Grocer2014 issue2 web

2014, ISSUE 2

CALIFORNIA GROCERS ASSOCIATION

Drought in California IN THIS ISSUE n

For the latest industry news visit www.cagrocers.com

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Industry Honors Grocery Executives Willie Crocker: New Illuminator Headlite

M A RK YOUR CA L E ND AR

September 21 – 23, 2014 | Palm Springs Convention Center | Palm Springs, California

STAN D OU T. BE A T RU E AN D AU T H EN T IC OR IGINAL .

Traditional grocery? Meet non-traditional thinking.

A place where one-size-fits-all is being replaced by one-size-fits-one. A place where true value is derived from expressing your true values.

With today’s fragmented shopping reality, customers are looking for a different kind of retail relationship. Omni-connected consumers are embracing the companies and brands that express and demonstrate their values. How retailers define themselves is as important as the products on their shelves and the prices they charge. Truthfulness, integrity, sincerity, individuality, and openness are the new currencies that creates loyal customer connections — in-store and on-line.

Join your industry colleagues at this mind-expanding, purposeful journey into the next generation of grocery retailing.

CON FERENC E SC H EDU LE OV ERV IEW S U N D AY, S E P T E M B E R 2 1 Illuminators Golf Tournament Opening General Session Opening Reception sponsored by Kraft Foods and E&J Gallo Winery After-hours Social Event sponsored

by Heineken

M O N D AY, S E P T E M B E R 2 2

Collaborative Share Group Discussions Opening Remarks and General Session Pre-scheduled Business Meetings Reception & Illuminators Special Event

T U E S D AY, S E P T E M B E R 2 3 Multiple Educational Sessions & Retailer Spotlight Pre-scheduled Business Meetings Luncheon Keynote Address

www.cgastrategicconference.com

“ T he CGA Strategic Conference is one of the finest annual resources to better understand the direction of the industry, as well as strengthen relationships between retailer and vendor. The disciplines in place allow for a fast paced, very informative conference, which provides great opportunities for both new business, as well as honing existing programs.”

“ T his is by far the best conference I attend all year! Where else do you get uninterrupted time to discuss and review your business with so many retail managers and VP’s. At the retailer meetings there is a lot of give and take and both the retailers and myself walk away with a far better understanding of our business needs. This always results in more sales and profits for both of us!!”

Kurt Erickson, President Vallarta Supermarkets

Bob Kennedy Jack Link’s

M EET W I T H CALIFOR NI A’S TOP RETA ILERS Don’t miss this unique opportunity to meet with California’s top grocery industry decision-makers. All conference sponsors receive customized, pre-scheduled meeting schedules as part of their investment. Whether you represent a new niche product, or an established national supplier, the CGA Strategic Conference provides a highly productive forum to meet one-onone with buyers from California’s top retail companies.

Last year’s sponsorship opportunities sold out early so call today to secure your spot Now for this year’s conference.

The 2014 CGA Strategic Conference offers a variety of sponsorship packages and new, customized opportunities to promote your company’s products, equipment, or services. Sponsor benefits range from dedicated use of a Business Conference Suite, to 10' x 10' floor display spaces, or exclusively-presented social events. Whatever your desired outcomes, the 2014 CGA Strategic Conference offers a variety of opportunities to meet your goals and budget.

Many thanks to

The Illuminators for their continued, generous support of the CGA Strategic Conference by providing the outstanding conference meal functions and entertaining social events.

For complete sponsorship information including a list of participating retailers and sponsorship prospectus, contact:

Beth Wright Director, Events & Sponsorship California Grocers Association

(916) 448-3545 | (800) 794-3545 bwright@cagrocers.com

CONTENTS

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F E AT U R ES

COLU M NS

COVER STORY: Data Breach is No Fairy Tale

President’s Message Keeping in Step.................................................... 5

Remember when your parents told you bedtime stories that ended with… ”happily ever after”? This may still be a fairy tale when it comes to data security and the breaches that have rocked the retail universe.

California’s Drought: Looking Beyond 2014

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Although California is entering its third dry year with the most devastating drought in nearly four decades, waterrelated price hikes on produce are not likely to kick in until 2015, according to agricultural industry insiders.

Industry Honors Grocery Executives

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Friends, family and industry peers laced up their sneakers recently to honor this year’s inductees into the CGA Educational Foundation Hall of Achievement including the Amen Family, Super A Foods, and Kevin Arceneaux, Mondelez International.

Meet New Illuminator Headlite Willie Crocker

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| Issue 2

In April, Willie Crocker, Bimbo Bakeries USA, will assume the role of Illuminator Headlite and direct an association of hundreds of grocery suppliers whose purpose is to “Spread the Lite of Good Fellowship.”

From The Chair Join the Band....................................................... 7 Viewpoint — Kevin Coupe Fare Game........................................................... 9 Perspective Will Leadership Changes Impact Grocers?.......... 14 Capitol Insider — Louie Brown Water Wars......................................................... 16

DEPA RT M EN TS CGA News........................................................ 12 Washington Report ..................................... 20, 22 Know the Law................................................... 24 Q & A — Lynette Kucsma...................................50 Q & A — Kevin Faulconer...................................60 Rollout ............................................................. 63 Advertiser Index ............................................... 64

CALIFORNIA GROCERS ASSOCIATION President/CEO Ronald Fong

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

Director, Events & Sponsorship Beth Wright Director, CGA Educational Foundation Brianne Page Director, Local Government Relations Laura Peralta

For association members, subscription is included in membership dues.

Subscription rate for non-members is $100 and does not include CGA Buyers’ Guide. © 2014 California Grocers Association

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

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

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

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

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

Executive Director, CGA Educational Foundation Shiloh London

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PRESIDENT’S MESSAGE

Keeping in Step

Measuring performance is the key to ensuring a healthy body, and a healthy association.

Technology truly is amazing.

Like many of you, I wear a thin rubber wristband that monitors my physical activity.

It’s an amazing device and one that when used regularly can be a strong motivator to stay on your fitness plan.

While the band has many whistles and bells, what I find of most value to me is the step counter. My daily goal is 10,000 steps, or about five miles. Most days I’m successful, some days I fall short.

I measure my personal fitness success by the number of steps I take. One of my measurements for CGA’s success is its membership.

Our Chair, Mary Kasper, Fresh & Easy, also is a huge advocate of this technology as you will learn in her column on page 7. She addresses this phenomenon and how lessons learned from using it can be applied to every business practice.

Like our Chair Mary Kasper, I too find parallels between my band and our industry, and in particular CGA. I measure my personal fitness success by the number of steps I take. One of my measurements for CGA’s success is its

membership. A robust, well-rounded membership means the Association is providing the programs California grocers and suppliers want.

RO NALD FONG President/CEO

We’re fortunate to have strong industry support, from large chains to small independents and everything in between. Our diversity is one of CGA’s greatest strengths, yet at times can be one of our greatest challenges.

I’m often asked how CGA membership continues to grow, even during tough economic times. Like my fitness program, CGA meets its members’ needs one step at a time. And, like my 10,000 steps a day goal, most times the Association is successful.

Rarely have we as an industry, or as an Association, not been able to come together and reach a compromise at the end of the day.

Monitoring my fitness plan throughout the day also alerts me to make changes to ensure I reach my goal. It may require me to climb stairs instead of using the elevator, or walking to a nearby meeting instead of driving.

Likewise, regularly monitoring our membership allows staff to adjust their programs as needed.

In addition, CGA’s Board of Directors and the Association’s numerous committees are very engaged and help keep CGA on task.

I commend those of you utilizing fitness technology to monitor your health. I pledge to continue monitoring the Association’s health to ensure strong, relevant industry representation for our entire membership. n C A L I F OR N I A G R OC E R

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FROM THE CHAIR

Join the Band I received a fitness band for Christmas. Worn on my wrist, it tracks my steps, sleep and diet. I love it because it gives me data and motivation to (hopefully) make healthy lifestyle choices. It’s friendly, nonjudgmental and is a great coach. Most of all, it makes me more mindful of my current state and future goals, which is a huge first step to staying fit.

There are lots of fitness bands out there right now.

Canalys forecasts that over 17 million smart bands will ship in 2014, following massive growth in the second half of last year, and it estimates that this

CGA also goes to market with the same holistic spirit. CGA’s strategic plan is broad: growing membership, planning a successful Strategic Conference, strengthening the reach of our

number will grow to over 23 million units by 2015, and over 45 million by 2017.1

government affairs program, and supporting the work of our Educational Foundation. While ambitious, CGA’s strategic plan is achievable with the talent and contributions of each of our members.

Sales are always king, but other things are just as important for a healthy, profitable business.

That sounds like a powerful opportunity for grocers. The food tracking features of these bands are awesome. Product bar codes are easily entered on the band, providing instant, helpful information and making it simple to understand nutritional information and caloric intake. Of course, as with other data driven devices, there’s a natural tension between customizing customer information and a customer’s desire for privacy that we will need to explore and respect.

Each brand offers something different, but they have one important feature in common. Each offers a holistic approach to a healthy lifestyle — it’s not just one thing, but a good balance of a lot of things that matter.

CGA Chair of the Board Senior Vice President, General Counsel, Secretary Fresh & Easy

My fitness band creates awareness and celebrates the value of incremental progress.

Who knew that adding just a 20 minute daily walk would get me to my daily steps goal?

Or that substituting a regular latte for my beloved vanilla latte would manage my sugar intake? It’s the same with CGA — every single accomplishment on our strategic calendar makes us a stronger and fitter association.

I try not to confuse the physical metrics that my fitness band tracks with the equally important but unrecorded measures of my personal wellbeing. Similarly, although CGA’s strategic plan measures our progress against set goals, CGA’s Board of Directors and staff understand and build upon the authentic and individual voices of each of our members that make us such a successful organization.

Just like our members, CGA makes every step count. As for me, I’m going to listen to my fitness band and try to get more sleep and eat more green vegetables. n

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

The same could be said for grocers. Sales are always king, but other things are just as important for a healthy, profitable business — connecting with our customers, being part of our communities, treating our employees well and providing career development opportunities, and understanding how to run a business in a state that does not always make it easy.

MARY KAS PER

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http://www.canalys.com/newsroom/16-million-smart-bands-shipped-h2-2013#

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CGA

| Board of Directors

EXECUTIVE COMMITTEE

Chairman of the Board Mary Kasper Fresh & Easy First Vice Chair Joe Falvey Unified Grocers, Inc.

Second Vice Chair Kevin Konkel Raley’s Secretary Diana Godfrey Smart & Final Stores

Dave Jones Kellogg Company

Dora Wong Coca-Cola Refreshments

DIRECTORS

Raul Aguilar Anheuser-Busch InBev Jon Alden Jelly Belly Candy Co. Renee Amen Super A Foods, Inc. Teresa Anaya Northgate Gonzalez Markets Joe Angulo El Super (Bodega Latina Corp.)

Kevin Arceneaux Mondelez International, Inc. Dennis Belcastro Hillshire Brands Company Paul Cooke Nestlé Purina PetCare Brent Cotten The Hershey Company

Robert Digrigoli Procter & Gamble Brian Dowling Safeway Inc. Kendra Doyel Ralphs Grocery Company John Eagan Costco Wholesale Jon Giannini Nutricion Fundamental, Inc. Robin Graf Whole Foods Market Michel LeClerc North State Grocery, Inc. Eric Lindberg, Jr. Grocery Outlet, Inc. Dave Madden MillerCoors Casey McQuaid E & J Gallo Winery

Dan Meyer Stater Bros. Markets Omar Milbis Rio Ranch Markets Phil Miller C&S Wholesale Grocers Hee-Sook Nelson Gelson’s Markets Keith Olscamp Campbell Soup Company Chris Podesto Food 4 Less - Stockton/ Rancho San Miguel Markets Kim Stokes Unilever Bob Richardson The Clorox Company Harish Solanki Big Saver Foods, Inc.

