2018Issue1_Alabama_v2.indd

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Alabama

IT'S NOT JUST FOR BREAKFAST ANYMORE PAGE 24 click-and-collect or home delivery? PAGE 32

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A L A B A M A G R O C E R S A S S O C I A T I O N

Harnessing Innovation page 2 0

Bringing to Market a Powerful Brand Portfolio for every customer taste!

Utz Quality Foods, LLC. 900 High Street, Hanover, PA 17331 1-800-FOR-SNAX utzsnacks.com

CONTENTS | ISSUE

FEATURES

COLUMNS President’s Message Our Industry's Impact by the Numbers . . 6 Chairman’s Message Changing With the Times . . . . . . . . . . . . . 8 Government Relations Alabama Legislative Session Begins . . . . . 10 Convention Chairman Message 2017 Convention Issues Are Addressed . . 12 Viewpoint History Lessons . . . . . . . . . . . . . . . . . . . . . 14 Inside the Beltway How to Be a Winner With The New Tax Law . . . . . . . . . . . . . . . . . . . . . . 16 Washington Report 5 Priorities for Independents in the 2018 Farm Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Harnessing Innovation to Fuel Business Results In our turbulent business climate, we all seek new pathways to growth and success. Yet winning can be elusive in these times of dizzying speed and ruthless competition.

It's Not For Breakfast Anymore A founder and Chief Operating Officer of My Cloud Grocer shares his 10 best secrets to increase basket size week after week.

DEPARTMENTS Outside the Box New Retail Perspectives . . . . . . . . . . . . . . 24

The Why Behind the Dine Consumers spending in the foodservice channel is growing. The question is why?

14 Click-and-Collect or Home Delivery? That’s the Question Food retailers using online commerce face a new dilemma, what system works best? 32

ALABAMA GROCER |

AGA | BOARD OF DIRECTORS

Sergeant-at-Arms James Cochran Buffalo Rock Pepsi Cola Company

Treasurer Jay Mitchell Mitchell Grocery Corporation Secretary Bo Taylor Coca-Cola Bottling Company United, Inc.

Immediate Past Chairman Peter "Greg" Gregerson Gregerson's Foods Past Chairman Jack Howell Forster & Howell

Chairman of the Board Frank D'Amico, III

executive committee

BTC Wholesale Vice Chairman Johnny Collins Dean Foods

vice presidents David Bullard

Wade Payne Food Giant

Bill Davis A&R Super Markets

Bob Crawford United Johnson Brothers of Alabama

Piggly Wiggly Alabama Distributing Company

Harold Garrett Gateway Foods

directors Naseem Ajlouny

Eddy Quinley Advantage Solutions

Kris Jonczyk Publix Super Markets, Inc.

Mike Coggins Sherwood Food Distributors John Fargason Acosta Sales & Marketing Mark Gallivan Alliance Sales & Marketing Robert Gamble Bunzl Distribution Julie Anderson Goolsby The Hershey Company

Buy Lo Quality Foods Stan Alexander Associated Grocers of the South Danny Babb Associated Wholesale Grocers Jack Carlile SuperValu Kirk Clark Mitchell Grocery Corporation

Dana Weldon Dutch Farms John Wilson Super Foods Supermarkets Jimmy Wright Wright's Markets

Melanie LeBlanc Anheuser-Busch Curtis Lyons, Jr. Flowers Bakeries Mike Oakley Alabama Power Austin Peake Peake & Associates

ex-officio board members

Mike Fuller Fuller's Supermarket

Mac Otts Autry Greer & Sons

James Scott Lighting Specialists

R. Kevin Miller "Official Board Photographer" Acosta Sales & Marketing

Darwin Metcalf Western Markets

Secretary/Treasurer Paul Burnett Byars | Wright

President Ellie Smotherman Taylor Alabama Grocers Association

Vice Chairman Phillip Davis A&R Supermarkets

Board of Trustees Chairman

Bob Crawford United Johnson Brothers of Alabama

Cliff Thomas Snyder's Lance Chris Woods Truno, Retail Technology Solutions

Ken Hestley Sell Ethics Don Richardson Coca-Cola Bottling Company

Larry Garrett Vietti/Southgate Foods Kevin Gillespie Acosta Sales & Marketing Chip Harden Bank of America

Gerry D'Alessandro Fourth Avenue Supermarkets Chris Crosby UTZ/Golden Flake Jimmy Freeman Freeman's Shur Valu

United, Inc. Brian Smith Community Coffee

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PRESIDENT’ S MESSAGE

O ur i ndu s t ry ' s i mpac t by t h e numb e r s

ELLIE SMOTHERMAN TAYLOR PRESIDENT ALABAMA GROCERS ASSOCIATION

One of the things we are always touting to our elected officials is the impact of the grocery industry not only in the state of alabama, but also throughout the country.

