Grocer2015 issue1 web

C ALIFORNIA GROCERS A SSOCIATION

TODAY’S SHOPPER

REIGNS RULING THE GROCERY AISLE

IN THIS ISSUE Wow Your Customers Understanding the New Health & Wellness Remaining Relevant Through Innovation

2015, ISSUE 1

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

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

WEDNESDAY, APRIL 8, 2015 SACRAMENTO, CA For additional information, contact Dane Hutchings, CGA, at (916) 448-3545.

Sponsorship opportunities available. Please visit our website at www.cagrocers.com, or contact Beth Wright (916) 448-3545.

CGA

| Board of Directors

EXECUTIVE COMMITTEE

CHAIRMAN APPOINTMENTS

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

DIRECTORS

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Chairman of the Board Joe Falvey Unified Grocers, Inc.

Second Vice Chair Diana Godfrey Smart & Final Stores

Secretary Bob Parriott Twain Harte Market

First Vice Chair Kevin Konkel Raley’s

Treasurer Jim Wallace Albertsons LLC

Immediate Past Chair Mary Kasper Fresh & Easy

Kevin Arceneaux Mondelez International Inc.

Kendra Doyel Ralphs Grocery Company

Dave Jones Kellogg Company

Raul Aguilar Anheuser-Busch InBev

Dennis Darling Foods Etc.

Lynn Melillo Bristol Farms

Denny Silva Coca-Cola Refreshments

Jon Alden Jelly Belly Candy Co.

Brian Dowling Safeway Inc.

Dan Meyer Stater Bros. Markets

Renee Amen Super A Foods

Jon Giannini Nutricion Fundamental, Inc.

Omar Milbis Rio Ranch Markets

Naresh Solanki Bestway/Gardena Supermarkets

Teresa Anaya Northgate Gonzalez Markets

Dick Gong G & G Supermarket, Inc.

Phil Miller C & S Wholesale Grocers

Joe Angulo El Super (Bodega Latina)

Robin Graf Whole Foods Market

Hee-Sook Nelson Gelson’s Markets

Rich Arnold Oberto Brands

Rickey Hamacher Bimbo Bakeries, USA

Keith Olscamp Campbell Soup Company

Kelly Augustin United Markets, Inc.

Arthur D. Jackson, Jr. Costco Wholesale

Denny Belcastro Tyson Foods, Inc.

Michel LeClerc North State Grocery Inc.

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

Jennifer Bosma Harvest Market

Eric Lindberg, Jr. Grocery Outlet, Inc.

Paul Cooke Nestlé Purina PetCare

Dave Madden MillerCoors

Brent Cotten The Hershey Company

Casey McQuaid E & J Gallo Winery

Bob Richardson The Clorox Company Mike Ridenour Kraft Foods Group Casey Rodacker Mar-Val Food Stores, Inc. Dean Ryan Tops Fresh Market

Mimi Song Superior Grocers Mike Stamper Nestlé Sales Division Kim Stokes Unilever Dirk Stump Stump’s Markets John Swindell Food 4 Less/Foods Co. Paul Turcotte Pepsi Beverages Company—WBU Jim Van Gorkom NuCal Foods Kevin Young Young’s Payless Market IGA

CONTENTS

F E AT U R ES

COLU M NS

Today’s Shopper Reigns - COVER STORY

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Changes in the marketplace are occurring at unprecedented rates. The consumer has spoken and catering to their wants and needs is causing retailers to update their 2015 To-Do lists.

Wow Your Customers

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With so much competition out there, customer loyalty is the single most important attribute your business can have. Learn from a Disney veteran the three keys to delivering great customer service.

Understanding the New Health & Wellness

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Increasingly, “health & wellness” is more about “wellness” and that’s good news for the grocery industry as it allows more items to be considered “healthy.”

Remaining Relevant Through Innovation

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| Issue 1

The biggest challenge in brick and mortar retailing is remaining relevant to consumers – matching the store to their lifestyles and creating an experience that’s unique.

That requires constant innovation.

President’s Message In Other Words…..................................................4 From The Chair Between The Aisles...............................................6 Viewpoint—Kevin Coupe Silver Screen, Golden Lessons................................8 Government Relations New Legislative Challenges Requires Greater Involvement........................................... 10 Capitol Insider Statewide Carryout Bag Law Celebration Short Lived....................................... 12 Final Thought Earn The Right To Stay Open...............................56

DEPA RT M EN TS Washington Report...................................... 14, 16 Q & A - Chris McKenzie......................................18 CGA News..........................................................20 Member Profile...................................................26 Know the Law.....................................................30 Advertiser Index .................................................55

CALIFORNIA GROCERS ASSOCIATION President/CEO Ronald Fong

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

Director, CGA Educational Foundation Brianne Page Director, Local Government Relations Laura Peralta California Grocer is the official publication of the California Grocers Association.

For association members, subscription is included in membership dues.

Subscription rate for non-members is $100 and does not include CGA Buyers’ Guide. © 2015 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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Executive Vice President, COO Retail Marketing Services Jeff Snadow

Director, Events & Sponsorship Beth Wright

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

In Other Words…

RO N ALD F ONG President/CEO

In visiting with members around the state I have discovered that politics and “unfriendly” business legislation has reared its ugly head.

CGA’s advocacy staff address hundreds of legislative and regulatory issues annually. For us, pouring through bill summaries and committee meeting agendas is akin to grocers stocking shelves and bagging groceries. It’s what we all do.

The Office of Environmental Health Hazard Assessment (OEHHA), a part of the California Environmental Protection Agency, administers the Prop. 65 program and it is enforced by the California Attorney General’s Office.

Sometimes though, we forget that in reporting how these laws and regulations impact our members we must do so in language you can understand. The law in “plain English” as my law professors used to call it.

In addition to district and city attorneys, any individual may enforce Proposition 65 by filing a lawsuit against a business alleged to be in violation of this law. Penalties for violating Prop.

65 can be as high as $2,500 per violation per day. The inclusion of allowing “individuals” to pursue litigation is the brunt of the lawsuits we see against grocers.

Throughout the year I will use this column to revisit key issues in “plain English” to explain the impact to your business.

Let’s begin with Proposition 65.

In the mid-80s, California voters approved the Safe Drinking Water and Toxic Enforcement Act of 1986, better known as Proposition 65, that requires the State to publish a list of chemicals known to cause cancer or birth defects or other reproductive harm. The list includes approximately 800 chemicals.

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

Prop. 65 requires businesses to notify Californians about the presence of any of those chemicals in the products they purchase, or that are released into the environment. It also prohibits California businesses from knowingly discharging significant amounts of listed chemicals into sources of drinking water. Grocers are not the only businesses that must comply with Proposition 65. You might have seen similar warnings in airports and restaurants.

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The list contains a wide range of naturally occurring and synthetic chemicals. These chemicals include additives or ingredients in pesticides, common household products, food, drugs, dyes, or solvents. Listed chemicals may also be used in manufacturing and construction, or they may be byproducts of chemical processes, such as motor vehicle exhaust.

Businesses are required to provide a “clear and reasonable” warning before knowingly and intentionally exposing anyone to a listed chemical. This warning can be given by a variety of means, such as by labeling a consumer product, posting signs at the workplace, distributing notices at a rental housing complex, or publishing notices in a newspaper.

Businesses with less than 10 employees are exempt from Proposition 65’s requirements.

To guide businesses in determining whether a warning is necessary, OEHHA has developed safe harbor levels. A business has “safe harbor” from Proposition 65 warning requirements or discharge prohibitions if exposure to a chemical occurs at or below these levels.

These safe harbor levels consist of No Significant Risk Levels for chemicals listed as causing cancer and Maximum Allowable Dose Levels for chemicals listed as causing birth defects or other reproductive harm. OEHHA has established over 300 safe harbor levels to date and continues to develop more levels for listed chemicals. n

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FROM THE CHAIR

Between The Aisles

J OE FALV E Y

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

CGA Chair of the Board Executive Vice President Unified Grocers, Inc. President, Market Centre

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There are few businesses, if any, besides the food industry that touches every person on a daily basis. Our contact with customers, vendors, and retailers on many levels, often create long-term relationships and a path for communication, problem solving and education is developed and enhanced.

We strive to put items on the shelves or across the scanner, but what goes on between the aisles, with these associations, is what not only sustains our business, but also propels

Within CGA’s membership, we want to increase employee engagement and leadership.

Continued communication and education will help set people up for success, taking them to

us towards other business-building ventures.

The exchange of information and the rapport established benefits the individual and our industry as a whole.

the next level with a sense of ownership of the idea, project and company. This in turn creates a “walk-thru-fire” loyalty.

In a generation of texting, emails and conference calls, we often miss face-to-face contact. However, when we spend time learning about each other’s families, their history and values, we tend to feel a sense of trust and confidence in each other. This promotes communication within our business relationships as well as personal satisfaction.

Whether you are a company CEO or bagging groceries, the relationships you create with all those you meet will influence the success or failure of a business.

The California Grocers Association promotes this idea and provides opportunties for developing friendships and valuable business contacts.

Informative speakers at the CGA Strategic Conference provide education and the casual environment allows members to connect with others on a personal and relaxed level.

Within our industry, it may not always be the price of an item that brings people through our door, but rather, the overall experience. Taking time to listen to customer needs and impressions and looking at the store or personal service through the lens of the customer, creates a memorable environment and lasting relationship.

This encourages new relationships and maintains those developed throughout our careers. Grocers Day at the Capitol and the recent Independent Operators Symposium are two other examples of how valuable relationships are to accomplishing our goals. These events provide the opportunity to meet state representatives in person and convey our legislative agenda, or meeting with peers to share ideas.

I was just talking to my daughter, Brooke, who is attending the WAFC-sponsored Food Industry Management program at USC, and after sharing with me her experience so far, she concluded with, “You know what Dad, it is really all about the relationships I am developing.” n

Whether you are running a company as the CEO or bagging the groceries for your customers, the relationships you create with all those you meet will influence the success or failure of a business.

VIEWPOINT

Silver Screen, Golden Lessons KEV IN C OU P E

This always seems like a good time of the year to take a look at some of the movies out in the multiplexes and suggest which ones offer relevant business and leadership lessons.

This isn’t just because the awards season is beginning, and it isn’t just because I co-wrote a book entitled “The Big Picture: Essential Business Lessons from the Movies” (though my publisher does love it when I stoke the fires). In fact, I do think that there are some excellent films out there that offer some graphic examples for business leaders to consider. (And there’s one old film that I watched over the holidays that is a great primer on what not to do. But more on that later...)

“The Imitation Game” is the story of Alan Turing, the highly idiosyncratic mathematician who led a team of cryptologists assembled by the British government to break the Nazi Enigma coding machine, an effort that most felt was critical to being able to win the war.

From the beginning of the movie, Turing is shown as what we’d now call an outside-the-box thinker; while the other men on the team kept trying to outthink the Enigma machine, Turing realizes that it will take a machine to do so... and he starts to build what essentially was the first computer, designed for that specific purpose.

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

And nobody believes in him.

