RESTON, Va. -- Unintended consequences happen, and happen to Center-Store sales.
Thomas K. Zaucha, president of the National Grocers Association, here, told SN in an interview that Center-Store sales have taken a hit lately because of retail-industry consolidation, and the attendant efforts to achieve greater sales efficiency that came in their wake.
SN interviewed Zaucha prior to this week's NGA convention in Las Vegas. Center Store is to take center stage at the convention in the form of a "virtual supermarket" setup on the exhibit floor, which will feature Center-Store product, selling solutions and category-management programs.
In the interview, Zaucha maintained that because many large-scale retailers have been formed by means of mergers, some manufacturers have found their business to be concentrated into the hands of fewer and fewer players. And, he said, the prospect of doing business with a rapidly declining number of retailers is a situation many manufacturers are starting to view with some discomfort.
The phenomenon of concentration -- and all it implies for Center Store -- has come atop more than a decade of declining Center-Store sales in the conventional supermarket industry, Zaucha pointed out. The decline has been brought about by the drain of Center-Store sales to alternative classes of trade. Moreover, the whole sales-decline scenario has been exacerbated by industry-wide efficiency moves, whether associated with retailer concentration or not -- many of which have resulted in the attenuation of the number of Center-Store stockkeeping units.
Owing to the decline in Center-Store sales, and the reasons behind the decline, independent operators are poised to step into the breach and to grow the category, Zaucha said.
"There"s a need for the independent-wholesale system to begin to recapture Center-Store sales," Zaucha said. "There has been an attrition of Center-Store sales that has been going on in excess of a decade. There was an attitude that began to permeate this industry that categories could be lost, but the revenue could be made up with perimeter [service] departments.
"There has been a tremendous orientation toward the perimeter and, by abdication, we've let other channels of trade have Center Store, with the loss of the tremendous profitability of Center Store. Since we're looking to win back share of stomach, and to transition toward meals prepared at home with ingredients and products that come from Center Store, there is a significant renewed interest in Center Store from independents, and manufacturers.
"I think there has been a change of attitude by brand manufacturers, who previously were in a rush to do more and more business with the most efficient customers. What the manufacturers found was that a lot of effort and attention went to a more limited customer base. The independent was left out in the cold.
"Manufacturers' concern also is that, because of retail concentration, they don't want to end up with just five or six major customers for their whole business. And so they now see independent operators as an important means to achieve expanded sales."
NGA will help promote the growth of Center-Store sales in the independent sector not only through the exhibit at this week's convention, but by means of its Industry and Trade Relations Executive Council task force which has been charged with fostering manufacturer and retailer initiatives aimed at pumping up the category. ITREC was formed last year.
Zaucha also told SN that another challenge facing the wholesale-independent retail sector is the maintenance of a level playing field in the face of large-scale retail-industry concentration.
In a bid to weigh in on consolidation issues, NGA has stepped up its communication with the Federal Trade Commission in recent months. This activity has included:
NGA's promotion of the notion that if consolidating retailers are obliged to divest stores, independents should be considered as prime acquirers of the locations. NGA has also stood in opposition to a number of proposed retailer consolidations.
NGA's promotion to the FTC of the idea that if independent retailers wish to sell their businesses, wholesalers should get first crack at making the buy.
NGA's fronting of a discussion concerning whether a consolidated retail industry ultimately is in the best interest of American consumers.
And, NGA's backing of stricter enforcement of the Robinson-Patman Act. Zaucha maintained that NGA is in receipt of information concerning large-scale buyers' ability to wrest from manufacturers more favorable "services, pricing, deals, allowances and packaging that the rest of competitors can't receive." He declined to elaborate.
At the same time, Zaucha acknowledged, enforcement of seemingly anti-competitive practices under Robinson-Patman is far more difficult than many industry observers think.
"The burden of proof in a Robinson-Patman case is a lot more complicated and is of of a much higher standard that a lot of people have believed, including ourselves," he said. "It involves intent and the definition of impact. It's not sufficient to prove that a competitor is hurt by an action, but that competition is hurt. And there's a substantial degree of difference there. So an action may be unfair, or not viewed as ethical, and may be interpreted by a lot of us as illegal, but we've come to understand that may not be the proof the Act requires.
"We have created an anti-trust task force, involving many of our key members, which is taking a honest look at laws to see if they are consistent and contemporary with today's practices and to see if there is a need for modification. We're also looking at state statutes to see what form of protection might be available at the state level, and whether it might be feasible to develop some type of state-model law."
Meanwhile, NGA chairman Joseph H. Campbell Jr., president and chief executive officer, Associated Grocers, Baton Rouge, La., also told SN the issue of leveling the playing field is of paramount importance to NGA's future agenda. Campbell was also interviewed prior to this week's NGA convention.
Campbell asserted there is a need to ensure that all types of food retailers are equally treated, by manufacturers, in terms of product, price, promotion, packaging and payment terms.
And, he said, if fairness is not enforced in such areas, further retail consolidation will be encouraged as a result: "Many mergers have occurred because with bigness comes clout; it's why we have seen such a rash of consolidation up to now, and is why we will see more."
