Chairman’s Message Make Your 2019 Convention Plans .. . . . . . 8
Little Things Make the Biggest Difference in Customer Experience In a world where 60-80 percent of customers describe themselves as satisfied or very satisfied…right before going on to defect to the competition, “meeting expectations” is no longer an option. In business you either fall below expectations or you exceed them.
Government Relations The Craziest Session Ever .. . . . . . . . . . . . . 10
Inside the Beltway Fees, Fees and More Fees . . . . . . . . . . . . . . 18
Washington Report Payments Marketplace Reform: Opportunities on the Horizon .. . . . . . . . . 20
36 Loss Prevention with Foolproof Knowledge Retention While their roles are quickly evolving, your associates’ impact on you company’s bottom line can’t be ignored. Associates today need to know more than ever. 2
Homelessness and Mental Illness: A Challenge to Retailers No one has an exact handle on the number of homeless, only that their number has increased significantly across the country since the 1970s. For retailers, this means walking a fine line between sympathy for those in distress and protecting assets, staff and customers. 36
ALABAMA GROCER |
AGA | BOARD OF DIRECTORS
Chairman of the Board Frank D'Amico, III BTC Wholesale Vice Chairman Johnny Collins Organic Valley Fresh
Immediate Past Chairman Peter "Greg" Gregerson Gregerson's Foods Past Chairman Jack Howell Forster & Howell
Treasurer Jay Mitchell Mitchell Grocery Corporation Secretary Bo Taylor Coca-Cola Bottling Company United, Inc.
Sergeant-at-Arms James Cochran Buffalo Rock Pepsi Cola Company
vice presidents David Bullard
Bob Crawford United Johnson Brothers of Alabama
Bill Davis A&R Super Markets
Harold Garrett Gateway Foods
Piggly Wiggly Alabama Distributing Company Wade Payne Food Giant
directors Naseem Ajlouny
Mike Coggins Sherwood Food Distributors Chris Crosby Golden Flake/Utz Snack Larry Garrett Vietti Foods Kevin Gillespie Kelley Foods Julie Anderson Goolsby The Hershey Company
Kris Jonczyk Publix Super Markets, Inc. Kenneth Jones
Austin Peake Peake & Associates Eddy Quinley Advantage Solutions Brian Smith Community Coffee John Wilson Super Foods Supermarkets Jimmy Wright Wright's Markets
Buy Lo Quality Foods Stan Alexander Associated Grocers of the South Danny Babb Associated Wholesale Grocers Jack Carlile UNFI Kirk Clark Mitchell Grocery Corporation
Rouses Enterprises Melanie LeBlanc Anheuser-Busch Curtis Lyons, Jr. Flowers Bakeries Mike Oakley Alabama Power
ex-officio board members
Mike Fuller Fuller's Supermarket
R. Kevin Miller "Official Board Photographer" Acosta Sales & Marketing
Mac Otts Autry Greer & Sons
James Scott Lighting Specialists
Vice Chairman Phillip Davis A&R Supermarkets
President Ellie Smotherman Taylor Alabama Grocers Association
Secretary/Treasurer Paul Burnett Byars | Wright
Board of Trustees Chairman
Bob Crawford United Johnson Brothers of Alabama
Jeff Bolas Bunzl Distribution Dana Bowen
Gerry D'Alessandro Fourth Avenue Supermarkets Jai Freeman Freeman Foods Ken Hestley Sell Ethics
Bubba Lindley EdLinco Rob Renfroe Renfroe Foods Don Richardson Coca-Cola Bottling Company United, Inc.
Cliff Thomas Campbell Snacks Chris Woods Retail Data Systems
Frito-Lay Tim Cano Post Holdings
| ALABAMA GROCER 4
PRESIDENT’ S MESSAGE
o u r No . 1 P r i o r i t y
ELLIE SMOTHERMAN TAYLOR PRESIDENT ALABAMA GROCERS ASSOCIATION
Legislation and lobbying efforts on key bills and issues affecting the food industry is our no. 1 priority.
number of months parents can receive TANF in a lifetime, recertification every six months and mandates to require a private company to administer the process. The bottom line for all these bills is that it would cut many people off SNAP or reduce their benefits, create new red tape and force DHR and Medicaid to enter into a costly and unnecessary contract with a commercial data company. An analysis done by the Association shows that SNAP benefits have already been reduced by 30% in the last five years and our industry can not afford any further reductions. As you see your local legislators, please let them know that this is an issue. We have been able to fight off these bills again this year, but each year they continue to be introduced. Another bill we were proud to work on this year was SB10 sponsored by Linda Coleman-Madison that would give a misdemeanor and community service to anyone misrepresenting a pet or emotional support animal as a service dog. This has become a huge problem in our industry and signage will be available to all members to post in their store. There were also bills we worked on regarding alternative nicotine products, Mobile tobacco county taxation, removal
As of this writing, we are just a few days away from the end of the 2019 Alabama Legislative Session. What a session it has been! We started this year with a Special Session to address the gas tax. Effective September 1, 2019, the current 18-cent gas tax will be raised by 6 cents to 24 cents. It will then go up 2 cents on October 1, 2020 and 2 more cents on October 1, 2021 for a final 28-cent gas tax. Starting in 2023, the tax will be indexed to a national index of construction costs, which could increase the tax by up to a cent a year. About 67% of the money raised from the tax will go to the state for road and bridge projects, with 25% going to the counties and 8% to the municipalities. According to the County Commissioners of Alabama, even the smallest county will see a 42% increase in road funds. Funding for the Port of Mobile was also passed as part of this tax. Our big win this session was HB186 sponsored by Representative Reed Ingram on Sunday Sales. It will allow any wet county or wet municipality by resolution or ordinance to permit and regulate the
sale of alcoholic beverages on Sunday after the hour of two o’clock a.m. for on-premises or off-premise consumption or both, as determined by the local governing body. This means that counties and cities will no longer have to send bills to Montgomery regarding Sunday sales and these decisions can now be made at the local level. It will also remove the state requirement that cities and counties spend money advertising local legislation. This bill simply avoids the cost and time involved in advertising and passing local legislation. This is a HUGE economic win for the grocery community, especially in those areas like Oxford/Anniston where literally an interstate separates communities that allow Sunday sales. A University of Montevallo study completed by the Heartland Institute in 2011 showed that 21% of all grocery sales occur on Sundays. The bill will now become law on August 1, 2019. There were many bills this session regarding changes in the Supplemental Assistance Program including requiring drug testing, non-allowance for waivers in times of disaster, reductions in the
| ALABAMA GROCER 6
“Another bill we were proud to work on this year was SB10 sponsored by Linda Coleman-Madison that would give a misdemeanor and community service to anyone misrepresenting a pet or emotional support animal as a service dog.”
