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Highlights of the December 2016 Issue


Fresh, Tasty, and in Stock at Every Base


Van Parrish, Markets Director - Military, The McLane Company

Consumers are eating more snacks and on-the-go meals than ever — by some estimates about 2.35 snacks per day on average — and c-stores are taking advantage of the trends by expanding and re-organizing their snack and foodservice assortments. Van Parrish, markets director-Military for The McLane Company, spoke with E and C News about the company’s broad and contemporary portfolio of offerings; its distribution capabilities across the national stage, and the company’s support of Navy Exchange Service Command (NEXCOM), Marine Corps Exchange (MCX), Veterans Canteen Service (VCS) and Coast Guard Exchange (CGX) stores.

E and C News: What are some of the innovative solutions that McLane may be able to offer exchange convenience stores?

Van Parrish: McLane has developed its own brand of expertise on foodservice, including produce and salads, which is a major differentiator in today’s c-stores. Foodservice means so many different things to different people. For some retailers and customers, “foodservice” can mean something as simple as serving cheese and crackers, while for others it could be preparing deli and sandwich items, for example, at a WaWa — which is a McLane customer — or at —which is self-distributed.

McLane has developed a special process with which we can sit down with a retailer and help them define their needs when it comes to foodservice. From there, we can develop customized solutions.

We have sources for all of types of foodservice products, whether it’s pizza, chicken, roller grill, onion rings, cheese sticks and other appetizers, to egg rolls, mini tacos, corn dogs and potato wedges, as well as coffee, deli, sandwiches, and so on. There are many examples at the McLane website and at McLaneKitchen.com. It all depends on what the retailer has the desire and or commitment to implement.

Not only can we deliver, but we also serve as the retailer’s consultant to help develop solutions that fit any need they might have. From hot dogs to Buffalo chicken, McLane can offer retailers a wide range of offerings.

At trade shows, people are anxious to sit down with our product director for that segment, Holly Veale, because of her vast expertise in c-store and foodservice sales.

Foodservice is the main area where convenience stores can grow and expand. This crosses into produce as well — we can do as little as they need, or expand into more developed programs. ...


'The Intangible Benefit'


Ed Brunot, Executive Vice President, SpartanNash and President, MDV

As the Defense Commissary Agency (DeCA) takes the next steps in its transformation journey this year with the implementation of its Enterprise Business System, it has also tightened the focus on its supply chain. In this interview, Ed Brunot, executive vice president of SpartanNash and president of MDV — DeCA’s primary distributor partner and now the third-party private label supplier that was selected just as this issue went to press — turns the spotlight on the unique ways this military-specific grocery distributor delivers added value to the commissary network worldwide. The company’s systems have been honed over more than a decade to serve the particular needs of not only the agency, but also its patrons. Brunot — himself a former Army captain — talks about the commissary distribution landscape and the special connection MDV employees feel they share with servicemembers and their families.

E and C News: What distribution challenges and opportunities does SpartanNash see?

Ed Brunot: The food distribution industry — both wholesale and military — is changing as consumer demands and lifestyles shift. In increasing numbers, families purchase food online, at big-box discount or home good stores, drug stores, health food retailers and co-ops, or grab-and-go options at delis or restaurants.

This has led to declining sales throughout the grocery industry — and at the commissaries and exchanges as well. Factor in deflation at 3.0 percent wholesale and 1.4 percent retail, and it creates a tough environment. The upside is that the industry is experiencing growth in perimeter sales, primarily fresh produce and organics, as well with private brand products.

With respect to the commissaries and exchanges, this shift impacts our military patrons and their families on a deeper level.

E and C News: Can you elaborate?

Brunot: The commissaries and exchanges offer patrons the intangible benefit of emotional and social support, whether abroad or based in the U.S. As an industry leader in food distribution to U.S. military commissaries and exchanges worldwide, SpartanNash is privileged to play a role in serving our military heroes, and we see firsthand how important the commissaries and exchanges are to patron families.

There is camaraderie and a bond among the patrons that cannot be found with alternative distribution channels. Those shopping the aisles know that others they meet there have served, continue to serve, and may possibly be struggling on fixed incomes, have challenges of transitioning to civilian life, or are juggling household demands while a family member is deployed.

