California California VS. Trump PAGE 36
workplace harassment PAGE 40 2 0 1 7, I S S U E 3
to catch A Thief New ideas to reduce shrink
CALIFORNIA GROCERS ASSOCIATION
The California Grocers Association presents
September 24–26, 2017 Palm Springs Convention Center Palm Springs, CA
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.
“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.” 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 grocery industry attend.” Jeremy Cullifer Jule’s Market
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-toface meetings and networking events. Explore new ways to collaborate that creates the perfect retail performance and builds your business.
♪ Sunday, September 24 • Illuminators Golf Tournament • Opening Experience • Opening Reception • After-hours Social Encore!
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.
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 firstname.lastname@example.org
Many thanks to
♪ Monday, September 25 • Whiteboard Sessions • Opening Remarks and General Session • Pre-scheduled Business Meetings • Independent Grocers Forum • NEW – Loss Prevention Executive Sessions • Reception & Illuminators Special Event
♪ Tuesday, September 26 • Morning Jam Session • Pre-scheduled Business Meetings • Luncheon Keynote Address • NEW – Loss Prevention Executive Sessions
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.
The Illuminators For more information visit www.cgastrategicconference.com
for their continued, generous support of the CGA Strategic Conference by providing outstanding meal functions and entertaining social events.
CGA | BOARD OF DIRECTORS
CHAIRMAN APPOINTMENTS Independent Operator Committee Chair DIRECTORS
CALIFORNIA GROCERS ASSOCIATION
2 | CAL I FOR N I A G R OC E R
Chairman Jim Wallace The Albertsons Companies
Second Vice Chair Kendra Doyel Ralphs Grocery Company
Secretary Hee-Sook Nelson Gelson’s Markets
First Vice Chair Bob Parriott Twain Harte Market
Treasurer Phil Miller C&S Wholesale Grocers
Past Chairman Kevin Konkel Raley’s
Renee Amen Super A Foods
Kevin Arceneaux Mondelēz International Inc.
Dave Jones Kellogg Company
Jon Alden Jelly Belly Candy Co.
Steve Dietz UNFI/Tony’s Find Foods
Mark McLean CROSSMARK
Jonathan Samorajski Anheuser-Busch InBev
Teresa Anaya Northgate Gonzalez Markets
Damon Franzia Classic Wines Of California
Casey McQuaid E & J Gallo Winery
Denny Silva Coca-Cola Refreshments
Joe Angulo El Super (Bodega Latina)
Jen Fulton PepsiCo Inc.
Mario Mediati The Clorox Company
Elliott Stone Mollie Stone’s Market
Rich Arnold Oberto Brands
Ted Gardner Rio Ranch Markets
Lynn Melillo Bristol Farms
Joe Toscano Nestlé Purina PetCare
Denny Belcastro Kimberly-Clark Corp.
Michel LeClerc North State Grocery Inc.
Dan Meyer Stater Bros. Markets
Jim Van Gorkom NuCal Foods
Leon Bergmann Unified Grocers, Inc.
Hillen Lee Procter & Gamble
Doug Minor Numero Uno Market
Michael Walton Unilever
Bob Bukovec Tyson Foods, Inc.
Eric Lindberg, Jr. Grocery Outlet, Inc.
Nicole Pesco Save Mart Supermarkets
Richard Wardwell Superior Grocers
Cindy Chikahisa Sprouts Farmers Market
Dave Madden MillerCoors
Laura Price Nielsen
Kevin Young Young’s Payless Market IGA
Brent Cotten The Hershey Company
Jonathan Mayes Albertsons Companies, Inc.
Mike Ridenour The Kraft Heinz Company
Willie Crocker Bimbo Bakeries USA
Joe McDonnell Campbell Soup Company
Casey Rodacker Mar-Val Food Stores, Inc.
President/CEO Ronald Fong
Senior Director, Events and Sponsorship Beth Wright
California Grocer is the official publication of the California Grocers Association.
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
Publisher Ronald Fong email@example.com Editor Dave Heylen firstname.lastname@example.org For advertising information contact: Bill Kaprelian email@example.com
CONTENTS | ISSUE 3
24 Shrink – A Roundtable Discussion California Grocer invited several retail loss prevention managers to discuss what is happening in the areas of loss prevention, safety and risk management, and in particular, the impact of Proposition 47 on the state’s grocery industry.
George Frahm 2017 Hall of Achievement Inductee The CGA Educational Foundation inducted Stater Bros. Markets executive George Frahm into its prestigious Hall of Achievement during its recent 25th anniversary celebration.
COLUMNS President’s Message Big Issues Start Small. . . . . . . . . . . . . . . . . . . 5
30 Aligning Loss Prevention with CEO Goals In the first of a three part series, Larry Miller addresses the building blocks for profitable selling and the need to align loss prevention goals with corporate goals.
Chairman’s Message It’s Your Conference.. . . . . . . . . . . . . . . . . . . 7 Viewpoint Tomorrowland. . . . . . . . . . . . . . . . . . . . . . . . 8 Guest Column The Real Value of LPSRM. . . . . . . . . . . . . . 10 Government Relations Taxes and California’s Crumbling Infrastructure. . . . . . . . . . . . . . 18 Capitol Insider Do No Harm. . . . . . . . . . . . . . . . . . . . . . . . 20
36 California vs. President Trump California’s Democratic leaders wasted little time in declaring war on President-elect Donald Trump, ramping up their arsenal even as the final votes were being counted. What impact will this have on the state and the grocery industry?
Washington Report Let the Games Begin .. . . . . . . . . . . . . . . . . 22
DEPARTMENTS CGA News. . . . . . . . . . . . . . . . . . . . . . . . . . 12 Outside the Box New Retail Perspectives.. . . . . . . . . . . . . . . 46 15 Minutes With… Samantha Barnes. . . . . . . . . . . . . . . . . . . . . 58
40 Workplace Harassment: Low Profile, High Price Tag
Know the Law Protecting Intellectual Property Rights. . . . . . . . . . . . . . . . . . . . . . 61 Index to Advertisers. . . . . . . . . . . . . . . . . . 63 Mommy Blogger Diary of an Online Shopping Newbie.. . . . 64
The California Grocers Association recently launched an industry-focused workplace harassment prevention training program. With the number of harassment lawsuits on the rise, understanding prevention has become center stage. CAL I FO RNIA GRO CER | 3
s n o i t a l u t a r g Con George Frahm, Stater Bros. Markets, and the Legends of the Industry
e h t t r o p p u s o t d u P ro
CGA Educational Foundation and your induction into the Hall of Achievement
Thank You for making a difference! W W W. U S I N T L M E D I A . C O M
“Good People Helping Good People” ®
Big Issues Start Small
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
The regulation you don’t see coming is often the real problem, which is why engaging in local government is a must. Every week hundreds of small regulatory bodies throughout California meet to pass dozens of laws. They only provide 72-hour notice. They limit input to mere minutes of testimony. They grind forward with few recognizing meetings take place and fewer understanding the impact they have on businesses. So, who are these voracious regulators? California’s 540 cities and counties. The showmanship of federal and state government regularly upstages the mostly mundane activities of the 58 counties and 482 cities in California. But local governments humdrum reputation belies their real impact on the grocery industry. In many ways, local government impact can overshadow that of our State Legislature. Look at the current menu of state legislative threats facing grocers and you will notice many began as local government ordinances. Don’t believe it? Plastic bags, minimum wage increases, predictive scheduling, packaging bans, soda taxes and CRV recycling limitations all started as local legislation.
It has become the battle plan for advocates looking to push for state and federal laws to start with local governments in California. The theory is to use local government regulation as an incubator in order to build political momentum. Unfortunately, there are many California cities and counties looking for the opportunity to be the first to regulate. CGA is unique as the only California retail association with dedicated statewide local government representation. We know as an industry that turning a blind eye to local governments leaves our industry exposed to the possibility of expensive threats, both in the jurisdiction and, eventually, statewide. To fully understand the challenge local government presents, it is important to understand how cities and counties work. Every square inch of California is covered by either a city, a county or both. They are only required to provide only a minimum of 72-hour notice of their meetings.
Congress, most can simply pass ordinance with two votes, usually just a week apart. Passed laws usually go into effect 30 days later. Local government is fast and furious. Local government relations require both diligence and speed in order to be effective. This is why CGA invests in engaging and educating local decision makers on a constant basis. Just like the business world, relationships with decision makers is key to success. Exposing local government officials to store operations, issue education and reminders of the value of successful grocery stores to livable communities are part of CGA’s program. It’s important to note the most important part of CGA’s local government program is you. Participating in CGA’s local government programming, creating a relationship with your local elected officials and sharing information you receive from local governments with CGA are crucial. While local governments can appear to be an unwieldy beast, with relationships, understanding and diligence, we can prevent unnecessary regulation. ■
With most meeting on Tuesdays, this means they release agendas Friday afternoons. Unlike the State Legislature or
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GEORGE FRAHM on his induction into the 2017 CGAEF Hall of Achievement
It’s Your Conference
J I M WA L L AC E THE ALBER T S ON S COMPAN IE S
The CGA Strategic Conference is where our industry networks within the business of grocery. Wallace
By now you have received correspondence from CGA regarding its Strategic Conference this fall in Palm Springs. If you have yet to participate in this annual gathering of our industry, I highly encourage you to do so, and for a number of reasons. Each year, after meeting with a group of grocery retailers and suppliers, CGA thoughtfully creates the conference theme. This year’s theme – Working in Concert – focuses on the importance of retailers working more closely with every link in the food distribution chain to ensure we are providing our customers with the best shopping experience and product available. This sounds simple enough and yet it continues to be a daunting challenge, particularly when you consider the rapid pace in which technology and our customer base is evolving. To better understand the importance of greater collaboration, CGA is once again assembling an impressive list of thoughtprovoking speakers who are on the cuttingedge of this timely topic. CGA has set the standard for finding the few true nuggets in a vast field of speakers that truly understand what is just over the next hill for our industry.
Of course, the conference anchor continues to be its signature face-to-face pre-scheduled retailer-supplier meetings. It’s been called “speed dating for grocers” and I think that’s an accurate description. Our goal is for you to maximize your time away from your office. I highly recommend you wear comfortable shoes. Additionally, we’ve added a new wrinkle this year – a special track just for your loss prevention, safety and risk management associates that will include six hours of LPSRM-focused educational programming and pre-scheduled meetings with LPSRM vendors. The CGA Strategic Conference roots go back nearly 120 years. It’s where California’s grocery industry annually gathers to strengthen business relationships, discover new products and services, and learn new ideas to make our companies stronger and more competitive. Plan to join us this September. To learn about attending and sponsoring at this year’s conference, visit the website at www.cgastrategicconference.com. See you in Palms Springs! ■
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K EV I N CO U PE FOUN DE R , MOR N IN GN E WS BEAT.CO M
Technology can change how business interacts with consumers, but there is an epiphany that must precede the tech choices that businesses must make. I recently had the opportunity to attend a presentation at which Marc Tarpenning, one of the co-founders of Tesla, talked about the company’s early development process… and there were two things he said that really grabbed my attention and struck me as relevant to pretty much any business facing 21st century competitive realities. First, there was his observation that in creating the Tesla there were far greater problems than developing the batteries that propel them.
“That was just science,” he said, arguing they always knew they could work that part of it out. Unlike co-founder Elon Musk’s other business, Tarpenning said, “this wasn’t rocket science.” No, the bigger problem quite literally had to do with the nuts and bolts of the business. They could design the batteries and design the car…but then they actually had to find someone who could do things like make a door, and a rear-view mirror, and all the other stuff that goes into a physical car. That was a lot harder…until they discovered something about traditional car companies – they don’t make that stuff either. It ends up the only thing traditional car companies really make is the engine, and everything else is outsourced. So, all Tesla had to do was network, network and network some more until they could find outside companies that could meet their standards, and were willing to work on the smallproduction scale Tesla had in mind. Which they did. iStock
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Listening to the ruminations of a Tesla cofounder, who, it could be argued, is ideally positioned to talk about business disruption, was one of the real benefits of attending the recent GMDC Retail Tomorrow Conference in Silicon Valley. It was one of the most provoking such meetings that I can remember, and GMDC set a benchmark for what a technology conference should be. I always thought I was a reasonably enlightened and imaginative guy, until I spent time on the Google campus and at the Plug And Play “accelerator” that provides infrastructure for startup companies and plays matchmaker between them and major companies that serve as their partners. (Many years ago, we were told, one of the first companies to work with Plug And Play was a little entrepreneurial effort you might have heard of. It was called Google.) I was simultaneously humbled and energized because there were so many business lessons. Tracie Maffei, who runs the retail practice at Google, told us during our visit to the Google campus that there are certain basic realities that businesses have to understand and ignore at their own peril. “Millennials represent the most diverse, educated, socially conscious and tech-savvy group in history…they’ve never used a fax, never used a rotary phone, never listened to a cassette tape,” she said.
