July 2018 Vol 72, Number 7

Also Inside  Drafting Error in New Law Hurts Retailers, page 3  MRA Names Michigan House and Senate Friends of Retail, page 5  What Happened at the June Golf Outing? pages 6-7  Register Now for Grocers Fall Event, page 12

Supreme Court Delivers Major Retail Victory! By MRA Vice President of Government Affairs Amy Drumm On June 21, the U.S. Supreme Court ruled that states can require online, out-of-state sellers to collect sales tax like local stores do. The ruling is a huge win for retailers. It puts all retailers on a level playing field and brings commerce into the 21st century. In its 5-4 decision, the Supreme Court upheld South Dakota’s law requiring out-of-state sellers to collect South Dakota’s sales tax. The court said that the physical presence test (a requirement that businesses with a substantial physical presence in a state collect taxes) is not necessary and that a virtual presence is enough. The court also found that previous court rulings created, rather than resolved, market distortions.

What’s Next? Michigan’s current sales and use tax acts require the collection of sales taxes by sellers that have a physical presence, or nexus, in Michigan. We now need clarification on whether or not all states will be able to require online sellers to collect and remit sales taxes without first updating state laws. While MRA successfully expanded what types of activities gave a business physical presence (“affiliate/click-through nexus”), a physical presence standard is still the law. Unlike South Dakota’s law that the Supreme Court upheld, Michigan has not adopted an economic nexus standard. With the court’s favorable ruling, the state will need to determine whether legislative action is required to force all out-of-state businesses to collect sales taxes. We suspect a legislative change will be necessary to update the reference to physical presence; and we have begun to discuss this with lawmakers. 4.

Michigan Retailers Association 603 S. Washington Avenue, Lansing, MI 48933

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president ’s message

Summer Musings James P. Hallan Publisher Lisa J. Reibsome Editor

Advertising Index AWG ................................................................ 2 Miller Poultry ................................................... 4 SpartanNash ................................................... 11 Star Truck Rentals .......................................... 10

Effective January 1, 2018, Michigan Grocers Association is officially a division of the Michigan Retailers Association

Michigan Grocers Division Board of Directors Rich Beishuizen, Country Fresh Craig Diepenhorst, H.T. Hackney Dave Duthler, AMRA Energy Jim Forsberg, Arctic Glacier Premium Ice Jim Gohsman, SpartanNash John Leppink, Leppink’s Food Centers Ken McClure, Kroger Company of Michigan Bryan Neiman, Neiman’s Family Market DJ Oleson, Oleson’s Food Stores Joe Risdon, Prairie Farms Dairy Don Symonds, Lipari Foods Thom Welch, Hollywood Markets Jim Zyrowski, Ben’s Supercenters Michigan Food News is completely recyclable. Printed on recycled paper with soyoil-based ink. Publisher does not assume responsibility for statements made by advertisers in business competition. MICHIGAN FOOD NEWS © 2018 Michigan Retailers Services, Inc. All rights reserved.

Contact Information Lisa J. Reibsome, communications director 517.449.2256 MGAReibsome@comcast.net  Michigan Food News advertising  Michigan Food News all content, layout, and printing  Grocers Division public relations Grocers Division Michigan Retailers Association 603 South Washington Avenue, Lansing MI 48933 517.372.5656 or 800.366.3699 www.Retailers.com

One of my favorite sayings is that “the only constant is change.” It is as true today as it was when the phase was first coined thousands of years ago. MRA’s fiscal year ended on June 30, and like most years, it was a year of change. Good change. I can report to you that the health of Michigan Retailers Association remains very strong. In fact, today we are healthier and stronger than we were a year ago. The addition of Michigan Grocers as a division of Michigan Retailers certainly helped maintain our upward growth spiral both in terms of sheer membership numbers and financial strength. And our first-ever combined Michigan Grocers-Michigan Retailers Golf Outing was a great success. See pages 6-7 for an outing wrap-up. A few fiscal year financial highlights are worth noting here. Through June 30, total transactional volume that flowed through Michigan Retailers exceeded $1.4 billion, which is up over 4% from the previous year. Over 70% of our revenue comes from our merchant-processing program, which allows us to keep our dues at a competitive level. Dues represent less than 12% of our operating income. Most trade associations are heavily reliant on dues, so we are very fortunate to have developed a service-providing niche to our members. Our other main revenue sources include income from our insurance operations. Like most companies, our largest expenses are people related. About 60% of our expenses are employeerelated while operating expenses such as merchant processing expenses, printing, occupancy, professional fees, and taxes make up the majority of our other expenses. While we are still in the process of closing out our fiscal year, and subject to our annual certified audit, we expect to show a very healthy net income. On the legislative front there were many victories, but none more important than the passage of the statewide pre-emption bill that prohibits local units of government from taxing food and beverages. Any time we make it easier for retailers to do business across the state is a big win. Of course, every year has its own set of changes and challenges. Our landscape of challenges for coming fiscal year is already emerging. The key to success is finding the sun among the ever-present raindrops. Let’s hope we all find our sunbeams.

it ’s the law

Ban on Artificial Trans Fats Now in Effect

Most foods containing Partially Hydrogenated Oils (PHOs) — artificial trans fats — are officially banned as of June 18, 2018. The FDA said they were not safe for human consumption in June 2015 and gave manufacturers three years to phase them out. Some flavor enhancers and spray oils used to grease baking pans were given an extra year to reformulate. Beyond that, new products can’t be made with trans fats. To allow additional time for already manufactured produtcs to work their way throught distribution, the agency will not begin enforcing the ban on products sold by retailers until January 1, 2020. The National Grocers Association warns that grocers and wholesalers may still face legal exposure now if they are selling items with trans fat. NGA recommends that grocers work with their wholesalers to ensure compliance. To read FDA’s full notice, see https://federalregister.gov/d/2018-10714.

