Food Retail Survey Anticipates Amplified Audit Function Over Five Years
Supermarket audit departments and audit budgets will witness resource expansions congruent to the expanding roles within information technology, retail operations and supply chain departments, according to the Food Retailing and Wholesaling Internal Audit Study published by the Food Marketing Institute (FMI). Forty-two percent of companies expect to grow the size of the internal audit function over the next five years in order to maintain effectiveness and efficiency of operations, reliability of financial reporting, compliance with laws and regulation and safeguarding of assets.
The in-depth report, conducted by 210 Analytics LLC, details the findings of a national survey of 31 supermarket retailing and wholesaling companies, representing 24,688 stores and 981 internal audit professionals. The study was released today at the 2013 Annual Internal Audit conference in San Antonio, Texas.
The report’s findings include:
• Trends in position profile and department structure
Supermarket retailing and wholesaling companies predominantly employ full-time audit professionals, who make up 97.7 percent of all auditors represented in the survey. These auditors come from primarily accounting backgrounds and 31.4 percent are Certified Public Accountants (CPAs). Internal audit departments most often report to the CFO or head of finance.
• Outsourcing specific audit functions
Eight in 10 supermarket retailing and wholesaling companies use third-party vendors for audit functions, albeit for less than 10 percent of total audits performed. The most commonly outsourced function for audits pertains to informational technology. Outsourcing is more common among companies operating a greater number of outlets and/or employing a greater number of employees.
• Time allocation to functional areas
The average number of days to issue an audit report is 18 days, inclusive of fieldwork efforts to the final report. Nearly one-third of total available audit time is allocated to retail operations, followed by the areas of finance and information technology. Companies operating fewer stores and employing fewer auditors spent more time on retail operations audits compared with their larger counterparts.
• Development of the audit plan
More than half of respondents formally assess the success/effectiveness of their internal audit department, but 96.6 percent of food retailers and wholesalers have a formal audit plan. Performance evaluations prioritize input from senior management, according to 66.7 percent of companies.
Snack Food Association Appoints Dempsey CEO
Jim McCarthy, SFA’s president and CEO since 1999, will continue as president with a focus of enhancing SFA’s presence in federal, state and international arenas. Dempsey’s focus will be to help increase SFA’s value to its members while helping to develop a long-term strategy that will make the association increasingly successful into the next decade, a news release says.
ROFDA Adopts Food Safety Solution From ReposiTrak
The Retailer Owned Food Distributors & Associates (ROFDA), the largest cooperative of independent food wholesalers, is adopting the use of track and trace technology from ReposiTrak, a solution provider backed by international food safety consultants Leavitt Partners and retail technology experts Park City Group. The ReposiTrak system, which includes Document Management and Track & Trace, is being deployed among the 14 ROFDA members.
“We selected the ReposiTrak solution for three reasons: the technology on which it is based is a proven, scalable platform; it is easy to use and inexpensive; and it is simple to implement because it is web-based and requires no hardware or software installation,” says Francis Cameron, president and CEO of ROFDA. “We see the ReposiTrak system becoming an industry standard for the retail supply chain, helping all trading partners meet the new federal food safety requirements, reducing unsalable products and keeping the end consumer healthy.”
Powered by Park City Group’s technology, ReposiTrak enables grocery warehouses, supermarkets, packaged goods manufacturers, food processing facilities, drug stores and drug manufacturers, as well as logistics partners, to track and trace products and components throughout the food, drug and dietary supplement supply chains. In addition, the technology addresses the market need of receiving, storing, sharing and maintaining regulatory documentation all in one convenient location. ReposiTrak reduces risk in the supply chain by identifying backward chaining sources and forward chaining recipients of products in near real time.
“The relationship we’ve built with ROFDA and its members has been a case study for vendor–customer collaboration,” says Rich McKeown, president of ReposiTrak. “We have jointly implemented a solution that is exactly what the member distribution companies need to meet government regulations, maintain supplier insurance and inspection documentation and keep the consumers safe.”
