SpartanNash CEO tells NFRA conference to get back to pre-pandemic basics and focus on consumers and innovation.
Having more SKUs doesn’t necessarily mean having more innovation. The industry needs to focus on returning to pre-pandemic basics such as pricing, on-time delivery and fill rates. And listening to consumers — perhaps especially influencers on social media — is crucial. These were among the points made by Tony Sarsam, CEO of SpartanNash, in his keynote presentation during last month’s Executive Conference of the National Frozen & Refrigerated Foods Association in Tempe, Ariz.
Large-scale disruptions today include inflation, poverty and hunger, and water and aridification. With inflation, consumers are looking for more bang for their buck, he said, and eating more meals at home. We’ve also seen the first rise in global poverty since 1998, he added. “COVID set poverty reduction efforts back 10-plus years due to lost education, jobs, income, etc.”
‘The fundamental things you spent most of your career focusing on are still the right things.’
Drier conditions have made it more expensive to plant and maintain crops, leading to higher food prices. “Water infrastructure in the United States has been neglected,” he said. “You’re playing a game of inches. The difference between utter failure and the golden statue is 1%. Your success is inextricably linked to agriculture.”
We need to prepare for more frequent disruptions, Sarsam said. Recent years have already set the pattern. For example, “In 2019 we were enjoying a 99.0% fill rate, a 98.5 on-time delivery rate and modest price increases every few years. Prior to COVID, we saw an 85%-90% on-time and in-full performance from vendors to us,” he noted. “In 2022, we saw a 65% performance and just recently have seen improvement to 75% performance.”
Since March of 2019, vendors have taken 15 years’ worth of pricing, according to Sarsam, citing frozen food Consumer Product Index inflation from the U.S. Department of Labor. That breaks out to 24% for ice cream, 30% for frozen fruits and vegetables (32% for frozen vegetables alone), 13% for frozen juice, 29% for frozen prepared foods, 28% for frozen bakery products and 21% for frozen seafood. “When the price of a mainstream brand goes up, consumers don’t see a specific brand,” he said — they blame the retailer instead.
Sarsam noted that SpartanNash has a data-driven approach to comparing vendor prices with expected list cost changes, based on commodity markets. Underlying input costs don’t justify cost increases from suppliers, he said. Frequent news headlines showing increases in supplier profits in the wake of higher pricing prove this point, he said. “SpartanNash is eager to partner with companies that want to move past COVID, and someone is going to step up and win.”
Once the industry takes care of business fundamentals, real innovation can occur, according to Sarsam. That means big changes to big things. “We should be willing to take risks — bring innovations that are truly innovations. We’ve created a risk-averse environment,” he said. As a hypothetical example, he said there’s no innovation in adding another bell pepper to a two-pepper pack. “This is just making small changes to big things, which is insidious because it creates the illusion of progress without really having any.”
SpartanNash has a data-driven approach to comparing vendor prices with expected list cost changes, based on commodity markets. Underlying input costs don’t justify cost increases from suppliers, Sarsam said.
Adding more SKUs isn’t the same thing as innovation. In the early 2000s, he said, there were perhaps 1,000 SKUs available for the ice cream section. Today, there are “easily more than 15,000. What kind of innovation or progress is that?”
CONSUMERS LEAD INNOVATION
Consumers are too often overlooked in the search for innovation. “We have to listen to consumers and their ideas, usually found on social media. Influencers are full of creative ideas, and they’re not risk-averse,” he said, citing unexpected partnerships he’s seen on TikTok: fruit roll-ups and ice cream, and “cottage cheese ice cream” made with two cups of cottage cheese, two tablespoons of maple syrup and toppings to taste. In concluding, Sarsam urged attendees to move beyond COVID. “The fundamental things you spent most of your career focusing on are still the right things.” n