Mergers & aquisitions PAGE 36
Becoming a heart-led leader PAGE 40
2 0 1 7, I S S U E 1
CALIFORNIA GROCERS ASSOCIATION
trumponomics the “new” new deal
Congratulations new CGA board members!
CGA | BOARD OF DIRECTORS
CHAIRMAN APPOINTMENTS Independent Operator Committee Chair DIRECTORS
CALIFORNIA GROCERS ASSOCIATION
2 | CAL I FOR N I A G R OC E R
Chairman Jim Wallace The Albertsons Companies
Second Vice Chair Kendra Doyel Ralphs Grocery Company
Secretary Hee-Sook Nelson Gelson’s Markets
First Vice Chair Bob Parriott Twain Harte Market
Treasurer Phil Miller C&S Wholesale Grocers
Past Chairman Kevin Konkel Raleys
Renee Amen Super A Foods
Kevin Arceneaux Mondelēz International Inc.
Dave Jones Kellogg Company
Jon Alden Jelly Belly Candy Co.
Willie Crocker Bimbo Bakeries USA
Joe McDonnell Campbell Soup Company
Mike Ridenour The Kraft Heinz Company
Teresa Anaya Northgate Gonzalez Markets
Steve Dietz Tony’s Fine Foods
Mark McLean CROSSMARK
Casey Rodacker Mar-Val Food Stores, Inc.
Joe Angulo El Super (Bodega Latina)
Damon Franzia Classic Wines Of California
Casey McQuaid E & J Gallo Winery
Denny Silva Coca-Cola Refreshments
Rich Arnold Oberto Brands
Jen Fulton PepsiCo Inc.
Mario Mediati The Clorox Company
Elliott Stone Mollie Stone’s Market
Denny Belcastro Kimberly-Clark Corp.
Ted Gardner Rio Ranch Markets
Lynn Melillo Bristol Farms
Joe Tescano Nestlé Purina PetCare
Leon Bergmann Unified Grocers, Inc.
Michel LeClerc North State Grocery Inc.
Dan Meyer Stater Bros. Markets
Jim Van Gorkom NuCal Foods
Bob Bukovec Tyson Foods, Inc.
Eric Lindberg, Jr. Grocery Outlet, Inc.
Doug Minor Numero Uno Market
Michael Walton Unilever
Cindy Chikahisa Sprouts Farmers Market
Dave Madden MillerCoors
Nicole Pesco Save Mart Supermarkets
Richard Wardwell Superior Grocers
Brent Cotten The Hershey Company
Jonathan Mayes Albertsons Companies, Inc.
Laura Price Nielsen
Kevin Young Young’s Payless Market IGA
President/CEO Ronald Fong
Senior Director, Events and Sponsorship Beth Wright
California Grocer is the official publication of the California Grocers Association.
Publisher Ronald Fong email@example.com
Dennis Darling Foods Etc.
Senior Vice President, Government Relations and Public Policy Keri Askew Bailey
Senior Director, Government Relations Aaron Moreno
Senior Vice President, Business Development and Marketing Doug Scholz
Director, CGA Educational Foundation Brianne Page
Vice President, Communications Dave Heylen
Director, Administration Lesley Hall
Executive Director, CGA Educational Foundation Shiloh London, CFRE
Controller Gary Brewer
1215 K Street, Suite 700 Sacramento, CA 95814 (916) 448-3545 (916) 448-2793 Fax www.cagrocers.com For association members, subscription is included in membership dues. Subscription rate for non-members is $100 and does not include CGA Buyers’ Guide. © 2017 California Grocers Association
Editor Dave Heylen firstname.lastname@example.org For advertising information contact: Bill Kaprelian email@example.com
CONTENTS | ISSUE 1
Symposium inspires to Lead, explore, And communicate
32 Trumponomics: The “New” New Deal Not since the New Deal of the 1930s has there been an attempt at shifting the role of government this drastically. That change has the potential to impact the cost structure of the grocery business as well as the way in which consumers interact with their supermarkets. Or, perhaps it will not.
COLUMNS President’s Message California’s Troubled Recycling Program.. . . . . . . . . . . . . . . . . . . . 4 Chairman’s Message A Force to Be Reckoned. . . . . . . . . . . . . . . . 6
Viewpoint Going, Going…Gone. . . . . . . . . . . . . . . . . . 8 Government Relations Strength in Numbers. . . . . . . . . . . . . . . . . 10
Mergers & Acquisitions: Who’s Next?
Capitol Insider Meet Your New Legislators. . . . . . . . . . . . . 15
The 2017 is not likely to be record-setting for merger and acquisition activity in the grocery industry, but after five years of consistent – albeit slow – economic recovery, relatively low interest rates and strong availability of capital, the stage is set for another round of consolidations.
Inside the Beltway Unleashing a Populist Wave Against #UnfairSwipeFees.. . . . . . . . . . . . . 19
40 Becoming a Heart-Led Leader Noted author Tommy Spaulding shares stories and leadership lessons of heart-led leaders that prove that living and leading from the heart will change your organization, your career and your life.
Washington Report A New Administration Creates New Opportunities.. . . . . . . . . . . . 20
DEPARTMENTS Outside the Box New Retail Perspectives.. . . . . . . . . . . . . . . 24 CGA News. . . . . . . . . . . . . . . . . . . . . . . . . . 28 Member Profile Numero Uno Markets... . . . . . . . . . . . . . . . 48 Index to Advertisers. . . . . . . . . . . . . . . . . . 51 Mommy Blogger Saved by the Snack.. . . . . . . . . . . . . . . . . . . 52
CAL I FO RNIA GRO CER | 3
California’s Troubled Recycling Program RO N F O N G PR ES IDEN T AN D CEO CALIFOR N IA GR OCER S AS SO CIATIO N
This year, I will be focusing this column on the exploitation of grocery retail. First up: the state’s Beverage Container Recycling Program. How would you react to a notice from the state telling you to start paying $100-a-day over a violation for which you were not at fault? I’m guessing not too kindly, especially if you knew the whole thing could have been prevented had the Governor and his administration acted in a timely manner to provide a fair and sensible fix. For some of you, particularly in Northern California, this hypothetical has become a frustrating reality. And consumers are suffering as well, with the situation about to worsen unless action is taken immediately. What is the cause of this catastrophe? The collapse of California’s Beverage Container Recycling Program (BCRP). California’s recycling infrastructure suffered a significant setback in January of 2016 when a combination of factors – most notably a reduction in fees paid by the state to recyclers and a precipitous decline in global commodities prices – caused the closure of nearly 300 recycling centers across the state. The result was hundreds of stores (the 300 grocery stores with the recycling centers, plus any grocery stores within the half-mile 4 | CAL I FOR N I A G R OC E R
radius of the 300 recycling centers) forced out of compliance with the law through no fault of their own. This has put grocers in an untenable position, as the state’s recycling laws call for sanctions against stores that don’t provide recycling centers – either pay $100-perday, per location, or take back dirty bottles and cans in-store at the same checkout lanes where customers pay for their fresh food. Both are bad choices for grocers and consumers. Numerous attempts were made in the last legislative session to reform the BCRP, but to no avail, primarily due to issues dealing with monies paid into the program by beverage container recyclers – an issue which grocers have no influence over. To make matters worse, there continues to be some in the Governor’s administration who insist on an all-or-nothing resolution to fixing the BCRP. This means – despite the fact that CGA has offered fixes that would enable recycling statewide – as long as beverage container manufacturers quibble over fractions of a cent, there is no interest in addressing any solutions. In the
meantime, grocers remain liable for actions beyond their control. The Governor’s staff had indicated that it would offer a comprehensive fix to the BCRP in its January budget proposal, but in spite of those assurances, the best it could muster was a set of bullet points setting out general principles. To say the situation has become more frustrating would be an understatement. CGA remains undaunted and committed to protecting our industry from unsympathetic bureaucrats. To that end, we have worked with Senators Steven Glazer and Mike McGuire, and Assemblymember Catharine Baker to introduce Senate Bill 60. The measure will provide much needed immediate and temporary relief to grocery operators facing potential fines of $100-perday, per location, as a consequence of recycling center closures they had no control over. Affected store locations will be held harmless until this July when the budget is passed, allowing for negotiations with parties that grocers have no control over to play themselves out. Resolving this issue remains a top CGA priority. While delaying unjust sanctions has saved hundreds of thousands of dollars, there is still much work to do. ■
A Force to be Reckoned
J I M WA L L AC E T HE ALBE R TS ON S COMPAN IES
It is with great pride that I write my first column as Chairman of the California Grocers Association. Wallace
It is truly an honor to lead this organization, which serves not only our industry, but has an impact on all Californians. Our success as an industry has a ripple effect that is felt by everyone. I look forward to navigating both our Association and our industry to continued heights in the upcoming year, and I will be counting on your help to get us there.
CGA does so much to support our industry; from our outstanding annual conference, to providing hundreds of thousands of dollars in scholarships to workers and their children. With all we do, it is important that we don’t forget about another area of support the CGA is known for, which is government 6 | CAL I FOR N I A G R OC E R
relations. This area of work done by our Association, in many ways, provides the greatest benefit to members by setting up a regulatory climate that allows us to thrive. To those who have been involved through participation in our annual Grocers Day at the Capitol, or by being a part of our Government Relations Committee, I say thank you and hope that you continue to contribute and participate. To those who have not yet had the opportunity to be active in these areas, I want to encourage you to consider being a part of these worthy efforts and take advantage of the access to power that they provide. It is often said that, “the squeaky wheel gets the grease,” and in the world of government relations, this is definitely the case. The only way to get that attention is to participate. Don’t just take my word for it. Talk to your industry colleagues who have been able to participate in Grocers Day or other Government Relations Committee
activities. I know they will share many of the same sentiments that I share with you here and encourage you to add your voice to our advocacy efforts. They might also add that it helps bring a new perspective on our industry when seen through a government relations lens. We have many challenges facing us this year, such as: sponsoring bills to amend Proposition 47, addressing the state’s troubled Beverage Container Recycling Program, anticipation that labor will again run a full schedule of bills which will directly impact our industry. While we successfully defeated a number of such bills in 2016, we cannot rest on our laurels. I am confident this year will be CGA’s best yet, but I need your help. Join me at Grocers Day at the Capitol on April 18 in Sacramento and the other events which educate decision makers and the public about the amazing work we do. Together, we will make CGA a force to be reckoned with. ■
Uniﬁed Grocers is the largest wholesale grocery cooperative in the western U.S. Retailers can rely on Uniﬁed to deliver all the products and services they need to compete in today’s ever-changing grocery industry.
For more information, please visit UniﬁedGrocers.com or call 323.264.5200.
K EV I N CO U PE FOUN DE R , MOR N IN GN E WS BEAT.CO M
Amazon ended 2016 by reminding the retailing business of the competition level it intends to provide in 2017. The alert came in the form of a new concept called Amazon Go, which is in beta testing right now in Seattle, Wash., scheduled to be open to the general public early in the New Year. Here’s what we know about this new and unexpected format. Amazon Go is a 1,800 square foot convenience store format that allows consumers to enter the store using a mobile application, choose the items they want, and then leave – without having to go through a checkout lane. The concept in some ways is reminiscent of one that IBM illustrated in a television commercial more than a decade ago, which showed a guy in a big coat wandering through a supermarket shoving products into his pockets; rather than being a shoplifter, the commercial’s denouement showed that he’s actually using the store’s RFID system, which eliminates checkout lanes. IBM said that the commercial was a vision of the future...but it was a future that never really came, in part because of the cost of RFID tags, but more, I think, because retailers really saw no need to eliminate a part of the shopping experience that nobody really likes but everybody accepts. 8 | CAL I FOR N I A G R OC E R
Until now. Until Amazon decided to challenge conventional wisdom and expectations. As best we can tell, Amazon isn’t using RFID technology for its system. Rather, it says that it is using the same sort of technologies that power self-driving cars. They call it “Just Walk Out” technology, and it combines what Amazon refers to as a combination of “computer vision, deep learning algorithms, and sensor fusion" to allow people to walk through the store, with everything they pick up added to their virtual cart. The products are charged to the person’s Amazon account on departure from the store.
