Ray Sprinkle, president and CEO of URM in Spokane, Washington, sat down in mid-November with Shelby Publishing’s president and publisher, Ron Johnston, at Sprinkle’s office in Spokane.
URM Stores Inc., formerly called United Retail Merchants, began in 1921 when five retailers banded together to form a corporation. Today, URM comprises many more retailers than that, but the cooperative’s member-owners still call the shots, Sprinkle says.
“Each member-owner is a shareholder and therefore my boss. So, I listen to them very closely,” he says.
URM has been able to pick up new members following the consolidation of Supervalu and Unified Grocers in June 2017, and it will continue to seek more growth, especially on the west side of its territory—Washington, Oregon, Idaho and Montana—in addition to evolving its programs and services for its members as the industry continues to change.
Following are excerpts from the interview.
Q: Bring us up to date on the state of URM.
Sprinkle: We’re still proceeding through replacing our (computer) operating system. We have a number of pieces in place and still have more to go. But we want to make sure it’s tried and true before we put it in place, that it’s well tested. It’s gone a little slower than we anticipated, but we have not missed a beat in terms of pick, pack and ship products to our existing customer base, and that’s critical. One of the commitments that we made to the membership is that we want to upgrade the system but have minimal impact in the operation while we do that.
It’s best to get it done right the first time, isn’t it…For your retailers, is everybody on board?
Yes, our members are on board. It’s been a priority of ours; last year and again this year, as we work through the implementation phase. Last year, we implemented a new buying system and we’ve been very pleased with the outcome thus far. We also recently completed the work force management implementation and continue our work on the financial applications. As those are completed, our members will start to see the progress from the standpoint of the retail programs, retail pricing, retail promotional activity and such.
When we convert to retail pricing, it will be really the first piece that our membership sees and touches as we replace our operating system. We’ve formed a group of members that I have been providing input to make sure it meets their needs as we go forward.
What is the goal to have everything done?
We’re still about two and a half years out from full implementation…we’ll take our time to make sure that it is done properly so that any negative impact is eliminated to the extent possible.
In the stores, what trends are independents recognizing in terms of what shoppers are looking for?
There are a number of areas, depending on where you’re (located), whether you’re a rural store or an urban store. We are putting self-checkout into a number of stores. The perimeters, the fresh departments, continue to be a priority to make sure we can offer products to our members that meet the changing expectations of their customers. Meal kits, online ordering, curbside pickup and home delivery are areas where many of our member-owners are experimenting. We are here to help them with these. We’ve partnered with Rosie and a number of our major retailers have aligned themselves with Rosie.
Concerns continue to be the expansion of Amazon and Amazon Fresh. We believe our members are doing what independents do best, and that is align themselves within the local community and meet their customer needs by adding value.
Amazon and its Whole Foods subsidiary…what is your take on them?
Looking at the results, I don’t think they’re stubbing their toe very often. They’re a huge disruptor and they’re changing the face of what our grocery industry is all about. We’ve had (disruptors) before, we’ll have them in the future. Unfortunately, there will be some that don’t believe they’ll have an impact and those stores may not be with us three to five years from now.
But that’s been the history of our industry; operators that don’t change don’t seem to be around long-term. The other more progressive retailers seem to embrace the change, find a way to compete and be able to meet the needs of their communities.
You used to run the Phoenix division of Fleming Cos., so you came from the voluntary wholesaler side. How much did that differ from the cooperative community you’re in now?
The member-owner cooperative environment has been a lot more fun than a publicly traded company…We manage the business for the long term. When I was in the public sector, we made a lot of decisions that were focused on the short term, quarter to quarter. We’re managing for the long-term, what’s in the best interest of the member-owners and what they want to see vs. management trying to hit Wall Street expectations. In our environment, if it is prudent to do so, we can sacrifice short-term profits maybe one quarter to build a program that is meaningful for our membership that enables them to better compete. If one of our members goes away, if a store fails, it’s a black mark against URM. Without its members, URM ceases to exist. There is no other reason for URM to be here than to serve its member-owners. We have one goal in life and that is to make our members successful, because our success will be determined by how successful they are in terms of their growth and expansion.
Would it be an apt description that in the cooperative world, the culture is a little more familial, that there are more personal relationships?
Without a doubt. The relationships that we have with our members extend beyond the business side of it. Relationships run deeper. I think that comes about because what we promise, we must deliver. We are held accountable to the promise. We are totally transparent with our membership regarding our financials. (We) show them what our markups are, what our profitability is and break it down to profitability by store. We need to make sure they remain competitive and therefore we work very hard on cost of goods and pass through everything we can. And we have the flexibility of lowering margins if we need to be more competitive in certain categories. We certainly have done that over the last couple of years as competition has come in on top of our membership and our trade area. We need to make sure that they remain successful.
