California Grocer Issue 3, 2018

California Demystifying blockchain PAGE 36

caught in the crossfire PAGE 48 2018, ISSUE 3

CALIFORNIA GROCERS ASSOCIATION

California’s Regulatory

Nightmare how can grocers keep up?

page16

September 23–25, 2018 | Palm Springs, California

RETAILING WITH A SIXTH SENSE In today’s fragmented, hypercompetitive and channel-free food industry, businesses are tapping into their sixth sense in order to win over today’s shoppers.

Online and in-store, successful companies are becoming experts at knowing customer preferences and understanding how they engage with employees, stores and brands.

Empowered by innovations such as data analytics and artificial intelligence, retailers and brands are using technology to hone their intuitions to anticipate the needs of today’s digital first consumers. Businesses are executing new partnerships and retooling their operations to focus on executional excellence and efficiency in order to drive profitability.

Simultaneously, retailers are differentiating themselves by creating compelling experiences within the physical store that instill trust and enhance their personal relationships with customers. Leveraging staff expertise and talent, retailers are constructing convenient and appealing environments that please all the senses.

Come listen to top industry speakers, enhance your view of today’s customers, follow the scent of innovation to get a taste of what’s coming next, keep in touch with your most important partners and heighten your sixth sense about today’s customers.

SPONSORSHIP – SOUNDS RIGHT! The CGA Strategic Conference offers a wide variety of sponsorship packages and customized opportunities to promote your company’s products, equipment or services. Capitalize on this unique conference to get in touch with California’s top grocery decision makers.

For complete sponsorship information, including a list of participating retailers and a sponsorship prospectus, contact: Beth Wright Senior Director, Events & Sponsorship California Grocers Association (916) 448-3545 | (800) 794-3545 | bwright@cagrocers.com

HEIGHTEN YOUR BUSINESS SENSE Our concierge-level meeting services offer you and your team a highly efficient way to book the business-critical appointments you need to justify the time away from your office. Blend in social events that are relaxed and approachable and you have the perfect recipe for one of the grocery industry’s must-attend events.

After Hours Social

“

“CGA always does a tremendous job in combining education, networking and the overall venue and activities to ensure the annual strategic conference is a must attend event. Our team looks forward to it each year.”

Cherish Changala VP, Marketing – Command Packaging

LOSS PREVENTION EXECUTIVE SUMMIT The CGA Strategic Conference continues its expansion to professionals in loss prevention, safety and risk management. Understand best practices and collaborate with colleagues through two days of tailored educational programming and top-to-top vendor meetings.

REGISTER TODAY! Online registration is now open. Join the single largest gathering of California grocery industry executives for three days of knowledge building, face-to-face meetings and networking events.

TO REGISTER, OR FOR MORE INFORMATION, VISIT: CGASTRATEGICCONFERENCE.COM

CGA | BOARD OF DIRECTORS

EXECUTIVE COMMITTEE

CHAIRMAN APPOINTMENTS Independent Operator Committee Chair DIRECTORS

CALIFORNIA GROCERS ASSOCIATION

Chairman Bob Parriott Twain Harte Market

Second Vice Chair Phil Miller C&S Wholesale Grocers

Secretary Renee Amen Super A Foods

First Vice Chair Kendra Doyel Ralphs Grocery Company

Treasurer Hee-Sook Nelson Gelson’s Markets

Past Chairman Jim Wallace The Albertsons Companies

Kevin Arceneaux Mondelēz International Inc.

Dave Jones Kellogg Company

Lynn Melillo Bristol Farms

Jon Alden Jelly Belly Candy Co.

Jake Fermanian Super King Markets

Casey McQuaid E & J Gallo Winery

Elliott Stone Mollie Stone’s Market

Teresa Anaya Northgate Gonzalez Markets

Mark Foley Raley’s

Mario Mediati The Clorox Company

David Toothaker Nielsen

Joe Angulo El Super (Bodega Latina)

Damon Franzia Classic Wines Of California

Doug Minor Numero Uno Market

Joe Toscano Nestlé Purina PetCare

Mark Arrington Post Consumer Brands

David Higginbotham Stater Bros. Markets

Tim Murphy Costco Wholesale

Rob Twyman Whole Foods Market

Denny Belcastro Kimberly-Clark Corporation

Michel LeClerc North State Grocery Inc.

Nicole Pesco The Save Mart Companies

Jim Van Gorkom NuCal Foods

Leon Bergmann SUPERVALU

Hillen Lee Procter & Gamble

Mike Ridenour The Kraft Heinz Company

Michael Walton Unilever

Jeanne-ette Boshoff MillerCoors

Eric Lindberg, Jr. Grocery Outlet, Inc.

Casey Rodacker Mar-Val Food Stores

Richard Wardwell Superior Grocers

Bob Bukovec Tyson Foods, Inc.

John Mastropaolo Chobani

Greg Sheldon Anheuser-Busch InBev

Karl Wissmann C & K Market

Brent Cotten The Hershey Company

Jonathan Mayes Albertsons Companies, Inc.

Jeff Sigmen Reyes Coca-Cola

Kevin Young Young’s Payless Market IGA

Willie Crocker Bimbo Bakeries USA

Joe McDonnell Campbell Soup Company

Lee Smith Smart & Final Stores

Steve Dietz United Natural Foods, Inc.

Mark McLean CROSSMARK

Rick Stewart Susanville Supermarket IGA

President/CEO Ronald Fong

Senior Director Events & Sponsorship Beth Wright

Dennis Darling Foods Etc.

Senior Vice President Marketing & Business Development Doug Scholz Vice President Communications Dave Heylen Executive Director CGA Educational Foundation Shiloh London, CFRE

2 | CAL I FOR N I A G R OC E R

Senior Director Government Relations Aaron Moreno Director CGA Educational Foundation Brianne Page Controller Gary Brewer

California Grocer is the official publication of the California Grocers Association.

1215 K Street, Suite 700 Sacramento, CA 95814 (916) 448–3545 (916) 448–2793 Fax www.cagrocers.com For association members, subscription is included in membership dues.

Subscription rate for non-members is $100.

© 2018 California Grocers Association Publisher Ronald Fong rfong@cagrocers.com Editor Dave Heylen dheylen@cagrocers.com For advertising information contact: Corey Gerhard cgerhard@cagrocers.com

CONTENTS | ISSUE 3

FEATURES

16 In-Depth Look

44 Loss prevention Issues in recent research

California’s Regulatory Nightmare California has a reputation as one of the most highly regulated states in the nation, resulting in companies spending millions of dollars annually to deal with regulations, often just in trying to understand them.

COLUMNS President’s Message Laws are Just the Beginning. . . . . . . . . . . . . 5 Chairman’s Message The Gift of Learning. . . . . . . . . . . . . . . . . . . 6

36

Viewpoint Business Lessons from Flyover Country. . . . . . . . . . . . . . . . . 10

Demystifying Blockchain

Government Relations Legislators Legislate, Obviously. . . . . . . . . 12

Blockchain is this year’s buzzword, but what is it and how can it apply to the grocery industry?

Capitol Insider The Games Legislators Play.. . . . . . . . . . . . 14 Washington Report Key Ingredients Missing from Menu Labeling Debate . . . . . . . . . . . . . . . . 24

48 Caught in the Crossfire What do you do if the Immigration and Customs Enforcement (ICE) Agency knocks on your door? Understanding your rights and being prepared are the keys to successfully complying with federal and state law.

Inside the Beltway The Importance of a Unified Voice in Public Policy. . . . . . . . . . . . . . . . . . . . . . 26 Mommy Blogger It’s in the Bag(ging). . . . . . . . . . . . . . . . . . . 60

DEPARTMENTS Grocery by the Numbers Let’s Eat!. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Outside the Box New Retail Perspectives.. . . . . . . . . . . . . . . 28

54 15 Minutes With Brian Dahle Brian Dahle is a California farmer with a tough row to hoe. As Assembly Republican Leader for the Legislature’s minority party, Dahle is faced with the challenge of bringing relevance back to his party and growing its numbers in the Legislature.

CGA News. . . . . . . . . . . . . . . . . . . . . . . . . . 30 Know the Law Grocers’ Guide to the Toxics in Packaging Prevention Act. . . . . . . . . . . . 58 Index to Advertisers. . . . . . . . . . . . . . . . . . 59

CAL I FO RNIA GRO CER | 3

PRESIDENT’S MESSAGE

Laws are just the beginning

RO N F O N G PR E S IDE N T AN D CEO CALIFOR N IA GR OCE R S AS S O CIATIO N

Once a bill becomes law, the real work begins as state regulatory agencies define and implement the Legislature’s intent.

Every year, thousands of new state laws and local ordinances are passed by elected bodies up-and-down the state – some good, some not-so-good. CGA’s government relations team advocates on behalf of its member companies to help pass favorable laws and try to stop unfavorable laws.

Some agencies and boards have broad, and some might say overly broad, authority to implement the vision of lawmakers. Often this is done by design, as legislators prefer to leave the “tough decisions” necessary to carry out new policies to someone other than themselves.

One might think that regardless of the Association’s position on a measure, the work ends when it becomes law, but that’s far from the case.

Without the accountability of elections for those whose decisions will affect them, and because many of them act well outside of the public eye, regulators and their decisions are difficult to handle.

This issue speaks to the disconnect that can sometimes exist between regulators and those under their purview. Whether it’s a conflict between state and local law, or a conflict between different regulatory agencies, grocers are forced to navigate tricky waters to deliver food to their customers.

Passing a law is one thing. Implementing the law is a whole other matter. Enter the regulators.

In many cases, legislators paint in broad strokes when they create new laws. It is impossible for them as policymakers to foresee every possible detail or outcome of legislation they pass.

Because of this, legislators abdicate authority to state boards and departments to implement the will of the Legislature.

How much authority depends on the legislation. Many state agencies and departments have well-defined roles and powers, giving businesses a level of certainty they seek. Unfortunately, this is not always the case.

To meet this ambitious goal, many tough decisions have been made, with many more to come. Because of the nature and the sheer number of these decisions, the Legislature empowered CARB to develop regulations to achieve the necessary lower emissions standards.

iStock

While CGA members thrive in spite of these challenges, we are always looking for ways to work with legislators and regulators to create a business environment where our industry not only survives but thrives. ■

Take, for instance, the California Air Resources Board’s (CARB) role in implementing AB 32 – The Global Warming Solutions Act of 2006 – which requires California to reduce greenhouse gas emissions to 1990 levels by 2020.

CAL I FO RNIA GRO CER | 5

CHAIRMAN’S MESSAGE

The Gift of Learning

B O B PA R R I OT T T WAIN HAR TE MAR K ET

Although our formal education years are behind us, we should never stop seeking new knowledge, guidance and wisdom.

As I write this column, commencement speeches are being given, quoted, lauded and judged. Not every speaker will knock it out of the park, but all have the same goal: to impart some wisdom that will hopefully inspire the next generation.

It’s great to receive sage advice on this banner signaling “adulthood.” Ask yourself: when was the last time someone seriously “dropped some knowledge” on you?

The Association has broadened my horizon to the diversity of food industry business.

Chain stores and independent operators approach their markets in dramatically different ways. By blending the best of both business models I have gained many new ideas on how to go to market.

This knowledge mix has enhanced my relationship with suppliers and wholesalers. I now feel better prepared to communicate the appropriate information to both suppliers and wholesalers so we can all prosper and grow. We are all looking for ways to facilitate and improve decision-making.

I enjoy serving my customers every day and I try to have fun while doing it.

I’ll continue to delight in seeing new progress and services as we morph into the future and discover new ways to go to market and improve the customer experience.

Let me close by saying I appreciate the tremendous support of the CGA staff, board and especially the Executive Board.

Their continued and overwhelming encouragement makes my participation as CGA Chair much easier! ■

“The world is more malleable than you think and it’s waiting for you to hammer it into shape… So, go forth and build something with it.”

