New Jersey Issue 1, 2016

NEW JERSEY APRIL/MAY 2016 VOLUME 1, ISSUE 1

NEW JERSE Y FOOD COUNCIL

Shopping For

MERGERS AND ACQUISITIONS

IN THIS ISSUE Exploring Tomorrow Today Saving The Planet... Quietly Foundation Inducts Industry Execs For the latest industry news visit www.njfoodcouncil.com

NJFC

| Board of Directors

OFFICERS

DIRECTORS

Chair Judy Spires Kings Food Markets

Associate Vice Chair Joseph H. McCarthy Bimbo Bakeries USA

Secretary Michael Murphy Quick Chek Corporation

Vice Chair Richard J. Saker Saker ShopRites

Treasurer Michael Rothwell Pennington Quality Market

President & CEO Linda M. Doherty New Jersey Food Council

Dan Croce Acme Markets

Peter Rojek Fairway Market

James J. McCaffrey III McCaffrey’s Markets

Jason Ravitz Ravitz Family Markets

Debbie Pregiato Advantage Solutions

Phil Scaduto Food Circus

Michael Biase Mission Foods

Frank Mastrangelo Supervalu, Eastern Region

Ken Weingartner C&S Wholesale Grocers

Andrew Kent Glass Gardens

John Wachter Murphy’s Markets

Rebecca Peifer Unilever

Eva Kohn CBA Industries

Luis Tejada Goya Foods

Jody Avallone Nestle USA

William Sumas Village Supermarkets

Kelly Johnston Campbell Soup Company

Joseph F. Pagano Inserra Supermarkets

David Maniaci Nicolas Markets

Richard Wood Wawa

Michael Sullivan Coca-Cola Refreshments USA

Lisa Angeles Kraft Heinz Company

Leonard J. Sitar ShopRite of Carteret

Joe Sofia Wegmans Food Markets

Howard Kent Krasdale Foods

Colleen Meares Stop & Shop Supermarkets

Christina Minardi Whole Foods Market

Rafael Cuellar Cuellar Family ShopRites

|

N E W J E RS E Y G R O C E R

Retail moves quickly.

Does your accountant?

2

Whether it’s protecting customer data, implementing new point-of-sale technology, or navigating the tax impact of a business strategy, work with a team who speaks your language—and moves at your speed.

W W W. M O S S A D A M S . C O M / R E TA I L

Certified Public Accountants | Business Consultants

CONTENTS

24

F E AT U R ES

COLU M NS

Mergers and Acquisitions

President’s Message Minimum Wage... So if They Jump Off a Bridge, NJ Should Follow?..................................5

2015 was a record year for all merger and acquisition activity and 2016 might hit the same heady heights. The reasons are simple and not surprising.

Saving the Planet... Quietly

30 44

For years now, there’s been a quiet movement under way on the part of the food industry to save the planet. And best of all, these sustainability efforts are…well, sustainable.

Exploring Tomorrow Today

37

| Issue 1

From The Chair Strong Despite Challenges of a Difficult Business Environment...............................7 Viewpoint – Kevin Coupe The Shopping Path of Least Resistance..................8 Inside the Beltway POS Credit Card Fraud Escalates........................ 20

A California-based think tank is exploring global economics, generational trends and technological developments to learn more about where and how people will live, eat and shop in the future.

Washington Report Challenges Continue for EMV Implementation.... 22

DEPA RT M EN TS NJFC News.........................................................10 Government Relations........................................ 17 15 Minutes With.................................................40

NEW JERSEY FOOD COUNCIL President & CEO Linda M. Doherty Asst. V.P. for Govt. Affairs Mary Ellen Peppard

Executive Assistant Office Manager Sandy Malecki Meeting Planner Kori Little-Buro

For advertising information contact: Dave Heylen E-mail: dheylen@cagrocers.com

30 West Lafayette St. Trenton NJ 08608 (609) 392-8899 (609) 396-6571 Fax www.njfoodcouncil.com For association members, subscription is included in membership dues.

Annual Subscription: $50

© 2016 New Jersey Food Council

|

Financial Manager Christine Higgins

Editor Gary La Spisa, II

N EW JE R SE Y G R OC E R

Director of Public Affairs Gary La Spisa, II

New Jersey Grocer is the official publicaton of the New Jersey Food Council.

3

PRESIDENT’S MESSAGE

“ Dog chow

®

n a t u r a l plus vitamins & minerals is made with real chicken.

There ARE no

artificial colors,

and Yoshi

loves it.”

BARBARA J. Dog Chow, Production Davenport, IA

I make MADE

WITH Real Chicken

NO ARTIFICIAL

COLORS OR PRESERVATIVES

|

N E W J E RS E Y G R O C E R

New

4

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

PRESIDENT’S MESSAGE

Minimum Wage... So If They Jump Off a Bridge, NJ Should Follow?

State Legislators should consider mom’s age old advice before enacting a disastrous minimum wage increase.

Growing up in Brooklyn and following other kids into some benign mischief, my Mom would say, “So if they jumped off a bridge, you should follow?”

employers would have higher costs resulting from compression. In some cases, collective bargaining agreements contain provisions for raises which are triggered by minimum wage increases.

Today, I clearly see the wisdom in my Mom’s

Companies would be forced to make tough

sentiment as NJ is again considering a dramatic increase in the minimum wage to $15. Just recently, both California and New York approved a significant incremental minimum wage increase to $15. Both initiatives were negotiated with union leaders without any participation or input from the business community, the payers of the wage. How ironic that labor officials, who would never stand to be outside the door of a negotiation, had no issue keeping the paying party out of the discussion.

choices including cutting the workforce, reducing hours or scaling back benefits. Our industry is facing unprecedented competition from online and big box stores, and some large chains have been unable to survive the challenges.

In Massachusetts, the Labor Department just revealed the retail and hospitality sectors experienced its longest stretch of net job losses since their wage hikes to $9 in 2015 and $10 in 2016. The state lost jobs in the grocery sector and the chairman of a large chain of supermarkets warned that the minimum wage hikes would be difficult to bear. In Washington DC, a higher minimum wage resulted in fewer hours of work for hourly employees and a contraction in the pay scale. These impacts were recently chronicled by Investor’s Business Daily.

Minimum wage increases reduce access to entry level jobs, particularly in retail jobs dependent on teens who live at home, seasonal workers and retirees who are supplementing their income.

These are not breadwinners supporting a family.

NJFC members currently provide generous health benefits, savings plans, tuition reimbursement and other fringe benefits that significantly add to labor costs. These compensation costs should be included in the calculation of the wage rate.

This proposal would lead to significantly increased food prices that would hurt seniors on fixed incomes who would be forced to pay higher prices but would not see a corresponding raise.

Their purchasing power would drop drastically.

Even worse, Democratic leaders have warned Governor Christie that if he fails to approve their proposal, they will force it to the ballot box. As we argued in 2013 when the minimum wage was considered at the polls, it is terrible public policy to place a labor contract on the ballot.

We implore our legislative leaders to consider the impact in Massachusetts and Washington DC and wait to see results from retailers in California and New York before we jump off that bridge too!

|

This is a HUGE and potentially unsustainable cost increase on our members. Additionally,

President & CEO

N EW JE R SE Y G R OC E R

NJFC is adamantly opposed to a proposal by NJ Democratic leaders which would significantly increase the state’s minimum wage by a whopping 79 percent! This legislation would increase the wage from $8.38 per hour to $10.10 per hour on January 1, 2017, and increase the wage annually from 2018 to 2021 by the larger of $1.25 per hour or the sum of $1.00 per hour plus any increase in the CPI-W. Annual increases will be tied to the CPI-W after 2021.

L I N DA DOHERT Y

5

FROM THE CHAIR

Strong Despite Challenges of a Difficult Business Environment The New Jersey Food Council remains in a strong position to take on the challenges of a difficult business environment in New Jersey.

We currently have sound financial footing with a healthy surplus, a large and growing scholarship fund, an effective Trenton team and valuable relationships at the State House.

Over the course of the past decade, NJFC has implemented two strategic plans with great success. Of note, the last plan in 2011 helped NJFC quickly pay off our victorious gift card litigation as well as develop and implement the Leadership Development Project, a program that is seeing immediate dividends as we mentor young professionals who will be the industry leaders of tomorrow.

It’s evident that our past Strategic Planning objectives has been a thoughtful process for the relevancy and effectiveness of the New Jersey Food Council.

Last December, a diverse group of NJFC members were invited to our latest strategic planning session to review our progress, examine industry trends, define our challenges and chart the future activity of the association. In

particular, we analyzed our capital investments, member services and areas for growth, trends in legislative and regulatory food industry policy, economic outlook, and educational Foundation opportunities.

J UDIT H S PIRES NJFC Chair of the Board, Chairman & Chief Executive Officer Kings Food Markets

It was determined that NJFC will tackle five categories in our newly developed Tactical Action Plan: •

Membership growth and defining new nontraditional member categories;

•

Educational Scholarship Foundation promotion, expansion and legacy building;

•

Weights and Measures management and investigation of price verification system;

•

Investigation of disposable bag policies and legislative opportunities; and

•

Member engagement in our government affairs agenda, association management issues and political action activities.

As we know, a Tactical Action Plan is a living document that gains momentum and sets a course for direction and engagement. For our plan to be effective, the activism and ownership of the membership are essential.

Members are being approached to participate in activities, working groups and provide feedback.