The video hints at the likelihood that Amazon may be offering a broader selection of fresh foods than one might’ve expected, but we don’t exactly know the extent of it, nor how fresh categories will be serviced. And we don’t know whether Amazon could make store patronage dependent on being a member of its Prime program; it hasn’t said anything about that, but it wouldn’t surprise me since Amazon has been disciplined and relentless about luring/pushing people to join Prime, which for $99 provides expedited shipping and a host of other features. (Prime members spend on average twice as much on Amazon each year as non-Prime members.)
What we don’t know about Amazon Go is what the company’s plans are for any sort of expansion or national rollout.
My friend Tom Furphy, who got Amazon into the CPG business and launched Amazon Fresh, and is CEO and Managing Director of Consumer Equity Partners (CEP), a Seattle-based venture capital and venture development firm, says that he likes the idea of an Amazon Go-Prime tie-up, saying it would be “consistent with the treatment of Prime customers throughout the rest of the Amazon ecosystem... I would have no problem giving Prime members access to exclusive deals or products. And I would support offering better pricing for Prime members.”
We also don’t know how this concept will merge or dovetail with other bricksand-mortar plans that Amazon has been pursuing, including a grocery format that would focus on click-and-collect technology.
To me, perhaps the most important thing about Amazon Go is that it illustrates the degree to which Amazon is willing to challenge itself and conventional wisdom when it approaches a project.
By the way, if you’re interested in seeing the video that Amazon posted to YouTube introducing the concept, go here: www.bit.ly/AmazonGoVideo
“Good is not good when better is expected.” – Vin Scully Amazon doesn’t just offer a me-too solution with some minor tweaks to the customer experience. (Think about how the Microsoft Store is just a pale imitation of Apple Store, except with fewer customers and lower sales.) No, Amazon thinks big...the store, as shown in the video, seems to be a significant rethinking of the shopping experience. It won’t be for everyone, it won’t be for every trip, and it won’t be for all locations. But it has the potential for moving the needle...and for raising the bar on what will be considered a competitive entry by virtually every other player in the retail food business. It also is important to remember that Amazon Go isn’t taking place in a competitive vacuum. It is being developed inside a company that already has a robust e-commerce business, and game-changing concepts such as Prime, Subscribe-and-Save and Dash Buttons. And, Amazon Go is opening at a time when its Echo/Alexa voice recognition technology allows people to place orders just by talking to their devices. (If you are not intimately familiar with all these entries, it’s time to get on the stick.) It’s like everything is aimed at fulfilling the now-familiar Amazon mantra: “We don’t want to sell people stuff. We just want to make it easier for them to buy things.”
There are, of course, potential downsides for Amazon. For one thing, it puts the company’s strategies and tactics on full view for competitors to observe and learn from, and it also takes away a little flexibility, since there is no way that the bricks-and-mortar world can be as nimble as the virtual world. It’d be foolish to focus on the potential downsides for Amazon, though. I got a taste of this when I first wrote about Amazon Go on MorningNewsBeat, and got a bunch of emails from traditional retailers who seemed mostly focused on how shoplifting could be an enormous problem. My answer to this is that yes, it could be, but it seems to be a pretty good bet that Amazon has figured out how to deal with it. Besides, there is little that Amazon would like than for all its competitors to be focused on shoplifting while it tries to change the world.
the same benefits for a decade by using “Human Technology.” You can watch that video here: www.bit.ly/MonoprixVideo The strategies and tactics you use to compete in this environment are less important than the act of constantly, consistently, disruptively finding new ways to compete and be relevant to your shoppers. If you think you’re not going to be affected by what companies like Amazon are doing, think again. And remember the words of the immortal Vin Scully: “Good is not good when better is expected.” ■
The thing that retailers competing with Amazon - and let’s face it, every retailer competes with Amazon - have to focus on is how they are going to approach a world in which good enough not longer is good enough, where consumer expectations are being reshaped...and not just by the retailer down the road or across the street. Sometimes the response may be intertwined with technology, but sometimes not. I was actually heartened when I saw a video produced by Fresh retailer Monoprix that poked gentle fun at Amazon Go while pointing out that it has offered many of
“If you think you’re not going to be affected by what companies like Amazon are doing, think again.” iStock
Strength in Numbers
A A RO N M O R EN O S E N IOR DIR ECTOR CGA GOV E R N ME N T R E LAT ION S
Like a murmuration of birds, the gathering of CGA members at our annual lobby day demonstrates a collective powerful force. You’ve probably seen a murmuration and just not known that it’s called a murmuration – hundreds, sometimes thousands of birds flocked together in the sky, flying in complicated and patterned unison, mesmerizing all those around it. Ornithologists believe the main reason behind this incredible phenomenon is a simple one. Small birds flying alone are vulnerable to larger predatory birds such as eagles and falcons. But thousands of years in nature has taught the smaller birds an important lesson: When they fly together and remain in coordinated motion, it is nearly impossible for a predator to take one from the many. There is safety and strength in numbers. As it is in nature, so often is it in politics. We must maintain constant vigilance against any predator who sees us as an easy meal, or against any rivals who seek to take our territory. The murmuration exponentially increases the power of each bird, scaring away any rival and ensuring its continued existence. The Legislature can certainly seem like a den of predators, with some legislative sessions providing more threats than others, and many ways CGA provides for our 10 | CAL I FOR N I A G R OC E R
members the same power and protection a murmuration provides birds in the wild. Nowhere is this more evident than our annual Grocers Day at the Capitol. Many of our successes over the course of a legislative year can be directly traced back to the show of collective force that CGA’s Grocers Day at the Capitol provides. It is our opportunity to show the Legislature that CGA is more than just a government relations team. It is our opportunity to show legislators and their staffs that we are many and speak as one. With our collective voice amplified we are able to show the gravity of the issues our industry faces. If you participated in last year’s Grocers Day, you experienced first-hand how beneficial this day is towards forwarding our interests in the Capitol – from the GROPAC legislative dinner the night before, to the meetings the day of and the reception after. Our members were able to have direct contact with legislators in order to explain how issues ranging from recycling, to scheduling, to product pricing, would directly affect their bottom lines. These valuable sit-downs bring to life
the facts and figures about the grocery industry that otherwise exist on the types of information sheets that are discarded annually by legislative staff. We can tell a legislator how many people we employ in his, or her district. We can tell a legislator the economic impact a store brings to their district. We can tell a legislator about the charity work we do every day in their district that often goes unnoticed. And they will, hopefully, remember these things when facing a vote that could negatively impact any or all of these things. But it’s more than just a day of asks. This access is an opportunity to establish new relationships and nurture existing ones. Our members have the opportunity to offer themselves as resources to legislators and their staffs, whether it be to make themselves available to answer questions about specific aspects of our industry as needed, or to offer such things as places for public events or help with charity drives. Again, these relationships provide so much value not only to our members, but to our government relations team that work the halls on an almost daily basis representing industry interests. I can’t tell you how many times I’ve visited an office in the weeks after Grocers Day and been told by legislators and staff how much they appreciated the time spent with our members, and how they learned about issues they had no idea existed. Continued on page 12 ▶
I found my
“I’ve built my business around Expo West. Four years ago I walked the show wide-eyed, not knowing much about the food industry but driven by an idea for a mission-driven moringa business. Now our products are carried by retailers nationwide, largely thanks to the relationships we’ve formed in Anaheim.” Lisa Curtis Founder & CEO Kuli Kuli Foods
Education & Events March 8–12, 2017 Trade Show March 9–11, 2017 | Anaheim Hilton & Marriott March 10–12, 2017 | Anaheim Convention Center Anaheim, CA USA Register online at expowest.com
Questions? Contact us at 1.866.458.4935 or 1.303.390.1776 | firstname.lastname@example.org Produced by:
Co-located with: PRESENTED BY:
◀ Continued from page 10
“It is our opportunity to show legislators and their staffs that we are many and speak as one.” iStock
Most importantly, they ask: How can we help? This year’s Grocers Day is Tuesday, April 18. If you’ve never attended, don’t take my word for the value of participating, ask other members of CGA who have. And if you are able to, consider attending our legislator dinner the night before where we dine in an intimate and informal setting
with legislators from both parties for an evening of networking and conversation. Those who have attended in the past can attest to what a wonderful event it truly is. So as you begin to fill your calendar for the year (April 17 & 18, specifically), remember the power of murmuration. Those birds flying in unison are much powerful than those who choose to fly alone. They send
Have Cardboard? Other Scrap? We offer used balers for purchase or lease. Fully reconditioned with warranty. Save using durable American machinery, short R.O.I. Call Steve: 510 760-6376
www.greenplanet21.com 12 | CAL I FOR N I A G R OC E R
a message to all who see them for miles around that they are a force to be reckoned with. Let’s make this year’s Grocers Day our most powerful show of force yet. ■
Grocery Operations: We Smooth ‘em Out Cart Retrieval ■
The industry leader in shopping cart retrieval Reduce cart-loss expenses and aggravation Detailed reporting from an accountable partner
Cart Maintenance ■
Reduce cart cleaning and maintenance costs Lower new cart acquisition expenses On-site, quick return-to-action convenience
Receive and reinvest manufacturer reimbursement money faster Avoid costly chargebacks, enjoy one-stop convenience Zero upfront costs or counting and sorting hassles
Because we understand the details of grocery operations, we can save you money and aggravation dealing with things you'd rather not have to. Come to us to simplify your operations and save money.
Operational Efficiency, Greater Convenience, More Money in Your Pocket.
FOLLOW US ON SOCIAL MEDIA
CSCRC and CCRC are RMS companies – 1020 North Lake St., Burbank, CA 91502
Dairy, Deli, Bakery & Foodservice Professionals,
NETWORKING BEGINS HERE
YOU’LL SEE: 9,000 Professionals 700 Exhibitors Retail Decision-Makers Top Speakers Trends Research And More...
and The Board of Comedy
New Concepts Merchandising Retail Takeaways Unique Displays
Former President of Trader Joe’s
Latest Trends Hundreds Of Items Mike Eardley
President/CEO of IDDBA
One-on-One Expert Advice The Industry’s Premier Event
Arnold Schwarzenegger California’s 38th Governor
Meet your new Legislators LO U I E B ROW N PAR T N E R IN THE S ACR AMEN TO OFFICE OF K AHN, S OAR E S AN D CON WAY, LLP
This is the smallest freshman class of Legislators since voters passed Proposition 28 in 2010, which extended term limits to 12 years and was intended to limit turnover in the Legislature. Brown
The 2017-18 legislative session welcomes 31 new legislators to Sacramento; 22 in the Assembly and nine in the Senate. Four of the incoming Assemblymembers and six of the Senators have served before in Sacramento. November’s results also brought the Democratic supermajority back to the State Capitol. Unlike the last Democratic supermajority in 2012, with less turnover this year and a greater familiarity with returning members there are new opportunities to further CGA’s legislative agenda. AD 4 Cecilia Aguilar-Curry (D-Winters) was elected to represent all or parts of Napa, Lake, Yolo, Sonoma, Colusa and Solano counties. Prior to her victory in November, she was the first woman elected as Mayor of Winters and as the Chair of the Yolo Housing Commission. Aguilar-Curry was born into a farming family and owns an 80-acre walnut farm in Yolo County. AD 6 Kevin Kiley (R-Rocklin) was elected to represent portions of El Dorado, Placer and Sacramento counties. Prior to being elected
to the Legislature, Kiley practiced law, specializing in businesses litigation, before serving as Deputy Attorney General. AD 12 Heath Flora (R-Ripon) was elected to represent eastern Stanislaus and San Joaquin counties. He owns Golden Valley Equipment which sells used agricultural equipment to farms in the Central Valley and has served as a volunteer firefighter for more than 15 years. AD 14 Tim Grayson (D-Concord) was elected to represent portions of Contra Costa and Solano counties. Prior to being elected to the Assembly, he served as the Mayor of Concord and as the Concord Police Department Critical Response Chaplain. AD 24 Marc Berman (D-Palo Alto) was elected to represent southern San Mateo County and northern Santa Clara County in the heart of Silicon Valley. Berman was a council member for the City of Palo Alto. He is the former Development Director at the Silicon Valley Education Foundation, a non-profit focused on STEM education.