Naresh Solanki Bestway/Gardena Supermarkets Mimi Song Superior Grocers Mike Stamper Nestlé Sales Division Dirk Stump Stump’s Markets Tiernan Summins Kraft Foods Group, Inc. John Swindell Food 4 Less/Foods Co. (A Kroger Company) Paul Turcotte Pepsi Beverages Company — WBU Jim Van Gorkom NuCal Foods Jim Wallace Albertsons LLC

SUPPLIER EXECUTIVE COUNCIL

Veronica Rendon, Dave Thatcher Alta Dena Certified Dairy, LLC Rick Van Nieuwburg Altria Corp. Services Raul Aguilar Anheuser-Busch InBev Dan Atkins Berkeley Farms, Inc. Rick DuCharme, Rickey Hamacher Bimbo Bakeries USA Gilbert de Cardenas, Bob Cashen Cacique USA Victoria Horton California Beer & Beverage Distributors Cindy Plummer California Table Grape Commission Keith Olscamp Campbell Soup Company Mark Cassanego Carr, McClellan, Ingersoll, Thompson & Horn Pat Huston, Robert Hilliard Cash Register Services

Bob Richardson The Clorox Company Nancy Limon, Dora Wong Coca-Cola Refreshments Vic Chiono Coca-Cola Refreshments Minute Maid Business Unit Ron Bloes Coffee Bean & Tea Leaf Stephenie Shah Diageo Gregory E. Morrissey Durable N.A. Jeff Andrews Elite Storage Solutions Scott Johnson, Shannon Nadasdy Financial Supermarkets, Inc. Bruce Wyatt, Thomas Wilson Flowers Baking of California Brian Rosen Gleason Inc. Fernando Gallego Golden Gate Paper Company David Van Winkle Hansen Beverage Company

Elizabeth Alvarez-Sell, Greg Bailey The Hershey Company Tim Cohen, Bob Kelly Hidden Villa Ranch Dennis Belcastro Hillshire Brands Company Kristina Crystal-McVay The J.M. Smucker Co. Dave Jones Kellogg Company Richard Bell LOC Software Dave Madden MillerCoors Kevin Arceneaux, Rick Brindle Mondelez International, Inc. Steven Schultz Moss Adams LLP Paul Cooke, Karen Doggendorf Nestlé Purina PetCare Jim Van Gorkom NuCal Foods Lauren Ziminsky Patriot Risk and Insurance Services Inc.

Laurie Stone PBI Market Equipment, Inc. Paul Turcotte Pepsi Beverages Company — WBU Mia Hagen Polymer Logistics Inc. Robert Digrigoli Procter & Gamble Melanie Zitting, Sue Sharp Pure Water Technologies Renee Wasserman Rogers Joseph O’Donnell Darrell Costello Roplast Industries, Inc. Tom H. Daniel Sterilox Food Safety Karen Grierson TC Transcontinental Northern California Phyllis Adkins TruGrocer Federal Credit Union Kim Stokes Unilever Jennifer Ward WorldPay US, Inc.

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CHAIRMAN APPOINTMENTS

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Immediate Past Chair Kevin Davis Bristol Farms

VIEWPOINT

Fare Game A core mantra at Amazon goes like this:

“We are not in the business of selling people stuff. We are in the business of making it easier for people to buy stuff.”

Sometimes, you get so focused on doing business you forget about who is doing the actual shopping that makes it all possible.

Now, this isn’t exactly the case, of course. As someone who has seen thousands of his books sold through Amazon, I feel very much as they are my sales agent to the consumer. But as a shopper, I never feel like I’m being “sold,” mostly because the vast majority of communications I get from Amazon are relevant… that is, related to previous purchase behavior that is related to my needs and interests.

Because it sometimes is easier — or at least less painful — to look at other businesses for examples and metaphors, let’s consider the case of American Airlines, which recently announced that it was ending what is called “bereavement fares,” which consisted of 5 percent off the listed ticket price when people need to get home for the funeral of a loved one.

It was doing so because it needed to align its policies with those of US Air, with which it is merging. Plus, the company said, there are plenty of ways to get cheaper fares from lowcost airlines, and so it didn’t make sense to offer them anymore.

This decision was either made by accountants, proving once and for all that accountants shouldn’t make decisions, or by someone with so little sense of public relations and customer service that they ought to be summarily fired.

Sometimes, you get so focused on doing business you forget about who is doing the actual shopping that makes it all possible.

Process, policy and procedures become more important than enabling… or, in Amazon’s

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

The notion of being consumer-centric hardly is a new concept either. Years ago, when the great Glen Terbeek created Smart Store for what then was called Andersen Consulting (now Accenture), he wrote a book entitled The Agentry Agenda: Selling Food in a Frictionless Marketplace, in which he advanced the premise that by serving as the tool of suppliers, many retailers were distancing themselves from their customers, which could not help but hurt them in the long run. I would argue that when you see chains and stores being shut down or sold, this is a large part the reason.

business construct, enabling… the customer.

And that’s when bad things happen.

Scott Olson/Getty Images News/Thinkstock

That’s more than semantics. It strikes me as a very clear-headed way of saying that Amazon’s goal is to be a consumer-centric company… that its primary value is in being perceived as serving as the agent for the consumer, not the supplier.

KEVIN COUPE

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Continued on p. 10

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VIEWPOINT

Continued from p. 9

These guys are morons.

Now, let’s be clear. I actually agree with some of the analysis out there that says that, in fact, bereavement fares were no great bargain, and so nobody should mourn their loss. But that’s not the point.

killerbayer/iStock Editorial/Thinkstock

What American Airlines has done is say that policies are more important than people. It has said that the bottom line is more important than our customers, who actually spend the dollars that go to the bottom line. And, it has effectively told its customers, whenever you are in a time of great personal need, don’t call us.

Go on Kayak. Or Expedia. Or Priceline. Because they’re better at serving your needs than we are.

If I were running American Airlines (and it probably is a good thing I am not, for reasons having nothing to do with bereavement policies), I would say that instead of aligning our policy with that of US Air, we’re doing it the other way — we’re aligning their policy with ours.

And then, I would tell anyone who is a member of my frequent flyer program who is facing such a personal emergency, when these kinds of disasters strike, call us, because we’ll move heaven and earth to get you where you need to be at the cheapest possible fare. And if we’re lucky enough to have all our planes full, I’d reach out to other airlines to help my customers as best I could.

(And I’d be happy to help them in similar situations.)

Sure, you’d have to have some rules, just to make sure that people don’t abuse the program. But I don’t think it would be that hard… especially today, when you can call up almost any piece of information — like obituaries — you need online.

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There are probably all sorts of reasons American Airlines would cite to justify its announcement, just as there are probably all sorts of reasons why businesses have dumb policies.

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But that doesn’t make it any less moronic, though arguably typical for an industry that with every passing day proves itself to be more soulless. They are taking whatever goodwill was left, and flushed it down the proverbial toilet.

The American Airlines example illustrates something much more universal than just how the airlines are taking a misguided path.

Companies in any industry that depend on customers doing business with them have to do their best whenever possible to be the go-to solution when it comes to needs and desires related to whatever segment they are in. Otherwise, what’s the point?

That’s why for many people, Amazon is the go-to solution for virtually anything they want to buy. It is a resource for information, as well as a source of product.

And it has been my experience that on those rare occasions when I’ve had a problem with a purchase, their customer service folks are fast, decisive, and always have the ability to make decisions that favor me rather than their policies, procedures and processes.

Except, of course, for the fact that Amazon’s policies, procedures and processes are designed to favor the shopper. That’s how they keep me coming back. Again and again and again.

The question is, what kind of company do you want to emulate when it comes to creating a customer experience? American Airlines? Or Amazon? n Editor’s Note: Kevin Coupe is co-author of “The Big Picture: Essential Business Lessons from the Movies”, and is working on a sequel.

Trademarks owned by Société des Produits Nestlé S.A., Vevey, Switzerland

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Meet Purina.

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

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CGA Welcomes New Members THE CALIFORNIA GROCERS ASSOCIATION WELCOMES THE FOLLOWING NEW MEMBERS: Regal Poly & Paper Co. 5600 Grace Pl Commerce, CA 90022- 4119 Contact: Sylvia Sajo, General Manager E-mail: sylvia.sajo@regalpoly.com Tel: (323) 888 -2500 Website: www.regalpoly.com

MaintenX International 2202 N Howard Ave Tampa, FL 33607-3454 Contact: Bill Schaphorst, VP, Business Development E-mail: bill.schaprost@maintenx.com Tel: (704) 845-1203 Website: www.maintenx.com

Command Packaging 3840 E 26th St Vernon, CA 90058 - 4107 Contact: Julieun Kawasaki, Director of Marketing E-mail: jkawasaki@commandpackaging.com Tel: (323) 996 -2247 Website: www.smarterbags.com

BMA USA Inc. 7923 Gloria Ave Van Nuys, CA 91406 -1823 Contact: Jamal Deeb, General Manager E-mail: jdeeb@bmausa.net Tel: (818) 241-8383 Website: www.bmausa.com

(Now bigger than ever!)

We’re making some exciting changes to our annual Expo that you won’t want to miss. Join us for the largest independent grocers’ selling show in the west!

Register today!

For more information and to register for Expo, go to: unifiedgrocers.com and click on “Events” at the top of the page.

This event is exclusively for Unified’s customers and supplier partners.

Ph: 800-724-7762 | unifiedgrocers.com

Photo courtesy Long Beach Convention & Visitors Bureau

PERSPECTIVE

Will Leadership Changes Impact Grocers?

CHRI S M IC HE LI Legislative Advocate Aprea & Micheli, Inc.

There have been a number of changes in the State Senate, and impending changes among three of the four legislative leaders, that are likely to impact some legislation of interest to California’s grocery industry.

As the second year of the 2013–14 Legislative Session commenced, there were 1,930 bills introduced, about 325 fewer than last year. There are still a number of controversial items, including a substantial increase in the minimum wage by Sen. Mark Leno (D-San Francisco) and a GMOlabeling bill by Sen. Noreen Evans (D-Santa Rosa).

As some of you may be aware, the State Senate has experienced a number of changes in its current composition due to a resignation and two leaves of absence. Republican Senator Bill Emmerson resigned in November and a special election to fill his seat will occur this spring. It is expected to remain in Republican hands, which would return them to 12 seats in the upper house.

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Democrats currently maintain 28 seats in the Senate, one more than the super-majority of 27 votes. In early February, Sen. Rod Wright (D-Inglewood) was convicted of eight felony counts, with his sentencing due in mid-May. In late February, Sen. Ron Calderon (D-Montebello) was indicted by a federal grand jury. They have both requested and received a leave of absence, although Senate Leader Darrell Steinberg (D-Sacramento) does not expect either senator to return.

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As a result of these changes in the current composition of the State Senate, Democrats have lost their “super-majority” status and their ability to pass on their own tax increases, proposed constitutional amendments, and urgency clause measures. This will provide Republicans with some ability to engage in certain policy debates. You may recall that, with the passage three years ago of Prop. 25, the state budget and related budget “trailer bills” can be passed by a simple majority.

In addition to the change in the Senate’s, this year Assembly Speaker John Perez (D-Los Angeles), Assembly Republican Leader Connie Conway (R-Visalia), and Senator Steinberg will be termed out of office and will be replaced.

Senate Republican Leader Bob Huff (R-Brea) has another two years to serve before he is termed out of office. Senator Toni Atkins (D-San Diego) has been chosen to be the next Speaker and will likely take office in June. Senator Kevin de Leon (D-Los Angeles) has been chosen to be the next Pro Tempore and will likely take office in November. No one yet has been chosen to be the next Assembly Republican Leader.

Democrats currently maintain 28 seats in the Senate, one more than the supermajority of 27 votes.

