MILITARY UPDATE:
Commissaries Answer Sales Drop with 'Value Brand' and More
The Defense Commissary Agency (DeCA) faced a tough operating environment in the fiscal year that ended Sept. 30 as sales fell by 4.3 percent.
The drop was due in part to commissaries closing for six days during a government shutdown last fall. But patrons also saw the worth of their benefit debated for months after the Obama administration proposed cutting DeCA’s annual appropriation of $1.4 billion to $400 million by 2017, with the idea that average shopper savings of 31 percent could be pared by one third.
Congress rejected the plan this year, but commissaries are expected to be targeted again in the 2016 defense budget to be unveiled next February.
On Tuesday, in speech to the American Logistics Association’s annual convention in Washington D.C., DeCA Director Joseph H. Jeu shared his plan for marching past budget uncertainty with fresh actions to sustain the benefit including a full-throttle modernization of its business operations over the next five years.
“There’s been a lot of bad publicity,” Jeu acknowledged to me after his speech. “But the point is, now we have a lot of good things going on.”
Jeu reviewed for vendors and brokers a host of initiatives to enrich the shopping experience worldwide, including a new “Value Brand” program to take effect this November. Shelves worldwide will be stocked with 350 brand name goods priced to match or to fall below prices of generic or “private label” products being sold by commercial grocers outside the gate.
Discounts on Value Brand items, to be identified with bright orange shelf tags, could be as much as 50 percent below private label, Jeu said. The average added savings across all Value Brand items will be about 20 percent, he said, and that’s below normal commissary discounts.
“We are really excited about this,” Jeu told attendees.
Though Jeu refused to confirm this, the Value Brand initiative appears to have been sparked by controversial testimony last May of Adm. James A. Winnefeld Jr., the Joint Chiefs vice chairman, before the Senate Armed Services Committee.
In defending the plan to whack the commissary subsidy, and to free up $1 billion a year by 2017 to protect training and readiness, Winnefeld argued that commissaries could be run more efficiently. At one point he recounted his recent experience shopping for ibuprofen and finding a dramatically better price at a commercial grocery chain store compared to the commissary.
Winnefeld said the commercial grocer sold ibuprofen for $4.49 under a private label while the commissary price was $7.98 for brand name, just a dollar less than the same brand sold off base. Winnefeld used this to urge Congress to drop a requirement that commissaries stock only recognizable brand name goods.
Hours after his testimony, lobbyists for the military resale community let it be known the four-star officer had his facts wrong. Had Winnefeld shopped more carefully, he would have found the Good Sense brand of ibuprofen, in 100-tablet bottles, selling at the commissary for only $2.39.
Jeu didn’t reference this in discussing the Value Brand rollout with industry representatives. They knew the issue well, however, because Winnefeld’s ibuprofen story had caused headaches for defenders of the commissary benefit.
Jeu did explain that more than a decade ago DeCA had launched a “very similar” program to compete with private labels called Best Value Items. But it wasn’t explained well to patrons and lost momentum, he said. Value Brand “re-energizes” the concept by clearly defining that the orange tag means a price equal to or below private label. Also, every Value Brand item will be stocked next to a recognizable national brand so shoppers “can compare prices to see the value.”
Initially the items will span 30 product categories including cereal, peanut butter, canned seafood, detergent, paper products and healthcare items. By January, up to 15 more categories will be added.
“So this program is going to grow,” Jeu said, “not only in emphasis but in variety as well as number of items.”
He acknowledged that budget challenges remain. The administration sought a cut of $200 million in commissary funds for fiscal 2015 and also a change in law to allow DeCA to begin to mark up prices “to make up the difference.”
The Senate committee rejected this first year cut entirely. The House-passed version of the defense bill accepted only half of it, but directs DeCA to absorb this $100 million cut without raising prices, and to hire a grocery industry expert to study the impact on patrons of making far deeper cuts to commissary funding.
Despite a “disappointing” drop in store sales in fiscal 2014, Jeu said DeCA has many initiatives to increase customer traffic. Besides Value Brand it has begun “lot product” sales, popular with customers seeking deeper savings.
To increase the number of items purchased per customer, DeCA is urging vendors to offer more multi-purchase discounts, incentives and packaging.
“All those things will encourage people to buy maybe multiple items versus just the one item they are thinking about buying,” Jeu said.
In January, commissaries began scanning patron ID cards at entrances. Besides verifying shopping eligibility, DeCA is using the scans to collect data on customers including rank, family size and whether they are active duty, retiree, reserve component member or dependent. Not collected, Jeu said, is any personal identifiable information. DeCA wants the data it does collect to better understand and serve patrons, he said.
DeCA also has a consultant conducting a branding study to advise on how to create a “commissary culture” that would be valued by patrons, consistent across all stores and delivers a “constant brand experience” shoppers value. The research involves focus groups with patrons, meetings with managers and tag-along shopping, Jeu said. Early findings are that “the commissary is really more than a grocery store. It provides a sense of military community,” Jeu said.
Commissaries also are moving into e-commerce with development a secure “commissary app” to shop by smart phones and other mobile devices. Soon, he said, patrons will be able to review all commissary prices remotely, order groceries electronically and pick up full shopping orders at commissary docks.
Sales data from patrons testing this “click-and-go” technology and digital coupons at select commissaries show they spend almost three times as much per shopping trip as patrons pushing carts inside the stores, said Jeu.
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Tom Philpott has been breaking news for and about military people since 1977. After service in the Coast Guard, and 17 years as a reporter and senior editor with Army Times Publishing Company, Tom launched "Military Update," his syndicated weekly news column, in 1994. "Military Update" features timely news and analysis on issues affecting active duty members, reservists, retirees and their families.
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