2023 AWG David Smith HOF

The Shelby Report congratulates

David Smith and AWG on his induction into the Industry

ALL of

AME

Hall of Fame inductee reflects on storied 48-year career in grocery Smith has guided Associated Wholesale Grocers since August 2015

by Treva Bennett / senior content creator “It’s been a good ride.” Reflecting on his 48-year career in the grocery industry and upcoming retirement, David Smith, president and CEO of Kansas City-based Associated Wholesale Grocers, said it will be the people he will miss the most – co-workers, AWG member retailers and vendors.

Shelby Publishing is inducting Smith into its Food Industry Hall of Fame, and he recently reflected on his career and the bright future he sees for AWG as new leadership prepares to take the reins.

Smith said August marked 48 years since he earned his first paycheck in the grocery business. The Tennessee native started out in lower-level jobs and worked his way up to running retail stores. In 1986, he sold his company.

“At that point, I was kind of looking around. I did a couple of short stints helping out some other retailers. By the end of the year, I started to work for a wholesaler called Malone & Hyde.”

Malone & Hyde was the wholesaler that had supplied Smith’s business.

That wholesaler later was acquired by Fleming Co. While at Fleming, Smith said he worked a variety of jobs before finding his niche in retail development. He helped retailers with building, buying and remodeling stores. He later worked in sales for a time before being named to head the Nashville division in the late 1990s.

A turning point in his career came on April 1, 2003, when Fleming filed bankruptcy.

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Darkest of days Smith said from the day that Fleming filed for bankruptcy until August 2003, those were “the darkest days for me in my career.” He was in charge of the Nashville division but had no answers for employees or retailers who were looking to him for guidance.

“It was a difficult, difficult time. I made my mind up early that my No. 1 role was to help everybody every way that I could. Some things were unorthodox in a lot of ways. We made a lot of arrangements for competing wholesalers to be able to get groceries to our stores. I wrote many reference letters for employees that I really needed. They felt compelled that they needed to go on and find something because they just couldn’t stand the wait.

It was like a dagger in the heart to see them go, but I had to do right by them. Those were the darkest of days.”

Also at that time, the U.S. was “still reeling from the aftermath of 9/11, and the country was kind of shell shocked. We had started the Gulf War. A lot of things were uncertain.”

Smith said he recalls going outside each week with other employees in the administrative office to gather around the flagpole. There, they would talk about whatever was on their mind, share their worries and then have prayer.

“I think that the experience of that, and going through such a protracted battle, helped me appreciate people. It helped me also to have a disdain for greed. It was nothing but greed that had bankrupted our company.”

Also Kansas City, Kansas-based Associated Wholesale Grocers reported record results at its annual shareholders meeting in March.

While President and CEO David Smith prepares to retire at the end of the year, to be succeeded by President-elect Dan Funk, the co-operative wholesaler is looking to continue its growth.

The Shelby Report takes a more in-depth look at many of the recent initiatives and what they will mean for AWG going forward: • Creating the Upper Midwest division (page 42) • Opening an all-in-one distribution facility in Mississippi (page 33) • Continuing on its Convergence path (page 35) According to Smith, the company had done whatever it could to make itself look successful in order to spike shareholder interest and drive stock value.

“I don’t have very much of an appetite for that and will never have an appetite for that. I believe in transparency, and I believe in honest dealings. I believe in leading the old-fashioned way and not trying to use smoke and mirrors and illusionary tactics to try to find favor from shareholders.”

That period was a critical time for him and, as difficult as it was, he learned from the experience.

“I learned a lot about what not to do. The people and the impact and the toll that it had on people, in the way that it caused them to worry, I vowed to never, ever put people through that. I’ve tried to always be careful, never to hire more than we need, never to overextend ourselves to where we would have to go through and have broad cutbacks and, as a company, to really place value on the Please see page 2

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ones that make things happen, and that isn’t in the c-suite.

It’s everybody else. It’s to place the value on the ones that really get things done.”

AWG ended up buying the Nashville division of Fleming, along with its Memphis division. Smith started working for AWG at that time. Drawing on his experience with real estate and development, he continued working in that area until 2007. At that time, he went back to the Nashville division for about a year, then moved to Memphis.

“In Memphis, we just experienced this explosive growth, especially down south.”

When he was offered the opportunity to head up a new division, Gulf Coast, he took it. AWG broke ground on the new facility in Pearl River, Louisiana, in 2011 and it opened for business in January 2013. The new division became very successful.

In 2014, Smith said he was approached about moving to the corporate office in Kansas City to take on the role of chief operating officer following the retirement of Mike Rand. He moved in August and became COO the next year. About mid-year 2015, Smith said CEO Jerry Garland announced he would be retiring. In August, the AWG

‘It’s been a passion for him to support independent retailers and wholesale companies’ “David’s been a passionate leader about growing AWG and helping to grow the company, helping to grow independent members, helping to support independent grocery growth across the whole country. I think that passion has also been what’s driven him here at AWG. He’s wanting to see independent members grow market share. And then with that, he’s wanting to see AWG continuing to grow to support our members.

“David has a huge fingerprint on the development and the growth that went on with our new division in the Gulf Coast back in 2012 and 2013. And since then in his CEO role, he certainly has made a huge impact on the decision we had made to unify with Affiliated Foods Midwest and bring the Nebraska division and the Great Lakes division into the AWG family.

“Then certainly, in the growth of the Upper Midwest, as those two divisions grew with members wanting to join the cooperative and be part of AWG, the need to continue to build capacity and help to strike growth [there].

David has been a huge part of leading the charge and being the largest cheerleader for that. Those are definitely lasting legacies that David would have, and he certainly had a huge contribution and fingerprint on every one of those.”

ADVOCATE ROLE

board selected Smith to succeed Garland as CEO. “The rest is kind of history, I guess.”

Love of people One thing Smith takes great pride in is having been able to open doors or provide help to others, allowing them to achieve success.

“I look back and I think about the people that I’ve had the chance to work with along the way, and the great things that they’ve gone off to do.”

Please see page 4

‘He’s a great mentor for a lot of people’ “I’ve had the opportunity to do a lot of different things with AWG and interact with David, both from a vision standpoint as well as corporate. David’s been a great supporter through that whole process for me of getting to know AWG. “Most of my years were spent on the retail side prior to coming to AWG. David’s always been a great supporter. He’s always been somebody you could talk to wherever you’re at in the organization. He’s a great mentor for a lot of people, including myself.

He’s been instrumental in many people’s career here at AWG. “David’s been a wonderful part of [the growth of AWG], but we’re very excited for him to do other things in his life. He’s definitely earned it.”

– Tye Anthony, SVP of merchandising, AWG

Ability to connect is ‘generational gift’

“David and I have worked extremely close together the last eight years. We’ve both been leading day-to-day operations of the organization, as well as a lot of the strategic projects that we’ve been working on. He’s been, at times, our strongest cheerleader for me individually, as well as for our team, AWG and for our members. It’s hard to replace that.

“He’s got an energy and a passion for what we’re doing. He’s advocated for all of us in our company, as well as our members, and he’s been outstanding in that role. When I look back on it, what I’ve liked is each of us have contributed differently to that puzzle. And David, over the course of time, he’s really been able to utilize his strengths and really excel in them and use that to drive the organization. It has been awesome to see him shine.

“I think anybody coming in new to the role, there’s areas that you’re really comfortable with and areas that you may not have had experience in. He’s tried to build a team around him and support that team. I’ve appreciated him as a leader for that. It’s been great to learn from him, both on industry relations and how to help grow independent business across the country. His passion for what we do here at AWG to help family businesses thrive and succeed are legacies that I’ll carry forward, and I know many other team members will, too.

“He’s been a true friend and a mentor to me through this, and I’m excited for him and his family to hopefully push the pause button. We’re all not clear how he’s going to push the pause button, but we’re really excited for him getting to take some time in his retirement. It’s well overdue for him to take a break.

“It’s an exciting time for him and his family. We’ve got him on the food shows, so we’re trying to send him out with a bang. I think he’s getting a kick out of that.”

“He has a special generational gift to be able to connect with people that you just don’t always see in someone in his kind of position. It doesn’t matter who it is, it could be the CEO of a huge CPG company, it could be the owner of 100 stores, or it could be the guy cleaning up the meat room, it can be a kid pushing in carts. He treats everybody the same. There is no pomp and circumstance about him. He’s just genuine and caring, and it just comes out of him everywhere he goes.

“He doesn’t take himself too seriously. He has a very light and jovial side that makes it easy to get to know and easy to approach him, and he’s an easy person to follow. You just want to work for him and want to be around him because he’s such a light and easygoing person. But behind the scenes, he has such an incredible mind and vision for what it looks like for the success of the independent retail industry in the long haul and how to best position our co-op to continue growth for our membership, to add membership and be the preferred supplier for independents all across the country.

“In addition to being highly intelligent, he has the ability to articulate complex problems in easyto-understand verbiage … He really has a way to bring real world examples to the mainstream and get it in very understandable representations of how it affects not only our members but independent grocers all across the country.”

– Dan Funk, president-elect, AWG

– James Neumann, SVP of special projects, AWG

“AWG has had a long history of supporting trade associations – local, state and national level – and particularly in areas where it aligns with helping our members grow and being successful in our marketplace. In an overall company stance, it’s been very important to us to be part of all the associations and help drive that forward. I don’t see any of that changing.