“Technology can change the way business interacts with consumers, but there is an epiphany that must precede the tech choices that businesses must make.” In other words, if you are operating a business in a digital world with a rotary phone mentality, you simply cannot succeed. “Ninety-eight percent of the economy will be impacted by digitization,” she said. “And, 65 percent of children entering primary school today will have jobs that don’t even exist yet.” But if those comments pointed to a future that requires imagination to envision, Maffei also talked about Google’s approach to business that is rooted in everyday realities. For example, she asked if the businesspeople in the room (and outside the room, for that matter) are “setting goals that go beyond accepted industry standards.” She talked about the notion of banishing the notion of “online” and “offline,” and focus on “all-line,” creating a new standard that is “seamless” and “end-to-end,” establishing “lifetime value” that is not just transactional. And while technology obviously is a driver – and the notion of voice-activated, artificial intelligence-driven, screen-less and wearable computers would seem to propel us into a Star Trek-like future – Maffei actually suggested that retailers not start with technology as they establish priorities and strategies. Rather, they should start by thinking about what problem they are trying to solve, and what pain points in the consumer experience they are endeavoring to eliminate. Technology can change the way business interacts with consumers, but there is an epiphany that must precede the tech choices that businesses must make. One of the things that a visit to Silicon Valley offers is a chance to visit communities like Palo Alto – where net worth and IQ are in a constant race to see which one will be higher compared to the rest of the known
universe – and see some of the unique retail concepts that are being funded by tech guys with big bucks. Some of them are pretty out there, but still can offer lessons for more traditional retailers. For example, there was B8ta (pronounced “Beta”), a fascinating retail store that caters to both consumers and business customers. Essentially, the store leases out small spaces on Apple Store-like tables to technology businesses that want to test out their products’ viability. The products range from electric-powered skateboards to juicers and virtual reality viewers to hightech security systems. B8ta has a highly trained staff that helps guide customers through the store, and rotates products regularly to make sure there is variety; it also has technology that is able to track how customers interact with products, so suppliers have the maximum amount of actionable data. B8ta has a full supply of products for customers in the backroom, and it only profits from the table lease payments; it takes no cut of the sales. What B8ta made me think about, though, was how retailers may want to approach the whole notion of new products if they want to infuse their bricks-and-mortar stores with excitement and make them a destination. Maybe there should be whole sections of new products with generous sampling available that are used not as a way to get money out of the manufacturer, but as distinguishing the retailer from both online competitors and the guy across the street. We also visited a store called Relonch, which is designed to address the precipitous decline of the traditional camera business – 10 years ago, 127 million cameras were sold, a number that was down to 20 million last year.
Relonch takes the position that it is in the photograph business, not the camera business – so it essentially gives its customers a high quality camera which automatically sends photos taken back to the company, which then sends the customer a preview version of those pictures, and you pay $1 apiece only for the ones you want to keep. This got me thinking… What would happen if a food retailer went to a customer and said, “We want to give you a new refrigerator/freezer, and all you have to do is commit to buying $200 worth of refrigerated or frozen foods a month from us for X number of months.” I have no idea how the economics of this would work, and I suspect that most retailers would find this unworkable. But I also wouldn’t be surprised if Amazon announced such a program next week. Which I think was the point of a trip and the GMDC conference. Pretty much everything is possible. Tarpenning said that it usually is easier to create a disruptive culture in a start-up company than it is in an established, legacybased company. I think that is true – but it is an explanation, not an excuse. To compete in the 21st century, it strikes me as critical to understand that new competition can come from anywhere and everywhere, and that this new competition is likely to have a disruptive culture based on questioning traditional assumptions. Competing with such entities won’t be easy. And it seems to me that one of the first things retailers have to do is look at themselves and pose one simple question: If we were starting this company tomorrow, how would we do it? ■
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The Real Value of LPSRM
MIKE BOWE R S S E NIOR D I R ECTO R , A SS ET PR OTECTION N O R T H G AT E G O N Z A LE Z S UPE R MAR K ET S
Understanding the impact of an effective loss prevention, safety and risk management program should be top of mind for every CEO. The supermarket industry has led retail innovation in many areas, largely based on necessity. As any executive experienced with perishable food can attest, the precision of ordering and the level of perfection needed to handle inventory have a much smaller margin of error in a business where products expire quickly. Interestingly, there are areas where the thought process of some supermarket operators lags behind the curve. Loss Prevention, Safety and Risk Management (LPSRM) are disciplines that leading retailers use to create a competitive advantage and provide headroom for building sales. Solid LPSRM disciplines contribute to the a company’s performance in the same way fuel-efficient vehicles contribute to long trips: their owners get a lot more mileage from the same tank. With that in mind, it’s interesting to see the parity in which both fuel-efficient vehicles and LPSRM programs are viewed by lagging companies. At best, they save money; at worst they impede sales. 10 | CAL I FOR N I A G R OC E R
But herein lies the great thought betrayal of an organization that is constantly offbalance, switching between priorities and putting out fires. They fail to recognize the real value held by a great LPSRM program, the same way some view fuelefficient vehicles. While cars with great gas mileage can get us there cheaper, truly successful organizations see that the real benefit of an LPSRM program, like the car, is efficiency gets us there quicker. And quickness is important when operating a corporation with thousands of SKU’s and market-driven assortments that vary not only by the zip code but also by the season. Quickness means that you can be confident knowing your store operator (on whom the business hinges), who is being pelted with regulations and shrink and accidents and all those things which detract from the core mission, will not be distracted longer than necessary with these daily derailments. In retail, quickness stands in the gap of selling and profiting, or not getting there at all. This perspective is one of
the many forks in the road where leaders and laggards either take a pit stop, or pull ahead of the competition. Any organization without an LPSRM executive at the decision-making table is likely stopping to get gas far more often than necessary. Some leaders may intentionally exclude LPSRM executives from key conversations because the viewpoints they provide could distract from the issues at hand, which are perceived to be “more important.” This is similar to avoiding your physician’s phone calls to schedule that open-heart surgery you talked about last month so you can focus on spending more time with your family. Effective leaders put first things first and always view the whole business as important. And this is one area where the supermarket industry could use some thought leadership as the gap widens between the winners and the losers. Your LPSRM opportunities and the need to execute other business plans will intersect at some point. Will they support one another or crash? ■ Editor’s Note: Mike Bowers is Senior Director, Asset Protection, Northgate Gonzalez Supermarkets and Chair of the CGA Loss Prevention, Safety and Risk Management Committee.
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INDUSTRY RECEIVES “HANDS ON” ADVOCACY TRAINING More than 70 grocery retailers and suppliers from throughout California received a hands-on course in government relations during the California Grocers Association’s “Grocers Day at the Capitol” in April. The Association’s annual one-day member lobbying event was particularly meaningful this year due to several bills CGA is sponsoring this session. “This year’s Grocers Day was a win-win for both the Association and its members,” said CGA President Ron Fong. “They got to see first-hand all the negotiating that occurs in moving legislation and we benefited from their ‘boots on the ground’ knowledge our members shared with legislators and their staff.”
Assemblymember Jim Fraizer (D-Oakley) addressing Grocers Day attendees.
CGA President Ron Fong with CGA board members visiting the Assembly floor. 12 | CAL I FOR N I A G R OC E R
Attendees spent the morning of April 18 being briefed by CGA staff on both CGAsponsored bills as well as all key groceryrelated legislation. In addition, Assemblymember Jim Frazier (D-Discovery Bay), author of the $57 billion transportation bill signed into law, provided insights into why the bill passed so quickly through both houses and was signed by the governor.
“Our strong member support at Grocers Day plays an important role in the Association’s advocacy program,” Fong said. “Legislators need to hear from retailers, particularly the independent operator, on how certain legislation will impact their constituents.” Following the morning briefings, attendees hustled to the Capitol for an afternoon of face-to-face team meetings with legislators and their staff. In all, grocers met with more than 70 percent of the Legislature. In what has become an annual tradition, CGA hosted its popular Ice Cream Social in Capitol Park which was open to all legislators and their staff. The event was sponsored by Clover Sonoma. The full day of activities capped off with CGA’s annual President’s Reception at the Association’s headquarters, which provided an informal gathering for attendees and legislators to discuss pending legislation. “CGA is extremely appreciative of those companies sponsoring this year’s Grocers Day including the Supporting Sponsor Safeway/Albertsons/Vons/Pavilions,” Fong added. “We couldn’t make this the event it has become without their tremendous support.”
CGA members met with Assemblymember Laura Friedman (D-Glendale) (right).
Thank You Sponsors CGA wishes to thank the following sponsors for their generous support of this year’s Grocers Day at the Capitol. Supporting Level Safeway/Albertsons/Vons/Pavilions Gold Level Coca-Cola Refreshments Unified Grocers, Inc. Silver Level (L to R) Jim Wallace, Albertsons Companies; Kathleen Smith, Albertsons Companies; Assemblymember Tim Grayson (D-Concord); Ron Foss, Albertsons Companies.
C&S Wholesale Grocers Food 4 Less/ Rancho San Miguel Markets Gelson’s Markets Ralphs Grocery Company/ Food 4 Less Retail Marketing Services, Inc. Bronze Level Bristol Farms Grocery Outlet North State Grocery, Inc.
(L to R) Kendra Doyel and Brian Gray, Ralphs Grocery Company.
Bob Parriott, Twain Harte Market, (left) with Thomas Honer, Harvest Market.
Breakfast Kellogg Company Save Mart Supermarkets Luncheon Jelly Belly Candy Co. Kimberly-Clark Corporation Ice Cream Social Clover Sonoma President’s Reception Anheuser-Busch INBEV
Dan Meyer, Stater Bros. Markets.
(L to R) Jonathan Mayes, Albertsons Companies; Kathleen Smith, Albertsons Companies; Matt Hillbrink, Raley’s; Tim Murphy, Costco; Assemblymember Cecila Aguiar-Curry (D-Winters); Christian Park, Roplast.
Roplast – Revolve Recycling & Bring Back Bags Continued on page 14 ▶ CAL I FO RNIA GRO CER | 13
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NEW MEMBERS CGA welcomes the following members:
About Food, Inc. dba Redlands Ranch Market 800 E Lugonia Ave Ste H Redlands, CA 92374-2550 Contact: Cheri Ireland, President Email: firstname.lastname@example.org Tel: (909) 307-2600
Bay Cities 5138 Industry Ave Pico Rivera, CA 90660-2550 Contact: Eric Quiroz, Sales Representative Email: email@example.com Tel: (562) 551-2979 Website: www.bay-cities.com
Crusader Insurance Company 26050 Mureau Rd Calabasas, CA 91302-3174 Contact: David Klayman, Sr. Marketing Representative Email: firstname.lastname@example.org Tel: (818) 591-9800 Website: www.crusaderinsurance.com GoHealthNow.com PO Box 1271 Alamo, CA 94507-7271 Contact: Michael Curtin, VP, Sales & Marketing Email: email@example.com Tel: (916) 719-8651 Website: www.gohealthnow.com
(L to R) Jim Wallace, Albertsons Companies; Mary Kasper, Unified Grocers; Senator Mike McGuire; Senator Steven Glazer; Rachel Zenner, Albertsons Companies; Ron Fong, CGA.
TWO SENATORS RECEIVE LEGISLATOR OF THE YEAR AWARD California State Senators Steven Glazer (D-Orinda) and Mike McGuire (D-Healdsburg) were the inaugural recipients of the California Grocers Association “Legislator of the Year” award. The lawmakers received the prestigious award at CGA’s 2017 Grocers Day at the Capitol on April 18, in Sacramento. The senators were recognized for their ongoing efforts in trying to help repair the state’s troubled Beverage Container Recycling Program. Both senators are co-authors of legislation (SB 60) that would suspend penalties for store operators that are unserved by a parking lot recycling center due to a closure that occurred between January and March 2016, or a government action.
State law AB 2020 requires grocers to redeem beverage containers if there is not a recycling center in their convenience zone. More than 200 recycling centers have closed in the past two years due to a variety of reasons including the bottom dropping out of the plastics market due to lower petroleum prices worldwide. “Our members are extremely appreciative of the efforts both these senators have made in helping us seek resolution to this important industry issue,” said CGA President Ron Fong. “Both Senators Glazer and McQuire are worthy recipients of this new award.”
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Earth Friendly Products salutes
George Frahm Congratulations on your well-deserved induction into the CGA Educational Foundation Hall of Achievement, in honor of your contributions to Stater Bros. Markets and the California Food Industry.
Powerful. Sustainable. Affordable. For a family-friendly, plant-powered clean. Made in facilities using 100% renewable energy. All four plants are carbon neutral, water neutral, and Platinum Zero Waste certified.
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CGA DELEGATION MEETS ON CAPITOL HILL
NEW MEMBERS CGA welcomes the following members:
Halo 4885 Greencraig Ln San Diego, CA 92123-1664 Contact: Felipe Greven, Business Development Executive Email: firstname.lastname@example.org Tel: (858) 609-0748 Website: www.halobi.com
(L to R) Kate Stille, Nugget Market; Chelsea Minor, Raley’s; Congressman Ami Bera (D-Carmichael); Ron Fong, CGA; Aaron Moreno, CGA.
