2012 ROFDA Report

Francis Cameron, President & CEO, ROFDA

Martin Arter,

Randy Arceneaux,

Neal Berube,

Christopher Miller,

Mike Bourgoine,

Stan Alexander,

Jay Campbell,

President & CEO, Affiliated Foods Midwest Cooperative, Inc.

President & CEO, Affiliated Foods, Inc.

President & CEO, Assocated Food Stores, Inc.

President, Associated Grocers of Florida, Inc.

President & CEO, Associated Grocers of New England, Inc.

President & CEO, Associated Grocers of the South, Inc.

President & CEO, Associated Grocers, Inc.

Christopher Michael,

Jim Denges,

Randy Simon,

Jim Ried,

CEO, Associated Wholesalers, Inc.

President & CEO, Central Grocers, Inc.

President & CEO, CERTCO, Inc.

President & CEO, Olean Wholesale Grocery Co-Op, Inc.

David Bullard,

Al Plamann,

President & CEO, Piggly Wiggly Alabama Distributing Co., Inc.

CEO, Unified Grocers, Inc.

John Runyan,

Dean Sonnenberg,

Executive Advisor to the CEO and President, Unified Grocers, Inc.

President & CEO, URM Stores, Inc.

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Peter J. J. Lar Larkin kn ki Pre Presi side den ntt and and CEO CEO

!

Peter Larkin

Cameron: ROFDA Must Remain Relevant New

pResiDeNt AND CeO DevisiNg plANs tO keep MOMeNtuM gOiNg

To “promote and support the retailer-owned distribution segment of the food industry with value-added programs and services, all in furtherance of servicing Independent Retail Grocers located throughout America.”

I’ve been afforded the unique perspective of being involved with ROFDA through each of those lines represented on our logo. I have come to unFrancis Cameron became president in each case, that the key to relevancy is collaboration. It’s derstand, and CEO of Retailer Owned Food what we’re all about. I have introduced the notion that together “We are Distributors & Associates on Sept. 1, 2012. He joined ROFDA in 2010, first ROFDA.” Given our structure, each individual involved with us is empowin the role of VP of business develop- ered to positively impact the independent. We simply need to act.

At the end of the day, this is still a relationship business. ment, then EVP and COO. Over our many years, one of the ways we’ve provided a platform for Cameron began his professional career with Hallmark Cards in 1983, building greater relationships is through our conferences. The format of and after 10 years moved on to a our conference is unique. It’s really a relationship event. Our agenda is number of executive management built around a combination of business and entertainment. Our members roles with Gibson, American and associate members come together in an environment meant to build Greetings and Paramount/Premier upon familiarity and trust. The ability for an organization to become an Greetings. In 2005, he built the mar- associate member and attend our events is contingent on their commitketing firm, Start Incorporated, and ment to the independent retail grocer and our shared mission. Not everyin 2007, started Plus 3 Alliance, a one is granted access to our group. To become an associate member Francis Cameron consulting firm concentrating on requires a recommendation from a member, associate member or ROFDA leadership. A company that becomes an associate member of ROFDA is business development. made up of great people and great products delivered at a great value.

Our conferences are only part of the equation. We work with our memQ: How did your career path lead you to ROFDA? bers and associate members every day to align I think it really all started from my humble begininterests and deliver solutions against buying nings as part of a small-town, ranch family. My parbetter, selling more, sharing information and/or ents instilled a sense of confidence and ROFDA by the numbeRs: executing against best practices. Together, our independence through their expectations. I have six collective power provides an opportunity for parMembers: 14 brothers and a sister who were expected to “earn ity.

By providing this through our members, indeour keep.” As a family working together, you find Member Employees: 12,883 pendents can continue to prosper and focus on solutions to difficult challenges. It’s really what it Wholesale Revenue: $16.6 billion what they do best—customer service, unique martook to survive. I understand the entrepreneurial keting programs and community involvement, just Conventional Grocery Stores: 7,630 spirit, having lived it firsthand then, and in recent to name a few. years, through the small businesses we built.

Retail Employees: 205,515 In so far as the topic of relevancy, understandROFDA’s recently retired president, Ferrell ing our association is very important. We are not Retail Sales: $42.5 billion Franklin, initially contacted me about providing my a typical trade association. We are owned by our services in pursuing business development opportumembers, which in turn are owned by the nities for ROFDA. Then a number of ROFDA memindependent retail grocers they serve. bers also approached me. They spoke about Retailer Owned Food Distributors & ROFDA’s strategic plan and how I might fit Associates is a cooperative. The very definto that now and into the future. I didn’t inition of a cooperative is “an organizaneed much convincing. I came to know the tion that’s owned or jointly run by its integrity of this group and recognized the opportunity to do something bigmembers, who share in the benefits.”

It dictates a level of collaboration ger than myself. I certainly was not looking for a major career change when the opportunity came to me. Rather, I realized that everything I had done simply based on this fact. Our aggregated numbers are impressive, and in the past, both personally and professionally, prepared me for this very those associated with us are afforded an opportunity to work against prorole. What made my decision really easy was my wife, Teri. During my ca- grams that create greater benefit to all parties involved. reer, she not only provided the primary parental role to our children, Cole and Kaci, she was my assistant, travel agent, counselor and more. Teri had come to know and love the people of ROFDA over the years and while it meant a significant change, she supported it completely. So you could say that “we” chose ROFDA. We understand the American Dream, and I am honored to put my feet on the floor at the beginning of each day to work on behalf of those pursuing it.

Q: After 50 years, how is ROFDA still relevant today?

ROFDA is probably more relevant today than ever before in our history.

However, to answer that question adequately, one must have a clear understanding of who we are and why we exist. Let’s start by looking at our logo. There’s a pretty deep meaning in it. The three lines on the left represent members, associate members and ROFDA leadership. The footprint of the United States represents independent retail grocers across our great country. The line to the right represents our shared mission:

Q: What is your vision for ROFDA’s future?

I intend to build upon the great foundation of our previous leaders, Jim Morton and J. Ferrell Franklin. Our mission is built around a worthy cause, and I think it’s clear that we work together on behalf of the independent retail grocer.

I would like to start by bringing deeper meaning to our organization. In the spirit of collaboration, I have solicited involvement from our members and associate members to create ROFDA’s vision statement. This statement reflects our core values and really defines why we do what we do. In the coming months, I am confident that we will introduce a vision statement that will resonate with the industry.

At the same time, we have several strategic considerations on the table. I am working closely with our board to refine those and work diligently against our pursuit of continuous improvement. The bar is set pretty high, and as a result, we are seeking new and creative ways to Please see page 6

4 • December 2012 – A Shelby Report Special Publication

theshelbyreport.com

ROFDA put Down Roots 50 Years Ago In 1962, a few cooperative food distributors from around the Southeast formed an organization known as the Southeastern Food Cooperative Association (SFCA). Over the years, growth from outside the Southeast occurred as cooperatives recognized the numerous advantages of participating in a cooperative-only environment.

Due to the new geographic locations of its members, and the changing demands of the retailer-owned segment of the food industry, the name Southeastern Food Cooperative Association did not appropriately identify its members.

So in 1988, a name change was approved by the board of directors, and thus the new name, Retailer Owned Food Distributors & Associates (ROFDA), emerged.

The group’s mission is to “promote and support the retailer-owned distribution segment of the food industry with value added programs and services, all in furtherance of servicing independent retail grocers located throughout America.”

Here’s a look at ROFDA through the years:

1962 • The Southeastern Food Cooperative Association (SFCA) was founded.

1983 • Hillar Moore, president and CEO of Associated Grocers Baton Rouge, is SFCA chairman.

• Affiliated Foods, Amarillo, Texas, joins SFCA. • The oldest meeting minutes on file are from Oct. 13, 1983; four of today’s ROFDA members were SFCA members in 1983—AG Baton Rouge, AG Birmingham, AG Florida and Affiliated Foods Amarillo.

1984 • Affiliated Foods Midwest, Norfolk, Neb., joins SFCA. • The ’84 Spring Conference is held at the Opryland Hotel.

1988 • SFCA changes its name to Retailer Owned Food Distributors & Associates (ROFDA), based on the expanding geography of its member co-ops.

Ferrell and Jean Franklin with Sandy and Jim Morton at a ROFDA conference in the 1990s. Morton was the first executive director of ROFDA. His daughter, Teresa Pope, continues to run the ROFDA office in Alabama.

1989 • AWI in Robesonia, Pa., joins ROFDA—the first to join under the new name.

1990 • Jim Morton hired as ROFDA’s first executive director.

1991 • Olean Wholesale Grocery Cooperative in Olean, N.Y., joins ROFDA. 1992 • Associated Food Stores, Salt Lake City, becomes a ROFDA member.

• Ferrell Franklin hired as assistant director to Jim Morton.

1993 • Piggly Wiggly Alabama Distributing Co. in Bessemer becomes a member of ROFDA.

Cameron from page 4

provide greater value for our members and associate members. Some examples include enhancements to future conferences, opening some ROFDA programs to associate members, improvements to technology, improvements to communication…again, just to name a few. More specifics will be defined when we receive our member and associate member surveys due in January.

A couple of very important pieces of our future success will not change. One of those critical pieces is Teresa Pope. Teresa not only has the longest history with ROFDA, her knowledge and her commitment to our members and associate members is invaluable. Teresa will continue to provide administration and conference planning functions from our office in Alabama. Also, I am pleased that Ferrell Franklin has agreed to serve on a part-time basis in the role of executive advisor.

Our biggest opportunity to align interests and deliver value to one another will be realized through our ability to work together in growing our respective businesses. Therefore, my ultimate role is to create the right environment for people to connect and make that happen. I feel blessed to have been given this opportunity and will work diligently to make a difference.

6 • December 2012 – A Shelby Report Special Publication

At the 2012 ROFDA Spring Conference, from left: Teresa Pope and Jean & Ferrell Franklin, ROFDA; Jay Campbell, ROFDA chairman; Francis & Teri Cameron, ROFDA.

theshelbyreport.com

1996 • Associated Grocers New England in Pembroke, N.H., joins ROFDA. • ROFDA is incorporated as a cooperative. Before that, it had been a nonprofit association, but the aim of the association to “do things in an aggregate way that would generate income,” as Franklin describes it, led to the change.

1997 • CERTCO in Madison, Wis., joins.

1999 • URM Stores, Spokane, Wash., becomes a member of ROFDA. • Unified Grocers, Los Angeles, joins.

• AG of the South resigns its ROFDA membership.

2000 • AG of the South rejoins ROFDA under its new leader, Gerry Totoritis.

• Ferrell Franklin succeeds Morton as president and CEO of ROFDA. 2004 • Associated Grocers of Seattle joins ROFDA. 2007 • AG of Seattle merges with Unified Grocers.

• Central Grocers in Joliet, Ill., becomes a member of ROFDA. 2012 • Francis Cameron succeeds Ferrell Franklin as president and CEO of ROFDA.

The missing years...

Ferrell Franklin, former president and CEO of ROFDA, explains the likely reasons why the first meeting minutes from the organization are from 1983: “Probably the first dozen years they didn’t take minutes because they’d just get in together, exchange some ideas.

Eventually, they formally started doing this thing in a routine way. And then they started taking minutes, (but) probably because the group did not have a staff, the general managers and presidents were doing these kinds of things.