Drafting Error in New Tax Law Hurts Retailers

A new tax law — the Tax Cuts and Jobs Act — that went into effect in December 2017 contains a provision known as “100% bonus depreciation,” which allows businesses to write off the full costs of short-lived investments to spur upgrades and improvements to commercial properties. However, due to a drafting error, the law actually increases the tax burden on a category of business investment called Qualified Improvement Property (QIP). QIP investments include projects such as flooring, lighting, sprinkler systems, or other types of remodeling and interior improvements to nonresidential buildings. A group of 84 grocers, retailers, restaurants, and associations wrote a letter to Congress urging that the mistake be corrected “at the earliest possible opportunity.” The letter explains, “As the law stands now, businesses investing in upgrades are worse off from a cash flow and tax exposure perspective than they were pre-tax reform (when 40% bonus depreciation would have applied to all QIP, and restaurant, retail, and leasehold properties would have had a 15-year recovery period). To put this into perspective, in 2018, instead of being able to write off 100% of these investments under the Act’s accelerated bonus depreciation provisions or roughly 47% under pre-tax reform law, businesses are only able to write off 2.5% this year and then depreciate the remainder over the next 38 years.” For more information, see www.nationalgrocers.org/news-landing, click June 8 “Grocers and Others Call on Congress.” July 2018  Michigan Food News 3

Supreme Court Delivers Major Retail Victory!, continued from cover Additionally, while Congress is not required to act, it will likely want to weigh in by outlining the terms under which states can collect taxes. Unlike Michigan, 38 of the 45 states with a sales tax also have county and local sales taxes. If Congress acts, they likely will address the following issues: • Tax rate – Federal legislation has considered simplifying multiple tax rates to set an average state tax rate that would be remitted to the state rather than each jurisdiction. • Taxable items – Many states tax different items in different ways. While 23 states, including Michigan, voluntarily comply with the Streamlined Sales and Use Tax Agreement, 22 do not. • Audit liability – Can and should every taxing jurisdiction audit any and every business collecting taxes? • Remittance schedule – Each state and local taxing jurisdiction have different rules on how often and when taxes must be remitted. • Where the sale “occurs” – Since sales and use taxes are based on use and fund schools and local governments, we believe customers should pay the same state/local taxes for products delivered to their door that they would for products they buy from a nearby store. However, Congress may try to address whether the sale occurs where the product originates (shipped from location) rather than the destination (shipped to location). • Providing free software to sellers – Congress has also considered requiring states to offer free software to sellers who will collect sales tax. • Exemptions – While we would argue that traditional brick and mortar retailers and those currently collecting sales taxes don’t get any exemptions – they’re required to collect on the first dollar they bring in – Congress has been sympathetic to smaller businesses asking for a certain dollar threshold exemption in the past. The Case Itself The retail victory in Wayfair v. South Dakota overturns previous landmark decisions Quill v. North Dakota, 504 U. S. 298 (1992) and National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753 (1967). The Supreme Court ruled South Dakota’s law did not violate the U.S. Constitution’s Commerce Clause since it does not discriminate or cause undue burdens on interstate commerce. South Dakota’s law passed the Commerce Clause test by setting a sales threshold, not going after retroactive taxes, providing access to sales tax software paid for by the state, providing immunity for sellers using the state’s provided sales tax, and because South Dakota is one of the 23 states that has adopted the Streamlined Sales and Use Tax Agreement (SSUTA). SSUTA standardizes taxes to reduce administrative and compliance costs. It requires a single, state-level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules.

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Michigan Food News  July 2018

We’ve pulled out several interesting excerpts from the decision and included them here: • “Physical presence is not necessary to create a substantial nexus.” • “In effect, Quill has come to serve as a judicially created tax shelter for businesses that decide to limit their physical presence and still sell their goods and services to a State’s consumers—something that has become easier and more prevalent as technology has advanced.” • “Worse still, the rule produces an incentive to avoid physical presence in multiple States. Distortions caused by the desire of businesses to avoid tax collection mean that the market may currently lack storefronts, distribution points, and employment centers that otherwise would be efficient or desirable.” • “But is not clear why a single employee or a single warehouse should create a substantial nexus while “physical” aspects of pervasive modern technology should not.” • “... [Quill] allows remote sellers to escape an obligation to remit a lawful state tax is unfair and unjust. It is unfair and unjust to those competitors, both local and out of State, who must remit the tax; to the consumers who pay the tax; and to the States that seek fair enforcement of the sales tax, a tax many States for many years have considered an indispensable source for raising revenue.”

