A MessAGe FRoM youR ChAIRMAN

As one door closes, another door opens: a saying which proved true in 2009/2010 as we ushered an old decade out and a new one in. A similar transition in leadership transpired with the National Grocers Association (N.G.A.). After 28 years of dedication and leadership to the independent grocery industry, President and CEO Tom Zaucha transitioned the organization to Peter Larkin. Larkin is the former President and CEO of the California Grocers Association (CGA). On behalf of the N.G.A. Board of Directors we say welcome Peter! Time and again, the independent grocers have been challenged by doubters, regulators, mother nature and more. Yet as each challenge is tossed at our industry, we fi ght back. The National Grocers Association steps forward and tells our story – the story of thousands of innovative retailers and their employees across the country who strive every day to serve the communities in which they live. The independent grocers have a voice and the National Grocers Association is here to get that voice and message heard. Together this year, we advanced the cause of independent grocery retailers and wholesalers on many fronts – from regulation to legislation, from operational issues to food safety. One of the things I am most proud of is the way grocers from different states came together to speak with one voice and raise the profi le of today’s independent community-focused retailer. In the following pages, you will learn what your Association accomplished in 2009/2010. I expect even greater success in 2011. If you are not an active N.G.A. member, I encourage you to get involved. Join an executive council; attend the annual convention and other networking events and conferences. Don’t just belong to N.G.A., be a part of your Association. If you are not a member, now is the time to join. Visit N.G.A.’s website, www.nationalgrocers.org and view our membership materials. Find out why you need N.G.A. It is an investment well worth your consideration.

Chris Coborn N.G.A. Chairman of the Board President and CEO of Coborn’s Inc.

tABle oF CoNteNts: Letter from the Chairman ...... 1 Who is N.G.A.? ...... 2 Who Do We Speak For? ...... 2 What Do We Speak For? ...... 2 Convention - Communicating the Value of Our Industry ...... 6 Educational Conferences and Events ...... 9 Government Affairs - Strengthening the Independents Voice ...... 11 Communications & Research – Connecting the Industry ...... 16 Industry Affairs - Supporting a Stronger Commitment to Service ...... 17 Operational Programs and Services - Increasing the Effectiveness ...... 21

1 ✹ 2010 National Grocers Association Year In Review Who Is N.G.A.?

American consumers have benefited from the most diversified food distribution systems in the world, and independent community-focused retailers and wholesalers have historically been the cornerstone of that diversity; providing variety, selection, competitive prices and value for the American consumer. For 28 years, the National Grocers Association (N.G.A.) has been the voice of independent community-focused retail and wholesale grocers before Congress, the White House, regulatory agencies and the food industry as a whole. N.G.A. is the only industry association devoted exclusively to the needs of the independent sector.

Mission Statement To ensure independent, community-focused retailers and wholesalers the opportunity to succeed and better serve the consumer through its policies, advocacy, programs and services.

Philosophy Statement To promote diversity in the marketplace through a vibrant independent sector, and thereby increase consumer choice in price, variety, quality, service and value.

N.G.A.’s Values Association Value. Every key segment of the grocery industry deserves and will demand full representation and service. N.G.A. is the only industry association devoted exclusively to the needs of the independent sector.

Independent Retailer Value. The existence of independent retailers is a central requirement of a competitive grocery market: independents are the major source of retailer innovation; they focus on their communities, their customers and their associates; they are the first to respond to the constantly changing needs of their diverse marketplaces; they preserve consumers’ options on product selection, prices, product quality, service levels and store formats.

Wholesale Distributor Value. To succeed in today’s every-changing business environment, all retailers must achieve the necessary economies of scale to compete with the industry’s mega-companies and other classes of trade. For the majority of independents, parity is achieved through a vibrant wholesale distribution system that buys competitively, distributes efficiently, merchandizes creatively and provides the necessary services to help retailers succeed.

2010 National Grocers Association Year In Review ✹ 2 Who Do We Speak For? N.G.A. Staff N.G.A. Executive Staff N.G.A. is the national trade association representing the retail and wholesale grocers that comprise the independent Peter J. Larkin sector of the food distribution industry. Along with President and CEO affiliated associations, manufacturers, service suppliers Frank DiPasquale as well as other entrepreneurial companies that support Executive Vice President and N.G.A.’s Philosophy and Mission. Executive Director of GREF The meaning of “independent retailer” is more a question of ownership and philosophy of operation, rather than Tom Wenning number of stores or type of format. An independent retailer Executive Vice President and General Counsel is a privately owned or controlled food retail company operating a variety of formats. A few members are publicly N.G.A. Staff traded, but with controlling shares held by the family, and others are employee owned. Independents are the Anne C. Allnutt true “entrepreneurs” of the grocery/food industry and are Graphics Production Manager dedicated to their customers, associates, and communities. Jennifer Brant Manager, Registration and Meeting Services Kristen Comley Executive Assistant to the President and CEO Janice Coon What Do We Speak For? Membership & Database Manager

N.G.A.’s Working Agenda – 10 Keys Michelle Cooper Administrative Assistant 1. Effectively compete against supercenters and Christine Cunnick other power buyers. Director of Communications 2. Repeal the estate tax. Irene Dele 3. Create a level playing field. Sales Coordinator 4. Reinvent the supermarket as a lifestyle Debbie Etter destination center. Membership Coordinator 5. Win back center store sales. Greg Ferrara 6. Recruit the next generation of quality managers Director of Government Affairs and entrepreneurs. 7. Retailers/Wholesalers must operate more as a Jessica Harper virtual chain. Manager, Industry & Associate Member Relations 8. Take full advantage of all available technology. 9. Create new synergies that achieve more Su Li competitive economies of scale. Accounts Receivables 10. Access to competitive growth capital. Perry Maison Controller Irene Pound Receptionist Kim Robinson Administrative Assistant Karen Voorhies Director, Concept Show Floor Mary Wallace Director of Education & Meeting Services

3 ✹ 2010 National Grocers Association Year In Review National Grocers Association 2010 BOARD OF DIRECTORS N.G.A. EXECUTIVE COMMITTEE OFFICERS Chairman Immediate Vice Secretary/ President of the Board Past Chairwoman Chairman Treasurer and CEO

Christopher Coborn Carole Bitter Joseph Sheridan Richard Niemann, Jr. Peter J. Larkin Coborn’s, Inc. Friedman’s Wakefern Food Corporation Niemann Foods, Inc. National Grocers St. Cloud, MN Freshmarkets Keasbey, NJ Quincy, IL Association Butler, PA Arlington, VA EXECUTIVE COMMITTEE MEMBERS

Neal Berube Roger Collins Nicholas D’Agostino, III Kevin Doris Associated Food Stores, Inc. Harp’s Food Stores, Inc. D’Agostino Supermarkets, Inc. Gerland’s Food Fair Salt Lake City, UT Springdale, AR Larchmont, NY Houston, TX BOARD MEMBERS