As we began 2016, we already are seeing the positive response from members who are coming together to work on our Tactical Action Plan.

NJFC recently hosted a workshop providing a legal perspective on how to handle weights and measures inspections, following up on the goals set by our Strategic Planning Committee.

N EW JE R SE Y G R OC E R

We remain grateful for the member engagement and are hopeful for another successful strategic approach that keeps NJFC strong, relevant and a value to the food distribution industry in NJ.

| 7

VIEWPOINT

The Shopping Path of Least Resistance KEV IN C OU PE Founder MorningNewsBeat.com

It isn’t quite the replicator technology fantasized about by “Star Trek,” – with which one could just say, “Early Grey, Hot” to a computer and it would magically appear – but that doesn’t mean it can’t – and won’t – change the world.

The fact is, I think it has the potential to do both.

Earlier this year, we learned that Samsung had unveiled a new refrigerator at the annual Consumer Electronics Show (CES) in Las Vegas.

But this wasn’t just a refrigerator. It was a “smart” refrigerator.

Called the Family Hub Refrigerator, this piece of equipment comes with a 21.5-inch touchscreen on one of its doors, which people can use to shop for products as they run low or out.

Even more impressive, the refrigerator also has cameras inside that keep track of products as they are removed, so it can let people know when supplies are running low. And, people can access all this information from their smart phones, and use them to place orders.

freezers and refrigerators and put pots of hot water inside in order to defrost them. It was a total pain in the neck, but a routine part of life.

(Barbaric, huh?)

Commerce-enabled devices like the Family Hub Refrigerator represent an unprecedented opportunity for our customers because it puts them right where the consumer path to purchase begins: in the kitchen.

Samsung said that it has partnered with MasterCard to provide payment services, and, to start with, MyWebGrocer, FreshDirect and ShopRite for online grocery ordering. Needless to say, these platforms are thrilled.

“Commerce-enabled devices like the Family Hub refrigerator represent an unprecedented opportunity for our customers because it puts them right where the consumer path to purchase begins: in the kitchen,” said Eric Healy, president of MyWebGrocer. And Jodi Kahn, FreshDirect’s Chief Consumer Officer, observed that it created a “frictionless” and “seamless” road between shopper and shop.

Bingo.

|

N E W J E RS E Y G R O C E R

iStock

8

Wow. I’m old enough to remember when refrigerators didn’t even have automatic defrosting. (Young people reading this will have to trust me on this. We used to have to unplug

Not long after Samsung made its announcement, I got an email from Amazon promoting a new item available on the site – a Brita water pitcher that comes with a filter that enables the consumer to have cleaner, better-tasting water.

Except that this was a pitcher with a curveball – because this Brita pitcher is WiFi enabled.

VVI E I EWWPPOOI N I NTT

It comes, the email said, “equipped with a built-in counter that tracks the amount of water that passes through the pitcher’s filter. The pitcher itself will automatically order a new filter through Amazon Dash Replenishment when the old filter nears its capacity.

This new connected pitcher with Amazon Dash Replenishment gives Brita owners exactly what they want – a new Brita filter on their doorstep at the time they need it.”

Pretty cool.

(I’m tempted here to tell younger readers that I can remember a time when we had to fetch water from the well with a bucket and a rope... but I’m not quite that old.)

The Brita Infinity Pitcher will cost about 45 bucks, which seems to be about a third more expensive than most of the Brita pitchers that I found on Amazon... but the argument is that the tech-driven convenience will make the price difference palatable. And I have to say that I think the argument is pretty compelling. Or, to coin a phrase, it is an argument that holds water.

Innovations along these lines have been much discussed over the years, and it only was a matter of time before dreams and reality met in such a way that products like these could become mainstream.

Without a doubt, we’re pretty much there... products like the Family Hub Refrigerator or Amazon’s ecosystem-centric strategies (which are tied to the

One of the things that one finds a lot at food industry conferences is people who like to cast doubt on the e-revolution.

Interestingly, Ford and Amazon announced at CES that they are working on an initiative “granting Ford owners

And the Amazon ecosystem expands a little more.

What is important to remember here is that once one buys a refrigerator or a water pitcher, it usually will be quite some time before you have to replace them. The refrigerator only has value if it is filled with food that you want to eat... and the pitcher only has value if you have the filters that create cleaner, tastier water. And so it is critical for companies like Samsung and Brita to find ways to be more relevant and useful... which is exactly what they’ve done.

One of the things that traditional retailers have to realize is that the advent of smart appliances and the expanding ecosystems being created by some retailer platforms – especially, but not limited to, Amazon – are combining to create an environment in which it is less and less necessary for people to actually go to the store. These progressive-minded companies are creating paths of least resistance that provide few reasons for consumers to detour elsewhere.

Not everybody, and not all the time. But enough to have an impact on a lot of bottom lines.

One of the things that one finds a lot at food industry conferences is people who like to cast doubt on the e-revolution. They like to talk about the people who still want to go to the store, about the hiccups that can affect click-and-collect or delivery services, about how rural customers have different needs than urban customers, and about how selling points like “your neighborhood grocer” or “hometown proud” or “old-fashioned service” or similar tropes are enough for retailers to hang their hats on when competing in this new environment.

All of this may, in fact, be true. And still not enough to stave off the impact of technology, especially on a generation of shoppers that does not remember those ancient pre-Amazon days.

Not all people, and not all the time. But enough to create leaks in the traditional market shares of a lot of retailers and manufacturers. Leaks that are likely to grow bigger with time.

The future is coming. And it is traveling at Warp Eight. n

N EW JE R SE Y G R OC E R

Echo, Subscribe-and-Save, the Dash replenishment system and even the delivery drones that probably will be flying over our homes one of these days) are putting us right in the middle of what could turn out to be a pretty remarkable time. And retailers have to be prepared to embrace this revolution, which almost certainly will unfold faster than anyone expects.

unprecedented access to their connected-home devices from their cars, and vice versa.”

| 9

N J FC N EWS

Trade Relations Conference Gets a New Date and Location!

The 2016 Trade Relations Conference will be held on May 11, at Harrah’s Casino and Resort in Atlantic City, NJ. John Derderian, President of Allegiance Retail Services, will provide remarks on the State of the Food Industry, and Tim O’Conner, Managing Partner of Retail Performance Group, will present to the attendees on “Retail Transformation 2020.” The reception and program will be held from 3:00 p.m. – 6:00 p.m.

Also at the event, Debbie Pregiato, Customer Team Leader for Advantage Solutions, will be honored with the New Jersey Food Council’s Max Stone Trade Relations Award, she will be the first woman to receive this prestigious honor.

“Debbie’s role as a leader on our new member development campaign, her business partnerships with NJFC members and her continuous dedication to the advancement of the Food Council’s mission made her an obvious choice,” said NJFC President Linda Doherty.

“Debbie has forged long lasting food industry relationships and is a role model as a respected trade relations leader,” Doherty added.

The Max Stone Award is named in honor of the longtime trade relations leader for Best Foods, CPC in recognition of his accomplished career in trade relations in New Jersey.

|

N E W J E RS E Y G R O C E R

The Conference will feature our first annual “Chef Cook-off Challenge;” an opportunity for retail food industry chefs to showcase their culinary skills and compete for the award as NJFC Best Chef 2016.

10

In addition to the Chef Challenge, we will be highlighting members’ new products in the market; which will give the opportunity for product sampling at the Conference.

In addition to the Max Stone Trade Relations Award, NJFC will be announcing the winners for the 15 scholarships being awarded totaling $53,000 to promote future leaders and support the workforce and families of the NJ food industry.

2016 Educational Scholarship Awards $5,000 SCHOLARSHIPS NJFC Founders Scholarship NJFC Thomas Infusino Scholarship NJFC Student Award Lawrence R. Inserra Memorial Scholarship Raymond J. Maniaci Educational Scholarship Perry Sumas Educational Scholarship CBA Industries Scholarship

$2,500 SCHOLARSHIPS ACME Markets Educational Scholarship Cuellar Family ShopRites Scholarship Wawa Scholarships (2)

$2,000 SCHOLARSHIPS Grace Scaduto Memorial Scholarship Spires Family Scholarships (2) Quick Chek Scholarship

As is tradition, the event will conclude with a golf event at Galloway National Golf Club on May 12 at 9:00 a.m. in Galloway, NJ. Contact Kori Little-Buro at (609) 392-8899 with any questions, or to register for the event go to http:// njfoodcouncil.com/register-today

The Future of The Food Industry

N J FC N EWS

Trade Relations Conference May 11, 2016

Harrah’s Resort & Casino Cocktail Reception, Awards Ceremony and Presentation 3:00 p.m. — 6:00 p.m.

Guest Speakers: John Derderian

President Allegiance Retail Services

State of the Food Industry

Tim O’Conner

Managing Partner Retail Performance Solutions

Retail Transformation 2020

Presentation of the Max Stone Trade Relations Award Debbie Pregiato

Customer Team Leader Advantage Solutions

1st Annual NJFC Chef Cook-off Challenge Viking Kitchen @ Harrah’s Casino

May 12, 2016 GALLOWAY NATIONAL GOLF CLUB

|

7:00 a.m. Networking Breakfast Buffet 9:00 a.m. Golf Outing - Galloway National Golf Club

N EW JE R SE Y G R OC E R

Industry Chefs compete to win the title of the NJFC Best Chef 2016!