Retailers Reminded to Follow Latex Glove Allergy Guidance

A significant number of people are allergic to latex. The National Institute for Occupational Safety and Health (NIOSH) recommends nonlatex gloves be used by food employees. The Michigan Department of Agriculture and Rural Development encourages all retailers to be familiar with and follow the industry guidance for latex glove use. The full guidance is available at www.michigan.gov/MDARD, click on “Food & Diary Safety,” “Food & Diary Industry, and then “Dairy Laws,” “Food Code Changes, Information and Fact Sheets,” and finally “Latex Glove Allergies and the Food Industry.” In general, the guidance gives the following recommendations for using latex gloves in the workplace: (1) NIOSH recommends that food workers use non-latex gloves. A wide variety of alternatives exist including polyvinylchloride, neoprene, styrene, or synthetic. (2) If latex gloves are used, employees should be provided with powderfree, reduced-protein gloves. Powdered gloves pose a greater risk than non-powdered gloves because latex proteins bond to the powder, causing more latex to reach the skin. In addition, particles may become airborne when gloves are worn. The powder may be inhaled by an allergic individual, possibly causing an adverse reaction. (3) If employees are wearing latex gloves, they should not use oil-based hand creams or lotions; these products can cause glove deterioration that exacerbates the allergy. (4) Encourage employees to wash hands with a mild soap and dry thoroughly after removing latex gloves. This ensures removal of any proteins from the employees’ hands, reducing the potential for long-term exposure and allergic reaction. (5) If latex allergy is suspected, avoid contact with latex and seek medical advice. “If retailers vigilantly and proactively observe these allergy concerns, it could prevent the state from enacting more onerous requirements,” says MRA Vice President of Government Affairs Amy Drumm.

Michigan Retailers Association Names 2018 Friends of Retail

Michigan Retailers Association announced the designation of 120 legislative candidates (41 state senate and 79 state house candidates) in the August 7 primary election who are considered a “Friend of Retail” and deserve member support. The designations were approved by the Association’s Legislative Committee and are based on an analysis of voting records and candidate questionnaires. “These Friends of Retail have demonstrated through their votes on key issues and their answers to critical policy questions that they understand the importance of the retail industry to Michigan’s economy,” says MRA President and CEO James P. Hallan. “We look forward to working with them to continue to make job-creating improvements in Michigan’s retail business climate. I encourage everyone to vote in the August primary and November general election. Michigan’s retailers are battling on many legislative fronts, and it’s critical we elect candidates who will include us at the table as these issues move forward.” District 2 5 6 7 8 10 10 10 12 12 13 14 15

Michigan State Senate Adam J. Hollier (D-Detroit) David Knezek (D-Dearborn Heights) Robert Kosowski (D-Westland) Laura Cox (R-Livonia) Peter Lucido (R-Shelby Township) Joseph Bogdan (R-Clinton Township) Mike MacDonald (R-Sterling Heights) Henry Yanez (D-Sterling Heights) Michael McCready (R-Bloomfield Hills) Jim Tedder (R-Clarkston) Marty Knollenberg (R-Troy) Ruth Johnson (R-Holly) Jim Runestad (R-White Lake)

16 17 18 20 21 21 22 23 24 24 25 27 28 29

Mike Shirkey (R-Clarklake) Dale Zorn (R-Ida) Martin Church (R-Ypsilanti) Margaret O’Brien (R-Portage) Kim LaSata (R-Bainbridge Township) Dave Pagel (R-Berrien Springs) Lana Theis (R-Brighton) Curtis Hertel (D-East Lansing) Tom Barrett (R-Potterville) Brett Roberts (R-Eaton Township) Dan Lauwers (R-Brockway) Jim Ananich (D-Flint) Peter MacGregor (R-Rockford) Chris Afendoulis (R-Grand Rapids Township)

District 4 4 13 17 20 24 30 32 33 36 36 38 39 39 40 40 41 41 43 44 44 45 46 47 51 51

Michigan State House of Representatives Rabbi Alam (D-Hamtramck) Justin Jessop (D-Hamtramck) Frank Liberati (D-Allen Park) Joseph Bellino (R-Monroe) Jeff Noble (R-Plymouth) Steve Marino (R-Harrison Township) Diana Farrington (R-Utica) Pamela Hornberger (R-Chesterfield) Jeff Yaroch (R-Richmond) Scott Czasak (R-Washington Township) Karen Potchynock-Lund (R-Shelby Township) Kathy Crawford (R-Novi) Ryan Berman (R-Bloomfield Hills) Marsha Kosmatka (R-West Bloomfield) David Wolkinson (R-Birmingham) Joe Zane (R-Birmingham) Ethan Baker (R-Troy) Doug Tietz (R-Troy) Jose Aliaga (R-Clarkston) Matt Maddock (R-Milford) Matt Marko (R-Waterford) Michael Webber (R-Rochester Hills) John Reilly (R-Oakland Township) Hank Vaupel (R-Handy Township) Matthew D. Anderton (R-Swartz Creek) Ian Shetron (R-Flushing)

