CHANGING TIMES FOR IGA

DAVID MERREFIELD -- ELLIOT ZWIEBACH

CHICAGO -- Larry Willis, IGA's new executive vice president and chief operating officer, has arrived in office at a critical time for independents and their wholesalers.

Many industry observers argue that the independent and wholesale sector of the industry are

under severe challenge at the moment from at least a couple of directions: The new focus on efficiency is testing traditional relationships between independents and wholesalers at the same time new competition from supercenters is infiltrating many markets.

And Willis, who took over the executive vice presidency of IGA in recent weeks, acknowledged in an interview with SN that the challenges will only increase. "The next few years will be a most precarious time for all retailers, including IGA members," he said. "With the development of Efficient Consumer Response programs, with Fleming's re-engineering efforts and Supervalu's Advantage program, the retailer will be asking himself how he fits in.

"Anytime there's change, people want to fight it. What we have to let them know is, everyone must embrace change because it's going to be good for everyone's future.

"At IGA we have to help each retailer determine how to best utilize all these new approaches. With technology moving along, it's very important to stay current with all developments."

In a way, said Willis, the mandate for wholesaler and independent change may spell some opportunity for IGA. "We're now seeing that companies which even a couple of years ago didn't want to be part of IGA are beginning to realize that there is strength in numbers," he said. "They want to take advantage of the ability to get the benefits of a chain while keeping their own independent identities."

Asked how that might work, Willis pointed out that those who join the IGA banner group always have the option to retain the store's traditional or family name alongside the IGA name. As for using the IGA banner as a wedge to drive more efficiency into independent retail organizations, Willis pointed out that there are other new ways of doing business.

"It's important to know that many wholesalers who supply IGA stores recently have started dedicating people to work with IGA independents; they are specifically dedicated to supporting that segment of wholesalers' business.

"This can lead to a better sense of partnership between wholesalers and independents, in keeping with what ECR calls for, and it certainly makes possible more efficient relationships with manufacturers.

"The real world is that manufacturers' representatives now have the ability to visit an IGA specialist at a wholesale company and explain upcoming promotional or product offers, knowing that independents will be notified in turn. They no longer have to visit each independently owned store to be sure the world will get out."

And, said Willis, banner affiliation may be useful in qualifying for new forms of promotion, such as pay for performance. If manufacturers want to reward dealers according to scanner-verified sales, it makes more sense to pool sales under a banner affiliation that attempts to qualify as a single store, he said. As for using banner affiliation to fend off competitive threats, Willis said one four-store group in St. Joseph, Mo., recently joined hands under the IGA name at the same time a Wal-Mart supercenter moved to town. After renovating the stores and boosting common advertising, the IGA affiliates ended up with a sales volume gain, despite the entry of the new supercenter. But the need for change at IGA is based on more than just concerns about the independent sector. The reality is that IGA is looking at slightly declining numbers of stores on its rolls. Last year there were 43 fewer IGAs -- IGA licensed 441 new members while losing 484 others. Of the net loss, some simply went out of business, but others failed to meet IGA's minimum standards, which call for a store size of at least 7,500 square feet and a sales volume of no less than $35,000 a week.

Despite the loss of members, Willis said he does not view the situation negatively "because it only makes the IGA program more successful in certain areas, and makes more people want to be part of it." And, in fact, the store count loss is quite tiny in the context of IGA's worldwide size. IGA affiliates do an aggregate business of $16.5 billion annually, comprising $10.6 billion from 2,500 retailers in the United States, $4.2 billion from 750 retailers in Canada and $1.7 billion from 1,100 retailers in six foreign countries: Australia, China, Japan, Korea, New Guinea and the West Indies.

IGA is owned by 20 wholesale companies, 15 in the United States and five elsewhere.

Willis, 47, assumed his new job following an 11-year career with Fleming Cos., Oklahoma City: initially as director of equity stores in Oklahoma City, then as operations manager in the wholesaler's Phoenix division, then as president of its Fort Worth division and finally as president of its Miami division.

Willis joined IGA after the resignation Bill Kies, who was president. The title of president is to remain vacant; instead, Willis became executive vice president to make IGA's executive structure consistent, said Thomas S. Haggai, IGA chairman and chief executive officer.

"We've had an executive vice president in charge of international development [Roger Romrell], so it seemed logical to give a similar title to the person in charge of North American development," he said.

Haggai said he believes Willis injects a perspective that IGA has lacked for more than 20 years.

"Larry is the first person with a background in both retail and wholesale that we've had at IGA since Dick Jones was president in the late 1960s and early 1970s," Haggai said.

"When he talks with our retail and wholesale constituencies, it's with knowledge he learned from sitting where they're sitting. So when someone from either side of the industry presents an idea, Larry is able to see if it makes sense for the retailer."

Willis agreed that his experience should help as IGA plans for the future.

"People at IGA headquarters don't have a retail and wholesale background. As a result, they've always had to rely on consultants to tell them what to do in specific areas.

"Some of that advice was certainly very good. But because of my experience, I think I'll be better prepared to work on certain problem areas and to put something together that's more broadly based for all IGA members.

"I know a lot of people in this business, and I intend to rely on them to help us build a strategic plan. We want to utilize a team effort to develop a plan that will enable the independent to survive and be more successful."

Willis said the strategic planning will begin after he has logged a number of months on the job talking with IGA retailers, wholesalers and suppliers.

"I want to know what they see as IGA's strengths and weaknesses. Then we intend to work on our weaknesses and take advantage of our strengths.

"Quality will be one of the key elements of new plans. Quality in terms of programs, physical facilities and sales numbers."

Meanwhile, IGA continues to be bullish on TV advertising and will continue to use flights of a four-times-a-year TV advertising campaign on cable.

"In my experience, many IGA retailers are just dying to run TV ads, and one of the reasons we're able to sell them on joining IGA is the national TV campaign.

"With TV they see the results of the ads in terms of increased product movement. For example, following IGA's pre-Labor Day ads last summer, sales of Nabisco products featured in the TV spots increased 96% over the prior year, and sales of Coke rose 32%. So the ads are definitely working."

IGA plans four commercial flights this year: pre-Easter ads; Memorial Day spots; pre-Labor Day ads, and pre-Thanksgiving ads from Nov. 3 to 16.

IGA plans to run the same number of spots as in previous years: a total of 2,000 ads of 30 and 60 seconds each.

As in the past, the ads will focus on IGA's "Hometown Proud" campaign and feature vignettes of everyday life, built around the particular holiday being featured.

However, in contrast to the image presentations of the past, the next group of ads may also stress some of the specific advantages of shopping at IGA stores, including shorter lines, better service and greater ease getting in and out.

IGA is also building its name through international retailing. Willis said IGA's expansion into six foreign countries in the last few years is having a positive impact on domestic retailers. "Our members are proud to be part of an international company, and they like having the ability to exchange ideas with retailers in other countries."