AD 27 Ash Kalra (D-San Jose) was elected to represent Santa Clara County and the City of San Jose. Prior to being elected to the Assembly, he was the first Indian American to serve on the San Jose City Council and spent 11 years as an attorney in the Santa Clara Public Defender’s Office. Kalra is also a professor at Lincoln Law School of San Jose. AD 30 Anna Caballero (D-Salinas) was elected to represent Monterey County. She represented this District from 2006-2010. Caballero has practiced law in the Salinas valley for 30 years and founded a non-profit called Partners in Peace, which develops strategies to reduce youth and gang violence. She served on the Salinas City Council for seven years and was appointed by Gov. Jerry Brown as Secretary of the California Department of Consumer Affairs. AD 34 Vince Fong (R-Bakersfield) was elected to represent most of Kern County including Bakersfield-Oildale, Taft, and Tehachapi. For nearly a decade, he served as the district director to House Majority Leader Kevin McCarthy. Fong is on the boards of the Jim Burke Education Foundation and Honor Flight Kern County, where he works to send WWII, Korean War and Vietnam Veterans to Washington, D.C. to view their memorials. Continued on page 16 ▶ CAL I FO RNIA GRO CER | 15
CAPITOL INSIDER ◀ Continued from page 15
“with less turnover this year and a greater familiarity with returning members there are new opportunities to further CGA’s legislative agenda.” AD 35 Jordan Cunningham (R-Templeton) was elected to represent San Luis Obispo and the northern part of Santa Barbara County. Prior to being elected to the Assembly, he served as the Deputy District Attorney in the San Luis Obispo County District Attorney’s Office and later started his own practice. AD 37 Monique Limon (D-Santa Barbara) was elected to represent Santa Barbara and
Ventura counties. Prior to being elected to the Assembly, she served two terms on the Santa Barbara Unified School Board and was the Assistant Director for the McNair Scholars Program at the University of California, Santa Barbara. AD 38 Dante Acosta (R-Santa Clarita) was elected to represent Simi Valley, Santa Clarita and North Los Angeles County. Prior to being elected to the Assembly, he served on the
Santa Clarita City Council and as Santa Clarita’s representative to the Southern California Association of Governments. Assemblyman Acosta is a Blue Star Father. AD 39 Raul Bocanegra (D-San Fernando Valley) was elected to represent the Northeast San Fernando Valley and communities of Lake View Terrace, Mission Hills, Newhall, North Hollywood, Pacoima, San Fernando and Sylmar. First elected the Assembly in
Rethink the way you dispose of something as simple as an orange peel.
16 | CAL I FOR N I A G R OC E R
CAPITOL INSIDER 2012, he chaired the Assembly Revenue and Taxation Committee, and authored California’s Film and Television Tax Credit. AD 43 Laura Friedman (D-Glendale) was elected to represent the cities of Glendale and Burbank. Since 2009, she has served on the Glendale City Council and is on the board of the Metropolitan Water District of Southern California. Before getting involved in politics, she was a producer on numerous film and television projects. AD 47 Eloise Reyes Gomez (D-Grand Terrace) was elected to represent the communities of Colton, Fontana, Grand Terrace, Rialto and San Bernardino. She operates a law practice in Colton and is an adjunct professor at Cal Poly Pomona. AD 48 Blanca Rubio (D-Baldwin Park) was elected to represent the cities of Covina, West Covina, Glendora, Baldwin Park, Azusa, Irwindale and Monrovia. Prior to
being elected to the Assembly, she was a classroom teacher and served as the President of the Baldwin Park Unified School District Board of Education.
previously elected to the Assembly in 2012. Prior to coming to Sacramento, she was a teacher for 31 years and served as the Mayor of Fullerton.
AD 55 Phillip Chen (R-Walnut) was elected to represent parts of Los Angeles, Orange and San Bernardino counties. Assemblyman Chen is a former reserve Sheriff ’s Deputy and served on the Walnut Valley Unified School District.
AD 66 Al Muratsuchi (D-Torrance) was elected to represent the communities of Hermosa Beach, Manhattan Beach, Redondo Beach and Torrance. He was first elected to the Assembly in 2012. He is a former prosecutor and Deputy Attorney General with the California Department of Justice and a criminal prosecutor with the L.A. County District Attorney’s Office.
AD 60 Sabrina Cervantes (D-Riverside) was elected to represent the western end of Riverside County. Cervantes was born and raised in the Inland Empire and served as the district director for Assemblyman Jose Medina. Prior to joining Assemblyman Medina’s office, she was the Director for the California Voter Registration Project. AD 65 Sharon Quirk-Silva (D-Fullerton) was elected to represent the cities of Anaheim, Buena Park, Cypress and Fullerton. She was
AD 68 Steve Choi (R-Irvine) was elected to represent the cities of Irvine, Tustin and the City of Orange. He has served as the Mayor of Irvine since 2012 and owns a small business in Orange County. Choi has also served on the Board of Directors of the Southern California Association of Governments (SCAG) and the Orange County Sanitation District. Continued on page 18 ▶
And you’re helping recycle food waste into energy. An alternative to landfills and traditional compost programs, Grind2Energy™ food waste 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 generating renewable energy and protecting the environment. Learn more at www.Grind2Energy.com
CAL I FO RNIA GRO CER | 17
CAPITOL INSIDER West Hills and a portion of Santa Clarita in Los Angeles County. Stern is a member of the Santa Monica Mountains Conservancy Advisory Committee, the Jewish Federation, the American Jewish Committee, and the Truman National Security Project.
◀ Continued from page 17
AD 71 Randy Voepel (R-Santee) was elected to represent Eastern San Diego County. Prior to being elected he served as Mayor of the City of Santee for 15 years. AD 78 Todd Gloria (D-San Diego) was elected to represent the City of San Diego as well as the cities of Coronado, Del Mar, Imperial Beach and Solana Beach. Prior to coming to Sacramento, he served as President of the San Diego City Council and as San Diego’s Interim Mayor in 2013. SD 3 Bill Dodd (D-Napa) was elected to the 3rd Senate District which includes parts of Contra Costa, Napa, Solano, Yolo and Sacramento counties. Prior to being elected to the Senate, he represented Yolo and Napa County in the Assembly. Senator Dodd is a small businessman who served on the Napa County Board of Supervisors. SD 9 Nancy Skinner (D-Berkeley) was elected to the 9th Senate District which unites cities in Contra Costa and Alameda counties, including Richmond, Berkeley, Oakland and San Leandro. Prior to being elected to the Senate, she served in the Assembly for six years. Skinner teaches public policy at UC Berkeley and serves as a Senior Policy fellow at UC Davis Energy and Transportation Institutes. 18 | CAL I FOR N I A G R OC E R
SD 11 Scott Weiner (D-San Francisco) was elected to represent the 11th Senate District which includes the city and county of San Francisco as well as South San Francisco. Prior to his election to the State Senate, he was a member of the San Francisco County Board of Supervisors, serving on the Board’s Land Use and Economic Development Committee. Before entering politics, Senator Weiner served as a Deputy City Attorney in the San Francisco City Attorney’s Office. SD 21 Scott Wilk (R-Santa Clarita) was elected to represent the 21st Senate District which includes northern Los Angeles and San Bernardino counties. Prior to being elected to the Senate, he served in the Assembly for four years. SD 25 Anthony Portantino (D-Pasadena) was elected to represent the 25th Senate District which connects the Los Angeles County foothills from Sunland-Tujunga in the City of Los Angeles on the west to the City of Upland in San Bernardino County on the east. Prior to being elected to the Senate, he served in the Assembly for six years. Portantino also served on the California Film Commission. SD 27 Henry Stern (D-Augora Hills) was elected to represent the 27th Senate District which connects the communities of Simi Valley, Thousand Oaks, Westlake Village, Calabasas,
SD 29 Josh Newman (D-Fullerton) was elected to represent the 29th Senate District which is comprised of portions of Los Angeles County, Orange County and San Bernardino Counties and includes the cities of Anaheim, Chino Hills, Diamond Bar,-Fullerton, West Covina and Yorba Linda. Senator Newman is a veteran who has served as an officer in the United States Army with active duty assignments in South Korea. He founded ArmedForce2Workforce, a non-profit organization to assist young veterans in the Orange County. SD 35 Steven Bradford (D-Gardena) was elected to the 35th Senate District which includes the Los Angeles County communities of Carson, Compton, West Compton, Gardena, Harbor City, Hawthorne, Inglewood, Lawndale, Lennox, West Carson and Watts. Prior to being elected to the Senate, he served in the Assembly for six years. Bradford coaches both baseball and football at Rowley Park in the City of Gardena and is the proud founder of the Gardena Jazz Festival. SD 39 Toni Atkins (D-San Diego) was elected to the 39th Senate District which is located within San Diego County and includes most of the City of San Diego north of SR-94, the coastal cities of Coronado, Del Mar and Solana Beach. Prior to being elected to the Senate, she served six years in the Assembly and was the third woman to be elected Speaker. ■
INSIDE THE BELTWAY
Unleashing a Populist Wave Against #UnfairSwipeFees J EN N I F ER H ATC H ER S E N IOR V ICE PR E S IDE N T GOV ER N MEN T AN D PUBLIC AFFAIRS FOOD MAR K E TIN G IN S T ITUTE
The Food Marketing Institute (FMI) recently launched a website and digital campaign to shine a light on the swipe fees practices of big banks and card companies. On the FMI website, we ask consumers to join our grassroots efforts to keep credit and debit card fees in check by signing the petition found on the Citizens Against Unfair Swipe Fees (www.unfairswipefees.com). We would love for you to lend a hand by engaging on social media. Like us or comment on Facebook. Retweet information on Twitter. Any help in raising consumer awareness and directing traffic to the website would be greatly appreciated. We know when the newly elected Congress returns to Washington, one of their agenda items is the repeal of the Dodd-Frank Wall Street Reform and Consumer Protection Act. As you know, the only control or oversight of swipe fees currently in place is a hard-fought amendment included in the 2010 DoddFrank legislation that allowed the Federal Reserve to monitor and put caps on debit fees and required at least two ways to route a transaction – i.e. competition! Obviously, this second one is a tough one to explain, however, consumers are quick to understand that it is better to have 12
highways to go down than one (for everyone except the person who collects the toll). The existence of 12 regional networks to route a transaction instead of one means there are options if a particular option goes down – greater “up time.” Also, if a retailer is more comfortable with a particular network’s security protections or lower price, transactions can be routed there first. Our goal with this campaign is to educate consumers about the high fees merchants and ultimately, consumers, are charged by big banks and card companies every time a card is swiped or dipped – $79 billion per year and $2,500 per second. A ticker on the website calculates this for visitors. Our hope is that by showing consumers how much big banks/card companies collect from every swipe and dip that they will be willing to engage with their Members of Congress to keep these checks on debit cards in place. Americans pay the highest swipe fees in the world and this is one arena in which I am reasonably sure we do not wish to remain
number one. This year, let’s be aware and intentional about who receives our holiday gifts. Post Christmas, the campaign changed from presents to holiday returns and evolved a gain as the Super Bowl approached. Again, our goal is to be visible, not just with grocers and associates, but also with consumers, as we know the only way to win this fight on Capitol Hill is to have our customers’ support. When the Senate and House reconvened in January, one item anticipated to receive an early floor vote was an attempt to eliminate the big bank oversight put in place by the Dodd-Frank Wall Street Reform and Consumer Protection Act passed in 2010. At stake in the consideration of the Financial CHOICE Act – House Financial Services Committee Chairman Jeb Hensarling’s legislation intended to repeal and replace Dodd-Frank – would be the loss of debit swipe fee reform, established by the Durbin Amendment. Our industry fought hard for this reform and if it gets removed, then once again big banks would be granted open season on setting debit card swipe fees as high as they want and under anti-competitive terms by eliminating competition. Continued on page 22 ▶ CAL I FO RNIA GRO CER | 19
