Opportunities to Win: Insights from NGA’s Executive Conference

By Jim Dudlicek / NGA Managing Editor and Content Strategist

Put a few hundred independent grocery leaders in a room for three days, and some keen insights into the business are bound to emerge.

That's exactly what happened during the National Grocers Association's annual Executive Conference and Public Policy Summit, held Oct. 28-30 at the Fairmont Hotel in Washington, D.C.

In many ways, the three days of education and networking were building toward the closing session, during which some of the industry's top executives discussed, among other things, what NGA President and CEO Greg Ferrara called "opportunities to win."

Ferrara moderated a panel discussion that featured Emily Coborn-Wright, SVP of growth initiatives at Coborn's Inc.; Matt Echols, chief corporate affairs officer at UNFI; Mike Stigers, president of Wakefern Food Corp.; and Brad Thomas, customer VP at Kimberly-Clark Corp. Their wide-ranging discussion explored a host of topics, from tech to labor to advocacy.

Coborn noted that while e-commerce is growing, it's not cannibalizing her company's brick & mortar business: "We want our shoppers to shop both in store and online. They're worth twice as much to us." She outlined Coborn's strategy of operating "grocery campuses" anchored by supermarkets and "cross-pollinated" with franchise businesses designed to drive traffic to their grocery stores.

Echols said UNFI's top priority moving forward is its fill rate; the company will be working on supply chain resilience and how to fully optimize its network for the benefit of suppliers and retailers.

In the coming year, Thomas said, K-C plans to invest in its value brands, as technology has allowed the company to remove costs and lower some prices. In fact, the difficulty in attracting talent for its manufacturing and distribution sites has led to enhanced automation at these facilities, Thomas explained: "Tech is really a big deal for us."

All acknowledged the need for talent development and retention. For its part, Stigers said Wakefern's top budget priority is training its teammates, "to invest in them so they'll invest in the company and stay there … We're seeing strong growth of people who want to be future leaders of the company." Wakefern offers a retail management certification program that provides opportunities for employees to pursue college-level education, Stigers noted.

Echols noted that turnover at UNFI has dropped to historically low levels as employee training has increased: "The key is listening to what is important to them."

Coborn asserted that compensation must go beyond the "table stakes" of a good base salary to attract and retain a skilled workforce. Noting that inflation is a challenge for employees as well as customers, Coborn's boosted its employee discounts.

The economy's impact on the industry was illustrated with an analysis of the latest FMS Solutions/NGA Independent Grocers Financial Study, presented by FMS President and CEO Robert Graybill. The report revealed average net profit among independent operators at 1.4%, a return to pre-pandemic levels, and an EBITDA decline to 2.77%, underscoring challenges in the independent grocery sector.

Graybill led a panel discussion that included Richie Morgan, executive chairman of California's North State Grocery Co.; Ray Sprinkle, president and CEO of URM Stores Inc. in Washington state; and Paul Rowton, EVP at Arkansas-based Edwards Food Giant.

How can grocers drive sales with cash-strapped customers?

Morgan said that while we're seeing lower prices on some commodity items and specials on produce, independent retailers should lean into their strengths: "Create a better shopping experience - shorter lines, be personal. It actually does make a difference."

Rowton noted that "customers are trading down" from regular format supermarkets to cost-plus stores. He suggested focusing more on private label and, in prepared foods, offering smaller portions for better price points.

Sprinkle advised contending with a tight labor market and higher expenses by upgrading warehouse operations for efficiency and reassessing routing systems to eliminate empty returns.

Higher utility rates "aren't going to come down," Rowton acknowledged. "You have to look at other ways to become lean."

Most important to reducing shrink, Morgan said, is imparting to employees what shrink really is versus their perception of it. He stressed the importance of ordering properly and noted that automating the inventory process has helped.

Sprinkle noted that URM has store counselors that work with member-owners on inventory, merchandising and reducing shrink, as well as dedicated produce delivery to maintain cold chain integrity, which extends shelf life and reduces shrink.

Scott Moses from Solomon Partners tackled the broad view of the marketplace and how independents stack up against the larger players with a comprehensive update on the state of the industry. Moses began by pushing back on allegations of price gouging by some lawmakers, noted that grocers are not responsible for food inflation, an issue he said has been "politicized in a way that's awful and pretty ignorant."

Price-gouging accusations undermine confidence in the industry, he said, which has been beset by supply chain disruption, the impact of the Russia-Ukraine war on some products, and manufacturers passing cost increases on to retailers and consumers.

Continued splintering of the grocery market among competing channels like big-box retail, discount, drug, club and dollar stores has resulted in traditional supermarkets today accounting for only five of the top 15 food retailers, down from 10 two decades ago, Moses explained. Growth of these other channels - particularly by Walmart, Amazon and Costco - has accelerated since the pandemic.

In fact, Moses noted, national and discount grocers control 66% percent of the grocery market, with Walmart alone responsible for 30%, nearly equal to all supermarket grocers combined.

Moses likened changes in the grocery market to the department store landscape of the past 30 years, suggesting that in the next 10 years, the market share of national and discount grocers could swell to more than 75%.

The discussion continued as Moses led a panel that featured Joe Kirby, CEO of Imperial Distributors, and Amy McClellan, SVP and chief customer officer at SpartanNash.

McClellan asserted that winning over customers isn't only about price, noting that many retailers served by SpartanNash are making significant investments in refreshing their shopper experience. "Those are the independents that are thriving and will be for many years," she said. "How we show up in the communities makes a difference."

Kirby acknowledged that while independents are not going to beat giants like Walmart on price, they have a "game-changing opportunity" to make a difference with their team members, by attracting and training a good workforce to deliver a high-value shopping experience.

McClellan said the key is "creating an environment where people want to do their best work" … and "bring[ing] our scale as an industry to provide an experience as good" as the big players.

Additionally, independent need to leverage customer data to be able to offer personalized deals, "listen to our customers … [and] "knowing our customers by name and what substitutions they like."

For the future, McClellan anticipates "great things if we stay focused on meeting shoppers' needs. … We are the heartbeat of many communities. [Grocers should] create awareness for what we do and jobs we create … stay focused on the shopper. … Independent grocers will continue to evolve. As long as we focus on the consumer, we'll continue to be super relevant."

Kirby added, "Food is a very personal, local experience. We need to continue to surprise and delight shoppers with good value."

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