WASHINGTON -- Strong leadership will be needed to manage the seismic shifts now being felt in every area of the supermarket business, and the Grocery Manufacturers of America here has every intention of stepping up to the plate as the industry responds to the challenges of change in the next millennium.
"Clearly, we are in an era of transformation, and the forces of technology, science and changing demographics will forever change the brand marketers' landscape, and the retail landscape as well," said C. Manly Molpus, the GMA's president and chief executive officer, in an interview with SN. "Our intent at GMA is to lead as a knowledge-based organization to help the industry through this era of transformation."
SN spoke with Molpus on the eve of the GMA's Executive Conference, which is being held this week at The Greenbrier, White Sulphur Springs, W.Va., starting Friday and continuing through June 14. The theme of this year's program is "Strategies for the Era of Transformation."
Featured speakers include Doris Kearns Goodwin, historian and author; Robert W. Pittman, president and chief operating officer of America Online; Gary Van Wagnen, partner in PricewaterhouseCooopers; and Raul Yzguierre, president of the National Council of La Raza. Retail executive participants include Robert G. Tobin, president and CEO of Ahold USA; Christian W.E. Haub, president and CEO of A&P; and Daniel Wegman, president of Wegmans Food Markets.
In the interview with SN, Molpus specifically addressed a number of areas of current industry transformation, including consolidation, solution selling, functional foods and biotechnology.
According to Molpus, retail consolidation presents opportunities for manufacturers as well as retailers. Moreover, it is the way the industry is moving, and the GMA is prepared to successfully operate within the new paradigm.
"Everything would seem to indicate there will be more consolidation on the retail side," Molpus said. "Manufacturers understand consolidation. Most have worked around the world in countries like Canada, the U.K., or Germany, where consolidation rates are significantly higher than in the U.S.
"I think what people fail to perceive quite often, regarding the consolidation issue, is that there are some plusses and opportunities for manufacturers working with larger retail entities; to drive costs down, for example, and to work for better growth and sales," he said.
Other advantages for manufacturers, noted Molpus, are that they would work with retail organizations with more technological sophistication. That would result in opportunities to effect mutual growth, and to gain efficiencies in areas such as promotions and product introductions.
"If you are in a major retailer, you can get your product out. You will have distribution," said Molpus. "As you work on sales promotions, if you get good partnering with a retailer, you can implement and move your sales promotion, or you can make more sophisticated use of data."
Molpus did not specify that consolidation would hurt small manufacturers either. Rather, he predicted that smaller companies would, like smaller retailers, use their unique strengths to stay in the game and develop niche-marketing strategies.
"It may be [that they have the] ability to move faster in adjusting to work with the retailer," said Molpus. "But just as we've seen a lot of regional retailers do well in this environment, like Wegmans, Schnuck and H.E. Butt, we will see the same thing with innovative, fast-moving, smaller manufacturers.
"But clearly, any manufacturer in this future environment must have strong brands and products that are relevant to the consumer. So product development and product innovation are key," he continued.
SN asked Molpus to speculate on the next step in solution selling, a topic to which the GMA devoted a lot of energy last year. In conjunction with Anderson Consulting, Chicago, the trade group published a second monograph on the subject, titled "Solution Selling II: Delivering the New Shopping Experience." This year's follow-up report is called "Full-Service Solution Selling."
As reported in SN, the GMA presented a number of case studies of innovative supermarkets that had created new and successful shopping concepts. SN asked Molpus why some solutions, especially those involving multi-temperature units, sometimes did not meet retailer expectations.
"I think we are still in the early stages of experimentation in what works. This is a new merchandising concept. Maybe some of the technological issues need to be worked out, but the concept is valid," Molpus said. "But we are seeing increasing awareness of the validity of solution selling. Some of it is reflected in new products that come to market, in both integrated multi-solution products and in packaging."
Molpus went on to say that successful solution selling requires manufacturers and retailers to both think together and work together, from concept to execution. But ultimately, said Molpus, fundamental changes are required on the level of store layout and configuration.
"When you really get into solution selling," said Molpus, "you get into store-layout issues; where equipment fits in the store, and a whole host of fundamental issues. The best time for solution selling may be yet to come, as we get into the next generation of store layouts designed with solution selling in mind."
Very much on Molpus' mind were advances in science and technology, which are affecting the growth of functional foods.