11

N J FC N EWS

Store Tour Tuesdays Kicks Off 2016 Starting in January, the Food Council has embarked on a plan to host a minimum of one legislative tour each month in a program called “Store Tour Tuesdays.”

The goal is to provide legislators a perspective on the impact of the overzealous layers of government laws and regulations on grocers, suppliers and convenience stores.

In January, NJFC hosted Assemblyman Troy Singleton (D-7) at the ShopRite of Burlington. We were joined by members of the Eickhoff Family, the owner-operators of that location, for a 90 -minute tour and issue briefing. NJFC continues to work with Assemblyman Singleton on some of the issues which were covered during the visit.

In February, Assemblyman Jack Ciattarelli (R-16) joined the Food Council Team at Kings Food Markets

in Bedminster for a tour led by Kings’ President and COO Rich Durante, Vice President of Operations Joe Parisi and Store Manager Bill Members of the Eickhoff Family VanBuskirk.

and NJFC President Linda Doherty

As one of the Food lead Assemblyman Troy Singleton (D-7) on a tour of the ShopRite of Council’s closest Burlington. allies in Trenton, the tour provided Assemblyman Ciattarelli with an opportunity to gain first hand industry knowledge before returning to Trenton to defend business from overregulation and the progressive agenda.

In March, the Food Council hosted the first annual Assembly Agriculture Committee store tour.

Committee Chairman Bob Andrzejczak (D-1) and Assemblyman Eric Houghtaling (D-11) participated in the tour with several members of their staff.

The tour included stops at Campbell Soup Company in Camden, and Wawa and Wegmans Food Markets in Cherry Hill. Thank you to Kelly Johnston and Jennifer Sweeney of Campbell’s, Leonardo Impagliazzo of Wawa, and Joe Sofia and Todd Ferrera of Wegmans for providing a thorough and diverse overview of the food chain in New Jersey.

Rich Durante, Joe Parisi and Bill VanBuskirk of Kings Food Markets; and, NJFC President Linda Doherty lead Assemblyman Jack Ciattarelli (R-16) on a tour of the Kings Food Market in Bedminster.

Members who would like to host a legislative visit should email Gary La Spisa at glaspisa@ njfoodcouncil.com.

|

N E W J E RS E Y G R O C E R

n

12

Assemblyman Eric Houghtaling (D-11); Joe Sofia of Wegmans; Assemblyman Bob Andrzejczak (D-1); NJFC President Linda Doherty; Todd Ferrera of Wegmans; and Mary Ellen Peppard of NJFC during the tour of the Wegmans Food Markets location in Cherry Hill..

The New Jersey Food Council hosted its annual “Night of Distinction” Reception at The Palace at Somerset in Somerset, New Jersey in March. The event with its powerful slate of honorees drew over 500 guests including prominent food industry executives.

Joe Gozzi, Wakefern; Len Sitar, ShopRite of Carteret; Joe Colalillo, ShopRite of Hunterdon; and Herman Dodson, Chase

At the event three industry leaders were honored with Industry Achievement Awards for their meaningful contribution to advance the mission of the Food Council, for achieving significant food business success and for their history of civic service within the New Jersey food community. The honorees were Dan Croce, President of Acme Markets and his Executive Team; Rafael Cuellar, President & CEO Cuellar

Family ShopRites; Barry Schiro, President, CBA Industries.

Linda Doherty, NJFC President & CEO, also was presented with the Excellence in Honorees Barry Schiro of CBA Leadership Award Industries and Dan Croce of ACME recognizing her 23 Markets, pose with their awards at years of service at the Night of Distinction. the Food Council and her 12 years as President.

N J FC N EWS

Food Council Honors Industry Leaders

NJFC Chair, Judy Spires, CEO of Kings Food Market stated, “This distinguished class of food industry leaders was recognized for their continued achievements in the competitive NJ marketplace. We were thrilled with the outpouring of support for this event and the honorees, which is no surprise given these honorees are among the most respected leaders in the industry.”

In addition to their Industry Achievement Award, each honoree was presented with Joint Resolutions by State Senator Jennifer Beck of the NJ State Legislature commemorating their industry achievement and dedication to business in the Garden State.

N EW JE R SE Y G R OC E R

|

Dan Croce of ACME Markets, Barry Schiro of CBA Industries, Senator Jennifer Beck (R-11), Linda Doherty of NJFC and Rafael Cuellar of ShopRite of Passaic pose with their Joint Senate and Assembly Resolutions at the Night of Distinction.

13

N J FC N EWS

Leadership Development Class Gets Politically Active in Trenton Members of the New Jersey Food Council Leadership Development Program participated in the “Getting Politically Active” session at the Statehouse.

Participants met with Lt. Governor Kim Guadagno, Senator Thomas H. Kean, Jr. and Senator Fred H. Madden to discuss political leadership, legislative process, and the role of government and its impact on business. The session began with a tour of the Statehouse.

This is the second class of the NJFC Leadership Development Program, created to provide both orientation and skill development to future leaders of various segments of the NJ food distribution industry.

Members of the 2015-2016 Leadership Development Class with State Senators Thomas Kean, Jr. (R-21), and Fred Madden (D-4).

Michael Nelson, Wegmans Food Markets; Jessica Riley, Food Circus Super Markets and Kevin Sullivan, Acme Markets.

The program combines elements of mentoring, organizational education, leadership training, policy trends, and guided experiences to prepare the industry’s up and coming professionals for future leadership roles.

NJFC President Linda Doherty stated, “This program will allow these young business leaders of tomorrow to gain the experience and skills needed to grow in their organizations and promote the food industry for years to come.”

Two of the inaugural class members have already been elected to the NJFC Board of Directors.

The program consists of five sessions meant to introduce the future leaders to business and public policy at both the State and National levels. Sessions include meetings with elected officials, regulatory agents, policy makers, NJFC Committee leaders and a food industry CEO.

|

N E W J E RS E Y G R O C E R

This year’s class of eight was chosen by a selective criteria and includes Antonio Acosta, Kings Food Markets; Keith Breen, Perlmart; Paula Colatriano, Acosta Sales & Marketing; James Haslett, Bimbo Bakeries USA; Nicholas Lewandoski, Acme Markets;

14

Members of the 2015-2016 Leadership Development Class with NJ Lieutenant Governor Kim Guadagno.

For more than a decade, the Food Council has received a food handlers training grant from the Customized Training Program within the New Jersey Department of Labor.

have been awarded to help train NJFC member associates so we are thrilled to receive the grant and offer the program for another year as an NJFC member benefit.”

In February, the grant was renewed for $248,000 and will continue to cover Food Handlers and Soft Skills Training through our administering partners at Rutgers University Office of Continuing Education.

This newest grant will be used to fund food safety certification and soft skills training programs on more than 30 topics, ranging from employee development, CPR, and soft skills to computer skills through courses administered by Rutgers University.

The Food Handlers Training Grant has been an immense success as Food Council members have taken advantage of the funds to train almost 25,000 NJFC member associates since 2002.

NJFC President Linda Doherty stated, “The success of this member training program has been unprecedented and it is evidenced by the annual renewal of the grant for 14 consecutive years. Since the program’s inception, close to $3 million in funds

N J FC N EWS

NJFC Receives Nearly $250,000 for Food Handlers Training Grants

“Our partnership with Rutgers University is paramount as they do a tremendous job of recognizing the increasing demand for training programs in the retail environment, and have continuously delivered a grant program with courses designed to better prepare our workforce for the changing marketplace,” stated Doherty.

NJFC President Linda Doherty to Sit on Board of ‘Opportunity New Jersey’ Earlier this year, NJ business leaders announced the formation of a grassroots organization called Opportunity New Jersey whose mission is to increase awareness of the impact that policies and legislative action will have on the state’s economy and job growth for New Jersey residents.

NJFC President Linda Doherty has been elected to a seat on the Board of Directors of this new initiative.

Long term, the coalition hopes to address numerous other taxes and regulations which make it harder to do business in New Jersey.

The coalition is comprised of business organizations, trade associations, labor groups, educational institutions, not-for-profits and individual companies throughout the state of New Jersey.

|

“It is crucial that the business community establishes a vehicle which can effectively educate New Jersey residents on the impact that Trenton’s unsettling

The coalition’s most immediate agenda involves opposing three economically-damaging initiatives that have recently been proposed. They are increasing the minimum wage to $15 per hour; constitutionally requiring quarterly public pension payments; and mandating paid sick leave.

N EW JE R SE Y G R OC E R

Opportunity NJ will use grassroots outreach to inform policymakers and the public about how proposals out of Trenton will impact the state economy. The 501(c)(4) organization will raise the donations from individuals, businesses and organizations.

business climate can actually have on their daily lives, whether they own a business or not,” said Linda Doherty.

15

Morcilla Quesadillas Quesadilla Española con Morcilla

Discover new recipes at VVSUPREMO.COM 2014

2015

Variety is the spice of life...

|

N E W J E RS E Y G R O C E R

Enjoy it with our award winning premium authentic line of cheeses!

16

Discover the authenticity, quality, service and pride that fine grocers and restaurants across the country have experienced for over 50 years.