– Bono, 2004 University of Pennsylvania commencement iStock

Shouldn’t we make more room for such guidance and reflection during our working years? I can truthfully say that the first half of my year as Chairman has brought a much-unexpected gift – the gift of learning.

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In the end, we are all committed to the same result – how can we help consumers satisfy their needs and desires. This is a moving target in today’s world, with technology now underpinning so much of the decision process… more on this in my next column.

Our roses are sustainable.

For farmers. For the environment. For tomorrow.

What a beautiful thing!

615G_N_N_N_3STN_1628BN00007581

GROCERY BY THE NUMBERS

let’s

Eat!

The Consumer Expenditure Survey, produced by the Bureau of Labor Statistics (BLS), provides data on the buying habits of consumers in the United States. The latest data show that the average American household spends about 30 percent more on groceries (food at home) than eating out (food away from home). What type of groceries are people buying?

Of the 3 surveyed areas in California, Los Angeles consumers spend the most on meat, poultry, ďŹ sh and eggs; San Franciscans have the largest expenditures on fruits and vegetables; and consumers in San Diego lead in spending on dairy, cereals and bakery products.

12.6

%

Average annual household expenditures on 4 major food at home categories $1,000

of total Annual Household spending for food.

$800

$200 $0

Fruits and vegitables

spending on food away from home.

$400

Dairy Products

spending on food at home.

$3,081

Meat, poultry, fish and eggs

$4,032

Cereals and bakery products

$600

$7,113

Annual Household spending on food in the United States

Catagories of most food households purchase by region

Los ANgeles San Francisco San Diego

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For more detailed information on the spending, income, and demographics of consumers visit www.bls.gov/cex.

The ONLY Federal Credit Union in the United States chartered to serve grocery industry employees and their families www.trugrocer.com CAL I FO RNIA GRO CER | 9

VIEWPOINT

Business Lessons From Flyover Country

K EV I N CO U PE FOUN DE R , MOR N IN GN E WS BEAT.CO M

Competitions are won where you are differentiated, not where you are the same.

One of the great pleasures of my career has been the opportunity to spend a lot of time on the road. Not that I don’t like being at home with my wife and family, but even after more than 30 years, I still enjoy getting on planes and visiting both new and familiar places. (I recently celebrated my 35th wedding anniversary, and my wife will be the first one to tell you that we’ve made it this far because I’ve been away a third of the time. I don’t take it personally. I agree with her… nobody could live with me for that long.)

Because I like to eat and drink, I picked the right profession – a core pleasure of my travels always has been trying new restaurants and visiting stores that differentiate themselves through really good food. That’s one of the reasons that, though I live most of the year in Connecticut, I’ve always liked visiting the West Coast, especially California – the food seems fresher and the beer and wine more interesting, perhaps because the sun is brighter, the air is warmer and the people often friendlier.

Today, however, I’m writing about what many people consider flyover country. Specifically, Dayton, Ohio, and Detroit, Mich.

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The reason is simple. They are home to two of the nation’s best supermarket companies.

Let’s start with Dayton, where if you visit you should make a beeline for a threestore local institution named Dorothy Lane Market.

At DLM, the relentless focus is food – food that tantalizes the senses, looking and smelling and tasting wonderful.

The reason I bring DLM to your attention is that everything it does makes it exceptionally competitive in an increasingly challenging marketplace.

Especially a marketplace that is typified by threats from online retailers like Amazon, behemoths like Walmart and Kroger, and ambitious discounters such as Aldi and Lidl.

How do you do that? I think you focus on food.

Dorothy Lane Market always has done this. Its three stores obsess about great, highest common denominator food, and its operations are fueled by people utterly committed to and invested in their roles in a great company.

DLM is illustrative of my conviction that to compete effectively today, you have to do what you can better and differently from everyone else.

For example, I often write about Amazon Go and the siren call of the checkoutfree shopping experience. (There’s just one, in Seattle, for the moment, but everything we know about Amazon suggests that this will not be the case for long. Plus, there are plenty of other companies experimenting with checkoutfree technology.) But I would submit that there essentially are two ways to compete against it.

You can compete with technology, or you can go the other way.

At DLM, the checkouts aren’t a gantlet to be endured between the store and car.

They are an extension of the superior shopping experience – DLM doesn’t offer self-checkout, because they want you to interact with their people, who are friendly, helpful ambassadors for the DLM’s food shopping vision.

Of course, it isn’t just the checkouts.

From the colorful and artistically crafted produce department to the sushi counter (where they make their own rather than outsourcing it, better to control and maintain quality), from a bakery designed to make you hungry, to a meat

and seafood department anchored by Jack’s Grill, where you pretty much have anything made for you on the spot, DLM is nothing less than an eater’s paradise.

In Dayton.

In Detroit, just a little over 200 miles to the north, there is a company called Westborn Market, which is, I think, a hidden-in-plain-sight jewel of U.S. food retailing, with four stores that are emblematic of the business, cultural and culinary resurgence taking place in the Motor City.

“Whether you take the paths blazed by DLM and Westborn, or find another route to a competitive advantage, you have to bring a differentiated A-game to the table.”

There are numerous reasons why Westborn is so good.

First of all, it doesn’t look like a traditional store – there aren’t the aisles that one normally associates with a food store, but rather lots of cases at odd angles, unusual display pieces, exposed brick and glass and unconventional lighting… all of which create the image of one of the coolest farmers’ markets ever.

Its newest store is in an old, decommissioned post office and is a great use of space that creates a community center.

These folks are superior when it comes to fresh foods, especially produce, but that expertise is paired with what I think is a simple but compelling message: “Eat Good Food.”

That message is repeated everywhere, even on private label products.

There is a ton of grocery – 35,000 SKUs – but clearly there is an effort made to have items nobody else has, or at the very least would be hard to find elsewhere.

This is incredibly important, especially these days.

Competitions are won where you are differentiated, not where you are the same. This is the kind of compelling

iStock

store experience you can’t get online… you want to come here, because it’s an adventure.

Maybe the most compelling thing about the Westborn store is the fact that it smells great… the aromas of good food waft over entire store… you can smell the spices, smell the seasoning, smell the food, and it makes you hungry, and that is the best way to sell food.

Amazon can’t offer that. Walmart won’t offer that. Very few stores will go out of their way to make themselves smell any different from the chain drug store next door.

That’s what Westborn Market does.

It’s what Dorothy Lane Market does.

I’m all in… because not only is life too short to drink lousy wine and eat indifferent food, but I think it’s also too short to shop at mediocre stores.

These days, while I think people who predict some sort of retail Armageddon are way overstating their case, I do believe that when things start to shake out – and they will – mediocrity will be among the first victims.

Whether you take the paths blazed by DLM and Westborn, or find another route to a competitive advantage, you have to bring a differentiated A-game to the table.

Every day.

Norman Mayne, CEO of Dorothy Lane Market, once told me something I think is as smart as anything I’ve ever heard.

DLM, he said, is good and has been lucky, and has a great reputation.

“But reputation,” he said, “is what you had yesterday. Today, you have to do it all over again.”

Exactly. ■

CAL I FO RNIA GRO CER | 11

GOVERNMENT RELATIONS

Legislators Legislate, Obviously

A A RO N M O R EN O S EN IOR DIR ECTOR CGA GOV ER N MEN T R ELATION S

Legislators can introduce 40 to 50 bills every two years, but should they?

To state the obvious – legislators legislate.

And in California, they tend to legislate a lot. In this current two-year session, Senators and Assemblymembers combined to introduce a whopping 4,775 pieces of legislation. Now to be fair, not every one of these bills is intended to add a new law to the books. It does, after all, take a piece of legislation to undo as current law.

And a number of introduced bills are mainly ministerial in nature in terms of budget bills, sunset extensions, code clean-up bills, appropriations for state settlements, and the like. Even with that in mind, let’s assume for discussion sake, that half of the bills introduced (2,388) are to undo some of the things described above.

The rest are presumably meant to do something new. Which begs the question: Just because legislators can introduce 40 or 50 bills every two years, should they?

I realize this question has become a sort of conservative trope that is trotted out annually in political think pieces calling for such outlandish things as severely limiting the number of bills that can be introduced, or a part-time Legislature.

I’ve always thought of those suggestions as a bit hackish, to coin a phrase often used by comedians to describe tired and cliché

material. Being a product of the legislative branch, I am a fan.

Frankly, any proposal to limit the legislative branch’s power potentially gives more power to the executive branch and all agencies under it than it really ought to have. But I digress discussing separation of powers as I tend to get a little pedantic discussing the three co-equal branches of government (Fun Fact: California actually has four co-equal branches, but that's a difference discussion.)

There definitely is a need for the Legislature to nudge or press parties, depending on the policy area, towards better behaviors. Civil rights and equality come to mind as areas the Legislature has been and should continue to be bold with.

We are very fortunate in the grocery industry to have strong partnerships with our employees, with many operators working in partnership with unions to provide an environment where labor and management can thrive.

This has enabled our industry to apply many policies legislators have sought to implement for all industries. Grocers have been on the forefront of many pro-worker policies from issues like predictive scheduling to higher holiday pay.

The challenge we face is confronting legislation that proposes a one-size-fits-all approach on something we already do. In a way, we fall victim to the cliché of “no good deed goes unpunished.”

It’s when the Legislature tries to press on certain types of business regulations that the question of “should they?” comes to mind, or more accurately “should they so quickly?”

Another question that is sometimes forgotten when drafting legislation is: “What if they’re doing it already?”

That last question is arguably the most important to ask. iStock

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“A bill filled with exemptions can become toothless and an industry may not be able to check every box required by legislative mandates, putting them in harm’s way for something they already do.”

Take predictive scheduling. Many California grocers have worked with employees to develop an approach that mutually benefits everyone. A conflict, however, occurs when a bill is introduced that doesn’t exactly line up with an existing, working policy. Hence: What if they’re doing it already? This real possibility threatens the very people who were early adopters of such a policy.

There are no easy answers to how to settle these types of conflicts. No outcome satisfies both sides. A bill filled with exemptions can become toothless and an industry may

not be able to check every box required by legislative mandates, putting them in harm’s way for something they already do. Which leads back to the question – just because bills can be introduced, should they?

In a perfect world, legislation ought to be the last resort, not the opening salvo. I know we don’t live in a perfect world, but it’s not as bad as you think, and you never get an answer to a question that isn’t asked.

The answer lies somewhere between yes and no, depending on who you ask. Maybe the better question would be to ask whether a solution exists other than legislation.

You’d be surprised how willing companies (grocery companies, at least) are to work towards a solution without the threat of a “gotcha” hanging over them.

P.S.: Think about how much happier committee and legislative staffers would be with less bills to address – allowing them to dedicate more time to legislation they eventually end up working on.

Everybody wins! ■

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CAL I FO RNIA GRO CER | 13

CAPITOL INSIDER

The Games Legislators Play LO UI E B ROW N IN T HE S ACR AME N TO OFFICE O F K HAN, S OAR ES AN D CON WAY, L L P

Don’t downplay your ability to impact proposed legislation. Remember, all politics is local.

Brown

Say what you will about California politics and the dysfunction that usually characterizes our State Legislature, but the process we live with offers various opportunities to limit the legislative ambitions of overreaching lawmakers.

As you read this column the State Legislature will be in the midst of culling proposals from a staggering list of nearly 3,000 bills.

Not unlike years past, legislators have introduced a bevy of bills ranging from the silly and inconsequential to the draconian.

If passed in its entirety, this laundry list of bills would cripple our industry. Given the high stakes, our job as part of CGA’s government relations team is largely a game of defense.

Through the development of strategic alliances and a reliance on established relationships with key policymakers we work to support worthy bills, fix moderately bad bills and kill those with little redeeming value. Unfortunately, most bills we encounter fall into the last two categories.