All this data provides a great picture for us to show our elected officials the difference the food retail industry is making in our state. They always point to the manufacturing industry like Mercedes or Remington or Airbus. I’m here to tell them that our industry makes a large impact as well. So, as we go into this important election year, be sure to tell those running for political office the importance of our industry. You can find all this information at https://www.fmi.org/government-affairs/ grocery-industry-economic-impact . Good things are happening at the federal level. Be sure to take advantage of the new tax reforms. I’m sure all of you are happy with your investments returns and I look forward to another prosperous year. Stay active on the political front – we will need your help in this election year! Many blessings to you and your family for the New Year! .

This is especially important when discussing issues that have a direct impact on our industry like menu labeling, minimum wage, interchange fees, healthcare costs, etc. I am very excited to announce that there is a new study done by the Food Marketing Institute contracted by John Dunham & Associates that looks at the full food retailing industry not only in Alabama but nationwide. I thought I would share a few of the numbers with you as they are staggering. From a nationwide perspective, the total direct economic impact of the food industry across the United States is $363,196,974,500. We employ 4,844,397 people and pay $167,736,840,500 in wages across grocers, general merchandise stores, pharmacies, and wholesalers. If you add in the supplier impact and the induced economic impact the overall economic impact is $899,245,208,200. The food industry across the nation pays over $71.79 billion in state and $81.88 billion in federal taxes each year.

So how does the state of Alabama compare? The direct economic impact of the food retail industry in our state is $5,412,986,900. We employ 69,777 people

and pay $2,266,182,800 in wages. If you add the supplier impact and the induced economic impact in

Alabama, the overall economic impact is $12,111,951,900. In Alabama alone, we pay over $1,042,139,100 in federal taxes and $1,227,259,000 in state taxes. The study then drills down to the Congressional and state level. Let’s take Congressman Gary Palmer’s District for example. His Congressional District 6 employs 12,252 people, provides $389,161,800 in wages for a total direct economic impact of $918,436,800 or a total economic impact of $2,002,215,900. At the state level, let’s use Senate President Del Marsh’s district. His state Senate District employs 2,566 jobs, has $81,772,700 in wages with a direct economic impact of $193,319,800 or a total economic impact of $322,522,500.

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Please make it home safe today.

ALABAMA GROCER |

CHAIRMAN' S MESSAGE

chang i ng w i t h t h e t i me s

FRANK D'AMICO, III BTC WHOLESALE DISTRIBUTORS AGA CHAIRMAN OF THE BOARD

February 15 is also the cut-off date to receive the early bird discount on your exhibit booth for the Alabama Grocers Association Annual Convention. We are excited to be going back to Sandestin and hope you have already added July 29th - August 1st to your calendar of events. So we can all work together to change our business with the times. We anticipate another huge crowd this year and hope you will consider this event among your “do not miss” events of 2018! I look forward to seeing each of you soon!

While 2017 was a rough year for non-grocery retailers, it reminds us how important it is to stay viable as we move forward.

Be sure you are reading your every Tuesday Market Minute to know when and where these will take place. We are continuing to strengthen our relationship with the Alabama ABC Board, Alabama Department of Public Health and all other agencies so that we can stay on top of hot topics that face our industry. Please join us in our fight, if you have any issues that come up, please let us know. We work on a daily basis to keep our retailers and vendors strong in this unpredictable market. As many of you know, we offer Alabama Grocers Education Foundation Scholarships to students currently in college and children of parents that work for an AGA member company. Please remember that the cut-off to get in your application and high school and college transcripts is February 15. We hold three events each year to raise money for these scholarships and are proud that we have awarded over 1.2 million dollars to date!

According to Business Insider more than 8,000 stores closures were announced. Many of these were staples of the retail industry such as Payless shoes (closing 900 locations), RadioShack filing chapter 11, Kmart closing another 283 stores and appliance and electronic powerhouse HHGregg closing 220 store locations. Even Sears and JCPenney’s is closing over 100 stores each. While these are non-grocery retail locations, it shows us that we need to be constantly changing with the times to stay viable in a volatile market. Now more than ever we need to band together through your Association to help each other fight for the good of the grocery industry in our State. As we move into 2018 we need to keep our focus on moving forward. We are still working with the Alabama WIC Department on rolling out eWIC in the 4th quarter of 2018. As the pilot date draws near, we will be hosting several eWIC seminars throughout the state to help with the conversion.

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AGA NEWS The Al abama Groce rs Assoc i at i on wishe s to recogni ze it s Di amond and Four St ar Sponsors for t he i r gene rous suppor t of t he AGA Annua l Convent i on . Diamond Sponsors

Four Star Sponsors

ALABAMA GROCER |

GOVERNMENT RELATIONS

a l abama l e g i s l at i v e s e s s i on b e g i ns

PATRICK MCWHORTER LEGISLATIVE REPRESENTATIVE THE MCWHORTER GROUP

Congress reauthorizes the Children’s Health Insurance Program (CHIP) and if they require a state match. The Senate Republicans, led by President Pro Tem Del Marsh, announced last week their intention to pass legislation that would allow more taxpayers to take the maximum standard deduction on their state income taxes. Marsh said the effort would be targeted for the middle class by allowing more people to claim the maximum standard deduction. But no fiscal note has been prepared as of yet. Other proposals the Senate GOP plans to push include providing incentives to companies to develop broadband access in rural Alabama; making child sex trafficking a capital offense; and saving money in Medicaid, partly by encouraging the state to seek federal waivers, such as a work requirement for able-bodied recipients. Just under 400 bills were introduced by both Houses the first week of the session. Among them include issues of concern to grocers, including: • HB 6 by Rep. Tommy Hanes (R) of Scottsboro, and SB 139 by Sen. Arthur Orr of Decatur, impose new requirements (including work)

Every four years, literally everyone in Alabama stands for election.

