E and C NEWS

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Highlights of May 2014 Issue



• DALLAS — The Army & Air Force Exchange Service (AAFES) confirmed with E and C News that it has participated in discussions concerning the expansion of shopping privileges at the online exchange store to all honorably discharged veterans.

Although an AAFES spokesman said the organization has not submitted a formal proposal to extend this access, if such a proposal were enacted, it would open the online store at shopmyexchange.com to about 22 million veterans. This site is already open to authorized customers from all service branches. ...


DeCA Budget Cuts Hang in Balance


• WASHINGTON — The past few weeks have seen a great deal of animated discussion of military resale topics on Capitol Hill, as legislators digested the Administration's 2015 budget proposals and both houses of Congress began work on separate versions of defense authorization bills for the coming fiscal year.

Plans to convert the Defense Commissary Agency (DeCA) into a cost-recovery operation — and to scale back its appropriation — have headlined much of the recent discussion, along with questions, more recently, of product assortment.

Whether funding that supports servicemembers' commissary savings will be cut, or by how much, greatly depends on what language the House and Senate Armed Services Committees (HASC and SASC) agree upon before final passage of the 2015 National Defense Authorization Act (NDAA). Also in question is whether the SASC will adopt HASC language calling for an independent review of the feasibility of variable pricing in commissaries; the introduction of private-label items into the assortment, and operating DeCA as a nonappropriated fund entity. ...

Tober Named VCS Executive Director


• ST. LOUIS — On May 2, the Department of Veterans Affairs (VA) appointed Joseph R. “Ray” Tober as the executive director of the Veterans Canteen Service (VCS). Tober, who succeeded Marilyn Iverson, the long-time director of the canteen service who retired on Oct. 31, had served as acting director/ chief operating officer (COO) until he was named executive director, following a competitive search to fill this Senior Executive Service (SES) position.

The VCS provides retail and food services to over 200 VA facilities generating more than $429 million in annual revenue. As executive director, Tober will lead over 3,600 employees executing PatriotStore and PatriotCafe operations with an emphasis on standardization of national programs and policies. His primary focus will be placed on providing the highest level of quality, value and service to veterans enrolled in the VA healthcare system, their families, VA staff, caretakers and visitors to VA hospitals. ...

Marines Realign MCX, Semper Fit Organization

• QUANTICO — On April 16, Lt. Gen Robert E. Milstead Jr., USMC, the deputy commandant for Manpower and Reserve Affairs (DC M&RA), realigned program execution and oversight of several Semper Fit programs from the Semper Fit and Exchange Services Division to the Marine and Family Programs Division. ...

Board Approves Five Senior Positions

• DALLAS — In order to improve the execution of the Army & Air Force Exchange Service's (AAFES) strategic priorities, the exchange service's Board of Directors elevated five positions to the level of executive vice president (EVP). ...

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Mother Nature Cannot Hold Up the Benefit
As DeCA Opens New Store


• NSB NEW LONDON, Conn. — Not even Mother Nature could deter Sailors, retirees and their families from attending the April 16 grand opening of the Defense Commissary Agency's (DeCA) newest store. A day before the store's unveiling, the local community experienced heavy rains, snow, ice, frigid temperatures … and finally sunshine.

The new $14.5-million commissary replaced a store built in 1981 at the installation known historically as the Navy's first submarine base. With a significantly larger sales area, the commissary represents a much-anticipated boost in the installation's quality of life, said Capt. Carl A. Lahti, USN, base commander.

“The commissary offers a peace of mind that allows 'Team New London' members to focus on their duties and make a difference for our Navy and nation,” Lahti said. “It's a peace of mind that I value immensely, and that sailors here have enjoyed since 1918, when SUBASE's first commissary store opened in the Supply Department's Building 17.” ...



