CAGrocer 2015 issue 5

In

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suhis e

CALIFORNIA GROCERS ASSOCIATION

More Fresh

Less Sugar Navigating Disruption

The State

of the

GOP

For the latest industry news visit www.cagrocers.com

2015, ISSUE 5

A Bit More

UPBEET

Braga Fresh Family Farms knows organics. After farming for three generations, with nearly 20 years leading the industry in organic production, we put our grandmother’s name on our Josie’s Organics line of fresh vegetables to demonstrate our ongoing commitment to her high standards—and yours.

www.bragafresh.com

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

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.

Phil Miller C & S Wholesale Grocers

Naresh Solanki Bestway/Gardena Supermarkets

Teresa Anaya Northgate Gonzalez Markets

Dick Gong G & G Supermarket, Inc.

Hee-Sook Nelson Gelson’s Markets

Joe Angulo El Super (Bodega Latina)

Robin Graf Whole Foods Market

Keith Olscamp Campbell Soup Company

Rich Arnold Oberto Brands

Rickey Hamacher Bimbo Bakeries, USA

Kelly Augustin United Markets, Inc.

Arthur D. Jackson, Jr. Costco Wholesale

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

Jennifer Bosma Harvest Market

Michel LeClerc North State Grocery Inc.

Bob Bukovec Tyson Foods, Inc.

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

Mike Stamper Nestlé Sales Division Kim Stokes Unilever Dirk Stump Stump’s Markets John Swindell Food 4 Less/Foods Co.

Bob Richardson The Clorox Company

Doug Todd PepsiCo Inc.

Mike Ridenour Kraft Foods Group

Jim Van Gorkom NuCal Foods

Casey Rodacker Mar-Val Food Stores, Inc.

Kevin Young Young’s Payless Market IGA

Dean Ryan Tops Fresh Market

CONTENTS

F E AT U R ES

COLU M NS

Irrelevant, Relevant, or in the Midst of a Revival?

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Nationally, Republicans enjoy a legitimate edge – currently leading both houses of Congress and poised to be competitive in the 2016 presidential race. In California, however, the tables are decidedly different.

Navigating the Disruption

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Old habits need to be laid to rest if retailers and suppliers expect to succeed in the face of major industry disruption, says the director of retail insights for one of the nation’s leading research and consulting firms.

More Fresh, Less Sugar Are Driving Choices

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CA GROWN IS GROWING

C O N T I N U ED

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President’s Message The Complexities of California’s Cap and Trade Program........................................4 From The Chair Explore California’s Culture of Food.......................6 Viewpoint—Kevin Coupe Hunger Games....................................................10 California Politics The Unintended Consequences of Power to the People............................................ 24

Fresh foods and beverages are included at more meals now compared to a decade ago. But the consumer segments responsible for driving the increase may come as a surprise.

Capitol Insider The California Legislature’s Changing Culture..... 28

The Farmers Market Trend in Grocery

Know the Law.....................................................14

DEPA RT M EN TS

The incorporation of farmers market sensibilities into the modern grocery store is a return to our food roots – part of a larger zeitgeist that values transparency, simplicity and responsibility in commerce.

15 Minutes With.................................................18

What’s the Deal?

Advertiser Index .................................................88

CGA News..........................................................22 Washington Report...................................... 30, 32

For most organizations, attracting, retaining and engaging critical talent is often cited as a top concern that keeps many a business leader up at night.

CA GROWN Is Growing

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New research, new partnerships, new members and a new consumer campaign is reinvigorating a much-loved buy local marketing program that centers around a well-known blue and gold license plate.

CALIFORNIA GROCERS ASSOCIATION President/CEO Ronald Fong

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

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

For association members, subscription is included in membership dues.

Subscription rate for non-members is $100 and does not include CGA Buyers’ Guide. © 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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California Grocer is the official publication of the California Grocers Association.

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

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

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

Executive Director, CGA Educational Foundation Shiloh London

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PRESIDENT’S MESSAGE

The Complexities of California’s Cap and Trade Program RO N ALD F ONG President/CEO

CGA President Ron Fong continues his review of key State legislative and regulatory issues and the impact – in “plain English” – that they have on your business. This month: the Global Warming Solutions Act. In 2006 the California legislature enacted Assembly Bill (AB) 32 the Global Warming Solutions Act, a comprehensive state mandate to reduce greenhouse gas emissions (GHG). Under AB 32, the California Air Resources Board (CARB) was required to develop various regulations and market mechanisms to reduce GHG emissions to 1990 levels by the year 2020.

The main funding mechanism for AB 32 is the market-based cap and trade emission auction.

Under this program the state sets a limit on the amount of greenhouse gases a business can emit, and reduces that amount each year. While this may be a laudable environmental goal, the business community by and large is directly on the hook for funding AB 32 reforms.

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The program covers primarily energy and petroleum producers in California, but will roll out to include suppliers of natural gas, pulp and paper manufacturing, glass production facilities and others—all the while generating billions of dollars in revenue for the state.

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The actual cap and trade auction is not what you might imagine. There is not an auction house jammed with traders nor are there phones ringing incessantly. Rather, the auction is held on-line, lasting three hours. Using what’s known as a sealed bid technique, bids are placed from companies across the country while state officials monitor the auction. Regulators acknowledge that there is a shroud of secrecy surrounding the auction and that secrecy is needed to maintain the auction’s integrity.

There are various ways companies can stay under the cap. Companies are able to purchase permits to emit GHG’s through the auction, modify operations to use energy more efficiently or pay for what are called “offsets” which allows

companies to go over the cap as long as they are investing in an environmentally beneficial project somewhere—even out of state. The offset system was put in place to allow companies sufficient time to modify their operations to adhere to the increasingly strict goals outlined in AB 32.

Cap and trade is hailed by some as the most advance eco-economic policies in the nation yet this “unique” way of attacking climate change has not caught on in other states as the proponents claimed it would. Proponents of a cap and trade program envisioned that this market-based system would quickly be adopted in other states but thus far not a single one has enacted legislation on par with these California specific mandates.

Moreover, there is some ambiguity about the legality of the program. Although the auction is public, revenues raised from the auction are (in part) placed in a newly established state fund used for state projects such as the controversial high-speed rail project—among other renewable projects. The California Chamber of Commerce contends that AB 32 violates Proposition 26 which states that all new taxes must be passed by a 2/3 majority of the legislature. AB 32 was passed by the legislature with a simple majority vote. Thus far, the state has survived its first legal challenge.

Cal Chamber’s legal appeal is currently pending.

Capital investment costs for manufacturers will continue to rise as the state continues to require lower and lower GHG emissions levels. So what does this mean for the grocery industry? In short, the price of goods will continue to rise.

Grocery companies will have to make their own independent business decisions on how to combat price increases, but it stands to reason that increased costs will have to be passed on to the consumer in order to remain profitable. n

FROM THE CHAIR

Explore California’s Culture of Food

J OE FALV E Y CGA Chair of the Board Executive Vice President Unified Grocers, Inc. President, Market Centre

Palm Springs is filled with beautiful golf courses, El Paseo upscale stores, senior citizen tap dance shows and most importantly the CGA Strategic Conference. The combination of our high-energy educational programming and business meetings with relaxed social events, cultivates an environment for genuine discussion and quality time with people in this unique food industry.

This year’s CGA Strategic Conference focus is California’s Culture of Food. What does that really mean? Is it just another cliché we often banter

customers’ wants and values. In addition, it’s not only the people themselves, but also the way they live their lives. Time, convenience, local or organic,

about, similar to labels such to those used to describe generational, ethnic and socio-economic groups – Baby Boomers and Millennials, Asian and Hispanic, wealthy and poor?

and health and wellness, all shape what’s placed in their shopping cart.

The lines are blurred between groups and food choices. Asians are not the only people eating sushi and kimchi. Seniors are ordering their groceries online. Digital natives living the high tech life reside in the city and walk to the corner store with all the other city dwellers that are blended together from different ethnic, cultural, generational and economic ingredients.

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As an industry, we all have unique cultures we must cater to. At Market Centre, we are constantly challenged with providing for these environments through a variety of retail formats and consumer profiles. For example, the needs of Mollie Stone’s Markets in downtown San Francisco are quite different than those of Vallarta Supermarkets in Whittier.

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Although many retailers provide products specifically targeted to one group, it is becoming more obvious that there is a crossing over of cultures seeking many of the same types of foods. As an example, customers from all groups consume sriracha sauce. Sushi, tortillas and almond milk are products sought in every neighborhood as well. Consequently, we in the food business must educate ourselves to the blending needs of our customers.

Our size, both geographically and demographically, cannot be overlooked in having a huge impact on the rest of the nation.

Trends are created here through the blending of

The speakers at this year’s Conference “Whiteboard Sessions” address many of these topics and therefore your customers, your employees and your success. Doug Scholz, who oversees the conference for CGA, has brilliantly pulled together professionals to speak about eating trends and center store, competing with restaurants, grocery personalization, inspiration from farmers markets and employment engagement and retail success. The facts and ideas presented will provide all of us with tools to adopt and share with our companies.

A true illustration of how blended our society has become occurred during a recent vacation with my wife Dolly to several national parks in a 39-foot recreational vehicle. We shopped at everything from a ShopKo-type chain to various truck stops along our journey. While shopping we met people from all parts of the country with varying backgrounds, expecting to find products to fit their comfort level. We found familiar products and discovered new and interesting items as well along the way. It was fun to see how each grocery store reflects the personality of the area, as well as a willingness to venture beyond familiar borders.

The culture of food is influenced by our customers, societal changes and current events.

In turn, our customers are influenced by the foods available on the shelves. Therefore, it is imperative that we in the industry keep up with the changing faces and behaviors of our society. n

CATEGORYISGROWTH EVERY DAY.

Trusted iconic brands and

EXPERT CATEGORY MANAGEMENT deliver sustainable growth.* Another way we’re committed to creating shared success every day.

The Hershey Company is proud to support the California Grocers Association.

SUCCESS IS AN EVERYDAY THING.

*Source: Nielsen, 12/2012-12/2014

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Leading the World in Essentials for a Better Life

Kimberly-Clark and its well-known global brands are an indispensable part of life for people in more than 175 countries. Every day, nearly a quarter of the world’s population trust K-C’s brands and the solutions they provide to enhance their health, hygiene and well-being. With brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex, and Depend, Kimberly-Clark holds the No. 1 or No. 2 share position in more than 80 countries.

速

Select the Best

FRESH Since 1918, C&S Wholesale Grocers has provided independent retailers with the freshest local products at the best prices. We continue that tradition through longterm partnerships with the best local California companies, including Ratto Bros., Premier Mushroom Farms, Ocean Mist Farm, and Simoni and Massoni Corn.

Ratto Bros.

Premier Mushroom Farms

Family-owned since its founding in 1905, Ratto Bros. provides herbs, greens, fruit, and vegetables from its Modesto, CA farm.

Currently selling over 70 unique items, they have been a member of the California certified organics since 2002.

At their state-of-the-art facility in Colusa, CA, Premier operates 64 climate-controlled growing rooms for white and brown mushrooms. The compost, grow, process, pack, and ship from on facility, giving them greater consistency and control over quality.

Ocean Mist Farm

Simoni and Massoni Corn

The largest artichoke growers in the Castroville area, Ocean Mist is considered top label by many in the industry for wet vegetable items such as broccoli, cauliflower, celery, and iceberg lettuce.

Established in 1969 in Byron, CA, Simoni and Massoni Corn is sought after across the nation.

Producers of the famous "Diamonds" Brentwood corn, they are considered one of the premier growers of corn in the state.

Come see us in Business Conference Suite O to learn more about how C&S Wholesale Grocers can help you succeed in Fresh!

Eric Pearlman, Dir of West Coast Independent Sales

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1.916.373.4286

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www.cswg.com

VIEWPOINT

Hunger Games KEV IN C OU P E

It made me very happy when I saw that the theme of this month’s issue — and CGA’s Strategic Conference — was “California’s Culture of Food.”

It is a subject to which the food industry actually pays too little attention.

Here’s a test.

Walk to the center of your store. Close your eyes. (You can close your eyes first and then walk if you want, but that might be a little more dangerous.)

Now smell. Does it smell like a food store?

Now open your eyes. Look around. Do you see anything that sparks your gastronomic imagination?

Finally, here’s the big question.

Does your store make you feel hungry?

I remember years ago writing a short piece about a company that specialized in “developing scents aimed at keeping customers inside businesses longer, giving them more time to spend money.”

They were coming up with all sorts of exotic scents, with names like “Lotus Flower” and “Enchanted Apple,” designed to enhance the shopping experience. Probably cost a pretty penny to do business with them, too.

I have my own theory about the kinds of scents that will get people to stay in the store longer and spend more money. They have names that are a lot more familiar and less exotic, and I don’t think it would cost that much to put them to work for you.

Here they are.

Chocolate chip cookie. Apple pie. Fresh baked bread. Bacon. Cajun seafood. Garlic.

I’ve been writing about food retailing for more than 30 years, and I think it is fair to say that the majority of foods stores that I’ve visited during that time have not cultivated what I would call a robust food culture within their companies — they simply don’t play the hunger game.

Often this is because companies have decided that they aren’t really in the food business, or that food is somehow incidental to their business. They’re so busy focusing on price, or transaction size, or sourcing that they are, in essence, in the business of selling boxes and bottles and cartons and jars and bags. But not food. Not really.