As a result of these leadership changes, it’s impact on pending legislation is unclear, other than measures that require a super-majority vote. Of course, last year, there were votes from Republican legislators to repeal the California Enterprise Zone tax credit program and establish the Governor’s Economic Development Initiative in its place. As a result, it’s difficult to predict with certainty that no tax law changes will be made that are adverse to the business community in this state.

At this point, we believe that these measures would be difficult to enact this year: n

Proposed amendments to the California Constitution, such as those to reduce the local voter threshold from two-thirds to 55 percent for education, transportation and

PERSPECTIVE

public safety funding. Note that constitutional amendments are not acted upon by the Governor. If approved by both houses of the California Legislature by a two-thirds vote, then they’re placed on the next scheduled statewide election ballot. n

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Bills that would enact targeted tax increases on specified industries, such as a soda tax, tobacco tax increase, or oil severance tax. Senator Evans has re-introduced her oil severance tax, while Sen. Bill Monning (D-San Luis Obispo) is pursuing an alternative to his soda tax, instead requiring “warning labels” on soda bottles about the health effects of obesity. And it appears that tobacco tax proponents have turned their attention to a potential ballot measure instead.

Urgency measures that do not enjoy bi-partisan support. Note that budget trailer bills are exempt from the two-third majority vote requirements

even though they take effect immediately upon the Governor’s signature.

Senator Calderon is termed out of office this year, while Senator Wright has another two years remaining on his Senate term. If Senator Wright were to resign prior to that time, then a special election would occur.

Both of these seats are strong Democrat districts, so it is unlikely they would change partisan hands at election time. If that is the case, Senate Democrats could once again have a super majority when the new Legislature is seated in December 2014.

In the Assembly, Democrats control 55 seats, also one more than the 54 super majority status and that may not change this November either. Republicans maintain 25 seats and need to pick-up two additional seats to get out of their super-minority status. This November’s elections will provide vital for both parties as they vie for power in the California Legislature. n

CONGRATULATIONS WILLIE CROCKER May you spread the Lite of Good Fellowship!

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

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CAPITOL INSIDER

Water Wars Mark Twain’s famous quote, “Whiskey is for drinking; water is for fighting over,” have never sounded truer.

California entered 2014 facing the possibility of it being the driest year on record. Thankfully, a series of February storms have taken the State out of the realm of extreme records, but the crisis continues. Decision makers are faced with multiple issues on how best to manage this precious and scarce resource for the short and long term.

California built above and below ground water storage facilities.

Construction on the State Water Project began in 1960 and now includes 21 dams and more than 700 miles of canals, pipelines and tunnels.

In most years, the water starts in the North where the greatest percentage of precipitation falls and then moves south via a complex water delivery system. The drought of 2014 has turned that situation on its head.

The northern part of the state, which represents more acres but fewer people proportionally, has not been able to make the same investments.

So, as we entered an extremely dry 2014, it was the northern part of the State in the worst condition with a number of municipalities facing the possibility of losing all water within just a matter of months. Southern California, on the other hand, claims it has enough water to make it through 2015.

After the last major drought in the early 1990s, Southern California remained cognizant of the need for conservation and left in place many water saving practices, like tiered water pricing, water meters, and paying consumers to remove water-thirsty landscapes. In addition, Southern

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David McNew/Getty Images News.thinkstock

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Construction on the State Water Project began in 1960 and now includes 21 dams and more than 700 miles of canals, pipelines and tunnels.

Notwithstanding the system’s size and ability to move massive amounts of water, it has not been able to keep up with the demands of a growing population, climate change and other factors that restrict the movement of water.

To add to the complexity, State and Federal regulators have authority over different segments of the system. Some of the storage facilities in Northern California were built by and are operated by the Federal Bureau of Reclamation (Bureau), which has negotiated water rights with property owners.

The State operates the State Water Project, which water from both state and federal projects flow. At the heart of the system is the Delta from which most water from the north must flow in order to get to Southern California.

Continued on p. 18

Š2014 Jacob Leinenkugel Brewing Co., Chippewa Falls, WI * Beer

CAPITOL INSIDER

Continued from p. 16

As the Chair of the State Water Board, Felicia Marcus stated in a meeting recently, “We understand that whatever decision we make, we are likely to look like idiots.”

State and federal regulators who oversee this system are now in the process of deciding what to do with the limited amount of water in 2014, and the possibility of another dry year in 2015. The State made a decision in early January to minimize flow through the Delta to a level that barely controls salinity and essentially eliminates any deliveries south of the Delta.

Now, many in Sacramento believe the voters are ready for a water bond, but one not as large as $11.4 billion.

It prefers to store water in the north as security for next year. Using different modeling numbers, the Bureau stated its intention to deliver water to water rights holders south of the Delta knowing they cannot fulfill contractual obligations, but seeking to maximize every drop they control. This difference of opinion has created major issues between the two levels of government and those who hold the water rights.

This near term crisis has refocused the Legislature on a long-term solution.

An $11.4 billion water bond was passed by the Legislature in 2009 and placed on the 2010 ballot.

It included funding for additional above ground and below ground storage, environmental mitigation in the Delta, groundwater clean up and a variety of other projects intended to make more water available for the entire State. It was moved to 2012 and then again to November 2014 because polling showed it was not popular with the voters.

If the State is able to change the Bureau’s mind, then senior water rights holders are allowed to access water from other sources, forcing the junior rights holders to go without. In the San Joaquin Valley, this could instantly create crisis by forcing thousands of agricultural acreage to be fallowed.

Now, many in Sacramento believe the voters are ready for a water bond, but one not as large as $11.4 billion.

So, the Legislature has introduced eight different bond measures to replace the one on the ballot, ranging from $3 billion to $9.2 billion.

The domino effect could have significant and long lasting impacts for the State’s economic future. On the other hand, if the Bureau succeeds in convincing the State that delivering water to uses other than those defined as “health and public safety” in 2014 is in their best interest, the state could win the battle and lose the war if precipitation totals stay below normal in late

It’s too early to tell if any will survive, but it’s safe to assume if the drought continues voter interest in water infrastructure is likely to be at an all-time high by the time November rolls around and the size of the bond may not be an issue.

2014 and early 2015.

18

David McNew/Getty Images News.thinkstock

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

Even if 2014 is not considered to the driest on record, it will likely be remembered for a long time due to the decisions to be made for both short and long term water management in California. n

This article was authored by Louie Brown, a partner in the Sacramento office of Kahn, Soares and Conway, LLP.

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Peyton Manning What It Takes to Be a Champion

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WASHIN GT O N R EP O RT |

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

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

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Setting the Table for Fall Legislative Action MY GRANDMOTHER USED TO ALWAYS SET THE TABLE FOR BREAKFAST AFTER DINNER. I THOUGHT THIS WAS ODD BEHAVIOR UNTIL I WORKED IN A RESTAURANT. ON HER SMALL SCALE, SHE WAS TAKING THE OPPORTUNITY TO PREPARE IN ADVANCE FOR THE INEVITABLE HUSTLE AND BUSTLE THAT WAS TO COME. I am taking my grandmother’s advice for the second session of the 113th Congress. We need to do everything we can now to be ready for the inevitable hustle and bustle of the end of year Lame Duck session. It is very unlikely to get anything more substantive than a post office naming accomplished between now and September.

There are too many primary battles forcing Congressional members to go farther right or farther left than a legislative compromise will allow, and too much at stake politically with control of the Senate and potentially the House up for grabs. We can be frustrated with this scenario, or we can use this lull as the opportunity to “set the table” for the fall rush.

There may be a window for some legislative activity in September, after primaries and before the general elections. Then there will likely be a flurry of activity after the November elections in a Lame Duck session in November and December. Clearly that is a busy time for grocers and not the time to start setting any tables.

However, the most likely items to get done in Washington in a September clean up, or a Lame Duck flurry, are those items where the table has already been set and both sides of the aisle, and the Capitol (House and Senate), know the issue well.

n

The CEO/owner remains in contact with the congressional office every other month, or when he/she sees an article about this issue in the news or maybe just some other trigger to make communications appropriate. The trade association does the same.

n

The CEO/owner invites the Congressman/ Senator to the store or facility, snaps a great photo in front of products, or at the checkout, and explains the issue with an in-store example.

n

The CEO/owner shares this photo and information about the visit with the trade association so they can follow up with staff members and with the Member of Congress who can put it in their newsletter to show how he/she is in touch with the community. There is perhaps nothing better than a produce department for this photo opportunity!

The best china is out, the silverware is polished, the napkins are folded and now we are just waiting for the chance to pour water in the glasses when that first opportunity arises. n

Below are the signs of a well-set table: n

The CEO or owner has told the member of Congress eyeball to eyeball how important this issue is to his/her business and their ability to maintain jobs or increase the number of employees in the community.

n

The CEO has left a one-pager with the member of Congress with a specific example pertinent to their company.

n

The trade association has the same documentation and can follow up with personal office staff and the committee and leadership staff responsible for writing the legislation.

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WASHIN GT O N R EP O RT

Consumer Insights: An Independent Perspective THE FINDINGS FROM A RECENT NATIONAL SURVEY PROVIDE THE GROCERY RETAIL INDUSTRY A REASON FOR CONFIDENCE. IT REVEALED THAT ACROSS A BROAD RANGE OF ATTRIBUTES, TRADITIONAL SUPERMARKETS ARE SCORING WELL IN THE MINDS OF SHOPPERS. Nearly 1,400 chief household shoppers participated in the 2014 Annual NGA-Supermarket Guru Consumer Survey, detailing their experiences, behaviors and sentiments on what appeals to them, and what doesn’t about supermarkets, as well as their purchase influences, eating habits and nutritional concerns.

ethnic offerings; and more inventive and fresh foods from their primary supermarkets to help them eat healthier, with less tedium, at home.

Independent and local stores that perform well on these points can enhance a shoppers’ ability to integrate food into their lifestyles on their terms.

The more personalized the shopping experience at friendly, nimble regional supermarkets, the greater their edge over retailers less connected to communities and less empowered to please people as personal situations arise.

According to the survey, an area where independent grocers have excelled, and one that can be used to differentiate from competitors is within perishable departments. According to the consumer survey, shoppers are spending more than half of their freshfood dollars in supermarkets.

Shoppers visit supermarkets more than any other retailer, and caring about the customer goes beyond basic customer service.

The percentage of respondents who said they spend more than half of their fresh-food dollars in supermarkets has risen from the prior two years.

Independents continue to focus on identifying that niche of what their customers want, such as local sourcing of fresh produce, and will work to meet and exceed their customers’ expectations.

Shoppers visit supermarkets more than any other retailer, and caring about the customer goes beyond basic customer service. When shoppers feel welcomed, whether it is a store layout that can better serve the customer’s need and store cleanliness, to product offerings, properly trained employees, or fast checkouts, those stores that execute these traits well can inspire more consumer support of their business.

Additional issues that shoppers identified as rising in importance include the convenience of a retailer’s location and access, navigable layouts and checkout processes, courteous, friendly employees, and caring about the customer.

22

Interestingly, the top five improvements consumers seek are price/cost savings; more locally grown foods; more variety/better assortment/wider choice; more

Grocery statistics and shopper trends are important for our industry to keep a pulse on consumer habits and wants, and insights from this survey provide a benchmark to help store operators to evaluate their strategies and find areas of improvement.

ChrisBoswell/iStock/ Thinkstock

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

Peter Larkin President/CEO National Grocers Association

The SupermarketGuru.com Consumer Panel is an opt-in, food-involved population of more than 105,000 shoppers that are pre-registered with the site and submitted their confidential demographic information. To find more on this survey, visit www.nationalgrocers.org. n

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KN O W T HE L AW

Securities Law Update: Companies Can Raise Capital by Advertising THE JOBS ACT REMOVED A SIGNIFICANT BARRIER FOR COMPANIES SEEKING TO USE GENERAL ADVERTISEMENTS OR GENERAL SOLICITATIONS TO CONTACT INVESTORS AND RAISE CAPITAL. COMPANIES CAN NOW TAKE ADVANTAGE OF THIS RECENT CHANGE IN THE SECURITIES LAWS TO FUND THE NEXT STAGE IN THEIR GROWTH OR EXPANSION PLANS. In order to successfully commence business operations, introduce new products or services, or expand into new markets, a company must be able to obtain adequate capital. There are numerous methods of obtaining capital, and a company’s current stage of development and nature of business will dictate which transaction structure best fits the company’s capital-raising needs.

