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Reports, Bill and Testimony Explore   Elimination of Resale Benefits • WASHINGTON   Servicemember quality-of-life (QoL) resale benefits came under attack here in Washington recently, in three documents that either proposed or sought the consolidation, privatization or elimination of either or both of the commissary and exchange systems. With the Department of Defense (DoD) and Congress deeply engaged in overhead reduction analysis and processes (see analysis below), all these papers — one a bill (H.R.5784), the others reports — took issue with appropriated funding used to support resale systems and their operation as businesses.

While these documents mostly addressed resale systems as if they were essentially businesses, minimal play was given to their fundamental roles as benefits, which, by law, remain their co-primary function, along with their essential work in support of military support and readiness.

Against the backdrop of a Presidential budget request for savings of more than $100 billion, and a Secretary of Defense (SECDEF) directive to reduce overhead to better allow the Pentagon to focus funding on programs and initiatives that directly support warfighters'' most valued needs, multiple congressional subcommittees and the commands they oversee have been working doggedly for new and creative ways to slash, trim, nip and/or tuck their budgets to meet mandated goals by scheduled dates.

A benefit that just happens to be a business. Commissaries such as this one at Fort Belvoir, Va., use best practices such as Lean and Six Sigma to streamline processes and operations; however, they must operate primarily as a benefit to provide at least a 30 percent savings to patrons. Despite legal constraints, the commissary system yields a return on investment of 5 to 1 on aggregate, per dollar in appropriations, while at the same time supporting military family readiness, and the military community at large in a multitude of ways.

The SECDEF initiative has all segments of the Department of Defense (DoD), Congress and think tanks, evaluating every budgetary option and efficiency at their disposal, and with good reason.

With cuts sought across the board, the Defense Commissary Agency (DeCA) and the military exchange systems —— the Army & Air Force Exchange Service (AAFES), the Navy Exchange Service Command (NEXCOM), the Marine Corps Exchange (MCX) and the Department of Homeland Security's Coast Guard Exchange System (CGES) — are no exceptions to the scrutiny, and the Center for Strategic Budgetary Analysis (CSBA) recently proposed a menu of proposals to the Defense Business Board for consideration.

Army & Air Force Exchange Service (AAFES) Sales Directorate Mass Candy Buyer Randy Demster reported that, among other trends, customers continue to seek the best value when they make candy purchases at post and base exchanges (PX and BX).

The candy assortment is one of the AAFES exchanges' trendiest areas. The candy aisle at the Randolph BX at JB San Antonio, Texas, stocks everything from the most traditional candy to those items that address trends such as health and wellness.

“In terms of SKU sizes, we are seeing more variety sizes being offered by the vendor community,” he noted. “I believe in today's economy, more consumers are looking for value, and variety sizes are delivering a better cost per ounce on their purchases.”

Theater boxes — candy in larger sizes akin to those items sold in movie theaters, originally designed to last through an entire film — continue to be a growing segment of candy purchases.

““The theater box category will continue to grow this year,” he reported, adding that the candy industry is projecting theater boxes to be a $276 million category and growing at a 10-percent rate from June 2009 to June 2010.

“I believe the theater boxes' popularity is due to vendors offering the perfect packaging for the on-the-go shoppers at a good value, and I believe the popularity and growth of the theater boxes will continue to expand in the long term.”

Front-lines fixtures show off a wide expanse of the candy assortment at NAS Oceana, Va.

The NAS Oceana, Va., main store candy department is a vibrant area that stocks both traditional fare and the newest candy items currently on the market. With 548 SKUs in its everyday candy assortment and many more brought in for candy-focused holidays, this dynamic department is aiming for even sweeter sales results this year.

According to Department Manager Eliot Fitzpatrick, the department posted fiscal 2009 sales of $470,008, which trumped the same period in fiscal 2008 by 2.6 percent. For fiscal 2010, the department is projecting a significantly larger increase, of 15.5 percent.

Areas that performed well during the past year included bagged candy, single candy bars and seasonal candy, according to Fitzpatrick.