Years ago, I remember visiting with Shelley Broader, then the CEO of Hannaford-owned Sweetbay Supermarkets in Florida. She had redesigned the company’s employee application form so that every person looking for a job had to answer some very important questions: What is your favorite food? What six items are always in your refrigerator? What’s your favorite restaurant?

If the answer to this last question is McDonald’s, she told me, that person would not be hired.

Shelley used to say that she could teach a person how to be an effective retailer, but it was almost impossible to teach them to love food if they didn’t walk in the door with that inclination.

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

(To be fair, Sweetbay was not Hannaford’s crowning achievement... and the division was sold several years after Shelley left. But it wasn’t her fault... it was damaged goods when Hannaford bought it, and she did the best she could with what she had. These days, Shelley is at the upper echelons at Walmart, which says a

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Maybe it’s just me, but I got hungry just writing those 12 words. Imagine what would happen if I walked into your store and smelled any of those things.

iStock

VIEWPOINT

lot to me about that company’s ability to improve its food culture, if it so chooses.)

By the way... these days it seems like fewer and fewer people would be likely to say that McDonald’s is their favorite restaurant... and even those who would swear allegiance to the fast food experience might be more likely to talk about Chipotle. Why? In part, I think, is because Chipotle has a stronger food culture, and more than ever, Americans are responding to that. But I digress...

It made me very happy when I saw that the theme of this month’s issue — and CGA’s Strategic Conference — was “California’s Culture of Food.” It is a subject to which the food industry actually pays too little attention, I think ... even though we live in a world that in some ways seems obsessed with the subject.

There’s the Food Network, a seemingly endless supply of food travel and cooking shows, and a dizzying array of cookbooks and cooking magazines.

But in supermarkets... not so much. Or at least not nearly enough.

The thing is, when most people walk into a supermarket, they have food on their minds... if not exactly food on the brain (which is what I have, being one of those people who generally spends part of lunch thinking about what I’m going to have for dinner). So you’ve got a head start... and through savvy and persistent marketing, merchandising and sampling, you can get people to try new things, which more often than not will result in incremental sales.

While I’ve been doing this a long time, I can remember vividly some of the great meals I’ve eaten or purchased in supermarkets. I once was visiting a Lunds store in St. Paul, Minn., where I ate a sandwich made with smoked turkey, Jarlsberg cheese, a slice or two of bacon, topped with cranberry mayonnaise and served warm on toasted thick cinnamon bread.

Yum.

Yum, yum, yum.

I’ve always believed that the world can be divided up into two groups — people who eat to live, and people who live to eat. (Clearly, I’m in the latter category.) But even people who do not share my enthusiasms are susceptible to an enticing aroma or an eye-catching display.

In my summer job as an adjunct faculty member at Portland State University in Ore., one of the things I ask my students to do each summer is to write me a simple essay to begin the semester: Tell me about your most memorable meal.

The reason for this is that it is a great way to loosen them up and get them connected to the notion that food marketing is different, because many or most people relate to food differently. Everybody has a most memorable meal. (I bet you know exactly what yours was, where it was, who you were with, and why it was memorable.)

Since I started with a test, let me end with another one … except that this test is one you can give your prospective and existing employees.

Ask them what their most memorable meal was, and then get them thinking about the notion that your store has the privilege and responsibility of serving or selling the components of most memorable meals every single day.

Turn your store into a different kind of hunger game — a place where people on both sides of the counter celebrate food and connect with each other differently because of it.

A place where the minute you walk in, one thought immediately occurs to you: Yum. n

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Yum, yum.

Just recently, I had this amazing marionberry Greek yogurt sold from a service case in a Zupan’s store in Portland, Ore., and it also was in Portland that I became totally enamored with the ahi poke sold at the Whole Foods Market in the Pearl District.

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

There was another sandwich I ate in a Ben & Bill’s deli in the Price Chopper store in Saratoga Springs, NY, stacked high with warm, melt-in-your-mouth corned beef and pastrami, served on thick homemade rye bread with mustard, and with an “old pickle” and store-made potato chips on the side.

Years ago, I had some of the best red-beans-and-rice of my life at a Rouse’s supermarket just outside New Orleans. There was this extraordinarily tasty grilled tuna sandwich I ate at a Dorothy Lane Market in Ohio. I still remember a hot dog I ate at a (now closed) store called Amarraca, outside Pittsburgh, in 1985.

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KN O W T HE L AW

Mergers and Acquisitions in the Grocery World ISSUES TO CONSIDER WHEN BUYING OR SELLING When considering buying or selling a business, the parties almost always consider the business terms first.

Does the deal make fiscal sense? Will I make money buying or selling? What are the profits and losses, operating history and income, or value of assets?

While these business terms will dictate whether or not a deal should go forward, many buyers and sellers fail to recognize the legal and tax issues that can have drastic impacts on the business deal and its eventual success or failure. And, the earlier that these legal and tax issues are considered, the greater the chances for success, both for the deal and the operation afterwards.

Across all different types of businesses, deals will have a number of common legal and tax considerations beyond the business terms; namely deal structure, types and condition of assets, and contracts, licenses and approvals. But, a few types of businesses combine not only the common general considerations, but highly unique issues and circumstances as well, and retail grocery stores are among them.

Buying or selling a retail grocery store (or a number of them) requires knowledge of common acquisition issues together with an understanding of the specific and critical items that are unique to the industry.

Getting Started: Do Your Due Diligence!

Every purchase, whether a retail grocery store or other business, should begin with a thorough investigation of the business, its finances and operations and its assets.

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Business and Financial Records: Audited or reviewed financial statements are always a great place to start. These contain a wealth of information on the business, its past practices and potential liabilities and issues.

But, remember that financial statements that are prepared internally could be inaccurate; the safest financials to review are prepared by a certified public accountant that audits or

reviews the books of the company, and cleans up incorrect entries. Additionally, it’s critical to review the organizational documents and, at a certain point, the tax returns and books and records used to prepare the financial statements.

If anything looks awry here, it’s not a good sign of things to come. n

Condition of Assets and Liens: A physical inspection of the assets and business will begin to tell the story of how the business was run, how maintenance was performed and whether there will be any potential capital outlays after the deal closes; but, a comprehensive lien search (and title report if owned real property is involved) will give you the rest of the picture.

What assets are owned outright? What are the liens and who are the lienholders? Are there capital leases? Is there consignment inventory?

A lien search starts to clarify the answers to these important questions.

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Contracts: Every business relies (or should rely!) on written contracts for its operations. For a grocery store, the major ones will likely be leases (real property and equipment), and vendor and supplier contracts. There should be effectively written contracts in place that spell out the parties’ rights clearly, with hopefully no active or likely defaults under any of them!

Every purchase, whether a retail grocery store or other business, should begin with a thorough investigation of the business, its finances and operations and its assets.

General Considerations: Work Through Your Structure and Its Implications!

Once there’s a general sense of the business and the shape that it’s in, the parties can really start discussing structure. Although, there are a number of ways to structure a deal, each being appropriate

K N O W T H E L AW

under different circumstances and each having drastically different tax implications, most grocery transactions are structured as either a stock purchase or an asset purchase.

the creditors of the seller. Additional liabilities, taxes and other amounts due to governmental authorities may remain with the business or assets. None of these should be a surprise after a closing, so it’s critical to understand these liabilities, amounts due or past due and when they remain payable by a successor upfront.

A stock purchase allows a buyer to walk into the business as is. The buyer becomes the new owner of the entity that operates the business and, through the entity, inherits all of the assets and liabilities (whether known or unknown, truly ALL liabilities in the business) of the seller. An asset purchase allows a buyer to pick and choose the assets that it wants to purchase and the liabilities that it wants to assume.

For a retail business, especially one with a variety of inventory and asset, an asset purchase generally allows the parties to craft a specific deal for certain assets, contracts or lines of business without overly complicating the structure.

Depending on your role in the transaction, a stock sale or asset sale (or any other structure) will have significantly different impacts on the parties.

Depending on your role in the transaction, a stock sale or asset sale (or any other structure) will have significantly different impacts on the parties.

Generally, a stock purchase is more beneficial to the seller as they are taxed at capital gains rates and a buyer is unable to further depreciate assets. On the other hand, an asset purchase penalizes the seller as they pay tax (generally at ordinary income rates) on the profit on each asset (remember that depreciation reduces your basis), and a buyer takes a basis in the assets in the amount they paid and can then depreciate them.

iStock n

Contracts. Many contracts will require notice to or consent of the other party if the business is sold, otherwise the other party to the contract may be able to terminate. If the contract is an important part of the deal, like a lease, supply or vendor contract, make sure that any notice/ consent requirements are strictly complied with.

Also, if the contract is not part of the deal, make sure that is clear and that the seller takes care of properly terminating it.

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Licensing. The permits and licenses needed to conduct the business, including business licenses, environmental and health permits, liquor licenses, pharmacy licenses, PACA licenses, WIC and SNAP licenses may not all transfer to the new owner.

It is important to understand the required

Grocery Specific Considerations: [Know Your Business and Think About What’s Important]

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Regulated Assets. Some types of inventory are heavily regulated and require special procedures or precautions to transfer. Liquor, pharmacy stock and patient profiles and information all require specific handling.

Continued on p. 16

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Bulk Sales Law and Successor Liability. If a large portion of the assets are sold, there are notice requirements and other items that must be met or the buyer may get stuck being liable to

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Once you’re generally comfortable with the business and have decided on a structure, it’s time to dig into the details for grocery stores that can have significant impacts.

licenses, whether they are transferrable and how they transfer, and how long the process will take to transfer a license or obtain a new one at the relevant location.

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K N O W T H E L AW

Continued from p. 15 n

Employee and Union Issues. Buyers should be mindful of how they intend to address existing employees and, in January 2016, the implications of AB 359, which will affect those decisions and be addressed in more detail in a separate article in California Grocer. If employees are terminated, the parties may also need to comply with requirements to notify the employees of terminations or they can be held liable for amounts due under federal or state law.

Also, how will the parties handle benefit and welfare plans or accrued PTO or vacation time?

Depending on the size of the business, these can be significant liabilities. And, if the business being acquired has a union, or employs people that belong to a union, there will be implications related to the collective bargaining agreement.

Purchasing a business obviously requires careful consideration of numerous factors, and those factors are often dependent on many variables. This article

is meant to provide a cursory overview of some key issues to consider, and is not a comprehensive list of all of the important considerations a party should contemplate when selling or acquiring a business. Although some transactions may seem too small to justify engaging an attorney experienced in negotiating and documenting commercial transactions, doing so will always allow a party to better protect its interests while at the same time provide a more comprehensive understanding of the transaction and potential issues. Moreover, the initial investment in an attorney may save a purchaser tens (even hundreds) of thousands of dollars in taxes, fines or litigation expenses in the future. n Brian Pick is a partner and Brian Schusterman is counsel in the Corporate, M&A and Finance group of Downey Brand LLP. Both practice primarily in the areas of business organizations, mergers and acquisitions and finance and commercial transactions.

Legal and Regulatory Counsel to Retail Grocers and Suppliers

Dale A. Stern

Outside general counsel to CGA

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Retail Practice Group

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Joseph G. De Angelis John C. McCarron Leila C. Bruderer

downeybrand.com

Business Contracts • Proposition 65 Hazardous Waste Handling & Environmental Compliance Food Safety • Trespassing • Employment Worker Retention Ordinance Compliance Proposition 2 • Advertising Claims WIC, SNAP & ABC Compliance Mergers & Acquisitions Business & Real Estate Litigation

advancing your interests Sacramento I San Francisco I Silicon Valley | Stockton I Reno 916.444.1000

15 MIN UT ES WIT H…

15 MINUTES WITH…

Doug Rauch, President Daily Table DOUG RAUCH, FORMER PRESIDENT OF TRADER JOE’S, HAS ALWAYS APPROACHED BUSINESS WITH A COMBINATION OF PASSION AND PURPOSE. Nowhere is this more evident than at the Daily Table, a nonprofit supermarket in the economically-challenged Dorchester neighborhood of Boston, that sells produce, grocery and other items donated by growers, manufacturers, supermarkets and wholesalers which are either past their prime, nearing their expiration date or cosmetically imperfect. And there’s a large instore kitchen for preparing healthy, ready-to-go meals Is this the answer to the country’s massive food waste and way to put people on a path to healthy eating?

Maybe! Next stop – California? Why not?

CG: When did you come up with the idea for the Daily Table?

Rauch: “When I graduated from Trader Joe’s I had a fellowship at Harvard’s Advanced Leadership Initiative. They asked me if I had the run of the college how I would tackle some major social ills.

“One was that up to 40 percent of the food we grow is never consumed and going to waste.

If wasted food were its own country in the world it would be the third largest generator of greenhouse gases behind the U.S. and China.”

But we’re not talking about food waste?

“No. That does a disservice to the food industry.

That’s for sanitation and composters to deal with.

The product wasted is wholesome, healthy food that’s going to waste. The idea is to use a problem to solve a second problem.”

How so?

And that’s the basis for Daily Table?

“Exactly. It’s an environment people choose because it delivers great tasting, affordable and healthy food.”

Why Boston?

“It’s home to world class medical education. We have nutritionists from the Harvard School of Public Health, Children’s Hospital. Eleven different groups and agencies helped us with nutrition guidelines. We look at this as a health care initiative masquerading as a retail store – a way to turn the tables on dietary-based epidemics like obesity, diabetes and heart disease.”