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Benedict Cumberbatch (“Sherlock”) plays Turing, and he submerges much of his natural charisma to do so; in addition to being brilliant and arrogant, Turing also was a social misfit, and gay at a time when homosexuality was a criminal offense. Today, someone would probably diagnose him as being somewhere on the Asperger’s spectrum, but then he just seemed antisociaL—lousy at taking orders, and worse at leadership. And it didn’t help that many of his bosses didn’t see the potential behind his behavior.

There is a lovely line in “The Imitation Game” that, I think, sums up everything that the movie is about, both explicitly and implicitly:

“Sometimes it is the people no one imagines anything of who do the things that no one can imagine.”

It is a turn of phrase that both captures the spirit of this elegant, fascinating movie and offers a lesson to leaders - business, political, religious, or any other kind - about the importance of creating an open, nurturing environment that prizes differences rather than marginalizes them.

“The Imitation Game” is about how important it is not to make assumptions about anyone, and how anyone, given the opportunity, can make a contribution to a larger cause. All they require are confidence, nurturing and a sense of belief.

“Sometimes it is the people no one imagines anything of who do the things that no one can imagine.”

There’s absolutely no nurturing going on in “Whiplash,” a compelling drama that is absolutely loaded with business lessons.

“Whiplash” is about the relationship between a young drummer, played by Miles Teller, who attends an exclusive New York music conservatory, and a jazz teacher/conductor there, played by JK Simmons. Calling it a “relationship” actually is inaccurate - it is more like an ongoing heavyweight fight between two talented and obsessive men, and it raises more questions about leadership than it answers.

That’s a good thing.

What “Whiplash” is about is actually the cost of obsession. Simmons—a talented and muchemployed character actor getting a crack at a lead role and making the most of it—plays a man who believes that the path to greatness lies in psychological and even physical abuse of his students. He pushes and pushes and pushes some

VIEWPOINT

more, believing that it is the only way that the students can find transcendent moments. Teller’s character actually believes it, and is willing to do whatever is necessary to achieve greatness as a musician; he believes he has it in him, even when his teacher does not.

“Whiplash” poses some important questions. What is the cost of greatness? And is greatness worth the cost?

Oddly enough, at the end of the movie, despite some devastating costs, teacher and student in “Whiplash” might actually agree … and the audience becomes almost complicit in that agreement.

I urge you to see it, and then think about the issue of how we nurture and revere greatness in our organizations.

One of the other terrific new movies I’ve seen recently is a Swedish film called “Force Majeure,” which, while a family drama, actually raises an interesting leadership point.

The setup is simple. A man who is a borderline workaholic takes his wife and two kids on a fourday skiing vacation in the French Alps. The idea is to reconnect with his family.

One day, they are eating in an outdoor restaurant at their ski lodge, and they see what appears to be a controlled avalanche… except that the avalanche quickly gets out of control and seems about to envelop the deck where they are sitting. At the last moment, the husband grabs his cell phone and keys and runs… leaving his wife and kids behind.

Everybody survives, but the decision sets up a series of conversations, discussions and confrontations that throw into question his integrity, commitment and marriage. And it isn’t just his relationship that gets questioned… it is that of every other couple they encounter and tell about the event.

It is the curse of my existence that I can’t seem to go to the movies without walking away with at least one concrete business lesson or metaphor. (On the other hand, it isn’t such a curse ... it always gives me something to write about. And there are a lot worse things to write about than the movies.) It’s nice even to come back to an old favorite that I haven’t seen in some time, and find lessons lurking there as well.

This winter, it was “The Caine Mutiny,” the great Humphrey Bogart-Van Johnson-Jose Ferrer movie based on the Herman Wouk novel about a fictional mutiny that breaks out on a U.S. Navy minesweeper during World War II. While Captain Queeg may suffer from a number of leadership deficiencies, he is undermined at every turn by a crew that doesn’t like him, doesn’t respect him, and actually wants him to fail.

And that’s the real lesson of “The Caine Mutiny.” It is a movie that is not just about how to be a great leader, but also about how to be a great follower. Because they’re important, too.

I’ll see you at the movies. n

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

To me, “Force Majeure” serves as a strong business metaphor. How many leaders—at the top of the corporate ladder, or running stores or departments— put their own needs first? Ahead of those of the corporation, ahead of those people who work for them and depend on them for direction, inspiration, motivation? What message does that send to the people upon whom every enterprise depends for viability and vitality?

iStock/Thinkstock

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G O V E R N M E N T R E L AT I O N S

New Legislative Challenges Requires Greater Involvement KERI ASKEW BAILEY Senior Vice President of Government Relations and Public Policy for the California Grocers Association

Last November’s General Election ushered in nearly 40 new state lawmakers between the California Assembly and Senate. Your help is needed in assisting CGA establish strong relationships with these new legislators.

As the grocery industry looks ahead to 2015, there will be significant challenges facing our industry. Additional minimum wage increases,

they face doing business in California,” said California State Assemblymember Frank Bigelow (R-O’Neals). “Meeting one-on-one with grocers

worker retention mandates and retailer liability data breach legislation are just a few ideas being considered by elected officials.

allows me to ask questions, be a stronger voice for them in Sacramento, and cultivate a strong working relationship with my constituents.”

With nearly 40 new legislators having been sworn in this January, it’s critical CGA establish strong relationships with these new lawmakers to obtain greater visibility and stay active in the legislative process. It becomes incumbent upon us to educate our representatives as to the potential impact their legislation will have on the grocery business.

The Association’s annual Grocers Day at the Capitol is a perfect opportunity for large grocery retailers and independent grocers, along with suppliers, to meet directly with their lawmakers and provide a resounding voice for California’s grocery industry. This year’s Grocers Day at The Capitol is Wednesday, April 8.

“Hearing directly from the grocers in my district gives me a better understanding of the challenges

The more lawmakers hear from their constituent businesses the stronger advocates they will be for the wide range issues that affect our industry.

The grocery industry, to some extent, is taken for granted – often looked upon as business that will remain in California. But the truth is the industry has its challenges. Whether you’re an independent grocer with a handful of stores, or a national grocery chain, each story is unique – just as every legislative district is unique. The more lawmakers hear from their constituent businesses the stronger advocates they will be for the wide range issues that affect our industry.

When CGA members meet with lawmakers and their staff it gives decision makers a new perspective on an ever-changing industry and helps lay the ground work for our government relations team moving forward into the legislative session.

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

Those boots on the ground, real world anecdotes help paint a complete picture for legislators who might otherwise not know the extent the retail food industry is regulated.

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This is your call to action. Help CGA build relationship bridges with key policy makers. Mark your calendar and plan to attend Grocers Day at the Capitol on April 8. n

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CAPITOL INSIDER

Statewide Carryout Bag Law Celebration Short Lived On September 30, 2014, Gov. Jerry Brown signed SB 270, the first statewide legislation to ban the free distribution of single use plastic bags in grocery stores, chain pharmacies and convenience stores.

Finally, our years of hard work and perseverance had paid off! Unfortunately, the celebration was short-lived because within hours of the legislation being signed, the American Progressive Bag Alliance filed a petition for referendum of the law. This petition threw us and other SB 270 supporters into a little known, but historical area of the law.

a referendum only has 90 days from the enactment date of a bill to request and receive a circulating title and summary from the Attorney General, print petitions, gather the required number of valid signatures, and file the petitions with the county elections officials. On the other hand, an initiative is allowed a maximum of 180 days to accomplish the same.

The referendum process has been part of our State’s Constitution since 1911. Article II, Section 9 establishes the referendum as the power of the electors to approve or reject statutes enacted by the Legislature, with exception. Those exceptions include urgency statutes, statutes calling elections, or statutes providing for a tax levy or appropriations for current expenses of the State.

The signature threshold is determined by the last gubernatorial election. The number of signatures must be equal to at least 5 percent of the total votes cast for Governor. Using the vote count from the 2010 Governor’s election, the proponents of SB 270 referendum are required to submit at least 504,760 valid signatures to make it on the ballot.

The signature requirements are the same for a referendum as an initiative, however, the timelines for a referendum are substantially different. For example, a proponent of

The proponents spent several million dollars to collect around 800,000 signatures. Proponents of these measures typically submit more signatures than required because a signature must be valid to count. Only persons who are registered, qualified voters in the county where the petition is signed are entitled to sign. Any signature not meeting all of these requirements is deemed invalid and not counted.

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

Using the vote count from the 2010 Governor’s election, the proponents of SB 270 referendum are required to submit at least 504,760 valid signatures to make it on the ballot.

On December 29, the proponents submitted their signatures to the county election officials throughout the state.

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Upon receipt of the signatures, the county election officials begin the process of validating

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CAPITOL INSIDER

signatures. Within eight days after the receipt of the signatures, the county election officials shall determine the total number of signatures submitted and transmit the information to the Secretary of State.

If the numbers received from the county election officials show that the number of valid signatures is more than 110 percent of the signatures needed to qualify, the Secretary of State deems the referendum qualified to be on the next general election ballot.

If the referendum passes and SB 270 is repealed, the state law will not take effect but local ordinances will survive.

If the numbers received from the county election officials show that the number of valid signatures is between 95 percent and 110 percent of the signatures needed, the Secretary of State directs the county officials to verify every signature. This process is referred to as a “full check.� If this process is necessary, the county election officials have 30 days from notification to complete the full check.

If the total number of signatures filed with county election officials is less than 100 percent of the number of qualified voters required to qualify the referendum, the Secretary of State notifies the proponents and no further action is needed. The referendum fails.

However, there is a chance, albeit small that a large number of signatures could be disqualified, which would allow us to continue our celebration in early March and prepare for full implementation of SB 270 on July 1. Either way, we will keep you posted. n

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If the numbers received from the county election officials show that the total number of valid signatures is less than 95 percent of the signatures needed to qualify, the Secretary of State notifies the proponents and the referendum fails to qualify.

So, now we wait! Due to the money spent by the proponents and the total number of signatures submitted, the odds favor the referendum qualifying, which means our celebration will be placed on hold until November 2016.

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

If the number of signatures filed with the counties is 10 percent or more of the number of qualified voters needed to qualify the referendum, the Secretary of State notifies the election officials. Within 30 days after this notification, the county election officials shall determine the number of qualified voters who signed the petitions.

If more than 500 signatures were submitted in that county, the county election official will use a random sample technique to verify signatures. The county election officials then submit the results of the random sample to the Secretary of State.

This entire process should be completed by the end of February. If the referendum qualifies, implementation of SB 270 will be placed on hold until the November 2016 general election. If the referendum fails, meaning voters vote to support SB 270, the law will take effect immediately. If the referendum passes and SB 270 is repealed, the state law will not take effect but local ordinances will survive.

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WASHIN GT O N R EP O RT Jennifer Hatcher Senior Vice President Government and Public Affairs, Food Marketing Institute

Let the Axe Sharpening Begin!

“GIVE ME SIX HOURS TO CHOP DOWN A TREE AND I WILL SPEND THE FIRST FOUR SHARPENING THE A XE.” In advance of President Abraham Lincoln’s birthday anniversary, his advice on planning is as important now as it was also 150 years ago. In order to have success, you have to do a lot of planning.

With the start of a new year and a new Congress, the 114th Congress wants to shed the “do nothing” mantra and set a plan now for how to get legislation passed through the House and the Senate in such a bipartisan fashion that the President feels compelled to sign it into law.

