Earlier this month, JLL, a commercial real estate firm, released its 2019 Grocery Tracker. The report showed an expanding grocery industry led by new store openings in California, Texas and Florida. The CGA communications team caught up with one of the report’s authors, Taylor Coyne, for a follow-up to dive deeper into the report’s conclusions to draw out new insights for California’s grocery community.

For reference, the full report can be downloaded here.

California grocery stores were one of the largest drivers of square footage growth in the U.S. This growth sounds positive, yet year-over-year, it appears the percentage growth was actually lower. What is your overall impression of the California grocery market?

A clarification about those percentages – California had 12.2 percent of all new openings (in square feet) in 2017 and had 7.83 percent of all new openings in 2018. California’s year-over-year growth is not reflected in that number. It took less of the overall pie because Florida had such strong growth from Publix. California opened approximately 157,000 square feet of more grocery space in 2018 compared to 2017. All signs continue to point to a strong and healthy California grocery market.

California growth was boosted by expansions of Sprouts Farmers Market, Aldi, Grocery Outlet, and Smart & Final. Do the particular brands that are expanding, and their operational niches, signal anything in particular to you about the state’s grocery community?

One of the characteristics of well-performing grocers is an awareness of the customer. All these grocers are doing a good job at connecting with shoppers both from the quality of products and price point. There is an acknowledgment that the modern consumer is focused on wellness and these grocers are responding by providing food options that appeal to this desire and need to purchase good quality foods and products for themselves and their families – all while not breaking the bank.

Grocery Outlet is headed towards an IPO while Smart & Final has been reacquired by Apollo. What do these strategies for raising capital, both going public and private, tell you about where the California grocery market is headed?

It’s about growth opportunities for these grocers. Raising additional capital to expand footprints will benefit many markets across the U.S., including California. California is and will likely remain a top market for grocery expansion because of our population numbers and the density of our major urban hubs. Grocers will want to continue to solidify footprints in the state.

A lot has been written in the industry about the trend towards smaller formats. Your report also talks about this trend, referencing formats designed for short, frequent trips. Why do you see a bifurcation in customer behavior occurring as the frequency of small trips grows, all while click and collect/e-commerce grow? What can this mix tell grocers thinking about building new storefronts?

This all goes back to realizing that not every customer shops in the same way and not all customers have the same shopping behavior for every grocery trip. It’s about providing reliable options for every shopper. So, while there seems to be a bifurcation in the way customers shop, there’s more fluidity between those two sides of the spectrum. In the years to come, grocers are going to become increasingly aware of these varying shopping patterns and will expand format options. As we see grocers expand, I think we’ll be seeing more concepts emerge as part of that process.

Despite the trend towards smaller formats, recent headlines have also noted that grocery retailers are exploring opportunities in shopping malls or replacing Sears and other failing mass retail concepts. Then again, there is also concern about foot traffic falling for malls…What is the logic behind these large concepts?

It’s not just grocery stores moving into these vacant spaces. We’re seeing much more food and beverage, entertainment concepts, and fitness and wellness backfill these spaces. These concepts are helping to reinvigorate these centers and are giving people new reasons to shop there. The location of these centers is also appealing. Many of these opportunities are in great locations with access to nearby consumer spending. Grocers may hope to capitalize on that proximity of potential shoppers.

Follow up to #5, what consumer dynamics are pushing grocery retailers into redeploying mall spaces? Will that continue?

It stems from customers wanting more out of their shopping experience at these centers and malls. It’s also about convenience. There is an appeal to checking off multiple items on a to-do list and a co-tenancy with grocery and other more typical retailers gives that ability and flexibility to the customer.

Final question: As e-commerce grows, do you predict grocers will grow square footage for “dark stores” or “ghost” supermarkets to separate the shopping experience for in-store vs. online?

We’re already seeing grocers experiment with micro-fulfillment centers both attached to existing stores and as stand-alone sites. We mentioned Giant Foods new click-and-collect store that also allows customers to order groceries at a walk-up counter. I expect we will see more grocers explore these hybrid concepts in the future as companies work to provide this flexible shopping experience to all types of shoppers.

Each year, Consumer Reports measures responses from its 75,000, or so, members to rank supermarkets based on 13 attributes — characteristics like food quality, product variety and price. In this year’s survey four out of the top five grocery stores are regional chains, with Gelson’s Markets winning top honors for Western grocers.

