. Cianco noted that retailers, both large and small, are not reticent about using data, but can fall short of really comprehending its power.

But properly mining the data is still the challenge. “When I was at Kroger my responsibility was the loyalty program,” he said. “I made the decision to bring dunnhumby into Kroger because we didn’t have the right skill sets and it would take years to acquire the kind of talent to build the program ourselves. Now, Cianco said, there are more young analysts coming out of universities who have a better idea of what to do with data in order to gain some insights. “But there still aren’t enough and I see more retailers trying to take this function in-house with various degrees of success,” he points out. “As such, few are

The challenge lies in transforming data into useable information. leveraging all the benefits of big data.” But even having people with the right skills is no guarantee of success. And the question that comes up is whether consumers are too much of a moving target for data to keep up with changes in their tastes? “It’s a fair question,” Cianco said. “The technology consumer is always connected. They have different experiences around price transparency and can immediately check prices and availability. So there’s a bit of worry or consternation on just how to keep up with them. They are creating new data points that can be baffling – especially if you’re not optimizing the data you already have.” Basically, keeping up with consumers means keeping up with social media.

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Continued from p. 29

So what are the new hot trends?

“Historically, loyalty marketing has focused on just a few dimensions of the shopping experience like spending and visit frequency,” he said. “Those are the underlying metrics that create definitions of loyalty in the business and they’re all derived from the transaction model.”

“The hottest ones relate to two things – healthy eating

But, Cianco said, there are other data points or dimensions that should be measured. “One is the ‘talk dimension’ – that is, how consumers are talking about brands, or the retail experience on social media,” he said. “Progressive retailers have to pay attention to pay attention to this.” In this regard, one of the most important segments of customers is the so-called “foodie,” a multigenerational group that can have hugely diverse attitudes. “Basically, foodies are a more adventurous group that is willing to expand their choices across different categories in the store,” he said. “They can have more exotic tastes and are open to trying new things. They are getting away from basic meat and potatoes and enjoy a more diverse menu.” This idea of engaging in different foods has clearly been fueled by social media which encourages groups like Millennials whose tastes change more quickly, he said, citing, some emerging products like coco nibs, beet juice, figs, flax, goats milk and sciracha, which are now seen everywhere.

David Cianco,

Senior Customer Strategist for Dunnhumby

The technology consumer is always connected. and what we call ‘new value’, Cianco said. “Organic, natural and locally sourced foods in produce, meat, fish and bakery remains popular in healthy eating circles.” There’s also been lots of conversation lately about Kroger’s introduction of Simple Truth organics which is now a $1 billion brand. “There’s a sort of fallback into recipes that involve organic and natural products,” he said. “Supermarkets are also responding to this trend with store clinics and more pharmacies and more relationships with outside drug chains like Target has with CVS that respond to consumer interest in health.” New value is another macro trend. “We are seeing an entire generation whose attitudes have been shaped to being more frugal,” he said. “It’s become something that’s socially acceptable and, in fact, the way to gain social status among one’s peers. We can see the results of that in the success of discounters like Lidl and Aldi.” Cianco also sees frugality at play in some hot categories – particularly fresh fruits and vegetables, with consumers getting away from the cosmetic standards that were once so important. Now things like odd size apples or double head carrots, with the same nutritional value, are being picked up by valuedriven Millennials. As such, we are now seeing what Cianco calls “scrimp and splurge” behavior among consumers – scrimping on the basics, including core or center store products, in order to splurge on more fresh items and trading up in categories like wine, chocolate, luxury goods, high end brands or private label. “I think we’ll see more of trading down in one area of the store to spend more in another,” he added.

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Private label will also continue to play a key role at retail.

“Retailers in the U.S. use private label in different ways depending on how they’re positioned themselves in the market – either as a value line, a national brand equivalent or as a premium or exclusive store brand like Archer Farms at Target, or Kroger’s Private Selections,” he said. “How retailers use private brands can be hugely influential in setting a retailer’s value and price perception.”

same taste profile as African-Americans. It becomes part of your heritage. But, he says his company is careful to describe people

Another key for dunnhumby is what constitutes a true long-term trend, or a short-term fad. “We try to identify shopper DNA based on the principal that you are what you eat and segment that into lifestyles,” he said. “For example, in 2004 and 2005, we looked at the Atkins diet and saw groups of customers who were interested in living a lifestyle around that. “But in a short time – a year more or less – we saw it being faddish. Customers would do some trials, but repeat usage dropped off quickly.” On the other hand, the explosion of the pet food

They are not fully aware of big data’s impact on everything from logistics and assortment to pricing, promotion and other forms of personalization business was spotted early on. “Our research found that more households had pets then kids at home,” he said. “That’s a good example of a long-term trend.” Asked about emergence of ethnic consumers – Hispanic and Asian – and how retailers should approach them, he replied: “We’re looking to identify lifestyles, lifestages and different taste preferences.

less in terms of demographics and more in terms of what their tastes might be. As to the next generation – Generation Z as they’re being called by observers, Cianco said little is known about them but it’s time to learn. “I’ve seen numbers about their buying power, what influences them and their use of social media,” he said. “Also they are incredible advocates and much better marketers. They market to themselves and others online which is interesting phenomenon. They are also sharing their disappointments with brands and that’s something to watch out for,” he said. Cianco said the industry must tune into them because they are using their mobile devices to influence friends parents when they are in the store. n Len Lewis is editorial director of Lewis Communications, Inc., an editorial planning, research and consulting firm. He is a contributor to several retail publications and trade groups in the U.S. and Europe and has been a speaker and moderator at numerous industry events. He can be reached at lenlewis@optonline.net or via his website www. lenlewiscommunications.com

“We have identified Latin, and African-American taste profiles. Those profiles cut across demographics so you might see white people in the south with the

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ARE YOU? HUNTER or FARMER

Do you have the instincts and keen eye of a hunter, adapting to whatever environment you face? Or, are you a farmer, toiling in the fields, planting the same seeds year-after-year and hoping the crop comes in? By Len Lewis

The answer may be the difference between success and failure in the increasingly cutthroat and demanding world of retailing where consistent innovation in products and services and the ability to turn on a dime, is a business imperative now and in the future, said Jeremy Gutsche, noted author, researcher and CEO of Trendhunter.com. Gutsche, a featured speaker at this year’s CGA Strategic Conference, emphasized that in order to know where retail is headed, it would be wise to visit the recent past.