of the sales tax on food at the state and local levels, plastic bag bans, alcohol beverage delivery service permits, state wine shipments, pharmacy issues, privatization, reduction in the age of CDL licensed drivers to 18, and the misrepresentation of meat products. In total, there were over 130 bills we followed this session. Please see the full legislative report for a full analysis.
Legislation and lobbying efforts on key bills and issues affecting the food industry is our number one priority. Please know that your industry is well represented in Montgomery. If you have any questions/concerns regarding this legislative session, please do not hesitate to reach out to myself or Patrick McWhorter, our Association Legislative Consultant. Thanks to all of you who reached out this session to your
local representatives on our behalf. We appreciate your support! I hope to see all of you at our upcoming convention in Sandestin!
2019 Assoc i at i on Dates
• July 29-31, 2019 – Alabama Grocers Association Annual Convention - Sandestin Golf & Beach Resor t, Destin
• October 23, 2019 – Alabama's Food Industr y Finest Luncheon, The Club, Birmingham
• October 24, 2019 – Alabama Grocers Education Foundation Fall Golf Outing -
ALABAMA GROCER |
CHAIRMAN' S MESSAGE
Mak e yo u r 2 0 1 9 c onv e n t i on p l ans
FRANK D'AMICO, III BTC WHOLESALE DISTRIBUTORS AGA CHAIRMAN OF THE BOARD
from both independent and chain markets.
IHave you made plans to join us for the 2019 ADA Convention? If not What are you waiting on?
Alabama Department of Agriculture & Industries Update – Commissioner Rick Pate. Rick Pate grew up working on his family’s cattle and poultry operations in Lowndes County, where he learned the value of hard work and perseverance. Because of his roots in agriculture, he studied horticulture and received his bachelor’s degree in 1978 from Auburn University’s College of Agriculture. Pate put his degree and determination to work and started Pate Landscape Co., Inc. over 36 years ago. In 1996, Pate he had the opportunity to join the Lowndesboro’s town council and later serving as mayor in 2004. He resigned his position as mayor after winning the run-off election for Commissioner of Agriculture and Industries in 2018. Growing up on a farm, running a business, and serving as the mayor of a small rural town has given Pate a unique prospective to bring to the office of Ag Commissioner. He has a genuine concern for the future of agriculture and the people of Alabama.
Suckow, CMP in the eye opening session that will leave you with fresh ideas to address the new marketing landscape. She was a multi-million-dollar B2B buyer for over 20 years. Today, she studies both consumer and buyer behavior to uncover the latest trends, which she has shared with organizations on five continents. Sourcing Local Products Retailer Panel – Moderated by Dr. Glenn Richey. Join Dr. Glenn Richey, Professor in Supply Chain Management of Auburn University as he moderates a Panel Discussion on Sourcing Local Products. Panel participants will talk about the hot topic, Buying Local, which is perceived as 250 miles. Dr. Richey will lead the discussion with these retailers on how they go about researching/buying local products, marketing these products to consumers and some of their best practices. The panel will include retailers
This years convention is going to be one of the best yet! The Convention Committee has done an amazing job putting together a convention you will not want to miss. The business session should be one of our best to date. Highlights include: Keynote Speaker – Shawna Suckow. There’s never been a time where our culture that has been more saturated with marketing messages from every angle, every minute of the day. Translation: There’s never been a more challenging time for marketing departments trying to get consumer to pay attention to their brand. As consumers, we’ve all grown savvier about blocking and ignoring what we deem to be irrelevant messaging and grown intolerant with interruption marketing. How can you break through this cluttered marketing landscape to get the attention of your desired audience? Join Shawna
"The Convention Committee has done an amazing job putting together a convention you will not want to miss."