Also featured in the rankings of 96 supermarkets were Costco, New Leaf Market and Grocery Outlet. Read more about the report.

In another exciting piece of news for California’s grocery community, the Stater Bros. 12th Annual Jack H. Brown Heroes Challenge Golf Tournament raised $110,000 for charities that support veterans. Read the press release.

Jacquie Slobom, Senior Director of Store Operations, Gelson’s Markets, was recently elected Chair of the California Grocers Association Educational Foundation (CGAEF) Board of Directors, succeeding Brad Askeland, North State Grocery, Inc., who had served as Chair for three years.

In addition, Mark Johnson, UNFI/SUPERVALU, was re-elected Vice Chair; Christy Duncan-Anderson, The Albertsons Companies Foundation, Treasurer; and Jeremy Cullifer, C&S Wholesale Grocers, Secretary.

“Jacquie’s leadership will be a tremendous asset to the Foundation to guide and ensure the continued growth of our vibrant industry through education and training. We look forward to the future under Jacquie’s guidance.”

CGAEF President Ron Fong.

Slobom began her career with Gelson’s Markets more than 30 years ago and worked up the store ranks in a variety of positions to her present role of senior director of store operations.

In this capacity, Slobom is responsible for the overall four-wall operations for several Gelson’s locations. She also spearheads multiple charitable giving causes for the company. She initiated and developed programs with local food banks and supports numerous organizations.

“I am honored to serve as the Chair of the CGAEF Board of Trustees,” said Slobom. “CGAEF is transforming lives in the grocery industry. I believe in CGAEF, I believe in its mission, and I look forward to helping the team achieve sustainable success for years to come.”

The CGA Educational Foundation was created in 1991 to assist CGA member companies by encouraging them to identify qualified employees, educate them in preparation for advancement and offer them the means to sharpen their skills in order to grow.

 “CGAEF is an organization near and dear to my heart,” Slobom said. “Since the beginning, the Foundation has worked to improve the industry by empowering people to learn and grow. I look forward to working with fellow trustee members, the staff and CGA membership to help shape the Foundation’s future to positively impact the grocery industry.”

SACRAMENTO, CA (4/9/2019) – After extensive renovations, the California Grocers Association officially opened its new, member-owned offices located at 1005 12^th Street – in the heart of Sacramento’s burgeoning downtown district – during a gala celebration on Tuesday, April 9.

The Association purchased the 20,544 square three-level historic building in 2015 for $3 million with the vision of creating a new, permanent home for one of California’s most well-established state trade associations, and began renovating in 2018.

“CGA was founded in 1898 and has represented the interests of shopkeepers and grocery business-owners for more than 120 years,” Fong says. “Now our association has a permanent home located just steps from the California State Capitol.”

CGA’s offices occupy the second floor, with additional tenant space, meeting rooms and storage in the lower level. The ground floor features retail outlets. Improvements included seismic and other structural upgrades and installation of an elevator.

“On behalf of the CGA Board of Directors, we are so proud that this day has come and that we have invested our ‘corner of the world’ in resurging downtown Sacramento,” said CGA Chair Kendra Doyel, Ralphs Grocery Co., during the gala Grand Opening. “I’d like to personally thank the Board for its vision and determination in making this happen.”

The original one-story building was built in 1925 and appropriately located in the same block as the historic Sacramento Public Market Building, which opened in 1923. (now the Sheraton Grand).

“It is California to its core — new and old, traditional and nonconformist – all at the same time,” says CGA President and CEO Ron Fong, referring to the architect’s goal to return the building’s Spanish colonial revival exterior and lobby to its original look, and its clean office spaces featuring restored wood beams and exposed original brick. “The space feels fitting as the physical embodiment of a grocery industry that has deep roots, yet also encompasses a market being rapidly transformed by new technologies.”

For practical purposes, the new building represents more than nice aesthetics. It features room for focused and private work, as well as plenty of space for collaboration and team work. And, there are material benefits as well.

Owning a building in the city’s revitalized urban center presents an opportunity to mitigate the risk of ever-increasing rent costs and to reap the proceeds of continued growth down in the future, Fong says.

“Ownership is a sound investment for the Association,” he adds. “It represents the steadfast position of the industry and a base from which CGA can better serve California’s community of grocers.”