While most things change with time, the content of legislation we face is far from new. Indeed, most proposals are direct reincarnations of bills from yesteryear that met a timely demise. These retreads and their progeny are often shopped as 14 | CAL I FOR N I A G R OC E R

novel approaches to persistent problems but we ensure they are exposed during the committee process as tired and flawed fixes.

If that were enough to eliminate all bad bills our job would be easy.

The reality is that most lawmakers are hesitant to question a colleague’s legislation for fear that legislative karma will turn on them in due course. Even fewer legislators want to risk their legislative agenda by opposing a fellow colleague’s pet proposal.

Supporting a member of your own caucus is often more important than drilling down into the real impact of a policy proposal.

And, let’s not forget the role in-district meetings play. Those one-on-one conversations in a legislator’s district may be the most effective.

As such, when CGA sends out periodic alerts identifying key bills moving through the legislative process you need to act.

Fortunately, we have not had much need to issue a Call to Action this session, but the year is far from over.

So, to the extent you have information on how bills would negatively impact your business please relay that data to us in Sacramento. Every little piece of information and input is critical to our success in protecting your bottom line. ■

So, what can get us past this sort of hurdle?

Well, often the answer lies with you.

The quickest way to convince a legislator that a proposal equates to bad public policy is by pointing out local opposition. Substantial numbers of letters, phone calls and emails from constituents detailing the shortsightedness or high cost of pending legislation can often trump party loyalty and institutional courtesies. Social media also plays a significant role in today’s lobbying activities. The power of a hashtag or a direct communication from constituents via Facebook cannot be overestimated.

iStock

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California’s Regulatory

Nightmare: How can grocers keep up?

BY Jessica Dumont

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For Renee Amen, the cost of doing business in highly regulated California has become excessive.

Her family owns and operates Super A Foods, headquartered in Commerce, Calif., which operates seven stores in Ventura County and one in Los Angeles County.

“It’s ridiculous how difficult it is to do everything we do.

We are always having to look over our shoulders to make sure we’re doing things right,” Amen says.

California has a reputation as one of the most highly regulated, least friendly business climates in the United States. With more than 300 state and regulatory agencies regulating everything from water to medical practices; air quality to pest control and hundreds of industries in between, complying with state regulations as a business is a dizzying prospect.

Grocers, and the food industry at large, are no exception. Grocery stores in California face a massive list of regulations related to food quality and safety, chemical use, environmental issues and many more.

This not only affects the way they do business, but it impacts the California Grocers Association’s (CGA) efforts to advocate for its members.

Regulations also have a ripple effect across California’s food industry – from manufacturing to processing and packing.

“It’s not just the grocer – it’s the entire food delivery system that is grappling with this at all stages,” says Dennis Albiani, a vice president and lobbyist with California Advocates who represents the Grocery Manufacturers Association (GMA) and the California Association of Egg Farmers, among others.

He says the regulations placed on grocers often extend to manufacturers and farmers, affecting their businesses as well.

This results in food businesses spending millions of dollars per year to deal with regulations – whether fighting them, complying with them or simply trying to understand them.

Proposition 65: A Regulation Run Amok One of the current thorns for grocers, food producers and manufacturers is Proposition 65, an environmental safety regulation that is formally called the Safe Drinking Water and Toxic Enforcement Act of 1986.

“The food industry is really upset about Prop. 65 because it has become completely out of control,” says Aaron Moreno, senior director of government relations for CGA. “It’s a poster child for how things can not work in the regulatory arena.”

Continued on page 18 ▶

CAL I FO RNIA GRO CER | 17

◀ Continued from page 17 Scott Warman on Unsplash

ccording to the Office of Environmental Health Hazard Assessment (OEHHA), which enforces Prop. 65, the measure is intended to protect the state’s drinking water sources from being contaminated with chemicals known to cause cancer, birth defects or other reproductive harm.

It also requires businesses to inform Californians about exposures to such chemicals with labels.

Moreno says CGA tried to collaborate with OEHHA for a long time on Prop. 65, but it did not work well, and the agency came back with a vengeance.

Another industry association, the California League of Food Producers (CLFP), struggles with many of the same regulations that CGA does – including Prop. 65. Formed in 1905, CLFP’s membership includes fruit, vegetable and dairy processors, and the food processing industry accounts for more than 750,000 jobs statewide, both directly and indirectly.

“Prop. 65 has been increasingly problematic from the field all the way to the grocery store,” says Trudi Hughes, director of government affairs for CLFP. “We are

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desperately trying to get some relief and trying to work with OEHHA and the administration on warnings that make sense for food. We would argue that we shouldn’t even be in Prop. 65, that it was never intended for this. But it’s a train run wild.”

One major issue for CLFP with Prop. 65 is that it targets bisphenol-A (BPA), which is used as an epoxy lining in cans that CLFP members have used to ensure food safety.

OEHHA listed BPA as a reproductive toxicant in 2016, despite numerous studies showing that BPA is safe.

“We’ve always argued that BPA linings are safe and necessary for food safety. There is a body of evidence that shows that it’s safe,” Hughes says.

However, due to market forces and consumer demand – not because CLFP agrees there is a health risk – Hughes says processors are reformulating their liners to remove BPA. Albiani with California Advocates says this is also an issue for GMA members, who have had to change packaging because of California’s specific BPA requirements.

“With Prop. 65, there’s such a high level of uncertainty. What could be next?”

Hughes says.

Most recently, Prop. 65 has been in the news because of acrylamide, a chemical found in coffee, which is now required to be labeled with cancer warnings.

This is yet another headache for grocers.

“What are we going to do about the coffee?

It’s insane,” Amen, with Super A Foods, says. “Right now when you walk into a grocery store there’s a sign in different areas with the Prop. 65 warnings. Now they want it in front of each individual item. Imagine how you can even do that.”

But wait – there are more Prop. 65 is just one of the frustrations Amen feels for her family’s business. Weights and measures is another regulation Super A Foods struggles with.

The weights and measures law and regulation is enforced by the California Department of Food & Agriculture’s Division of Measurement Standards.

The law was created to ensure accuracy and value of products for consumers.

At Super A Foods, Amen says enforcement of weights and measures just feels like another way for the state to fine her business.

For example, when the store packages shrimp for sale, Amen says that a certain amount of dehydration takes place from the time of packaging. If a weights and measures regulator comes in – which they have – the regulator may find that the weight and price of the shrimp is off by a very slight amount due to the dehydration.

So, for what might cost a customer less than 15 cents, Super A Foods could instead receive a $400 fine.

Amen and her teams work hard to do right by their customers and to comply with all regulations put in place, but satisfying every requirement can be challenging.

“There’s no way for us to be perfect,” Amen says. “We have 400 employees.”

Another pain point for the industry is Assembly Bill (AB) 32, also known as the California Global Warming Solutions Act of 2006. Regulated and implemented by the California Air Resources Board (ARB), AB 32 requires California to reduce its GHG emissions with the goal of mitigating climate change. According to the ARB, all sectors are held accountable in helping the state meet this goal.

“The Air Resources Board has rules for fleet turnovers, rules regarding what they call transport refrigerated units (TRUs), and have created quite a cost burden on the industry because they’ve had to invest in new technologies that result in fewer emissions,” says Louie Brown, lobbyist for CGA and partner in the law firm Kahn, Soares & Conway, LLP. “It’s hard to argue with fewer emissions and cleaner air, but the downside is the cost of the units and retailers having to make adjustments at distribution facilities to accommodate new technologies,” Brown says.

Rob Neenan, president of CLFP, says that AB 32 is also a major concern for food processors.

“There are roughly 40 food processing plants in California that have to participate in the greenhouse gas cap-and-trade program,” Neenan says. “They’re having to purchase emissions allowances for that, and as the program moves forward, the cost of participation is going to keep going up and up, plus the carbon – the annual cost of compliance can go from hundreds of thousands of years to possibly millions.

We’re worried about cost control.”

Positive Changes for the WIC Program Many California retailers participate in Women, Infants & Children (WIC), a federally funded program implemented by the California Department of Public Health.

Around 4,100 grocery stores in the state of California are on the WIC program, according to Clyde R. Steele, a consultant for Government Relations for Nutricion Fundamental.

“Prop. 65 has been increasingly problematic from the field all the way to the grocery store.”

Nutricion Fundamental is a specialty grocer that primarily serves families who participate in WIC’s supplemental nutrition program. Michael Amiri, CEO of Nutricion Fundamental, says the company operates 72 small, healthy convenience stores in lower income communities throughout California.

“It’s an easy, convenient way for families who might need a little extra help in redeeming their food coupons to get the nutritious food they’re entitled to through the program,” Amiri says. “We help them select the items in their basket and will bag them and bring them to the car.” The stores even have spaces for children to play while parents grocery shop.

Dealing with WIC regulations can be challenging since the program is federally funded with federal statutes, says Steele, who previously managed the WIC vendor program for the state and participated in writing and enforcing the regulations.

“There are federal statutes that authorize the program and federal regulations that define what is permissible and not permissible, but it does grant the states s ome oversight,” says Steele.

Amiri says that operating a store around WIC can be challenging.

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“It’s a really cumbersome program.

There are a lot of regulatory intricacies that are inherent with a food program, unlike SNAP [the Supplemental Nutrition Assistance Program] where people can get most of what they want without restrictions. The WIC program is incredibly prescriptive – only certain brands and certain sizes,” Amiri says.

Steele says the state of California legislated a change to the state statutes for WIC to expedite the regulatory process about seven or eight years ago. Ultimately, this helped regulators at the state level to bring the program into better order.

“Regulators aren’t trying to frustrate the businesses they regulate – it’s just that they regulate what they know.”

“It’s gotten better,” Amiri says of the expedited process. “What is also nice is that WIC has implemented a local vendor liaison program. The idea was to create a localized opportunity for communication between the program and vendors and retailers in the program.”

He adds that almost every community has a liaison assigned for each vendor who makes quarterly visits. They do not act as compliance officers, but rather provide guidance and answer any questions retailers might have about compliance. That way, when compliance officers do visit, retailers will have everything in line.

“I think that’s been a positive outcome,” Amiri says.

The Legislative Road to Regulation Proposals to regulate business may come from a place of good will or altruism, according to Moreno with CGA. “As the Legislature becomes more aspirational in what they’d like to accomplish for the state, they don’t have time to deal with details and oversight or supervision of the grand plans they put in place,” Moreno says. iStock 20 | CAL I FOR N I A G R OC E R

But once a law is passed and enforcement of it is assigned to a California government agency, the Legislature’s grand plans fall into the hands of state regulators.

Whether the regulation makes sense or not, the bigger issue is how the California regulatory environment has ballooned into what it is today. With hundreds of propositions regulating every possible behavior and industry in the state of California, grocers simply cannot keep up.

Even CGA struggles to communicate every detail and deadline with its members.

Brown, who lobbies for CGA, says that one of the issues, especially dating to previous term limit rules, is that legislators had such a short time to be in office, so many would pass significant pieces of legislation giving broad authority to regulatory agencies.

“By the time the regulation had been implemented, the legislator who wrote that bill would have been termed out. So it creates a dangerous situation for business when you have legislators giving broad authority to regulators, and then having no oversight of that activity after it’s been implemented,” Brown says.

He explains that new, longer term limits set in 2012 are bringing about positive change and more emphasis on oversight, but some in the business industry would say that the damage created during the previous time period with shorter term limits has created a regulatory nightmare in California.

Another major issue, according to Moreno with CGA, is the divide between the Legislature and the regulatory agencies with those industries they regulate.

Lawmakers and public sector employees often have limited experience in the private sector, with a lack of experience in the issues they oversee.

Having worked on both the regulatory side and now on the side of the retailer, Steele with Nutricion Fundamental understands this situation.

“The government employees who are doing the regulating can forget that they deal with a particular program and set of rules every day, so it’s second nature to them,” Steele says. “The people you’re regulating

are generally acting in good faith – it’s just confusing. One set of regulations might seem to conflict with the other.”