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Retailers and Manufacturers Partnering to Grow Online Sales – Missy Polhemus. Come join Missy Polhemus, Senior Vice President of Marketing, Shipt on how working together, retailers and manufacturers can promote each other, reaching consumers with relevant messages that can ease shopper decision making. Shipt was founded by Bill Smith in Birmingham with a soft launch in November 2014 with 1,000 pre-enrollment customers and officially launched in Birmingham in May 2015. By 2016, the service was available to 27 metro areas in 9 states and initially targeted regions that had no grocery delivery services. In December 2017, Target announced that it would acquire Shipt for $550 million, while keeping the headquarters in Birmingham. Learn how an online delivery web service like Shipt can give manufacturers and retailers the opportunity to coordinate, combining their understandings of the consumer to improve the relevance of their messaging. Manufacturers can target a retailers’ frequent shoppers with custom deals and messages, in turn helping to drive traffic to stores or online. Retailers can provide manufacturers with the opportunity to message new products and deals to the right shoppers. Other Convention highlights include Monday Night Casino/Silent Auction Party, Tuesday Exhibit Hall and Best Bagger Contest and Tuesday Nights Chairman’s Banquet Entertainment, Comedian Henry Cho. New this year, if you stay at Sandestin for 6 or more nights you can receive 25% off the AGA published rates. To learn more about this and anything with the convention, I would recommend calling the Association Office at 205.823.5498
or visit the AGA Website at www. AlabamaGrocers.org. Best Regards,
PATRICK MCWHORTER LEGISLATIVE REPRESENTATIVE THE MCWHORTER GROUP
mandating changes to be made. They did pass a wage discrimination bill based solely on race or gender. Legalizing medical marijuana was punted; a task force has been formed to look into it and report back to the Legislature in December. Legislation was passed revising, revamping and giving the Governor more control over the state Board of Pardons and Paroles. The Education Trust Fund (ETF) and General Fund budgets are the only issues constitutionally mandated for the Legislature to complete, and usually cause the trouble in a session. Boosted by a strong economy, the $7.1 billion ETF that Governor Ivey has signed provides a 4% pay raise for education employees; increases to most K-12 programs and increases of at least 6% to the state’s four-year public colleges and universities. The $2.1 billion General Fund budget also had fewer headaches than years previous. It will give state employees a minimum 2% pay raise and provide boosts to most state agencies — including a $40 million increase to the state’s troubled prison system. But legislators are already nervous about next year’s budget, with Medicaid, the Children’s Health Insurance Program (CHIP) and prisons likely needing more money going forward. For our industry, there were several wins. HB168 by Rep. Reed Ingram of Pike Road
I know you’ve heard us say this before, but this has been the craziest and most stressful sessions we’ve dealt with.
marriage licenses, creating instead an affidavit to appease a handful of probate judges who are opposed to same-sex marriage. Lawsuits have already been filed to block the abortion bill. Many thought it was finally the time a lottery proposal would be placed on the ballot for voter approval. But the bill was caught between the Poarch Band of Creek Indians and local gambling interests in Greene and Macon Counties, and failed to receive the necessary votes to be considered by the House. A major education change is on its way to the ballot, abolishing the elected state school board and replacing it with one appointed by the Governor and confirmed by the Senate. They avoided dealing with a crisis in our prison system, instead asking the Governor to call another special session later this year to deal with a report of the U.S. Justice Department condemning the system and
This year’s session began March 5 since it is the first year of the four-year term. The Governor immediately called a special session, which recessed the regular session for two weeks, and the Legislature passed a phased-in 10-cent/gallon increase in the state gasoline tax for infrastructure. Members came back for one week and recessed again for Spring Break. So, a substantial amount of the allowable time was used. And yet, work was completed, and the session was ended on May 31, about two weeks ahead of schedule. As you can imagine, that sped up the whole process substantially. In the process, we lost two great members of the House: Rep. Dimitri Polizos of Montgomery, and Rep. Jimmy Martin of Clanton. Special elections have been called to replace them. The Legislature voted to ban nearly all abortions in the state, and abolished
“FOR OUR INDUSTRY, THERE WERE SEVERAL WINS.”