How long did it take to get your project off the ground?

“About three and a half years.”

How many people said it wouldn’t work?

“Lots of them – because it had never been done.

I’m a big fan of innovation for social challenges.

You can’t just keep doing the same thing and hope for better results.”

Maybe being a non-profit has something to do with the skepticism?

“As a non-profit we are attempting to break even outside of the cap-ex costs. We want to operate without the need for annual infusions of charitable dollars. Then the concept becomes easily scalable.”

How many suppliers are you getting products from?

“Hard to say. There are a lot fewer retailer suppliers. No one wants us to sell their label for a huge discount when they’re right down the street.

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“Partly. Another challenge facing hunger relief agencies is dignity and self-respect. Many people

So it’s what mainstream supermarkets are doing?

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

“Well, hunger in America is not like anywhere in the world. Obesity is the face of hunger in America. Most people who are food insecure are not struggling with a shortage of calories, but with a shortage of nutrients. The solution is affordable nutrition.”

don’t use food banks and pantries because they feel it’s demeaning.

“The idea is to have a non-profit that’s run like a retail store where people can choose products and you’ve got to earn their patronage.“

Continued on p. 20

19

15 MINUTES WITH…

Continued from p. 19

So we work with suppliers like Stonyfield, Cedars, Hain Celestial and other local manufacturers and wholesalers.”

“I love retail but at this point I’m fully engaged. We may fall flat on our face but we’re going to give it our best shot.”

How does it work?

“A company like Cedars, for example, can’t ship products to grocery stores with less than 30 days code. But to us 30 days is an eternity. So, I’m telling your readers, if they’ve got product with enough shelf life to go cross-country, or plants on the East Coast, we should talk.”

How big is the store?

“It’s 10,000 square feet. About 4,000 square feet is retail space and half of it is really a commercial kitchen. We learned in focus groups that no one has time to cook, particularly in economically challenged areas. They want grab-and-go meals.”

Everything at prices that don’t break the bank?

“Right. We’ll have organic avocados at two for $1, bananas for 29 cents per pound and fresh apples at 40 cents a pound. A one-pound tray of chicken and brown rice is $1.49 and meat dishes are from 1.99 to 2.99.”

Are you concerned about supply issues?

“Only every day. I count on the law of large numbers to save us. One supplier may only have something once every three months. But there are a lot of companies with products that aren’t selling. We’re also counting on the goodwill of the industry.”

What’s your transport situation?

“We have a refrigerated truck that makes pickups across New England. Some companies drop product off at the store. We just try to be nimble.

We’re not a 40,000 square foot supermarket.”

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

What about legal issues?

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“Under Bill Clinton, the Good Samaritan Act protects nonprofits. Also, we haven’t sold any expired foods, but I hope we will after getting the community’s trust. The Boston Health Department is one of the toughest in the nation and they’ve banned the sale of expired food even though state law allows it. However, we are working with them to set up scientific protocols

that will give them confidence that this food is healthy and safe.”

It might be educational for retailers, too?

“It’s surprising how many people in the food industry don’t know that, aside from baby formula, expiration dates are not federally regulated and the sell-by date is a peak quality, not a safety issue.”

You’re looking for a second site in Boston?

“Yes. But it’s a tight market and costs are prohibitive. We are also looking at where we go next. California is a main contender.”

Could you develop a coast-to-coast supplier network?

“We could but it takes time. It’s the same as private label was at Trader Joe’s in the 1970s.

There were only a few stores and it was hard to get some products if you didn’t have volume.”

Do you ever thing about getting back into mainstream retail?

“I love retail but at this point I’m fully engaged.

We may fall flat on our face but we’re going to give it our best shot.”

If you weren’t doing what you doing now. What job would you like the most?

“That’s a tough one. I wouldn’t mind being a lifeguard in Hawaii. On the other hand the real joy in life comes from doing things that are meaningful, by engaging in something larger than yourself.”

How about an ocean view Daily Table in Honolulu?

“That would be sweet.” n

C GA N EWS

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

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CALIFORNIA POLITICS

The Unintended Consequences of Power to the People C GA GOV E R N M EN T R E LATION S D EP T.

The year is 1911. The first public elevator is put into use. The planet is about to experience its first world war. And California changes course forever. The stranglehold of the legislature and the governor as exclusive lawmakers for the state is broken with the passage of Initiative and Referendum.

In that year the people of California gained the ability to both pass and remove state laws. Once given the opportunity for direct democracy, Californians quickly used and, some say abused, their new power.

Initiative is the power of the Californians to propose state laws and amendments to the state constitution. Essentially, any concept or policy can be brought before the voters of California and, if successful, become the law of the land.

The power of Referendum allows for the approval or rejection of existing laws, or just parts of laws, by vote of the people. Referendum is basically the inverse of Initiative. Instead of proposing new laws, Referendum allows for their repeal. With either effort the actions of the Legislature and Governor can be trumped by the people – creating new levels of accountability to the voters.

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

This new-found power came at a time when accountability was in short supply. For most of California’s early history the government was bought and paid for by wealthy business owners, most notably the railroad industry.

24

The movement to secure Initiative and Referendum is firmly rooted in breaking the undue influence of special interests and it was successful, at least for a time. Within just a few years these new-found powers were being used to subvert and antagonize the Legislature.

One of the unintended consequences of Initiative, especially in modern times, is that anyone with an impassioned idea and enough resources can change California dramatically.

Both the Governor and Legislature have taken notice of this power, as well. Many times

during policy negotiations well-heeled advocates threaten to take the decision to the voters if they don’t get their way in the Capitol.

This new-found power came at a time when accountability was in short supply.

One of the more recent versions of this tactic is the effort to raise the minimum wage. It was no secret that labor interests, lobbying for a bill to increase the minimum wage in 2015, were simultaneously submitting an initiative for the 2016 ballot, calling for an even greater wage increase. Working both a legislative and an initiative strategy simultaneously is a clear sign to state elected officials that advocates will not be denied a victory. With the legislative effort failing in the capitol, California voters can now expect to be asked the question at the polls next year.

With the ability to completely bypass the Legislature you would think nearly every special interest would just simply submit their desires through Initiative and bypass the Legislature and Governor on most issues. Looking at the process to qualify and pass an initiative sheds light on the likely success of an initiative.

In a state like California, with its vast size, diverse electorate and an erratic zeitgeist, the best indicator of success is how much money can be raised either for or against a measure.

Convincing a majority of voters in a state of 38 million is difficult and can only be made easier by spending tens of millions of dollars.

Continued on p. 26

CALIFORNIA POLITICS

Continued from p. 24

Qualifying an initiative for the ballot can be broken down into three simple sounding steps. The first step is putting the idea on paper. This is where you essentially write the law you propose and some are better at it than others. The challenge here is that almost anything can be submitted.

One of the more interesting efforts recently called for California to be split into six separate states. Needless to say it did not get very far, with the potential for drastic impacts far beyond California. It is important to recognize that this is where many will actually find value in the legislative process.

A bill introduced in the state Legislature must be reviewed by a committee and the full body of both the Assembly and Senate and signed by the Governor to become law. While frustrating on many occasions the legislative process allows for a full public review which most times results in a better piece of law than when it started.

When filing an initiative it only takes a few thousand dollars for a filing fee and a cursory review by the Attorney General. Any mistakes, errors, or regrettable decisions can only be fixed by another initiative, so the stakes are high, but the bar is set low.

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

The second step is gathering signatures to qualify.

Currently, 365,000 registered voters signatures are required to qualify an initiative for the ballot. The thought process is that if you can’t get at least some folks to agree to place your idea on the ballot, the state shouldn’t waste time asking everyone to vote on it.

26

This is also the point where the costs of running an initiative increases considerably. The cost to prepare an initiative and achieve the needed signatures carries between $3-5 million. This price tag, just to make it on the ballot, is too high for most. But, if the advocates behind the idea, whether they are business, labor or environmentalists, have the money it can be well worth it.

The third step, which is the hardest, is convincing just over 50 percent of voters in an election that your idea is worthwhile. If you thought gathering signatures was expensive, the sticker shock of spending $30 million to $80 million in a campaign will likely turn you away.

In a state as large and politically diverse as California, getting enough people to agree to a single idea is

not only difficult, but sometimes impossible. It should also be recognized that repealing a state law through Referendum is equally as expensive, with the only advantage being you are tearing down an idea. An Initiative is arguably harder to pass since you are trying to convince voters an idea is worthwhile.

As the 2016 General Election creeps closer, dozens of Initiatives and Referendums are lining up to be voted on. There are currently initiatives slated to allow for recreational marijuana use and several to raise the minimum wage to $15 per hour.

California reformers in the early 1900s fought for Initiative and Referendum powers in order to break the undue influence the power of business had over state laws.

However, most important to the grocery industry will be the Referendum on SB 270 which is the statewide carryout bag bill passed in 2014. A large East Coast plastic bag manufacturer spent millions of dollars to qualify the Referendum soon after the bill was signed by the Governor. In November of 2016, voters will be asked to either vote “Yes” to keep the state law, or “No” to remove it. It will be interesting to see if the opposition spend tens of millions of dollars to see it passed.

California reformers in the early 1900s fought for Initiative and Referendum powers in order to break the undue influence the power of business had over state laws. Their gift to us was having a voice and vote greater than the Legislature and Governor.

However, over a century later it still seems a single business, or anyone else, can spend tremendous amounts of money to get their way in California.

Many ask if the state is better off having Initiative and Referendum at anyone’s disposal.

It is difficult to say no, but when a narrowly focused advocate, or non-Californian business, abuse the power it does provide pause. n

CAPITOL INSIDER

The California Legislature’s Changing Culture Kangaroos, medical marijuana and climate change – oh my! The end of a legislative session is always an interesting spectacle and this year didn’t disappoint.

L O UIE B R OW N Partner in the Sacramento office of Kahn, Soares and Conway, LLP.

While the story line of the 2015 legislative session will be focused on the rise of the moderate democrat, I believe more attention should be placed on the changing culture of the California Legislature as a result of the change in term limits.

The Governor set the stage for the session in his State of the State address where he made climate change the issue. He called for an intensified focus on climate change, which included an increase in the renewable portfolio standard (RPS), an increase in building energy efficiency and a goal to decrease the state’s consumption of petroleum fuel.

These goals were introduced in the Legislature by Senate Pro Tem Kevin de Leon (D-Los Angeles) in SB 350. He also called for an extension of AB 32, the bill that established California as a leader in the effort to reduce greenhouse gas emissions.

When the final gavel fell after midnight on September 12, SB 350 was on its way to the Governor, achieving two of its three main goals.

Earlier in the week, the Governor, Speaker and Pro Tem held a press conference to announce they would be deleting the language in the bill to reduce California’s reliance on fossil fuels.

The democrats who opposed or abstained from voting on the bill included more than the business friendly moderate caucus.

Rather than focus on the elements remaining in SB 350, increased RPS to 50 percent and an increased requirement in building efficiency, both of which will continue to lead the nation, the Governor and Legislative leadership focused on the defeat handed them by the oil industry and moderate democrats in the Assembly who refused to support the bill.

We will never know if this defeat was truly a moderate democrat-led effort or one where legislators from all backgrounds were truly concerned about the impacts on their districts, because the bill was amended before any vote was taken in the Assembly.

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

The decision to amend prior to a vote may have been forced after SB 32, the bill to extend AB 32, was soundly defeated on the Assembly Floor earlier in the week. The democrats who opposed or abstained from voting on the bill included more than the business friendly moderate caucus.

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The push back on SB 32 and SB 350 included a number of freshman legislators who are not interested in providing unfettered discretion to administrative agencies. These members, due to the new term limit rules, have the possibility of serving for 12 years in one house, which provides

28 iStock

Continued on p. 31

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WASHIN GT O N R EP O RT

YOUR FEDERAL ELECTED OFFICIALS RETURNED TO WASHINGTON AND A FULL LEGISLATIVE AGENDA AFTER LABOR DAY AND A MUCH-NEEDED MONTH AT HOME IN THE REAL WORLD. THERE ARE A NUMBER OF ISSUES THAT IMPACT YOUR BUSINESSES THAT WE WANTED TO MAKE SURE YOU HAVE ON YOUR RADAR. Upon their return to Washington, the Senate immediately took on the Iran Nuclear Agreement, which is certain to again heighten tensions between the President and Senate Republicans and even some Senate Democrats who feel like they were left out of the negotiation process.

Once again, we are three quarters of the way through the tax year and we still do not have a resolution on which of the various tax extenders Congress will allow to exist in 2015, much less 2016. Along a similar track, Congress and particularly Ways and Means Chairman Paul Ryan, have been focused on trying to get some part of comprehensive tax reform over the finish line and if that sounds like an oxymoron, it should. The focus is on international tax reform, which may be a snoozer to some folks only operating domestically, but we can’t snooze for fear of finding ourselves the victim of being used as a “pay-for” with no accompanying tax win in areas such as the elimination of LIFO accounting.

We are also urging the Senate to follow the House’s lead and pass legislation requiring the FDA and USDA to establish a federal labeling program for non-genetically engineered products that would provide consistency, preempt state/municipal regulations, and avoid confusion for customers. We are working through the challenges in Vermont of trying to comply with a law that would require multiple SKUs for the same product in five states by June. The complexities will be tenfold if another state creates yet another different program.

