Supply Scan

 

SPECIAL REPORT: How will the new food safety regulations impact your business? Coming in the September issue of Food Logistics.

 

» WalMart To Establish Sustainable Product Index
WalMart Stores Inc. is developing a worldwide sustainable product index, which will establish a single source of data for evaluating the sustainability of products.

“Customers want products that are more efficient, that last longer and perform better,” says Mike Duke, WalMart’s president and CEO. “And increasingly they want information about the entire lifecycle of a product so they can feel good about buying it. They want to know that the materials in the product are safe, that it was made well and that it was produced in a responsible way.

“We do not see this as a trend that will fade. Higher customer expectations are a permanent part of the future,” Duke continues. “At WalMart, we’re working to make sustainability sustainable, so that it’s a priority in good times and in the tough times. An important part of that is developing the tools to help enable sustainable consumption.”

The company will introduce the initiative in three phases, beginning with a survey of its more than 100,000 suppliers around the world. The survey includes 15 questions that will serve as a tool for WalMart’s suppliers to evaluate their own sustainability efforts.

The questions will focus on four areas: energy and climate; material efficiency; natural resources, and; people and community.

“The survey will include simple but powerful questions covering familiar territory, such as the location of our suppliers’ factories, along with new areas like water use and solid waste,” says John Fleming, chief merchandising officer, WalMart U.S. “The questions aren’t complicated but we’ve never before systematically asked for this kind of information. The survey is a key first step toward establishing real transparency in our supply chain.”

Fleming also says the company will ask its top tier U.S. suppliers to complete the survey by Oct. 1. Outside the U.S., the company will develop timelines on a country-by-country basis for suppliers to complete the survey.

As a second step, the company is helping create a consortium of universities that will collaborate with suppliers, retailers, NGOs and government to develop a global database of information on the lifecycle of products—from raw materials to disposal. WalMart has provided the initial funding for the Sustainability Index Consortium, and invited all retailers and suppliers to contribute.

The company will also partner with one or more leading technology companies to create an open platform to power the index.

“It is not our goal to create or own this index,” says Duke. “We want to spur the development of a common database that will allow the consortium to collect and analyze the knowledge of the global supply chain.”

» SUPERVALU TO SELLSUPERMARKETS IN UTAH
Supervalu Inc. has reached an agreement with Associated Food Stores for the sale of the majority of its Albertsons stores located in Utah.

The sale will include 36 Albertsons stores in Utah and their respective pharmacies and fuel centers, with the exception of three St. George—area stores which will remain Albertsons and continue to be operated by Minneapolis-based Supervalu.

In connection with this transaction, Supervalu is also seeking a buyer for its two Albertsons stores in Orem, UT and two Albertsons stores in West Jordan, UT, and will continue to operate those stores while a buyer is identified.

Associated Food Stores intends to rename the 36 purchased stores, and expects to offer employment to most Albertsons associates. Supervalu’s Salt Lake City distribution center will remain part of Supervalu and will remain open to serve Albertsons stores in Idaho, Wyoming and Montana.

The transaction, which is subject to regulatory approval, is expected to close this fall. Supervalu will realize approximately $150 million in after-tax net proceeds from the sale.

“While this was a difficult decision due to the impact on our associates and the Utah community, the sale of these stores will allow the company to focus on our greatest growth opportunities while at the same time monetize non-strategic assets for debt paydown,” says Craig Herkert, Supervalu CEO.

“Albertsons has a long history of serving the Utah marketplace and the decision to sell these stores was made only after careful analysis and deliberation,” he adds.
Founded in 1939, Albertsons was acquired by Supervalu in 2006.

» PEPSICO MERGES WITH BOTTLING GROUP, PEPSIAMERICAS
PepsiCo has entered into merger agreements with The Pepsi Bottling Group Inc. and PepsiAmericas Inc. under which PepsiCo will acquire all of the outstanding shares of common stock it does not already own in its two largest anchor bottlers.

This transaction is expected to create annual pre-tax synergies of $300 million by 2012 due to greater cost efficiency and improved revenue opportunities. The acquisitions are expected to be accretive to PepsiCo’s earnings by about 15 cents per share when synergies are realized in 2012.

Purchase, NY-based PepsiCo cited a number of specific benefits it expects to realize by consolidating its two largest bottlers:

• Consolidation of 80 percent of the North American beverage volume will speed the decision-making process and eliminate friction points;
• Offering more compelling bundles across food and beverage and providing enhanced customer service nationally, taking the “Power of One” to the next level;
• Consolidation of manufacturing networks will provide cost benefits and also optimize investments in growth and innovation;
• Greater flexibility in deploying multiple go-to-market systems to tailor distribution by channel;
• Elimination of redundant costs to leverage scale efficiencies.

