CONSERVATIVELY OPTIMISTIC

ELLIOT ZWIEBACH

WASHINGTON -- Republicans are in control of Congress, so the Food Marketing Institute is finding a more receptive ear for pro-business positions on both sides of the aisle.

"The new Republican Congress is more willing to listen to business' perspective on issues, which gives us an opportunity to reach out and be proactive, instead of always being on the defensive," Timothy M. Hammonds, FMI's president and chief executive officer, told SN in a preconvention interview. FMI convenes in Chicago May 7 to 10.

"That will have a long-term impact, particularly with the realization dawning -- even on the Democratic side of the aisle -- that job creation depends on the success of business. We find many Democrats more willing to listen and to talk about issues on our agenda than we once did.

"Clearly the whole set of regulatory issues, particularly as they impact smaller family-owned businesses, are easier to address in this Congress."

Hammonds said he believes Congress is more polarized than it was before the 1994 elections, but that it remains a wise strategy for FMI to take a bipartisan position whenever possible.

"Our tendency has always been to approach issues in a bipartisan way and seek support on both sides of the aisle. It makes our job much easier and makes FMI more effective.

"But when issues become polarized as either Republican or Democratic, we've found in the past that we end up with a long, protracted, often bitter fight on our hands if we take a partisan approach.

"You can't lose sight of the need to make friends wherever you can find them."

Sometimes, though, it's necessary to stake out a more clearly defined position, as FMI has in the battle to change food-stamp methods, Hammonds said.

FMI supports changes that would improve the efficiency of

food assistance programs, reduce fraud and abuse, and improve the efficiency of benefit delivery systems, but it also opposed early efforts to cash out food stamp programs. That position put FMI at odds with the Republicans' Contract with America and raised the hackles of some of its sister trade associations, Hammonds said.

"Our position was contrary to the initial perception of what the Contract with America called for, and some of the other associations felt it was un-American for us to oppose anything in the Republican Contract."

FMI opposed the cashing out because, in the words of an FMI policy statement, "research has demonstrated that removing the link between program benefits and the actual purchase of food results in the deterioration of nutritional diets, [which] increases long-term health care costs dramatically and often arrests the normal growth and development of children."

According to Hammonds, "FMI's board determined its position on food stamps before January and added its voice to the debate before most other industry associations had taken a position, and I think that made a lot of difference in pushing our view forward and influencing final legislation.

"By taking an advance position, we were able to work with the other associations and convert them to oppose the cash-out, which is the position that ultimately prevailed."

On the question of striker replacement, Hammonds said FMI opposes President Clinton's executive order that prohibits federal contractors from hiring permanent replacement workers during strikes.

FMI is supporting congressional efforts to overturn the executive order, he said. If Congress cannot overturn the executive order, FMI supports efforts to attach riders to various bills that would prohibit the Department of Labor from spending money to enforce the regulation.

Apart from dealings with the changing Congress, Hammonds spoke to a variety of other topics during his interview with SN, including these:

An assessment of escalating interest rates, and the danger that they could lead the country into another recession.

Benefits going to retailers because of increased consumer spending and wholesalers' struggle with restructuring.

The likelihood that Efficient Consumer Response initiatives will continue to generate profound changes in the industry.

In assessing the impact of escalating interest rates, Hammonds said the biggest challenge faced by the food industry "is the danger that the Fed will overdo it in its zeal to control accelerated inflation and push the economy back into a recession.

"We're just starting to see the

bite from the initial round of increases, and what we need to do is give last year's increases time to work their way through the economy and refrain from tightening things further.

"If the Fed wants to continue to tighten interest rates through the middle of the year, then it runs the substantial risk of pushing the economy back into recession, and retailers should get ready for consumers having a tough time with their budgets again."

Based on consumer spending levels, it appears the recession of the last two to three years has ended, Hammonds said.

"The mood among consumers is definitely improving," he said. "Even in areas that have been slow to recover, retailers are seeing consumers spending a little more freely. And they're seeing cost controls and restructuring becoming effective."

But for wholesalers, recovery has been a little slower in coming, Hammonds said.

"The majors are still going through their own restructuring, and they're still working with independent operators to find new ways to be more efficient in their joint approaches with manufacturers."

Such efforts between distributors and suppliers are becoming more the norm under the aegis of ECR, Hammonds said.

"Typically retailers and wholesalers tell me that, although they may still have specific problems with certain manufacturers, they are nevertheless working cooperatively on a variety of ECR initiatives."

Hammonds said he believes ECR initiatives are just beginning to pay off.

"While no one company is doing everything, most companies have specific projects they're working on, and ECR projects are still in their initial stages.

"We're going through a period that will lead to a pattern of other changes in the industry. ECR has changed the way trading partners do business together, and that is a continual process.

"So even once they're all in place, ECR efforts will serve as a jumping-off point for a lot of other changes in the way we do business together."