| ALABAMA GROCER 10
will allow cities and counties to determine their own fate when determining whether to allow alcohol sales on Sunday. No longer will they need to incur the expense and time of advertising and waiting for the Legislature to pass a local bill. That should help our members immensely, since the Heartland Institute says 21% of grocery sales occur on Sunday, and at least 37 cities where we have members do not allow the sales currently. Thanks to a lot of hard work, sponsor Rep. Shane Stringer of Mobile agreed to a number of amendments to HB41 before it passed. As introduced, it would have limited the free speech rights of companies involved in tobacco sales and placed heavy restrictions on the sale and use of alternative nicotine devices. Amendments made the bill acceptable to our industry. Governor Ivey has signed the bill. A number of bills were introduced again this year to allow for the direct shipment of wine in Alabama. As a compromise, Senate Rules Committee Chair Jabo Waggoner passed Senate Joint Resolution 64, creating the Task Force to Study the Direct Shipment of Wine. The Task Force will report back to the Legislature next session with recommendations on how to deal with this issue. Rep. AJ McCampbell passed HB278, requiring the state Department of Revenue to develop a fleet licensing system for vehicles. This will allow our members to register and renew trucks, etc. in one place online. governments trying to impose bans or taxes on plastic bags. HB346 was sponsored by House Majority Leader Nathan Ledbetter and SB244 by Sen. Steve Livingston, but neither bill got out of the gate. This stirred up talk in Birmingham already of a ban, An effort by a national trade group attempted legislation to stop local
so we will have to be on alert for any cities or counties attempting local ban or tax ordinances. Rep. Danny Crawford of Athens, the new Chair of House Agriculture & Forestry, passed HB518, which prohibits products developed in a lab from being labeled “meat.” This effort was initiated by the Alabama Cattlemen’s Association to try to get ahead of products coming on the market. Milk producers lost their battle and there are many products being sold as “milk” which are not dairy products. Sen. Linda Coleman-Madison of Birmingham originally introduced a bill relating to service animals that would have caused numerous problems in grocery stores. She was very kind to work with industry representatives, and SB10 has been signed into law by the Governor and will be a help to our industry and others while protecting the rights of those who legitimately need a service animal. Attached is a poster you can use in your store informing consumers of the new law. And again, this year, we fended off efforts to restrict the rights of persons qualifying for SNAP and TANF benefits, requiring drug testing, work, and community service to qualify and maintain benefits. Those bills were defeated. One issue we are excited about. Late in the session, Rep. Gil Isbell of Gadsden introduced HB519 (Sen. Shay Shelnutt introduced a companion bill, SB 368). Rep. Isbell worked closely with us and a committee substitute bill was developed and passed by the committee which would allow grocery stores to make home delivery of alcohol products. We anticipate this bill will pass next session. One disappointment: legislation was not completed in time to introduce this session which would phase out the sale of alcoholic beverages by the state ABC. A coalition
has been developed and we expect that legislation to come out strong next year. Other issues of interest that passed and have been signed: HB 69 by Rep. Arnold Mooney – electronic prescriptions must specify whether a generic may be dispensed HB 76 by Rep. Chris England – further provides for distribution of controlled substances for a medical purpose HB 104 by Rep. Chip Brown – corrects problems with current Mobile County tobacco tax law HB 183 by Rep. Rod Scott – updates to Simplified Sellers Use Tax (for online retailers) HB 203 by Rep. Ron Johnson – allows installment agreements under Taxpayer Bill of Rights HB 225 by Rep. Adline Clarke – discrimination in wages prohibited based solely on race or gender HB 250 by Rep. Bill Poole – Model Business Corporation Act HB 329 by Rep. Paul Lee – clarifies fees on business delivery licenses HB 345 by Rep. Rhett Marques – Enterprise Sunday Sales – REFERENDUM HB 368 by Rep. KL Brown – Oxford Sunday Sales – REFERENDUM HB 479 by Rep. Dexter Grimsley – drops minimum age on Commercial Driver’s License for instate drivers from 21 to 18 HB 493 by Rep. Lynn Greer – Lexington Draft Beer - REFERENDUM HB 500 by Rep. Margie Wilcox – increase penalties on littering SB 49 by Sen. Billy Beasley – Union Springs Sunday Sales – NO REFERENDUM
Continued on page 12 ▶
ALABAMA GROCER |
◀ Continued from page 11
SB 50 by Sen. Billy Beasley – Baker Hill Sunday Sales – NO REFERENDUM SB 51 by Sen. Billy Beasley – Midway Sunday Sales – NO REFERENDUM SB 73 by Sen. Arthur Orr – Pharmacy Benefit Managers – prohibited from restricting pharmacies from disclosing cost info to patients SB 93 by Sen. Billy Beasley – Hurtsboro Sunday Sales – NO REFERENDUM SB 146 by Sen. Jabo Waggoner – allows Mountain Brook Sunday Sales to start as 10 am SB 193 by Sen. Arthur Orr – makes improvements in unemployment benefits maximums SB 292 by Sen. Jabo Waggoner – allows Hoover Sunday Sales to start at 10 am
HB 621 by Rep. Chris Pringle – sales tax on food (phased out) HB 627 by Rep. Ralph Howard – Eutaw Draft Beer SB 71 by Sen. Arthur Orr – step up requirement for E-Verify use by businesses SB 77 by Sen. Arthur Orr – phase out ABC Board sales SB220 by Sen. Greg Albritton – Failed lottery bill SB 120 by Sen. Clyde Chambliss – compromise bill on theft of shoplifting (we expect to see this again during a special session on the prison issues) SB 325 by Sen. Bobby Singleton – would have raised threshold for theft of property crimes to $2,500 (we are opposed, but expect it to come back again during special session on prisons)
Bills of Interest That Did Not Pass: HB 135 by Andrew Sorrell – Alabama Small Business Act – regulation of franchisers HB 149 by Rep. Danny Garrett – attempted to sunset automatic indexing of gas tax HB 317 by Rep. John Rogers – Motor Fuels Marketing Act repealed HB 322 by Rep. Laura Hall – remove sales tax from food HB 391 by Rep. Chris Brown/SB 166 by Sen. Cam Ward – further regulation of beer wholesalers’ contracts HB 406 by Rep. Shane Stringer – prohibit use of electronic nicotine delivery devices where smoking is also prohibited HB 470 by Rep. Mary Moore – remove sales tax on food (phased out) HB 482 by Rep. Napoleon Bracy – allow local governments to set minimum wage
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AGA NEWS The Alabama Grocers Association wishes to recognize its Diamond and Four St ar Sponsors for t heir generous suppor t of t he AGA Annual Convention. Diamond Sponsors
Four Star Sponsors
| ALABAMA GROCER 14
AGEF SPRING GOLF OUTING
THE WINNERS CIRCLE
Delma Craft, PWADC; Kenny Harbin, Ice Cream Specialties; Jeff Brown and Matt Peters of PWADC.