Martin Arter Larry Collins Dave Jones James Nilsson, Jr. Edward Roche Affiliated Foods Midwest Collins Family Markets Kellogg USA, Inc. Geissler’s Supermarkets, Inc. Roche Brothers Norfolk, NE Philadelphia, PA Battle Creek, MI East Windsor, CT Supermarkets Wellesley, MA Michael Bourgoine James Denges Kathy Kuzava Gerard Norkus Associated Grocers of CEO, President Georgia Food Industry Norkus Enterprises, Inc. James Rogers New England Central Grocers, Inc. Association Pt. Pleasant Beach, NJ Food Ind. Alliance of Manchester, NH Joliet, IL Smyrna, GA New York State Jack Porter Albany, NY Michael Bozzuto Jerry Garland George Lankford Kehe Distributors, Inc. Bozzuto’s, Inc. Associated Wholesale Affiliated Foods, Inc. Romeoville, IL Van Sapp Chestire, CT Grocers Amarillo, TX PepsiCo, Inc. Michael Provenzano, Sr. Kansas City, KS Purchase, NY Christopher Brown Jay Lawrence Pro Ranch Markets Nash Finch Company Janel Haugarth Lawrence Brothers Ontario, CA Trygve Solberg Minneapolis, MN SUPERVALU, Inc. Sweetwater, TX T.A. Solberg Company, Inc. Minneapolis, MN Barry Queen Minocqua, WI James Brown Robert Ling, Jr. Queen’s Stores/Price Doc’s Food Stores, Inc. Eric Hench Unified Grocers Chopper Dean Sonnenberg Bixby, OK Chief Supermarket, Inc. Commerce, CA Paola, KS URM Stores, Inc. Defiance, OH Spokane, WA Jerry Brown Roger Lowe, Jr. Ron Rehkopf Unilever Kenneth Hubbard Lowe’s Supermarkets Rehkopf’s Enterprises, Michael Stone Trumbull, CT Western Supermarkets, Littlefield, TX Inc. Mollie Stone’s Markets Inc. Texarkana, TX Mill Valley, CA Cal Miller James Buchanan Birmingham, AL Laurel Grocery Associated Grocers of James Ried Donald Weiss Company, LLC Dean Janeway Florida Olean Wholesale Grocery WiseWay SuperCenters London, KY Key Food Stores Pompano Beach, FL Cooperative Merrillville, IN Cooperative Olean, NY Juvenal Chavez, Sr. Staten Island, NY Mi Pueblo Food Center San Jose, CA Ex-Officio Members Mark Batenic Joseph H. Campbell, Jr. Thomas Haggai Dean Janeway IGA, Inc. Associated Grocers, Inc. IGA, Inc. Wakefern Food Corporation Chicago, IL Baton Rouge, LA Chicago, IL Keasbey, NJ

Michael Needler Charles Pilliter Steven C. Smith Fresh Encounter Trader Joe’s Company K-VA-T Food Stores, Inc. Findlay, OH Monrovia, CA Abingdon, VA

2010 National Grocers Association Year In Review ✹ 4 N.G.A. Auxillary Groups

Women Grocers of America Executive Council Meetings Women Grocers of America N.G.A. members have the opportunity to participate in (WGA) serves as an one of the executive or advisory councils set up as part information and advisory of the N.G.A. Strategic Plan. These councils are charged arm to the National Grocers with the task of identifying and communicating to the Association. WGA supports N.G.A. Board of Directors the needs of their respective and encourages the education of students pursuing a constituency and ensuring that N.G.A. satisfies those career in the grocery industry through its Mary Macey needs. Councils include: Scholarship program; supports and recognizes retail/ • Wholesaler Executive Council; wholesale women • Single Store Executive Council; in the industry • Community-Based Retailer Executive Council; through its annual Woman of the Year • Regional Retailer Executive Council; award; encourages • State Association Executive Council; all segments of • Food Industry University Coalition; the food industry • Human Resource Executive Council; to promote breast • Legal Task Force; cancer awareness and prevention; • Government Relations Leadership Council; WGA Lifetime Achievement Award and participates in • The Health and Wellness Leadership Council; and Presentation and supports the • Supplier Advisory Council. (Left to Right) Denise Beckman, WGA President presents Mildred programs offered Steward of Affiliated Foods Midwest by the National the WGA Lifetime Achievement Grocers Association. Food Industry University Coalition Award at the 2010 N.G.A. Annual Convention along with Martin Arter, Membership in WGA In 2004, with guidance and support from the National President and CEO of Affiliated Foods is open to any woman Grocers Association, the Food Industry University Midwest. affiliated with a Coalition was formed when representatives from 9 food retail, wholesale, and retailing industry university programs met. Today, manufacturing/ service supplier company or state/local the FIUC includes members from 14 university programs association that maintains membership in the National who meeting semi-annually to advance a collaborative Grocers Association. agenda of industry focused academics and research. Its mission is to leverage the combined wealth of its member’s intellectual capital, strategic perspective and Asparagus Club third party status to provide thought leadership for the The Asparagus Club was founded food industry in dealing with its most challenging issues. in 1909 to generate a spirit of • University of Alabama cooperation and fellowship among • Arizona State University members of the grocery industry. The • California Polytechnic State University club feels that there is no better way to ensure a healthy future for the • Cornell University grocery industry than by ensuring a • Florida A & M University constant stream of talented young • University of Florida people who want to make a career in this fascinating and • Louisiana State University ever-changing business, particularly in the independent • Michigan State University retail and wholesale sector. Since 1990, the Asparagus Club Scholarship Program has provided over $850,000 • Western Michigan University in scholarships to students preparing for careers in • University of Minnesota the grocery industry. In just the past five years, the • Oklahoma State University Asparagus Club awarded over $100,000 to young men and • Portland State University women who have set out on the road to careers in the • St. Joseph’s University industry. • Texas Tech University

5 ✹ 2010 National Grocers Association Year In Review CONVENTION Communicating the Value of Our Industry

Thanks to the support and dedication of N.G.A. members, the 2010 National Grocers Association Annual Convention and Supermarket Synergy Showcase, February 9-12, 2010 at the Paris Las Vegas Hotel, was the best Annual Convention we have ever had. We are proud to report that the numbers for this convention went up in every category, most noticeably in attendance and revenue. These results are truly an achievement during these challenging economic times and a testament to the strength and vitality of the independent grocery sector and N.G.A. This convention was also very special as we honored the career of Tom Zaucha who had served as N.G.A.’s distinguished President and CEO since the founding of our great Association in 1982. Convention Highlights

Opening Keynote Session - Former President Co-Chief Executive George W. Bush Officer of Grocery Outlets and The political and Frank DiPasquale, economic events Executive Vice of 2009 marked a President of the fundamental and National Grocers unpredicted change Association. The for our country. In Wednesday’s Panelist discuss consumers group discussed and what makes their companies different the Opening Keynote a number of key within their marketplace. Session, Former Former President George W. Bush addresses the attendees at the findings from the President George Opening Keynote Session. just released 2010 N.G.A. Consumer Panel Survey, as well W. Bush discussed as the need for retailers to spend time talking with their how he responded to the numerous challenges he faced consumers and not allowing the federal government to while in office, based on the basis of core principles tell them what decisions to make. he has held throughout his years of public service, and that have guided America since its founding: Freedom, Opportunity, Responsibility and Compassion. Former Thursday General Session - General Pace: N.G.A. President and CEO Tom Zaucha then moderated a We All Answer to Someone: Leadership Up one on one discussion with President Bush on a variety and Down of topics from security home and abroad, the economy, jobs and more. President Bush said his prescription for Retired General Peter Pace, USMC, healing the economy would be to cut taxes for small former head of the Joint Chiefs of businesses “like so many of you grocers, to make sure Staff under President George W. Bush, the people who create jobs have money to expand their said grocery store operators are doing business.” their part to ensure the security of the United States by keeping the economy going. At the Thursday General Session, Wednesday General Session - Marketplace Pace said, “We couldn’t have a free Leadership and Innovation: Companies That nation without a good, strong military, Retired General Make a Difference Peter Pace, USMC and we couldn’t have a good strong addresses the military without a strong economy. Phil Lempert, the SupermarketGuru, led a lively panel attendees. discussion with award winning retailers who have Your businesses provide livelihoods successfully made a difference in their marketplace. and sustenance in so many ways for The panelist included: Jeff Brown, President and CEO of so many people, and I know how much those of us who Browns Family Shoprite; Joe Sheridan, Executive Vice defend this nation appreciate what all of you do for the President of the Wakefern Corporation; MacGregor Read, economy and for providing support to the armed forces.”