“Certainly, if anything, we’re going to continue, as we’ve grown in states and geography to be more aggressive in new states, while monitoring and being part of efforts in individual state and local areas as well.

“For David, individually, it’s been a passion for him to support independent retailers and wholesale companies throughout the industry to try and help drive the industry. He has been very active, very vocal. And I think you’ll see both myself, as well as the other ELT members, stepping into some of these roles in the future to continue to advocate and help drive independent grocery success throughout the country … I think you’ll continue to see us be very active and have a strong voice for independent retailers across America.”

TRANSITION

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This includes employees who have gone on to lead companies, helping family businesses grow and prosper and helping many suppliers connect with independent grocers.

“If I take any pride in the highs of my career, it has to be just the privilege of being able to be a small part of the success of others … It’s been a unique role where we had an opportunity to help a lot of people. We’ve been blessed with great successes, and we’ve had some big challenges, too. The thing that I’m most proud of is, because of the unique role of the co-op, the unique role of the way our company works, because all we do is for the independent grocer, that we’ve been able to make an impact on them.”

Convergence During his time working for voluntary wholesalers, Smith realized there was a distrust in the buy-sell relationship.

“The consequence of that relationship is the better that the supplier does, it’s at the consequence of the retailer. I get it. There’s a distrust. It’s just inherent. But whenever I came to AWG and really started to understand how things work, and that it’s a closed system and that all of our profits are given back to our retailers, one of the top things that just was burning in me was to figure out how we could start to instill more trust. I knew there was so much more that we could achieve if we could have that level of trust.”

He realized there were so many things that could be done more efficiently and effectively if the wholesaler and retailers “did more together.”

That was one of the overarching purposes of the Convergence initiative, Smith said, to “start to head up that road.”

He knew the only way to develop trust was to do what he said he was going to do, over and over again.

“You start small and you build big, and that’s what we’ve been doing. While we’re nowhere near where we

He set up ‘team concept of leadership’ “Back when he basically led the startup of Gulf Coast [2012-13] …

I saw him as a definite potential leader if he would come to Kansas City. When I first talked about that with him, he was probably just more focused on getting Gulf Coast up and running. But I wasn’t surprised when he came up here in late 2014 or so. For him to be one of the candidates when Jerry Garland was retiring didn’t surprise me a bit.

“When David took over, I think he was really good at trying to set up a team concept of leadership. Traditionally, we probably had more of a CEO in charge and a couple of close executives that they depended on. And David expanded that to be a bigger team.

“I think that played into a lot of people growing in their careers – myself included – to take on more things and feel like you were helping steer the ship, as opposed to just maybe executing.

“I think it really helped us to push it down even further into the organization, so that things that are being decided or initiatives or ideas or recommendations don’t have to be born on Kansas Avenue for them to be good.”

– Gary Koch, CFO, AWG

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Greatest legacy will be his support of reviving, enforcing Robinson-Patman Act “David Smith is literally one of the first people to volunteer to help support an industry initiative or effort, and he stays personally involved to see it through. Honestly, I’m not sure when he sleeps, because he’s always been there, willing to help support the greater industry cause.

“His greatest legacy for this industry will be his support for reviving and enforcing the Robinson-Patman Act. We all saw during COVID the inequities that occurred in the marketplace, driven by the dominant food retailers. David laid his and AWG’s reputation on the line to advocate for what is right and to ensure that American communities, whether they are rural or urban, have access to the products they need at competitive prices. I am convinced we would not be where we are today if it were not for David’s leadership and his personal investment in this issue.

“While I’m very excited for David and his family, selfishly I will miss his presence at NGA and throughout this industry. Fortunately, David and the AWG Board of Directors have built an incredibly strong and capable team, led by Dan Funk, who will carry AWG forward.

“It’s so fitting that he’s being recognized by The Shelby Report with this honor, and it was wonderful that Stephanie [Reid] was able to recognize David at the spring ROFDA meeting. When we think back to those great men and women who have built and sustained the independent supermarket industry, David Smith will always be at the top of that list.

“David, thank you for all that you have done for NGA, and on a personal level, thank you for your friendship and mentorship to me over the years.

“I’m sure he’s happy he’ll never have to wear a sport coat or tie again as he looks forward to many great days fishing on the beautiful Gulf water.”

– Greg Ferrara, president and CEO, National Grocers Association need to be, we’ve already been able to drive over $50 million a year in savings for our members in cost of goods and in trade funds. That’s just a small tip of the iceberg of what we can do as we do more and more together.”

Unjust leverage A strong advocate of the independent grocer, Smith said he is saddened at the way things have changed since the 1970s, as it relates to the relationship with suppliers and competition. He said in the ’70s, everything was very transparent.

“The companies that made products that we sold in the stores, there were efficiencies and economies of scale, and we knew how that worked. If we could only buy a case of something, we knew what the price for that would be.

If we could buy a pallet of that product and could put together a mixed truck from that same manufacturer, we knew what the price would be.

“We knew what the price would be if we could buy an entire tractor trailer of a single product, which was the most efficient way for them to sell to us. We understood those things. It was as simple as doing everything we could to try to find the largest scale in order to achieve the most we could. If we couldn’t get there, we understood it. It was a challenge, the competition, being able to get there.”

Today, it is more than just efficiencies and economies of scale. There is a factor of unjust leverage, according to Smith. This is due to the very largest retailers having the ability to “put a supplier out of business if they turn on them.”

“That’s one thing that we have to advocate to change or else we’re not going to have supermarkets anymore.

We’re not going to have independently owned, neighborhood supermarkets.

We’ll just have chains where they choose to go, and we’re going to have all kinds of areas of the country that are just going to be devastated because they’ll lose their local grocer.”

Smith said independents are not looking for a handout but for “a clean shake.”

“If we can buy in the same efficiencies, in the same levels and quantities as a competitor, I should be entitled to buy the same way as anyone else. That’s how I believe, and I believe that it should be transparent. The nice thing about it is that the manufacturers would like to be like that, too.”

However, he noted that many large and small suppliers, in their 10K and 10Q reports about risk, cite the concentration of the largest retailers as their No. 1 risk factor.

“They cite that because they say that those largest retailers, if they decided to eliminate the product lines from their stores, they could put the companies out of business and that’s their largest risk.”

Per Smith, there is a term for companies exerting that kind of leverage.

“If that happens, and it happens to me or you, just in life, they call that extortion. It’s when someone is able to say, ‘You do this or I’m going to take this action,’ and it’s some action you can’t hold up under, it’s something that is devastating to you. So the only time you act in a way that’s not in your own best self-interest, you’ve been extorted.”

He said the theory that competition is good as long as it saves the consumer money has led to businesses turning their heads to this practice.

“I agree with that, to a point. That’s a snapshot in time.

What we’ve learned – and we learned a lot about it during COVID – is that even if those largest chains are lowering prices in the short run to eliminate competition, when they’ve eliminated the competition and the independent grocer and the local grocer and regional chain has left, they raise their prices in perpetuity. So the savings, the illusion that the consumer was being helped, they were being helped but only for a season. And when that season was over, the prices went up forever because they were left unchecked.”

Smith said there are no checks and balances anymore.

That’s why he and others have been advocating for enforcement of the Robinson-Patman Act. Please see page 6

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“I’ve been very pleased that there’s been traction on that. I’m hopeful that’s something that will continue, and I believe that it will. A lot of people, they’ve woke up because it’s not only about trade funds or promotional dollars or cost of goods. It’s also just outright supply, where the big guys get the product, little guys get none. It’s all kinds of things, the way that it manifests itself, and we’ve seen it at its worst during COVID. Consumers deserve better, and I’ve seen what happens when small towns, even county seats, lose their supermarket. It’s not good.”

The Robinson-Patman Act was established over the supermarket business, Smith said, so the large chains could not use their leverage to try to eliminate competition. However, in the 1980s the theory that “competition is good, as long as it saves the consumer money” became popular and the law was not enforced.

Smith said the federal government, for decades now, has considered Robinson-Patman “an antiquated law, because they really thought that economies of scale were at play and the strongest shall survive, and really, that’s not what it’s about. It’s when these companies get so large that they can leverage these suppliers, then the suppliers are left with no other alternative.”

He said there is a clear strategy where the largest of chains eliminate competition in an area, then use those profits to target areas where they still have competition “so that they can eliminate more and more competition in

a systematic way.”

The Robinson-Patman Act, along with the Sherman Act, are two laws that are on the books to eliminate or to prohibit these type of actions but haven’t been enforced in four decades, Smith said.

The issue, which is being championed by the National Grocers Association, is being talked about by lawmakers.

Smith has testified on the issue before the U.S. House, Senate and joint committees. He also said he met individually with every member of the Federal Trade Commission, the governing body with oversight of the matter.

“I’ve talked with the Judiciary Committee. I’ve talked with anybody that would listen to me, or talk to me, pretty much.

“I would love to be positive and say that something will be done, but unfortunately, we know that it’s politically charged, and big companies have a lot of money. They have a lot of lobbying power that can persuade support and keep things like this from getting ahead.”

Smith said he is hopeful, but he is a realist.

“As far as going forward, I have the ultimate confidence in the National Grocers Association and in their leadership and the efforts that they’re leading. So many people are working on this. It’s not a sole person crusade. They’ve got tremendous momentum and so many great retailers that have been standing up for this.”

