California
The withering California Dream PAGE 36
Illuminator Headlite: Mark olejnik 2 0 1 7, I S S U E 2
CALIFORNIA GROCERS ASSOCIATION
PAGE 48
Prop 47: Mend, don’t end Page 24
CGA Educational
Foundation Celebrates 25 th anniversary PAGE 40
September 24–26, 2017 Palm Springs, California For more information visit www.cgastrategicconference.com “The CGA conference is an excellent way to learn more about what’s going on in our industry, including the use of cutting edge technology, changing consumer trends, and how to come together to protect our industry from unfriendly legislation. It’s also a wonderful venue to renew old friendships and establish new ones and share solutions to grocery business problems.”
Success in grocery retailing today requires companies to do a multitude of things exceptionally well. Accelerated competition, divided customer economies and new shopping behaviors empowered by mobile technologies have created an extraordinarily complex business atmosphere. Creating the perfect retail performance requires improvisation and experimental riffs while working in concert with growers, manufacturers and all aspects of the supply chain in a way that is pleasing to your audience and endearing to your fans. Increasingly, grocers are focusing on creating venues where food takes center stage and seamless logistics create a harmonious customer experience. Successful companies are fine tuning the instruments of digital marketing, employee training, store design, healthful assortment and blending center and perimeter priorities to strike just the right chord with today’s shoppers. Come join your colleagues and business partners and uncover new ways to be a retailing rock star and set the stage for this new age of grocery shopping.
Eric Hanks Earth Friendly Products
“This was my first Conference and I was uncertain of how worthwhile it would be. The speakers were excellent and the topics both timely and educational. Beyond that, I was able to talk to others who face similar challenges to mine. The opportunity to meet with other retailers and vendors was great. I’d recommend anyone in the grocer industry attend.”
Jeremy Cullifer Jule’s Market
Calendar ♪ Sunday, September 24
• Illuminators Golf Tournament • Opening General Session • Opening Reception • After-hours Social Event
♪ Monday, September 25
• Collaborative Share Groups • Opening Remarks and General Session • Pre-Scheduled Business Meetings • Independent Operators Forum • Loss Prevention Executive Summit • Reception & Illuminators Special Event
The Main Event Mark your calendar now and plan to join the single largest gathering of California grocery industry executives for three days of knowledge building, face-to-face meetings and networking events. Explore new ways to collaborate that creates the perfect retail performance and builds your business.
Rock On! 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 most successful conferences.
New in 2017! The CGA Strategic Conference expands its targeted educational content and successful one-on-one meeting format to include the disciplines of store Loss Prevention, Safety and Risk Management.
Sponsorship Opportunities 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 opportunity to meet with California’s top grocery decision makers. For complete sponsorship information including a list of participating retailers and sponsorship prospectus, contact: Beth Wright Senior Director, Events & Sponsorship California Grocers Association (916) 448-3545 ♪ (800) 794-3545 bwright@cagrocers.com
♪ Tuesday, September 26
• Multiple Educational Session & Retailers Spotlight • Pre-scheduled Business Meetings • Luncheon Keynote Address
CGA | BOARD OF DIRECTORS
EXECUTIVE COMMITTEE
CHAIRMAN APPOINTMENTS Independent Operator Committee Chair DIRECTORS
CALIFORNIA GROCERS ASSOCIATION
2 | CAL I FOR N I A G R OC E R
Chairman Jim Wallace The Albertsons Companies
Second Vice Chair Kendra Doyel Ralphs Grocery Company
Secretary Hee-Sook Nelson Gelson’s Markets
First Vice Chair Bob Parriott Twain Harte Market
Treasurer Phil Miller C&S Wholesale Grocers
Past Chairman Kevin Konkel Raley’s
Renee Amen Super A Foods
Kevin Arceneaux Mondelēz International Inc.
Dave Jones Kellogg Company
Jon Alden Jelly Belly Candy Co.
Willie Crocker Bimbo Bakeries USA
Joe McDonnell Campbell Soup Company
Laura Price Nielsen
Teresa Anaya Northgate Gonzalez Markets
Steve Dietz UNFI/Tony’s Find Foods
Mark McLean CROSSMARK
Mike Ridenour The Kraft Heinz Company
Joe Angulo El Super (Bodega Latina)
Damon Franzia Classic Wines Of California
Casey McQuaid E & J Gallo Winery
Casey Rodacker Mar-Val Food Stores, Inc.
Rich Arnold Oberto Brands
Jen Fulton PepsiCo Inc.
Mario Mediati The Clorox Company
Denny Silva Coca-Cola Refreshments
Bary Benun Anheuser-Busch InBev
Ted Gardner Rio Ranch Markets
Lynn Melillo Bristol Farms
Elliott Stone Mollie Stone’s Market
Denny Belcastro Kimberly-Clark Corp.
Ryan Jost Procter & Gamble
Dan Meyer Stater Bros. Markets
Joe Toscano Nestlé Purina PetCare
Leon Bergmann Unified Grocers, Inc.
Michel LeClerc North State Grocery Inc.
Doug Minor Numero Uno Market
Jim Van Gorkom NuCal Foods
Bob Bukovec Tyson Foods, Inc.
Eric Lindberg, Jr. Grocery Outlet, Inc.
Nicole Pesco Save Mart Supermarkets
Michael Walton Unilever
Cindy Chikahisa Sprouts Farmers Market
Dave Madden MillerCoors
Richard Wardwell Superior Grocers
Brent Cotten The Hershey Company
Jonathan Mayes Albertsons Companies, Inc.
Chris Posdesto Food 4 Less (Stockton)/ Rancho San Miguel
President/CEO Ronald Fong
Senior Director, Events and Sponsorship Beth Wright
California Grocer is the official publication of the California Grocers Association.
Publisher Ronald Fong rfong@cagrocers.com
Dennis Darling Foods Etc.
Senior Vice President, Government Relations and Public Policy Keri Askew Bailey
Senior Director, Government Relations Aaron Moreno
Senior Vice President, Business Development and Marketing Doug Scholz
Director, CGA Educational Foundation Brianne Page
Vice President, Communications Dave Heylen
Director, Administration Lesley Hall
Executive Director, CGA Educational Foundation Shiloh London, CFRE
Controller Gary Brewer
1215 K Street, Suite 700 Sacramento, CA 95814 (916) 448-3545 (916) 448-2793 Fax www.cagrocers.com For association members, subscription is included in membership dues. Subscription rate for non-members is $100 and does not include CGA Buyers’ Guide. © 2017 California Grocers Association
Kevin Young Young’s Payless Market IGA
Editor Dave Heylen dheylen@cagrocers.com For advertising information contact: Bill Kaprelian bkaprelian@cagrocers.com
CONTENTS | ISSUE 1
FEATURES
24 Prop 47: Mend, Don’t End It seemed innocuous enough. Prop. 47 was touted as the Safe Neighborhoods and Schools Act. But as often is the case, if something sounds too good to be true, it more than likely is.
48
Meet The Illuminators New Headlite Mark Olejnik This May, Mark Olejnik begins his tenure as Headlite of the Illuminators, continuing a tradition that began in 1928, and a responsibility he takes very seriously.
COLUMNS President’s Message Why Grocers You May Ask?. . . . . . . . . . . . . 5 Chairman’s Message Reflecting Back, Looking Forward. . . . . . . . 6
36
Viewpoint April Fools. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Capitol Insider BCRP Reform: Another Wasted Year. . . . . 18
The Withering California Dream
Inside the Beltway Talking About Taxes…. . . . . . . . . . . . . . . . 20
The California dream isn’t dead. It just upped and moved to South Dakota. For the first time, children born in California have a less than 50 percent shot of making more than their parents did at age 30. What’s the bigger message here?
Washington Report Don’t Undo Debit Card Swipe Fee Reform . . . . . . . . . . . . . . . . . . . . 22
DEPARTMENTS CGA News. . . . . . . . . . . . . . . . . . . . . . . . . . 10
40 CGA Educational Foundation Turns 25 For a quarter century the CGA Educational Foundation has served California’s grocery industry by providing financial support to deserving students and creating meaningful educational programs.
Outside the Box New Retail Perspectives.. . . . . . . . . . . . . . . 14 Member Profile BevMo!. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Know the Law The New Frontier of Nutritional Labeling Guidelines. . . . . . . . . . . . . . . . . . . 58 15 Minutes With... Deborah Weinswig. . . . . . . . . . . . . . . . . . . 60 Index to Advertisers. . . . . . . . . . . . . . . . . . 63 Mommy Blogger Nuts About Nutrition.. . . . . . . . . . . . . . . . . 64
CAL I FO RNIA GRO CER | 3
OUR PEOPLE DELIVER
INNOVATION. VALUE. RESULTS. Unified Grocers is the largest wholesale grocery cooperative in the western U.S. Retailers can rely on Unified to deliver all the products and services they need to compete in today’s ever-changing grocery industry.
For more information, please visit www.UniďŹ edGrocers.com or call 323.264.5200
PRESIDENT’S MESSAGE
Why Grocers You May Ask?
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
Ask any retail member why they belong to CGA and the response always includes a reference to California’s burdensome regulations.
rules and regulations will play out in real life.” Unfortunately, that could be said for nearly every state regulatory agency. Sometimes burdensome regulations are the unintended consequences of bills signed into law, or propositions approved by voters. Proposition 65 and the Beverage Container Recycling Program come to mind.
California, once dubbed the “Golden State” is now often referred to as the “Nanny State.” While the grocery industry isn’t alone in laboring under the weight of over regulation, it often seems that way. Why is that?
These are just a few of the reasons why our industry is such a prime target for over-regulation. There are many more. Technology, cash-strapped municipalities, entitlement programs and special interest groups are but a few.
Given it’s universally accepted that California businesses are over-regulated, there are reasons as to why we’re prime targets. Some reasons are obvious, while others aren’t. First, the low-hanging fruit. Exposure alone places a bulls-eye on our backs. Simply put, everyone eats. Nearly everyone shops. But few, if any, interact with manufacturers or distributors, so when there’s an issue – labeling for instance – who do they turn to? The grocer. Think about it. Local government can’t regulate beyond their boundaries, neither can the state. So when government seeks to regulate food, the easiest touch point is the in-state entity. Again, the grocer.
That’s not to say all regulations are bad. In many ways, regulations like taxes are a necessary evil and serve a purpose. But, I think, in moderation.
iStock
Compounding this problem has been the Legislature’s willingness to hand over vast amounts of authority to unelected regulatory bureaucrats in a multitude of state agencies who then implement expensive and cumbersome regulations.
Everyday CGA’s government relations team works hard to educate lawmakers and regulators to the unintended, and sometimes intended, consequences of laws and regulations that in the long run not only burden business but every Californian. It’s a challenge, but one we are determined to address head on. ■
In reporting on an Air Resources Board proposal to make underinflated tires punishable by a $1,000 fine, the idea “reflects a state environmental bureaucracy that sees breaking new ground as its fundamental goal – no matter how new CAL I FO RNIA GRO CER | 5
CHAIRMAN’S MESSAGE
Reflecting Back, Looking Forward
J I M WA L L AC E T HE ALBE R TS ON S COMPAN IES
The CGA Educational Foundation celebrates its silver anniversary this year. Over the years the Foundation has provided numerous educational advancement opportunities for CGA-member company employees. Wallace
In this issue of California Grocer we celebrate the California Grocers Association Educational Foundation’s 25th anniversary. It’s an opportunity to reflect on its many accomplishments, but more importantly gaze into its future. The Foundation was created in 1992 as a vehicle to provide educational opportunities to CGA-member companies and their dependents. Its earliest trustees will attest that this impressive undertaking was a daunting task to say the least as few trade associations back then realized the enormous benefits of such a program.
Over the last quarter century, CGAEF has solidified itself as one of the top grocery foundations in the country, due in large part to the generous contributions of grocery retailers and their trade partners. We owe a tremendous debt of gratitude to these numerous companies and individuals. While we pause to reflect on the Foundation’s successes and those who blazed this new frontier, I believe it’s more important that we share where the Foundation is headed, and what that means to CGA-member employees and their dependents. The Foundation’s impressive college scholarship program will only continue to grow and provide deserving students with needed financial assistance, thanks in large part to the dedication of the Board of Trustees and staff. This could not occur at a more important time as college tuition costs continue to escalate. While the Foundation will continue to expand its financial assistance programs, it recently embarked on several worthwhile projects that will provide tremendous value
6 | CAL I FOR N I A G R OC E R
to CGA member companies; including the release this month of an affordable online workplace harassment prevention training program designed specifically for the grocery industry. Learn more about this timely and costsaving program on page 12. In the coming months, the Foundation will unveil several new and exciting programs I know you will want to engage and support. If your company’s employees have benefitted from Foundation involvement, I encourage you to continue providing this valuable resource. If not, make it a priority in 2017. I am confident your company and employees will join with those of us that have benefitted from the educational and research programs the Foundation has had to offer. ■
EVERY CLIMB DESERVES A
REFRESHING FINISH
©2017 COORS BREWING CO., GOLDEN, CO
CL_Refreshing_Finish_8x10__208778JC.indd 1
2/8/17 2:25 PM
VIEWPOINT
April Fools
K EV I N CO U PE FOUN DE R , MOR N IN GN E WS BEAT.CO M
Reality just isn’t what it used to be. Go figure. There are a number of stories that have popped up recently that I think illustrate ways in which the world is changing, and why leaders in the food industry need to pay attention.
Which shows that even the most enlightened, progressive, forward-thinking and legendary businessperson can be myopic. But he was able to get beyond that mindset. He was able to grow.
For example...
That’s what every business needs to do. It’s what business leaders need to do. (As opposed to business managers.)