The good news, as has been reported, is that both the Education and General Fund Budgets are in relatively good shape. But of course, the fight always starts when there is any extra money. Combine that with the historical penchant of legislators’ desires to give state employees and teachers pay raises during an election year, and things may get sticky in passing budgets. In her first State of the State message last Tuesday evening, Governor Kay Ivey announced her commitment to provide for these raises in her budget proposals. Her budget proposal also requests additional funds for the Corrections Department to satisfy a federal court decision on mental health – $30 million this year, and $20 million next year. She also requests an additional $53.9 million for Medicaid, and a $9 million increase for the Department of Mental Health. Raises will depend on whether

Every four years, literally everyone in Alabama stands for election. The Governor and all constitutional officers, 105 Representatives, 35 Senators … all face the voters in the June Primary and November General Election. As provided in the Constitution, the Legislature comes into regular session in early January during an election year, so the members can get out earlier and get home to campaign. Historically, these election-year sessions are most notable for their desire to do nothing to “rock the boat.” Controversial issues are avoided at all costs. This year is no different. Leadership of both the House and Senate are promising to get right down to work, fulfill their primary constitutional requirement of passing budgets, and get home. No doubt they’re sincere, but things never seem to work out that way.

“Historically, these election-year sessions are most notable for their desire to do nothing to 'rock the boat'. ”

on SNAP recipients. SB 139 will be considered by Senate Fiscal Responsibility & Accountability Committee Wednesday, 1/17/18.

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“in the political arena, most interest is focused on the governor's race.”

$1.46 million; State Sen. Bill Hightower of Mobile - $695,000; and Birmingham evangelist Scott Dawson - $562,000. Dawson’s campaign received a major boost last month when Hobby Lobby founder David Green contributed $100,000. Ivey has received high marks for her first year in the office, and should benefit immensely from last week’s announcement of the state landing the Toyota/Mazda joint venture factory in Limestone County, which is expected to add 4,000 direct jobs and countless thousands of secondary jobs in supplier plants in the state.

County & Municipal Government Committee Wednesday, 1/17/18. SB 58 by Sen. Clyde Chambliss of Prattville, establishes the crime of theft by shoplifting and prescribes criminal penalties. In the political arena, most interest is focused on the Governor’s race. Former Lt. Governor Kay Ivey ascended to the Governor’s Office upon the resignation of disgraced former Governor Robert Bentley. She is seeking election to a full term as Governor, and as of the last report, has raised the most money - $2.3 million. Also raising funds in that race are Huntsville Mayor Tommy Battle – raising •

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HB 47 by Rep. Chris Pringle (R) of Mobile, raising the minimum age to purchase tobacco products to 21. HB 151 by Rep. Ron Johnson (R) of Sylacauga, requiring a two year surety bond for sales tax license registration – new or renewal. Will be considered by House Ways & Means-Education on Wednesday, 1/17/18. HB 157 by Rep. Corley Ellis (R) of Columbiana, providing that certain evidence of comparable sales or leases shall be inadmissible in taxpayer appeals for the rulings of boards of equalization fixing value of commercial property Will be considered by House

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ALABAMA GROCER |

CONVENTION CHAIRMAN' S MESSAGE

2 0 1 7 C onv e n t i on I s s u e s ar e addr e s s e d

HAROLD GARRETT PRESIDENT, GATEWAY FOODS 2018/19 AGA CONVENTION CHAIRMAN

As a way of introduction, i am harold garrett, president of gateway foods and the 2018/2019 aga convention chairman.

If your company is a Diamond Sponsor or you are interested in becoming a Diamond Sponsor, I would encourage you to reach out to the AGA Staff for more details on this new event! 4. We got countless remarks about the Monday night event in the survey. We are going to fix as many of these issues as possible. We have decided to move away from Casino Night and do something very exciting! In 2018 we will be hosting a Night at the Derby & Silent Auction Party! The Silent Auction items will be in the Camellia Ballrooms this year so you can browse the items at your leisure. When you enter the large Azalea Ballroom you will be given play money, betting slips and a racing program. We will have betting booths with tellers and a giant projection screen where we will watch 10 filmed horse races with a live announcer giving the pre-race favorites. You will place your bids on your favorite horse for each race! At the end of the night, you will take all your winnings and trade them in for raffle tickets. Tickets will be used for the raffle of door prizes ranging from a 55” 4K TV to a Camera Drone!