There has been some legislation passed that is beneficial to independent grocers, and there are several areas

He reflects AWG’s core values – humility, accountability, transparency, serving Jeff Pedersen, president and CEO of the Retailer Owned Food Distributors & Associates, said he first met David Smith in 2003. Pedersen was working for AWG and transferred to the Nashville division, which was acquired by AWG as part of the Fleming Cos. bankruptcy.

Pedersen was VP of merchandising for the division, and Smith was working in the area of store and business development.

“What I saw from David back in those days was, right out of the gate, his passion to help the independent retailer, whether at the time it was through acquisition of stores or remodels or finding new locations, or just helping AWG to bring on new customers down in that part of the world. From day one, I learned really quickly how passionate David was about the grocery business and helping independent retailers. “ Pedersen said they went on to follow varied paths with AWG over the next several years. Smith stayed in the Memphis and Nashville area, which was a new territory for AWG, and Pedersen went to Oklahoma City.

He said Smith was completely focused on growing AWG and helping independent retailers in the area understand the benefits of a member-owned co-op. “It was like he was in waters that were just meant for him, and really was able to help them understand the benefit of being part of a member owned co-op versus what they had seen in the past being part of a publicly traded company. He was very passionate about helping them understand that.”

Pedersen said when he decided to retire from AWG in 2021, after nearly 25 years with the company, Smith and the ROFDA board reached out to him about taking on the role of president and CEO. “David was championing the belief that it would be a great opportunity for ROFDA and myself.”

Pedersen said he was ready to slow down and fish, but Smith told him there were still things he could do to help the independent. He credits Smith and the ROFDA board with staying focused on helping the independents and the co-op wholesalers “stay strong in the space.”

Pedersen said while in some areas ROFDA wholesalers compete against each other, Smith has taken the approach that “the greater good is really making sure that we have successful independent retailers. The rest of the board and those CEOs are on the same page.”

“We have to take off our competitive hat and say what’s best for independents and how do we help them. I would say that all of those CEOs champion that cause, but because AWG competes against many of the wholesalers, David really helped to create a belief structure that it’s not about how we compete, it’s about the strength of the independent retailer and how we help them.”

On a personal note, Pedersen said Smith is a great friend.

“David is one of those special individuals that makes everybody in the room feel like he’s known them forever, and that they’re another brother or sister, they’re part of his family. He’s got a special talent in really trying to listen to people and care for them.

“I believe that his faith and his family and his leadership style really embrace AWG’s core values, which are humility, accountability, transparency and serving. I believe that David really tries to live that every day in his approach to helping others. He was such a big part of my life, and I look at him as a brother in my life that I wouldn’t have wanted to live without. He’s been a very, very positive influence on me and my family.”

– Jeff Pedersen, , president and CEO of the Retailer Owned Food Distributors & Associates

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that are getting good momentum from industry support.

While he will not be involved as much after retirement, Smith said he is happy to help if called on.

“This is a lifelong passion, and you don’t give things up that you believe in. I know that the ones that are even more qualified are behind me. I’d love for them to stand on my shoulders and be able to take us to a higher level and even maybe get something over the finish line. But I feel like I’ve been on a relay race, and I just carried that flame for a distance. And the ones that have taken it from me, they’re the ones that are taking the key leg of the race, so I know they’re going to do great.”

Brings ‘instant credibility’ wherever he goes “David has led AWG through lots of growth, lots of strategic issues that I think put them in a strong position going forward.

He’s developed relationships with retailers who are AWG members and those who aren’t AWG members throughout the industry, through his efforts with the National Grocers Association.

“I think that a lot of people know him, and that gives AWG instant credibility wherever he goes, representing AWG and as an ambassador for AWG. I think he has done just a super, super job.”

Speaking to Smith’s advocacy efforts for the independent grocer, Eskew said he had served on the board and the executive committee at NGA with Smith for several years.

“Having somebody in his position, willing to do all of that and who is able to articulate it in a way that congressmen and the people in Washington can understand is critically important to our industry.

He’s been willing to do that, and he’s been able to do it in a clear, professional way.

“And I think he’s made a difference for all independents everywhere through his efforts. He’s just good at it.”

– Kim Eskew, chairman and CEO of Harps, AWG board member

New leadership Those coming behind him at AWG include his successor Dan Funk and a strong executive leadership team.

Smith had set a “window of time” for his retirement with the board of directors eight years ago. In 2020, he set a specific date and started succession planning.

Smith said when he became CEO, one of his goals was to broaden the span of leadership. He wanted to put together a “high-functioning leadership group that worked together but challenged each other, and to be better prepared for Please see page 8

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FOOD INDUSTRY HALL OF FAME INDUCTEE

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growth.”

Having worked together for several years, Smith said Funk is “wicked smart.”

“His background in merchandising and operations far exceeds anything that I’ve ever had. I’ve worked with him for 12 years, and I know what he’s capable of doing. He, along with the rest of his team are going to achieve much more than we’ve ever achieved.”

Smith said AWG had “tremendous leaders” in the past, and he wanted to build on their strengths by putting together a team that, collectively, had more experience,

‘Life-long advocate’ for grocery industry “David Smith has been a lifelong advocate for the grocery industry, and I am proud to know him and to have become a partner with him and AWG over the last few years as they became our primary wholesale supplier.

“He is a man of integrity, transparency and has worked tirelessly for us and for the industry as a whole, to make us all better. His legacy in the industry spreads far and wide, from his influence on the smallest main-street retailers that AWG supports, all the way to Capitol Hill, where he has worked so hard to advocate for the industry.

“I wish him the very best as he moves into retirement, but I know our friendship will continue.”

– Chris Coborn, chairman and CEO, Coborn’s

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skill and intellect than just one individual.

“It was more about going to a team approach. In 2015, we put together an executive leadership team, which is the key leaders at AWG in all departmental areas, and most of us have been together since that start in 2015.

For eight years, we’ve all been working together.”

There have been a few retirements and recent new additions, including some “extraordinary leaders” who are positioned to have a tremendous impact on AWG’s future, Smith said.

Derek Jones recently was hired as EVP, division operations. Jones was the “unicorn” Funk was looking for to fill that position, Smith said. Funk had said he wanted someone with a retail background but also had worked in wholesale, had been in charge of warehousing and distribution and also had been in charge of everything from

procurement to sales to customers and more.

“We were so blessed to find Derek… He was a perfect fit for us, and he’s going to be a fantastic asset to really supplement Dan and this new leadership team.”

Smith said AWG has been blessed over the years with people who were able to build long and lasting relationships with independent grocers. Recent hire James Neumann is one such person. As SVP of special projects, Neumann will be AWG’s retail advocate.

He joined AWG after serving on the board for 13 years as a member retailer. He and his brother owned stores in Louisville, Kentucky. He left the company to join AWG, with his brother and brother-in-law continuing in the family business. Smith said he believes Neumann will be “fantastic” as retail advocate and can’t wait for all AWG members to get to know him.

“He is going to be that face that people remember and associate with AWG.” Tye Anthony is leading the merchandising team, which Funk previously oversaw.

Anthony, with support from Funk, will “accomplish great things in both Convergence and all things that have to do with helping our stores be more competitive at retail.”

Richard Kearns, who is over warehousing and distribution, is “absolutely brilliant,” Smith said. He is helping transform those operations from being so

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labor intensive to a more sustainable model by leveraging automation and technology. AWG will be continuing that transformation “on a pretty quick pace,” as it already has commitment for more automated facilities, such as the all-inone warehouse in Hernando, Mississippi.

“We’ve got lots of work to do in transitioning to those type of facilities. What that’s going to mean for our member retailers long term is going to be fantastic, because it will alleviate the worry of what happens when the hurricanes come in, and what happens when we have another virus or when we have labor shortages.

“We’re able to operate and have a sustainable supply chain and have the advantage of having groceries on the shelf when others may be challenged by a number of things. It’s going to give us a lot of redundancy. It’s going to give us a lot of flexibility and just be a great, great thing.”

Shelly Moore, chief information officer and head of technology, has been with AWG for two years, and “she has such a tremendous road map.”

AWG is investing several million dollars in modernizing its technology platform to better serve its member retailers, “to just make it easier for them running their respective

9

Has herded ‘spirit of independent retailer’ “David, as it relates to his characteristics and leadership style, came to AWG, to his position, at the right time. He has been the most innovative, open minded, articulate, kind of a scholar, Southern gentleman that has been able to herd the spirit of the independent retailer and get them directly focused on what we need to do to be able to compete and be relevant.

“He’s a teacher, trainer and coach. And he adopts the term ‘teammate.’ He knows that the teammates are so important to the organization and his team members to execute … He’s been able to bridge the gap of the old grocer and the new grocer. Not too many leaders can do that these days.

“I’d like to call out his influence and his footprint that he’s leaving AWG with … Lou Fox was always the legend, but David, well deserved, is probably the single individual that has taken us to a position where we can compete for the future and has got us on a strategic path. We’ve had great growth under his leadership. His focus has always been, ‘how can we take this battleship and get it ready for battle?’ When he took over, he really built us a battleship for the future.

“And the AIO, that was a 10-year project … That’s just one example. It’s a good example, but there’s hundreds of those examples as it relates to people, processes, productivity, growth.”

– David Ball, chairman, CEO and president of Balls Food Stores and AWG board member

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businesses.”

