FALLS CHURCH, Va. -- Change means opportunity to John Block.
Block, president and chief executive officer of the National-American Wholesale Grocers Association here, was interviewed on the eve of NAWGA's annual convention in Dallas this week.
Block told SN he anticipates changes in the industry's approach to the way it does business, in the nation's approach to reform under the Republicans' Contract With America and in the way trade associations relate to each other, "all of which will mean new opportunities for distributors at all levels. "A trade association like NAWGA must help its members survive in changing times by encouraging them to decide how they can best adapt to change in order to prosper," Block said. Accordingly, he said he believes an update on a 1993 NAWGA research report may be in order in the wake of last year's merger of Scrivner into Fleming Cos. and the ongoing re-engineering efforts by Fleming and Supervalu. "Although I haven't discussed this yet with the [NAWGA] board, I am thinking about the possibility of updating our 1993 report on the state of the wholesale industry, because I think we're at a point where that information may be needed." The original study -- called "Wholesale Food Distribution: Today and Tomorrow" -- offered suggestions to food wholesalers on how to use Efficient Consumer Response to reduce costs and to meet the competitive challenges posed by the emergence of discount stores, mass merchandisers, warehouse clubs and supercenters that were challenging traditional distribution channels. Block said an updated report would address ways for distributors to adapt to changes within those traditional channels -- changes based on the industry's experience with ECR over the past two years and changes resulting from consolidation and re-engineering efforts within the distribution industry. It could take six to eight months to complete and could be published later this year, he said. Block said he is convinced that consolidations and re-engineering efforts by the industry's giants will have positive benefits for all distributors. "When two big companies like Fleming and Scrivner come together, the merger provides advantages in terms of sheer size and buying power," he said. "But it also opens opportunities for other, more niche-oriented regional suppliers who may be more willing or better able to deal with customers on a more intimate basis." Re-engineering efforts are still in their early stages, Block said, "and the jury is still out on exactly what will prove profitable or efficient. "But those efforts are part of what the times are telling all wholesalers -- that they have to take a serious look at their businesses and review them carefully to find ways to cut costs and improve efficiencies and profitability. "No one can do business as usual and hope to survive. "The exact blueprint or perfect model has not yet been determined, and while Fleming and Supervalu are trying to reinvent a model that fits their needs, there are a lot of niche distributors that service convenience stores and smaller retail operations that may not be able to use those models or simply won't find them best for their companies. "There's no one single plan to fit every company." Block said he is optimistic that the regulatory reforms likely to be enacted by Congress this year under the Republicans' Contract With America will enable the industry to become more profitable. "We've been in pretty much of a holding pattern for the last two years as we've tried to hold off an onslaught of new regulations and taxes. "But now we have a Congress that's telling us it's willing to help take that monkey off our back, which means we can spend less time on the defensive and more on the offensive to encourage deregulation, a reduction in the capital gains tax and elimination of the Perishables Agricultural Commodities Act." The Contract With America is a series of proposals by the GOP majority in the House of Representatives to reduce government regulations and deal with the budget deficit. "NAWGA members support the Contract With America because they believe it will benefit the industry," Block said. "We're all looking for less government, less oversight, fewer regulations and less meddling in our business lives." After this week's convention, Block said he plans to send a letter to the NAWGA membership asking it to list "the five most onerous, ridiculous federal government regulations. "Then we'll compile a list of the worst excesses and target those in our dealings with Congress." One area in which he said he anticipates a big need for regulatory reform is in the Occupational Safety and Health Administration. "OSHA has always put a heavy hand on our members with a number of unreasonable requirements," Block declared. "We've got to rein OSHA in a little because it's been running wild and trying to extend its base of power and oppression. "For example, one OSHA official told Supervalu that in order to achieve a safe workplace, he didn't care if it meant reracking a warehouse to make it one level with a 10,000-mile pick line. "And the OSHA people told Lewis Bear Co. its employees on the warehouse floor would have to wear steel-toed shoes -- which I think would only make things worse if something dropped on anyone's feet." Block said he doesn't anticipate a repeal of capital gains taxes but hopes to see some compromises. "When you buy or invest in property and it goes up in value at the rate of inflation every year, you show a profit when you sell it. But you haven't actually made a profit, and that issue needs to be addressed because the capital gains tax discourages sales and the transfer of resources and investments." Block, who was secretary of agriculture from 1981 to 1986, said he supports efforts to repeal PACA, a law passed during the Depression that requires buyers to pay growers promptly for produce shipments. "What we need to have is a totally free market," Block said. "PACA is funded by money that comes from NAWGA members and their retail customers for the primary benefit of growers and packers, and we need to get rid of it. "As secretary of agriculture I was very close to growers, but the time has arrived when they need to set up their own protections by working with farm bureaus for some kind of insurance plan to protect them from buyers who don't pay. "That insurance ought to be funded by the private sector, without the government riding herd. But if growers feel they need government assistance, they can get it from the states." Block said NAWGA will oppose increases in the minimum wage "because it's one more example of the federal government trying to tell us what we can or can't pay. "Our members are already paying more than the minimum wage, and we oppose the principle that the government is dictating it." If the minimum wage is raised, "then labor costs will increase and business will have to hire less labor, which will reduce the number of jobs." An increase in the minimum wage would also be inflationary, he said, "at a time when the Fed is raising interest rates to counter other inflationary pressures. "And it would also have a big impact on our food-service members because many restaurants use a lot of part-time workers and regard tips as part of their employees' wages." Turning to a discussion of the increased spirit of cooperation among industry trade associations, Block said, "Each association understands its own responsibilities, but the mood is to expend a lot more effort on reducing redundancies and duplications of effort to become more cost-effective." One of the best examples of association cooperation, Block pointed out, is NAWGA's annual Food Industry Productivity Conference, which began inviting other groups to attend four years ago. "To their credit, the other associations determined that NAWGA has the flagship logistics meeting for the industry."
When the meeting convenes in October in Phoenix, it will have 11 other associations involved: the American Meat Institute; the American Wholesale Marketers Association; the Canadian Council of Grocery Distributors; the Food Marketing Institute; the Grocery Manufacturers of America; the General Merchandise Distributors Council; the Grocery Product Manufacturers of Canada; the National Food Brokers Association; the National Food Processors Association; the National Grocers Association, and the United Fresh Fruit and Vegetable Association. Another example of industry cooperation is the reduction in the number of meat operations conferences from two to one, he said. One had been sponsored by NAWGA and NGA, while another had been sponsored by FMI and AMI. For the first time the four associations will combine their efforts this year in a single conference, scheduled for April in Atlanta. In June NAWGA will hold its annual government affairs meeting in Washington at the same time as NGA, "so we can combine some events," Block said. "And we're inviting other food associations to join us, in hopes we can show the power and muscle of the food industry on one occasion." In another first, NAWGA will participate in FMI's annual transportation survey later this year, "so instead of showing benchmarks in trends among retail chain warehouses only, the survey will include wholesale warehouses as well to make it a more meaningful effort," Block explained. Turning to NAWGA's sister organization, the International Foodservice Distributors Association, Block said efforts to achieve Efficient Consumer Response, "which have taken the grocery side of the business by storm," are beginning to find their way into the food-service part of the business. "The food-service side has been watching developments in ECR, but it hasn't tried to look seriously at it. But a lot of grocery manufacturers who distribute to both sides of the business are starting to see how best practices can take some costs out of the food-service industry." Rather than calling it ECR, however, the projects will come under the heading of AFE, for Alliance for Foodservice Efficiency, Block said.