2010 National Grocers Association Year In Review ✹ 6 CONVENTION

Educational Programming/Workshops N.G.A.’s dynamic workshops are designed to link cutting edge educational sessions with participants of the S3 Concept Show Floor. The 2010 educational program was developed with the determination to present attendees with the most innovative information available to reinforce their knowledge and promote the growth of their businesses. From health and wellness to taking advantage of the latest technology. This year’s educational program featured more than 35 workshops focused on how members could excel in the marketplace by better controlling costs, increasing sales, and enhancing customer loyalty. In addition to the concurrent workshops held over two days, every morning started with a Super Breakfast Session. This provided attendees the chance to listen to well known, industry experts on topics that could affect their bottom line. This year Harold Lloyd entertained a packed crowd dressed up as Batman, while discussing ways to raise your deli and bakery sales. Another crowd favorite was Art Turock and his session on self-management, coaching and developing employees. Closing out the convention was Dr. Richard Harold Lloyd, aka. Batman, entertained and George of Saint Joseph’s University and his session on the mature educated a packed session of attendees on millennial and their attitudes towards food retailing. increasing their deli and bakery sales. In conjunction with Financial Management Solutions (FMS), N.G.A. presented the Financial Management Symposium, this value-added one day program consisted of a variety of issues relevant to the day-in and day-out management of a retail grocery store. Topics included: benchmarking your company; controlling costs; buying and selling in today’s economic environment; changes and updates in the 2009 tax code; using technology to communicate with the next generation of shoppers; and asset protection.

S3 Concept Show Floor The 2010 Supermarket Synergy Showcase (S3) Concept Show Floor opened to record attendance at the N.G.A. Annual Convention at the Paris Las Vegas Hotel. The show provided retailers, wholesalers, manufacturers and service suppliers an opportunity to exchange ideas with trading partners in the grocery industry and provided attendees an opportunity to watch and participate in live demonstrations, sample a large selection of new products and talk directly with the manufacturers. The S3 Concept Show Floor also offered both participants and attendees the opportunity to participate in Specialty Areas located conveniently on the show floor and developed to enhance our efforts to entertain, educate and expand our food demonstration program, while offering sampling of quality foods to our attendees. These areas included industry chefs cooking exciting entrees from their The 2010 S3 Concept Show Floor. product lines, food tasting areas that included a variety of menu items provided by N.G.A. member CPG companies, and specialty briefings where S3 participants had the opportunity to speak and / or share service related information with show floor attendees. Chef Philippe Parola was also featured again this year as he presented live interactive cooking demonstrations on both days of the show.

7 ✹ 2010 National Grocers Association Year In Review CoNVeNtIoN

sPeCIAl eVeNts

• President's Dinner and Gala • N.G.A. Best Bagger National Championship This year’s President Dinner and Gala while always a This is a year long, nationwide program in memorable event, took on a special meaning as it was which the best of the best grocery baggers dedicated to our outgoing President and CEO, Tom in the country compete for the great prizes Zaucha. A pioneer for independent community focused and the title of “America’s Best Bagger”. retailers and wholesalers in the United States, Mr. Contestants are judged on speed, bag Zaucha’s 28 years of service with N.G.A., and over 40 building technique, weight distribution between bags years within the food industry will have lasting effects and style, attitude and appearance. on the industry and ensured his legacy will remain strong and steadfast. The legendary Paul Anka, took the stage performing hit songs like “Diana’”, “Lonely Boy”, and “Put Your Head on My Shoulder.” Anka also performed the Frank Sinatra’s signature song, “My Way” followed by a new rendition dedicated and written specifi cally for Tom Zaucha.

Kyle Perry of Martin’s Super Markets in Osceola, Indiana is the winner of the 2010 Best Bagger National Championship. As the winner, Perry takes home “bagging rights” as well as the $10,000 grand prize, the coveted “Golden Grocery Bag” trophy and the Pan-Oston “Best Bagger Golden Lane” for the organization.

Paul Anka entertains the crowd. • Developing the Next Generation of leaders • store tours N.G.A.’s University Student Intern Program is a unique program that exposes college students who are pursuing Las Vegas has scores of competing degrees in the food marketing fi eld to the grocery supermarkets, from specialty and industry and gives them a fi rst-hand look into the ethnic groceries to upscale gourmet preparation that goes into producing the general sessions and conventional stores. Attendees and workshops integral to the Convention’s success. This had the opportunity to visit a variety of these retail year the program had 55 students from eleven different formats during the store tours of the Las Vegas market. universities. Students served as workshop moderators, Stores included Greenland Supermarket, Glazier Food participated and presented in workshops, toured the Marketplace, Sunfl ower Farmers Market, Cardenas Market concept show fl oor with N.G.A. members (mentors) as and The Butcher Block. well as attended trading partner business sessions, store • Grocers Awards Reception tours and council meetings with their mentors. REATIVE The Grocers Awards Reception featured C OIC the winners of the N.G.A. Creative CH E Curt Cullison, Director, Choice Awards and Progressive Grocers Independent Sales of SUPERVALU INC. Corporate Outstanding Independents Awards. AWARDS West and Joseph Della The Creative Choice Awards is a retailer Noce, Executive Vice contest that highlights the “Best of the President, of SUPERVALU INC. Eastern Region Best” in grocery merchandising and advertising and the spend time talking to two Outstanding Independents Awards honors an outstanding University Interns on the wholesaler, regional retailer and community-based S3 Concept Show Floor. retailers for the year.

2010 National Grocers Association Year In Review ✹ 8 Educational Conferences and Events N.G.A. Executive Management Conference The Food Institute Webinars This conference provides an opportunity for all segments As an N.G.A. member, you are able to enjoy of the food industry to meet on a number of industry and a discounted rate in attending webinars trade relations and regulatory issues, as well as executive hosted by the Food Institute. The Food council meetings. Held each September, the Executive Institute has webinars on topics such Management Conference offers a comprehensive as food labeling, food safety, merger educational agenda which features top executives, & acquisition activity, marketing and industry experts, and key government officials. Executive advertising of food products, and much council and committee meetings are held to discuss the more. Each session is presented by a panel of industry individual needs of their respective constituency and experts including government, retailers, CPG, service what N.G.A. can do to meet those needs. This conference suppliers, and the academic community. also features senior-level Trading Partner Business Sessions and Store Tours. N.G.A. Retail Manager Advancement Program (R-MAP) Industry Fly-In “A Day In Washington” The N.G.A. Retail Manager Advancement Program (R- Retailers, wholesalers and state association executives MAP) held in March 2010, was developed to assist in the from around the country participated in the March 2010, training of the future leaders within your organization “A Day in Washington”, sponsored by N.G.A., FMI and as well as update the skills of seasoned veterans FIAE. This event provided executives the opportunity within the grocery industry. This interactive three- to meet with their Representatives and Senators to day program provided attendees with a broad range of discuss healthcare, Employee Free Choice Act, Estate Tax, tools to leverage their organization for future success credit card interchange fees, LIFO repeal and more. Jim in an increasingly competitive environment. After VandeHei, the executive director and co-founder years of assessing the needs of the grocery industry, of the POLITICO, provided attendees with his 2010 N.G.A. and the University Food Industry Coalition Congressional election perspective. Senator Jon Kyl (R- created a educational program that covered topics such AZ), Senate Republican Whip also addressed attendees on as: marketing and customer service strategy; basic the Estate Tax issue. accounting; finance, and store operations; employee coaching and leadership; personality typing; customer behavior and expectations; integrated marketing communications; and supplier and retailer negotiation.

N.G.A.’s Center for Family-Owned Business The mission of the Grocers Research and Education Foundation (GREF) Center for Family-Owned Business is to provide a professional and interactive program for the industry aimed at teaching the operators of family retail and wholesale food businesses how to solve the crucial practical problems of: strategic business planning; improving leadership style and interpersonal effectiveness; succession planning and human resource/ N.G.A. members meeting with Nebraska Congressman. organizational effectiveness; estate planning; developing a will; provide an ongoing entrepreneurial “think tank” that retailers, manufacturers and suppliers can utilize for input and feedback and to provide a network for the family-owned business. This intense three-day program developed in partnership with Louisiana State University engages attendees to discover how to safeguard their business, protect their wealth and preserve family harmony.