“We stock an additional 140 SKUs for Halloween, and 425 more for Christmas,” he noted. “For Valentine's Day, we have 250 additional SKUs, and for Easter, we add 275 items.”

Early returns on the second quarter of fiscal 2010 show that sales of energy drinks in Marine Corps Exchanges (MCX) stores account for more than one-third of the activity in the exchange service's non-alcoholic beverage category.

Although the economic downturn has impacted sales of soft drinks, energy drinks are powering ahead in MCX stores, and continued robust category sales are expected for the remainder of the fiscal year.

In MCX stores such as this one at MCAS Miramar, Calif., four-packs helped lead the way in category growth.

According to Stephanie Wilcox, non-alcoholic beverage buyer in the Marine Corps Personal and Family Readiness Division (PFRD), year-to-date sales of energy drinks through May 2010 were $5 million, representing 34.3 percent of the total non-alcoholic beverage business and a 9-percent boost from the same period last year. This follows up a solid fiscal 2009, when energy drink sales were $13.9 million, or 32.7 percent of the MCX's total non-alcoholic beverage business.

Although energy drinks have been a hot category for a number of years, Wilcox said that industry sales of energy drinks were comparatively flat in fiscal 2009 versus the previous year, which she attributed mainly to the economic downturn.

“Year-to-date 2010, industry results are much more promising, as per the latest Nielsen Co. report looking at the 13 weeks ending May 22, 2010, showing that total energy drink sales have grown 8.7 percent over last year,”“ Wilcox noted. “I think the category is in the beginning stages of maturity. Keep in mind this is still a relatively new category, and we feel the key players are moving from the 'learning' phase into a phase of increased innovation in production and marketing.”

On March 27, Hank, decked out in Hawaiian shirt and sunglasses, took first place in the “Best Dressed” category at the Randolph Commissary, JB San Antonio, Texas. Hank competed against more than two dozen other family pets during DeCA's “Your Pet, Your Family” competition on base.

The pet department continues to be one of the liveliest areas found in Defense Commissary Agency (DeCA) stores. Bolstered by strong promotions — including one major initiative that debuted this spring — the department is revved up for an exciting remainder of fiscal 2010 into fiscal 2011.

On March 27, DeCA launched its “Your Pet, Your Family” campaign as the lead pet promotion for the year across its worldwide network of stores. According to Linda Callery, the agency's Marketing Business Unit (MBU) pet buyer, commissaries and customers have helped make this a successful program.

“Patrons really enjoyed all the fun and energy the stores created for this event, with one location generating more than 4,000 customers,”” she noted. “In addition, our customers have benefited through additional patron savings on the pet aisle as well as from the mass displays in which Purina, Del Monte and our other pet food products shine.”

Choosing school supplies can be fun and help students start off the academic year on the right track, as these shoppers at the Kaiserslautern Military Community Center (KMCC) BX/PX hope.

Homework is a vital part of any educational effort, and preparing for the Back-To-School (BTS) selling season is no exception. Army & Air Force Exchange Service (AAFES) Buyer Bob Schmid has been a diligent student of the sales and marketing process, and explains that in order to earn top marks, the exchange service studied its past performance and has made adjustments accordingly.

With well over a year under his belt in the role of AAFES stationery buyer, Schmid shares his perspective of how the various elements of the job have made the grade. “As we gain experience and maintain stability in the key positions, the roles are becoming more clearly defined. The role of the buyer is evolving into the person most responsible for the execution of the assortment, planograms and marketing,” he said, “while the planning, allocation and replenishment (PAR) team concentrates on keeping the distribution centers and stores in stock and, at the same time, maintaining the discipline to manage the inventory. This process will very quickly improve the overall sales and gross profit results.”

Change brings challenges, and the evolution of planning, allocation and replenishment (PAR) was no exception. “This past year has been a learning year, both for PAR teams and the Sales Directorate,” Schmid believes.

“Dealing with the challenge of redefining our assortments while assuring that every item in the assortment was properly entered into the system to allow stores to both buy and receive the assortment, and eventually be automatically replenished, has been very time-consuming,” he said. “As the process smoothes out, the buying team will be able to better react to market trends and service the stores' and customers' needs.”

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