Pat Reeves leads the human resources area for AWG. “He’s a tremendous leader and helps us form the culture that AWG has, and to attract and retain the best and the brightest. We’ve been very, very fortunate that we’ve been able to get fully staffed in all of our facilities and locations.

I know that many of the strategies that he leads that are implemented throughout is making a difference.”

Gary Koch, chief financial officer, is “our rock,” Smith said. He is the longest tenured member of the executive leadership team and will serve as Funk’s right arm, Smith said.

As a co-op, what AWG does for one member, it does for all members. While all members are equal, it is important to know and understand that no two are the same, Smith said, which provides both challenges and opportunities.

The company must walk a fine line there and be really good stewards.

“Gary and Dan will be a tremendous partnership in doing that. Gary’s also a great steward in financial performance.

Since all our profits go back to our member retailers, it’s really important that we make our numbers every year, and we’ve been blessed to be able to do that and maintain that performance for the last couple of decades. We’ve never missed a year as far as having met or exceeded our patronage targets that we have for our members, so it’s really worked out well for us.”

Rounding out the leadership team are Stephanie Becker, chief legal officer; and Emile Breaux, SVP, chief sales and support officer.

Smith has great confidence in this team moving AWG

Took chances to better AWG, its members “David is one of the most visionary, charismatic leaders I have known in 50 years in our business. He makes bold decisions that allow AWG and its member companies to stay competitive in future years. This sometimes requires capital where results will not be seen for years. The new [all-in-one] warehouse and Convergence are two examples.

“David has taken them into the next level of technology so that they can be even more competitive than they are today. Convergence falls under that technology investment. Their go-to-market plan with Convergence allows them to be competitive with the leading-edge retailers in the United States today.

“Because information is everything in today’s world, the more accurate information that you have to work with suppliers – to make sure that you’re going to market in the most efficient, best way to be competitive – starts with technology … Now that they have Convergence, they are equal to or better than the leading supermarket chains that are out there today.

“A tribute to David for not only investing in technology but investing in quality people to take over the leadership when he departs. Dan Funk fits that category … There are a lot of good CEOs. David is one of the best. He is willing to take chances to make his company and his retailers better.

“He is a great people person. David has the unique ability to connect with all people, from the floor sweepers to the board room. He will be missed.”

– Bob Richardson, director of trade and industry relations for The Clorox Sales Co.

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and its member retailers forward.

“I believe that one of the many things that people look at AWG and expect from us is continuity … The things that we do are very consequential for our members, so we want to make sure that they’re a part of it and that we communicate well, so it’s never a secret. This has all been very deliberate. I’ve always known that after my bag of tricks is empty and I’ve done what I can do, it’s time for me to step aside and for someone else to take us to a higher level. That’s what Dan’s going to do.”

Always understands both sides of equation

Smith said he believes AWG’s “explosive growth” will continue.

“I can only imagine where we will be 10 years from now. It exceeds even my imagination of where we will be, because that’s the kind of people we’ve got that’s in this next round of leaders.”

Reconnecting with family Smith and his wife Tammy have been married for 41 years. They have two children: son Cody, 36, and his wife Tia; and daughter Blakelee, 35. In 2019, he and Tammy bought a house in Cookeville, Tennessee, for their

“David, in my words, has always had a commitment to excellence in building his industry presence. He’s always been the first one to collaborate, to understand both sides of the equation – not just what’s good for AWG and its members. I think his leadership has simply been best in class.

“On a personal note, he has been overwhelming with engagement and support whenever I have needed help. I’m the chairperson of the industry collaboration council for FMI, so whenever I’ve needed to get feedback on things, David has been there or offered up Dan Funk or someone to give the appropriate feedback.

“He has helped me personally in my career, as I made the transition from predominantly 35 years in food and beverage and now join Kimberly Clark.

“He was one of the people that I reached out to, to say, ‘You know me, tell me about this company.

Is this a good company culturally? Am I a good fit with this company?’ But more importantly, ‘Do you think I could add value to this company in front of the customers?’ And David was one of the people that I did reach out to.”

‘Great advocate’ for independent grocers

– Denny Belcastro, VP of industry affairs and customer development for Kimberly Clark

– Brad Ramey, owner-operator of Ramey’s; been with AWG since 2005

“One thing about AWG, everything they do, they do for their members. The only reason to build a warehouse in Pearl River, Louisiana, is to cut my freight from Memphis … That’s 2 percent cheaper on the cost of groceries coming to every one of my stores.

“They take a look at that in everything they do.

And that’s the reason they choose to do projects. It’s not to make more money, because they’re a co-op.

They make decisions on what’s best for the retailers, and it’s one of the reasons that from that day in 2005, I switched all my stores.

“He is a great advocate for the independent grocer. I hope he continues it. He’s not bombastic, he’s not demanding. He knows that it takes small, baby steps to get anywhere, especially when you’re dealing with government entities or changing the way things have been done for 30 years. And that’s what makes him one of the smartest people I know, in the sense that he’s a people person … He’s always trying to help me, and I would do anything in the world for him.”

Approach to business underscores people are a company’s most valuable asset “I could not be more pleased to endorse and applaud David Smith’s induction into Shelby Publishing’s Food Industry Hall of Fame. David has been a friend and valued member of the FMI community for many years, and his contributions to the betterment of the industry are par to none.

“He is a stalwart supporter of FMI, having served multiple leadership roles over the years, including as an active participant on FMI’s Board of Directors and Executive Committee. David is reasonable, accountable and creative, making him a natural leader on the FMI Wholesaler and Finance Committees and keeping us focused on successful and profitable governance models. He brings reason and keen insight to weighty discussions about issues of critical importance to our association and the food industry.

“There’s no question that he has an acute business sense, but David has always been a champion of his people, investing in them and their success to better serve the shopper. His approach to business underscores that people are a company’s most valuable asset.

“When he served as co-chair of FMI’s Future Leaders program in 2019, David told us, ‘The foundation for being a great place to work is the environment and culture of the organization. It is our leadership and teammates that form the environment and culture at AWG and articulate what we stand for.’ David leads his people with humility and grace, taking their feedback to heart to cultivate an environment that fosters dedication to the company’s mission and a sense of belonging. Without a doubt, he has created a dynamic culture at AWG that many of his peers at FMI celebrate and try to emulate.

“We are sad to be losing David’s leadership and commitment to the industry. I will especially miss the sound counsel he has provided to me through the years, as well as his sense of humor and caring spirit. We wish him and his wife, Tammy, an exciting and much-deserved transition to retirement to spend more time with family and one another.”

– Leslie G. Sarasin, president and CEO, FMI – The Food Industry Association

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Both children are back in the Volunteer State, which is Tammy’s dream to have the family nearby.

As for what he expects in retirement, Smith said he isn’t sure.

“It’s a lot like going on a vacation you plan for your entire life.

You’re going to a destination you’ve never seen, and you don’t know what it’s like when you get there. But it’s something that you really longed for, all this time. There’s some anxiety. I’m sure Tammy has some level of anxiety as well, because for our 41 years, I’ve been away at least part of the time.”

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He said his biggest regret over his career is the time he missed being with his wife and children, adding that he sometimes did not “do as good a job as I should have with my priorities of placing God first, my family second and my work third. I’ve made the mistake of getting out of alignment many, many times, and I need to make that right.”

He said being home will be an adjustment for everyone.

“There’s probably a fine line where enough of me is enough and too much is too much. As I learn where that line is, I’ll plan not to exceed that line.”

He said on a recent weekend at home, he was talking with his wife and daughter.

“My wife commented to my daughter and said that, come first of the year, I was going to learn about boot camp. I’ve never been in the military, but I can imagine that must mean that I’m getting ready to go through some

sort of an intensive makeover to establish new discipline.

I look forward to that.”

Smith said that, at 62, his “model year’s not that bad, but my mileage is pretty bad.”

He has had a good career, but it’s the friends he made along the way that he cherishes most.

“Those friends, that’s the thing that I’ll take with me to the grave. My last memory will be the great people that I’ve gotten to work with in this business.”

‘Focused on trying to create efficiencies’

Makes ‘everybody better at what they do’

Has ‘just incredible retailer connections’

“If he’s not anything else, he’s a deal maker. He’s negotiated to buy warehouses and build warehouses and bring on new customers and has been the catalyst for growth for AWG. His personal touch has made that happen.

“He was a retailer first, and he’s a retailer at heart, so he really understands what the retailers need to be competitive. And he’s focused on trying to create efficiencies and drive the cost of goods down for all members. He’s a guy that’s in a high-level position, and he always takes a phone call and will talk to you and try to work things out, anything from egg prices to building a new store.

Speaking to Smith’s advocacy efforts: “The Greg Ferraras and NGAs of the world, those are great.

And they are these people in Washington, they’re able to get their foot in the door and all that. But when you’ve got somebody like David or Dan … representing AWG, then you basically can show them a map and say, ‘Look, here’s 48 states and our customers, and these are real people and they’re catering to your constituents. This is what they need.’ And I think that’s a big deal to able to do that.”

“I’ve always had a tremendous amount of respect for David, just [his] amount of experience and contributions to the business. He’s made everybody better at what they do … David’s leadership style at AWG really holds us to some very high standards to be the best we can be as a wholesaler.

“In terms of growth, David for years played an integral role in business development for AWG. His background really came out of the real estate market analysis areas, where he helped members find new sites, identify locations for building stores, as well as help evaluate sites for acquisition. He later went on to do the major business development role for the company, which has been in front of retailers.

