A look at the key issues/opportunities impacting the retail food industry

1. Is Your Distribution Operation
prepared to succeed in 2015, 2016
…2025??
or
Oh $*%#@@!
The Food Consumer Changed and
My Company and I didn’t!
Richard H. Kochersperger
June, 2015

2. Industry Gurus
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3. Age Brings Wisdom

4. Tell Me and I Forget
Teach Me and I Remember
Involve me and I Learn
Ben Franklin
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5. Previous Presentations
• 2015: Oh $*%#@@! The Food Consumer
Changed and My Company and I didn’t!
• 2014: Disruptive Forces: Are U Prepared?
• 2013: Value Chain Strategy in a VUCA world
• 2012: Speed: The Consumer is Changing Faster
than the Food Industry can change!
• 2011: Seek to stay out in front and don’t look back!
• 2010: The World is Changing Faster than you are!
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6. Goals/Objectives
• Who’s Driving the Bus (food industry)?
• The REAL Economic Situation
• Food Industry Perspective
• Winners and Losers
• New Developments
• Snowballs rolling down the hill (key issues)
• Logistics Strategy: 5 Key Initiatives
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7. The Consumer Drives
the Food Supply Chain
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8. Customer’s Perspective
•Anytime: 24/7/365
•Any Place: Format
•Anywhere: geography
•My Way!
•Right Now!
806/15/15

9. Future FCPG Industry
Value Network
Command Center
Control Tower
Roles can not
be defined
Retailers
Google Uber
Microsoft
Amazon
The Consumer
Distributors
Third Party
Alliances,
Partners
Manufacturing
Network
Regional, global plants
Bulk, Semi-finished,
Filling Finishing,
Suppliers
Information Information
InformationInformation
Information
906/15/15

10. Value Network

11. Value Network Mapping

12. The “Have” and “Have Not’s”
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13. U. S. Demographics
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14. 14
U. S. Demographics
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15. Who Are My Consumers?
Generation Age Millions of
People
Generation Alpha 0 - 9 ??
Digital Natives (Generation Z) 10 - 17 25
Millennials (Generation Y) 18 - 24 91
Generation X (Busters) 25 - 35 41
Younger Boomers 35 - 50 48
Mature Boomers 50 - 65 40
Depression / WWII 67 - 80 35
G.I. - Pre 1928 Over 80 26
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16. Observations about the Consumer
• Consumer behavior is changing faster than our
abilities to change the FCPG supply chain
(OMNI-Channel) !!
• Demographics don’t work!!!
• 5 W’s: Who, What Where, When, Why?
• Different drivers affect decision making
• Supply Chain/Value Network is complex!!!!
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17. Thought for the Moment
“Insanity is doing the same thing,
over and over again, but
expecting different results.”
― Albert Einstein
1706/15/15

18. A look at the Economy

19. Food Economics

20. Food Prices
• Bacon: 55% increase since 2010
• Ground beef: 45%
• Oranges: 35%
• Coffee: 31%
• Peanut Butter: 30%
• Margarine: 30%
• Wine: 25%
• Turkey: 24%
• Chicken: 22%
• Pork: 15% 2014

21. Thought for the Moment

22. Food Retail Industry Graveyard
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23. Food Retail Industry Graveyard
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24. Food Retail Industry Graveyard
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25. Food Industry E R
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26. Food Industry E R
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27. Food Retail Winners
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28. Food Retail Winners
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29. Rise of the Ethnic Focused Retailer
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30. Foodservice Losers
25% of new restaurants go out of business the first year

31. Foodservice Industry Winners
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32. Consumer Reports 2015
• 28% changed primary
store
• 45% looking for lower
prices
• 26%Long wait Checkout
• 30% poor selection, long
lines
• 20% Cleanliness
• 17% employee rudeness
• 55% had complaints
• Not enough checkouts
• Wegmans 90
• Trader Joe’s 87
• Publix 87
• Fareway 85
• Marketbasket 85
• Costco 84
• Raley’s 84
• Sprouts 83
• Stater Bros 83
• Winco 83
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33. Top US Food Retailers
Name Sales Stores Format
Wal-Mart Stores $288,049,000 4,024 Walmart Supercenter (3,407)
Walmart Neighborhood Market (600)
Walmart Express (15)
The Kroger Co $108,500,000 2,625 Multiple
AB Acquisition LLC $56,443,140 2,238 Safeway, Vons, Albertsons
Publix Super Markets $30,559,505 1,097 Publix (1,085) Sabor (9) GreenWise (3)
Ahold USA Inc $25,976,700 761 Stop & Shop (394) Giant-Landover (154)
Giant-Carlisle (147)
H-E-B Grocery Co. $22,590,000 363 H-E-B (258) H-E-B Plus (36) H-E-B Central
Market (9)
Delhaize America Inc. $16,900,000 1,296 Food Lion (1,108) Hannaford (188)
Meijer Inc $15,400,000 213
Wakefern Food Corp. $14,700,000 141 ShopRite (77) Price Rite (58) The Fresh
Grocer (6)
Whole Foods Market $14.194,005 414