Until recently, California companies generally could not use general advertising or solicitations to sell their securities unless the securities had been registered with the Securities and Exchange Commission (SEC) under its rigorous, extensive and expensive requirements in what is commonly known as a public offering.

Because of recent changes in the securities laws and related regulations of the SEC, however, companies may now use general advertising and solicitations to contact investors and sell company securities.

Background on Securities Regulation in the U.S.

One such exemption specifically exempts “transactions by an issuer not involving any public offering,” and the SEC adopted regulations to create certain safe harbors for complying with the private offering exemption (Private Offering Regulations). As a result, companies offering to sell securities are generally not required to formally register such offerings with the SEC if the offering meets the applicable requirements of the Private Offering Regulations.

Because of recent changes in the securities laws and related regulations of the SEC, however, companies may now use general advertising and solicitations to contact investors and sell company securities.

Raising Capital Through Private Offerings Since their enactment in 1982, the Private Offering Regulations have provided a limited safe harbor for securities offerings in which the issuer (1) did not use general advertising or general solicitation, and (2) sold the securities to any number of accredited investors but not more than 35 non-accredited (but still sophisticated) investors.

While the Private Offering Regulations have historically served as one of the primary means for companies to raise capital, the prohibition on general advertising and general solicitation significantly limited companies’ direct access to capital markets.

On April 5, 2012, however, President Obama signed into law the Jumpstart Our Business Startups Act (JOBS Act), which was aimed at increasing American job creation and economic growth by improving access to the public capital markets.

As required by the JOBS Act, the SEC amended the Private Offering Regulations effective September 23, 2013, to, among other things, allow the use of general advertising and general solicitation to

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

Shortly following the Great Depression, Congress enacted extensive laws regulating the offer and sale of securities in the United States. These laws are still largely in place today. Under these laws, any offer to sell securities must either be registered with the SEC or must be exempt from such registration requirements.

Until the law was recently changed, however, one of the requirements of the Private Offering Regulations, with limited exceptions, was that the company could not use general advertising, or solicitations to offer, or sell its securities.

24

Continued on p. 26

K N O W T H E L AW

Continued from p. 24

Words of Caution

offer and sell securities provided that the following conditions are satisfied:

Although companies may now raise capital by using general advertising and solicitations under the Private Offering Regulations, as revised, other rules apply.

Any company that offers and sells securities must ensure that there are no significant misstatements or omissions made to investors in connection with any offer or sale of securities.

1. All purchasers of securities in the offering must

be accredited investors (generally referring to natural persons having a net worth in excess of $1 million or annual income in excess of $200,000, or to business entities, employee benefit plans, trusts, or others persons meeting the criteria set forth in the federal securities laws), or the issuer reasonably believes that they are, at the time of the sale of the securities to that person; 2. The issuer takes reasonable steps to verify that

all purchasers in the offering are accredited investors; and 3. Certain other provisions in the Private Offering

Regulations are satisfied.

As a result, the JOBS Act has made it significantly easier for many companies, including companies in the grocery industry, to access public financing.

Under the Private Offering Regulations, as revised, companies are now allowed to advertise their offerings on television, in newspapers and magazines, on the internet, in social media, and at seminars where attendees have been invited by general solicitation.

Application to the Grocery Industry Due to its broad applicability, the Private Offering Regulations can now be used by start-up companies seeking initial capital from family and friends, by emerging companies seeking financing from angel investors or venture capital firms, and by established companies seeking additional capital from institutional investors.

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

Companies, including retailers, wholesalers, brokers, and suppliers in the grocery industry, should consider using the Private Offering Regulations to finance the next stage of their business development.

26

Private offerings can be significantly less costly than public offerings, and the JOBS Act has now made it significantly easier to contact the investors needed to obtain adequate funding.

For this reason, although not always required by the Private Offering Regulations, many companies provide potential investors with private placement memorandums or circulars (containing information such as company background and history, financial statements, and risk factors).

Any company that offers and sells securities must ensure that there are no significant misstatements or omissions made to investors in connection with any offer or sale of securities.

In addition, investors are often times required to sign subscription agreements that include numerous representations and warranties about the investors to ensure that they are qualified investors. Also, federal and state securities filings are usually required when a company offers or sells securities.

It should also be noted that the federal and state securities laws are very complex, and the failure by a company to adhere to all applicable securities laws with regard to a securities offering can subject the company and management to significant civil and/or criminal liability. Prior to the commencement of any securities offering, it is highly recommended to seek the advice of experienced securities law counsel. n Jim Dyer and Matt Decker are attorneys in the Corporate, Securities, and Tax practice group at Downey Brand LLP. Jim Dyer is the practice management group leader and serves as outside general counsel to a number of business enterprises ranging from privately held businesses to public companies.

He assists clients with a variety of general corporate matters, including corporate governance, corporate structuring and financing, and shareholder relations. Matt Decker assists clients in the areas of mergers & acquisitions, entity formation and restructuring, and corporate finance.

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D ATA B R E A C H

LEN L EW IS

COVER STORY:

DATA BREACH

DATA BREACH

IS NO FAIRY TALE Remember when your parents told you bedtime stories that ended with… “happily ever after”? This may still be a fairy tale when it comes to data security and the breaches that have rocked the retail universe.

Since last December, all eyes have been on the massive data breach that took place at Target, which reportedly compromised information on more than 70 million customers. It was the biggest breach in retail history and could cost the chain upwards of $1 billion in fines, merchandise losses, card replacement and litigation fees, according to some observers.

But as serious as this breach was, security experts believe that retailers remain one of the most vulnerable groups out there and data breaches by unknown hackers, emboldened by the Target and Neiman Marcus thefts, will continue.

One of the latest concerns relates to Microsoft’s decision to stop offering updates and patches for Windows XP in April, the operating system that handles about 95 percent of the world’s ATMs and some of the hardware used for swiping credit cards.

It’s been estimated that only about one-third of ATM providers will upgrade to a newer operating system before the April 8 deadline, or spend the money to rebuild their own software.

Separately, the FBI has expanded its “Most Wanted” cyber criminal list to 10 individuals, most of which operate out of Eastern Europe, Russia, the Middle East and Pakistan.

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

Meanwhile, the U.S. Secret Service, now part of the Department of Homeland Security, and the Federal Bureau of Investigation, are the lead law enforcement agencies in the forensic investigation of the Target affair because of their roles in identity theft, electronic crime and computer intrusion.

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Continued on p. 30

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D ATA B R E A C H

C O N TI NU E D

Continued from p. 29

Richard McFeely, executive assistant director of the Bureau’s Criminal, Cyber, Response, and Services Branch said: “Because cybercrime knows no boundaries, criminals think they can hide overseas.

We are using our international partnerships and the publicity generated by our Cyber’s Most Wanted to ferret them out…The fugitives we seek have caused significant losses to individuals and to our economy and cyber crime continues to pose a significant threat to our national security.”

This begs the question of whether total data security is something of a myth, and what retailers can do to protect potentially sensitive consumer information.

The Retail Industry Leaders Association (RILA) has launched a Cybersecurity and Data Privacy Initiative in an effort to bring the public and private sectors together. It is centered on three major elements: 1. Strengthening cybersecurity through the

formation of a retail leaders council, development of a federal data breach notification system, and federal legislation to promote information sharing mechanisms.

2. Improving payments security by eliminating

mag stripe technology and promoting pin and chip-based smartcards.

3. Addressing consumer privacy with different

shopping options and to describe in detail how retail data is being used and protected.

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

While some observers question when Target actually discovered the malware that triggered the massive pre-Christmas breach and the time it took to tell consumers, the chain has tried to address the consumer issues through its website and the media.

Among them:

30

n

That shoppers have zero liability for charges they didn’t make,

n

Reassure shoppers that they don’t need to take any action,

n

Offering consumers one-year of free credit monitoring to shoppers at U.S. stores,

n

Warning consumers about email scams offering protection but seeking personal data.

The company is also accelerating its plans to put chip-technology on its Target REDcards by early 2015 and has launched a $5 million multi-year campaign to educate consumers about cybersecurity.

However, damage to the company’s bottom line has already been done, according to a report by Kantar Retail, which found that the breach impacted the retailer’s fourth quarter comp-store sales and post holiday business. This shift away from shopping at Target was most significant among its core Gen X shopper base, those in the 32 to 49 -year age range, but was also evident among lower income shoppers, according to Kantar.

“Target is at a critical inflection point as it strategizes how to win back the confidence of shoppers,” said Amy Koo, senior retail analyst. “While the breach caused an immediate blow to sales and will affect traffic for some time to come, it also exposed the larger issue of Target’s fragile relationship with its less engaged guests.”

Meanwhile, the breach has also convinced companies to up their spending on cybersecurity, according to comments by Ted Schlein, a partner in Kleiner Perkins Caufield and Byers, a Silicon Valley venture capital firm, in an interview with the Financial Times.

“The bad guys have got smarter, better funded and the tactics have changed,” he said. “The good guys need to keep pace.”

Industry insiders say that the first step toward solving the issue of data breaches is to recognize that businesses are in an “arms race” with highly motivated, talented cyber criminals and that the issue is not local, but a global pandemic.

Furthermore, everyone is vulnerable. This is illustrated by the fact that in January, hackers reportedly accessed financial information for companies bidding on contracts for the Department of Homeland Security.

Evidence of this widespread activity, and the time it takes to discover them, was outlined in the “2013 Data Breach Investigations Report” by Verizon. In a reported 47,000 security incidents, it was found that there were 621 confirmed data breaches during 2012, the latest year available. Over the nine years that the study has been done, there have been 2,500 data breaches compromising 1.1 billion records.

D ATA B R E A C H

The report found that retail environments and restaurants accounted for 24 percent of breaches during the year, making these segments second only to financial institutions.

n

Eliminate unnecessary data; keep tabs on what’s left.

n

Ensure essential controls are met; regularly check that they remain so.

n

Collect, analyze and share incident data to create a rich data source that can drive security program effectiveness.

n

Collect, analyze, and share tactical threat intelligence, especially Indicators of Compromise (IOCs), that can greatly aid defense and detection.

n

Without de-emphasizing prevention, focus on better and faster detection through a blend of people, processes and technology.

n

Regularly measure things like “number of compromised systems” and “mean time to detection” in networks. Use them to drive security practices.

n

Evaluate the threat landscape to prioritize a treatment strategy. Don’t buy into a “one-size fits all” approach to security.

However, analysts also note that security strategies in retail and consumer organizations have not kept pace with the risks.

“You can’t fight today’s threats with yesterday’s strategies,” says Gary Loveland, a principal in PwC’s security practice. “What’s needed is a new model of information security, one that is driven by knowledge of threats, assets, and the motives and targets of potential adversaries.”

RTimages/istock/Thinkstock

In analyzing the problem, the report suggested a number of steps companies could take to protect themselves.

E X A M I N E T H E W H AT A N D W H Y It’s not enough to decide what to do after a data breach occurs, who to notify and how to assign liability. It’s important to look at why breaches occur and what the perpetrators get out of them.

This was the message brought to House Financial Services subcommittee on Financial Institutions and Consumer Credit last month by Mallory Duncan, senior vice president and general counsel for the National Retail Federation.

“We urge the committee to examine the issue in a holistic fashion,” Duncan said. “We need to reduce fraud and find ways to reduce and prevent not only the breaches themselves, but the fraudulent activity that is often the goal of these events. If breaches become less profitable to criminals, they will dedicate fewer resources to committing them.”