For sales information and menu recommendations call our in-house Chef or visit our website Para información sobre ventas y recomendaciones para su menú llámenos o visite nuestra pagina de internet SHREDDED OAXACA WAS AWARDED BEST OF CLASS “2016” WORLD CHAMPIONSHIP CHEESE CONTEST, QUESO CHIHUAHUA® BRAND SHREDDED WAS AWARDED BEST OF CLASS “2014” WORLD CHAMPIONSHIP CHEESE CONTEST, QUESO CHIHUAHUA® BRAND SHREDDED WITH JALAPEÑO WAS AWARDED GOLD “2014” AND “2015” IN LOS ANGELES INTERNATIONAL DAIRY COMPETITION. V&V®, V&V SUPREMO®, CHIHUAHUA® & DESIGN ARE REGISTERED TRADEMARKS OF ©V&V SUPREMO FOODS, INC., 2016, DISTRIBUTOR, CHICAGO, IL 60608 TOLL FREE 1-888-887-8773 • MADE IN THE U.S.A.

New Jersey’s food retail and distribution industry is being challenged by several devastating legislative proposals simultaneously.

Much of this is caused by significant political infighting by Democrats in the Legislature to be viewed as the most “progressive” as they jockey for support in next year’s gubernatorial election.

Adding to the mix is Newark Mayor Baraka who started advocating for a bottle bill, which would of course be extremely detrimental to our industry, to fund testing for elevated levels of lead in water.

Mayor Baraka began pushing this decade old proposal with the false promise that the funds from unredeemed beverage containers would go toward water infrastructure testing and abatement after the recent unfortunate discovery that many schools in Newark have elevated levels of lead in their water systems.

Given the political pressure to address the water problems, the New Jersey Assembly Environment Committee agreed to pass a bottle bill out of Committee, despite significant opposition from the New Jersey Food Council, American Beverage Association, county and municipal recycling organizations and many other business groups that registered concerns.

The latest harmful proposal to advance is predictive scheduling legislation, which contains numerous time consuming and inflexible mandates pertaining to employee scheduling.

Additionally, like many other food industry associations around the country, New Jersey is facing a proposed minimum wage increase. Legislative leadership is pushing legislation that would phase in the wage increase to $15 per hour plus indexing by 2021. NJFC is working with a coalition of business iStock trade groups to fight this proposed increase through advocacy and grassroots outreach.

Of significant concern is that New Jersey’s legislative leaders have indicated that they intend to once again put a minimum wage increase on the ballot as a constitutional amendment if the Governor vetoes the legislation, which is likely.

There are several other proposed legislative mandates we are challenging including paid sick leave. NJFC has been fighting this onerous, expensive legislation for two years, and trying to interject common sense, reasonable recommendations into the discussion, such as an exemption for employers who already provide paid time off, and state preemption.

Already New Jersey has a dozen local paid sick leave ordinances.

The latest harmful proposal to advance is predictive scheduling legislation, which contains numerous time consuming and inflexible mandates pertaining to employee scheduling.

We continue to explain to the Legislature how a one size fits all solution does not work for every employer, and these types of prescriptive bills have unintended consequences that often harm the very person the legislation is intended to help- the employee.

|

Unfortunately, we can expect to see even more counterproductive legislation in the coming months as legislators try to position themselves for the 2017 Gubernatorial and legislative elections.

Mary Ellen Peppard NJFC Assistant Vice President of Government Affairs N EW JE R SE Y G R OC E R

The Food Council is working to ensure that this bill does not get any more traction in the Legislature.

Two major New Jersey Newspapers came out strongly against the bottle bill proposal and one journalist noted that the proposal is “not to recycle bottles for people but to recycle cash for politicians.”

NJFC recently met with the Mayor and Assembly Envrionment Committee Chair Grace Spencer to advocate for a carefully crafted bag fee modeled on the Montgomery County, Maryland, program which has benefitted both the environment and retailers, in lieu of the bottle bill proposal.

GOV ER N M EN T REL ATIONS

2017 Gubernatorial Election Looms Large in Trenton Already

17

N E W J E RS E Y G R O C E R

| 18

©2016 BLUE MOON BREWING COMPANY, GOLDEN, CO BELGIAN-STYLE WHEAT ALE BREWED WITH CORIANDER AND ORANGE PEEL

Not Your Everyday Dishes

Find Blue Moon® recipes at bluemoonbrewingcompany.com

®

Select the Best

SUSTAINABILITY For nearly 100 years, we have been taking care of our customers while also caring for our planet. Our company-wide waste reduction, recycling, and energy-efficiency measures are central to the way we do business.

The annual impact of our sustainability efforts is adding up!

• 421,000,000 gallons of water saved • 1,100,000 cubic feet of landfill space preserved • 350,000 kilowatt hours eliminated • 529,000 trees protected

Contact us today to learn how we can help make this your best year ever!

Eric Pearlman, Dir Independent Sales WC Eric Pearlman, Dir Independent Sales WC

1.916.373.4286 1.916.373.4286

www.cswg.com www.cswg.com 19

INSIDE T HE B ELT WAY

POS Credit Card Fraud Escalates Post EMV – Best Practices NORMALLY THE FOOD MARKETING INSTITUTE ELECTRONIC PAYMENT SYSTEMS COMMITTEE IS FULL OF CREATIVE IDEAS AND SURE THEY CAN TACKLE ANYTHING PRESENTED TO THEM. BUT THE LATEST ESCALATION OF CHARGE BACKS ON CREDIT THAT OUR EXPERTS PUT AT A 400-1,000% INCREASE OVER 2015 NUMBERS HAD THEM STUMPED. We reached out to law enforcement, reached out to congressional committees, reached out to the card associations and reached out to asset protection experts.

We put the best ideas of the group together and offered the following advice and a webpage where we can add additional ideas, suggestions, tips and encouragement to get this problem under control.

The first step is understanding the scope of problems you are experiencing, as there seem to be a couple of different problems. Some of our folks are seeing what we are calling “organized crime.”

When a card is used 100 times in your store(s) in a couple of days; that is organized crime and clearly there are multiple people involved in this fraud.

On the other hand, when one individual uses a card in your store and then tells their credit card company that they were not in the store and did not buy the products, that is still a crime, you are still out the money, but at least for now, it seems to be the work of one person attempting to take advantage of a bad system or bad issuers happy to charge back and ask questions later because of their “zero liability.”

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

This term “organized crime” – is clearly not based on a legal definition, just a recognition that there is clearly more than one type of problem we are seeing simultaneously.

n

Putting in-store controls in place: Gift cards are a prime target for criminals for a number of reasons. A person can buy a high denomination gift card, they are lightweight and easy to transport and they are easily sold on the Internet.

Several FMI members have taken steps to mitigate this risk using one or more of these approaches: n

Moving the card-branded gift cards that can be used in any store, behind customer service.

n

Restricting selling high value gift cards to certain hours of the day (example: 6am–10pm).

n

Only allowing cash, or PIN-enabled debit cards for the purchase of gift cards.

n

Requiring a photo ID for gift card transactions.

n

Removing gift cards from self-checkout lanes.

n

Setting up a point of sale system prompt for managers’ approval for gift card transactions above a certain dollar amount.

n

Not allowing purchase of gift cards with a prepaid or reloadable Visa, American Express, MasterCard or Discover card.

n

Limiting the value and/or the number of gift cards that can be purchased in a single transaction or on a single card in a certain period of time.

|

N E W J E RS E Y G R O C E R

Getting a handle on the problem:

20

n

Track your chargeback rates and work to identify where your greatest vulnerabilities are in the store.

n

Coordinate with local law enforcement and ask for any trends they may see that could be the work of an organized criminal element. Share your experience with them.

Fraudulent transactions are a crime, so ask law enforcement how and when they may suggest you file a police report for chargebacks resulting from fraudulent transactions and any terminology you should use if you believe a particular chargeback may be linked to others.

I N S I D E T H E B E LT WAY

We are seeing fraud now well beyond gift card fraud. You may want to put additional precautions in place for any credit card transaction.

Looking Beyond Gift Card Fraud to All Credit Transactions

n

Implement CVV verification on manually entered credit transactions or all credit transactions.

n

A manager’s override on any large order (over $1,000). An order at a grocery store for more than $1,000 (unless you know the customer and the reason for the transaction – hosting a large party/ caterer/restaurant owner) should cause immediate concern/scrutiny.

n

ID check and transaction amount limits per customer and per day to help mitigate risk.

Members are reporting cards Why am I asked for ID on that have been used more than credit transactions?

100 times in stores in 2 days.

You need to have a mechanism The supermarket industry has seen an extraordinary level of in place to make sure this type fraud on credit card transactions of “organized crime” does not in the last several months on happen to you.

We are seeing fraud now well beyond gift card fraud.

You may want to put additional precautions in place for any credit card transaction: n

n

n

n

Require a 100% ID check on all credit card transactions, or ID over a certain dollar value or ID on any customer not using a loyalty card. If you can say that you check ID 100% of the time or can link a transaction that was charged back by a customer who presented a loyalty card or is shown via camera to be in the store purchasing products at the time of the transaction, your ability to fight a chargeback is greatly enhanced.

Post signage at the POS explaining this fraud and your response to combatting fraud and protecting your customers and your intent to involve law enforcement. The sign alone may be enough to move the criminal to another location. Plus it cuts down on time your cashier has to explain why they are asked for ID and the customer in front of them using a PIN debit card was not asked for ID. Some companies have added address verification system (AVS) to their credit card processing. As frequently seen at gas pumps, it prompts the customer to enter their 5-digit zip code at the point of sale. If they get a mismatch, they have trained all cashiers to ask for ID. Prohibit manual entry if the magnetic stripe does not work or send that transaction to a customer service desk for more scrutiny.