9 ✹ 2010 National Grocers Association Year In Review Educational Conferences and Events

N.G.A. Executive Leadership Development Grocers Research and Education Foundation Program and Online Training Programs With over 200 graduates from 75+ companies from all In 1992, N.G.A. formed the Grocers Research and across the country and the Bahamas, N.G.A. is helping Education Foundation (GREF) as a nonprofit organization. association members to prepare the next generation of Through industry research and educational programs, the senior executives to lead the industry into the future. Foundation serves the The N.G.A. Executive Leadership Development Program industry by improving held each June at Cornell University helps retailers productivity in all key and wholesalers develop leaders from within their areas of operations organizations who can respond to business challenges in through sharing the 21st century marketplace. This program, generously information, education, sponsored by PepsiCo, provides attendees with the and research to N.G.A. knowledge, tools, resources and inspiration necessary members as well as the industry as a whole. GREF is to lead their companies and drive them to long-term comprised of eight educational centers that address success. It is a high-impact learning opportunity industry-specific operational needs. This year N.G.A. and encompassing intense, interactive instruction presented Online Training Technologies (OTT) developed a number by a mix of respected academic and industry leaders. of specialized compliance and job skills development The program is attended by those rising grocery industry programs to provide the highest quality and the most executives who have been identified for expanded cost-effective online training available. These engaging leadership and strategic planning responsibilities. courses and powerful administrative tools provide the most innovative training programs that target all levels of employees.

Epstein, Becker & Green, LLC Seminars/ Webinars N.G.A.’s outside labor counsel, Epstein, Becker & Green, LLC holds a number of seminar and webinars throughout the year that N.G.A. members can attend. This year such 2010 Executive Leadership Development Program attendees events included topics on employment and labor issues (classification of employees, wage and hour laws, independent contract status, and payment of wages); the Employee Free Choice Act, and healthcare. Some events N.G.A. and Epstein, Becker & Green held included: • A Proactive Approach to the Employee Free Choice Act • A Year of Investigation and Enforcement - An Overview of What Retailers Could Expect in 2010 Regarding Employment and Labor Issues • Employers Under Siege: Managing Your Workforce in Unprecedented Times. • Healthcare Reform: What It Means for Your Company and Employees.

2010 National Grocers Association Year In Review ✹ 10 GOVERNMENT AFFAIRS

Strengthening the Independents Voice No matter the issue, N.G.A. is a trusted, essential partner for its members. N.G.A. listens and responds to members’ needs, effectively working on their behalf in shaping public policy. Independent grocers and wholesalers rely on N.G.A. to be their collective voice on legislative and regulatory issues. For years, N.G.A. has been regarded as a respected advocate, representing independent grocers’ and wholesalers interests in Washington, DC. N.G.A. actively monitors a wide array of issues that concern grocers, keeping members informed as well as providing perspective, analysis and recommendations. Members can count on N.G.A. to help develop practical, workable solutions when local, state and federal regulation and legislation create hardships.

Legislative

Interchange Fees N.G.A. produced a complete summary of the immediate N.G.A. and Merchants Score Major Victory and future changes for members. It is available for download at www.nationalgrocers.org. with Passage of Interchange Reform Legislation The success of this campaign was made Five years ago possible through the N.G.A., along assertive lobbying efforts with similar by N.G.A., members of merchant the Merchant Payments organizations, Coalition, and most began to importantly the grassroots aggressively outreach from N.G.A. educate member retailers, Members of wholesalers, and state Congress on associations. Thousands the impact Senator Dick Durbin (D-IL) and Peter Larkin, of letters were sent to excessive N.G.A. President and CEO. Members of Congress credit and via the eGrocers Action N.G.A. Politico Advertisement debit card Network (eGAN) from interchange fees and anticompetitive operating rules retailers and their employees, often followed with phone have on merchants and consumers. In July, merchants calls to Members of Congress urging support. A number scored a major victory when Congress took the first step of N.G.A. members were instrumental in swaying votes in toward reform of interchange fees with the passage favor of the interchange legislation with personal calls of the Dodd-Frank Wall Street Reform and Consumer and notes to their Representatives and Senators. Protection Act. In Title X, the language added by Senator In addition to the grassroots support, with the financial Durbin (passed in the Senate with a bipartisan vote of contributions made to N.G.A.’s Campaign to Preserve 64 to 33), addresses debit interchange fees by giving the Competition, Consumer Choice, and a Democratic Federal Reserve power to ensure fees are “reasonable and Workplace, N.G.A. was able to dedicate significant proportional” to the cost. Additionally, card associations resources to running two-full page ads in the Capitol Hill were prohibited from mandating that issuing banks newspaper, Politico, raising awareness to the issue and require debit cards to exclusively transact on specific N.G.A.’s position. networks. These reforms will take effect after the Federal This important legislative victory is only the first step Reserve engages in a 9 month rule-making process. The in the complete reform of the interchange system. reformed operating rules also now allow merchants to: However it’s an important first step and N.G.A. members • offer a discount to consumers based on their should be proud of their efforts to enact this historic payment method (i.e. cash or check); and change. Equally as important will be the Federal Reserve • set a transaction minimum for credit card rulemaking process to assure that the intent of Senator transactions of up to $10.00. Durbin’s amendment is reflected in the final regulations.

11 ✹ 2010 National Grocers Association Year In Review GOVERNMENT AFFAIRS EMPLOYMENT/LABOR ISSUES opposed the legislation that now prohibits the use of Organized Labor Again Fails to Pass Job HRA or health FSA funds from being used on over-the- counter-drugs (effective January 1, 2011) and limiting Killing Employee Free Choice Act (EFCA) the amount of contributions to flexible spending This past year, N.G.A. has made stopping organized accounts for medical expenses to $2,500 a year (effective labor’s number one legislative issue, passage of the January 1, 2013). Employee Free Choice Act (EFCA), our top priority. Due N.G.A. and other business organizations were successful to strong opposition by N.G.A. and a large contingent in achieving a 90-day waiting period before new of similar organizations, coupled with strong grassroots employees must be enrolled in to an employer’s health action by N.G.A. members, support for EFCA in Congress program. This delay was important for the supermarket continues to fade. At this time, Democrats do not have industry, which experiences high turnover, especially the votes to overcome a 60-vote threshold in the Senate, among part-time workers and also often hires additional particularly during its mid-term election year. However, staff during peak holiday periods. N.G.A. member many proponents led by Senate Health, Education, retailers and wholesalers were in Washington and on Labor, and Pensions (HELP) Committee Chairman, Tom Capitol Hill March 17 and 18 during the peak of the Harkin (D-IA) continue to make public comments that healthcare debate to raise concerns over the impact EFCA is far from dead. Chairman Harkin has suggested many of the new mandates and taxes. that Democrats will push through EFCA during the lame duck session this fall. While it’s virtually certain that EFCA in its current form will not pass, there remains the TAXES chance that certain provisions of EFCA could be moved N.G.A. Fights to Protect Family-Owned separately. As a member of the steering committee of the Business from Estate Tax 500 member Coalition for a Democrat Workplace (CDW), which has led efforts to defeat EFCA in Congress, N.G.A. N.G.A. sent a letter to the House and Senate calling remains committed to ensuring the defeat of EFCA (in all on Congress to put aside partisan politics and pass forms). estate tax relief. Lack of congressional action to permanently fix the estate tax has placed a significant and unacceptable burden on family-owned businesses. HEALTHCARE Without congressional action the estate tax reverts Democrats Force Through Healthcare back to a top rate of 55% and with only a maximum Legislation Using Procedural Tactic; N.G.A. exemption level of $1 million. N.G.A. has worked Helps Pass 90-day waiting period for new aggressively to urge Members of Congress, and in particular Senators to support compromise language enrollments by Senators Jon Kyl (R-AZ) and Blanche Lincoln (D-AR) On March 23, 2010 President Obama signed the Patient to set the estate tax at a $5 million exemption ($10 Protection and Affordable Care Act into law enacting million per couple) indexed to inflation with a top rate sweeping healthcare legislation that includes new of 35%. The Lincoln-Kyl proposal successfully passed the employer mandates and tax increases on small businesses Senate in spring 2009 as part of the FY 2010 budget with as well as numerous changes to health plan requirements. N.G.A.’s support, but was stripped out by Democrats in Unable to garner enough votes in the Senate to pass the House. the bill outright and further complicated by the death Numerous meetings have been conducted to build of Senator Kennedy (D-MA), Democrats used a budget support for the Lincoln-Kyl compromise and a grassroots procedure known as “reconciliation” to pass the bill. campaign is ongoing to bring pressure to bear on Reconciliation is narrowly focused, but only requires a Congress. Full repeal of the estate tax remains a top goal majority vote to pass in the Senate, therefore preventing of N.G.A., but recognizes that the current political and Republicans from blocking passage by filibustering. economic environments prevent full repeal at this time. N.G.A. opposed the House and Senate bills due to the tax Absent full repeal, N.G.A. continues to bring grassroots increases on businesses, especially those that operate pressure to bear on Members of Congress and Senators to as Subchapter S Corporations or pass through entities. pass the Lincoln-Kyl estate tax relief compromise. Additionally, N.G.A. opposed employer mandates in particular over the application of employer mandates with respect to part-time employees. N.G.A. also