Steele says that on the other hand, regulators aren’t trying to frustrate the businesses they regulate – it’s just that they regulate what they know.

“Both sides forget the difference in focus that the other has,” Steele says.

There is also a major challenge in terms of regulatory enforcement at the local level versus what the authors of those regulations intended to implement. While regulations are written at the state level, enforcement often trickles down to the city or county government. And even then, guidelines may not be black and white, and can be subject to interpretation.

Amen with Super A Foods says her stores regularly struggle with this.

“How do you make these people happy when they all have different rules?” Amen says. “They get guidelines from the county, not hard and fast rules, and they all have their own interpretations. There’s no rhyme or reason – I swear it has so much to do with the person walking in the door and the mood they’re in. It’s crazy. Our fines and fees are different at all of our stores.”

To make matters more difficult, regulators rarely connect with the stakeholders they’re regulating, according to Tim James, senior manager of local government relations and regulatory affairs with CGA. He says when it comes to writing regulations, agencies

make minimal requests for public or stakeholder input.

still fill their customers’ demands for holiday turkeys.

“The Administrative Procedures Act outlines the process for regulations. Some agencies will engage in a pre-regulatory process, using a public hearing or stakeholder meeting,” James says. “This can help CGA get a better idea of what an agency is thinking and provide some feedback, but they won’t make any commitments.”

Because of the interpretation of one local enforcement agent in one local jurisdiction, a lack of consistency nearly stole Thanksgiving.

James says it’s rare that CGA or its members gain anything from that process, and ultimately no one sees what happens until a regulation is released. From there, the agency may open a 45-day comment period, but it is difficult to lobby the process.

The Role of Consumer Demand

How Regulations Nearly Stole Thanksgiving In some cases, the confusion among regulatory guidelines and how they apply have created an infuriating yet laughable scenario.

Around the holidays, when demand for turkeys skyrockets, James with CGA says that grocers will often park refrigerated trailers to store extra turkeys in the back of their stores.

However, the California Department of Public Health mandates how food is stored, and one year an inspector in the city of Los Angeles determined locally that a trailer was not a sufficient method of food storage.

Ultimately, the inspector went around the city red tagging turkey trailers, and grocers were left wondering how to comply and

The following year, James says CGA had to create a special permitting process for turkey trailers.

Albiani, with California Advocates, says that the regulatory environment as it exists today is due, in part, to the consumer’s demand for full disclosure.

He says that California has the largest population in the U.S., and is generally viewed as progressive in its policies. At the same time, California is also the largest farm state.

“We have a great farm economy and food economy, yet we have the most food consumers who are demanding progressive policies, and that’s creating a challenge for everyone,” Albiani says.

Consumers who have assertive beliefs on food production techniques, animal welfare and other issues can drive challenges for the producer, the manufacturer and the retailer, Albiani says.

For example, because of consumer demand and state regulations, California’s egg production and sales requirements are completely different than the rest of the country.

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“There’s a collision. A strong desire by the consumer for as much information as possible drives policies that then require food retailers and manufacturers and growers in California to meet Californiaspecific requirements,” Albiani says. “These state-specific regulations can distort markets, require additional labeling and education for the consumer, and make it difficult for retailers, manufacturers and farmers to do business.”

How Can CGA Help You? CGA goes to great lengths to support and educate its members on the many regulations they should comply with in California, but it is still a challenge to reach all members with necessary information and to track every regulation.

The organization regularly communicates with members through webinars, emails and other tools, but the nebulous regulatory environment is much more difficult to track than the legislative process, which follows a specific calendar and is confined to the State Capitol in Sacramento.

For grocers to benefit most from their partnership with CGA, Moreno advises members to pay attention and be engaged, and to share information with CGA on what they need and what challenges they are facing. CGA can be more effective in the regulatory arena when they have more information from retailers.

“The more you put in, the more you get out,” says Moreno.

Will anything change, and will it make a difference?

The big question is, will the regulatory environment in California ever change?

“I don’t think anything’s going to change as long as you have people making the rules who have never run a business,” says Amen with Super A Foods. “All I’m trying to do every day is provide a clean and safe space for my customers to grocery shop, and to provide everything at a reasonable price, and I think the government’s mentality is that big government is necessary instead of a free and open business environment.”

Whether or not the environment changes in the future remains to be seen, but in some cases, the damage may already be done.

Hughes with CLFP says that the cumulative impacts of regulations have made it difficult

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for CLFP’s members to stay competitive in the state of California.

“I think that our industry and business in general is very resilient,” says Hughes.

“We have some smart, nimble people running these organizations and they are able to figure out ways to comply. It doesn’t mean it’s easy or that it’s the most costeffective or efficient, but they want to be in compliance. They’ll bend over backwards to do that.”

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A few other ways to help CGA help you include: • Participate in CGA’s webinars • Reply to ACTION REQUEST emails • Attend luncheons with legislators • Participate in tours • Communicate often and share information with CGA

She adds, however, that just because food processors or grocers don’t shut down because of regulation doesn’t mean there aren’t opportunity costs.

“What would have been if we didn’t have these costs? Could we have hired more people, expanded operations, built more plants in California? What are we missing out on because we’ve had to adhere to these regulations?” Says Hughes.

Straining to comply with existing regulations, the industry may never know. ■

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WASHINGTON REPORT

Key Ingredient Missing from Menu Labeling Debate 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

There’s no doubt that something is missing from the menu labeling rule as it stands: common sense.

It comes as no surprise to many that the supermarket industry remains a fiercely competitive marketplace. Low profit margins and constantly changing consumer preferences make it challenging even for the best operators.

But, for several years now, grocers have been distracted by more than just competition: a 400-page menu labeling regulation has been dangling over their heads that continues to present challenges and confusion.

restaurants, operate in a variety of different formats without a standard menu board.

In fact, that uniqueness is what sets independent grocers apart; they treat their supermarkets like neighborhood stores, regardless of if they operate in one location or 20. In other words, one deli bar might offer a product while another in the next town doesn’t, depending on the preferences of the communities they serve.

First, some background is needed. When the Affordable Care Act passed in 2010, a provision was included to create a uniform national menu labeling standard for chain restaurants as a solution to the patchwork of state and local regulations the restaurant industry was facing.

Fast forward to 2014 when the Food and Drug Administration (FDA) published its final rule, where grocers were – unexpectedly – captured under the law with the addition of four words, “similar retail food establishments.” But while restaurants and grocery stores might both sell food products, the industries operate vastly different businesses models.

The most profound differences are evident among locally-owned independent supermarkets that, unlike large chain 24 | CAL I FOR N I A G R OC E R

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The penalties are even more worrisome.

Under the Food, Drug, and Cosmetic Act, store operators and their associates acting in good faith could face criminal charges for simple human errors, such as adding an extra slice of ham to a sandwich. Even the smallest

failure to comply carries the threat of civil and criminal penalties of up to a $1,000 fine and the possibility of jail time.

Independent supermarkets are committed to providing consumers with the calorie information needed to make the purchases best for them. These operators are in the business of meeting customer demands and are committed to providing their customers with a wide variety of information on products. In fact, 95 percent of food items in stores are labeled.

Unlike chain restaurants, many supermarket food items are not standardized, and recipes vary by store location and customer demand. The industry just needs a feasible way to comply rather than an onerous one-size-fits-all regulation.

Luckily, there’s a simple solution. The bipartisan Common Sense Nutrition Disclosure Act (H.R. 772), introduced by U.S. Representatives Cathy McMorris Rodgers (R-Wash.) and Tony Cardenas (D-Calif.), would provide grocers the flexibility they need to comply.

The bill contains simple changes that have a significant impact, such as protecting businesses from fines in the event of inadvertent human errors and allowing for the averages or ranges for variable menu items.

While the bill passed the U.S. House earlier this year, unfortunately it has not been taken up by the Senate and was not included within the omnibus spending bill. Therefore, the rules went into effect on May 7 of this year.

The regulation requires any banner operating more than 20 stores under the same name and selling substantially the same prepared foods to comply with new caloric labeling standards.

While the FDA has announced that the first year after implementation will focus on educational efforts intended to help companies comply, many companies are wary of state and local inspectors and the potential for penalties and fines for minor infractions or simple misunderstandings.

Additionally, although the FDA has stated its intention not to seek enforcement actions within the first year, there has been no prohibition against private rights of action during that same timeframe, leaving the door open for activist groups or private entities to take legal action.

fixes so that independent grocers can get back to focusing on the customers instead of regulators in the Beltway.

NGA continues to urge the Senate HELP Committee to take up the Common Sense Nutrition Disclosure Act in order to provide companies with the additional flexibility needed to make this regulation work for all covered entities. â–

There’s no doubt that a critical ingredient is missing from the menu labeling rule as it stands: common sense. It’s crucial that Congress pass these much-needed legislative

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INSIDE THE BELTWAY

T h e I m p o r ta n c e o f a U n i f i e d V o i c e i n P u b l i c P o l i cy J EN N I F ER H ATC H ER S EN IOR V ICE PR ES IDEN T GOV E R N ME N T AN D PUBLIC AFFAIRS FOOD MAR K ET IN G IN S TIT UTE

Grocery faces a number of issues requiring a unified from our industry, consumers and other stakholeders so as to better understand and response proactively.

The Food Marketing Institute Foundation recently launched the Unified Voice Protocol, a new initiative that will attempt to provide a platform for the grocery industry to play offense instead of defense, and to create a way to understand customer needs for information and education related to emerging issues in the food, agricultural and consumer goods sectors.

Its mission is to create an environment of greater trust in the food and consumer goods industries so that shoppers can purchase products with full confidence in those providing them.

As you in California know far too well, the retail food industry faces many emerging and more developed issues on a regular basis that may play a significant role in the perception of the industry as a whole or on particular types of products or practices.

These challenges can present themselves in the context of public policy or regulatory changes, but more often than not, the conversation develops via an activist group or online activity and may not include the most accurate or thorough issue explanation.

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Through the Unified Voice initiative, we hope to unite our industry, consumers and other stakeholders to identify and communicate an understanding of these issues in a more coordinated and proactive way.

Unified Voice’s recently completed first pilot project addressed consumers’ knowledge and interest in poultry production practices with a particular focus on cage-free eggs and slow-growth broilers. The research examined the potential impact of price and other factors on consumers’ willingness to purchase a product.

If food retailers are being prompted to make pledges about cage-free eggs or other sustainability-related practices, both consumers and retailers need to understand the impact of decisions on pricing and availability. While a consumer may say they prefer a particular type of egg without pricing or other variables, will that preference translate into a change in their purchasing behavior?

Summary observations for Cage-free Eggs Study • Price is a significant driver for most consumers • Room for cage-free egg market to grow, but may never reach majority market share

Summary observations for

Slow Growth Broilers Study • Price is a significant driver for most consumers • Low levels of knowledge about broiler production in general and slow growth chicken in particular • Consumers hold disadvantageous beliefs about slow growth claims

This concept is one core goal of the initiative, and as Unified Voice moves forward with new pilots, we hope to educate all supply chain participants and consumers to help enhance shopper confidence in the foods they purchase.

INSIDE THE BELTWAY

The same Unified Voice Protocol goals and principles apply to public policy, and we expect to use our pilot project findings to enhance food policy conversations on Capitol Hill. Ideologies and political beliefs can be softened when congressional offices are presented with consumer data on a particular issue.

We recently shared data on the number of SNAP households in every congressional district and paired it with the economic impact of the food and agriculture industries. Many offices expressed surprise in the significant economic role of the food industry.

“as Unified Voice moves forward with new pilots, we hope to educate all supply chain participants and consumers to help enhance shopper confidence in the foods they purchase.”

Our industry needs to continue identifying critical emerging issues, whether local or international in scale, and proactively educate consumers to maintain or improve trust in the food industry before the narrative forms without our input.