Remain vigilant against any kind of suspicious activity, such as:

both chip and magnetic stripe cards. In an effort to keep your information safe and keep our prices low, we are asking for your ID to confirm your identity on a credit card transaction. We are not experiencing fraud with PIN debit or PIN credit, so if you insert a PIN, you will not be asked for ID. We are working closely with law enforcement and are filing police reports when fraudulent transactions occur.

n

Guest/customer attempting multiple credit cards with declines.

n

Guest has a stack of credit cards visible and outside of wallet.

n

Pay close attention to cards issued by international banks in Asia and the Middle East, etc.

n

Buying large quantities of open value gift cards.

n

Buying large quantities of beer or wine.

n

When asking for ID, the customer becomes agitated, nervous or in a hurry.

In response to our requests, both Visa and MasterCard have offered more specific information available on our web page.

FMI EMV Chargeback Page: http://www.fmi.org/emv-credit-chargebacksbest-practices-and-guidance Bottom line, you are certainly not the only supermarket being defrauded, but be aware, be vigilant, be prepared, and share what you learn.

|

In considering any actions, you need to consult your contracts and the operating rules of the card associations. n

N EW JE R SE Y G R OC E R

n

If you are testing EMV in-store and have a register running EMV, direct all gift card, high value or questionable transactions through that lane.

This could significantly lower your chargeback exposure.

21

WASHIN GT O N R EP O RT

Challenges Continue for EMV Implementation THE ONGOING TRANSITION FROM MAGNETIC STRIPE TO EUROPAY, MASTERCARD AND VISA, KNOWN AS EMV, HAS GATHERED MUCH ATTENTION FROM BOTH BUSINESS OWNERS AND CONSUMERS. AND ALTHOUGH THE OCTOBER 1 LIABILITY SHIFT DEADLINE IS BEHIND US, MERCHANTS STILL CONTINUE TO FACE CHALLENGES ON THE ROAD TO IMPLEMENTATION. Not a day goes by that I don’t hear from NGA members who are beyond frustrated with the slow pace of EMV implementation.

To be clear, the vast majority of NGA’s members – from single-store operators to regional chains – invested tens of thousands of dollars in new hardware and software well before the October 1 shift only to be left waiting on a massive backlog in the certification process which is controlled by the card networks.

iStock

As an example, NGA has one retail member who installed EMV capable hardware in its 70 -plus stores well over a year before the October 1 deadline and yet continue to wait on certifications so it can begin accepting EMV cards. Meanwhile, these retailers are being hit with thousands of dollars in chargebacks from the banks and card networks simply because they are not “EMV compliant.”

|

N E W J E RS E Y G R O C E R

Peter J. Larkin President and CEO National Grocers Association

22

We understand that the certification process, which is mandated by the card networks, has experienced a number of delays that range from the card networks’ late delivery of technical code to other complications slowing the certification process.

None of these delays are the fault of merchants, yet it’s the merchant who is facing an onslaught in new chargebacks as well as confusion among consumers who don’t understand why they can’t use their chip cards at their local supermarket.

While some people may feel that EMV technology is more secure for consumers, the reality is the chip has one main purpose and that is to validate the authenticity of the card at the point of purchase, making it more difficult to counterfeit the card.

Unfortunately, the vast majority of EMV credit cards being issued by banks in the United States are being issued without PINs, which raises the question why go to all the expense to issue EMV cards without adding a simple PIN authentication as well?

Many independent supermarkets are investing in advanced technology such as tokenization and end to end encryption to further protect the consumer’s data from the swipe on through the transaction processing.

Some are even making further investments to protect consumer data with products such as First Data’s TransArmor® Solution – the same technology that secures Apple Pay – to offer an added layer of security.

Merchants who have made the investment to comply with the October 1 deadline should be given a “safe harbor” and shielded from EMV specific chargebacks. NGA has reached out to Visa and MasterCard leadership to open a dialogue in regard to the significant backlog in the EMV certification process and the increased number of chargebacks to merchants.

NGA is also working to educate federal policymakers on the challenges merchants have faced during this transition period.

It’s time for the card networks and banks to stop passing the buck onto the backs of merchants, but rather they should work together with merchants to further eliminate fraud by issuing credit cards with PINs, work to speed up the EMV certification process, and put a hold on chargebacks. n

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

F E AT U R E T I T L E

|

N E W J E RS E Y G R O C E R

BYLI N E /C ONTINU E D

24

There’s still a major need for retailers to achieve economies of scale, especially as they face specialist competition that has a much lower cost base.

MERGERS AND ACQUISITIONS

BY LEN LEW IS

2015 was a record year for all merger

and acquisition activity and 2016

T might hit the same

heady heights B Y L E N L E WI S

he reasons are simple – economic fundamentals are sound, the need to acquire expertise and distribution is essential; and there are plenty of strong regional chains and independents looking to wed.

“There’s a lot of interest in the grocery sector,” said Brian Todd, president of The Food Institute.

“Private equity firms have a lot of cash on hand and are looking for a profitable investment rather than starting up something new. Some are just looking for a safe haven for cash.

“Meanwhile, some family owned chains, especially third- or fourth generations are looking to cash out,” he adds. “Also, grocery is seen as a lot sexier business than it used to be.”

His comments underscore KPMG’s 10th annual survey focusing on the outlook for M&A activity across a wide variety of industries this year.

About 12 percent of those surveyed expect the consumer-retail market to be among the most active in M&A activity this year.

The need to get bigger in new markets is not necessarily driving M&A at retail, according to Rampoldt.

“It’s about elevating capabilities,” he says. “When you think about all the things that retailers need to be good at – everything from pricing and promotions to localized assortment – it’s obvious they need to be sharper than they were five years ago.”

Rampoldt says its especially true when it comes to amortizing the cost of those capabilities over a bigger store base.

“The ability to execute better and drive more sales and EBIDTA out of every square foot requires capabilities and, in some cases, technology,” he says.

“It’s a totally different game. Retailers must be more data driven in order to make a rapid response.”

No one is ruling out the possibility of more mega-deals this year since, as Todd put it, “There are always surprises.”

However, with the industry coming off a year of mega-mergers, the total number of stores involved in merger activity this year will be down, according to David W. Schoeder, principal in The Food Partners, a Bethesda, Md.-based investment banking firm, providing merger, acquisition and divestiture and restructuring services to the food industry.

“But over the next 36 months, we’re going to see consolidation driven by two factors,” he says. “First, if you’re operating a conventional store you’re probably in denial. You have to be focused on Continued on p. 26

|

The executive survey, conducted in partnership with FORTUNE, anticipates an acceleration of M&A

While not focused strictly on retailing, the survey found that 38 percent of executives surveyed will initiate between one and three acquisitions this year.

And the vast majority of deals will be in the U.S. given the relatively strong economic outlook.

N EW JE R SE Y G R OC E R

Joel Rampoldt, retail and consumer lead for KPMG Strategy noted: “There’s still a major need for retailers to achieve economies of scale, especially as they face specialist competition that has a much lower cost base. The ability to spread out things like distribution, marketing and sourcing costs and SG&A across a broader perimeter is imperative.”

activity this year and an increase in the average deal size. The average value per acquisition will be less than $250 million, according to 52 percent of respondents.

25

MERGERS AND ACQUISITIONS

C O N TI NU E D

Continued from p. 25

So you want to sell the business or maybe buy another one but can’t find the right partners?

A former Italian comedy writer and MBA v, Brian Pallas, has come with a unique idea called the Opportunity Network designed to connect nearly 6,000 ceos and owners of family businesses with potential merger and acquisition partners in 75 countries.

Opportunity Network is headquartered in London, but the company now has offices in New York and Barcelona along with reps in cities like Dubai, Paris, San Francisco and is in the process of moving into Asian markets.

The business has been described as something like the Craigslist of mergers and acquisitions. Members can list businesses anonymously and connect with another that they think might be a good fit.

However, there is a minimum deal size of $1 million.

The app enables members to filter the deal by size, location and industry. So, if you’re tired of looking for bargains on golf clubs or restaurants, you can shop around for another company.

operating a conventional store with a twist. Otherwise you won’t be in tune with the new world order and what it takes to be successful today.”

Schoeder says the other factor is an aging group of independents with no succession plan. Many of those will probably exit over the next 36 months and the majority of stores will be sold to other independents.

These are the ones Schoeder called “pac-men” who have grown by gobbling up others.

“These are the super independents,” he says. “They’ve got management teams in place, they’re generating cash flow and have the money to reinvest and buy stores as they become available and make them far more successful.”

Rampoldt also expects to see smaller chains absorbed by larger counterparts if the multiples are attractive to both sides.

“Most grocery retailers are not truly nationwide, so filling in their portfolio is always attractive,” he says.

“This will probably happen more in supermarkets than other classes of retail.”

This is also true for independents who are not only selling out but interested in buying new locations to expand their territory, said Todd.

“Competitive concerns are also driving deals,” Todd says. “Everyone’s selling food – dollar stores, convenience stores, clubs and other alternative formats.

Retailers are looking to protect their market or expand into new ones to increase sales and profits.”

Clearly some geographic areas are more ripe for deals than others, Todd said, noting that the Southeast and, to some degree, the Southwest are still growing. Some secondary markets can be attractive due to their low capital costs, but it’s the major metro areas with built-in demographics that are more appealing.

