ECN CoverE&C Commissary News

Editorial Comment — June 2017

Next Question …

When the smoke has cleared and the dust has settled, when the stumbles and fumbles are overcome, when pricing of $10 a head for lettuce and 19 cents a box for cereal has all been corrected, when by-hand calculations have been taken over by properly functioning computer programs, perhaps a few simple questions could be answered:

• How much, if any, of the monies garnered from variable pricing margins and category performance “improvement” (CPI) negotiations will go to benefit the commissary patron?

• How much of the manufacturer pay-to-stay funds will go to benefit BCG?

• And how much of the reduction in cost of goods sold (COGS) will show up on DeCA’s balance sheet?

What will DeCA’s share of any earnings from round 1 of CPI pay for? How much will be used to defray expenses or reduce appropriations? How much of it be “spread across the store” to even out the perception of savings, say, on key market basket comparison items?

While we’re at it, will there be any report as to whether the market basket savings measured this past quarter met their established benchmarks?

And how many rounds of CPI negotiations will there be before the system goes down for the count? Or, put another way, how much more is industry expected to kick in before it can no longer support the commissary system? (That’s not a question anyone likes or wants to ask, of course, but it’s one that must be dealt with and resolved at a high level. There is a point at which the offering becomes so eroded it ceases to be a competitive assortment, or could fail entirely.)

Then there is the question of private label. If any direct replacement items are priced the same as the items they replace, but are purchased at a lower cost — do all the savings go to offset appropriated funding? Or how much of the difference, if any, is spread across the store or again, to pay BCG? Conversely, if a direct replacement is sourced at a lower cost, how much of that lower cost savings will accrue to the patron and how much to the DoD appropriation and/or BCG?

When the Pentagon decided DeCA should operate in the real business world and make a “profit,” it seems to have overlooked the point that in the real business world, there’s a limit to manufacturers’ and brokers’ tolerances for taking losses. As dedicated as they have generally been in trying to give DeCA the lowest pricing they can, taking into account the economies of scale, the demands of regulations, the costs of logistics, management and marketing, suppliers are not going to stick around to lose money! Unlike government agencies, their paychecks are dependent upon their sales.

When DeCA removes a key national brand from a category, it chips away at the very brand infrastructure that gave patrons choices while at the same time providing DeCA a platform to exploit competition for its business and shelf space. When choices diminish beyond a certain point, the customer whose preferences were ignored will just shop elsewhere.

And since the commissary system underpins the fabric of exchanges, MWR, and the very viability of the quality of life of military families living on base — and similarly for very many others who still make the trip — it’s unacceptable for the system to abandon customers it should be serving.

This is not to question the need for improvement. Changes, reforms, can work wonders when accomplished in a measured, thoughtful, and calculated way. Rarely are they successful (and again, for whom?) when they are rushed through as if it were a case of “Let’s get it all in place now before anyone notices.”

It’s like ordering online (“Only 1 left in stock!”) or from a TV ad (“Call now — sale ends at midnight!”). Short windows of opportunity demanding rush decisions should always be suspect.

From outside, it looks like the reforms have run wild, the hard questions about how pricing changes are being implemented are not being asked, and no one is paying very much attention to where the money is going. Does anybody really know exactly how much or to whom — and even whether those numbers make sense for the department, DeCA and the customer?

Will patrons actually see any of the difference between “before” and “after” pricing, and if so, will it translate into an improvement in what they save on groceries by shopping at the commissary?

There are a lot of questions*, and more to come! It’s time for Congress to exercise systematic oversight, insist upon answers and not just rubber stamp future rounds of CPI and private label rollouts before accurate, meaningful data and analysis are in hand.

*Anyone who wishes to ask questions, send them to us; we’ll submit them. Address them to ebm-mail@ebmpubs.com.

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