THE MORE THINGS CHANGE

DAVID GHITELMAN

WASHINGTON -- Supermarkets may not look the way they did 25 years ago, but many of the challenges the retail food industry has faced over the last quarter of a century remain similar.

Which is not to say that nothing has changed.

For Robert Aders, who served as the Food Marketing Institute's president and chief executive officer from its founding in 1977 to 1993, the first great challenge was winning the confidence of consumer groups, who were generally convinced that the supermarket industry was raising prices in the inflationary 1970s to gouge shoppers.

Now, according to Ron Pearson, current FMI chairman (and chairman and CEO, Hy-Vee, West Des Moines, Iowa), the organization's great challenge is encouraging, training and cajoling members into adopting the technological advances that will enable them to flourish as 21st-century businesses.

During the past 25 years, FMI has worked hard both to explain the retail food industry to the world and enable the industry to adapt itself to a changing world.

For a look at how some of FMI's past and present leaders envision the future of the supermarket industry -- and what they see as FMI's likely role in it -- see the story on Page 19.

As for the past, most of FMI's leaders, past and present, told SN that it involved more continuity than discontinuity.

Mike Sansolo, FMI executive vice president, said, "The change has been evolutionary, not revolutionary."

Bob Bartels, FMI chairman, 1995 to 1997, and president, Martin's Super Markets, South Bend, Ind., told SN, "The micro-issues have changed because the industry has changed. "If you think about it, one of the unique dimensions about the U.S. supermarket industry is that it's about everything that's right about our system. It's free enterprise, it's competition and it's focused on satisfying the consumer.

"It's been that way forever."

IN THE BEGINNING

However, in 1977, convincing the American shopper (and the American government) that the supermarket industry did operate in the public interest was not an easy task, Aders recalled to SN.

A former chairman of Kroger Co., Cincinnati, Aders came to FMI after a stint as acting labor secretary in the Ford administration.

"This was a time with an energy crisis, high inflation [and] impatient labor unions," he said. "There were consumer groups that didn't like the way the industry was running its business."

FMI's strategy with these groups was to speak with them and learn what they wanted: freshness dating, unit pricing and nutritional dating, Aders said.

Although some members of the FMI board would have preferred to take a purely defensive position, replying to the consumer groups' criticisms on a one-by-one basis, Aders said the FMI staff wanted "to identify FMI as a consumer organization."

He credited Irving Raab, the organization's first chairman, with bringing the other board members around to this position. "Internally, it was a tough sell," Aders said.

Aders said Karen Brown, FMI's vice president for consumer affairs, was given the perhaps even more difficult task of convincing the Carter administration that supermarkets were raising prices to reflect costs, not to gouge the American public.

Carter had imposed wage and price controls. "They were allegedly voluntary," Aders said, "but the industry had to work with the Department of Agriculture, the presidential staff, the Cost of Living Council.

"We addressed that one hard. Ultimately, however, those issues helped us in the public arena."

A QUARTER CENTURY OF CHALLENGES

Over the next 25 years, FMI would face a variety of challenges.

In the late 1970s, technology was an emerging issue. Jack Crocker, FMI's chairman from 1977 to 1979 and then chairman and CEO of Supervalu Stores, Minneapolis, recalled, "We recognized that the pace of change necessitated that all partners had to work together to take advantage of it."

The partner Crocker reached out to was the Grocery Manufacturers of America. "I contacted the chairman of the GMA," he said, "and so after that discussions were held between the executive committees of both organizations. Such discussions became an annual event and helped open communications even as the issues themselves changed."

The providing of first-class food retail opportunities in the inner city is another issue FMI has addressed. Allen I. Bildner, FMI's chairman from 1987 to 1989, and then president and CEO of Kings Super Markets, West Caldwell, N.J., recalled, "Supermarkets had abandoned the cities by moving to the suburbs. FMI started early in the game to help the inner cities." Bildner also noted that FMI recognized the "need to build cultures that fostered diversity within supermarket companies."

Globalization is another issue FMI has addressed, in part by naming a chairman from outside the U.S., Richard Currie, then president of Loblaw Cos., Toronto. Currie would later remark, "I knew that one day another non-American would be an FMI chairman, and I wanted FMI to remember that a non-American had done a first-class job."

Currie, who served as FMI chairman from 1991 to 1993, was also involved in helping FMI in one of its most important internal challenges: finding a successor to Aders. A nine-month selection process concluded with the naming of Tim Hammonds, then FMI senior vice president, as the organization's second president and CEO, a post he continues to hold.

Roger Stangeland, then chairman of Vons Cos., Arcadia, Calif., participated in the selection process and then went on to chair FMI from 1993 to 1995, the period when the organization installed and adjusted to its new leader. As he was preparing to step down as FMI chairman, Stangeland told SN both selection and transition were more difficult than they may have appeared. "Now, it's easy to look back and say, 'that wasn't much,' but at that time we were on the wrong side of the mountain trying to figure out how to get over a mountain that looked awful tall."