The economy in and of itself will have little impact on

consolidation, according to Schoeder. What does have an impact is availability of credit, he said, noting that some banks shied away from lending to grocery stores after the Haagen and A&P bankruptcies.

“They’re still very skittish,” Schoeder says. “The ability of a private equity firm to get a deal done at a higher multiple is based on their borrowing more money, not putting more equity into it,” he says.

“You used to be able to borrow four times the cash flow to get a deal done,” he says. “The debit to cash flow ratio is probably off a bit for strategic buyers. But everything depends on the quality and vision of the operators.

You have to have a credible plan and the bite size has to be manageable.”

But scrutiny by lenders could be eclipsed by that of government agencies.

“The Hagen debacle embarrassed the Federal Trade Commission,” Schoeder says. It even slowed down the Ahold/Delhaize merger he said, noting that the FTC is doing an internal investigation to see what went wrong.

Nonetheless, Schoeder believes the agency’s stance is still far more liberal than it was 10 or 15 years ago.

“The focus now is making sure there are credible buyers that can operate the stores to be divested,” he says. “Their mandate is to make sure there is a viable competitor to maintain competition in the marketplace.”

Meanwhile, Rampoldt believes the U.S. supermarket industry is still attractive to overseas buyers.

“I worked a lot in Europe,” he says. “The competitive intensity there is enormous and the ability to grow by opening new units ended decades ago. We’re only just getting to that life stage in the U.S., yet there are still lots of places to grow by opening new stores and increasing square footage.”

Continued on p. 28

“There are plenty of examples of successful retailers being owned by

|

N E W JE R S EY G R OC E R

non-merchants,” he says. “In many cases they try to free the business

26

by shifting investment and assets from things that don’t do anything to things that do and improve the customer proposition.”

The ONLY Federal Credit Union in the United States chartered to serve grocery industry employees and their families www.trugrocer.com

MERGERS AND ACQUISITIONS

C O N TI NU E D

Continued from p. 26

WHAT’S DRIVING ACQUISITIONS IN 2016?

37%

36%

25%

25%

Entry into new businesses

Expand geographic reach

Opportunistic-target becomes available

Opportunistic-target becomes available

37%

34%

Expand customer base

Enhance Intellectual Properties, or acquire new technologies

16%

16%

Acquiring additional supply chain elements

Acquiring additional supply chain elements

Foreign investors might also be attracted to acquiring stores for alternative delivery formats like “click and collect,” according to Rampoldt.

“It’s very big in the UK and France and those who have cracked it in Europe may see a greater opportunity to do it in the U.S.,” he says. “In fact, it may be more attractive than just buying a company for brick and mortar (sales). It’s inherently more complicated, but I wouldn’t be surprised if many companies weren’t thinking about it.”

However, entry as a startup, like the route that German deep discounter Lidl is taking, is certainly feasible.

“They decided not to come in through acquisition but it all depends on the format. It makes sense to grow organically if you’re operating a format that appeals to a specific segment of customers. Where you site those stores is key,” he said, noting that an acquisition would not necessarily provide this flexibility.

When considering acquisitions, a strong cultural fit continues to be essential.

|

N E W J E RS E Y G R O C E R

“If you look at the companies that have been successful you’ll see that they’ve paid a lot of attention to individual cultures when bringing two firms together – with associates, the culture they project to their customers as well as the pace at which they make changes,” he says.

28

“Companies that go slowly tend to do better than those that put their names on the building and open a completely different operation the next day. ” You’ve got to think about the customer experience and protect the one-on-one interaction between customers and associates,” he adds. “It’s important that the quality of that relationship is not jeopardized.”

But the trickiest part of any acquisition may be the decision involving central vs. local control and how much autonomy the regions and stores will actually have.

“It’s critical to get right,” Rampoldt says. “There are examples of both strategies being successful, but you have to be one or the other.”

Asked whether buyers are shying away from turnaround situations, he replied: “Not really. There’s still an appetite for that when the price is right and it’s clear what levers have to be pulled to turn the acquired company around.”

This is especially true for private equity firms who are likely to continue acquiring retail operations.

“They like businesses where they understand what to do to get results,” Rampoldt says. “They’re very good about basic blocking and tackling around inventory management, distribution, store operations and efficiency. Those things are cause and effect in retail and private equity firms have a good idea of what to do, what they have to put into the business and how long it will take before they get out.”

But, he quickly noted that acquisitions are not necessarily a short-term play for private equity firms.

“There are plenty of examples of successful retailers being owned by non-merchants,” he says. “In many cases they try to free the business by shifting investment and assets from things that don’t do anything to things that do and improve the customer proposition.” n

We’re making a difference

Albertsons Companies is focused on the challenges of food waste to help shrink our environmental footprint while addressing hunger in America.

475,491+ tons* Diverted from landfill

How we do it

228,540 tons CARDBOARD

8,198 tons PLASTIC BAGS

134,494 tons MISC RECYCLING

Our backhaul process picks up reusable trays and recyclables at the point of product delivery. Recyclables are collected and sent to the appropriate recycler, composter, or farmer for reuse, resulting in:

84,655 tons COMPOST

19,573 tons ANIMAL FEED

Food donated

71.8 million lbs IN CALIFORNIA ALONE!

Reducing food waste is the right thing to do for our communities, our customers, the environment, and for California.

N EW JE R SE Y G R OC E R

• Reduced GHG emissions • Over 71.8 million pounds of food donated • Fewer trucks on the road • 475,491 tons of recycled materials diverted from landfill (2014)

31 tons ALUMINIUM

| 29 SWYDCORPIV57868_CGA_AdIssues_2016_V1_03/2016

*of waste kept out of landfills as of 2014 from Safeway stores alone

F E AT U R E T I T L E

BYLI N E /C ONTINU E D

By Cassandra Pye

For years now, there’s been a quiet movement under way on the part of the food industry to save the planet.

These efforts are important to consumers, they shave operating costs in a variety of ways, they align with a complex and intricate supply chain and they’re having a real impact on the industry’s environmental footprint. Best of all, these sustainability efforts are…well, sustainable.

Today, sustainability has become an essential part of every business across the nation.

California consumers lead the nation in the demand for preservation of our planet and its resources; sustainability is no longer an option, it’s an expectation for customers. And, where our customers go, as they say, we follow.

Take Kroger, for example. In the middle of their 49 -acre campus in Compton, Calif., sits the firstin-the-state anaerobic digester. Billions of bugs

cleaning up the environment under the Ralphs and Food4Less banner.

“Our perishable food program donated $4 million of food to our community partners last year,” states Kendra Doyel, Vice President of Public Relations and Government Affairs for Ralphs/Food4Less. “Food which can’t be sold or donated is run through our anaerobic digester which converts food to fuel. This fuel powers about 20 percent of our home offices, our warehouse, the creamery and the transportation center – all located at our Compton facility.”

“The digester has reduced diesel truck trips by 500,0000 miles each year – miles we used to drive to take food to our composting center. It also cleans up about 29,000 gallons of wastewater, every day, from our creamery.”

|

N E W J E RS E Y G R O C E R

It wasn’t so long ago that sustainability for a grocer meant breaking down cardboard for scrap collectors and giving the local Boy Scout troop a spot near the store entrance to collect bottles and cans. Locating a market for recycled wood and metal was almost considered progressive.

30 iStock

S AV I N G T H E P L A N E T … Q U I E T LY

BY CAS S ANDRA PYE

Wastewater from the creamery is mixed in with food waste – including packaging – creating a “milkshake” which is heated and fed to the bugs. Upwards of 150 tons of food waste is processed each day. The result: the equivalent of power for 8,000 homes, annually, is produced to support the facility.

And, clean water – a byproduct of the process – is reused. Doyel says the company is now looking at ways to eventually use particulate matter as compost.

The processor sits in a compact space and, according to Doyel, is both odorless and emits very little noise.

“This is a fairly unique project,” says Doyel. “There are anaerobic digesters all over the world but this one sits in the middle of an urban area, surrounded by businesses, homes and people. We’ve been operating the project successfully for three years.”

Ralphs/Food4Less also engages in traditional sustainable practices, recycling about 7 million pounds of cardboard, plastic and metal, annually.

“And, we’re also helping our customers live a more green lifestyle by offering recycling inside our stores, offering green products – like light bulbs, for example – which help them to save energy,” she says.

For Ralphs, she adds, sustainability means striving to reduce the company’s impact on the environment by using natural resources responsibly while minimizing waste in their operations.

Brian Dowling, Vice President for Public Affairs for Albertsons-Safeway, says the term sustainability, over the last decade, has evolved.

“I would say sustainability wasn’t a term that was tossed around too much,” Dowling said. “But if I look at what companies did 10 years back it was about the environmental footprint – so recycling, collecting cans, cardboard, etc.

Albertsons-Safeway, whose 14 operating divisions include Acme, Shaw’s and Jewel in the east and midwest and Vons on the west coast, has taken environmental stewardship to a whole new level.

“In the seafood space, our goal was to have all of our fresh and frozen label sustainably-sourced by end of 2015,” states Dowling. “Although we did not hit our target for fresh, we were pretty darn close with our frozen – at 99 percent.”

Dowling says that in fresh [seafood], the challenge is there aren’t good alternatives available yet.

“So we’re really working hard with that industry and that objective continues – especially now that we’re a larger company,” he says. “We don’t have a goal yet, but we’re working with FishWise and expect to wrap up by June.”