Newsmakers: Band-Aid, TRWB 'Stick Together' In Relay Event for Veterans


• NEW BRUNSWICK, N.J. — Johnson & Johnson's Band-Aid brand is working on an exciting new partnership with Team Red, White & Blue (TRWB), whose mission is to enrich the lives of America's veterans by connecting them to their community through physical and social activity.

In the 1940s, Band-Aid provided first-aid products to support the efforts of servicemembers during World War II, and they are continuing their long tradition of serving the military with this month's launch of a new product called Our Veteran Heroes Band-Aid Brand Adhesive Bandages.

This product features patriotic and militaryinspired designs, and Band-Aid will make a donation to TRWB for each box sold.

In addition, Band-Aid will be the presenting sponsor of the TRWB Old Glory Coast-to-Coast Relay. From Sept. 11 through Veterans Day on Nov. 11, runners will carry an American flag 3,800 miles across the country — starting from a VA hospital in San Francisco, Calif., and ending at Walter Reed NMMC, Bethesda, Md. — to raise awareness and funds in support of veteran communities in America. ...



AAFES Interview: Measuring Progress on the Path to Strategic Success

Army and Air Force Exchange Service Director & CEO Tom Shull

Following a challenging but transformational fiscal 2013, in which the Exchange gained traction along the path toward objectives it set for itself in 2012, E and C News asked Army and Air Force Exchange Service (AAFES) Director and Chief Executive Officer (CEO) Tom Shull for his thoughts on the progress of the strategic initiatives he announced in 2012.

While sales may have struggled, the primary aspects of the AAFES mission — to go where the troops and airmen go — remains intact, along with generating a dividend for MWR as selling, general and administrative costs (SG&A) have been reeled in.

However, in a multi-faceted sales arena that is changing as fast as the world of “omni-channel” retailing, the Exchange is working to set some new foundations for what Shull expects will lead to future growth …


The Exchange's successes in 2013 are due in no small part to the phenomenal work of our associates. Reductions in troop strength and the drawdown in Afghanistan bring new challenges for the Exchange, but 2013 showed that the organization is prepared for the future. Over the past 22 months, accomplishments concerning the Exchange's strategic priorities include: intensifying national brands; growing concessions; growing convenience stores; transforming the online experience; optimizing the supply chain; reducing selling general and administrative expenses (SG&A), and refocusing capitalexpenditures (CAPEX). ...



VCS 'Environment of Care' Takes Aim at Highest Standards

VCS Executive Director Joseph R. "Ray" Tober
During Veterans Canteen Service (VCS) Executive Director Joseph R. “Ray” Tober's past five years as the organization's chief operating officer (COO), the canteen service has transitioned from a government organization with legacy systems to a full-fledged modern-day retailer and foodservice operator. The “canteens” of old have rebranded into appealing new PatriotStores and PatriotCafès, and assortments and menu items have been completely revamped with a focus on patron preferences and on nutrition and food offerings that more closely support the VA's goals.

Today, VCS leads the way as a “trendsetter” in the Department, powered not only by a caring cadre of dedicated personnel, but also by up-to-date retail and business intelligence systems. Financial pressures, however, weigh on VCS's customer base, and they count on the canteen service to help them stretch their budgets and meet lifestyle goals. It's a challenge that motivates Tober and the VCS team to come to work each day to deliver value, quality and service to help make Veterans and their caregivers' lives a little brighter.

E and C News: What are some of the changes you are most proud to have been a part of at VCS during the last five years?

Ray Tober: We have made great strides with improving our technology base with new register hardware and software from NCR as well as the introduction of the Oracle retail system. Our technology transformation has positioned VCS to provide an enhanced customer experience and improved operating results. We have seen this already. Sales are up, inventories are down, accountability variances have improved dramatically and customer satisfaction scores are above industry averages. I'm so proud that VCS is perceived within the Department of Veterans Affairs (VA) community as a trendsetter. We are recognized as a “can-do” organization capable of achieving great results. Our achievements are a reflection of VCS leadership and the great workforce to rally together and execute. That is our most significant accomplishment: team work, team spirit and team success..