Continued on page 34 ▶

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◀ Continued from page 33

“Let’s rewind to the 1990s when retail was about the big beige stores, sometimes in the mall, where people went to buy their widgets,” Gutsche said. “Frankly, it was pretty uninteresting and that crossed over into the grocery business. Then, in the late ‘90s everyone in the business became obsessed about finding ways to get their e-commerce operations up and running. But at the same time, according to Gutsche, they stopped or reduced investments in stores and put all their money in the race to get online. “When the dotcom bubble burst, everyone got burned, the economy got a little crazy for a few years and some retailers ended up ignoring the store,” he said. By 2005 and 2006, retailers again began putting money into their stores. But when the economy hit the skids again, retailers were faced with chaos and many of them collapsed along with the market. “It was a time when famous retailers were going out of business and those that held on became even more cautious about pumping money into their stores,” he recalls. Meanwhile, it was during this period that marketing changed forever and cultural authenticity became an overriding issue among consumers. “I remember someone asking an executive from Harley-Davidson what the company sells,” Gutsche said. “His answer was: ‘What we sell is to have a 43-year-old accountant ride through small towns and have people be afraid of him.’“

Jeremey Gutsche, CEO of Trendhunter.com is a featured speaker at this year’s CGA Strategic Conference.

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And while grocers were ignoring investments in stores, social media popped up and suddenly every person walking into any store started advertising their attitudes or complain publicly. It was then that every retailer in every category realized how much catching up there was to do, he said.

“We work with and advise all kinds of retailers at Trendhunter,” Gutsche said. “It’s amazing the rapid game of catch-up everyone is playing. There’s a realization that retail is about connecting with the brand on social media, offering consumers a cultural experience and embedding authenticity into the store.” And now, he said, we’re seeing everything in the store being transformed because of greater investments in retail – including supermarkets. “We are entering an interesting space,” he said. “More consumers are focusing on eating well, whether it’s local foods or organics. They want to feel good about what they eat and not have all those tricky ingredients to pronounce. All of these elements are transforming the shopping experience.” Trendhunter also closely focuses on what he called “Millennial parents” who are among the most competitive of demographic groups. “They have a career, a home life and they are trying to win at parenting,” he said. “As such, they want the most Instagramworthy meals for their children. They want to take pictures of these meals and send them out to friends to show they are the best mom possible and have the best vegan foods, or the best gluten-free cookie. There’s a world of chaos that’s really changing the shopping experience.” Depending on the circumstances, these changes mean adopting the characteristics of both hunter and farmer, according to Gutsche. “When I talk about innovation, it’s akin portfolio management,” he said. “In your portfolio there’s the trust stocks, but also some higher risk ones in order to insure you can get the gains you need. You have to look at innovation the same way. I don’t think you have to leap in and change everything.”

In many ways, according to Gutsche, companies must continue doing what they do, but also need to be dedicated to hunting for new ideas and finding new ways to adapt. Adapting, in part, means becoming obsessed with customers and using every method possible to understand how they are evolving. According to Gutsche, companies must develop and refine those hunter instincts including being curious, insatiable and willing to destroy in order to succeed. “Curiosity alludes to whether you have methods in place to hunt for new ideas and to experiment with new ways to get people and, while they’re in the store, to market to them in new ways,” he said. “Insatiable means always believing in the need to perpetually adapt and not just do the same thing for the next 10 or 20 years.” He noted that the willingness to destroy is a tough one. “It’s about a willingness to move beyond egos and all the legacy of the past to try something new,” he said. “The more you get into small and medium businesses, private companies and those run by families, the more difficult a time people have letting go of the past in order to embrace something new.” While his company focuses mainly on smaller firms, one of his favorite larger companies in terms of being an effective hunter, is Google. “You can see how many times they try things that simply don’t work out,” he pointed out. “They have a portfolio of attempts because they are always trying to innovate in a different way.” One company that Gutsche likes discussing is Zara, the Spanish fastfashion chain, that is one of the most unique companies in their space. The average fashion retailer will design a little

red dress and get it in the store 12 months later. At Zara, the process only takes 14 days. As Gutsche points out in his book, “Better And Faster” Zara doesn’t carry every design and size in stock and styles are rarely consistent. “Designers and patternmakers craft several different concepts for a piece of clothing every day which is then manufactured in local factories,” he said. “They work with ‘Greig’” or nearly colorless textiles which can be dyed at the last minute. Because of the speed to market, outsourcing to China is not an option.” "Additionally, changes can be made on the fly. The company can manufacture a little red dress with a collar and is capable of having five sizes in 2,000 stores in two weeks. But if stores learn that consumers like the dress but not the collar they can redesign it and again, have it in all 2,000 stores within 14 days," he said. “The takeaway here is that they have figured out a way to insure ongoing communication with consumers to look for new ideas,” he said. “They will try any new designs and not perpetually cling to just one.”

“…it was during this period that marketing changed forever and cultural authenticity became an overriding issue among consumers.”