I was amazed the other day when I saw that it has been 10 years since the introduction of the iPhone. Amazed, in part, because 10 years seems like a long time, and in some ways it seems like yesterday that Steve Jobs stood on that stage and wowed the crowd. (For that matter, has it really been almost a half-dozen years since Jobs passed away?) That original iPhone had something like 500 apps. Now, there are 2 million available apps for the iPhone, and 2.2 million apps for Android smartphones, and it is fair to say that the smartphone has changed our lives.
The more specific lesson in this case is the importance of collaboration with third parties as a way of making any single product or service more robust simply because there is interconnectivity. The vast majority of organizations have to be nimble enough to work with other organizations, which ends up making them both more relevant to shoppers.
But here’s the thing. There never would have been so many apps had companies like Apple tried to do them all in-house.
That’s a lesson that even Steve Jobs learned. My friend Tom Furphy of Consumer Equity Partners (CEP) puts it this way: “Companies that follow the old school mindset of ‘this is how we do things around here’ or ‘we build everything in house’ will struggle in the coming years.” “It will be difficult for them to be agile and impossible to serve customers in ways that they will demand in this rapidly changing environment.” Now compare the iPhone’s 10th anniversary to this more sobering story. After five years of steady, unrelenting declines, research firm Gartner says that the BlackBerry now has a market share of – wait for it – zero. That’s right, zero. Zip. Nada. Nil. Zilch. Think about this for a moment. At one point, BlackBerry was on top of the world, but for a wide variety of reasons, it got leapfrogged in terms of hardware and software by the iPhone and the Android phone.
And ironically, opening up the App Store to outside developers – the decision that essentially jump-started the smart phone industry and gave it so much momentum – was something that did not come easily to Steve Jobs, who preferred to control pretty much everything. He was used to doing business a certain way. iStock 8 | CAL I FOR N I A G R OC E R
That’s an important lesson for retailers. It isn’t a crime to be myopic, but it is a kind of business malpractice not to try to get beyond that mindset.
Now it is virtually dead. One can argue that the folks at BlackBerry didn’t see the importance of continued innovation, didn’t pay attention to the changing marketplace,
VIEWPOINT
and got complacent about the leadership position the company enjoyed. Or all of the above.
should expect that four out of 10 dollars spent in center store will then will “migrate to an online shopping experience.”
There was a time when the word “CrackBerry” was coined to illustrate how addicted users were to their BlackBerry devices. Well, it ends up that it indeed is possible to break that addiction…and in a lot of ways, the company that came up with the cure was BlackBerry. Because it stopped being relevant.
Those are big numbers. Even if Nielsen is only half right, the numbers are considerable, and the impact on the retail food industry will be enormous.
Speaking of relevance... The Nielsen Co. recently released research projecting that by 2025, the share of online grocery spending could reach 20 percent, representing $100 billion in annual consumer sales. That’s total store…and it is the equivalent of the volume done by thousands of bricks and mortar stores. There also was research suggesting that during that same time frame, the industry
The question is, how many traditional companies in the food business are ready for this? Are you? Experts tend to believe that while we’re still in the second or third inning when it comes to e-grocery evolution, momentum – generated by both technology and accelerating consumer demands – means that we may be as far as half way “there.” What nobody knows is where and what “there” is.
I suspect that the winners will be the ones who have a vision, but also are nimble enough to understand that “there” may mean something different when you’re in the fourth inning than it does when you’re in the seventh. But I absolutely believe that leaders and companies at least have to have some sort of strategic sense of where “there” is for them, and have to be completely committed to moving organizations in that direction. This means being willing and able to establish networks that make the whole bigger than the component parts. It means being willing to go against established business practices to try new things. It means never being complacent. Always seeking relevance. Accepting the fact that things never will be the same again. We have no choice but to do these things. No fooling. ■
CAL I FO RNIA GRO CER | 9
CGA NEWS
NEW ON-LINE WORKPLACE HARASSMENT PREVENTION TRAINING PROGRAM AVAILABLE THROUGH CGA EDUCATIONAL FOUNDATION Required By law
The California Grocers Association Educational Foundation is proud to launch the first-of-its-kind workplace harassment prevention training resource that is customized for the grocery industry. This is convenient, easy to use and affordable way to fulfill your training requirements and prepare your supervisors to address realworld harassment issues. Harassment in the workplace is a major source of litigation in California and can damage your employee’s morale and your company’s effectiveness. That’s why it’s important to purchase harassment prevention training which is current, relates specifically to the grocery industry and meets California’s compliance requirements. Customized to Grocery Industry As an employer, you want to make sure any training solution you select is fully compliant with California state regulations, helps protect your company from unnecessary litigation, is relevant to your business and effectively trains employees to spot harassment in the workplace and deal with situations as they arise. The CGA Educational Foundation’s online supervisor course for individual learning meets all state training requirements, making it easy to educate employees and fulfill your compliance obligations. What’s more, this 10 | CAL I FOR N I A G R OC E R
on-line training tool has been uniquely customized with real-life situations that present themselves in the grocery business. Using practical examples and scenarios that are tailored to the grocery industry, this training is more effective at addressing requirements and protect your business from liability. Understand why workplace harassment training is important and essential to the health of a company. Define and identify legal protections against harassment in the workplace. Understand the rights and protections available to both complainants and employers. Understand the supervisor’s role in the workplace harassment complaint process. Identify strategies to prevent workplace harassment in the workplace. CGA Members Receive Considerable Savings CGA Educational Foundation has teamed up with a leading online learning provider to create this affordable grocery-focused training program. CGA members can take advantage of deeply discounted rates of up to 75 percent off the price of your current solution.
Two hours of training is required of all California companies with 50 or more employees are required to provide two hours of workplace harassment prevention training for all supervisors within six months of hire or promotion, and every two years thereafter. Part-time and temporary employees (including those hired through staffing agencies) as well as independent contractors are included in the minimum employee count of 50. Specific pricing is determined by the number of units purchased. Tiers – Member Pricing
Tiers – Non-Member Pricing
1–50
$25
$50
51–100
$21
$42
101–500
$17
$34
501–1000
$14
$28
1001–2000
$11
$25
2000+
$5
$25
Easy to Use This turnkey, on-demand training will monitor course progress, issue certificates upon completion and provide the reporting needed to document your company’s compliance. All you need is an internet connection! To learn more about the training program, visit www.cagrocers.com/workplaceharassment, or call (916) 448-3545.
CGA SUPPORTS BILL TO REDUCE SHOPLIFTING rings now commit multiple thefts, day-after-day, but below the $950 felony threshold.
CGA INDEPENDENT OPERATORS SHARE CALIFORNIA INSIGHTS WITH CANADIAN COUNTERPARTS
“This is bad for grocers who suffer high losses, bad for employees who are put in harm’s way due to the increased aggressive nature of these thefts, and bad for shoppers who ultimately pay the consequences at the register,” he said. Assemblymember Cooper, a retired Sacramento County sheriff ’s captain, said Prop. 47 motivated serial thieves who repeatedly target businesses since they don’t fear punishment.
CGA President Ron Fong addresses media. Assemblymember Jim Cooper (right) looks on.
The California Grocers Association announced its co-sponsorship and fullfledged support for Assembly Bill 1326, by Assemblymember Jim Cooper (D-Elk Grove) that will aggregate the dollar value of certain property crimes, such as shoplifting and check fraud, with a felony being charged if a suspect’s total dollar value from such crimes surpasses $950 in a 12-month period. This much-needed legislation will provide grocers and other retailers with relief from alarming increases in theft since 2014 when changes in state law more than doubled the felony threshold for many property crimes from $450 to $950. The measure, co-authored by Assemblymembers Sabrina Cervantes (D-Corona) and Raul Bocanegra (D-Pacoima). “California’s grocers have seen a steady increase of criminals shoplifting higher amounts of goods at higher rates,” said Ron Fong, President and CEO of the California Grocers Association, said at a press conference in February to announce the bill, adding that shoplifters and organized crime
“This has emboldened and encouraged a culture among career criminals to participate in coordinated and deliver acts of repeated theft,” he said at the press conference. Many CGA retail members have seen double-digit, and in some cases tripledigit percentage increases in losses from shoplifting and organized retail crime rings over the past five years, with a notable spike beginning after 2014. “We look forward to collaborating with Assemblymember Cooper to pass this sensible piece of legislation,” Fong said. “We urge the California Legislature to help grocers, their employees, and consumers turn back this alarming crime growth by passing AB 1326.” If AB 1326 is passed by the Legislature and signed by the Governor, it then must be approved by voters at the next general election before its provisions can go into effect. Additional co-sponsors of AB 1326 include the California Police Chiefs Association and Crime Victims United California. The unintended consequences of Proposition 47 are explored on page 24.
Dennis Darling, Foods Etc.
Dennis Darling, Foods Etc.; Renee Amen, Super A Foods; Ron Fong, CGA
Dennis Darling, Foods Etc., CGA Independent Operators Committee Chairman, along with fellow CGA Board Executive Committee member Renee Amen, Super A Foods, joined CGA President Ron Fong for a panel discussion at the 2017 Canadian Federation of Independent Grocers (CFIG) Grocery & Specialty Food West conference in Vancouver, British Columbia, in March. The panel focused on “Trends and Challenges in the California Marketplace.” Both Darling and Amen shared insights into each company’s business plan and how they operate as independent grocers in California’s diverse marketplace. Fong, who moderated the panel, explained the unique state regulatory challenges facing independent operators.
Continued on page 12 ▶ CAL I FO RNIA GRO CER | 11
CGA NEWS
◀ Continued from page 11
SEC TOURS MOLLIE STONE’S MARKETS
The CGA Supplier Executive Council kicked off its 2017 Store Tour series with a visit to Mollie Stone’s Markets, a nine-store supermarket chain in the San Francisco North Bay. Leading the tour, which included a visit to three store locations, was Vice President Elliott Stone who shared his insights into the company’s future strategic plans. Making a cameo appearance was company co-founder Mike Stone, Elliott’s father, who shared his personal story on how the company started and became one of the Bay Area’s leading independent grocers. The tour also included a visit to the company’s produce distribution center. Four SEC store tours are slated for 2017. Feature tours scheduled include The Albertsons Companies and Save Mart Supermarket. For more information on these upcoming events, or for information on becoming an SEC member, visit www.cagrocers.com, or call Sunny Porter, Membership Manager, CGA, at (916) 448-3545.
Mike Stone (right) speaks with SEC members.
NEW MEMBERS California
Why collaboration matters PAGE 5
CGA welcomes the following members:
Are you a hunter or a farmer? PAGE 5
2016, ISSUE 5
CALIFORNIA GROCERS ASSOCIATION
supermarkets battle for share of stomach PAGE 5
RESHAPING RETAIL CGA STRATEGIC
CONFERENCE 2016
new look, new content CAL IFORNIA GROCER | 1
CALIFORNIA GROCER GARNERS NATIONAL AWARD California Grocer recently received a national award for “Most Improved Magazine or Journal” from Association Trends. The CGA publication was recognized for its complete redesign in 2016 which focused on streamlining its look and editorial content. California Grocer competed with publications in its class from throughout the U.S.
12 | CAL I FOR N I A G R OC E R
Andreini and Company 131 A Stony Point Cir Ste 500 Santa Rosa, CA 95401-9507 Contact: Joe Platt, Vice President & Branch Manager Tel: (707) 303-4878 Website: andreini.com
H&W Market, Inc. DBA The Market 7088 N West Ave Fresno, CA 93711-0462 Contact: Joe Pressutti, President E-mail: joep@themarketfresno.net Tel: (559) 432-3306 Website: themarketfresno.com
Popcornopolis 3200 E Slauson Ave Vernon, CA 90058-3919 Contact: Glen Roeper, VP, Grocery E-mail: groeper@popcornopolis.com Tel: (562) 656-7220 Website: popcornopolis.com
Fastrip Food Stores 3101 State Rd Bakersfield, CA 93308-4931 Contact: Rich Abel, Dir., Stores E-mail: richa@jaco.com Tel: (661) 393-7000 Website: fastrip.com
IB&C Insurance Services 1105 Sutton Way Grass Valley, CA 95945-0984 Contact: Darin Maguire, Agent E-mail: darin@ibcinsuranceservices.com Tel: (800) 576-1228 x 220 Website: ibcinsuranceservices.com
QOS Consulting LLC 2121 Rosecrans Ave Ste 2330 El Segundo, CA 90245-4756 Contact: Brian Perrott, Exec. VP, Partner Solutions E-mail: brian@qos-consulting.com Tel: (310) 817-6950 Website: www.qos-consulting.com
!
OUTSIDE THE BOX N EW RETAIL PERS PECTIV ES
GOING, GOING, GONE?
iStock
There’s no doubt that independents are a strong force in retail, but change can come to anyone. Witness New York City where the number of family-owned grocers less than 7,000 square feet dropped about 8 percent over the past decade, or about 300 stores, according to a study by Strategic Resource Group.
It’s an
Uber World
iStock 14 | CAL I FOR N I A G R OC E R
Lately, everyone wants to be known as the “Uber” of something – even laundry. Electrolux, the Swedish appliance maker, is exploring the idea of having consumers use their own washing machines for other people’s clothes. The company is looking into options like having people share their unused laundry time and an automatic oven that would cook beef until it’s rare rather than having consumers set the time and temperature.
When
iStock
Going into smaller marketing areas doesn’t necessarily mean downscaling operations. Over the past decade, boutique hotels have exploded and now they are going into small cities like Bethlehem, Pa., and Sewanee, Tenn., and focusing on attracting younger travelers who want more personalized, social spaces.
