BRAND ADVOCATE

ELLIOT ZWIEBACH

A century ago people bought food in bulk. There were few brands.

The move to branded packaging and advertising — and the standards of fair competition in promoting those brands — was engineered throughout the 20th century by the trade group known today as the Grocery Manufacturers Association, which is celebrating its 100th anniversary this year.

Paul Willis, the man who guided GMA though a third of its existence, recalled years later the struggles manufacturers initially had getting their brands established and offered for sale.

“It was difficult to introduce brands in the early 1900s,” Willis said in an interview in the early 1980s. “When manufacturers wanted to introduce a brand, they would have a salesman call upon a grocer, explain the product and try to get him to stock it. But even if he booked an order with the retailer, success was not guaranteed.

“The retailer would turn the order over to his wholesaler, and the wholesaler might decide to ship his own brand instead of the manufacturer's.”

Gradually, Willis said, companies began to put products in packages and advertise their brands to consumers.

As branded items became more accepted, wholesalers began having their own brands packaged by an outside firm, and they would try to substitute them by asking grocers to promote their brands to shoppers.

“That was one reason the manufacturers banded together — to try to overcome these wholesaler substitutions,” Willis said.

Orders for branded products were called “specialty orders,” so when the manufacturers decided to band together in 1908, they called themselves the American Specialty Manufacturers Association.

In an interview with Bill Greer for his 1986 book “America the Bountiful,” Clarence Francis, who was one of the association's early statesmen and would go on to become chairman of General Foods from 1935 to 1943, talked about the change packaged goods made in the ways grocery stores did business.

“[Packaging] resulted in better handling [and] more efficiency all the way,” he said. “It cleaned up everything in the grocery store. It turned mom-and-pop basement stores into real grocery stores.”

The establishment of self-service supermarkets helped propel the brand movement, Willis told Greer in another interview for Greer's book. “The self-service system became the real lifeblood of an advertised brand. It also proved the consumer preferred having the variety of advertised brands.

“When grocers had store clerks, they could influence what consumers purchased. By eliminating the store clerks, self-service gave consumers an uninterrupted opportunity to make their own choice. By displaying the manufacturers' products instead of hiding them behind the counter, supermarkets gave branded products an opportunity to be chosen.”

FIRST MEETING

Many of the association's charter members initially got together in 1906, two years before they created the association, to endorse passage of the Pure Food and Drug Act in an effort to eliminate dishonest practitioners who were selling adulterated foods.

In March 1908 some of those manufacturers decided to form a trade association of like-minded companies. Seven months later, 60 manufacturers representing 45 companies held their first formal meeting in New York and pledged to bring their industry in line with the new law.

Andrew Ross, an executive with Toasted Corn Flake Co., Battle Creek, Mich., was elected ASMA's first president. Dues ranged from $50 a year for companies with annual sales of $250,000 or less up to $250 a year for companies whose volume exceeded $5 million.

Despite a growing membership base, funds were tight in 1910, prompting ASMA's president then — Walter Lipe, general manager of Beechnut Packing Co. — to offer to pay $50 out of his own pocket to replenish the treasury and to ask other members to do likewise, which they did.

1911 — ASMA goes on record urging Congress to pass a uniform weights and measures law to protect consumers and distributors as well as manufacturers.

1916 — ASMA supports legislation to require standardized quantity information to appear on food packages.

1917 — ASMA sends Walter Lipe, its former president, to Washington to represent the association and its member companies.

As the U.S. entered World War I, President Wilson called on ASMA member William Sweet, president of Rumford Chemical Works (a baking powder company), to set up a committee of manufacturers to work with the American Food Administration — headed by Herbert Hoover — to coordinate war production efforts and educate the public on conservation and nutrition.

Speaking at ASMA's 9th annual executive conference in 1917, Sweet said, “The call to service against the enemy is not only to those who go forth to fight our battles but to those who stay home and assist the Food Administration in pushing food conservation and production.”

Between 1917 and 1918, American food manufacturers were able to nearly triple normal production, which helped feed not only the population at home but also the military and needy people overseas.

1919 — ASMA seeks to maintain a level playing field by making sure the railroads are not giving packers unfair advantages over manufacturers.

1922 — ASMA tries to make sure manufacturers have the right to suggest a fair resale price for their goods and to decline to sell to dealers that refuse to charge that price.

1924 — The American Specialty Manufacturers Association changes its name to the American Grocery Manufacturers Association.

1929 — The American Grocery Manufacturers Association changes its name again, this time to the Associated Grocery Manufacturers of America.