34. Global Food Industry

35. The Gartner Supply Chain Top 25
for 2015• Rank Company Peer Gartner 3-Year Inventory 3-Year Composite
ROA Turns Revenue Score
• 1 Amazon 3,394 468 0.0% 8.7 21.7% 5.32
• 2 McDonald’s 1,626 283 14.6% 157.3 -0.2% 5.23
• 3 Unilever 1,996 619 11.3% 6.7 -0.2% 5.15
• 4 Intel 1,064 481 12.1% 5.0 2.4% 4.09
• 5 Inditex 1,003 297 17.0% 3.8 8.8% 4.04
• 6 Cisco Systems 1,147 500 8.4% 12.6 1.5% 4.01
• 7 H&M 809 89 26.6% 3.7 12.8% 4.01
• 8 Samsung 1,568 330 10.5% 17.7 0.5% 3.91
• 9 Colgate-Palmolive 1,034 318 17.8% 5.0 0.6% 3.91
• 10 Nike 1,369 214 14.5% 4.1 10.7% 3.78

55. Lidl
• 850,000 sq ft DC in Almance, NC
• Lexington, Winston-Salem, NC

70. Thought for the Moment

71. Issues Impacting your Business!!

72. Foodies: Green, Natural, Organic
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73. Clean Food
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74. Real Food
Real Food is food which truly nourishes producers, consumers, communities and the
earth. It is a food system--from seed to plate--that fundamentally respects human
dignity and health, animal welfare, social justice and environmental sustainability.Some
people call it "local," "green," "slow," or "fair." We use "Real Food" as a holistic term
to bring together many of these diverse ideas people have about a values-based food
economy
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75. Pure Food
eating food that mother nature grew
and offered for us.
No Man Made products

76. FRESH

77. 77
Farmers Markets
2013: 8,000+
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78. Rise of the Grocerant
• "Grocerant means any retail food item that is ready-2-eator ready to heat. Traditionally
these items can be found in grocery stores in the deli / lifestyle section, C-stores in the
prepared food area and prepackaged, ready to eat items and in restaurants under the
To-go, takeout or take away or delivery section of the menu or on the website."

79. Rise of the Grocerant

80. Eataly

83. Subscription Meals

86. Click and Collect
Arkansas, Arizona, Canada, Great Britain

87. Walmart Click/Collect/Flex site
This is a typical welcome site
that is displayed when Wal-
Mart delivery trucks park
offsite in Phoenix and act as a
collection point for online
grocery orders. Customers are
treated to gifts, with first
timers receiving a welcome
box and loyal customers a
rewards box. All users are
treated to bottled water and a
snack while they wait for their
order to be loaded in their
vehicle.

88. Delivery to the Consumer!

89. FMI: Store of the Future
• Nearly half of shoppers want store associates to provide in-
depth product information.
• 52 percent continue to be annoyed by long lines.
• More than 50 percent will want to integrate their mobile
devices into their shopping.
• 5 percent include online grocery shopping as a primary
future channel.
• 28 percent say competitive pricing will be the main reason
for choosing their grocer.
• 39 percent want retailers to reward them for making healthy
purchases and trying new foods.
• 30 percent ranked virtual grocery stores as a top-three
"want" for the future.