A delegation of California grocers rallied with more than 200 supermarket industry executives from throughout the U.S. on Capitol Hill to discuss federal policies during the annual FMI/NGA/FIAE Day in Washington Fly-in. CGA’s lobbying team joined the delegation in meeting with California lawmakers to discuss debit swipe fee reform and reforming the tax code in a way that restores predictability and stimulates capital investment.
the Obama administration. Swipe fee reform has saved retailers and consumers more than $40 billion and brought badly needed competition to the payments market. “Whether it’s at the local, state or national level, engaging elected officials is crucial to successfully advocating our position on important legislative issues,” said CGA President and CEO Ron Fong. “Lawmakers have to hear first-hand how legislation will impact their constituents.”
The industry’s lobbying efforts helped convince Republican leaders in the House of Representatives to abandon a plan to repeal debit card swipe fee reform passed during
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CALIFORNIA GROCER GARNERS SECOND AWARD For the second time this year, California Grocer was recognized for its complete design makeover – this time from the Western Publications Association. The magazine underwent a graphic redesign in late 2016 and was recognized earlier this year by Association Trends. “Our goal was to redesign the publication is such a way as to make it more informative, easy to read and visually appealing,” said Dave Heylen, Vice President, Communications. “We will continue to add value through strong editorial content in the issues to come.”
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Taxes and California’s Crumbling Infrastructure A A RO N M O R EN O S E N IOR DIR ECTOR CGA GOV E R N ME N T R E LAT ION S
Despite what you think, when it comes to raising taxes, it’s not as easy as you think, except this year. It’s generally not easy to raise taxes. Politicians are often loath to raise taxes for fear of facing the ire of the electorate and opening themselves up to accusations of taking the taxpayers’ hard earned money to be wasted by the government.
Democrats have long advocated for raising taxes to generate enough money to fix the enormous transportation infrastructure of the world’s sixth largest economy, knowing a shift of existing funds would simply not be enough to carry out this gargantuan task.
It is even more difficult to raise taxes in the California Legislature thanks to the tax revolt that took place in the 70s, led by Howard Jarvis – who pushed for the passage of Proposition 13 in 1978 that created a supermajority threshold for the passage of taxes by the Legislature.
The partisan make-up of the Legislature has long resulted in a stalemate on funding transportation infrastructure with neither the Senate or Assembly having enough Democrats to raise taxes. This changed, however, in the last election cycle where Democrats were able to secure the supermajorities necessary in both houses to pass any tax measure.
Since then, California’s constitution has required a two-thirds majority by both houses of the Legislature and the Governor’s signature to create a new tax or increase an existing one. With all this in mind, it has been rare for the Legislature to muster the political will to put up the votes needed to raise taxes. We recently witnessed one of those rare occasions, unlikely to be seen again for a while. There has been agreement for years that California’s transportation infrastructure has been in dire need of upgrade. Crumbling and congested streets and highways cost Californians millions of dollars a year in vehicle repairs and lost time sitting in gridlock. 18 | CAL I FOR N I A G R OC E R
Where the disagreement has been is how to pay for it. Legislative Republicans have long advocated for shifting existing monies within the state budget (something Democrats didn’t necessarily disagree with, but noted that it would not be nearly enough to address the depth and breadth of the problem).
Though this was seen by some in Democratic circles as an implied mandate by the public to raise taxes, it is worth noting that a number of these newly elected Democrats hail from what are generally considered to be “purple” districts – that is, districts where partisan registration is nearly even and voters prefer their legislators to govern from the center and more importantly not raise taxes.
It certainly would not be easy for any new member to risk reelection by voting for a new tax so soon after their initial election, no matter how pressing the need for the tax may seem.
California’s roads, the money they would pay in new taxes would actually be less than the annual losses with an actual return on the money spent in the form of a better transportation system.
A proposal came together in the early months of the new two-year legislative session after weeks of negotiations between the Governor and legislative leaders. They settled on a deal to raise $52 billion explicitly dedicated to transportation infrastructure improvement to be evenly divided between the state highway system and local government agencies.
This business support gave many of these members representing “purple” districts the political cover to support the measure since these groups and companies almost always oppose any form of new taxation. Even with this political cover, the tax package passed both houses with the barest of supermajorities.
So important was this extraordinary investment that state leaders were able to bring nearly every major business group in the state on as active supporters of this measure. The rationale was that companies around the state lose so much time and money annually due to the condition of
While this was certainly a rare use of supermajority power to raise taxes, some legislators believed that there might be an appetite for more taxes if they were in support of necessary and righteous efforts, much like fixing the state’s crumbling transportation infrastructure.
And some pundits around the state began to question whether or not this emboldened supermajority would begin to exercise its new found strength. Sure enough, we have already seen the introduction of measures to tax liquor, candy, snack foods, and sugar sweetened beverages. Fortunately, for the state’s business community, there has been little appetite on behalf of many Democratic legislators, “purple” and otherwise, to leave themselves vulnerable to attack from a challenger based on a record of raising taxes indiscriminately. The new transportation taxes in California will cost everyone a little more every year, but ironically the passage of the new taxes may have actually saved Californians from many more taxes in the long run. It really isn’t easy to raise taxes…especially in California. ■
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CAL I FO RNIA GRO CER | 19
Do No Harm 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
The phrase may have good intentions, but that may not be the case in the halls of the State Capitol. Brown
“Do No Harm” is a common refrain in and around state government in Sacramento. In fact, former State Senator Sheila Kuehl would post a sign with these words on the dais when she chaired a committee. But, what does it really mean? In a vacuum, it’s a wonderful thought. Treat people like you want to be treated; be uplifting in your thinking and actions; find balanced solutions to complex problems. In the State Capitol, however, the definition often shifts to protecting self-interest – legislation and reelection, for instance – rather than more elevated thinking to which we should all aspire. In regulatory agencies surrounding the Capitol, the process of implementing and administering laws often becomes distorted as well because of the isolation in which they exist and because of little or no legislative oversight. Consider two examples and judge whether compassion or self-interest is at the forefront of thinking by the people we elect and who are appointed to serve the public. In January 2016, RePlanet gave notice to CalRecycle of its intention to close hundreds of recycling centers due to an inefficient regulatory process not able to keep up with the ever-changing global marketplace for raw materials. 20 | CAL I FOR N I A G R OC E R
This notice created a domino effect that now has more than 3,500 dealers (grocers, convenience stores, and other small retailers) paying $100 per day to the State of California or be forced to take recyclables back in the store. A short-term legislative proposal was drafted in June 2016 and a bill introduced in early 2017 to address the harm placed on grocers and consumers by these unintended consequences, only to be held up by the Administration due to its interest in pursuing a comprehensive reform package – that has yet to be drafted. And, don’t forget the WIC crisis from just a few years ago when numerous stores throughout California were prevented from acquiring a WIC license due to an unexplainable moratorium. In that instance, regulators wouldn’t even speak openly about potential solutions. They simply chose to cast blame on others and divert attention from the problem. While more examples could be added to this list, the California legislature is pushing legislation that will create a Single Payer Health Insurance program, estimated to cost more than $200 billion in new taxes (total cost estimated at $400 billion per year).
A $5 billion per year fuel tax package will take effect this November. And, other measures that will increase the cost of doing business and ultimately the cost of goods purchased by our customers are moving through the Legislature. Clearly, piling on to this extreme without consideration of real life impact ignores any credible definition of “do no harm.” And, it’s not as though legislators don’t know better. For instance, they have been provided economic data showing that we are just two years short of the longest economic recovery in recent history and our economy is softening. The Governor’s May Revise clearly shows that state revenues are falling behind expectations, at more than $3 billion below the 2016 budget forecast, and states “a recession at some point is inevitable.” It would be bad enough if these examples were exceptions, but the “do harm” list is too long to embrace that conclusion. The push-pull of California’s 40 million residents naturally drives controversy and conflict. That’s understandable. What is not, and what can never be business as usual, is for people in positions of authority to be driven by personal or uninformed agendas that “do harm” under the pretense of balance and common good. ■
Let the Games Begin
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
Grocers anxiously await action on Republicans’ ambitious policy agenda. Following a somewhat turbulent first 100 days in office, President Donald Trump and Congressional Republicans are now gearing up for the next chapter with an ambitious policy agenda that includes repealing and replacing the Affordable Care Act and reforming America’s tax code. While there is a lot on the “to do” list, independent supermarket operators are in a unique position to see action on issues that affect them most. From protecting debit swipe fee reforms to amending food labeling policies to rolling back countless regulations, there are never a shortage of issues impacting the supermarket industry. The following is a summary of the issues on the forefront of many grocers’ minds which are being lobbied by the National Grocers Association. Durbin Amendment/Debit Card Swipe Fee Reform The independent supermarket industry and entire retail community scored a major win after House Republican leadership announced on May 25 that the Financial CHOICE Act would no longer include a provision to repeal debit swipe fee reform,
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also known as the Durbin Amendment, which was passed as part of the Dodd-Frank legislation in 2010. At the beginning of May, nearly 300 supermarket executives lobbied lawmakers on the issue at the same time as the House Financial Services Committee marked up and ultimately passed the legislation. The bill was introduced by the chairman of the Committee, Congressman Jeb Hensarling (R-TX). The decision to remove the language came after an overwhelming response from retailers, including more than 1,100 independent grocers, made the provision a poison pill that threatened to kill the entire bill. As a result, debit swipe fees will continue to be regulated and the routing provision allowing businesses to choose their routing network will remain in place. Health Care Reform President Trump secured his first major legislative victory with the passage of the American Health Care Act on May 4 from the House of Representatives. The Senate has vowed to make major changes to the House bill, but as the measure currently stands, business owners will be faced with an uncertain regulatory environment given the parliamentary restrictions placed on the
passage of this bill. Included in the bill is a repeal of the small employer tax credit for employee health insurance expenses, a repeal of penalties for certain large employers who do not offer full-time employees and their dependents minimum essential health coverage, and a delay in the implementation of the excise tax on high cost employersponsored health coverage. The Senate has indicated it plans to craft its own health care bill rather than considering the package sent to them from the House. Thirteen Republican Senators have formed a working group and are beginning to develop proposals that have a chance at gaining the support of at least 50 members to pass the Senate. Tax Reform The House GOP has put forth their tax reform priorities, as has the White House, and now with health care out of the way on the House side, the question becomes when – not if – tax reform will happen. The House Republican plan raises many questions for the independent supermarket industry, such as, how will deductions be eliminated to pay for the proposed decrease in corporate tax rates, how will the proposed border adjustability tax impact food prices, will the LIFO accounting method be preserved, and will the House and the Senate be able to agree on a bill.
“Independent supermarket operators are in a unique position to see action on issues that affect them most.” iStock
With regards to the proposed Border Adjustable Tax (BAT), NGA has joined a coalition that launched February 1 to oppose the tax. Based on initial input from our members it is clear a BAT tax will substantially increase food prices, particularly on produce, ultimately increasing the cost of goods to consumers.
changing tax landscape in Washington and engaging with Members of Congress on the issues most critical to NGA members.
The Senate also has its own ideas on how tax reform should be handled, which could slow the ultimate passage of any reform bill. At this moment, NGA is closely monitoring the
FDA Menu Labeling Regulations NGA and independent grocers across America recently won a major victory when the implementation date for the Menu Labeling Regulations was delayed until May 5, 2018. Legislation has been reintroduced in both the House and Senate to fix problematic provisions of the rule and the FDA has reopened the regulation to public comments.
NGA and other coalition partners are working to impress upon Members of Congress the regulatory burden imposed on grocers as the law is currently written and to raise awareness on the need to support legislation that would provide the needed flexibility to comply with a law originally written for chain restaurants. Our team is also eager to begin working with Dr. Scott Gottlieb, who was confirmed as Commissioner of the FDA on May 9, to begin identifying burdensome regulations for independent grocers. ■
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CAL I FO RNIA GRO CER | 23
A Roundtable Discussion By Len Lewis
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Shrink, whether it’s attributable to simple shoplifting, organized retail crime, internal or vendor theft, or preventable operational errors, is pretty much inevitable. But with losses across the entire retail spectrum exceeding $45 billion annually, or about 1.4 percent of sales, according to statistics from the National Retail Federation, the situation has reached critical mass. And with Proposition 47 frustrating retailers and law enforcement, it’s time to double down on loss prevention policies and techniques. These were some of the issues California Grocer discussed recently with Todd Eid, Store Director, Susanville IGA; Mike Bowers, Senior Director Asset Protection, Northgate Gonzalez Markets; and Al Hrubeniuk, Director, Loss Prevention Services, Smart & Final stores.
California Grocer: The world’s a different place today. What’s been your focus on loss prevention? Hrubeniuk: “There are a lot of aspects to it. Basically it’s providing a safe shopping experience for our customers and associates, as well as protecting our brand and physical assets like buildings, inventory and equipment. “As such, we’ve written policies and procedures to establish control and accountability. Loss protection audits provide actionable feedback to our partners about procedural compliance and best practices. We also provide training and guidance to trading partners. Right now we’re focused on reducing operational shrink – much of which is in perishables. We’re trying to address where breakdowns occur and provide training, goal setting and discipline. “Writing good orders, properly forecasting sales and disciplined product rotation practices are all important in controlling shrink and 70 percent of it falls into this category.” Eid: “I’ve been in grocery for 43 years so I’ve seen a lot, but I’ve always had an eye for shoplifters. I can’t even guess how many I’ve caught over the years.”