E and C News: What have been the keys to VCS's sales success through an economic period that continues to challenge those on limited incomes?

Tober: We had an outstanding year. Total VCS sales were up 3.5 percent comparing fiscal 2013 over fiscal 2012 (52 weeks), with retail sales charging strong at a 4-percent increase. Customers are excited about our bi-weekly advertised merchandise sales flyers focusing on great brands, great prices and “Made in USA” offerings.

In addition to promotional advertising, automated replenishment of basic planogram merchandise has been a key factor in driving sales last year. Our replenishment system provides a consistent flow of basic everyday merchandise in a timely manner to reduce out-of-stocks and provide customers what they want when they want it.

Inventory management and merchandise flow has been a critical component in driving sales and improving earnings in 2013. It will continue to be important as we move into 2014. The focus is right-sizing the inventory to maximize sales and increasing turn rates with minimal markdown rates. Being in-stock on a consistent and timely basis has enabled us to drive sales and increase our customer satisfaction levels.

Furthermore, expanding weekend hours in more than half of our Medical Center retail locations has provided great customer service to Veterans and their caregivers as well as increasing overall sales. This initiative alone accounted for $17 million in sales for fiscal 2013. ...


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Hawaiian Punch, Mott's, ReaLemon, and Yoohoo brands will have promotional pricing during display period 12 (June 19th - July 14th). We are offering one lucky Commissary Patron (CONUS only) an opportunity to win their choice from two exciting prizes: a Harley-Davidson Softail Deluxe or a 2014 Chevrolet Camaro Coupe.


Click here for more information ...

NEXCOM Energy Drinks: Expanding Assortments and Sales In Limited Space

Although growth has slowed down a bit in recent times, energy drinks remain an outstanding non-alcoholic beverage subcategory in Navy Exchange Service Command (NECOM) stores.

NEXCOM Beer and Beverage Buyer Jeff Baker reported that unlike prior years, when energy drink sales would increase in strong double digits percentage-wise, fiscal 2013 sales of these beverages posted just a single-digit percentage increase. Sales for the subcategory reached $18.55 million in fiscal 2013, a 1.59-percent increase versus prior year sales of $18.26 million.


Asked about the exchange service's approach to setup, maintenance and replenishment of displays, Baker said “Planograms are important in the beverage area, and they are important in the merchandising of energy drinks.

“Planograms are developed to optimize space to sales,” Baker said. “All energy drinks are delivered by local direct store delivery (DSD) vendors. Stores work with vendors to set up service levels and ordering to maintain stock. Our total beverage planograms are developed by our category manager and then reviewed and approved by us, and our category manager handles all beverage categories.” ...



AAFES Pets: Creating a Destination For Patrons and Pets

Welcoming a pet into the family is like adding on another member to your growing brood. It is an enormous responsibility, and Army & Air Force Exchange Service (AAFES) stores continue to ensure patrons have an up-to-date assortment of quality products at a compelling savings.

According to Marissa Tinoco, buyer of pet food and supplies for the exchange service, AAFES pet food and treats posted impressive double-digit percentage sales gains from the prior year, with pet food sales increasing more than 15.5 percent to $17.71 million and pet treats climbing 15.7 percent to $3.98 million. Pet care, on the other hand, slipped by 5.7 percent to $14.63 million. Other pet merchandise contributed $73,379 to fiscal 2013's overall $36.39 million total for the pet area, which was up 5.9 percent over prior year.


Although the pet category is a generally robust area for AAFES stores, Tinoco said that the exchange service is not resting on its laurels in this area. Refinements are constantly being made to the assortment, to better zero in on what customers want and need for their pets.

“The focus over the past couple of years has been to expand the selection of national premium brands,” she said. “Blue Buffalo, Pro Plan and Royal Canin are just some of the new brands now available in select Exchanges. Blue Buffalo now reaches up to 90 exchanges worldwide.”