Many of you attended the 2017 Convention and I must say Keith Lusk and his committee did an outstanding job last year. It is going to be a hard one to beat this year. After each convention, we send out a convention survey. We gather a lot of information from how we can make adjustments for the coming years to make the convention better for each of our attendees. You wrote in and we listened. Below I would like to address the top 5 issues from 2017 and see if we can answer some of your questions. 1. “I had no idea that the final dinner was wear your team colors.” I apologize this was not communicated as well as we should. Please note that this year we will again have a “Wear your team colors night” We want to encourage everyone to support their favorite team by sporting their colors! 2. “Organized Tennis Event.” The convention committee and AGA staff is limited and can only organize so many

events. Years ago, we would hold a tennis tournament at the convention. However due to the lack of interest from attendees we opted not to hold this event as an AGA sponsored event. That being said, if enough people come to us and commit to participating and we can get a sponsor, the committee would be more than happy to look into it for future conventions. 3. “Opportunity to set up one on one meetings with requested retailers.” I am happy to announce that after a strategy meeting we have come up with a option for these retailer/wholesaler meetings. Starting this year we will be implementing Round Table meetings for Diamond Sponsors. On Monday afternoon, each diamond sponsor will be able to visit with key retail decisions makers one on one during the round table meetings on Tuesday afternoon. We have already had several retailers committed to participate and are working on more as we speak.

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Be sure to dress for the event! We will be awarding prizes for the best themed dressed! We will have food stations set up in the same ballroom along with tall stand tables and shorter tables with chairs around the room. We hope everyone comes with large hats and mint juleps on their minds! 5. The Football/Entertainment Debate. We have people on both sides of this topic. Some people love the sports speakers and some people do not. While we were at Point Clear, we opted to have singing artists. However, since coming back to Sandestin and the space being limited, we opted to

go back to Sports Speakers. There is an old saying “You can’t please everyone” and it is never truer than when it comes to “Entertainment.” We are going to try to come up with a compromise which means some of you will be happy some of the time but not everyone will be happy all of the time. For 2018 we have contracted former Alabama Linebacker great, Cornelius Bennett. (Don’t forget to wear your team colors!) However, we are looking at a comedian for 2019 and possibly 2020! If you have any suggestions, now is the time to get those in. We are trying to book entertainment over a year out. So please, if you have suggestions on comedians or other music acts or sports

speakers you would like to see, the only way we get those is through the Association Office. Call or email jbrown@alabamagrocers.org with your suggestions. We hope you can see from the above that your Association does listen to your concerns and works tirelessly to make sure you have the best experience at our convention! Please go ahead and mark down the dates July 29 through August 1 at Sandestin Golf & Beach Resort and plan to be with us!

ALABAMA GROCER |

VIEWPOINT

H i s t o ry L e s s ons

KEVIN COUPE FOUNDER, MORNINGNEWSBEAT.COM

A confession: I’ve worked for three retailers in my life, and all of them went out of business.

fit the many flight attendants (then called “stewardesses”) who lived in Marina del Rey and Playa del Rey, and upon whom he was fixated. It didn’t help that he’d often go off for afternoon-long “lunches” with some of these women, leaving me to run the place by myself. I was good at my job, but I didn’t have the secret sauce that he’d used to make the place so successful. Eventually, the place died. But I still had college to pay for, so I got another retail job at the Brookside Winery and Tasting Room, also in Marina del Rey. The one where I worked was one of a network of several dozen facilities that operated mostly in California; Brookside was a Southern California vintner, and its operating strategy was not just to sell wine, but provide a tasting room in which anyone could taste any of the winery’s products for free while making a purchase decision. I didn’t know all that much about wine, but I learned fast, and I was pretty good at socializing with the customers, who often would come in knowing what they were having for dinner but not sure what they wanted to drink. They’d taste some stuff, make a decision, and we’d send them out the door happy and with a couple bottles of wine. And I got to run the tasting room (Great job for a college senior!).

It was a very cool store; the owner, only a few years older than I, eschewed standard design techniques and instead scattered handsome antiques – tables, desks, even a brass bed – around the store and displayed designer jeans, khakis, sweaters and shirts on them. The antiques were placed at odd angles that forced people to walk around the store, we were constantly moving pieces so that it rarely looked the same for too long, and the boss cultivated a salon-like atmosphere in which people loved to come in and talk and maybe have a glass of wine while they spent money on clothes. I think about the British Stock Exchange now and realize that it would have been the kind of store that could’ve competed effectively with online retail (had it existed back then). The whole point of the store was to create a compelling shopping experience – fueled by my boss’s outsized personality – that people would go out of their way to visit. And it worked, really well. Until, as often happens in these cases, the owner took his eye off the ball. Rather than remaining focused on what worked and expanding in a strategic way, he decided to make an enormous investment in a women’s line of clothing; the problem was, it was cut so small that it would only

While that may not make me the ideal guy from whom to be taking advice and analysis about retailing, I actually think that my long- ago experiences with these retailers offer some lessons about how to succeed. I’ve been thinking about those retailers lately as I’ve been pondering some of the events of the past year and trying to prognosticate about what might happen in 2018. I generally try to stay out of the predictions business lest someone think I’m trying to cast myself as some sort of futurist. (I’m just a guy who has made some pretty good – and lucky – guesses over the years, which is the same as what “futurists” do, but I try to be a little less pretentious about it.) Two of the retailers I worked for, as it happens, were in Southern California, and have been gone for more than 40 years; my jobs there were not “career jobs,” but rather a way to work myself through college. (I graduated from Loyola Marymount University in 1977.) The first was called the British Stock Exchange, and when I started working there in early 1975, it was a men’s clothing store targeted at a group that had not yet been labeled as “yuppies,” or the young urban professionals who lived in Marina del Rey.