Most of those presidents and general managers were used to handing things off; they didn’t necessarily do it themselves. So they just sort of wrote some things down and as they changed officers, the minutes didn’t get moved with them, so that’s the reason I think we’re missing 21 years.

“If we were missing 21 years today since we are doing patron’s dividends, I would be in prison,” Franklin joked.

theshelbyreport.com

Participating in a panel at the ROFDA Spring Conference in May 2012 to celebrate the group’s 50th anniversary are industry retirees (from left): Jim Morton, first president and CEO of ROFDA; Benny Cooper, a former ROFDA chairman who retired as president of Affiliated Foods Amarillo; and Gregg Tarr, a past ROFDA vice chairman who retired as the top executive at URM Stores in Spokane, Wash.

ReAsONs tHeY ReCOMMeND ROFDA “being new as a CEO, you don’t walk out and talk to the people in the warehouse and say, ‘You know, I’m new.

What should I be doing?’... So the opportunity to be with other successful CEOs in the industry and have a source of information that I could tap into that was one of the major attractions.”

—Greg Tarr “…in 1983 when I joined ROFDA the main thing we did in those days was share successful things that we had done. I thought that that was really, really important, and it gave me some great ideas. I hadn’t been CEO for very long at that time, and sharing with other CEOs was a great thing. I think that’s the reason I joined ROFDA.” —Benny Cooper

A Shelby Report Special Publication – December 2012 •

7

Campbell: ROFDA Means— Collaboration, sharing, ideas and Concepts

J

. H. “Jay” Campbell Jr., president and CEO of Associated Grocers Inc. in Baton Rouge, La., says that AG Baton Rouge has had a “very long history, lineage and relationship” with ROFDA and its predecessor organization, the Southeast Food Cooperative Association (SFCA).

“We joined SFCA somewhere around the late ’60s, or early ’70s…I came to work at AG in 1972 as a parttime worker. I became full-time in 1976 and went to my first SFCA event in 1976,” Campbell said.

Becoming a member of SFCA was a bit of a given, according to Campbell. “The reasoning was that the cooperative movement was heavily represented in the Jay Campbell Southeast part of the U.S., and all members were Southeast cooperatives. We had similarity in our cultures, we had similarity in our focus and our mission in serving independent grocers, and SFCA was an unincorporated association—it was basically a share group,” he said.

He added that SFCA met twice a year, and when they met, the members gathered where one of the co-ops was located. The first meeting Campbell attended was at Richfood in Richmond, Va. “We went to Richmond and toured their warehouse and toured their other facilities,” he said.

But what he remembers most about that first meeting was that “the group was collegial, cordial and intimate. It was men who were willing to share their successes, their challenges and their obstacles about having to deal with independent grocers, but also dealing with large competition, dealing with vendor and manufacturer representatives, and all the other various things that you do in business. And all the members were willing to share their ideas and thoughts so all could be successful.”

For Campbell, what ROFDA has meant for AG over the years is four points—collaboration, sharing, ideas and concepts.

“When we became a ROFDA member, we actually started inviting our manufacturer friends to be with us, and our vendors with whom we do business, so we broadened the scope of our meetings…When we were SFCA, we were merely representatives from the member companies, which were warehouse personnel and management personnel from the various cooperatives. ROFDA broadened the net and invited manufacturers and other associates that we do business with, and it opened up more opportunity for collaboration and the development of better personal relationships with people,” Campbell said.

The change from SFCA to ROFDA was a collaborative focus between Jimmy Morton, the newly elected president at the time, and the board of directors of ROFDA. “ROFDA has always been about the relationships that have been nurtured and developed. I can remember very, very, fond memories (of those) that I, at a very young age, was able to befriend and learn more about how they did things in their organization, the way they treated people, the way they managed their expectations…They are all unique, they are all different and they are all special.”

In 1988, as an attorney and general counsel for AG Baton Rouge, Campbell helped forge the documents that took SFCA from an unincorporated association to its cooperative corporation status and newly formed name—“when ROFDA became the organized business that it is today.”

8 • December 2012 – A Shelby Report Special Publication

FORtY

YeARs witH

Ag

MAJOR

issues FACiNg

Campbell began his career with AG as a part-time bookkeeper in 1972.

“I worked in what we called ‘retail store accounting’ and graduated from undergraduate school in 1973 and went to law school. When I was in law school, I ran that department, retail store accounting, and worked part-time until 1976 when I graduated from law school and went full-time at Associated Grocers. And I’ve been with AG ever since in a variety of capacities.”

Campbell has served as internal auditor and general counsel, CFO, EVP and COO and then was named to his current position as president and CEO in February 1995.

What’s the best part of being the CEO of a member-owned co-op?

“It’s a very humbling experience because you are there to support the endeavors of entrepreneurs, and if you are a student of business, then you are in awe, and you greatly appreciate the risk-taking and the extraordinary desire of the American entrepreneur,” Campbell said. “And independent grocers are the epitome of that. They take extraordinary risks to go into this business, which is a very difficult business. They compete against some of the best financed organizations in the world and yet they are able to effectively compete. And the role the retailer-owned company plays in that process, in my opinion, is key and pivotal—to offer them the opportunity to be successful. There is no guarantee of success with anybody. But I think the retailer-owned philosophy provides the retailer with the best opportunity to be successful because of its role, goal and mission. And that’s what attracted me to AG—the people, their level of commitment, their level of dedication and their true commitment to the success of the retailer, first and foremost.”

He added that AG’s main emphasis “has always been on the success of our owners, and it has never been about creating size or scale of the wholesale entity just for the sake of size or scale.”

For AG, the path to success is riddled with many challenges, some as obvious as competition from large, well-financed organizations, Campbell said, to ensuring that the wholesaler provides retailers the fertile ground to grow and be successful. “So for us, it is always going to be about ensuring that the retailer is successful and to understand what they consider to be the most important thing to them being successful. Part of that success is having a lifestyle they would enjoy, where they could raise a family and be accessible to, and for, their children while also owning and managing a business and showing them that our organization is there to be a partner with them to make their life easier…That is why we design the types of programs and services and technologies that can help that retail entrepreneur to be very successful and still have balance in his or her life.”

Ag’s

MARketplACe

In east Texas, Louisiana and southern Mississippi, there’s population shift, but no real growth in the numbers of people, according to Campbell. “We have a pretty static marketplace in terms of the size of the marketplace. With that said, we also have a high and inordinate number of low-income people who are very dependent upon governmental subsidies and support in the form of either Social Security, SNAP (food stamps), WIC (Women, Infants, Children) payments or other various governmental programs because of their low-income or poverty status. And that further accentuates the need for pricing to be extraordinarily competitive. It puts a tremendous burden on the retailer and on their wholesale supplier to ensure that they can offer a low cost of goods where they can have a ‘pricing presence’ on the shelf that is attractive to the consumer every day.”

And that “pricing presence” is even more challenging as the area has seen an increase in discount stores, especially dollar stores, Campbell said.

“There are more dollar stores popping up in every area that not only sell dry food products but also refrigerated products. So it just adds another competitor in the marketplace. We already had the drugstores selling a limited assortment of grocery products, even refrigerated products, and now you have dollar stores broadening their selection and variety for the consumer to have that choice as well. We do have Save-A-Lot in this marketplace, but not a great number of them. We obviously have Walmart in all of its formats—the Neighborhood Market, the Supercenter and the Sam’s Club. We do have other chain competition in the marketplace, too, so there are plenty of offerings out there that provide competition at the re-

theshelbyreport.com

My FavMoremite ROFDA ory “...is the recent retir ement party honorin Ferrell Franklin. Fe g rrell is one of the ki ndest gentlemen I know, and he’s a southern gentleman. It was great to see him being ho nored for all his years of service and for the concern he had for the mem bers of ROFDA. He was very humbled by th e recognition he re ceived; it was a pretty em otional time. He wa s very sincere and very re spectful.”

Ferrell and Jean's last dance .

Farewell, Our Friend

prised the couple by attending Ferrell and Jean’s family sur y. the Gaylord Opryland in Ma Ferrell’s retirement party at

At the 2012 Spring Conference Ferrell Franklin takes in the surprise tribute on the big screen, saluting his 20-plus years of service and retirement from ROFDA.

Franklin in June 2003.

Jay Campbell continued

tail level. That makes it quite challenging for anybody to be in the retail business and to be successful.

“Because of our location, we have to do a lot more promoting for our retailers to drive promotions, and that is one of the things that has been indigenous to our area due to the economy and the demographics and the sociological realities that we experience. So by promoting products in a recession or a recovery is nothing unusual, and I think we are just doing more of it.”

Also, “I think succession planning is always going to be important for the members so that they have a plan and a strategy going forward, and we continue to work with our members on that as well,” Campbell says.

AG Baton Rouge was organized in May 1950 with 17 member stores. Today it serves 200-plus independent supermarkets in Louisiana, Texas and Mississippi.

theshelbyreport.com

A Shelby Report Special Publication – December 2012 •

9

Berube’s Co-Op Motto: Never Forget who Owns You

N

eal Berube has adopted what you could call a motto since becoming the president and CEO of Associated Foods Stores late last year: never forget who owns you.

“My job is to make sure (our retailers are) secure in their efforts, and to do that I have to be amongst them to know what their problems are,” Berube says. “I made it very clear when I became CEO that the retailers have an open line to me and that the Associated team has a very open Neal Berube line. Without your members you don’t have a company, right?”

Berube stepped into the CEO role of the Salt Lake City-based wholesale distributor in November 2011 following the retirement of Rich Parkinson who served in the position for about 17 years. Prior to becoming CEO, Berube served as the company’s CFO and COO. Berube, who holds a degree in accounting, first joined Associated in August 1990 as the controller when Gill Warner was the company’s president and Parkinson was serving as VP. Before becoming CFO and COO, when Parkinson moved into the president’s role, Berube was involved in practically every area of the business—from finance and accounting to information technology to logistics and procurement to overseeing the build-out of a new distribution center.

He also got a feel for the retail side of the business when, in 1999 as COO, Associated acquired some stores.

“As a result of acquiring those stores I became familiar with retail op-

erations as I was assigned to bring some of our previously independent stores into corporate ownership,” Berube says.

In November 2009, Berube led the acquisition team when Associated purchased 34 Albertsons stores.

“About a year after our acquisition, I became the president of Fresh Market, a subsidiary that operated the 34 Albertsons stores.

“It’s a great opportunity that I’ve had to be able to see the company from just about every angle, every perspective,” adds Berube, who even today as CEO spends as much time as possible with his retailers and Associated team members.

He was well prepared when he took the helm of the company, yet he reveals there were three areas of immediate focus that he committed to Associated’s retailers when he took over as CEO: • enhance and protect the retailer’s investment in Associated Food stores.

“We had to make sure we were making a profit at Associated Food Stores.

Our retailers have a lot of money invested in us. So we looked at becoming not only efficient in all we did but also effective in all we did. We brought those two together to make sure we were protecting and enhancing their investment.”

• Help members be more profitable at retail.

“Associated, partnering with Topco, recently completed a successful renegotiation of its pharmaceuticals supply contract. A new store supplies contract also was negotiated, and we cross-dock all the supplies to our retailers. That saves our retailers a substantial amount of money.”

• to be more transparent in everything we do.

