HAMMONDS: 'BIG ISSUES' STILL LOOM FOR INDUSTRY

WASHINGTON -- While the stage is set for policy changes that could benefit the food retailing industry, "the big issues are still there," according to Tim Hammonds, president and chief executive officer, Food Marketing Institute, based here.In an interview with SN, Hammonds said that although the November elections resulted in an administration and Congress favorable to FMI -- with five of six Senate

WASHINGTON -- While the stage is set for policy changes that could benefit the food retailing industry, "the big issues are still there," according to Tim Hammonds, president and chief executive officer, Food Marketing Institute, based here.

In an interview with SN, Hammonds said that although the November elections resulted in an administration and Congress favorable to FMI -- with five of six Senate candidates in tight races supported by the trade group elected -- FMI is still awaiting action on issues critical to its members' success.

"The election turned out to put a lot of people into office that share our positions. From that point of view, it was a good election," said Hammonds. "But while we have certainly made progress, the big issues are still there."

These include "a whole gamut of tax measures," including making the Bush administration's rate cuts permanent and eliminating the estate tax. Getting country-of-origin labeling moved from a mandatory to voluntary program is also high on FMI's agenda, Hammonds said.

Although a first step was taken when Congress addressed class-action suits, medical liability claims still need to be addressed.

"We got a measure passed that moves most of these [class-action suits] from state to federal courts, which makes it harder for people who bring those suits to shop around for the most favorable judges in the country," Hammonds said.

"That was a high-priority area for us where we've made some progress, and I think it opens the door for even more."

FMI also hopes to take on the issue of rising costs of credit/debit payments, which Hammonds said have become a "huge and growing problem" for its members and a difficult battle against interests of a powerful banking industry.

"If someone uses a plastic card in a supermarket today, the share of the consumer dollar that goes to the bank is almost double the profit for the grocer," he explained. "The banking industry has worked hard to exempt themselves from the laws of competition. They compete by raising fees for their member banks. We compete by lowering costs for consumers."

Asked about the health of the industry as the annual FMI Show approaches, Hammonds replied, "You almost have to take it region by region and company by company. A lot of our members have just gone through their best profit years ever, while we have others who have new competition in their markets and face a pretty tough situation, and continue to struggle.

"The interesting thing we're going to say at the convention is that we found in broad terms that smaller companies -- regionals and small operators -- had a much better profit year than the large companies," he continued. "That's in part because the largest were going through their own issues trying to get health care and pension costs under control. But it's true we see a lot of energy among the independent operators and regional chains."

Hammonds said he disagrees with those who say the industry lacks imagination, saying that efforts involving better cost controls, new consumer offerings and investments in technology indicate vibrant activity among supermarket operators who are fighting off more competition than ever before.

"All of our FMI members are either going through their own planning process where they have some innovative ideas on the board, or are in some phase of a test or rollout of different approaches to the consumer," Hammonds said. "All of them have started with the consumer and are working backward. So you look around and see a lot of folks revitalizing the center store with new formats, and other folks looking at making mealtime faster and easier.

"You also see a lot of growth on the technical side -- not just in the experimental things like the electronic product code, but in a real rollout of self-scanning in stores. I think there's a lot of innovation going on, and you won't see it in just one place."

FMI can support or lead innovations through research and by keeping members current on industry trends, Hammonds said. "Our members have to make their own competitive decisions. Because so much is market by market and company by company now, it's a very personal decision for them to make," Hammonds said. "But we can help in a variety of ways with research -- a lot that we'll roll out at the convention. We've had presentations at our MidWinter conference by people like McKinsey, Deloitte & Touche and ACNielsen that show how the competitive landscape is changing. Our role is to help our members stay current so they can have a feel for how the market is going now and where they can find their competitive niche."

Hammonds said one of the highlights of this year's convention will be discussion of revamping the meal-solutions category, which he said is poised to bounce back now that some retailers have finally made a success of it. "When our members got into the ready-to-eat food area, many discovered it was more difficult to execute than they thought," he said. "It's taken several years to learn how to do it. But there's some good companies now in that field, and it's time to get the category back."

In technology, Hammonds said FMI is working to focus on evolution of the electronic product code, which he described as "still in its infancy."

"There's a lot of research efforts on the electronic product code and how to use it on pallets, cases, and what the future is going to be for consumer packs," he said. Hammonds said issues of backhaul and reclaim centers have come to the forefront for grocery distributors. Making reclaim centers viable now that manufacturers have gone to a swell allowance to account for recalled, withdrawn or damaged goods is paramount because reclaim centers are valuable for food safety in bioterrorism incidents, Hammonds noted.

Hammonds praised the efforts of FMI and its members in food safety initiatives and said their efforts can result in safer and better controls than government-led initiatives. Under the new Safe Quality Food (SQF) certification program, manufacturers can audit and certify their suppliers' food safety programs in a program administered by FMI and increasingly practiced worldwide.

"I think we're seeing a shift: 'If it says USDA, it's OK with us,' isn't enough anymore because the government is cutting back budget for that kind of thing, and the buyers are developing their own safety programs that in many cases are more rigorous than government specifications. Private industry can say to their customers, 'We not only have developed food safety standards for ourselves and our supplier, but we're auditing our suppliers to be sure they comply."'