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VIEWPOINT

“Now malls seem irrelevant, with many made marginal in their appeal by e-commerce.”

County Boys’ held on until the late 80s, but I think it’s fair to say that a lack of competitive response, and a willingness to continue doing things the way we’d always done them because that’s the way things were done, killed the business. It was a long, slow death, but it taught me a lot. Complacency is as sure a killer of businesses as pretty much anything else. Times have changed. Now it’s malls that seem irrelevant, with many made marginal in their appeal by e-commerce. But certain competitive tenets seem like they are worth adhering to creating compelling, unorthodox, loaded-with- personality shopping experiences wherever possible… offering people the ability to sample the merchandise whenever possible… maintaining a vigilance that lets no threat go unanswered, ever… and never allowing oneself to be complacent. Of course, I learned something else from all these experiences – that I’d rather write about the business of retailing than actually do it. But that’s another story. ■

I ended up working again for County Boys’ after college, when I returned east and got a $6,500-a-year job as a newspaper reporter and needed to supplement my income. County Boys’ was a classic clothing store that existed for decades in several locations – the kind of place where moms would bring their sons for everything from navy blazers to Levi jeans to underwear, and where fathers would come in Saturdays to buy a suit or dress shirt to wear to work in Manhattan. We knew all the customers, and they knew us, and they wouldn’t think of shopping anywhere else. We had fair prices – not high, but not discount – and ran just two sales a year, and never opened at night or on Sundays. It was a different time, and we were both convenient and a known entity. And then malls happened. County Boys’ had its stores either in stand- alone locations or in strip shopping centers, and the building of enormous malls nearby put enormous pressure on sales. Kids didn’t want to get their jeans at County Boys’, but wanted to go to The Gap instead. Moms could take their kids to the mall and have a wide range of choices, as could fathers looking for new suits. As hair got longer, sales receipts got shorter, and we never really figured out a response.

Again, a great lesson. Offering tastes of whatever it is you are selling is an enormously effective way to get people to buy stuff. And I’m not talking about just relying on manufacturers to underwrite tasting programs, which is nice but doesn’t go nearly far enough. I’m talking about retailers getting their own people out from behind service counters, or into the aisles and ripping open packages, and funding its own aggressive tasting stations. If it smells good and tastes good, people are far more likely to buy it. Alas, Brookside ended up closing down several years later, though I think it has been reborn several times under different ownership. I just don’t think the wine was good enough at a time when Northern California wines were getting better and better, and often less-than-premium locations became even less so in the mid-70s when gasoline was getting very expensive. But the lesson stuck. Finally, the other retailer I worked for was back east, in the suburbs of New York City where I grew up. I started working at County Boys’ and Men’s Shop before my 14th birthday – I had a private, Catholic prep school to pay for, I was the oldest of seven children, and my father was a schoolteacher who wanted me to go there, but couldn’t afford to pay for it.

ALABAMA GROCER |

INSIDE THE BELTWAY

H ow T o b e a w i n n e r w i t h t h e n ew ta x l aw

JENNIFER HATCHER SENIOR VICE PRESIDENT GOVERNMENT AND PUBLIC AFFAIRS FOOD MARKETING INSTITUTE

deduction – a big win for second and third generation companies, secured with the help of key FMI members. After this deduction is taken, additional income tax is paid at the individual rates. The 20 percent deduction should create the equivalent of a top marginal rate of 29.6 percent. This goes into effect in 2018 and expires at the end of 2025 unless extended or made permanent prior to that time. The bill nearly doubles the standard deduction to $12,000 for a single filer and $24,000 for a joint filer (up from $6,350/$12,700). This will hopefully be a boost to associates and customers. The individual AMT remains in place but the exemption is increased to $109,400 for married filers and $70,300 for all other taxpayers. The phase-out threshold is increased to $1 million for married filers and $500,000 for other taxpayers, but expires at the end of 2025 and reverts to current law unless extended. The current system of state and local tax deductions is replaced with a new “hybrid” approach. Filers will be able to take up to a combined $10,000 deduction for state and local taxes, sales taxes and/or property taxes. Unfortunately, the estate tax was not

in every bill, there are winners and losers. fmi worked hard to try to secure as many wins for the grocery industry as possible with the new twax law and there are quite a few"

Below are some highlights and wins of particular interest to the supermarket industry: • The use of LIFO (last in first out accounting) is preserved with no changes.