California often sees a broad range of activist activity or regulatory changes before other states, or the federal level. We encourage you

to help identify the next topics you see in your stores and operations for our upcoming emerging issues pilot projects.

Editor’s Note: To learn more about the Unified Voice Protocol Approach and its research, visit www.fmi.org.

“Let’s GROW…2018”

A One-Day Seminar for Independent Store Leaders & Executives This essential seminar explores timely industry challenges and provides meaningful strategies to strengthen and empower independent store leaders and executives.

Seminar Topics: • Leadership Development • Employee Retention Northern California August 23, 2018 9:00 a.m. – 4:30 p.m.

Sheraton Grand Hotel Sacramento, Calif.

• New Merchandising Concepts • Effective Performance Reviews Southern California Fall 2018 Date/Location To be Determined

Cost: CGA Members: $25/person • Non-Members: $175/person Register: Visit www.cagrocers.com and click on the Events tab.

Featuring Harold Lloyd For more information, call (916) 448-3545 or visit www.cagrocers.com

Sponsored by California Grocers Association • Independent Operators Committee • CGA Educational Foundation CAL I FO RNIA GRO CER | 27

!

OUTSIDE THE BOX N EW RETAIL PERS PECTIV ES

Modest Fashion Upscale and cutting edge is not always the right strategy. Macy’s, which for years has relied on high-priced designer merchandise, has introduced the Verona Collection, a line of modest apparel, demand for which has been driven by e-commerce and social media. The line also speaks to diversity since it was designed by The Workshop at Macy’s, the chain’s minority and women-owned business development program. In fact, the entire “modest” movement, initially associated with religious restrictions, is gaining ground among consumers who want more traditional styles. iStock

Produce or Pie-in-the-Sky Driverless cars are one thing. But, driverless supermarkets? Robomart is building a fleet of selfdriving on-demand produce stores that it plans to license to retailers for delivery services. Customers download an app that can summon the closest Robomart. Customers then unlock the doors, take the products they want and the system tracks what they’ve purchased and emails a receipt. Commercial pilot tests will be taking place soon, the company said. iStock

CYBER SAVVY? Think you’re ready for hackers? Think again.

A cyber readiness report from research firm Hiscox has found that seven out of 10 global companies have failed to prepare for a cyberattack, despite the fact that 69 percent of those surveyed said that cybercrime, along with fraud, is the No. 1 threat to their businesses. iStock

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iStock

BUILD & BUY A lot has been written about department stores shuttering thousands of stores to migrate to the web. But Nordstrom’s, the quintessential upmarket department store, is taking the opposite strategy by opening more stores and adopting new policies that blend online and physical retailing. One hybrid test is taking place in California where Nordstrom’s stores are only carrying samples of items which can just be ordered online.

OUTSIDE THE BOX

HOLDING

ON

FLU BUGGED

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There’s an old saying that you can have too much of a good thing. We might be reaching that level with cupholders in cars. Subaru is the current champ with 19 in its Ascent SUV or about 2.3 per passenger. But customer demand is key and automakers, instead of cutting back, are making flexible holders that can be used for everything from a standard coffee cup to something the size of 7-Eleven’s Big Gulp.

iStock

It’s been a good year for the flu virus and a bad one for retailers who have been scrambling to restock depleted shelves. IRI reports the intensive flu season saw many retailers running out of cough and cold meds. Moreover, when customers can’t find what they want, fewer than half will make a substitute purchase and are therefore more likely to go to another store. One of the hardest hit areas this year was Houston, Texas, where an estimated 11.8 percent of the population was battling the flu, followed closely by San Diego at 11.7 percent.

Love Contracts

Not too many companies still have rules dictating workplace relationships – until now. With rising accusations of sexual misconduct, companies are getting a little nervous about who’s dating who. Some are bringing in lawyers and human resource consultants to develop relationship agreements stating that two people are dating voluntarily and forbidding them from retaliating against each other in the future if things turn sour.

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Following the iStock

ROOFTOPS

If you’re trying to figure out where to open a new store check out the construction business. Builders are stocking up on what is expected to be the busiest construction season in years. The downside is that demand has increased lumber prices to record levels and created a shortage so houses may be slower in coming and more expensive.

Low-Tech

Barbie iStock

Mattel is getting rid of technology in its Barbie doll line in favor of the basics. Gone is the Hologram Barbie which the company launched last year and was to cost a couple of hundred dollars, along with some high-tech baby monitors. Instead the company will be focusing on baking and cooking play patterns for Barbie as well as featuring different occupations for the 70-year-old toy icon.

CAL I FO RNIA GRO CER | 29

CGA NEWS

(L to R) Chelsea Minor, Raley’s; Jonathan Mayes, Albertsons; Assemblymember Catharine Baker; Tim Murphy, Costco Wholesale; Steve Gaines, The Save Mart Companies.

(L to R) Assemblymember Tim Grayson; Ricky Volpe, Cal Poly, SLO.

Lobbyists For A Day The 2018 edition of Grocers Day at the Capitol on April 3 drew more than 70 grocery retailers and suppliers to Sacramento and featured face-to-face meetings with state legislators and staff in the State Capitol.

Paul Mitchell, Political Data, Inc.

(L to R) Brooke-Lyn Emery, Roplast Industries; Bob Hess, The Save Mart Companies.

“Grocers Day allows our members to experience what CGA does for them on a daily basis,” said CGA President Ron Fong. “They basically became lobbyists for a day, and were terrific in sharing our industry’s message with our elected officials.”

In addition to the more than 50 meetings scheduled inside the Capitol, attendees heard from popular pundit and political consultant Paul Mitchell, Vice President, Political Data, Inc., who provided insights into this year’s state elections. Other presenters included Cynthia Brazzel, Food Marketing Institute; Tim James, CGA; and Lantrel Stockton, who provided an update on the state’s WIC program.

Grocers Day at the Capitol is CGA’s premiere member lobbying event.

To maximize their legislative visits, attendees were divided into small groups and met in 30-minute sessions throughout the afternoon. Key discussion topics included reforms to the state’s troubled beverage recycling program and Proposition 47’s impact on the growing shoplifting epidemic.

CGA NEWS

(L to R) Eric Lindberg, Grocery Outlet; Michel LeClerc, North State Grocery; Renee Amen, Super A Foods; Hee-Sook Nelson, Gelson’s Markets; Ron Fong, CGA; Mike Bowers, Northgate Gonzalez Markets; Bob Parriott, Twain Harte Market.

(L to R) Assemblymember Jim Patterson; Ron Fong, CGA.

(L to R) Kelli McGannon, Kroger; Sen. Ben Allen; Kendra Doyel, Ralphs Grocery Co.

“It was critical for our elected officials to hear from our industry regarding these two extremely important issues,” Fong said, noting that due to these visits two legislators agreed to join in co-authoring a bill to fix the state’s recycling program.

“This demonstrates the influence our members can have when they take advantage of these pre-scheduled meetings.”

The day concluded with the Association’s annual President’s Reception that evening at the CGA headquarters and provided industry representatives one final opportunity to network with their elected officials.

(L to R) Jason Parsons, Michel LeClerc, North State Grocery, Inc.; Assemblymember Brian Dahle; Rick Stewart, Susanville Market; Bob Parriott, Twain Harte Market.

Clover Sonoma provided the product for CGA’s annual Ice Cream Social.

(L to R) Phil Miller, C&S Wholesale; Michel LeClerc, North State Grocery, Inc.; Senator Nancy Skinner; Chelsea Minor, Raley’s.

(L to R) Assemblymember Laura Friedman; Lynn Melillo, Bristol Farms.

CGA also hosted its annual Ice Cream Social for legislators and staff in the basement of the State Capitol. Ice cream for this highly popular event was donated

by Clover Sonoma.

“The Ice Cream Social is a great opportunity to raise awareness that the grocers are in the Capitol,” Fong said. “We are extremely appreciative of Clover Sonoma along with all the sponsoring companies that helped make this year’s event a tremendous success.”

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CGA NEWS

A s s e m bly m em b er R ec e i v e s “ L e g i s l at o r o f t h e Y e a r ” A wa r d “It’s an honor to be recognized as CGA’s Legislator of the Year,” said Assemblymember Cooper. “California grocers often face step hurdles and very slim profit margins. As a state Assemblymember I recognize these difficulties and have fought to help our grocery industry succeed, helping keep costs low for consumers.”

The former Elk Grove mayor and retired law enforcement officer was also recognized for his efforts to legislatively address the growing theft epidemic facing the grocery industry statewide.

“Assemblymember Cooper had the courage to take those in his own party who saw nothing wrong with the status quo that has encouraged more people to steal with impunity,” added CGA President & CEO Ron Fong.

For 30 years, Cooper worked in law enforcement, serving in the Sacramento Sheriff ’s department at all levels where he worked undercover in the narcotics unit and gangs unit for nearly a decade; earned a Bronze Star for Bravery during the Good Guys hostage crisis in 1991; and served as the department’s spokesperson.

Assemblymember Jim Cooper receives award from First Vice Chair Kendra Doyel, Ralphs Grocery Company.

Assemblymember Jim Cooper (D-Elk Grove) was awarded the California Grocers Association 2018 “Legislator of the Year” Award during CGA’s annual Grocers Day at the Capitol event on Tuesday, April 3.

“He has been a champion of the grocery industry and the greater business community, as well as a tireless advocate for public safety,” Doyel said. “It is for these reasons that we are proud to honor Jim Cooper for being an exemplary public servant and a friend of the grocery industry in California.”

Cooper was honored for “being an exemplary public servant and a friend of the grocery industry in California,” said CGA First Vice Chair Kendra Doyel, Ralphs Grocery Company, who presented the award.

LOS S P REVEN TION COMMIT T EE UPDA T E The CGA Loss Prevention, Safety and Risk Management (LPSRM) Committee met in early April for a full-day of educational programming focused on a variety of issues and to network with industry peers from throughout California. Presentations included a retailer case study on root cause analysis, gift card fraud, Cal-OSHA consultation, general liability best practices, trailer tracking technology and government relations. The meeting was sponsored

by The Zenith Company and Retail Marketing Services.

The LPSRM Committee is open to all CGA members companies. To learn more, or to join the committee, contact Lynn Ronsse, CGA, at (916) 448-3545.

Dave Tognetti, Raley’s, addresses Loss Prevention, Safety, Risk Management Committee.

32 | CAL I FOR N I A G R OC E R

CGA NEWS

C GA P r e s i d e n t Ga r n e r s T w o N at i o n a l A wa r d s NEW MEMBERS CGA welcomes the following members:

InterWest Insurance Services, LLC 8950 Cal Center Dr Bldg 3 Ste 200 Sacramento, CA 95826-3259 Contact: Joleen Illes, Commercial Broker Email: jilles@iwins.com Tel: (530) 897-3194 Website: www.iwins.com

Peter Larkin, National Grocers Association, presents Ron Fong with Association Leadership Award.

Regional First First Aid/ Regional Eyewash Solutions 14189 Foothill Blvd Bldg 106 Fontana, CA 92335-3093 Contact: Brian Woo, Sr. Marketing Director Email: b.woo@regionalfirstaid.com Tel: (877) 872-2600 x 301 Website: www.regionalfirstaid.com

California Grocers Association President & CEO Ron Fong received two prestigious awards in April, both recognizing his Association leadership during his first 10 years.

Fong received the Association Leadership Award from the National Grocers Association for his commitment and service to the independent supermarket industry. On April 12, he was one of five grocery industry executives inducted into the Food Industry Sales Association (FISA) Hall of Fame during a gala dinner in Danville, Calif.

In presenting the Association Leadership Award, NGA President Peter Larkin praised Fong for his talent and dedication to the independent supermarket industry.

“Ron has been a passionate and enthusiastic industry leader throughout his career in his government relations work and successfully helping CGA to grow its membership,” Larkin said.

