VIEWS ON THE FUTURE

WASHINGTON -- Industry outsiders may see the food retailing world as a bastion of stability, but those on the inside know better.Rapidly changing technology and consumer lifestyles require near-instant, in-store adjustments.So when SN asked the Food Marketing Institute's past and present leaders to speculate about the future of the supermarket industry, they were understandably reluctant.No one wants

WASHINGTON -- Industry outsiders may see the food retailing world as a bastion of stability, but those on the inside know better.

Rapidly changing technology and consumer lifestyles require near-instant, in-store adjustments.

So when SN asked the Food Marketing Institute's past and present leaders to speculate about the future of the supermarket industry, they were understandably reluctant.

No one wants to go on record talking about how by 2007 shoppers are going to glide down aisles on their motorized skateboards plucking Mylar sacks of dehydrated buckwheat groats from auto-replenishing shelves.

Mike Sansolo, FMI's executive vice president, noted, "Whenever we try to look forward, none of us has a clue."

Robert Bartels, FMI's chairman from 1995 to 1997 and president, Martin's Super Markets, South Bend, Ind., said, "The less specific you are in viewing the future, the less embarrassed you'll be."

However, the organization's leaders did share some thoughts about where they thought the industry is headed. And no matter where the retail food world boldly ventures, FMI will be there leading the charge.

"I see nothing but continuing strengths and new applications for the association," said Byron E. Allumbaugh, FMI chairman from 1982 through 1985 and a former president of Ralphs Grocery Co., Compton, Calif

Bartels said, "The membership is what keeps FMI together.

"There are a number of dimensions to that. There's a common commitment to the consumer, whether you're talking about Wal-Mart or a single-store operator. Another thing we have in common is the need to deal with government. FMI has been very effective in representing the industry in government and public affairs."

Danny Wegman, FMI chairman, 1979 through 1991, and president of Wegmans Food Markets, Rochester, N.Y., said, "FMI has been and continues to be a darned good organization serving the American food Industry."

Some of the key challenges the leaders said the industry and FMI are likely to face in the next five years include the following:

Consolidation

Allumbaugh said, "There's been tremendous consolidation. The industry is learning to live with that.

"That doesn't preclude smaller operators. Not everyone wants to go to a gigantic supermarket that sells everything.

"It boils down to a split between the giant, complex business that has to show earnings improvement every quarter and the entrepreneur who has to take care of the customer and does very well for himself at the same time."

Alternative channels

"There are new channels, new competitors. Those of us who continue to focus on the consumer will continue to grow and prosper and be around," Bartels said.

Understanding trading partners

Commented Wegman, "I feel that we have to make sure we're understanding our trading partners a little better."

He observed that trade and promotion policies dating back to the 1960s "make it difficult to understand the true costs of items. Marketing monies come from one pool. Another pool funds public relations. Other incentives have to do with volume.

"Some of the manufacturers don't know at what price they're really selling to us, and we don't know at what price we're buying."

Responding to changing lifestyles

Ron Pearson, currently FMI's chairman, and also chairman and chief executive officer, Hy-Vee, West Des Moines, Iowa, said, "The evolution to convenience and quality foods, whether that convenience or quality comes from the manufacturer or the supermarket -- that's one change a lot of supermarkets didn't pick up on.

"That's going to intensify, in my opinion. There will be a growing diversity of competitors: casual restaurants, online shopping services and specialty stores."

Sansolo said he expects changes "in how companies will define niches for themselves. Twenty years ago, all supermarkets looked similar. In five years, stores could look vastly different and be geared to different segments of the market.

"We are going to see a continuing progression toward convenience and easy-to-prepare food. People don't have a lot of time, and the know-how on cooking is different today. It's a challenge for supermarkets to see how quickly and how well we move to win more meals back to the home kitchen."

Paying for health care programs

Commented Pearson, "Probably it will be the No. 1 focus for employers as the economy gets bigger. It's our fourth-largest expense and probably move to our third largest this year."

Helping the industry keep up with changing technology

Allumbaugh said, "Staying up with changing technology is going to be an ongoing challenge. There's a great deal of teaching for the members. I think that's going to continue."

Wegman noted, "We need to adopt a single, electronic trading community, but a lot of issues need to be worked out before that happens.

"It has taken us awhile to understand this new technology. The financial ramifications of the dot-com exchanges were divisive. They've been a deterrent to industry progress.

"I think those things are changing now. I think in the next year you'll see significant progress on technology in the food industry."

Pearson said, "The continual challenge is how to adapt technology into cost-savings processes. The industry did a wonderful job through the mid-1990s with efficient consumer response.

"The next phase is streamlining the process to move information from the point of purchase all the way to the manufacturer and supplier. It's expensive, difficult to get done and takes a lot of time."

Sansolo said, "It would be folly to say the Internet won't be playing a larger role in the retail food industry. It's already playing an important internal role. I'd hope in five years we'd have true paperless communication.

"The wild card is business-to-consumer Internet. There is likely to be a percentage of supermarket shoppers doing some sort of Internet purchasing, and the supermarket could become the hub for picking up Internet orders."

Food safety

Pearson said, "We have a continued effort on food safety. We started a foundation that is endowed with several million dollars, and it is putting the money back into food-safety research and education."

Sansolo noted, "Bacteria keep changing. It would be foolhardy to say there will be an end to concern about food safety. We live on a planet with dynamic organisms."