“Probably where most people know David is from his days when he spent time running all over the country, talking to retailers about AWG and really onboarding many of the new members that we’ve seen over the last decade or so. And of course, when he took a leadership role down here in this new division called Gulf Coast, he led the charge in building up the business that we enjoy today here.”

– Steve Edwards, owner of GES Inc. (Edwards Food Giant)

– Emile Breaux, SVP, chief sales and support officer, AWG

“David just has such a big personality, engaging humor, and he’s such a people person, such a connector. I have been stunned and amazed. I swear he knows every independent owner-operator, certainly up and down the Midwest, but even outside our lane – just incredible retailer connections.

“Despite his humility and engaging personality, he’s just an incredibly smart, incredibly strategic thinker, very savvy. But at the same time, such a down-to-earth and personable human. He’s certainly been tremendously supportive of the Convergence program and the investments that we’ve made over there and recognizes that power of connectedness and the power of technology. He’s just been a fun leader to work with here, over the past couple of years, to watch and learn.

“David is, clearly, going to be tremendously missed, but I think he’s also leaving us in great hands. Kudos to him for being out ahead as a leader and thinking about succession planning, bringing people into the organization that he sees the future for and planning for that success. I think with this organization, I’ve been pleasantly surprised and very impressed at our ability to bring leaders in and grow them up from within, to be able to take on more responsibility.”

– Shelly Moore, chief information officer, AWG

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Smith’s leadership throughout process has been ‘steadfast and resolute’

by Treva Bennett / senior content creator AWG’s all-in-one distribution hub in Hernando, Mississippi, has been a huge investment and massive undertaking for the company. The AIO facility is providing immediate and long-term sustainable benefits to the membership, according to AWG. The first of its kind in the U.S., and just the third such facility in the world, the AIO will replace warehouses in Southaven, Mississippi, and Memphis, Tennessee, while also housing an expanded variety of items and new products.

By substituting technology investments for human capital, it will reduce operating costs and provide a more reliable source of supply, all while significantly improving the product assortment available to member stores, the company stated.

While numerous benefits are associated with the AIO and its technology, none will be more apparent than pallets arriving at member stores. They are stacked better, resulting in less damage and fewer errors. Similar products are segregated together for easier and more efficient handling at the store, and fewer totes and pallets will be needed.

As a result, unloading time at stores will be reduced, fewer returnable assets will be handled, less time will be spent addressing credits and out of stocks will be

dramatically reduced. All of this adds up to savings for AWG members.

The AIO will provide the Mid-South division members with a full assortment of product categories and serve the entire membership and non-members with health and beauty, seasonal, specialty food, cigarettes, tobacco and a new extended variety of ambient and fresh-frozen items.

The AIO occupies 124 acres, nearly one million square feet of floor space and is more than 80-feet tall throughout. It accommodates all product temperature zones and is expandable for future growth. It also has unique features, including a state-of-the-art non-ammonia refrigeration system, 10 pressurized banana rooms, docks on both sides of the building to ensure end-to-end temperature control (promoting food safety compliance) and five high-capacity generators to ensure uninterrupted operations.

AWG President-elect Dan Funk said the co-op is in the process of moving division operations into the AIO, “as well as a lot of our centralized and future capabilities for expanding variety in that building and being able to support members not only in Mid-South but across the

company with expanded variety. A lot of our legacy, Valu Merchandisers business will be coming through that facility.”

CFO Gary Koch said the site uses automation and technology to take out some of the human error that can occur in selection, “because nobody’s perfect … occasionally you’re going to grab from the wrong bay or do something that is a slight error. This takes most of it away.”

The AIO also has allowed AWG to go from picking individual units in non-food items to a case-driven or innerpack type of unit.

“Our unit of measure has changed. That’s been the next transition that is really affecting retailer behavior, getting them to understand and do everything more like it was in grocery,” Koch said.

The AIO now is handling fresh meat and more than half of frozen products. Koch said when everything has been moved to the AIO, the Southaven facility will be shut down. “Once that’s over, we’ll be back to seeing more of the benefit.

Sometimes you’ve got to go through a little uneasiness to get to that end objective.”

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David Smith

Mississippi Gov. Tate Reeves

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Shelly Moore, AWG’s chief information officer, said she is excited about using data to transform the business. In the AIO facility, the use of data drives the automation.

“Understanding things such as product length, width, height, weight specification, all of those things are critical to driving efficiency and that automation. There are a lot of new learnings for the organization in terms of data, data quality, data governance … To me, it’s a critical part of what we do in technology and using that data to drive efficiencies.”

According to Emile Breaux, SVP, chief sales and support officer for AWG, the AIO addresses a challenge many across the industry are facing as far as workforce.

“We’ve got more work than we can say grace over,” he said. “Unfortunately, manual labor-type roles are not what … most people are looking for in their career. So we found a way to leverage automation to account for that.

“That’s really what Hernando represents, our attempt to mitigate any risks with limited labor. Moreover, it’s the accuracy and our ability to service our members in a way that reduces damage and reduces credits, improves assortment of items that we can make available throughout the network and do it in a way that’s fiscally responsible.”

Breaux added he believes automation will play a key role in the future of AWG’s facilities.

“What the all-in-one is really about is how can you take the most labor intensive, the most capital-intensive components of our distribution, like our each pick, and put that in one spot and service a big chunk of the network from that singular capital investment. That’s really what Hernando is all about.”

He said he believes other AWG distribution centers will include some level of automation in the future.

“How do you improve accuracy and the construction of pallet and service levels to your customer and also continue to reduce your reliance on a difficult labor environment? I think automation is the wave of the future,” Breaux said.

SVP of Merchandising Tye Anthony said he believes the AIO could have the “greatest impact on our co-op ever.

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FOOD INDUSTRY HALL OF FAME INDUCTEE The possibilities and the abilities to capitalize on that facility are enormous across our entire membership.”

After years of planning and construction, Anthony looks forward to seeing the AIO in operation.

“Our members are excited about it, obviously. It solves a lot of challenges in this business, whether that be labor, whether that be transportation, whether that be the ability to become more productive, all those things. It solves a lot of those challenges that the whole industry is going to continue to face. Our timing on that thing was impeccable … Hats off to our people who manage that whole process.”

James Neumann, former retailer and AWG board member and now SVP of special projects, said automation is a “great alternative” to continual turnover and other labor challenges.

He said AWG put a lot of time and research into the decision to move forward with the AIO, including selecting WITRON as its automation partner. AWG executives took board members to multiple sites where WITRON had installations operating to gain a better understanding of what they were proposing for the AIO and how it would help the co-op.

“As independent retailers, we’re skeptical of spending a lot of money on something that we’re unsure how it’s going to benefit [us],” Neumann said.

Automation takes out some of the physicality of the work, allowing AWG to train a more technical workforce that has a longer future with the company.

“It allowed us to invest heavily in a facility that has a much higher ceiling capacity, allows us to offer new offerings to our members by expanding our variety and specialty food. It’s allowing us to get into refrigerated and frozen specialty for all of our member stores for the first time. It gives us a tool that’s incredibly more efficient and accurate for our membership, and able to do it at a lower operating cost over the long haul.”

According to Neumann, everything should be transitioned to the AIO by the end of the year.

He added that while there is a lot of automation being used in the industry, “no one in North America has done a facility like we did in Hernando, and there’s only three in

the world that have all temperature zones – frozen, refrigerated and ambient – and does each pick for specialty food, general merchandise and health and beauty care under one roof. No one’s ever done it.”

He said it has been a massive undertaking, and “there’s been nothing remotely close to it in the history of our co-op.” While there have been some bumps in the road, Neumann said the AWG team has been “exceptional” in getting the AIO to “run like a top now.”

As the AIO was being proposed and now has begun operations, AWG’s member retailers are starting to see the benefits from the co-op’s investment in automation and technology.

David Ball, board member and owner of Kansas Citybased Ball’s Food Stores, said the $350 million capital expenditure was the largest in the co-op’s history. He said the AIO is an example of President and CEO David Smith’s leadership and vision.

“We will hold the trophy for at least six months or a year of being the most innovative, technology-driven warehouse in North America, if not the world. That’s a big deal.”

Steve Edwards, owner of GES Inc., which operates Edwards Food Giant and Cash Saver supermarkets in Arkansas, said the AIO will serve all of his stores.

“When that thing gets finished, it’s going to be a good deal … it’s really going to be a big savings for everybody in the company.”

Kim Eskew, chairman and CEO of Springdale, Arkansasbased Harps, said moving to the automated facility “puts us ahead of the game and in the direction that the whole world is going to probably wind up going, as it becomes nearly impossible to find people to do that job.”

He commended Smith on having the vision for the AIO. Scan to access “His leadership through that has AIO ribbon cutting been steadfast and resolute.” video.

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AWG working to increase efficiencies, strengthen buying power via Convergence

by Treva Bennett / senior content creator Technology is the top strategic investment for AWG, according to its annual report. Part of that technology investment has been in the co-op’s Convergence initiative, which is the alignment of AWG, its member stores and supply partners.

Convergence brings the co-op and its members together to work on areas to scale its more than $24 billion in retail sales.

According to Shelly Moore, the company’s chief information officer, Convergence focuses on three major objectives. AWG is enhancing its assortment and image, as well as how it positions itself in the marketplace compared to competition on private label brands.