"If we look to the future," said Molpus, "the growth will be in innovation and the speed with which we can deliver these new products. And many will come from the new platform of functional foods." He further noted that there is a tremendous opportunity to use science and technology to address consumer health needs, especially in the areas of maintenance and prevention.
The GMA's position, with regard to regulation of functional foods, is that there is already enough legislation in place to ensure that foods are safe when they come to market, and that they are adequately labeled.
"We were very encouraged with the introduction of two new functional food products -- margarines that will help lower cholesterol. They will go to market without any new regulatory activity," he said.
SN asked Molpus whether he thought that current labeling of some functional foods may raise questions about an additional need for regulation, since some products do not specify the amount of vitamins or herbal supplementation they contain.
"It is our view that we don't need any additional regulatory activity. At the same time, the agencies will be vigilant. Both the Federal Trade Commission and the Food and Drug Administration have a lot to say about claims we can make, and the accuracy of those claims and truth in advertising," Molpus noted. Moreover, "The great majority of manufacturers want to be very truthful about the attributes [they give to] their products," he said.
He also said that no additional activity is expected around the Dietary Supplement Health and Education Act. Within the last year, some objections have been raised, notably by David Kessler, the former commissioner of Food and Drugs, and Bruce Silverglade, director of legal affairs at the Center for Science in the Public Interest, Washington, that DSHEA is being used to market dietary supplements and functional foods with sometimes questionable health benefits.
"I don't anticipate any legislative change," Molpus said. "Congress just spoke on that not too long ago. And there is a powerful supplement industry out there, and I don't think anyone is going to tinker with [DSHEA] in the near future."
Related to that issue is GMA's advocacy of biotechnology, which Molpus claims can help feed the world and be used to develop healthier and safer products. He did not think that the United States would face the public outcry against genetically modified organisms that has been raised in European countries, since Americans are more favorably disposed toward technology. He also noted that the existence of a strong governmental regulatory agency, in the form of the FDA, gives consumers more confidence in the food supply.
Nonetheless, he said that "We need to be sure we do some communications work on biotechnology and its benefits and safety. We are in the process of putting together some communications plans. We are fully confident that a well-informed, knowledgeable consumer will accept the new technology."
The GMA has a new biotechnology task force, Molpus said, that is in the process of looking into how the GMA can achieve two objectives: assure the use of products made with biotechnology, and assure that there is a public understanding and appreciation of the new technology.
"We are in the early stages of examining how we might want to be helpful and to what degree public education and communication is needed. We are evaluating what needs to be done," Molpus said.
Molpus further noted that the GMA is pushing irradiation and advocating its use in the marketplace as a food-safety device. Currently, the FDA is reviewing proposed revisions to its requirement that irradiated foods be labeled with the "radura" logo (green petals in a broken circle) and the words "treated with irradiation" or "treated by irradiation."
The GMA is on the record as opposing labeling, but urging that, if labeling is required, consumers be informed that the product has been irradiated for their safety. Further, the trade group wants the label to state "cold pasteurized (irradiated) to make food safer from harmful bacteria." In addition, the GMA recommends that any amended labeling provisions apply only to retail packaged products that have been irradiated, not to foods containing irradiated ingredients.
When SN asked Molpus about some people's concerns that a consumer population increasingly ignorant about kitchen hygiene may take even fewer precautions with irradiated meat, for example, he countered that "Irradiation is not a silver bullet.
"Everyone has a responsibility -- producer, manufacturer, the USDA, FDA and the consumer. We have to be careful that the consumer doesn't think [she] can leave this product out or not refrigerate it. There will need to be some consumer education along with that, so that the expectations of irradiation are not greater than they should be," Molpus said.
Molpus also told SN that, in addition to science and technology and other macro-industry issues, shifting demographics are transforming the grocery industry. He noted that the baby boom, the "echo boom" and the growth of ethnic minorities, particularly Hispanics, are making new demands on manufacturers. The grocery industry has shown an extraordinary capacity to adjust to changes in preferences, he said.
"Hardly a week goes by that a company is not making some announcement about how it is transforming itself to meet the needs of this new era: by generally adding expertise in the area of innovation and marketing and by reinvigorating our brands," Molpus said.
"We are looking at innovation as the growth engine as we begin the next century. And that has to be fundamental to our business. The only way we will meet changing consumer needs is to have the greatest period of innovation we've ever seen in the history of this industry," he concluded.