CONSULTANTS: INDUSTRY ALLIANCES NEED WORK

MINA WILLIAMS

The supermarket industry won't become a serious player in the fresh meals business without first learning how to build new types of relationships, say a trio of industry consultants who have walked many miles in retail shoes.

The four consultants interviewed by SN, each former high-profile, retail prepared-food executives, agree that change must come, both to the supermarket chain's hierarchy, and to its relations with manufacturers.

"As far as these relationships are concerned, they have been haphazard and knee jerk, with a great degree of uncertainty between the manufacturer and the retailer," said Jim Reisenburger, Reisenburger Leenhouts & Associates, Rochester, N.Y. "It's a classic example of a lack of communication and a lack of creating alliances."

And even within the supermarket's own company, new alliances need to be formed, said another observer. "There is an inherent battle within the supermarket between operations and merchandising," said Scott Miller, president, Miller Consulting, Houston. "Those companies who can get these groups on the same page will be successful."

Miller pointed out that under current retail systems, the measurements for a successful operations system and a successful merchandising system don't jive: Merchandising is measured by increasing sales and profits, while and operations is driven by controlling expenses and maximizing productivity.

"You need all four for success," he said. "Retailers need to build bridges using a cohesive approach. For example, when the food-service distribution delivery pulls up, operations needs to understand that the time and attention taken at the backdoor by the delivery is worthwhile. Merchandising needs to understand that when operations needs to make a shift in scheduled delivery times, the change is being made because operations truly needs the backdoor."

The challenge will be in bringing all departments together, Miller said.

Silo-like departments, once erected by the service-oriented businesses within the store in the name of peak performance, product quality and profit, now need to be recast in order to respond properly to the fresh meals business.

"The days of segmented departments are numbered," according to Miller.

"There is a new breed of operations professionals. Grocery stores have evolved into bigger stores, and perishables have a big presence. Operations professionals need to be more involved. Units are running more scratch baking, restaurants and fresh fish. The skill set that operations people are developing is becoming wide and varied, as the stores have become more complicated."

As the store operations complexity increases, it is the consumer that the industry is danger of ignoring, these former retailers said.

"The ultimate goal is the integrity of the product, its freshness and quality, when the customers put it in their mouths," said Bishop Allen, president, Triad Foodservice Systems, Austin, Texas.

Just-in-time production, coupled with just-in-time delivery systems, may be one piece of the puzzle. "You don't want to build shelf life in so the product can sit in a warehouse," said Allen. "Products should be designed to give the end user the shelf life."

"Those who are still looking for long shelf life and frozen products are not going to [have programs] which work in the long haul," said Reisenburger. "You must have restaurant quality. When was the last time you went into a restaurant and ordered an item designed with a 21-day shelf life?

"The basic premise of this new age is that retailers can't jump suppliers for 20 cents cheaper," Reisenburger added.

"Whether items are prepared in-store or by a vendor or a combination of the two, each retailer has to decide where their commitment is, depending upon their own go-to-market strategy," said Miller.

"Volume will dictate which method is feasible. A high-volume operation is more efficient working with a direct supplier for example. Once the cost of goods is separated and the distribution fee is accounted for, retailers can then start defining the cost and determining how that structure fits into their customer base.

"The struggle with supermarket food service today is that a lot of people do things that they shouldn't be doing," said Miller. "They see things and just jump in. Grocery retailers need to define what they want to be."

To accomplish the goal of defining a fresh meals program, retailers must take the initiative in approaching the food-service side of the industry. According to Bill Hale of The Hale Group Ltd., Danvers, Mass., perceptions persist on both sides that are keeping one from talking to the other.

"The way the business has developed, the two facets tend not to communicate," he said. "Manufacturers need to be thinking of ways to realign their internal structure to better meet the needs of supermarket operations."

Still, Hale pointed out that supermarkets are the ones who need the answers, and should therefore make the first move. "Supermarket operators need to capture and leverage the expertise of major suppliers, distributors and manufacturers in food service," he said. "Within these groups there is a vast amount of expertise to deal with all sorts of food-service issues."

Unfortunately, he added, retailers haven't yet truly tapped into this know-how because supermarket executives continue to interface with the grocery side of the sales organization, when the expertise resides in the food-service side.