2010 National Grocers Association Year In Review ✹ 12 GOVERNMENT AFFAIRS N.G.A. Calls on Congress to Repeal New 1099 Efforts to Repeal LIFO Blocked for the Reporting Mandate Second Consecutive Year N.G.A. wrote to members of the Senate and U.S. House For the second consecutive year, President Obama has of Representatives in September 2010, calling on called for a full repeal of the accounting method: Last Congress to repeal section 9006 of the Patient Protection In, First Out (LIFO), and a requirement for companies to and Affordable Care Act. The provision, little noticed “write up” their LIFO reserves. N.G.A., along with member when enacted, forces companies to file reports to the retailers and wholesalers, have worked to educate IRS for purchases from corporate vendors that total Members of Congress, in particular those on the Ways and more than $600 in a tax year, starting in 2012. A Means and Senate Finance Committees, on the significant number of proposals have been introduced including an negative impact repeal of LIFO would have on N.G.A. Amendment by Senator Johanns (R-NE) which repeals member businesses. To date there has been no action in the 1099 reporting requirement. Senator Bill Nelson Congress thus far to repeal LIFO, although repeal of LIFO (D-FL) has proposed a plan that would not repeal the and a taxing of LIFO reserves is an attractive target for 1099 tax compliance requirement, but instead would Congressional Committees looking to plug the massive exempt businesses with fewer than 25 employees and national debt. N.G.A. is a steering committee member of would raise the reporting threshold for the remaining the LIFO Coalition and continues to work with a diverse companies from $600 to $5,000. N.G.A. does not support group of businesses and associations to protect LIFO that proposal as it would still subject the majority from repeal. of N.G.A.’s member retailers and wholesalers to the mandate. N.G.A. supports full repeal of the expanded 1099 reporting mandate and has urged Congress to fix HEALTHY FOOD FINANCING INITIATIVE this onerous reporting requirement. The 1099 reporting N.G.A. Supports Federal Funding to Create requirement is burdensome and will unnecessarily Nationwide Program; Helps Develop Local increase administrative cost for businesses, in particular and State Programs to smaller companies, which often lack administrative staff and would be disproportionately affected. Many Americans live in underserved communities without sufficient access to a wide variety of foods that are sold by supermarkets and other food retailers. One in N.G.A. Supports and Tells Senate to Pass every six Americans, that is 48.4 million people, live in Small Business Jobs Act with Business Tax low-income communities that are more than half a mile Incentives from the nearest large grocery store. Over 100 studies conducted within the past decade have shown that lack N.G.A. urged Senators to support and vote for the Small of access to healthy foods is a challenge in many low Business Jobs Act, which the Senate is expected to income urban and rural communities. N.G.A. has worked consider in the fall of 2010, after failing to pass the to build bipartisan support for a federal healthy food measure in July. The bill creates a $30 billion small financing initiative (HFFI), modeled after the successful business lending pool for small banks with assets Pennsylvania Fresh Food Financing Initiative to address under $1 billion, while also providing $12 billion in tax the problem of food deserts. President Obama included incentives. Additionally, the bill includes a provision to a recommendation for $345 million in funding in his extend bonus depreciation tax incentives through the FY 2011 budget request split between three federal end of 2010. The bonus depreciation provision would agencies: Department of Agriculture, Department allow businesses to recover up to 50 percent of the costs of Health and Human Services, and the Treasury. of certain capital expenditures for equipment placed Additionally a number of bills are being drafted to into service during 2010. The legislation also would address the national problem of food deserts, including a allow taxpayers to expense up to $500,000 in capital proposal by Senator Kristen Gillibrand (D-NY) and Allyson expenditures in tax years 2010 and 2011—double the Schwartz (D-PA) to create a national program aimed at current limit for 2010. The provision would also raise the helping bring fresh foods to underserved areas, which threshold for when the higher expensing limits phase N.G.A. supports. The successful programs in Pennsylvania out to $2 million, up from the current 2010 level of have been possible because of the commitment of $800,000. Both of these provisions will be beneficial to independent operators to the communities they serve. N.G.A. member businesses. Independent operators will continue to be uniquely positioned to help grow similar programs across the

13 ✹ 2010 National Grocers Association Year In Review GoVeRNMeNt AFFAIRs nation with the support of similar community fresh food programs. At the state and local level N.G.A. is coordinating efforts with stakeholders to develop opportunities for independent retailers as additional healthy food fi nancing initiatives launch in other states and localities. In New Orleans, funding is expected to be released in early Fall with independent operators expected to lead efforts to bring new stores to underserved areas, many which still eGrocers Action Network remain void of fresh food stores since Hurricane Katrina. Additionally, projects are in the planning or early (eGAN) development stages in a number of other states including This year N.G.A. launched the California, Mississippi, Tennessee, and Georgia with other eGrocers Action Network (eGAN), states being targeted for future action. giving N.G.A. members the ability to contact their Members of Congress on critical industry issues such as Interchange Fees, LIFO repeal, Estate Tax and recent healthcare reform initiatives, in as little as 90 seconds! eGAN allows you to speak up and give voice to our messages and representing a grassroots strength that is a powerful force on Capitol Hill N.G.A. member, Jeff Brown of Brown’s Superstore’s, Inc. testifi ed and across the country. Taking in April 2010, before the U.S. House Agriculture Subcommittee on Department Operations, Oversight, Nutrition, and Forestry on action is simple and makes a the issue of food deserts and the success he and other retailers difference! have had in addressing food deserts through the Pennsylvania Fresh Food Financing Initiative. In addition, Jeff urged the Committee to support a national program to address food deserts based on the Pennsylvania model.

ReGulAtoRy

INteRChANGe the best possible relief and benefi t to merchants. N.G.A. Federal Reserve Rulemaking Begins for Debit and other merchants associations will strongly urge the Federal Reserve to follow the spirit of the law and issue Interchange Reforms regulations that do not include extra costs. Additionally, N.G.A. is preparing to represent member retailers on the law does allow for an issuer to petition the Federal proposed rules to be developed by the Federal Reserve Reserve for adjusted debit interchange revenue if the in response to new debit interchange fee provisions issuer can show that an allowance is necessary to cover enacted by the Durbin Amendment to the Dodd-Frank costs incurred in preventing fraud in relation to debit Wall Street Reform and Consumer Protection Act. The transactions. The Federal Reserve must take into account rulemaking process must be completed within 9 months fraud related reimbursements the issuer already receives of enactment of the legislation. N.G.A. will be very (i.e. charge-backs). engaged in the process to ensure the fi nal rules provide