A New Administration Creates New Opportunities PET ER L A R K I N PR E S IDE N T AN D CEO N AT ION AL GR OCER S AS S OCIATIO N
While 2016 brought change on many fronts in Washington, D.C.– most notably in the White House, independent supermarket operators continue to have a long list of pressing matters to discuss. From protecting debit swipe fee reforms to labeling policies to countless regulations, there is never a shortage of issues impacting the supermarket industry. The following issues were closely monitored in 2016 by the National Grocers Association and remain of critical importance to independent grocers in 2017. Durbin Amendment/Debit Card Swipe Fee Reform: Congress enacted debit card swipe fee reform, also known as the Durbin Amendment, as part of the Dodd-Frank legislation in 2010, but since this bill was passed, U.S. merchants continue to fight for transparency and competition in the credit and debit card industry. Prior to the 2016 elections, the House Financial Committee narrowly passed the Financial CHOICE Act, a Dodd-Frank reform package that included language to repeal the debit reforms contained in the Durbin Amendment. This bill was introduced by the Chairman of the House Financial Services Committee Congressman Jeb Hensarling (R-TX). While the House did not bring the legislation to the floor for a vote, NGA is preparing for a renewed push in support 20 | CAL I FOR N I A G R OC E R
of a similar bill in 2017. NGA, along with other supermarket industry stakeholders, is encouraging the grocery industry to contact their Member of Congress to urge them to oppose any legislation that would alter the Durbin Amendment and reduce competition in the debit routing market. Health Care Reform: The President-elect has placed repeal of the Affordable Care Act (ACA) on top of his to-do list, and with a Republican-controlled Congress that effort seems much more likely to succeed. While repeal is on the agenda, at the time of this writing the details for an ACA replacement is unclear. Many in Washington have speculated that the incoming Trump Administration’s replacement bill could mirror House Speaker Paul Ryan’s “A Better Way” health plan. Included in Speaker Ryan’s plan are some proposals, such as individual tax credits and health savings accounts, that Trump had endorsed along the campaign trail. SNAP and federal feeding programs: In 2016, the House Agriculture Committee
conducted more than a dozen hearings on the Supplemental Nutrition Assistance Program (SNAP), including hearings last May in which NGA Board members testified. Given the interest from Members of Congress on SNAP, we anticipate to see more pressure in 2017 to bring about “reform” of this program. NGA will remain focused on ensuring any proposals, including ones that limit what items SNAP recipients can purchase, do not add new costs, or administrative burdens on independent supermarkets. In addition, the House and Senate Agriculture Committees are likely to begin the process of drafting a new farm bill next year. Farm bills are large bills that package together several different agriculture priorities, including crop insurance, livestock issues, and nutrition policies. Continued on page 22 ▶
Open Prairie™ Natural* Pork
With no added hormones ** or antibiotics, Open Prairie™ Natural Pork delivers shoppers a wholesome eating experience. Not only does Open Prairie Natural Pork bring you the highest quality natural pork, our team also provides the expert support you need to build your natural pork sales.
Naturally good pork. B2B.OPENPRAIRIENATURALPORK.COM *MINIMALLY PROCESSED. NO ARTIFICIAL INGREDIENTS.
**FEDERAL REGULATIONS PROHIBIT THE USE OF ADDED HORMONES IN PORK.
™/© 2016 TYSON FOODS, INC.
◀ Continued from page 20
“there is never a shortage of issues impacting the supermarket industry.”
Traditionally, legislation encompassing nutrition programs (including SNAP) are included as a part of the farm bill in order to receive urban support for the farm programs that often only appeal to Members of Congress from rural districts. These bills are large and expensive, and usually result in tough fights as both Chambers look to pass a product that pleases several different constituencies. GMOs: After a year of intense debate and legislative jockeying, a biotechnology labeling law that created a national labeling standard for food products made with genetically engineered (GE) ingredients and genetically modified organisms (GMOs) was enacted in July 2016.
The action now shifts to the U.S. Department of Agriculture (USDA), where the agency will begin the rulemaking process that will decide how the law is implemented across the country. NGA is already focusing on what opportunities and challenges the new administration and Congress may bring in 2017. Given these changes, we will have much work to do to educate lawmakers and regulators about the positive impacts the independent supermarket industry has on the economy and local communities. To make your voice heard on these issues, please visit www.grocerstakeaction.org. ■
INSIDE THE BELTWAY
◀ Continued from page 19
“Our hope is that by showing consumers how much big banks/card companies collect. they will be willing to engage with their Members of Congress.” Banks and card companies are applauding this transition as they have managed to convert that system into the best kind of profit center; one where the customer – for the most part – is not even aware they are paying. It costs American consumers and businesses somewhere between 23 cents and $4 every time a credit or debit card is used to make a payment. This is a high fee for a service that actually costs the banks very little, and they have been very successful at hiding what those fees are, and who exactly is assessing them.
22 | CAL I FOR N I A G R OC E R
Under the 2010 reforms that the big banks hope to repeal early in 2017, the Federal Reserve is required to collect data on banks costs’ relevant to debit card swipe fees and can adjust their caps based on what they find. We need your customers’ help and your help in making sure the debit reforms are not repealed, as they are the only measure we have in place to keep the greed of financial institutions in check.
If you are willing to sign a letter to Congress, encourage others to sign our petition or post a short video clip of the impact of swipe fees on your business and your customers, let us know, email@example.com. We appreciate your help! ■
Select the Best
C&S would like to congratulate all the new CGA Board Members! Contact us today to learn how we can help make this your best year ever! Eric Pearlman, Dir Independent Sales WC
OUTSIDE THE BOX N EW RETAIL PERS PECTIV ES
Alive & Kicking iStock
Remember the old neighborhood video stores that cropped up in every town and seemed to die out as quickly with the advent of streaming services? Well, they’re still around thanks to increased demand and some new strategies. There are still about 100 video store holdouts across the U.S. selling DVDs Blu-Ray and even VHS tapes – many of them in places were you find a large locavore population. Places like Video Free Brooklyn in New York, Vulcan Video in Austin, Texas and Movie Madness in Portland, Ore., have become one-stop shops for popular and obscure films you would need to get from multiple streaming services like Netflix or Hulu and movie props and accessories.
Turns out you can teach an old dog new tricks. In this case, an English bulldog – new tricks. The former Eurostar terminal at London’s Waterloo Station is being refitted for 135,000 square feet of retail space on three floors. But the project isn’t just for the benefit of commuters. British Railways and the Department of Transportation want to make Waterloo station as much a retail destination as the High Street.
t Ja va o H Blast from The (recent) Past Remember Boston Market – the darling of the fast casual dining industry? The chain has been pretty quiet of late, but that may be coming to an end. The company hired a new ad agency, The Richards Group, to get back some of the luster it lost to Chick-fil-A. Plans include new branding and creative strategy.
Global supplies of coffee are tightening, but demand is at record levels. Research indicates that Americans are becoming addicted to the beverage at an earlier age – even in China – as demand dwindles among older consumers.
OUTSIDE THE BOX
Millennials just don’t buy groceries and Donald Trump never had a chance of becoming president either. Right? Well, the latter has been disproved and now from the UK comes evidence that Millennials might be the best supermarket customers yet. Nielsen Homescan in the UK found that households where 16 to 35-year-olds are the main shoppers, grocery spending has increased 7.9 percent–far stronger than other groups. The conclusion? Millennials are freeing up more of their hard earned dollars for groceries and shop more frequently.
However, the study also shows that Millennials are increasing spending at discounters and bargain stores like Aldi, where sales among that group increased 46% over the past year.
Sometimes, customer service can go a bit too far. Three Squirrels, a growing Chinese e-commerce brand that sells nuts and snacks, uses cartoon squirrel mascots on its logo and commercials. But customer service employees also play the role of pet squirrels with squirrel-related nicknames and address shoppers as their “owners.” Apparently this oh-so-cutesy strategy works, especially with Chinese Millennials who see the company’s products as a healthy, youth-focused brand. iStock
Service with a Bark Is Fido in a hurry for a new bone or is kitty craving a new scratching post? Now no one has to wait thanks to PetSmart, which has started offering same-day delivery through Deliv, a Silicon Valley startup. The service is available in Los Angeles, Orange County, San Francisco, San Jose, Las Vegas, Atlanta, Miami, Seattle, and Chicago, with eight additional markets soon to come on stream.
Nuts to You!
Er a w e N
According to Adobe, online sales on Black Friday grew 21% over last year to $3.3 billion. In fact, Target noted that target.com had its best day ever on Thanksgiving, with sales up double digits.
CAL I FO RNIA GRO CER | 25
CGA ELECTS NEW BOARD MEMBERS The following individuals were elected to their first term on the CGA Board of Directors at the CGA Annual Board meeting on Dec. 2, 2016. Leon G. Bergmann Executive Vice President, Sales, Procurement & Logistics, Unified Grocers Leon Bergmann is responsible for the sales, procurement, service and logistics functions across all of Unified Grocers’ regions of operation. He joined Unified in December 2012 as Senior Vice President, Sales. In addition, Bergmann assumed responsibilities for the customer satisfaction team and grocery, frozen, and deli procurement in 2013. He was promoted to Executive Vice President in 2014 and added responsibility for the company’s transportation, warehouse and other logistics functions shortly thereafter. Prior to joining Unified, he was President, Independent Business for SuperValu. His extensive grocery industry experience includes nearly 10 years at C&S Holdings, where he held several positions including Senior Vice President, Sales and Customer Service, Northeast Region; General Manager, West Coast Operations; and Vice President, Corporate Development. Cindy Chikahisa Vice President of Operations, Field Development, Sprouts Farmers Market Cindy Chikahisa has been in the grocery industry since the early 1980s, starting as a courtesy clerk for Lucky Stores. After graduating from UC Irvine, she managed stores in the Orange County area. In the late 1990s, Cindy left the traditional grocery industry for Wild Oats. At Wild Oats, she served as a Store Director and Regional Director for their two brands, 26 | CAL I FOR N I A G R OC E R
Wild Oats and Henry’s. When Wild Oats was acquired by Whole Foods, she helped with the transition, afterwards returning to Henry’s to oversee the bakery and deli departments. In 2010, Henry’s and Sprouts merged, and she went back to the operations side, eventually migrating to an operations support role in the Phoenix office. She serves as the Vice President of Operations, Field Development at Sprouts Farmers Market, overseeing the training programs in the stores and field. She also oversees the East coast operations in a temporary role. Damon J. Franzia California General Sales Manager, Classic Wines of California Damon Franzia started his professional career at WalMart after earning a management degree at Santa Clara University. He held various assistant manager and co-manager positions throughout Wal-Mart stores in the East Bay area before joining the family firm in 1999. He moved to Southern California and began his sales career as Area Manager in the Greater Los Angeles area. In 2002, he was promoted to Southern California Regional manager and held that position until 2008 when he became the California General Sales Manager. Among his responsibilities managing the wholesale operation, Damon is heavily involved in production and new product development, plus managing and ordering all domestic and import products for the entire country.
