DEMAND FOR RETAIL DIVERSITY SEEN BOOSTING INDEPENDENTS

Elliot Zwiebach

RESTON, Va. -- The National Grocers Association here believes that tapping consumers' needs for a diverse array of food retail shopping choices is the key to its members' long-term success, Thomas K. Zaucha, NGA president, told SN.

Speaking in advance of the association's 2005 Convention & Supermarket Synergy Showcase, scheduled for Feb. 8-11 in Las Vegas, Zaucha said he believes NGA's goal of achieving more market diversity is not just an ideal but a realistic goal.

"We've gone through a period over the last 30 or 40 years in which the prevailing economic attitude in the U.S. has been 'bigger is better' -- a belief that having two or three companies in a market was sufficient for competition to thrive," he explained.

"But as a society, we're moving away from that economic model toward one that seeks what's best for the industry, the communities we serve, our employees and ultimately the consumer -- an approach that seeks to generate strong support for all segments of society by encouraging grocers to differentiate themselves and be more customer-responsive in everything they do.

"That's the debate that's going on in America today -- does the consumer, the manufacturer and the community benefit more from a retail food segment that's highly concentrated or one that provides higher levels of diversity? Our intent is to participate in that debate and come down on the side of more diversity.

"In addition, diversity involves a food distribution system that embraces the complexity and the differences among consumers and the benefits of creativity among diverse factors in a market -- both large and small companies, and traditional and ethnic formats."

Zaucha said he's been able to observe the pros and cons of market-share concentration right outside NGA's home base here.

"In a concentrated market like Washington, D.C., which has been dominated for years by Giant Food [a division of Ahold] and Safeway, there have been declines in service levels and increases in out-of-stocks in the last few years and, at the manufacturer level, less variety and fewer consumer choices -- all of which has opened the door to a new corps of more consumer-directed retailers like Whole Foods, Trader Joe's, Harris Teeter, Magruder's and Costco to come into the market.

"The result of that diversity in Washington, D.C., has been higher levels of service, better quality, better prices and more competition."

Member Councils

In an effort to encourage creativity among its members to better tap into marketplace demands for retail choice, NGA has begun forming member councils to help make the organization more responsive to the needs of its members and the allied trade and to enable them to be more responsive to the need of consumers.

"This is one way of letting our members know we will do what we need to do for them so we can help them grow their businesses," said Zaucha. "The councils are a way of giving members a greater sense of ownership and participation in the association and a greater sense that they are guiding the programs and services we make available."

Five executive councils and three alliance partnership councils are expected to be in place by the end of the fiscal year Sept. 30, Zaucha said. Two of them -- the Wholesale Executive Council and the State Association Executive Council -- will hold their first meetings during this week's showcase.

Other executive councils will focus on community-based independent retailers, regionally based independent retailers and emerging retail formats.

Three alliance partner councils will encompass branded manufacturers, service and supplier companies and a University Council, which held its first meeting last year with the mission of helping to recruit and retain the next generation of industry executives, Zaucha noted.

The councils will be charged with identifying the needs of their respective constituencies and communicating with them to ensure that NGA satisfies their needs, Zaucha explained. Each council will also be responsible for growing the membership within its constituency.

The alliance partner councils are designed to provide input and perspective on key issues and increase NGA's visibility, Zaucha pointed out.

The Regulatory Agenda

During the interview with SN, Zaucha also discussed the association's agenda for the year, which includes tax reform, country-of-origin labeling and the debate over credit and debit cards, he said.

"Our No. 1 priority is the repeal of the estate tax, but we think that will be included in the plans the [Bush] administration and Congress have for overall tax reform," he noted. "That kind of reform is an important opportunity to carefully consider a tax policy that reflects the needs of all industry segments.

"Country-of-origin labeling will still be on the table, and we're looking for its repeal as part of our agenda.

"Finally, we need to figure out a way to moderate the transaction fees our members have to pay to credit card companies because NGA has a sizeable electronic payment system program, and we want our fees to be more competitive with what the bigger companies pay."

The NGA show this week will be the association's third concept show -- called Supermarket Synergy Showcase -- which eschews a trade exhibit in favor of "concept areas" that integrate and demonstrate ideas discussed in the educational workshops in a "real world" environment.

Besides a first-ever dollar-store pavilion on the show floor, the workshops and showcase participants will cover such areas as specialty foods, whole health, fresh and prepared foods, center store, lifestyle solutions, store design and technology, and financial and operational services.

Speakers at the business sessions will include the following:

Gary Phillips, president and chief executive officer, Associated Wholesale Grocers, Kansas City, Kan., who will discuss NGA developments over the past year.

George F. Will, the political columnist, and Fareed Zakaria, international editor of Newsweek, who are slated to discuss the role of America in the world.

Indra Nooyi, president and chief financial officer of PepsiCo; Robert Reich, former secretary of labor under President Clinton; and J.H. Campbell, president and CEO of Associated Grocers, Baton Rouge, La., who will talk about innovations in business.

Phil Lempert, NGA's consumer adviser and the "supermarket guru" on NBC's Today Show, who will focus on innovations in technology. Lempert will also conduct a series of solutions-oriented interviews with industry leaders that will be broadcast on in-room televisions.

Brandi Chastain, the Olympics soccer champion, who is scheduled to speak about the ability to win.