Because of this — and the fact that we have over 30 percent of our MDV family of associates who have served or have a family member who served/serves — our team embraces the opportunity to give back in additional ways to our military heroes. ...


NDAA Eyes NAF Commissary Business Model


• WASHINGTON — Under the 2017 National Defense Authorization Act (NDAA), passed by the Congress on December 8 and awaiting the President’s signature at press time, the Defense Commissary Agency (DeCA) and its worldwide network of commissaries could eventually be converted to a partially or fully selffunding business model, as long as certain conditions are met. At the same time, the legislation (S.2943) would hurdle the fiscal lines between resale appropriated fund (APF) entities such as DeCA and nonappropriated fund (NAF) activities, such as exchanges and Morale Welfare and Recreation (MWR) organizations, by allowing the use of savings and proceeds from business optimization and synergies to offset appropriated funding, and permitting the sharing of revenues from mutual contracts.

Additionally, the conference report — which merges House and Senate armed services committees’ perspectives on military resale transformation — authorizes DeCA’s variable pricing and private label pilot projects that commenced on Dec. 16, again with the caveat that savings and satisfaction benchmarks are achieved.

The bill also revives congressional concerns about the ability of DeCA senior management to effectively manage transformation of the commissary benefit to the new model, and authorized the Secretary of Defense to “enter into a contract with an entity to obtain expert commercial advice, commercial assistance, or other similar services not otherwise carried out by the Defense Commissary Agency.” ...

GAO: DoD Report Lacks Data to Support Resale Changes

• WASHINGTON — Although the congressional Armed Services Committees appear to have casually breezed by it on their way to rubber-stamping the 2017 National Defense Authorization Act (NDAA), a November report from the GAO took issue with the lack of thoroughness of the Defense Department’s (DoD) “Report on Plan to Obtain Budget Neutrality for the Defense Commissary System and the Military Exchange System.”

GAO, citing what it described as a lack of supporting data, concluded that the DoD’s May 2016 report on commissaries and exchanges issued by the Office of the Under Secretary of Defense for Personnel and Readiness (P&R) “does not provide a plan for achieving budget neutrality” by 2018, and that further data would be needed to show why. ...

DeCA Chooses Private Label Supplier

• FORT LEE — The Defense Commissary Agency (DeCA) selected MDV SpartanNash LLC to bring private label products to its store shelves. Commissaries will add private label options to their assortments, while continuing to offer a selection of name brands that patrons have previously shopped in commissaries, albeit reduced in number and facings to accommodate the new “house” offerings originating from the midwestern grocer.

The program commenced on Dec. 16 and is slated to end on Dec. 15, 2019, with the potential for two one-year renewal options.

SpartanNash, which operates a variety of supermarkets in the north central and midwestern parts of CONUS — including such chains as Dan’s Supermarket, D&W Fresh Market, Econofoods, Family Fare Supermarkets, Family Fresh Market, Family Thrift Center, Forest Hills Foods, Fresh City Market, No Frills, SunMart, Supermercado Nuestra Familia, ValuLand and VG’s Food and Pharmacy — is already a leading supplier of commissary products in most of CONUS and is the product of a merger between Spartan Stores and MDV/Nash Finch (See E and C News 9/13).

Harvesting earnings from private label is one of several measures that have been suggested to help offset commissary appropriated funding (APF). The Department of Defense (DoD) submitted a report to Congress in May, which was mandated by the 2016 National Defense Authorization Act (NDAA), and was focused on various steps that DoD and its consultant the Boston Consulting Group (BCG) believed would help commissaries to eventually become “budget neutral,” or operating without the use of APF.

“Our customers have been asking for private label for a long time,” said Joseph H. Jeu, DeCA’s director and chief executive officer (CEO), citing a DeCA patron survey in which 60 percent of respondents said they would be willing to try private label offerings. “They are smart, savvy shoppers who know that private label products are cost-effective alternatives to national brands. We’re excited to help them save more at our commissaries.” ...

Branch Named President as ALA Restructures

• WASHINGTON L. Maurice Branch, the chief operating officer (COO) and chief financial officer (CFO) of the American Logistics Association (ALA), was named president of the military resale trade organization, effective Dec. 31, as part of a succession planning and restructuring effort.