Smaller Is
Better
S-Commerce At this point no one doubts the power of e-commerce which now represents over 7.5 percent of all retail revenue and rising steadily. But this is spawning an entirely new industry – subscription boxes. Millions of consumers now pay a monthly fee for regular delivery of everything from food to cosmetics. It is emerging as the ultimate expression of convenience.
iStock
OUTSIDE THE BOX
Time to let
go?
Ad-verse Conditions iStock
iStock
A new study by the National Retail Federation indicates that ads on shopping carts and at the checkouts may be fairly useless. The reason is that adults are more interested in getting out of the store and managing kids. As a result, these ads have little influence on them. The study, based on data from Prosper Insights & Analytics, found that direct mail and coupons have a bigger influence.
Sometimes it’s best to bite the bullet and realize when you’ve held onto things – or stores – too long. That’s the position of Marks & Spencer, which has been losing market share for years. As a remedy, the chain developed a massive five-year storeclosing program in the UK and overseas markets – including its iconic store on Paris’ Champs-Élysées, proving that profits trump panache any day.
iStock
Mi Casa, Su Waffles! Food delivery for lunch and dinner isn’t new. But if you’re craving waffles there’s a new delivery service for just that. Smash Waffles has begun operating out of Greenville, N.C. and uses private commercial kitchens to make waffles which are then delivered to customers. They have a regular weekly lineup and weekly special flavors smashberry, a blueberry waffle stuffed with whipped cream and topped with cream cheese icing and shortbread crumbles. Waffles sell for about $15 per half dozen or $21 for a full dozen, plus delivery fee.
Pet Bonanza Do people spend more on their pets than their kids? Fung Global Retail and Technology reports that pet industry sales are set to increase 4 percent this year to about $62.75 billion. Gains are expected in all categories including food, accessories, OTC medicines and vet care services. But this isn’t all. Technology-enhanced products, including cameras and wearables are attracting attention.
iStock CAL I FO RNIA GRO CER | 15
Select the BestÂŽ
COMMITMENT For nearly 100 years, we have been focused on helping family businesses succeed. Today, we continue our legacy of providing premier service to our independent retailer partners.
Your Success is Part of Everything We Do!
We Proudly Congratulate CGAEF For 25 Years Of Service &
Mark Olejnik
This Year’s Illuminator Headlite Contact C&S today to learn how we can help make this your best year ever! Eric Pearlman, Sr. Director, Independent Sales WC
|
1.916.373.4286
|
www.cswg.com
salesfrom a
Natural performer 19% of shoppers plan to purchase more natural meat this year.1 A strong natural beef program is vital to this growth; Open Prairie™Natural* Angus beef gives consumers premium-quality, natural Angus beef, with no added hormones, no artificial ingredients and no antibiotics administered—ever. Backed by the service of Tyson Fresh Meats, Inc. Open Prairie Natural Angus beef is primed to build your fresh meats category and drive your success, naturally.
Build Sales Naturally www.openprairiesales.com
1 THE POWER OF MEAT. (2017). RETRIEVED FROM WWW.MEATCONFERENCE.COM/SITES/DEFAULT/FILES/BOOKS/CLOSING GENERAL SESSION - POM.PDF *MINIMALLY PROCESSED. NO ARTIFICIAL INGREDIENTS. | ™/© 2017 TYSON FOODS, INC.
CAPITOL INSIDER
BCRP Reform: Another Wasted Year LO U I E B ROW N IN THE S ACR AMEN TO OFFICE OF K HAN, S OAR E S AN D CON WAY, L L P
I grew up listening to Car Talk on National Public Radio. Every week, Tom and Ray went through the same ritual to end the show by stating, “Well, you have wasted another hour listening to Car Talk…” Brown
I feel like I should start any update about California’s broken bottle bill program with a similar statement because it seems like our collective efforts over the last year have been wasted time. Like the listeners of Car Talk, we keep coming back, not for the entertainment value but because we must. We ended the 2016 legislative session with a promise from the Administration to provide a comprehensive solution with the introduction of the budget in 2017. Well, the budget was introduced in January and the Administration provided the Legislature and stakeholders with a three-prong concept to reform the bottle bill: Improving Recycling and Remanufacturing – The program has been successful in its initial goal of reducing litter by providing recycling collection opportunities for consumers. However, collection does not ensure that a product is recycled into a new commodity. Future investments should be focused on creating clean, recyclable streams of material, which will improve the recycling and remanufacturing segments of the current system. 18 | CAL I FOR N I A G R OC E R
Sharing Responsibility – Historically, the consumer has shouldered most of the financial burden to sustain the program. Program responsibilities and financing should be rebalanced among all program participants. Enhancing Adaptability and Sustainability – Increases in the recycling rate have resulted in a structural deficit in the Beverage Container Recycling Fund. In addition, the program does not respond quickly to fluctuations in the marketplace. The program must be both nimble and fiscally sustainable. Not many involved in the discussion over the last year would consider this a comprehensive solution. And, if you are looking for the piece that says grocers should no longer be the recycler of last resort, it’s not there. In February, California Department of Resources Recycling and Recovery (CalRecycle) Director Scott Smithline testified before the Senate Environmental Quality Committee that the provision requiring grocers to take back recycling in store is outdated.
He also stated the structural deficit for the program was anticipated to be only $6.2 million. This is a far cry from the nearly $100 million deficit predicted just two years ago. Why the sudden change in the fiscal situation of the program? The recycling rate has now fallen below 80 percent, even though a record number of stores have signed an affidavit agreeing to take product back in-store. These combined facts tell the reality we all know, in-store recycling is not a viable option for the consumer, or the business. Unfortunately, at the same hearing, SB 60, the CGA-sponsored bill authored by Senators Glazer and McGuire failed to get a vote. This bill would have created a short timeout for the penalties imposed on grocers when a convenience zone is deemed unserved, due to no fault of the grocer. This was a similar approach CGA took at the end of the 2017 legislative session only to receive the same message from the Administration – a comprehensive solution is the only solution. Comprehensive solution sounds great. Who doesn’t want to solve the entire problem? Unfortunately, it’s rare for the Legislature to solve any problem in one legislative action, especially one as complex as the bottle bill. In our mind, a comprehensive solution is a majority vote bill that increases the size of the convenience zone, provides flexibility to
CAPITOL INSIDER
REFORM “Unfortunately, it’s rare for the Legislature to solve any problem in one legislative action, especially one as complex as the bottle bill.”
the State and local governments to address recycling issues and makes the program more adaptable to changing economic conditions. This is an approach with little opposition or concern. The Administration’s comprehensive solution is a two-thirds vote bill that includes expansion of the products in the program, including wine and spirits, and increased fiscal responsibility from manufacturers, meaning they would pay more.
With the threat of proportionate reduction all but gone due to the fund’s fiscal situation, there is no reason for these parties to even start talking about additional shared responsibility, and the political leverage over them is all but gone. So, where do we go from here? With the help of CGA members, we will continue to share the stories about how the current program is unfair and outdated However, we also need your help in contacting your local legislators to tell
them about how your business and employees are being punished for actions out of your control. Remember, in the Legislature it takes noise plus pressure to create change. Even though, we have been at this for quite some time, if we keep at it we can ensure your time and effort aren’t wasted. ■
CONGRATULATIONS
to the CGA Educational Foundation th on your 25 Anniversary from The Kellogg Company
CAL I FO RNIA GRO CER | 19
INSIDE THE BELTWAY
Talking About Taxes. . .
J EN N I F ER H ATC H ER S EN IOR V ICE PR ES IDEN T GOV E R N MEN T AN D PUBLIC AFFAIRS FOOD MAR K ET IN G IN S T ITUTE
How would you like to see your tax rate go from 35% or 39.6% down to 20% or 25%? Sometimes questions that seem to have a very obvious answer need further reflection.
Potentially Negative Impact:
The opening of the 115th Congress with a Republican-controlled Senate, Republicancontrolled House of Representatives and a Republican President has created a potentially once-in-a-generation opportunity to achieve broad-based tax reform, similar to the kind of change achieved 31 years ago with the Tax Reform Act of 1986.
Ensure LIFO is not tapped for revenue (not currently part of the plan);
While there isn’t any official legislative language yet to help us understand what this reform might look like, House Republicans have issued a “blueprint” that offers insight into the direction they are heading. Some of the ideas discussed are very good for food retailers, and other parts require further scrutiny. Good: 100 percent first year expensing for business investments; The elimination of taxes on export revenues; The elimination of the estate tax; Possible parity for online and brick and mortar taxation (Main Street Fairness) (not currently part of the plan). 20 | CAL I FOR N I A G R OC E R
Border adjustability tax;
Repeal of most business deductions, except for the R&D tax credit; The elimination of the deduction for interest payments. One of the most controversial aspects of the House blueprint is the inclusion of a “border adjustment tax” (BAT), which is expected to raise more than $1 trillion over a decade. Although this proposal will be subject to change as it is converted into a legislative document that will need to pass both the House and Senate, it does provide valuable insight into the direction congressional leadership will move. As such, it is vital that the food wholesale and retail industry takes the time to understand and model how this proposal, along with all of the others, will impact individual companies so that we can offer members of Congress an accurate picture of how their plan will impact the industry.
The BAT included in the House proposal eliminates the deduction for “cost of goods sold” (COGS) for imported products and taxes it at the new marginal rate (20 percent for “C” corporations; 25 percent for “S” corporations and pass-throughs). Calculating the impact a BAT will have on your tax bill is thus a fairly straightforward process that a company can undertake using a previous year’s numbers or future projections (if they are detailed enough). You simply need to know the COGS for imported products. Figure 1
TEMPLATE FOR ASSESSING POTENTIAL IMPACT OF TAX RETURN Current Law Income Subject to Federal Tax
$
Tax Rate (35% or 39.6%)
x
Federal Income Tax Owed
=
%
House Proposal Income Subject to Federal Tax
$
Add Back COGS for Imports
$
Tax Rate (20% or 25%)
x
Federal Income Tax Owed
=
%
Of course, Figure 1 just gives you the dollar amount that the BAT will add to your tax bill. The other pieces of the House blueprint will also need to be modeled or considered to give an overall picture of what the proposal might mean for a company. So a more complete model might look like Figure 2. ■ Note: Pass through owners may also want to consider that the House plan will also repeal the estate tax and the impact that might have on their planning and expenses.
Figure 2
House Proposal with additional Provisions Income Subject to Federal Tax (Current Law)
$
Add COGS for Imports
+$
Subtract Current Export Income
–$
Add Interest Deduction Taken
+$
Subtract Capital Investments (100% Expensing)
Add Other Deductions
+$
(Other than R&D credit) Subtotal - Income Subject to Federal Tax
Tax Rate (20% or 25%)
$ –$
Federal Income Tax Owed
$
–$
This initial House Republican tax reform blueprint is available at: www.bit.ly/28VOwvf
Thank You CGA Educational Foundation for 25 years of educating our industry!
CAL I FO RNIA GRO CER | 21
WASHINGTON REPORT
Don’t U ndo Debit Card Swipe Fee Reform 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
Congress enacted debit card swipe fee reform, also known as the Durbin Amendment, as part of the Dodd-Frank legislation in 2010. But since this legislation was passed, U.S. merchants continue to fight for transparency and competition in the credit and debit card industry. Prior to the 2016 elections, Chairman of the House Financial Services Committee Jeb Hensarling (R-TX) rolled out a Dodd-Frank reform package (the Financial CHOICE Act) that included a provision to repeal the Durbin Amendment. While the House did not bring the legislation to the floor for a vote, NGA is preparing for a renewed push in support of a similar bill in 2017. At the time of this writing, Chairman Hensarling is expected to re-introduce the CHOICE Act as early as April of this year. The Durbin Amendment, which NGA supported, placed a cap on debit card swipe fees for the largest banks and introduced competition into the debit routing system. For retailers and merchants, swipe fees are their fastest-growing expense, despite technological improvements that have made it much cheaper for banks to process such transactions. Swipe fees typically exceed a grocer’s profit margins – and that’s just not sustainable.
22 | CAL I FOR N I A G R OC E R
Even more frustrating about this situation is that Visa and MasterCard are exercising their market power to squeeze out any hope for transparency and competition. The fees are centrally fixed, with no input from retailers, by credit card companies and not adequately disclosed to retailers or their customers. And the banks issuing cards under the Visa network, for example, all agree to charge the same fees, eliminating any possibility for competition or negotiation. Repealing the Durbin Amendment would only serve to increase profits for big banks while hurting businesses and consumers. As an industry that operates on profit margins between 1 and 2 percent supermarket operators have seen the benefits of increased transparency and consumers have seen the benefit of competition that debit card swipe fee reform has brought to the marketplace. Lower debit swipe fees have allowed supermarkets to pass along savings to consumers in the form of extended sales and have allowed grocery stores to maintain consistent prices even during shortages that would otherwise result in price spikes.
Consumers have also seen benefits in ways that directly contradict the predictions of the banks. Economist Robert Shapiro has noted that consumers saved more than $6 billion in the first year after the Durbin Amendment went into effect. And, banks continue to insist that the Durbin Amendment would be the end of free checking for consumers, but free checking has increased from 53 to 61 percent since Durbin was implemented, according to the American Banking Association’s own numbers. The Durbin Amendment has worked for consumers and businesses for the last six years and began to introduce competition into a system dominated by two major companies. We need to ensure more competition within the debit market – not remove it. ■ The Durbin Amendment was a step in the right direction, now is not the time to take two steps back. Tell Congress yourself at www.grocerstakeaction.org
NETWORKING BEGINS HERE Arnold Schwarzenegger
Giada De Laurentiis
California’s 38th Governor
Celebrity Chef
Molly Fletcher
Jim Donald
Author of Fearless At Work
Former CEO of Starbucks
Jim Belushi
Eric Chester
and The Board of Comedy
Author of On Fire at Work
9,000 PROFESSIONALS 700 EXHIBITORS
TOP SPEAKERS NEW PRODUCTS
This is the essential networking event for dairy, deli, bakery and foodservice professionals. Innovative products, merchandising, plus sales opportunities - all in one three-day show!