THE WILLIS ERA

At the end of 1931, Paul Willis was elected AGMA president. He had been working for Comet Rice Mills, Galveston, Texas, for 20 years, joining the company as a stenographer (male secretary) and moving through the executive ranks to the post of general manager.

He was elected and then re-elected to one-year terms at AGMA. However, the board of directors decided the association needed a full-time administrator to deal with the complexities of the Great Depression and the increasingly regulatory mood of Congress, and asked Willis to take the job.

Willis initially took a three-year leave of absence from his company but ultimately resigned in 1933 to become the association's first full-time president — a position he held until 1965.

Among the first causes AGMA tackled under Willis' watch was predatory price-cutting — what the association termed “profitless selling.”

According to Francis, “Things began to happen in the 1920s, when the chains expanded. The retailer would knock the spots off some of our national brands and ruin the interest of the other dealers in handling them.

“It would bring the people into the store by selling [merchandise] at half price. It didn't force us to lower our price, because we were selling at a proper margin. We had to fight it in other ways — through education.”

In a speech at that time, Francis estimated that 75% of all food was being sold based on price, “[and] 45% of the lines sold in food stores do not now carry a margin large enough to cover the cost of distribution. Of course consumers want low prices … [but] a great deal of the emphasis on price comes from the seller, [who] assumes price is the only appeal in which his customers are interested.

“Given the choice between large sales at a loss and small sales at a profit, sound business management can choose only the latter. Profitless selling is the easiest and the most disastrous method of meeting competition. It takes courage to resist the temptation.”

Willis condemned the practice of below-cost selling as “uneconomic and unfair” and recommended that each grocery manufacturer “individually act to prevent this practice in the resale of his products [by encouraging that] each state enact a law duly prohibiting this practice.

“The association believes that such legislation is a needed and effective remedy in the circumstances [and] that such legislation expresses a sound public policy, because it only prevents a practice inconsistent with the principle of economic and fair competition, which the public is interested to preserve.”

In 1933, AGMA applauded the creation by President Roosevelt of the National Recovery Administration to enforce codes of fair competition throughout American industry.

“When Franklin Roosevelt established the NRA, in effect he suspended many of the antitrust laws by encouraging industries to get together and agree on codes of competition covering wages, price, margins and hours,” Willis told Greer years later.

JOINT INDUSTRY COLLABORATION

In 1934 Roosevelt asked AGMA to coordinate the food industry's efforts to create a master code of competition. In one of the first examples of joint industry trade relations, Willis called a meeting of several food associations to draft a proposed master code for competition.

The associations that met included AGMA; the Food and Grocery Chain Stores of America (later the National Association of Food Chains); the National Association of Retail Grocers of the U.S. (later the National Grocers Association); Voluntary Groups Institute (later IGA); National Retailer-Owned Wholesale Grocers; the National-American Wholesale Grocers' Association (later Food Distributors International); and the National Food Brokers Association.

“They all knew there were going to be new rules,” Willis told Greer. “Even though the representatives didn't like each other, the NRA business was new, and they wanted to understand the implications.

“At the beginning there was a feeling of great enmity because they were vigorously competing with each other. I kept emphasizing that we were ordered to meet together, that we had to formulate a code, and I would not disband the meeting until we had accomplished the job.”

Together they formed a National Food and Grocery Conference Committee “to establish principles of fair trade practices” and to discuss “matters of mutual interest and united action where consistent.”

The committee seized on the master code initiative to eliminate trade practices they didn't like. The code they devised, like the Robinson-Patman Act that eventually followed, required that promotional allowances be based on services actually rendered; that brokerage payments for buyers be prohibited; that any advertising or distribution services be available on equal terms to all buyers; and that quantity discounts be limited to genuine savings by suppliers on the cost of manufacture, sale or delivery.

The code also prohibited product substitutions, deceptive labels and deceptively filled containers, and it also introduced the practice of preparing written contracts on allowances for services that would be applied against the cost of the product.

In a speech, Willis said that working with distributors was helping manufacturers learn more about the benefits of industry cooperation. “There is a real desire on the part of our manufacturers to want to cooperate with their distributors. When you suffer, we suffer along with you, [and] if you prosper, we prosper.”

Although many companies in the industry adopted some of the master code provisions, the Supreme Court nullified all codes when it ruled NRA unconstitutional in 1936. Later that year AGMA endorsed passage of the Robinson-Patman Act to prevent unfair price discrimination.