52 53 56 57 58 59 61 62 63 64 65 66 67 67 70 71 71 72 74 77 78 78 79 79 79 79 80

Teri Aiuto (R-Manchester) Jean E. Holland (R-Ann Arbor) Jason Sheppard (R-Temperance) Bronna Kahle (R-Clinton) Eric Leutheuser (R-Hillsdale) Aaron Miller (R-Sturgis) Brandt Iden (R-Oshtemo Township) Dave Morgan (R-Marshall) Matt Hall (R-Battle Creek) Julie Alexander (R-Hanover) Sarah Lightner (R-Springport) Beth Griffin (R-Mattawan) Zach Moreau (L-Lansing) Clyde L. Thomas (R-Dansville) James Lower (R-Cedar Lake) Christine Barnes (R-Grand Ledge) Chris Stewart (R-Grand Ledge) Steven Johnson (R-Wayland) Mark Huizenga (R-Walker) Tommy Brann (R-Wyoming) Daniel Hinkle (R-Niles) Brad Ryan Paquette (R-Niles) Bruce Gorenflo (R-St. Joseph) Maria Moen (R-St. Joseph) Troy Rolling (R-Benton Harbor) Pauline Wendzel (R-Coloma) Mary Whiteford (R-Casco Township)

29 30 30 30 31 32 33 34 34 35 35 36 37 38 81 82 83 84 84 85 86 87 88 89 91 93 93 94 95 97 99 100 101 102 103 104 105 106 107 108

Dan Oesch (R-Alto) Daniela Garcia (R-Holland) Joe Haveman (R-Zeeland) Roger Victory (R-Georgetown Township) Gary Glenn (R-Williams Township) Ken Horn (R-Frankenmuth) Rick Outman (R-Six Lakes) Jon Bumstead (R-Newaygo) Holly Hughes (R-White River Twp.) Bruce R. Rendon (R-Lake City) Curt VanderWall (R-Ludington) Jim Stamas (R-Midland) Wayne Schmidt (R-Traverse City) Mike Carey (R-Channing) Joel Williams (R-Emmett) Gary Howell (R-North Branch) Shane Hernandez (R-Port Huron) Philip A. Green (R-Millington) Dean Smith (R-Bay Port) Ben Frederick (R-Owosso) Thomas Albert (R-Lowell) Julie Calley (R-Portland) Jason Minier (R-Jenison) Jim Lilly (R-Park Township) Greg VanWoerkom (R-Norton Shores) Madhu Anderson (R-East Lansing) Graham Filler (R-DeWitt) Rodney Wakeman (R-Saginaw) Vanessa Guerra (D-Saginaw) Jason Wentworth (R-Clare) Roger Hauck (R-Mount Pleasant) Scott VanSingel (R-Grant) Jack O’Malley (R-Lake Ann) Michele Hoitenga (R-Manton) Daire Rendon (R-Lake City) Larry Inman (R-Williamsburg) Triston Cole (R-Mancelona) Sue Allor (R-Wolverine) Lee Chatfield (R-Levering) Beau LaFave (R-Iron Mountain)

UIA Asks Employers to Always Respond on Time to Information Requests When a worker files a claim for unemployment benefits, recent employers will receive a Monetary Determination form (Form 1575E) from Michigan’s Unemployment Insurance Agency. Companies that employed that worker during the base period of the claim (the last five completed calendar quarters) will receive the form and a notice of potential charges to their account. Timely employer responses help prevent suspected fraudulent claims from being paid. Employers have 10 days to respond to the monetary determination and any other requests for information related to a claimant’s eligibility. These requests may be received via an

employer’s MiWAM account or by mail via a Request for Information Relative to Possible Ineligibility (Form UIA 1713). If an employer does not wish to contest a claim, the employer should still respond to the request for information. A check-box has been added to the form allowing employers to indicate they do not wish to provide additional information. When checked and returned on time, it will be considered an adequate response. If an employer’s failure to respond results in a pattern of non-responsiveness, the employer may be charged even if the claimant is ineligible for benefits.

Failing to respond to five or more information requests and 2% of an employer’s total requests during the prior calendar year constitutes a pattern of nonresponsiveness. Recent legislation now requires every determination letter an employer receives to note whether the employer responded during the eligibility process. Providing this notice will help stop employers from falling into a pattern of non-responsiveness. The best way to avoid being charged is to always respond to requests for information fully and on-time, attaching any appropriate supporting documents. July 2018  Michigan Food News 5

A fantastic course, outstanding hospitality, great weather, and even better golfers made the 31st Annual Michigan Grocers golf outing — and the first ever combined Michigan Retailers/Michigan Grocers outing — an all-around success. Members came together on June 21 at the Brookshire Inn and Golf Club in Williamston to golf and network in the fresh air and sunshine, making it a productive and fun way to spend the first day of summer. The final result required an extended scorecard playoff between foursomes representing Liberati’s Italian Bakery & Deli, Lipari Foods, and UBCR — all carded scores of 12-under par 60. The Association thanks all of the golfers who participated and especially the generous sponsors. Golfers Take Note: The fall golf outing will be Tuesday, September 25 at Crystal Mountain Resort’s Mountain Ridge Course. You may enter as a single, twosome, threesome, or entire team via the registration form online at bit.ly/MGAsummit18. Playoff results:  First place went to the UBCR team (pictured here from left to right) — Derek Bajema with the Michigan Soft Drink Association, Nick Kronsbein with UBCR, Tom Freeman with Freeman Family Enterprises, and Mike Soboleski with Schupan Recycling.  The second place team, shown below middle, was comprised of Michigan Retailers Association’s Bill Hallan, Dave Tringer, Tullio Liberati, and Representative Frank Liberati — all with Liberati’s Deli.  The team from Lipari Foods took third place – Don Symonds, Doug Watters, Matt Montgomery, and Jim Stahl. Additional Winners (pictured below left):  Men’s Longest Drive — Dan Johnson, H.T. Hackney Company  Woman’s Longest Drive — Dawn Feldpausch, RPS Regency/Michigan Grocers Fund  Closest to the Pin #18 — Dawn Feldpausch, RPS Regency/Michigan Grocers Fund  Closest to the Pin #7 — Matt Montgomery, Lipari Foods