He underscored his comments by citing statistics from Verizon’s Data Breach Investigations Report (see main story) which indicated that breaches are simply a “fact of life” in the U.S. And while more of them occur at financial institutions than at retail, the fact is that far more merchants are potential targets of criminals, largely due to the volume of card (debit and credit) payments.

“Breaches are often difficult to detect and carried out in many cases by criminals with real resources behind them,” Duncan said. “Financially-focused crime seems to most often come from organized groups in Eastern Europe.” he said.

He noted that credit and debit fraud losses amounted to an estimated $11.27 billion in 2012, with retailers spending $6.47 billion annually trying to prevent it.

“In fact, estimates are that online and other fraud in which there is no physical card present, accounts for 90 percent of all card fraud in the U.S.,” he said.

Additionally, the number of respondents reporting that customer records were compromised increased

Payment systems, which place an unfair burden on retailers, are part of the problem.

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Continued on p. 33

Online fraud has become an increasingly significant problem, jumping 36 percent from 2012 to 2013, said Duncan.

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

The result is that attacks are becoming more highly targeted and more difficult to detect, according to PwC’s “2014 Global Information Security Survey,” which found that incidents have risen 30 percent in the past year.

Continued on p. 33

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Continued from p. 31

54 percent over 2012 and those reporting employee

records were compromised jumped 89 percent.

In addition to identity theft, retail and consumer companies, especially online retailers, were particularly concerned about credit card payment fraud. This was reported by 16 percent of respondents. In 2013, it was a 25 percent increase over the prior year.

One problem is the rapid rollout of hot, new technologies.

“Hot-button technologies like cloud computing and mobility are being implemented before they are secured, and many executives are hesitant to share security intelligence with others, forgoing a powerful offensive tool against targeted, dynamic attacks,” the report noted.

In fact, among respondents using cloud services, only 14 percent have policies governing its use and just 29 percent are prepared to protect sensitive data in thirdparty cloud environments.

As David Burg, leader of cybersecurity at PwC has stated: “As we use more and more technologies to collaborate among businesses, or to connect with consumers using mobile devices and other kinds of applications that allow consumers to interface with various corporations, what you have is an attack surface that keeps increasing in size and complexity, making it very hard to secure.”

Interestingly, despite increased threats, retail executives remain highly confident in their organization’s security capabilities.

Part of that is due to increased spending on security measures, which was up 61 percent in 2013, according to PwC.

E X A M I N E W H AT A N D W H Y (c o n t i n u e d f r o m p . 31)

“Retailers are obligated to collect and protect the card data they receive, but are obligated to deliver it to processors in order to complete a transaction, resolve a dispute or process a refund,” he told the subcommittee. “Retailers are essentially at the mercy of the dominant credit card companies when it comes to protecting payment card data.”

He said credit card networks — Visa, MasterCard, American Express, Discover and JCB — are responsible for an organization known as the PCI (Payment Card Industry) data security council, which establishes data security standards.

“While well intentioned in concert… these standards have been inconsistently applied, and their avowed purpose has been significantly altered,” Duncan said, noting that over time card security costs have been pushed onto retailers.

PCI has not addressed deficiencies in the cards themselves.

“Sensitive data is right on front of the card embossed with prominent characters. Simply seeing the front of the card is enough for some fraudsters,” he said, noting that information like the cardholder’s name, card number, expiration date, signature and card verification code is on the card.

However, technologies are available to reduce fraud.

One method is requiring the use of a PIN, so a card number cannot be used on its own. Another is the adoption of smartcards that uses integrated computer chips to store information, rather than a magnetic stripe. He also mentioned “end-to-end” encryption which would require everyone in the payment handling chain to accept, hold and transmit data in encrypted form, rather than having the data de-encrypted and vulnerable at different points in the process.

Moreover, the association also supports a range of legislative solutions to improve network security including better tools for law enforcement to address criminal intrusions, and standardization of the notification process so consumers can be treated equally across the country when it comes to notification of data security breaches, he said. n

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Additionally, an essential component of effective security is employee security awareness and training.

About 59 percent of survey respondents reported having an awareness and training program in place.

Len Lewis, is editorial director of Lewis Communications, Inc., a New York-based 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.

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

This optimism is strongest at the top with 82 percent of CEOs being most confident in their security program, the survey said. However, 25 percent of respondents also said that ineffective leadership by CEOs was the greatest obstacle to improving data security.

Meanwhile, companies are considering a number of other safeguards. This includes data loss prevention tools, 54 percent; point-to-point encryption, 51 percent; outsourced processing and storage, 30 percent; and data masking, 22 percent. n

33

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congratulates The Amen Family and Kevin Arceneaux for being inducted into the CGA Educational Foundation Hall of Achievement

CALIFORNIA DROUGHT

LEN L EW IS

California’s Drought: Looking Beyond 2014

CALIFORNIA DROUGHT

Although California is entering its third dry year with the most devastating drought in nearly four decades, water-related price hikes on produce are not likely to kick in until 2015, according to agricultural industry insiders.

However, the major concern for retailers, consumers, growers and processors across the state is what might happen to the millions of acres of farmland and resources over the next 10 years and the impact on yields, price, logistics, processing capacity, government regulation, water rationing and economic factors like unemployment that will further impact the cost of doing business.

The drought could also lead to a narrower selection of produce and increased imports of fruits and vegetables.

Concern over “megadroughts”— 10 to 20 -year dry spells that were prevalent in California’s early history — and about food price hikes are getting a lot of press nationwide with consumers stating they are planning to cut back on purchasing of categories like meat and produce if things get out of hand.

However, drought, or weather-related price increases may have the severest effect on those in the lowest economic strata.

Speaking with the San Jose Mercury News, Kathy Jackson, CEO of the Second Harvest Food Bank of Santa Clara and San Mateo counties, said the drought could be devastating to her organization which distributes 27 million pounds of fruits and vegetables annually — produce donated by farmers and growers across the state. This could be exacerbated by the fact that many families helped by Second Harvest are in “food deserts” where produce is the most difficult food to find and afford, she said.

Meanwhile, some legislators are again beginning to push for increased capacity, with plans that might include a new reservoir in Northern California, a new dam in the upper San Joaquin Valley and a politically unpopular water bond bill in 2014 which is scheduled for a vote before November.

The severity and timing of the impending price hikes varies between sources depending on whether the issue is being looked at locally, or nationally.

Recently, federal forecasters said food prices would rise 3.5 percent this year, due to droughts in California, as well as in other parts of the U.S. like Texas, and in growing areas overseas. Fresh vegetable prices, which were up 4.7 percent last year, according to the U.S. Department of Agriculture, could rise 3 percent this year, with fruit going up 3.5 percent.

However, the situation within California, which produces 400 different crops, and its impact on retail forecasting and planning, was explored in detail during a recent CGA Educational Foundation webinar by Barry Bedwell, president, California Grape and Treefruit League, an association specializing in public policy, and Ron Midyett, president and chief operating officer, Apio Inc., Guadalupe, Calif., and chairman of the United Fresh Produce Association.

Calling the Central Valley the epicenter of the current drought — the most severe since 1976 –1977 — Bedwell noted that recent rains were helpful but nowhere near the amount needed.

However, the situation varies depending on the growing area.

“The Coachella Valley, where grape growers are located, is now the best and most secure area since its main water source is the Colorado River,” he said. “If you’ve been to Palm Springs or Palm Desert recently the golf courses are extremely green.”

Bedwell says there should be little to no interruption in production from that area of the state. That can’t be said for the Central Valley. It gets water from the Sierra Nevada snowpack.

“That has improved recently, but it’s still one-third of what it is normally,” he said. Furthermore, the majority of the runoff is north of Sacramento, which is why there are storage and water transfer issues to the south.

Continued on p. 38

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“But to assess the true impact of the drought, the differences between current economic conditions and those in 1977 should be examined. In 1977, the state’s population was 22 million and per capita income was $8,500. Gross farm revenues were $9.6 billion.”

Today the population has grown to 38 million, with a per capita income of $42,500, and gross farm revenues of $45 billion, said Bedwell.

Some of the most severe changes over the past 35 years have come in water policy.

“In 1977, we had a multitude of government regulatory policies that placed a priority on environmental uses,” he said. “This has changed. If you’re driving through the Central Valley you’ll see signs that say ‘Stop the Congress Created Dustbowl’. These have to do with the amount of regulations that have been created over the past 30 – 40 years.”

Bedwell noted that most of the “permanent crops” like table grapes are primarily grown on the East side of the Coachella Valley, and most of those parcels are drawing water heavily from their own pumps and wells. In fact, less than 5 percent are at risk due to lack of surface water from allocations.

“But there’s an unknown,” he warns. “What percent could have pump problems, and if there’s a breakdown how long will it take to get a repairman. Right now, the backlog among pump companies in drilling new wells and repairs is said to be eight to 12 months.”

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Looking at the big picture, Bedwell says he doesn’t expect major production disruptions in 2014.

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“However, given the fact that there are a lot of parcels that don’t have enough water, we are estimating that crop levels will be lower than in 2013,” he said.

“As such, there could be some impact on producer pricing.”

The bigger concern is if the drought continues into 2015.

“We will see an impact not only on available water, but also the potential for legislation related to ground water management which could have far reaching applications,” he said.

Looking at the big picture, Bedwell says he doesn’t expect major production disruptions in 2014… The bigger concern is if the drought continues into 2015.

“The California Department of Water Resources and the state Resources Control Board ruled that they were going to use ‘maximum flexibility’ in getting the maximum amount of water through the Delta to agricultural interests in Southern California,” he said.

According to Bedwell, one proposal said that due to public health and safety, priority would be given to drinking water and public safety issues. He believes in the long term there will be proposals related to regulating ground water, which the farmers now own.

Focusing on fresh-cut produce, which is the largest portion of Apio’s business, Ron Midyett said the drought would have a major impact on sourcing row vegetables.

NA/AbleStock.com/Thinkstock

Continued from p. 37

CALIFORNIA DROUGHT

“Water is extremely important for growing and processing,” he said. “Our operation alone processes over 250 million pounds of products annually. This requires us to grow over 20,000 crop acres a year that is dependent on water,” noting that most fresh cut processors involve row crops whose growing regions are concentrated in coastal areas and in the Imperial and Yuma Valleys.

value water use whether it’s for permanent crops, row crops or residents.

“This means that if you continue to grow in California, you have to outbid higher value crops Continued on p. 40

DLeonis/AbleStock.com/Thinkstock

“We look at the different growing regions as microclimates and each has a different water scenario because each area has different sources for water,” he said. “So while the focus is on California, this is really a national issue when it comes to row crops.”

For example, 95 percent of all the broccoli consumed in the U.S. is produced in California, along with 92 percent of the strawberries, 74 percent of lettuce and 91 percent of grapes.

He agreed that the drought’s impact will be minimal in 2014. Coastal areas like Salinas, Ventura, Oxnard and Santa Maria rely on ground water, and aquifer levels are only down a bit. In the Central Valley, which relies on state water projects, growers are allocating more to permanent crops.

We look at the different growing regions as microclimates and each has a different water scenario because each area has different sources for water.

“Even if we get a lot of rain next year, California has long-term issues when it comes to water resources and resource prioritization that efficiency measures alone will not mitigate,” he said. “Growers are already doing everything they can to conserve water.”

n

Farmers in the San Joaquin Valley haven’t received 100% of their water allocations from the Central Valley Project since 2006. No allocations will be made this year.

n

An acre-foot of water can cost $1,300 vs. $40 several years ago.

n

95% of the state is suffering from drought conditions.

n

About 500,000 acres will not be planted this spring due to lack of water.

n

Snowpack in the Sierra Nevada is 20 percent of normal for this time of year.

n

Water supplies for residents north of the Sacramento/San Joaquin River Delta could be severely restricted this year.

n

4.4 million acre-feet of water is diverted annually for environmental uses like wildlife refuges and salmon restoration.

n

Protecting the three-inch long smelt can cost up to one million acre-feet annually.

n

Almond yields could be affected for years as farmers are forced to prune trees back by 90%.

n

Prices of artichokes, celery, broccoli and cauliflower could rise 10%.

n

The 5,000 residents of Willits in Mendocino County are restricted to 150 gallons per day. They are using paper plates and limiting showers to five minutes.

n

At least 19 water districts in California have imposed water rationing.

n

Lack of water means less hydropower, which has to be offset by increased use of more costly fossil fuels.