Zara is a great example of extreme adaptation. But Gutsche concedes that successful companies have a tendency to become overly complacent with potentially devastating results. “The average lifespan of a Fortune 500 company in the 1950s was 75 years,” he said. “If you made it on the list that’s how long you would last. That average has fallen to 15 years and is expected to be halved again.” Gutsche believes that in a decade from now, half of the current Fortune 500 won’t exist in a meaningful way. Continued on page 36 ▶

M ISSOUR I – KA NS A S GRO CER | 35

◀ Continued from page 35

AR YO

HUN FAR

“We are seeing a manufacturing industry that’s become faster, quicker sleeker and allows us to actually create more personalized offerings.” experience to evolve. That’s going to cause those who are complacent to become disruptive.” There’s no doubt that technology will continue to play a major role in this.

“They don’t have the advantages they once did,” he said. “Excessive complacency can happen to any company when it fails to try as hard as it should.” As always the big question is what retailers should be looking for in terms of customer behavior. “There are a couple of drivers out there. extreme diversification of preference or personalization,” Gutsche said. “They want things on-the-go and there’s a big drive toward sustainability and health – all of which impacts the types of items in the store. “A trend I really like is what I call the ‘next best thing,’” he said. “The idea is that people don’t always go for the No. 1 product anymore. They still remember the recession and are more likely to try the next best alternative. This isn’t just about price. It could be an entirely different product.” Clearly, these are among the elements reshaping the retail business. “Retailers are becoming a lot more competitive and there will be something of a shakeout in the business,” said Gutsche. “Retailers that are aggressive about change will enable the buying

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“Big data is helping us understand purchase patterns in the store,” he said “Things liked beacons are allowing people to tailor things like advertised products and recipes as they go through the store.”

“They don’t want the exact same food or offering as everyone else – something tailored to them,” he said. “On one hand you have the world of big data where marketers and other companies can figure out more easily what a person’s preferences are.

Do you have the instin adapting to whatever en a farmer, toiling in the year-after-year an

According to Gutsche, having that social media connection will allow the grocer of the future to suggest combinations of foods that go with the person’s purchasing pattern.

“For example, if you know someone’s on a gluten-free diet then you don’t need to present her with one-third of the offers that you might send to other people,” he said. “This enables you to create a deeper connection with that customer because you understand their preferences, behavior and priorities.” The issue is one of “convergence”, which can be a challenge to find.

“The question is what products or services can be combined with the offering,” he said. “For example, if a retailer has cooking classes in store he’s adding a service and not just selling groceries.” Another factor is “divergence” or customization and personalization. Society is moving rapidly toward a customized world, according to Gutsche. Divergence is the idea that people want to be opposite of the main stream.

“On the other hand we are seeing a manufacturing industry that’s become faster, quicker sleeker and allows us to actually create more personalized offerings,” he added. How far can personalization go?

“Well, look at Amazon Fresh,” said Gutsche. “It’s showing you books and products similar to what you last reviewed. And every time you log in the offerings get a little more customized. They are the masters at figuring that out and it gets faster every time you shop.” Another element is what Gutsche terms “redirection” or channeling and refocusing trends.

For example, if someone goes into a store and cooking lessons are taking place they end up with a very different store experience.

“It’s about reminding people that they shop at a particular grocery store because there’s always something new happening or they are surprised with some special offering or different sampling,” he said. “Basically, you’re trying to reposition what that shopping experience is really like and giving the store the element of surprise.” ■

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

Listening

Alignment

Why

Growth

Trust

Collab 38 | M I S S OU R I - K A N SA S G R OC E R

B y ELLI OT ZW I EB A C H

Increased collaboration between trading partners can mean better results on the bottom line for both sides, according to Marc Hubbard, Chicago-based vice president for U.S. client services at Advantage Group International. “No matter how good your business is, it can get better through collaboration,” Hubbard said. “Working more closely with your trading partners builds the kind of relationships that benefit both sides. Collaboration will lead to better sales, better service and better overall results. Without collaboration you are missing opportunities to grow.” Although collaboration has been an industry goal for many years, it’s more significant today, Hubbard said, “because of the economic state of the world we live in – for companies that are seeing improved performance as well as for the majority who aren’t seeing their wealth increasing.”

Nick Bertram, senior vice president, merchandising strategy and support for Ahold USA, Quincy, Mass., said he’s a believer in the benefits of collaboration. “When we launched our ‘reshaping retail’ strategy, one area of concentrated focus was a promise to become a better place to shop,” he explained. Ahold devised a number of programs, “but we soon discovered it wasn’t possible to achieve our ambition without stronger partnerships in the trade. So we created a trade relations team that focused on supplier engagement surveys, like those from Advantage, plus joint business plans for key partners that involved coordinating external events and top-totop communications. “All that has proven to be a big enabler to our category teams and yielded improved relationships with specific suppliers, which in turns has allowed us to delight customers and become a better place to shop,” he said.

Collaboration isn’t difficult, Hubbard added, “but it takes effort and resources.

Continued on page 40 ▶

“No company is an island – though if it’s not collaborating, then it will be an island. But opening yourself up to exchanging ideas with trading partners results in better business results for everyone.”

Matters

oration M ISSOUR I – KA NS A S GRO CER | 39

◀ Continued from page 39

Advantage is a Toronto-based market research firm that collects data from companies in 40 countries and uses that feedback to encourage retailers and suppliers to set benchmarks to improve their industry relationships. “We don’t tell companies what to do because we are not a management consulting company,” Hubbard explained. “What we do is share feedback from our surveys and hope retailers and suppliers respond in a positive way.” To achieve true collaboration, companies on both sides of the table must be open to feedback, Hubbard said. “The key is to put resources into gaining feedback and measuring sales results,” he said. “But with feedback being a soft metric, the effectiveness of feedback on sales is difficult to determine. It’s just something you have to believe in – and you need to build the tools and processes and put the time and effort into gathering feedback and measuring it.