FishWise is a sustainable seafood consultancy that promotes the health and recovery of ocean ecosystems through environmentally responsible practices.

Dowling says Albertsons-Safeway will establish a goal for all of its banners.

Sustainability efforts are in play on land, as well as sea.

J U S T T H E N U M B E R S: A L B E R T S O N S - S A FE WAY n

Over 22 million pounds of soft plastic (plastic film and grocery bags) recycled.

n

Well over 104,000 tons sent to compost or animal feed.

n

29 million pounds of seafood transferred to responsible sources since 2009.

n

First retailer in the world to offer Fair Trade Certified seafood – sushi grade tuna.

n

Set a goal to source 4.8 million pounds of CSPO (certified sustainable palm oil) in 2016 that is either mass-balance and or segregated for Own Brand items.

n

Set a goal to source only cage-free eggs for store operations by 2025, based on available supply.

“Legacy Safeway stores did recycling, starting in the 1960s,” recalls Dowling.

“In California, we have the opportunity to also backhaul and aggregate materials like cardboard, soft and hard plastic, metal, wood. But, we’re also focusing more on food waste.”

Dowling says Albertsons is taking a tiered approach – expanding its partnerships with food banks to be able to get food that’s at the point where it can’t sell it but can get it to food pantries by sell-by dates.

“We’re always looking for new alternatives; if we can’t send product to a food bank but don’t want to send to a landfill, then we can compost it or send to farmers for animal feed,” he says. “Our objective is to move towards zero-waste.”

Continued on p. 32

|

“Sustainability has been at the root of what we do – for a long time,” says Dowling. “Recycling cardboard

Whole different level, indeed. The nation’s secondlargest grocery chain is close to hitting an unprecedented target for seafood.

N EW JE R SE Y G R OC E R

“If you look at where it is today, it’s an opportunity for companies to create value for their organization and do good for the broader community at the same time.”

and plastic didn’t get headlines but our efforts in recent years – on the seafood side and, more recently, on the human trafficking side of the business – are taking things to a whole different level.”

31

S AV I N G T H E P L A N E T … Q U I E T LY

C O N TI NU E D

Continued from p. 31

The Albertsons-Safeway distribution facility in Tracy, Calif., is one of several which has achieved zero-waste status.

Dowling says his company is now constantly examining every part of their organization – products, community, employees – against what can be done for the planet.

“There’s also been a shift in consumer attitudes and what they expect companies to do in this area,” he asserts. “There are real issues in seafood supply so we want to provide product for our customers but do so in a responsible way.”

The Albertsons-Safeway partnership with FishWise was established in 2009 and the organization, Dowling states, continues to counsel and advise the company on seafood issues. He adds that the organization is showing retailers ways to continue to sell a lot of product but do so in a responsible way – for many years to come.

|

N E W J E RS E Y G R O C E R

“We’re a pennyon-the-sale business,” says Dowling. “That makes us look carefully at opportunities to save on water, energy, shipping costs. All these Ralphs Grocery Company’s anaerobic digester. efforts make good sense for the business; there’s a duality which drives what we do.”

32

For Richard Draeger, Chief Operating Officer, Draeger’s Market, San Mateo, Calif., sustainability is a collection of practices.

“It’s not one thing, it’s pretty much everything,” he suggests. “It includes energy-efficiency initiatives, recycling programs – including containers but also hazardous waste. It has a lot to do with energy

renewables that you employ as part of your overall energy consumption.

“We don’t want to burn energy,” he says. “After labor and labor-related costs, it’s the next highest line item for our company. We’re trying to mitigate cost.”

And, he says, his company is looking at everything because as a small company “we’re looking at decent paybacks – often five years for many of these items,” he states.

“We’ve got R-30 [insulation] on our rooftops and R-19 on our walls,” Draeger says. “We’re looking at photovoltaic energy production for our facilities and at the moment we are looking at “Bloom Boxes”* – cogeneration of energy derived from natural gas – for our operation.”

Draeger says LED lighting – lighting, in general, for that matter – is incredibly important to lower costs and sustainability.

“We’ve changed lighting, literally, throughout our stores,” he says. “There will not be a traditional light anywhere. For our Los Altos store (where they’re rebuilding the store, from the ground up, adding 25 percent more square footage), we’re going to include photovoltaic energy production, we’re also considering Bloom Boxes and anything else that’s sustainable.”

Including food.

“The food we select for sale is sustainable,” says Draeger. “The more we accept from local vendors – especially produce that’s considered much more sustainable as those from distance sources – the better. We’re also using better refrigeration gases; so much has changed – including those more dangerous gases from years ago.”

What do Draeger’s’ customers think?

“Consumer response is always positive,” Draeger insists. “They like to see that you employ sustainable practices. For example, we’ve just started on closing our open merchandised refrigerated fixtures with doors – really nice glass doors on all of our refrigeration fixtures – that’s sustainable.”

Draeger also thinks that when a customer looks at sustainability, they’re really looking at the types of foods a retailer is presenting to them in the produce department – buying locally, and folks who are within

S AV I N G T H E P L A N E T … Q U I E T LY

60 -100 miles of your store. He says consumers notice

that and they’re willing to pay for it.

“We don’t waste a whole lot of food either, to be honest with you,” says Draeger. “Most of it is backhauled. We get rid of a lot of organic waste that way. Not all communities we’re in provide backhaul to the farms. It’s expensive to do that for a small retailer. But, if you’ve got a community providing the service, it’s more cost effective to do it that way.”

Draegers recycles materials often.

“Those things aren’t even on the radar,” says Draeger.

“They’re happening on the natural and have been for a long time.”

The updated Los Altos store will have more natural lights by way of skylights and windows. And, there will be charging stations for electric vehicles (EVs).

“Again, these communities are maturing and these technologies are now available – so we provide the support services to our customers.”

Draeger also poses a challenge to the industry.

“The better we become at messaging [about] what it is that we do, the greater customer appreciation would be,” he insists. “That’s the trick. You do these things as a business and don’t necessarily tout what you do.

It’s important to do that.”

Draeger says they tell their customers about his company’s reusable bag program and some of the energy efficiency programs they carry out with the support of Pacific Gas and Electric Company – including electronic control monitors and variable speed compression motors, all aimed at lowering energy usage – but they can always tell customers more of that story.

involved – and deciding where opportunities for sustainable efforts exist.”

Human trafficking in the seafood supply chain, for example, is complex and difficult to monitor, says Dowling. Specifically, where it’s happening and to whom.

“That’s where the opportunity exists now,” he says.

“There’s so much more collaboration possible that includes the industry, governments, NGOs and others. We need everyone at the table to discuss these issues because they are larger than our companies.”

Doyel, Dowling and Draeger mimicked each other’s remarks on the question of why sustainability.

Doyel: “These efforts are in line with our core values for our customer and our community.”

Dowling: “They are good for the planet and good for our business, too.”

Draeger: “We’re doing good and doing good for the business.”

In all cases, customers win. n Cassandra Pye, is CEO of 3.14 Communications, LLC, a regular contributor to New Jersey Grocer. **The Bloom Energy Server (the Bloom Box) is a solid oxide fuel cell (SOFC) power generator made by Bloom Energy, of Sunnyvale, California, that can use a wide variety of inputs (including liquid or gaseous hydrocarbons[1] produced from biological sources) to generate electricity on the site where it will be used.

Albertsons’ Brian Dowling also sees a future where retailers begin to collaborate more on these efforts.

|

“The supply chain is where there is greater opportunity now for companies and others to have an impact,” says Dowling. “We were looking at our own four walls and spent the last few years reducing our footprint through our own initiatives. Now, we’re looking at the supply web – that complex mix of all

N EW JE R SE Y G R OC E R

“Early on,” he says, “the work we did made us independent of other retailers. It’s not going to happen that way anymore.

33

The Essential (HAVE-TO-BE-THERE)

Seminar and Expo For Dairy, Deli and Bakery Professionals

NETWORKING • 9,000 Professionals • 700 Exhibitors • 1,900 Booths SHOW & SELL CENTER CAKE DECORATING CHALLENGE

MERCHANDISING

NEW PRODUCT SHOWCASE

INDUSTRY RESEARCH

June 5 - 7 | Houston

JJ Watt

Randi Zuckerberg

Anthony Bourdain

EXPANDED EXPO HOURS

REGISTER TODAY! FOR MORE INFORMATION IDDBA.ORG

608.310.5000

Lidia Bastianich

Lori Greiner

Simon Sinek

FOCUS ON ALLERGENS CMYK

Topical educational sessions and resources!

Use a Better Formula for Backroom Optimization It’s time to rethink the role of the meat backroom. The backroom is really an in-store manufacturing facility. Here fresh meat is prepared, weighed, wrapped and labeled.

Run this process like a production line and keep pace with shopper demand while also managing costs and shrink.

880 Auto Wrapper

Using rugged and reliable equipment is a proven formula for backroom optimization.

Let METTLER TOLEDO help you increase operational uptime and productivity with the new, powerful 800 series of backroom wrapping and labeling machines.

Learn more www.mt.com/retail-backroom

By Len Lewis

The eminent British statesman Winston Churchill once said: “It’s always wise to look ahead, but difficult to look further than you can see.”

Difficult as it may be, but that’s exactly what the Institute for The Future, a Palo Alto-based think tank and non-profit research organization, is doing through diverse projects ranging from global economics and generational trends to technological developments – all of which can yield interesting insights into where and how people will live, eat and shop in the decades to come.

