Perspective on the “” Revolution

by

Lynn Callison Executive Director Rocky Mountain Food Dealers Association Lakewood, CO

The subject of this panel today is inter- entitled, America the Bountiful, How the esting, “Consumers in Search of Value . . . Supermarket Came to Main Street,” which I Reflections on the Value Added by the believe gives a broad, but most concise over- Changes in Food Distribution.” ~t is especially view of the value added by changes in the interesting when you look at the whole “super- food distribution industry that I have found, market” revolution from my perspective. Written in dialogue form by John Mugar, the preface reads As executive director of the Rocky Moun- tain Food Dealers Association, I have spent Never did I dream in 1925 while the past ten years reading, going to seminars bagging potatoes from 100-pound burlap and working in the field with grocers. sacks in my uncle’s Little oar membership includes the whole gambit-- in Watertown, Massachusetts, that to- the independent operator, the chain, the ware- day’s would evolve from house store, the “Mom & Pop” operation, and such beginnings. the convenience store chain. And let me tell you, it is an exciting industry and those who At that time, most communities are involved in the food distribution industry had the following types of food retail- can be proud. The American food distribution ing. industry is a model for the world --a “showcase for democracy.* - A national chain like A & P, together with a regional chain such as Today, consumers give supermarkets high First National Stores. They were small marks, including the highest rating for quality stores, selling canned goods, dairy prod- service in two 1986 polls by the George Gallup ucts, bulk cookies, bread and a few organization. Asked to rate various businesses hardy fruits and vegetables in season. on a scale of one to ten, 58 percent gave supermarkets a high quality rating, de~lned as - A meat market that also sold a eight or more. This is the surest sign of few canned goods, a small variety of significant change since the industry’s turbu- produce and bread. lent days in the 1930s, when its standing with consumers was low. - A typical corner fruit store with a stem of bananas hanging in the win- But maybe I’m getting ahead of myself, dow, Let me read to you the preface of a new book published by Food Marketing Institute in - A spa with its marble-topped cooperation with Beatrice Companies, Inc., soda fountain and glass canaly jars.

February 87/page 36 Journal of Food Distribution Research - A horse-and-wagon peddler hawk- the Steinbergs from Montreal, George ing his specialty--either bakery products, Jenkins of , A. D. Davis of Winn- fruits and vegetables, fish or ice. And Dixie, John Peachey of Loblaw, and the milk wagon was a common sight Frank Lunding from . We all everywhere. learned so much from each other. We were thirsting for knowledge and know- Many items came in bulk form; how to better serve consumers and de- potatoes in barrels and later in 100- velop the best stores possible. pound sacks, sugar in 100-pound cloth sacks, molasses and sauerkraut in bar- The other association that contri- rels, bacon in slabs, and butter in tubs. buted much was the Grocery Manufac- turers of America. Our industry was During the 1930-1940 era, the aver- fortunate in having the enlightened age grocery store, though still small, leadership with men like Jack Logan of doubled in size--carrying an expanded the National Association of Food Chains variety of canned goods, meats, fruits and Paul Willis of the Grocery Manu- and vegetables, and bakery products. facturers of America. They were per- Some independents, desiring to offer sistent, capable men with vision. It more services than the chains, expanded was at their seminars and conventions their credit and delivery business. that retailers, wholesalers, suppliers and manufacturers met and soon realized In the business world, the grocer that we all had the same customers -- was considered insignificant. In 1935, I the consumer. The manufacturers and wrote a college paper on the grocery suppliers listened to our needs. Out of business. Wanting to get all the infor- this process evolved our present stores. mation possible, I went to the Harvard Business School library. To my amaze- The results have been remarkable. ment, the only available published The American consumer’s food cost as a material was Chain Store Age magazine. percentage of wages is the lowest in The professor of marketing dealt only the world. More than anything else, with department stores. The grocery our supermarkets say to the world, “This business had not yet attracted the is America.” attention of academia. If historians thousands of years In the late 30’s, self-service groc- from now wanted to know about our ery departments were springing up culture, they would find the answers in around the country. Self-service became reading about our present supermarkets. the magic idea that caught the imagina- tion of many grocers. What helped its Before Iookjng into the future, I initial impetus was the National Associa- have one “what-fi What if the politi- tion of Food Chains and the newly- cians of the ’30s had been successful in formed Super Market Institute. To- their anti-chain legislation, which was gether, they became the catalyst that supposed to protect the little grocer? brought us all together to learn more What would our grocery stores be like about the self-service business. today? Certainly not what we enjoy today--in conveniences, service and the It was here that we met the most bountiful supply of food in the Cookes of , the Cohens of world! , the Weingartens of Houston, Wayne Brown of , Joe In the future, my wish is that the Bettendorf from St. Louis, new leaders in our industry derive as from Portland, Claude Edwards from much excitement and satisfaction in , Syl Goldman from Oklahoma, their daily work as we did.