REGISTER TODAY!
IDDBA.ORG 608.310.5000
24 | CAL I FOR N I A G R OC E R
By Aaron Moreno It seemed innocuous enough at the time, especially if you’d read the statement in support of the Safe Neighborhoods and Schools Act (aka Proposition 47, or Prop. 47 as it is more commonly referred to) in the California Secretary of State’s voter guide for the 2014 election: “A YES vote on this measure means: Criminal offenders who commit certain nonserious and nonviolent drug and property crimes would be sentenced to reduced penalties (such as shorter terms in jail). State savings resulting from the measure would be used to support school truancy and dropout prevention, victim services, mental health and drug abuse treatment, and other programs designed to keep offenders out of prison and jail.” Most Californians rely on the description provided in their voter guide when making decisions on the many initiatives they face at each election. On its face, there was much to like about what Prop. 47 had to offer Californians. Who could be against saving money by keeping non-violent drug and property crime offenders out of jails? And better yet, the money saved would go towards positive social programs? It’s no wonder the initiative passed with just under 60 percent of the vote. Such was the case with this measure. As with most laws, it has taken some time to see the effects manifest themselves, both good and bad, in such a way that policy makers could determine whether or not the law could be deemed a success. With nearly three years having passed since the provisions of Prop. 47 have gone into effect, enough time has passed to assess the impacts of the initiative.
But as is often said, if something sounds too good to be true, it more than likely is. Continued on page 26 ▶
CAL I FO RNIA GRO CER | 25
◀ Continued from page 25
The Nuts & Bolts
The Initiative Process
So, exactly what did Prop. 47 do?
California is one of 24 states with an initiative process that allows voters to bypass the legislature and put legislation directly on the ballot. Of those 24 states, California is the only one that does not allow the legislature to amend any statute approved by initiative.
Delving beneath the surface treatment of the initiative given in the state’s voter guide’s one-paragraph summary, the law made two essential changes to California’s criminal sentencing laws.
This has created many policy conundrums for lawmakers who lack an easy mechanism to correct even the most minor of unintended consequences brought about by an initiative.
The first change related to drug possession. Pre-Prop. 47, mere possession of controlled substances for personal use, including marijuana, cocaine, heroin, and hallucinogenics, was a felony, so long as the person charged did not have a criminal history that involved crimes of a violent, or sexual nature.
Grocers and other California retailers have been dealing with one of these unintended consequences for a few years now – yet another challenge in the navigation of California politics and policy. Now in most states, this would be an easily fixable problem – simply pass a piece of legislation to address this unintended consequence. If only things were that simple in California. To fix an initiative here, passing a bill is only the first step. CGA has started that process by helping to sponsor legislation (AB 1326) that would aggregate the dollar value of shoplifting incidents, with a felony being charged if a suspect’s total dollar value from such crimes surpasses $950 in a 12-month period. Should this bill be signed, it would need to go back to the voters for approval at the next general election…which isn’t until November of 2018. One would think that a state such as ours would have a more logical and responsive way to amend initiatives, but such is the way in California. Nothing can ever be too easy here.
The rationale was that state correctional resources could be better spent incarcerating more serious criminals; that those convicted of possession would be better served by diversion into drug treatment than by an already overcrowded prison system. The second change related to what the voter guide referred to as “non-serious and non-violent” property crimes. The guide dubiously claimed that such offenses would be subject to reduced penalties; the reality was that a number of crimes that were previously subject to felony charges were basically made into misdemeanors. Prior to Prop. 47, the crimes of forgery, check fraud, receiving stolen property, grand theft, and shoplifting could be charged as felonies if the crime’s value exceeded $450. The new law more than doubled the felony threshold to $950. As with the changes in sentencing for simple drug possession, the rationale for this change was that these crimes were not serious enough to justify taking up space in an already overcrowded prison system. It was also thought that many of those who committed these types of crimes did so to support a drug habit, so as with those who were charged with drug possession, they would be better served with an opportunity to get help than time in prison.
26 | CAL I FOR N I A G R OC E R
Few would argue that a state like California, with its boom-and-bust budget cycles, would benefit from a more efficient correctional system that dedicated its resources to incarcerating only the most serious and violent of criminals. But at what cost? Is California really saving money if the cost of crime shifts from the state budget to the state’s businesses? Well intentioned as it may have been, it appears as though Prop. 47 might have had some unforeseen consequences that are only now beginning to manifest themselves up-and-down the state.
The Numbers & State Effects The first reports of increased crime attributed to Prop. 47 began trickling in months after the law went into effect. Representatives from various law enforcement agencies around the state began to circulate new statistics showing a rise in crime that they warned of during the initiative campaign in opposition of the measure. “Rather than being incarcerated or in treatment, [drug offenders] are on the street reoffending and thus, crime is going up,” said Los Angeles County Sheriff Jim McDonnell in a Governing article published in October 2015, less than a year after the initiative had been in effect. That same article reported that property crime had increased 7.6 percent since the passage on Prop. 47 in November of the previous year. In defending the proposition, proponents argued that not enough time had passed to adequately determine whether or not the increase in crime could truly be attributed to the new changes in California law enacted by the proposition. In their defense, it could certainly have been argued that the increases were the result of common fluctuations in crime rates and not necessarily the cause of Prop. 47.
In fact, the same Governing article noted that in the same period of time Los Angeles County reported an increase in property crimes, San Diego County reported an actual decrees in crime. The jury was still out, but the case for crime increasing as a result of Prop. 47 would be made stronger by more current studies and statistics. A recent report issued by the California Police Chiefs Association based on data collected from over 300 police departments show California’s property crime rate increased by 7.26 percent in 2015 compared to 2014. This increase becomes more troubling when put into context. During the same period that the rate of property crimes rose in California, the rest of the U.S. saw a 4.77 percent decrease in the same types of crimes – a nearly 13 percent spread. These numbers become more troubling when looking at individual cities in the state. For example, the city of Los Angeles reported a 10.3 percent increase in property crimes in 2015. And a March 16, 2016 article from CBS SF Bay Area reports that property crime in San Francisco was up more than 17 percent in 2015 over the previous year, while violent crimes remained flat and gun violence declined. These statistics are further corroborated by similar trends from grocers and other retailers regarding shoplifting and product loss.
The Numbers & Industry Effects “I’ll be back…’cause I’m just gonna get a ticket!” These were the words uttered by a brazen shoplifter walking out of a store with a cart loaded with merchandise as reported by a major Southern California grocery company responding to a recent California Grocers Association survey on shoplifting.
As it turns out, law enforcement agencies aren’t the only ones who have been keeping track of property crimes and seeing increases since 2014. California grocers have seen an alarming trend of increased theft/shoplifting incidents along with higher dollar losses per incident. Shoplifters have come to the realization that so long as they keep the amount of what they steal to $950 or below, they will not go to jail. Grocers have found themselves dealing with more and more incidents where criminals now do nothing to hide the fact that they are stealing, sometimes even taunting store employees as they walk out the doors (as noted above) knowing they will suffer little, if any consequences. The higher felony threshold for shoplifting created by Prop. 47 has created a new type of shoplifter. This shoplifter does not necessarily steal to directly support a drug habit. Grocers and law enforcement have seen a proliferation in organized retail theft rings who have found lucrative, low risk/ high reward criminal opportunities resulting from the new $950 felony threshold for both shoplifting, and selling stolen property. A group of enterprising criminals can now hit one grocery store after another, day after day, stealing $900 worth of alcohol and selling it without the risk of prison or the risk of death that the same group might face in another line of crime. If one were to choose a life of crime, this would certainly be a way to go, because as our criminal friend notes above, you’d just get a ticket. “Running a successful Loss Prevention program in California was already hard. Current laws allowing leniency on organized retail crime is just feeding the beast. This has now become a monster that consumes private sector resources and retailers profitability…negatively effecting us all,” said Darian Griffin, director of Loss Prevention for Superior Grocers.
A few words on addiction Addiction is a horrible and crippling disease. Whether drugs, or alcohol, or drugs and alcohol, many who succumb to the debilitating effects of this disease reach their bottom in the form of incarceration. This can, in turn, lead to a vicious circle of jail time (where the emphasis is not on drug rehabilitation), followed by being released, only to return to jail as a result of drug possession or other crimes committed in an effort to raise money to support a drug habit. For many Californians suffering from addiction, caught up in this cycle, a new way out appeared in the form of another initiative passed by voters. Before Prop. 47, many addicts received jail time for simple possession of narcotics, though there was a “get out of jail free” card available in the form of Prop. 36, passed by over 60 percent of Californians in 2000. It diverted those whose crimes were the result of addiction from jail to drug treatment, albeit with some very important strings attached. A person charged with a felony drug crime would be able to avoid incarceration if they completed a rehab program. But if they didn’t they would face the consequences of the original felony – a classic “carrot and stick” approach. Alas, one of the other unintended consequences of Prop. 47 was removing both the carrot and stick used to deal with those suffering from addiction. “The drug courts have really dried up since the passage of Prop. 47,” said Jonathan Feldman, Legislative Advocate for the California Police Chiefs Association, referring to the incentive provided under Prop. 36 that allowed judges to sentence. “Without the threat of a felony charge, many who would have been steered into a Prop. 36 mandated treatment program simply don’t go because there is little reason to anymore.” It often takes a real scare to force an addict to make changes, and the threat of incarceration is a scare that can bring about a change. Did Prop. 47 actually undermine Prop. 36 by accident?
Continued on page 28 ▶ CAL I FO RNIA GRO CER | 27
◀ Continued from page 27
Case in Point The four case summaries highlighted below are examples of the effects of Prop. 47 legislation, as they relate to retail crime in the grocery industry. The suspects in each case are repeat offenders that continue to commit multiple thefts at retail stores throughout Southern California. The losses outlined in each case are fully documented and verified by video surveillance. These cases are only a fraction of the 1800+ incidents of theft reported by our retail stores in the past twelve month, validating a significant increase in theft over the previous year.
The numbers associated with shoplifting and retail theft compiled by grocers are shocking, especially when comparing the years before Prop. 47 (2014 and earlier) to those after. Consider these numbers reported by a large Northern California grocery chain: •
In 2012, we recovered $152,808 in merchandise at the front doors.
•
In 2013, we recovered $168,767 in merchandise at the front doors.
•
In 2014, we recovered $276,600 in merchandise at the front doors.
•
In 2015, we recovered $347,755 in merchandise at the front doors.
Formula Booster
Liquor Booster
•
5 suspects
•
0+ theft incidents
•
80+ theft incidents
(less than $950 per incident)
•
Numerous locations targeted in a single day
•
Numerous locations targeted in a single day
•
2 different law enforcement
•
5 different law enforcement
•
Suspect arrested and released;
•
•
Primary Suspect (Male) arrested and
In 2016, we recovered $400,409 in merchandise at the front doors.
Total Verifiable Loss: $6,000+
•
•
Secondary Suspect (Female) arrested and
The difference in dollar amounts between two-years before Prop. 47 as compared to two-years after Prop. 47 is over 250 percent.
agency jurisdictions
released twice; continued thefts after arrests
(less than $950 per incident)
agency jurisdictions
continued thefts after arrest
released once; continued thefts after arrest Total Verifiable Loss: $21,000+
Formula Booster
Booster Crew
Here are numbers reported by a small Southern California grocery chain:
•
10+ theft/attempted theft incidents
•
40 suspects linked by activity / vehicles /
•
•
Numerous locations targeted in a single day
•
Professional shoplifters: “Boosters”
In 2012, we recovered $12,401.00 in merchandise at the front doors.
•
2 different law enforcement
•
Numerous locations targeted in a single day
•
•
Suspect arrested and released;
•
Numerous arrests for Petty Theft despite
In 2013, we recovered $9,396.00 in merchandise at the front doors.
•
In 2014, we recovered $11,713.00 in merchandise at the front doors.
•
In 2015, we recovered $14,980.00 in merchandise at the front doors.
•
In 2016, we recovered $21,319.00 in merchandise at the front doors.
(less than $950 per incident)
agency jurisdictions
continued thefts after arrest
Total Verifiable Loss: $5,000+
residence (less than $950 per incident)
being in possession of burglary tools
(Purpose-made clothing for concealment of merchandise) Continued thefts after arrests.
Total Verifiable Loss: $3,000
Summary
It is also important to note the significant increase in violent offenders at our stores, since the inception of Prop. 47. Over the past twelve months, twenty-nine (29) incidents involved armed suspects who challenged our store employees when confronted outside of the store. (13 encounters included the display of a firearm) Additionally, numerous theft suspects have physically assaulted our employees, resulting in bodily injury to those trying to make an apprehension of the suspects. This behavior has posed a serious risk to the safety and well-being of our employees and our valued customers. As our company has adjusted to the results of Prop. 47, it is our belief that this measure is having a negative impact on our company. Specifically, we have been directly impacted by a substantial increase in theft incidents committed by repeat offenders. The monetary losses created by just a handful of offenders (highlighted above) are nearly $30,000.00, with no signs of slowing down in the near future. A revision of the Proposition, specifically addressing crimes committed by repeat offenders, would have very positive results, especially related to the safety of our front-line employees who are attacked daily by those repeat offenders who have no fear of prosecution or consequences of their actions in our stores.