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

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4. Tax Reform (LIFO, Effective Tax Rates,

Corporate/Pass Through Reform) Menu Labeling GMO Labeling Tax Extenders (for 2015) Federal Minimum Wage (No CPI Adjustment) SNAP (Potential Use of Block Grants and Other Administrative Changes to Narrow What Can Be Purchased) 10. COOL (Compliance with WTO) 5.

6.

7.

8.

9.

For the Food Marketing Institute, last Congress with a divided government resulted in few pieces of our priority legislation making their way through the legislative process, but we spent needed time planning and developing a framework for future action.

And this next list of priority issues represents those most important in the regulatory environment.

We read and reviewed more than 30,000 pages of proposed legislation and regulations; posted more than 250 tweets and blog posts; and provided 114 legislative, regulatory and state updates via reports, calls or webinars. We attended more than 1,250 meetings with lawmakers and congressional staff. We participated in, or chaired 490 coalition meetings. We met with regulators and administration officials 128 iStock/Thinkstock times and hosted or attended 158 political events.

2. National Labor Relations Board Enforcement/

Now, with a new Congress that includes a larger Republican majority in the House and a new Republican majority in the Senate – led by Leader Mitch McConnell (R-Kentucky) – our plans have changed and new issues are finding their way to the top of the priority list.

The following legislative issues were reported by FMI members to be near the top of their list of concerns at the federal level.

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— ABRAHAM LINCOLN

1. Data Security/Privacy 2. Affordable Care Act -- Full-Time Employee

Definition; Mandatory Auto-Enrollment; “Cadillac” Tax; Reinsurance Fee; Compliance/ Reporting 3. Interchange/Swipe Fees (Curb Attempts to Repeal Durbin Amendment)

1. ACA/Health Care Reform Implementation

(HHS, DOL, IRS, Treasury) Regulations (NLRB) 3. GMO Labeling (USDA) 4. Food Safety Modernization Act Implementation

(FDA) Menu Labeling (FDA) Country of Origin Labeling (USDA) SNAP Food Policy (USDA) Food Marketing Claims Enforcement/ Regulations (FDA/USDA/FTC) 9. Climate Action Plan and Hydrofluorocarbons/ Phase-out of Refrigerants (EPA) 10. Overtime Proposed Rulemaking (DOL) 5.

6.

7.

8.

We will plan a course of action on each of these and then will call an audible on those issues that change, making sure our axe is sharpened and we are ready for legislative and regulatory action when the time is right. n

WASHIN GT O N R EP O RT

Reinstating the 40-Hour Work Week DESPITE BEING SIGNED INTO LAW ALMOST FIVE YEARS AGO, THE AFFORDABLE CARE ACT (ACA) CONTINUES TO PRESENT BUSINESS OWNERS WITH UNCERTAINTIES ABOUT HOW IMPLEMENTATION OF THE LAW WILL IMPACT THEIR BUSINESS OPERATIONS. One of the most problematic provisions within the Affordable Care Act is the definition of a full-time work week as 30 hours per week per month, down from the traditionally accepted 40 -hour per week per month threshold.

According to a 2014 Independent Grocers Financial Survey, conducted by the National Grocers Association and FMS Solutions, the Affordable Care Act dominated the political concern index for independent supermarket operators.

Unfortunately, changing the 40 -hour work week forces many companies to rethink how they hire and schedule employees. Left unchanged, this provision will have far reaching consequences on the supermarket industry and could impact the ability of supermarket operators to continue providing quality benefits to their associates.

Simply put, 30 hours is not full-time. Requiring employers to meet this new definition is one of the most significant challenges of the law, and

Greg Ferrera Vice President, Government Affairs National Grocers Association

ultimately jeopardizes coverage for America’s true full-time workforce.

NGA has been helping to lead an effort to amend the definition of a full-time employee under the law and continues to urge Congress to work in a bipartisan manner to provide employers relief from this new 30 -hour threshold.

Unfortunately, changing the 40-hour work week forces many companies to rethink how they hire and schedule employees.

NGA applauds the House of Representatives for taking up this important issue early in the new Congress. We are now focused on working to pass a bi-partisan bill in the Senate.

Maintaining the full-time level many employers use today is something both sides of the aisle should agree on; it would undoubtedly be better for job preservation. Amending the ACA to reinstate the 40 -hour work week is vital to our members and their efforts to continue providing quality benefits and flexible hours for their employees. NGA will continue to work with members from both sides of the aisle to ensure they fully understand the importance of this issue to independent supermarkets.

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

Finally, I encourage you to join many of your CGA and industry colleagues on April 15 -16 in Washington, D.C. for the Supermarket Industry Day in Washington. With so many new faces in Congress and many important issues facing our industry it’s important that your elected officials hear from the independent supermarket industry. With sales of nearly $20 billion and over 105,000 direct jobs you have an important story to tell on Capitol Hill. n

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Jay Leno Entertainer

Martha Stewart Founder, Martha Stewart Living Omnimedia

Walter Robb Co-CEO, Whole Foods Market

Phil Lempert the Supermarket Guru

Harold Lloyd Founder, Harold Lloyd Presents

Youngme Moon Author and Professor, Harvard Business School

Arianna Huffington Co-founder & Editor-in-Chief The Huffington Post

Shaquille O’Neal NBA All-Star and Sports Analyst for TNT and NBATV

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The Evolution Continues

Hands-On Expo & Learning Opportunities

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Q&A

Q&A: Chris McKenzie, Executive Director, California League of Cities FROM STREET LIGHTS TO POLICE AND SEWERS TO BUILDING PERMITS, CITIES IMPACT YOUR BUSINESS DAILY. LOCAL GOVERNMENTS AND THEIR ELECTED OFFICIALS SHOULDER THE BURDEN OF CREATING VIBRANT COMMUNITIES LEADING TO SUCCESSFUL GROCERY STORES. WITH SO MUCH IMPACT ON OUR INDUSTRY HOW ARE CITIES DOING? CHRIS MCKENZIE IS EXECUTIVE DIRECTOR OF THE CALIFORNIA LEAGUE OF CITIES.

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

FOUNDED IN 1898, THE SAME YEAR AS CGA, THE LEAGUE IS AN ASSOCIATION OF

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CALIFORNIA CITY OFFICIALS WHO WORK TOGETHER TO ENHANCE THEIR KNOWLEDGE AND INFLUENCE POLICY AFFECTING CITIES. CGA AND THE LEAGUE PARTNER OFTEN TO SUPPORT OUR MEMBERS. 482 cities of all sizes and demographics in Q. With California, what do they believe are their most important challenges in the coming years?

biggest challenge for most cities as A. The they recover from the Great Recession is providing the best municipal services possible in an era of continued revenue limitations

Q&A

and growing needs. The fact is that costs – whether infrastructure maintenance, personnel, regulatory compliance with new water and wastewater requirements, goods and services – have risen faster than revenues have recovered. Like a family struggling to keep food on the table, cities are doing their best with limited resources. has been plenty of news about the Q. There financial challenges, including bankruptcies, facing California cities. What strategies are cities employing to create stability for their budgets?

How could it impact businesses?

generally have reduced personnel, cut A. Cities spending on nonessential goods and services, deferred infrastructure improvements, and recruited volunteers to help provide services.

Where possible, they have also asked the voters to renew existing taxes or support new ones.

In many cases, they have been successful.

This past November, 69 percent of the majority vote and 61 percent of the two-thirds vote tax measures were approved by city voters. This is an astounding expression of support for their city governments. stores are a vital component to successful Q. Grocery communities. In what ways are cities encouraging retail to remain and working to attract to new businesses?

city leaders know that their most A. Smart important economic development goal is to

can sometimes feel city hall is a Q. Businesses confusing maze, especially when making policy

influence our daily lives by providing Q. Cities police and fire protection, maintaining critical infrastructure like roads and water, and deciding where businesses can operate. How do cities go about balancing these responsibilities to maintain vibrant communities?

officials do it with great care and the A. City highest levels of transparency. Whether it is a decision about a permit or a land use approval, cities generally operate with a high degree of openness and transparency. City staff members are keenly aware that their job is to implement laws that are designed to protect the public health or safety. City councils and planning commissions are also aware that their land use decisions have long-term impacts on the city, so they must act on behalf of the entire community, including those not yet born. has long been a policy innovator for the Q. California country and the world. What role do cities have in creating and shaping regional and statewide policy trends?

year the League presents cities with A. Every awards for their innovation in a wide range of endeavors, whether it’s in community policing, parks and recreation programs, cutting-edge library services, economic development, intergovernmental collaboration, or other endeavors. The fact is that California cities are just as innovative as their private and public sector counterparts. At the end of the day, the rest of the nation continues to look to California for the next big idea. n

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decisions. How can businesses best connect with their city elected officials in order to influence policy decisions?

before they need to ask them for their vote on a project. So getting involved on a city board or commission, becoming active on a local chamber of commerce committee, or helping elect a city councilmember can provide the opportunities to build relationships before a particular situation arises that will trigger a need to talk to a city elected official.

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

make sure existing businesses want to stay and expand. So their first priority has to be on supporting existing businesses. This actually helps with the next priority, however, and that is business attraction. Some cities have no problem attracting business investment, and others have to offer incentives and work harder.

most important thing a business leader A. The can do is to get to know their elected officials

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C GA N EWS

Symposium Focuses on Independent Operators INDEPENDENT OPERATORS STEPPED AWAY FROM THEIR BUSY DAY-TO-DAY OPERATIONS RECENTLY TO RENEW, REVITALIZE AND REIMAGINE THEIR BUSINESS APPROACH AT THE 2015 INDEPENDENT OPERATORS SYMPOSIUM. independent grocers a unique opportunity to gather in a relaxed setting to share industry best practices and learn successful new strategies to grow and sustain their business.”

Snow, a Disney executive for more than 15 years, shared his unique perspective on providing the

Dr. Tom Deans presented a fresh look at succession planning.

Independent grocers from throughout California gathered in Hawaii this January for the 34th annual symposium that included an enhanced educational program that featured a trio of high-caliber educational sessions targeted at key challenges and opportunities facing independent retailers.

Speakers for this year’s event included former Walt Disney executive Dennis Snow, noted author and succession planning expert Tom Deans, and industry consultant Craig Rosenblum.

CGA President Ron Fong welcomed attendees to this year’s symposium.

Independent Operators Committee Chair Bob Parriott, Twain Harte Market.

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

“The Symposium was a tremendous success,” said CGA President Ron Fong. “It provided our

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The 2015 Independent Operators Symposium featured a trio of dynamic presenters who addressed key independent operator issues.

CGA NEWS

family ownership issues while developing and updating a company’s succession plan.

Using industry-specific data and examples of best and worst practices from independent grocers, Rosenblum, a partner at Willard Bishop Consulting, shared five key trends every independent operator Continued on p. 22

(l to r) CGA Chair Joe Falvey, Dolly Falvey and CGA President Ron Fong.

“Disney Approach” to customer service. Deans, the author of the best-selling book, “Every Family’s Business,” provided new concepts on navigating (l to r) Lynda Robles, Erin Downing, Dale Downing and Al Robles, Sonoma Market.

Former Disney executive Dennis Snow shared insights into effective customer service.

(l to r) Bob Garibaldi, Unified Grocers, Inc. and Richie Morgan, North State Grocery.