CG: That can be dangerous. Eid: “I’ve had people pull guns and knives on me. There were these two guys fresh out of prison who almost hung me by my tie back in the 70s. Frankly, with the new revolving door laws that have been passed, they don’t even run anymore. They’re bolder and brasher.” Bowers: “Most retailers are struggling with shoplifting because of Proposition 47 which CGA has been trying to combat. Unfortunately, we’re not getting a lot of traction right now from legislators due to the chairman of the Assembly Pubic Safety Committee. We need to put things in perspective for him and our governor and have retailers comment about the impact of shoplifting in the stores.” CG: Are you seeing more organized retail crime groups? Hrubeniuk: “We’ve seen a rise in professional shoplifting over the last 10 years. These rings steal specific products that are sold to fences, online auctions and flea markets – items like energy drinks, body washes, shampoo, razor blades, batteries, liquor and even national brand laundry detergent.”
Eid: “We’re just seeing basic shoplifters. Low-lifes or people without means. Most are just crimes of opportunity.” CG: Are we seeing more organized retail crime (ORC), or just crimes of opportunity? Bowers: “Frankly, the line between them has been obscured. In the past if you saw someone come in and fill up bags it would be ORC almost exclusively. Most amateur shoplifting was people stealing for what they want like a sandwich or a bottle of Tylenol. Now we just don’t know. “Prop. 47 encouraged a huge increase in professional shoplifting by raising the felony threshold to $950. Legislators on the Public Safety Committee say they don’t want us putting people in jail because they’re hungry.” CG: Is there a tendency to minimize the crime? Bowers: “Yes, but you can’t. If someone stole sandwiches from your refrigerator by breaking into your kitchen you’d want something done about it. And we’re seeing people coming back day after day – and in some cases hitting five stores. Every time they do it’s a misdemeanor and the police don’t even want to bother. They’re dealing with murders. Continued on page 46 27 ▶ CAL I FO RNIA GRO CER | 25
September 24–26, 2017 Palm Springs Convention Center Palm Springs, CA
s! i h T s s i M o t e m i r It would be a C The 2017 CGA Strategic Conference has added a NEW integrated track specifically designed for grocery loss prevention and asset protection professionals. In addition to the Conference’s general educational program and events, we have created specific programming for retailers that will: • Expand your professional skill set through LPSRM-specific educational programming • Provide face to face retailer/supplier pre-scheduled meetings with LP vendors • Grow your network by collaborating with LPSRM professionals
For suppliers, sponsoring at this year’s conference will: • Provide direct access to LPSRM decision makers • Expand your contact base through multiple networking opportunities • Provide considerable cost saving by not having to ship costly booth materials and other related costs. • Create dedicated, focused time with LPSRM retailers in pre-scheduled meetings
Sponsorship Opportunities A limited number of conference sponsorship levels are available for this track. More than 25 retail companies have committed to participate in this special loss prevention program. A complete list of retail companies can be found on the CGA Strategic Conference website.
For more information including sponsorship information, visit www.cgastrategicconference.com
◀ Continued from page 25
Good luck getting a report taken on a shoplifter that we don’t even have It sometimes put us at odds with law enforcement. They treat us with contempt when we call them.” CG: How do you handle shoplifting these days? Eid: “Because I’m older I attack it a different way. I used to arrest everyone. The local police and District Attorney’s office were in on it and prosecuted every single one. The word among thieves was don’t go to the Susanville Supermarket because they catch everyone. I was in the paper all the time so the wave of shoplifting would go away for a while.” CG: What changed? Eid: “As technology like camera systems got better there was less need to chase people. Now I show the police the videos and almost always they’ve had interactions with that person before.” CG: Is law enforcement still going after them? Eid: “At worst they write them a ticket. The district attorney pretty much round files it because it’s not worth taking them to court and jamming up the system. So today’s thief, the punks, they don’t care. They know there’s nothing we can do. So, they don’t even run anymore.” Hrubeniuk: “We employ a variety of strategies to prevent and discourage this activity. The harsh reality is that it continues contributing to losses. Proposition 47 and the resulting reduction in criminal penalties has really tilted the risk and reward scale. Criminals see it as little risk and high reward.” CG: So what do you do? Eid: “It’s changed store policy. I work with the district attorney’s office all the time on how to stop this and find ways around the new revolving door laws. But I don’t want to overburden the police with petty theft. It doesn’t make sense. They are fighting real crime. I still interact with the local police department really well, but we both know that we’re not going to get anything out of it.”
CG: But law enforcement is still in the loop?
CG: What would you say has had the greatest impact on your business?
Hrubeniuk: “We partner with law enforcement, but I understand the constraints on their resources. We do our best to provide a complete case package when presenting a case for prosecution. The more thorough our investigation the better our chance of getting the case filed and adjudicated.”
Hrubeniuk: “A majority of our losses involve a breakdown in operational best practices. Last year we hired over 6,000 new store associates and many had little or no experience in this industry. We had to do something to educate them on the impact of shrink, so we invested heavily in training and communications.”
Bowers: “Law enforcement is just as frustrated as we are. They believe the law’s tied their hands and they don’t want to deal with it. How would you feel if you worked all day and all your work was discarded? You’d find something different to work on.
Eid: “We’re having problems because of the plastic bag ban. I’m a big fan of not having them blow all over the place, but it’s taught shoplifters to put bags in their purse. They shop with them and they can walk out of the store with a bag full of groceries.”
“Honestly, the issue is government. It’s not allowing us to address it. Proposition 47 was passed under false pretenses. It didn’t make schools and neighborhoods safer. We don’t want to override the people’s will, we only ask to put a proposition on the ballot to create some accountability for people who get caught doing this multiple times. Right now the law says if you’ve been convicted three times for shoplifting, the fourth crime is up to judge. But if the person agrees to go to rehab it would be a misdemeanor with a deferred sentence.”
Bowers: “We see the same thing. People coming in with their own plastic bags, fill them up as they’re shopping. So we can’t tell the difference between someone with a backpack filled with unpaid stuff or someone who’s intending to go to the checkout with it.
CG: What have you found to be an effective method?
Eid: “We talked about creating a job and hiring someone 20 hours a week to watch videos. But the human brain can’t watch that much video and really pay attention. We have a well-trained staff and whenever clerks see something weird, they note the time and location in the store and a brief description to identify the person. Eight out of 10 times there’s a theft associated with the clerk’s observations.”
Eid: “I keep binders with pictures I print off our camera system. I note the date, what they stole and the next time they’re in the store we throw them out. If they won’t leave I call the police. They issue a 602 no trespassing order which the district attorney will process through the court system.” CG: There’s so much more than shoplifting. What other issues are you dealing with? Hrubeniuk: “Many retailers are also changing their policies on gift card sales by restricting the use of credit cards to purchase Visa, American Express and Mastercard products. We expect these losses to subside since Smart & Final is now EMV compliant.”
“There’s another new twist that popped up in the past month. Recently, people come in with a plastic bag and put high ring items like diapers in it. Then they go to the checkout and try to get a refund.” CG: How effective are cameras and who’s watching them?
CG: How involved do they get? Eid: “It’s store policy that no one gets physically involved or goes out of the store after a shoplifter. Only I can do that. I only want to know what they look like and what door they went out of. I don’t want anyone hurt or endangered over a petty theft the police aren’t even going to prosecute. I can replace goods and money. I can’t replace someone’s life.” Continued on page 29 ▶ CAL I FO RNIA GRO CER | 27
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◀ Continued from page 27
CG: What other steps you’re taking? Hrubeniuk: “We’ve invested in safety and shrink training, and awareness programs along with technology. We’ve invested in high definition camera systems that not only discourage crime, but also provide a safe environment for customers and associates. We also invested in video analytics programs to monitor and prevent losses at the register. “We’re also getting into exception reporting systems and analysis to identify abnormal behavior and trends with register transactions as well as electronic shopping cart containment systems and technology that prevents bypassing payment at the registers.” CG: With everything you’re doing, do you have a handle on LP? Eid: “Frankly, we’re still not on top of the situation. I would put my store up against any other, but I don’t think we’re catching even 10 percent.” CG: What other policies and procedures are you looking at? Eid: “It depends. It’s about balancing costs with what you stand to gain. It all comes down to having a well-trained staff and utilizing technology we have as best we can. One thing that’s been very effective is laminating photos of shoplifters in books, which are kept in front office. I encourage everyone to look at them.”
There’s a lot of work yet to be done. Reducing losses is a constant challenge. But when we focus on an issue we succeed.
“We could also increase payroll in order to staff all entrances or exits, but that would be about $65,000 per door per year for a supermarket and we’d have to figure out where to take it from. That would be like the Costco experience of finishing at the register and entering a queue to validate the receipt. Imagine that at every store you go to? Retailers shouldn’t have to change the customer experience to reduce losses due to a lack of enforcing laws. It just doesn’t make sense!” Hrubeniuk: “There’s a lot of work yet to be done. Reducing losses is a constant challenge. But when we focus on an issue we succeed. But sustaining programs is a challenge for all organizations including Smart & Final. Like many organizations our focus tends to shift and we adapt accordingly. It’s a matter of finding balance. We’ve experienced increased shrink rates over the past few years some of which is attributable to our accelerated growth and some to food price deflation.” CG: There seems to be a lot more technology coming too.
Bowers: “We would have to change the environment of store. But that’s not likely to have a positive effect on our customers if they have to enter through a turnstile or gate like they were entering a prison or something. Picture that shopping experience?”
Hrubeniuk: “Facial recognition is on the horizon and broader use of RFID technology to track inventory. Regulatory compliance, especially in California, is dictating policy and procedures as we strive to be good corporate citizens protect our environment and provide confidence among our consumers.”
CG: Have you hired any outside security?
CG: What do you consider preventable loss?
Eid: “We have over the years, but if they’re well trained they typically want to carry a gun. We don’t want a weapon involved in any deal. That’s up to the police department. We thought about hiring local law enforcement people, but unless we’re catching five people a day, the dollar cost doesn’t make sense.
Hrubeniuk: “In managing risk you first look for the root cause, and then deploy strategy and tactics to avoid future losses. Most accidents and injuries, for example, are preventable. Many losses associated with product damage, spoilage and even internal theft can be prevented. The same applies to vendor theft.” ■ CAL I FO RNIA GRO CER | 29
with CEO Goals By Larry Miller
Many of you know that I have spent the past 25 years teaching, training and consulting with retailers to implement store operations best practices and smart technology to grow profitable sales. In this article (part 1 in a three-part series), we will focus on the building blocks for Profitable Selling (e.g. Loss Prevention, Asset Protection, or my favorite… Profit Protection). Our goal must be to align with corporate goals and shift team thinking from theft reacted shrink loss to recognize total shrink loss for what it really is – Profit Loss. This can be a complex paradigm shift, but when properly accomplished, loss prevention can gain invitation to the CEO’s Round Table. Continued on page 46 ▶ Continued on page 32 ▶
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BIG 4 Best Practice Areas
Here’s What We Know:
Average Shrink: 2.70%
Shrink Caused by Operations 17% Production Planning & Specs Allocations
14% Store & Handling
13% Rotation 14% Cashier Errors
5% Scan File
1. Sales We always want to optimize sales. This demand’s focus on variety, optimal on-shelf availability, and an intense focus on fresh item quality. Customers come to shop, and our #1 job is to ensure they get what they came for. The three consequences of being out-ofstock or selling poor quality perishables include: a lost sale, customer having to trade off to a similar (but not desired) item, or worst of all, sending the shopper to a competing store. In summary, the tracking and managing of variety, freshness and your optimal in-stock condition are vital to profitable selling best practices. Tracking and managing daily sales at the lowest department or sub-department level allows managers to disrupt negative or sub-par sales trends (mid-week or midperiod) to promote for added profitable sales. Then, every store manager should collaborate with their department managers to promote one or two in-store (non-advertised) weekly featured items using promotional signage, displays and CSE best practices to grow sales $1,000 per week ($52,000 annually). Depending upon your situation, sales may or may not be a significant remedy to your shrink rate, but two things always remain true: (1) sales are every company’s life-blood and should be the everyday focus of operators and merchandisers and (2) profitable sales are every CEO’s No. 1 priority. What does this have to do with loss prevention? Traditionally not much, but with 64 percent of store shrink caused by a breakdown in store operations best practices, if loss prevention is to grow its value proposition as a profit realization partner then we must align with and contribute sales profitability and help operations sell its way to lower shrink loss. Next, shifting into high gear.