28 | CAL I FOR N I A G R OC E R
For this company, the difference in dollar amounts between two-years before Prop. 47 as compared to two-years after Prop. 47 is over 170 percent. This has been bad for grocers who have suffered higher losses, bad for employees who have been put in harm’s way due to the increasingly aggressive nature of these thefts, and bad for shoppers who ultimately pay the consequences at the register.
With enough time having passed since 2014 to get a better sense of the unintended consequences of the changes in the state’s sentencing laws, policy makers have now started to consider how to respond to the rise in property crimes reported by both business and law enforcement.
A Solution? There is little doubt that Prop. 47 has helped to prioritize what crimes the state expends its limited prison space and correctional resources. People from all parts of the political spectrum agree that decriminalizing simple drug possession is a positive thing. Many of those who had been previously imprisoned for this, argued many, suffered from the illness of addiction, and no one should be imprisoned for a genuine disease. It’s not often that a criminal measure such as this gets the support of leading liberals like Lieutenant Governor Gavin Newsom and former State Senator Mark Leno as well as leading conservatives like U.S. Senator Rand Paul and former Speaker of the House of Representatives Newt Gingrich. It’s the higher felony thresholds that have created a new type of criminal that need to be fixed. Such a measure has been introduced in the California Legislature. AB 1326 is jointly authored by Assemblymembers Jim Cooper (D-Elk Grove) and Sabrina Cervantes (D-Corona), and co-authored by Assemblymember Raul Bocanegra (D-Pacoima). It seeks to thread the needle in mending what has otherwise been a law with positive outcomes, by only addressing the $950 felony threshold for the nonviolent property crimes laid out in the original initiative. The measure would simply aggregate the dollar amount of these crimes, and if a person reached the $950 threshold in a 12-month period, that person would be charged with a felony. For example, under current law, a serial shoplifter can hit a grocery store for $900, be cited for a misdemeanor and hit another store for a similar amount, then another, then another. Under AB 1326, that shoplifter
would indeed be charged only with a misdemeanor for that first $900 score, but if that same shoplifter hit another store for anything more than $51 dollars within 12-months of the original theft, he or she would be charged with a felony. The benefits of the potential changes in statute are twofold. First, there would be a new deterrent for anyone who thinks they can keep stealing from grocers and other retailers for large amounts with little to no consequence. Secondly, it would take those operating real criminal enterprises off the streets, saving businesses from higher losses and consumers from higher prices.
“The higher felony threshold for shoplifting created by Prop. 47 has created a new type of shoplifter.” Of course, because it is amending an initiative, passage of AB 1326 by the Legislature and signature by the Governor would not immediately put these changes into effect. It would have to go the voters at the next general election for final approval.
Moving Forward Change is never easy. Many in the legislature are hesitant to make changes to a law that has reduced prison overcrowding and, arguably, decriminalized the disease of addiction. No one is suggesting undoing those important things. Good policy relies on identifying a problem and precisely fixing it with the least amount of harm. There is little doubt that there is a problem, the stats and anecdotes clearly show it. The question becomes whether or not enough legislators can agree to precisely fix an otherwise righteous law. Time will only tell. ■ Editor’s Note: Aaron is Senior Director of Government Relations for the California Grocers Association.
CAL I FO RNIA GRO CER | 29
CGA Educational Foundation supports food industry employees’ college success for 25 Years.
Paying it back, Paying it forward By Cassandra Pye Twenty years ago, Monet Leyva accepted a temporary data entry position in Unified Grocers’ customer satisfaction division. In the five years that ensued, she transitioned into a permanent call center associate role, completed high school, married and had a child. Monet was promoted to supervisor and remained in the division for 15 years before shifting to a new role in consumer analytics – where she’s part of a team which makes recommendations to Unified’s customers on the profitability of existing and new products, based on consumer data. As her daughter grew older, Monet took courses here and there in junior college, but knew she needed to do more. “I knew I would be in a position for more opportunities with a college education. It was a personal goal of mine to complete college.”
Monet returned to school in 2014, choosing a weekend program for working adults and electing English as her major. She attended class one weekend each month, meeting for 10 hours on Saturdays and nine hours on Sundays. She took advantage of Unified’s tuition reimbursement program and student loans, but her program was private, not public, and therefore more expensive. “I applied online to several programs for supplemental funding and was really surprised when my application to the CGA Educational Foundation was accepted – I was honored and grateful,” she says. “It was also really helpful to get the award,” she adds. “Getting those funds – $800 total – allowed me to pay my tuition balance and purchase books.” Continued on page 34 ▶
◀ Continued from page 33
Foundation President Ron Fong suggests Monet’s story is a classic one and may be a sign of things to come. In a typical year, according to Fong, CGAEF provides roughly $150,000 in tuition reimbursement awards. This year, just prior to the end of Q1/2017, more than $35,000 in requests have already been met. “Something’s happening,” says Fong, who also serves as CGA President and CEO, “There’s been a huge uptick in requests. It took us six months to distribute this level of funding last year. Our industry’s employees see a degree as an avenue to promotion and I believe our members are doing more to encourage them.” And that’s exactly what the CGAEF founders had hoped for. Lynda Trelut, then CGA Board Chair, recalls that in 1992 this first-of-its-kind effort for the grocery industry was aimed initially at helping grocers take seminars to remain current on business practices.
“There were no industry scholarship programs to speak of,” says CGA’s first female Chair. “The fact that it’s evolved the way it has – and is much more solvent – is the dream we always had: helping young people stay in the business. I love how it has evolved.” The Foundation’s mission was to establish scholarships, tuition reimbursement and career development programs for food industry employees who wanted to attend college and build their careers. Further, the founders hoped to sponsor meetings, seminars and workshops that would keep members informed on trends and issues affecting the industry. Trelut expresses great satisfaction with the fact that CGA members seem to be more actively promoting the scholarship and tuition reimbursement programs to their employees and believes that may be the reason for the uptick, Fong describes. “Grocers are running their businesses, and have so many things to think about so, in the early days, we didn’t always get the word out,” Trelut shares.
“I’m glad it’s being publicized and utilized. We’re keeping good people in the business and keeping them motivated.” Shiloh London, hired in 2012 as the Foundation’s first full-time Executive Director, says several measures have been executed over the years to raise awareness of the scholarship opportunities – including the launch of a CGAEF stand-alone website and a recruitment tactic which proved successful in today’s high-tech environment. The Foundation directed employees to text “tuition” to the number “313131” to reach the program directly. With that text, employees receive a text with instructions for how to apply. “This completely changed the game,” claims London. “Everyone has a cell phone with them in the break room – where our posters are – or when they’re talking with their HR director, so it was the appropriate method to drive awareness.” Since instituting the program, the office has received over 1,500 texts.
CGA Educational foundation
Timeline First Hall of Achievement (Thomas Raley, Wilfred Von der Ahe)
Peter Larkin Named CGAEF President
Foundation Funds CGA Emergency Planning and Procedures Manual Project
1992
1996
2000
1991
1995
1998
2004
CGA Educational Foundation Founded
Career Development (Tuition Reimbursement) Program Launched
First Scholarship Awarded (Don C. Beaver Memorial Scholarship)
Legacy Scholarship Program Created
34 | CAL I FOR N I A G R OC E R
“The Foundation’s mission was to establish scholarships, tuition reimbursement and career development programs for food industry employees who wanted to attend college and build their careers.” iStock
And the Foundation tries to keep things simple: a single online application puts a prospective awardee in the pool for all available scholarships. “Giving away free money is not as easy as you may think,” says London. “But we try to make the process easy by having a simplified online scholarship application.” The CGAEF scholarships are provided to employees and, primarily, their dependents. The tuition reimbursement program is offered only to employees. A typical tuition reimbursement award is $200 per class,
Foundation Scholarship Awards Surpass $1 Million
up to $1,000 per year. Scholarships range from $1,000 to $5,000. London cites significant growth on the tuition reimbursement side. The Foundation is on track to reach a record $200,000 in tuition reimbursement grants in this 25th year of operation. Monet Leyva took advantage of the $200 tuition reimbursement award for four of her classes. And she sees a direct correlation between the support she received from CGAEF and her prospects down the road.
“When I applied for this new position, I was told that my experience was helpful but the fact that I said I would complete my bachelors this year really, really helped,” she beams. Leyva was also selected to attend the USC Food Management program and says she really enjoyed the marketing courses the most. Next steps? She’s decided to seek her masters in business or marketing. Fong applauds Monet’s efforts and so many like her. Continued on page 36 ▶
Tuition Reimbursement Increases to $150/$750 annually
Foundation Acquires CGA Golf Classics
Total Tuition Reimbursements Grants Surpass 10,000
Cal-Poly San Luis Obispo Partnership Launched
Tuition Reimbursement Increases to $200/$1,000 annually
2007
2011
2014
2016
2008
2012
2015
2017
Ron Fong Named CGAEF President
Shiloh London Named First CGAEF Executive Director
Foundation Receives $403,000 CIGA donation
Workplace Harassment Prevention Training Program Launched
Total Tuition Reimbursements Surpasses $1 Million
Foundation Co-Sponsors CGA Grocery Compliance Toolkit Foundation Funds Cal-Poly San Luis Obispo Research Project
CAL I FO RNIA GRO CER | 35
◀ Continued from page 35
“These are the kinds of stories which are told throughout the industry,” he asserts. “With the support of a very strong and engaged Foundation Board of Trustees, Shiloh and her team continue to expand the number of educational opportunities for our members and their employees.” “This effort is having a profound impact on our industry,” Fong continues. “We are leveraging our industry’s resources to help our members to attract, retain and promote talent truly from within. This is exactly what the founders envisioned when they disbursed that single $2,000 scholarship in 1992.” Fong says he’s proud of the continued growth in utilization, brought on by increased awareness on the part of CGA members. CGA Chairman and Pavilions Senior Vice President Jim Wallace says his story is much like Monet’s. “When you first start in the industry – in high school or with a little college – money is pretty good and you can live on it," Wallace says. “But, when our son was born, I realized I needed a formal education, both to advance my knowledge base and to grow my leadership skills.” The Albertsons executive attended school at night, first a junior college and then obtained his bachelors at the University of the Redlands. “It took seven years to get there and I went the non-traditional route, but I ended up doing it because I think education is so important in our industry.”
Wallace’s two children also received CGAEF scholarships as undergraduates, something he calls “a wonderful gift” for employees and their dependents. “If we can help our employees – all the better,” he adds. Former CGA and CGAEF President Peter Larkin says the Foundation is now a model for the food industry nationally. “Most importantly, it appears that a large number of scholarship and tuition reimbursement recipients are remaining within our industry,” he says. “And that’s a good thing.” Fong agrees, adding, “We have an obligation to our members to have the leading philanthropic arm of our industry. We want to continue to grow as our industry grows and undergoes change. Taking some of the financial pressure away helps that employee base become stronger.” In looking back at the Foundation’s tremendous growth, Larkin, who now directs the National Grocers Association says the Foundation really expanded due to two programs complement each other. “The tuition reimbursement program represents a model of collaboration between two organizations – the Foundation and the Western Association of Food Chains (WAFC),” he recalls. “WAFC had recently launched a retail management certificate program designed to provide opportunities for store level and office level supermarket employees,” Larkin says.
Wilfred Von der Ahe, The Vons Companies was one of the first inductees into the Foundation’s Hall of Achievement.
“The Foundation took advantage of that timing and decided to use its funds to help with tuition and books – to increase the number of industry employees who would participate.” The CGA Educational Foundation has, since its inception, granted over $5 million in scholarships and an additional $1.4 million in tuition reimbursement funds, exclusively for industry employees. For Fong and his team, administering the Foundation’s programs is more than just a job. “This is our responsibility,” he says. “We wouldn’t exist without our members – they support our events, programs and services. That’s why we here. That’s why we have an obligation.” ■
“We are leveraging our industry’s resources to help our members to attract, retain and promote talent truly from within. This is exactly what the founders envisioned when they disbursed that single $2,000 scholarship in 1992.” -Ron Fong CGAEF President
The Stater Bros. Supermarket “Family” congratulates the CGA Educational Foundation th on its 25 Anniversary! ®
®
Proudly Serving Southern California Families Since 1936 CGA_25AnniversaryAd_4_2017.indd 1
® 4/4/17 2:06 PM
CAL I FO RNIA GRO CER | 37
Congratulations
Mark Olejnik
2017-2018 Illuminator Headlite and
CGAEF
Celebrating 25 years of service
40 | CAL I FOR N I A G R OC E R
By Matt Levin | CALmatters
The California dream isn’t dead. It just upped and moved to South Dakota. Less than half of people born in California in 1980 are making more money than their parents did as young adults. That’s the lowest percentage of children out-earning their parents that California has seen since at least 1940. By contrast, 62 percent of people born in South Dakota in 1980 out-earn their parents. That’s the highest percentage for any state in the country. Those figures come from a recent study by Stanford economist Raj Chetty and several prominent co-authors, whose widely publicized work on intergenerational income mobility – the likelihood children will fare better financially than their parents – has transformed what we know about the data behind the American dream.
