ADAPT TO THRIVE THROUGH CHANGES: GMA CEO

STEPHANIE FAGNANI

WASHINGTON -- The food industry must be more flexible than ever in order to keep pace with changing technology and easily adapt to the business strategies of the emerging new generation of leaders, according to the Grocery Manufacturers of America here.

The organization said it is poised to help its members understand and assimilate new technologies and corporate practices.

"There are a number of forces converging on our industry today, and they're all coming at a fast pace. Fundamentally, this creates a need for growth and innovation," said C. Manly Molpus, the GMA's president and chief executive officer.

"All of us are finding ourselves in new and challenging environments, and consequently the industry today has to be as nimble as ever before and be able to adapt and have an open mind to try new approaches to the consumer. If we're going to ensure our future, we're going to have to try to get out ahead of it and not be reacting to it after it's happened," he added.

Molpus spoke to SN on the eve of the GMA Executive Conference, being held this weekend at The Greenbrier, White Sulphur Springs, W.Va., starting Friday and going through June 12. The theme of this year's conference is "Future Forces," and a large portion will be devoted to talk of the Internet's effect on the food industry.

"Speed has become a new value that everyone has come to appreciate. GMA has made a significant transformation to move into e-commerce and all these new technologies, and to assist our members in understanding these technologies, their impact on the business, and the potential opportunity they bring to the business," said Molpus.

Speakers will include Louis V. Gerstner Jr., chairman and CEO of International Business Machines; Dr. Rudi Dornbusch, Ford International Professor of international competitiveness and economics at the Massachusetts Institute of Technology; Michael S. Heschel, chief information officer and executive vice president of information systems and services for Kroger Co.; Edwin R. Gropp, chief information officer of Ahold Information Services; Gloria Borger, contributing editor at U.S. News & World Report; Paul Gigot, editorial board member of The Wall Street Journal; Michael McCurry, president of Public Strategies Group LLC; Craig Schnuck, chairman and CEO of Schnuck Markets; Don Cannon, senior vice president of food merchandising for Wal-Mart Stores; and Sharon A. Fordham, president of Nabisco Global e-commerce, Nabisco.

"This executive conference program is one of the most powerful that we've ever had. The mix of issues is built around technology, the war for talent, brands and where they stand in today's society, biosciences, the impact of demographics on how people eat, new functional foods, and we'll have a global economist.

"The meeting will offer people a really substantive opportunity to examine these forces that are impacting our business today and in the future. That's what GMA is all about and that's what a meeting like this should be all about," Molpus said.

Also about the time of the conference, the GMA should be ready to officially launch its new Internet-based procurement trading exchange program, which at the time of this interview had 74 consumer packaged-goods companies, including Coca-Cola, Sara Lee, Procter & Gamble and Borden, participating through executive steering committees or acting as equity investors.

As previously reported by SN, the goal of the initiative is to reduce the $200 billion manufacturers spend on goods and services to support their operations and for overall supply-chain improvement.

"This trading exchange facilitation effort we've taken may well supersede the ECR effort or be equivalent to the industry effort on UPC. It's one of those significant, historical, watershed events," Molpus said.

"A tremendous amount of new resources were put into this to help this industry make the leap from the old way of doing things to the new technology, information-based way of doing things. This has the potential to change the way trading partners deal with each other; they will work more closely together to drive growth. There is no bigger challenge, whether it be the retailer or the manufacturer, than how to get top-line growth."

According to Molpus, procurement is the first level of the program, but it may eventually reach into media buys and forecasting replenishment. He said there is a "high degree of interest in the trading exchange" and the Wall Street group is interested in seeing how the so-called old-economy companies can embrace new technologies that will, in turn, make them more efficient.

Smaller companies will achieve some of the immediate benefits in the volume generated for procurement, which some of the larger companies already have, while the larger companies are interested in the value-added propositions.

Retailers are forming some of their own exchanges, and all these exchanges are going to be of the global nature, he said.

Molpus also spoke to SN about a number of topics currently affecting the grocery industry, including the Internet, consolidation, biotechnology and labeling issues.

According to Molpus, within the next three to five years many of the traditional grocers will become major players in the on-line shopping business after a significant amount of experimentation.

"More of the traditional retailers will find ways to use the Internet to promote shopping and promote sales," he said.

"They may do this by investing in some of the on-line companies, as some already have, or by creating hybrids of on-line environments, like using the Internet to place an order and then going to the store to pick it up. There's a tremendous opportunity in that," he added.

In addition, Molpus said, he believes the wave of consolidation that has shaken the industry over the last several years will continue, though not at so aggressive a pace. "Certainly, for a while consolidation will be a key factor in the industry's future, and there will be a continued march toward consolidation," Molpus said.

Molpus also predicted food and beverages will be offered at far more points of distribution as the industry moves into the future.

"Manufacturers will have their product at every point where people gather," he said, citing airport kiosks as a current example.

Another significant area of growth will be vending machines, he predicted, and more products will be displayed in nonfood stores as the industry takes a renewed focus on products in C-stores.

"The supermarket will be the primary channel that we buy into, but these other channels will have an impact on the growth of the supermarket channel," he said.

An area that Molpus said presents tremendous opportunity for the industry as far as new product introduction is concerned is biotechnology. As long as the industry avoids ill-advised government regulations and consumer communication problems, Molpus said, he believes the industry has the potential in the next 10 years to start producing healthier products, some of which may even carry therapeutic benefits.

"The next generation of seeds will bring more consumer benefits, possibly cholesterol-lowering benefits. I'm optimistic that we'll be able to bring these products to market. The government currently has in place fundamentally sound policies to regulate these products and their safety and there just isn't a safety issue," he said.

An issue that the GMA and the Food Marketing Institute have tackled together has been the GMO/labeling controversy. According to Molpus, both associations requested that the Food and Drug Administration make its consultation process mandatory for genetically modified products coming through the FDA, as is the case with the U.S. Department of Agriculture, and create guidelines for labeling GM-free products. The FDA agreed to both requests.

However, to impose labeling would require an act of Congress, Molpus said, which is unlikely to happen due to the absence of a safety issue. The main policy in place currently requires relabeling if the composition of the product is changed in any way.