CGA THANKS THIS YEAR’S SYMPOSIUM SPONSORS

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

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C GA N EWS

Continued from p. 21

Sponsors such as MOM Brands helped make this year’s Symposium a tremendous success. (l to r) Kristin Young, Kevin Young, Jordan Young, Young’s Payless, and Gabrielle Oleari.

should know and how to successfully apply them to their stores.

This year’s Symposium was January 11-18, at the Disney Aulani Hotel on the Hawaiian island of Oahu.

The event was formerly hosted by the California Independent Grocers Association and was retained by CGA as part of the merger of the two associations.

Enjoying one of the symposium’s many events were ( l to r) Ron Fong, CGA; Marbus Benedetti, Mary Beth Benedetti, Clover Stornetta Farms.

“We look forward to building this event in the coming years and making it the premier gathering for our independent retailers,” Fong said. “I encourage every independent operator to mark their calendars for next January and plan to join their peers for this tremendous event.” n

New Members

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

CGA WELCOMES THE FOLLOWING MEMBERS.

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Crunchies Food Company 733 Lakefield Rd Ste B Westlake Village, CA 91361-5930 Contact: James Lacey, Chief Executive Officer E-mail: jlacey@crunchiesfood.com Tel: (805) 230 -2248 Website: www.crunchiesfood.com

Panovo Alimentaria, S. de R.L. de C.V. La Sauceda 162 Col. San Martín 47079 San Juan de Los Lagos, Jalisco, Mexico Contact: Eduardo De La Torre, Business Coordinator E-mail: edelatorre@panovo.mx Tel: +52 (395) 785-3744 Website: www.panovo.mx

Church Brothers Produce, LLC 19065 Portola Dr Ste C Salina, CA 93908 -1250 Contact: Kori Tuggle, VP, Marketing E-mail: kori@churchbrothers.com Tel: (800) 799 -9475 Website: www.churchbrothers.com

Bay Equipment Exchange Inc. 7075 Pyramid Ct Garden Valley, CA 95633-9509 Contact: Mark Brown, President/Owner E-mail: markbrown.bee@gmail.com Tel: (530) 621-2113 Website: www.bayequipmentexchange.com

B r i s t o l Fa r m s

For becoming a new Board Member of the California Grocers Association

We Are Proud of You!

from your Bristol Farms Family

C GA N EWS

CGA Welcomes Its New Board Members Rich Arnold Oberto Brands Rich Arnold joined Oberto Brands three years ago as Director of Sales – West and was responsible for grocery sales in the West along with Safeway Corporate. He was promoted in Sept 2014 and is now responsible for retail grocery sales in the U.S. to include Alaska.

Lynn Melillo Bristol Farms Lynn Melillo is Senior Director of Asset Management for Bristol Farms and is responsible for workers’ compensation, general liability, loss prevention, risk management, regulatory compliance with local, state and federal agencies and food safety/sanitation.

He began his career in the grocery industry while attending college and has over 40 years of experience in various aspects of the industry. His background includes retail sales, category manager, executive at a major sales and marketing agency, executive with a regional manufacturer and his current position working for a national manufacturer.

She is a graduate of IIA Insurance Institute of America where she earned her Associate Risk Manager designation, UCLA Certificate Program in Business and Finance for Human Resource Management, and the USC Food Industry Executive Management Program. She also holds certifications from National Registry of Food Safety Professionals as a trainer and proctor, NSF International Certified HACCP Manager, and Cornell University in Food Store Sanitation.

He is a graduate of CSU Sacramento with a Bachelor’s Degree in Business Administration / Marketing. He is a member of the board for the City of Hope’s Northern California Food Industry Circle, President Emeritus of the Frozen and Refrigerated Food Council of Northern California and a member of both the Illuminators and Sales Managers Club of San Francisco.

He and his wife Julie recently relocated from the Bay Area to Granite Bay, CA. and have four grown children and three grandchildren.

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

Arthur D. Jackson, Jr. Costco Wholesale Arthur Jackson is the Vice President of General Administration for Costco Wholesale. He serves as Chairman of Costco’s Charitable Contribution Committee. His responsibilities include Governmental Affairs, Community Relations, Supplier Social Responsibility Compliance and the Supplier Diversity Program.

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Prior to joining Costco in 2001, Art was Vice President of Labor and Employee Relations, Government and External Affairs for The Bon Marche in Seattle, now known as Macy’s. He was in the private practice of Law in Dayton, Ohio before serving as a Dayton Municipal Court Judge for 11 years.

Denny Silva Coca-Cola Refreshments Denny Silva began his career with Coca-Cola as an Account Manager in 1995. Over the next 16 years Denny continued to advance through several sales leadership roles with increasing responsibility across multiple locations in the Northern California Market Unit. As Vice President, Northern California Market Unit Field Operations, Denny drives operational excellence throughout the Coca-Cola system in Northern California.

He is active with the Boys and Girls Club of Tracy and serves on the boards of Special Olympics Northern California and the California Nevada Soft Drink Association.

He is active with the Boys and Girls Club of Tracy and serves on the boards of Special Olympics Northern California and the California Nevada Soft Drink Association.

MEM B ER P R O FILE

Five Decades of Serving Northern California AFTER FIVE DECADES IN THE GROCERY BUSINESS DALE DOWNING AND DON SHONE HAVE SEEN A LOT OF PROGRESS IN THEIR NORTHERN CALIFORNIA MARKETPLACE. “I don’t think we even had a gas station and we were here before they had stoplights and now we have five or six,” said Downing who, with his partner Don Shone, operate the Glen Ellen Village Market named after the laid back and bucolic town in which it’s located and the Sonoma Market, in the city of Sonoma, an area that’s become a Mecca for foodies and wine lovers.

Clearly, both stores have changed with the times.

But one thing remains—an unyielding commitment to freshness, customer and community service that have made these independents an institution in Northern California.

This attitude has served the stores well. Asked how the business is shaping up for the remainder of 2014 and into next year, Downing replied: “We’re up over last year and things look very good.”

Downing and Shone—who previously worked for Purity Markets and started in business as box boys— are celebrating their 51st year of business in the Sonoma Valley. Shone purchased the original Glen Ellen store in 1963 when the area was still pretty rural and the population was sparse. It was called Shone’s Country Store and measured about 2,000 square feet.

It was expanded in 1994 and now measures about 12,000 square feet of selling area. Downing came on board 3 years after Shone bought the store.

In 1984, the partners purchased a store called Valley Mart and after some significant renovations— including expanding into adjacent retail space— reopened as Sonoma Market. “The Valley Mart store had seen its day and was a little tired looking. It had a self-service meat counter that we tore out and put in a service meat counter. We were already known for our high quality meats,” he said, noting that this remains a key category for the 24,000 -square-foot store.

In addition to a selection of dry-aged beef, the store now carries a large selection of gourmet meats marinated in the store’s own mixture of wine and garlic, teriyaki and jerk flavors. Sonoma Market is also known in the area for its line of all-natural, hormoneand antibiotic free beef, grass-fed beef and South Dakota raised Buffalo meat.

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

The 100 -foot meat, poultry and seafood counter is also the place to go for organic and free-range chicken and poultry and products from local poultry farms.

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Downing doesn’t hesitate to characterize the store as upscale. ”We cook our own crabs and the meat counter is still all service. We have a huge fish and seafood counter.

The store also maintains an extensive cheese section, which carries 600 -700 different types of cheeses all year long and as many as 1,100 during the Christmas season. Additionally, the store has handmade

MEMBER PROFILE

employees, including 20 in the deli and kitchen at any given time,” he said.

With all the challenges facing the grocery industry at large and independents in particular, Downing feels the most important to him are customer service, product quality and generally keeping up with the times.

specialties like cheese tortas, homemade Gorgonzola and a variety of Brie in puff pastry.

The bakery has over 100 varieties of fresh basked breads, cakes, cookies, pies, muffins and doughnuts, including gluten- and sugar-free varieties along with artisan-made items from local companies.

“Back in the 1990s when everyone was throwing out salad bars we put them in. We even run our own 18 -wheeler into the city to pick up our produce.”

The store also has a 20 -foot hot food bar, which is stocked with different hot dishes and vegetables throughout the day. “We also have 10 different hot soups at all times and most of it is cooked in our own kitchen. We have an olive bar with more than 80 varieties. Then there are the made to order hamburgers, burritos, croissant sandwiches, lasagna and chili,” said Downing.

Although the store maintains a small dining area, most of the business for breakfast, lunch and dinner is takeout for gourmet dishes that are made in the store.

Additionally, Sonoma and the Glen Ellen Market are very active in their communities, providing e-Scrip for local schools, sponsoring five or six charity golf tournaments every year and providing box lunches at no charge, providing gift baskets and other support for fundraising auctions for the Boys and Girls Clubs and school functions. “We sell See’s candy in the store three times a year and 100% of profits goes to local non-profit organizations like the Boosters or the community center.”

The stores are also heavily involved in recycling efforts. “We have to charge for bags. But customers who bring their own can enter a daily drawing for $100. It’s really helped. We used to go through four bales of paper bags when we started the program 5 years ago. Now, our usage is way down. It’s well worth the $100 giveaway and it’s fun for our customers.”

But Dale Downing and Don Shone’s philosophy pretty much sums up the way they do business. “You get out of it what you put in.” n By len Lewis

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Being an independent has been a big advantage. “For one thing we can adapt to changes more quickly. If one of our customers wants something we’ll go out of our way to find it just for them. Servicing these customers means having enough people to do the job properly. Between the two stores we have about 180

But other things are just as important to Downing.

For example—employees. “We want to provide all employees with health benefits. But it’s a real struggle to keep that under control. We have a lot of employees who have worked with us for 20 or 25 years, and we also have two generations of employees from the same families. We are very fortunate and keeping them is important to us. If it weren’t for them we would be having a really hard time,” he said.

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

To go along with all this, the store has an extensive wine department with everything from value priced products to premium, limited production wines with an emphasis on products from Sonoma County, which is home to more than 400 wineries.

“It’s different than it was many years ago. Often both people in the family are working and getting home later. Our towns in particular have a lot of commuters, many of them coming from San Francisco, about 45 miles away. We have to staff differently and the food needs to be available to them later. If they get home at 6:30 they know they can come here for dinner. This is something that changes the nature of the business,” he said. “You have to listen to what your customers want.”

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KN O W T HE L AW

Understanding California’s New Paid Sick Leave Law WITH THE 2014 HOLIDAY SEASON BEHIND US, THE CALIFORNIA GROCERY INDUSTRY MUST BEGIN COMPLYING WITH THE WAVE OF NEW LAWS GOING INTO EFFECT IN 2015. WHILE THE MINIMUM WAGE INCREASE HAS DOMINATED HEADLINES, GROCERS SHOULD BE MINDFUL THAT CALIFORNIA IS NOW THE SECOND STATE TO REQUIRE PAID SICK LEAVE. Last year, Gov. Jerry Brown signed the Healthy Workplaces, Healthy Families Act of 2014. Although the law became operative on January 1, employers do not have to provide sick leave until July 1, 2015.