Branch, who ALA said would retain his CFO title as he moves over to the president’s role, succeeds Patrick Nixon as the organization’s president. In a third-party agreement, the services of Nixon, a former Defense Commissary Agency (DeCA) director who had also been ALA’s chief executive officer (CEO), will be retained as a consultant, effective Jan. 1, 2017. Two titles in the ALA hierarchy — CEO and COO — were eliminated in this change. ...

AAFES Opens First Stores Supporting Korea Transition

• USAG HUMPHREYS, Korea —The Army & Air Force Exchange Service (AAFES) and installation leadership celebrated the opening of an important new facility here, making it the Exchange’s first new retail mini-complex to open at a garrison that expects its population to more than triple during the next several years.

The newly opened Mini-mall/Express is set to support the increase in the base’s military community population, as the bulk of U.S. forces stationed in Korea relocate to the base, about 55 miles south of the capital area.

The much-anticipated $6.2 million project has been 42 months in the making, and was made possible by the Exchange’s partnership with U.S./Republic of Korea Alliance, Camp Humphreys command and directorates, the U.S. Army Corps of Engineers and Dosan Construction Co.

“This five-way partnership set the path and joined patrons of this community had an outstanding variety of services and selection, further enhancing the shopping experience,” said Maj. Gen. James Walton, USA, U.S. Forces Korea’s director of Transformation and Restationing, during the Nov. 8 ribbon-cutting. “This complex is the first Exchange facility opening in support of the units transitioning to Camp Humphreys.” ...

AAFES Names Executives to Management Roles

• DALLAS —The Army & Air Force Exchange Service (AAFES) recently named a series of executives from among a variety of directorates and locations to management positions and/or locations, effective in the November 2016 through February 2017 time frame. ...


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NEXCOM’s Honiball Accepts Award on Behalf of Team


• VIRGINIA BEACH Rich Honiball, senior vice president and chief merchandising and marketing officer (CMMO) of the Navy Exchange Service Command (NEXCOM), won the CMO Marketing Innovation Award from The CMO Club.

The award recognizes demonstrated capability in creating an innovative environment that delivers break-through marketing and game-changing outcomes in return on investment (ROI) and customer engagement for the industry.

““It is great that the members of The CMO Club are recognizing the work Rich has been doing here at NEXCOM,” said NEXCOM Chief Executive Officer (CEO) Rear Adm. Robert J.” said NEXCOM Chief Executive Officer (CEO) Rear Adm. Robert J. Bianchi, SC, USN (Ret.). “Our customers are the beneficiaries of his talent and ideas. He is most deserving of this award.”...

AAFES Brings Holiday Cheer To Young Servicemembers


• JB SAN ANTONIO — The Army & Air Force Exchange Service (AAFES) helped Soldiers, Airmen and Sailors at the Lackland Exchange and Fort Sam Houston Exchange here bridge the gap between Texas and home with two holiday shopping events geared to their needs.

On Dec. 3, the Lackland Exchange held a special shopping event for more than 3,000 Basic Military Training (BMT) recruits who are normally not allowed outside of their dorms when not training.

Just a week later, on Dec. 10, the Fort Sam Houston Exchange held an event for Advanced Individual Training (AIT) students, many of whom were about to travel home for the first time in months. ...

Mars’ Donation Helps USO ‘Holidays for Heroes’ Program


• HACKETTSTOWN, N.J. — With the theme of giving back for the holidays in mind, Mars Chocolate North America recently helped the United Service Organizations (USO) put together 5,000 care packages for servicemembers stationed overseas.

As part of USO’s “Holidays for Heroes” program, Mars made generous product donations of candy, snacks, DVDs, and other items for inclusion in the packages. Many of the care packages were sent to remote locations around the world, including to downrange hotspots, during the week of Nov. 7, including during a Nov. 9 event at Yankee Stadium, Bronx, N.Y., where the fabled arena’s Great Hall hosted over 250 volunteers helping to assembl e c a r e packages for those deployed in some of the most remote overseas locations.

Victoria Nastri, the USO’s director of Corporate Alliances, noted, “The holidays can be a particularly difficult time for our deployed service members. Thanks to you, we are able to bring a taste of home to those who can’t be with their families this holiday season. These care packages are now traveling to Afghanistan, Iraq, Kuwait and Djibouti, and were set to arrive before the holidays.

Mars Chocolate’s generous donation will help remind service members around the world they are not forgotten, but appreciated and celebrated by Americans every day,” Nastri said. “We believe our contribution will make our troops smile when they see candy favorites in their care package.” ...