“WITHOUT COLLABORATION YOU ARE MISSING OPPORTUNITIES TO GROW.” “However, some retailers still have an adversarial approach toward suppliers and vice-versa. They tell them ‘this is the way we do things and that’s how we want you to do it.’ That attitude doesn’t foster collaboration,” he added. Hubbard said that opening up to receiving feedback – by listening to each other – allows companies on both sides to expose themselves to new ideas and uncover new opportunities.

“If a company is struggling, we can supply them with possible reasons why and then encourage them to change their approach by giving examples of the kinds of behaviors they should pursue,” he added. When asked for examples of situations where a lack of collaboration hurt partners, Hubbard cited one instance where a supplier was antagonistic to the idea of working with a retailer, with the result that the retailer was unable to drive sales. “That supplier didn’t want to work with that retailer, and as the relationship kept growing more and more sour, sales were suffering,” Hubbard said. “When trading partners are that un-collaborative, that’s when they need to realize how much better things could be if they worked together to maximize sales – and once the supplier in this example changed his attitude, things did get better for both partners.” In another instance Hubbard recalled a retailer who saw sales trending downward over a three-year period as he resisted collaborating with suppliers. “But once he changed his attitude and began working with them, he was able to reverse the negative trend,” he said. To emphasize his point, he cited the change in attitude of Steve Jobs, the late founder of Apple. “In his early days at the company Jobs was terrible at collaboration,” Hubbard said. “He tended to be very dictatorial. But his second time around, he opened up, and when he become more collaborative and shared his vision with others, everyone benefitted.” Issues with collaboration may arise for partners on both sides of the table, Hubbard pointed out. “Traditional retailers are facing a plethora of competition they weren’t seeing 10 or 15 years ago – not simply from a host of

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alternative-format operators but also from Amazon and ecommerce companies,” he said. “Because consumers can get the same goods at so many different outlets, there’s more complexity in retail, which makes a collaborative focus between retailers and suppliers even more important.” For most retailers, the top three concerns for suppliers to get right are supply chain excellence, proactive communication and a desire for personalization in the programs they are offered, Hubbard said. In terms of supply chain, retailers want to be sure they get what they want when they want it and the way they want it, he pointed out." Supply-chain excellenceretailers build their businessneed to make sure the supplyworking correctly to get the products they need to run their businesses properly,” he explained. Retailers also want to be sure suppliers are adapting to their unique needs, especially given the intensity of competition, Hubbard added. “Each retailer knows he needs to stand out with consumers or else they will go elsewhere, which means suppliers need to personalize and tailor their programs to each retailer’s particular needs,” he said. “Sometimes that can be challenging for a supplier,” Hubbard added. “But a retailer is looking for flexibility in terms of being served by the supplier, which means the supplier must be sure to meet the retailer’s needs, not just his own.” Communication between partners is key, Hubbard noted. “To make sure each partner is getting what he needs, he has to send a clear message about what he expects.” Often though the retailer’s message to the supplier is not clear, he explained, because retail buyers, merchandisers and those dealing with logistics may not

be on the same page with each other or communicating the same message to suppliers. “Without that kind of internal alignment, how can you expect suppliers to do their best work?” Hubbard said. “A retail organization must be clear and consistent in its message in terms of how a supplier can help the retailer meet his goals,” he explained. “To do that, the different teams within an organization must talk among themselves rather than operating in separate groups that don’t communicate internally. Most suppliers are willing to help retailers, if only the retailer is willing to ask for help.” For suppliers, “the message to retailers is to do what they say they are going to do,” Hubbard said. According to Advantage’s most recent survey, the No. 1 priority for suppliers– as it’s been for four years in a row, Hubbard noted – is for retailers to implement agreed-upon business plans. “You’d think we could all live by the philosophy of ‘do what you say you are going to do.’ But sadly, we hear time and time again that suppliers are frustrated with retailers for not doing what they said they would do. They wonder why they should do all this collaboration, joint business planning and top-to-top meetings if the retailers are not going to follow through,” Hubbard explained. Continued on page 42 ▶

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◀ Continued from page 41

He said the other top supplier priorities are for retailers to work productively with them to build a profitable business for both parties; and for stores to execute promotional and retail marketing plans in accordance with previous commitments. While most large suppliers have been developing collaborative relationships for years, even some of the largest CPG’s are averse to collaborating, he pointed out, “simply because they are so large that they can get stuck in their ways, which sometimes means they become somewhat dictatorial.” Smaller suppliers usually need to be more open to collaborating, he added – to make sure they get their foot in the door. But even some smaller suppliers, who make up the vast base for most retailers, have their problems with collaboration because they rarely see the retailer, “so knowledge and understanding of the needs of each customer’s business is often more limited,” Hubbard pointed out. “The future for suppliers of any size can be enhanced and improved through greater collaboration,” he added. What makes the challenge more difficult, Hubbard said, is the growth of digital and

omni-channel offerings, which many retailers separate from their brick-andmortar businesses. “The challenge is getting both sides within a retail organization to work together to develop one holistic point of view,” he said.

“TO ACHIEVE TRUE CO L L A B OR A T I ON , C OM P A N I E S ON BO TH S I D E S OF T H E T A B L E MUST BE OP E N T O F E E D B A C K . . . ” The most recent Advantage study of U.S. retailers produced one major surprise, Hubbard said. Asked to rank 37 strategies in terms of their importance, retailers ranked “digital” as a very low priority, at No. 34, he noted. “Our hypothesis for why digital ranked so low is that the respondent base was comprised mainly of buyers, merchandisers and supply chain/ replenishment personnel – a group that doesn’t see digital as part of its job. It’s the advertising and marketing people who are more focused on ecommerce and digital right now. “But we would expect interest among all groups to increase as digital strategies become more integrated at the retail level.” Editor’s Note: Elliot Zwiebach has been reporting on the food industry for 47 years. He retired from Supermarket News in July when his job was eliminated.

