The food industry is confronting a new world where outside forces will ultimately reshape food distribution policy and processes.
Those outside forces are numerous, complex and emerging at an unprecedented pace. The main issues — sustainability, food safety, and health and wellness — are global in scope and will force collaborative efforts from all industry sectors, industry association executives said.
“There is a convergence of a variety of factors that are affecting consumers and the business environment,” noted Pat Walsh, vice president of industry and trade development at the Food Marketing Institute, Arlington, Va. Myriad challenges are in play, including recession, recalls, rising commodity costs, price inflation and supply chain inefficiencies. “There is recognition that the challenges are very complex and diverse. Therefore, trading partners are motivated to find new ways of working together.”
Stephen Sibert, senior vice president of industry affairs for the Washington-based Grocery Manufacturers Association, said the polarization of today's shoppers will require closer working relationships between retailers and suppliers. “There are consumer groups shopping the stores at both ends of the economic spectrum using the same [store]. If you are a retailer, how are you entertaining that consumer at both ends?” he asked.
FMI's Walsh contemplated what would happen to the industry if gas prices hit $6 a gallon. Would today's supply chain, which was designed 40 years ago, be able to function under such economic strains? “Those are the types of economic pressures that will require collaborative discussions on what it will take to reinvent ourselves to remain competitive and healthy in the marketplace,” Walsh explained.
Despite progress in trade relations on many fronts, trust between the different parties remains a fundamental issue, said Sibert. “We both have interests in selling more product the best way we can in a very challenging environment with higher input costs and higher go-to-market costs.”
A new strategy termed “New Ways of Working Together” has emerged to help trading partners work through various hurdles, avoid distractions and focus on the consumer. Initiators include Wegmans Food Markets and supply partners Coca-Cola, Kraft, Frito-Lay, Procter & Gamble and J.M. Smucker.
Some may view the New Ways strategy as supplanting the industry's Efficient Consumer Response movement that some say emerged because of the competitive threat Wal-Mart Stores presented.
New Ways is similar to ECR, said Sibert. “It is about scaling successful pilots in the industry, whether they are around joining the supply chain more efficiently, technology or data synchronization pilots.”
Frank DiPasquale, senior vice president and executive director of National Grocers Association's Grocers Research and Education Foundation, Arlington, Va., said the industry lost its enthusiasm for ECR because it was heavily weighted toward logistics and distribution rather than the consumer. But ECR did provide a needed framework that gave all industry segments, including independent retailers, a seat at the table to discuss the big issues of the day, he noted.
DiPasquale believes such a framework is needed today. So far, NGA is not part of any New Ways projects. “There is a lot of discussion on ‘New Ways of Working Together.’ I am hopeful there will be an opportunity for our segment to be represented,” he added.
While trading partner relations aren't perfect, association executives agree they are progressing with a lot more sophistication, understanding and openness than in years past. “We are trying to approach a lot of concerns that manufacturers and retailers have in a collaborative fashion, and not allowing issues to escalate creating contention among companies, noted Cal Dooley,” GMA's president and chief executive officer.