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Long-term, whether due to the drought or a growing population, the state has the option of developing more water resources, or more prioritization of high

T R E A D I N G WAT E R — FAC T S A B O U T C A L I F O R N I A’ S D RO U G H T

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“So, from a fresh-cut perspective, even producers in the East are concerned since high quality raw materials come predominantly from California,” he said. “Then there’s the economics. Normal growing conditions in California result in extremely high yields and that equates to low cost. That feeds into the supply chain.”

CALIFORNIA DROUGHT

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Continued from p. 39

like strawberries,” Midyett said. “If a grower has the ability to get a better return somewhere else, that’s where the water is going to go. Or, if the economics don’t work, some lower-value row crops may be outsourced to alternative regions like central Mexico.

In terms of fresh-cut, materials will be transported to processing facilities.”

Turning to manufacturing, Midyett noted that depending on the type of product, most are waterintensive operations.

A fresh-cut plant can use 200,000 to one million gallons of water per day for refrigeration, plant sanitation and product washing, he said.

“Our objective is to produce a clean, safe product for end-users,” Midyett said. “We already have multiple water usage for washing and rinsing which is then pumped through the floor drains to keep the facility clean. We use dry cleaning as much as possible and

low-volume, high-pressure water nozzles. We even filter it for use in landscape irrigation,” Midyett said.

“There’s simply not a lot of discretionary activities you can cut back on and still have a successful freshcut operation.”

Asked about the possibility of sourcing and moving processing to other regions, he replied: “It’s not an easy thing to do. Our objective is to provide a quality product at reasonable cost. So we have to consider the labor pool, technical competence, infrastructure, proximity to supply and logistics. Water alone will not drive a decision on where plants are located.” n Len Lewis, is editorial director of Lewis Communications, Inc., a New York-based 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.

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Jim, Jeanne, Renee, Joanne

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At home in California.

And around the world.

Every day, we’re invited into households worldwide to help two billion people look good, feel good and get more out of life. Unilever is committed to making a difference—at home and around the world.

Learn more about Unilever and our Sustainable Living Plan at unilever.com

©2014 Unilever

your

MONDELEZ INTERNATIONAL CONGRATULATES

KEVIN ARCENEAUX on his induction into the California Grocers Association Educational Foundation Hall of Achievement.

It’s not often you meet a real superstar, so if you run into Kevin be sure to congratulate him on his recent induction. The CGA Educational Foundation’s recognition is a prestigious award given to those who have contributed substantially to the benefit and advancement of the food industry.

For his commitment to charitable activities, public service and generally enhancing the quality of California’s food industry, we at Mondelez International proudly take a moment to salute Kevin for his achievement.

Foundation Honors

GROCERY EX E CU T I V E S More than 450 friends, family and industry peers laced up their sneakers to celebrate the induction of five industry executives into the CGA Educational Foundation Hall of Achievement on March 13.

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auction items and participated in a Fund-A-Need supporting CGAEF’s college scholarship and tuition reimbursement programs.

Led by this year’s event chairs Mark Johnson, Unified Grocers, Inc.; Valerie Oswalt, Mondelez International; Dave Rann, Super A Foods; and Jerry Whitmore, Nestlé, the event raised more than $380,000.

The Amen Family (Jim, Jeanne, Joanne, and Renee), Super A Foods, and Kevin Arceneaux, Mondelez International, join a prestigious group of Hall of Achievement recipients who have been recognized for their many contributions to not only the grocery industry, but the communities they serve.

The CGA Educational Foundation was created under the direction of the California Grocers Association Board of Directors in 1992. Beginning with a single scholarship, the Foundation has grown exponentially over the last 22 years to bestow more than 2,600 worthy college students with awards totaling more than $3 million — ensuring that California’s grocery employees and their dependents have the resources necessary to start or complete their higher education.

Continued on p. 46

“We were very excited to welcome these deserving individuals into our prestigious Hall of Achievement,” said CGAEF Executive Director Shiloh London. “The Amen Family and Kevin have served the grocery industry their entire professional careers and like their Hall of Achievement peers have given back generously to the communities and industry they serve.”

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Led by this year’s event chairs Mark Johnson, Unified Grocers, Inc.; Valerie Oswalt, Mondelez International; Dave Rann, Super A Foods; and Jerry Whitmore, Nestlé, the event raised more than $380,000 — funds that support the Foundation’s college scholarship and tuition reimbursement programs.

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“It is very gratifying to see the strong industry support for the Foundation’s signature event,” London said.

“Their generous donations allow the Foundation to achieve its mission of advancing the grocery industry through industry education, college scholarships, and tuition reimbursement programs.”

The evening featured an inspiring speech by Ralphs Grocery Co. employee Rhonda Brown-Palacios, a CGAEF scholarship and tuition reimbursement recipient. After her presentation, guests bid on live

HOA honoree Jim Amen, Super A Foods with CGA Chair Mary Kasper, Fresh & Easy.

Congratulations to The Amen Family & Kevin Arceneaux on your induction into the CGA Educational Foundation Hall of Achievement!

On behalf of our company and employees, please accept a heartfelt thank you for your support of such a worthy cause.

Š2014 Y-Opco, LLC.

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Continued from p. 44

K E V I N A RC E N E AU X , M O N D E L E Z I N T E R N AT I O N A L Kevin Arceneaux was born in Los Angeles, Calif. and has lived in the Southern California area for most of his life. He received his Bachelor’s Degree in Marketing from the University of Southern California and also has a Master Degree in Business Administration from the University of California at Irvine. Kevin has spent over 30 years calling on the retailers in California for three major CPG companies.

In 1980 Kevin joined the E & J Gallo Winery after graduating from USC in their Management Development Program. He held a number of positions in Sales and Sales Management throughout his 11 year career with Gallo. His time there included working as a Field Marketing Manager in New Jersey, New York City and Connecticut. In 1991 Kevin joined the Frito-Lay Division of PepsiCo as a Zone Sales Manager in Los Angeles. He was responsible for leading the DSD sales Force for Frito-Lay in all channels of trade. He also was their Account Executive for Ralphs and Food 4 Less for several years. In 2001 Kevin joined Kraft Foods to become the Region Vice President for their Nabisco Division, overseeing the Nabisco DSD Salesforce and account executive team calling on all major and independent retailers in Southern California.

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In 2007 he became the West Area Vice President of Retail for the Western US and recently was appointed the Region Vice President for the newly created California Region for Mondelez International, the parent Company for Nabisco and Cadbury.

He now has responsibility for the entire state of California and Hawaii. Kevin is a product of South Central Los Angeles and has made it a part of his life to give back to the community. He has served on the Board of Directors of the Challengers Boys & Girls Club in South L.A for 10 years. This club serves over 3500 families in the South L.A. area. He also gives back to his Alma Mater, USC, by serving on the Undergraduate Advisory Board for Marshall School of Business.

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He has mentored students in the Business School in their Career Advantage Program for over 12 years. In his career with three CPG companies in California, Kevin has always supported the causes of many charitable organizations the industry serves such as City of Hope, Olive Crest, MDA in addition to WAFC and the California Grocers Association.

Kevin has been married to his wife Annette for 30 years. They have two children, Erica and Adam and one grandchild Isaiah.

He resides in Foothill Ranch in Orange County.

CGAEF Trustees (l to r): Sherry Hughes, Ralphs Grocery Co.; Jim Van Gorkom, NuCal Foods; Jacquie Slobom, Gelson’s Markets.

(l to r) Amen family members Christopher Wasgatt, Dorie Amen, with Joe Falvey, Unified Grocers, Inc.

HOA honoree Kevin Arceneaux with wife Annette.

CGAEF Executive Director Shiloh London with (l to r) Vic Chiono, Coca-Cola Refreshments; Steve Haworth & Mark Baldwin, Acosta Sales & Marketing.

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CHOICES CONGRATULATIONS Amen Family & Kevin Arceneaux SUPER A FOODS

MONDELEZ INTERNATIONAL

2014 CGA Educational Foundation Hall of Achievement Inductees

ranchosanmiguelmarkets.com myfood4less.com

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(l to r) Brett Sternard, Blaire Baker, Casey McQuaid, E&J Gallo Winery.

T H E A M E N FA M I LY, SUPER A FOODS Lou Amen opened his first grocery store on a Los Angeles street corner back in 1951 and launched Super A Foods two decades later. Lou, 84, still starts most days at the City of Commerce headquarters by 5:45 a.m. All told, four of Lou and Dorie Amen’s seven children, two of their sons-in-law and their grandson, Andrew, work for the family business, which is comprised of 10 groceries in the Los Angeles area sprinkled on the map from Torrance to Temple City. The roster includes daughters Jeanne-Amen Miller, Renee Amen and Joanne Tedmori, as well as Miller’s husband, Ken, and Tedmori’s husband, Joud.

Renee Amen started in the grocery business in 1976 as a bagger at Gelson’s. A graduate of UCLA, she began working for Super A Foods in 1982 and promoted from cashier to bookkeeper to general merchandise buyer and Supervisor. She is currently the corporate controller and a CGA board member.

She is a mother of 2.

CGAEF President Ron Fong.

Rhonda Brown-Palacios, shared how receiving a CGAEF scholarship impacted her life.

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The youngest sibling, Joanne Tedmori, has been with Super A on and off for 30 years. She started as a box girl, was a checker, and then moved to the office. She is currently a project manager and payroll supervisor. Joanne and Joud have 4 kids and 3 of them worked for Super A while in high school and college. Joud Tedmori has been with Super A for over 30 years.

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Jeanne Amen-Miller was 16 when she started as a box girl in the Hollywood store and advanced to checker six months later. Miller’s 42-year career with Super A Foods includes turns as bookkeeper (for 15 years), trainer and buyer. Her husband, Ken, oversees the trucking side of the business. She is the mother of two and grandmother of 6.

Then there’s Jim Amen, the older of two sons. He has worked in the family business since he was 12 and has held just about every position: bottle boy, box boy, checker, night manager, deli man. Jim has been married to Sherrie for 33 years and is the father of 3 sons and has 1 grandson.

Pete and Tanya Van Helden, Stater Bros. Markets.

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The CGA Educational Foundation wishes to thank the following companies for their generous support of the 2014 Hall of Achievement Dinner.

P L AT I N U M D I N N E R S P O N S O R S

Anheuser-Busch Kellogg Company Mondelez International Unified Grocers, Inc. GOLD RECEP TION SPONSORS

Fresh & Easy General Mills Kraft Foods Group

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Q&A

Q&A

All the Food That’s Fit to Print

LYNETTE KUCSMA IS CHIEF MARKETING OFFICER AND CO-FOUNDER OF BARCELONA, SPAIN-BASED NATURAL MACHINES, A COMPANY THAT MANUFACTURES “FOODINI,” A NEW GENERATION KITCHEN DEVICE (3D FOOD PRINTER) THAT COMBINES TECHNOLOGY, FOOD, ART AND DESIGN. THE COMPANY EXPECTS TO BEGIN SHIPPING UNITS IN THE SECOND HALF OF 2014. CALIFORNIA GROCER RECENTLY SPOKE TO LYNETTE, A FORMER MICROSOFT EMPLOYEE, ABOUT 3D PRINTING AND HOW IT IS GAINING TRACTION IN TODAY’S FOOD INDUSTRY.