“We remember who owns us, and we make sure we’re communicating better with our retailers, listening to what they have to say…it’s each independent retailer that we’re here to serve, so we’re very transparent with them.”

ROFDA OppORtuNities ADD tO AFs

suCCess

A member of ROFDA since the mid-’90s, AFS values its membership with the group.

“The thing that’s been most helpful to us is the willingness of the other members of the group—the Jay Campbells, the Dean Sonnenbergs, the Chris Michaels—that group, they’re very open in helping you solve problems,” Berube says. “In fact, I believe that is probably the main benefit of ROFDA. You can sit in a room and talk with people who aren’t your competitors and openly share problems and get solutions because they have faced, many times, the same things we have.”

Berube also points out that if it were not for ROFDA, Associated would not be involved with the RORC technology platform that assists independent operators.

As for what to expect from ROFDA in the future, Berube believes the organization is in good hands with Francis Cameron leading the group.

“I think you’ll see a lot of support for the new direction Francis is taking ROFDA because the new guys (the newer member-CEOs like Berube) are not saddled with any preconceptions to change the philosophy of new guys who don’t have one.

“And I think the existing CEOs are very, very supportive and very appreciative. What I’ve noticed is they put their arm around you and bring you into the fold. I think with Jay’s (Campbell, ROFDA chairman) leadership, we’ll be able to build those relationships and continue on.”

10 • December 2012 – A Shelby Report Special Publication

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iNteRMOuNtAiN west pRiMeD FOR gROwtH Retailers in the Intermountain West, Berube reports, have experienced many of the same challenges faced by grocers in other parts of the country: stiff competition and a smaller consumer wallet. However, and unlike its fellow retailers in some other parts of the country, Berube’s territory is experiencing good economic growth.

“We’re in an area that’s viewed as a high-growth area,” Berube says.

“Population is projected to expand pretty rapidly in the next 20-plus years.

We have a very good workforce here that attracts people into the area.

“Many people don’t know this, but in the state of Utah, we’re attracting businesses here because we have one of the best healthcare providers; both Gov. Romney and President Obama have talked about Intermountain Healthcare,” he says. “As that becomes a bigger and bigger part of everyone’s business operations, low-cost, high-quality healthcare becomes an economic driver here in the state. People are saying, ‘Wow, they’ve got good education, it’s a growing population, they have one of the best healthcare providers in the country at one of the lowest costs. Let’s take a look at that.’

“As the country recognizes the benefits of operating in the Intermountain West, it brings with it grocery competition. Everybody wants to have a grocery store on every corner. But that’s OK, competition makes you better.”

Actively battling that competition is a priority for Associated and its members.

Of course, ROFDA is involved, too.

“I think what Francis is trying to do is aggregate the members’ volume,” Berube says. “We’re looking at all types of opportunities to aggregate our volume in order to get our members the best possible cost.”

Success comes down to the in-store consumer experience as well.

“We’re innovatively looking at it and saying the battle’s not won outside the four walls of the store, it’s won within the four walls of the store on how the customer’s treated, how product’s merchandised and things of that nature.”

Additionally, Associated’s even “entered into relationships with Kroger to produce some of our products, with our name on it,” according to Berube.

“The consumer, as long as it’s a good quality product, and it’s a good value to them, doesn’t care who produces the product,” he says.

“So we’re not afraid to partner with those who some would view as our competition.”

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A ‘ReFleCtiON OF OuR RetAileRs’

Being the CEO of a more than 6,000-employee operation brings its challenges. But the bottom line, Berube notes, is that Associated serves as a mirror image of its retailers.

“The major challenge for Associated is adjusting to an environment of accountability,” Berube says. “We had to make some very, very tough decisions that affected people’s livelihoods to right-size the company to make it representative of what our retailers expected of us and to maintain compliance with debt covenants.”

Building a culture that’s reflective of its membership is always Associated’s goal.

“I think any leader would tell you developing a culture supportive of your customer base and trying to help everyone get on that same page” is important, he says.

“There are a lot of opinions out there and so we’re trying to be very respectful of that and trying to be very patient in developing a culture that’s supportive of our retail base.”

Central Grocers Came into the ROFDA Fold in 2008

T

he Retailer Owned Food Distributors & Associates (ROFDA) is now in its 50th year. Central Grocers is the new kid on the block, having joined in 2008.

The last four years have been eventful for Joliet, Ill.-based Central Grocers as it merged with a competitor and moved into a 1 million-s.f. distribution facility.

These changes have taken place under the leadership of Jim Denges, who in 2007 took the helm at what is now the seventh largest grocery cooperative in the U.S. Central Grocers supplies approximately 400 independent supermarkets. Combined, the independents served by Central Grocers have the second largest share in the Chicago market. The cooperative James “Jim” Denges supplies groceries, produce, fresh meat, service deli items, frozen foods and ice cream and offers its retailers the Centrella private brand.

As it has grown physically, Central Grocers also has grown fiscally over the last several years. First came transitioning members from Certified Grocers when it closed in 2008. That was the year Central Grocers was invited to join ROFDA. In 2009, Central Grocers moved to a new 1 million-s.f. facility that significantly increased capacity for fresh produce and meat.

“That’s a difference maker between us and the discounters,” Denges said. “We have successfully taken programs from prior to moving into this facility and grown them, like produce sales increasing from $20 million in sales to $150 million in sales. Our fresh meat program, which was next to nothing in our old facility, about $15 million in sales, grew to more than $200 million in wholesale sales. That was the reason we made this major investment in this facility. That’s been the game changer for a lot of our members.

“In the warehouse, we’ve been very, very successful because we’ve become very, very large but we still recognize that individual members face those challenges,” he said. “There is a lot of center store pressure. That’s been the challenge for our retailers and us.”

Another challenge was the “culture change” required of retailers when they were asked to let go of some of their meat and produce purchasing power, Denges said.

“I was a retailer, in retail stores all the time and we have some large retailers, too,” Denges said. “But when we sat down to do business, because we were independent, we were individual entrepreneurs. We felt that we could buy our meat and our produce best on our own. For many years that was successful, until the big boys came in.”

They key to battling major discounters like Target and Walmart is to be unique, as successful independent retailers know, but competing on price has been more difficult.

“One thing we worked on that I’m kind of proud of is that the members realize that together, if we leverage this volume, then we’re probably at an advantage vs. these discounters,” Denges said. “When they work with their fellow members in combining sales to make these purchases and add volume, it’s to their advantage.”

For example, he said, when Central Grocers goes to buy holiday hams, it will buy 60 truckloads.

“Where would I ever think I’d ever sell 60 truckloads of hams?” he said.

“But I can do that now, and that reflects in their costs. That’s been an important part of everything here.”

When the recession first hit, grocers benefited as shoppers moved from restaurants to eating at home, but then consumers traded down further, from supermarkets to discounters.

“Maybe their headcounts are similar, but the average purchases have been dropping,” Denges said of the independent grocers. “There is no doubt when a recession like this hits and it becomes a challenge to some families, they have to change their habits. They have no choice, and it’s tough to respond.”

That has hurt the center store more than anything, he said, and that is where uniqueness comes into play.

“The independent grocers still need to be themselves and market the way they have in the past, whether it’s an emphasis on services or deli programs or whatever it may be, that’s where they can continue to do that.

“The purpose of the house here, which we’re very successful at, is to lower their costs, get them better costs, get them extra programs,” Denges said.

Central Grocers has been working on a new major software system change for more than two years that will give independent grocers more information at their fingertips and give the cooperative the ability to help more with item selection and positioning products.

Central Grocers also plans to begin sharing information with Nielsen by the end of the first quarter next year. Denges said that would help qualify Central Grocers for programs that could bring in marketing dollars typically not available to its members.

“I’ve acquired permission to do that, which was not an easy thing,” he

ROFDA Offers ‘Co-opetition’ Opportunities for Distributors

t

he power of Retailer Owned Food Distributors & Associates (ROFDA) can be summed up in one word: “co-opetition.”

ROFDA co-opetition could be defined as a gathering of executives from retailer-owned food distributors across the country who share knowledge and resources with one another with the same goal in mind: ensuring the success of the independent grocery retailer.

“I think co-opetition is going to be key to the future of the cooperatives and other businesses,” said Martin Arter, president and CEO of Affiliated Foods Midwest.

“We all need to be able to provide the services to these independents if we’re going to stay viable in the future.”

Arter offered the example of a subsidiary created by California-based Unified Grocers called Market Centre. Its sole focus is to seek out special products and seasonal items that make independent retail stores unique. The 15,000 products are a little out of

the ordinary or somewhat hard to find. Market Centre has proven to be a valuable program for Affiliated Foods Midwest, based 1,500 miles away in Nebraska.

One of Affiliated Foods Midwest’s roles is to ensure that its retailer members have a level playing field vs. the big-box operators. In order to do that, it builds strong vendor and manufacturer relationships.

ROFDA also has a role there. There is no application fee or annual dues and no exhibits at meetings, but companies that supply ROFDA members with goods or services can join the organization as “associate members” if they are providing or actively pursuing distribution through grocery wholesalers. They pay “sponsorship fees” at each conference to help offset costs, which they willingly do to get closer to ROFDA’s “regular members,” the distributors. ROFDA is selective about associate members, allowing only a limited number.

By mid-October, more than 100 associate members Please see page 14

Martin Arter

Jim Denges continued

said. “I go to one of our members and say, ‘I want to share your front end’ or ‘I want to share what you sell everything for at retail.’ But they have realized that to compete for some of those additional dollars they need to do that.”

As a member of ROFDA, Denges said the sharing of information has been a “major plus” for him, and a CEO-only retreat is his favorite memory so far with the organization.

“We spent maybe a day and a half together discussing all the different points,” he said. “To me, that was probably one of the most exciting things we did.”

Denges has been in the grocery business his entire life, starting out as a 13-year-old sorting bottles for an independent grocer on weekends. As he got older, his retail experience grew and he managed independent grocery stores.

In 1978, he joined Central Grocers as a buyer, and was named VP of purchasing in 1982. Denges was named CEO in 2007.

He’s learned in his 34 years at Central Grocers that there’s more than one way to operate a successful retail store.

“There are all types of ways for members to be successful, and they run their businesses totally different,” he said. “It’s the fact that they tailor their businesses to their areas and their consumers, the customers that they serve.

There probably could never be a book written on it, but I’ve seen very successful owners, and their businesses are completely different than others from across town. I’ve always enjoyed those experiences.”

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“The independent grocers still need to be themselves and market the way they have in the past, whether it’s an emphasis on services or deli programs or whatever it may be...”

—Jim Denges, Central Grocers

A Shelby Report Special Publication – December 2012 •

13

Decisions are very fluid.”

Affiliated Foods Midwest also has started subsidiaries to help busy indehad signed up for the ROFDA Fall Conference in Scottsdale, Ariz., Nov. 10-13, with companies ranging from MOM Brands of Minneapolis and Kraft pendent retailers bring new technology to the marketplace that reaches Foods North America in Northfield, Ill., to Manda Fine Meats in Baton consumers where they are—online.

“They are very forward thinking in regard to digital signage and social Rouge and Pilgrim’s Pride, with U.S. headquarters in Greeley, Colo. media, all the pieces that go with that, including the websites that we “We rely on the manufacturers to treat our retailers the same—same menu, same pricing—as the big-box stores, to be fair and equitable,” Arter own the source code on,” he said. “We understand there needs to be a gap between the print side and then getting the products into consumers’ said. “We feel that we’ve been able to make some headway there.”