Jake Sim, Bill Davis, Ken Herron and Robert Burnett of A&R Super Markets.
First Place: Greg Waldrop, Gateway Foods; Scott Wade, Deaver Industries; Don Richardson, Coca-Cola Bottling Company United; Jim Coalson, Piggly Wiggly Williams.
Keith Holley, George Skinner, Danny Babb and Darryl Miller of AWG.
Lee Cox, UNFI; Jay Holloway, Hometown Market; David Wright, Ron McClellan with Food Outlet.
Second Place: Morgan Hollifield, 5 Hour Energy; Dan Burdick, Frozen Specialties; Cory McGuffie, D&T Sales and Marketing: Jai Freeman, Freeman Foods.
Manny Shoemaker, Country Delite Farms; Tony Minor, Cameron McMillan, Publix; and Frank Kyger, Country Delite Farms.
Stan Alexander, Stave Maune and Leland Slay of AG of the South.
LONG DRIVE, CLOSEST TO PIN WINNERS
Third Place: Wade Payne, Robbie Robinson, Food Giant; Chris Crosby, Bradley Lyman, Utz Golden Flake.
Closest to the Pin winner Jeff Hopping, Birmingham Budweiser, with Bob Crawford, UJB and AGEF Chair.
Longest Drive Winner Mike Bishop, Federated Insurance with Bob Crawford of UJB and AGEF Chair.
ALABAMA GROCER |
www.alabamagrocers.org for more information
Sandestin Golf & Beach Resort July 29 - 31, 2019
OUT AND ABOUT
Ellie Taylor Appears on Talk of Alabama to Discuss Buy Alabama's Best Program.
AGA Board members Wade Payne, Food Giant, and Peter V. Gregerson, Jr., Gregerson's Foods, along with NGA Executive Vice President Greg Ferrara met with Alabama Senator Doug Jones on S. 803.
AGA Board Member Jimmy Wright at the 2019 Auburn Food Entrepreneur Conference.
Danny Manning of Manning Inc., Jessica Brown with AGA and Glen Ezell with Community Coffee at the PWADC Show.
AGA President Ellie Taylor visits with Congressman Mike Rogers.
Congratulations to AGA Board Member Jay Mitchell, Mitchell Grocery - Tennessee Grocers & Convenience Store Association Supplier of the Year!
Jessica Brown with AGA and Jeff Brown with PWADC at the Piggly Wiggly Golf Outing.
ALABAMA GROCER |
INSIDE THE BELTWAY
F e e s , F e e s a n d Mo r e F e e s
JENNIFER HATCHER SENIOR VICE PRESIDENT, GOVERNMENT AND PUBLIC AFFAIRS FOOD MARKETING INSTITUTE
clawbacks via the regulatory process. In May 2018, the Trump administration released American Patients First, a comprehensive blueprint to reduce prescription drug prices and out-of- pocket costs at the pharmacy counter. The plan advocates for increased transparency throughout the pharmaceutical supply chain, including reforms that would upend the PBM business model, making it harder for PBMs to take money away from pharmacies after the customer is gone via DIR fees. To that end, late last year, the Department of Health & Human Services’ (HHS) Centers for Medicare and Medicaid Services (CMS) released a proposed rule containing a number of positive policy reforms to pharmacy DIR fees. That rule, which FMI strongly supports as an essential first step (albeit not a silver bullet), has been sent to the White House Office of Management and Budget for review. In an effort to express our support and also reinforce the points made in FMI’s comments filed in response to the proposal, FMI and several of our members recently met with a team of folks who are working on the rulemaking from several government agencies, including OMB, the White House Office of Information and Regulatory Affairs (OIRA), HHS and CMS.
Unpredictable credit card fees have existed for decades, now have been added to the pharmacy dialogue.
These DIR fees are unpredictable, unfair and seemingly unconnected to a pharmacy’s performance and other standards. According to the federal government, pharmacy DIR fees have grown by more than 45,000 percent between 2010 and 2017. And, in an industry that operates on razor-thin profit margins (under 2 percent), supermarket pharmacies have virtually no ability to absorb these unexpected costs. Therefore, they are forced to either pass those costs on to consumers in the form of higher prices or worse, discontinue offering pharmacy services altogether at certain locations. Importantly, the fees also disadvantage patients, who are assessed a higher cost-share against their deductible rather than the retroactive, lower adjusted price. The result pushes patients more quickly into the so-called “donut hole” – a point during a beneficiary’s annual prescription drug coverage where the patient is responsible for a considerably larger portion of their prescription drug costs. It is important to recognize that the Trump administration has made a concerted effort to address pharmacy DIR fees and PBM
Whether you can run a profitable food retail business these days is less about how much you sell and more about how many fees you are charged – often well after the customer leaves and usually without your knowledge. This issue of unfair and unpredictable fees has been part of the credit card equation for decades and has now been added to the pharmacy dialogue as well in the form of DIR fees – direct and indirect remuneration fees. Now you may be asking what are DIR fees and how do they impact supermarket pharmacies and their patients? Remuneration simply means payment. Food Marketing Institute members have been frustrated by DIR fees, which pharmacy benefit managers (PBMs) are using at an alarming and increasing rate to claw back funds from pharmacies long after transactions have been completed. Under the current system, PBMs – the middlemen hired to administer prescription drug benefits – often claw back fees from pharmacies retroactively, weeks or even months after prescriptions are filled.