2010 National Grocers Association Year In Review ✹ 14 GOVERNMENT AFFAIRS

WIC EBT poultry products. Labeling of ground products with N.G.A. Works on Development and Future “percent lean” and “percent fat” was proposed as optional. For the 45 most commonly consumed major Implementations of WIC EBT cuts of fresh meat and poultry products, the nutrient The WIC Program (the Special Supplemental Nutrition content would have to be listed on the package or Program for Women, Infants, and Children) received posted at the point of purchase, such as on a poster or a significant shot in the arm in 2009 when Congress brochure. appropriated $100 million for planning, development Since 2001, N.G.A. has filed numerous comments and and implementation of WIC EBT (electronic benefit attended a number of meetings with the USDA and the transfer) and upgrades to technology needed for eWIC. Office of Management and Budget (OMB), expressing An additional $60 million was appropriated by Congress our support for voluntary guidelines over the proposed in the course of FY 2010 budget appropriations. To date USDA mandates that would disproportionately affect the USDA Food and Nutritition Services (FNS) has awarded custom service meat department that many independent $40 million to state WIC agencies through a competitive retailers use as a point of differentiation versus pre- grant process. This influx of money has allowed the packed case ready meat. In comments filed in February WIC EBT program to grow rapidly. To date, fewer than 2010, N.G.A. expressed concern to the USDA over twenty WIC EBT programs have been approved for federal labeling each package of ground meat and poultry and funding and are in varying stages of the planning urged the USDA to provide the industry with a ground and implementation process. N.G.A. supports uniform meat calculator so the industry could create nutritional standards across all states and WIC agencies for both information. Additionally, N.G.A. has requested that online and smartcard technologies. USDA delay the implementation of the rule for 18 months N.G.A. has been active as part of an industry working to allow the industry and USDA time to enact the new group to develop a set of operating standards and requirements. technology standards for both online and smart card. These standards are expected to be finalized by the end of 2010 and will provide new WIC EBT state agencies “WE CARD” PROGRAM with a blueprint to follow when implementing new EBT N.G.A. Urges FDA to Approve “We Card” As An projects. Additionally, N.G.A. is working with the USDA Approved Tobacco Training Program Food and Nutrition Services on the development of a In October 2009 N.G.A. filed comments with the FDA new UPC database that will serve as a national repository regarding the Family Smoking for WIC agency approved items, commonly referred to Prevention and Tobacco and as an Approved Product List (APL). N.G.A. supports the Control Act. N.G.A. urged the FDA legislative language included in the House and Senate to recognize and authorize the WIC reauthorization and remains committed to ensuring “We Card” program as an approved a level playing field for independent operators, including educational training program under insisting that state agencies include representatives from the new law. The FDA was directed the independent grocery retail community in that state under the new law to develop from day one of the planning process. N.G.A. remains standards for approved training technology neutral with regards to online/smartcard. programs for retailers and their employees. N.G.A. member retailers have long used and invested in the “We Card” program, NUTRITIONAL LABELING RULES therefore inclusion of “We Card” as an approved training N.G.A. Raises Concerns with USDA over Meat program is of great importance to N.G.A. members. The Nutritional Labeling Rules; Request Delay in FDA has yet to release final regulations regarding training Enactment of Regulations programs. On December 18 2009, USDA released its rule for meat nutritional labeling for 60 days of public comment before finalizing the rule for implementation. The original proposed rule would require nutrition labeling information on the package of all ground meat and

15 ✹ 2010 National Grocers Association Year In Review CoMMuNICAtIoNs CoNNeCtING the INDustRy

Newsletters and Member updates Independent Grocers Network Members receive all N.G.A. newsletters and N.G.A. has partnered with Progressive Grocer to create communications free of charge. These timely updates are the Independent Grocer, a exclusive, members-only online designed to keep N.G.A. members informed on the most community where independent grocers can develop, current information and activities taking place both in share, and discuss issues, strategies, and information the association and the industry. These newsletters and critical to their operations, as well as directly connect reports include: with their most valuable information resource - each other. N.G.A. will be actively involved in promoting and • Express Lane, N.G.A.’s weekly newsletter updating this site to its members and will use this site to • Capitol Alert, N.G.A.’s bi-weekly Government Affairs regularly communicate with its various councils. Update • Congressional and Regulatory Updates • Employee and Labor Relations Newsletters • Food Recalls • Counterfeit Coupon Alerts • Action Alerts N.G.A. Members only Website • Legal Updates N.G.A. members have access to a secure member’s only • Across State Lines section on the N.G.A website, where various tools, resources and information such as Grocers Research • Press Releases and Education Foundation (GREF), Employment Audit Checklist, A Strategic Plan for EFCA, Senate and House Member contact lists, a labor relations law hotline to N.G.A.’s labor law fi rm, Epstein, Becker, & Green, eGrocers Action Network and many more are available.

NGAtV NGATV is a feature on our website that provides video podcasts on timely and relevant issues affecting today’s independent retailers and wholesalers. NGATV provides a vehicle to more thoroughly explore the pressing issues and advance when warranted, N.G.A.’s point of view. Videos are not only produced by N.G.A. but also many are contributed by preferred partners such as Pan-Oston, RetailControl.com, the SupermarketGuru and more.

2010 National Grocers Association Year In Review ✹ 16 Industry Affairs

Supporting a Stronger Commitment to Service Understanding what is on the horizon is exceedingly important in protecting a strong, vibrant industry that offers opportunity for innovation. By monitoring trends and issues, N.G.A. is proactive in identifying opportunities and averting or minimizing potential problems. We gather information and knowledge about these issues and, when appropriate, lead an effort with our key partners from government and business to address them.

Payment Card Industry Data Security Standard (PCI DSS)

The Payment Card Industry Security Standards Council Acquirers can start fining merchants anytime after the (PCI SSC) is the global, open industry standards body July 2010 deadline. Fees and fines can be administered that provides management of the Payment Card Industry not only if there is a breach but simply if a merchant Data Security Standard (PCI DSS) and other requirements. uses never approved PIN-entry devices. PCI compliance is a continuous process that requires N.G.A. has been actively monitoring the PCI Council’s constant vigilance and an ongoing investment. However actions throughout the year, as we believe that the these commitments are minor when compared to the current PCI requirements do not always benefit our substantial, and potentially devastating, economic membership, the merchant community or consumers; but and reputational risks of a data breach or other major rather the card brands. Currently retailers are paying the compliance violation. Throughout the year, N.G.A. has cost for development, deployment, compliance and any urged the membership to implement PCI compliance data breaches while operating under standards developed and worked to educate retailers on alternatives to by the PCI Council. More than four years after PCI meet compliance, such as tokenization, and end-to-end compliance requirements were first placed on businesses, encryption. there remains a serious lack of understanding regarding Retailers who implement a thorough, proactive approach the risks of noncompliance— including industry fines, will reduce the scope of PCI compliance and be able reputation damage, and even uncertainty of business to focus on key business objectives such as cash flow, survival—and the commitment required to implement profitability, and customer service. The PCI Security and maintain an adequate PCI compliance program. Standards Council is set to release their next revision of N.G.A. has been working the Payment Card Industry Data Security Standard (PCI with other merchant trade DSS) 2.0, in October, which will contain clarifications but associations in discussing no major changes to the standard. ways to engage the PCI As of July 2010, U.S. merchants must have meet Council in a collaborative three different mandates required by VISA to stay in effort; identifying different compliance. challenges our members are having regarding PCI • All never approved payment devices on which PIN compliance, and looking debit transactions are conducted must be removed for alternatives to meet from service. This includes any device that is not compliance, such as either VISA PED or PCI PED; tokenization, and end-to-end • All debit card PINs must be encrypted in TDES from encryption. the payment device; and • All applications that "store, process, or transmit cardholder information" must be PA-DSS or PABP compliant.

17 ✹ 2010 National Grocers Association Year In Review Industry Affairs Produce Traceability Initiative (PTI) Steering Committee

The Produce Traceability Initiative (PTI) is an industry wide effort aimed at creating a traceability process that will enable the quick and efficient electronic tracking and tracing of produce cases between supply chain members. PTI is designed to help the industry maximize the effectiveness of current traceback procedures, while developing a standardized industry approach to enhance the speed and efficiency of traceability systems for the future. As a founding member of the PTI Steering Committee, N.G.A. works with the other 50 members that hail from across the supply chain; grower, packer/shipper, retailer, distributor and foodservice, to develop a real-world plan and timeline based on what was achievable within each company, to ensure the plan was reasonable and attainable. The Produce Traceability Initiative’s (PTI) action plan outlines steps for achieving traceability at the case level by 2012 via best practices guidelines based on GS1 global databar standards for supply chain management and product identification. The milestones were identified during an eight-month planning process by the companies of the PTI Steering Committee.