Affiliated Foods Midwest also has developed programs designed to help hands through a mobile device, and we’ve been very fortunate. We’ve independent retailers keep prices low, like the modified high-low “Good surrounded ourselves with good people. That’s been a fun project and it’s really getting legs.”

Buys” program.

Affiliated Foods Midwest has wrapped up yet another record-breaking “(Their prices) may not be as low as the big-box stores every day, but year.

Sales grew 9.6 percent and rebates increased by nearly 12 percent. with the programs in place and working with key vendors it’s been a winThe cooperative returned $55 million to its member-owners, all while drivwin,” Arter said.

It is important that independent retailers get the same consideration not only ing its operating expenses down 5 percent.

“We had a record topline and bottomline, and the members count on the to help them succeed, but also to help shoppers trying to make ends meet. all-cash rebate to stay competitive,” Arter said. “We’re a cooperative.

“We pass all the allowances through and make sure that it does hit the We’re not a wholesaler, and there’s a big difference. We’re truly owned by consumer, so that they are able to have items in their pantry at the right the membership. We’re member driven cost at the right time,” Arter said. “We and not management driven. They benefit have some great partners out there. and it’s one big family. The organization is They love the Affiliated Foods Midwest one big family.” cooperative business model. We hold no Arter has been with Affiliated Foods money for administrative fees and the Midwest for 31 years, and is proud of the vendors will work with us to help us grow jobs that the cooperative has helped creand be profitable.” ate over time.

As he worked his way up, As the member-owned cooperative that he worked in several departments on the serves independent retailers from the distribution side and with subsidiaries of Dakotas to Arkansas to over the Denver the company as well.

Pass and back to the Chicago/Detroit He recalled being quickly moved out of area, Affiliated Foods Midwest sees the procurement because “I was horrible at margin pressure they are under. That is a it,” he said. challenge, Arter said, but also an opporHe has been CEO since 2001. tunity to sharpen the focus of Affiliated “You really don’t think about it when Foods Midwest. “We need to continue to you’ve grown along with it,” he said. “I come up with ways to be efficient,” he The ROFDA board at the 2012 Spring Conference. Standing, from have been fortunate to grow along with said. “That’s just learning to do things left: Ferrell Franklin, Dennis Stewart, Jay Campbell, Dean Affiliated Foods Midwest. You’re no differbetter and relying on great people within Sonnenberg, Jim Ried, Gerry Totoritis, ent than anyone else, and it’s fun to be a Randy Arceneaux, Neal Berube and Glenn Kriczky; the organization to keep the cost struckneeling: John Runyan, Randy Simon, Chris Miller, part of it.” ture in place. It’s utilizing resources, Martin Arter and Francis Cameron.

There also are the relationships bewhether it is hardware or services, that tween the executives who are part of ROFDA. Arter has been attending help independent retailers grow and be profitable.”

ROFDA gatherings for some time and was hard pressed to choose just one Affiliated Foods Midwest uses a best-in-class technology system with tablets that has reduced the time spent on order processing, and that favorite memory over the others. The networking, venues and knowledgeis “probably one of the key attributes that the cooperative retailers able speakers are always excellent, he said. Coming together at ROFDA benefit from, and they own it,” Arter said. “It’s a just-in-time society. also allows the members to keep up with one another and changes in their organizations.

“There’s no other venue where you can spend time with 15 to 18 other CEOs or top executives who have similar businesses and work with independent retailers.

That time is invaluable,” he said. “It’s been amazing for me to see the changes that have occurred with the leadership, not only within ROFDA, but also other companies. I’ve had the benefit of seeing maybe two CEOs within that time frame, and it’s great to see the cooperatives grow.

“You meet a lot of great people with a lot more knowledge than I have,” he said. “You never quit learning, and you appreciate all the people in the industry.”

Arter from page 13

14 • December 2012 – A Shelby Report Special Publication

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ROFDA a unique group that provides for unique Needs

D

ean sonnenberg, the CEO of URM Stores in Spokane, grew up in the grocery industry. His father owned and operated an independent store in central Washington State where Sonnenberg began working when he was just 10 years old. He’s never left the business.

“I helped get myself through college managing a grocery store and working on a night-stocking crew for another independent operator,” he says. “I went to work for URM right out of college.”

Sonnenberg: Much at Stake in This Year’s Election “Whichever party wins needs to dedicate themselves to a nonpartisan solution to the country’s debt problems, or sooner or later we will all be paying dearly in the form of skyrocketing interest rates and high inflation. Not to even have an agreed-upon operating budget for over three years should be looked at as a national disgrace, yet we have a government that wants to lecture the private sector on how to run their business. There is a tremendous amount of work to be done at the federal level.”

Sonnenberg will soon celebrate his 37th year with the company of which he became CEO in 2003.

teAM,

lOCAl ANgle MAke

FOR suCCess Much of URM’s success can be credited to its team members. Working with them, Sonnenberg reveals, is one of the best parts of his job.

“Between the staff and the member owners, I have had the opportunity to watch the kind of personal and business growth that few people get Dean Sonnenberg to witness, and it is one of the most gratifying parts of the job, he says.

Sonnenberg also points out that URM’s true local service, within both its wholesale and retail operations, have kept the business’ focus incredibly customer-centered.

“We have always considered ourselves…as ‘local,’ simply because we are local,” he says. “We do not have a national footprint nor do we aspire to one.

“I cannot help but wonder why some national companies continue to believe that every time some new trend is introduced, such as ‘buy Please see page 29

ROFDA provides a ‘Network of Folks’ to Rely On

M

Mike Bourgoine

ike Bourgoine, president and CEO of Associated Grocers of New England, sees ROFDA as a network of advice and counsel.

Bourgoine was first introduced to ROFDA (Retailer Owned Food Distributors & Associates) in 2003 by his predecessor, Norm Turcotte.

“Norm started to bring me to a few of the conferences back in 2003 or so, knowing full well that I may be transitioning to his position later on.

So I started to get involved in 2003 and then I got more involved as the years have gone on,” Bourgoine said.

He said that Turcotte expressed to him that ROFDA, as an association of cooperative wholesalers across the country, was a share group, one that exchanged information and ideas, and that “it would really develop a good net-

work of people” for him to rely on.

“If I had questions down the road, my peers, so to speak, that I could talk to and who would give me advice and counsel on things. So he really opened it up to me as more of a network of folks I could work with in the future if I had questions about how to handle certain situations,” Bourgoine said.

Bourgoine added that ROFDA also opened up business opportunities with the associate membership group. “To me it has two real aspects… that is (a) the networking amongst the CEOs themselves and then (b) the interaction you get with the associated members who bring business opportunities to you.”

Bourgoine also sees AG New England’s ROFDA membership as a business advantage. For example, a number of times in his career at AG, he has called upon ROFDA to survey its members on certain subjects, all completely anonymously. “One of the things we do as a group and we’ve done this a number of times, any one of us members of ROFDA can call up Ferrell (Franklin), Francis (Cameron, president and CEO of ROFDA, Scottsdale) and ask them to send a request out to all the other ROFDA members on a certain subject, be it wages and compensation, be it your union contracts. We use that a lot. If we have a question here about how do we compare with certain things or how should we look at certain aspects of our business, often we’ll call ROFDA and say ‘survey the members’… and what ROFDA will do, what Francis and Ferrell will do, is consolidate those responses and send them back to us in a report-type fashion. That is very helpful. And we’ve done that on a number of occasions, specifically relating to again, wages and compensation, vacation policies, maybe, benefit policies, interactions with different CPG companies. Those kinds of things really work out well.”

ROFDA’s future, according to Bourgoine, is the creation of a clear path of understanding between CPG companies and ROFDA and how both can work together for the betterment of the independent retailer. Such was a recent “memorable session that I think set up the foundation for future sessions and meetings,” Bourgoine said. “…we happened to meet recently at the last conference with the top leadership of Campbell Soup Co. That’s the first time that I’ve been involved with ROFDA that we’ve been able to do that. And I thought that was groundbreaking and something we hope to continue to expand. This fall, we are going to be meeting with the folks from Kraft at a very high level, top-to-top type of meeting.

What we’ve been able to find out is that the CPG companies don’t recognize ROFDA for what it is, from the standpoint of its business clout, so to speak, in the marketplace, and I think they (now will) walk away with a different understanding of the opportunity that may be there for them

16 • December 2012 – A Shelby Report Special Publication

and for us to work together to help the independent retailer.”

BOuRgOiNe

gROws up iN supeRMARket iNDustRY

Bourgoine, who took over the leadership of AG New England in July 2004, brought more than 36 years of food industry experience when he joined the wholesaler.

“I’ll give you the Reader’s Digest version,” Bourgoine said. “I was a college student, attending the University of New Hampshire, and got a parttime job in a supermarket in (Durham),” Bourgoine explained. After graduation, he applied for a “beginning buyer’s position, basically what I would call a junior buyer type of position, entry level. I applied and got the job. So then I got into wholesale procurement for this wholesaler in White River Junction, Vt., and a couple of years later I went to Wetterau Inc., a large national wholesale company. I went to them in a buyer’s position.”

He spent several years with Wetterau serving as head buyer, VP, EVP and finally as president of its New Andover division. He changed views a few years later and became a partner in the Farm Fare group, a three-store supermarket chain that grew into 12 stores, which was sold in 1994 to a Supervalu customer.

“For the next few years…I left the industry and bought some other businesses. I sold those off in 2001 and joined AG New England at that time as an SVP. A couple of years later, I was promoted to president and CEO.”

seeiNg

MeMBeRs’ suCCess is sOuRCe OF sAtisFACtiON

The best part of being a CEO of a cooperative, according to Bourgoine, is seeing the success of not only the cooperative but of its retail members.

“I really take a lot of pride in the fact that we’ve been able to grow our business and company along with growing our membership and helping our retail grocers grow their businesses. So that’s the best part of it.

It truly is. It’s a very rewarding…I don’t own any part of the company or cooperative so my mission is pretty simple—it’s not out for my personal gratification, although I do get a lot of pride from doing what we do, and it’s not out of personal reward—it’s more out of what I can do to help our member retailers succeed.

“So that’s the real joy of it and it really is, to me, a cause—a commitment to be part of a co-op and to work in this environment. When I was part of an independent voluntary wholesaler serving independent supermarkets, the motivations were different. Not that we didn’t talk about how we wanted to help the independent retailers succeed, we did and we did try to do that but our mission in a co-op is much deeper than that and that’s what I like about it. You really get into the fabric of being part of a co-op.”

But it’s not all rosy, according to Bourgoine; there are some challenges.

“The biggest challenges are the competitive challenges that we face.

More so today than it was a few years ago and the need to keep growing your business in an environment that, for a conventional store, is shrinking for a lot of different reasons. And the independent marketplace is not getting larger, it is getting smaller. And so I think our biggest challenge is where our growth is going to come from, where our healthy growth is going to come from and that’s probably the biggest challenge that I see for us. We’ve been fortunate to be able to grow fairly well over the last 10 years, but it’s going to become a tougher struggle going forward.”

And then there’s succession planning.