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PRESENTING supermarkets battle for

SHARE STOMACH of

COMPETITION

By Brian Todd

COMPETITION HAS BEEN PART OF THE RETAIL FOOD BUSINESS SINCE IT BEGAN AND WHILE IT CAN BE A BATTLE FOR GROCERS, IT HAS ALSO HELPED SPUR INNOVATION AND MORE RECENTLY, ECONOMIZING BEHAVIOR.

That battle for “share of stomach” has never been more intense than right now as traditional supermarkets saw growth of less than 2 percent in sales during the first six months of 2016, according to Food Institute analysis of data from the U.S. Bureau of the Census. While the lack of food price inflation this year is definitely a factor in the sluggish results being reported, traditional supermarket operators are also faced with more competition from what The Food Institute calls “alternative retailers.” These competitors include warehouse clubs, supercenters, drug stores, and online sellers.W And while they are fierce warriors in the struggle for a piece of the consumer food dollar, they have also forced many traditional supermarkets to become stronger. These grocers are continually innovating to compete, adding club-sized products and aisles, expanding their pharmacies and health care offerings, to offering their customers the option of buying online and home-delivery in some cases. And in the past few years, supermarkets have been very efficient at cutting costs out of the supply chain, making their operations as lean as possible. They have also been aided in the lack of inflation in food prices at the wholesale level, although that has also meant a lack of inflation at retail – for the overall foodat-home category at least. More recently, grocers find themselves competing with home-delivered meal kits like Blue Apron and Hello Fresh.

Over 100 such companies are now delivering millions of boxes to consumers’ doorsteps each month and with sales topping $1 billion in 2015. Initially, some may have been frustrated at the prospect of losing customers to a higher cost, limited offering competitor that was heavily funded by private equity or venture capital. But again to their credit, they are not standing on the sidelines to see how that market develops. For example, the Fresh Market chain, introduced “Little Big Meals.” For $20, the complete meal kit is available in its stores and puts together several easily compiled ingredients from their shelves to feed a family of four similar to the meal kit. A very convenient alternative and one that it heavily featured, saving customers $10-$15 off the “list” price of the individual parts. And several other chains have responded in a similar fashion. Some 84 percent of consumers now purchase prepared food from retailers monthly, according to data from Technomic, Inc. Interestingly, half say they visit fast food restaurants less often each month as result. And supermarkets continue to devise innovative ways to compete. Roundy’s, part of the Kroger Co., designed a store in Sherwood, Wis., designed a store appealing to Millennials’ desire for more prepared foods. The Metro Market in Madison, Wis, meanwhile, features a sushi bar, an oyster bar and a bar with a dozen beers on tap along with live piano music and a fireplace.

Prepared foods are a driving force at Shubie’s Marketplace in Marblehead, Maine. The 10,000 sq. ft. store features 35 to 40 prepared entrees daily as well as hand-crafted sandwiches and craft beer. The Impact of Alternative Retail

Club and supercenters alone sold more than $90 billion worth of food in the first half of 2016 according to Food Institute estimates. That’s more than one-third of traditional supermarket sales during the same period. But the growth at the formats has slowed considerably in the past two years after posting double digit gains in much of the last decade. Through the first half of 2016, club and supercenter sales rose only 1.6 percent, while supermarket sales rose 2.1 percent to nearly $300 billion. And at drug stores, food sales are estimated to be in the vicinity of about $1 billion monthly. As chain drug stores have expanded their food offerings, customers have found them as a source of groceries well beyond the candy and snacks featured near the checkouts. Their prevalence in urban locations has definitely aided in this effort because of their convenience for shoppers. And while only 19 percent of consumers surveyed by Technomic have ever purchased a prepared meal from a drugstore, 43 percent of those who do so buy them at least weekly. And dollar stores are doing much of the same, particularly in suburban and rural areas.

Continued on page 48 ▶

M ISSOUR CAL I –I FO KARNIA NS A S GRO GROCER CER || 45

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There ARE no

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ALTERNATIVE RETAILER PERFORMANCE - JAN. 1 - JULY 1

Millions: JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC JAN - JUNE JAN - DEC

2016 $33,903 $34,060 $36,720 $35,492 $37,244 $36,287

$213,706

(Food Institute analysis of Census Bureau data) WAREHOUSE CLUBS DRUG STORES & SUPERCENTERS & PHARMACIES % Est. 2016 % Est. 2016 2016 2015 Chge. Food Sales* 2015 Chge. Food Sales* $33,835 0.2% $ 13,053 $22,121 $21,782 1.6% $ 929 $32,802 3.8% $ 13,113 $22,346 $20,137 11.0% $ 939 $35,853 2.4% $ 14,137 $23,976 $21,873 9.6% $ 1,007 $34,598 2.6% $ 13,664 $22,980 $21,597 6.4% $ 965 $37,812 -1.5% $ 19,553 $23,555 $21,503 9.5% $ 989 $35,927 1.0% $ 19,051 $23,318 $21,530 8.3% $ 979 $36,631 --$ $21,806 --- $ $37,463 --$ $21,563 --- $ $34,148 --$ $22,025 --- $ $36,768 --$ $22,640 --- $ $39,039 --$ $21,637 --- $ $45,266 --$ $25,180 --- $ 1.4% $92,571 $138,296 $128,422 7.7% $5,808 $210,827 --$263,273 --$440,142

2016 $34,714 $34,821 $38,894 $37,491 $38,847 $38,678

$223,445

E-SHOPPING & MAIL ORDER % 2015 Chge. $31,758 9.3% $29,879 16.5% $34,046 14.2% $33,449 12.1% $33,091 17.4% $33,699 14.8% $34,529 --$34,231 --$34,783 --$35,824 --$41,688 --$55,765 --$195,922 14.0% $432,742 ---

Est. 2016 Food Sales* $ 729 $ 731 $ 817 $ 787 $ 816 $ 812 $ $ $ $ $ $ $4,692

* Estimated by Food Institute as follows: 38.1% of warehouse club/supercenter; 4.2% of drugstore and pharmacy; and 2.1% of e- and mail orders.