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Q: First of all, Lynette, what exactly is 3D printing?

D printing is the process of making a three A: 3dimensional solid object into almost any shape

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or form from a digital model. It is, essentially, an additive process in which successive layers of a material or substance are laid down in different shapes and sizes according to digital inputs that have been programmed into a 3D printer. While a traditional 3D printer may use plastic or other substrates to construct an object, a 3D food printer uses food products to

Q&A

construct three-dimensional edible objects or products.

Q: How far back does 3D printing go? of the very first iterations of 3D A: Some printing go back to the early 1980s. It was essentially an industrial application that was used by manufacturers and other companies to make limited numbers of inexpensive prototypes or models of various objects. Today, thanks to advances in technology and its greater overall accessibility to almost anyone in the marketplace, 3D printers have far greater capabilities, are more efficient and, of course, are much smaller. was your first exposure to 3D printing?

Q: What How were you introduced to it?

husband worked in research and A: My development for an industrial company and they owned a 3D printer that they used in the office on various projects. He would come home and describe the machine’s capabilities and I, like people who are trying to understand emerging technologies, found his description of the process somewhat difficult to comprehend. I remember asking him questions like, “How do you ‘print’ something that’s three dimensional?”

“How does it know when to layer on what — and in what shape?” When I actually saw the process first-hand, it all made sense to me.

Q:

Your company, Natural Machines, is about to launch one of the world’s very first 3D food printers — a device that can generate three dimensional products that not only are edible,

husband is well connected within A: My technology circles. He introduced me to the

process. I asked them if it might be possible to focus on the sweets and savories market, as opposed to just the sweets market. In other words, would it be possible to print products utilizing fresh food? They were intrigued by the suggestion and it stimulated more thought and further action — the net result of which was my joining the company and helping to develop and launch Foodini.

Q: So tell us about Foodini. How does it work? separates Foodini from other food A: What printers on the market is that it uses fresh food Continued on p. 52

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folks at Natural Machines and they shared with me a project they were working on — a 3D printer that could produce multi-shaped,

Q: What happened next?

I was not thrilled with the products A: Although they were printing, I was intrigued by the

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but that can be produced by consumers right in their own kitchen. When did you first realize that food could be “printed.” How was your machine, Foodini, conceptualized?

edible objects out of sugars, chocolates and other confections that could easily be liquefied (for extrusion). My first reaction was negative because the only products they were able to output were processed foods that loaded with preservatives and additives. I didn’t want to be a contributor to such marketplace issues as obesity, diabetes or other health concerns.

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Q&A

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that is placed into five capsules. Depending on the recipe, Foodini recognizes what food is in each capsule and outputs it — generally in layers — in the right amount and configuration.

Q: How would a consumer actually use the device? is connected to the Internet, so the A: Foodini first thing a consumer would do is to find a recipe from our online database. The recipe would tell you what food to put in each capsule and would also tell you the consistency that it needs to be in order to print correctly. Tomato sauce, for example, extrudes best when it isn’t too watery or too chunky — and this consistency can easily be achieved with normal kitchen tools and appliances, like a food processor or a hand or power blender. If you were making a pizza, another capsule might contain the dough, another might contain a vegetable and so on.

The machine assembles all of the ingredients in the right order and in the desired shape so it is ready for cooking in the oven. If the recipe involved a food product that didn’t need cooking — like a chocolate treat — it could be consumed after the printing process.

of rolling out the dough to a thin layer, adding filling, adding the top layer of dough and then cutting it to size, Foodini makes individual raviolis by creating a layer of pasta, a layer of filling and a layer of pasta again, thereby assembling the ravioli. It does it all automatically, freeing-up time for the chef to do something else while assembly is underway.

There are other benefits, as well. Because it is a digital appliance, Foodini can convert scanned images into edible food designs. For food professionals like bakers or caterers who are looking for decorative ways to create one-of-akind customized food products, Foodini offers a practical solution.

The most important benefit, in my opinion, is that Foodini is a device that promotes cooking with fresh ingredients and, as a result, helps people to eat healthier. mentioned a few of the food products Q: You’ve that Foodini can make. What is your favorite?

done a lot of testing and experimenting A: We’ve at our office so I’ve tried quite a few different

Q: How long does the printing process take? on the recipe and the ingredients.

A: ItIf depends you wanted to make a single, decorative chocolate vase, it would probably take about 20-25 minutes. On the other hand, 6-10 mini fish-shaped crackers (made with fresh ingredients and no additives) would take under a minute to print.

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would anyone want to 3D print food?

Q: Why What benefits does 3D food printing offer to the

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end user?

is a food assembly appliance that A: Foodini saves time by automating the preparation process for certain foods. This is particularly useful with food products that are difficult or time-consuming to prepare by hand.

Homemade ravioli is a good example. Instead

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Congratulations

Safeway is a proud supporter of the

California Grocers Association Educational Foundation.

Congratulations to the Educational Foundation Hall of Achievement Inductees!

Jim Amen Jeanne Amen Joanne Amen Renee Amen Super A Foods Kevin Arceneaux Mondelez International Your accomplishments inspire us all.

Q&A

Continued from p. 52

products. One of my favorites was a recipe we used to make gnocchi — it was very good. types of end-users do you believe will be Q: What purchasing it?

see this as an appliance that will be A: We found in consumers’ homes on the kitchen counter, particularly those who are interested in cooking with fresh foods and eating healthier.

We also believe it will be popular among food professionals — chefs, caterers and others who are creative in their approach to design and like to create one-of-a-kind products that are unique or difficult to replicate. pointed out earlier, 3D printing is not Q: Asyetyou in the mainstream and many people (including yourself initially) may be skeptical of the need for such a device. Just how big — or pervasive — do you think 3D food printing can become?

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are convinced that 3D food printing will A: We become commonplace in the consumer market

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in a relative short period of time. There surely will be some resistance along the way, just as consumers struggled to adapt to microwave ovens when they first started appearing on the landscape several decades ago. People didn’t understand how microwaves worked and found them difficult to use, so adoption and acceptance rates were rather slow. We think food printers will be accepted by consumers much more quickly than microwaves simply because we are in a completely different era — technologically-speaking — than we were when microwaves first entered consumer kitchens.

People are much more savvy about technology today and how to use it than they were several decades ago. opportunities does 3D printing offer to Q: What food retailers?

food printers require ingredients in A: All order to perform the functions that the end user desires. In many cases, consumers will

continue to buy these ingredients and fresh foods from retailers as they always have. In the case of our machine, however, I could see retailers or food manufacturers working with us to pre-fill our capsules with shelf stable, fresh food products that are packaged by food type in quantities and consistencies that match the digital recipe and are ready to be inserted into the machine, making the entire process even more convenient for the consumer.

We are convinced that 3D food printing will become commonplace in the consumer market in a relative short period of time.

Many food retailers also operate catering businesses that serve a wide variety of customers in their local communities. In addition to saving time assembling certain food products, food printers would allow caterers to offer specially designed and/or decorated food items to their customers.

Also, because our device is connected to the Internet, it provides easy access for the enduser to connect to a retailer — or perhaps to a retailer’s online recipe — for an in-house or signature product. The recipe can be calibrated so it is optimized by Foodini for use at home and the retailer can provide the ingredients.

Or, the process could be reversed, consumers could find a retailer online and select a Foodini optimized recipe offered by the retailer. The recipe is then printed by the retailer and the customer picks it up later at the store. n Thomas P. Schaffner is President of Schaffner Communications, Inc., a Chicago-based consulting firm that provides strategic counsel and professional services to business organizations in the area of corporate communications. (tom@schaffnerinc.com)

IN APRIL, WILLIE CROCKER, BIMBO BAKERIES USA, WILL ASSUME THE ROLE OF ILLUMINATOR HEADLITE AND DIRECT AN ASSOCIATION OF HUNDREDS OF GROCERY SUPPLIERS WHOSE PURPOSE IS TO “SPREAD THE LITE OF GOOD FELLOWSHIP.” Every consultant, life coach, mentor, friend, or family member will, at one time or another, tell you that having fun is an important part of life. So, why shouldn’t it be a big part of your work?

“We are very strong. That’s why we’ve stood the test of time. Few organizations can say they’ve been around for 86 years. I just want to make sure we hold on to our traditions.”

“One of our principal responsibilities is to provide some fun and relaxation at CGA and WAFC gatherings. I want to put the fun back in our own organization,” said Willie Crocker, senior portfolio development manager for Bimbo Bakeries USA, and incoming Illuminator Headlite for 2014.

is to get up to about 350. The question is how to get this growth.

“When you go out and talk to our members, they’re pretty tapped out,” Crocker says. “I’d like to give new members a different perspective on the organization and show them how we add excitement to the conventions.

“We want them to aspire to be part of that,” he says.

“My fear is that prospective members will look at us and see a lot of work and drudgery. We want to get back to what made us famous back in the day.”

However, Crocker doesn’t want to give the impression that The Illuminators is an organization on the wane.

Quite the contrary.

T HE ILLUM IN ATORS

New Illuminator Headlite: Willie Crocker

Crocker, who has been in the food industry for nearly 25 years, believes it’s important for the industry to

redouble its efforts to make The Illuminators more appealing to prospective members — particularly the younger generation who are working hard to establish their careers and industry networks.

“This is an organization that goes back 86 years and I’d like to see us get back to our roots,” he said. “The Illuminators started as a group who simply wanted to improve meetings in the grocery industry and bring people closer together. We may have gotten away from that a bit.“ Crocker says he wants to put the fun back into the organization.

Crocker says the main thing is for the organization to stay relevant in the face of an ever-changing retail landscape and significant changes in shopper buying habits that impact everyone in the industry.

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This attitude will help The Illuminators increase its membership in the future. At present, that membership is hovering around 220 and the goal

“We are very strong,” Crocker boasts. “That’s why we’ve stood the test of time. Few organizations can say they’ve been around for 86 years. I just want to make sure we hold on to our traditions.”

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

“We forget sometimes that these are volunteer positions,” he says. “We all work 60 plus hours weekly — sometimes more. We don’t want to ask members to put in an additional 20 hours leading up to conventions.”

Willie Crocker (left) with CGA Board Member Kevin Konkel, Raley’s.

Continued on p. 59

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BIMBO BAKERIES USA

THANKS ED HEPLER,

FOR HIS DEDICATION IN 2013 AS OUR ILLUMINATOR HEADLITE.

&

WELCOMES WILLIE CROCKER,

OUR INCOMING HEADLITE AS HE CONTINUES TO “SPREAD THE LITE OF GOOD FELLOWSHIP” IN 2014.

BimboBakeriesUSA.com

©2014 Bimbo Bakeries USA, Inc. All rights reserved.

T H E I L L U M I N AT O R S

Continued from p. 57

“This means tracking Millennials,” he says. “We see them dropping out of organization after they join because of their job changes and market conditions.

Toward that end we’re trying to encourage the ‘young lions’ in the industry to come on board.”

Crocker says one problem organizations face is a lack of loyalty among younger people to stay on with any given group.

“They are always going to move around within the industry and that’s fine,” Crocker says, “But we want them to stay active as an Illuminator by participating in committees and strengthening their relationships with retail partners through CGA and the Western Association of Food Chains.”

This will help elevate the Illuminators’ stature with both associations, Crocker believes. “Basically, we’re a support arm and we want to be able to provide both organizations with the service they are expecting from us,” he says.

“We have the convention golf tournaments and the WAFC pre-convention rallies, all of which have been incredibly successful,” Crocker explains. “We’re also continuing to send members through the Food Industry Executive Program at USC, and there is the potential to increase the number of people attending in the future.”

According to Crocker, the benefits of joining The Illuminators are many.

“I have found my involvement with The Illuminators to be a very valuable experience and another opportunity to build relationships with retail partners,” the incoming Headlite says. “At the end of the day this is a relationship business and we try to tell members that you can’t always put a dollar value on that — particularly those that strive to become Illuminator officers. In that capacity you’re invited to CGA and WAFC functions you normally wouldn’t attend.”