Above right: SpartanNash’s Jim Gohsman takes his time before teeing off on the hole with the longest drive competition. Left: Prairie Farms Dairy was an outing sponsor, and the team members — Joe Risdon, Bobby Enell, Tom DenUyl, and Steve London — enjoyed their day on the course. At 6,300 yards, the 18-hole, par 72, layout is ideal for both the casual and skilled golfer. It is uniquely mature and offers scenery more characteristic of courses found in Northern Michigan. Michigan Grocers has hosted a spring/early summer golf outing annually since 1987 including more than 3,300 golfers playing nearly 60,000 holes of golf. 6

Michigan Food News  July 2018

Above, left to right, top to bottom: The Lipari Foods team stops for lunch at the turn. The Brookshire served up burgers, hotdogs, and brats with all the fixings. Shown here are Doug Watters, Don Symonds, and Matt Montgomery who tied for first place and ultimately took third after an extended scorecard playoff. An afternoon of golf makes for hungry players. The awards dinner offered a delicious buffet of barbecue ribs and chicken, salad, corn on the cob, and more. Outing sponsor Meijer was represented by Bob Mooney, Bob Vujea, and Andrew Martin — all with Meijer — and Frank Foster with Public Affairs Associates. The team from Kroger — John Schroeder, Jarrod Pitstick, Patrick Hayes, and Ken McClure — stands proudly by their sponsor sign. The 19th Hole, sponsored by Lansing Brewing Company, offered golfers the perfect opportunity to enjoy a craft beer, socialize, and share stories of the time they almost got a hole-in-one. Here MRA Director Bryan Double Eagle/Eagle Lunch Sponsors Neiman, with Neiman’s Family Market, and MRA’s Tom Tuggle take a break from discussing the outing venue Campbell Group Kroger Company of Michigan to smile for a photo. This was the first time the outing H.T. Hackney Co. Meijer was held at the Brookshire Inn. Golfers had nothing but praise throughout the day for the course and level of perSpartanNash sonal service provided by the golf club.

IGT

19th Hole

Hole/Tee Sponsor

Lansing Brewing Company

Arctic Glacier Premium Ice Hap Herbruck Poultry Ranch/Eggland’s Best IGT Michigan Potato Industry Commission Michigan Retailers Association Novolex Prairie Farms Dairy Priority Health Retailers Insurance Company Schupan Recycling UBCR

Golf Cart Sponsor Michigan Grocers Fund

Prize Donations Schupan Recycling Griffin Pest Solutions Tullymore Golf Resort

July 2018  Michigan Food News 7

Michigan’s Bottle Deposit Law Michigan Retailers Association Member Tom Emmerich, COO of Schupan & Sons Recycling, submitted the following response to an article about Michigan’s Bottle Deposit Law by MRA’s Vice President of Government Affairs Amy Drumm published in the May issue. The article explained the Association’s anti-bottle deposit law, pro-comprehensive recycling position. That article is reprinted here on the right.

RESPONSE

Michigan’s Deposit Law: 40 Years Strong!