Chetty’s research has profound implications for California, a state whose unique mythology of boundless opportunity and instant riches has attracted generations of migrants to settle here in pursuit of a better life for their children. There’s a reason you’ve heard of “the California dream,” while the phrase “Vermont dream” doesn’t really evoke much beyond a good name for a Ben and Jerry’s flavor. With the president declaring the American Dream dead and at least one leading candidate for governor staking claim to “the California dream” as a major campaign theme, let’s play Freud for a moment and analyze why decades ago young Californians dreamt of picket fences and swimming pools, while many of today’s young Californians can dream only that their parents will subsidize their cell phone bill well into their forties. To the charts and graphs! Continued on page 42 ▶
CAL I FO RNIA GRO CER | 41
◀ Continued from page 41
Falling income mobility in California closely tracks what’s happening nationwide
According to Chetty’s research – which is revolutionary primarily because of access to a longitudinal database of Americans’ tax records – children born in 1940 in California had a roughly 90 percent chance of making more money than their parents did around the age of 30. Fast-forward 40 years, and Californians born in 1980 stand less than a 50 percent chance of making more than their parents. Your odds of out-earning your parents in California
% of children making more than parents
For the first time, children born in California have less than a 50 percent shot of making more than their parents did at the age of 30. 90% 85%
Younger Californians shouldn’t feel uniquely sheepish about making less than their parents. California mirrors the national pattern in income mobility very closely. % of children making more than parents
Since 1940, the proportion of Californians out-earning their parents has dropped by nearly half
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1940
1950
80%
1960
1970
1980
Birth Year
75%
US
70%
CA
OH
Source: Chetty et al., “The Fading American Dream: Trends In Absolute Income Mobility Since 1940”
65%
55%
Nationwide, only 50 percent of Americans born in 1980 were outearning their parents at the age of 30. That percentage has ticked up a bit in subsequent years, but not by much.
50%
Wait, we’re not that much better than Ohio?
45%
California closely tracks the national trend in income mobility. The Golden State is also fairly similar to many states in the Midwest.
60%
1940
1950
1960
1970
1980
Birth Year Source: Chetty et al., “The Fading American Dream: Trends In Absolute Income Mobility Since 1940”
It’s important to think through how the comparison between children and parents is actually being measured here. For California babies born in 1980, researchers are using the total income they’re receiving as young adults in 2010, regardless of whether they stay in the state or move elsewhere. They are then comparing that income to what their parents made at around the same age, regardless of their age when they became parents, or where those parents were born. So we’re not just comparing one generation of native Californians to another. Obviously, part of that drop over that 50-year-period can be attributed simply to how poor everyone was back in 1940, when the United States had yet to fully escape the depths of the Great Depression. In 2014 dollars, the national median income of parents for children born in 1940 was around $18,000.
There’s not a lot of variation between states in levels of income mobility, or in changes in mobility over time. There are some exceptions to this – states like South Dakota, Montana, and Arkansas all appear to have above-average mobility rates for younger natives. But interestingly, California does not fare much better than many states in the Midwest, where the narrative of a dying American dream played heavily in the 2016 presidential campaign. Ohio and California have very similar mobility rates.
How can we possibly be similar to Ohio? We have Silicon Valley and the 6th largest economy in the world! Ohio has…LeBron? To be fair to Chetty and his co-authors, their research is less focused on state-by-state differences than the broader national picture of declining mobility. But one of the study’s conclusions about why the American dream is fading could help explain what’s happening at the state level. There are two primary determinants of mobility: economic growth and inequality.
Continued on page 44 ▶ 42 | CAL I FOR N I A G R OC E R
Grocery Operations: We Smooth ‘em Out Cart Retrieval ■
■
■
The industry leader in shopping cart retrieval Reduce cart-loss expenses and aggravation Detailed reporting from an accountable partner
Cart Maintenance ■
■
■
Coupon Redemption
Reduce cart cleaning and maintenance costs Lower new cart acquisition expenses On-site, quick return-to-action convenience
■
■
■
Receive and reinvest manufacturer reimbursement money faster Avoid costly chargebacks, enjoy one-stop convenience Zero upfront costs or counting and sorting hassles
Because we understand the details of grocery operations, we can save you money and aggravation dealing with things you'd rather not have to. Come to us to simplify your operations and save money.
Operational Efficiency, Greater Convenience, More Money in Your Pocket.
www.cartretrieval.net 1-800-252-4613
(818) 563-3031
FOLLOW US ON SOCIAL MEDIA
CSCRC and CCRC are RMS companies – 1020 North Lake St., Burbank, CA 91502
www.cartretrieval.net
◀ Continued from page 42
To use the overwrought “pie metaphor,” it’s inherently good for income mobility when the economic pie grows over time. But when a smaller share of the population receives a larger chunk of that pie, the odds that the average child will out-earn his or her parents shrinks. “What we’re seeing on the national level is that most of the decline (in mobility) is not due to overall economic growth,” says Robert Fluegge, a Stanford researcher who contributed to the study. “What counts more is the change in the distribution for income growth.” To test how much rising inequality determined mobility rates, Chetty’s team simulated what would have happened if the United States kept its very equal income distribution from 1940 through 2010. Under that scenario, 80 percent of children born in 1980 made more than their parents. That would help explain why despite its remarkable economic growth over the past half century, California’s mobility rate is not that much different than states like Ohio or Indiana. “Even if you’re in California, you’re getting a concentration of income growth among high skilled labor that are able to use technology,” says Fluegge. “And those type of jobs are likely grabbing a lot of that income growth.” Fluegge cautions that although inequality is likely part of the explanation for California, researchers have yet to drill down on the state specifically.
Interestingly, plotting the level of inequality in a state to its level of mobility doesn’t reveal much of a relationship. Nor does plotting changes in the level of inequality over the past decade, which arguably would affect young wage-earners more. Researchers will have more work to do disentangling the relationship between inequality, growth and mobility at the state level.
Can’t you tell me some good news about living in this state? While the fact that only 49 percent of younger Californians are making more than their parents may seem concerning, there are reasons to think that number may be overstating things a little. That figure is at the household level, and does not adjust for household size. So a single 30-year-old born in 1980 may be compared to the dual incomes of their married parents at the same age. When adjusting for family size, the share of young adults outearning their parents nationally improves from 50 percent to 60 percent (unfortunately those figures aren’t calculated at the state level). The sharp downward trend from 1940 persists, but the picture is somewhat rosier. Perhaps more significant for California, the 49 percent figure does not include immigrant children.
Rethink the way you dispose of something as simple as an orange peel.
44 | CAL I FOR N I A G R OC E R
Also, 2010 was also a particularly bad year for California incomes. In the depths of the Great Recession, median California household income dipped to a five-year low. The result could be that measuring the income of a 30-year old born in 1980 is artificially depressed in California, relative to both previous generations and other states where the recession took less of a toll.
Median home price, 2015 dollars
That shortcoming could be of enormous consequence to the Golden State, which has the highest percentage of foreign-born residents of any state in the country (27 percent).
What about cost of living?
$400k $350k $300k $250k $200k $150k $100k $50k 0 1940
1950
1960
So that’s the glass half full version of income mobility in California. The glass half empty version? Nothing in Chetty’s study accounts for this chart: California vs. U.S. median home prices, over time Over the past forty years, the cost of housing has exploded in California relative to the rest of the United States. While the chart above only refers to median housing prices, there’s nothing much better about California’s rental market. That means that those 49 percent of Californians making more than their parents are likely seeing their paycheck stretched much thinner by steeper mortgages and rents.
1970
US
1980
1990
2000
2010
2015
CA
Source: Legislative Analyst’s Office
Here again, Californians might look at South Dakota with envy. Before adjusting for cost of living, younger Californians could defend the state’s lackluster mobility numbers by saying, “well, sure South Dakotans may be making more than their parents. But that doesn’t mean Californians aren’t making more than South Dakotans overall.” Indeed, the median household income for 25 to 44-year-olds in California is about $8,000 more than their equivalents in South Dakota. But after adjusting for California’s high cost of living, South Dakotans appear much better off. Continued on page 46 ▶
And you’re helping recycle food waste into energy. An alternative to landfills and traditional compost programs, Grind2Energy™ food waste recycling system efficiently converts food waste to renewable energy. Our non-sewer based technology enables you to dispose of all types of food waste — including kitchen fats, oils and grease — faster, cleaner and easier. Reduce odors, pests, emissions and labor costs, all while generating renewable energy and protecting the environment. Learn more at www.Grind2Energy.com
CAL I FO RNIA GRO CER | 45
Why you should wish you were born and raised in South Dakota South Dakotans of a certain age are more likely than Californians to out-earn their parents. After you adjust for cost of living, they’re making more money than Californians too. ■ Editor’s Note: This article is reprinted by permission of CALmatters (calmatters.org), a nonpartisan, nonprofit journalism venture based in Sacramento. The author, Matt Levi, is a data journalist for CALmatters.
% of kids born in 1980 out-earning parents
◀ Continued from page 45
64% 62% 60% 58% 55% 53% 51% 49% 47% 45%
55k
57k
59k
61k
64k
66k
68k
70k
Median Income for 25-44 Year Olds, Adjusted for Cost of Living CA
SD
OH
NY
Sources: Chetty et al, “The Fading American Dream: Trends In Absolute Income Mobility Since 1940”, 2015 American Community Survey. Cost of living adjusted by Regional Price Parities provided by the Bureau of Economic Analysis.
CGA_Dimond_OlejnikAd_4_2017.qxp_Layout 1 4/7/17 11:14 AM Page 1
Dave Dimond
e Stater Bros. Supermarket “Family” salutes outgoing Illuminator Headlite
Milton’s Baking Company
Dave Dimond, Milton’s Baking Company
and welcomes incoming Illuminator Headlite
Mark Olejnik, C & H Sugar Company / ASR Group Proudly Serving Southern California Families Since 1936
46 | CAL I FOR N I A G R OC E R
®
Mark Olejnik
C & H Sugar Company / ASR Group
Mark Olejnik 2017-2018 Illuminator Headlite and CGAEF for 25 years of service
48 | CAL I FOR N I A G R OC E R
Meet Illuminators Headlite
MARK OLEJNIK This May, Mark Olejnik will begin his year tenure as Headlite of the Illuminators, continuing a tradition that began in 1928.
By Len Lewis On any given weekend, you can find Mark Olejnik on horseback in the Northern California foothills doing endurance races of anywhere from 25 to 50 miles – something he has been doing for the past few years. It’s a hobby and something he and his wife have been able to share. But it’s also a metaphor for his business and personal philosophy – making sure you’re in it for the long haul and not just the sprint. That philosophy is coming right along with him as Olejnik, Regional Manager of C&H Sugar-ASR Group, takes his place as incoming Illuminators Headlite for 2017.
“Our company has been a scholarship donor for 55 years and we’ve been very involved in both the Western Association of Food Chains and CGA conventions,” Olejnik says. “As I moved West with the company and took on new responsibilities, I gravitated toward these associations and a couple of colleagues got me involved with several committees at the Illuminators and I was hooked.” Olejnik kept taking on more committee assignments and by early 2000 he was serving on the group’s board of directors, the Constellation of Hilites. Continued on page 52 ▶
To coin an equine phrase, this is certainly not his first rodeo having been a member of the Illuminators for 21 years.
CAL I FO RNIA GRO CER | 49
BIMBO BAKERIES USA
Congratulations to
Mark Olejnik 2017-2018 Illuminator Headlite and
CGAEF for 25 years of service BimboBakeriesUSA.com
©2017 Bimbo Bakeries USA, Inc. All rights reserved.
C ONGRATULATIONS Mark Olejnik 2017-2018 IllumInator HeadlIte
From your friends at Domino Foods - ASR Group.
Expanding our Portfolio
Creating Innovative Products
ASR-Group.com
Meeting Consumer Needs
◀ Continued from page 49
“Everyone in grocery is being challenged to open opportunities in order for the younger generation to see what the industry has to offer...”
When he came back from corporate assignments back East in 2011 he rejoined several committees and became an officer in 2014. Since then he has gone through such posts as Tailite, Spotlite, and Sidelite and will become the 2017 Headlite in May at the WAFC Convention. “We talk a lot about social and professional networking like Facebook, Instagram and LinkedIn these days,” Olejnik says. “But the Illuminators have been doing it since 1928. We’ve been able to create a community of truly selfless individuals that come together a few times a year to host important industry events. “The fact is that most of the personal and professional relationships I’ve made in the industry over the years were with people I met through the Illuminators,” he adds. Clearly, the Illuminators and its association with WAFC and CGA have provided forums to discuss important social and business issues. One of the big things Olejnik mentioned came out several years ago at WAFC when a speaker discussed his experiences in foster homes and what it’s like for young people who age out of the system. The subject hit home for Olejnik who has a degree in psychology and spent time working in youth homes prior to joining the CPG industry. “At a board meeting I said I believed our industry had an opportunity to help the community of foster children,” he recalls. “The next thing I know I’m meeting with the 52 | CAL I FOR N I A G R OC E R
Senior Vice President of Human Resources at Raley’s and an organization called iFoster to develop a job training program for kids in the system. A year later, Raley’s hired a significant number of these kids and the program expanded to Southern California with 250 youths being hired in 20 different retailer and manufacturer companies. In another case, Olejnik met the founder of Sababa Water, at the 2016 CGA Strategic Conference who is launching a line of enhanced and spring water that for every bottle sold a meal gets donated in the local community to help end childhood food insecurity. “Because of my Illuminators involvement I was able to connect Sababa with C-suite executives to possibly open some doors,” he says. “That sort of validated what the Illuminators are all about – programs, synergies, the scholarship fund and time people put into the organization that makes a real difference in the lives of others and adds value to everything we do.” The question, according to Olejnik, is how to bring new people into the organization so these and other programs can continue. “Part of the issue we’re facing is due to the consolidation in the industry,” he says. “It stands to reason the more retailers who attend and the number of people they bring, that the broader audience enables manufacturers to send larger vendor teams, which provided greater exposure to the Illuminators to bring in new members.”