California’s Paid Sick Leave Requirements California’s paid sick leave law requires employers to provide eligible employees with 24 hours or three days of paid sick leave per year starting July 1, 2015 (assuming 8 -hour shifts). An eligible employee is an employee (exempt or non-exempt) who works in California for 30 or more days within a year from the date of hire.

Other than a few exceptions, the law applies regardless of whether the employee is part-time, full-time, regular or temporary, so long as the 30 -day per year requirement is satisfied. The law does not require the 30 days to be continuous.

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

As a result, part time, seasonal, and temporary employees who work sporadic schedules may satisfy the 30 -day requirement prior to the completion of a work year. For example, suppose a temporary employee works 20 days in July and then returns to work for the same employer on Dec. 1, 2015. The employee is entitled to paid sick days on the 30 th day of work, i.e., after working 10 days in December.

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Eligible employees may use sick leave upon reasonable request. They may use sick leave for diagnosis, care, or treatment of an existing health condition of, or preventive care for, an employee or an employee’s family member.

Additionally, an employee who is a victim of domestic violence, sexual assault, or stalking may use sick time under certain scenarios. See California Labor Code § 246.5(a). Employers may on their own, or as part of a collective bargaining agreement, adopt a more generous sick leave use policy so long as it satisfies the minimum requirements of the new law.

Upon termination, employers do not need to cash out an employee’s accrued, but unused, sick leave.

However, if the employer rehires the employee within a year, it must reinstate that employee’s sick leave rights.

The policy reason behind the cap and use limit is to ensure that employees will always have at least 24 hours or three days of sick leave at the beginning of every year.

Employers who rely on the same seasonal workforce each year, or who use on-call employees should keep this requirement in mind. Failure to reinstate sick leave rights can incur penalties and litigation costs.

Sick Leave Options Employers covered by the new law must decide the method they will use to provide sick leave. The law provides three options for providing sick leave that may be appropriate depending on the employer’s planning goals. Options include the accrual method, the lumpsum method or a hybrid of the accrual method.

Under the accrual method, employees accrue sick leave at a rate of no less than one hour for every 30 hours worked. Similar to accrued vacation, an employee may carry over unused accrued sick leave to the next year. Employers may cap sick leave accrual at 48 hours or six days and can limit an employee’s use of sick leave to 24 hours or three days for each year of employment.

The policy reason behind the cap and use limit is to ensure that employees will always have at least 24 hours or three days of sick leave at the beginning of every year. Sick leave policies may provide that an employee is entitled to use accrued sick days beginning no later than the 90 th day of employment.

K N O W T H E L AW

Alternatively, employers with existing paid sick leave or paid time off (PTO) policies may elect to provide sick leave pursuant to the lump-sum method. Under the lump sum method, employers can front load an employee’s sick leave at the beginning of each year.

Employers do not have to provide additional sick days if their existing policy guarantees that an employee will have at least 24 hours or three days of paid sick leave per year. Notice that an employee who works 10 -hour days could be entitled to 30 hours (three days) because the law uses the phrase “at least.”

Many employers are electing to use the lump-sum method, in order to avoid the administrative hassle of the accrual and carry over requirements.

Employers with existing paid sick leave or paid time off (PTO) policies may also elect to provide sick leave pursuant to a hybrid of the accrual method. Under the hybrid method, employers do not have to provide additional sick days if their existing policy satisfies the accrual, carry-over, and use requirements of the new law.

The cap on accrual, the cap on the number of days that can be used each year, and the list of reasons that paid sick leave may be taken are different than many existing policies and may necessitate updates to existing PTO policies.

Notably, employers using a PTO policy to satisfy the sick leave law must continue to pay out all of the PTO upon termination when sick leave is intermingled with vacation time. Further, employers must still comply with the posting, record keeping, and other requirements of the new law regardless of the option they choose to provide sick leave.

Posters, Recordkeeping and Notice Requirements

with these requirements. Grocers should start planning early to avoid such penalties.

Considerations The law raises numerous concerns about the proper implementation of the new requirements to business practices in the grocery industry. For example, the new law is ambiguous as to what constitutes a sick day for employees who work variable work shifts, e.g., three 4 -hour days followed by two 8 -hour days.

Employers with existing paid sick leave or paid time off policies should carefully review such policies in light of the new paid sick leave law.

Employers using the accrual method must also cope with an ambiguity concerning the definition of “paid sick days” and the ability to limit the use of sick days to “24 hours or three days.” For example, if an employee regularly works ten hours per day, it is unclear whether the limit is 24 hours or 30 hours (three paid sick days). Until the Labor Commissioner, courts, or administrative agencies provide additional guidance, employers should be mindful of the aforementioned ambiguities in the new law.

Conclusion Although the objectives of the new law are straightforward, the failure to properly plan for and implement its requirements can be costly to employers. Employers with existing paid sick leave or paid time off policies should carefully review such policies in light of the new paid sick leave law.

Employers must retain records showing how many hours the employee earned and used for three years.

The law prohibits retaliation or discrimination against an employee who requests or uses paid sick leave. Finally, there are penalties for failing to comply

Cassandra M. Ferrannini is a Partner and Johnny A. Colón is an Associate in the Employment Counseling & Litigation Practice at Downey Brand, LLP, in Sacramento, California.

Their practice focuses on advising employers on employment compliance and litigation defense.

By: Cassandra M. Ferrannini & Johnny A. Colón

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Human resources departments should obtain and display the necessary notices and posters. Payroll departments should revise wage statements. In light of the complex and unclear requirements of the new law, employers should consider consulting with a knowledgeable employment law attorney. n

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

Simply providing sick leave is but one of the law’s numerous requirements. Additionally, employers must display a poster on paid sick leave where employees can read it easily. They must provide written notice to employees of the company’s sick policy at the time of hire. Pay stubs must now show the number of available sick days.

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T O D AY ’ S S H O P P E R R E I G N S

BY C RA IG R OSE NB LU M

TODAY’S SHOPPER

REIGNS

RULING THE GROCERY AISLE HOW SHOPPERS’ DECISIONS ARE CHANGING THE RETAILER’S SHORT LIST FOR 2015.

There are two kinds of retailers those that clearly understand that the consumer is calling the shots; and those that soon will.

Changes in the marketplace are occurring at unprecedented rates. In fact, change has become so pervasive that many retailers are opting to “let the dust settle,” particularly in the area of eCommerce, while others are feverishly fanning the winds of change in order to gain a competitive edge.

Consider the following comments from leading retailers: Doug McMillon, President and CEO of Walmart Stores, Inc. said, “Time is the new currency. Our shoppers want convenience and we recognize that shopping in one of our supercenters isn’t always convenient. Hence, we will continue to build out Neighborhood Markets and Walmart-to-Go (smaller footprint stores).”

Rodney McMullen, Chief Executive Officer at the Kroger Company said, “Shoppers want a one-stop shopping experience. They don’t want to have to go to all of the specialty retailers to get healthy and organic products.”

Brian Cornell, Chairman and CEO at Target said, “We believe we should continue to present a meaningful

T O D AY ’ S S H O P P E R R E I G N S

food offering in our stores and on-line. Our identity in food will be a combination of national and our own and exclusive brands, with increased emphasis on natural, better-for-you products.”

Michael Silverman, Global Communications at Whole Foods said, “Our customers have wanted an affinity program for some time. With such strong existing customer demand for a program like this, we believe it will enhance existing customer loyalty and drive new customers. The rewards will be personalized based on individual preferences.”

These are just a few examples that validate the amount of power that the shopper now wields. Yes, the consumer has spoken, and catering to their wants and needs is causing retailers, in all trade classes, to update their To-Do list for the upcoming year.

The Retailer’s Short List for 2015 For many years retailers have attempted to be all things to all people. And decades ago, that approach worked as super centers proved that consumer goods and durables could be sold through a single channel and/or banner.

But shopper behavior has once again shifted and it’s causing significant confusion across all consumer goods channels. For example, limited assortment stores are enjoying rapid growth, yet eCommerce is attractive because it offers an endless aisle. So is assortment important or not?

The answer lies within the bell curve. Growth and competitive differentiation occurs in the periphery.

Competing in the middle is dangerous because you are trading market share back and forth with other middle-grounders.

TIER

DESCRIPTION Frequent, High-Value Shoppers

2

Regular, Moderate-Value Shoppers

3

Infrequent Shoppers

1. Shopper Analytics

Navigating the changing marketplace starts with shopper analytics. Traditionally, retailers have done a good job of using shopper data to increase volume.

However, new tools and data sets will be needed to take their understanding of shopper behavior to the next level.

They will need to thoroughly understand their target shoppers’ DNA in order to increase store visits and build a loyal consumer base. One of the best places to start is with the retailer’s existing loyalty card, or transaction log data, considering: n

Eighty-two percent of shoppers are more likely to shop stores offering a loyalty program

n

One loyal household equals eight uncommitted households

n

Loyal shoppers have a greater share of wallet (~10% greater)

n

Loyal shoppers, on average, make up 50 to 66 percent of total sales

Shopper analytics begins with understanding which shoppers are most important. While this can be accomplished in a number of ways, one of the most common approaches uses simple classifications and shopper segmentation as illustrated below.

SEGMENT Platinum Gold

%SHOPPERS 5 6

%SPEND 31 28

Silver Bronze

25 22

18 9

New Uncommitted Lapsing

17 14 11

6 1 7

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

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The middle is not where growth occurs; therefore, it is not sustainable. This, along with other monumental changes occurring in CPG retail, is requiring retailers to increase their understanding of shopper behaviors; which is why shopper analytics is the first item on the retailer’s short list for 2015.

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Continued on p. 36

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T O D AY ’ S S H O P P E R R E I G N S

C O N TI NU E D

Continued from p. 35

Fortunately, there are a number of ways retailers can differentiate their banners, including: formats, private label, and customer service.

Formats Retailers may have different philosophies and/or solutions, but all are striving to make their store(s) convenient by meeting shopper needs. While geography and competition play significantly in this equation, most retailers forget the most important elements are organization and change management.

Needless to say, the same traditional mindset doesn’t work in non-traditional formats. Here are examples of those who are addressing a variety of needs.

Express – These stores are smaller in design (usually 20,000 sq. ft. or less) and enable the shopper to get in and out of the store quickly.

Once segmented, retailers can extract meaningful insights that correlate store visits (patterns) with weekly spend rates. This will help retailers establish shopper recency and frequency of periods shopped.

From here retailers can determine the average or median spend per period; then segment their shoppers into bands or groups based on opportunity and share of wallet. The final step of value segmentation deals with the breadth of the store, which is determined by the number of categories shopped across the store during each visit.

From here, shopper data can be further mined to develop profiles for each store visit and for establishing price sensitivities for each respective profile. Other analytics will help in determining product and category appeal, as well as multi-channel purchases, including eCommerce.

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2. Shopper Experience

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The customer or shopper experience is so important that both Walmart and Kroger listed it as a priority in their most recent investor/analyst conferences. Both retail giants consider convenience and simplicity as critical elements that will define their shopping experience.

The importance of the shopping experience will continue to increase as eCommerce gains momentum and as price transparency becomes ubiquitous.

Small comes in many shapes and strategies such as Fresh & Easy, which provides convenience for the health conscious. Target Express and Walmart Walmart-to-Go, provide groceries, sandwiches, BBQ, a beer cave, and more.