Fong received the award while attending Grocers Day in Washington D.C., sponsored by the Food Marketing Institute and NGA. The following day Fong was in Danville, Calif. for his induction into the FISA Hall of Fame. Joining him were Joe Falvey, SUPERVALU; Kevin Konkel, Raley’s; Steve Junqueiro, Save Mart Companies, and posthumously, Bob Wilson, Dreyer’s Grand Ice Cream.

“It was a real honor to be inducted with such an impressive group of grocery executives,” Fong said. “Both awards reflect the dedication our members and CGA staff have towards our Association and industry. Without their tremendous support, none of this would have been possible.”

Select Systems Technology 390 Amapola Ave Ste 6 Torrance, CA 90501-1400 Contact: Nathan Stuart, Dir., Marketing Email: Nathanstuart@selectsst.com Tel: (310) 224-3000 x 309 Website: www.selectsst.com

Stratus Wine & Spirits, LLC 4441 S Downey Road Vernon, CA 90058-2518 Contact: Anita Bagramyan, Marketing Manager Email: anitab@stratusws.com Tel: (323) 581-3663 x 232 Website: www.1849wine.com

CAL I FO RNIA GRO CER | 33

CGA NEWS

SE C Hosts Store Tours o f S tater Bros. Markets, Costco W hole sa le The CGA Supplier Executive Council (SEC) hosted two store tours in April and May featuring visits to Stater Bros. Markets and Costco Wholesale.

David Higginbotham (right) leads SEC Store Tour.

Both visits were part of the SEC’s 2018 Store Tour series features executive-led tours who share business operation strategies and detailed information on store concepts and company philosophies.

The first store tour featured the newly opened Stater Bros. Markets in Rancho Cucamonga, Calif., which is dedicated to former company chairman Jack Brown and his parents. The tour was led by David Higginbotham, Regional Vice President, Retail Operations.

In May, SEC members toured the Costco Wholesale store in Livermore, Calif., which included a bonus tour of the Costco Wholesale Depot in Tracy, Calif. Leading the tour was Tim Murphy, VP/GMM Food & Sundries.

“Both tours provided valuable insights into each company’s operation that you typically wouldn’t receive,” said Sunny Porter, CGA. The SEC completes its 2018 Store Tour series with visits later in the year to Raley’s Fine Family of Stores in Sacramento, Calif. and Vintage Grocers in Southern California.

To learn more about the Supplier Executive Council, and participate in upcoming store tours, contact Sunny Porter, CGA, at (916) 448-3545.

Costco Wholesale’s Tim Murphy (center) discusses store format.

F o u n dat i o n L a u n c h e s U p dat e d W o r k p l ac e H a r a s s men t Prevention Training Course

The CGA Educational Foundation is relaunching its online Workplace Harassment Prevention Training supervisor course with updated content that meets all of the state’s new training requirements.

California enacted a new law in January requiring employers with 50 or more employees to modify mandatory sexual harassment training to include discussion of gender identity, gender expression and sexual orientation.

The Foundation’s online training tool has been uniquely customized with real-life situations present in the grocery business. Using practical examples and scenarios tailored to the grocery industry, this training is more effective at addressing requirements and protecting your business from liability.

This turnkey, on-demand program monitors course progress, issues certificates upon completion, and provides reporting needed to document a company’s compliance. CGA members also can take advantage of deeply discounted rates (up to 75% off).

34 | CAL I FOR N I A G R OC E R

To learn more about the training program, visit www.cagrocers. com/workplace-harassment or call (916) 448-3545.

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D EMYST IFY B L OC K C HA I N B Y LEN LE WIS

HOW M AN Y O F YO U H AV E HEAR D TH E N AM E SAT O S H I NAKAM OT O ?

Right now, even the geekiest techno-geek doesn’t know if this is a person or a pseudonym for a group of people or whether he, she or they are, as the name implies, Japanese.

It is being touted as a way to achieve real and complete transparency in the supply chain, the solution for every issue in supply chain management and “the second generation of the Internet.”

What the world does know is that Nakamoto was the creator of Bitcoin, the mysterious, misunderstood, loved and loathed cryptocurrency.

At its core, blockchains are a series of blocks or computers linked together that allow participants to keep track of digital orders and data transmission that are secured by cryptography.

However, more critical to the business community, including supermarkets, is that Nakamoto invented the blockchain, technology initially designed as an accounting method for Bitcoin but shaping up to be a game changer for data collection, storage and transmission.

36 | CAL I FOR N I A G R OC E R

Continued on page 38 ▶

Y ING

◀ Continued from page 36

It is, in effect, a digital ledger or digital spreadsheet available to a network of computers. The information contained on it exists as a shared and continually updated database which is distributed publicly but cannot be copied.

The document sharing part of the equation is far from traditional. Instead of the ledger or document being passed from one party to another and running the risk of it being lost or not everyone seeing the same one, all information on the blockchain is shared simultaneously.

“This makes it easier to track a product throughout the supply chain and log data points about key safety and quality information at every stage,” according to Peter Mehring, CEO of Zest Labs, which uses wireless sensors that can capture product information for blockchains.

The question Mehring and other observers have is whether blockchain, now in its infancy, is a true game changer or just another overhyped technology.

“You have to balance the two,” he said.

“Ever since the first fax machine, data between suppliers and retailers have been difficult. This is a great way to share data in a secure, reliable fashion that we haven’t had at the commercial level. We need to look beyond the hype and how it can deliver real value.”

“Hacking is difficult if a blockchain is created in the right way.”

Mehring said there have been electronic data interfaces like EDI, GS1 and Advanced Ship Notification (ASN) but companies have different formats and systems, making it difficult to connect data.

“Moreover, everyone’s always suspicious when there’s a single entity managing data,” he added. “Blockchain gets away

38 | CAL I FOR N I A G R OC E R

from that with peer-to-peer transactions.

If implemented properly – that’s a game changer.”

Christian Beckner, Senior Director of Retail Technology for the National Retail Federation, said it’s still early in terms of use cases and applications for blockchain.

“Good traceability food safety initiatives are being done by Walmart and Kroger,” Beckner said. “However, it’s too early to tell how some broader applications might be adopted.”

Beckner said that until blockchain is more visible from an applications standpoint, it’s hard to explain to senior leadership. It must be built into applications without realizing that it’s blockchain-enabled.

“It’s the same as 20 years ago when building an e-commerce platform was a big hurdle,” he said. “Eventually, it became a seamless process and the same thing will happen with blockchain technology.”

Making it all possible are so-called “smart contracts.” These are not contracts in the usual legal sense, but agreements that use a kind of digital fingerprint for authorized users to store information and boost transaction speed.

Also, since the blockchain database is decentralized rather than stored in one location, it can’t be accessed or corrupted by a hacker. This means that you always know whom you’re doing business with, according to knowledgeable observers.

While the technology is presently hackresistant and incorruptible, this could change at some point if quantum computers become more readily available, according to observers. The theory is that the additional computing power could negate the blockchain’s encryption, making it more vulnerable to tampering.

“Hacking is difficult if a blockchain is created in the right way and there’s a governance structure with a closed group of responsible parties among manufacturers, distribution centers and growers there shouldn’t be a security problem,” said Beckner.

Concerns about hacking are not stopping retailers, financial institutions transportation companies and others from enthusiastically working on blockchain programs.

Walmart began running pilots with IBM two years ago to reduce waste, manage food safety and recalls. The goal is to improve overall business transparency – not just traceability – and the chain is encouraging suppliers and other stakeholders like growers and processors to join in. Overall, the system can trace a product’s journey from the farm to retail in a matter of minutes instead of days, the company said.

The ability to identify fraudulent ingredients and trace the source of contaminations could, for example, be invaluable in the case of E. coli outbreaks in order to determine the region a produce item came from and who grew, supplied and distributed it.

At present, by law, each party in the supply chain must disclose a product’s path to market one step forward and one step backward. Then government agencies and retailers can analyze the data to find the source of the problem, a process that can take days or weeks.

Frank Yiannas, Vice President of Food Safety and Health for Walmart, who partnered with IBM on a pilot, told the MIT Technology Review’s Business of Blockchain conference recently that blockchain was able to cut the time it took to track produce from six days to two seconds.

Hilary Thesmar, Chief Food and Product Safety Officer for the Food Marketing Institute, believes the timeframe is feasible.

Paper purchase orders and bills of lading and centralized databases have become inefficient and cumbersome connecting the supply chain for a single item creates tremendous challenges due to overlays between order, pricing, inventory, date and locality information,” she said. “However, all of this data can be stored in the blockchain, making it easily accessible. Finding the lot number for a recalled product can indeed be reduced from days to minutes or seconds.”

“Overall, the system can trace a product’s jour ney from the far m to ret ail in a matter of minutes.”

Mehring also believes this can be done because blockchain is a single database and cloud computing is very fast.

“But that’s tracing back,” he said. “If you run the same exercise from the source, I don’t think results would be nearly as quick. If you’re a supplier and you want to put all the mangos shipped on May 14 in quarantine it would take more than a few seconds.”

He would also disagree with those that say blockchain is an industry cure-all.

“Some say blockchain on its own will solve the safety issue or waste issues,” Mehring said. “But it’s really about how you use the data you put into it. Some people like to think that by using blockchain for the food supply means we’ll never have another E. coli outbreak in lettuce. I wish it were true.

From a technical standpoint that’s not what blockchain delivers.”

However, the good news is that developments are happening quickly.

“Companies are being challenged to do better, and that fosters time and investment in solving the problem,” said Mehring.

Continued on page 40 ▶

CAL I FO RNIA GRO CER | 39

◀ Continued from page 39

EMBRACING BLOCKCHAIN

Thesmar added: “We do know that the future success of blockchain and other emerging technologies to enhance traceability will still depend on the collaboration of supply chain partners to adopt harmonized, and interoperable systems that allow for the exchange of key data elements and critical tracking events that are the foundation of food product tracing.”

Blockchain technology, while still in its infancy, has become an international business imperative, with many companies developing applications specific to their own industries.

What blockchain does deliver, according to NRF’s Beckner, is total visibility from the point of origin.

“Think about the recent recall of romaine lettuce and the ability to trace it from the field to the initial processor to the warehouse to the grocery store and have a record of where everything was throughout the supply chain,” he said.

Walmart, which first started testing blockchain technology with pork from China in 2017, has formed the Blockchain Food Safety Alliance to develop food standards and partnerships that will result in a food safety ecosystem and a standard method of collecting worldwide data about safety, authenticity and origin of food products.

The company is also experimenting with storing payment data on blockchain.

This could be safer than traditional cloud storage and offer greater protection from data breaches and identity theft. Walmart has also filed two patent applications with the U.S. Patent and Trademark Office for a “vendor payment sharing system” that includes authentication protocols.

On another front, Fortune magazine has reported that Walmart is exploring blockchain for its drones to improve delivery to customers’ homes.

Some observers do question whether blockchain technology will be limited to large companies.

40 | CAL I FOR N I A G R OC E R

Helzberg Diamonds Two hundred stores will be able to use their phones to find out exactly where their jewelry came from.

Through an alliance called TrustChain, IBM, Helzberg and companies involved with mining and refining will be able to track gems and precious metals from their origins all the way to the mall, eliminating the marketing and sale of so-called blood, or conflict diamonds.

Maersk Line The world’s largest container shipping company is developing blockchain technology to track the movement of goods globally with greater efficiency.

It has dozens of partners around the world which will enable Maersk to use one global system to track products and eliminate paper.

Batavia Batavia is a blockchain-based financial platform developed by the Bank of Montreal, Commerzbank and others, which involves sending cars from Germany to Spain and textiles used in furniture production from Austria to Spain.

Companies including Airbnb, and Daimler AG have purchased blockchain startups. Others like JP Morgan, American Express and Visa have started researching it.