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Defense Commissary Agency Fiscal 2016 Sales Statistics Snapshot


DeCa' s worldwide store network generated more than $5.25 billion in sales during fiscal 2016. Here are numerous charts chronicling the commissary sales picture during the past fiscal year. ...



‘Need States’ Simplify Complex Category


The Defense Commissary Agency (DeCA) assortment of vitamins and supplements is one that is “very important to commissary patrons,” many of whom are shopping with health “need states” in mind, according to LaRue Smith, the agency’s Baby and Healthcare category manager, who counts these products as part of his responsibilities.

Smith told E and C News that vitamins and supplements have experienced what he referred to as “disruptions” over the last decade, including health ‘need state’ areas of focus. “By identifying those vitamins and supplements by need state — including general health, energy/fatigue and virility — it simplifies a complex category, educates patrons, and makes the category more shoppable,” he said.

In terms of heart health, the category manager said DeCA offers fish oil, CoQ10, and Nature Made CholestOff, a plant sterol-based cholesterol reducer, among other high-demand supplements. Smith noted that many of these products provide multiple health benefits; for instance, some heart health products can provide benefits for skin, mood, and cognitive function. “Likewise, CoQ10 can provide energy as well as heart benefits,” he said.

Another “disruption” that Smith described is that alternative product delivery formats are “transforming the category. Vitamin C powders and gummy vitamins are attracting millennials into the vitamin and supplement category.”

The connection between trends and sales seems to be as strong as ever. “Trends are key drivers to growth in vitamins and supplements,” Smith explained. “For instance, gummy vitamins’ trends have brought both men and women into the category. While they may start with a single purchase of a multivitamin at first, customers will normally add other forms to their shopping list like gummy vitamins.” ...



Ensuring Mission Success


AAFES Senior Vice President, Supply Chain, Tom Lozier

Large-magnitude distribution footprint changes in Germany, force repositioning in Korea, the seemingly unending quest for supply chain cost reductions across the system, and seamless “Ship from Store” online fulfillment are several of the focus areas for the Army & Air Force Exchange Service’s (AAFES) senior vice president, Supply Chain, Tom Lozier.

With logistics and operating foundations in two worlds — the military, where Lozier served a 24-year career in the Navy Supply Corps and the Navy Reserve — and civilian business, where his previous experience saw him pioneer the launch of Loehmann’s Stores’ eCommerce Fulfillment Center and provide home delivery and apparel services in the western U.S. to such chains as Macy’s West, Broadway, Emporium-Capwell Co. and Bloomingdale’s, while at the helm of Warden West Corporation — the executive’s career has prepared him well for the diverse challenges that he and AAFES face today.

Lozier and his team are busy planning for a future that may look quite different behind the Exchange scenes, but at the same time transparent and familiar to the customer.

E and C News: What are some of the supply chain challenges you are looking to solve?

Tom Lozier: The Exchange supply chain is undergoing several changes to streamline the flow of product to stores and customers and to improve the level of merchandise availability. As our military forces relocate in Germany and Korea, we’re moving our distribution centers (DC) to better support them.

In early 2017, we will move from Giessen to Germersheim, Germany. This move will enable us to better collaborate with the Defense Logistics Agency (DLA) and the Defense Commissary Agency (DeCA), as they already have established DCs in Germersheim.

As part of this move south, we will be more centrally located, reducing mileage and transportation costs and increasing speed to market.

We are also moving from Camp Market to Camp Humphreys, Korea, in 2018. This move is expected to reduce supply chain costs while improving service levels and merchandise availability.

Another area of focus is supporting seamless online fulfillment for our customers. We have expanded our “Ship from Store” program in the U.S. and overseas, placing inventory closer to the customer. This strategy reduces transportation time and costs, and can mean same-day delivery in some cases. For our DCs, we have retooled to support additional online fulfillment and improve speed of product to customers. Regardless of where the online order is fulfilled, our customers can expect same-day pick, pack and ship!

As for in-stocks, our merchants continue to focus on having the right product, at the right place, at the right time and in the right quantities.

We have challenges in where we go, with some locations being the most austere in the world, but continue to overcome obstacles and serve Soldiers, Airmen and their families, wherever they are called to serve. ...




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