“The Food Futures Lab is one of our longest running programs,” said Rebecca Chesney, research manager for the Lab, who also oversees the group’s 10-year forecast program.

“We look at cities, food, water issues and every year, we take a different angle,” she said. “This year one of our goals is to focus on kids and how these digital natives will impact the business model we use and how to communicate with them.”

Other studies have also led IFTF into areas that might be closer to impacting today’s food retailers when it comes to consumers and employees.

Furthermore, the loss of traditional benefits or reduction of the traditional 9–5 workday will start to impact what people eat at lunch, how they socialize and redefine work and school days.

“For example,” she said, “Uber drivers might make most of their money at night. In this kind of fragmented workplace, we have to look at the types of foods they need, where they’re eating them and what they’re shopping for.”

That means mapping food experiences – not only eating food but also packaging branding, accessing food – the entire food experience.

|

“Basically, the work landscape is changing and more people are becoming freelancers and moving away from the traditional jobs and locations.

The goal, according to Chesney, is to get people to think beyond next week or the next quarter when shaping their (business) strategies.

N EW JE R SE Y G R OC E R

“Our workable futures initiative is looking at the ‘gig’ or on-demand economy and how it’s going to affect things like health insurance and social safety nets,” Chesney said.

A lot of people are trying to figure out what benefit structure they’ll need in the future and how to do things differently.”

Continued on p. 38

37

E X P L O R I N G T O M O R R O W T O D AY

BY LEN LE W IS/C ONTIN U E D

Continued from p. 37

“And access to food impacts where we get our food,” she added. “Retailers need to think about that today.“ The Institute is not only tracking the further fragmentation of retail, but the next iteration of retailing, which is likely to be a mixture of on-demand and fully-automated food delivery, the latter of which could be about 10 years away, according to Chesney.

As an example, she cited Amazon’s Subscribe and Save program which offers consumers up to 15 percent savings on recurring delivery of everyday items like toilet paper, paper towels, flour and baby wipes.

On another level, Amazon Dash is partnering with companies like Britta to develop a filter that can track how much water a consumer is filtering using the company’s system.

“It’s tied to your Amazon account and knows how much water you’re using, when you will need filters and automatically orders them for you,” she said.

“It’s a different type of online retail that changes the extent to which consumers are involved in shopping decisions.”

Cheney said itt’s a new purchasing pathway that’s not been fully researched and brings up the question of how much consumers will care about brands in the future and whether they will simply tell Amazon to send them the cheapest item in any given category.

However, customer involvement could increase in a different way.

|

N E W J E RS E Y G R O C E R

Consider a San Francisco-based company called Betabrand, a clothing designer with a platform similar to Kickstarter.

38

“You post an idea of what you would like then other people can build on it with their ideas to help designers refine the item.” Chesney noted. “Once an item gets enough votes it moves to a crowdfunding stage for prototype designs.”

If it reaches a certain threshold and the company can guarantee a minimum market, Cheseny says, Betabrand will manufacture the item and apply the amount you donated towards the purchase of the finished item.

“This way the company can reduce space, inventory costs and risk. It’s almost the opposite of automated retail yet another online environment to watch,” she said, noting that many people are already funding food products on Kickstarter.

“Even if people are not purchasing, they are involved in a community,” Chesney said. “We call it engaged shopping. They are not just consumers they are actually participating in the development of a product. Betabrands is a signal of the future. We look for those signals and that’s how we do our forecasts.”

People want to be able to access whatever kind of food they want at any given time. This isn’t just a 24-hour grocery store. The idea of convenience has changed and retailers need to rethink what it really means.

Another field of study for the Institute is automation and automated shopping via “Body Area Networks,” as Chesney called it.

“Think about what’s becoming networked and all the different technologies that are connected,” she said.

“Today it’s a smartphone or Fitbit. But people are working on clothing with sensors to detect hydration levels when you’re working out. There are skin or injectable sensors that could track biometrics and detect illnesses. All these technologies on or in our bodies will be connected to the other technology around us.”

Chesney said people are focused on understanding e-commerce and online retailing, but “the thing to understand now is what information is being tracked about health and nutrition from the different fitness apps that are on the smartphone. The question is how retailers can be involved with that.”

All of these things add up to the next step in data analytics.

“It will be much more nuanced and will offer views into preferences and tastes for different types of consumers,” she said. n Len Lewis is editorial director of Lewis Communications, Inc., a New York-based editorial planning, research and consulting firm. He is a frequent contributor to New Jersey Grocer and several retail publications and trade groups in the U.S. and Europe.

N EW JE R SE Y G R OC E R

|

39

40

|

N E W J E RS E Y G R O C E R

15 MIN UT ES WIT H…

15 MINUTES WITH…

Corby Kummer

B Y L E N L EWI S

Corby Kummer is an acclaimed food journalist, whose books and columns in The Atlantic, Boston magazine and the New Republic have become must-reads for foodies, amateur and professional chefs. Kummer, who isn’t shy about sharing his views on what’s being sold and how, spoke with California Grocer about a few of his favorite issues.

California Grocer: The industry seems to have a love affair with anything tagged local. What do consumers really think?

Kummer: “It’s more important than ever even though consumers don’t really know what it means. Everyone has their own definition of how many miles around the store or restaurant it should come from. Tut they like the idea of helping local economies. It’s the main reason I care about it.”

Is there a mileage number?

“Some people say 40 miles some say 100. It depends on where the settlements are around you. You’re helping keep a place that’s not very far from your home thriving.”

What about environmental issues?

“I’m not entirely convinced buying local is better for the environment. It can use more resources than big farms that offer more economies of scale. And shipping in huge trucks consumes much less energy per unit to get to a store or restaurant.”

Are they asking questions?

“No, they just take their word for it.”

Who’s driving local food trends?

“I think it’s Millennials. It starts with concerns about their own health and that of their families. Then, it’s about how much money they’re spending on food and then it’s about incorporating social ideals.”

What’s considered healthy food? Will the argument over GMOs continue?

“I think the GMO argument will go away regardless of the demographic group. Lower income people are equally concerned with health and fresh products. They may not have access to it and lack time to make it but they are aware and concerned.”

What do you see coming in new food trends?

“A lot of it was what I saw at the recent Fancy Food Show – Paleo diets, higher fat meats. There’s much less fear of fat today so people are returning to meat.

|

Is local overrated considering availability of fresh products from around the world these days?

“Undefined but not overrated. But I think that people are asking how companies treat their employees and put a premium on hiring people from the

I get the impression that ‘local’ has just become a marketing and advertising buzzword?

“I think that’s absolutely true. People have to make up their own minds by going to their stores and asking questions. It’s up to consumers to enforce the definition.”

N EW JE R SE Y G R OC E R

The whole Chipotle E.coli contamination has put a spotlight on safety of local products.

“That’s complicated. Organic and local doesn’t mean safer. Unfortunately, that’s part of the lesson learned from Chipotle. It generally means it’s better for the people who raise your food. That’s what I think consumers should be focused on.”

community. That’s what it means to me. It’s about making sure people are able to live comfortably in a community that’s supported by community services. It’s about farms, small businesses, or artisan producers creating jobs locally rather than seeing everything move to cities or big packing centers.”

Continued on p. 42

41

15 MINUTES WITH…

Continued from p. 41

Gluten-free is still roaring along and I don’t see a reduction. But I saw organic leveling out and not as much product with whole grains as two years ago.”

Natural and organic is price of entry in retailing these days.

Yes. But organic what?

As a food writer do you think consumers are interested in getting back in the kitchen and doing more prep?

“No, I don’t think they are. It’s just wishful thinking on our part. It’s not that this generation doesn’t want to return to home cooking, there’s just a certain fear of it. There’s always the excuse there’s no time, and buzzwords like local are often proxies or excuses for not making food for your family.”

Anything retailers can do to get people back in kitchen?

“I think there should be more chopped, fresh vegetables. Also, cooking classes at supermarkets,

and community centers would help, as well as demos in stores if retailers are willing to make the investment. These ideas have been around a long time. Generally, what gets people to cook again is when they realize they can save money by doing it themselves.”

What do you think about home delivered meal kits?

“I did a recent column on that in the New Republic. I asked why anyone would ‘pay a premium for a large box filled with ice packs and little baggies and tiny shampoo-sized bottles whose contents will produce a few meals and a lot to recycle.’ Clearly, they are competing with supermarkets. I’ve tried a variety of meals from four different companies and what they had in common was a lot of packaging. It has its advantages, but I wouldn’t buy another meal kit.” n

|

N E W J E RS E Y G R O C E R

Good for grocers.

Good for the environment.

42

An alternative to landfills and traditional compost programs, Grind2Energy™ Organics Recycling System efficiently converts food waste to renewable energy. Our non-sewer based technology enables you to dispose of all types of food waste — including kitchen fats, oils and grease — faster, cleaner and easier. Reduce odors, pests, emissions and labor costs, all while protecting the environment. So whatever doesn’t make it to the table doesn’t have to go to waste. Learn more at www.grind2energy.com To schedule an appointment, contact: Heather Dougherty Commercial Solutions Group | Food Waste Specialists M 216-200-9439 | Heather.Dougherty@emerson.com

The Emerson logo is a trademark and a service mark of Emerson Electric Co. All rights reserved.