Killing the Harvest Box Vampire

Recently I joined a host of IGA retailers and wholesalers at the NGA / FMI Day in Washington Supermarket Industry Fly-In event, where members of the independent grocery industry met with senators and congressional representatives from almost every state. IGA has always participated in this event because we believe it is important to show support for our trade associations on issues our retailers care about, but this year attendance was even more crucial.

I went with a mission: To kill the Harvest Box once and for all. To stick a stake through the heart of this vampire and make sure it never comes to life again.

As you well know, the administration’s Harvest Box plan proposed shifting 40 percent or more of SNAP benefits from EBT cards now used at local stores to a government-led, direct-shipped food box. Somehow, somewhere, someone in government thought that our federal government would be more efficient delivering food (like a federal Blue Apron), rather than letting retailers and wholesalers do what they know how to do so well: deliver fresh food to every location in the country daily, at extremely low cost.

Ludicrous ideas sometimes take on a life of their own, especially in this era of Twitter-based policy and “fake news”. Shifting the responsibility for food distribution from the private to the public sector seemed fantastical coming from a small-government mandate Republican administration, but there it was, proposed and apparently seriously considered as a legitimate way to reduce costs.

High praise goes to our partners at NGA and FMI who helped us navigate the complex space, making sure the voice of the independent retailer was clearly heard over last few months, and leading the charge as we descended on Washington.

And special thanks to all the IGA retailers and wholesalers who joined the fight, connecting in Washington and at home with your local representatives to get our message out.

 Laurel Grocery Company’s Winston Griffin (left) and Ross (right) meet with Congressman Comer (middle).

Laurel Grocery Company’s Winston Griffin (left) and Ross (right) meet with Congressman Comer (middle).

Independent retailers have clout because we represent not only the jobs and tax dollars we create, but also because of the family businesses and local farms that depend on our high-traffic / high-volume stores to succeed. Our legislators all know that if the local grocery store fails in small town America, so fails the town.

Our government heard our collective voices, and now we’re seeing the pay-off. Late last week the House released the 2018 farm bill, the massive bipartisan bill responsible for SNAP and other food and nutrition legislation, and the Harvest Box vampire that threatened to suck the blood out of retail is not in it. No mention of boxes, no suggestion of test programs, nothing.

 

 Senator Durbin meets with Ross and other grocers

Senator Durbin meets with Ross and other grocers

On top of that, the farm bill proposes some beneficial provisions we think should be great for IGA, like supplemental dollar incentives for SNAP shoppers to purchase fresh fruits and vegetables, driving more trips to grocery stores instead of dollar stores and convenience outlets.

And unlike a similar program from the last version of the bill, these supplemental bonuses are baselined, designed to be a permanent part of the food subsidy program going forward.

It looks like small business (and our allies) won this battle, but with new restrictions and caveats in the farm bill, IGA has to remain diligent in our efforts to protect the families we serve. Especially those in economically depressed areas where jobs are scarce, and SNAP-related work requirements that make sense in other parts of the country have the potential to become an impossible burden.

The good news is we have a powerful voice when we work together, and our lawmakers are listening.

 

 Ross meets with Senator Mitch McConnell

Ross meets with Senator Mitch McConnell

At Day in Washington, I met with congressmen and senators from Louisiana, Ohio, Illinois, Massachusetts, Maine, Kentucky, North Carolina and more; Republicans and Democrats from junior representatives to senior politicians like Senate Majority Leader Mitch McConnell himself. I can tell you that I won’t stop the fight to ensure that our independent family grocers stay a living, breathing, healthy part of our communities. I won’t back off until our part of keeping American families healthy and fed is supported and assured.

And I will pick up the hammer and stake and return to DC if the stupid Harvest Box vampire even peaks out of its coffin again.

Why the Proposed SNAP Changes Won't Work

What did your grandmother cook?

If you grew up in Oklahoma like me, it was meatloaf, mashed potatoes, buttered carrots. Or spaghetti night, with salad and green beans. Or summer Saturday barbecue, with corn and cucumber salad.

Problem is, I’m a white male Baby Boomer, and to generalize those meals across American families today is nothing short of arrogant. The recipes that defined my life were totally different from those for my Louisiana-born wife or my New York-raised college friends.

There’s a reason that an American grocery store carries 38,000 items: American families are diverse, and what they eat is as diverse as their backgrounds. And that diversity is growing, both in the ethnicity of American families and in the food palates of all shoppers.

Hummus, avocados, Greek yogurt, bagels – they’ve all become top-selling SKUs across the United States, even though the those products hail from vastly different places.

GOVERNMENT’S NOT THE ANSWER

That makes it all the more unreasonable that the federal government wants to overhaul the Supplemental Nutrition Assistance Program (SNAP) with a “Harvest Box” sent to economically challenged homes, filled with shelf-stable items that the government decides families should eat. How could an administrator decide what’s going to be good for millions of families in need? The reality is that very few items in your local grocery store are common to all shoppers. In fact, most items have a basket penetration of 1 percent or less.