The Illuminators are very focused on this and recently established a diversity committee to make sure the organization reflects the vast cultural range within the food industry. “We have a number of things on the table in regards to developing some young leaders committees to show the younger population that the grocery business is a viable and stable opportunity for them,” he says. “There is this thought that college graduates don’t see the industry as an attractive business proposition,” he says. “We’re attempting to get across the message that with time and the right mentoring they can be successful in the industry.” Everyone in grocery is being challenged to open opportunities in order for the younger generation to see what the industry has to offer in terms of wages, career paths and lifestyle,” Olejnik says. “We want to tell them how great the industry is and how we can use their talents to make it even better,” he says, noting that the Illuminators is doing this through its Guidelites and membership committees, which are in the process of merging. The Guidelites, who have served on the Illuminators’ board of directors, are assigned to new members. Prior to the convention they discuss how best to get involved. “As far as attracting new members, our best opportunity is at the conventions,” he says. “The WAFC and CGA conventions are
where new members can get the greatest exposure. If you’re not attending, it’s more challenging to communicate the value of the organization.”
Asked about other items on this year’s agenda, Olejnik believes a break from tradition might be in the offing.
However, he says, the Illuminators are continuing to create new networking events that are not convention oriented such as the upcoming Sacramento Rivercats baseball event with Raley’s in July. This event joins the four rallies and the CGA Educational Foundation golf tournament rallies the Illuminators already host.
“I know tradition has always been a big part of the Illuminators, WAFC, and CGA conventions, but I’d like to examine what we’ve done to how it can be done differently,” he says. “There is a lot of talk about disruption in the market – companies that emerge to create paradigm shifts. While disruption can cause uncertainty, it can also lead to new ways of creating value.”
“All of these give new members a good perspective on what the Illuminators provide.”
For example, the Illuminators recently developed a committee to leverage social and professional networking.
The diversity initiative is going to lead the Illuminators in new and different directions.
“We’re going to give that committee a significant amount of attention in order to move the organization to the next level,” he says. “We just know there is a different communication and branding strategy needed.”
“Part of that will focus on working with retailers,” he says. “They need to be part of this issue as well. We need to ensure they’re not behind the curve when it comes to workforce diversity in markets where we do business.”
“Olejnik believes with the talented board he is working with they will create a better understanding of the organization’s brand and what it stands for.”
The incoming Headlite said he was 27 when his eyes were opened to what the grocery industry had to offer. “I walked into WAFC and saw such a broad spectrum of manufacturers and all the energy they were putting behind education,” he recalls. “I realized how vibrant a business it was, and what great opportunities it offered. “We would encourage retailers and manufacturers to identify their high potential associates and give them access to the conventions perhaps as a perk or incentive,” he continues. “It would expose them to what’s going on and, hopefully, get them more engaged in the industry.” At the center of the Illuminators agenda is the scholarship program. In 2017, $130,000 in scholarships will be offered. “I’ve also challenged our board to explore the potential of letting scholarship winners know they should encourage individuals to consider part-time work in the grocery industry while they’re going to college,” he says. “It’s an opportunity to expose them to consider the industry as a career move, by bringing them into companies that show the different facets of the business, like digital marketing, merchandising and operations.”
Olejnik believes with the talented board he is working with they will create a better understanding of the organization’s brand and what it stands for. “Our motto has always been to ‘spread the lite of good fellowship’ and we do that by supporting all the conventions and our scholarship program,” he says. “But to create a relevant brand in today’s marketplace means finding new ways to communicate and increase engagement.” ■
CAL I FO RNIA GRO CER | 53
MEMBER PROFILE
BevMo! More than beverages BY LEN L E WIS
When Dimitri Haloulos’ grandmother stepped off the plane here from her little village in Greece, she carried a jug of wine as his family in Greece made a living in agriculture. “This is how I grew up. It’s not just about the stores and the products. It’s about being part of people’s lives,” said Haloulos, CEO of the 163-store BevMo! chain, which also stocks non-alcoholic beverages, specialty foods, snacks, cigars, glassware and related bar and wine accessories. Actually, Haloulos’ life and career has revolved around both the food and beverage industries. He started by working in his father’s small Greek restaurant in Northeast Ohio when he was 10 years old. Later, he attended West Point and after graduating in 1996, served in the military until 2001 in Korea, Washington and Oklahoma. After completing his service, Haloulos cut his teeth in the grocery business in brand management for P&G, working with BJs Wholesale and Delhaize on a P&G customer team. “That’s when I fell in love with retail and developed marketing skills and close connections with retail partners,” he recalls. “When the Safeway opportunity came up, I was excited to apply my skills in an environment I loved. “It was a phenomenal experience and I learned a lot watching many strong leaders at Safeway and Albertsons,” he said. 54 | CAL I FOR N I A G R OC E R
“The learning curve continued at Albertsons/ Safeway where Haloulos was vice president and got the private label business ready for a decentralized, multi-unit environment.” The best thing about the grocery environment, he said, is learning to understand how marketing, merchandising, price, and service all interact to drive customer loyalty – all invaluable lessons when he joined BevMo! In 2015. “I love BevMo’s purpose, finding the perfect drink for every glass, and the role the brand plays in helping our shoppers celebrate both special and everyday occasions. That’s why this remains a very personal business for me,” he said. At present, the company has 163 stores, primarily in California, but also Washington and Arizona with most averaging between 9,500 and 10,000 square feet. “We’re opening some exciting new stores,” he said. “There are over 20 stores in the remodel program today with many outperforming expectations,” he said. New stores, as well as remodels, are placing the emphasis on assortments that appeal to individual communities’ tastes.
“Local doesn’t just mean local products,” he said. “It could be that customers at a particular store prefer sweet wines, want luxury tequila or a bigger selection of vermouths,” Haloulos said. “We are also modernizing the décor and making stores more shoppable by improving fixturing for a better experience. We’re being rewarded with greater trip frequency and more dollars in their basket in our remodeled stores.” However, localization means different things. “In the grocery environment, local varies by category,” he said. “Alcohol is an extremely local and we have to meet consumer demand across a wide spectrum of whiskey, wine and local beers. We pride ourselves on finding the perfect drink for every glass. This means having the right items in the right location.” Private label is an important part of BevMo’s merchandising program. “The brands we own or exclusively sell are important – particularly wine,” Haloulos said. “But we aren’t going to push private label at all costs. We take a consumercentric approach making sure we’re meeting consumer needs and innovating in areas that drive incremental growth,” he said, adding, “All our brands need to win. It’s an ‘and’ not an ‘or’ ”. The focus on consumers inevitably turns the conversation to millennials. What are they drinking?
MEMBER PROFILE
“You name it, they’re drinking it,” said Haloulos. “Millennials are fundamentally upending traditional norms. They are willing to spend more than consumers in that age range of 30 years ago and are driving tradeup in the category. They are experiential and experimental.”
New challenges are always a concern but as Haloulos put it, “I sleep extremely well at night. California is the No. 1 alcoholic beverage market in the U.S. and growing. In fact, it is the second fastest growing category among consumables next to produce and we expect strong growth this year.”
For example, Haloulos said, BevMo! recently automated its sign prices in store so employees have more selling time with customers. The company is working on automating some of its educational materials so customer questions can be answered more quickly.
Haloulos says millennials don’t want their grandmother’s brand. They are less brand loyal and willing to try lesser known brands that have a story. This, he says, creates a unique opportunity for BevMo!.
In retail today, change is constant. Identifying consumer trends and quickly positioning yourself to serve them is critical to success. One area BevMo! is focused on is better utilizing its club card data.
“We’re still working towards tapping into the benefits of our scale that will enable us to accelerate our business,” he said.
“I love BevMo’s purpose...Helping our shoppers celebrate both special and everyday occasions.” When asked about new product launches in alcoholic beverages, Haloulos replied, “That will continue, especially given Millennial shoppers’ desire to explore and new flavors.” Trends are playing into BevMo’s strengths, as well. “We’re seeing a continued move to luxury products in whiskey, tequila and gin thanks to craft spirits from local distillers,” he said. “We expect continued growth in wine, especially in the $10 to $20 range. We’re still excited about craft beers, but with more breweries and new items we might be reaching the saturation point in growth.”
Meanwhile, BevMo! launched its first consumer app in July. “The results are promising,” he said. “With personalized communication we know our shoppers and can send them specific information about their beverages of choice or new items we think they may like through targeted marketing.”
“In June we combined IT and marketing under one leader who has extensive experience in database marketing,” he said. “So I’m excited about making a true omnichannel transformation to e-commerce with shoppers.”
Additionally, the chain is closely monitoring its e-commerce channel for online orders, which are either delivered or picked up in store. With a partner called Saucey, it’s delivering beverages in 40 minutes or less and it’s preparing to test two additional delivery options.
But this functional merger will also make life easier for the stores, according to Haloulos.
“Our goal is to be the most convenient retailer in California,” Haloulos said. ■
“The reality is that we have to service customers more efficiently,” he said. The more we can automate or provide tools that help employees serve customers, the more effective we can be.”
CAL I FO RNIA GRO CER | 55
2017 Pre-Conference June 12 Conference & Expo June 13–15 Las Vegas Convention Center
• 3,000+ Tea Professionals • 50+ Conference Sessions • 200+ Exhibiting Companies • Endless Networking • 1 Location
Register Today at worldteaexpo.com/register Exclusive Savings on the Premium Conference Pass! Enter the Discount Code TEAM13 for $200 Off
Reach grocery buyers in the country’s largest market: California! The CGA Annual Buyers’ Guide is your key to reaching thousands of grocery executives and buyers in California. This comprehensive list of grocery c-suite executives, owners and buyers is your ticket to the country’s No. 1 grocery market. Plan Pla now to advertise! The 2017 edition is published in July. For advertising rates and deadlines, visit www.cagrocers.com, or call Bill Kaprelian, CGA, at (559) 284-9440.
Contact baler@greenplanet21.com
Have Cardboard? Other Scrap? We offer used balers for purchase or lease. Fully reconditioned with warranty. Save using durable American machinery, short R.O.I. Call Steve: 510 760-6376
www.greenplanet21.com CAL I FO RNIA GRO CER | 57
KNOW THE LAW
The New Frontier of Nutritional Labeling Guidelines BY CO U R TNE Y DAN I EL S
Grocers, food producers, and retail food establishments have two new regulations that will soon affect their businesses. The two new regulations impact packaged food and foods for immediate consumption. This article highlights both regulations.
Packaged Foods On May 20, 2016, the FDA announced new requirements for the Nutrition Facts Label for packaged foods. The changes were initiated to update the look of the iconic food label; update the label to reflect changes in nutritional science; and update the serving size. Updating the Look The new label increases the type size of the calorie content, servings per container, and serving size information. Additionally, the calories per serving information must be bold. Manufacturers will also be required to declare not only the daily percentage, but also the amount of Vitamin D, calcium, iron and potassium in their products. Finally, the “Daily Value” footnote at the bottom of the label will be amended to better explain the meaning. The new footnote will read: “The percemt Daily Value tells you how much a nutrient in a serving of food contributes to a daily diet. 2,000 calories a day is used for general nutrition advice.”
58 | CAL I FOR N I A G R OC E R
Changes in Nutritional Science The FDA’s study revealed that it is difficult to meet nutrient needs while staying within calorie limits if you consume more than 10 percent of your total daily calories from added sugar. To combat this, the FDA is requiring that manufacturers include the gram amount and daily value percentage of added sugars on each label. The FDA is also updating the list of required nutrients on each label to include: Vitamin D, potassium, calcium and iron and the daily values for nutrients like sodium, dietary fiber and Vitamin D. Listing Vitamins A and C will no longer be required, but can be included on a voluntary basis. Updating Serving Size The amount of food people eat and drink has changed since the previous serving size requirements were published in 1993. The new requirements seek to update food labels to reflect the amounts of foods and beverages that people are actually consuming, instead of the recommended serving size. For example, the serving size on a carton of ice cream was previously ½ cup and is now changing to a cup. Similarly, a can of soda will now reference a 12-ounce serving
size compared to the previous 8 ounces. Furthermore, the FDA has recognized that the size of food packaging has a direct effect on the amount of food that people consume. So for packages that are between one and two servings, such as a 20-ounce soda or a 15-ounce can of soup, the calories and nutrients must be labeled as one serving for the entire package because people typically consume it in one sitting. For some products that are larger than a single serving but can be consumed in one sitting or multiple sittings, manufacturers will have to provide “dual column” labels to indicate the amount of calories and nutrients on both a “per serving” and “per package”/“per unit” basis. Manufacturers have until July 26, 2018, to comply with the new guidelines. The FDA has granted manufacturers with less than $10 million in annual food sales an additional year to comply.
Immediate Consumption Foods The impact of changes in our nutritional disclosure law is not limited to food manufacturers. The Affordable Care Act, signed into law by President Obama in 2010, created new menu-labeling requirements for restaurants that will go into effect as of May 5, 2017.
KNOW THE LAW
Nutrition Facts 8 servings per container Serving size 2/3 cup (55g) Amount per serving
230
Calories
% Daily Value*
Total Fat 8g
Saturated Fat 1g
10% 5%
Trans Fat 0g
Cholesterol 0mg Sodium 160mg
Total Carbohydrate 37g Dietary Fiber 4g
0% 7% 13% 14%
Total Sugars 12g Includes 10g Added Sugars Protein 3g
20%
Vitamin D 2mcg
10%
Iron 8mg
45%
Calcium 260mg
Potassium 235mg
20% 6%
* The % Daily Value (DV) tells you how much a nutrient in a serving of food contributes to a daily diet. 2,000 calories a day is used for general nutrition advice.
fda.gov
These labeling requirements currently apply to restaurants and similar retail food establishments that are part of a chain of 20 or more locations. A restaurant or similar retail food establishment is defined by the FDA as “a retail establishment that offers for sale restaurant type food, which is generally food that is usually eaten on the premises, while walking away, or soon after arriving at another location.” Although the rule seems simple enough, it can be difficult to decide what is a “restaurant” or “similar food establishment” under the law. For example, many grocery stores offer hot foods, coffee bars, and sandwich shops. Although these venues do not fall under society’s common perception of a restaurant, they function like a restaurant and therefore fall under the definition of a “similar food establishment.”