Value – The battle for price has never been greater and value leaders such as Aldi, Save-A-Lot and Price Rite continue to thrive and expand with their limited assortment, value-based private label offerings, and limited services. The days of mistaking poor quality for value are gone.

Experience – Many retailers are focusing on shopper experience as a way to differentiate their value equation versus traditional and value competition.

While Wegman’s, Stew Leonards, and HEB Central Market have been around for some time, there are a number of new entrants focused on the in-store experience, such as Price Choppers, Market 32 and Lowes Foods with their Pixar designed stores.

Specialty – Niche players such as Fresh Thyme, Sprouts and Trader Joe’s continue to provide a unique and health conscious shopping experience that shoppers embrace, as evidenced by their consistent growth.

Private Label One of the greatest ways to differentiate the store/ banner is by providing a portfolio of private label products that cannot be purchased elsewhere. The

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days of generics and inferior product quality are behind us. The leaders are seeing private label share of sales in the low 30 percent range and growing.

In fact, some private label brands, like Kroger’s Simple Truth, have become billion dollar brands.

Retailers are now providing a complete portfolio of lower priced National Brand Equivalents (NBE) throughout the store, including meat, produce, health and beauty, and non-consumables.

The importance of the shopping experience will continue to increase as eCommerce gains momentum and as price transparency becomes ubiquitous.

Kroger and Walmart also introduced entry-level brands such as Heritage Farms, p$$t, Check This Out (Kroger), and Price First (Walmart). These entrylevel brands will help fend off competition from dollar stores.

n

3. Digital Engagement

Retailers should think of digital as the highway to personalization. However, with great power comes great responsibility. Recognizing that compared to electronics, technology, soft goods, and specialty retailers, grocery retail is late in the game, consumer expectations are high. Several leading retailers are already down the digital highway by offering the following:

n

Shopping List Shoppers expect to see their favorites, or most recently purchased items, readily available. They also expect the retailer to suggest other products they may like (similar to Amazon’s model).

n

Ads Almost all retailers put their ads online, which can segment the offers by store location, or zone. But best-in-class retailers are delivering a personalized ad that is unique to each household, based on their preferences (e.g., healthy household with more natural/organic preferences).

n

Apps Replacing Email The days of mass emailing are no longer acceptable. If emails aren’t relevant, shoppers will block access; however, that point is becoming moot as more retailers are using their specific apps as their primary communications vehicle.

However, new services are being introduced to up the customer service ante. For example: n

No Check-Out Lines Leading retailers like Kroger have incorporated technology that counts shoppers entering the store; then calculates the length of the shopper’s visit, and adjusts the number of check-out lines open to ensure shoppers never wait in-line.

n

Dieticians Given the focus on healthy eating and the variety of medical ailments (e.g., obesity/diet, gluten, diabetes, lactose intolerance, etc.), leading retailers have added this valuable member to the store staff to ensure shoppers have this personal assistant to make them more comfortable in-store.

Continued on p. 38

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Personalized Offers and Digital Coupons No longer is it acceptable for retailers to bombard the shopper with coupons in hope of getting one to stick. Shoppers expect offers to be relevant to them, and these offers should be automatically loaded into the shoppers loyalty account. In fact, Kroger’s redemption rate for personalized offers exceeds 30 percent. Similarly, their load-to-card redemption rate is three-to-five times higher than the industry average.

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n

Customer Service Most retailers, with the exception of the extreme value discounters, believe they provide superior service vs. the competition. Unfortunately, in our experience this is not truly the case. Bagging groceries, taking them to the car, full service meat and seafood, walking a shopper to a product in-store, and coffee bars have become table stakes.

Community Grocery stores are becoming more than a place to shop. Many retailers are now incorporating cooking schools/classes, meeting rooms, and large seating areas to meet more community needs and enable patrons to spend more time in their stores.

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Continued from p. 37

Craig Rosenblum presented at the 2015 CGA Independent Operators Symposium.

4. Price and Promotion

Total price transparency and showrooming are enabling shoppers to get the lowest price for their most frequently purchased items. While programs like Walmart’s Savings Catcher occur post-purchase, we expect similar programs and technologies will impact the shoppers purchasing decision in advance of, or during, the store visit.

Yet, even with price transparency, the battle for price/ value dominance continues as Amazon seeks to become the preferred retailer for groceries, household items, and pet supplies. Of course Walmart is still leading the charge with its hybrid-EDLP format and its Savings Catcher program.

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But even Walmart is at risk as the merger of Family Dollar with Dollar Tree brings new buying power to the price negotiation table. The good news is that traditional retailers can still benefit from a wellorchestrated shopper value equation by:

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Using price communication best practices to get full credit for the values being offered

n

Integrating savings strategies across all communication platforms (in-store, print, digital, social)

n

Leveraging private label (national brand equivalents and entry-level price points)

n

Optimizing weekly circulars by understanding the tradeoffs between margins and traffic

5. Omni-Channel

Winning in the year ahead will require retailers to integrate their digital strategies with their physical stores. Specifically, retailers demonstrating

the simplest, most convenient click-and-mortar configurations will leapfrog those just entering the digital marketplace. eCommerce in CPG, which is expected to increase by 60 percent in the next three years, is creating new opportunities to engage shoppers. Capitalizing on these opportunities requires a unique and integrated shopping experience comprised of the following: n

Shopping Retailers must continue to connect with shoppers in-store and online (using smart phones, tablets, computers, and kiosks).

n

Delivery Retailers must embrace home delivery and clickand-collect models.

n

Information-Based Services Shoppers, particularly Millennials, expect retailers to understand their product preferences while providing meal solutions and time-saving services such as automatic prescription refills.

For most of the consumer goods industry, 2014 was a turning point highlighted by declining unemployment and increasing consumer confidence.

The Year Ahead For most of the consumer goods industry, 2014 was a turning point highlighted by declining unemployment and increasing consumer confidence.

While this is certainly good news, it does not necessarily indicate that growth in consumer goods will exceed the rate of inflation.

However, retailers embracing new strategies and tools that help them to better understand their shoppers’ needs and wants will grow at disproportionate rates.

And those focused on shopper analytics and clickand-mortar retailing will position their banners to outperform the market for many years to come. n

W O W Y O U R C U S T O M E R S : 3 K E Y S F O R D E L I V E R I N G G R E AT C U S T O M E R S E R V I C E

BY DENNIS SNOW

Wow Your Customers 3 Keys for Delivering Great Customer Service

Thinkstock

THE TERM “CUSTOMER SERVICE” EVOKES DIFFERENT IMAGES IN PEOPLE’S MINDS. ONE IMAGE COULD BE THAT OF FRIENDLY, SMILING, HELPFUL EMPLOYEES WHO GO OUT OF THEIR WAY TO SERVE YOU. OR IT COULD BE THE OPPOSITE – INDIFFERENT, UNFRIENDLY

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EMPLOYEES WHO CAN’T WAIT FOR YOU TO LEAVE OR HANG UP THE PHONE.

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Most people can recall many examples of poor customer service. Whether it’s the help desk employee who puts you on hold for 20 minutes, or the store cashier who engages in a personal conversation instead of ringing up your purchase, poor customer service can make people feel frustrated and vow never to do business with that company again.

On the other hand, great service feels like a gift.

It makes us want to continue to do business with an organization over the long haul. That alone is the secret to business success – retaining customers by providing great customer service.

With so much competition out there, customer loyalty is the single most important attribute your business

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can have. You achieve loyalty by doing the “little things” that make customers want to deal with you again and again and recommend you to their friends.

With two out of three customers citing poor customer service as a reason for leaving, what can your company do to achieve customer loyalty?

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Several reasons exist for why customers defect from a company. The customer may move away, a competitor may lure them away, or they may leave because they are unhappy with the product.

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The real difference is how a business makes their customers feel. If customers feel valued, most will remain loyal. If they feel under-valued, sooner or later they will defect to a competitor.

However, a recent study found that a whopping 68 percent of customers who defect do so because of poor service. That’s a sobering statistic. The study further noted how customers defined poor service: “An attitude of indifference on the part of employees.” So while bad service certainly causes customers to leave, indifferent service can be just as detrimental.

Continued on p. 42

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Continued from p. 41

Dennis Snow was a featured speaker at the 2015 CGA Independent Operators Symposium.

customer’s interests. When that employee suggests a new product or service, the customer trusts that his or her best interest is at heart. On the flip side, if the customer senses a lack of caring, he/she will question the motives behind any recommendations.

Every business has its jargon, so be careful to speak in a language that customers understand. Successful businesses speak the language of the customer, not the language of their own industry.

Assuming your products and prices are competitive, you need to focus on providing superior customer service in order to gain loyalty. To do that, here are three simple steps to help you make sure your customers stay with your company.

1

Look through the “lens of the customer”

No matter what industry you’re in, chances are that you interact with customers at some level. Realize that customers can be shoppers in a store, patrons at a bank, patients of a doctor, clients of a law firm, etc. Because customers have their choice of where to obtain goods or services, the business has to convince the customer that they truly care.

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An engaged, caring employee raises the customer’s confidence that the business is looking out for the

42 iStock/Thinkstock

Take, for example, the banking industry. Would a young couple buying their first house be looking through the same lens as a customer who buys and sells real estate for a living? Of course not.

That young couple purchasing their first house is excited and nervous – that is the lens through which they are experiencing this purchase. Therefore, they need a loan officer who is excited for them, who explains the terms in everyday language, and who provides information that will make their buying experience easier. A bank that shows that level of care is likely to earn that young couple’s ongoing business.

The same applies for customer complaints, which can be frustrating for customers and employees alike. As employees, we often can’t understand why a customer is making such a big deal about a particular issue.

Didn’t the customer read the contract? (Probably not.)

Doesn’t the customer understand that researching a problem takes time? (No, they don’t.)

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Remember, it’s not the customer’s job to see through the business’s lens; it’s the business’s job to see through the customer’s lens and demonstrate an understanding of the customer’s frustration.

Employees who understand that everything speaks will take a moment to pick up some wadded paper and straighten the display because they know that such behaviors have a direct impact on the customer experience.

Next time you are working with a customer, stop and ask yourself: “Am I seeing this experience through the customer’s lens?”

2

When it comes to a company’s environment, recognize that “everything speaks” Imagine visiting a fine dining restaurant for a special occasion. You’ve been looking forward to the meal and you’ve heard good things about the restaurant.

the other hand, when customers sense an atmosphere of professionalism, care, and order, they feel a sense of confidence.

How many times have you seen employees in a business walk right by trash on the floor, or a display that has been bumped out of alignment? Employees who understand that everything speaks will take a moment to pick up some wadded paper and straighten the display because they know that such behaviors have a direct impact on the customer experience.

Take a moment to think about your company’s environment. Since everything speaks, what are the details saying about your organization?

3

Create customer “wows”

Small gestures can create customer wows. Consider the housekeepers working in the hotels at Walt Disney World. Housekeepers have a tough job. Cleaning up after people on vacation is a challenge. Even in such a challenging job, Disney’s housekeepers will do little things that make guests say, “Wow.”

Then imagine noticing something crusty dried to your silverware and old lipstick marks on your water glass. Wouldn’t you begin worrying about the cleanliness and quality of everything else in the restaurant? Everything speaks!