Walmart Posts First Quarter Results
Walmart Stores Inc. today reported financial results for the first quarter ended April 30, 2013.
Net sales for the first quarter were $113.4 billion, an increase of 1.0 percent over last year. Net sales last year benefited by 1.0 percent from the extra day due to leap year. On a constant currency basis, net sales would have increased 1.8 percent to $114.2 billion, according to a news release. Membership and other income increased 1.6 percent vs. last year, due primarily to an increase in membership income. Total revenue for the first quarter was $114.2 billion, a 1.0 percent increase over last year.
Consolidated net income attributable to Walmart for the first quarter was $3.8 billion, up 1.1 percent. Diluted earnings per share (EPS) attributable to Walmart were $1.14, a 4.6 percent increase, compared to $1.09 last year.
“In a quarter marked by considerable headwinds to top-line sales, Walmart delivered solid EPS growth of 4.6 percent,” said Mike Duke, Walmart Stores Inc. president and CEO. “Walmart’s mission is simple and focused—to help people save money so they can live better. When we simplify and focus our execution against this mission, it’s easy for our associates to prioritize what they have to do to serve our customers.
“I’m confident about our long-term strategy and the direction Walmart is headed,” Duke added. “Our expectations about our U.S. businesses’ performance, coupled with more discipline in International, will allow us to improve our performance throughout the year.”
Duke also noted that e-commerce sales grew more than 30 percent in the first quarter vs. last year.
“There is no doubt that our company is making the right investments in e-commerce to differentiate ourselves and become a better Walmart,” said Duke. “And with our sales growth in the first quarter, we believe our investments are paying off.”
The company’s operating expense leverage was relatively flat for the first quarter, but the commitment to leverage for the full year remains a priority, the news release says.
“We are proud that our U.S. segments leveraged operating expenses in the first quarter, and we expect them to continue leveraging,” said Duke. “To operate in a difficult sales environment requires disciplined expense and productivity management, the core of EDLC and EDLP. We are committed to have the total company achieve expense leverage for the year.”
“Although we believe our company will leverage expenses for the year, the second quarter will be challenging, given expense pressures in International and our corporate area,” said Charles Holley, EVP and CFO. “Expense leverage may not be delivered evenly across the quarters, but we believe that by executing our plans, we will continue to reduce expenses and improve productivity.”
“We deployed cash to grow our business and return value to shareholders,” said Holley. “Despite the multiple headwinds during the quarter, we grew operating profits ahead of sales growth. Our balance sheet is strong, and we continue to grow.”
During the first quarter, the company repurchased approximately 30 million shares for $2.2 billion. In addition, the company paid $1.6 billion in dividends. As previously announced, the company increased its dividend by 18 percent for fiscal 2014 to $1.88 per share.
Return on investment (ROI) for the trailing 12 months ended April 30 was 17.8 percent, compared to 18.1 percent for the prior trailing 12 months ended April 30, 2012. The decline was primarily the result of acquisitions, along with an increase in fixed assets within Walmart’s base business.
Walmart ended the quarter with free cash flow of $1.9 billion, compared to $3.1 billion in the prior year. An increase in income tax payments due primarily to changes in federal bonus depreciation rules and an increase in capital expenditures contributed to the free cash flow decline.
“Given current business and economic trends, including currency, we expect second quarter EPS to be in the range of $1.22 to $1.27,” said Holley. “Investments in global e-commerce initiatives were forecast to have an incremental $0.09 impact for fiscal 2014, and this remains in our guidance. We expect the Q2 impact to be in line with the $0.02 per share we had in the first quarter. In addition to e-commerce initiatives, expenses related to FCPA matters are expected to range from $65 to $70 million for the second quarter.”
Last year, Walmart delivered $1.18 in EPS for the second quarter.
Net sales, including fuel, were as follows:
• Last year’s net sales included an extra day for leap year, which added approximately 1.0 percent growth in the first quarter of last year.
• On a constant currency basis, Walmart International’s net sales would have been $33.8 billion, an increase of 5.4 percent over last year.