The regulations require covered restaurants and similar retail food establishments to post on a menu or menu board the calorie information for standard menu items; a succinct statement concerning suggested daily caloric intake; and, a statement that written nutrition information is available upon request. The calories contained in each standard menu item must be listed next to the name or the price of the associated item in a type size equal or larger to that of the name or the price (whichever is smaller) and in the same color, or a color at least as conspicuous as the rest of the menu. Similarly, the caloric information must use the same contrasting background or a background at least as contrasting as that used for the rest of the menu.
However, a repeal could cause a further delay in enforcement. Furthermore, California’s current laws and regulations incorporate the requirements set forth in the Affordable Care Act. Therefore, a repeal of the Affordable Care Act may require California legislators to enact new laws and guidelines absent federal regulation. In conclusion, the new laws are focused on promoting health by better informing the public. However, the new laws put the burden on the food provider to do so. With enforcement on the horizon, food producers, restaurants, and grocers would be well advised to plan to be in compliance before May 5, 2017. ■ Courtney Daniels is an attorney at Downey Brand LLP practicing in the areas of food & agriculture, real estate, and corporate law.
Enforcement of the regulation was originally expected to begin December 1, 2015, but has been delayed twice. In December 2015, Congress directed the FDA to push the law’s enforcement date until one year after the agency published final guidance. Final guidance was published May 5, 2016, making the regulation enforceable on May 5, 2017. Therefore, starting this May, the FDA may request that covered establishments provide information substantiating the nutrient values, including the method and data used to derive them. On a final note, there has been speculation as to whether the new regulations will stay in place in the event that the Affordable Care Act is repealed. It is likely that the FDA has the authority to regulate and require these nutritional disclosures absent the Affordable Care Act.
CAL I FO RNIA GRO CER | 59
1 5 MINUTES WITH...
Deborah Weinswig M AN AG IN G DIRECTOR F U N G G LO BAL RETAIL AN D TECHN O LOGY
BY LEN L E W IS
Deborah Weinswig is Managing Director of Fung Global Retail and Technology who travels extensively and is considered one of the top analysts in the field of retail innovation and technology. We caught up with her between flights to talk about everything retail. CG: There’s a lot of talk about the customer experience in retail. For someone who works with all retail segments, What does this mean to you? Weinswig: “There’s been a lot of focus on the in-store experience, but it’s more relevant in discretionary sectors like apparel and beauty than a nondiscretionary sector like grocery. Retailers must be judged on the overall ‘experience.’ That can mean anything from getting an online order quickly and conveniently to walking out of a discounter knowing you got the best price.” What do you think it means for supermarkets? “I think the in-store experience comes behind fundamentals such as proximity, product availability, choice and especially price, in terms of shoppers’ priorities. If store experience was highly important, Whole Foods Market would be flying; instead, it is faltering and no-frills discounters are growing.”
If we’re looking for lessons from non-grocery retailers, who typifies the best in-store experience? “Apparel and beauty are the sectors where in-store experience is most important. It can build a brand image and provide the tangible experience that inspires discretionary spending. In mass market apparel, some retailers consistently outrank many of their peers.”
Can these experiences help battle online sales? “It depends on the quality of the experience. And the ‘experience’ doesn’t suit all shopping missions. It’s mainly relevant in the discretionary sectors, where consumers are choosing to shop – not having to shop. Basically, we’re going to see three types of shopping to complement e-commerce.”
“APPAREL AND BEAUTY ARE THE SECTORS WHERE IN-STORE EXPERIENCE IS MOST IMPORTANT.” Who’s in that group? “H&M, Zara and Uniqlo offer consistent, quality store environments, even if the shopping experience isn’t exceptional. Their standards and merchandising often overshadow those of some legacy players in apparel. “Primark has great flagship stores in the budget segment, with elements like digital signage, great merchandising and conveniences such as phone-charging areas. Since Primark doesn’t advertise, the stores serve a marketing function. When it comes to apparel retailers, Urban Outfitters and Anthropologie really stand out in building a retail brand.” What about the beauty segment? “International players such as Sephora, Lush and Kiko successfully combine a premium experience with mass-market price points.”
“First, are the convenience shoppers who make distress purchases of goods needed quickly, often at stores close to home. The experience will be less important to them. Then there are collection shoppers who go to stores to pick up online purchases. It’s the destination or leisure shoppers who make trips to those stores that they like to visit rather than have to visit. This is where in-store experience will be key.” Should there be better integration of brick and click strategies? “Most big retailers appear to be doing the right things. Walmart and Kroger are integrating online and stores at a lower cost than home delivery. Target’s smaller stores complement e-commerce with edited collections and in-store pickup. Macy’s and others are using RFID to get a full view of inventory across stores and distribution centers.” Continued on page 62 ▶ CAL I FO RNIA GRO CER | 61
15 MINUTES WITH...
◀ Continued from page 61
Is it enough? “For some of them, it’s not. Some generalists have problems with theirs overall retail proposition and positioning in an age of near-unlimited choice, more specialized stores, coupled with ever more diverse consumers. An omnichannel offering is no panacea if your overall brand appeal is diminishing.”
Robotics is a hot button but how relevant is it and are there hard benefits to any of it at this point? “There are a number of interesting examples. Auchan in France will trial robots that follow customers in stores, and carry and check out groceries. Walmart has patented a system of self-driving shopping carts that scan, retrieve and deliver products, as well as check inventory.
“INVESTMENT IN INVENTORY AND LOGISTICS IS ESSENTIAL FOR DIGITAL RETAILING.” Where does technology fit in? “VR, AI and AR offer some promise to retailers further ahead. Near term, we see several pockets of opportunity. Technology that drives productivity such as self-scan, self-checkouts and automated collection points is appealing in a rising-wage environment. Automated distribution centers such as the one deployed by Hudson’s Bay Co., and RFID enable buy-and-collect or reserve-and-collect strategies.” Should we focus tech expenditures on improving the supply chain? “Investment in inventory and logistics is essential for digital retailing. RFID gives retailers visibility of inventory that enables pooling inventory across stores and distribution centers. It also underpins services such as buy-and-collect and reserveand-collect. “Logistics investments equip distribution centers for e-commerce and our research has looked at how much time digitalization of the whole supply chain can cut off the apparel supply chain. A traditional apparel supply chain takes about 40 weeks from design to sales. Digitalization has the potential to reduce that by 48 percent. That means digitalization could cut up to 19 weeks off the process, allowing apparel retailers to respond more promptly to changes in consumer preference.”
62 | CAL I FOR N I A G R OC E R
“Just Eat, an online food ordering service in the UK is using self-driving robots to deliver food orders. But near term, robotics that push up productivity and help deliver omnichannel services are the most promising.” With the growth of online sales, will we see more small format stores and how will this impact mall development? “Smaller stores serve convenience and collection. There’s still space for large, flagship stores as destinations for leisure shoppers. But we are likely to see fewer large stores overall, and some malls may see their anchor tenants close. High-end malls are doing well. However, at least 30 percent of U.S. malls, or more than 350 of them, mostly within the C and D classifications, need to be closed. “Department store and specialty store operator are likely to close more stores in 2017 than they have in the past, and the bulk of the closures will be mall locations. We predict there could be several hundred department store closures in 2017, and that a number of retailers could file for bankruptcy, which would result in even more store closures. For example, most of the department stores like Macy’s, as well as Banana Republic and Gap, will continue to close less profitable locations.”
You travel extensively, what do you think are some of the more interesting formats you’ve seen lately? “Amazon Go is among them. It’s not going to prompt a revolution in the near term but I’m excited to see how it will pan out. We’re waiting for the first U.S. Lidl stores to open. At around 36,000 square feet they will be much bigger than European stores and it will be interesting to see how they use that extra space.” How about internationally? “In London there’s a store called Missguided. It’s the first physical store for this UK fashion pure play and one with real spectacle to appeal to young-fashion shoppers. Also in London is Estée Lauder’s Estée Edit. It was designed for millennials by bringing together tech and experiences. It includes a selfie wall, a video wall showing user-generated content and a range of beauty services.” We’ve seen some pure play online companies move toward physical stores. Will this continue? “It can be especially valuable for singlebrand pure plays such as Bonobos and Warby Parker. These operators are brands as much as they are retailers, so opening physical stores is about bringing their brands to alternative distribution channels. At the same time, we think the pure play segment will remain very strong and there’s little urgency for most online retailers to open stores.” ■
ADVERTISER INDEX PAGE COMPANY
PHONE
FAX
39
Albertsons
925-467-3000
925-467-3323
50
Bimbo Bakeries USA
916-456-3863
916-732-4780
510-787-4416
510-787-4205
916-373-4396
916-373-4296
pmiller@cswg.com
cswg.com
909-261-4065
626-246-3111
ghurd@vonscu.com
vonsefcu.com
doug@emerson.com / heather.dougherty@emerson.com
grind2energy.com
51 16 BC
C & H Sugar – ASR Group C&S Wholesale Grocers, Inc. Certified Federal Credit Union
WEBSITE albertsons.com
wcrocker@bbu.mail.com
bimbobakeriesusa.com chsugar.com
44-45 Emerson Grind2Energy
800-845-8345
47
Gelson’s
818-906-5709
57
GreenPlanet21
510-281-8200
23
International Dairy Deli 608-310-5000 Bakery Association
608-238-6330
19
Kellogg Company
269-961-2000
269-660-4518
7
Miller/Coors
949-353-9422
IBC PepsiCo Inc.
949-330-5804
949-643-5765
38
Raley’s
916-373-3333
916-444-3733
21
Ralphs Grocery Company/Food 4 Less
310-884-9000
310-884-2505
43
Retail Marketing Services
800-252-4613
818-563-3041
cartretrieval.net
909-783-5000
909-733-4038
staterbros.com
37, 46 Stater Bros.
818-990-7877
gelsons.com info@greenplanet21.com
greenplanet21.com
iddba@iddba.org
iddba.org kelloggs.com
jessica.owens@millercoors.com
millercoors.com
jen.fulton@pepsico.co / freda.dickens@pepsico.com
pepsico.com raleys.com
kendra.doyel@ralphs.com
ralphs.com food4less.com
31
TruGrocer Federal Credit Union
208-385-5273
208-385-5290
cdemaray@trugrocer.com
trugrocer.com
17
Tyson Foods Inc.
480-949-6700
480-948-0755
robert.bukovec@tyson.com
tysonfoods.com
4
Unified Grocers, Inc.
323-264-5200
323-729-6619
customercare@unifiedgrocers.com unifiedgrocers.com
56
World Tea Expo
866-458-4935
info@worldteamedia.com
worldteaexpo.com
CAL I FO RNIA GRO CER | 63
MOMMY BLOGGER
Nuts About Nutrition L A R A B A L DW I N BLOGGE R
Today’s parents are under pressure to be more nutrition-conscious than ever.
discussions at book club to salivate over the newly released flavors from their favorite brand of seltzer.
If you’re blissfully unaware of the madness of our generation, let me educate you: gluten is bad. Dairy is frowned upon (both are banned from my son’s preschool classroom).
4 5
it was encouraged. Our fridge, and that of my friends and grandparents, were always stocked with a buffet of soda options. My kids? They don’t know what soda is.
Sugar is a no-no. If there’s anything worse than sugar, it’s artificial sweetener. And don’t even say the words high fructose corn syrup, artificial food dyes, or partially hydrogenated.
We visit multiple stores. While my mom is still loyal to the local market we stopped in almost daily growing up, my approach is much more fragmented. I visit the bulk grocery store once a month, buy my fish and produce each week from another, and get all my kids’ favorite snacks at yet another store. A highly scientific survey conducted on my Facebook page confirms that I am not alone – we need very specific products and we are willing to be highly inconvenienced to get them.
Make no mistake, this has affected our shopping habits in ways I’m certain are uniquely millennial.
1
We have to be allergenconscious. According to the CDC, food allergies among children increased by approximately 50 percent between 1997 and 2011 and is only growing. Many schools are now nut-free. Milk, eggs, wheat, and soy are other hot-button areas of concern as varying levels of intolerance affect policies not just at school but also for sports, camps, and playdate etiquette. I can sleuth out a precautionary allergen label faster than you can say liability lawsuit.
2
We don’t buy soda. I grew up with parents that wholeheartedly believed lemon-lime soda could fix any ailment, from a headache to a broken heart. Drinking soda wasn’t just allowed;
64 | CAL I FOR N I A G R OC E R
We are suckers for organic and local. Just slap an organic label on that lollipop and my mom-guilt is slightly lessened.
3
Instead, there’s another bubbly beverage that has taken soda’s place: seltzer water. The caloriefree, sugar-free, sodium-free, artificial sweetener-free magic has assumed saintly status, with steadily climbing sales. The same moms who would never dream of letting their kids drink a cola will derail group
The modern obsession with nutrition has been both a blessing and a burden for parents. We’re looking for a particular combination of quality and value that meets precise nutritional profiles, and that pressure has been passed on to retailers to meet these diverse demands. ■
California Grocer Online www.cagrocers.com
PRSRT STD US Postage Paid Permit No. 1401 Sacramento, CA
Read California Grocer on your mobile device, or share with an associate.
Congratulating MARK OLEJNIK, the 2017-18 ILLUMINATOR HEADLITE
and
CGAEF, celebrating 25 YEARS OF SERVICE