Now imagine a customer entering your place of business. She notices trash in the parking lot. When she enters the reception area, she sees delivery boxes stacked by the receptionist’s desk. She sees employees standing around eating and having personal conversations.

All of this detracts from your business’s image.

Consciously or unconsciously, the customer’s antennae goes up and makes them question, “Do I really want to spend my money here?”

Employees can do many things to create wows.

Remembering a customer’s name is a huge wow, creating a feeling of family. Letting a customer know that another product may better meet their needs is another wow.

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Anything that sticks out as “wrong” becomes an intrusion on the customer experience. These intrusions add up and result in customer concern. On

For example, while spending a day in the Magic Kingdom children will often leave their stuffed Disney characters in their hotel room. Housekeepers have been known to position the characters with playing cards in their hands, or tuck the characters into the children’s bed to create a moment of magic.

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The “everything speaks” philosophy means that all employees understand that even the little things count. So pay attention to everything, including whether the physical environment is neat and clean, whether all necessary supplies are available, whether the employees are dressed appropriately, etc.

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Continued on p.44

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BY DENNIS SNOW

Continued from p. 43

Take Action Now

Sending a goody basket with a handwritten note to that young couple who just took out their first mortgage is a wow. Some wows are small and some are large, but make no mistake about it – wows add up.

Excellent service is not about policy manuals.

Excellent service is about excellent behaviors. When employees focus on excellent service, the results can be magical. Customers are happy, employees are happy, and shareholders are happy. Everyone wins.

One of the most powerful ways to create wows is to share best practices with fellow employees. Hold a company meeting so employees can share things that they have done that dazzled customers. Just talking about these behaviors increases the likelihood that others will adopt some of the practices, or create new ones of their own.

It is also likely that some wows can become standard procedure, whether it’s a grocery store bakery handing out fresh-baked cookies to children, or salespeople escorting customers to a product rather than simply pointing.

The key is to make service excellence a habit.

Encourage every employee to internalize the above steps so they become habits. When employees focus on these principles, your company will achieve the most powerful result of all – intense customer loyalty. n About the author: Dennis Snow is a business author, speaker, and consultant who helps organizations develop world-class customer service. He is the author of two books, “Lessons From the Mouse: A Guide for Applying Disney World’s Secrets of Success to Your Organization, Your Career, and Your Life” (DC Press), and “Unleashing Excellence: The Complete Guide to Ultimate Customer Service.” (Wiley). Dennis can be reached at dennis@snowassociates.com, or at (407) 294-1855.

Next time you’re helping a customer, ask yourself, “Will my behaviors make this customer say or think, ‘wow’?”

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U N D E R S TA N D I N G H E A LT H A N D W E L L N E S S

BY LYNN DOR NB LASE R

“Health & wellness” is much more than it used to be.

ONCE, “HEALTHY” WAS ALL ABOUT CALORIE OR FAT RESTRICTION.

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And while that is still important, it is so much more.

Increasingly, “health & wellness” is more about “wellness,” with a stronger focus on overall wellbeing and optimizing health. And that’s good news for the grocery industry, as it allows many more things to be considered “healthy.”

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In general, consumers know they need to take care of their health, and they know, in theory, what they need to do. According to Mintel data, 93 percent of U.S. consumers say the most important factor in health and wellness is balance. However, they struggle with it. About 40 percent of consumers say they try to eat healthy, but unhealthy foods are too tempting.

Research confirms that consumers are confused and unsure about the products they buy. Mintel’s research shows that consumers overall are skeptical and worried, and therefore want to have more control over the foods they eat, and want to understand what is in what they eat. Let’s look at each of these issues, and see how companies are responding to consumer concerns.

Skepticism and Mistrust Consumers no longer trust companies as they used to, and they often distrust where products come from. As a result, they look for proof and reassurance, and we see many companies providing that.

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The chart below clearly illustrates the issue: Only 38 percent of U.S. consumers say they trust what companies write on their labels about their food products. This is troubling data indeed, as it means that whatever you say, it is quite likely that consumers are not going to believe you.

What is happening is that consumers are turning to other sources (sometimes each other) to gather information about the products they buy. Phone apps, such as Fooducate, allow consumers to scan

a product’s barcode, and receive more information about what’s inside than the brand may provide on the package. It also helps to recommend “better” choices.

To help overcome their sense of mistrust, in some areas consumers are turning back to experts to give them advice. For example, Mintel data indicates that 76 percent of U.S. consumer drug store shoppers like having their medical and drug questions answered by an in-store pharmacist. This ability to consult an expert helps to better foster reassurance.

Table 1:

“I trust what companies say on their labels about their food products”

38%

All

43% 45%

18-24 25-34

37% 34% 34% 35%

35-44 45-54 55-64 65+ 0

10

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Mintel data indicates that 76 percent of U.S. consumer drug store shoppers like having their medical and drug questions answered by an in-store pharmacist.

Control

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devices, from those that track your every move to those that do specialized testing and monitoring. We also see some companies offering easy, simple ways for consumers to keep track of their activities.

Vittel, the water brand, offered a special bottle in France for a short period of time last year. The cap had a timer integrated in it – you set the timer for a specific period (such as one hour), and at the end of that time, a flag would pop up on the top of the cap as a reminder to drink more water.

This notion of control also extends into consumers choosing products having the benefits they seek. For example, on food and drink products, 62 percent of U.S. consumers say they look for products that are

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When it comes to self-monitoring, consumers more than ever are embracing a variety of monitoring

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Although consumers are embracing consulting experts, they are increasingly seeking to be the expert, monitoring and controlling themselves and others. In CPG products, this often translates into seeking and understanding the claims products make.

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Continued on p. 48

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good or excellent sources of vitamins, fiber, and other nutrients, according to Mintel research.

About half look for low sugar, low carb, or low sodium claims, while about the same percent look

for indication of a product providing a full serving of fruits or vegetables. These needs that consumers have mirror the kinds of claims new product introductions make, as can be seen in Table 2.

Table 2:

US CPG introductions, 2009-Nov 2014, by key claim groups 15000 14000 13000 12000 11000 10000 9000 8000 7000 6000 5000 4000 3000

2009 NAtural Convenience Functional

2010

2011

Ethical & Environmental Suitable For Positioning

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The most prevalent types of claims are those that fall into the “natural” claim group, which includes All Natural, Organic, No Additives/Preservatives, and Wholegrain. The second most prevalent claim group in 2014 was Suitable For, which includes claims related to Allergen Free, Gluten Free, Kosher, and Vegetarian.

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2012

In the U.S. market, a surprising number of products bear a Kosher claim, not because there are more consumers who choose Kosher for religious or dietary reasons, but rather because more consumers feel that Kosher products are somehow more “natural” or “wholesome.”

Looking at the pattern of claims on products, it’s clear that companies have a stronger focus than previously thought for products tied to “better for you” statements. These products can have less fat, sodium,

2013 Beauty Enhancing Minus Free From

2014 Plus

calories, etc., but more likely promote the inherent goodness of what is “in” a product.

There are products on the market, globally, that address these concerns. For example, in Canada, McCain Foods offers a rising crust pizza that it says is “made from simple ingredients.” A complicated product with many components, like a pizza, must find ways to make these kinds of softer statements regarding the wholesomeness or naturalness of the formulation.

When it comes to nonfood products, these same values can be expressed in a variety of ways. The incidence of products claiming to be paraben-free continues to grow. Allergen-free claims also are popular. For example, Endust has expanded its furniture dusting products to include Endust Free Hypo-Allergenic Dusting & Cleaning Spray. It

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features a reduced-mist spray and contains lessirritating ingredients. The company claims it removes up to 92 percent more dust mite allergens than dry dusting.

Information and Understanding Ultimately, what consumers want is easy-tounderstand products they can feel good about. This often translates into the concept of clean label, and clear communication of simple ingredients.

Clean label products are those that have simple-to-understand ingredient statements, and often have a relatively small number of ingredients.

“Clean label” is a concept that is much-discussed in the CPG industry. The term is an industry one, not clearly communicated to consumers. Clean label products are those that have simple-to-understand ingredient statements, and often have a relatively small number of ingredients.

They often have no additives, preservatives, or artificial ingredients of any kind. Most clean label products we see are ones in categories that often convey healthfulness naturally (e.g. yogurt, beverages, snack bars). However, the concept of clean label has expanded to other categories.

The first product to label itself as “clean label” was a yogurt from Valio, sold in Russia. The descriptor is on front of package (in English), and the company explains that the term is “the international term for a new

principle for the production of food,” meaning that the product uses traditional ingredients and does not contain “components of artificial origin.”

Sometimes, other “shortcut” language is used to convey the benefits of clean label products. For example, Unilever sells its I Can’t Believe It’s Not Butter margarine spread in a “new simple recipe,” that the company says also contains nonGMO sourced ingredients, and 0 percent artificial preservatives. This product illustrates that “clean” and natural values can appear on all types of products.

In beauty and personal care products, “clean” can also be conveyed by the use of food ingredients. Using ingredients that consumers know from their kitchens or recipes, helps to reinforce the “naturalness” of the product they are using. We see ingredients such as yogurt (which has been in beauty products for at least a decade) to newer ingredients such as pumpkin extract, hemp seed oil, and chia seed oil.

These types of ingredients can appear in products at all price points, but in beauty products they tend to appear in prestige or upscale products first. For example, we are seeing some use of green vegetables, such as kale, spinach, and broccoli, in beauty products, but they are still in the realm of prestige products. They should expand into more mainstream products within the next year or so.

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“Clean” can also refer to environmental responsibility – offering products that do not further endanger the environment. Of course, many of these products are those that come in environmentally friendly packaging, that can be recycled or are from unexpected sources.

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Continued on p. 50

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Continued from p. 49

Method, for example, offers dish and hand soap in a product package that stands out because of its look and composition. The soap comes in an opaque gray bottle, which the company says is made from a blend of post-consumer waste and recovered ocean plastic.

Use of recovered ocean plastic is quite new, but we may see more on the market.

The Future Moving forward, for companies of all types (manufacturers, retailers, suppliers) to win the respect of consumers, they must engage in clear, simple communication. Today’s consumer demands transparency from all the companies with which they

interact. That means to communicate not only what IS in the products you offer, but also what is NOT. Keep in mind that consumers know how to double check the statements you make, which reinforces why clear and simple communication is so essential. If you don’t tell them about your product, they will find out about it another way, which may not be the message you want them to have.

Although product introductions continue to grow, and the marketplace continues to be more fragmented, and as consumers are more questioning and skeptical than ever before, it is still possible for many products on the market to succeed and thrive. n Lynn Dornblaser is Director of Innovation & Insight at Mintel Group, a global market intelligence company.

MORE NEW PRODUCTS? MAYBE

By Lynn Dornblaser

CPG product introductions, USA, by branded and private label, 2001-2014, as % of total 100 80 60 40

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Private label varies considerably by category ¬– for example, it is quite low in carbonated soft drinks, but high in household cleaning products.

Nevertheless, the increase in private label clearly shows that U.S. retailers are ever-more creative when it comes to their store brands.

One note about new product introductions: We are often asked about new product failure rates.

20 0

25 percent of all new product introductions we recorded. That is up from 10 percent in 2004.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

At Mintel, we do a number of things; one of our main areas of business is tracking new product introductions.

