TWO MOVEMENTS FORGE DISTRIBUTION LINKS

Elliot Zwiebach

Two issues demonstrated the positive changes in retailer-supplier attitudes over the years: the fight for backhaul legislation in the 1970s and the drive for Efficient Consumer Response in the 1990s.

The effort to legalize backhauls pitted suppliers represented by the Grocery Manufacturers of America against retailers and wholesalers represented by other trade associations.

Backhaul programs enabled distributors with empty trucks to pick up merchandise from a manufacturer's warehouse and be paid an allowance equal to the amount the manufacturer would otherwise have paid a common carrier to deliver the order -- a practice the Federal Trade Commission ruled in 1967 was illegal because it raised the possibility of price discrimination.

In 1975 the FTC reiterated its earlier position, saying it believed the Robinson-Patman Act did not justify the granting of different backhaul allowances on the basis of hypothetical delivery-cost differences.

That ruling prompted Lou Fox, chairman, Associated Wholesale Grocers, Kansas City, Kan., and a longtime backhaul proponent, to seek congressional action to legalize cost-justified backhauls, based on his belief food prices could be reduced by $330 million a year if backhauls were legal.

The backhaul issue split the industry down the middle, with GMA coming out squarely against it in mid-1979, while the Food Marketing Institute, the National-American Wholesale Grocers' Association, the Cooperative Food Distributors Association and the National Association of Retail Grocers all lined up in favor of the proposal.

According to George Koch, GMA president and chief executive officer, legalizing backhaul would "make a mockery of the Robinson-Patman Act, leading to even higher supermarket prices at a time when American consumers are already suffering under one of the worst inflationary spirals in our nation's history," SN reported.

In April 1980 the Senate overwhelmingly approved the backhaul legislation, and the House followed a month later, adding an amendment requiring that all savings resulting from backhaul be fully passed along to consumers. President Carter signed the bill into law in June 1980.

Two months later, James Ferguson, GMA chairman and chairman of General Foods, said the association would eventually join with retailers and wholesalers in trying to bring about an orderly and legal transition to cost-justified backhaul, and in September SN reported that Procter & Gamble, which had opposed backhaul, was considering a limited test of the plan, pending an advisory opinion from the FTC.

The FTC told P&G in August 1981 that its backhaul plan was legal, prompting other suppliers to begin offering backhaul plans of their own.

The industry took a more united approach in the 1990s when it launched the series of initiatives known collectively as Efficient Consumer Response -- a comprehensive strategy aimed at streamlining the existing distribution and buying system with the aid of new technology and encouraging partnerships among industry segments to reduce costs for all segments -- all aimed at cutting distribution costs by $30 billion a year.

ECR altered the course of industry relations because it required cooperation from all segments to work. According to one marketing executive quoted in SN, "This is an industry in transition. The old ways of doing business have been thoroughly, totally discredited in every forum -- retailers and manufacturers will admit this in private."