| ALABAMA GROCER 18
We were also joined by an advocate from the Small Business Administration, who is helping the many small business members that stand to benefit from pharmacy DIR fee reform. While HHS leadership has hinted that the final rule could be forthcoming soon, OMB received the rule on April 3 and has up to 90 days to complete its review. There is more that can be done beyond the rulemaking. We encourage you to ask your member of Congress or Senator to: "THIS ISSUE OF UNFAIR AND UNPREDICTABLE FEES HAS BEEN PART OF THE CREDIT CARD EQUATION FOR DECADES AND HAS NOW BEEN ADDED TO THE PHARMACY DIALOGUE." • Cosponsor the Improving Transparency and Accuracy in Medicare Part D Drug Spending Act (H.R. 803/S. 988). Bipartisan bills which had broad support in the 115th Congress and have been re-introduced in both the House and Senate, the legislation would ensure that pharmacies receive reimbursement at the rate posted at the time prescriptions are filled by prohibiting PBMs from retroactively reducing payments on accurate reimbursement claims submitted by pharmacies. This would help ensure pharmacies can continue to serve beneficiaries and combat the growing financial uncertainties pharmacy businesses are facing. The House bill was introduced in February by Reps. Peter Welch (D-VT) and Morgan Griffith (R-VA), while the Senate companion bill was released in early April by Sens. Shelley Moore Capito (R-WV) and Jon Tester (D-MO). • Cosponsor the Phair Pricing Act (H.R. 1034/S. 640). This bill would require all pharmacy price concessions in Medicare
Part D, excluding positive contingent amounts, to be applied at the point of sale. The bill also requires all Part D sponsors to utilize CMS-established quality measures that are standardized and pharmacy-specific. Similar to provisions contained in the proposed rule, the legislation was introduced by Reps. Doug Collins (R-GA) and Rep. Vicente Gonzalez (D-TX), along with 14 additional cosponsors. • Cosponsor the the House Ways and Means Committee on April 9, this bill addresses key issues related to transparency and public reporting of information to improve accountability. Most importantly, it would require the HHS Secretary to publicly disclose rebates, discounts and price concessions achieved by PBMs. • Cosponsor the Prescription Pricing for the People Act of 2019 (H.R. 2376). Introduced on April 29 by the Chairman and Ranking Member of the House Judiciary Committee – Reps. Jerrold Nadler (D-NY) and Doug Collins (R- GA), respectively – this bill would try to shed light on how PBMs are affecting prescription costs and patient choice and bring needed transparency to this space. ■ Prescription Drug STAR Act (H.R. 2113). Passed unanimously by
ALABAMA GROCER |
Payme n t s Ma r k e t p l a c e R e f o rm : O p p o r t u n i t i e s o n t h e H o r i z o n ?
PETER LARKIN PRESIDENT AND CEO NATIONAL GROCERS ASSOCIATION
With debit and credit card transactions becoming more and more popular, swipe fees continue to be a major line-item for grocers.
play by the same rules, including financial institutions, payment processors, and technology providers. The independent supermarket industry supports the need for robust federal security standards that hold all actors in the marketplace accountable to ensure our customers can shop with confidence. The 116th Congress has brought an opportunity to advance our efforts to reform the payments system and level the playing field for merchants. NGA is a founding member of the Secure Payment Partnership (SPP), a group that is comprised of merchants and payment processors seeking to improve the payment ecosystem in America by making it easier for merchants to authenticate transactions and innovate and invest in cutting edge secure payment technology. NGA, alongside other SPP members, have held numerous meetings with lawmakers to discuss payment security and solutions to improve the payments infrastructure, including creating a standard-setting body that ensures retailers and other stakeholders have a voice in the standard setting and implementation process. ■
Earlier this spring, grocers from across the country came to Washington, D.C. for the annual supermarket industry fly-in to advocate for commonsense policies that will have positive impacts on the industry. Top priorities on the agenda during this year’s fly-in included fixing the retail glitch tax typo and advancing solutions that make the payments marketplace more competitive, transparent, and secure for consumers, merchants, issuing banks and the economy. The retailer community achieved landmark reforms to debit swipe fees in 2010 through the passage of the Durbin amendment included in the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. Debit reforms lowered the cost of acceptance for debit cards and introduced competition into the debit routing market that was quickly becoming a duopoly. NGA has worked alongside other industry association partners to defeat proposals to delay and repeal debit reforms in 2011 and again in 2017. Unfortunately, credit cards have yet to see that kind of reform, and grocers continue to pay the highest swipe fees in the world.
According to The Nilson Report, U.S. retailers pay almost $100 billion to process card transactions every year. These swipe fees have ballooned into retailers’ second- largest operating costs, behind only labor, and ahead of rent and utilities. With debit and credit card transactions becoming more and more popular (transaction percentages have doubled in the last 15 years, according to NGA survey data), swipe fees continue to be a major line-item for grocers. Additionally, as new payment options and innovations enter the retail space, we must ensure that the best security technologies and tools are available. And, there’s a good reason, too. According to a recent study, 42 percent of U.S. cardholders (debit, credit and prepaid) have experienced card fraud in the past five years, compared with a much lower 27 percent of cardholders globally. NGA believes improvements to security protocols should result from an open and collaborative process among all industry stakeholders, where merchants have an equal voice at the table. Any data and payments standards should require all industries to
| ALABAMA GROCER 20
REAL COFFEE. REAL TEA. GUARANTEED GREAT.