• Net sales for Sam’s Club, excluding fuel, were $12.2 billion, an increase of 0.5 percent from last year.
• Consolidated net sales, on a constant currency basis would have increased 1.8 percent to $114.2 billion.
“On a constant currency basis, Walmart International’s first quarter sales were $33.8 billion, up 5.4 percent. Our stores in the U.K., Africa, Mexico, Central America, Brazil, Chile, Argentina, China and India delivered positive comp sales,” said Doug McMillon, Walmart International president and CEO. “Comps in Canada and Japan declined. We grew our share in seven of our 11 markets.”
During the 13-week period, the Walmart U.S. comp was negatively impacted by a delay in tax refund checks, challenging weather conditions, less grocery inflation than expected and the payroll tax increase, the news release says. Comp traffic was down 1.8 percent, while average ticket increased 0.4 percent.
“Despite comps being lower than expected, we continued to generate market share gains,” said Bill Simon, Walmart U.S. president and CEO. “According to The Nielsen Co., we gained 20 basis points of market share in the measured category of ‘food, consumables and health and wellness/OTC’ during the 13 weeks ended Apr. 27, 2013.”
For the 13-week period ending July 26, Walmart U.S. expects comp store sales to increase from flat to 2.0 percent. Last year, Walmart’s comp sales rose 2.2 percent for the comparable period.
“The second quarter is off to a good start, with positive comps,” Simon said. “We continue to believe in the strength of our strategic plan to deliver a broad assortment with EDLP. We also continue to monitor the impact of the 2 percent payroll tax increase, along with other factors, like fuel prices.”
In the first quarter, Sam’s Club comp traffic was up 1.3 percent, while ticket was down 1.1 percent for the 13-week period ended April 26.
“Comp sales for the first quarter were impacted by unfavorable weather and less than expected inflation,” said Rosalind Brewer, Sam’s Club president and CEO. “Our business member is an integral part of our business, and comp sales and traffic patterns indicated that they remained pressured in the first quarter. Small business optimism remains at historically low levels, as businesses adapt to higher payroll taxes and cautious consumers.”
As of May 15, Sam’s Club increased its membership fee to $45 nationwide for both Advantage and Business base memberships, reflecting a $5 and $10 increase, respectively. The fee for Plus membership remains $100. This is Sam’s Club’s first fee increase since January 2006.
“The combination of our strategies, including our membership fee increase, positions us well for the second quarter, and we have a number of events to drive sales,” said Brewer. “Members will experience exciting merchandise, heightened by local brands, all displayed with a new level of visual excitement.”
Sam’s Club expects comp sales, excluding fuel, for the current 13-week period ending July 26 to increase from 1.0 to 3.0 percent. Last year, for the 13-week period, comp sales, excluding fuel, increased 4.2 percent.
Walmart U.S. and Sam’s Club will report comparable sales for the 13-week period ending July 26 on Aug. 15, when the company reports second quarter results. For fiscal year 2014, Walmart will report comparable store sales on a 53-week basis, with 4-5-5 week reporting for the fourth quarter.
Dairy Farmers Want Grocery Shoppers To Get To Know Them
by Terrie Ellerbee/associate editor
What would dairy farmers like to say to grocery retailers?
Don’t overcharge for milk, but don’t devalue it by undercharging for it either, and please stop putting our product in the farthest back corner of the store.
But the more important request from dairy farmers is a simple one: Introduce us to your shoppers.
The Shelby Report visited two dairy farms in the north Georgia town of Clermont to see the operations and hear from the people whose cows produce milk sold in grocery stores.
Dairy farmers would like to see grocery retailers move more toward informing their shoppers about store offerings—whether products are local, who makes them and how they are produced.
What real dairy farmers look like
Dixie Truelove (pictured above) was born into the dairy business, and got her first calf when she was 6, maybe 7 years old. She remembers being a little older when her first one, named “Sweetie Pie,” died.
Few people consider the little girl Dixie Truelove was when they think of dairy farmers. In fact, few people think of a woman like her. It’s an image problem, and she’s tired of it.