The near year-long renovation project was under the direction of Wells Construction, Inc., Roseville, Calif. The project’s architect/designer firm was Williams and Paddon, Roseville, Calif.

CGA’s new office is located at 1005 12^th Street, Suite 200, Sacramento, Calif. 95814. The telephone (916-448-3545) and fax (916-448-2793) numbers remain the same. See photos from the grand opening.

By Len Lewis and Tim James

Everything in a grocery store includes packaging of some type. If it’s not packaged by the manufacturer, it’s packaged in-store by the grocer. Even loose products like produce and bulk foods are packaged, usually by the consumer, in some manner.

Packaging is normal, necessary and simple. But with rapidly changing considerations by consumers and their political leaders that include climate change, waste reduction, recyclability and sustainability is food packaging still a simple thing? Or, has it always been complicated?

Packaging is normal, necessary and simple. But with rapidly changing considerations by consumers and their political leaders that include climate change, waste reduction, recyclability and sustainability is food packaging still a simple thing? Or, has it always been complicated?

In 1988, the City of Berkeley started the regulation of food packaging and banned chlorofluorocarbons as an ingredient – a key component of foam at the time. While not much came from the effort, with the plastics manufacturers voluntarily removing these chemicals from packaging before the ordinance’s implementation, it set a precedent that many more cities would follow.

More than 30 years later, California is now home to more than 120 local ordinances regulating food packaging in one manner or another, with some ordinances being more onerous than others.

Well-crafted food packaging regulation strikes a balance between the environmental gain and the necessity for safe and quality food items.

However, some local jurisdictions have placed more emphasis on the environmental side of the equation. The unfortunate result is grocers facing decisions to either make wasteful decisions, or discontinue product sales to comply.

Examples of unbalanced local food packaging regulation include the City of Santa Monica, whose city council passed an ordinance calling for only using “marine degradable” food packaging for all food items.

The problem with the ordinance is that “marine degradable” food packaging per their definition does not exist. While it had initially received an ASTM standard, it was abandoned four years ago and no manufacturer is offering the product. Beginning this summer there will not be a food retailer in Santa Monica that will have compliant food packaging. How could this regulation get so far out of balance?

Santa Monica elected officials stated they were so concerned about food packaging becoming litter and marine debris that they regulated to an unrealistic standard requiring all food packaging to fully degrade after 120 days in the ocean.

Despite input from the grocery industry that this would result in most food items prepared in-store from being unavailable for sale, they chose to assume all food packaging could or would end up in the ocean.

Just up the road from Santa Monica, the City of Malibu passed food packaging regulations requiring all raw meat products be packaged in recyclable or compostable packaging whether it was packaged in-store or packaged outside the city and delivered to the store.

Even with a delayed implementation, grocers are unable to be fully compliant. In attempting to comply, grocers have either had to repackage meat products delivered to the store into compostable packaging – doubling the waste – or simply discontinue the sale of some products.

It is important to note that Malibu doesn’t provide for compostable product disposal for its citizens. Again, it was a city council’s focus on potential environmental impacts and not the safety and quality of food which was overly weighted.

Other jurisdictions have taken note of the environmentally-friendly ordinances passed by Santa Monica and Malibu and are looking to enact similar policies. Unfortunately, in doing so they are putting food safety and supply at risk, despite hearing directly from grocers and the California Grocers Association that grocery food packaging is different from restaurant-style food packaging often found as litter and debris in their communities.

“There’s no doubt retailers are seeing growing policy reaction at the local level on what packaging should be allowed in their community,” said Mark Murray, Executive Director of Californians Against Waste, one of the largest environmental advocacy organizations in the country, and a close ally of CGA in the battle for common sense regulations. “Joining with the retail sector, we believe that it’s time for a uniform statewide policy.”

Jeff Hall, Division Meat and Seafood Merchandiser for Ralphs Grocery Co., agrees.

“We’re working with the State Legislature to get more involved and to institute some type of blanket policy rather than have each municipality initiate their own regulations,” Hall said, pointing to areas like Malibu, San Diego and Manhattan Beach.

“This would take some of the burden off grocers and get manufacturers to think differently about some of the products they offer in the stores,” he added, noting that headway is being made on some common-sense regulations with CGA leading the charge.