The financial industry is also a strong case for blockchains. One application would be for international remittances or money transfers, which the World Bank estimated was over $430 billion in the U.S. alone in 2015. Some observers believe blockchains would also improve liquidity and free up capital in the financial markets.

Fortacast This Singapore software company is using blockchain technology to help companies automate finance and operations to achieve labor savings.

Bank of America Bank of America has filed with the U.S. Patent and Trademark Office outlining plans for a permissioned blockchain for personal and business data sharing.

A user will authorize service providers to securely access their data, but only for the specific records they have access to. For example, a healthcare provider will only have access to relevant healthcare records.

On a more altruistic note, Microsoft is working with Accenture and the United Nations to prevent human trafficking by using blockchain to provide a legal form of identification for 1.1 billion people worldwide.

Observers are quick to emphasize that blockchains, still in their infancy, don’t represent a magic formula for curing all the ills of the Internet. But as one expert pointed out: “blockchain is the answer to a question we’ve been asking since the dawn of the Internet Age – how can we collectively trust what happens online.”

“Larger companies are the ones that will pilot it because they have the resources and technology,” Beckner noted. “But once you have the platform in place it would be open to a broader set of small and medium-sized companies.”

Mehring thinks the answer is to work with smaller partners.

“We want to encourage adoption of blockchain at the grower level and beyond that to small retailers and farmers that don’t have IT departments,” he said.

“We’re just trying to democratize the use of blockchains.”

As Thesmar noted: “Big or small, each participant in the supply chain would provide a block of data in the chain – including farms, pack houses, importers, processors, distributors, retailers and consumers. Having all this information accessible in seconds is a tremendous

benefit. For an independent operator, blockchain could offer a way to differentiate their business and supply customers with enhanced information about products.”

The consumer part would be relatively easy because data in the blockchain can be segmented.

“This is called the enterprise blockchain,” said Mehring. “This would let consumers see the provenance of a product – things like harvest data – not proprietary information like the wholesale price. You can develop an application for the cache of public data that’s easily accessible.”

He noted again that this is not allowing consumers full access, but access that’s fully validated by the blockchain.

Due to the international nature of the food industry, blockchains can improve relationships with overseas suppliers, but it boils down to how data is gathered.

Currently, blockchains are, for the most part, run on barcodes.

“We’re taking a different approach,” Mehring said. “We gather our data from low-cost sensors that have a built-in ID. They don’t require any labor to catch the data at every step in the supply chain, and you don’t have to worry that someone in Ecuador decided they don’t want to capture the data today. Sensors make international adoption more reliable, consistent and easier. Less training involved and it will make everything more trusted.”

Mehring recommends that everyone should be involved.

“The best way to understand new technology is to test it, work with it, so you understand the benefits and overhead,” he said. “It’s hard to understand how it will affect your business by asking others.” ■

CAL I FO RNIA GRO CER | 41

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LOSS PREVENTION ISSUES In Recent Research

Academics who examine crime and security-related issues aren’t always seeking practical solutions, but some recent research studies have pragmatic applications and impart some actionable advice on relevant loss prevention issues.

44 | CAL I FOR N I A G R OC E R

Below are questions researchers have recently looked at and what loss prevention should know about what they found.

Does providing a financial incentive for reporting workplace theft, such as a percentage of the recovered loss or a cash reward, increase employee reporting?

A research project out of the University of Texas suggests that incentives can be beneficial, but that it seems to be limited to work environments where job satisfaction is low. Financial rewards probably have less or a negligible impact on reporting among workers with high job satisfaction and at businesses with robust pre-employment screening programs, according to the study, “Comparing Risk Reducing and Incentive Bases Reporting in a Small Business.”

Is it only violent acts or does the mere fear of violence have an impact on client-facing staff?

Perception matters, according to a study in the Journal of Occupational Health Psychology, “Consequences of clientinitiated workplace violence: The role of fear and perceived prevention.” Fear levels – based on workers’ perception of violence and how well they think they can cope with client-initiated violence and threats – have negative personal and organizational consequences, including turnover, the study concluded.

Do shoplifters consider the design layout or just security techniques as they walk the store?

Both expert and novice shoplifters consider both, according to a study that put shoplifters in an actual department store and then gathered their thoughts on the deterrents they recognized. The most commonly cited deterrents by both expert and novice participants were formal

surveillance, product positioning, employee positioning, access control, and store layout.

“This supports previous research that found shoplifters considered both design and security techniques,” concluded the study, “Advancing Retail Security Design: Uncovering Shoplifter Perceptions of the Physical Environment,” published in the Journal of Interior Design. “All shoplifters focused attention on the physical layout of the store and security devices and typically remarked that the best deterrents combined multiple strategies for preventing theft.”

Do stores in neighborhoods that are in good order benefit from more aggressive interventions by neighbors?

A researcher walked up and down streets of a medium-sized coastal city in the northeastern United States to test whether individuals took notice of her observing their properties or went further and confronted her or called police.

The experiment was designed to test if environmental factors, such as property maintenance issues like broken lights, trash, and graffiti, have an impact on “guardianship intensity.” That is, would casual observers be more likely to actively intercede to discourage crime in orderly neighborhoods?

Ultimately, the study found “a weak but significant direct relationship between the guardianship level and the image/ maintenance of the property.”

More significant, however, was the relationship between guardianship level and opportunities for surveillance. That is, the study showed that guardianship intensity is lower when physical features obstruct property windows from public space. The experiment also showed that individuals don’t need to be actively looking for trouble to provide a crime deterrent.

“Previous statements that it is the mere presence of guardians who could be watching and could observe untoward behaviors are supported by this research,” according to the study published in Security Journal, “What makes a guardian capable?

A test of guardianship in action.”

Do body cameras impact behavior in a way that makes lawsuits less likely?

Lawsuits are one of the more prevalent loss prevention issues for today’s LP executives, so it’s worth noting that researchers have found that when police officers wear body cameras use of force is cut in half, which translates into fewer public complaints.

The experiment, written up in Journal of Quantitative Criminology, was the first to test the effect of wearable video cameras on officer compliance rates and citizen complaints, “The Effect of Police BodyWorn Cameras on Use of Force and Citizens’ Complaints Against the Police: A Randomized Controlled Trial.”

Over 12 months, the researchers from University of Cambridge’s Institute of Criminology randomly-assigned Rialto, Calif., police officers to “experimental shifts” during which they were equipped with body-worn HD cameras and “control” shifts, in which officers did not wear cameras.

“We found that the likelihood of force being used in control (non-camera) conditions were roughly twice those in experimental (body camera) conditions,” according to the study. “The number of complaints filed against officers dropped from 0.70 complaints per 1,000 contacts to 0.07 per 1,000 contacts.” ■ Editor’s Note: This article was reprinted by permission of LP Magazine.

CAL I FO RNIA GRO CER | 45

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Caught in the

Crossfire

Complying with Federal, State and Local Immigration Laws

48 | CAL I FOR N I A G R OC E R

One of the Trump administration’s highest priorities since assuming office has been enforcing the nation’s immigration laws and taking steps to discourage illegal immigration.

The Immigration and Customs Enforcement (ICE) Agency made 232 arrests in a March 2018 sweep in the Bay Area after making 212 arrests in Los Angeles in February. The Los Angeles sweep targeted 122 businesses.

California’s elected officials responded to the anticipated increase in federal enforcement activity by passing a controversial “sanctuary law” in late 2017, which places limits on how and when local law enforcement agencies and businesses cooperate with immigration authorities.

To further complicate matters, there are local California jurisdictions which have also established their own “sanctuary rules” including the Berkeley, Oakland, Los Angeles, San Francisco, Santa Ana and Watsonville. Fourteen counties have also adopted some form of sanctuary status: Alameda, Contra Costa, Los Angeles, Monterey, Napa, Riverside, Sacramento, San Bernardino, San Francisco, San Diego, San Mateo, Santa Clara, Santa Cruz and Sonoma.

The new state law went into effect in January 2018 and since then California employers have been caught in what likely feels

like crossfire between the federal government and state and local jurisdictions.

State law bars employers from voluntarily providing employee information to federal authorities. Businesses could face fines up to $10,000 if they violate its provisions. The U.S. Department of Justice is challenging California’s sanctuary statute in the courts which means it could be several years before matters are settled.

In the interim, what’s the best course of action for grocers?

“California employers often are faced with having additional compliance requirements imposed by state law,” says Liz Stallard, an employment attorney with the Sacramento-based law firm Downey Brand LLP. “This situation is no different; unless and until something changes, California employers need to make sure that they are complying with California law.”

The simple answer is to do three things: understand and adhere to federal and state laws, remember your rights as an employer, and have a plan in the event ICE makes a call on your store/operation.

Continued on page 50 ▶

CAL I FO RNIA GRO CER | 49

◀ Continued from page 49

Documentation What the feds say: Grocers should be diligent in complying with federal I-9 requirements. Employers are required to have an I-9 form on file for every person

I-9 employment eligibility verification forms, the state prohibits employers from reverifying the employment eligibility status of current employees unless required by federal law.

Workplace Entry/Inspections What the feds say: When ICE wants to inspect an employer, it must forward a Notice of Inspection (NOI), starting the clock on a three-day window in which ICE will collect the documents it wishes to review.

What state law says: Under the state law, employers cannot allow federal immigration agents to enter private workplace areas without a federal judicial warrant. If ICE agents arrive, staff should ensure agents remain in a public workspace.

“One of the Trump administration’s highest priorities since assuming office has been enforcing the nation’s immigration laws and taking steps to discourage illegal immigration.” they employ, and the form should indicate whether the employee is a U.S. citizen, permanent resident, or on some type of non-immigration visa that provides authorization to work in the United States.

Employers must see and record the documentation the employee provides as proof of their identity and status. The I-9 form includes a list of what constitutes acceptable documentation. These I-9 forms should be completed within three days of an employee starting work and kept on file.

Retain a copy of these files, many suggest, in the event they are collected by immigration agents; typically, it takes months for ICE to review and then return documents.

What state law says: The new state law prohibits employers from allowing federal immigration to access employee records without a subpoena or judicial warrant.

While these restrictions don’t apply to 50 | CAL I FOR N I A G R OC E R

Your Rights as an Employer Ultimately, the employer is responsible for properly completing I-9 forms.

Most experts suggest companies conduct self-audits of I-9 documents to ensure they’re in compliance with federal statutes.

Identifying deficiencies doesn’t necessarily require reverifying employment eligibility; make sure information is correct and that documentation isn’t missing. It’s also recommended to seek the legal counsel advice to clarify actions that could constitute improper reverification – a violation of the new state law.

Continued on page 52 ▶

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◀ Continued from page 50

Should ICE agents seek a review of your I-9 forms, you do have the right to speak with your attorney before answering questions and/or signing documents.

If ICE determines that employees are not authorized to work, it will allow an employer 10 days to provide valid work authorization for these employees. If you’re unable to provide the documents in that time, you will be directed to terminate their employment. If this happens, you must notify the affected workers of the audit.

If your employees belong to a union, you may need to provide copies of the audit documents to the union and work with the union as you respond to the audit.

What is an I-9 Audit?

An I-9 audit is what occurs when ICE visits a business to inspect employee I-9 forms. I-9 forms confirm a worker’s identity and authorization to work in the U.S. Employer I-9 Requirements I-9 forms are required for all new employees and must be kept on file for three years after hiring or one year after the worker’s last day of work, whichever is later.

What is a reverification?

A reverification occurs when an employer conducts a self-audit and reverifies current employees’ work authorizations. Doing so could leave employers exposed to being fined by the state of California. Seek legal counsel to clarify if your actions could be deemed to be a reverification.

“The best course of action is to reach out to unions now to discuss a plan for communicating about these issues,” Stallard suggests. “The better prepared you are, the easier it will be when you find yourself in this situation.”

Have a Plan Formulate a brief written action plan, in light of the change in law and practices, with your human resources leader.

