Progressive Grocer

JAN 2017

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W hen assessing the industry's foremost challenges and opportu- nities, Albertsons' Denningham says that regardless of how the grocery indus- try evolves or innovates, "it's always going to be a business built on pennies and very small profit margins. But what we have learned over the last decade ... is that customer service drives sales. "While our industry is about driving what the customers want," Denningham notes that "it's also about remembering who our customers are, and maintaining those relationships. at isn't something that you can mandate as a corporate mis- sion; it needs to happen organically, store by store. at's both the greatest challenge and opportunity throughout the industry." Challenges aside, Davis is certain that Bristol Farms, as it does every year, will head into 2017 with optimism and a strategic plan to do better, no matter what the circumstances, pointing out that tough economic conditions can sometimes help efficiently run companies perform even better. And although new competition will enter California, continued grocer consoli- dation will act as a buffer against sales loss to these food retailers, he adds. According to Cortesi, Sunset's challenges for 2017 include deflation. "Food costs are low; profitability is much different," he says. "ere are many regulations in the industry. We're challenged in finding good people, so recruitment and training will be some- thing we focus on in the coming year." Likewise, Coborn says lingering defla- tion continues to be a challenge. "While changes like this are cyclical, and eventually things will get better, the long duration of this trend has created a tough en- vironment for grocers across the country. However, even with challenges come great opportunity," he notes, pointing to the company's new Marketplace format (see this issue's Store of the Month, starting on page 42). Wright considers deflation and a "hypercompetitive operating environment" the top challenges grocers will face in the new year, with innovation being the key opportunity: "Difficult times always bring out the best in us." Although a changing grocery landscape and recent deflationary pressures have proved to be major challenges for the overall grocery industry, Smart & Final finds its greatest opportunity in its differentiated model to serve both business and household customers. Over the years, it has successfully maintained its community approach. Festival Foods is investing in its e-commerce and mobile experience, which Stoa sees as both a challenge and an opportunity. Food safety "continues to be one of those things that keeps retailers up at night," admits Potash, whose stores are located in down- town Chicago. Other major challenges he cites include compliance and more govern- ment regulation and oversight. In that vein, Natural Grocers' Is- ely suggests that perhaps the greatest challenge will come from the Safe and Accurate Food Labeling Act of 2015 — called by some GMO labeling advocates "the DARK (Denying Americans the Right to Know) Act" — which bans states from requiring food manufacturers to label food ingredients that come from genetically modified crops. But while these types of rulings are worrying, Isely stresses that they also present an oppor- tunity to reward vendors that choose to be transparent. "Retailers who continue to educate their customers and require transparency from their vendors will see greater customer loyalty," she asserts. Newport Ave. Market's Johnson points to "increased competition with other retailers — including restaurants — especially as the big chains improve in the specialty category." And at Publix, "increased competition and new competi- tors entering existing markets remain a focal point," Brous says. For his part, Cashion sees potential ahead. "One of the greatest opportuni- ties in our industry is the ability to reach a large market of consumers and test new trends," he asserts. "We pride ourselves on not doing the same thing as everyone else." Despite the challenges of rival industry players, Glei remains optimistic. "Super- markets that provide a relevant offering, coupled with [a] great customer experience ... will continue to grow in spite of an intensely competitive landscape," he asserts. "Our chal- lenge and opportunity is to better anticipate, understand and deliver what our customers expect than our competition." Dan Shanahan, president and COO of Wooster, Ohio- based regional grocery chain Buehler's Fresh Foods, con- tends: "It's possible that we need to be more things to more people and we need to expand our core competencies, per- haps by looking for creative new partnerships, collaborations and alliances. Making things better for our core base while simultaneously embracing these multiple significant trends will allow us to stay relevant and lead the way." PG How do retailers feel about the new presidential administration? Find out at 2017 Retail Outlook What do you consider to be the greatest challenges and opportunities for the industry as a whole? 60 | Progressive Grocer | Ahead of What's Next | January 2017

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