We also are nearing the end of the authorization of the Child Nutrition Act (September 30), which authorizes the WIC program and the school lunch program. While we are no longer expecting any comprehensive reworking of the program, we are hoping to get some improvements in licensing.

Anyone who has gone through the process for WIC (and for SNAP) will know how much can be improved in this area.

And it may seem like Groundhog Day that we still do not see a clear path forward to funding the federal government when the current FY2015 funding expires on September 30 th. Speaker Boehner in particular has said there will be no government shutdown, but an agreement will have to be reached among enough of the factions to reach a majority, which could prove to be challenging particularly given the limited time for negotiating.

We are hopeful that the Senate will follow the House’s lead in eliminating country of origin labeling (COOL) for meat to avoid significant penalizing tariffs from some of our best trading partners. Canada and Mexico charged that the COOL rules were an unfair trade barrier, and the WTO agreed in a recent decision.

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

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

The Washington End of the Year Sprint Began in September

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WA S H I N G T O N R E P O R T

We are working through the challenges in Vermont of trying to comply with a law that would require multiple SKUs for the same product in five states by June.

Given FDA’s lack of responsiveness and lack of understanding with treating a supermarket like a fast-food joint under “menu labeling” regulations, we are going to have to press the Administration and Congress to resolve many problematic and confusing aspects that FDA continues to leave inadequately addressed. I use quotation marks as anyone who has attempted compliance with this rule knows the challenges are not those standardized items listed on a menu or menu board, but those truly fresh items, like cut-fruit and salad bar items that originate from other departments of the store, that are not the problem that Congress intended to address. The

restaurant association pushed to get these items included to benefit their chains with formulaic items and to penalize food retailers like ours by regulating away anything that is made in-store or customized to a neighborhood.

Revisions to the Affordable Care Act, such as the definition of a full time worker, changing auto enrollment and revising some of the paperwork requirements are all pieces of legislation with bipartisan support, but so far, need greater urgency from Congress.

This is by no means the end of what we think Congress needs to get done legislatively and does not begin to touch the overactive regulatory activity we are facing and expecting to grow as the Obama Administration’s term winds down.

Let the End of Year Legislative sprint begin! n

The California Legislature’s Changing Culture (continued) Continued from p. 28

them the opportunity to see laws take effect and conduct oversight.

Many of the members opposing SB 32 and components of SB 350 sought amendments seeking to limit the authority of the California Air Resources Board (ARB) and provide the Legislature more say in their future programs and proposals. Rather than negotiate such limitations, SB 350 was amended to delete the reduction in transportation fuel, which would have been overseen by the ARB and SB 32 was left until next year.

If by chance you are concerned about the lack of achievement of climate change (which would be slightly crazy because SB 350 will continue to place California on the forefront of climate change action), you can feel comforted that a variety of other top of the fold issues were addressed in the last two weeks.

Namely, the import of products made from kangaroo skin will be prohibited as of January 1 and medical marijuana, which is still prohibited by federal law, will be officially regulated by the Bureau of Medical Marijuana Regulations (BMMR). Oh the joys of the end of session! n

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These legislators are more interested in legislative oversight and limitations on the regulatory authority of unelected administrative bodies. The unfortunate result of the prior term limit rules was legislation drafted with little specificity and significant latitude to those

While the moderate democratic caucus surely played a significant role in stopping many bad bills and amending a lost list of others, I believe the new class of legislators are also beginning to appreciate their role as not only the branch of government that write the laws, but also the one with some responsibility for oversight and accountability.

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

To many in the Capitol representing business interests this is a great sign and what we had hoped would happen when the voters approved a change in term limits. Legislators know they have the opportunity to serve up to 12 years in one house – allowing them the time to oversee laws they will author.

responsible for implementation. Interpretation was left to regulators and little to no oversight occurred unless affected stakeholders chose to take the issue to court.

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WASHIN GT O N R EP O RT

Data Breach: It’s Not “If,” but “When” WE’VE ALL HEARD THE WARNING, “IT’S NOT ABOUT IF A DATA BREACH WILL HAPPEN, BUT WHEN,” AND WHILE DATA BREACHES GRABBED HEADLINES LATE LAST YEAR – A YEAR THAT WAS DUBBED “THE YEAR OF THE BREACH,” DATA SECURITY INCIDENTS CAN HAPPEN TO BUSINESSES OF ALL SIZES, FROM ALL INDUSTRIES. Cyber attacks and breaches have a huge impact on both consumers and business owners.

include any changes in a company’s duty to report a breach to government agencies.

Sixty percent of small businesses that suffer a breach go out of business within six months, and although that number is staggering, most consumers might be surprised to learn that data breaches occur more often in the financial services industry (13%), than the retail industry (8%), according to a 2015 Verizon Data Breach Investigations Report.

The National Grocers Association believes the following fundamental principles will strike the right balance to form the foundation of effective data security and data breach notification legislation.

Despite the bad headlines, there are reasons to be encouraged that the goal of data security can indeed become reality.

Second, protecting consumer information and payment data must be a shared responsibility among all those entities in the payments ecosystem, including merchants, banks and credit card issuers.

Companies are investing in additional resources to find solutions and are going to great lengths to provide a more secure shopping experience for their customers. This energy, in turn, is fueling innovation to counter the complex strategies of hackers.

But, cybercriminals are becoming increasingly sophisticated and innovative solutions alone won’t solve the problem; we need federal legislative solutions aimed at protecting consumers and stopping cybercriminals.

Third, retailers who suffer a breach should be provided with multiple avenues to provide notices to consumers.

Lastly, new chip and personal identification number (PIN) technology, which, according to the U.S. Federal Reserve, makes transactions 700 percent more secure than the current signature method, should be implemented.

The use of personal identification number and chipenabled credit and debit cards has been successful in Europe and Canada during their shift to Europay, Mastercard, and Visa (EMV) payment standards.

Protecting consumers’ personal and financial information – and ultimately maintaining the integrity of a customer’s trust – is of utmost importance to community-focused, independent supermarket operators.

We look forward to working with Congress to move legislation that establishes uniform national data security and breach notification standards for stakeholders in the payments ecosystem. n

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

Peter J. Larkin President and CEO, National Grocers Association

While cybersecurity is expected to be addressed

by Congress this year, it is likely that any proposed legislation will only tackle the issue of inter-company information sharing, and at the time of this writing, remains unclear whether such legislation would

First, we need a strong national data security and breach notification standard that strongly preempts the current patchwork of state laws.

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I R R E L E V A N T, R E L E V A N T, O R I N T H E M I D S T O F A R E V I V A L ?

BY C ASSANDR A WALK E R P Y E

Irrelevant,

Relevant,

— or —

in the midst of a

Revival?

I R R E L E V A N T, R E L E V A N T, O R I N T H E M I D S T O F A R E V I V A L ?

SHORTLY AFTER HIS ELECTION TO THE POST OF CHAIRMAN FOR THE CALIFORNIA REPUBLICAN PARTY (CRP), FORMER CALIFORNIA STATE SENATOR JIM BRULTE ENGAGED CGA PRESIDENT RON FONG IN A CONVERSATION WHICH, ULTIMATELY, LED TO A REQUEST FOR FINANCIAL SUPPORT FOR THE CRP. FONG RECALLS THAT HE PUSHED BACK ON HIS OLD FRIEND, REMINDING BRULTE THAT NEITHER ASSEMBLY NOR SENATE REPUBLICANS HAD PICKED UP SEATS IN RECENT ELECTIONS AND SUGGESTING THAT IT WOULD BE DIFFICULT TO MAKE THE CASE TO HIS MEMBERS. “THEN, THE CHAIRMAN-ELECT DID SOMETHING I DON’T THINK I’LL EVER FORGET,” FONG SAYS. “HE PROMISED ME THAT IF HE DIDN’T PICK UP A SEAT OR TWO IN EACH HOUSE, HE WOULDN’T ASK AGAIN.” THE TWO MEN SEALED THE PROMISE WITH A HANDSHAKE. Nationally, Republicans enjoy a legitimate edge – currently leading both houses of Congress and poised to be competitive in the 2016 race for the Presidency. In California, however, the tables are decidedly different. Democrats hold all seven statewide executive offices, control both houses of the State Legislature and – when it really matters – can generate both financial and grassroots support for their candidates and caucuses by way of their greatest ally: organized labor.

That said, Chairman Brulte kept his word: Republicans picked up six seats – four in the Assembly, two in the Senate – in the 2014 election.

And, for the first time in 20 years, Republicans defeated three incumbent legislative Democrats.

What happened? More importantly, how? And, most importantly: could it happen again?

Observers said the CRP had suffered, for several election cycles, from a failure to modernize its “thinking” and a failure to modernize operationally.

Shortly after his election, Chairman Brulte persuaded Cynthia Bryant, a veteran policy player in the Capitol, to help him rebuild the party from the foundation, up.

Bryant says discipline, data hygiene and little things like having a personnel manual – have all made a huge difference.

“If we were all hit by a bus, someone could come in and understand what’s in our database,” she says.

GOP Headquarters in Burbank, Calif., another “symbol of disrepair” in Bryant’s words, was sold for $2 .2 million; the CRP’s permanent headquarters is now located in Sacramento, for the first time in the organization’s history.

“It makes so much sense to be here,” says Bryant.

“It’s so much easier to know what’s going on in the Capitol and to support our Legislative partners.”

The headquarters building will be open to staff in early 2016.

2014: an Anomaly?

Shawnda Westly, senior strategist for the California Democratic Party (CDP), says that while she admires her GOP counterpart and calls Chairman Brulte agreat electoral tactician, she does not believe the CRP is relevant anymore.

“They’re leading a party that’s out of touch with Californians,” she states. “Unless the CRP specifically address issues in its platform that deal with what

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Going in, it wasn’t a pretty sight.

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

“I took the [COO] job because Senator Brulte is a very convincing person,” she admits. “At the time he was about to become Chairman, I took a look at the environment and thought I was the right person at the right time. If the Party was going to be relevant again, I wanted to be a part of it.”

“We were a million dollars in debt, we had no infrastructure and we had voter files with eight million pieces of data – only two million of which were any good,” she recalls. “Fast-forward to 2014, where we had 72 million pieces of good data.”

Continued on p. 38

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I R R E L E V A N T, R E L E V A N T, O R I N T H E M I D S T O F A R E V I V A L ?

C O N TI NU E D

Continued from p. 37

mainstream Californians believe in, Republicans are never going to be relevant in California.”

She calls 2014 an anomaly because Democratic turnout was suppressed. In fact, California was one of three large states in 2014 where less than one-third of eligible voters turned out to vote.

Westly believes that even no-partypreference (NPP) voters – a category of voters which continues to expand – will vote largely with Democrats in 2016.

“Our voters stayed home,” Westly confirms, insisting that when voters turn out in strong numbers in California, Democrats win. “Republicans are going to have to hold onto a larger group of their incumbents and won’t have the resources to do so, next cycle.”

Westly believes that even no-party-preference (NPP) voters – a category of voters which continues to expand – will vote largely with Democrats in 2016, citing issues like choice, immigration reform, climate change and marriage equality where NPP voters are in sync with Democrats “seventy-five to 80 percent of the time,” she adds.

Those voters, Westly says, will be an integral part of the CDP’s 2016 electoral strategy. That, plus a presidential election which will turn out Democratic voters – from mainstreamers to activists.

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

Two Veteran Viewpoints

38

Carla Marinucci, veteran political reporter and blogger for the San Francisco Chronicle, says California Republicans may be missing an opportunity to forge coalitions among multiple segments of voters – Millennials, small business owners, women, Asians and Latinos – by talking about issues which resonate with each of those subsets of the electorate.

“At this point, with a 14 -point gap in voter registration and no real serious candidates for U.S. Senate or for governor, Republicans have lost the stage on a lot of issues,” she suggests. But all, she says, is not lost.

Marinucci says it appears that organized labor is “overplaying its hand” and cites at least one legislative race, recently won by business interests, where labor “…didn’t understand – in fact, ignored completely – voters’ views of public employee unions.”

She believes the right Republican candidate, aggressively recruiting women candidates, striking the right tone with voters on the right issues can win races – particularly with the current party Chair.

“Brulte has kept his eyes on the prize,” she says.

“They spent money on races they could win – they knew the Governor’s race wasn’t winnable in 2014 – and they’re focused on rebuilding the party from the ground up.” Positive news?

No, says another veteran pundit, Tony Quinn, a former Republican strategist and co-editor of the California Target Book (a nonpartisan analysis of legislative and congressional elections).

He says there no longer exists a two-party system in California. It’s a hybrid, one-party system, he states.

“Even when they hold one-third of the seats of the Legislature, Republicans still don’t know how to negotiate,” he asserts. “They still get their chains pulled by ‘outside people’ like [conservative Republican blogger John] Fleishman and they haven’t figured out how to take advantage of the handful of moderates in the Caucus elected in the 2014 top-two primaries.”

Like Marinucci, Quinn suggests that opportunities do exist for California Republicans to talk to average voters about things that matter to them.

“Our poverty rate is outrageously high in this state; higher than the national average and higher than it’s been for dozens of years,” he says. “Yet, Republicans seem to be incapable of telling average people that the Democrats aren’t doing anything for them.”

Then, there is also the matter of a leadership void at the top-of-ticket, which could, he says, be used to capture voter interest.