Another focus is assortment optimization – making sure AWG has the right variety in its warehouses to support its members.

This is accomplished through using data and technology.

The third focus centers around “the power of using data to better negotiate, plan, connect and collaborate with our suppliers to drive trade and investment improvement, as well as negotiation and supply chain planning,” Moore said.

All of that is underpinned by technology,

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she said. One of AWG’s investments has been its partnership with Circana (formerly IRI) to create a collaborative portal “so that we are working off of one version of the truth to our suppliers, so both our category managers and our suppliers have standardized reporting, more standardized policies so that as they're coming to the table and they're doing joint business and looking at the next six months or the year ahead, we're really working off the same version of the truth.”

“That's phase one, which has been out there for some time and has yielded a number of results in efficiencies, certainly in working with suppliers,” Moore said.

President-elect Dan Funk said the first work on Convergence has been focused on assortment and variety and looking at how to help lower the cost of goods and improve promotional planning around AWG’s private label assortment and go-to-market strategies.

“There’s a lot of benefit there, and we see that moving forward,” he said.

Circana and AWG have created a partner gateway to help improve “the interface between our vendor partners and AWG and helping to build out an infrastructure where CPG partners can look at AWG in the whole and

compare our business to other similarly suited businesses across the North American landscape.”

Funk said next steps will focus on IT infrastructure and helping members improve efficiency, boosting the shopping experience and also benefitting the distribution side.

“We’re going to focus a lot on our support services on the last phase of Convergence,” he said.

This will include taking steps to ensure “that we have the proper support infrastructure to help our members be successful at retail.”

According to Funk, AWG wants its members to be able to see the marketplace more competitively. It also wants to improve the flow of communication and efficiency from the vendor partners through AWG to the members, and also have data flowing from the members to AWG and back to the vendors. This will help with cost efficiencies and synergies that can be used for comparisons.

“The tools that Circana is bringing forward also are really valuable both for the vendor partners, as well as our AWG team members, in history, forecasting, supply chain visibility, the ability to really help a lot of our interfaces promote and to build sales at both retail and wholesale,” he said. “Those next phases will be focused on the retailer and tools that will help our members and continue to help our teams through that interface.

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Partnership with Circana results in portal to enable integrated collaboration

by Treva Bennett / senior content creator Associated Wholesale Grocers Inc. and Circana (formerly IRI) teamed up in January 2022 to launch AWG Partner Gateway, a portal to enable integrated collaboration between members and their vendor partners using Circana’s Liquid Data technology.

The gateway is part of AWG’s Convergence initiative.

Convergence is AWG’s long-term strategy to operate as a $23 billion cooperative retailing organization, delivering “bestin-class” capabilities to its members and vendor partners.

Wei Lin Wong, president of global retail at Circana, said AWG wanted to take some of the workflows between all three parties – AWG, its members and vendors – simplify and optimize them across a number of fronts such as category management, assortment optimization, supply chain management, rest of the market measurement and POS share analytics.

“That's where we plugged into the broader Convergence and the broader, long-term strategies to help enable some of the things that they're trying to do as they get to that simplification and better collaboration across all those partners.”

According to Wong, the process is “a pretty big technology lift.” It is underpinned by Circana’s Liquid Data platform.

“You can do whatever analytics you want at a very, very granular level … it Wei Lin Wong does it at speed and scale, designed specifically for retail and CPG, the entire store from a retail lens.”

Wong said the platform is live, with about 1,400 suppliers participating in some of the basic workflow, but work continues.

“We're working on a whole host of simplification opportunities, other things that will get put in as we go through the process. I would say, V1.0 is out and kicking.”

He said additional items, such as POS data, panel and consumer data and market measurement data, are on the road map. There is much more to come “as we add datasets, as we add analytics, as we add process and workflow into the platform.”

Retailers will benefit from market measurement as well as POS and panel insights, Wong said. It will allow them to look at where they are compared to others in their market.

“That's data that's outside of the four walls of that retailer in particular, that we have from a broader market measurement perspective.”

Retailers also will have access to consumer data, looking at trips, baskets and other consumer measures and analytics.

“That’s all coming to the platform, I’ll call it 2.0. We’ll get it deployed for AWG’s retail partners.”

Wong said what makes AWG’s Convergence initiative different from what other companies are doing is the “breadth in which they’re working from a strategy perspective.”

While Circana has been helping other companies on “tying insights and data to supply chain and on-shelf availability, tying insights and data from a POS and panel insights perspective to activation, media activation, marketing, targeting,” Wong said the company is including all that and more working with AWG. “I think AWG is one of those more unique wholesalers who's trying to help their partners on all sides to dive into that data analytics world in that way as well, which is just obviously one part of the bigger Convergence strategy that they're working through.”

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visibility to the marketplace that will help our individual vendor partners make decisions that can best help grow our business, as well as help our merchants and, ultimately, their stores continue to grow their businesses.”

Funk said Convergence is designed to ensure the co-op is doing its part to help members and also to allow them to focus energy on helping drive their operations forward and “create the growth that they need at retail with their consumers.”

CFO Gary Koch described Convergence as the blending of AWG and its members so that, as much as possible, they “act as one.”

He said AWG wants to be seen in the industry, especially with its trading partners, as a $24 billion retail cooperative “because that’s the leverage that we should probably be given if it was all under common ownership. We'd be this $24 billion retail chain, and more people would probably take notice.”

“We are this cooperative that has approximately 1,100 members, and they're independent grocers and they can make individual decisions. We're not seen like that as much because maybe, in the past, we haven't executed in tandem.”

He said the Convergence initiative can provide alternative programs members can opt into “that don’t necessarily increase the cooperative’s bottom line but drive value directly to their bottom line.”

Emile Breaux, SVP, chief sales and support officer, described Convergence as advanced or “next level” category management.

“It's looking at the category assortment and promotional planning through the lens of the consumer,” he explained. “We're taking direction back to retail through sales data we get through POS data feeds, and we're putting it in some pretty sophisticated systems that have given us better data, better intelligence, on how to assort our categories, how to price our categories, not only day to day but with promotions.”

Breaux said this gives AWG better visibility into what’s happening in members’ stores so it can better negotiate with manufacturers.

“We’ve got far better market intelligence now that'll tell us objectively what we need to be doing in terms of changes, whether it's vendors that are in our categories or product lines, how we assort,

how we merchandise our shelves, the items which we promote, how aggressive we get in our promotions.

It's a very advanced and sophisticated data-driven approach to category management.

“It gives us visibility into what's happening at the shelf far better than we've ever had in the past,” said Breaux, adding that the process helps put AWG on a level playing field with some of the “largest players on the planet.”

SVP of Merchandising Tye Anthony added that Convergence is capitalizing on as many opportunities as possible to leverage the buying power of AWG as a whole. This is more important in today’s competitive environment and what many see as an unlevel playing field as far as supply chain goes.

Anthony said AWG members represent $24 billion in retail sales, “which carries its own strong buying power.” Leveraging that power is what Convergence is all about.

“I commend the board and our members for looking at that, from our largest members to our smallest members, saying we certainly are a lot better together than we are apart.”

He said he believes Convergence has been well received from the vendor community, because it has created efficiencies.

“They realize that it is yet another thing that they can get a better return for their dollars on, too. We want to see more vendors embrace it even further.

But we're very pleased and satisfied with the efforts to this point, and thank our vendor community for helping us along this path.”

Anthony said there is more excitement among AWG members around “contributing to that greater cause than we’ve ever had in the past.”

Looking more closely at the member side of Convergence, SVP of Special Projects James Neumann said Convergence provides transparency “from top to bottom, because what the CPG wants is information so they know how effective their promotions can be, what price points determine case movement, what makes their spend make sense.”

“When we can only show half of the picture by showing wholesale movement, it doesn't give them the lens to be able to accurately depict if their spends are working based on the metrics that they compare against when they're looking at chains,” he said.

“It allows us to negotiate with our vendors with a better level of certainty and accuracy and benchmark

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Neumann noted that one lesson learned from the COVID19 pandemic was that it’s not just about cost of goods but also availability of products. He said when the world’s largest retailer is demanding 97 percent order fill rates or the vendors are penalized for not delivering, those vendors may undersell to everyone else to meet that requirement.

He said Convergence allows AWG to make a case to those vendors using specific data to “pinpoint the inadequacies in deal level and supply chain and have better leverage to offer better supply and better cost of goods to our members than we did without this information.”

It also allows AWG to develop “a smarter planogram” to better concentrate volume for its vendor partners so “they’re not chasing the breadth of variety.”

“They can focus on the items that are selling better and bring us the items that are selling better in other channels that we might be missing in our planograms. Specifically, it helps us with negotiating our private brands and our Best Choice label by being able to drive better cost of goods because we have better penetration within our stores to create movement. It's kind of a big lifecycle. It's information from retail, back to wholesale, back to our vendor, which in turn delivers better cost of goods and gets new items introduced into planograms at a wholesale level, which can execute at a retail level. And that lifecycle continues to perpetuate itself to deliver the best cost of goods with the right product assortment ultimately to our members' customers, our consumers.”

Retailer, vendor perspectives Kim Eskew, chairman and CEO of Springdale, Arkansas-based Harps, said one of the challenges in dealing with so many different independent owners is getting them to agree on anything.

“We’re pretty stubborn in our ways, and getting independents to all agree that we’re going to go this direction and this is the stuff we’re going to carry is hard. I think Convergence has been necessary in order to make that happen,” he explained. “It’s not been easy, but we anticipate that there are going to be savings as a result of that program.”

