GLOBAL RETAILERS GRAPPLING WITH CONSUMER SHIFTS

PARIS -- Food retailers around the world are facing dramatic shifts in the direction of consumer discretionary spending and the importance of emerging markets, according to Alan McClay, chief executive officer of CIES -- The Food Business Forum here.These changes are forcing retailers to boost efficiency and operational excellence and to seek genuine innovation rather than just product extensions,

PARIS -- Food retailers around the world are facing dramatic shifts in the direction of consumer discretionary spending and the importance of emerging markets, according to Alan McClay, chief executive officer of CIES -- The Food Business Forum here.

These changes are forcing retailers to boost efficiency and operational excellence and to seek genuine innovation rather than just product extensions, he added.

"There is a shifting center of gravity in every aspect of the business at the moment," he said. "Many mainstream retailers feel it."

McClay, who was officially named to head CIES, a global food organization, last November, discussed worldwide trends and the association's latest activities in an SN interview in advance of CIES' World Food Business Summit on June 22 to 24 in Budapest, Hungary. CIES has more than 350 member companies, about half of which are retailers and the remainder manufacturers and service providers.

McClay said retailers tend to point to discounters or category killers as influencing major changes, but he argued that a bigger shift is led by changes in consumer spending.

As one example, McClay cited the redirection of consumer dollars to technology-based items. "Mobile phones are taking spending from other things," he said. "The same is true with PCs and computer games. Retailers are trying to adapt."

These changes coincide with a new outlook from emerging markets. "The emerging areas don't have the baggage of other areas," he said. "Some can leapfrog the history. It's not just in the business sector. For instance, the Baltic countries have a successful flat tax compared to progressive taxes elsewhere. No one in the Baltics considers this tax unfair. It works. It's a different outlook than elsewhere."

Emerging markets bring their new perspectives to the business world, including retailing, he said.

"China is experimenting with new store formats that are different than elsewhere," he said. "They include hybrid stores that combine traditional and nontraditional approaches. We can look to these ideas for new approaches."

CIES will focus on all of these trends in its upcoming Budapest summit. The gathering is titled: "What Is Food Retailing Today? Managing a Shifting Center of Gravity."

The event will include presentations from retailers that operate around the world, including in the United States. The presenters will include Jeff Noddle, chairman, president and CEO, Supervalu; James W. Keyes, president and CEO, 7-Eleven; and Renaud Cogels, president and CEO, Delhaize Europe.

Topics will include reinvention of formats, the future of technology, lessons from outside the food sector, and the importance of leadership.

Discussing CIES' major areas of focus, McClay said the organization is targeting "consultation between retailers and manufacturers rather than just providing information."

A prime example is CIES' role in helping to promote global standards in sectors such as food safety and technology. CIES continues to help advance the industrywide Global Food Safety Initiative, a 5-year-old effort that aims to strengthen consumers' confidence in the food they buy in retail outlets. GFSI initially designated criteria to judge existing food-safety standards, and has recently been determining which standards are compliant. Standards previously found compliant include those from the United Kingdom and the Netherlands, and a U.S. standard, SQF (Safe Quality Food) 2000, which is owned and operated by Food Marketing Institute, Washington, through the SQF Institute. Suppliers of private-label items use these standards in order to keep the business of their retail customers. GFSI has recently been expanded to include a focus on agricultural produce.

"This is more complicated than industrialized products," McClay said. "There are already high local standards and codes for agriculture that go well beyond what's required by law. So, GFSI is looking at internationally recognized benchmarks."

One of these is SQF 1000, which has been recognized as meeting the qualifications of GFSI. The SQF 1000 code, which aims to increase food safety at the farm and primary produce level, is owned by FMI.

The GFSI guidance document is updated every year and individual standards are reconsidered at that time. The benefit of this entire process is open markets for retailers, McClay said.

"So, hypothetically, small or medium suppliers of preserves in France or Germany would have better access to British retailers," he explained. "Or, major retailers would know that a small shrimp supplier in Thailand conforms to standards."

The initiative has the potential to reduce the need for retailers to separately audit each supplier, but that shift would only happen gradually. "Retailers are still doing the thorough work of making sure their own private labels are closely monitored," he said. "It takes time to change behaviors. But the availability is there for retailers to make more use of the GFSI work."

CIES is also actively supporting global standards on the technology front through its conferences and involvement with numerous industry technology organizations. A CIES conference last fall called "Tag, Trace and Synchronize" focused on the need to support synchronization.

"Product data quality in electronic communications between buyer and seller is a big issue that has only recently come to the forefront," McClay said. "Retailers are up against poor data from manufacturers. This causes out-of-stocks. It's important to get data synchronization on the road."

CIES also wants to widen the road between its organization and geographic sectors around the world, McClay said. The organization is redoubling efforts to ensure that it fully represents the global food retailing arena. This includes the expanding markets of Central Europe, Southeast Asia, China and Latin America. It also includes Japan, as the second biggest world consumer market, he said.

"We are making sure that CIES represents all markets, including the newer ones," he said. "We are making sure that all five continents are represented on CIES' board with active companies."