In December, Congress passed the most significant overhaul of the U.S. tax code in 30 years, delivering a landmark legislative victory to President Trump and Republicans. The bill provides for a number of wins for the grocery industry. Some of the highlights are listed below. It is important to note you should work with your accountants and tax professionals to make sure you are able to utilize the provisions of the law could apply to your business and associates. Also, if you run across issues that you think could be addressed in a technical corrections bill, forward them to the Food Marketing Institute. As quickly as this bill moved through the legislative process, there are likely to be errors or mistakes that will need to be corrected this year.

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There is no BAT (border adjusted tax). The tax rate for “C” corporations is set at a flat 21 percent, down from 35 percent, goes into effect in 2018 and is permanent. The corporate alternative minimum tax (AMT) is permanently repealed. A 20 percent deduction for qualified business income is established for pass-through businesses. Pass-through businesses operating through estates or trusts are eligible for the 20 percent

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“The bill nearly doubles the standard deduction to $12,000 for a single filer and $24,000 for a joint filer.”

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“the bill does not repeal the individual mandate of the Affordable care act, despite some reports along these lines.”

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The Work Opportunity Tax Credit and New Markets Tax Credit are preserved. The deduction for expenses related to employee meals is repealed but employees can continue to exclude the benefit from income. However, the tax act also expands the 50 percent limit to de minimus fringe benefits to onsite eating facilities until Dec. 31, 2025. Afterwards, employer costs for providing food and beverages to employees through an onsite facility are not deductible.

health insurance to $0, making the mandate toothless. The repeal of the tax penalty does not begin until 2019 – so individuals are technically able to be fined in 2018. This likely will not have a significant impact on business aspects of the health care law, however, left unresolved it could make health insurance markets more unstable, which will have ripple effects for the whole system. It eliminates carry-backs and limits the use of Net-operating losses (NOLs) to offset up to 80 percent of a company’s taxable income. It creates a temporary tax credit of 12.5- 25 percent for businesses that provide employees with paid family or medical leave depending on how much of the employees’ wages are paid above 50 percent. Consult your accountants. The deduction for state and local lobbying expenses is repealed. The use of like-kind exchanges is basically limited to real estate transactions. The deduction for domestic manufacturing operations (Sec. 199) is repealed. Some in the industry may currently use this provision to help write-off expenses associated with central kitchens, etc. It removes the ability to deduct the cost of legal settlements if a violation of the law takes place. Also prevents write-off of sexual harassment claims if an NDA is attached.

repealed and remains in place at 40 percent. However, the exemption for estates from the tax was doubled to $11 million for individuals and $22 million for couples. The gift tax exemption is also doubled. However, both provisions expire at the end of 2025. Full expensing is allowed for qualified property placed in service between Sept. 27, 2017, and Jan. 1, 2023. The proposal phases-down in 2023 and beyond. Both new and used property can be included in the calculation. Sec. 179 expensing (aka “small business” expensing) is also made more generous with the maximum increased to $1 million and the phase-out threshold set to $2.5 million. This is permanent, but you may want to consider full expensing in the years it is allowed. The deduction for interest expenses is limited to 30 percent of a taxpayer’s adjustable taxable income. The formula for how adjusted taxable income is calculated changes in 2022. It uses a more generous EBITDA formula for the first four years and than a less generous EBIT in later years. An important rulemaking will determine what will be included in the formula! The bill does not repeal the individual mandate of the Affordable Care Act, despite some reports along these lines. It does reduce the tax penalty for individuals failing to purchase • 2023 – 80% • 2024 – 60% • 2025 – 40% • 2026 – 20%

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ALABAMA GROCER |

WASHINGTON REPORT

5 p r i o r i t i e s f o r i nd e p e nd e n t s i n t h e 2 0 1 8 farm b i l l

PETER LARKIN PRESIDENT AND CEO NATIONAL GROCERS ASSOCIATION

congress has the chance to strengthen the food security safety net, also known as the Supplemental nutrition assistance program, or snap, for recipients and retailers in the 2018 Farm Bill.

and maximizing federal resources for grocery stores. 2. Preserving Consumer Choice in SNAP. It’s crucial that lawmakers not place burdensome regulations on supermarket operators by restricting what SNAP customers can purchase with SNAP benefits. Today, there’s more than 300,000 food items in the marketplace with over 15,000 new food items being introduced each year. Placing restrictions on SNAP purchases would significantly increase burdens on independent supermarkets by adding new costs and administrative burdens to an already highly regulated, low-margin industry. 3. Fighting Swipe Fees on SNAP Authorized Retailers. A major credit card brand is asking Congress to lift the legislative prohibition on swipe fees for SNAP transactions. If card networks are allowed to charge the average swipe fee of about 48 cents per transaction, retailers could face an additional $1.3 billion – yes that’s billion with a B – a year for accepting SNAP payments. While these fees might prove to be a nice cash windfall for the mega-banks and major card brands, they would unfairly and significantly increase retailers’ SNAP costs. 4. Protecting Private SNAP Retailer Sales Data. While Freedom of Information