“I want people to see what farmers really look like, because I think they have that idea in their head that they’re not intelligent, for one thing, that they’re all really old and in overalls,” she says. “As the years keep going by, it bugs me even more that there’s an idea of what a farmer should look like, and yet these people work hard, are intelligent, will try new things, new ways of doing things to try to stay in business.
“They really care about what they’re producing, which should be important for the consumer to know, because we are taking care of your food for you, so you don’t have to worry about it,” Truelove says.
Aimee Jones, industry relations communication account manager for the non-profit Southeast United Dairy Industry Association (SUDIA), shared that many dairy farmers have high-level college degrees.
She quotes another dairy farmer who says that in the course of their day, many have to be a horticulturist, veterinarian, nutritionist and scientist—and still milk the cows.
“I don’t think people always appreciate that,” Jones said.
The solution Truelove suggests is one that has been catching on in supermarkets, though not necessarily in the dairy department.
“I think the Krogers and all of the local stores here should really have the photos of your local dairy farmers in their stores promoting the fact that it is still a family business and the fact that we really do care about the product in the store, because we’re also a consumer and we’re shopping right there with them,” Truelove says. “I’ve always thought they should tap into the fact that they have farmers in their area. Sometimes some of the stores may have had a photo with the fruit and vegetables, but even that wasn’t a true local farmer. I just think they could always find local people and have their photo in the store.”
Jones says SUDIA is working on that, but with dairy farm families from Alabama to Virginia to serve, it is no small job.
“We’ve got some point-of-sale retail pieces that are going into Kroger and Publix in Georgia and North Carolina,” Jones says. “But for every retail market, to do that is difficult—but we’re trying.”
The association has taken the approach of going where consumers are: online.
SUDIA’s “Dedicated to Dairy” website features farm families as well as nutritional information, recipes and events—including June Dairy Month—and also highlights the organization’s work with schools and other organizations.
This year marks the 75th anniversary of June Dairy Month. It began as a way to stabilize demand during periods of peak production. Originally named “National Milk Month,” it actually was started by chain stores.
Truelove has another idea for grocery retailers, one that may be easier to implement. It’s something a local Kroger store already does.
“The consumer isn’t forced—if all they need is that gallon of milk, there it is right there on the shelves near the checkout,” she says. “You have your milk right there to grab and go, which I think is important from a consumer’s standpoint.”
They can come back and buy the rest of the groceries another time, she says, but when shoppers need just that one staple, it would be nice if it were available in a more convenient spot in the grocery store.
Truelove Dairy began in 1954, when Dixie Truelove’s father and an uncle started it. Their milk is currently picked up by the Maryland & Virginia Milk Producers Cooperative Association every other day. While the ultimate destination may vary, recently Truelove Dairy’s milk has been packaged in Publix, Kroger and Ingles private label jugs.
The Glover family keeps cows comfortable
It’s not clear yet whether 10-year-old Eliza Jane Glover will be the next generation to run the family dairy farm. Her father Scott represents the fourth generation in the business. He and his wife Jennifer own and operate Glo-Crest Dairy.
Marrying into the dairy business was an eye opener for Jennifer Glover, a teacher. The constancy of it caught her a bit off-guard.
“Anything can tear up, break or happen on the farm, and no matter where you bought a plane ticket to or what you planned to do, that doesn’t matter,” she says. “That was a big adjustment for me as far as being so dedicated to something. I guess that’s something that I’ve learned to live with because there are so many other positive aspects of farming—the rewards that we see and the passion that Scott has for it.”
Cows are milked at least twice a day, every day, usually at 4:30 a.m. and 4 p.m. The co-op the Glovers belong to, Southeast Milk, sends a truck to pick up the milk every third day or so (sometimes more often as needed). From there the milk goes to be processed and then on to retail stores.
The journey from cow to the refrigerated case may not be terribly complicated, but the pricing structure certainly is, and that’s something dairy farmers have no control over. What they do control isn’t valued enough, they say. Hard work, sacrifice and caring go into the production of what often is a loss leader in the grocery store.