◀ Continued from page 45

ARE LOWER FOOD PRICES AT SUPERMARKETS, PARDON THE PUN, EATING INTO RESTAURANT SALES?

In addition, supermarkets are competing more and more with restaurant chains as both high-end and quick-service are looking for a piece of the at-home market as well. As a result, more prepared or easy to prepare convenience items are being offered to offset this, as well as the placement of sit-down restaurants in some retail locations. In talking about at-home and away-from home food prices recently, McDonald’s USA President Mike Andres recently stated, “If I’m not mistaken, it’s the biggest gap we’ve seen in the last 10 years.” Wendy’s Todd Penegor, the chain’s chief executive, said, “The most notable driver behind the sales slowdown appears to be the continued gap between cost of eating at home and cost of dining out, which is now at its widest point since the recession.” That prompted us at The Food institute to do some research and it turns out that away-from-home food prices advanced 3.3 percentage points more than at-home prices in the first half of this year – the largest positive gap since 1983 when away-from home price increases exceeded at-home by 3.4 percentage points. The 2016 change was also the fifth largest such change since the Bureau of Labor Statistics followed such trends back in 1954.

So what does this mean? Are lower food prices at supermarkets, pardon the pun, eating into restaurant sales? And the answer is…maybe not for all, but apparently for some players, like McDonald’s and Wendy’s who have attributed their lack of sales growth to lower grocery prices. So once again grocers are competing fiercely. You see, overall eating and drinking place sales in the first half of 2016 were up 6.5 percent from a year earlier at $326.7 billion and when deflated by the 2.7 percent increase in prices, sales still increased 3.8 percent from 2015. Meanwhile for supermarkets, sales in the first half increased just 2.1% from a year earlier but prices during the same period were down 0.6%. That puts the deflated grocery store sales gain at 2.7% or 1.1 percentage points less than the increase at eating and drinking places. So eating and drinking place sales growth in the first half, both deflated by the Consumer Price Index for awayfrom-home food, and un-deflated, still exceeded sales growth at the nation’s grocery stores even though the gap in the two price indices was the fifth largest on record. Looking ahead, eating and drinking place price increases will likely accelerate due to rising minimum wages. To counter that, and reducing staff, more automation, particularly in the fast-food sector will likely be on the horizon. That again can be an opportunity for grocers as at-home food prices make their own prepared or easy to prepare offerings even more attractive in price, quality and convenience. Editor’s Note: Brian Todd is President and CEO of The Food Institute, a nonprofit information-based organization founded in 1928. Learn more at www.foodinstitute.com or contact Todd at brian.todd@foodinstitute.com M ISSOUR I – KA NS A S GRO CER | 47

? ?

?? ? ? ?

This summer marked the sixth television run of the decades-old game show, “To Tell the Truth.” While its style has evolved over the years, the central premise remains intact: a panel of questioners must try to distinguish the correct subject character from a few imposters. The show host initiates the big reveal by asking:

“WOULD THE REAL [PERSON’S NAME] PLEASE STAND UP?” By Doug Madenberg

48 | M I S S OU R I - K A N SA S G R OC E R

Today’s supermarket environment actually feels quite similar. Apart from the sign out front, it is getting tougher to distinguish independent stores and chains from their regional and national competitors, who act more like local players all the time. A number of benefits that independent grocers have traditionally “owned” are now being actively challenged by larger (sometimes much larger) retailers. Here are five competitive mantras that independents often cite; how major retailers are staking their own claim to these advantages; and the competitive response that savvy independent grocers can employ.

“We know our customers and understand our markets.”

Being physically rooted in the communities they serve, independent retailers have traditionally had a close relationship with the individual shoppers in their stores. Independents are often family-owned or familyinvolved, sometimes with second and third generation owners and managers who grew up in the same towns as their customers. Local grocers could once proudly say that they knew their customers by name,

but in today’s information-driven retail environment, that claim is hardly a complete indicator of a strong customer relationship. Grocery chains of all sizes, aided by research and multiple data streams, know a whole lot about the purchase preferences and behavior of their customers, often by demographic and psychographic segment. Many retailers make use of loyalty programs to provide targeted incentives and reward their better customers, perhaps the modern-day equivalent of dealing with folks on a first-name basis. In the midst of all of these data-driven relationships, independent grocers can refocus on human relationships. In our experience, smart local chains interact with customers in numerous ways that go beyond the suggestion box of yesteryear.