Many experts suggest employers select an “immigrant point person” for your company/operation. That individual should be the point person with ICE and your employees should be advised to direct inquiries there, leaving less vulnerability to violating state or local statutes. Ideally, it’s best to have an attorney serve that role.

Having an attorney as your designated point-of-contact reduces the likelihood that ICE will visit your workplace.

Stallard says the compliance burden falls heavily upon employers, who must ensure they comply with their legal obligations, while at the same time navigate appropriate responses to law enforcement requests.

“Having a knowledgeable resource in this area is vital for every employer; so is making sure the rest of your workforce knows to

52 | CAL I FOR N I A G R OC E R

call on that resource when situations arise so that company actions are consistent and legally compliant,” Stallard adds.

It is recommended that company I-9 forms are in order and staff conducts due diligence in filling out these documents on each new hire. That way, you’ve complied with federal law upfront, and are less likely to wind up in the crossfire between federal officials and state (or local) lawmakers should enforcement personnel, with proper notice, pay your store/company a visit. ■

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CAL I FO RNIA GRO CER | 53

1 5 MINUTES WITH…

Brian Dahle A S S EMBLY REPU BLICAN LEADER

Brian Dahle has represented California’s First Assembly District since 2012. Prior to his election to the state Assembly, he was a Lassen County supervisor for 16 years. Assemblymember Dahle is a thirdgeneration farmer, business owner and father.

relationship with my colleagues across the aisle and go extra lengths to make sure they get some perspective from a part of the state they don’t always see. I’ve had around 100 legislators from both parties up to my district. Most have left with a very different picture of what California really looks like.

“We need the small businesses that are the lifeblood of our economy to realize that being involved in politics is an essential part of keeping their businesses afloat.”

In April, the Assembly Republication Leader addressed the CGA Board of Directors and shared his views on California politics and the role business must play.

California Grocer: What led/inspired you to get involved in politics?

Dahle: I want to be able to pass on my farm to my children. California is going in the wrong direction, but I can’t just pick up my land and leave. There are millions of people here who feel the same way. I came to Sacramento so that I could fight for policies that will actually help farmers and small businesses stay afloat.

As Assembly Republican Leader what is your approach to legislating/ interacting with Democrats? What are your major challenges?

As part of the super-minority, the only way to get things done in this state is through cooperation. I work hard to keep a good

What does the business community need to do to effect change in the Legislature?

We need businesses to get engaged in the political process. Not just big business either.

We need the small businesses that are the lifeblood of our economy to realize that being involved in politics is an essential part of keeping their businesses afloat.

We have $200 billion in looming state debt that will eventually come due.

The government doesn’t create wealth, it can only take it. Businesses need to realize that if our government continues to grow and borrow at an unsustainable rate, the bill will eventually come due. When that happens, businesses are going to be the ones who pay.

California’s problem is the regulatory environment. What are some examples from your business and what can be done to ease the problem?

Since I’ve been in elected office, our Legislature has passed thousands of bills.

Of those, I’m hard pressed to think of one that actually helped businesses. Every time this legislative body acts, it’s another hurdle for businesses.

We need to start cutting through the red tape. The first and biggest step we can take is reforming CEQA. A small business shouldn’t need a stable of lawyers in order to build and grow.

What is the short-term and long-term plan to grow the Republican Party.

What are we looking at 2018? What’s your plan to get there?

The Republican Party has a branding problem. People in California think we don’t care about them and don’t reflect their values. A lot of that is unfair and untrue, but perception can become reality and we have to face the facts. Republican Party registration in California is hovering around 25 percent. Luckily for us, the other party is not fairing much better. As people continue to defect to decline-to-state voters, we have an opportunity to reach out and win them over.

Our first step is to get back out of the super-minority. That means keeping all of our current seats and picking up a couple more where we have the opportunity.

Continued on page 56 ▶ CAL I FO RNIA GRO CER | 55

15 MINUTES WITH… ◀ Continued from page 55

We’ve recruited some amazing candidates throughout the state who truly reflect their districts. These people can connect with voters in their own districts in a way that out of touch members of the majority party no longer can.

Once we are back to 27 seats, we are in the game. A few more seats, and we’re real players. From there, it’s on to 41 and we are governing.

Are there any words of political advice you would give to grocers, or anyone else reading this interview?

The party registration numbers may look bleak, but I’m optimistic about this next election. I would say don’t count us out just yet. This party is far from dead and on the verge of a rebound in California. The key is organization. Democrats have the unions behind them and that gives them an organizational advantage, but if small businesses started organizing the same way, we could flip the table. ■

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Anheuser-Busch InBev

Kellogg Company

Bimbo Bakeries USA

Kimberly-Clark Corporation

C&S Wholesale Grocers

MillerCoors

Coca-Cola North America

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In Appreciation of the California Grocer’s Association for 120 Years of Leadership and Service to our Industry.

CAL I FO RNIA GRO CER | 57

KNOW THE LAW

Grocers’ Guide to the Toxics In Packagi ng Prevention Act BY: LEIL A BRU D E R ER , DOW N EY B R A N D L L P

Despite its focus on packaging manufacturers, A law to reduce package toxicity may impact Retailers as well.

The Toxics in Packaging Act Can Impact Retailers Prevention Act (TPPA), passed by the California Legislature in 2003, and amended in 2004, 2007 and 2008, was intended to reduce the toxicity in packaging that ends up in solid waste landfills.

The TPPA’s primary focus is on packaging manufacturers; it bans manufacturers from selling or promoting packaging that contains one or more specified heavy metals if the metals have been intentionally introduced during manufacture or distribution of the packaging.

purchases packaging from a manufacturer to package a product manufactured or sold by the grocer, the grocer would be considered a “purchaser” under the TPPA. A “purchaser” under the TPPA is someone who purchases and takes title to a package or packaging component from a manufacturer or supplier for the purpose of packaging a product manufactured, distributed or sold by the purchaser.

In addition, it restricts the total concentration of the regulated metals present in a package component to less than 100 parts per million by weight.

And, it requires manufacturers to provide a certificate of compliance stating that the packaging they sell is compliant with the TPPA to each purchaser.

The heavy metals covered by the TPPA are lead, cadmium, mercury or hexavalent chromium. The TPPA is enforced by the California Department of Toxic Substances Control (DTSC).

Despite its focus on packaging manufacturers, retail grocers can get into trouble under the TPPA. Where a grocer 58 | CAL I FOR N I A G R OC E R

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Purchasers are required to retain the certificates of compliance received from manufacturers for as long as the packaging component is in use by the purchaser. This requirement would apply to the carry-out bags grocers give to customers as well as to

packaging used in the bakery, deli, meat, and prepared foods departments among others.

Where grocers purchase products already packaged from suppliers, the grocer would not be considered to be the manufacturer or purchaser but should request and retain certificates of compliance for the packaging from its supplier. There are two reasons for this.

First, DTSC may request copies of your certificates of compliance via an information request. Under the TPPA, DTSC can inspect packages in your store, purchase and sample those packages, and request that you provide them with information regarding the packages, including the identity of your supplier and copies of the certificates of compliance.

Second, when a grocer sells a product in non-compliant packaging, but has a certificate of compliance from the manufacturer and relies on that certificate for compliance, the grocer will not be subject to any administrative or civil penalties for the alleged sale of non-compliant packaging if the grocer takes prompt corrective action upon notice of violation from DTSC.

KNOW THE LAW

“The TPPA’s primary focus is on packaging manufacturers; it bans manufacturers from selling or promoting packaging that contains one or more specified heavy metals.”

It is recommended as a best practice that grocers request certificates of compliance from all suppliers of packaging components and all suppliers of packaged products and maintain those certificates of compliance while they are still using the packaging or selling the products. Since the TPPA’s adoption, DTSC has only pursued a few enforcement actions focused on the manufacturer or purchaser of packaging.

It is unclear whether DTSC would pursue enforcement against a grocer for its sale of products packaged in non-compliant packaging, but requiring suppliers to provide you with certificates of compliance for their packaging will ensure that DTSC never gets that opportunity. ■

Editor’s Note: Leila Bruderer is a Counsel in the Sacramento offices of Downey Brand LLP. She practices in the areas of environmental litigation, environmental compliance, hazardous waste compliance and Proposition 65.

ADVERTISER INDEX PAGE COMPANY 47

Agilence

PHONE

EMAIL

WEBSITE

856-366-1200

bdonnelly@agilenceinc.com

agilenceinc.com

4, 42 Albertsons Companies

925-467-3000

41

Alto

305- 424 1677

klanghorst@alto-us.com

alto.us

43

Bimbo

916-456-3863

wcrocker@bbumail.com

bimbobakeriesusa.com

15

C&S Wholesale Grocers, Inc.

916-373-4396

pmiller@cswg.com

cswg.com

BC

Certified Federal Credit Union

909-261-4065

ghurd@vonscu.com

vonsefcu.com

23

ECOS

800-335-3267

craig@ecos.com

ecos.com

IBC Miller Coors

916-786-2666

13

916-503-8206

marci.reynolds@mossadams.com

mossadams.com

Moss Adams

albertsons.com

7, 57 Ralphs Grocery Company

310-884-9000

ralphs.com

51

Real Time Services

800-908-2823

referral@realtime-srvcs.com

53

Regional First Aid

877-872-2600

sales@regionalfirstaid.com

regionalfirstaid.com

35

Retail Marketing Services

800-252-4613

mdodson@retailms.net

cartretrieval.net

46

SUPERVALU

323-264-5200

customercare@unifiedgrocers.com

supervalu.com

9

TruGrocer Federal Credit Union

208-385-5273

cdemaray@trugrocer.com

trugrocer.com CAL I FO RNIA GRO CER | 59

MOMMY BLOGGER

It’s in the Bag(ging) K I M B ER LY M I L L ER WR IT E R , ACT R E S S

The checkout line is where I know whether I’ll be having a long-term relationship with a grocery store.

We’re not perfect, but my family tries to make environmentally friendly choices where we can, like: swapping out paper products for cloth where we can, using paper straws, refillable glass bottles for water, and we recycle everything we can. We 100 percent support our local government’s initiative to phase out single-use plastic bags for reusable ones.

While some of the other moms on my local family listserv complained about the added expense and annoyance, I was psyched.

This was an excellent opportunity to teach my toddler about all the everyday things we can do to protect the environment.

He helped me pick out a colorful set of reusable bags to keep in our car, and I even splurged on mesh bags for produce – because anything worth doing is worth doing right.

(At least that’s the parenting message I’m aiming for most days.)

I was ready to tackle this new project.

But some of my favorite stores weren’t.

The new bagging dance was a little awkward to begin with: • Do I bag my food?

• Do you bag my food?

• Do we chuck it all in the cart and I’ll deal with it at my car?

I noticed after a few months that for some stores, the long, slow lines and exasperated looks of customers and cashiers as I fumbled to pack my groceries and quickly pay while keeping my two-year-old from plummeting to his death, melting down, or throwing everything in arm’s reach, were just growing pains. For others, it had become the status quo. The message was clear: Your bags, your problem.

The 10-minutes or so that I spent in line at the grocery store, bags at the ready, changed the way I shopped for my family. Instead of scouring the weekly circulars for the best deals, I’ve resigned myself to shopping at the few stores I know have worked out a bagging system that doesn’t leave me frazzled.

Each of these, I noticed, has its method; one moves food directly from your cart to a new cart bags or no bags. Another encourages shoppers to fill their bags as they shop and rings up everything in each bag and packs it right back up.

But by far the most efficient system is what we used to have in every grocery store – a cashier and a bagger at each register. ■ Editor’s Note: Kimberly Miller is a writer and actress whose articles have appeared on Conde Nast’s blog network, Social Workout, Yahoo’s women’s network Shine and in various magazines. She also contributes entertainment news to CBS Radio and CBS New York.

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