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2. “Get Your BIG” Every day! Seventy-five percent of all companies we work with have a Known Loss program. Thirty percent of these companies have a good, efficient and effective Known Loss program. Properly implemented, Known Loss can be your portal into Profit Loss. We calculate that Known Loss Control is the No. 1 most failed shrink prevention program. The source of Known Loss can most often be tracked back to breakdowns in the efficiency of ordering, handling, storage, production, display and sales. Hence, training operators in the very best and proven practices for seeing and proactively managing known loss and implementing smart Known Loss control technologies must be a top operational imperative. Implementing an effective Known Loss program is the first step on the yellow brick road to 18 percent lower shrink loss, leading to sales and profit improvement. What is meant by our “Get Your BIG” strategy? It means recording 100 percent of known loss caused by damaged and/or distressed products and 100 percent of any programmed gross margin erosion. When we see our BIG every day and understand the mandate to be sales driven, we can help to change the operational thinking and behaviors associated with profit optimization. The difference between a weak Known Loss program and a best practice guided Known Loss program is 17 percent less shrink with every dollar saved going straight to your bottom line. 3. Smarter Ordering Building on the concepts of the vital role of inventory control and getting your BIG, operators and loss prevention professionals must think about turns, turns, turns. Smart ordering is all about being 100 percent in-stock with full variety while turning your inventory with minimal associated Known Loss.
Smart ordering leads to excellent variety and smart Known Loss control. Ordering is key to profitable selling and smart inventory turns is key to controlling shrink loss and making cash flow efficient. By teaching, training and coaching principles of known loss control, every store’s profit will benefit. Easy to understand? Absolutely. Simple to consistently execute? Nope. Not at all, but they are proven to work every time. 4. Daily Performance Visualization and Team Action Smart technology will not reduce shrink loss. However, people using smart technology will. For too long, store operators and merchandisers have been victims to data and paper glut, waiting for the end-of-week or even end-of-period to see their results. We need to stop focusing on reports and graphs that provide analytics in the rear-view mirror. Rather, we should engage with and improve all vital key performance indicators every day. We can optimize practices by utilizing immediate performance metrics that discover and disrupt negative patterns before they result in missed budgets. When you put smart technology in the hands of store teams, you provide “disruptive intelligence” to reduce shrink, improve sales and will help to align Loss Prevention with Operations, CEO Goals and Corporate Objectives. By merging best practices, smart technology and operating standards, loss prevention can help store teams to out-perform sales and profit P&L expectations. ■ Larry Miller is President of Smart Retail Solutions. He can be reached at LarrySmartRetailSolutions.com or on LinkedIn and his videos are available on YouTube.
6 Smart Take-Aways 1. Sales Matter: When Out of Stocks, sub-par Freshness and less than optimal Customer Service negatively impact Sales, it should be everybody’s concern. Why? Because Lower Sales = Higher Shrink. So, in the pursuit of profit through Shrink Loss Prevention, Sales Matter and Loss Prevention pros should never operate as if they are just along for the sales ride. Consistent execution of excellent shrink prevention best practices helps to grow profitable sales and makes CEO’s very happy. 2. Smart Ordering: Ordering for Optimal Variety and Turns leads to more sales and lower shrink. For this article; excellent Variety leads to increased sales and smart Inventory Turns encourage lower shrink loss, promotes employee productivity and improves cash flow. When Operations and Loss Prevention partner to see and optimize these profitability components through the same prism, great things will happen. 3. Tracking Known Loss: Tracking 100% daily Known Loss and Gross Margin erosion and acting with urgency to control Known Loss is a vital Operations and Loss Prevention best practice. While Known Loss programs are widely implemented, we have tracked 7 different variations in “how” they are implemented. 4. FRESH IS KEY is so many ways. Fresh departments are spreading their in-store footprint and importance to the consumer. Additionally, as on-line shopping expands, the first area for sales erosion will be in center store goods. This will make Fresh Depts. more important as a profit center. With this, shrink prevention for sales and profit optimization will gain importance. Every Loss Prevention professional should train to understand and support Fresh Dept. profit realization. 5. Smart Loss Prevention: Whether you call it Loss Prevention or Asset Protection, these business units should not just be about catching wrong-doers. More than 64% of store shrink is caused by a breakdown in store operations best practices. Loss Prevention should be a vital Operations Partner to assure the in-store behaviors of the 6 Vital Profit Drivers of Shrink Prevention. In this area, on-going education, training and consistent execution are key in creating a smart culture of control. 6. Choose Smart Technology: Smart technology will merge and interpret data from Sales, Known Loss, Out of Stocks, Ordering Efficiency, Cashier Mistakes and Theft to detect precise shrink causing behaviors. This all-in-one solution provides Daily (plain English) Action Alerts for both Loss Prevention and Operations and serves as a vital collaboration portal. For more information on Consulting & Training Services or Smart Technology to Run More Profitable Stores, Larry Miller can be contacted at (602) 448-8500 or Larry@SmartRetailSolutions.com
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PRESIDENT TRUMP 36 | CAL I FOR N I A G R OC E R
By Keri Askew-Bailey
Senior Vice President, Government Relations and Public Policy
California has a long history of, as my Father would say, marching to the beat of its own drummer. That is in part what drew our family here decades ago from the rather structured confines of the American South. It is one of the hallmarks of being a Californian – it is just different here. Often times we celebrate it, sometimes we lament it. But I doubt any of us out here on the “left coast” have felt it so profoundly as we do these days, at least not in decades. Beginning late in the evening on Nov. 8, 2016, California’s Democratic leaders essentially declared war against newlyelected President Donald J. Trump and in fact much of the rest of the nation. While it is not insignificant that Trump lost the popular vote by a wide margin – just over 2 percent which is the third-widest gap in history – the fact remains that he won the electoral college and thus was elected president. And the reaction in California was swift. To be fair, California’s electorate has deviated from the rest of the nation in many regards over the past decade. For instance, Republicans across the nation beat a steady drumbeat of gains during much of the Obama era and yet lost significant ground here in California. By 2014 Republicans had gained 68 seats in the U.S. House of Representatives, and grown to control both the Legislature and Governor’s office in 24 states. So in some ways, the reaction where Trump is concerned perhaps should not be unexpected. But the volume and force of the reaction is somewhat unprecedented. Within hours of the polls closing on election day, Democratic leaders had formed what they called “the Resistance.” Some began using social media, complete with hashtags, to file reports from their offices cataloging efforts to thwart the future assumed agenda in Washington, D.C. Democratic Senate President Pro Tem Kevin De Leon and Assembly Speaker Anthony Rendon released a joint statement the day after the election saying the voters of America had delivered a Presidential result that was, “…clearly inconsistent with the values of the people of California…” – despite almost a third of California voters, nearly 4 million, having voted for Trump.
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Within days of lawmakers returning to Sacramento on Dec. 5, 2016, bills had been introduced to: •
provide training for public defenders on the “immigration consequences” of criminal convictions;
prohibit state and local law enforcement officials from cooperating with federal immigration authorities in the case of any juvenile;
require the state to provide the indigent with immigration attorneys;
equire CA voter approval of any federally-funded infrastructure project along the CA-Mexico border costing $100 billion or more;
An article in The New York Times quoted Sen. De Leon as highlighting the environment, criminal justice and immigration as policy areas where Holder would be expected to lend a hand. The tone improved none once the formalities were taken care of and the president-elect officially became the nation’s 45th on January 20. In fact, in many ways it ramped up as specific policy proposals began to issue forth from the Oval Office.
To be certain, some changes Trump seeks could have profound impacts on California. A Milken Institute report noted that if the Affordable Care Act, otherwise known as “Obamacare”, was to be repealed entirely it could cost California an astounding $20 billion in federal funds and some 4.5 million Californians could lose healthcare. So on some level, the fight may be a good one, but are Legislative Democrats really on the same page as “average” Californians?
California’s majority Democrats have continued the drumbeat with a series of resolutions – which have no force in law but put California “on the record.” For instance, resolutions have been forwarded by Democratic lawmakers to:
As noted earlier, Trump did receive essentially a third of the vote here in California. His support mirrors a growing divide in the state’s politics. It was largely voters in rural, more inland communities and counties that voted for Trump.
To be certain, some changes Trump seeks could have profound impacts on California.
institute a government-managed “universal healthcare” system; and
prohibit state and local law enforcement agencies from notifying federal officials when they arrest someone on a drug charge and find they have a deportation hold.
And official policy was not the only thing on majority Democrats’ resistance to-do list. In January, the California Legislature’s Democratic leadership announced it had taken the unusual step of “lawyering up.” It hired former U.S. Attorney General Eric Holder to act as legal advisor and if need be combatant. The move was announced as an attempt to provide a measure of protection against what California’s Senate President Pro Tem characterized as, “…a very clear and present danger to the economic prosperity of California…” – that “clear and present danger” being President Donald Trump and his policy priorities.
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call for Congress and the President to do away with the electoral college and provide for direct election of the President and Vice President;
urge President Trump to resign and Congress to impeach him if he chooses not to;
urge Trump to reject “expedited removal” or mass deportation of undocumented immigrants and continue the DACA program;
call upon Trump to release his tax returns;
declare that the California State Assembly will fight to “safeguard” current healthcare, worker protection, and immigrant opportunity laws;
declare that the California State Senate opposes Trump’s “travel ban” executive order; and
all upon Congress to conduct a, “full, independent, and public” investigation of connections between Trump, and his campaign and advisors, and Russia.
For example, just one of the 25 counties where Trump prevailed enjoys a view of California’s vast coastline. Largely it was the state’s urban and coastal voters that supported Hillary Clinton in a big way, and often by larger margins than in the counties that supported Trump. And by all indications, most voters are sticking by their choices, but that’s about it. In late March, the respected, nonpartisan Public Policy Institute of California (PPIC) released results of a survey noting that 34 percent of likely voters in California approved of Trump’s job performance. And that figure was relatively unchanged from the support he received in the same survey back in January. The PPIC survey also found that the slimmest of majorities – 51 percent – approved of the job the Legislature was doing. Similarly, 52 percent approve of the job their own state elected legislators are doing. A slightly larger majority, 55 percent, felt the state was going in the right direction when PPIC asked them a bout their overall mood. But voters are a fickle bunch and it remains to be seen whether that slim margin of support will hold once Californians face the real-world impacts of marquee policies of the State’s Democratic majority.
One prime example is SB 1, a massive $54 billion transportation infrastructure plan that will lead to better roads but also will see gas prices rise by 12-cents per gallon. In addition, the state’s car tax rises under that new law by between $25 and $175 depending on vehicle value. But it isn’t just voters that lawmakers on the “left” side of the aisle need worry about. The Democratic party itself is being roiled by dissent and seems to be struggling through an identity crisis of sorts. Nowhere has that been on display more prominently than at the recent Democratic State Convention. Self-proclaimed “progressives” (aka “Berniecrats”) staged several disruptions over the weekend-long state party convention held in Sacramento May 19–21. And they came within a handful of votes of electing a progressive disrupter as the new party Chair. Anti-Trump rhetoric fuels the fire of the movement to take over the levers of control of the state party, and even some of the party’s stalwarts are joining the fray. During his farewell speech to the delegates, outgoing State Party Chairman John Burton, famed for his profuse use of profanity, reportedly closed out his speech by shouting “F*#k Donald Trump” and flipping two “birds” into the air – recruiting a group of current party luminaries to join him in the gesture. And his was only the most, shall we say colorful, of the many combative speeches and activities over the weekend. And some state lawmakers on the left who attended the event got in on the action even without official speaking roles. A group of nearly two dozen State Legislators officially launched, with a hip-hop party at the convention, the “New Progressive Caucus.” They signed on the dotted line back on May 4 but used the excitement generated at the convention among the left flank of California’s political left as a backdrop for the pomp and circumstance piece of the announcement – and of course press avails. The New Progressives reportedly see themselves as a counterweight in the Legislature’s New Democrats Caucus, a group of moderates who represent districts with much closer voter registration margins. For example, the New Progressives’ Caucus
Chair, Assemblyman Reggie Jones Sawyer, represents a district where fully 66.8 percent of voters are registered Democrats, 24 percent registered with no party affiliation, and a scant 5 percent are registered as Republicans. The Caucus Chair of the New Democrats, Assemblyman Jim Cooper, on the other hand represents a district where 46 percent of voters are registered as Democrats, 22.5 percent have no party affiliation, and 22.5 percent are registered as Republicans. Interesting information all of it, but you may be asking where that leaves CGA and why we should care about the Democrats’ tirades against the new or the battle for the soul of the state party. Well, as with much in the world of politics, it all plays into policy priorities and where folks are willing to cast votes or withhold them. On the plus side for us, in many ways all this distraction has allowed us to fly somewhat under the radar this year. We simply aren’t the focus of attention in the same way we have been in past years. While we certainly have battles to fight, they tend to involve issues that impact broad coalitions of California employers. We have seen many priorities of the past few years, priorities that focused almost exclusively on our industry, go by the wayside as majority Democrats tackle the larger employment regulations they fear Trump will attack, like the new Federal overtime rule.
And then of course, all the drama can mean it is difficult to get critical mass behind initiatives that are priorities for our industry. A perfect example is beverage container recycling. Ironically, both California Governor Jerry Brown and Democrats in the Legislature have been very vocal about climate change. They have declared time and time again that California will go its own course and prove to Trump, and any other “climate denier”, that California can be aggressive about fighting climate change and still have a robust economy. And yet our efforts to get reform in the Beverage Container Recycling Program – one of California’s oldest recycling laws – have languished. Lawmakers are waiting on Brown, and Brown is distracted, apparently, with other climate change issues. Similarly, majority Democrats have included fighting Trump on “criminal justice” issues as a priority. And this year, the Chairman of the Assembly Public Safety Committee, Assemblyman Reggie Jones Sawyer (a name you may recall as Chair of the newly formed New Progressives Caucus) has defeated every measure seeking to modify the disaster that Prop 47 has become. In the face of a documented spike in property crimes in the retail sector, he has refused to allow anything through his Committee that would bring some rational change and crack down on career thieves.