But, he says, not everyone has a smart phone, or signs onto Facebook or Twitter.

As to additional goals for the coming year, Crocker wants to make sure The Illuminators remain financially strong, continue providing scholarships for industry employees and their families, build membership among younger people and, in general, be a good steward for the organization.

“There’s been a lot of great Headlites that put their stamp on the organization by taking us to the next level,” Crocker says. “I want people to remember me as the Headlite that put the fun back in the organization.” n

Congratulations!

Milton’s Craft Bakers welcomes Willie Crocker as the new Illuminator Headlite and would like to thank Ed Hepler for his outstanding leadership in the last year.

At Milton’s Craft Bakers our team’s cultural value of “Help Me Help You” expresses our responsibility to find meaningful ways to help our customers and business partners succceed.

Milton’s is obsessed with providing consumers with only the best products to support healthy living and happy taste buds.

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www.miltonsbaking.com

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

Asked about the future of The Illuminators, Crocker says that a number of programs are being discussed. But, Crocker adds, “There is a limit to what the organization can do if it is to remain focused on providing a high level of service to the CGA conference in the fall and the WAFC convention in April.”

The group is looking at some potentially significant initiatives in social media. “We’re open to what’s out there, but we’re still in the exploratory stage…” he says. “A number of people have talked to committee members about the effective use of social media networks.”

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Q&A

Q&A

Q&A

SAN DIEGO MAYOR

KEVIN FAULCONER

KEVIN FAULCONER WAS ELECTED MAYOR OF SAN DIEGO, CALIF., IN A SPECIAL ELECTION IN FEBRUARY 2014 AND WILL SERVE THE BALANCE OF HIS PREDECESSOR’S TERM THROUGH 2016. HE IS THE ONLY REPUBLICAN TO LEAD A MAJOR CITY IN CALIFORNIA. What are your top priorities as Mayor? serving two terms as Councilmember in San 2: 1: After Diego, what prompted you to run for the position top priority is to restore trust and of Mayor?

A: “My integrity to City Hall and continue voterapproved financial reforms to free up more “I felt my eight years of experience on the A: City Council would be valuable in putting our money to rebuild our neighborhoods. I will do

city back on the right track after Mayor Filner’s behavior and micromanagement ground city operations to a halt. During those years, I worked alongside former Mayor Jerry Sanders and the City Council on bipartisan solutions to fix the financial mistakes of past city leaders and provide a solid foundation for a bright future.

“I believe a commitment to fiscal reform and collaboration is exactly what the city needs right now and I’m honored that San Diegans elected me to carry forward that vision for our city’s future.”

this by paving 500 miles of roads over the next five years, investing infrastructure dollars in the city’s most neglected neighborhoods first and hiring more police officers with the eventual goal of getting the Police Department fully staffed for the first time in nearly a decade.

“Each of those issues has been a civic problem for years, but the difference now is you have a mayor who will make each of them a priority.

The budget proposal I’m preparing to release next month will be my first chance to prove that Continued on p. 62

dancestrokes/iStock/Thinkstock

Q&A

Continued from p. 61

this administration isn’t going to just pay lip service to these important issues; we’re going to do something about them.”

regulations getting in their way and streamline the permitting process at City Hall.” you have any issues or concerns about the 4: Do international border?

are your plans to support the local business 3: What must do more to partner with our community?

A: “We neighbors on the other side of the border. San

a city councilman, I’ve been a strong A: “As advocate for the local business community and that will continue as mayor. I have voted in favor of making it easier for local breweries to operate and for allowing restaurants to construct sidewalk cafes without having to pay hefty permit fees.

“Those are the sort of commonsense solutions that will be the hallmark of my mayoral administration. I’m committed to working with small businesses to eliminate unnecessary

Diego and Tijuana should be working together as a single mega-region, taking advantage of the unique synergy that can develop when we’re both rowing the economic boat in the same direction.

“I’ve committed to keeping an office in Tijuana to foster this partnership and plan to hire a director of binational affairs to focus on border issues. I’ll also be advocating for our federal government to invest more heavily in our border crossings so we don’t continue to lose billions annually due to lengthy border wait times.” n

Southern California Food Industries Circle

Salutes

62

Bimbo Bakeries USA

Illuminator Headlite, 2014 www.cityofhope.org

DEV 22279 JC

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

Willie Crocker

We congratulate the Amen family on their induction into the CGA Educational Foundation Hall of Achievement

bold colors and engaging graphics of the standup, re-sealable pouches carry over the premium feeling of the distinctly flavored sugars of the well-known British Tate & Lyle® sugars brand.”

Tate & Lyle Sugars has grown to become one of Britain’s leading cane sugar brands, having graced Britain’s finest tables, including those of royalty, making it an integral part of the country’s epicurean history for over 130 years. These delightful British sugars will now be available to U.S. consumers nationwide.

Through Fairtrade certification, Tate & Lyle Sugars makes a positive contribution to many small-scale cane sugar farmers in developing countries. All three varieties of Tate & Lyle® sugars are Fairtrade certified, which means fair prices and opportunities for small-scale sugar cane farmers to invest in their communities for a more sustainable future.

In addition to being Fairtrade certified, all three sugars are verified non-GMO. Tate & Lyle® Organic Pure Cane Sugar and Organic Turbinado Raw Cane Sugar are also certified organic by the international organic certification services of QAI, Quality Assurance International. n

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“Domino Foods is proud to leverage an esteemed global asset from the UK and bring excitement to the US sweetener category,” explains Brian O’Malley, Chief Executive Officer and President of Domino Foods, Inc. “Tate & Lyle Sugars, an established leader in fair trade and a source of high-quality sweetening since 1878, has an iconic brand heritage that we are confident will also delight U.S. consumers. The

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

A trusted British brand, Tate & Lyle®, is being introduced to the US consumer with Fairtrade certified Organic Pure Cane Sugar, Organic Turbinado Raw Cane Sugar and Natural Pure Cane Sugar.

ROLLOU T

Domino Foods Brings Iconic Tate & Lyle to U.S.

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ADVE RTIS E R INDE X C A L I F OR N I A G R OC E R

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PAGE COMPANY

PHONE

FAX

EMAIL

WEBSITE

4

al fresco all natural (Kayem Foods)

800-426-6100

617-889-5478

chris.reisner@kayem.com

www.alfrescoallnatural.com

27

Anheuser-Busch InBev

909-597-0460

909-597-0460

raul.aguilar@anheuser-busch.com

www.anheuser-busch.com

58

Bimbo Bakeries USA

714-459-4772

714-441-3435

rhamacher@mailbbu.com

www.bimbobakeriesusa.com

32

C&S Wholesale Grocers, Inc.

916-373-4396

916-373-4296

pmiller@cswg.com

www.cswg.com

23 California Shopping Cart Retrieval Corp.

818-563-3070 800-252-4613

818-563-3041

www.cartretrieval.net

62

City of Hope

213-202-5735

213-241-7139

ckennick@coh.org

www.cityofhope.org

BC, 25

Coca-Cola Refreshments

213-746-5555

213-744-8765

mikanderson@coca-cola.com

www.cokecce.com

15

Domino Foods, Inc. - ASR Group

510-787-4416

510-787-4205

kent.kunsman@asr-group.com

www.chsugar.com

45

Fresh & Easy

310-341-1501

310-341-1201

47

Food 4 Less (Stockton)/ Rancho San Miguel Markets

209-957-4917

209-956-8550

www.myfood4less.com

47

Gallo Wine Company

323-869-6520

323-869-6790

barbara.hale@gallowineco.com

34

Gelson’s Markets

818-906-5709

818-990-7877

6

Gizmo Beverages

281-300-1009

brad.foster@gizmobeverages.com

www.teaofakind.com

21

The Hershey Company

717-534-3660

717-534-5297

bcotten@hersheys.com

www.hersheys.com

56 Illuminators

209-835-1346

209-835-9964 ed.hepler@hain-celestial.com

www.Celestialseasonings.com

19

608-310-5000

608-238-6330

iddba@iddba.org

www.iddba.org

63 Mastro & Associates

714-699-1030 949-713-5331

949-713-7418

larrym@mastroandassociates.com

17 MillerCoors

916-771-6428

916-786-9396 stacy.thorsen@millercoors.com www.millercoors.com

59

Milton’s Baking Company

858-350-9696

858-350-9695

ddimond@miltonsbaking.com

www.miltonsbaking.com

40

MOM Brands

952-322-8000

952-322-8005

lkbrown@mombrands.com

www.mombrands.com

42

Mondelez International Inc.

973-503-4955

973-503-2336

pat.m.smith@mdlz.com

www.mondelezinternational.com

11 Nestle Purina PetCare

800-421-1721 x9 314-982-4876

314-982-2860

paul.cooke@nestle.purina.com

www.purina.com

35

NuCal Foods

209-254-2200

209-254-2255

www.nucalfoods.com

2

Pepsi Beverages Company - WBU

925-416-2573

925-416-2600

www.pepsi.com

IBC

Procter & Gamble

925-867-4900

513-277-7964

www.pg.com

53

Safeway Inc.

925-467-3000

925-467-3323

www.safeway.com

13

Unified Grocers, Inc.

323-264-5200

323-729-6619

customercare@unifiedgrocers.com

www.unifiedgrocers.com

41

Unilever

714-315-1405

kimberly.stokes@unilever.com

www.unilever.com

12

Western Exterminator Company

800-540-5181

littleman@west-ext.com

www.westernexterminator.com

International Dairy Deli Bakery Association

paul.turcotte@pepsico.com

www.freshandeasy.com

www.gallo.com www.gelsons.com

©2011 The Coca-Cola Company. “Coca-Cola,” “open happiness” and the Contour Bottle are registered trademarks of The Coca-Cola Company.

OUR CLOCKS HAVE MOVED FORWARD AND THIS IS A GOOD TIME TO CHECK OUR PROGRESS ON 2014 MILESTONES AND JOURNEYS. The “Market” and “Main Street” still seem a little disconnected, but what can we do to align our strategic directions?

I have been struck by “C’s” that are occurring around us. To a banker, the “C’s” refer to character, collateral and credibility.

Our community, region and nation are in the midst of challenging and wonderful opportunities. At no time have we had better options and resources.

In our industry we are being impacted by consolidations.

What are the choices consumers are making when they visit our stores? Do they shop for price, variety, or a boutique experience?

Donald Trump once said, “Without passion you have no energy. Without energy you have nothing.”

What creative efforts must we adopt to remain on the cutting edge of our industry/community?

For years I have talked in terms of each of us having complete personal accountability. How are we being affected by local and regional politics? The weather?

What are the things we can manage? What are the issues out of our control? What is our chosen attitude as we move forward?

Frank Sinatra challenged us to “Dare to wear the foolish clown face.”

Whether we are part of a major provider, or a boutique operation it is important to decide a clear direction and commit to it!

“Decide who you are and commit to doing it right,” Dolly Parton once said. “You’d be surprised how expensive it is to look this cheap.”

WEA LT H M A N AGEMENT

Spring Has Sprung!

What creative processes are we using to assure we consistently stay ahead? Are we the competition? Do we set the pace? We make that choice in terms of the price we pay and the leadership we provide.

Our community, region and nation are in the midst of challenging and wonderful opportunities. At no time have we had better options and resources.

“The empires of the future are the empires of the mind… continuous effort, not strength or intelligence, is the key to unlocking your potential,” said Winston Churchill.

Make positive choices and stay the course. Take complete personal authority, accountability and action to make your dreams and milestones come true. n C A L I F OR N I A G R OC E R

John B. Kelly, CFP is a nationally recognized speaker, consultant and investment advisor assisting families and businesses with succession/transition planning and retirement goals. He can be reached at 916-296-9019 or investorscaddie@gmail.com. www.linkedin.com/in/theinvestorscaddie.

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