During hearings on Robinson-Patman, Willis and other industry leaders worked together — through discussions of the Food and Grocery Conference Committee — to present the same thinking to Congress to counter arguments that any segments were looking after only their own interests.

Willis said at the time he was satisfied that the discussions leading up to passage of the legislation had a positive impact. “Members of the trade are now openly discussing the existence of [certain] trade practices and are seriously concerned with what to do about them,” he indicated.

1935 — AGMA urges enactment of a law to safeguard proprietary foods against the misappropriation of their formulas and to allow “harmless trade puffing” in ads.

GROWTH OF PRIVATE LABEL

Regarding the growth of private-label products, Francis told Greer: “When the chains got large enough, they wanted their own private label. That obviously made a difference in manufacturing. If the manufacturers of the brand refused to make the private label, somebody else would do it for them. Then you had a struggle of proper pricing between your product and the retailer's product, the cost of which was unknown.”

A controversy arose in 1937 after the New Orleans division of A&P distributed a handbill promoting a sale on private-label products in which the chain compared the prices of 15 branded items — which sold for a combined $2.40 — with 15 equivalents manufactured by A&P — a combined $1.70.

Time magazine reported that, among big food manufacturers, Tide was in “conniptions.”

According to Time: “In the past six years the ratio of A&P's private brands to other merchandise on A&P shelves has increased immeasurably. If A&P decided to discredit national brands as a preliminary to making everything it sold, that would be horrid news to U.S. foodmen.

“That the New Orleans handbill might be the opening gun in just such a campaign was the dizziest speculation that occurred to food manufacturers. Another was that the handbills were intended as a gratuitous slap at the Robinson-Patman Act.”

Asked about the challenge to brands posed by private-label goods, Willis told Time: “I am thoroughly familiar with the practice of trade puffing, but I have never seen national brands held up as a yardstick in this fashion. In my opinion, this practice falls into the category of unfair methods of competition.”

Time quoted A&P officials saying the handbill was “a regrettable mistake” and that the company did not plan to increase the ratio of private-label brands on the shelves. It also ordered all district managers not to duplicate the handbill in their regions.

In 1938, Charles Wesley Dunn, AGMA's legal counsel, helped write the Federal Food, Drug & Cosmetic Act, which provided a strong national law against product adulteration and mislabeling of food and which set standards for food safety — legislation the association believed was a proper extension of the original Pure Food and Drug Act of 1906, which had covered only poisonous substances being added to food.

1942 — AGMA changes its name for a third time, to Grocery Manufacturers of America.

Once the U.S. joined the fighting in World War II, GMA converted its trade relations effort — the Food and Grocery Conference Committee — into the Food Industry War Committee to help deal with increasing wartime demand and an increasing number of regulations and government red tape.

Key GMA board members also became executives of the War Production Board in Washington, with Clarence Francis appointed to the National Defense Council and put in charge of getting all idle manufacturing plants — in food production and otherwise — into full operation.

In June 1943, GMA held its annual meeting with the theme, “Fighting the War With Food,” during which members agreed that food was absolutely essential to winning the war and for humanitarian efforts in any subsequent peace. According to Willis, “Food is as important as any other weapon in the successful prosecution of the war. It will be equally important in the rehabilitation and relief of the liberated areas and in the shaping of the peace that is to come.”

During the war, the grocery industry had to deal with price controls imposed by the Office of Price Administration. “We learned this much from our experiences with controls,” Willis told Greer: “[that] you just can't freeze wages and prices alone and not the prices for all raw materials [or] farm products, which will go up.

“Without that, controls put manufacturers right up against a buzz saw. All the ingredient prices would rise, while manufacturers could not increase their prices to cover the higher costs.

“Beyond that, we learned well that the free enterprise system operates best without restrictions, and the problems will work themselves out.

1944 — GMA takes a stand in favor of using surplus food for foreign relief efforts, with the remainder to be made available on the domestic market at a fair price.

1945 — Willis presses wholesalers to modernize their facilities in preparation for the growing competition expected to follow the removal of price controls on foods.

FOOD FOR PEACE

GMA was involved in the use of food to shape the peace — for example, by bringing European businessmen to the U.S. to study American food production and distribution techniques; or helping member companies participate in providing goods for the Berlin Airlift, which dropped food into Berlin after the Soviets blockaded the city.

During the Korean War, when hoarding of food supplies occurred, Willis sought to reassure the public, letting it know that manufacturers had ample supplies available to meet the emergency.

However, the industry struggled during the Korean War with government-imposed margin controls, which were set far below industry averages.