According to Bourgoine, it’s one of the bigger challenges AG has had to face for many years. And it seems even more pronounced today, he said, because young people have even more opportunities open to them than ever before. “(Young people) weren’t necessarily brought up in the business like most of us, so what we’ve recently launched” is a program whereby AG has dialogue with its member retailers about their succession planning. “At the annual meeting I spoke to this issue and gave them some facts and figures and some insight as to how successful the second or third generation would be if this planning were done vs. how successful they would be if there wasn’t any planning. And also if they plan to sell the business to a third party, what’s the proper way to go about doing that?

“What we find happening today is if we don’t get involved, our retailers gravitate to some kind of real estate or food store brokering company, who specializes in selling small stores, and obviously if we are not involved, potentially (a) we could lose the business that is there and (b) the retailer could make a bad deal just based on the motivations of the

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broker vs. the motivations that we would have to try and make sure of a successful transaction. We don’t want (a) the current owner of a store to get short-changed because we have an obligation to them and (b) we don’t want the buyer to fail because we’re going to fail if that happens.

So it’s a delicate balance… after the annual meeting I had five retailers in the audience come to me and say ‘I want to talk to you about this.’

Prior to that, they weren’t talking to us because they didn’t visualize us as a vehicle to help them transition their business, so we are in the process of doing the interviews now.”

Bourgoine added that AG may hire someone to head the program “because it is that critically important to the future of the independent retailer and to the co-ops that serve those retailers.”

Innovation also is a key to success, whether it’s coming up with ideas for new formats, concepts or the development of innovative strategies for the future and future growth. AG believes one of its future growth vehicles is the convenient store business.

“We were always in the convenience store business but we were always in it in a kind of haphazard way,” Bourgoine said. “And a few years ago we set up a division in the company, staffed it with its own people, hired experts in the convenience store business and so when I say ‘where is our growth going to come from’ one of the vehicles I see it coming from is our continued growth of our c-store side of the business. We are really getting some traction on that side.

We are still targeting the supermarkets and the superette side of our business, the small food store side… but that business is going to be harder to come by and we’re seeing the c-store side being a real potential growth vehicle for us. That’s not innovative, but what we really did was we finally gave a face and a name to our convenience store business and put the right people in place. “…Some of our other challenges for our retailers are people issues. How they can find and hire good people and how they can offer competitive benefit packages to those people they want to hire. One of the things we’ve been able to do and this is innovative, is we have a company 401(K) plan, the AG New England 401(K) plan and because we are a co-op we were able to take our plan and make it a multi-employer plan so that now every member of the co-op can join our 401(K) plan and offer it to their employees. It really has gotten some traction.

“The other beautiful part of it is we have doubled the investment, or the assets, that are in the plan over

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the last six months by adding our retailers to the plan. What that has done is reduced our fees down to a very low level. Our independent retailers, on their own, could not have gotten these kind of rates or the level of benefits that we are able to offer. Even our larger members have converted their plans over to our plan because the advantages are so great. So that’s probably the most unique thing we’ve done in the last few years.”

Other innovative programs recently launched at AG New England include very low interest rates on financing packages for equipment upgrades and remodeling to its retailers.

“We’ve probably loaned out now close to $1.75 million in low interest rate money to our membership,” he noted.

AG New England’s nearly 300 individual members operate 650 stores— 250 convenience stores, 200 superettes and 200 supermarkets—in New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island, Maine and the Upstate New York/Albany area.

The co-op was founded in 1946 by a small, enterprising group of independent grocers.

Bullard enjoys Challenge of Bringing Out the Best in people

D

avid Bullard stepped into the top spot at Piggly Wiggly Alabama Distributing Co. only about six months ago, but already he is enjoying the challenge of running the Bessemer-based wholesaler that has achieved upward of $730 million in sales this year. In fact, according to Bullard, that “challenge of working with and through other people to get positive results that make a positive impact on people’s lives” is the best part of being the company’s president and CEO. David Bullard Bullard, a former airborne paratrooper with the United States Army, also has a competitive streak. Because of this, most everyone would say he is in the right business. So, what’s Bullard’s secret in maintaining and improving his company’s and customers’ market position? He feels one step is being an active member of the Retailer Owned Food Distributors and Associates (ROFDA).

“Our company has participated with ROFDA,” Bullard says. “I am really excited about ROFDA and looking forward to our company being very actively involved. In fact, I will always carry one or two of our managers with me to the meetings in an effort to increase our opportunities to learn.”

Bullard expected to attend his first ROFDA meeting as the company’s CEO during the co-op’s fall conference meeting in Scottsdale, Ariz., in November.

BuYiNg

pOweR,

CeO

NetwORk ARe

ROFDA pluses

“Uniting with ROFDA certainly gives us mass buying power,” Bullard says. “It should assist our company tremendously in the future. When you aggregate these co-ops together, it becomes a pretty powerful buying unit. Based on material I have received so far, there is going to be a lot of opportunity with major manufacturers as we pool our buying power and negotiate with them.”

Bullard notes, too, that the networking opportunities ROFDA will provide him and his company are priceless.

“We are looking forward to taking our warehouse performance to a higher level,” he says, “and we are really looking forward to the information-sharing opportunities that ROFDA provides.”

tHe

sHRiNkiNg pie, pRivAte lABel AND tHe ‘New NORMAl’

piggly wiggly Alabama Distributing Co. inc., Bessemer, Ala.

“We are a mid-sized company. We have a lot of challenges before us, and it is a lot of fun,” Bullard says. “We have many great operators as well as employees, and our group is really looking forward to competing in this marketplace.

The company employs more than 550 employees.”

Title—President and CEO, took position on June 1 following the retirement of Dennis Stewart.

Professional History—Bullard has been with Piggly Wiggly Alabama Distributing Co. for 16 years at various levels of management. Prior to stepping into the president and CEO role, he was a VP with the company, serving in the areas of human resources, labor relations, risk management, grocery buying and worked on several special projects. Prior to Piggly Wiggly, he worked in management with Michelin Tire Co. Education—Bullard has a master’s degree in business administration from Auburn University and a juris doctorate from Birmingham School of Law. Military Service—Bullard served in the U.S. Army’s 82nd Airborne Division as an infantry paratrooper.

Family—Bullard and his wife Peggy live in Hoover, Ala. They have two daughters and three grandsons.

Few, if any, could argue that the amount of disposable money that consumers have available to spend on groceries has gotten smaller over the last several years.

Couple that with the growing marketplace for groceries and the result can be an intimidating one for the entire grocery supply chain.

“There is more competition for a smaller pie now; and people are often buying down, buying less expensive products,” Bullard says. “Our private label sales have become so important and have increased greatly.”

Pr i v a t e label as well as dollar items have become mainstays for consumers—and not just among the economically challenged, but for middle income consumers. Because of this, Bullard’s company is putting greater emphasis on those private label products.

“If you go to the grocery store and you fill your basket with private label products you can save a significant amount on that part of the groceries you just bought,” he says. “…I think the economy is tough, and I don’t anticipate it getting a whole lot better anytime soon. I think it’s kind of just the way things are going to be for some time to come.”

While the economy will eventually turn around, Bullard doesn’t foresee the coupon clipping and private label trends going away when it does.

“Historically, when the economy would dip, private label or generic sales would increase, and when the economy came back, they would decline,” he says. “But I think those items will continue to be a focus even when the economy improves—because people have tried it and have learned the private label items are of such quality now.”

Concerns that affect wholesalers like Piggly Wiggly Alabama Distributing Co. Inc. include high unemployment rates, a lack of good paying jobs and our nation’s debt.

“I think the unemployment/underemployment, to include those who have given up looking for jobs, is something that is Please see page 20

18 • December 2012 – A Shelby Report Special Publication

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exchange of ideas, procurement power part of ROFDA’s Benefit package

A

l plamann became CEO of Unified Grocers, the largest retailerowned wholesale grocery cooperative in the western U.S., in 1994.

He and his Los Angeles-based company have been involved with ROFDA ever since. Among the best benefits of being a ROFDA member, according to Plamann: idea exchanges and procurement.

“In certain parts of our business, like the warehousing, for example, we’ve benefited by utilizing some of the preferred vendor deals to procure together,” Plamann says. “Also, the networking that happens at the ROFDA meetings, with the other co-ops, has helped with questions on how to deal with common issues. It’s a combination of the networking and some of the procurement activities.”

And the 70-year-old stresses the importance of sharing ideas with others in the business; it is paramount to success, especially considering the challenges that come along with leading a wholesale grocery co-op.

“One thing about being a CEO of a retailer-owned distribution company or wholesaler that can both be rewarding and challenging at the same time is that you have an opportunity to satisfy your retail owners and get to be friends with them, but they're also your boss."

And, even after all these years of being at the helm of Unified, Plamann still takes pleasure in visiting retailer stores.

“I enjoy talking to them about what they’re doing, trying to come up with new ideas with them and figure out how to satisfy their shoppers’ needs better; how to grow their business; how to supply them with not only the products they need but some services and other support activities,” he says.

“That is really an exciting thing to do—watching them grow is exciting.

Watching competition come in around them, like Walmart, and hurt them is not fun. There are things the retailers can do to compete.

“So that’s why I say this retailer relationship can really be fun and rewarding, but it can be incredibly challenging also.”

west Hit HARDeR tHAN

MOst DuRiNg

eCONOMiC DOwNtuRN In addition to the everyday challenges that come along with operating any organization in today’s economic environment, the recession has hit business in the western states particularly hard. It's had “a big negative impact on our retailers,” according to Plamann. “The consumer continues to really closely guard their pennies,” he says.

The result? A change in consumer purchasing habits, most notably in the meat and produce departments, as well as an uptick in the buying of private label products.

Across the board, and particularly in urbanized areas, consumers are still buying “at a pretty good level”—at least during the first couple weeks of the month, according to Plamann. That shopping pattern, however, drops off by the third week and “by the fourth week, (consumers) have to decide whether they’re going to fill the gas tank or if they’re going to walk or ride their bike and have hamburgers and hot dogs,” Plamann says.

“We probably have 25 percent of the people that in some way, shape or form are dependent on some of these support mechanisms (the

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Supplemental Nutrition Assistance Program, or SNAP, etc.),” Plamann says. “And that’s going to skew pretty much every retailer’s sales profile.

“And I’m afraid with the stagnant economy that we have very few new jobs at salaries or wages at what I call acceptable levels will be opening up for workers. This shopping pattern—both buying down to private label and smaller sizes and monitoring their budget week by week through the month—is basically the new norm that we need to Al Plamann become accustomed to.”

What does this mean for retailers?

Plamann says retailers must learn to manage and balance a stable workforce based on this new shopper behavior. “It likely will require some operational adjustments,” he adds.

DOllAR,

CHAiN DRug stORes AMONg tHe

lAtest COMpetitiON Despite the tough economy, competition in the grocery arena hasn’t waned. In fact, it appears to be increasing.

“In the West we’ve seen what I would call a ‘flood’ of competition from dollar stores, from chain stores,” Plamann says. “Chain drug stores are adding a lot of products.”

Chain drug stores, he points out, are adding so many products—from frozen food to milk and bread—that the vendor community is beginning to look at the format as a different channel altogether.

“So you’ll see different-sized products that can be priced very competitively against our retailers, because the impulse or convenience buying that may occur in the chain drug store has an effect, especially in a tight economy, on traditional grocers,” he says. “I think that’s having a big effect not only on our independents but on the traditional chains as well.”