Manufacturers are well aware of the issues and are working on several fronts, noted Lee Anderson, Director of Global Issues Management and Public Affairs for General Mills. In addition to the company’s own initiatives, he works closely with the American Institute for Packaging and the Environment (AMERIPEN) to focus on policy at the state and local levels. The company also is a member of the Sustainable Packaging Coalition.

“AMERIPEN is material neutral so we’re not focused on one type of packaging,” Anderson said. “We found it a more effective way to present a broader voice on public policy issues. We are engaged in some discussions at the national level and the EPA has put out some very general guidelines. But the reality is that packaging policy is, for the most part, made at the state and local level.”

Time may be of the essence, according to Murray.

“The issue of packaging has reached a critical point because citizens and regulators believed we were recycling more grocery packaging than we were,” Murray said. “We’ve been recycling soft drink bottles, glass and metal containers but, for the last decade, sending mixed paper and plastics overseas to places like China, Indonesia, Malaysia and the Philippines where brokers sorted through the mix for PET bottles, aluminum cans and clean paper.”

Murray noted that in 2017, California exported 13,000 tons of recyclable materials overseas, with more than half exported to China.

The problem, according to Murray and other industry observers, is that China is now telling its private brokers they can no longer accept mixed paper and plastic,
only clean and clear paper and plastic. This means the mixed stream, previously a source of revenue, has become a disposal cost and more is being landfilled.

This is leading to a lot of proposals on single-use plastics.

“A ban on single-use plastics will have broad implications for retailers which are also foodservice providers and who are caught up in a torrent of local regulations. It’s not clear yet what direction these proposals may take – whether they will be grandfathered in, or pre-empted by state regulations. All that has yet to be determined,” Anderson noted, adding that it’s a good bet all this will increase retailer costs.

“Regulators in California are trying to decide what to next,” Murray said. “Supermarkets are caught in the middle of all these discussions. More local governments are attempting to restrict food-to-go packaging.”

He added that about 100 different cities have passed some ordinances restricting takeout packaging, primarily polystyrene. Municipalities like Malibu, Santa Monica, San Francisco and Oakland have adopted even more comprehensive strategies.

Grocers have already stepped up to the plate, replacing polystyrene with polyethylene terephthalate (PET) for bakery item packaging, and there is potential to replace dairy item packaging like margarine tubs and yogurt. These and other initiatives are particularly urgent for private label products since retailers are considered to be the brand owners.

“There’s no doubt the grocery industry is willing to do its part by internalizing some of the cost. But there needs to be a uniform statewide structure,” Murray said.

“I have a lot of confidence in the team at CGA to work this out,” he added. “They are as skilled and influential as anyone in Sacramento and they need the go-ahead from its membership to support a comprehensive policy.

“This is where we were with plastic bags eight years ago. We can spin our wheels and have hundreds more local, piecemeal ordinances for the next four years, or come together for a statewide solution.”

Retailers are dealing with this regulatory conundrum as efficiently as possible.

“In Malibu, we were instructed to remove all polystyrene from the building. It didn’t just affect meat, but also grocery and general merchandise,” noted Hall. However, according to Hall, there were issues with implementation and the city is reassessing the situation.

Meanwhile, Ralphs came up with a compostable tray for Malibu from several suppliers. However, there’s also the issue of styrofoam cups and coolers to be replaced.

“Those replacements are hard to find,” Hall said. “If it was mandated tomorrow that we had to switch away from polystyrene, finding good replacements would be extremely difficult.”

According to Hall, the company removed about 100 SKUs from the Malibu store to comply with regulations.

“This has limited customer choices and they are going outside the city to buy these items and bringing them back,” Hall said. “So, the city still has to deal with the trash issue.”

The bottom line has been a double-digit decline in revenue in the meat department which can be traced directly to the packaging issue, said Hall.

“A company like Foster Farms supplies chicken nationally and does it in such a way that’s most cost-effective for them,” he said. “They’re not going to change what they do for one grocery store in Malibu. That’s what we’re facing today.”

However, Ralphs has worked with Foster Farms for some of its private label items.

“They have a couple of SKUs that are plastic rather than Styrofoam,” he said. “Basically, we have to truck those items from Northern California to our distribution facility in Los Angeles and reship them to the Malibu store,” Hall said. “This takes days of life off the products not to mention the gasoline and carbon footprint we’re putting down.”

In some instances, grocers removed products from banned packaging in the store into an alternative package.

