NGA Fine-Tunes Offering for Independents

CHRISTINA VEIDERS

ARLINGTON, Va. — The National Grocers Association seeks refinement rather than major change to keep its mission relevant for independent grocers, said Thomas K. Zaucha, NGA president and chief executive officer.

Zaucha discussed his outlook for the independent sector with SN as the association gets set for its 24th convention and trade show next month, Feb. 5-8, at the Paris Hotel, Las Vegas.

The association, which celebrated its 25th anniversary last year, held its first convention in 1983. This year's event promises to be the biggest ever in terms of attendees and number of exhibitors, said Zaucha. International attendance is up with increases from Australia, Mexico and Canada. He credits NGA's close ties with the Canadian Federation of Independent Grocers and IGA, Chicago, for boosting international registrants.

This comes despite other food industry-related events held in Las Vegas this year, including the Food Marketing Institute Show, May 4-7.

“Let's not fool ourselves. Multiple meetings in the same location, in the same year, will have an impact. It's like anything else. Differentiation is important. Substance is important. We are getting a draw from an audience and retailers we haven't gotten before,” Zaucha commented.

Six years ago, NGA revamped its convention format to include the Supermarket Synergy Showcase (S3), what it calls a concept show that features pavilions devoted to a single area of concentration such as specialty foods or technology.

That format change has worked out well for the association, Zaucha said, as has its revised mission “to ensure success of independent retailers and wholesalers to better serve the consumer.”

“Our programming, conventions, meetings, share groups have more than met our expectations. If I had to identify a core competency or service area we will focus on in a more formal way, that is to ensure our membership has the most timely and relevant information to stay competitive in an ever-changing, fast-paced world,” Zaucha told SN.

Independents, as do the larger chains, face similar challenges: food safety, new competitive formats, environmental sustainability, technology advances, rising costs and maintaining a competitive position. However, unlike the large chains, independents' margin to make mistakes is less because of limited revenues and resources, Zaucha stated. NGA's main priority is to be the resource for independents who must confront today's challenges.

This year's convention program will address many of those critical issues. Importantly, the first day of the convention will reveal who is most likely to run for president of the United States since 27 states will have held their presidential primaries by then. Keynote speakers Tony Snow, President Bush's former press secretary, and Tom Daschle, the former Senate Majority Leader, will project the expected party winners and discuss what the country should expect in terms of domestic and foreign policy, depending upon who wins the White House.

With the prospects of a Democratic-controlled administration, Zaucha said it wouldn't be a time to “belly up to the bar,” especially after coming off an era of relatively little government regulation under the Bush administration.

“It is not surprising [that] some issues like food and import safety, labor issues, employment law violations have popped up. It's the cycle the environment has put us in, but that is where industry associations need to create and build upon the concept of collaboration,” he said, adding it is not a time to go it alone.

Under the Democrats, Zaucha is concerned about pro-labor initiatives, higher taxes and other costs that could challenge small businesses.

He is monitoring House Ways and Means Committee Chairman Charles Rangel's, D-N.Y., tax reform proposals, which include repeal of the last-in, first-out (LIFO) method of accounting for inventory in an effort to offset a proposed reduction in the corporate income tax rate. LIFO allows business owners to value inventory at the less expensive cost of the older inventory. Analysts predict that many smaller companies would either have to raise prices or face going out of business in order to deal with the change.

The rising costs of doing business is a concern Zaucha says will challenge independents this year. Some costs such as energy, labor and health care will be out of retailers' control.

While independents have benefited in the past from large retail mergers and acquisitions, Zaucha predicts a tighter credit market could make it more difficult for independents to take advantage of stores being sold off in consolidating markets.

The continuing transition to plastic from hard currency is adding extra costs for food retailers in the form of high credit card interchange fees, which NGA and FMI contend violate U.S. antitrust laws.

Just last month, the European Union ruled that MasterCard's Multilateral Interchange Fees violated the European Commission's treaty rules on restrictive business practices and inflated the charge of card acceptance by retailers.

At the time, Zaucha said, “It is clear this decision by the E.U. reinforces the need for Congress to act now in reforming the broken interchange system in the U.S.”

The NGA has joined other merchants in a lawsuit against the credit card companies and banks, charging that interchange fees are fixed in violation of antitrust laws.

The NGA wants the fees significantly reduced and based upon real costs. It is calling for transparency on how the banks calculate the fees and it wants to eliminate price discrimination among merchants.

Zaucha said it is simply a question of time before legislation is introduced to reform the interchange fee system.

Food safety will continue to be a focus in 2008. NGA advocates uniformity in food labeling, and it will work to become a reliable and timely source of information when it comes to food safety issues, said Zaucha.

Environmental sustainability will be a challenge for retailers. It's an issue that will only increase in importance, Zaucha said. “The more we can tie it into the economics of running a business, the more attention we will give to it.”

What distinguishes independent retailers from the publicly traded food chains is that they are independently owned and operated, which allows for greater flexibility and the ability to quickly respond to changing market conditions and outside challenges, said Zaucha.

“Privately held companies are not beholden to Wall Street's expectations, but they have to continue to meet consumers' needs and remain in a growth mode,” he said. In a tough business climate, flexibility is an important competitive quality, he added.