The lagging economy and new competition isn’t all that’s impacting grocers in the West. Online shopping is cutting into retailer profits as well.

Please see page 20

A Shelby Report Special Publication – December 2012 •

19

Plamann from page 19

“It’s not well measured, but I’m convinced that, especially for the younger people, the convenience of online ordering, in certain categories… may take the place of price as the real reason to utilize e-commerce,” Plamann says.

Among those categories that are gaining ground in the online marketplace: baby products, including food and diapers, and pet food. “I think that’s eating into some categories inside our traditional stores,” Plamann says. “And probably will continue to.”

the store manager or is the produce department manager or the meat assistant manager,” Plamann says. “Local can mean a lot, and I think local can be one significant point of differentia-

tion for our retailers, particularly in these highly competitive marketplaces where you have competition like Walmart, Trader Joe’s and others.

“So I really like to focus on local in a big way.”

ComBating Competitors with through-and-through ‘loCal’

Local, which has become a popular marketing tool for just about every grocery retailer, encompasses much more than simply sourcing local products, according to Plamann. It also means modifying a store to reflect the neighborhood’s atmosphere and, perhaps most importantly, hiring local employees—something that is difficult for larger chains to do.

“Local can mean somebody’s neighbor is

Bullard from page 18

going to be with us for a while,” Bullard says. “It is part of the ‘new normal’ and we in the grocery business are going to have to develop effective strategies to deal with it.

“I am also very concerned about our country’s deficit spending and I think the state of our economy will parallel our progress in reducing that debt load,” he adds. “In business, because of our current policies, there is so much uncertainty that businesses are reluctant to grow, to invest, to create jobs. Additionally, issues such as government control of healthcare and increased federal and state regulations are concerns.”

Better

listeners and tougher negotiators

Wholesalers across the board, according to Bullard, must be tougher negotiators to remain competitive in the marketplace.

“Our company is putting special emphasis on volume buys in an effort to provide its operators with pricing that will in turn bring customers into their stores. If we can buy several truckloads of one item at a very low price, we can really pass on substantial savings to our operators.”

Additionally, Bullard feels that wholesalers must not forget to listen attentively to the retail operators.

“I think 50 percent of my job is listening to our operators.

Retail is what drives our company, and we can never forget that. I learn so much every time that I go into one of our stores by just talking with the managers and truly taking note of what they have to say. It is a joy to talk with and learn from the people who truly know this business.”

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Certco serves ‘the Real independents’ with a little Help from ROFDA Friends

C

ertco inc. joined ROFDA in 1997. An agreement with vendor partner Blue Bunny Ice Cream was part of the draw to the organization. These types of arrangements have been mentioned by several ROFDA CEOs as a catalyst to join the group, and Blue Bunny specifically was cited at least twice.

Randy Simon has been CEO of Certco for four years, but has been attending ROFDA events longer than that, for about six years, as he stood in for former CEO Don Watzke.

Certco delivers within a 200-mile radius of its three Madison, Wis.area facilities.

“That’s our footprint and we pretty much stay inside those walls, which helps us control our Randy Simon costs,” he said.

Fuel cost increases and product cost increases cut into efforts to keep independent grocers competitive.

“We try to help the independent retailer be a value to the communities they serve, and the cheapest price is not always what everybody is looking for,” Simon said. “You have to have a relevant value to your community and, of course, that’s what independents do. They’re involved in their communities, but we have to show customers a value when they come to shop.

It’s all about value, not price.”

He said the recession affected Certco in much the same way as it has retail grocery operators.

“We also look at costs and processes harder,” he said. “That’s something

22 • December 2012 – A Shelby Report Special Publication

that we should be doing every day—and shame on us if we didn’t do it enough— but it has made us smarter. I think we probably look under more rocks now, and it’s made us better and more efficient. It’s not any different than how we go out to the retailers. They are surviving because they have been able to do the same thing. Where you have to cut costs, you have to cut costs.”

He said independent retailers are “optimists,” and “they don’t buy into” what has been called the “new normal.”

“We had a food show here a couple of weeks ago and I had at least two stores say, ‘We are operating and we are operating at a profit,’ and they’re waiting for the economy of course to move forward, but they don’t accept the ‘new normal,’ and I would never preach that. I think that’s part of the problem we have in trying to come out of this recession. Everybody is keeping their money in their pockets.”

Certco’s motto is, “we serve the real independents,” Simon said. One thing that means is independent retailers borrow money from their local banks.

“We don’t go out and offer money or help pay for front ends and then have people sign contracts with us,” he said. “We’re just there to help them. We feel like we’re small enough that if your idea and your philosophy are to do ‘this,’ then we’re there to support it. They’re certainly not cookie cutters. Their towns all need something different, so we’re here to support whatever type of format they’re looking for.”

In his former experience as a buyer, Simon built relationships with many store owners, which has served him well as CEO. “The stores can call directly into our buyers here. We put no barriers in between them,” he said. “I know them very well. They’re close to me also, so that has helped.”

Of course, part of the CEO’s job is to also serve the people “inside the building,” Simon said. It is a tall order to meet the needs of employees.

“It’s challenging right now to make sure that our employees’ jobs are relevant and family sustaining, making sure they’re comfortable,” he said.

Then there are the local communities around Certco’s facilities that are facing challenges of their own.

“They are struggling also to have money to build roads and new projects—it is always a challenge,” he said. “Whether you’re buying new facilities or expanding facilities, the cities and the towns that you have your facilities in can help you get through that. But I think everybody is stretched a little bit.”

Simon was part owner in a meat market and a successful sausage maker before joining Certco. He worked his way up from his start in the meat department to grocery buyer, and then to meat director when the former director retired. After that he became VP of procurement, then EVP, and 23 years later, he said, “here I am.”

He was a COO when he first attended a ROFDA meeting.

The organization has evolved to include more than CEOs or their proxies at its gatherings.

“The warehouse director meets with other warehouse directors, and so on. We’ve gone a little bit further there,” he said. “It’s not just the CEOs meeting anymore. It’s not all my responsibility to bring it back to my office. Everybody is face to face, and they all should take what they need out of their meetings.”

Simon shares the sentiment of many leaders who give ROFDA high marks for the opportunity to share challenges and solutions with their peers.

“It’s given me a way to connect with other CEOs,” Simon said.

“It has given our management team the opportunity to actually get into other facilities. ‘How do other people do it?’ It’s a surprise how you pick up little things that really save money and time, and time is money. It’s helped us move forward.”

Simon met Gerry Totoritis, who retired in August as CEO of Birmingham, Ala.-based Associated Grocers of the South, at a ROFDA meeting, and getting to know the “former cheesehead,” as Simon referred to him, was beneficial personally and professionally.

“He has been the biggest help for me that I could ask for,” Simon said. “I go into my first meeting not knowing anyone, and I sit down next to a gentleman who knows all about Wisconsin. As they say, small world. His people were very instrumental in us changing processes in our warehouses.”

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ROFDA Member unified grocers in top 10 FMs/NgA study Finds on NCB’s Co-op list Healthcare Reform No. 1 on independent grocers’ Concerns index

Associated Wholesale Grocers Inc. (AWG), Kansas City, Kan., with revenue of $7.7 billion at No. 6.

In the middle of October, which is National Co-op Month, National Cooperative Bank released its annual NCB Co-op 100 that lists the nation’s top 100 revenue-earning cooperative businesses. NCB is a provider of banking solutions for cooperatives.

In the grocery co-op category, Unified Grocers Inc., Commerce, Calif., reported $3.8 million in revenues to come in at No. 9.

In 2011, cooperatives posted revenue totaling approximately $215.6 billion, an 11 percent increase from 2010.

“As we conclude the International Year of Cooperatives and reflect on the impact cooperatives make around the world, this report highlights the economic success this business model has on the U.S. economy and strengthening communities,” said Charles E. Snyder, president and CEO of NCB. “As a cooperative business ourselves, we are proud to participate in the International Year of the Cooperative. Our report is just one of the many ways we work to inform the public on the advantages of cooperatives in all fields of enterprise.”

Other ROFDA members on the top 100 list include (by rank): 16. Associated Wholesalers Inc. (AWI), Robesonia, Pa., $2.3 billion 21. Associated Food Stores (AFS), Salt Lake City, Utah, $2 billion 23.Central Grocers Cooperative, Franklin Park, Ill., $1.9 billion 37. Affilated Foods Midwest Co-op Inc., Norfolk, Neb., $1.4 billion 41. Affiliated Foods Inc., Amarillo, Texas, $1.3 billion 59. URM Stores, Spokane, Wash., $914 million 75. Piggly Wiggly Alabama, Bessemer, Ala., $773 million 88. Associated Grocers Inc., Baton Rouge, La., $685 million 97. Associated Grocers of Florida Inc., Pompano Beach, Fla., $596 million Other grocery co-ops on the list included Wakefern Food Corp. in Keasbey, N.J., with $10.3 billion in revenue and the No. 4 ranking, and

Independent grocers express a great level of concern over the financial impact of the changes to healthcare insurance mandated by the Patient Protection and Affordable Care Act (PPACA). Ranking eight political issues from one (most important) to eight (least important), the impact of healthcare reform ranks first by a wide margin, according to the 2012 Independent Grocers Financial Survey, released this month by FMS and the National Grocers Association (NGA).

“Healthcare insurance costs among independent grocers increased by an average of 7 percent in 2011 and 77.4 percent expect further cost increases this year,” says Bob Graybill, FMS president and CEO. “Despite year-overyear cost increases, 47.3 percent of independents fully absorbed the additional expenses and another 44.4 percent shared the cost increases with the employees.”

As is, healthcare costs make up an average of 1.5 percent of sales, with an average per-employee cost of $6,153 in 2011.

Other issues drawing top concern include the budget deficit and deficit spending, with an average score of 3.9. At an average of 4.1, swipe fee regulation continues to rank as a top-three concern among independents, despite the enactment of the financial reform legislation.

Another pressing issue among independent grocers is the looming tax crisis. There is a lot of uncertainty surrounding income, Medicare wage, estate and other taxes with current rates along with 40 tax provisions set to expire Dec. 31.

“NGA has worked non-stop through grassroots action, meetings with key legislators, testimony submitted to congressional committees, and in-district meetings with constituents,” says NGA President and CEO Peter Larkin, “all in an effort to press Congress to take action by extending these provisions for at least one year. Many of our members run family-owned businesses that could be greatly affected by the potential changes in estate and other taxes.” political Concerns index 2012 (ranking scale 1-8, where one is highest concern) • Healthcare reform (average score of 3.1) • Budget deficit and deficit spending (3.9) • Swipe fee regulation (4.1) • Job stimulus/unemployment policy (4.2) • 2012 presidential election (4.5) • Energy policy (4.9) • Estate (death) tax (5.7) • Immigration reform (5.9) In addition to an in-depth review of the political and economic marketplaces, the study includes operational and financial benchmarks as well as sales, margin and profit data by region, store sales volume and profit leaders.

The 2012 Independent Grocers Financial Survey is based on data from 123 independent grocers.

24 • December 2012 – A Shelby Report Special Publication

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Alexander: share groups valuable Q: How have you and your retailers responded to today’s challenges? What are some of the most innovative strategies you have devised around those?

