Washington Insider-- Wednesday

Whole Foods and Lower Prices

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Senate Ag Panel Unveils CFTC Bill With Dodd-Frank Curbs

Senate Agriculture Committee Republicans released a bill reauthorizing the CFTC through 2019, ahead of an April 14 panel vote, but with provisions that the panel's ranking Democrat said second-guesses the financial watchdog agency.

The draft bill would broaden judicial review options for CFTC regulations, giving litigants direct access to the Federal Court of Appeals.

Chairman Pat Roberts, R-Kan., said he will take the draft bill into the committee markup scheduled for Thursday without a bipartisan agreement and see whether he has the votes to move it. Roberts said the legislation addresses some of the basic concerns he has about regulations that the commission has issued under the 2010 Dodd-Frank financial regulatory overhaul.

The measure would exempt some swaps end-users from record-keeping requirements under Dodd-Frank and would broaden the Dodd-Frank definition of bona fide hedging activities not subject to position limits. The Senate bill prevents CFTC from subjecting smaller swaps dealers to Dodd-Frank regulations until a study is completed.

The House bill has stronger language, exempting dealers with less than an $8 billion portfolio.

Unlike the House bill, the Senate does not require cost-benefit analysis of CFTC regulations, and does not limit CFTC’s ability to regulate foreign SWAPS dealers.

Sen. Debbie Stabenow, D-Mich., ranking Democrat on the Senate Agriculture Committee, said the draft bill would not authorize sufficient funding for CFTC, which saw its responsibilities greatly expanded under Dodd-Frank. Stabenow also questioned a provision that would require CFTC to conduct a study of the requirements to register swap dealers and to use the report’s findings to replace the existing exemption through rule-making. A registered swap dealer must comply with a variety of regulations designed to reduce systemic risk and increase customer protections.


Stabenow offers GMO food labeling plan

Consumer groups should not expect to get everything they want from legislation creating a nationwide labeling system for foods with ingredients from genetically engineered crops, Sen. Debbie Stabenow, D-Mich., said during a policy conference.

“I do believe that we can create something that is positive and a step forward, but I think it's going to be very challenging to do what you would feel is perfect,” Stabenow, the ranking member on the Senate Ag Committee, said during a speech at the Consumer Federation of America's 2016 Food Policy Conference on April 7.

Groups such as Just Label It and the Center for Food Safety have pushed for a nationwide, mandatory biotech labeling system such as the one set to take effect in Vermont on July 1. Those groups and most Democratic senators were successful in scuttling a voluntary labeling bill (S 764) in the Senate in March, which Stabenow also opposed, saying that a voluntary system is not enough to meet consumer demand.

But Stabenow stressed that getting labeling standards through Congress will require compromise between consumer activists and traditional agriculture, something that has so far been “very hard to do,” she acknowledged.

“I don't live in a world where I can do perfect,” Stabenow said. “When you advocate, you can do perfect. I live in the world of the doable. And so what I'm working on is how we get to the best thing that is achievable.”

Stabenow told reporters after her speech that negotiations in the Senate continue and that she recently sent language related to the biotech issue to Senate Ag Chairman Pat Roberts, R-Kan., but added that her stance remains the same. “The chairman asked me to put down in writing things we've been talking about for months, but my position on the path forward that gets bipartisan votes has not changed for months,” Stabenow said.

Stabenow said that she expects the Senate to act on national labeling legislation because the food industry wants a national uniform standard and not multiple and differing state laws, while consumers want information. “I think we have to resolve this issue. We’re looking for the best outcome possible given the situation."


Washington Insider Whole Foods and Lower Prices

The urban press seems fascinated by food retailer strategies these days, especially as Whole Foods Market implements its new strategy of more competitive prices. For example, the Washington Post took particular note that the launch date for the firm’s new smaller stores is rapidly approaching and will mean significant changes for this organics-focused retailer.

The new marketing effort is being interpreted as a bet that price competition can help it deal with the tougher competition it is encountering, especially from supermarkets and big-box stores who are dedicating more shelf space to organic food, often at lower prices. The new stores will be called “365,” and are expected to change the Whole Foods Markets’ image, the Post says.

The first 365 store is slated to open May 25 in the Silver Lake neighborhood of Los Angeles. Recently the company has offered more details on what the new operations will look like and how the lower prices will be achieved. At some of the emphasis of the new stores is similar to other market-building efforts by high-end food retailers. Jeff Turnas, president of new store concept 365 by Whole Foods Market seemed eager to discuss the stores’ feel—and their freshness.

But, Turnas, president of 365 by Whole Foods Markets, also emphasized to WAPO that he and his team have “looked and turned over every stone to find efficiencies.” By that, he said he meant thinking carefully about how to create attractive merchandising and displays at less cost and creating a uniform store design prototype that can be used across many locations. “We’re not putting as much capital into these stores as we would a traditional Whole Foods,” Turnas said.

Even the product assortment offered in these smaller-format stores is designed in part with an eye toward greater efficiency. Bottled water, for example, is a category in which 365 won’t have a particularly deep selection, because it takes a lot of effort to stock and because 365 executives don’t believe their customer demands it, he said.

“Rather than 50 or 60 olive oils, we’re going to have 10,” Turnas said. “But they’re going to be well-represented from around the world and [different] price points.”

The Post says that Whole Foods will need to “more tightly curate”--that is, manage--its selection in these smaller stores that will run perhaps 30,000 square feet, compared to the 40,000 to 50,000 square feet that co-chief executive John Mackey says are the objective of a typical Whole Foods. But the company is working hard to describe his new operations as not simply be “a line-up of the cheapest organic goods.” It will be an experiment in whether a more ruthless efficiency in curation and stocking can help bring down prices across the store. So, the new 365 stores hope to have much in common with their sister operation, including high-quality meats and seafood and a sprawling produce department, the Post says.

There will be key differences, though, including an emphasis on prepared food bars that Turnas said will be “a little more get-it-yourself, self-serve” than those in a traditional Whole Foods. In addition, the new stores will be built around a program called Friends of 365, in which it will turn over a small section of its square footage to like-minded retailers “to make shopping more of an experience.”

So, the Silver Lake store will include a 1,245-square-foot vegan fast-casual restaurant called Chloe and a 396-square-foot Allegro Coffee Company bar that will serve craft coffee and beer. There also will be a kiosk called TeaBot built by a company of the same name that allows shoppers to create customized tea blends that are served up hot to the user in less than 30 seconds.

The thought process for choosing the Friends of 365 will vary from location to location and is generating some discussion in the press, Turnas said. While the New York-based Chloe seems to fit the Silver Lake store, they likely will be looking at different partners for a new store in Portland.

So, Whole Foods seems to be generating considerable interest in its new stores, even before they open. However, the fact remains that the retail food business seems to be more competitive these days, even in the world of organics. Whole Foods is well known for its success in building a strong market image and avoiding too much focus on prices. Whether it can rebuild that image at more competitive prices remains to be seen, Washington Insider believes.

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