“There are no longer ‘Reagan-like’ visionaries, no statewide officeholders; thus, the state Party is stuck being wagged by the national dog,” says Quinn, adding that Republicans used to have a pretty Continued on p. 40

I R R E L E V A N T, R E L E V A N T, O R I N T H E M I D S T O F A R E V I V A L ?

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Continued from p. 38

positive outlook and could talk about things they did to put people to work.

“National Republicans have no interest in talking about infrastructure, no job creation policy,” he says.

“There’s nothing to trickle down here.”

And, says Quinn, California’s Republican officeholders have no real way to garner attention and, therefore, no way to rally voters.

“No one in the media respects them so, as a result, they never get covered,” Quinn complains. He calls Assembly Republican Leader Olsen “one of their better leaders” but adds, “…in a state of 38 million people, no one knows who she is. They know who Donald Trump is but there’s no one currently at the state level to rally around.”

Kristin Olsen – many say – could, eventually, become one such leader. Youthful, a seasoned communicator and, by all accounts, a decisive leader, Olsen made headlines when she replaced two veteran policy experts with “fresh blood” and boosted the communications staff by eight at the start of her term.

Her chief of staff, Jim Richardson, says, “You can’t launch an exchange of ideas if you’re not able to communicate.” The Caucus combined its policy and fiscal units, making the operation more efficient and established a “21st Century communications operation with personnel who look like real Californians” – including a full-time Latino press deputy and a lead for outreach in Asian communities, according to Richardson.

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Assemblywoman Olsen says Caucus operations had been stagnant for more than 20 years.

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“Any business – any healthy organization – has to go through a continued refinement,” she asserts.

“Our operation needed to be aligned with our strategic goals, so we undertook a fundamental overhaul. Much of that effort was focused on building a robust communications team so we could get our message out.”

Olsen says change is never easy, but critical.

“We’ve taken tips from a variety of industries – from our innovation economies to longtime, main street business like grocery stores – and it’s been rewarding,” she says.

Olsen claims Republicans did really well in 2014 because they focused on policy and politics.

“I believe Californians are tired of the status quo – schools worst in the nation, diminishing economic opportunities and a water situation leaving our families and industries without getting the basics covered,” she says. “This has all happened under a Democratic majority.”

Like Marinucci, Quinn suggests that there does exist opportunities for California Republicans to talk to average voters about things that matter to them.

According to Olsen, her party recruited candidates who reflect the communities in which they serve and demonstrated that they are “…real people: moms, dads, workers, business owners.” She says they can do so again in upcoming elections.

She does, however, foresee challenges in 2016.

“Our national leaders and candidates do have a tendency to set the tone and stage for Republicans around the country,” Olsen says. “I do believe California Republicans can have an influence within our own sphere, however.”

She says using a tone that’s inclusive and not divisive is incumbent.

“We’ve got to acknowledge mistakes of the past and demonstrate our willingness to lead for solutions for all Californians,” she states. She takes issue with Shawnda Westly’s contention that the CRP is out-ofstep with voters on key issues.

“We have a pretty strong message: water, education and economic opportunity,” Olsen says. “In those three areas, we have to expose to voters where and how Democrats have failed them and where Republicans have ideas that work.”

Olsen also cites resources as a factor for success in 2016. “We have to raise money in all parts of the state because we will be outspent – and we’re up against endless resources from unions.”

Cynthia Bryant says there are traps Republicans will have to take care to avoid during a presidential year.

Continued on p. 42

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I R R E L E V A N T, R E L E V A N T, O R I N T H E M I D S T O F A R E V I V A L ?

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Continued from p. 40

“One of the things we learned last time is that it’s critical to have our candidates focus on issues that matter to constituents in their districts,” she says.

Bryant suggests that it’s also a safe bet that Democrats will have a hard time recreating the level of excitement they did in the 2008 presidential race.

“If we stay focused on our districts and on what’s going on in those districts, our candidates can rise above the clutter of the presidential race,” says Bryant.

The CDPs’ Westly says the Republican Party used to be able to count on Democrats staying at home, on their issues resonating with voters and could count on voters in the Inland Empire and the Central Valley to show up and vote, without pause.

CGA’s Ron Fong says that, regardless of the projected landscape, the business community cannot afford to give up on California Republicans. He suggests the next real window of opportunity for pursuing Republican seats is likely to be in 2018. While gaining the majority in either or both houses of the Legislature poses an uphill battle for Republicans, he believes businesses have no choice but to engage.

“If we stay focused on our districts and on what’s going on in those districts, our candidates can rise above the clutter of the presidential race.”

“We can now speak to voters in those areas,” she suggests. “The voters in those communities now look to us for solutions. We have the same set of mainstream values as they do.”

“The cry to our members will be to continue supporting Republicans and asking our Democratic leaders in the Senate and Assembly to help us elect more moderates,” he suggests. “That’s the only way the business community survives.”

Bryant says Republicans are far more relevant now than they were two years ago.

CRP Operations Chief Cynthia Bryant warns that a one-party state is bad for business and for taxpayers.

“We’re going into this cycle so much stronger: out of debt, good staff, money in the bank – not as much as the Democrats – and we’re working well with our national partners and caucuses. We really are in a position to help Republicans get elected at all levels of government,” she says.

“One-party rule is not a good thing in the Legislature,” she says, warning that if the Democrats ever obtain that two-thirds majority again, the state will see record spending.

“They’ll still want more,” Bryant says. “They can’t restrain themselves.”

Bryant says Republicans are and remain relevant because theirs are often the only voices that cry foul to tax increases and legislation that harms business.

“You’ve got to have someone inside to play defense.

Democratic lawmakers are beholden to public and private unions, with little regard for real people,” she maintains.

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The Chronicle’s Marinucci is similarly optimistic.

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“They can pull this back,” she believes. “It will take eight years, but I don’t think it’s an impossible dream. The Republicans should start with independent voters – and take a good look at them.” n iStock

Editor’s Note: As we went to press, Assembly Republicans elected Assemblyman Chad Mayes to the position of Caucus Leader. He and Assemblywoman Olsen will work together on a four-month transition; he will officially assume the post in January.

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N AV I G AT I N G T H E D I S R U P T I O N

BY LEN LE W IS

Na igating the

Disruption

THERE’S A SAYING THAT “OLD HABITS DIE HARD.” IT’S CERTAINLY THE CASE IN RETAIL WITH OPERATIONS, FORMATS, PRODUCTS AND PROMOTIONS THAT HAVE BEEN THE NORM FOR DECADES AND JUST REFUSE TO DIE.

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But old habits need to be laid to rest once and for all if retailers and suppliers expect to succeed in the face of major industry disruption, said Mike Paglia, director of retail insights for Kantar Retail, one of the nation’s leading research and consulting firms.

“They are also incorporating digital into their purchasing decision – often before going to the store,” he explains. “They also have different expectations about the features and benefits of food whether it’s gluten-free products, vegan or non-GMO.”

“There’s a whole array of disruptors out there within and outside the supermarket industry that need to be watched,” he said. “Within the industry, we have the continuing growth of online grocery, which is really shaking up the way everyone does business – whether it’s home delivery or click and collect models.”

However, this doesn’t mean that traditional supermarkets are dead in the water, unless, like A&P that went bankrupt this year, they are unwilling to adapt. He noted that other companies like Kroger, Publix and HEB are doing a great job adapting to change.

On top of that, Paglia said, there are third party platforms like InstaCart throwing its weight around.

“Frankly, all the disruption in the market is forcing retailers to elevate their capabilities in business and on new ways to connect with shoppers,” he said.

Additionally, the growing prevalence of Amazon is not to be ignored, particularly around center store products sold through Amazon Prime and other programs.

“Essentially, this takes items off the shopping list that consumers would have gone to a store to purchase – things like paper towels or a 50 -pound bag of dog food,” said Paglia.

At the same time, another potential disruptor is Walmart’s Neighborhood Market concept.

“Make no mistake,” Paglia warns, “this is a supermarket format that’s got the clout, efficiency and buying power of Walmart behind it. And all the signs point to heavy investment in this format.”

Outside of the supermarket channel is where disruptions really gets interesting, according to Paglia, emphasizing that the focus on consumer demographics is more important than ever.

“It’s all about specific shoppers,” he said. “There’s enormous disruption in terms of income and generational polarization. We are seeing Millennials entering the family formation stages, but doing so in a different way than baby boomers, which, by the way, are still a target demographic for retailers and suppliers.

“But, Publix saw the writing on the wall and knew they would have to accept technology if they wanted to maintain relevance with shoppers. It has given them enormous insight into segmenting stores, assortments and promotions,” he said.

Paglia added that, Publix is being very purposeful and cautious in how it rolls things out, adding it is adamant about putting shoppers at the center of everything it does.

HEB already knows its shoppers very well.

“What makes them a disruptor is a willingness to operate outside their comfort zone,” Paglia said.

“You can see it in their diverse portfolio of stores – everything from the foodie-based Central Market to the Joe V Smart Shop, a discount operation that was modeled after Aldi.”

Kroger has really been the uncontested champion of the industry for some time by taking the long view of the industry and using its long-term relationship with Dunnhumby to revolutionize U.S. retailing.

“The chain made deliberate efforts over the years to tie Dunnhumby data into all their strategic decisions,” Continued on p. 46

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Asked about key demographic differences, Paglia said Millennials are buying smaller homes and are either not having children, having fewer children or having children later than their predecessors.

“This may seem to be a small step, but it was a watershed moment for Publix,” he said. “This is a company that has traditionally been very averse to incorporating technology into its overall value proposition.

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“The longer we continue to think of shoppers as an homogenous group, the greater the liability becomes,” he added.

Publix, which has a bit of a reputation for being slow to accept change, according to Paglia, has launched a digital coupon program.

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Continued from p. 45

Paglia said. “Now, they are ramping up their digital and online capabilities to accentuate their leadership.”

According to Paglia, there’s a tendency (in business) to look at things quarter by quarter and making the numbers and it’s the same view taken by Wall Street.

But these chains are okay with investments that may take an extended amount of time to yield returns.

Most companies don’t have that kind of patience.

“It’s easier to respond to a short-term threat than to invest in a long-term opportunity,” he said. “People are slowly starting to realize that the short-term view of growth isn’t as fruitful as it used to be.”

Looking outside the industry, he said, the industry should continue to monitor Amazon.

“They’re disrupting the entire retail industry,” he warned. “It’s reminiscent of what Walmart did several decades ago when many people dismissed the chain’s approach to efficiency and productivity.”

Now, Paglia said, it’s Amazon that’s disrupting things like assortment, fulfillment and shopper engagement.

However, Amazon is at a point where it has to decide whether it wants to be a tech company, or a retailer.

Turning to other disruptive channels of trade, Paglia noted that dollar stores remain the fastest growing class of brick and mortar trade in consumables that Kantar tracks.

“We expect them to grow 6.6 percent annually between now and 2020,” he said.

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On the other end of the discount spectrum are the warehouse clubs whose growth has been tracking in excess of 5 percent annually. Over the next five years, this segment will grow faster than the entire marketplace, he noted.

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“Both segments are business models that don’t play by the same rules in terms of demand for standardization of case packs and mass distribution that conventional retailers and suppliers have been playing by for decades,” Paglia said.

According to Paglia, dollar stores want small pack sizes that some suppliers aren’t set up to produce in their current facilities. Conversely, the clubs want totally unique items that no one else carries and, given the current infrastructure, can be costly to produce.

Mike Paglia is a presenter at this year’s CGA Strategic Conference in Palm Springs.

“Both were the beneficiaries of the great recession and that’s when they began to shine,” he said.

“Everyone was laser focused on value and spending.

As value became more mainstream, these discounters were able to meet everyone’s needs – not just low income shoppers.”

On another front, Paglia warns not to underestimate the disruptive power of online retailers over and above Amazon.

“It’s been very transformative,” he said. “I’m not just talking about purchasing, but even before that in terms of how people consume media and how they interact with brands. Essentially, retailers and suppliers need to think about new ways to connect with shoppers.”

Paglia said some companies cling to the attitude that the way things have always been done will continue to yield growth. But the world has changed at a pace that hasn’t been experienced in the past. At the core, retailers and suppliers must be willing to find growth in uncomfortable places including different shopper groups, additional channels of trade and different product categories.

“We have to rethink the role of the store,” he suggested. “It’s no longer just a place where a truck drops off goods, and products are put on the shelf for shoppers to buy. The store is meant to be a more experiential environment where you’re engaging shoppers on a more personal, or emotional level.”

How personal can stores get? That’s anyone’s guess, according to Paglia.

Fifty years ago, the level of personalization now would have been unthinkable.

“Everyone just put out FSIs and it was a good day if you got a 1 percent redemption rate,” he said.

Continued on p. 48

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N AV I G AT I N G T H E D I S R U P T I O N

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Continued from p. 46

“Similarly, what we are doing now may be obsolete in 20 years.”

It boils down to how retailers and suppliers go to market, he said, noting the development of a Kantar’s framework called Reconfigure Retail.

“Basically, it focuses on the need for companies to reconfigure their approach to value, engaging shoppers, store formats, and the very nature of commerce,” Paglia said. “All these things are on the table. Retailers and suppliers will have to address all of them if they want to succeed in the future.”

Re-engaging shoppers means understanding that what’s relevant to one may not be to another. It’s about having meaningful conversations with them and providing what they need instead of trying to convince them they need what you are selling.