17

Denny Belcastro, VP of industry affairs and customer development for Kimberly Clark, said he believes Convergence is beneficial.

“Not only does the physical structure help us, it’s the systems and technology that goes along with it that is going to help us forecast better, produce better and obviously provide better long-term supply chain and customer service,” he said.

Belcastro commended AWG leadership for its forward-thinking approach in its investment in Convergence. Through the initiative, AWG is working with suppliers to say, “Let me tell you why you should invest in us.”

He said AWG has backed Convergence through the physical structure, investments in technology and “with strong leaders like Dan and his team that he has put in place.”

He said David Smith’s leadership has allowed AWG to “punch above its weight,” and Kimberly Clark views the co-op more as a national customer than a regional customer.

“Customers like that, what you want to do is influence manufacturers on how they think about doing business with you. Are they as big as Kroger? No. Are they as big as Target or Walmart? No. But in their marketplace, they drive market share, so they are critically important. And that's what their leadership has done in the past. And I think Dan and his team will continue to do that in the future.”

At a glance AWG’s Convergence Initiative focuses on three key areas: 1. Improving AWG Brands’ positioning.

2. Optimization of total Vendor Partner Trade Funds and their investment across the co-op and member retailers.

3. Investments in integrated technology solutions and analytics to continue optimizing category management processes.

AWG will continue to focus on technology to reduce the store-level labor associated with daily and weekly replenishment-ordering activities. Point of sale data will be crucial to this effort. AWG will continue to use technology to drive new efficiencies in category management, warehouse and distribution, supply chain, and retail members’ execution, ensuring sustainability and growth for its members’ futures.

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David Smith

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FOOD INDUSTRY HALL OF FAME INDUCTEE

Strong executive team ready to lead company to future success

by Treva Bennett / senior content creator When AWG President and CEO David Smith retires at the end of the year, his successor will step into the leadership role well prepared to steer the company into the future.

Dan Funk, incoming president, has been working with Smith for several months preparing for the transition.

Even before being named as Smith’s successor, the two had worked closely together, with Funk serving as chief operating officer since 2020.

Smith has termed Funk as “wicked smart.” He said Funk’s background in merchandising and operations “far exceeds anything that I’ve ever had. I’ve worked with him for 12 years, and I know what he’s capable of doing. He, along with the rest of his team are going to achieve much more than we’ve ever achieved.”

Funk joined AWG in fall 2012 David Smith and led its VMC subsidiary before moving into merchandising, procurement and marketing roles on the AWG side. When Smith was named CEO in 2015, Funk took a lead in merchandising, procurement and supply chain before being promoted to COO. Funk, who grew up in a small town in North Dakota, began his career working at an independent Dan Funk grocery store while in high school.

In college, he was employed by a large retail chain and worked after graduation with two different competitive

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wholesalers.

Funk said a “disproportionate” amount of his time has been spent in wholesale, supporting independent retailers across the country.

“That’s been a big part of my history, with a lot of corporate responsibilities over the years. It’s definitely in the blood, and it’s something that I’ve enjoyed doing and being part of.”

At AWG, Funk said it is important to understand what’s going on in the stores to be able to help its members to be successful.

“You also have to run the business that you we’re challenged to run every day. I’ve been fortunate to have roles of different responsibility in a lot of different areas. I think of it more as just being fortunate to be able to have a lot of different opportunities over the course of my career that have really gotten me to this time, to be in a position to try and help our members be successful and our team be successful going forward. That’s going to be the fun part and the part that I’m most excited about.”

Funk said, first and foremost, he and the rest of the executive leadership team are focused on a successful transition as Smith retires and he moves into that role.

“We’ve done a lot of work on building up our executive leadership team here in the back half of the year.”

This includes the recent additions of Derek Jones as EVP, division operations and James Neumann as SVP of special projects.

“We want to get through that [transition] to have our company prepared, both from the division level and the corporate level, for our company and the stores moving forward.”

CFO Gary Koch said Funk is “extremely intelligent about multiple facets of the business. I think he sees us needing to continue to grow in the right way and take advantage of opportunities, and maybe create some of our own

opportunities, to expand both geographically and maybe in some product lines.”

“I think we are definitely going to continue this upward trajectory that we’re on. The momentum isn’t going to slow down at all. I really believe he’s been looking forward over his career to become the man in charge. I think he’s really, really well prepared to lead us.”

Koch said Funk will stay committed to the membership, and that’s one of the reasons the board selected him for the top role.

“We like stability. I like to say we’re volatility intolerant.

We like the steady and improving results.”

He also said he believes Funk will be able to take up Smith’s mantle of advocating for independent grocers.

“I would sure hope that he’d be … continuing AWG’s proud tradition of not only participating but actively leading on various initiatives in the trade. AWG really stands for helping the independent grocers, whether we’re shipping to them or not.”

“David’s been very vocal on that, especially with NGA, on the power buyers and wanting to make sure that we are not being out-leveraged or being looked at as a channel that shouldn’t get all the opportunities that other channels get. I think Dan’s going to step right in and be that voice or be one of those voices … Dan is well suited to be very helpful, and obviously very intelligent about all the facts and what it really means to the independent grocer.”

Chief Information Officer Shelly Moore is excited about Funk moving into the president’s role.

“I think Dan’s got just an incredible background – his merchandising experience, his focus on products and innovation and how we work with our suppliers. I think the additional structure in his background, from some of the large companies that he worked with, is very positive for the growth trajectory that we’re on. He brings some of that structure and order and large organization experience. It

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Moore said she sees growth in the future for the wholesaler and its members, who have put their trust and confidence in AWG. “I certainly think that paints a picture of a trajectory for growth. I think that’s a critical piece of our future.”

Along with growth is an increase in efficiency, evidenced by the company’s “technology transformation” and the all-in-one warehouse in Hernando, Mississippi.

“It sets the stage for a future of driving that efficiency and, quite frankly, managing what I call workforce shifts and workforce transition in this country. These are very, very physical jobs, lifting tens of thousands of pounds on any given day. They are just very physical jobs that we’re seeing a workforce in this country not be as interested in, even though they’re great jobs.”

Moore said she sees automation as a path to the future, “making sure that we can support our members and we can get critical groceries and supplies to all the towns and cities that our members service and supply … I see a continuing trajectory for technology transformation that’s going to make not only AWG more efficient but make our members more efficient and our suppliers more productive.”

She said another area that sets AWG apart is customer service.

“I do believe our customer-first centricity is something that sets us apart. And quite frankly, the collaborative model that we run in, where we feed the hand that feeds us, it’s just an incredibly powerful business model. I spent most of my career in public companies, with Wall Street and shareholders to please, and this model definitely drives a different mindset in terms of our focus on the customer.”

Emile Breaux, SVP, chief sales and support officer, also sees a strong future for the company going forward.

“Dan’s probably one of the smartest guys I’ve ever met. He can remember the intimate details of discussions, and he knows his numbers as cold as anyone. I think he is a very well-suited candidate to pick up that role from David. He certainly brings a unique set of experiences, very different than David … I think Dan’s background, experience and really where his passion lies is going to serve AWG very well.”

Breaux said AWG will be leveraging “to the highest degree possible all the benefits that this new automation initiative’s going to put in front of us.”

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David Smith

OCTOBER 2023 • THE SHELBY REPORT

From page 19

“There are just countless projects currently in flight.

We have retail pricing programs that are in the process of being rolled out on next generation platforms with new capabilities … It makes your head spin, the amount of technology that’s going into this business in the initiatives that we’re trying to move forward at this point … We think that this is the best platform for independent retailers to leverage scale so that we can compete at the national and the global level.”

Tye Anthony, AWG’s SVP of merchandising, said the executive team members are “just as excited about having Dan now sitting in that chair as we’ve been about David.”

He said Funk brings a different perspective and is a “great inclusive leader.”

“We’re excited to turn this page in the next chapter. We all have a high degree of confidence in his knowledge of the business and the way he can lead AWG.” Anthony noted that AWG has had many great leaders who all have brought different strengths to the role.

“Certainly, Dan will bring many positive things to the table that will benefit AWG in the long term,” he said. “I think, as much as each one of those leaders have been different in their styles and their approaches, one thing has remained consistent. Every one of those leaders has been extremely focused around the success of our members.

That’s been the common denominator.

“Dan will be no different. He grew up in a family that was entrepreneurial and independent … He understands the needs of the independent retailer well.”

James Neumann, SVP of special projects at AWG and former board member, said while it is tough to follow someone as “revered and well thought of as David Smith,” he believes Funk is up for the challenge.

He pointed out that Funk was instrumental as COO in

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FOOD INDUSTRY HALL OF FAME INDUCTEE getting the company through the COVID-19 pandemic, getting the all-in-one facility open in Mississippi and in the expansion in the Upper Midwest.

“Dan really was the glue that held together all of our operations. Because he’s not in the limelight, I think a lot of people … just don’t know Dan as well as they know David. He has a wonderful, caring personality. He’s deeply invested in this co-op.

“I don’t know that I’ve ever met a smarter individual in this industry. His ability to process analytically, look at the numbers to get a pulse for operations, is second to none.

I have never seen anyone who just can dissect and understand how all business units are operating … He’s truly a full package.”

Neumann said while Funk is more analytical and methodical than Smith, he still has great vision.