Available at your Alabama grocery.
ALABAMA GROCER |
_RD2018 AGA Convention Ad-fnl.indd 1
6/12/18 3:12 PM
KEVIN COUPE FOUNDER, MORNINGNEWSBEAT.COM
With the continued growth of online specialty stores, traditional retailers must offer more compelling reasons to draw shoppers out of their homes.
specific geographic areas have bought, or might be interesting in buying based on previous shopping trips. Then, they outfit a truck with those products and send it to that area, sending its customers an email or text, or alerting them via an app, that the truck is incoming and what it is. Fleat pitches this as being the ability to send a highly targeted and relevant small store into people’s neighborhoods and even driveways…which expands and cements retailers’ relationship with those shoppers, while at the same time giving them a reason not to go to the store. Filld. I used to think that if there was one bricks-and-mortar format that was safe from disruption, it was the gas station – as long as there are cars that use gasoline, their owners would have to them their tanks filled up at the local gas station. But then I met the folks from Filld, which essentially is a subscription service for fuel. It was started as a way to service company car fleets, but has added a consumer component – in areas where it is offered, you can arrange the Filld truck to come to your home or office and fill up your tank. (It is energy agnostic – Filld can do regular,
The former Secretary of Defense Donald Rumsfeld once famously said that “there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know.” It is the latter category, Rumsfeld said, that’ll get you. I was thinking about this rumination the other day when I considered some of the specific ways in which certain businesses are working hard to prevent people from having to go to the store…or at least, the stores that they traditionally have patronized. I’m not talking here about Amazon’s Subscribe & Save program, which has successfully mined the automatic replenishment vein to the tune of an estimated $8 billion in annual sales (that used to go traditional bricks-and- mortar stores). No, that would be too easy. And I’m not talking about Replenium, a subscribe-and-save-like service that was created by some Amazon veterans and
can (and will) be used by retailers and manufacturers that don’t want to concede the replenishment business to Amazon (Which they shouldn’t. $8 billion is a lot of money to come out of traditional retail and go to Amazon.). I am talking about companies and trends that I have encountered beyond Amazon and that I think have an enormous potential – in some cases, already fulfilled – for not just impacting traditional store sales, but inspiring other people and companies to do the same. I have seven in mind. Fleat. This is a company that I recently came in contact with that essentially takes the concept of the old-fashioned ice cream truck and giving it fresh life with technology
and an expanded product range. Fleat has developed software that allows its retail customers (it could
be a supermarket, c-store or restaurant, though I suppose there also could be non-food-oriented applications) to their customer data to figure out what people in
premium, or diesel, but also can charge up electric cars.)
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You pay a convenience fee, plus the cost of gas, but this strikes me as a great way for retailers to provide a tangible service to their customers…or lose their customers to someone who offers Filld as an option. And people won’t have to go the store. Quip. I’ve become more than a devotee of the Quip toothbrush system; I’m pretty much an evangelist. The value proposition is pretty simple – the Quip toothbrush is advertised as having a more gentle, yet effective vibrating mechanism, and it has built into it a tiny computer that makes it go for two minutes, pausing every 30 seconds to let you know how long you’ve gone and allowing you to switch to another sector in your mouth. If you sign up for the program, you get a fresh brush head plus a new battery every three months…and I have to believe that I’ve taken better care of my teeth since I got it. Plus, I’ll never have to buy a toothbrush in a store ever again. The Internet of Things. This refers to the ability to embed internet connectivity into appliances…for example, building a washing machine that will reorder detergent when it begins to run low, or a coffee pot that will reorder filters, or a map that will reorder light bulbs, or…you get the picture. Pretty soon, because our appliances will reorder products that they need and use (from a local store or from Amazon or maybe directly from the manufacturer), and for these things at least, we won’t need to go to the store. Close Shave. If you have any doubt about this, just think about what companies like Harry’s and Dollar Shave Club have done to the traditional razor-and-blades business. Legacy companies like Gillette continue to struggle with how to compete with these interlopers, which have gone beyond their pure-play internet businesses and are starting to gain a presence in bricks-and- mortar stores. But make no mistake…once you’re into their ecosystems, if you don’t want to, you never have to go to the store for items in this category ever again. Coffee. I never buy coffee for at-home brewing in a store. I get mine from City
Girl Coffee, which is a Minnesota company that is run by women and sources its coffee from plantations that are women-owned and women-run. I love this. My wife and daughter love this. And the coffee is terrific…plus it shows up once a month, which means that for coffee, I never have to go to the store. (One note: Starbucks used to have a subscription program to which I belonged but canceled it saying that it wanted people to go to its stores to get coffee for home brewing. It was, in my opinion, a boneheaded decision by a company that doesn’t make a lot of them. For me, it was goodbye Starbucks and hello City Girl.) Stitched, Fixed. My wife and two of my kids are regular users of Stitch Fix, which has a service that regularly send each of them boxes of clothes chosen based on a survey they filled out and previous shopping patterns. If they like everything in the box, they keep it and get a discount. They can also send any or all of the items back, and their decisions are noted and factored into future styling
get people to go out to shop for some kinds of food or fuel or laundry detergent or toothbrushes or razors or coffee or clothing, those stores are going to have to be special. Different. Compelling. Experiential. Relevant (which speaks to the head). Resonant (which speaks to the heart). Some of this is a known known. Some a known unknown. But some of the challenges coming down the road cannot be seen or even, maybe, anticipated…and fit into the category of an unknown unknown. Those are the ones that’ll get you. ■
“Pretty soon, because our appliances will reorder products that they need and use (from a local store or from Amazon or maybe directly from the manufacturer), and for these things at least, we won’t need to go to the store.”