In terms of format, it’s a willingness to operate stores that are more differentiated and shopper centric,” he

added. “That may mean a smaller format, but it also has implications for the types of products sold and how much space categories receive.

“For a long time there was a power struggle between retailers and suppliers,” he said. “In the past decade, power has shifted to shoppers and they will decide where and how they want to spend their money.

Companies that want to grow need to seek out mutually beneficial relationships with each other.

Many top tier companies do that now, but a lot of small firms still look at things from a transactional view,” Paglia concluded. “We need to develop more symbiotic relationships going forward.” n Len Lewis is editorial director of Lewis Communications, Inc., a New York-based editorial planning, research and consulting firm. He is a contributor to several retail publications and trade groups in the U.S. and Europe and has been a speaker and moderator at numerous industry events. He can be reached at lenlewis@optonline.net or via his website www.lenlewiscommunications.com

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MORE FRESH, LESS SUGAR ARE DRIVING CONSUMER CHOICES

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BY DARREN S EIFER

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Are Driving Consumer Choices The foods and beverages people consume often reflect their cultures, which is why change in consumption behaviors comes slowly.

The top foods and beverages we consume today are very similar to the ones consumed 20 years ago, however, change can happen over time. Among the changes we’ve witnessed is the increased use of fresh foods in the United States.

Fresh foods and beverages are included at more meals now compared to a decade ago. The categories driving this increase include fruit, vegetables and dairy aisle items. But the consumer segments responsible for driving the increase may come as a surprise.

Younger adults, including the Millennial generation, are the main drivers of the shift to fresh foods and beverages. The surprise element is that Millennials are in a life stage when people typically consume lower quantities of fresh items in favor of more time-saving and convenient options.

Millennials’ increased interest in “fresh” may be explained in part by their reactions to the Great Recession when it was in full grip. Younger adults were hit hardest by unemployment, and this also was the group that pulled back the most Continued on p. 54

MORE FRESH, LESS SUGAR ARE DRIVING CONSUMER CHOICES

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Continued from p. 53

from going out to restaurants. It seems these adults still wanted many of the properties that restaurants provided – among them, freshness with speed.

As Millennials returned to their homes to source more of their meals, they spent a little more time in the kitchen to make dishes such as eggs/omelets, pancakes, vegetables/legumes, and rice, to name a few. This doesn’t mean they are becoming chefs or that they even enjoy spending time in the kitchen.

In fact, Millennials account for more than their fair share of rice cooker sales, meaning they wish to have fresh rice with their meals without having to hover over a saucepan for 30 minutes. The notion of convenience for the younger generations seems to be focused on freshness, while at the same time, getting out of the kitchen quickly. In contrast, previous generations considered frozen options to be convenient.

As younger generations are opting for more fresh foods and beverages, it would appear the notion of convenience is experiencing a definition change.

Millennials are like any other demographic group in that they want to get out of the kitchen in a short amount of time.

To achieve this goal, younger consumers are reaching for appliances that produce fresh dishes without heavy time burdens on the food preparer.

This shift appears to be generational since we see a clear difference once we examine Gen X, the next generation older than Millennials. This group continues to seek convenience in the form of frozen foods, and they also continue to consume more cold cereal in the morning as opposed to the increase in eggs and pancakes consumed by Millennials.

As younger generations are opting for more fresh foods and beverages, it would appear the notion of convenience is experiencing a definition change.

This news doesn’t bode well for the freezer section of the store. Over the last decade the rise in frozen food consumption has stopped as more consumers are sourcing their foods and beverages from the perimeter of stores.

Our research also shows this can in part be attributed to the growing Hispanic population in the U.S., who tend to be younger and have a strong heritage of fresh and scratch cooking. Hispanics use frozen items considerably less often compared to non-Hispanics particularly during the mid-day meal, which is often their largest meal.

Enticing them with traditional dishes in the frozen section has been met with headwinds as well since they tend to shun Hispanic frozen foods, such as tamales or empanadas, as inauthentic. This certainly does not mean consumers are completely cutting out other forms of food and beverages, such as frozen or canned, but their role in our diets is being reduced.

Products in these categories can maneuver through this change by aligning themselves with fresh items by showing they are a perfect accompaniment.

For instance, as we see consumers preparing eggs more often at breakfast, a frozen side dish such as sausages can show how they complement the fresh eggs while saving the consumer time.

And just as consumers are moving toward fresh, we also see a shift away from sugars.

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Along with rice cookers, these same consumers were also early adopters of pod coffee makers, which allow them the chance to have a freshly brewed cup of

coffee without dealing with filters and measurements of coffee grinds or water.

54

Continued on p. 56

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MORE FRESH, LESS SUGAR ARE DRIVING CONSUMER CHOICES

C O N TI NU E D

Continued from p. 54

Annual Eatings per Capita of Fresh Foods/Beverages Two years ending May 800 750 700 650 600 550 500 450 400

2004

2005 55+

2006

2007

2008 35-54

Our Dieting Monitor asks adults the items they’re trying to cut down on or avoid completely in their diets. Fat has topped that list since the service was introduced.

In 2014, for the first time, sugar narrowly edged out fats for the No. 1 spot on the list. This shift is largely from falling concerns for fats – 10 years ago, about 75 percent of adults wanted to avoid fat, but now that figure is about 64 percent. This is another clear example of how slowly change happens within food and beverage consumption.

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A decade ago was when we first started hearing about low-carb diets and lifestyles, which made two very clear categories for consumers; good carbs and bad carbs. Sugars as well as simple carbohydrates were called out as contributors to consumers’ larger waistlines, while at the same time the stigma surrounding fats were diminished.

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to its convenient preparation and clean-up, eggs command greater share of breakfasts today versus a decade ago.

While U.S. consumers are not quite consuming eggs at the same frequency as in the 1980s (when cholesterol was just starting to make its way into the vernacular), this increase at breakfast represents a shift away from simple carbohydrates and toward more protein-based items.

Since 2006, there has been a slow but steady decline in sweet snack food consumption, which includes candy bars, donuts and chocolate candy.

While this news was groundbreaking at the time, consumers still mostly stuck to their routines. It took a decade for consumers to adjust their concerns and behaviors and this reaction is still likely unfolding.

We’re also seeing a move away from sugars when we snack. Since 2006, there has been a slow but steady decline in sweet snack food consumption, which includes candy bars, donuts and chocolate candy.

At the same time, more consumers now reach for products such as protein bars, fresh fruit and yogurt.

We see evidence of this intention to avoid sugars in some of the categories growing and declining in Americans’ food consumption. While cold cereal remains the top item consumed at breakfast thanks

And consumption of meat snacks among adults has increased by 18 percent over the past five years.

We should expect this shift away from sweets to continue. Our “Future of Eating” report forecasts

MORE FRESH, LESS SUGAR ARE DRIVING CONSUMER CHOICES

better-for-you snack foods will be consumed more often than sweet snack foods by 2018.

Of course sweet foods won’t entirely be a thing of the past, but it does seem consumers are reserving them for specific times and occasions rather than considering them every day options. Consumers are more likely to consume sweet snack foods toward the end of the day when they’re looking for a treat or a reward for themselves, such as after a long day at work.

Marketers of sweetened foods or beverages should examine whether it makes sense to find ways to lower their products’ sugar content or communicate to consumers about being the perfect solution for when they are more open to consuming sweet products.

As for the fresh movement, there are predictions that Millennials will return to lower levels of

consumption in order to manage their increase time pressures. But there’s also evidence that fresh actually may be here to stay. When looking at typical behaviors of Americans across the past 30 years, the consumption of fresh foods and beverages increases with age as consumers gain more cooking skills and confidence in the kitchen.

It would seem Millennials’ heightened levels of fresh consumption could represent a sizeable shift in the way consumers prepare foods for decades to come. The key to success in food and beverage consumption is to plan for the long term.

These behaviors are among the most stable of consumer behaviors, but change will happen slowly meaning marketers need to prepare their business now for the expected changes five or even ten years down the road. n

Note: As The NPD Group continuously monitors shifts in consumption patterns, arming the industry with input for fact-based decisions about where to focus their long-term strategies. To learn more about the topics discussed here, contact Darren Seifer at darren.seifer@npd.com.

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THE FARMERS MARKET TREND IN GROCERY

C O N TI NU E D

THE FARMERS MARKET TREND IN GROCERY

BY CHRI STOPHER S T UDACH

The Farmers Market Trend in Grocery (Everything Old is New Again) FOOD RETAIL IS IN A CONSTANT STATE OF CHANGE. The evolution of grocery stores: how they look, what they sell, where the goods come from, and how they are shopped is affected by everything from our cultural attitudes to evolving food and aesthetic tastes, innovations in technology, and the agricultural landscape both here in the U.S. and globally, among myriad other factors.

Serving as the creative director of a store planning and design firm with a strong grocery focus for more than 30 years, I have seen over the course of my career that the more things in the world of grocery change, the more they stay the same.

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Continued on p. 62

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

So, while this article focuses on the very current trend of assimilating factors from farmers markets, farm stands and urban street markets (which I’ll collectively refer to as farmers markets, here, for the sake of succinctness) into modern grocery store environments, I will also say that this isn’t necessarily a ground-breaking trend. This ground has been trod in the past. It’s just been many years in-between and what was born of

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THE FARMERS MARKET TREND IN GROCERY

C O N TI NU E D

Continued from p. 61

necessity (in the past) is today very much a choice retailers are being asked to make.

In general, markets are changing in response to the changes in society. The middle class is shrinking, and more grocers want to define themselves as something other than “conventional.” For instance, we began work fairly recently with a retailer whose first words to me were, “The middle road is the road to nowhere.” That phrase has become a mantra to me and my entire design team.

The incorporation of farmers market sensibilities into the modern grocery store is a return to our food roots – part of a larger zeitgeist that values transparency, simplicity and responsibility in commerce in addition to continuing to value “good value” itself.

These are the new standards which shoppers not only appreciate, but are beginning to demand dogmatically. And while farmers market sensibilities hold much in the way of appeal to the modern, high-minded shopper, incorporating the often unpredictable, smaller, slower, local, seasonallyaffected aspects of a farmers market into what has otherwise evolved into the low-margined, massively streamlined merchandising machine that is the modern grocery store can be a daunting concept.

How to give the shoppers what they want without gumming up the works?

The first thing retailers must understand is that while the farmers market aesthetic (recycled woods, natural

light, apple crates, hand-lettered signs, etc.) is certainly on trend today, incorporating these elements without also taking steps to “localize” the goods sold, will at best serve as a bit of design refresh for your retail space, but at worst will come across as disingenuous if not downright deceptive to your shopper.

Authenticity is what allows farmers markets to have thrived recently – consumers faced with so much in the way of mass-produced, generic or otherwise homogenous options are seeking any and all ways to feel “real”, “soulful” or otherwise “unique” about themselves, their lives and the purchases they choose to make. This turn towards authenticity is especially critical if you want to engage the younger consumer groups – including Millennials.

Authenticity is their magnet.

The challenge for the designer – and retailer – is to deliver authentically. Authenticity requires quality commitment, service and heritage (history through experience). You cannot promise a farmers marketlike experience via design, décor and/or signage communications to your customers unless you authentically also deliver elements of that experience on multiple levels. These filters of quality, service and heritage allow a high level of engagement and acceptance even with imperfections.

It’s easy for a retailer to say, “I want my store to feel more like a farmers market,” but what does that mean exactly? What specifically appeals to shoppers?

What doesn’t?

Looking for objective answers to those simple questions inspired King Retail Solutions to kick off a research project in 2014 which culminated in a short analysis dissecting: What Shoppers Love About Farmers Markets, What They Don’t, and importantly How Retailers Can Create a “Best of” Street Market Experience in Their Stores.

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

What was quickly brought to light is the fact that regardless of region (we looked at shopper feedback from the Pacific Northwest, Southern California, South Central US, Midwest, and Northeast), modern shoppers delight in farmers markets for just a handful of reasons.

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Those reasons, which we called the “pros,” boil down to an enjoyable shopping experience (often

62

iStock

Continued on p. 64

THE FARMERS MARKET TREND IN GROCERY

C O N TI NU E D

Continued from p. 62

complete with entertainment), that appeals at the personal level and still feels more like a good value than an indulgence.

Innovators in branding a retail experience, stores like Whole Foods, Starbucks and Target, have figured out how to turn the drudgery of a shopping trip into a sought-after experience. The next wave of innovation will come from the retailers who take that a step further, getting more local, tapping deeper into the communities they serve, and creating environments that entertain, educate, and allow shoppers to linger and enjoy their purchases.

But all of that within reason.

Locality is certainly a growing priority but it absolutely isn’t the only priority for shoppers today.

When it comes to standards like bread, apples, and cheddar, seeking out local sources could serve your retail brand well. But modern shoppers have also grown used to the lifestyle value that comes from global access and options.

Whether they prefer pomi strained tomatoes from Italy or a specific Feta from the South of France, the majority of shoppers desire the best of both worlds: local and global selections in a grocery environment which offers convenience, consistency, variety, and community connection.

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

The opportunity now is for retailers to embrace the farmers market mentality; give shoppers more of what they like in a space that visually reflects the values shoppers care about, and continue to provide the consistent price point, value, selection, and convenience that shoppers expect from a commercial retail space. In other words, give the people who already like you a reason to like you even more. Give them the best of both worlds.