“PepsiCo has had a constructive partnership with PBG and PAS over the past 10 years,” says Indra Nooyi, PepsiCo chairman and CEO. “While the existing model has served the system very well, it is clear that the changing dynamics of the North American liquid refreshment beverage business demand that we create a more flexible, efficient and competitive system that can drive growth across the full range of PepsiCo beverage brands.”

HR 2749 RAISES CONCERNS FOR SOME IN THE INDUSTRY

The House version of food safety regulations—HR 2749 “Food Safety Enhancement Act of 2009”—is causing concern among a few segments of the food supply chain. While not one organization is against the intent of the bill—food safety—the proposed implementation worries some because it assumes equal responsibility for everyone along the food supply chain, particularly food warehousing companies and 3PLs, whose sole responsibility is to store the finished products.

The IWLA (International Warehouse Logistics Association) agrees HR 2749 is comprehensive food safety legislation. However, the legislation does not distinguish what a third-party logistics provider does, states Joel Anderson, president and CEO of the Washington, organization. Manufacturers, processors and packers have a far greater impact on food safety than a warehouse storing food products.

“This bill states that if there is a recall, we would be held as responsible as if we had knowledge of the product and the ingredients within and we cannot withstand this liability standard,” states Anderson. “This could terminate our business model.”

The goal, says Anderson, is to help legislators understand the chain of custody involved in tracing back to the source of a contaminated product. “To hold everyone who touches the product to the same standards as the grower, producer, or processor is just not the proper approach and could wipe out the 3PL food warehousing industry because of the implied liability,” he warns.

Both GMA and FMI have issued endorsements of the bill, citing the bill’s ability to strengthen food safety while providing the FDA with the required resources to achieve its food safety mission. No one disputes this mission, but IWLA is concerned that the bill ignores the role and limited responsibilities of warehouses and 3PLs, a vital segment of the food supply chain.

Other concerns in the industry point to the House bill’s overly broad traceability requirements and the introduction of civil monetary penalties for things like recordkeeping errors that could carry fines up to $250,000 for each violation. Furthermore, new fees include a registration fee of $500 per facility and another $175,000 per company, which is significant for companies with a number of facilities.

This is the largest overhaul of the food safety law for some time. The industry is also monitoring the Senate version—S. 510 “FDA Food Safety Modernization Act” —which many groups feel offers a more sensible approach.

The industry will continue to be part of the discussions so that when both versions of the bill go before the Conference Committee in late September or early October, members of the Senate and the House will have the information they need to produce a fair food safety bill that addresses and quells these concerns. —April Terreri

STUDY FINDS MOBILITY IS COMPETITIVE DIFFERENTIATOR FOR HOSPITALITY INDUSTRY

A recent Motorola Inc. study uncovered that mobile and wireless technologies are top of mind for hospitality decision makers—playing a pivotal role in creating a symbiotic relationship between establishments and customers.

The Motorola Enterprise Mobility Solutions Hospitality Barometer discovered that 82 percent of respondents reported an increasing importance of mobility within their organization in 2009 to help drive revenue and improve the customer experience. And more than 60 percent of hospitality decision makers believe these technologies are providing consistent service and competitive advantage.

The Motorola Hospitality Barometer surveyed approximately 468 hospitality decision makers globally—representing a broad spectrum of establishments including bars, restaurants, hotels, resorts and conference centers. Respondents agreed that increased productivity, revenue generating opportunities and cost savings initiatives are driving IT investments in mobility.

Nearly half of the survey respondents reported a boost in customer satisfaction; 27 percent cited an increase in per-guest average spend; and one quarter identified a rise in inventory accuracy as a result of implementing a mobility strategy.

“Hospitality IT decision makers have made it clear that mobility is no longer an option but a necessity to survive in an increasingly competitive market,” says Frank Riso, senior director of retail, Motorola Enterprise Mobility Solutions, Holtsville, NY. “And with seven in 10 decision makers viewing mobility as a downtime conversion tool—Motorola’s hospitality barometer indicates that the mobilization of key applications enables organizations to save or recover a daily average of 44 minutes per employee.”

As the industry matures, new technologies will continue to emerge and will provide an even greater impact on how hospitality decision makers run their businesses. In the next five years, 53 percent of survey respondents believe wireless ordering and reservation technologies will provide the greatest impact on the hospitality industry.

“With a focus on revolutionizing the customer experience, empowering our wait staff with the right tools has been a priority since the inception of City Winery,” says Michael Dorf, founder and chief executive officer, City Winery, New York. “As we recognize the value of mobility, we look for new ways to leverage our Motorola mobile computers. Moving forward, we will mobilize our ‘Vinophile’ customer loyalty program, setting a new bar for customer service within a hospitality establishment.”

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