Anti-Trump rhetoric fuels the fire of the movement to take over the levers of control of the state party.
But the combative nature of Legislative leaders also creates some challenges. Our new President is known to keep score and retaliate with force when challenged or attacked. And some of his proposals do seem to be crafted to have a specific impact on California. The fact that our state stands to take the biggest hit if the ACA is in fact repealed is not lost on many.
Real World consequences aside, one has to admit that the view from the sidelines has been interesting thus far. And given the tone and tenor of the conversation, it seems it will remain so in the near term. Hang on to your hats, folks. The ride could get bumpy. ■
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HARASSMENT: Low Profile, High Price Tag By Cassandra Pye Fox TV News personality and author Bill O’Reilly lost his job in April 2017 after allegations by several of his female colleagues of sexual harassment – and subsequent private settlements – were made public.
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O’Reilly denied the reports and Fox stood by their award-winning host as the story heated up. The O’Reilly Factor was cable television’s most popular, and likely among the most profitable, news show. O’Reilly still maintains his innocence. The late Roger Ailes, former Fox CEO, was also accused of sexual harassment and resigned from his post when a high-profile Fox anchor sued him last year. As this story goes to press, it is estimated that Fox will spend more than $45 million in costs related to harassment-related litigation – in addition to those costly severance payouts to O’Reilly and Ailes. Three more claims were filed by employees against Fox News in late May, including one woman who alleges she was both sexually harassed and physically threatened by a former radio news anchor. The O’Reilly story was gripping, dramatic and made for sensational headlines. Harassment lawsuits in the grocery industry may not hold nearly the same intrigue, however, understanding new nuances in the law, and being mindful of the dramatic impact any related online campaign can add to the risk is important. A company’s reputation, once lost, can be challenging to recover. The United States Equal Employment Opportunity Commission (EEOC) states that “It is unlawful to harass a person (an applicant or employee) because of that person’s sex.” According to the EEOC, harassment can include “sexual harassment” or unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature. The legal definition of sexual harassment varies by state jurisdiction. California’s sexual harassment laws are governed by the Fair Employment and Housing Act (FEHA), which expressly prohibits sexual harassment
For the most part, FEHA provides greater protection for employees than federal statutes. Thus, California employees generally seek relief exclusively under FEHA. While most agree the contemporary notion of sexual harassment was conceived in the early 1970s, it was the 1991 testimony of Anita Hill against then-U.S. Supreme Court nominee, Judge Clarence Thomas, that did a great deal to propel awareness. The number of sexual harassment cases reported in the U.S. (and Canada) increased by 58 percent since the Hill testimony and continues to climb. At the same time, private companies and agencies also responded by launching training programs to deter sexual harassment.
Kasper suggests the number of sexual harassment claims for the food industry haven’t changed much. “There are very few ‘quid pro quo’ cases – like those alleged in the O’Reilly case,” she says. “Gone are the days of only women filing claims against men.” Kasper says the industry is seeing claims that aren’t the classic women-filing-harassmentclaims-against-men. Instead, men are filing against women, women filing against other women and men filing against men. “This is what a diverse workplace brings,” she says. “As women rise through the ranks, it’s not necessarily true that women who rise to senior positions are less likely to behave badly than men.”
“Nowadays the trainings are more interactive, demonstrate subtleties; you have to engage on what you would do.” Mary Kasper, General Counsel and Secretary for Unified Grocers, Inc., recalls the Hill testimony and how it raised awareness among “rank-and-file” employees. “We all went through this phase, back then, where we overreacted, when we were overly careful about what we did and didn’t do,” she remembers. “We were careful not to compliment a man on his tie or hug a co-worker.” Kasper says recent news events may have rekindled sensitivities around the harassment issue. “There’s this weird irony again,” she adds. “People are talking about Anita Hill again.” But the truth is employers have invested in raising awareness and providing sexual harassment trainings for going on three decades and, while several high-profile cases have dominated news cycles recently,
Unified’s general counsel says what makes the grocery industry so unique is that its workplace is more diverse. “That makes it fun, but also makes for a more sensitized workplace,” she says. “So what has changed, are more hostile work environment claims and they’re far more nuanced. People are more sensitive about what they do and say but also people are more sensitive about what they perceive and what they hear. “If you are my supervisor and you say something to me that’s inappropriate, now the law looks at how it was perceived by me,” she adds. “In the last five years or so there’s been a lot of conversation around intent vs. impact.”
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CGA Offers Affordable Training The California Grocers Association Educational Foundation is proud to launch the first-of-its-kind workplace harassment prevention training that is customized for the grocery industry. It’s a convenient, easy-to-use and affordable way to fulfill your training requirements and prepare your supervisors to address real-world 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 situations that present themselves in a grocery environment and meets California’s compliance requirements. 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 on-line training tool has been uniquely customized with real-life situations that present themselves in the grocery business. For more information, or to purchase the training program, visit www.cagrocers.com
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And, says Kasper, a new class of harassment claim is on the rise: bullying. “Bullying claims are on the rise and we’ve trained our people to recognize it when they see it,” says Kasper. “By bullying, we don’t mean ‘my boss is mean to me’ or ‘they didn’t let me sit at the lunch table.’ It’s much more than that. We have to be careful about excluding people from conversations and projects which could ultimately lead to their career development.”
“Diversity is also important so that employees don’t feel isolated – that there’s no one in their department to go to,” she adds. Not healthy for a company to go through this. Most harassment training can be completed online, says Stallard, and is required every two years if you’re a people manager. They’ve been updated and adapted to the times.
“Companies are doing so much more to prepare and manage the threat of harassment claims.” Companies are doing so much more to prepare and manage the threat of harassment claims, says Kasper. Most have mandatory legal arbitration to manage these cases internally, through disputeresolution processes. She also cites the rise and effectiveness of affinity groups, over the last five years or so, as being a critical part of operations – so there are greater opportunities to discuss issues in a safe place. “Most employers believe it’s better to be safe than sorry,” asserts Elizabeth Stallard, Partner in the Employment Group at Downey Brand, LLP. “The Fox story was prominent but not typical; we’re just not seeing much in the way of ‘quid pro quo’ claims. There’s far less of that kind of behavior in the food industry because it wouldn’t be tolerated.” So it’s important to commit to best practices, says Stallard. In addition to providing employee training programs (mandatory in California), it’s important for employers to create a diverse environment where there’s an ability to approach Human Resources departments, to deal with claims quickly and to adopt and enforce a zero-retaliation policy (especially where sexual harassment has been claimed).
“Harassment trainings have been online for a long time but they used to be simplistic and somewhat boring. They’re better now,” she suggests. “You’re no longer just checking the boxes. Nowadays the trainings are more interactive, demonstrate subtleties; you have to engage on what you would do. The answers aren’t that obvious – you really have to put some thought into them.” The California Grocers Association Educational Foundation recently partnered with ZipMart Education which offers several online training programs that meet State of California and federal requirements around harassment training and are tailored for the supermarket industry. “It’s an innovative course providing scenarios and language relevant to grocery industry employees,” says Maria Acosta, ZipMart’s Vice President for Strategy and Business Development. “Statistics show that when content is relevant, retention is much higher – employees can relate to the material and the interactive activities are related to grocery stores.” Acosta says content addressing bullying is included in the training platform.
It’s been only three years since the Legislature added bullying to sexual harassment training in the law. And, like Kasper, Stallard has seen an increase in these types of claims. Recent harassment training modules have been modified to include the definition and impacts of bullying, according to Stallard, and she says retailers need to be mindful of making sure everyone in the workplace is on the same page. “There are multiple generations in the workplace and the notion that ‘I was hazed and you’ll be hazed’ can’t be tolerated,” she says. “Millennials are looking for a different kind of work environment and have a different set of expectations for how they and everyone else should be treated.” Stallard says tone from the top is very important. You want your people to know you’re holding them to the same standard of behavior that you have. “Consistency is important, too,” she says. “You can’t be all places at all times, so making sure management is on the same page and knows who to call when issues arise is critical.”
customers,” she advises. “It’s important to maintain a culture that’s welcoming and get some training and advice.” Kasper and Stallard used the word “subtle” over and over. “It’s not Mad Men anymore,” asserts Stallard. “People know what’s against the law and they know they’ll get in trouble. But they should be careful of the subtle stuff and mindful of the little things. There’s this sense, in some places, that rejecting ‘PC’ behavior is OK. It’s not.” For example, she says, employers should be careful to not exclude people from opportunities to bond. Yes, some people naturally develop relationships with each other, or develop familiar relationships online. “You have to accept that some people get along better than others,” she counsels. “However, there are those little things that make people feel like you’re not taking them into account. It costs you nothing to be inclusive.”
others. The list of allegations was shared by these groups to their tens of thousands of followers on Twitter and tweets were targeted directly at the show’s advertisers. Released on April 4, by April 18, more than 80 advertisers had issued public statements confirming they removed their ads from the show, costing the network millions. Fox News announced that it parted ways with their star anchor on April 19. “Social media can fan the flames,” says Kasper. Says Stallard: “I think that generally speaking social media is so instantaneous so things can mobilize very quickly. It’s easier than ever before to get messages to people. Educate your staff, educate your supervisors. Retailers have to be consistent and protect their brand.” ■
And, then always remember that someone is always watching.
“Stallard says tone from the top is very important. You want your people to know you’re holding them to the same standard of behavior that you have.” Stallard also suggests paying attention to the new focus on transgender issues. Issues like unisex bathrooms, gender-related terms and pronouns are all a part of what she calls a new frontier for employers. Employers should be sure to follow the guidance of counsel and need to be mindful and respectful of employees as well as
While most would agree that no single factor contributed to O’Reilly’s fate, many point to a digital campaign which online activists affiliated with the Media Matters website launched against News Corp and its advertising partners as the proverbial straw. A list of The O’Reilly Factor’s advertisers was shared online via Google Docs by Media Matters, a group called Sleeping Giants and
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OUTSIDE THE BOX N EW RETAIL PERS PECTIV ES
Branching Out No one can sell just one category anymore. The solution for fast fashion retailer H&M is a new concept called Arket, which offers a curated assortment of apparel and home accessories, all of which is offered at slightly higher prices than H&M. Some Arket stores, opening in London, Brussels, Copenhagen and Munich, will also have cafes. Meanwhile the company is planning to open stand alone H&M Home stores next year.
When in Rome For any retailer who thinks they’ve had a hard time with zoning restrictions, consider McDonald’s which recently opened a restaurant just outside the Vatican’s St. Peter’s Square. The company had to suffer some fire and brimstone from Cardinals who objected to the Golden Arches 100 yards from the Pope’s residence. But as it turns out, the Vatican owns the building and will be collecting rent of about $33,000 per month. iStock
Instead of using the backroom to store cartons, mops and carts, retailers could use the space to grow food. An experiment in urban farming or “aquaponics” is taking place in Brooklyn, New York where several companies are growing tilapia in old warehouses. One company called Edenworks is even using the waste produced by the fish to fertilize racks of LED-lit vegetable crops. Local enough for you? iStock 46 | CAL I FOR N I A G R OC E R
If you’re wondering what to do with that little bit of extra space or alcove in your store, Staples has come up with a unique solution. The chain is now offering co-working spaces at their stores in Boston, branded as Workbar at Staples. It’s targeting millennials and small businesses with upgraded workstation at $130 per month for unlimited use. Maybe supermarkets can sell them lunch or dinner while they work?
OUTSIDE THE BOX
If you’re tired of hearing about millennials, you now have Gen Z to worry about. Also called the iGeneration, post-millennials, plurals or the Homeland Generation, the group includes people born roughly between 1995 and 2015, meaning that the oldest members are graduating college or starting careers while the youngest haven’t yet entered kindergarten.
Research company PYMNTS.com said cash purchases are on track to hit $3.5 trillion by 2020. While consumers in the 35-44 age group are increasingly using card and mobile payments, younger millennials show a higher propensity for cash.
According to some observers, Gen Z consists of about 60 million people, making it larger than the baby boomers and millennials. While there is considerable debate over where these people fit in demographically, they all have one thing in common – none of them have lived in a world without the Internet or mobile phones.
If you’re wondering what your employees are up to, a Stockholmbased tech startup called Epicenter has developed microchips the size of a grain of rice that can be implanted by syringe between the thumb and index finger. It sounds like something out of 1984 but the chips function as swipe cards to open doors, operate printers or even buy a smoothie with the wave of the hand. The idea is so popular at Epicenter that workers hold parties for those being implanted.
NOT REGISTERING Starbucks is testing a location at its headquarters in Seattle where employees can only order via the chain’s app. Customers can see their orders being made through a window where they can also pick it up. One has to wonder if it will really speed up the painfully slow process of getting a cup of coffee. While this is designed to speed up service, the chain is working on its Reserve stores, high-end coffee shops designed for lingering, and offering small lot coffee beans, and food from a local Italian bakery.