90. Amazon Dash

91. Amazon Income Promotions

92. Walmart

93. New Developments
• Tesco to sell off Korea
• XOXO: 900 stores in Texas
• Target to invest $50 million in Va DC
• Sysco acquires Tannis Trading
• Amazon to build new DC in Shakopee, MN
• Wegmans to open in Brooklyn/Richmond/Tysons
Corner
• Sycamore Partners buys 330 Family Dollar Stores
• Blue Bell Creamery shuts down due to listeria
• C&S closes White Rose operations

94. New Developments
• Schnucks to build new DC in Missouri
• ACON buys Fiesta
• Ahold Fresh opens in Phila/Boston
• Meijer curbside/Wisconsin
• Publix continues invasion of Carolinas
• Giant Eagle closes Good Cents
• I supply to Michigan
• Reinhart Foodservice to Washington DC

95. New Developments
• Amazon Now Offers Free Same-Day Delivery in 14
Metro Areas
• Walmart Turns Weekly Circular into Online Catalog,
Focus on 'Live Better'
• Amazon Working on Pinterest-Like Browsing Called
'Amazon Stream'
• Walmart Launches App-Based Virtual Store in China
• Apple Partners With Postmates for Same-Day Delivery
Trial

96. New Developments
• Taco Bell Pledges to Remove Artificial Ingredients
as Consumers Demand More Information
• Walmart Announces Changes for Food Suppliers
Around Animal Treatment
• Ebay To Extend Click and Collect in Europe
Following Successful UK Pilot
• Ecommerce business models are disrupting the
historical value chain
• Ecommerce to account for 22% of global chain
retail by 2020

97. Thought for the Moment
7 most expensive words in business
We have always done it that way!!!

98. 5 Strategic Initiatives
• Manage the Network
• Inventory Management Plan
• Step up to the Omnichannel Opportunity
• Embrace Technology
• Invest in Education/Mentors

99. 1. Manage the Network
• Seek to control every touch point in the logistics
process.
• Map out the nodes of your logistics footprint.

100. Map the Value Network
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Sources
Products
Routes
Costs
Pricing
Inventory

101. Product Visibility
• Track and trace from source to your operation
• Procurement is a supply chain function
• Ensure integrity of the product
• Identify opportunities to improve in-stock
performance throughout the supply chain
• Temperature
• Quality
• On-time
• Lowest Cost
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102. Control the Network!

103. 2. Inventory Management Plan
• New Items:
• Current strategy of 1 for 1 doesn’t work!
• Organics growing at 14% rate annually
• Fresh, Natural, Healthy 10-15% annually
• If you say no! You make UNFI the hero.
• Inventory performance controls your
productivity (layout, shorts, mistakes)

106. Response:
• Pareto’s Law: 20/80
rule
• Develop fee structure
based on:
• Cube
• Velocity
• Handling expenses
• Don’t put partial pallets
in the air

107. 3. Step UP to the Omnichannel
Opportunity

110. Omni Channel Opportunities
Develop an Omni Channel
Strategy:
•Pick from a DC; Direct to Consumer
home/office
•Pick from a DDC; Direct to Consumer
home/office
•Pick from a DC; Pick up at the store
•Pick from a DC; Pick up via a locker
•Pick from retail store; direct to
consumer home/office
•Pick from retail store; pick up at the
store
•Click and collect dedicated site
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Peapod/Ahold: $600+ million
Fresh Direct: $500+ million
Amazon Fresh: $200+ million
Alibaba, Grubhub, Uber,
Google, etc.
Picking from the store is not
an ideal solution!!!

111. 4. Embrace Technology
• Invest in the technical opportunities
Goal is to go paperless with immediate response
time
• Internet of things
Wearables
Scannables
Flyables
• Big Data: the ability to analyze and identify
developments as they happen
• Cloud: Opportunity to connect/collaborate/share

112. Target: 2016
Amazon:
Partners with Auburn University RFID lab

113. DC: Automation
113
Take Fingerprints
off the Box!
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114. Internet of Things
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115. Internet of Things
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116. 3-D Printing
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117. Video: SAP Glass
Going Paperless in the supply chain
• https://www.youtube.com/watch?v=9Wv9k_ssLcI
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118. Video: Amazon Drones
• https://www.youtube.com/watch?v=Le46ERPMlWU
• https://www.youtube.com/watch?v=qmHwXf8JUOw

119. Video: Kiva
• https://www.youtube.com/watch?v=6KRjuuEVEZs

120. 5. Invest in Education/Mentors

121. 5. Invest in Education/Mentors
• Share Groups
• Association local meetings
• CSCMP, APICS, WERC, ASM
• Road Trips
• Educational Programs: 600 colleges/universities
now offer degrees in Supply Chain Management
• Logistics Institute (Canada)
• Consultants
• Blogs
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122. Blogs:
• Food: valuenetworkissues.blogspot.com
• Marketing: haccmarketing.blogspot.com
• Logistics: logisticsvaluenetworks.blogspot.com
• http://www.scoop.it/t/food-value-networks
• richard2496@comcast.net
• 610-256-6636
• Post on www.slideshare.com
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123. Closing Thought
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