Jen Fulton Senior Director of Retail Sales, California Region, PepsiCo Jen Fulton is Senior Director of Retail Sales, California Region for PepsiCo. She started her career with Pepsi in 2004 as a front-line merchandiser. In 2005 she was appointed Merchandising Manager in Seattle, Wash. From 2006-2016, she served in various capacities in California and the East Coast before accepting her present assignment in 2016. She says that her passion as a leader is to build collaborative teams that focus on delivering growth for our partners and flawless execution in the trade. She was graduated in 2004 with a B.S. in Communications from Oregon State University. Douglas W. Minor President, Numero Uno Market Douglas Minor began his grocery career as a store manager for Stater Bros. Markets in 1978. In 1985, he left the industry to pursue a real estate career. In 1988 he was hired by Albertsons, Inc, as a store director in the company’s Max Foods Division. In 1995, Minor joined Unified Grocers, Inc., as a retail counselor. His responsibilities included working directly with owners and upper level management of independently owned grocery stores. In 1998, Minor was named Chief Operations Coach for Fiesta Mexicana Markets where he was responsible for all aspects of Fiesta’s Continued on page 28 ▶
◀ Continued from page 26
operation, including its 1,300 team members. In 2010 he became President of Numero Uno Acquisitions, LLC. He is responsible for all operational aspects of Numero Uno Markets, a 13-store Southern California supermarket chain with headquarters in Los Angeles. Tim Murphy VP/GMM Food & Sundries Costco Wholesale – Bay Area Region Tim Murphy began his grocery career in 1984 at the Price Club in Santa Ana, Calif. He held various operations management positions until becoming a General Manager in 1992, just prior to the Price Club/Costco merger. He continued in that role until 1999, when he made a career move to the buying side of the business. He was a buyer for dry grocery & sundries until 2004 when he moved into the position of Assistant General Merchandise Manager of food & sundries. Murphy has also spent time in the non-foods side for Costco before being promoted to his current position in February 2012. Laura Price Client Director, Nielsen Laura Price, Client Director for Nielsen, has more than 16 years of retail experience in marketing, merchandising and applied analytics. For most of her career, she has worked extensively with retailers competing in California. She has a passion for helping retailers make business decisions based on consumer insights, industry trends, and the macroeconomic environment. Prior to joining Nielsen, she worked for Albertsons, SUPERVALU, and Bausch & Lomb. She has a personal passion for food: Laura and her husband live on a hobby farm where they grow fruits and vegetables for personal consumption and community donation.
28 | CAL I FOR N I A G R OC E R
Elliott Stone Vice President, Mollie Stone’s Markets Starting in high school, Elliott Stone worked in every grocery store level in the business his father started in 1986. While earning his degree at Arizona State University, he worked for A.J.’s Supermarkets in management. After graduation, he moved back to Northern California to work for the family company. For the last three years, he has worked at two high-volume stores as the Store Director. He is also focusing on future strategic planning of Mollie Stone’s Markets. In addition, he is a graduate of the University of Southern California Food Industry Management Program. Joe Toscano Director of Category Development, Nestlé Purina PetCare Company Joe Toscano began his Nestlé career after graduating from Cornell University. He started in the retail sector as a Territory Manager and has managed positions across the category management and sales operations. For more than 25 years he has worked with the Nestlé companies and brands – always keeping an acute focus on the pet category. He and his family have relocated eight times during his Nestlé career and now resides in St Louis, Mo. Richard Wardwell Executive Sr. Vice President, Superior Grocers Richard Wardwell began his grocery career at Raley’s in 1982, as a courtesy clerk in Reno, Nev. and entered management in 1984. During his 25 years with Raley’s he managed locations in Nevada, California and New Mexico.
In 2007 he left for a Director of Operations role at Save Mart Supermarkets. Three years later he went to work for WalMart. In March 2011, he returned to Raley’s as Vice President of Operations for their Food Source Division, until leaving to work for Superior Grocers in November of 2014 as Vice President of Operations. He is responsible for store operations at all 45 Superior Grocers locations, as well as overseeing facilities, merchandising, marketing, retail pricing, information technology, loss prevention, food safety and distribution center. He previously served on the Board of New Mexico Grocers Association and the Board of Northern Nevada Food Bank. Continued on page 30 ▶
Unified Grocers, Inc.
Sprouts Farmers Market
Classic Wines of California
Numero Uno Market
Costco Wholesale Nielsen
Mollie Stone's Markets
NestlĂŠ Purina PetCare Company
CGA NEWS ◀ Continued from page 28
NEW MEMBERS CGA welcomes the following members:
Divert Inc. 23 Bradford St Concord, MA 01742-2971 Contact: Ryan Begin, Chief Executive Officer Tel: (978) 341-5417 E-mail: firstname.lastname@example.org Website: www.divertinc.com
Kysor Warren 5201 Transport Blvd Columbus, GA 31907-1961 Contact: Randy Fernandez, Sales Director West E-mail: email@example.com Tel: (208) 971-5090 Website: www.kysorwarren.com
Jackson Lewis P.C. 725 S Figueroa St Ste 200 Los Angeles, CA 90017-5408 Contact: Armen Zenjiryan, Principal Tel: (213) 630-8202 E-mail: firstname.lastname@example.org Website: www.jacksonlewis.co
Nielsen 150 N Martingale Rd Fl 12 Schaumburg, IL 60173-2080 Contact: Tom Duffy, VP, Industry Service Tel: (856) 321-2550 E-mail: email@example.com Website: www.nielsen.com
Golden West Food Group 4401 S Downey Rd Vernon, CA 90058-2518 Contact: Tony Cimolino, Chief Marketing Officer Tel: (323) 581-3663 E-mail: firstname.lastname@example.org Website: www.gwfgc.com
Mollie Stone’s Market 150 Shorline Hwy Bldg #D Mill Valley, CA 94941-3639 Contact: Elliott Stone, Vice President Tel: (415) 289-5720 Website: www.molliestones.com
30 | CAL I FOR N I A G R OC E R
BIMBO BAKERIES USA
Congratulations to the incoming
Â©2017 Bimbo Bakeries USA, Inc. All rights reserved.
By Jerry Nickelsburg Adjunct Full Professor of Economics UCLA Anderson School of Management Senior Economist UCLA Anderson Forecast
We are about to embark on a new experiment in economic policy. Not since the New Deal of the 1930s has there been an attempt at shifting the role of government this drastically. To be sure, supply side economics touted by Ronald Reagan was a shift from Keynesian macroeconomic policy, but the basic structure of the relationship between the federal government and the economy remained more or less in tact. That is about to change, at least in the near term, and it has the potential to impact the cost structure of the grocery business as well as the way in which consumers interact with their supermarkets. Or, perhaps it will not. To understand Trumponomics in the context of retail food, we first need to consider the macro-economy. At the UCLA Anderson Forecast we project the U.S. and California economies for the next few years. After the election we had to think long and hard about what might happen with this new, radical administration. The answer was, in the near term, there might not be much new in the macroeconomy. There are three big policy changes that we forecast taking place in the middle of 2017, a lowering of tax rates for corporations and individuals (this seems almost certain), a significant increase in defense spending (tweets about the F-35 not withstanding), and an increase in infrastructure spending. The tax bill ought to have at least three components: a restructuring and lowering of tax rates for individuals, a lowering of tax rates for corporations, and a tax incentive for U.S. companies that repatriate dollars held abroad.
The bulk of these tax cuts will devolve on the highest income earners. While there are claims that this will spur economic growth, there is no good evidence as to what kind of tax reductions do this. In principal, lower taxes mean greater incentives for earnings and therefore growth. But if the last six years of Kansas is an example (or of California as the contrary example), it is hard to sort out. Would the Kansas economy shrunk and California’s economy grown faster than they actually did but for the changes in their tax laws? We have no way of knowing. The data only tell us that Kansas has only added 5,000 net new jobs since 2007 while California added 1.14 million. Our assumption for the 2017/2018 forecast is that the decrease in taxes increases household spending, but not at a one-for-one rate. Savings rates go up as well. Thus there is a boost, but not a dramatic one. The increase in defense spending also seems a lock. A big portion of this is to “modernize” the military. That means the purchase of defense durable goods such as tanks, airplanes and warships. California will disproportionately benefit as it remains a dominant manufacturer of high-tech defense durable equipment.