“He’s always going to have his pulse on things because that’s how he’s wired. He’s always looking analytically and objectively on how things are running. But by having someone of Derek [Jones’] caliber to come in and really take that load off of him, you can see a different Dan already, because he’s starting to move into that next chapter of his life and leadership by being able to give up some of that in the weeds, operational oversight.”

Neumann said he, along with Funk and other members of the ELT have been accompanying Smith on “the Rolling Stones farewell tour of food shows.” At the events, he said Smith has continued to reiterate the fact that during his time with AWG they have never had “a better balance of leadership and depth of bench to continue to propel this co-op going into the future.”

Neumann said in the last three to five years, the board has focused on developing that bench strength and talent “because we had such a rapid expansion, going from three to five, then five to seven and seven to nine distribution

centers. We really spread our team out and didn’t have a lot of backfill. Now we’ve made a conscious effort, through our HR department and Pat Reeve’s leadership and his team, to go back and really streamline and update our talent evaluation and acquisition initiatives, as well as retention and getting highly motivated folks in the right tracks of training to be able to move up and backfill as their leaders get promoted or retire … It’s awfully reassuring when you see so many names of people that are ready for the job today, ready for the job within 12 months because of how we’ve overhauled our retention process and our training and promotion processes here at AWG.” AWG’s member retailers also are optimistic about the future of the co-op under the new leadership.

David Ball, owner of Kansas-based Balls Food Stores, which was a founding member of the co-op, said he is excited about the future growth of AWG. “It really looks good. I’m glad I’m an AWG member; always have been.”

He said the “very diverse executive leadership team” is capable of overcoming any obstacle.

“We have a very unique team. We have a lot of seasoned veterans, plus we have a good mixture of new, innovative, aggressive young people that are excited about the future of AWG.” Ball added that the board of directors also is diverse, comprised of single-store operators to multi-store operators. He said of AWG’s co-op model, “it’s all for one, one for all. The single-store operator has all the same services and benefits and buying power that the 50-store operator has.

It’s hard for people to understand that. And we’re very transparent. We’re open book.

“The leaders of AWG listen to the membership. You don’t have to be on the board to voice your opinion. They listen, and they’re there to support you … Their main job is

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Steve Edwards, owner of Arkansas-based GES Inc. (Edwards Food Giant and Cash Saver supermarkets), said he also believes Funk will do a good job heading the company.

“I think having somebody from within, that knows how the members expect it to be operated, that’s going to be a big plus as opposed to bringing somebody in from the outside. And he’s got a great team. There’s a lot of good people in place there in Kansas City.”

Brad Ramey, owner of Ramey’s Marketplace in Mississippi, said he is confident in the future of AWG. “Dan’s been there long enough, and he’s been under David long enough. He’s just a good man.”

Harps Chairman and CEO Kim Eskew said he believes Funk will do “a great job.”

“Dan is different from David. I’m different from my predecessor. That’s just the way life is. Hopefully, you surround yourself with the right people, and I know Dan will do that, who will complement him and that will allow AWG to continue to grow and be successful going forward. I think the days ahead for AWG are really bright.”

The vendor community also is confident about AWG’s future.

Denny Belcastro, VP of industry affairs and customer development at Kimberly Clark, said Smith has done “a marvelous job” picking his successor. He knows Funk well, as they co-chair FMI’s Industry Collaboration Council.

“He is a terrific listener, to understand how things work, always trying to find a way for what I would call the win-win approach to things but also keeping the priorities of his retailers top of mind, trying to get suppliers to push a little harder, grow a little faster and get a little closer to what AWG is trying do.”

Referring to AWG’s new all-in-one warehouse in Hernando, Mississippi, Belcastro said Funk has been instrumental in keeping manufacturers informed and educated on how that will benefit their business long term.

“I think he is a perfect choice. You don’t ever want anyone like David to leave, but I don’t think he could have picked a better person than Dan to replace him.”

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David Smith

OCTOBER 2023 • THE SHELBY REPORT

FOOD INDUSTRY HALL OF FAME INDUCTEE

Upper Midwest Division providing opportunities for growth

by Treva Bennett / senior content creator AWG’s Upper Midwest division opened in St. Cloud, Minnesota, in 2022. It is comprised of two facilities – a 300,000-square-foot dry facility and a state-of-the-art, 330,000-square-foot fresh/frozen facility.

Emile Breaux, SVP, chief sales and support officer for AWG, said the expansion into the new geography just made sense.

“We knew that there were a number of really great independent retailers that operate in the northern central U.S. geography, and we didn’t have a way to reach those

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folks in an efficient way. Kenosha really was too far away to the Nebraska facility. When Coborn’s expressed interest in becoming part of the co-op, that really gave us the base that we needed to establish the distribution center there.”

Coborn’s, headquartered in St. Cloud, became AWG’s first member in the new division. The employee-owned grocery retailer has more than 9,000 employees and 590 stores across Minnesota, North Dakota, South Dakota and Wisconsin.

Coborn’s President and COO Dave Meyer said the company had heard from many others about their experiences with AWG.

“AWG’s co-op model intrigued us as it got us as close to being self-supplied as we could get without having to make all the capital and infrastructure investments of a warehouse on our own. AWG brings a tremendous amount of transparency and collaboration that has been very refreshing. What they do for us, they do for everyone, which is the best of the co-op model.”

Meyer said Coborn’s was very happy AWG chose St. Cloud as the site for its Upper Midwest facilities and was a “significant consideration” for the company to join the co-op.

“Growth is a big part of who we are. If we grow, we provide bigger opportunities for our employees, and it creates opportunities for our entire company by being part of AWG. “Our partnership with AWG has provided us with a conduit to that growth. AWG has scale – they’re not just St. Cloud – it’s all of their warehouses, all across the country and that allows us access to the same large-scale leverage that the bigger retailers get, so the playing field is more level.

“As with any big initiative like this and any major transition of your supply chain in a very complex industry, we certainly had some speed bumps along the way, but we worked hard together and are in a great place now to continue to move forward and grow together,” Meyer said.

AWG President and CEO David Smith said while the co-op had experienced growth in the area, distance and distribution costs weren’t favorable. The Upper Midwest division was created as an opportunity for growth.

He said adding Coborn’s, one of the nation’s top independent grocers, to the division was “a blessing.”

Smith said he believed the division would be a “game changer” for grocers in the area and would become a highgrowth division for AWG. James Neumann, SVP of special projects for AWG, said Smith understands the need to continue to grow the co-op.

“David just saw opportunities to reach more independents with the co-op model of members owning their own wholesaler and being able to grow as we grow,” Neumann said. “David understands that growth is absolutely paramount. It’s about attracting new business into our co-op and expanding our geographic footprint, but also making our operations run more efficiently and working within the management team here at AWG. We’ve got some really exceptional folks in operations, at division level as well as in our transportation and logistics.”

The St. Cloud location also allowed existing members in the region to relocate to the new division, drastically reducing freight expenses and improving profitability.

The migration of existing members from the Great Lakes and Nebraska divisions began in the first quarter of 2023, utilizing more of the building’s available capacity and saving those members millions annually in freight costs.

The new facility is also strategically located to allow future business development opportunities in the region.

The new warehouse has seven modern banana rooms, a full generator backup, 40-foot clear ceiling heights and an efficient operational design. The physical site was designed to allow for future ambient and frozen automation and the addition of a new division office.

This expansion created AWG’s ninth full-line wholesale division. AWG currently operates divisions in Kansas City, Kansas; Springfield, Missouri; Oklahoma City, Oklahoma; Goodlettsville, Tennessee; Hernando, Mississippi, Pearl River, Louisiana; Norfolk, Nebraska; Kenosha, Wisconsin; and St. Cloud, Minnesota.

AWG President-elect Dan Funk said the co-op is excited about the growth in the division.

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TEE “We’ve been able to move 80-plus stores from other divisions into that Upper Midwest division, and that’s created more capacity for us in some of our other northern divisions.

It’s also allowed us to take some capacity from our southern divisions and reposition that into areas like Great Lakes, where we have some business caught between our Nashville and our Great Lakes division. Smoothing out capacity, post-pandemic, and being able to manage capacity has been a big part of that Upper Midwest project.”

CFO Gary Koch said AWG is committed to the region. He said the volume from Coborn’s continues to grow, and the division has added new members, as well as transferring members from other divisions.

“Now, they’re in their true home division of Upper Midwest, and we have other prospects that are in the pipeline for transferring to AWG, for the benefit of the lower cost of goods than what they currently have.”

Tye Anthony, SVP of merchandising for AWG, said the division is “another great market that we’ve added to the AWG portfolio.” He said they expect the Upper Midwest division to be very successful, building off the partnership with Coborn’s.

“It’s just another great independent market. That willingness and desire to be a part of the co-op, and the benefits of being part of the co-op, it’s another great market for us to get into. We’re excited about it … We’ve made great investments there, and we’re happy about that.”

Shelly Moore, chief information officer, said the Upper Midwest division offers the co-op an opportunity and ability to expand and grow.

“As you can imagine, starting off operations anywhere takes a lot of time, investment, faith and confidence from new members. Coborn’s has certainly weathered those initial startup stages with us.

“I think the standout up there is there’s a lot more independent owner-operators up there, a lot more growth potential for us to go after. Both the facility as well as the land that we’re positioned on allows us that trajectory for growth, most certainly.”

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