In April 1961, after the Bay of Pigs invasion of Cuba failed and more than 1,100 Cuban exiles were imprisoned, President Kennedy conducted behind-the-scenes negotiations for their release, ultimately getting the Cubans to agree to accept food instead of money as ransom, and then asking Willis and GMA for help.

“A lucky coincidence at Gerber Products enabled us to deliver a large amount of baby food,” Willis told Greer. “Gerber was switching its containers from tin cans to glass jars, so they were willing to provide Cuba with the baby food packaged in the tin cans. Other manufacturers had nutritious products that were not selling well and were willing to ship those to Cuba.”

The food contributions, totaling $12 million, helped secure the release of the prisoners.

Willis stepped down from his position at GMA in June 1966, 35 years after he took a one-year job there. He died in 1987 at the age of 96.

He was succeeded by George W. Koch, who assumed the title of GMA chairman, with the title of president shifting to the industry executives who were elected for two-year terms.

Koch (pronounced Cook) came to GMA from Sears, Roebuck and Co., which hired him in 1959 to open a government relations office in Washington. Earlier in his career, he was the lobbyist for the Ohio Council of Retail Merchants, and before that he was the assistant city attorney in Cincinnati — “a true public policy wonk,” he told SN in an interview.

Before he arrived, GMA was more like a sales managers' club than a trade association, Koch told SN. “GMA brought me in with two goals: to convert the association into an organization that could handle public policy, and to become an organization run by CEOs,” he said.

With the exception of the National Association of Food Chains, none of the major trade associations was directly involved with what was going on in Washington at that time, Koch said.

A WASHINGTON VOICE

GMA had been headquartered in New York since its founding in 1908, but Koch recognized the need to move the association to Washington if it was to be a more effective voice for suppliers.

Asked how GMA had dealt with Congress earlier, Koch replied, “GMA wasn't dealing with Congress at all, except on a crisis basis.

“But you don't run a business and deal with Congress just by testifying. You do it by getting people back home at the grass roots to talk with their representatives and senators about what their needs are.

“And you need strategy and tactics. You can't wait till some Congressman drops a bomb to decide what to do.”

With a growing number of potential “bombs” coming out of Washington, Koch said, “GMA knew it was in trouble. That's what convinced manufacturers they needed to get to Washington and be represented.

“It took four years to do it, but we were there by 1970,” he said.

As for the GMA board, it had historically been composed of a mix of CEOs, national sales managers and vice presidents of marketing, “but the association wanted a board made up of CEOs — people who could make decisions for the industry,” Koch said. “And once we had it, it made it much easier — and more fun — though sometimes it was more difficult.

“It's been the ability of CEOs to get things done that has enabled GMA to survive for so long, because it gave every company stock in every issue that came up. It may have been a struggle sometimes, but those CEOs were big thinkers who were able to look at the long-range implications of each issue as part of an industry, not as individual companies, and they made decisions based on that rather than selfish motives.”

One of the first issues GMA tackled under Koch's leadership was ingredient labeling. GMA said at the time that it opposed any legislation that would add to the cost of packaged goods for consumers.

“We talked about it with the Federal Trade Commission until we were able to work out a compromise,” Koch recalled — the way GMA worked through most issues, he noted.

1968 — GMA establishes an “early warning system” to quickly and efficiently identify, analyze and establish protocols for dealing with issues affecting the industry.

1970 — GMA encourages its members to voluntarily place a date on shipping cartons to help distributors rotate their stock.

1971 — GMA supports a requirement that manufacturers place plant and batch codes on all food products to help in product recalls; it also endorses establishment of a recall system for use by government and industry.

Koch said one of the accomplishments of which he's most proud was the creation in 1974 of the Universal Product Code, “which revolutionized the industry.”

His contribution to the process, he recalled, grew out of a meeting he had with Clancy Adamy, president of the National Association of Food Chains, and Mike O'Connor, president of Super Market Institute.

“When Mike pointed out that discussions about a product code had been around for 30 years and it was time the industry did something about it, I said the industry couldn't get anything done without the support of CEOs from each association.” Koch told SN. “The three of us had trouble over the years agreeing on a lot of things, but we agreed on getting CEOs involved.”

Koch said the industry might never have reached agreement on adopting a product code without CEO support, “because many retailers were worried about the expense and risk of buying equipment if all manufacturers didn't change their labels to include the UPC. But with the industry's CEOs supporting it and moving their companies forward, UPC became a reality.”

1974 — GMA says it should be left to a retailer's discretion whether to individually item-price grocery products bearing a UPC.