Recently, the Michigan Food News ran an article by MRA’s VP of Government Affairs Amy Drumm, which questioned the value of Michigan’s Deposit Law and its relevance today. While this is a fair question as 2018 marks the 40th birthday of, arguably, one of our state’s most popular and successful pieces of legislation, it is important for MRA members and all Michiganders to understand there is another side to this story. Michigan’s deposit law was implemented in 1978 as a litter prevention tool to support our state’s growing tourist industry and enhance our beautiful beaches as well as the roads that lead to them. Its impact was immediate and hugely successful. The deposit law has evolved into a recycling instrument which keeps millions of pounds of beverage containers out of our landfills every year. In fact, 3.5 billion containers and nearly 450 million pounds of glass, aluminum, and plastic bottles (PET) are diverted from landfills and recycled annually as a direct result of our deposit law, which is regarded by some as the most efficient system in the nation.1 Why is Michigan’s system so efficient? Here are just a few reasons why our deposit system works so well and continues to be a valuable and efficient process:  Over 95% of aluminum and PET containers and over 85% of glass containers are redeemed and recycled, for a total of 92%! This is down slightly from previous years as declining out-of-state containers and a strong economy have had an impact; however, 92% is the highest return rate of all deposit states, with Maine the next highest at only 84%.  A New York Public Interest Research Group study found that, in New York, 68% of consumers spend their deposit refund at the same store where they redeemed the containers. Although a similar study has not been conducted in Michigan yet, I would think that consumer behavior would be similar.  Our deposit system generates the highest quality of beverage container recyclables in the country which means we always have a home for our processed containers. Unfortunately, this is not always the case for many curbside or single stream efforts where glass cripples the stream and the value of the aluminum and PET can be reduced by as much as 20% due to contamination. Most people do not think of such devastating, unintended consequences. Steve Alexander, President of the Association of Plastics Recyclers, has stated, “Michigan’s deposit program has long been viewed as the GOLD standard of all deposit programs as it provides the cleanest and highest quality of recyclable materials.” As for Michigan’s poor performance in overall municipal recycling rates as compared to neighboring states, one must understand all the dynamics at play. For instance, while Michigan is spending only $1 million a year on recycling, Minnesota has a budget of $17 million, and Wisconsin’s is $20 million. These states also have significant recycling mandates that Michigan does not impose on our citizens. The correlation between investments and recycling rate pretty much speaks for itself. See the graph below. It is also important to point out that, of the top 10 recycling states, six have deposit laws. This means parallel systems of deposit and curbside can, and do, maximize results. To date, Michigan has left it up to the citizens and industry to address statewide municipal recycling issues, with little success. However, thanks to the efforts of the Governor’s Recycling Council, strong leadership from the Michigan Department of Environmental Quality, and some recent increases in funding, we may begin to see some progress in the near future. I certainly understand the challenges the deposit law has caused the retailer community. I also greatly respect the effort over the years by retailers, in particular, to enhance the law’s effectiveness by increasing the consumer’s convenience and experience through innovation, constant improvement, and working with industry partners. No law or system is perfect. That said, Michigan’s deposit law has proven to not only clean up our roadsides and beaches, it also has played a significant role in our recycling efforts. Thanks to the cooperation of retailers, distributors, and recyclers like Schupan Recycling, TOMRA, UBCR, and Glass Recyclers, Michigan’s deposit law has thrived and is a model of success that we should all be proud of. When I think of “Pure Michigan,” nothing is a better example than our state’s deposit law! —By Thomas B. Emmerich, Chief Operating Officer, Schupan & Sons, Inc. 1 Steve Alexander, President of the Association of Plastics Recyclers, and Susan Collins, Executive Director of Container Recycling Institute, “Keep Michigan First,” YouTube, Sept. 11, 2017. 8

Michigan Food News  July 2018

ORIGINAL ARTICLE

Michigan’s Recycling Efforts Dragged Down by Unfair Deposit Law In April, Bridge Magazine wrote an article exploring Michigan’s abysmal recycling rate and declaring the state’s 10-cent deposit law on bottles and cans a “handsdown success.” In fact, the opposite is true. Michigan’s recycling record is terrible because of the deposit law, not despite it. We need only point to the many states that have no bottle deposit policies and much higher recycling rates than Michigan’s 15%. These include neighboring states Illinois (37%), Minnesota (43%), Pennsylvania and Wisconsin (both at 35%). Bottle return rates have slowly dropped over the years, falling to 92% in 2016. That’s the lowest rate since tracking began in 1990, according to the Department of Treasury. It’s clear consumers are becoming less enamored with taking their trash back to grocery stores and want more comprehensive and convenient recycling options. The deposit law was passed in 1976 as an anti-litter measure at a time when recycling wasn’t really contemplated. The law addresses 2% of our waste. The responsibility has been shoved off onto bottlers and grocers, costing them $100 million annually, according to a Public Sector Consultants study. That same study found the state only spends $200,000 to support recycling efforts that have fallen markedly short. A bill in the Legislature proposes expanding the law to water bottles. That would increase the burden on private industry by another $60 million to bring in just 2% more waste. Meanwhile, Michigan would continue to be awful at comprehensive recycling. And consider this: Michigan uses three-quarters of the revenue gleaned from unclaimed deposits to pay for contaminated site cleanup, not recycling initiatives. Municipalities could desperately use such revenue to educate residents, expand curbside pickup programs and improve community recycling centers, like other states that realized long ago that recycling is driven by convenience. But a curbside cart cannot live on cardboard boxes alone. The deposit law takes valuable aluminum and PET plastics out of the cart and into grocery stores. If households put those recyclables into a curbside cart, that would add about 25% more value to the recycling stream. It would also add efficiency to our current two-pronged recycling process: one method for bottles and cans, another for everything else. Michigan’s deposit law takes bottles and cans out of the regular stream, puts them in grocery stores, where they go to distributors who then send them off for recycling. So many touches for one little can. Wouldn’t it be more efficient to throw it into the curbside cart and send it directly to the recycler? A comprehensive recycling plan also would relieve an unfair burden on grocery stores, which must make room for the recyclables and pay for the machines to accept them. Here’s the irony: While demanding sanitary conditions for our grocery stores, we force them to accept bottles and cans that contain cigarette ashes and worse. After four decades of major changes in our economy and culture, it’s time for the anti-litter deposit law to be reexamined to keep up with the times and with other more environmentally successful states. —By Amy Drumm, MRA VP of Government Affairs; Chairwoman, Michigan Recycling Partnership, a task force of retailers, grocers, and bottlers.