While everyone is partying, it does raise some security and privacy issues since it shows how often an employee comes to work, what they buy and where they go. iStock
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2017 CGAEF Hall of Achievement Honoree
GEORGE FR A HM
George Frahm has had just two jobs his entire life: the first as a cook at the Camelot Castle Smorgasbord, and the second at Stater Bros. Markets. That second job has worked out pretty well. Convincing a manager to let him work as both a night shift janitor and a clerk’s helper, Frahm started at Stater Bros. Markets when he was just 18-years-old. He squeezed in classes at Cal State Los Angeles between shifts as he studied to become a teacher.
Frahm has a way of getting the job done, though, regardless of what is needed. Needless to say, he shaved his beard, reported to the store on time, and quickly earned a promotion to food clerk when the Azusa, Calif. store opened. The rest, as they say, is history.
After getting married in 1975, he and his wife, Debbi, a year later both quit their jobs to take an extended vacation in Europe, and he figured that was the end of his stint in the grocery business.
“It just kind of got in my blood,” he says of what turned out to be a nearly lifelong career with Stater Bros. Markets. He worked his way up through in-store managerial positions, district management, and eventually into the corporate office.
Upon returning to the States, however, he gave his former manager a call to see if he might be able to get some work while figuring out his next career move. The manager told him to report to work in 15 minutes if he wanted a job. This posed a problem for the full beard Frahm had grown while in Europe – as it would violate the Stater Bros. dress code!
In 1995, 20 years after that European adventure, he was promoted to director of labor relations. He sums it up with a chuckle, saying, “I’ve done every job in grocery from the floor to the ceiling.”
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That kind of dedication and longevity is hard to come by in today’s corporate landscape, and it makes Frahm’s story even more admirable. “Stater Bros. is a traditional, all-American store,” says Ron Fong, President of the California Grocers Association Educational Foundation, “and George has really adopted that culture in his personal and professional life. He exemplifies loyalty, character and trustworthiness.” Fong points out that Frahm served on both the CGA Board and the CGA Educational Foundation Board simultaneously. For Frahm, serving on both Boards made sense.
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George and Debbi during their European vacation.
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“When a CGAEF Board opening came up, I welcomed the opportunity to participate. The goals for the Board aligned so well with my personal goals of providing educational opportunities to individuals and companies within the food industry,” says Frahm. “I felt I could make a positive difference for individuals at my company and in the industry.”
That was “not an easy commitment,” says Fong, and it’s an example of George’s willingness to lead wherever he sees a need. “He saw that during that time in our economy, there was a need to help get people through school,” Fong recalls, “and he felt a need to help the community and his employees.” Frahm spearheaded an increase in the tuition reimbursement programs offered by the CGA Educational Foundation. During his tenure, the CGAEF Board made significant moves to invest in the Foundation’s management and overall capacity to serve the industry. “I’m proud that the Board had the vision, faith and leadership to step up and expand the management of the Foundation when it hired an Executive Director,” he says. “At the time the Board took this step, a fiveyear plan was put in place to ensure that the Foundation remained financially sound.”
“We went from eight compactor pulls per month down to one.” - Nick Balistreri Co-owner, Sendik’s Food Markets
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Shiloh London, who was hired as the Foundation’s first Executive Director, knows Frahm’s contribution quite well: “George’s commitment to the Foundation was never compromised by a need to honor the status quo. He challenged me to become a better executive and contributed critical leadership to help us achieve our goals. He has been one of the greatest teachers in my professional career.” “George’s pursuit for excellence is unwavering,” explains Dan Meyer, Executive Vice President of Retail Operations at Stater Bros. Markets, about George’s dedication to making a positive impact through his work and the Educational Foundation. “His standards are high and he strongly believes in doing the right things for the right reasons. He is a very honorable guy with a high level of integrity.” Not content to only focus his attention and leadership within the grocery industry, Frahm has also served as chair or co-chair of Stater Bros.’ fundraising campaign for the Leukemia & Lymphoma Society’s Light
“I felt I could make a positive difference for individuals at my company and in the industry.”
As District Manager, George participated in the re-grand opening of Store #42 in Riverside in 1989.
the Night Walk for the past nine years. Under his stewardship, the event has grown from 600 participants raising $5,000 to over 1,000 people and more than $125,000 raised last year.
“What’s really neat is that the money stays in Southern California,” he says, further demonstrating his belief that Stater Bros. has a responsibility to serve its community beyond providing well run grocery stores.
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“George’s pursuit for excellence is unwavering…his standards are high and he strongly believes in doing the right things for the right reasons.”
It’s not all fun and games with Frahm, though. “I love the competition,” he says of representing Stater Bros. in the grocery industry. “I’ve gotten to know so many people and have learned so much from people at other companies. It’s been such a rewarding experience for me.” He advises younger people starting out in the industry to take advantage of the immense knowledge his peers possess. “I always tell people to pay attention to their managers, incorporate the best practices into their own management style so they can be better than anyone they’ve ever worked for,” he said. Although Frahm’s loyalty to Stater Bros. is one of the first things most people think about, his respect for his competitors is at the core of what fuels his work ethic.
George commits himself to several non-profit organizations including Inland Empire’s Believe Walk, which supports cancer patients and their families.
Frahm’s commitment to using his role at Stater Bros. to better the community can be traced back to his early days as a clerk. Working with a cashier named Vicki Philipson, who worked at Stater Bros. until she was 94, “really taught me what it meant to take care of customers,” he says. Her line was always the longest because customers specifically wanted to be rung-up by Vicki. “She taught me that we create relationships with our customers and our co-workers; that we’re really in the people business.” He said. “This is a great business to be in if you like working with people.” Luckily, Frahm is great with people. Upon 35 years with the company, George received his service award pin from Stater Bros. Executive Chairman Jack Brown.
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“George is known for reaching out to people when they are having a tough or challenging time, like a death in the family or an illness,” says Sylvia Shermer, Vice President of Human Resources for Stater Bros. Markets. “Once I got to know him, he was actually very funny. His laughter is unique and recognizable down the hall.”
“The grocery industry in Southern California has some of the best people I’ve met in my entire life,” says Frahm. “Not just at Stater Bros., but other stores, vendors, and distributors. We compete hard, but when we’re together for association meetings or other causes, we always stop competing and come together for a common good. I’m proud to be part of that.” What’s next for George Frahm and Stater Bros. Markets? “Right now we’re going through a transformation with technology, social media and online capabilities,” he says. “It’s going to change the industry tremendously. It’s exciting to compete and make sure we don’t get left behind. I’ll probably see more change in the next five years than I have in the 44 years I’ve been with Stater Bros.” He adds with a laugh: “I’ve got some skin in this game.” “Stater Bros. and the grocery business has been very good to me,” Frahm echoes sentiment shared by so many, “it’s been a great industry to grow up in.” ■
congratulates George Frahm from Stater Bros. for being inducted into the CGA Educational Foundation Hall of Achievement
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ONE FOR THE
AGES T H I S Y E A R ’ S H A L L O F AC H I E V E M E N T S E T A N E W R E CO R D F O R D O N AT I O N S – M O N I E S T O F U N D T H E CG A E D U C AT I O N A L F O U N DAT I O N ’ S M A N Y I N D U S T R Y P R O G R A M S .
Hall of Achievement inductee George Frahm.
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Peter Larkin, NGA, with CGA President & CEO Ron Fong.
Stater Bros. Markets George Frahm and Pete Van Helden, with Jim Lee, former President, Stater Bros. Markets.
National Anthem singer Mario Bryant.
CGAEF President Ron Fong, HOA inductee George Frahm, and CGAEF Executive Director Shiloh London.
Former California Grocers Association Chairman of the Board George Frahm, Stater Bros. Markets, was honored as the 2017 CGA Educational Foundation Hall of Achievement inductee during a record-setting gala celebration in early April that also recognized the Foundation’s 25th Anniversary.
Scholarship Recipient Speaker Manuel Rosas, Albertsons Companies.
The Stater Bros. Markets executive was recognized for his numerous contributions to California’s grocery industry, and his dedication and commitment to the many charities, organizations and causes he supports.
Frahm, Executive Vice President, Administration & Distribution, for Stater Bros. Markets, is the 46th grocery executive to be inducted into the prestigious Hall of Achievement, and the third from the Inland Empire supermarket chain.
Frahm served on the Foundation’s Board of Trustees and played a major role in helping grow the organization into the country’s premier state grocery foundation. He also served on the CGA Board of Directors and was elected for a one-year term in 2010 as its Chair.
In addition to Frahm’s induction, the Foundation also celebrated 25 years of providing educational programming to CGA member companies including college scholarships and tuition reimbursement.
This year’s dinner set new attendance records for the event and raised an impressive $530,000 which helps fund the Foundation’s numerous programs and college scholarships.
In receiving his award, Frahm expressed his deep appreciation for the tremendous support of Stater Bros. and for the Foundation’s efforts in providing educational opportunities to grocery companies throughout California.
CGA celebrated its 25th Anniversary with a special video recognizing the “Legends of the Industry” – the 45 Hall of Achievement inductees that preceded Frahm’s induction. A number of whom attended the event and were recognized on stage with special medallions presented by CGA and CGAEF President Ron Fong. In addition, the Foundation used the gala event to announce the creation of the “CGAEF Scholarship Endowment” in honor of its 25th anniversary of supporting the grocery industry with financial assistance and educational opportunities.
Former HOA inductees and “Legends of the Industry”.
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“A special thank you goes to Dennis McIntyre and the entire Stater Bros. Markets family for their instrumental role in assisting the Foundation staff in creating such a memorable evening,”
Dennis McIntyre, Stater Bros. Markets, with Susan and Bob Lim.
Legends of the Industry honorees.
Paul Coates, Kim Ferguson, and Tony Oliver, all of Stater Bros. Markets.
Chad Otte, Dave Jones, and Scott Salmon, The Kellogg Company.
Through initial investments of $335,000, scholarships will be created and awarded to CGA-member company employees. The founding donors include: Stater Bros. Markets, Alta Dena Dairy and Got Milk representing the California Milk Processors, The Kellogg Company, The Albertsons Companies Foundation, Frito-Lay, Acosta Sales & Marketing/Clorox, The Coca-Cola Company, Southern Glazers Wine & Spirits, Raley’s, Unilever, and Anheuser-Busch. Scholarships will be applied towards tuition for CGA-member company employees that meet a list of CGAEF Board of Trustees criteria. The Foundation hopes to raise $1 million for the endowment which will enable it to offer multiple scholarships. Dinner attendees also heard an emotional presentation from Manuel Rosas, a senior at Cal State Fullerton and a 15-year employee with Albertsons Companies. Rosas, who returned to college after a 17-year absence, shared how a $1,000 scholarship from the Foundation helped him pass four of his core business classes. 56 | CAL I FOR N I A G R OC E R
Kevin Konkel, Jerry Landers, Raley's; George Frahm, Stater Bros. Markets; Kevin Arceneaux, Mondelēz International; and Mike Stamper, Nestlé.
“I want to thank the CGAEF once more because without their help I would not have had the opportunity to be in front of you giving my testimony today,” he told the audience. “My new goal of earning a bachelor’s degree in business management operations and supply chain is something I once thought was out of my grasp.”
“A special thank you goes to Dennis McIntyre and the entire Stater Bros. Markets family for their instrumental role in assisting the Foundation staff in creating such a memorable evening,” said CGAEF President Ron Fong. “We congratulate George Frahm on his induction and in joining such an elite class of industry professionals.” ■
The Foundation wishes to thank the hundreds of patrons who attended the Hall of Achievement Dinner and the many sponsors that helped make the event the most successful in Foundation history.
Learn more about this year’s Hall of Achievement, including photos, and how your company can contribute to the CGAEF Scholarship Endowment at www.cgaef.org
Southern Glazer’s Wine & Spirits Congratulates
George Frahm of on his induction into the CGA Educational Foundation’s Hall of Achievement
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1 5 MINUTES WITH…
Samantha Barnes K I TC H EN K I D FOU N DER AN D CU LIN ARY COACH
BY LEN L E W IS
While everyone’s agonizing over mysterious millennials and burgeoning baby boomers we shouldn’t forget the “Kitchen Kids”!
In retail we’re always talking about demographics. Would you say kids have been overlooked?
That’s the focus of Raddish, a 10-year-old membership cooking club for kids ranging in age from four to 14, founded by Samantha Barnes, a former Los Angeles grade school social studies teacher.
“That’s an interesting point. Food is something everyone can relate to. It’s the great unifier. Kids like to cook and they have a real passion for it. Parents and teachers tend to forget how talented and smart kids can be. So giving them the opportunity to cook is really powerful.”
The club is a kind of edible education program offering summer camps, afterschool classes, parties and other events focusing on teaching kids about shopping, food preparation and feeding their interest in a wider variety of foods with simple recipes that also manage to blend in a healthy serving of math and science. CG: How do you get from social studies for elementary schoolers to food? Barnes: “I discovered that my students loved talking about food and were excited about it, but few had the opportunity to get involved at home. Even though they watched the Food Network, none of it was geared to kids. So I took my education background and started doing some after school cooking classes, which morphed into summer camp programs and cooking birthday parties.” How many kids are involved in Raddish?