How willing has the vendor community been in terms of giving you their ear in some of the challenges of being an independent?
I think ROFDA (URM is a member of Retailer Owned Food Distributors and Associates) has done a phenomenal job bringing us new vendors that maybe we would not have seen if we were out here by ourselves. Attempts to aggregate purchasing within ROFDA hasn’t worked, so we’ve had to look for other synergies. We understand where we are in the food chain, so to speak. We’re not a big player on a national scale, and we are somewhat isolated in the Northwest, so we look to ROFDA to help aggregate services, as well as our relationships with Topco and others to bring lower cost of goods. We know that we must aggregate to bring more volume to the vendor community in order to get their attention and the pricing we need for our members. I believe the local vendor representatives understand this, but the dollars aren’t controlled here locally. We must be able to show a value to the CPG companies, whether that’s in growth, in spend or promotional activity. The challenge is to get the same type of pricing and promotional activity support from the CPG companies.
What are your members doing in terms of community- or civic-oriented things that further entrench them with the neighborhoods they serve?
Our members ingrain themselves in the communities they serve. If a community has a fund-raising effort, the first place they go is their local grocery store because they know they’re going to get support, whether that’s cash donations or in-kind donations. It’s a community place at the grocery store.
I know you have won some stores recently in the Northwest. Have you added any more members in the last few months?
Yes, we have added new members in the last 100 days. We’ve been very successful expanding west. That really has more to do with what our competition has done. These new members have become our biggest advocates as we’ve been able to meet their needs.
We continue to look west to grow in 2019.
Any personnel changes or promotions?
The newest member of the URM staff is Mike McShane. He is our VP of procurement. He came from Southeastern Grocers out of Florida. He and his family have relocated here in Spokane and have been here about four months now. Mike has been an excellent addition to our team.
Anything in the warehouse in terms of expansion or retooling, infrastructure?
We started a project back in June to study the effective utilization of our warehouse. The direction of the study changed a little bit back in August/September because of the new business we picked up. Now the study is also looking at our capacity and the ability to handle the additional growth effectively and efficiently. The study will answer the question if we need to look at a warehouse expansion. That study will bring some light to that.
Also, at Peirone Produce, URM’s wholly owned produce facility, we have experienced double-digit top line growth over the last three years. We were running out of space, but we were able to reconfigure the layout of the facility and increased the capacity by 40 percent without adding any additional square feet. We have had a very successful operation at Peirone Produce and are pleased about the growth the team there has added over the last three years.
How about your meat business?
We continue to add lines that our membership requests. We’ve developed a case-ready program to assist some of our smaller stores that are out in the rural areas and are having difficulty finding meat cutters. We feel that a case-ready program for them will help solve some labor issues they may have and still be able to offer the selection that’s necessary for them in their communities.
We know the truck driver issue continues to be a challenge. Any changes you’ve made?
When we started adding the new business in late summer, we did go out and hire a number of additional warehousemen. We also hired a number of additional drivers. We’ve been very fortunate that we’ve had an alliance with the local community college that has a tech school for drivers. We have been able to partner with them to make sure that we continue to add their graduates to our team. Where we see the driver shortage affecting our operation has been on inbound freight, with the producing plants shipping product to us. We just don’t get the product as quickly or reliably as we have seen in the past. We’re always working on that.
Anything to add?
We have three priorities for 2019.
One is the continuation of the Aurora project, which is replacing the operating system I spoke of earlier.
The second one is what we call market development, and that is where we want to continue to support our existing membership and make sure they’re profitable and growing by providing them with lower cost of goods and services. In this manner, we can make sure that they stay viable in their markets. The other piece of market development is to continue to attract new membership and provide value to them as we look beyond our existing market area.
The third piece would be that we really need to get back in and promote and drive additional sales for our exclusive brands. A year ago, I think we talked about the conversion to Topco, and the Topco brands. We need to make sure those items are now on the shelf and make sure they’re positioned right on the shelf and then drive sales to our exclusive brand program. Our membership finds tremendous value in those exclusive brands, which allows them to compete on price as well as see incremental gross margins. So, we must pick up and gain back some market share in our exclusive brands that we’ve lost in conversion to…primarily the Food Club label, where we went away from the Western Family label that our stores had for 65 years. We need to make sure their customers see value.
We have a plan; now we need to execute that plan.