In the late 1990s, consumers grew increasingly concerned about the issue of food safety following several incidents of accidental contamination. In October 1997, FMI unveiled Fight Bac, a multimillion-dollar consumer education initiative that was developed in conjunction with the American Meat Institute and ultimately adopted by the government.

Commented Mike Wright, FMI's chairman from 1997 through 1999, and then chairman, president and CEO of Supervalu, Minneapolis, "To get the government, consumer groups and associations under one umbrella is a major accomplishment."

CONTINUING COMMITMENTS

All the issues mentioned above remain prominently on the FMI agenda.

The organization is still reaching out and deepening its relationships with industry partners, most notably as it continues to work out the details for a potential merger with Food Distributors International.

"Any time you merge two very viable entities together, it will help in the streamlining of communications and problem-solving in an industry," said Ron Pearson, current FMI chairman, and chairman and CEO, Hy-Vee, West Des Moines, Iowa. "The challenge will be taking advantage of all the synergies that the merger should allow."

New technology also remains an FMI focus, with the organization last year joining the electronic product code project under development at the Massachusetts Institute of Technology, Cambridge. MIT is developing microchips that would track the use of products from the manufacturer to the retailer to the consumer.

Sansolo said, "The MIT project could lead to the complete overhaul of the front end of the store. Checking out would be like using EZ Pass on the highway. The potential is there to completely change the way the customer feels about the store."

Increasing diversity -- both in terms of better serving minority communities and in increasing minority representation within the retail food industry -- remains an FMI priority. The organization has sponsored a supermarket industry pavilion at the annual convention of the National Urban League since 1991. FMI has also presented a supplier diversity program at its annual convention since 1998.

Looking back on FMI's efforts on diversity, Hammonds said, "While much work remains to be done, I believe the supermarket industry over the last 25 years has made more progress on this very important issue than any other industry in our economy."

In terms of globalization, FMI is looking beyond Canada to promote alliances throughout the Americas.

Danny Wegman, FMI's chairman from 1999 to 2001, and president, Wegmans Food Markets, Rochester, N.Y., said, "Right now, we don't have a bona fide international body to make decisions for the food industry. There's a need for that."

Food safety and -- particularly since Sept. 11 -- food security have stayed near the top of FMI's concerns.

In February, the organization created a public/private-sector partnership to help the FBI identify credible threats and craft specific warning messages for the retail food industry. Observed Hammonds, "What's new today is that in the wake of Sept. 11, all of America's strategic industries are now on the front lines of the war on terrorism."

A Delicate Balance

Food Marketing Institute leaders are proud that their organization represents nearly the entire retail food industry, from single-store operators, roughly half of all members, to the largest national chains.

However, juggling the needs of the two groups has required a deft touch over the past quarter century.

Byron E. Allumbaugh, FMI chairman from 1982 through 1985 and a former president of Ralphs Grocery Co., Compton, Calif., said the larger companies from the very beginning realized the importance of the smaller ones.

"The gigantic companies can't bring clout in every congressional district," he noted. "The small operators grew up in the same town where the congressmen grew up. In some ways, that makes the smaller operators even more important to FMI than the big operators."

Allumbaugh recalled, "We had two good organizations. One catered to larger companies and primarily was used for lobbying.

"We spent about two years figuring out how to put the two organizations together. We realized we had to add value for the smaller operators.

"Well, it was worth all the effort to give smaller operators tremendous education, training [and] research because we wanted input from and the involvement of small grocers in lobbying.

"We learned how to work together. There was some level of distrust at first, but I think we overcame that many years ago to become a formidable force in Washington."

Supporting the smaller operators has continued to be a focus for the organization. Robert Bartels, president, Martin's Super Markets, South Bend, Ind., currently a 19-store chain, said of his term as FMI's chairman, from 1995 to 1997, "We gave the independent side of the business a presence and exposure that was important."

Danny Wegman, chairman of FMI from 1999 to 2001 and president of Wegmans Food Markets, Rochester, N.Y., said the consolidation in the industry over the last decade has changed the mood at some FMI gatherings.

"I think FMI evolved a lot, and the make of the members has changed from what it was just 10 years ago," he said. "They were more smaller companies, and they all didn't compete against each other. There was more sharing.

"As consolidation swept the industry, the sharing was curtailed, but what we've begun to realize is that even if we compete against each other there are areas where we need to cooperate."

Ron Pearson, currently FMI's chairman, and chairman and chief executive officer, Hy-Vee, West Des Moines, Iowa, said, "There are different needs for small, medium and large retailers. FMI has adapted to handle those needs. We have an independent operators committee. We have share groups. We have all three sizes represented on the board, and we're doing programs for all three sizes."

Mike Sansolo, FMI's executive vice president, said the goal of the organization is not to please everyone all the time, but to make sure that it has enough programs to serve each of its members well.

"One of the great assets of FMI is our incredible diversity of membership," he said. "The challenge for us is to be relevant to this very diverse group of members and continue to speak with one voice. When we speak on Capitol Hill, having one voice is a tremendous asset."