Store Brands for the Military?

Atten-tion! Military commissaries may finally get private label for their shoppers. Len Lewis has the details.

Len Lewis
Store Brands for the Military?
January 2017
 
Military commissaries have been serving officers and enlisted personnel for 150 years. Now, they are facing one of their toughest assignments: bringing in private label.
 
The modern commissary was established in 1867 when the average outlet carried about 82 items, the same as civilian dry goods stores at the time.
 
Today, nearly 250 outlets worldwide carry about 38,000 items for the military and their families at five percent above cost.
 
In 2016, commissary sales were about $5.25 billion, a drop of 4.7 percent from the prior year. Since 2012, dollar sales at these outlets have declined about 14 percent, signaling the need for change.
 
However, last year Congress passed the National Defense Authorization Act, enabling DeCA to make operational changes and paving the way for eliminating the agency’s $1.4 billion in federal funding by making commissaries self-sufficient.
 
Private label has been on DeCA’s radar for nearly 20 years. However, the agency hasn’t had the resources or expertise to do this in-house and recently selected SpartanNash to source products. 
 
The company is already the largest DSD distributor to military bases through its MDV SpartanNash military division.
 
Boston Consulting Group was also hired to develop and administer the pilot program, make recommendations on assortment, layout options, forecasting and pricing.
 
The initial program will consist of about 400 items, increasing to 1,000 by the end of 2017. If successful, additional items will be phased in over the following two years. 
 
Meanwhile, products and categories will be evaluated based on price and performance either quarterly or every six months.
 
These moves will enable DeCA to move from a cost-plus to a variable pricing strategy without increasing out-of-pocket costs for customers.
 
DeCA, along with Boston Consulting Group, is reportedly pressuring manufacturers to come in 30 percent lower than civilian prices. However, this does not include the cost of delivering product and makes the business significantly less profitable for suppliers.
 
Nonetheless, adoption of private label fits into the agency’s top priorities. Among them: offering quality products at low prices and improving the shopping experience.
 
Some industry critics say that the Department of Defense is trying to fast-track the switch to private label too quickly and risks delay or even demise of the entire process. And, with a new administration in Washington, the entire project may be up for reconsideration. In the meantime, many PLMA member companies will be watching carefully.
 
I’m Len Lewis for PLMA Live.
 
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