“We won’t do that for safety reasons,” said Hall. “Once you remove a product from packaging that has a federally inspected seal on it, you can’t trace it back, Basically, you’re doubling the amount of trash and creating a potential food safety issue.

“We are working with the state to institute some kind of blanket policy that would take the burden off grocers and get manufacturers to think differently about some of the products they offer in the stores,” he said, noting that Ralphs’ parent company Kroger is taking the lead in speaking with the vendor community.

Meanwhile, the company is deeply involved in its Zero Hunger Zero Waste Initiative, with a goal to eliminate both by 2025 in the communities its stores serve. In the interim, the company, as part of its sustainability goal, aims to divert 90 percent or more of waste in its operations from landfills by 2020.

At Ralphs it’s about recycling wherever possible, according to Hall. This means no cardboard in the dumpsters, recycling plastic wrap and asking customers to bring plastic bags back to the stores.

General Mills also has an ambitious program to have 100 percent of its packaging recyclable by 2030. Just one example is the Cascadian Organic brand cereal which uses a liner produced with biomaterial and is fully recyclable, Anderson noted.

This is only one initiative in the company’s target goals. This includes: Reducing greenhouse gas emissions within its packaging supply chain or 7 percent of its total value chain emissions and a commitment to sustainably source 100 percent of its fiber packaging by 2020. This will achieve zero waste to landfill at 30 percent of General Mills production facilities by 2020 and 100 percent by 2025.

These and other initiatives are creating opportunities for the grocery industry to address legislators.

“The reality is that retailers, brand manufacturers and packagers have been responding to the waste issue,” Anderson said. “Everyone is tweaking it differently but the major companies are investing a lot of resources in helping packaging manufacturers develop recyclable alternatives and new packaging formats.”

However, Anderson and others emphasized that consumer attitudes and input are an important part of the equation.

“People care. We’ve heard more from consumers about plastics in particular –specifically ocean plastics,” said Anderson. “They are reaching out, asking questions and wanting more information about packaging. They buy our brands but they’re buying them from CGA members. We want to make sure we’re sharing information with people, addressing the issues and providing options.”

As a recent report from research firm GlobalData reported: “With increasing public awareness of the harm plastic has on the environment, consumers are increasingly seeking a relationship with retailers and manufacturers that extends beyond a mere transaction. With increasing government legislation, consumers across all generations, particularly the young, are adapting their purchasing behavior in line with the ethics and values of retailers and manufacturers.”

One way the company engages people is through collaborative partnerships with organizations like the Sustainable Packaging Coalition which has developed a program called How2Recycle. This program consists of a standardized labeling system that offers clear instructions to consumers on recycling metal, paper and plastics.

The goal is to reduce confusion on the part of the public, improve the reliability and transparency of recyclability claims, provide a labeling system that follows FTC Green Guides and increase the availability and quality of recycled material. General Mills is adding it to an increasing number of packages, Anderson said.

In spite of industry efforts and burgeoning efforts by state legislators to reduce plastic packaging, local jurisdictions will no doubt continue crafting ordinances of varying quality.

Most California food packaging ordinances focus on eliminating packaging types being used for convenience purposes, generally meaning food packaging used by restaurants for take-out items.

They recognized the intricacies and challenges of grocery food packaging, with exemptions included for food items common in the grocery store setting and nowhere else, like raw meats and baked goods.

Unfortunately, the recent lack of recognition by some environmental advocates and local government decision-makers has raised the alarm for the grocery industry.

Where folks get lost is not realizing their six-pack of blueberry muffins baked in-store requires food packaging that can handle several days on the store shelf, consumers shuffling packages to pick their favorite, transportation in the store and to their home, and, finally, sitting on the kitchen counter for up to six days as a muffin is consumed each morning.

“Grocers need to package these six muffins to remain safe and retain their quality for up to 10 days,” said CGA’s Aaron Moreno, Senior Director, Government Relations. “This is far from a simple accomplishment, but very few think about these challenges.

“As legislators set out to craft a statewide policy on single-use plastic and food packaging, there is much hope by the grocery industry – both retailers and manufacturers – that the special needs of the industry are recognized and addressed,” he added.

Much like it was when the Legislature set out to create a uniform state policy on single-use plastic bags, CGA stands ready to provide its expertise in service of a policy that truly balances food safety and shelf life with environmental sustainability. To find food packagings in your areas of operation, visit our Local Ordinance Database.