Focus on Fresh Fresh Categories Drive Growth

Organic Fresh Produce Sales are Strong

Across brick-and-mortar grocery stores, leading fresh departments — bakery, deli, meat, produce, and seafood — have become destinations for consumers, reports Nielsen. “[M]any Organic fresh produce sales started the year strong fresh ingredients have been the starting point for category reinvigoration across both packwith 8% dollar and volume growth compared to the aged food and non-food items. When so many retailers are struggling to get people in store, fi rst quarter of 2017, according to the Organic Proit’s no surprise that so many are placing a heavier emphasis on fresh categories throughout duce Network (OPN). the perimeter,” Nielsen says in its “Total Consumer Report,” published June 2018. Organic packaged salads remain the category The report found that fresh categories are driving nearly 49% of all dollar growth across driver, responsible for 19% of all organic fresh profast-moving consumer goods, with fresh and perishable foods generating more than $177 duce sales. Behind packaged salad sales were orbillion in sales. Additional research found that top-performing U.S. fresh retailers (deterganic berries and apples, with the three categories mined by total fresh dollar velocity; company’s were not named in the report) are experiencmaking up 40% of all organic fresh produce sales for ing stronger growth across total store sales — 4% total store growth in 2016, compared with the quarter. a modest 1% total store growth in bottom-performing fresh counterparts (also not names). If you are just testing the waters to see how well Not only do today’s top-performing grocery retailers lead the way with total food product your shoppers respond to organic produce, packaged sales, they derive a larger portion of their sales from the fresh departments. In fact, nearly salads, berries, and apples are fairly safe products to half of all food sales among top-performing fresh retailers comes from fresh products, comoffer. If you are looking to expand your organic fresh pared with just 27% among bottom-performing fresh retailers. offerings, consider herbs, spices, and citrus. So what are the key “Organic fresh produce continues to be a major take-aways for retailers revenue generator at retail. In addition to berries, orlooking to capitalize on ganic potatoes, mushrooms, herbs/spices, beverages, consumers’ growing hunand avocados all increased by double digits in both ger for fresh? For starters, dollar and sales volume compared to the first quarter top-performing fresh reof last year,” says OPN CEO Matt Seeley. “At the tailers are putting a major same time, per Nielsen data, conventionally grown focus on the deli departberries, beverages, mushrooms, potatoes, and herbs/ ment. This department spices were all flat or declined in volume sales.” takes a significantly more prominent spot, accounting for 29% of total fresh sales, while deli sales at bottom-performing fresh retailers only account for 14% of total fresh sales. More Nielsen findings: :  Sushi is another fastKroger Michigan partnered with JFE Franchising’s Snowfox Sushi Program to bring fresh sushi to store shoppers. The company’s growing opportunity in trained chefs serve fresh sushi to new customers daily, shining the the deli, as top retailers have as many as 32 differspotlight on deli fresh prepared. ent types of sushi available. Sushi has driven strong growth in both grocery (+13%) and drug stores (+20%). The market for grocery store sushi was $700 million in 2015 and expected to grow by 25% annually.  Organic is another key principle helping top-performing fresh retailers grow. Offering fresh options often boosts sales across the entire store. For example, 32% of U.S. households purchase organic produce from top-performing fresh retailers, allowing them to sell more product across the entire fresh departments. In fact, top-performing fresh retailers garner 16% of their produce dollar sales from organic products, compared with only 6% in bottom-performing fresh retailers. Organic meat is particularly on trend, generating 9% of meat dollar sales at leading fresh retailers, compared with just 0.4% in bottom-performing fresh retailers.

Consumers Want Transparency Especially When it Comes to Fresh Purchases

FMI’s “The Power of Meat 2018” identifies mega trends influencing meat purchases. Key findings from the study:  FMI reports that the industry is being reshaped by competitive forces, demographic shifts, and trends such as technology, convenience, health and wellness, and transparency. The meat category, from trip planning to consumption, is changing along with it. Meat can remain crucial for driving customer loyalty and competitive advantages by addressing the various population groups’ different approaches to meat through targeted advertising, marketing, and merchandising. It is not “one-size-fits-all.”  The industry can drive demand and sales by enhancing shoppers’ meat knowledge. It is a powerful formula: extensive meat knowledge equals a greater variety purchased equals preparing meat more often equals greater store loyalty, spending, and trips. In reality, 83% of shoppers purchase only a handful of meat cuts/ kinds. However, 42% say they would branch out, if advised.

 Shoppers continue to embrace manufacturer and private brands. Outright brand preferences in both fresh and processed meat reached their highest points in 12 years. Shoppers cite a general inclination for buying familiar brands, but other purchase drivers are perceived better quality, value, and consistency. While brand preference is high, 62% of shoppers say promotions can drive them to try a new brand.  Four big areas for improving the meat department emerged from hundreds of shopper suggestions. These are: (1) transparency of product quality and freshness to accurately judge value; (2) greater variety, including pack sizes, cuts/kinds, and specialty items; (3) better pricing and promotions; and (4) operational excellence, with a focus on better customer service, more information and outreach, packaging innovation, better in-stock performance, and cleanliness. Beyond Meat FMI’s white paper, “Top Trends in Fresh,” reports that two in three fresh food shoppers say health & wellness/transparency is now a more

motivating factor when they shop. Nearly half of shoppers define healthy food by the “absence of the bad stuff.” When it comes to transparency, the order of factors that are important to fresh food shoppers are: (1) Health & wellness, 65%; (2) Free of growth hormones, 33%; (3) Free of antibiotics, 32%; (4) Free of pesticides or fertilizers, 31%; (5) Non-GMOs or bioengineered ingredients, 30%; and (6) Non-irradiated foods, 15%. How to Respond to These Trends. FMI offers ways retailers can capitalize on these trends:  Amplify the Integrity of Fresh – Throughout the fresh departments, increase the focus on social and culture needs that are relevant to each demographic.  Own the Consumer Connection – Retailers are a trusted source of information for shoppers. Continue to maintain that trust and nurture it, particularly in the fresh category.  Showcase How You Give Back – Share your stories of working with community partners on programs that reduce waste and maintain food integrity. July 2018  Michigan Food News 9