At Glo-Crest Dairy, each of the 60 or so cows is a registered Holstein and has a name. Their comfort is paramount. During Georgia’s hot summers, the dairy uses fans and misters to help keep the cows cool. They have sand and sawdust bedding to lie on and can roam from the freestyle barn out into the pasture on nice days.
Great care is taken to ensure their feed is just the right mix. Each cow eats 100 pounds of feed and drinks 50 to 60 gallons of water a day. They can weigh up to 1,600 pounds.
“I think one of the things that is a misconception is that farmers just use their cows, but what they don’t realize is if that cow’s not healthy and well taken care of, she’s not going to be profitable. Therefore, the dairyman is not going to be profitable,” Scott Glover says.
The nutritive and economic value of milk cannot be overstated, and while it should be priced low enough so that it is affordable, the price also should reflect the work that goes into it, he says.
“I think grocers use milk as a way of getting people into their stores,” Scott Glover says. But then when grocers sell milk for prices that he likens to “giving it away…it really almost makes milk look like, ‘It’s not important to us,’” he says. “But for what it takes to produce milk and get it to the grocery store, milk ought to be priced a lot higher than what it’s selling for.”
The Glovers have become retailers themselves. They opened Mountain Fresh Creamery in 2011 about six miles from their dairy farm. There they bottle and sell their all natural, non-homogenized whole milk, lowfat milk and buttermilk, as well as heavy cream, butter, about a dozen or so flavors of ice cream and ground beef from cows raised on the farm. The milk from Glo-Crest Dairy that eventually will be in grocery stores is what’s left over after the retail products are made.
The Glovers also invite other local producers to sell their honey, sausage, jams and jellies in the creamery’s retail store.
Just Born Celebrates 90 Years Of Candy Making
Just Born Quality Confections, the family-owned maker of Peeps, Mike and Ike, Hot Tamales and Goldenberg’s Peanut Chews Brand Candies, is celebrating its 90th anniversary this year.
The company was incorporated on May 23, 1923, in New York City and has been operating in Bethlehem, Pa., since 1932. Today, Just Born is led by cousins Ross Born and David Shaffer who share the title of co-CEO.
“It’s wonderful to be celebrating Just Born’s 90th anniversary,” Shaffer says. “To have made it to 90 years, three generations of family ownership, and grown to become the 10th largest candy company in the U.S. is amazing to us. Our iconic brands and 600 dedicated associates are the key to our success.”
Just Born also is celebrating the Peeps Brand’s 60th anniversary this year. Peeps has become one of America’s most recognized brands and has been the No. 1 non-chocolate candy at Easter for more than 20 years, according to the company. This Easter alone, fans consumed more than one billion Peeps and the brand has grown beyond Easter to sweeten other holidays and seasons, including summer.
As it focuses on transformational growth, the company says it remains committed to the communities where it operates through its philanthropy, associate volunteerism and sustainability programs.
In March, Just Born was certified as a Landfill Free enterprise by Sustainable Waste Solutions (SWS). The company recycles 92 percent of its waste and the remaining 8 percent is converted into energy. Additionally, Just Born this year was selected one of the “Lehigh Valley’s Top Workplaces” in an independent survey conducted by The Morning Call and WorkplaceDynamics. It is one of only two large food and beverage manufacturing companies across the U.S. to be named a top workplace.
“We are excited about the future,” says Born. “And we believe our work has just begun as we strive to become the most respected confectionery company in the world.”
United Fresh Introduces Class 19 Of Produce Industry Leadership Program
The United Fresh Foundation has named the 12 members of the 2013-2014 United Fresh Produce Industry Leadership Program. Presented through the foundation’s Center for Leadership Excellence and sponsored by a grant from DuPont Crop Protection, this program was launched in 1995 and has graduated more than 200 program participants.
The following professionals make up the 19th class of the Produce Industry Leadership Program:
• Bob Biesterfeld, C.H. Robinson Worldwide Inc.
• Brian Cook, San Miguel Produce Inc.