Tinoco added that although the focus is on premium brands, “Customers want the high-end brand dog food, but don't want to pay higher pet prices. By adding premium brands at 10-15 percent savings over pet specialty, our goal is to get the repeat traffic on the consumable purchases and, while they are in the area, pick up a toy, bed or kennel. Creating a destination for the pet owners is our focus.” ...



NEXCOM Pet Food and Supplies: Bringing Up a Healthy and Happy Pet

Navy Exchange Service Command (NEXCOM) stores stock a wide assortment of food, treats, toys and other products that Navy families can use to bring up a healthy and happy pet, and the category has continued on an extended growth tear in many NEXCOM stores.

Adina Gadell, NEXCOM buyer of pet food and accessories in the headquarters-based General Merchandise Group (GMG), who was recently named food buyer, reported that the exchange service's pet-related sales were impressive in fiscal 2013, and were continuing their upward movement thus far in fiscal 2014.

Sales in fiscal 2013 were $17.9 million, an 18.54-percent increase from the prior year's $15.1 million in activity. Gadell noted that to kick off fiscal 2014, sales during during February and March were $3.2 million versus the prior year's nearly $3 million, a better than 8-percent increase.

“Humanizing pets continues to be the driver for innovation in the category,” Gadell noted. “Because of that, we continue to see a focus on premium nutrition, natural products, and sustainable materials.”


Gadell said planogram facings and quantities related to the pet department are based on average weekly unit movement by location, in addition to leadtime calculations for each product.

“We want to ensure that there is enough pack-out on the shelf to carry through until the next replenishment run,” she said. “We work with our vendor partners to get their feedback on ideal SKU mix, their internal rankings, new product releases and consumer shopping insights.”...



MCX Pets: Once a Marine Pet, Always a Marine Pet

Although the Marine Corps Exchange (MCX) does not carry a pet selection at all locations, the exchange service ensures a broad assortment at locations where it has historically experienced strong sales in this category, featuring everything a Marine family needs for their pets.

According to Semper Fit and Exchange Services Division Buyer Karen Macdonald, the pet department is doing well in MCX stores, sporting a frisky 20-percent increase in sales during fiscal 2013, reaching $2.7 million in activity.

During the first month and a half of fiscal 2014, through mid-March 2014, pet sales reached $392,000, up 13.3 percent.

“The biggest trend in the pet category continues to be the humanization of our pets, including their diets,” Macdonald said. “This means that our pets are becoming perceived more as family members. As such, pet owners endeavor to provide the very best for their pets. We especially note the trend of purchasing foods that use meat as the first ingredient, are gluten-free, or are intended to address various 'wellness' concerns such as age and weight.”


With a pet selection limited to only certain locations, Macdonald noted that the MCX must maximize the display area that it has for pet products.

“Because of the already limited space allocated to pet products, we have to be creative about the number of subcategories that we carry and with the merchandising of those items,” she told E and C News. “We feature smaller displays with the maximum number of items to ensure a good variety and selection for our servicemembers and their families. We recognize that space is always at a premium in the retail environment, and we work with what we have to give the best assortment we can.”

In-stocks can be a very important factor in the continuity of pets' diets, health and their owners' loyalty to a store, and Macdonald said that the MCX stays on top of this by making brand availability a prerequisite for success.

“We know how important having their favorite brands available is to our customers,” Macdonald said. “Our customers expect us to have what they need, when they need it. To that end, many of our pet products are on automatic replenishment, and fill levels are reviewed on a regular basis to make sure that we are keeping up with those wants and needs.”

Macdonald said that MCX's vendors “are an integral part of determining the exchange service's pet planograms. “With their assistance, and utilizing historical data, we are able to put together the most efficient planograms for each location,” she noted. ...



RESALE SNAPSHOT — February 2014


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