If military bases are closed abroad and the number of military units increase, there will also be an expansion of home-based military, some of whom will be based in Southern California. The infrastructure bill is a bit less of a lock. About half of the infrastructure bill was to come from public/private partnerships. With the exception of regulated utilities – quasi-public firms – there does not seem to be much enthusiasm for that part of the funding. Where it has been offered (e.g. toll roads) it has not been a great success. More likely, the funding will have to come from the federal government and a massive $1 trillion dollar package maybe too much for a conservative House of Representatives to swallow. Thus we assume a smaller stimulus package. When these are put on top of the dynamics already at work in the U.S. economy it generates increased economic growth, from 2.5 to 3.0 percent, in the latter part of 2017 and the early part of 2018. But here is the rub. In spite of the unrest in certain parts of the country, we are near full employment. To be sure, there is anger and dismay at the loss of factory jobs and the hollowing out of many mid-west industrial cities, but slack in the labor market is slight. Continued on page 34 ▶ CAL I FO RNIA GRO CER | 33
◀ Continued from page 33
This leads to what my colleague David Shulman wrote in his December Anderson Forecast article as “reckless fiscal policy.” Basically, when there are not sizable slack resources and the economy is stimulated with massive increases in demand, from households, the Department of Defense and the Corps of Engineers, firms increase prices in order to garner the resources to meet the new demand. That does not sound bad until one realizes that in a normally functioning economy weak firms exit due to competitive pressures releasing labor and capital to stronger firms. In an overheated economy, weak firms stay around and all disappear when an external stimulus causes demand to back off. Where might that come from? An overheated economy generates inflation and the Federal Reserve is charged with reigning inflation in. Or it could be from an external stimulus such as the Euro-zone restructuring or breaking up. As we look at the next two years, we don’t see anything more than the economy coming back to its sluggish 2 to 2.5 percent annual growth rate. Of course for someone who promised us 4 to 5 percent growth rates, sliding back down to 2.5 percent as the nation moves towards a mid-term election is not going to be a wanted outcome. Though increased federal spending and tax cuts in a near full employment economy is a recipe for a correction, the pressure of imbalances usually take a while to build. Thus we have a forecast for solid growth but the most likely outcome is for nothing dramatic to happen in the economy in 2017 and 2018. That is relatively good news, at least in the near term. And that brings us to a
consideration of a host of policies that were touted in the campaign and are being seriously discussed by the incoming administration. We still do not know the exact dimensions of Trumponomics, but one can infer from the cabinet nominations thus far (as of the end of December) what it might look like. There are six areas to consider; the ACA, trade policy, immigration policy, environmental and business regulation, food safety regulation, and agriculture policy. For Republicans, repeal and replace the ACA is just a slogan. Thus far all we know is that the individual and corporate mandates are sure to go. However the problem they face is that Obamacare is an integrated package. Repeal is easy. Replace is quite difficult. If it is only repeal then expect mass cancellations of insurance policies and chaos in the health care sector; a sector that has led in the economic recovery thus far. So don’t worry; the ACA is not going away anytime soon (except in name). Most likely there will be a bill that simultaneously repeals the ACA and extends it for two years. If an acceptable substitute – acceptable to a sufficient number of House Republicans and Senate Democrats, a no mean feat – cannot be found, look for the repealed law to stay in place for quite some time. From gate to wire the President-Elect campaigned on changing trade agreements; particularly with China and Mexico. How this is done is not clear. These two countries, along with Canada, are our chief suppliers of imported food. Were that to be reduced, the price of the foods we import; tomatoes, mushrooms,
“Though increased federal spending and tax cuts is a recipe for a correction, the pressure of imbalances usually take a while to build.” 34 | CAL I FOR N I A G R OC E R
broccoli, and the like will be in shorter supply and will see an increase in price. This might possibly induce more domestic production, output that will mitigate the price rise, but produce with a significant import percentage today will be more costly in the future. In response our imposition of tariffs on imported foods our trading partners may well restrict the delivery of food from U.S. farms to their shores. This would be principally grains, meats and processed foods. Here the opposite impact occurs – more supply and lower price. On the other hand, trade negotiations take a very long time and unless the Trump administration wants to have a real trade war with the concomitant recession, trade arrangements are not going to change dramatically anytime soon. So don’t worry, trade wars are not likely anytime soon. And then there is immigration policy. Aside from the wall, the “beautiful wall,” which may never be built, immigration policy has focused on deportations. In the first interview after the election Trump promised to begin deportations of millions of people right away. He claimed these would only be “bad hombres,” ones with criminal records.
The problem is, there are not that many of them. So where to find undocumented workers to deport? They will be concentrated in the fields and the slaughterhouses. That means higher prices for foods that are intensive in labor for harvesting and higher prices for meats. On the other hand, the courts are already clogged with immigration cases. It is very hard to ramp up from the present 462,000 deportations to 1 million or more. Moreover, it is going to be even harder still with a new head of The Office of Management and Budget, Rep. Mulvaney, who has made a career of opposing deficit spending. Will he insist on a funding source for all of the new judges, court personnel, public defenders and INS agents? And of course they are not out there ready to go to work, they have to be hired, trained and put into place (and facilities for the new courtrooms found as well). So don’t worry, this is not going to happen any time soon. The balance of the policies that might affect the economics of the grocery business revolve around labor and environmental regulation. The campaign rhetoric claimed that this would free business up to expand. The idea is that if labor is less costly and if environmental compliance is less costly, then more labor (and more of the environment) will be used in the production and distribution of goods and services. On the other hand, state laws and the courts may have a lot to say about such changes and while the elimination of regulations at the federal level will most certainly occur, don’t worry, there will be nothing dramatic here anytime soon. The American supermarket revolutionized the last mile in the food chain. Their genius is an intermediation of a large variety of food with a single consumer. Rather than the weekly farmer’s market where one purchases tomatoes at one stall, beef at another and dry goods at a third, the consumer is treated with competitive products and check-out in one place. The real key to supermarket economics has the ability to deliver at low cost due to economies of scale; economies gained by large capital investment in plant and equipment.
A recent Federal Reserve study by Gangnon and Lopex-Salido found that it was the cost of this equipment and the supply cost of the products sold that in the main drive prices in grocery stores and not fluctuations in consumer demand. Though entirely speculative, this could change if as promised the EPA, FDA, and USDA become shells of their former selves.
“The balance of the policies that might affect the economics of the grocery business revolve around labor and environmental regulation.” If American consumers find that they cannot depend on these agencies to ensure food safety for their families, then either the supermarkets are going to have to find another way to signal food safety, or consumers will begin to migrate to different food distribution models. On the other hand, it is hard to imagine the Republicans taking a risk of a food safety scandal that can be pinned on them. So don’t worry, be happy, this is not about to happen any time soon. The only thing we know about agricultural policy is that the new head of the EPA, Scott Pruitt, Attorney General for the State of Oklahoma, argued before the Supreme Court that the EPA’s ethanol requirement, among other things, boosted the price of corn. Ethanol production is a significant consumer of the U.S. corn crop. If the ethanol industry tanks it will also cause the price of corn to fall and with it the myriad of products with corn as its principal input. What this means is the price of produce relative to grains will be higher and at least to some extent there will be a shift in demand towards grain related foods. The evidence is that lower income families purchase relatively more inexpensive starchy
and grain products than higher income families and therefore this shift will be more pronounced in grocery outlets in less affluent neighborhoods. On the other hand…wait there is no other hand here as I expect this to happen. So, what to make of Trumponomics? It sounds like a plan, but it is more a philosophy. To get the things promised in the election done will be highly disruptive to the U.S. economy and given that, they would have to happen prior to the 2018 mid-term elections. Our Founding Fathers made it hard to make big changes. It is certain there be changes, but the biggest change will be in the trend of the past 85 years towards more federal intervention in business and consumer daily activity. It will be halted if not reversed. Beyond that there maybe one or perhaps two experiments that are tried, with the most likely an attempt at overhauling health care policy. If in fact the Republicans get a mandate in 2018 and 2020 to keep going, then that is a different matter, but for now, on the other hand (for the last time) with respects to Bobby McFerrin “don’t worry, be happy .” ■
CAL I FO RNIA GRO CER | 35
Whoâ€™s Next? By Len Lewis
The year 2017 is not likely to be record-setting for merger and acquisition activity in the grocery industry now that mega-mergers like Ahold/Delhaize, Walgreens/ Rite Aid and Albertsons/Safeway are complete. But after five years of consistent â€“ albeit slow â€“ economic recovery, relatively low interest rates and strong availability of capital, the stage is set for another round of consolidations with action centering around robust regional chains and independents who will continue to suffer the most from the e-commerce juggernaut, alternative formats like Aldi and the entry of Lidl, and the need to create niche stores in order to remain competitive. Looking at the entire M&A ecosystem, surveys by Citizens Commercial Bank found that 53 percent of sellers are involved in or open to making a deal in 2017, up from 34 percent last year.
Additionally, 25 percent of organizations are confident that their company will be acquired this year. This rush to buy is basically due to increased pressure to show revenue growth after several years of not being able to do it organically. The percentage of potential buyers and sellers was lower prior to the presidential election since little change in the business environment was expected no matter which party came to power. Continued on page 38 â–ś
◀ Continued from page 37
However, the potential of lower capital gains and estate taxes under the new administration, as well as hints of a less restrictive regulatory environment, have led to a post-election rise in equity markets in anticipation of accelerated economic growth – an indication that company valuations have yet to peak, the report said. Moody’s Investors Service believes that because of pent-up demand, continuation of historically low interest rates and growing piles of cash will spark a good year. According to a recent Moody’s survey the vast majority of corporate and private equity respondents projecting that 2017 will mark a rebound in M&A activity. “Every regional chain that does not have a distinct format and operates conventional stores could be a candidate for a business combination in the next five years,” according to David Schoeder, a principal in The Food Partners, Washington-based
behind this acquisition was to build up and complement Walmart’s existing online efforts and position the company for faster e-commerce growth by expanding its customer reach, according to officials. This was underscored by Walmart’s purchase in January of online footwear retailer ShoeBuy for about $70 million, which could further bolster Jet.com’s business and relieve some of the pressure being put on Walmart and other retailers by Amazon. On another front, but just as impactful to retailers, is continued consolidation in the manufacturing sector. “The major CPG companies have seen a material erosion in the value of their brands as private label penetration increased,” Schoeder said. “Driven by Walmart, manufacturers had fundamentally changed attitudes, behaviors, practices of the traditional grocery sector to reduce costs, and maintain their return on invested capital and market share in the U.S.
“Super independents are commonly referred to as Pac-Man because they continue to make acquisitions in adjacent markets to expand their marketing territory.” investment bankers. He deems it unlikely that retailers will look outside grocery retailing for acquisitions. “There are private companies that have multiple investments, but I don’t view this as a core strategy,” he said. “If your company has capital constraints, you want to focus on growing your core business to avoid top line erosion and increased operating expenses.” There have been a couple of notable exceptions – both from Walmart. In August, the company acquired Jet.com for $3 billion in cash and shares. The idea
“Continued consolidation of CPG companies is anticipated primarily to create synergies by eliminating duplication of sales forces and consolidation of food processing facilities,” he added. However, retail industry observers are quick to point out that grocery is only one part of a larger global M&A ecosystem which is also the result of five years of stable growth and the accumulation of massive cash reserves, giving corporate executives the confidence and the means to pursue acquisitions.
Schoeder believes 2016 was a year of transformation for merger activity in the grocery business. More stores traded hands because of large deals like Ahold/ Delhaize, Walgreen’s purchase of Rite Aid and Supervalu’s sale of its discount Save-A-Lot brand. “There’s not a lot more that can be done at the top,” he said. “So the next round of consolidation will affect the regional chains. Chains like HEB or Wegmans that have a well-defined identity will continue building on their own rather than growing through mergers or acquisitions.” But there is a new class of “super independents” emerging that are on the prowl for good buys. “As a rule they have in excess of $500 million in revenue, a quality management team and sufficient cash flow to reinvest in existing stores and fund rapid growth,” said Schoeder. “Not only have they been able to take retail locations discarded by major chains and niche them for specific markets, but they have also been the buyer of choice for smaller independents that have elected to sell their stores over the last 15 years,” he said. “That’s why super independents are commonly referred to as Pac-Man because they continue to make acquisitions in adjacent markets to expand their marketing territory.” We are also seeing a shortfall in nextgeneration ownership, indicating that more individual stores and chains may be up for grabs as owners, some of whom may be nearing retirement, take advantage of a strong market to exit the business, Schoeder said. “A lot of people now in their 60s who got into the business as store managers for companies like Safeway or National Tea are reaching retirement age,” he said. “Other than a few alternative formats that have sprung up, how many people are getting into the business to build a company? I only know one guy and he’s not happy!” A number of factors were responsible for driving merger activity last year, said Schoeder. “The primary reason was the need to achieve economies of scale by eliminating one set of back offices to remain competitive,” he said. “Some chains are focused on operational
efficiency in order to make the numbers and give investors an adequate return. On the other end of the spectrum, independents are focused on differentiation by store and customer intimacy in order to get an adequate rate of return. “I think Albertsons and Safeway are among those that have learned that you have to drive the business on a regional basis and create niche stores,” Schoeder said. “Clearly, you can’t take every grocery store in the U.S. and make it look like a Safeway. From that standpoint they are doing things right.” Schoeder, along with other industry observers, believes that the Ahold/Delhaize merger was something of a high-water mark. “This was a particularly good deal that involved minimum divestitures,” he said. “And with the exception of some Atlantic states, they now go from Florida to Canada.” Looking ahead, 2017 promises to be active for the entire merger and acquisition community.
in the next 10 years depending on where you operate,” Schoeder said. “So in 10 years with inflation, operating expenses will go up and the top line will go down 10 percent. The world is becoming more competitively priced.” Since the industry has pretty much automated everything it can, he expects that e-commerce will drive more consolidation because of the top line impact as well as margin compression. “Increased operating expenses are fine as long as everyone in the industry is facing the same thing,” he said. “But the 10,000-pound gorilla called e-commerce eliminates the need to put products on shelves or run them through cash registers. The question is whether consumers are so time starved they don’t care about delivery costs and are willing to pay for the convenience.” But you need population density in order to make an e-commerce solution successful.
