CGA President Ronald Fong on What's Keeping Grocers Up at Night

Back in December, WGB talked with California Grocers Association President and CEO Ronald Fong about a year unlike any other for grocers and his outlook for a sure-to-be-uncertain year ahead. This week, WGB checked back in with Fong ahead of the CGA's now-hybrid Strategic Conference, slated to take place in Palm Springs Sept. 26–28, to discuss the delta variant's impact on grocers, labor challenges in grocery and the biggest issues keeping CGA members up at night right now.

Christine LaFave Grace: How has the grocery landscape compared with your expectations for 2021?

Ronald Fong: It is really hard to plan for a year like this. Everything is literally shaped around COVID and what the next regulatory issue will be or the next local government ordinance or the next emergency ordinance. It’s really hard to predict.

I think overall the grocery landscape is really healthy right now. We came off of a pretty good year last year because of the volume. Things have normalized, and we’ve sort of gotten into a routine. We have more knowledge of how to deal with employees getting sick, or if there’s an outbreak in your breakroom—whatever the case might be, we’ve been through it, so unfortunately we have a year of experience.

How much of a business concern is delta for CGA members? We heard Target and Walmart saying two weeks ago that they hadn’t yet seen any major shifts in customer behavior because of the nationwide surge in new cases—does that track with what you’re hearing from members?

As far as sales go, I would say that’s fairly accurate. Sales have not changed for the better or for the worse—they’ve normalized. But the way that people are buying has changed.

With delta, fewer people are coming into the store to shop, because they’re worried. And they’re worried in a couple of different ways: You’ve got people who are vaccinated and don’t want to risk getting sick, so they won’t come to the store, and there are people who refuse to wear a mask and don't want to support an establishment where you have to wear a mask to come in. So we kind of get the lack of walk-ins according to however you think.

I think people are continuing to take advantage of delivery and online buying—those two categories have just gone through the roof. The volume is the same; the dynamics of shopping have changed.

With that said, services like home delivery and curbside pickup, for as much traction as they’ve gained, represent an added cost for retailers. How have you seen retailers apply their learnings from e-commerce in the past year?  

All of that is true. We’re seeing first of all a shift in the jobs that our store workers are doing, so less check-stand, less stocking type of work, and more picking. This shift in jobs has not been for the worse, because there’s less exposure when you’re picking for a customer and throwing it in the trunk of their car than when you’re at a checkout stand where there are partitions, and you can’t hear, and people are sneezing, etc.

I think it’s kind a natural shift with COVID that it has sort of forced the hand of both the ways our customers shop and also our employers have shifted their workforce.

What’s the biggest thing keeping grocers up at night right now—labor issues, product inflation, supply-chain headaches, the interplay of all of them?

I think it’s a mix of all of them. CGA has a conference we call the Leadership Summit that just happened in Santa Barbara about three weeks ago. We heard from one of our favorite economists; his name is Chris Thornberg, and he was [talking about how] there are so many jobs out there right now and not enough people to do them—in not just grocery, but restaurants, manufacturing, everything. There are a couple of different reasons for that. One is people are scared to go to work. And not laying fault on anybody, but the federal government has made it attractive to stay at home. You can make 75% of what you were making going to work. And for whatever reason, not judging, that’s going to keep people at home. Meanwhile, grocery is really busy and we need bodies.

The second thing is, everybody has a friend or family member who’s gone through this—women leaving the workforce because of daycare. “I’ve got two grade-school kids at home; I’m not paying for daycare; they can’t go to school; what do you want me to do?” It’s a difficult choice, and that’s a real issue.

Do you see that easing at all in September as more schools start back up in person?

Yeah, I see that making a little bit of a difference, but in some families, you’ve adopted this lifestyle for over a year, and you somehow make it work. There will be some people returning, but it will continue to be an issue.

The Consumer Brands Association earlier this week indicated that labor shortages and rising costs throughout the supply chain are threatening CPG product availability. From your perspective, what is needed to address acute labor issues in the grocery industry, and what ripple effects of labor shortages do you see? What do they mean for stores, for customers?

When you’re talking about the supply chain, they are short on truck drivers, [people] in distribution centers; there are issues at ports, so that slows all of the goods coming into the grocery store. That’s been a challenge.

Also, on the labor front in California, we’ve had the whole issue of hazard pay, where 36 local governments decided it was a great idea to make grocers only pay a $4 an hour or $5 per hour premium for grocery store work. That sounds well and good, and we try to make our stores as safe as possible, and we’d love to pay our employees more money, but we’re a low-margin business, and $4 or $5 an hour, that can be a 30% rate increase. So how do we adjust for that? We have to raise prices; there’s really no other choice.

This hazard pay issue has caused some significant price inflation that I don’t know if we’re going to recover from. It’s hard once you’ve raised prices to come back down, except for commodities like eggs and milk. But once you’ve raised the price of a can of beans, that’s probably doing to stay up there. Because of hazard pay in 36 counties, groceries are more expensive now. 

What are some ways that you and CGA are going to advocate in these closing months of 2021?

Our lawmakers and our governor need to have a better idea of how business works. Just instilling more costs to us is not the answer.

Right now what we’re working on that’s a big topic is whether to mandate vaccines for employees and whether we have to check vaccines for our customers coming in. That’s a big challenge not only in California but everywhere. It can’t be a knee-jerk reaction that a lawmaker just says, “Oh yeah, we’ve got to do it.” They really need to think through, OK, what are the logistics like when we have to check 2,000 customers coming into our store a day? How is that possible?

And mandating vaccines (for employees), we get that, that’s for (people’s) safety and well-being, but you’re going to have some employees that refuse to get vaccinated, so what happens? They leave; they quit. And we’re already having a problem attracting workers; this is going to make it worse. So I think communication with our policymakers is going to be key to take us through the rest of this pandemic.