The U.S. market has seen ups and downs in the last 10 years, but the general trend has been increaseing over time. In fact, new product introductions in 2013 were more than tenfold the number of introductions in 1964, 50 years earlier.

Although product introductions are high – upwards of 35,000 new consumer packaged goods are introduced in the U.S. every year –

that doesn’t mean necessarily that innovation is up significantly. Rather, in recent years, we have seen more introductions that are new varieties, new packaging, and relaunches, indicating that companies are refining and updating their portfolio, perhaps instead of ramping up new product ideas.

Where we have seen significant increases in launches has been in private label. Across all CPG categories, private label introductions in 2014 accounted for about

As far as we can tell, the true number is likely unknowable – the difficulty in verifying new product failure across all product types, categories, and outlets appears to be impossible. However, the commonly discussed failure rate is normally around 85-95 percent.

In my experience, if you look at all product introductions, across all types of outlets, from all types of companies, it feels as if that number is close to being correct. What that tells us: However you measure it, most new products fail. Thus, it is essential to find an important point of differentiation in order to be successful. n

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THE BIGGEST CHALLENGE IN BRICK AND MORTAR RETAILING IS REMAINING RELEVANT TO CONSUMERS – MATCHING THE STORE TO THEIR LIFESTYLES AND CREATING AN EXPERIENCE THAT’S UNIQUE. But what does the future of retailing really look like?

“You have to always think about innovation,” said Neil Stern, senior partner, Ebeltoft USA McMillanDoolittle, who outlined its annual Global Retail Innovations and Award winners at the recent National Retail Federation annual convention. “If you’re going to succeed in the retail business today you have to lead and constantly refresh and be relevant to customers you’re trying to service.”

Turning to the mashup of online and offline retailing, Stern said there’s a lot of talk about omni- and multi-channel retailing. Yet, being a great retailer means blending that in a meaningful, functional way.

Stern, a specialist in strategic planning, new concepts and trends impacting the business, emphasized that retailers have to start thinking differently about how they interface with customers around seven key themes – customization, curated collections, experiential retailing, localization, combining online and offline tools, new retail categories and use of technology.

The idea of curation means getting the right assortment for your customers.

“In an age where everything is available on the Internet, being curated or standing for something becomes incredibly important,” said Stern.

“The more you work with stylists, the more the contents of the box are customized to you,” he said.

This is also a good example of how to build a brand online and offline.

When it comes to customization and micro manufacturing, Selfridges, the iconic United Kingdom department store took the prize for the Fragrance Lab concept at its London store.

“Customers can customize a fragrance quickly by just answering a few questions. It’s an immersive experience and customers walk away with something that’s just right for them,” said Stern.

“We all talk about experiential retailing,” he said. “But if the business is going into the world of low priced commoditization we have to create a reason for having a retail store. The store is becoming a social gathering place, an information and education center and a place to relax. It’s a place for people who are fans of the brand.”

One of the best retailers is Hedonism, a store in the Knightsbridge area of London that is what Stern called “a temple to wine and everything you could imagine about the wine experience. It’s an incredible visual journey with an incredible assortment and where even the chandeliers are made out of wine glasses. The store specializes in rare vintages in wines and spirits. But it’s not intimidating. They have great people in the store who love the products and work with customers to make them feel comfortable.”

Turning to the mashup of online and offline retailing, Stern said there’s a lot of talk about omni- and multichannel retailing. Yet, being a great retailer means blending that in a meaningful, functional way.

The award winner in this space was Argos, another retailer based in the UK. “This is the first retailer we know of that has reached the omni-channel tipping point,” he said. “Over 50 percent of the company’s sales come from customers ordering online and picking up in stores, or by ordering in stores and picking up products immediately.”

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

One example from this year’s award winners is Trunk Club USA, a try-before-you-buy concept, where online personal stylists analyze a customer’s size, style and preferences and then have a box of products delivered to their homes once a month.

“It’s the combination of virtual sales people along with physical retail stores that creates the optimal experience for customers,” he said.

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Continued on p. 54

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C O N TI NU E D

Continued from p. 53

Stern said the company operates giant catalog showroom stores that might have gone out of business 10 years ago when the Internet came along, but they were able to create a relevant business model that focuses stores on being delivery points for products.

“They brought the size of a new store down significantly and made it a virtual showroom,” he said. “When you go to the store you see about 40 different ordering stations for customers which can get products delivered to their homes using same-day or next-day delivery.”

When it comes to the idea of reinventing a category, this year’s winner was Dr. Fleming, a Milan, Italybased franchise of pharmacies and health stores.

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

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“We teamed up with Google and came up with a new concept – an interactive ordering wall that is a television that uses Near Field Communication technolog y.”

“It’s the pharmacy of the future,” said Stern, noting that the store doesn’t focus on assortment and inventory but about preventive care in health and beauty. “The focus is not so much on product as it is about customer wellness.”

Van Gelder noted that the store is engaging customers by having them tell employees about their favorite dishes, which could also become one of the meals offered in the store.

The company has abandoned traditional architectural barriers and instead has small, designated positions for different categories where customers and pharmacists meet.

“We also set up a competition asking regular customers to send us their favorite recipes,” he said.

“We’ve had three winners and the recipes are now available in the store.”

The award winner in the area of technology was Disney for its development of the MagicBand that brings all products together on a 24 -hour basis.

The stores, which employ two chefs, have branched out into catering.

“It’s making technology meaningful and relevant to the customer,” Stern said. “People get a band which enables them to pay for products in the stores, opens the doors to their hotel rooms, and enables them to make reservations for rides. This one ecosystem creates a universe for customers and tells Disney where people are in the park and what they are shopping for.”

54

“Urban people tend to have a very busy life, with little time for cooking. They have a lot of options for getting meals and we try to give them some inspiration,” said Leopold. “They can find everything they need for a recipe on one table, with recipe cards that explain step-by-step how to prepare the dishes. The stores also have an area for lunch and breakfast customers. This area enhances the experience of shopping the store and it’s good for revenues since we are mainly focused on dinner and this brings in people all day long.”

The top retail award winner of the year is Bilder & De Clercq, an Amsterdam-based food store that answers the consumer question – “What are we going to do for dinner tonight?”

Outlining the concept at the meeting were company co-founders Rogier Leopold and Diederik van Gelder.

The store contains 14 different tables. Each table has the ingredients for preparing a particular meal and the selection is changed every week.

“People kept asking if we could prepare meals for them,” said Leopold. “So last summer we began catering parties. It’s becoming more important and a nice billboard for the stores.”

Although the in-store food experience is essential, this year Bilder & De Clercq will focus on technology, said van Gelder.

“We are going to the customers and the businesses they work for,” he said. “We teamed up with Google and came up with a new concept – an interactive ordering wall that is a television that uses Near Field Communication technology.”

The wall shows the store’s 14 dishes. When a customer has made a choice, they touch their phone against the dish pictured and the dish appears on their phone. The ingredients are then delivered to their homes or place of business in Amsterdam by that afternoon. It takes the hassle out of supermarket shopping, he said. n

COMPANY

PHONE

FAX

EMAIL

WEBSITE

5

al fresco all natural (Kayem Foods)

800-426-6100

617-889-5478

chris.reisner@kayem.com

www.alfrescoallnatural.com

IFC

Anheuser-Busch InBev

909-597-0460

909-597-0460

raul.aguilar@anheuser-busch.com

www.anheuser-busch.com

11

Braga Fresh Family Farms

831-678-3835

sales@bragafresh.com

www.bragafresh.com

23

Bristol Farms

310-233-4700

310-233-4701

29

C&S Wholesale Grocers, Inc.

916-373-4396

916-373-4296

pmiller@cswg.com

www.cswg.com

25

Coca-Cola Refreshments

213-746-5555

213-744-8765

mikanderson@coca-cola.com

www.cokecce.com

32

Gelson’s Markets

818-906-5709

818-990-7877

17

International Dairy Deli Bakery Association

608-310-5000

608-238-6330

iddba@iddba.org

www.iddba.org

33

Natural Products Expo West

866-458-4935

303-939-9559

tradeshows@newhope.com

www.expowest.com

IBC

Nestle Purina PetCare

800-421-1721 x9/314-982-4876

314-982-2860

paul.cooke@purina.nestle.com

www.purina.com

39

Pepsi Beverages Company – WBU

949-330-5804

949-643-5765

douglas.todd@pepsico.com

www.pepsi.com

45

Safeway Inc.

925-467-3000

925-467-3323

15

San Miguel Produce

805-488-6461

805-986-4814

sales@cutnclean.com

www.sanmiguelproduce.com

BC

Unified Grocers, Inc.

323-264-5200

323-729-6619

customercare@unifiedgrocers.com

www.unifiedgrocers.com

www.bristolfarms.com

www.gelsons.com

A DVE RTIS E R INDEX

PAGE

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FINAL THOUGHT

Earn The Right To Stay Open Stores as we knew them are over! Retailers have to earn the right to stay open.

LE N LE W IS

Bold statements. Not so much signaling the demise of brick and mortar stores, but rather a call for retailers to rethink what they should be in order to survive the onslaught of online retailing and the new consumer.

One solution, but by no means the only one is BOPIS – buy-online-pickup-in-store. A study

by WD Partners found that 64 percent of consumers who purchased items online opted for in-store pickup.

This was the gist of comments by Lee Peterson, executive vice president of brand strategy and design for WD Partners, at a recent National Retail Federation conference in New York City.

And why not? No taxes, no delivery charges and greater convenience, all of which are extremely attractive to younger shoppers.

Although Peterson was directing his comments largely at retailers like Sears, JCPenney, RadioShack, Target, et al, supermarkets too must learn new survival skills to compete in today’s new retailing world.

Consumers now carry stores on their phones and buy from anywhere without leaving their own space.

Back when Amazon was just an online bookseller, success meant opening a lot of similar looking stores stuffed with merchandise. People packed up the kids, drove to the store, found a parking space, unloaded the kids, shopped the aisles, got through checkout, packed up the car and drove home. Customers fulfilled orders.

Retailers of every stripe have to compete with fulfillment centers like Amazon, Walmart and maybe even Alibaba, the Amazon of China, that’s expanding at a rapid pace. This is the essence of modern retailing and one that requires a significant change in thinking.

That’s once-upon-a-time retailing. Consumers now carry stores on their phones and buy from anywhere without leaving their own space.

As such, retail sales are increasing, but footfall is declining.

This places the burden of fulfillment squarely on the retailer. And staying relevant means filling orders differently than in the past.

The first question is how to handle the fact that consumers don’t have to go to your stores.

Walmart is testing the “black box”, in-store lockers where customers can pick up online orders. The same has been done by Amazon at places like 7-Eleven and Staples.

Additionally, “click-and-collect” can be curbside pickup, or a kiosk in the parking lot as Tesco has done in the UK. The only no-no is putting BOPIS at the back of the store in hopes of selling customers something else. It doesn’t work and just angers the consumer.

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

The future of retailing seems to be shaping up as twofold – part fulfillment center and part social playground where customers can interact with products, store associates and meet their neighbors in a place that creates an emotional experience.

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The bottom line – create a retail experience that they can’t get online. n

56 iStock/Thinkstock

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