choices. I’d guess my wife and daughter like about 50 percent of the stuff they send, but my son probably likes 90 percent of the merchandise…and both my son and daughter have mused that between Stitch Fix and Zappos, they may never have to go to a clothing or shoe store ever again. Get the pattern? Need I say more? I’m not arguing here that bricks-and-mortar retailers are going away. Far from it. But I am suggesting that if a store is going to
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OUTSIDE THE BOX NEW RETAIL PERSPECTIVES
GREEN BANDWAGON Washington D.C. has its “Green NewDeal” but the clothing industry may be the first to jump on the green trend. Mainstream fashion brands are coming out with sustainable and “ethical” clothing collections at a dizzying pace. The problem is that everyone’s definition of sustainable is different and the industry may face some backlash from consumers.
If you’re looking for the latest in automated high-tech warehousing, head to Erith in the United Kingdom to see Ocado’s latest and largest online fulfillment center with 750,000 storage locations and managed by about 3,500 robots. The site, which is expected to hit revenues of about $1.3 billion, will devote about one-third of its capacity to Morrison’s, the U.K.’s fourth largest retailer. Using robotics, the site can pick a 50-item order in about seven minutes compared with an hour doing it in-store, according to officials, noting that the site handles about 300,000 orders weekly. ROCKING ROBOTICS
Gig workers, who accounted for $1.4 trillion income at the end of 2018, are now in the mainstream of the global economy, according to research by PYMNTS.Thissegmentincludesevery one from Uber drivers to designers, who often juggle multiple jobs. Those with specialized skills account for nearly one-third of gig workers and are looking for greater flexibility in how they’re paid. Nearly half of these workers were compensated via PayPal. MAINSTREAM THE NEW iStock
The Nuclear Myth
Euromonitor finds that the traditional definition of the two- parent, two-child nuclear family is imploding. The new norm
includes single parents, unmarried couples raising children, fewer people per household, fewer children due to falling fertility rates and higher divorce rates – all of which is expected to have a significant impact on many sectors including retail. All this doesn’t mean fewer selling opportunities. Simply that companies have to shift their marketing and strategies.
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That’s the advice from Harvard University lecturer Jesse Keenan, who studies urban development and climate adaptation. With wildfires in the West, floods and storms in the East, Keenan has pinpointed Duluth, Minn., as the place to avoid climate catastrophes. No place is immune to climate change, according to experts, but this frigid city is seeing less severe winters and because it is inland, the area is protected from the expected rise in sea level.
Barney’s, the iconic New York clothier, is bowing to a shift
in lifestyle of its customers by installing an upscale cannabis lifestyle and wellness shop in its Los Angeles store.
Lives Some observers call it social media self-destruct. Bowing to public and legislative pressures, Facebook is focusing greater effort on private communications such as encrypted messaging and tools that enable people to automatically delete content they’ve posted after a certain period of time. iStock
Looking for a new type of promotion? Check out the barnyard. A three-year- old Nubian goat named Lincoln has been elected pet mayor of Fair Haven, Vt., by a narrow margin. Lincoln beat out 16 other animals for the job, including an assortment of dogs, cats and gerbils. An evacuation accident during the swearing in ceremony did not hurt his approval ratings but the sheriff had to clean it up. GOVERNMENT SCAPEGOAT
Sweating it out At times, expansion means breaking out of your comfort zone. That’s what Dollar Shave Club, the online men’s grooming company is doing with the introduction of deodorants and antiperspirants called Groundskeeper. As Michael Dubin, CEO and Co-founder notes: “What connects the whole line is taking care of your dark, sweaty stinky places that don’t get a lot of love and attention throughout the day.”
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The Biggest Myth in Business It was a summer evening back in 2009. I was in New York City with a work colleague. Brad and I were at a trendy rooftop bar. One of those places where a bottle of beer is $15. We were waiting to meet a few people before heading over to a networking event. I noticed an older gentleman sitting on his own for over 30 minutes. It was obvious that he was waiting for someone. I decided to strike up a conversation about waiting by offering my standard line: “Do you know that we spend 10% of our life waiting?” I told him I knew it was true because I once read it on the internet…so it must be true. We laughed and started talking about the etiquette of waiting. I stressed the importance of being on time. Right then this guy shook his head and said something I’ll never forget: “There is no such thing as being on time. Being on time is a fallacy.” I told him that I’m usually on time, but then he shook his finger in my face and uttered, “You either are early…or you are late. No one is ever on time. On time is a myth.”
This was a complete paradigm shift for me. I immediately started thinking about how this applies to the customers we serve and the idea of meeting customer expectations. I’ve always thought that the idea of meeting expectations was a surefire recipe for losing business. It almost guarantees you will fall short. It’s similar to playing prevent defense in football. Prevent defense only prevents you from doing one thing…winning. In business you either fall below expectations or you exceed them. There is no middle ground. It bears repeating: “There is no such thing as meeting expectations.” In a world where 60-80 percent of customers describe themselves as satisfied or very satisfied… right before going on to defect to the competition, “meeting expectations” is no longer an option.