“However, companies are taking a more disciplined approach to it. In the past acquisitions were driven by synergies and people wanting to increase their geographic footprint,” Schoeder said. “Today, companies are more focused on sustaining sales and enhancing the store.” Consequently, whether companies are in the market for turnaround situations is questionable. “If they’re public yes, if private no,” he said. “The jury is still out on whether Kroger’s acquisition of Roundy’s was a good thing or not. The Pick ’n Save stores in Wisconsin were a turnaround situation. Kroger was enamored with Mariano’s, which are lovely stores, but the question is whether they can they make them profitable enough. They are putting their systems and marketing approach in place. I don’t think we’ll know the outcome for at least 12 to 24 months.”
“Over the next 12 to 24 months it is the e-commerce business that will set the tone for acquisition and merger activity for the next five years.” But won’t involve the same volume of stores in the grocery industry,” he said. “In 2015 the average deal peaked at 71 stores and a total of 4,164 stores traded hands. We’ll probably average 40 transactions per year for the next five years.” Schoeder doesn’t believe the political climate will have much effect. “A lot of people in the industry felt their world was coming to an end due to increased regulations, specifically from the Department of Labor,” he said. “But there’s not much on the regulatory front.”
Unless robotics is used to solve the picking problem it’s hard to employ people full time at a distribution center. “Every grocer in the country has spent a ton of money trying to figure out e-commerce. You have to have it to compete but most have not been successful. Over the next 12 to 24 months it is the e commerce business that will set the tone for acquisition and merger activity for the next five years,” he added. This will be the same for chains and independents with between one and 25 stores, according to Schoeder.
While inflation will be a major factor in accelerated consolidations in 2017 and beyond, the continued rise of online retailing is an overriding issue.
“Some of this activity will be below the radar since there’s a lot of one and two store deals being done that never rise to the level of being published,” he said.
“One of the things that drove 2016 was the acknowledgement that e-commerce will take five to 15 percent of grocery store sales
Despite all the optimism in the marketplace, the criteria for a good acquisition have not fundamentally changed.
Meanwhile, the jury is still out on whether the growth of alternative formats – specifically the entry of Lidl and continued expansion of Aldi – will have a significant impact on industry consolidation. “My concern is that Lidl could do a lot of damage to markets before they prove or disprove their model works. My understanding is they’re not picking ’A’ sites and poor site selection was one of Fresh & Easy’s problems,” Schoeder said. “For the most part they’re putting stores in urban markets primarily dominated by chains. That strategy is not going to drive merger activity.” Schoeder added that health and wellness trend is also going to drive consolidation. “Aldi got the memo,” he said. “But those operating conventional groceries without that twist are becoming less relevant at an accelerated pace. They’re prime candidates for consolidation.” ■
m o e c e
Self-serving leaders build a resume that is impressive, but heart-led leaders build a life they are proud of. By Tommy Spaulding
One stormy night many years ago, an elderly man and his wife entered the lobby of a small hotel in Philadelphia. Trying to get out of the rain, the couple approached the front desk hoping to get a room for the night. “We’d like a room, please,” the husband requested. The hotel clerk, a friendly man with a winning smile, looked at the couple and explained that there were three conventions in town. “All of our rooms are taken,” the clerk said. “But I can’t send a nice couple like you out in the rain at 1:00 in the morning. Would you perhaps be willing to sleep in my room? It’s not exactly a suite, but it will be good enough to make you folks comfortable
for the night.” When the couple declined, the clerk insisted. So the couple agreed to spend the night in the clerk’s room. As he paid his bill the next morning, the elderly man said to the clerk, “You’re an exceptional man. Finding people who are both friendly and helpful is rare these days. You are the kind of manager who should be the boss of the best hotel in the United States. Maybe someday I’ll build one for you.” Two years passed. The clerk was still managing the hotel in Philly when he received a letter from the old man. It recalled that stormy night and enclosed
was a round-trip ticket to New York, asking the young man to pay him a visit. The old man met him in New York, and led him to the corner of Fifth Avenue and 34th Street. He then pointed to a great new building there, a palace of reddish stone, with turrets and watchtowers thrusting up to the sky. “That,” he said, “is the hotel I’d like you to manage.” That old man’s name was William Waldorf Astor, and the magnificent structure was the original Waldorf-Astoria Hotel. The clerk who became the first manager was George C. Boldt. Continued on page 42 ▶
◀ Continued from page 41
This young clerk never foresaw how his simple act of sacrificial service would lead him to become the general manager of the world’s most glamorous hotel. (Source: Growingleaders.com). I’ve heard this story a hundred times. Each time it raises the hairs on the back of my neck. Each time it teaches me the difference between “service” and sacrificial service. The difference between a self-serving leader and, what I call, a heart-led leader. And how when you go the extra mile with serving others, you never know how your life (and business) may change forever.
“But leadership is about more than hard work,” he said. “Leadership is also about character.”
42 | CAL I FOR N I A G R OC E R
A mentor of mine, Bill Graebel, CEO of Graebel Relocations, once told me, “Most of us go out of our way to help ourselves, but few go out of their way to help and serve others.” And, often, when we do genuinely serve others and lead from the heart, it is not seen by others. I learned this valuable lesson as a young teenager. When I was growing up, I was a Boy Scout. As with most things in my life, though, I wasn’t content to be just a regular Scout. I wanted to excel. So, I pushed myself to earn the coveted rank of Eagle Scout, which is achieved by only about five percent of all Scouts. In fact, I achieved this honor when I was 15-years-old, which at the time made me the youngest Eagle Scout in the history of our troop. Then, when I attended a Boy Scout summer camp one year in high school, I made it my goal to be named the Outstanding Scout, which our Scoutmasters told us would be awarded at the end of the camp to the individual who had best demonstrated leadership and character. I wanted so badly to win that award that I could taste it. For the next few weeks, I worked as hard as I could work. I kept my tent and camp site perfectly clean. I hustled everywhere and when the camp leaders were looking I hustled even more. I strived to be a leader around other Scouts. By the time camp was finished, I was certain that no one had outworked me or outhustled me or shown any more leadership than me. So, when all of the campers and troop leaders gathered on the last night in front of a roaring campfire and under a sky full of stars, I knew they were going to call my name as the winner of that summer’s Outstanding Scout award.
When the time came, the Scoutmaster made a speech about the importance of leadership and character. “And, in our judgment, the Scout who has best demonstrated those traits this summer is…” I took a deep breath and started to stand up. “…Jimmy Brown.” Jimmy Brown? What? I was stunned. Who the heck is Jimmy Brown? He wasn’t a better Scout than me. He wasn’t a better leader than me. He hadn’t outworked me during camp. How could they not have noticed all my efforts, my skills, my leadership capabilities? Jimmy Brown? Are you kidding me? What more did I have to do? I went to bed that night utterly confused, frustrated and dejected. The next morning, when camp was over and we were all waiting around for our parents to come pick us up, I happened to find myself standing next to the Scoutmaster. So, I managed, a bit awkwardly, to steer the conversation towards the Outstanding Scout presentation. “Tell me about Jimmy Brown,” I said. “Why did he win the award?” The Scoutmaster looked at me and put his hand on my shoulder. “Tommy boy,” he said, “you’re a great Scout and I know that you may have worked harder than any other young man here this summer.” I nodded. “But leadership is about more than hard work,” he said. “Leadership is also about character.” He then told me a story about something that had happened a week earlier, unbeknownst to me or any of the other Scouts. “We put a large log on the path between your campsite and the cafeteria,” he told me. “And then we hid in the woods to see what would happen when you all encountered that obstacle on the path. We watched as you and a hundred other Scouts walked down that path and, one by one, stepped over that log on your way to grab a cheeseburger at the cafeteria. But Jimmy Brown missed lunch that day. Because when he noticed the log there, he stayed behind and worked all by himself to move that log and get it off the path.” The Scoutmaster reminded me once more that leadership was about character. “And Tommy boy,” he said, looking me straight in the eyes, “character is what you do when no one else is looking.”
Character is what you do when no one else is looking. What a great lesson. If it weren’t for Jimmy Brown and if it weren’t for me failing to win that Outstanding Scout Award that summer, it would have taken me a lot longer to grasp this important lesson. Self-serving leaders are concerned with winning the “Outstanding Scout Award”, but heart-led leaders are concerned with doing the right thing regardless of what anyone else thinks, regardless of whether anyone else is looking. Self-serving leaders build a resume that is impressive, but heart-led leaders build a life they are proud of.
lead with love – we care deeply about serving others, about selflessness, about doing the right thing even when it’s difficult, about developing empathy and demonstrating generosity, about all those ideals that may seem “soft” but, in fact, allow us to live and lead more powerfully. I’ve met thousands of leaders in my career, and I make it a point to learn as much as I can from every one of them. In all of my conversations, one thing has become abundantly clear: Leaders and organizations that lead with their hearts are more successful and have better results than those that don’t.
“Character is what you do when no one else is looking.” iStock
It all starts with this critical question: What is your leadership philosophy? If you don’t have a leadership philosophy, that’s OK. Most leaders don’t have a specific philosophy, at least not one they can name. I hope to change that. I hope you’ll choose to become a heart-led leader. I want this for you because it will change your life, your organization and the lives of everyone you touch. And if you do it right, it will also change the lives of everyone they touch. If you want to have that kind of impact in the world, you have found your leadership philosophy. Leading from the heart means leading with love. If the word love scares you, then use passion, commitment, compassion, caring leadership, purpose-drive, mission-driven or your choice of any similar word or phrase, because at the core these are all forms of love. In this context, love is simply an unselfish and genuine concern for the good of others. So, when we lead from the heart – when we
Love and results are not opposites. They are two sides of the same coin. It is not love or results. It is love-driven results. If you love what you do, if you love the people you do it with, if you love your culture, if you love your mission, if you love your team, if you love your investors, if you love your clients, if you love your customers– you will gain better results. Defining your leadership philosophy is one of the most important steps you can take as a leader. Your philosophy filters every thought and action you take as a leader. Every decision you make and every conversation you have with your team. And when you take the journey to heart-led leadership – and it’s definitely a journey – you will make a significant impact on the lives of those that choose to follow you. ■
Tommy Spaulding was a featured speaker at the 2017 Independent Operators Symposium in January. He is the New York Times national bestselling author of “The Heart-Led Leader” and “It’s Not Just Who You Know.” To contact or learn more about Tommy Spaulding, please visit: www.tommyspaulding.com.
CAL I FO RNIA GRO CER | 43
Symposium Inspires to Lead , Explore and Communicate With winter storms pummeling California, the tropical island of Maui proved to be the optimal setting for Independent Operators Symposium attendees to relax, renew and recharge while hearing inspiring messages on leadership, personal growth and communications. While most of us employ a variety of communicate styles in daily work and personal situations, most of us also settle into a single pattern, according to communications expert Cassandra Pye. That was just one of the key messages delivered at the January 2017 Independent Operators Symposium, which annually gathers independent grocers and their supplier partners from throughout California for a week of education, networking and rejuvenation.