Let’s put aside for a moment, however, the argument that a one-size-fits-all approach to SNAP is bad for American families in need and explore instead the problem that the government is trying to solve: the expense and inefficiencies behind the program. The administration estimates that substituting food deliveries for food assistance payments would save $129 billion over a decade. That’s all well and good for the American taxpayer, but the logistician in me has a hard time understanding how we gain efficiency within SNAP by moving the distribution of food from the private sector — and the most efficient food distribution system in the world — to a government layered with bureaucracy.

Each day, our industry sources, ships, warehouses and distributes to local grocery stores in neighborhoods across America, allowing American families to get the widest selection of products at just pennies over cost. At IGA alone, we have more than 1,100 U.S. family-owned grocery stores, located from downtown Seattle to the deep rural south; from federal Indian reservations to the Florida Panhandle. We supply fresh eggs, milk, bread and produce daily to the most remote locations imaginable. Even Amazon Prime won't support every neighborhood we serve. That begs the question, how will the U.S. government do it, and save $129 billion to boot?

Let’s work to take cost out of SNAP; let’s reduce waste and improve nutrition. But please, please, let’s use logic, real data and good reason to come up with real solutions that don’t involve the word 'box.'

According to a USDA representative, the Harvest Box proposal was directly modeled after the Commodity Supplemental Food Program (CSFP), a program for economically challenged seniors in which states order boxed foods from a preset list, and develop their own delivery and distribution networks.

But modeling a new program after an existing one only makes sense if the original program works well, and as The Washington Post recently noted, the CSFP is fraught with flaws.

Let’s start with the infrastructure issues. In most states, these senior-assistance boxes are packed by volunteers and nonprofits that are subcontracted by the state, and then seniors are tasked with picking up their boxes from a central location.

Yes, let’s work to take cost out of SNAP; let’s reduce waste and improve nutrition. But please, please, let’s use logic, real data and good reason to come up with real solutions that don’t involve the word “box.” Our industry, our communities — and most importantly — the people we serve are all depending on us.

Now let’s assume that the proposed SNAP Harvest Box is managed in much the same way. So, keeping in mind that we’re talking about serving tens of millions of people as opposed a few hundred thousand served by CSPF, are we going to rely on volunteers and nonprofits to pack the Harvest Boxes, too?

Then there’s the food itself. CSFP, like the Harvest Box proposal, provides seniors with minimal or no choice in the foods they receive, and that becomes an even more glaring problem when you consider cultural and dietary restrictions. In a box meant for seniors, the USDA doesn’t currently supply dairy substitutes, gluten-free grains, or low-sugar juices for diabetics.

HARMFUL, NOT HELPFUL

Which brings us back to food choice versus food curation. One of the objectives for the Harvest Box seems to be a desire to shift poor families from poor choices to healthier ones. Frankly, most Americans could use this sort of assistance; it isn’t just poor families that are facing the epidemic of obesity, diabetes and other calorie-related health problems that plague our nation.

But assembling and shipping food is about the worst way to address the problem of nutrition. The items that store and ship the best are often sodium-heavy, chemical-laden and highly processed — in short, the kinds of foods designed for shelf-stability rather than nutritional value. And that’s then assuming that the families would even want to eat them.

So, will the Harvest Box increase efficiencies and lower costs in SNAP? I contend that it won’t. And more than that, it has the potential to hurt the very people who most need our help.

Want one more reason it won’t work? Let’s stop and think for a moment about the economic impact of cutting grocers out the equation. IGA alone stands to lose up to $2.7 billion of our $8 billion in U.S. sales, which would mean the closing of hundreds of stores. Shutting down what is often a primary source of employment in rural towns across America is clearly not the way to get people off SNAP.

Why independent retailers should care about net neutrality

Net neutrality. Right now it’s a big focus in a particularly busy news cycle. But if you’re like most retailers this month—crazed with holiday marketing, merchandising and selling—net neutrality is probably not top of mind, no matter how many times the term is blasted by the news media.

But it should be—and likely not for the reasons you think.

On December 14th, the Federal Communications Commission (FCC) will vote to dismantle current net neutrality rules that require Internet service providers to treat all data on the Internet the same. And while freedom of speech and protecting the public's internet rights to stream movies and download music for free may be what people are talking about most, in reality, that’s not even the real story here.

The real story is about the telecom industry, and how killing net neutrality will give them license to charge new internet gateway premiums that accelerate their margins and discriminate against smaller players on the Internet.

You see, today the FCC legislation equalizes the playing field for everyone online. High volume, low volume, it doesn't matter. Big brands and entrepreneurs have the same access to the web, regardless of the scope of their products and services.

But if the net neutrality rules are struck down, that means the telecom giants can charge premiums any way they want. In theory, big, high traffic users like Amazon or Netflix would be charged more because they suck up a lot of bandwidth. But if you take a step back and think about the way business really works, we all know it’s pretty unlikely that the heavy hitters will be the ones actually taking the hit.