• Amanda Costa, Del Monte Fresh Produce
• Hillary Femal, IFCO
• Ryan Fukuda, Avocados from Mexico
• Peter Hill, Alpine Fresh Inc.
• Duke Lane III, Lane Southern Orchards
• Sparky Locke, Apio Inc.
• Taylor Martin, FreshPoint—Charlotte
• Rebecca Meyers, Stemilt Growers LLC
• Bill Pollard IV, Save-A-Lot Food Stores
• T.J. Rahll Jr., Edward G. Rahll & Sons Inc.
Beginning in July, the members of Leadership Class 19 will participate in a number of educational events and outings centered on the four core focus areas of the program: leadership development, business relationships, government and public affairs, and media and public communications.
During the year-long fellowship, participants will take part in a series of customized trips, which include face-to-face meetings with leading industry players, hands-on training with top industry experts and educators, interactive experiences with influential leaders in Washington and more. This year’s schedule will feature trips to Michigan and Ontario, Washington, D.C., Wilmington, Del., Yuma, Ariz., and Chicago, where the class will graduate at the 2014 United Fresh Convention.
“We are proud to extend our congratulations to the newest class of the Produce Industry Leadership Program, and thank all of the candidates who applied for this year’s program,” said Leadership Advisory Committee Chairman and Board Member Lisa Strube of Strube Celery & Vegetable Co. “We applaud their commitment to developing themselves into future leaders of the fresh produce industry.”
“A special thanks is owed to DuPont Crop Protection for making this program possible and for their generous investment in the future of our industry,” added Victoria Backer, United Fresh SVP of member services. “DuPont has been the sole sponsor of this program since its inception in 1995, providing a unique opportunity for our future leaders to grow professionally and personally.”
Candidates for the program must submit an application including two essays detailing their interest in the program and what they consider the most important challenges affecting the produce industry. All applications are reviewed by the Leadership Advisory Committee comprised of United Fresh board members and program alumni. The committee is responsible for assessing each candidate based on their experience and expertise, as well as developing a class that is balanced and representative of the industry.
NGA Calls For Comprehensive Immigration Reform
The National Grocers Association (NGA) has released a formal position statement calling for comprehensive immigration reform. The position, unanimously approved by NGA’s executive committee and board of directors, calls for immigration reform to be comprehensive, preempt state and local laws and include the following key principles:
• Border Security: U.S. borders must be secured and the rule of law must be enforced.
• Employer Verification: NGA supports mandatory E-Verify of new hires for all employers, at no cost to the employer. Employers must be afforded a strong safe harbor of protections in exchange for good faith compliance of E-Verify.
• Expanded Guest Worker Program: Expand guest worker program to include workers with skills such as bakers, butchers and foodservice, in addition to other low-skilled workers important for the supermarket industry.
• Path To Legal Status For Undocumented Immigrants And Their Children: Clear path that allows the estimated 11 million undocumented immigrants to come out of the shadows and undergo background checks and face penalties.
At NGA’s board of directors meeting in February, a task force of member companies was created to review various proposals and challenges facing the supermarket industry with the ultimate goal to develop a position on immigration reform for the association. The task force, chaired by board member Bob Ling, president and CEO of Unified Grocers, recommended a position in April that was ultimately approved unanimously by NGA’s executive committee and board.
“I appreciate the hard work of NGA’s immigration task force, a group that included representatives from both retail and wholesale companies,” Ling said. “Employers are facing an ever-growing patchwork of state and local immigration laws that further complicate a broken system. The lack of progress in developing an effective national policy has adversely impacted our customers, employees and their families. Now is the time to enact meaningful reform, and NGA and its members can play a key role in the process.”
“The immigration issue is one that directly impacts our industry,” said Peter J. Larkin, president and CEO of NGA. “NGA’s position takes a common-sense approach by addressing border security, undocumented workers and important employer provisions and protections. We look forward to working with Congress, the White House and other stakeholders to help pass comprehensive legislation that is inclusive of NGA’s position and the priorities of the independent supermarket industry.”