Our retailers have stayed focused on their business and concentrated on their particular strengths rather than become “me too,” as in chasing the competition.

Q: How are grocery shoppers responding to economic challenges?

Actually, the consumer is probably spending as much as usual at the grocery store; they are just wiser about how they are spending it.

Stan Alexander

s

tan Alexander has just a couple of months under his belt as president and CEO of Associated Grocers of the South in Birmingham, Ala. Alexander was promoted from EVP of sales at AG, succeeding Gerry Totoritis, who had been at the helm of AG of the South for 12 years and officially retired Aug. 30.

Alexander started his career as a bag boy for WinnDixie when he was 16 years old. Over his 40-year career, he has served as a store manager, buyer, merchandising director and division president, among other titles, with various companies. These include Nash Finch, Roundy’s and Scrivner.

“Based on Stan’s extensive experience in our highly competitive market, we expect this to be a very smooth, seamless transition, as we all look forward to continued success,” said Jack Howell, AG of the South board chairman.

Though he has attended just two ROFDA conferences thus far, Alexander already realizes one of the benefits: “Learning things through the share groups that we can apply to our own company.”

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Gerry Totoritis, retiring president and CEO of Associated Grocers of the South, receives “special recognition” from Jay Campbell and ROFDA at the 2012 Spring Conference. Totoritis was responsible for renewing AG of the South’s ROFDA membership when he took the helm in 2000.

ROFDA’s surveys provide valuable input for CeOs

J

im Ried’s most memorable ROFDA conference was his first. There’s something about being “thrown into the fire” that tends to stick in your memory.

Ried had been named president and CEO of Olean Wholesale Grocery Cooperative in Olean, N.Y., for a short time when he was approached about speaking at the ROFDA conference at the Vinoy in St. Petersburg, Fla., in 2005. (He had become president and CEO on April 1 that year.)

“At that meeting I had to give a presentation on Olean Wholesale to the entire group, so I was thrown right into the fire,” says Ried. “I gave a presentation on who Olean Wholesale was and what we were all about, and why we had been in business for more than 80 years.”

After his presentation he was able to relax, though, and enjoy the surroundings at the beautiful Vinoy as well as his fellow CEOs and ROFDA’s associate members.

“That’s the one where I started to meet people for the first time and develop some pretty good Jim Ried relationships,” he says.

Olean has been a member of ROFDA since 1991.

Ried joined Olean Wholesale more than 20 years ago, but his grocery career began way before that, at age eight, with his dad Charles A. “Charlie” Ried, who ran a small grocery store under the family name in Allegany, N.Y. Young Jim cleaned the meat room and performed other basic store tasks before becoming a cashier. In 1973, Jim’s father opened a larger store in Allegany, and Jim returned to the family business after having spent a year as a food broker. In 1976, the Rieds opened a store in Olean, and in 1988, the Allegany store closed. That was when Jim Ried moved to the next phase of his career, at Olean Wholesale Grocery Cooperative. He had risen to COO when he was tapped to be the president and CEO, succeeding Jim Robinson.

ROFDA is a great organization to belong to, according to Ried, “because it’s basically a cooperative of cooperatives. We all talk the same language.”

It’s also a fount of information for the member companies.

The organization regularly sends out surveys to members covering issues ranging from executive compensation to the best software to use for various functions. They also take requests. If a member CEO has a nagging question and could use input from his fellow co-op

three Questions with Jim Ried Q: What’s at stake in the presidential election?

The biggest thing that’s at stake is what will happen with the Patient Protection and Affordable Care Act. I don’t think there’s any chance of it ever being repealed, but the regulations aren’t in place and depending on how the election ends up could affect how the regulations would affect our independent operators.

Very seldom do you pass a law that you don’t know how you’re going to enforce it, and this time, probably the biggest legislation that was ever passed, they had absolutely no idea what they were going to do with it. They just passed it and said, “we’ll figure out how to do it later.”

Q. How are you using technology but still maintaining the personal touch?

We just switched to Google Cloud mail so that we will not have any email servers inside the building, etc. Technology certainly has allowed us to get information out to our members quicker, particularly in the area of meat and produce, where things can change on a daily or even an hourly basis. And you can get information out much quicker to the stores.

We do have voice mail, but there is a very limited number of people who have voice mail. We still have a switchboard operator.

We want everybody to answer their own telephone. Nobody has an assistant that is screening all their calls. My own calls, if somebody calls and asks for me, it rings right into my office; it doesn’t go through anybody else, so that’s basically maintaining the personal touch with all of our members. There are so many times I get a phone call and the first thing they say is “Oh, I didn’t expect to talk to you!” And I say, “I answer all my own phone calls.” By the end of the day I try to return, before I leave, any phone call I had received that day.

If somebody called me that day they probably wanted an answer that day, not tomorrow. Particularly when you’re with a cooperative, most of the time when I get a phone call the person that’s on the other end of the line is not a retailer, it’s a member that actually owns, is an owner, of the cooperative. Customer service takes on a different level in a cooperative vs. a voluntary wholesaler. And we instill that in everybody. Every time we have department manager meetings or we have meetings with the entire staff, we remind them…and even new employees when we train them, the first part of the first day of training we tell them to remember that the person that you’re talking to is an owner. They’re not a retailer.

Q. What are you doing to help your members with succession planning?

It’s a concern not only of Olean Wholesale but every cooperative: Where is the next generation of members, of store owners?

Where are they going to come from? Because the financial climate is so much different today; the competitive environment is so much different. Even with succession planning, young kids have seen what their parents had to do and they don’t want to work like that.

26 • December 2012 – A Shelby Report Special Publication

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CEOs, ROFDA will send out a survey on his behalf and share the anonymous results with everyone.

He says there typically is a high percentage of participation in the CEO surveys, so there will be 10 or 12 responses out of 14 normally.

“Nobody knows who sent what response back; you just know that Warehouse A does this, Warehouse B does that,” Ried says. “It might be, for example, at corporate store level what are your meat managers making? What are produce managers making? Or at warehouse level, what do you pay your director of data processing? What do you pay your meat director, your produce director? We get executive compensation surveys on a regular basis. You can benchmark yourself with the industry.”

And ROFDA’s role in the process is invaluable, he adds. “If it were CEO to CEO, you’re probably not going to get an answer, but when ROFDA goes out as a blind survey, it works much better.”

One of ROFDA’s recent initiatives that Ried is behind 100 percent is its push to build deeper relationships with consumer packaged goods (CPG) companies that will lead to better deals for member co-ops, which in turn lead to more competitive prices at store level.

“The goal is to try to get the CPG companies to formulate a plan for the ROFDA group,” he says. “We do real well for the most part with warehouse supply items, those type things, but with CPG companies is where we see the growth as far as the collaboration.”

ROFDA’s member co-ops represent more than $40 billion in retail volume through more than 7,500 retail outlets—“a pretty viable part of the business,” he points out.

Ried also notes that ROFDA’s associate members, including product manu-

facturers, can count on getting real work done at ROFDA’s spring and fall conferences because the decision-makers are there.

“Out of all the trade organizations, because all the CEOs are there, decisions can be made,” he says. “All of the ROFDA associate members know that they’re getting their word out directly to the person that can do something about it. When an associate member shows up, he knows he’s going to talk to the person that’s going to get it done.”

The CEOs themselves often break off into share groups to discuss various issues, and ROFDA is careful to make sure it keeps co-ops who may have territories that overlap somewhat in separate groups so as not to impede the free flow of communication.

“Pretty much everybody knows what’s off- and on-limits to talk about, it’s sort of an unwritten thing,” he says. “If we’re in a share group of some kind, for example, I would be with the West Coast people vs. the East Coast people.”

Arceneaux: ‘You Can’t Buy Better than Buying From Yourself’

A

ffiliated Foods Amarillo has long been a member of ROFDA. The exact year may just have to remain a mystery, because the organization’s minutes were not meticulously kept from its inception in 1962 through to 1983.

Suffice to say that Affiliated Foods Amarillo was there early.

Minutes from 1983 show that it was a member of ROFDA then, and they confirm that it is one of four member organizations from that time that are members still today.

Affiliated Foods CEO Randy Arceneaux is a newbie to ROFDA compared to many of his peers. He has been in his current role for just two years. Affiliated Foods recruited him to come on board as Randy Arceneaux COO three and a half years ago.

His first job after completing his education was with a family-owned grocery wholesaler in south Louisiana. He stayed in Lafayette, La., as he moved up the ranks at Fleming Cos. and then developed the market area for Little Rock, Ark.based Affiliated Foods Southwest.

But it all began when he was 10 years old. His first job was as a bag boy, and he stayed with retail as he progressed through school.

“I came up the right way in the grocery business—on the retail side,”

28 • December 2012 – A Shelby Report Special Publication

Arceneaux said. “Because of that, it helps me today in my role on the wholesale side to better communicate and understand the independent operator.”

Belonging to ROFDA benefits him as a relatively new CEO because he can network with other CEOs and member cooperatives.

“It allows us to reach across the table and help each other, learn from each other the best practices we each are performing,” he said. “We get to share ideas, success stories and things that might not have been so successful. That’s probably the biggest benefit I get out of ROFDA.” Arceneaux is a self-described “cooperative cheerleader.

“I believe wholeheartedly that the cooperative for the independent grocer today is where they belong,” he said. “It’s the best of all worlds, in my opinion.”

An Affiliated Foods Southwest board member had a favorite saying that has stuck with Arceneaux: ‘You can’t buy better than buying from yourself.’”

It is a good description of what cooperatives do.

“That is technically what you’re doing,” Arceneaux said. “You’re buying from yourself. You’re supporting the company that you’re part owner in.

A cooperative is like working for your family. The beauty of it all, at least in our case, is that all of the members on our board of directors are store owners and owners of the company, so when we sit in board meetings, they really do take to heart what’s in the best interest of this company as a whole and the membership, because they are part of that membership. So that’s one of the biggest advantages of the cooperative.”

That’s why “all of the voluntary wholesalers are struggling,” and independent sector growth is in the cooperatives, he said.

“They’re benefiting in their buying power together, and they get all the returns of the profits at the end of the year,” he said. “There’s nobody trying to please Wall Street or anybody else.”

Affiliated Foods Amarillo just finished another terrific fiscal year, with a 12 percent increase in sales. Over the last three years, it has grown from a $1.1 billion company into a $1.4 billion company, with $100 million growth in each of those years.

With a thriving economy, there isn’t a lot of talk about the “new normal” out in West Texas, he said, but he has seen consumer behavior change over the last four years, as private label products have gained acceptance and become popular.

“We’ve all seen private label sales continue to rise.

We’ve seen the national brands come back and fight against it because they lost market share—in our market they did—so they’re coming back and battling private label,” he said. “Once you get them to try it, then it becomes the new normal. They realize they can save money, and the quality is as good or better than the national brands. I think the economy kind of forced some consumers to go into that arena.”

The economy is top of mind for most Americans as they head to the polls to elect the next president. Arceneaux believes they are holding back on spending—even if they do have a little extra discretionary money—because they’re nervous about what the future will hold.

“When it comes to how the election will impact us as a cooperative, health care reform is one of the biggest challenges that we’re going to have to overcome,” he said. “How Obamacare will impact small businesses throughout the United States and in our area, and how it will impact the independent operator is going to be a big issue.”