Big brands with massive leverage and enormous scale don't pay the tolls—the little guys do. Netflix, Google, Amazon and large retail chains engaged heavily in e-commerce will be able to keep their costs low as telecom giants instead hike up the fees for smaller internet users. Scale almost always rules in economic models, and this space is no different. 

The telecom industry runs gross margins in the 80%+ range, with net profits usually 11% or more. Do you really want independent retailers with net margins between 2 to 4% to help out the big telecom players?

It’s true that right now the grocery industry isn't heavily dependent on e-commerce. But that will change, probably faster than anyone thinks. And do we really want another situation where big brands like Walmart get yet another competitive advantage?

If you’re an independent retailer, you need to care about this issue, and do everything in your power to keep net neutrality alive.

Call your representatives and the FCC directly to tell them net neutrality rules are essential to the health of independent retailers. 

You have a powerful voice. Now’s the time to use it.

 

Why Amazon is good for the grocery industry

 

During a recent panel study, I listened to shoppers discuss their changing grocery habits. Adults from mid twenties to mid sixties discussed topics like loyalty, convenience, value. And it was hard to get them to stop talking about Amazon. 

As we have been seeing in research for years, shoppers generalize their expectations from one retail service to another.  If a person has a transformative experience with say a new, better way to order tickets, or pick their airline seats, or check into a hotel from their mobile phone, they begin to judge other kinds of retail experiences through this new lens. 

Think about how much banking has changed in the last ten years. How many times have you actually had to go into a physical branch? What about buying a car? Making reservations for dinner in a new city? Booking a European vacation? Checking to see what's playing at a local theater?

All of these experiences are radically different. And radically better. We are faster, more informed, better shoppers because of digital technology. And we could never go back. Remember looking in the newspaper for movie start times? Having to get your airline tickets mailed to your home? Or even stumbling through record stores, trying to find albums you might like based on just the recommendations of the kid at the counter? 

Now reflect on your grocery shopping habits. Certainly things have changed. Shoppers might be including a dollar store in their weekly routine, or expanding beyond just their grocer. And recently , we've seen direct to home meal services emerge, which certainly does impact shopping.

But for the vast majority of transactions, and the vast majority of shoppers, the grocery experience is remarkably unchanged from that of our parents. Same busy parking lot, same cart with a wobbly wheel, same hand written end cap signs, and even the same college football beer promotion sweepstakes. 

As industry insiders, we might bristle at that paragraph. We've invested billions in logistics improvements, self check out, electronic label printers, payment terminals and POS upgrades. 

But almost all of our capital has gone to inward-facing technology. To the shopper, these improvements are either invisible or marginal. To them, our industry seems amazingly stagnant.

To the shoppers in this recent panel, the innovator in our industry appeared to Amazon. They were amazed at same and next day; they loved the idea that they could find almost any product they wanted with just a few clicks; they appreciated that Amazon prompts them with items that other shoppers have bought; and they loved previous purchasers reviews. 

As a brick and mortar retailer by heritage, I admit that I cringe inwardly when shoppers praise a company that gets held to tech start up financial standards (they aren't expected to hit the same earnings goals as mature businesses) to a traditional retail brand. After all, physical retailers have to to increase market share year over year and do it *profitably*. The game doesn't really seem fair.

But then I reflect on what the consumers are saying. And the things they like about Amazon aren't really new at all. Product recommendations and "you might also like" suggestions - couldn't we figure out a way to do that in store, on shelf? What about previous purchaser reviews - would it really be that difficult to bring ratings to a tag, package or a shopper's phone when they tap an item? 

And even home delivery: We know it can be done. Retailer's core skill sets include merchandising and logistics... we are the people who know how to move products from one place to another fast, efficiently, safely. 

So yes, I think Amazon and its push into grocery is good for bricks and mortar retailers. It is a call to action, but it isn't Amazon that's calling; instead it's our owns shoppers saying, "serve me better, ramp up your game, service my needs in new, more creative ways."

Great retailers have always been great listeners. Like never before, it is time to seek out our shoppers, and tune into to what they are seeking. 

New site, new blog, new era

Welcome to the Fire in the Zoo website, and my blog. If you are here, you are already interested in the topic of shopper marketing. Whether you are from an agency, or a retailer or a brand, you spend your days trying to figure out how to get people to consider and buy your products. 

Shoppers today have more information, more access to product data, easier ways to learn about product choices than at any time before. And since many of those interaction are increasingly digital, we can see what they are doing. It;s like being able to hover over their shoulder, watch them make choices, and see what truly drives choices and what is simply noise in the system.

This blog will be a place to advance this dialog. Look for interviews with industry experts, conversations about emerging shopper science and new tools to listen to and respond to emerging shopper needs. 

I will also try and comment on marketing that seems to be shopper focused, directed toward the needs of those who are in the path to making a purchase decisions.