Leon Bergmann, Unified Grocers, Inc. welcomes attendees.
Entertainment at the Opening Reception
Presenter Eric Saperston engages Symposium attendees in a discussing how to maximize human potential to produce extraordinary results.
44 | CAL I FOR N I A G R OC E R
“Our speakers really hit the mark with our independent operators,” said CGA President Ron Fong. “Our goal has been to continually refine this annual independent grocerfocused event and we accomplished just that again this year.” The Symposium’s educational offering included three mornings of presentations featuring well-known inspirational presenters. Along with Pye’s lively discussion of the most effective styles of communication, attendees heard from New York Times bestselling author Tommy Spaulding, President of Spaulding Companies Corp, an international leadership development, training and executive coaching organization.
Mike and Renee Stigers, SuperValu Wholesale, discuss heart-led leadership with speaker Tommy Spaulding.
Mike Burns, Vallerga’s Market, with CGA President Ron Fong.
“The CGA Independent Operators Symposium offers a unique opportunity to retreat with industry colleagues, vendor partners and others discussing various topics important to the independent operator. It is impossible not to come away from this event feeling inspired and motivated to do something different that will positively impact you both personally and professionally.” – Phil Miller, C&S Wholesale Grocers Spaulding shared numerous stories and leadership lessons from heart-led leaders that prove living and leading from the heart can change organizations, careers and lives. Read more about Spaulding’s heart-led leader philosophy on page 40. Rounding out the trio of presenters was bestselling author and award winning filmmaker Eric Saperston. For the past 20 years, Saperston has been cold-calling world leaders, business tycoons, entertainment icons, visionaries and pioneers to ask about the lessons they’ve learned, struggles they’ve endured, and what advice and counsel they would give others. “Each presenter delivered their message in their own unique way,” Fong said. “Their presentations where extremely inspiring and resonated with everyone attending.” In opening the educational program, Pye, CEO of 3.14 Communications, facilitated a lively, high-energy, interactive discussion on the most effective styles of communication – in both professional and personal (family) settings.
Attendees learned to spot all five styles of communicating – preparing attendees to lead and manage clearly by using exactly the right communication approach. The five styles include: assertive, aggressive, passiveaggressive, submissive, and manipulative. To learn more about these five styles, visit www.bit.ly/communication-style. Knowing the difference in communication styles and, more importantly, when it makes sense to use them is one step in becoming an effective, assertive communicator. The other, according to Pye, is to simply practice.
Bob Parriott, Twain Harte Market, with speaker Cassandra Pye.
“Practice your assertive communication techniques with family, trusted friends and close colleagues,” she told attendees. “And, put yourself in the place of the person on the receiving end. Communicating with the recipient’s perspective in mind is another way to ensure you’re crystal clear in your message but also respectful of the recipient’s feelings.” The Fairmont Kea Lani Hotel on the tropical Hawaiian island of Maui was the site of this year’s Symposium. In addition to its inspiring educational programming, the
Continued on page 46 ▶
Enjoying the Symposium were Jennifer and Tim Bosma, Harvest Market; and Kevin Young and Shawna Foote, Young’s Payless IGA. CAL I FO RNIA GRO CER | 45
◀ Continued from page 45
Symposium provided numerous networking opportunities and social events, allowing independent retailers and their supplier partners to strengthen friendships and forge new business relationships. “Our goal has been to create an atmosphere conducive to stepping away from one’s day-to-day business operation and relax, recharge and gain new perspectives that will help build a more successful company in the coming year,” Fong said. “We look forward to many more independent grocers to join us next year!” ■
“The CGA Symposium is a great networking event to meet new people and see old friends. It’s always inspiring to see how others are dealing with many of the new challenges we face every day in the grocery world.” – Renie Ryan, Tops Super Foods
Speaker Cassandra Pye shared insights into better communication styles.
Attendees at the interactive Maui Chef ’s Table, located in the Mill House Restaurant.
(L to R) Mark Kidd, Mar-Val Foods; Dolly and Joe Falvey, Unified Grocers, Inc.; Ron Fong, CGA; Richie and Tyler Morgan, North State Grocery, Inc.
Thank You Sponsors! CGA wishes to thank and recognize the following Symposium sponsors for their tremendous support and generous donations to this year’s event. Opening Reception
Morning Refreshments Break
46 | CAL I FOR N I A G R OC E R
Morning General Sessions
Numero Uno’s Simple Philosophy Quality & Affordability BY LEN L E WIS
Everyone knows “Numero Uno” means Number One, or maybe top priority. For the company that bears the name Numero Uno Markets, the priority, and its very mandate, is bringing the freshest food at affordable prices to all consumers, particularly, but not exclusively, Los Angeles’ burgeoning Hispanic population.
Minor cut his teeth in the grocery business. He began as a box boy for Lucky Stores in 1974 when he was about 16 years old. After a few years, he moved on to Ralphs Grocery Co. as a clerk and then as a store manager for Stater Bros. Markets.
“There’s not a whole lot of secrets in the grocery business. We just want to offer customers high quality products at affordable prices in a clean, shopper friendly environment,” said Doug Minor, President of the 13-store chain.
Several years later he became a store manager for Albertsons Grocery Warehouse. After that Minor did a four-year stint as a retail counselor for Unified Grocers, Inc. and then 12 years with Fiesta Foods or what was then Fiesta Mexicana Markets. When the operation was sold to El Super in 2010, he joined Numero Uno as President.
Minor’s seemingly simple philosophy is anything but, particularly in one of the most competitive grocery markets in the country. However, it also comes from decades of experience in the industry.
48 | CAL I FOR N I A G R OC E R
At present, the chain operates 13 stores ranging from 12,000 to 32,000 square feet, averaging out at around 20,000 square feet.
“We’re pretty comfortable with that number,” said Minor, noting that most of the units are in heavily Hispanic areas. “We kind of zig zag up and down the 110 corridor in Los Angeles. But we do have outliers in Pacoima and San Pedro.” However, the notion that Numero Uno is a Hispanic supermarket is somewhat of a myth, he noted. “Our price structure is based on quality products at affordable prices that meets the needs of everyone shopping in our stores and it’s why we do a tremendous volume in meat and produce. It’s what everyone, not just Hispanic customers, are looking for,” he said. However, as the chain caters to an increasing number of second and third generation Hispanic shoppers, the merchandising strategy is changing to accommodate new tastes and purchasing patterns.
“Our price structure is based on quality products at affordable prices that meets the needs of everyone shopping in our stores.” “We are delving a bit more into organics and we’ll continue to look into that in the future,” Minor said. “Still, our customers are most interested in good, fresh meat and produce. I think that the way things are going with pay scales in California, a lot more people will be cooking at home again.” He notes that restaurant prices are going to increase due to higher wages. “It’s going to have a significant impact on dining out,” he said. “The result is the grocery business should be flourishing over the next couple of years.” Some food inflation related to the wage increases to $15 over the next couple of years, will impact grocery, he conceded. “There’s no choice in the matter and you can only cut costs so much before you
have to pass some of it on to consumers,” he said.“But we’re trying to become more efficient by cutting costs in all areas of the business to save pennies. “Basically, it’s the same thing everyone else is doing. But in doing so, we have to be careful not to jeopardize customer service,” he said, noting the stores will maintain full service and self service meat counters in all of our stores. Asked if new technology plays a role in improvements, Minor said Numero Uno is seeking out different ways to track and measure operations. “We’re looking at different POS systems, and anything else that can track the ’evils’ in all departments – that will help us run our business better,” he said. “We’ve had
quite a few years of excellent growth and I think sales will continue to be strong. I don’t anticipate seeing negative numbers. But it’s tapering off a bit and the later part of the year is going to be a big challenge.” That challenge, according to Minor, includes finding good, reliable employees. Numero Uno tries to hold job fairs at stores wherever possible, place ads on different apps, and use word of mouth and employee referrals. “We also face some pretty tough competitors and just maintaining our piece of the pie is a challenge every day,” he said. “Who knows what tomorrow will bring? We’re always looking for new stores. There’s nothing in the pipeline right now. But we’d like to grow and add a couple of stores this year if the opportunities arise. We’re ready.” ■
CAL I FO RNIA GRO CER | 49
ADVERTISER INDEX PAGE COMPANY
Bimbo Bakeries USA
C&S Whoelsale Grocers, Inc.
Certified Federal Credit Union
16-17 Emerson Grind2Energy
email@example.com / firstname.lastname@example.org
Harris Ranch Beef
International Dairy Deli 608-310-5000 Bakery Association
Natural Products Expo West
email@example.com / firstname.lastname@example.org
IBC PepsiCo Inc. 13
Retail Marketing Services
TruGrocer Federal Credit Union
Tyson Foods Inc.
Unified Grocers, Inc.
CAL I FO RNIA GRO CER | 51
Saved By The Snack L A R A B A L DW I N BLOGGE R
Snacks are the WD-40 of parenting; when stores support this it makes me feel a little less frazzled and a little more superhero. I remember my early days as a frazzled, exhausted mother of two (last week), running into a friend and her three children at the bulk grocery store. I had two kids on the brink of a meltdown, but somehow her whole crew was quietly content as she strolled the aisles. “How do you do this?!” I asked. “You are a shopping superhero!” She laughed. “Oh, honey, you need snacks. You can bring kids anywhere if you have enough snacks.” Nowadays I’m strategic about snacks and know all the tricks to find every in-store opportunity to get one. And I’m not alone – parents everywhere rely on these measures to make it through their grocery list in peace.
when the employee discreetly asks me first before offering one to my kid. Stickers, though unfortunately not edible, are a nice alternative for parents who choose to forgo the sugar but still need a little incentive to get to the checkout. In-Store Cafes Ask a mom if it’s a plus that she can pick up a latte for herself and a bag of crackers for her children while shopping and you will be met with a look as if you asked if it’s a plus that the store carried milk and eggs.
Samples I know moms who take their kids to sampledense stores for lunch. While I don’t go that far, I cannot deny the occasional tactical trip to stores I know will offer a sample or five. My preschooler loves the mystery of what will be offered, and I love that it’s a surefire way to get him to try something new.
Fruit Wagon Bingo. Whether it’s an actual basket of fruit for kids to choose from or simply a policy that each child gets one piece per visit, this new trend is the gold standard when it comes to snacks. Some like to use the promise of that pear at the end of shopping while others go with the eat-whileyou-shop route.
Register Treats Usually a lollipop presented by the cashier as I swipe to pay. While I am not against an occasional sweet treat, I do appreciate
Either way it’s a win-win-win: kids get a snack, parents like that it’s healthy, and it seems like a great way for the store to offload some of those ripe bananas.
52 | CAL I FOR N I A G R OC E R
The only challenge is convincing my kiddo that he can’t choose a whole watermelon or pineapple. Sure, I can (and do) bring my own snacks to the store, but everyone knows food is better when it hasn’t been unearthed from the depths of your mom’s purse. These tricks have all but ended the age-old dilemma of whether or not it’s acceptable to let my child consume an item off the shelves before paying for it (By my estimation, 90 percent of parents admit to this practice. The other 10 percent are lying). ■
California Grocer Online www.cagrocers.com
PRSRT STD US Postage Paid Permit No. 1401 Sacramento, CA
Read California Grocer on your mobile device, or share with an associate.