business news in context, analysis with attitude

Reporting in from the Food Marketing Institute Midwinter Executive Conference.
BOCA RATON, Fla. -- The geopolitical situation is racked with uncertainty, the national economy is stagnant at best, and the supermarket industry is grappling to deal with both the press of heightened competition and the need to make sense of a state of affairs racked with ambiguity.

It is in the context of this cauldron that the Food Marketing Institute (FMI) hosted its annual Midwinter Executive conference here, addressing in its first day of general session issues of national security, demographic shifts, and the role of health and nutrition in the world of food retailing. And, of course, there was the overarching consideration, sometimes stated and sometimes implied, of how retailers can tackle all these issues while still dealing the brutal reality of intense price competition.

From one perspective, the enormity and breadth of the problems that must be dealt with suggest that defining the issues will be a lot simpler than creating solutions.

Some highlights from the day’s events, along with some MNB commentary:

  • Pierre Olivier Beckers, president and CEO of Delhaize as well as chairman of the conference, offered a word of caution to American retailers facing heightened price competition, advice that he said was rooted in “painful experience.” Beckers said, “Low price retailers appeal to more than just poor people. Everyone is impacted.” He added, “Poor people need low prices, but rich people love them. Differentiation is how you use assortment and private label, but assortment and service alone won’t carry you past non-competitive prices.”

    It is worth noting that Beckers was making his comments just days after Delhaize announced that it would close more than 40 of its under-performing US stores. His comments were not just theoretical; like almost everyone attending, they reflected a reality he deals with daily.

    Beckers also suggested to his largely American audience that they should be ready to deal with some of the same consumer backlash against genetically modified organisms (GMOs) that most European retailers have faced. “It is not an issue with you,” he said, “but this problem may be slowly coming to you. In Europe, it has been a highly politicized situation, and we all have to sort this out together.”

  • Speaking about the economic issues facing the nation, especially rising unemployment, Hy-Vee chairman and CEO Ronald Pearson, who also serves as chairman of FMI, said there is a bright side. “A few years ago, we were hiring people we didn’t want anywhere near our businesses, because we didn’t have any choice,” he said. “Now, we have choices.”

    We found this a particularly intriguing comment, because it suggests that in times of prosperity, supermarkets find it difficult to have the kind of people on staff that they believe will help their businesses thrive. If this is so, we wonder if the labor problems that the supermarket industry experiences isn’t so much about whether the economy is good or bad, but a matter of how they approach the whole subject of staffing. Should the industry be changing its reliance on part-time employees, and creating a new model in which the roles of “shopkeeper” and ‘entrepreneur” can be extended to many or most of those who work at store level?

    Decentralization and store autonomy, of course, is a hallmark of Hy-Vee’s whole philosophy – which makes Pearson’s opinion on this subject particularly applicable. He noted in his speech to the attendees, in fact, that personal autonomy for employees, and “the strength of letting people do things and empowering them at the customer level” is one of the key issues that retailers need to face over the next five-to-ten years.

  • In a panel discussion about “emerging demographic groups,” Keith Clinkscales, chairman and CEO of Vanguard Media, a company that caters to urban audiences, urged the audience to market to an urban audience with significant disposable income. “This industry (can) seize the opportunity with urban culture and minorities to enhance your stores,” he said, saying that “the companies that get to this culture first will be the ones that will win.”

    Marketing battles, Clinkscales said, “are won and lost in the urban communities,” because it is the nature of the urban audience to be brand loyal and to spread the word about brands and stores that serve their needs. And, he noted, companies have proven that they can tweak their marketing messages so they can appeal to this audience without alienating core and existing consumer groups.” Media proliferation, he said, has familiarized so many people with so many diverse cultural experiences that they are less threatened by things they haven’t seen before.

    During the same discussion, William Strauss of Lifecourse Associates noted that consumers -- especially the “Millennials,” the name he used for what often are referred to as members of “Generation Y” -- are extremely smart, and questioned why stores that cater to these intelligent consumers tend to have down-market magazines at checkout.

    Good question!

    And Margaret Regan, president and CEO of the FutureWork Institute, said, “You have to stop using the word ‘minority.’ Think of it as the ‘emerging majority.’”

  • Interestingly, the day also featured a talk by Daniel Pipes, columnist for the Jerusalem Post and the New York Post, in which he spoke about another kind of minority.

    Pipes warned that the United States should not be declaring way on “terrorism,” but rather on the perpetrators of the terrorism that has had a major impact on the US – namely radical Islam. “Terrorism is a symptom of the problem, not the problem itself,” he said, noting that these radicals see Islam in terms of politics and ideology, not religion. “Their goal is not the conversion of individuals, but the ascension to power.” Pipes compared radical Islam to Nazism and Communism in its devotion the notion that the US Constitution should be replaced with the Koran. “It is not a plausible goal,” Pipes said, but suggested that it is a goal that makes these radicals extremely dangerous.”

    The challenge for retailers is that there is a significant and growing moderate Islam population that has specific dietary needs, and there is a business opportunity in finding ways to cater to their needs.

  • In a fascinating afternoon session, Dr. Kenneth Cooper, the founder of the famed Cooper Aerobics Center, and Dr. Dean Ornish, president and director of the Preventive Medicine Research Institute, offered a compelling look at how food, used as a way of preventing the onset of disease, can be an extraordinarily effective way to maintain good health.

    Cooper pointed out to the audience that by 2010, it is anticipated that there will be more deaths connected to lack of exercise than there will be to smoking, and said that “globesity” has become pandemic throughout the world. “There are one billion people in the world who are obese,” he said, noting that this is more than they the number of people in the world suffering from malnutrition.

    According to Ornish, the power of lifestyle changes that promote better diet and exercise is that it is “good for the health of the country and good for the health of our business.” He said that by promoting the right foods, stores could practice “anticipatory management” that would give them a competitive advantage,. The message that retailers ought to be sending to consumers, he said was that “we care about your health, the health of our country, and we’re doing something about it.”

    The presentations by Ornish and Cooper were underwritten by PepsiCo, and Ornish said that Pepsi’s goal is to “make a spectrum of foods, sp people can figure out where they want to be on the spectrum.” Offering a broad range would allow Pepsi (and, one assumes, other companies) to fend off obesity lawsuits that might come their way; PepsiCo is taking it seriously enough, he said that it was half of all its new product introductions to be on the healthy end of the spectrum.

    Of the varying diets that exist out there, Ornish urged attendees to focus on those that are science-based, not fads. “Unlike a cult, science doesn’t have all the answers. It’s always evolving,” he said. “The confusion is the opportunity.”
KC's View:
So what this means is that retailers have to identify new and emerging demographic groups and figure out how to cater to them…find new ways to communicate about nutritious food and its role in a healthy lifestyle…hire the right people to deal with these customers and products in-store…and run a store that informs and educates people without abandoning competitive pricing and while making the necessary technology investments that allow it to compete on a global scale.

No problem.