Lottery News

Super Raffle Expected to Generate Strong Sales By Brian O. Neill, Michigan Lottery Commissioner A frequent question from players is: “When will the Lottery have another raffle?” Since 2006, the Lottery has offered 25 different raffle games. These games have featured different designs and top prize amounts ranging from $40,000 tax free to nearly $2.5 million. To meet the demand from players, the Lottery again will offer a raffle game. The Super Raffle will feature the richest payouts of any raffle game offered by the Lottery. It will feature a top prize of $4 million and two $2 million prizes. We expect player excitement for this raffle to reach unprecedented levels and help boost store traffic and sales for retailers.

Tickets for the Super Raffle go on sale Aug. 12. Each Super Raffle ticket costs $50, giving retailers a $3 sales commission on every ticket sold. Each Easy Pick play will feature a unique seven-digit raffle number, making sales quick and easy for retail staff, since players won’t have to use play slips. In addition to a $4 million top prize and two $2 million prizes, other prizes are: $100,000 (10), $500 (3,300), and $100 (12,000). The Super Raffle drawing will take place on or after Sept. 19. With the unique raffle structure and multi-million prizes available, we expect interest in this game to be strong for avid and casual Lottery players and to boost sales for retailers. Red Ball Double Draw Coming in August The Lottery will bring back one of the most popular Daily 3 promotions this summer: the Red Ball Double Draw. It’s scheduled to start on August 1 and will offer Daily 3 evening players extra chances to win during the promotion. Beginning August 1, five white balls and one red ball will be loaded into a drum, and a special “Double Draw” will be shown after the regular Daily 3 evening drawing. If a white ball is drawn, it will be removed from the drum, set aside, and another “Double Draw” will occur the next day. When the red ball is drawn, the Lottery will conduct a second Daily 3 evening drawing. Once the red ball has been drawn, all balls will be loaded back into the drum for the next Daily 3 evening drawing. The Red Ball Double Draw promotion applies to Daily 3 evening drawings Monday through Saturday. The promotion will run for a limited time. During the promotion, the Lottery will conduct at least eight Daily 3 evening drawings each week rather than seven. With an extra drawing each week, players will have more chances to win and more incentive to buy Daily 3 tickets. We expect this promotion to bring additional store traffic to retailers, boost sales, and also provide more opportunities for retailers to earn more commission by cashing winning tickets for players. Best of all, the promotion is easy for retailers because no additional action or cost is required for a player to take part. Historically, Daily 3 and Daily 4 promotions have been very successful. They have boosted player awareness and interest in daily games, leading to increased sales and commissions for retailers.

10 Michigan Food News  July 2018

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2017 Bocce Winners

2017 Kessel Winner

Food Retailers Summit September 23-25 Crystal Mountain Resort, Thompsonville, MI “The first step towards getting somewhere is to decide you’re not going to stay where you are.” —J.P. Morgan

The Food Retailers Summit Will Take Networking to the Next Level A Refreshed Agenda Gives Retailers & Suppliers Better Opportunities to Connect What’s New?  Out with the Trade Show, in with the Grocer-Supplier CONNECT Luncheon – to provide more personal, effective networking.  We’ve dropped the registration fee to $120 in honor of the 120th gathering. There is no extra fee for meals. Spouses can attend for free!  Each year attendees are enthusiastic about the activities unique to the Michigan Grocers event, such as bocce and cornhole. This year we’re adding a Euchre tournament — another opportunity to connect and have fun. What’s Continuing?  Great speakers with sessions on government affairs, shopping trends, leadership, service, best practices in store safety, and more.  Your favorite events – including bocce, cornhole, and golf. This year’s golf outing will be on the fantastic Mountain Ridge course.  We’ll celebrate one outstanding retailer and one outstanding supplier at this year’s Al Kessel Awards Dinner. REGISTER TODAY: ATTENDEE AND SPONSOR REGISTRATION FORMS ARE AVAILABLE AT bit.ly/MGAsummit18 DEADLINES: SPONSORSHIP, SEPTEMBER 7  ATTENDEE REGISTRATION, SEPTEMBER 14  HOTEL RESERVATIONS, AUGUST 27 DIRECTLY WITH CRYSTAL MTN (855) 520-2974; ASK FOR THE MICHIGAN GROCERS BLOCK, USE GROUP CODE 4642OM OR BOOK ONLINE AT bit.ly/foodsummit18 QUESTIONS? CONTACT NORA JONES, NJONES@RETAILERS.COM