He said while the last presidential debate was about foreign affairs, that is not what people will be thinking about at the polls.

“They’re voting on the economy and healthcare,” he said. “They’re going to vote based on who they feel is going to take care of those challenges best. Foreign affairs are a big issue, and they have an impact on the economy, but who will best create new jobs and jumpstart the economy? I feel that will be the deciding factor for the American people.”

That’s the case even in Texas, despite how well it is doing economically thanks in part to the most recent oil boom,

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Sonnenberg from page 15

local,’ they can convince the consumer that they have somehow instantly reinvented themselves.

“In my opinion you have to believe in who you are and what you represent, and your operation must always be a reflection of those values. Consumers are smart, they understand who is local.”

“Are these changes permanent? In my experience everything is cyclical,” he says. “Once the economy improves companies will slowly add overhead until things repeat themselves. I would like to believe this will change, but history tells me it will not.”

“I firmly believe the cooperative business model is by far the single best way for independent grocers to grow NO stRANgeR tO CHAlleNges The veteran grocery man has seen his share of challenges over the years, and to prosper.” and continues to do so as he nears retirement.

“Here at URM we face all of the same major retail competitors as everyone else in the country,” Sonnenberg says. “We have some very strong regional chains in our market that we compete with on the retail side and we have national and regional competition on the wholesale side as well.”

The recession also has proven difficult.

“We already run a lean operation but as a result (of the economic recession) we became even leaner,” Sonnenberg says. “Everyone is trying to do more with less at retail, and we have to do our part by doing the same at wholesale.

Randy Arceneaux continued

but the blessing doesn’t come without a cost.

“Texans have enjoyed years and years of success and growth, and now the independent is starting to face more and more competition,” he said.

“Because the economy is so vibrant and because of the oil boom, the Walmart Neighborhood Markets and H-E-Bs of the world also are building new stores and expanding in our market because the opportunity to do that is now. I can see that’s going to continue.”

That is why it is so important for independent grocers and the cooperative to think ahead. Affiliated Foods Amarillo has a weeklong board retreat scheduled for next February for that very purpose.

“Not only do we look at succession planning within (the retailer’s) own organizations, but we look at succession planning as a cooperative,” Arceneaux said. “What is our fiveyear plan, our 10-year plan? Where do we want to grow? We have been very fortunate, but then we have to start looking past that, because our facility is only ‘x-amount’ of square feet. You have to ask, ‘Do we expand here?

Do we look for other markets, a second distribution center?’ That’s succession planning, in my book.”

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—Dean Sonnenberg, URM Stores

wHY ROFDA?

Co-ops have many unique challenges, according to Sonnenberg.

“Designing and implementing programs that will fit such a diverse group of owners is not always easy,” he says. “That being said, the positives outweigh the negatives when compared to any other form of grocery wholesaling, and I firmly believe the cooperative business model is by far the single best way for independent grocers to grow and to prosper.”

Sonnenberg to page 31

willingness to share sets ROFDA Membership Apart

t

hough he’s not new to the grocery business, John Runyan is still pretty new to the grocery co-op world.

More than 60 years ago, Runyan started working, at age 12, at an independent grocery store in Topeka, Kan. The driving age was 14, and his dad told him if he wanted a car when he turned 14, it would be up to him to earn the money for it.

So Runyan, the eldest of six children, went to work. Among his duties as a stocker were stacking John Runyan bottles and candling eggs—checking eggs for cracks using a light source (light bulbs had replaced candles by the time Runyan came along).

He got that car at 14, and he kept working until he completed high school.

Runyan had a lot of energy (still does) and was a bit of a challenge to his teachers and his dad—the school allowed him to graduate two credits short, “because they wanted me out,” he says—so he found himself in the Army and off to Korea as soon as high school was over.

“Then I came back and worked two jobs all the way through college,” he says. The jobs were in the grocery business.

After graduation, Runyan was hired by Fleming Cos. and worked in five different operating divisions, eventually serving as president of the Fremont and Oakland, Calif., divisions. Next was a position as corporate SVP of operations responsible for export/international, seven division presidents of full-line DCs and one GM/HBC division in the Western U.S. His last decade with Fleming was spent as a senior executive, involved with a range of retail formats, including Food 4 Less and Mega Markets, Piggly Wiggly, Sav-U-Foods and IGA. He retired from Fleming at the end of 2000 after a 38-year career.

He then founded his own company, JSR&R Co., which is involved in the food business in the U.S. and internationally.

When he went back into the wholesale food business in October 2005, it was as president and CEO of Associated Grocers in Seattle, Wash.—his first experience with a grocery co-op.

Help wANteD

AG of Seattle was a fairly new member of ROFDA, having joined in 2004.

Runyan began attending the group’s conferences as soon as he took over.

And he was candid (as always) with his fellow ROFDA board members: “I’m going to be looking to you guys to help me…because I took over a company that is near bankruptcy and hasn’t paid a patronage dividend in six years,” he told them.

“When I became a CEO of a co-op, I admitted that I didn’t know what I didn’t know. And that’s important,” Runyan says.

He got to know his fellow ROFDA CEOs at that first meeting, “and I started sending them emails, some of them personal, some of them to the whole board (of CEOs), and I would say, ‘hey, here’s my situation; please help me!’ Every one of them replied each time. It was great. The CEOs that represent the various co-ops are good guys, hard workers, and they’re willing to share.”

He states that ROFDA is a prime example of “co-opetition,” says Runyan, borrowing the term coined by Adam M. Brandenburger in his 1997 book.

“Co-opetition plays well particularly with co-ops. It combines the advantages of both competition and cooperation, which can be used to generate more sales and profits and to change the nature of the business environment in ROFDA’s favor,” he says.

Quoting Brandenburger, Runyan says, “In today’s business environment, most companies can achieve more success working together than they ever could working alone.”

“In effect, we’re saying, ‘hey, we’ve got to work together,’” he says.

30 • December 2012 – A Shelby Report Special Publication

“When companies work together they can create a much larger and more valuable market than they ever could by working individually. It’s a concept that fits like a hand in glove with co-ops, assuming they’re part of a good organization, such as ROFDA.” Today, Runyan is executive advisor to the CEO (Al Plamann) and the President (Bob Ling) at Unified Grocers. Unified purchased AG of Seattle on Sept. 30, 2007, after Runyan and his team there managed to turn the company around.

In what many viewed to be an unlikely-to-be-successful alliance, Plamann asked Runyan to stay on for three months after the deal closed to help with the transition of the AG Seattle business to Unified.

Runyan already had mapped out his post-AG plan, which was going back to his own company to concentrate on it full time again.

“I had many retailer and wholesaler clients here in the U.S. and internationally, and I was going to go back and do that because I really enjoyed it.”

But he decided to stay on for those three months, helping transition the two companies. That strengthened the relationship, because the end of September 2012 marked five years that Runyan has been at Unified.

“I’ve learned a lot from Al Plamann. He’s an excellent strategist. He keeps us on track and headed in the right direction,” he says.

And despite the misgivings others had about them working together, “he and I have really gotten along well,” says Runyan.

Unified is a ROFDA member, and while typically the CEO is the one who sits on the ROFDA board, at Plamann’s request Runyan has special permission to be Unified’s representative on the board.

Asked what stands out in his mind about his involvement with ROFDA over the years, Runyan is quick to respond: “Making friends with quality men who have had proven success and are open about sharing the pros and cons of many different circumstances. When I took over an almost bankrupt company, I had to make a lot of decisions very quick. I reached out to other CEOs and they really helped me.”

He says one of the best parts of being involved with a co-op is that “you have an opportunity to really get to know the members on a business and a personal basis. When you’re out visiting the membership, they’re part owners of the company and as normally happens, you form a bond, a good relationship, with these retailers. And not only do you talk business, you talk personal stuff. It’s a close-knit community. You see the fruits of your endeavor because you’re working with people that own the company and they care as much about your company, in this case, the co-op, as they do about their company. And we in the co-ops have to think about and care about them as much as we do our own company. It truly is a joint relationship.”

MeetiNg

MeMBeRs’ NeeDs DRives

uNiFieD

Unified works to make sure it is providing the goods and services its member retailers need to compete in the competitive Western grocery marketplace.

Runyan points to Plamann as the driving force behind the company’s evolving business model.

In addition to growing the company through the acquisitions of both United Grocers in Portland and Associated Grocers Seattle, Plamann also has “added a variety of programs and services for retail members to help them better compete in the marketplace.”

While some wholesalers “have outsourced their specialty and ethnic business to third parties and have outsourced retail technology and other services, that is not true at Unified,” which celebrated its 90th anniversary in 2011.

“Unified, on the other hand, has not outsourced any of these functions,” Runyan says. “We’ve handled them ourselves and in the process we’ve become a convenient, one-stop-shop for our retailers. This helps differentiate us from our competitors, and, of course, it obviously helps our retailers. That’s how we’re meeting the challenge—being state of

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Sonnenberg from page 29

The unique challenges that face co-ops call for unique solutions. That’s one reason URM Stores is a member of ROFDA. URM became a member in 1997.

“ROFDA is the only grocery-specific trade group exclusively created for member-owned wholesalers,” Sonnenberg says.

“We have some unique needs, and the opportunity to get to know your peers in this industry and to be able to learn from them has been a tremendous help in many facets of our dayto-day operations. It is a unique group that is extremely open about their operations.”

ROFDA, however, isn’t all business. In fact, one of Sonnenberg’s favorite ROFDA memories happened during an annual chairman’s dinner event many years ago. “…At this particular event, during the entertainment portion following the chairman’s dinner, Ferrell Franklin somehow ended up at the microphone with the band singing ‘Mustang Sally,’” Sonnenberg says. “As I recall, he was pretty good, too.”

Who is ROFDA? • We are a successful and historic trade association, established in 1962.

• We are selective, offering only a limited number of Associate Memberships each year.

• We are powerful and diverse, serving thousands of INDEPENDENT Retail Grocers.

• We are the best in the industry, with Members making up the top retailer-owned food distributors in the nation.

• We are ROFDA (Retailer Owned Food Distributors & Associates) and we are comprised of three categories of membership: *REGULAR MEMBERS—exclusively Retailer-Owned Food Distributors, defined as those primarily engaged in the wholesale distribution of food and related services in the United States, and having at least 66-2/3 percent of its issued and outstanding voting stock owned by active retail outlets. *ASSOCIATE MEMBERS—firms regularly engaged in the supply of services or products to Regular Members. *HONORARY MEMBERS—those former members or associates who are not presently active in the food industry, but permitted to retain an association with the organization in recognition of past service and dedication to the association.

John Runyan continued

the art in those areas.”

Unified also strives to be top-notch when it comes to its people.

“People don’t just come to work here and punch a clock and go home,” Runyan says.

“We at Unified Grocers invest heavily in training and development programs for two primary reasons: they help managers understand and perform their jobs better and they help define and develop our corporate culture and values. This leads to higher morale and greater cooperation and collaboration among teams and our associates. I really believe that.

“Unfortunately, some companies’ executives think the company makes the people; that’s not right—it’s just the reverse. Companies don’t make the people; people make a company.

I’ve always believed that; my dad used to say: The people you surround yourself with help make you successful.”

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A Shelby Report Special Publication – December 2012 •

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December 2012 – A Shelby Report Special Publication - The ROFDA Report