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The number one sited “pro” was variety, which fits in with an evolution we see happening across retail: category blurring. Shoppers are looking for retailers that cater to their lifestyle. For some, that means low cost all the way (dollar stores selling groceries). For others, that means quality of experience (pharmacies selling wheat grass shots and yoga pants).

When drilling down further into the results, we looked specifically at female shoppers’ responses, as

What shoppers love about Farmers Markets

63% 55% 54% 30% 30% 22% 10% 22%

love the variety sold love the prepared food love that it’s entertaining love how fresh the products are love that it’s local love being outdoors love that it’s inexpensive love that it’s unique & always changing

study after study continue to confirm that women still do the majority of household shopping.

Women’s responses didn’t vary greatly from men’s; although women were slightly more impressed by the freshness of the fares sold at farmers markets, the availability of goods with local sources, and the prepared food options. Women were also slightly more likely to list difficulty parking as a con to shopping at farmers markets.

In our 2015 annual Consumer Insights Survey of over 1,200 U.S. consumers, we found that farmers markets and local farm stands ranked as Americans’ fourth most likely location to purchase groceries outside of traditional grocery stores (topped only by Target, Walmart and Walgreens in terms of grocery purchase frequency).

Both within and outside of grocery, smart chain retailers are paying attention to these trends and statistics, and doing what they can to incorporate local appeal and community experience, in a sincere way, into their establishments.

At one extreme of this, high-end shops like Eataly in Chicago and New York City are gaining traction and attention by concocting a luxury approximation that

THE FARMERS MARKET TREND IN GROCERY

combines housewares, fresh groceries, prepared foods, demonstrations, classes, and more. Already embraced by the metro elite, as with many trends that start in the elite sector, we expect a downward trickle.

On the flip-side, grassroots chains like North Carolina’s Providence Produce Market, thrive by providing no-frills, local, seasonal food via roadside stands that combine the convenience and consistency of a branded retailer with the open air, community association of a farmers market.

Today, the focus is on locality and so naturally building on the best aspects of farmers markets, the ultimate local food source, is one strategy that’s working, when done right, for many retailers and their shoppers alike.

Christopher Studach is Creative Director for King Retail Solutions and a Whiteboard Session moderator at the 2015 CGA Strategic Conference.

Tomorrow, who knows?

the shopper to their food’s story in a way that touches their lives, answers their questions, and strengthens their connection to the food, the retailer, and the larger community.

Perhaps the next evolution comes not with a sharp change in direction, but with a layering of carefully tuned, thoughtful technology over everything that’s happening currently, further connecting

The next big winner is who can bring some new, enticing, but real experience (product and/or engagement) to a public that is just waiting to be a part of something totally new, real and special. n

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

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W H AT ’ S T H E D E A L ?

BY M I CHE LLE SE IDE L A N D C AT H E R I N E H A RT M A N N, TO WER S WATSON

What’s the Deal?

W H AT ’ S T H E D E A L ?

Attract and Retain the Best Talent with Your Employee Value Proposition (EVP) For most organizations, attracting, retaining and engaging critical talent is often cited as a top concern that keeps many a business leader up at night.

Company growth plans, competition for key and critical talent, and changing employee demographics can complicate a retailer’s talent acquisition and management strategy.

A clear EVP is an increasingly critical tool in the attraction and retention of top talent, particularly for critical and key skilled employees. For employers, it helps attract, retain, motivate and engage employees to drive business success.

For employees, it shapes the overall view, emotional connection and level of discretionary effort they bring to the company.

What is an EVP? EVP, also referred to as the

employment deal, refers to

the collective programs that an organization offers in exchange for employment. The EVP defines the

“give” and the “get”

between company and worker, encompassing every aspect of the

employment experience

— from the organization’s

mission, purpose and values, to its jobs, culture and people, to the full portfolio of its total rewards programs.

For both, it’s a crucial element for a successful workplace and career experience.

It can also inspire employees to think beyond how their daily activities and efforts contribute to the larger organization and motivate them to act in a way exemplifying the right behaviors.

Continued on p. 69

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W H AT ’ S T H E D E A L ?

Continued from p. 67

Current State of Attraction and Retention It is likely that your organization is confronted with similar issues, which places a burden on attracting and retaining key talent and top performers.

Findings from Towers Watson’s “2014 Global Talent Management and Rewards Study, Building a Superior Employee Deal,” confirms this: Approximately half of retailers (52%) say their organization does a good job of hiring highly qualified employees and slightly less (36%) say their organization does a good job of retaining highly qualified employees.

And retention is not much better, with approximately one in three retail employees stating they would leave for the right opportunity, and fewer than half intending to stay with their current employer by choice.

This current state is not ideal, with many retailers facing increasing challenges in attracting and retaining top-performing employees and 33 percent reporting that turnover is rising. Additionally, 56 percent of retail employers indicate that hiring activity has increased compared to the previous year, which is higher than the same statistic for general industry at 48 percent.

Companies that have adopted an integrated approach to their reward strateg y, design and execution in the context of an overarching EVP realize better outcomes.

When these numbers are considered along with engagement scores – only 34 percent of retail employees are reported to be highly engaged, compared to 39 percent among broader industries – it paints a gloomy picture.

Less likely to report problems attracting and retaining critical-skill employees

n

Five times more likely to report their employees as highly engaged

n

More than twice as likely to report achieving financial performance significantly above their peers.

Optimizing Your EVP: A Five-Step Approach So, what does it take to develop an EVP, and how do you get the EVP right? Towers Watson has distilled the process into five key steps: 1. Align your EVP with what your organization

stands for in the marketplace (customer brand) and the labor market (employment brand).

2. Once you have developed a formal EVP,

effectively communicate the EVP to employees.

If applicable, you can design customized EVPs for each critical employee segment so the messages are geared correctly by audience.

3. Articulate and form a total rewards strategy that

is aligned with your business and HR strategies – an EVP without programs and practices to back it up soon becomes hollow.

4. Create specific objectives for each talent

management and reward program to align it with the EVP. Know and acknowledge the behaviors and values toward which employees should strive.

5. Employ organizational analytics (i.e., business

performance and analytics, workforce demographics, workforce performance data) to test the effectiveness of your EVP and total rewards programs.

Be a Myth Buster: Understand What Really Drives Your Workforce Three myths drive many of the challenges companies have in determining their EVP and assessing the effectiveness of their existing and potential total rewards programs. Watch out for:

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Companies that have adopted an integrated approach to their reward strategy, design and execution in

n

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

The good news? Towers Watson’s research and experience reveals that retailers who get the employment deal – also known as the Employee Value Proposition, or EVP – right, will weather the talent crunch, have higher engagement levels, and better business performance.

the context of an overarching EVP realize better outcomes, including:

Continued on p.70

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W H AT ’ S T H E D E A L ?

C O N TI NU E D

Continued from p. 69

Myth #1 – Employees clearly convey what they want.

Employee surveys may ask questions in such a manner that the answers provided do not accurately reflect employees’ priorities. For example, a general question like, “Which of the following rewards vehicles are most likely to motivate you to perform better?” can provide misleading answers.

However, a more specific question contrasting two programs can provide more robust and insightful data for you to act on.

Myth#2 – Managers know what employees want.

When surveyed, employers and employees often notice a gap on each’s perception of drivers for attraction. Perceptions also differ on drivers for retention. As illustrated in Towers Watson’s Global Workforce Study, the contrasts can be significant and informative to an organization’s EVP. Myth #3 – Employees in a certain demographic group all want the same thing.

Companies should look more deeply into understanding their employees’ preferences within key demographics to ensure alignment of total rewards programs – in particular, employees within defined generations are not always motivated by the same drivers.

For example, while most Baby Boomers rank base pay as their top priority, high-performing Baby Boomers

How to get started with your evp:

right cross-functional team 2. Ask and answer the critical EVP questions 3. Explicitly define your organizations “give” and “get” 4. Take a deep dive into understanding employees’

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

1. Identify the

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needs and preferences 5.

Align with talent management and reward programs

Don’t forget to test for success and monitor progress along the way

rank other drivers (e.g. challenging work, recognition, and incentive compensation) more highly, with variation among business function.

Don’t Send Mixed Messages: Align Programs and Branding It’s helpful to use the external or customer brand promise as the basis of your EVP. This usually works well because it is key to understanding who the promise of who the company is.

Next, a well-thought-through creative brief lays the foundation for the EVP story. Interestingly, it’s here that companies can lose their courage. They tend to play it safe, first by assuming they know what’s truly relevant to their employee groups and second by shying away from emotion. When companies dive deep into understanding employees’ preferences, they are often surprised by what employees deem important.

When surveyed, employers and employees often notice a gap on each’s perception of drivers for attraction.

Armed with this knowledge, your organization can design relevant programs and better articulate a meaningful EVP. Testing creative concepts with key employees is another critical step.

Gathering employee input can give your EVP working group the courage to be bolder in their EVP communication and can help build buy-in with management.

Once the EVP has been branded, launching a big campaign isn’t always necessary. Many companies prefer to simply start using the language and design in communication materials for recruiting and for current employees. They also engage managers to help them understand the EVP and how to position it with their reports.

Companies with a strongly articulated EVP can customize it for critical employee groups, emphasizing elements of the deal that are most meaningful to those groups.

For example, one client’s employee research showed that its marketing staff valued flexible time over other

W H AT ’ S T H E D E A L ?

benefits, so in communicating to that group, that element of the deal was front and center.

Check, Check and Check Again: Be Deliberate and Test for Success All companies have an EVP, even if it has not been formally articulated. The EVP work described here is a way of moving from an informal, unmanaged EVP to one that is deliberate and aligns with what you stand for in the market and how you want to be known as an employer.

Once your EVP is defined and communicated, and total rewards programs designed accordingly, it’s essential to check with employee groups to make sure your organization is delivering on the promise.

Refining your EVP and its elements based on ongoing employee feedback will bring you full circle in getting it right. The outline of policy and program changes developed during planning stages, coupled with some practical measurement mechanisms, can help you gauge progress against critical milestones.

Some examples to monitor progress include regular engagement surveys, collecting feedback from recruited employees, regular analysis of employee productivity and financial performance and active employee monitoring. All of which will help tell you whether employees believe the deal is real and if your company is delivering on its EVP. Critical Outcomes of an EVP Companies that adopt a holistic approach to reward strategy that includes a thoughtful and wellarticulated EVP can realize significantly stronger results from their talent management and reward programs than those that do not. Perhaps even more importantly, Towers Watson’s research shows that a well-articulated and managed EVP is directly linked to both better HR and financial outcomes.

Catherine Hartmann and Michelle Seidel will moderate a Whiteboard Session on employee engagement & retail success at the 2015 CGA Strategic Conference.

EVP is about much more than communication. Too often, organizations design a recruiting campaign that touts their differentiators and then calls it a day.

Then, after recruiting talent to their customer service and collaborative environment, they wonder why engagement is down and turnover is up.

In these cases, they often have forgotten that the essence of an EVP, is that your rewards programs must match your EVP intentions, and that determining and communicating your EVP is only the first step in the path to delivering on the promise that an EVP holds.

However, the good news is developing an effective EVP, in this increasingly competitive market, is well within reach for any organization… you just need to get started. n Catherine Hartmann is a senior consultant at Towers Watson serving clients in the West Division, and the leader of the North America Talent Management and Rewards Study solicitation team. Her focus areas are on analyzing and designing total reward strategies and conducting human capital research to help build employee engagement. She can be reached at catherine.hartmann@towerswatson.com.

Tower’s Watson’s “2014 Global Workforce Study,” represents feedback from approximately 32,000 full-time workers in 26 markets globally. Visit TowersWatson.com for more information.

|

Michelle Seidel is an account director at Towers Watson based in Irvine. She partners with senior leaders and HR professionals to execute on their talent, reward and business strategies by delivering employee engagement, differentiating their employee value propositions, and building high performing cultures designed to drive broadscale organizational performance. She can be reached at michelle.seidel@towerswatson.com.

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

Editor’s Note: Towers Watson’s “2014 Global Talent Management and Rewards Study, Building a Superior Employee Deal,” includes data from 1,637 employers in 32 markets globally.

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69 % of Californians

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Contact: Nick Matteis, Executive Director PH: 916足441足5302 info@californiagrown.org www.californiagrown.org

CA GROWN IS GROWING

CA GROWN

is Growing NEW RESEARCH, NEW PARTNERSHIPS, NEW MEMBERS AND A NEW CONSUMER CAMPAIGN IS REINVIGORATING A MUCH-LOVED BUY LOCAL MARKETING PROGRAM THAT CENTERS AROUND A WELL-KNOWN BLUE AND GOLD LICENSE PLATE. The research

Consumer research proves what most people would assume, Californians have a strong desire to support local farmers and want to purchase their products.

Not only that, they would pay more for it, according to research conducted by Fleishman Hillard in 2013. To be precise, 69 percent of consumers would “pay more” for a “CA GROWN” branded product.

That consumer research report, and strong support from leaders in the agriculture community and the California Department of Food and Agriculture, has led to a revival for the CA GROWN brand.

Today, a strategic partnership with Visit California has lead to an “Always in Season” campaign that highlights the culinary aspect of visiting California.

The “Always in Season” program, which includes major media buys in Food and Wine and Sunset Magazine, as well as a $6 million online digital marketing component has made over 75 million consumer impressions with farmers and chefs talking about why CA GROWN produce is so special.