1976 — GMA agrees to participate in a joint effort with other trade associations to determine the feasibility of computer-to-computer ordering and invoicing — a process that leads to creation of the Uniform Communications System.

In 1980, Koch devised a new way to keep tabs on what was happening in Washington and to meet more of the players there when he initiated a series of monthly breakfasts, where he and various GMA staff members would invite key members of Congress to breakfast meetings.

“We'd invite speakers on all sides of the issues to share information with us and to help us get to know them, to open the lines of communication,” Koch told SN. “That enabled GMA to have contacts with as many Congressional personnel as anyone else in town.”

In 1982, after several people in the Chicago area had died after ingesting Tylenol laced with potassium cyanide, Jim Burk, chairman of Tylenol, called GMA for help, and the association led the industry in working for passage of anti-tampering laws and revising packaging to make it more tamper-proof, Koch recalled.

Asked recently how he feels about GMA reaching 100 years, Koch, now 82, said, “I'm going to live to be 100 myself, so it gives me some encouragement.

“Most organizations don't last 100 years, so it says a lot about the grocery manufacturing industry that our association has.”

Koch retired from GMA in 1990 and joined the Washington law office of K&L Gates, Pittsburgh.

His successor was C. Manley Molpus, who had been president and CEO of the American Meat Institute for 10 years after 10 prior years as a lobbyist for Kroger Co.

“AMI was a wonderful place to work, but the opportunity to work with the entire CPG industry through GMA was compelling,” Molpus told SN.

At the time Molpus came to GMA, the industry was wrangling with Congress over the Nutritional Labeling Act “and how the label would be constructed,” he explained. “For example, one member company was concerned with fat content, another with calorie or sugar content, another with serving size.

“Eventually we reached a healthy compromise, and in the end the industry supported the legislation.”

1992 — GMA creates the State Government Affairs Committee to bring state governments into the decision-making process “so we could do a better job processing issues and building consensus,” Molpus said.

WAL-MART'S INFLUENCE

As Wal-Mart Stores was growing into an industry powerhouse in the early 1990s, “there was more of an adversarial relationship between manufacturers and retailers,” Molpus said, “and we needed to find ways to collaborate. But at that point we didn't have the mechanisms to meet and work together.

“But one terrific thing that came out of the rise of Wal-Mart was the transformation of industry relationships through ECR (Efficient Consumer Response) — an effort to make the industry more technologically efficient and to lower supply costs. That caused us to look at the industry and talk at our meetings about value-added costs in the supply chain and how we ought to try to eliminate them.

“If those ECR measures were installed, then we wouldn't need the formality of ECR, and that led to a greater spirit of collaboration and the realization we could do more by working together.”

Another significant issue GMA dealt with during the 1990s was genetically modified organisms (GMOs). “We were aggressive in talking with the leadership in the biotechnology industry and the Food and Drug Administration and were able to withstand what they were doing,” Molpus said.

However, Oregon put a measure on the ballot in 2002 mandating that all processed foods sold in the state would need to carry labels indicating whether they contained gene-spliced ingredients such as corn, wheat, soy or even milk produced by cows eating such foods — a potential problem for national companies, which would have had to change their labels just to distribute to Oregon,” Molpus told SN.

GMA put up money for a statewide campaign in Oregon, arguing that GMO labeling was not the way to go, “and we were able to help defeat that measure” by a vote that exceeded 70%, Molpus indicated.

When Massachusetts put up a similar proposal, GMA helped finance a series of TV ads that again helped persuade enough people to defeat the issue, Molpus pointed out.

1993 — GMA launches a massive campaign on Capitol Hill for passage of the North American Free Trade Association (NAFTA) and adds its first director of international trade to reflect member companies' growing interest in doing business globally.

In 2001, GMA and the Association of Sales & Marketing Companies merged, with ASMC becoming a GMA subsidiary.

“If it makes sense, people in the industry support a reduction in the number of trade associations,” Molpus told SN. “The food brokers had gone through a tremendous amount of consolidation, and they made a good fit with GMA.”

2002 — GMA launches Project Vigilance, a collection of best practices used by member companies to secure their facilities, ensure the purity of their products and educate employees about ways to identify possible security threats.

2005 — GMA changes its name again — to reflect the global reach of its members — from Grocery Manufacturers of America to the Grocery Manufacturers Association.

By the time Molpus retired in 2007, another merger — between GMA and the Food Products Association — was taking place. FPA was headed by Cal Dooley, who succeeded Molpus as president and CEO of GMA in 2007.