Market, testifying before the Senate Agriculture Committee on issues retailers face while administering SNAP benefits on behalf of the National Grocers Association. Below are five of the most important provisions NGA is working hard to ensure make it into the next Farm Bill: 1. Strengthen the Food Insecurity Nutrition Incentive (FINI) Grant Program. FINI grants are awarded to nonprofit groups and government agencies to conduct programs that provide point-of-sale incentives for the purchase of produce. While the program is popular in the independent supermarket industry, grocers have received a smaller share of funding despite longer operating hours and ability to reach more low-income consumers. Congress should help increase grocery store participation by allowing supermarkets to apply directly instead of restricting eligibility to nonprofit organizations and government entities, helping stores to overcome technical challenges with program implementation,

Every five years, Congress must pass a comprehensive omnibus bill that’s one of the single most important pieces of legislation in the food and agriculture industry: the Farm Bill. The practice dates back to the 1933 when the first Farm Bill was enacted into law as part of President Roosevelt’s New Deal. Its three original goals ¬– keeping food prices fair for farmers and consumers, ensuring an adequate food supply, and protecting and sustaining the country’s vital natural resources – have largely stayed the same over the past 80 years. The agricultural and food industries authorized under the 2014 Farm Bill include 12 sections: 1) commodities; 2) conservation; 3) trade; 4) nutrition; 5) credit; 6) rural development; 7) research, extension, and related matters 8) forestry; 9) energy; 10) specialty crops and horticulture; 11) crop insurance; and 12) miscellaneous. Lawmakers are aiming to reauthorize the next Farm Bill this fall, with congressional hearings already under way in Washington. This includes Jimmy Wright, single-store operator of Opelika, Ala.-based Wright’s

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“the bill does not repeal the individual mandate of the Affordable care act, despite some reports along these lines.”

Requiring retailers to pay SNAP application fees won’t deter fraud in the program, however it would simply serve as a new tax on main street businesses, which is contrary to the Trump administration’s goal of lowering taxes and costs on small businesses. It’s an honor for NGA to spend the association’s time fighting on behalf of the independent supermarket industry. With such a large economic impact in both the state and the country, your voice matters.

poach the customers and revenues of smaller independent grocers. 5. Rejecting a SNAP Tax on Retailers. Last year, the Trump Administration proposed a SNAP retailer application fee. While stores do not pay a fee to become authorized, retailers take on large equipment, compliance, and training expenses to participate in the program. Under the proposal however, fees would range from $250 for the smallest businesses, such as convenience stores, to as much as $20,000 for the largest retailers.

Requests (FOIA) provide a means for citizens to know about the activities of their government, the release of store-level SNAP redemption data would harm competition within the independent supermarket industry. In fact, the annual and monthly nationwide and state level SNAP redemption data has long been available. The availability of site-specific data would simply create a windfall information for big box stores, who will gain a competitive advantage and

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HARNESSING

Innovation

RESULTS to fuel

BUSINESS

By Josh Linkner

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In our turbulent business climate, we all seek new pathways to growth and success. Yes winning can be elusive in these times of dizzying speed and ruthless competition.

Cultivating creativity and innovation is leadership job No. 1 if we want to enjoy sustainable growth and progress. But how do innovators think and act? How can we build a culture that fosters innovation rather than restricts it? As human beings, we are hard-wired to be creative, but many of us have lost our imagination over the years. The good news is that we can all tap into a giant reservoir of creativity, which can fuel our businesses and lives. Luckily, you don’t have to be a mad scientist in a lab coat, or an eccentric billionaire to embrace them. You just need an open mind and an open heart, a willingness to inject fresh approaches into everyday situations.

Companies like Tesla, Amazon, Netflix and JetBlue soar while their respective counterparts – Oldsmobile, Borders Books, Blockbuster, and PanAm – are merely tombstones in the business graveyard. Too often, once great companies become intoxicated by their own success. They fail to adapt, fail to innovation, and then simply fail. To avoid this trap in times of massive upheaval and change, we must exploit our most powerful weapon: human creativity. It is the one thing that can’t be outsourced or automated, and has become the currency of success.

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Having studied hundreds of the most innovative people in history, I’ve discovered five core beliefs that transcend industry, geography and upbringing. These patterns are easy to understand and can be implemented directly into your daily work to drive growth and success:

1. Get Curious It turns out that curiosity is very much the building block of creativity. The more curious you are, the more creative you’ll become. The best way to tap into your natural curious state is to ask a lot more questions instead of making fast decisions. Too often, we make decisions (big and small) based on what worked or what didn’t work in the past. If we lived a static world, that would be great. But today we live in a rate of change like none other in history. As a result, your instincts based on previous results can be misleading. Instead, pause whenever possible and ask more questions about the problem at hand or your proposed solution. Try questions that begin with “why”, “what if ”, or “why not?” When you ask these questions, it forces you to imagine the possibilities and explore fresh approaches. 2. Crave What’s Next It’s easy to think success is a permanent condition, yet that has been the downfall for far too many organizations. Instead, we must lean into change, embracing new approaches rather than clinging to old ones. Too often, we overestimate the risk of trying something new but underestimate the risk of standing still. Innovators have an insatiable appetite for new tech, products, trends, concepts, etc. They want to be first, on the bleeding edge of change. They also embrace a willingness to let go of what was in favor of what can be. 3. Defy Tradition Family traditions can be wonderful, but traditions in our professional lives can be deadly. Blindly doing things in a traditional way has been the downfall or far too many companies and careers. Instead, when you find yourself approaching your work in a traditional way, examine the tradition carefully and see if you can flip it upside down. What would the polar opposite move look like? Don’t change just for the sake of it, but at least put your traditions under a microscope to explore if they are still relevant and optimized. Or, perhaps there’s an oppositional approach that could yield a better outcome. This is the point where breakthroughs occur.

4. Get Scrappy We often believe our ability to innovate is tied to external resources such money, headcount or raw materials. The truth is, the real DNA of innovation has nothing to do with outside resources and everything do to with grit. Determination. Tenacity. Resilience. Internal resources fuel creative approaches, which is why startups are able to upend industry giants. Getting scrappy is about doing more with less; finding elegant and more creative ways to solve everyday problems. Instead of blindly throwing money at a problem, try throwing your imagination at it instead. You may enjoy a far better result. 5. Adapt Fast It’s easy to believe that innovation occurs as a single lightning bolt of an inspiration, followed by mindless execution. In fact, initial ideas are usually flawed. Only through a series of setbacks and mistakes, failures and pivots, tweaks and micro- innovations, does an idea gain any real merit. Take the weight of the world off your shoulders… you don’t have to invent some game-changing concept. Instead, apply your creative energy to small, fast, creative bursts. Rapid-fire creativity, practiced as a daily habit, can be far more important than the potency of an initial ideal. Experiment, learn, adapt. Rinse and repeat. While many adults don’t feel creative, the research shows otherwise. Creativity, in fact, is 85 percent learned behavior. In other words, it is a skill, a muscle, that each of us can build and use to drive our companies and careers to the next level. Embrace the five obsessions of innovators, and you’ll be well on your way to unprecedented achievement. Push the boundaries, shake it up, explore what’s possible. Inject innovative approaches into your everyday work and the results will be stunning.

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MICRO-INNOVATIONS The concept of innovation can be completely overwhelming. Images of Edison inventing the light bulb, or Henry Ford revolutionizing manufacturing push the idea of innovation outside the reach of us mere mortals. If we define innovation as a gigantic, change- the-world, cure-cancer type breakthrough, the concept is relegated to a select few: billionaires, mad scientist inventors, CEOs, and super-geniuses. Yet the vast majority of human progress

On the other hand, micro-innovations are accessible to us all. Each of us – regardless of role, tenure, age, or title – has the ability to develop creative solutions that lead to real progress. In this sense, innovation becomes a daily habit rather than a big, scary, overwhelming phenomenon. We all can be innovators, not just those in lab coats or with fancy degrees.

Take a look at your daily work, whatever it may be. While totally disrupting your entire

“While game-changing breakthroughs are glamorous, small acts of “everyday innovation” are the stuff of greatness.”

is crafted differently. In fact, it’s the little creative shifts – what I refer to as micro- innovations – that most often carry the day. These mini innovations can be subtle, but add up to significant results en masse. Maybe it’s implementing a fresh way of conducting your weekly sales meeting, or reimagining the physical layout of your shop floor. It could be a modern twist to the format you use to conduct job interviews, a novel way to manage a customer complaint, or a new item on the menu. The folks at Procter & Gamble were fighting hard to gain share of the $7 billion detergent marketing. Instead of inventing some revolutionary magic serum, they used a small packaging change to win big. Tide Pods were launched to allow customers to drop a small pod in the wash rather than pour from a messy bottle. This micro- innovation led to stunning success – over $500 million of revenue in the product’s first year. While game-changing breakthroughs are glamorous, small acts of “everyday innovation” are the stuff of greatness. Too often, we put the weight of the world on our shoulders and believe we only have two choices – world-shifting innovation, or do nothing. With that kind of pressure, it’s no wonder that most of us restrict our creative output.

industry may be daunting, ask yourself what little creative twists could make a small difference. Apply creative wonder to your product or service, production, culture, sales and marketing, recruiting, customer experience, and internal processes. While micro-innovations may not land you on the cover of a magazine, they can absolutely fuel your performance. Not to mention, they’re tremendously fun. View your work through the lens of an artist, looking to add just a little splash of creativity to even the most mundane tasks. Remove the burden to develop gigantic a-ha moments of brilliance, and focus on a high output of micro-innovations. Each change or twist may be small, but your results over time will be anything but puny. ■ Editor’s Note: Josh Linkner is a five-time tech entrepreneur, New York Times best-selling author, and venture capitalist. He is a sought- after keynote speaker on innovation, creativity, and hyper-growth leadership. He’s also a proud Detroiter and professional-level jazz guitarist. For more info, visit JoshLinkner.com.

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