The partnership with Visit California includes consumer activations and major events throughout the state, where the CA GROWN staff has seen the power of the brand first hand.

“There is a phrase we keep hearing over and over from people we meet at events. When they see the brand and we hand them a button or sticker to wear, they say ‘I am California Grown,’” said Matteis. “After Continued on p.76

|

The widely recognized CA GROWN brand makes it easy for consumers to quickly identify local produce grown by California farmers. The familiar blue and yellow license plate logo was launched in 2002 and had the support of a $19 million marketing campaign that included robust television, radio and print buys.

The partnerships

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

“Californians are making the connection that by purchasing and supporting their local farmers, they are supporting their community and their local economy,” said Nick Matteis, executive director for CA GROWN. “We’re seeing more and more produce companies sign up to use the CA GROWN logo because they know it will help drive sales.”

The results of the initial launch are still apparent today with 60 percent of consumers saying they remember seeing some sort of advertising for CA GROWN and 52 percent saying they have seen the logo. “The research indicated that there is a lot of equity in the CA GROWN brand,” added Matteis.

75

CA GROWN IS GROWING

C O N TI NU E D

Continued from p. 75

hearing different people say this to us, unprompted about half a dozen times, we knew we were on to something that was only going to grow.”

Other strategic partners of the CA GROWN campaign include local food banks. CA GROWN launched a social media campaign in an effort to get consumers involved with food bank donations.

The program involves asking consumers to use the hashtag #CAGROWN and post a picture of anything grown in the state, or the logo on Facebook, Instagram or Twitter.

For each hashtag CA GROWN counts, a pound of food is donated to a food bank. To date, the hashtag has been used over 30,000 times on social media. CA GROWN has participated in two food bank donations and media events in the state, and plan to do more.

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

One major retailer felt the hashtag donation program was so in line with their values that they promoted the CA GROWN donation program in all 307 of their

76

retail stores in the state, using CA GROWN signage and encouraging their employees to use the hashtag.

The membership

The agriculture community has rallied around the reinvigorated efforts to promote the brand and membership has more than doubled over the past year and a half. More members mean more CA GROWN brand awareness, as more and more companies add the logo to their packaging, retail displays, websites and social media content.

“We’ve seen some incredible retail programs established from some of our company members,” Nick Matteis said.

“We’ve seen some incredible retail programs established from some of our company members,” Matteis said. “Anything one member does with branding really helps promote everyone.”

Continued on p. 78

Grapes from California are a natural source of antioxidants and other polyphenols, which means that in addition to tasting great, they help support heart health. Learn more at grapesfromcalifornia.com

CA GROWN IS GROWING

C O N TI NU E D

Continued from p. 76

The consumer campaign

In addition to the “Always in Season” marketing program with Visit California, CA GROWN engages directly with consumers through a robust social media and online marketing program. Facebook, Twitter, Instagram and Pinterest are social media platforms that CA GROWN uses to reach Californians.

“In the past six months, we were able to generate 5 million impressions amongst Californians by using social media alone. It’s been a great tool for reaching people and getting feedback,” said Matteis. “It’s great to see how proud Californians are of the bounty of food that is grown in the state and how much they love and appreciate their farmers.”

Facebook has seen the most growth over the past year, increasing in size from 2,000 fans to nearly 60,000.

In addition to social media, CA GROWN has launched a blog that highlights the seasonality of California crops by featuring recipes, tutorials, food

festivals, restaurants and DIY projects. The blog, www.californiagrown.org/blog is managed by mom blogger and daughter of a farmer, Susan Phillips.

Each week, Phillips creates a new post that features an item that is in season. From watermelon kegs, to pistachio bows and pomegranate Moscow mules, Phillips keeps content interesting and timely.

Retail Promotions

The CA GROWN staff is actively looking for retailers who are interested in establishing promotional programs with CA GROWN. “In one of our consumer focus groups, one participant indicated that it would be great to see a California Grown section in the supermarket, similar to an organic section,” said Matteis. “We would love to do something like that.”

Retailers interested in promotions can contact Nick Matteis at (916) 441-5302 or via email at info@californiagrown.org. n

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

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JOE FALVEY KEVIN KONKEL Thank you Joe for being a great supporter of The Illuminators and your outstanding Leadership of the CGA. Congratulations and welcome Kevin to your Chairmanship of the CGA, 2015-2016.

Check out all upcoming Illuminator Events and Register to become a Member of the most respected and admired Grocery Sales Trade Association in America at www.illuminators.org

Changing of the

Guard The California Grocers Association and staff would like to congratulate Kevin Konkel, Raley's, on being nominated as the 2015-2016 Chair of the CGA Board of Directors. Kevin succeeds Joe Falvey, Unified Grocers, Inc., whose term ends in December.

On behalf of the entire Association, we say "thank you" to Joe on a job well done. Your guidance and leadership this past year was greatly appreciated. The Association looks forward to working with Kevin Konkel this coming year.

Joe Falvey

Kevin Konkel

NORTH STATE GROCERY, INC.

Thank you outgoing CGA Chairman,

Joe Falvey

Congratulations new CGA Chairman,

Kevin Konkel

FOUNDED ON STRONG PRINCIPLES YESTERDAY BUILDING INNOVATIVE NETWORKS TODAY DEVELOPING EFFICIENT SOLUTIONS FOR TOMORROW TONYS

FINE FOODS

.COM

Thank you

Joe Falvey

|

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

for your dedication and service to the California grocery industry

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Welcome

Kevin Konkel incoming CGA chair

Super A Foods congratulates Kevin Konkel as incoming CGA Chairman of the Board.

Thank you for a great year to outgoing Chairman Joe Falvey.

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

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| 83

BEVERAGES SPOTLIGHT

SIP Certified Seal Helps Consumers Go Green Consumer demand for eco-friendly products is at an all-time high. In fact, in 2014, 55 percent of consumers around the globe favored products that are responsible and sustainable, up five percent from just a year prior, according to a 2014 Nielsen study.

Now, wine consumers have an eco-friendly choice in SIP Certified vineyards and wineries.

The SIP – Sustainability in Practice – Certification program sets the environmental gold standard for vineyards and wineries, and the SIP seal of excellence appears on millions of bottles produced by over 200 California vineyards.

In order to display the seal on products, growers must meet strict eligibility requirements.

The SIP Certified Program requires farms and vineyards to tackle sustainability areas of habitat conservation, water quality, energy efficiency, human

resources, community involvement, and business.

Independent, third-party inspectors audit SIP Certified vineyards and farms to ensure all areas and resources meet the program’s rigorous standards.

“SIP Certification is unique,” said Beth Vukmanic Lopez, Certification Manager. “The sustainability model looks at the big picture. Ultimately, SIP Certified vineyards are committed to caring deeply for their places and people.”

Nearly two decades in the making, the SIP Certification program was launched in 2008 by a network of farmers devoted to sustainable agriculture, with input from government agencies, environmental groups, and industry experts. SIP’s independent inspectors audit vineyards throughout California.

SIP Certification offers education and materials to retailers for promoting sustainable wines. For more information, visit www.sipcertified.org. n

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

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

e Stater Bros.® Supermarket “Family” salutes CGA 2014-2015 outgoing Chair Joe Falvey, Unified Grocers, Inc.

86

Joe Falvey

Unified Grocers, Inc.

and welcomes CGA 2015-2016 incoming Chair Kevin Konkel, Raley’s Proudly Serving Southern California Families Since 1936

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To us, local means California We’re proud to offer more of what Californians are looking for—from farm fresh produce to California-raised USDA choice meat.

Long before local was cool, our family of stores has made it a priority to buy direct from local growers. In fact, some of our current relationships with farmers started over 60 years ago.

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COMPANY

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WEBSITE

27 49 BC 76 55 IFC,1 43 29,51 9 86 74 35 77 68 83 5,73 16 86 82 50,72

AlEn USA Alta Dena Certified Dairy, LLC Anheuser-Busch InBev Apio Inc. Bimbo Bakeries USA Braga Fresh Family Farms Bring Back Bags By Roplast Industries Inc. C&H Sugar - ASR Group C&S Wholesale Grocers, Inc. California Beer & Beverage Distributors California Grown California Lottery Calfornia Table Grape Commission Certified Federal Credit Union Ciuti International Coca-Cola Refreshments Downey Brand LLP F. Gavina & Sons, Inc. Fresh & Easy Gelson’s Markets

925-553-1192 626-964-6401 909-597-0460 805-249-5422 714-459-4772 831-678-3835 800-767-5278 510-787-4416 916-373-4396 916-441-5402 916-441-5302 916-822-8113 559-447-8350 909-261-4065 909-484-1414 213-746-5555 916-520-5316 323-582-0671 310-341-1200 818-906-5709

949-666-6230 626-913-9062 909-597-0460

matt.liddy@alenusa.com veronica_rendon@deanfoods.com raul.aguilar@anheuser-busch.com wsnodgrass@apioinc.com rhamacher@bbumail.com sales@bragafresh.com grocery@roplast.com kent.kunsman@asr-group.com pmiller@cswg.com

84

Hain Refrigerated Foods, Inc.

925-300-3966

22 7 79 59 41 8 58 33

Harris Ranch Beef Company The Hershey Company Illuminators Jelly Belly Candy Co. Kellogg Company Kimberly Clark Corporation Lone Peak Labeling Systems MillerCoors

23

Nestle Purina PetCare

559-896-3081 717-534-3660 925-973-6183 707-428-2800 269-961-2000 847-781-3730 800-658-8599 614-378-5538 800-421-1721x9/ 314-982-4876

81

North State Grocery, Inc. dba Holiday/ Sav-Mor Foods

530-347-4621

21

Novamex

888-668-2639

34,63 83 25 83 65 83 87 78 85 57 86 48 17 82 82 47 12 IBC 39

NuCal Foods Oberto Brands Pepsi Beverages Company - WBU Raley’s rePLANET, LLC Rogers Joseph O’Donnell Safeway Inc. Sioux Honey Association SIP Certified Sustainable Wines SkinnyPop Stater Bros. Markets Sugar Bowl Bakery Sun Products Corporation Super A Foods, Inc. Tony’s Fine Foods TruGrocer Federal Credit Union Tyson Fresh Meats, Inc. – Dan Peed Unified Grocers, Inc. Unilever

209-254-2200 925-786-9722 949-330-5804 916-373-3333 951-817-3258 415-956-2828 925-467-3000 510-888-1511 805-466-2288 847-982-9800 909-783-5000 888-688-1380 916-288-4692 323-869-0600 916-374-4000 208-385-5273 605-235-3215 323-264-5200 714-315-1405

801-975-1865

dennis.j.belcastro@kcc.com chrisa@lonepeaklabeling.com jessica.owens@millercoors.com

www.alenamericas.com www.deanfoods.com www.anheuser-busch.com www.apioinc.com www.bimbobakeriesusa.com www.bragafresh.com www.bringbackbags.com www.chsugar.com www.cswg.com www.cbbd.com www.californiagrown.org www.calottery.com www.grapesfromcalifornia.com www.vonsefcu.org www.ciuti.com www.cokecce.com www.downeybrand.com www.gavina.com www.freshandeasy.com www.gelsons.com www.greekgodsyogurt.com/ www.tastethedream.com/ www.dundeeyogurt.com www.harrisranchbeef.com www.hersheys.com www.illuminators.com www.jellybelly.com www.kelloggs.com www.kcc.com www.lonepeaklabeling.com www.millercoors.com

314-982-2860

paul.cooke@purina.nestle.com

www.purina.com

714-441-3435 530-532-9576 510-787-4205 916-373-4296 916-441-0713 916-446-1063 559-447-9184 626-246-3111 909-484-1445 213-744-8765 323-581-1127 310-341-1501 818-990-7877

info@californiagrown.org info@grapesfromcalifornia.com ghurd@vonscu.com john@ciuti-int.com mikanderson@coca-cola.com bapplegate@downeybrand.com mike.artukovic@gavina.com

marketing@greekgodsyogurt.com 559-896-3095 717-534-5297 707-399-2377 269-660-4518

brad.caudill@harrisranch.com bcotten@hersheys.com jfrench@co-salesnc.com jalden@jellybelly.com

www.shophqf.com consumer.relations@novamex.com 209-254-2255 916-740-2947 949-643-5765 916-444-3733 951-520-1701 415-956-6457 925-467-3323 510-727-9992 805-466-2292 312-277-2399 909-733-4038 510-782-2119 916-691-2410 323-869-0611 916-372-0727 208-385-5290 479-757-6720 323-729-6619

www.nucalfoods.com rich.arnold@oberto.com douglas.todd@pepsico.com joe.perez@replanet.com

info@vineyardteam.org info@skinnypop.com retailsales@sugarbowlbakery.com john.wagner@sunproductscorp.com kberger@tonysfinefoods.com cdemaray@trugrocer.com dan.peed@tyson.com customercare@unifiedgrocers.com kimberly.stokes@unilever.com

www.novamex.com/ www.jarritos.com www.oberto.com www.pepsi.com www.raleys.com www.replanet.com www.rjo.com www.safeway.com www.siouxhoney.com www.sipcertified.org www.skinnypop.com www.staterbros.com www.sugarbowlbakery.com www.sunproductscorp.com www.superafoods.com www.tonysfinefoods.com www.trugrocer.com b2b.openprairienaturalangus.com www.unifiedgrocers.com www.unilever.com

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