❏✓ Milestone No. 1: Obtain company prefix ❏✓ Milestone No. 5: Encode information for machine- (completed by Q1 2009) readable case bar codes (completed by Q3 2010) Requirement that each “brand owner” obtain a Concurrently, product packers should be ready to encode unique GS1-issued company prefix that provides the GTIN and lot number in a GS1-128 bar code, which for a unique product ID from each company. can be accurately scanned and recorded by buyers and The company prefix will then become part of all receivers. The human-readable information should appear GTINs assigned to cases of produce from that directly below or above the bar code. company, and immediately serve to identify the ❏ brand owner’s products throughout the supply Milestone No. 6: Read and store information on chain. inbound cases (complete in 2011) All buyers, receivers and subsequent handlers of cases ❏✓ Milestone No. 2: Assign 14-digit GTINs to should have systems in place to read bar codes and every case configuration packed (completed electronically store the GTIN and lot number from each by Q1 2009) case of produce received. Brand owners must then assign specific 14-digit ❏ Milestone No. 7: Read and store information on GTINs to all of their various case configurations, outbound cases (complete in 2012) based on the combination of their company All buyers, receivers and subsequent handlers of cases prefix and a reference number. should have systems in place to read and store the ❏✓ Milestone No. 3: Provide GTIN information to GTIN and lot number for all outbound cases of produce. buyers (completed by Q3 2009) This final step provides complete information on when After determining the GTINs of their own the product left the facility, thus completing electronic case configurations, brand owners must connectivity of case data across the total supply chain. then communicate this information and When the milestones are implemented, companies will not corresponding data to their buyers for only have the ability to efficiently track product within their scanability at the receiver location. own operation, but will also give governmental agencies the ✓ needed process to track product up and down the produce ❏ Milestone No. 4: Brand owners place GTIN and supply chain in an efficient and expeditious manner, thereby lot numbers on case labels in human-readable helping to reduce the impact of future product recalls. form (completed by Q3 2010) Additional information on each of the seven milestones, All product packers should be ready to print or as well as related Q&As and resources, is available at www. affix human-readable information specifying the producetraceability.org. You can find a list of companies that GTIN and lot number on every case of produce have endorsed the Produce Traceability Initiative (PTI) as of shipped, both of which should be shown April 2010 at http://www.producetraceability.org/endorse_ together on at least one side of the carton so pti/index.cfm that buyers and receivers can quickly read the information.

2010 National Grocers Association Year In Review ✹ 18 Industry Affairs GS1 DataBar sunrise date. 88% of the membership was aware of the plans to replace the UPC A and 128 symbols with the GS1 DataBar and about 85% were aware of the On January 1, 2008 a new coupon barcode format, the implementation deadline for the change in coupons. GS1 DataBar, was introduced. That move introduced the However, 49% of those surveyed were not ready for “Interim” DataBar coupon code, whereby manufacturers GS1 DataBar only coupons. Only 27% had POS scanning are producing coupons including both the UPC-A code equipment that was ready to scan the DataBar; 16% had and the GS1 DataBar. According to the current industry POS software that could process the DataBar and only 7% time table, by January 1, 2011 manufacturers will had POS transaction logs and downstream applications migrate from using both the UPC/EAN and GS1 DataBar ready to process the DataBar. coupon prefixes to only the GS1 Databar on coupons. Retailers will need to be able to process the DataBar on 27% of retailers surveyed said that they were ready now point-of-sale hardware and software. January 2014 is to begin scanning the new DataBar on coupons. 35% said set as a global implementation target (Sunrise Date) for they would be ready between June 2010 and December GS1 DataBar. At this time manufacturers of fresh foods, 2010. But the majority, 38%, said they would not be produce, consumer packaged goods and pharmaceuticals ready by the January 2011 date. Of those respondents, should begin to use the new GS1 DataBar on their over 75% did not know when they would be ready. The products. remaining 25% indicated they would be DataBar-ready in a range of dates between 2011 and 2012. DataBar Readiness N.G.A. and the Joint Industry Coupon Now is the time for retailers to start assessing where Committee they are in terms of GS1 DataBar readiness and what their next steps should be by setting up a complete GS1 In the beginning of February 2009, just prior to the DataBar project. With the new GS1 DataBar, retailers will N.G.A. Annual Convention, senior executives from benefit from improved scan rates, increased checkout both N.G.A’s Supplier Advisory Council and Wholesale speed and automatic expiration date checking. Executive Council met with representatives from GS1 US To help with the transition, GS1 US has created a to dialogue on the challenges retailers faced with the Starter Kit which provides retailers with the tools and implementation of the new GS1 DataBar. information they need for a successful adoption of the The meeting, combined with industry information GS1 DataBar. Topics such as selecting program leaders, collected by the Joint Industry Coupon Committee (JICC) supplier & vendor management, planning for private indicating that retailers would not have the necessary label products, preparations for changes in applications, equipment and POS software in place in time for the and training personnel are covered. If you would like to original deadline, resulted in the formal recommendation access the toolkit or for further information on the GS1 to the industry of a delay in the implementation timeline DataBar, you can visit the GS1 US website at http://www. to January 2011. gs1.org/barcodes/databar. The JICC is comprised of manufacturers and retailers along with N.G.A. and other leading industry trade Survey Results associations, GMA, FMI and NACS, who work to increase N.G.A. undertook an online survey in April efficiency and effectiveness in the development, distribution and redemption of coupons. 2010 with a short questionnaire to better understand our members’ readiness to the industry’s direction regarding the GS1 DataBar. Out of all the respondents, over 51% were Single Store Operators. The second largest group (27%) were retailers with between 2-10 stores. Rounding out the rest of the members were those retailers with 11-25 stores, 11%, and retailer with 25+ stores were at 10%. These demographics reflect current N.G.A. membership ratios. Overall, awareness is high for the upcoming GS1 DataBar 19 ✹ 2010 National Grocers Association Year In Review Industry Affairs

Fraudulent Coupons SIGIS and Auto-Substantiation at the Point-of-Sale In the past year, N.G.A. has received numerous comments and questions from members regarding counterfeit and The health care reform legislation signed into law by fraudulent coupons from the internet (print-at-home the President in May impacts over the counter (OTC) coupons) being used in their stores. With the economic purchases with Health Care Flexible Spending Accounts, downturn, coupon circulation and redemption has never Health Reimbursement Arrangements and Health Savings been higher. N.G.A. undertook a survey of members and Accounts beginning in January of 2011. OTC drugs found it was a large problem affecting a significant part and medicines will remain eligible with a note from a of the retail membership. provider. SIGIS is in the process of updating the Eligible With coupons appearing on the internet (use up products criteria to reflect the change of these items 17% over last year) and the rapid advancement of from the “Eligible” to “Dual Purpose” category. NOTE: technology, manufacturers, retailers and marketers are Because these items now require a doctor’s directive, being challenged to meet their customers’ coupon needs these items can no longer be auto-substantiated with an through new media and mobile devices. Coupon fraud, IIAS. The customer may be able to receive reimbursement counterfeiting, and illegal sales/auctions of coupons are for the item using their Health FSA, HRA or HSA; however large concerns for coupon professionals and the industry they must obtain a letter of medical necessity from their at large. doctor in order to be able to submit it as eligible under N.G.A. is a sponsoring organization of the Joint Industry their plan. Coupon Committee along with GMA, FMI, NACDS, and This has significant implications for SIGIS as an GSI US. With the JICC and organizations like the Coupon organization. Over-the-counter medicines, drugs and Information Corporation (CIC) and the Association biological treatments are about 35 percent of the current of Coupon Professionals (ACP), N.G.A. Staff attends SIGIS list. Effective January 1st, 2011, the affected meetings where they are briefed on the latest methods of items would be deleted from the list of eligible items. fraud, current initiatives in place to counter and combat It is important to note that not all items on the SIGIS fraud and counterfeiting, and the increase of programs to eligible items list would be affected. Only those items educate industry professionals and the general public. that represent drugs, medicines and biologicals require After the first Coupon Summit hosted by the CIC, N.G.A. a provider’s directive; began issuing Coupon Alerts regarding fraudulent or you can see the full list counterfeit internet coupons found in the marketplace. at www.sig-is.org. The When coupons are identified, N.G.A. sends out an change will also impact electronic PSA to members, complete with offer 90 percent merchants, description, pictures of the identified coupon, and in that the calculation information on what to do with said coupons. Also for who meets the included in the alert is a link to the N.G.A. website where 90 percent exception members can download a free poster, “Tips to Assist in would be based on Recognizing Legitimate Internet Coupons” to help their the new definition of employees to spot counterfeit or fraudulent coupons that eligible expenses, which they may come across in their stores. will exclude products N.G.A. continues our participation on JICC to work in the above categories with Association of Coupon Professional and Coupon because they are only Information Center on revising the Coupon Guidelines, eligible to the extent a publication due out next year, and to combat the the provider directs proliferation of counterfeit and fraudulent coupons. their use.