These retailers listen and respond to visitspecific shopper feedback, using ratings and comments to tailor their assortment and service level. They ask secondary and non-shoppers in the market why they shop elsewhere, and they survey their employees (often among the most knowledgeable customers) on a regular basis. Independent retailers can also use social media channels to stay in tune with local shoppers. There is a large opportunity

gap between shoppers using social media and those connected with their primary supermarket. Retail Feedback Group’s “2015 Supermarket Experience Study” found that while 83 percent of shoppers are using one or more social media platforms, just 31 percent are friended with or connected to their primary supermarket. This is not to imply that independent chains should ignore the increasing loyalty technology at their disposal. In fact, these grocers can use their local knowledge and brand equity to select and tailor the programs that make the most sense for their own customer base. One independent with a forward-looking loyalty effort is Coborn’s Incorporated, based in St. Cloud, Minn. Its new “more rewards” program offers special pricing and discounts to members, including fuel,

grocery, liquor, pet and baby rewards. Customers who download the associated mobile app can also receive special offers while they shop.

“We offer a strong variety of unique and locally sourced products.”

Independent grocers have traditionally been a source for local products that serve their shoppers’ tastes and preferences. For a long time major chains did not Continued on page 50 ▶ M ISSOUR I – KA NS A S GRO CER | 49

◀ Continued from page 49

So most supermarkets have an opportunity in this area. But it seems that independent retailers can (or should) have an authenticity advantage in marketing local products because they are local.

“I N D EPE N D E N TS S HO U L D USE ALL AVAI LA B L E RES OU R CE S TO T EL L T H E I R S TO RY TO TH E COMMU N I TY. ”

To counter the foray into local and specialty products by the major chains, independents need to carefully examine the demand for local products in each market, carry relevant items, and promote these products throughout their stores using a clear marketing effort. The Reasor’s chain in Tulsa, Okla., is one of many independent grocers that does an excellent job featuring items from local farms and community-based suppliers, with coordinated in-store signage, print ads, and digital promotion.

iStock

“We offer a convenient neighborhood shopping destination.”

A message to independents: Simply being smaller in size than a supercenter or massive grocery store does not provide an advantage per se. It’s the associated benefits of a smaller location that can resonate with shoppers: the convenience of being in a downtown area or sharing a shopping center with other trip destinations; the curated assortmentthat enables a busy mom to make quick selections; the ability to purchase a few items for dinner without waiting for an available express late, or self-checkout. These days, major retailers are offering many of these same advantages. Consider, for example, Aldi and Trader Joes that both offer a curated assorted in a small footprint resulting in a quick shopping experience.While these formats may appeal to different shoppers, they both compete with traditional supermarkets. Of course, e-commerce has expanded the whole notion of shopping convenience beyond a retailer’s physical store locations. To compete on true convenience,

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independents need to complement their locational advantage with digital shopping options that meet their customers’ needs. The majority of the major supermarket chains do provide an online ordering and fulfilment service of some sort, as do other dedicated online service providers such as Amazon Fresh and Fresh Direct. It is hard to imagine a grocery retailer, large or small, that will not need an omnichannel approach to compete effectively in the coming years. But focusing back on the physical aspect of convenience, some independents are experimenting with new designs and tailoring their stores to unique attributes of their neighborhood and associated consumer needs. Prime examples would be Longo’s in Toronto and Roche Bros. in the Boston area. Both venerable family-owned grocery chains with a suburban store base have opened downtown locations in recent years that cater to a different trade (likely, many of the same customers but just near their work rather than home environment). Each retailer has extended its trusted brand and used creative store design and a well-planned assortment of fresh food offerings that appeal to shoppers on a lunch break or taking home prepared food for dinner.

“Our customers appreciate that we invest in the local community.”

As mentioned above, independent supermarkets have strong roots in the local community. While in the past this meant strong, personal connections between employees and shoppers, and visibility in the community through Little League teams, local events and school programs, today many chains also engage in all of these same activities. Evidence has shown that consumers would

prefer to shop at a local store to keep their dollars in the community, but the economic reality is that rational consumers behave in a way that best suits their needs. There are so many more available options for purchasing food and groceries than ever before – from stores and online retailers – that offer compelling ways to spend the dollars traditionally reserved for the local supermarket. Additionally, major supermarket chains also have community involvement initiatives at the store level, enabling them to allocate resources to local groups, events, and causes. This can further erode the home team advantage for independent grocers. To respond to these factors, independents can and should double-down on their community engagement efforts. In our consumer research, we often find that the independent retailer who has been deeply embedded in a local market for decades does indeed receive a great deal of credit among shoppers for all they do in the community. However, we also find independent retailers can be reluctant to promote the good work they do, often out of modesty. While this is respectable, it can be a disadvantage. Major retailers tend to clearly and consistently communicate in as many channels as possible their charitable donations, large and small, as well as the volunteer efforts they support. So independents should use all available resources to tell their story to the community. An outstanding example of community involvement among independent retailers is Wright’s Market in Alabama. Recently after hearing concerns from his customers about blight and crime in their Opelika neighborhoods, Jimmy Wright approached the mayor with research from other cities that overcame similar issues, and he now spearheads a wide-scale community redevelopment effort.

Wright’s Market also offers rides between the store and its customers’ homes for no charge. For his efforts, Jimmy has won numerous awards already in 2016, including the U.S. Chamber of Commerce’s DREAM BIG Blue Ribbon Small Business Award and the Community Excellence Award. "We are more nimble and innovative than larger retailers.”

The ability to make quick decisions and execute innovative ideas in short order has long been an advantage for independent retailers. Relative to major chains, decisions are made closer to the customer without the many layers of approvals frequently required at large chains. Given this, new innovations can often be tested more quickly. However, while quick decision making and the ability to innovate indeed exist for independents, new technological innovations, for example, typically come with a steep price tag that many independents can’t afford to take a risk on before the technology is proven.

location-specific offers to shoppers via their smartphone. The resulting redemption rate is 10 to 20 times higher than for a traditional coupon. Future plans are to send personalized offers that tie into previous purchase history. Niemann Foods epitomizes the innovative mindset that independent grocers will need to stay competitive. If independent stores and chains intend to survive and thrive in the grocery space, they must take stock of – and capitalize on – their inherent advantages. By staying committed to the areas highlighted above, this vital retail segment can remain strong into the future, likely enduring several more re-makes of “To Tell The Truth.” So, would the real independents please stand up? ■

Doug Madenberg is President of Retail Feedback Group. RFG designs customer/ employee feedback systems for retailers.