What do the kids do? “Well, one of our camps, and the most popular, is called ‘Restaurant Camp.’ The kids actually create their own restaurants. They come up with the idea, the logo and the menu. Then they source ingredients, make grocery lists and go to farmers markets and supermarkets. They also interview for different jobs at the restaurant in the front and back of the house. Then, parents are invited to the opening. “Some of our camps sell out as early as February. But we’re expanding the concept. This summer we’re doing Edible Experiments where the kids will be exploring Food Truck Favorites, which will focus on international cuisine. We’re also doing Fresh From the Farm, a course that focuses on California’s local produce. We’re also looking for ways to bring these and other camps to other cities.”
Where are the camps? “Beverly Hills, Pasadena, Santa Monica, Hermosa Beach, Redondo Beach, and South Los Angeles. Our camps reach capacity with 15-20 kids, depending on the camp and kitchen. We also teach 150 students each semester at a local preschool.” What else is Raddish doing? “About three-and-a-half years ago Raddish launched a Kickstarter program to further our mission of bringing families together in the kitchen and at the table on a larger scale. We weren’t able to do that with all our camps and classes in Los Angeles. It was a challenge because parents were busy and basically dropped their kids off at camp. The kids were having a great experience, but it wasn’t creating family time around food which is so integral to our lives these days.” How is Raddish guiding them? “For one thing, we give them step-by-step illustrated recipes that even a four-year-old can read because they are visual. Adults like the visual instructions, too. So the kids are making food for parents who are amazed that their children are not only making the food, but also eating it. We found that kids are much more likely to eat what they have made.”
“We probably teach about 700 students in the Los Angeles area at six different camp locations. We rent various kitchens from the city Parks and Recreation Department or church kitchens everywhere from Beverly Hills to Santa Monica.” Continued on page 60 ▶ CAL I FO RNIA GRO CER | 59
15 MINUTES WITH…
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With that in mind, are you focusing on healthier meals? “Definitely. We’re all about family food using healthy ingredients – not kids’ food like mini-hot dogs. A lot of the stuff that’s marketed to kids isn’t real food. We’re helping them make dishes like hummus made with beets. It was bright pink and a lot of kids who loved it had never eaten beets before. “Kids might not be excelling in school at math or extracurricular activities like dance classes or piano, but cooking is a great thing for them and a life skill they’ll have forever. If we can get to them early, they can feel successful by doing something for their families.” Who’s coming up with the recipes? “We have a great team of developers who come up with themes six to eight months in advance. There’s usually a different theme every month and we’re always testing recipes for them. For example, we just did a Spanish Kitchen where the kids made paella and homemade churros. At the same time they were also able to learn something about the geography and culture of Spain. We’ve also got a pool party theme in July that includes fun summer foods. We’ve had Asian themes with potstickers, egg drop soup, and beef and broccoli. Other themes have had the kids making dishes like spring risotto with peas and even blueberry muffins.” Tell me about the subscription box program for food? “We don’t send ingredients, we send shopping lists with boxes to check off. It keeps kids and their parents organized when they go to the grocery store together to get what they need for the meal. The monthly kit also includes three laminated recipes in 12 easy-to-follow steps, an embroidered patch for the kids’ aprons, table talk conversation cards for the kids and their parents, a kitchen tool, and an activity card such as a science project.”
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Samantha Barnes and her family.
But all the recipes are geared to kids? “Yes, but they are designed to appeal to their parents and siblings. We don’t do anything with weird ingredients that are hard to find, or super high end. We have families subscribing across the country so we need products that are available to everyone, everywhere and easily sourced at their local grocery stores.”
I suspect all this will have a positive impact on supermarkets as well as the kids. “I would think so. I love the idea of getting kids into the supermarket. If it’s a chore for parents and kids to go to the store, they don’t learn skills like couponing, budgeting and how to find the items they need in different aisles.”
There also seems to be more to Raddish then just cooking.
Have you talked to any supermarkets about working with Raddish?
“We talk about where food comes from and the process by which it gets from the farm to the grocery store to the table. We also manage to incorporate a science lesson into it as well. For instance, we recently had a recipe for a chocolate soufflé cake that required whipping egg whites. We talked about the science and process for whipping egg whites. There are just so many things you can teach kids in the kitchen.”
“Not a lot. We worked with Whole Foods for a while when we first started, but didn’t pursue it. We had too many other things we wanted to accomplish.”
What’s the scavenger hunt about? “Each month we produce our Bonus Bites – free content that supports the Cooking Kit’s monthly theme. Our Grocery Store Scavenger hunt can be downloaded from our website and it makes learning about new and seasonal ingredients fun and exciting.”
Would you be interested in pursuing it now? “We have been approached by several brands like Campbell’s who talked about their initiatives and we are looking at the possibility doing partnerships over the coming years. But all that takes time to develop.” ■
KNOW THE LAW
Protecting Intellectual Property Rights BY WI L L IAM CHE N G
Companies in the grocery industry can take advantage of filing trademarks and design patents to strengthen their intellectual property portfolios. Upon hearing the term intellectual property rights, the first image that most people conjure are the tens or hundreds of patents that cover the various features of a smartphone – from the display, to the software, to the electronic components, to the sleek aluminum body. Furthermore, this image is further reinforced by the high-stakes litigation prevalent in recent years between global consumer electronics companies. However, companies in the grocery industry would be sorely mistaken if they believe that only high-tech gadgets and electronic devices can be protected by intellectual property rights.
Furthermore, it would be a mistake to believe that intellectual property rights include only utility patents (i.e., patents that protect a process, machine, manufacture, or composition of matter). Indeed, other intellectual property rights, such as trademarks and design patents can be equally as effective in protecting the interests of retailers, food manufacturers, and distribution companies, while also having the advantage of being less expensive, less time-consuming, and being associated with fewer hurdles than their utility patent counterparts.
Indeed, the first United States statute on patents defined subject matter that is eligible to be patentable as “any useful art, manufacture, engine, machine or device, or any improvement thereon not before known or used.”
Unlike utility patents, trademarks and design patents protect the ornamental and non-functional appearance of an invention. Companies in the grocery industry can take advantage of filing trademarks and design patents to strengthen their intellectual property portfolios.
More to the point, electronic and computer products represent a minority of the patents that are granted annually by the United States Patent & Trademark Office (USPTO). In 2012, electronic and computer patents represented only about 26 percent of the total patents issued by the USPTO.
Design Patents Design patents protect specific nonfunctional, ornamental features. Notable examples of design patents in the retail industry include the Coca-Cola contour bottle design, Ruffles chips design, and Eggo waffles design. Design patents can
cover any number of design indicia on products including shopping bags, shipping containers, snack foods, packaging label designs, laundry detergent containers, paper towel designs, water bottles, and so on. The design patent holder can exclude others from making, using, selling, or offering to sell a product having an identical ornamental design or a design that is substantially similar to the design that is claimed in the design patent. In essence, the design patent can prevent another entity (e.g., company, individual, etc.) from making, using, copying, or importing into the United States a design that is identical or substantially similar to the design protected by the patent. In exchange for disclosing the design to the public, the design patent holder is granted an exclusive right to the design for a period of up to 15 years from the date when the design patent was granted (for design patents filed on or after May 13, 2015). Additionally, design patents are significantly less difficult and less expensive to obtain than their utility patent counterparts. Indeed, design patents typically take between 12 to 18 months from the time of filing to grant. Moreover, design patents are granted at a significantly higher rate than their utility patent counterparts – in recent years, the allowance rate of design patents is about 90 percent. Continued on page 62 ▶ CAL I FO RNIA GRO CER | 61
KNOW THE LAW
◀ Continued from page 61
“Companies in the grocery industry can take advantage of filing trademarks and design patents to strengthen their intellectual property portfolios.” iStock
Trademarks Trademarks have evolved as a powerful tool for companies to protect their brand identity and to prevent consumer confusion. Among the different types of intellectual property rights, trademarks are perhaps the most extensive in breadth and scope. A trademark can cover a name, a word, a phrase, a logo, a symbol, a design, an image, a scent, a jingle, or a combination of any of these elements. Trademarks can be categorized as common law trademark rights (represented by ™) and registered trademarks (represented by ®). In common law, trademarks are acquired automatically as soon as a mark is used in commerce; however, marks that are registered at the USPTO provide a higher degree of protection. Grocers and manufacturers who register trademarks will garner specific advantages not otherwise available through common law acquisition. For example, registered trademarks are presumed valid, and can put others on constructive notice that such trademarks exist. Additionally, owners of a registered trademark are more likely to receive enhanced damages when another person infringes on the registered trademark.
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Perhaps the most compelling advantage of a trademark is the potential indefinite lifespan of the trademark. Unlike design patents, a trademark can last indefinitely so long as the trademark is regularly used in commerce (e.g., for sale, advertisements, etc.), and trademarks are renewable in 10-year periods. For companies in the grocery industry, the trademark can also be used as a revenue-generating source, such as when a food manufacturing company licenses its trademark to a retailer for the purpose of the retailer developing a private label product.
strong brand identity for the product through advertising and commercial use, which can be persuasive in securing trademark protection to protect the product for the duration of its commercial lifespan. As a matter of fact, Coca-Cola secured a design patent in 1915 covering the original “contour” bottle design. By the time that the design patent had expired, Coca-Cola had established such a strong association to the design that the contour bottle design was trademarked due to being so strongly tied to Coca-Cola’s identity. ■
Leveraging Trademarks and Design Patents Design patents and trademarks represent but a few of the available cost-effective measures for companies in the grocery industry to strengthen their respective intellectual property portfolios. Companies in the grocery industry that leverage both design patents and trademarks can build an indefinite lifespan of intellectual property rights. As an example, companies can first apply for a design patent for a product. During the 15-year period that the design patent is valid, the company can establish a
William Cheng is a patent attorney at Downey Brand LLP specializing in intellectual property rights covering consumer products, electronic devices, manufacturing techniques, and software.
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Diary of an Online Shopping Newbie L A R A B A L DW I N BLOGGER
Housewives joke: A clean house, happy wife, dinner on the table. Pick any two. So it is with grocery shopping: convenience, quality, cost. Pick any two. “We should try getting the groceries delivered,” my husband suggests one night. I scoff. Don’t get me wrong; I am a big fan of shopping online. From pizza to diapers, we are no strangers to delivery. Anything that saves me from having to get everyone fully dressed, in the car seats, out of the car seats, then back through the same dance again is a no-brainer. Why then, have I been so reluctant to try online grocery shopping? Maybe my inner control freak just can’t stomach the idea of someone else picking out my avocados. But on the eve of a particularly crazy week, I set out to determine whether the holy trinity of grocery shopping can be found online.
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Convenience I choose a grocery store I do not normally frequent and rejoice that I get to skip their nightmare parking lot. It’s easy to create an account and I am instantly given a coupon code for free delivery and $5 off my order. Score! The web interface is pleasantly intuitive. I can shop by aisle and department. I can even click through the packaged products and see the ingredients and nutrition panels, just as I would in store. Except it doesn’t matter that my kid isn’t wearing shoes. In fact, the kids are asleep upstairs and I have a glass of wine. I relish in this moment of grocery shopping nirvana. Quality I make a point to order a lot of fresh produce – I want proof positive that someone other than myself is capable of picking out a decent head of lettuce. I am disappointed to see they have no organic berries. In fact, the entire organic produce section is limited. This thought is quickly assuaged with the thrilling realization that a week’s worth of groceries will be at my door tomorrow morning. I feel a tinge of excitement when the driver shows up on time with my treasure trove. I scrupulously check expiration dates on
packaged items and closely inspect the fresh fruits and vegetables. Two things strike me – there seems to be an excessive amount of packaging, but this produce is perfect. Not a bruised banana in sight! Cost It looks like my romaine hearts were substituted for another, more expensive, brand. It is unclear whether I will be charged for this upgrade (Spoiler: I was not impressed.) A quick review of my order confirms a predictable conundrum: prices are a little higher, but I am certain I saved some money by avoiding impulse buys. I also dodged a toddler meltdown over refusing to purchase Elmo cheese crackers. Can you really put a price on that? Will I place another order? It makes sense for my family to use online ordering to keep bread, milk, eggs, and other basics stocked on a recurring basis. The luxury of everyday items delivered to my door is hard to resist. It would also be nice if the delivery fee could be waived with a minimum order requirement – this would certainly encourage me to order regularly. For more specialty items, there is something to be said for the ability to smell, feel and see the full breadth of a store’s offerings. For now, this insures part-time loyalty to the inperson experience. At least on the days that my kid will put on his shoes. ■
CONGRATULATIONS GEORGE FRAHM Stater Brothers Markets
on your induction into the
CGAEF HALL OF ACHIEVEMENT
California Grocer Online www.cagrocers.com
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Read California Grocer on your mobile device, or share with an associate.
on your CGAEF HALL OF ACHIEVEMENT induction
GEORGE FRAHM Stater Brothers Markets