2010 National Grocers Association Year In Review ✹ 20 oPeRAtIoNAl PRoGRAMs AND seRVICes

INCReAsING the eFFeCtIVeNess N.G.A. has teamed up with a number of companies and organizations to provide our members with the tools, resources and expertise to gain better command of their profi t optimization opportunities. N.G.A. Payment Processing Program – special The goal of the Member only Pricing Utopia Across America tour is Developed in cooperation with over 40,000 current to provide access grocers, N.G.A. and First Data offer a valuable payment to the latest services program with technology from unprecedented discounts, MEI, Pan-Oston, innovative technology Microsoft, Dell, and improved payment products and services for CED, Rockwell Inside the mobile Innovation Center, supermarkets. Members enjoy discounts on N.G.A. Automation, Pan-Oston shows off their latest front- Payment Processing programs such as Prepaid Reloadable MTX EPS and end technology at the prospective customers store. Card Programs, TeleCheck Internet and Telephone others. The Acceptance Services, Payroll & Disbursement Solutions traveling Innovation Centers feature: the Utopia Self- and Data Encryption and Tokenization. Our special Checkout an affordable PCI supportive solution that program includes the solutions needed to help attract is easily integrated to 99% of available POS systems; customers and grow sales. innovative cash handling technology; and assistive listening devices; as well as ergonomic checkout lanes N.G.A. and Pan-oston: Grocery Checkout For and revolutionary counter systems. Any size store And Budget Also on board are two never-before-offered tools developed by Pan-Oston: the Self-Checkout Cost In 2009, N.G.A. established an exclusive partnership Savings Calculator, which provides independent program with Pan-Oston, leaders in grocery checkout grocers with a means to evaluate self-checkout cost and store fi xture manufacturers for over 40 years and savings based on their particular operating objectives; creators of Utopia self-checkout stands/system. In this and the Front-End Optimizer, an aid to determine the partnership N.G.A. members are pre-approved to receive most cost effi cient and productive check out solution member benefi ts such as economy pricing, discounts based on sales, staffi ng, wages and customer service. on a variety of Pan-Oston products, Visit www.ngautopiaacrossamerica.com to learn more including checkout lanes, food service and schedule a visit today. equipment, service parts, and accessories. They also are eligible to upgraded technology FMs Retailer toolbox and support services on all Pan-Oston retail checkout and For over 30 years, Financial display products inclusive of the patent pending Utopia Management Solutions (FMS) self-checkout solution. has helped retail grocers and N.G.A. utopia Across America tour independent supermarkets succeed Committed to helping the independent grocer succeed by transforming historic accounting in a competitive marketplace, and fi nancial activities into timely, accurate decision N.G.A. and Pan-Oston developed support tools. FMS has complied a variety of resources two state-of-the-art mobile refl ecting best practices for the independent retail Innovation Centers to showcase grocery and supermarket industry. The FMS Retailer the latest in front-end technology. Toolbox includes downloadable information on industry The Utopia Across America Tour best practices including: Dot Book; DSD receiving; kicked off on April 26 at the N.G.A. front end pricing, and retail pricing. N.G.A. members headquarters and traveled throughout the U.S., also enjoy discounts on services by FMS, Inc. such as making stops at the corporate offi ces and stores of accounting and payroll outsourcing, fi nancial software independent grocers across the United States. applications and services, treasury management, payroll/ human resources applications.

21 ✹ 2010 National Grocers Association Year In Review Operational Programs and Services N.G.A. Surveys and Publications Sessions with an improved format! Trading Partners was held on the Concept Show Floor, at the heart of the Members are provided the N.G.A. Convention. Also new were the Trading Partner opportunity to receive the Business Suites. Each Trading Partner had a private space information and tools needed on the Show Floor. The meetings were also extended over to make timely and accurate a two day period, meaning there was time to attend more business decisions in today’s meetings, without missing out on exceptional Convention marketplace. events and sessions. Participation was the largest in the • 2010 N.G.A. Consumer history of the event. Panel Survey • N.G.A./FMS 2010 Campaign to Preserve Competition and Independent Grocers Survey is a financial and Consumer Choice operational review of the independent retail grocery industry. A great benchmarking tool. Independent retailers and wholesalers play critical roles in preserving a competitive, diversified marketplace • Supermarket Store Management Compensation and that greatly benefits the American consumer. Preserving Benefits Survey is designed to assist N.G.A. members a level playing field where independent grocers can in benchmarking their compensation and benefits thrive creates the best environment for consumers, practices with other similar size companies in the communities and the grocery industry as a whole. The grocery industry. Campaign to Preserve Competition and Consumer Choice is independently funded by private donations from individuals, corporations and organizations who are N.G.A. Resource Catalog actively engaged in preserving a level playing field in the The N.G.A. Resource Catalog was created through the marketplace. Grocers Research and Education Foundation (GREF) which serves the industry by providing innovative Grocers Care research and educational services that enable industry companies to improve efficiency and capitalize on America’s Grocers have a long history of being committed growth opportunities. The Resource Catalog offers a large to their country, especially during challenging times. selection of products to meet your needs in the areas of This is best exemplified consumer relations; employee health and safety; food through N.G.A.’s Grocers Care safety and sanitation; human resource management and program. While grocers do employment law; loss control and prevention; marketing their part throughout the year and merchandising; and training and development. each Memorial Day, N.G.A. in N.G.A. has taken special care to select products that are partnership with the White House high quality, cost-efficient and specific to the grocery Commission on Remembrance industry. The resource catalog is available to everyone honor those who have made the ultimate sacrifice by however N.G.A. members receive discounted pricing. supporting the National Moment of Remembrance. N.G.A. member stores and their communities take the opportunity to show their commitment to America’s Trading Partner Business Sessions fallen soldiers and the families of the fallen. Trading Partner Business Sessions is a senior, executive- level program where retailers and wholesalers meet N.G.A. Grocery Supplies and Services Guide with suppliers to discuss mutual business opportunities, strategies and goals. N.G.A. provides a professional In August 2010, N.G.A. was excited to announce the setting to meet with target customers and other release of our brand new online resource, the N.G.A. potential trading partners. It is a by-invitation Grocery Supplies and Services Guide. The guide features program, exclusive to N.G.A. members. Trading a wide range of products and services exclusively for Partner Business Sessions takes place in February at the grocery retail and wholesale industry that will assist the Annual Convention in Las Vegas and at the Fall users in purchasing decisions year-round. Executive Management Conference. For the 2010 Annual Convention, N.G.A hosted Trading Partner Business

2010 National Grocers Association Year In Review ✹ 22 2011 National Grocers Association Annual Convention and supermarket synergy showcase (s3) February 13-16, 2011 at the Mirage hotel and Casino las Vegas, Nevada

National Grocers Association 1005 N. Glebe Road, suite 250, Arlington, Virginia 22201 (703) 516-0700 • www.NationalGrocers.org