In contrast, major chains can take risks with access to larger pools of financial resources and the ability to recover from ideas that don’t work. To level the playing field and capitalize on their innovative instincts, independents can take advantage of resources like the Center for Advancing Retail Technology (CART) to help them vet technological solutions. Groups like CART help mitigate the risks of adopting new capabilities and place independents back on the forefront of executing on innovative technology. Niemann Foods, an independent retailer based in Quincy, Ill., is embracing new beacon technology in its 44 County Market stores. The beacons, approximately 25 per store, allow the company to make in-store, M ISSOUR I – KA NS A S GRO CER | 51

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1 5 MINUTES WITH...

tom Stenzel P RES IDEN T AN D CEO U N I T ED F RES H PRODU CE AS S OCIATIO N

Tom, can you tell us what’s the most important regulatory or legislative issue today for the produce industry and their retail customers? I would say the biggest impact we’re seeing right now for grocers and their produce suppliers is implementation of the Food Safety Modernization Act (FSMA). In the past year, FDA has finalized several different regulations under FSMA that will affect the growing of fruits and vegetables, their packing and processing, their transport through the supply chain, and even their handling in retail distribution centers and in store. What companies are covered under these rules? On the growing side, these new regulations apply to all foods produced domestically in the United States, and also to all imported foods. And, you can pretty much say that all food processors and food handlers such as wholesalers and retailers will be covered. Can you give us some examples of how these regulations might affect the industry? While most commercial growers are already aware of and following Good Agricultural Practices, the new Produce Safety Rule establishes specific guidelines

for everything from worker hygiene to use of compost to quality of irrigation water. Retailers are going to want to make sure they’re only sourcing produce from growers who comply with these rules. It’s never been more important for retailers to know who they’re buying from.

“WE’RE BEGINNING TO SEE SOME EXCITING NEW PROGRAMS WHERE RETAILERS ARE HELPING SNAP RECIPIENTS EAT HEALTHIER, WHILE ALSO BOOSTING IN-STORE TRAFFIC.AND PRODUCE SALES.” How about impact on retailers? Any food facility that has to register with the FDA, including distribution centers, are covered under the Preventive Controls for Human Foods Rule. That will require companies to have specific food safety plans and qualified individuals either on staff or as consultants to help comply with these standards. Retailers who arrange transportation will also have to ensure that foods are transported in accordance with the Sanitary Transportation Rule. Finally, retailers who are direct importers of foods will be responsible for ensuring that foreign suppliers are complying with all of these rules. FSMA is going to have significant impact on the entire food industry for many years to come. Continued on page 54▶

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15 MINUTES WITH...

◀ Continued from page 53

What other issues are important for produce suppliers and retailers? Although most retailers don’t see the direct impact, I’d say the biggest threat to our industry today is the severe labor shortage in harvesting, packing and processing fruits and vegetables. And that problem is compounded by Congress’ refusal to address immigration reform. We need to find a path to legal status for the more than one million undocumented workers who are working in agriculture today, and we need to create a new foreign guest worker program for the future that can properly screen out bad guys, but also help us attract the workers we need.

“TEACHING KIDS TO MAKE HEALTHY CHOICES WHEN THEY’RE YOUNG HELPS THEM MAKE THOSE CHOICES FOR A LIFETIME...” Most of our growers are paying far more than minimum wage, but we still don’t have enough workers. And for retailers, that will mean shortages of some crops and likely higher prices. Let me mention a couple other issues that the produce industry is working on that indirectly affect our retail customers. We’re seeing a rash of proposed new regulations from the EPA on all sorts of issues from restricting crop protection tools to trying to regulate streams and ditches on farms. Without a strong scientific consensus on the need for those steps, these actions simply add costs to production that have to be passed on to retailers and eventually consumers. And, Congress continues to duck the issue of assuring adequate water supplies, especially in California. I don’t have to tell your readers about the drought, or the importance of preserving runoff from the snow pack in the Sierras in reservoirs. 54 | M I S S OU R I - K A N SA S G R OC E R

We also have to have the political will to do a better job of distributing water from where it’s abundant to where it’s needed. This is another issue where grocers may not be on the front line, but you surely are impacted. Don’t you have any good news on the regulatory and legislative front? Actually I do. One of the most important programs to come out of the last Farm Bill is called the Food Insecurity Nutrition Grants (FINI) program. FINI is providing grants to retailers, community groups and farmers markets to incentivize SNAP recipients to choose more fruits and vegetables with their SNAP dollars. We’re beginning to see some exciting new programs where retailers are helping SNAP recipients eat healthier, while also boosting in-store traffic and produce sales. That’s a win-win. Let me also mention one more nutrition topic that I also believe is important to retailers in a different way. Your readers have probably heard about the food fight in Washington, D.C. over school meals. For the first time, USDA is requiring schools to provide one-half cup of fruits and vegetables in school lunches. Now that doesn’t sound like much, but that simple requirement is exposing kids to a tremendous new variety of fruits and vegetables. Our United Fresh Start Foundation has been leading a campaign for several years donating salad bars to schools, with the help of many retailers and produce suppliers. Teaching kids to make healthy choices when they’re young helps them make those choices for a lifetime, when they are the primary shopper. So you see, even school lunch regulations matter to retailers! We’d love to talk with any of your members about how they can get involved in supporting schools in their communities. ■