Journal of Food Distribution Research February 87/page 37 I hope that you agree with me, that this The industry also developed a universal com- brief overview capsulize the history of the puter model for f imncial analysis- -the Unified food distribution industry and helps you envi- Direct Product Profit (DPP) method. Other sion the dramatic changes between the grocery cooperative initiatives improved the industry store of not-too-long-ago and today, efficiency with standard pallet sizes, invoices, order forms and trade practices. The supermarket today is viewed best as a culmination of many changes in the food The retail food distribution industry is distribution industry that now delivers food to as competitive today as ever. We are still the tables of America in routine fashion. undergoing a revolution to a degree at the Chains provide the efficient distribution net- retail level today. Or should I say, we are work; independents and wholesalers, the mer- continuing to evolve. Smaller independents chandising prowess; manufacturers, mass pro- are finding that they can meet consumer de- duction and packaging. But the elements did mands as well as, if not better than, the not come together easily. They developed chains. New formats ranging from the most piecemeal and, in many cases, were resisted barren of services and product, a box store, fiercely by those who felt at a competitive to the newest craze, the niche marketer. The disadvantage. niche marketer specializes in whatever he feels the consumer wants in the area he opens The revolution of the thirties stirred his business. enmity even within the food industry itself, pitting chains against independents, manufac- The warehouse store, the upscale store, turers against wholesalers, farmers against the natural store--ail are examples of a mar- manufacturers. Charges and counter-charges keter meeting the needs of a particular seg- poured into the news media, the courts, state ment of the population. These marketers are legislatures, Congress, the Federal Trade determining what value is to today’s consumer. Commission, the U.S. Department of Justice And the one thing they are finding is that and even into the White House. value means different things to different people and there is plenty of room for every- The roles of the National Association of body in providing that value. With the forums Food Chains and Grocery Manufacturers of that the associations have provided, there America were pivotal in ending the chain store exists the continuing opportunity for retailers revolution of the thirties. Since many of the and other distributors to sit down to learn changes sparked contentious public issues, the and share with industry people. This learning associations became central participants in the and sharing is continuing to refine the re- debates over government policies, regulations tailer’s ability to provide real value to the and laws to resolve the issues. These organ- customer. izations orchestrated industry positions before government agencies, the news media and we most important thing that the many special interests. associations did was to take a broader view of events and issues, embracing the farmer They helped resolve issues by bringing and the ultimate consumers--the complete together opposing parties and encouraging chain of distribution from the field to the constructive discussion. In doing so, they warehouse -to the supermarket to the dinner inaugurated an era of constructive industry table. relations among food executives. They worked especially hard to improve This cooperative approach became the relations with the farm community. The foundation for such stunning industry achieve- National Association of Food Chains won many ments as the Universal Product Code, scanning friends in agriculture by initiating a series of and the Uniform Communications Standard, more than 400 programs to alleviate serious which enables computer-to-computer communi- product surpluses. Today, some industry lead- cation between food suppliers and distributors, ers believe that similar programs could allevi-

February 87/page 38 Journal of Food Distribution Research ate current farm surpluses far better than Whether we are or are not remains a big price-support and paid-diversion schemes--and question. Associations will again play an im- at a fraction of the cost to taxpayers. portant role in answering the question. What they do will determine the future of this The value that the consumer is receiving amazing food distribution industry. Involve- today is a result of food industry politics-- ment in that process is critical because our not politics in the narrow sense, but in the ability to provide value to the consumer de- broader one: relations among consumers, in- pends on such political realities. dustry and government.

Today we are facing another big question that must be answered if this trend is to continue. You, who are interested in this industry, who believe that we have provided consumers with value, must make a big deci- sion in the near future. The chief of the Federal Trade Commission has made statements that the Robinson-Patman Act, that act that forbids price fixing, should be abolished, and that all of the nation’s anti-trust laws should be scrutinized to determine whether we are stifling the further development of the free enterprise system.

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