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Transformation FAQ

Question Answer

What exactly is changing under the 2016 NDAA?

  • The 2016 National Defense Authorization Act (NDAA) provides DeCA the opportunity to make some specific changes to our operations that will protect your patron benefit, improve your overall shopping experience, and reduce DeCA's reliance on appropriated funding.
  • Starting in fiscal 2017, DeCA will be preparing to pilot some initiatives, such as variable pricing and private label, as changes to enhance its mission of offering the right products at the right prices to its patrons. Congress has directed DeCA to deliver the current level of the commissary benefit with a lower operating cost.
  • As a prerequisite to conducting any pilot, DeCA has been tasked with updating its patron savings methodology to better reflect the savings patrons currently experience at their local commissaries. This updated patron savings methodology will serve as a baseline against which we will measure the success of each pilot program we pursue.
  • Congress and the Department of Defense recognize the tremendous value the commissary provides for you and your families. They want DeCA to continue providing that value, but believe it can do even better if given the legislative flexibility and tools to serve patrons more effectively and operate more like a commercial grocer.
Question Answer

Why is DeCA making changes to the way it calculates savings?

  • DeCA is dedicated to providing its customers with significant savings. To maintain these savings DeCA will:
    • Follow the direction of the 2016 National Defense Authorization Act (NDAA), which authorizes DeCA to make specific changes to operations that protect patron benefits, improve the overall shopping experience, and reduce DeCA's reliance on appropriated funding.
    • Add a regionally specific dimension (required by Congress) to the savings calculations to more accurately monitor the savings benefit to patrons as the transformation is rolled out. This will allow DeCA to verify that customer savings are maintained at their current level or improved.
    • Monitor national savings and regional savings on items most frequently purchased by commissary patrons to more fully understand the patron savings experience.
Question Answer

Is the amount I save going down?

  • DeCA is dedicated to providing its customers with significant savings. To maintain these savings DeCA will:
    • No. The actual cost to you will not change as a result of changes to DeCA's savings measurement methodology. These changes in measuring savings just help DeCA more accurately measure the savings that customers see.
    • These changes are intended to help ensure patron savings do not decrease
Question Answer

How does DeCA measure savings?

  • DeCA monitors and calculates savings on a regular basis in different geographic areas, at different levels of specificity: regional, U.S./overseas, and global. The savings figures specific to each geographic area describe how much a patron could expect to save on average for grocery purchases in comparison to local grocers.
  • Regional – DeCA organizes its stores into geographic regions. To calculate regional savings, DeCA uses a few pieces of information:
    • Local Cost Comparison: DeCA compares the prices of over 1,000 products in each commissary with the same products in a variety of local grocery stores in each geographic region, including three stores in the area of each commissary.
    • Industry Cost Comparison: DeCA uses standard industry data to compare average prices on all 38,000 Stock Keeping Units (SKU's), individual products, with prices on those same items in all commissaries within the specific region. This method is used to ensure the entire assortment of products is considered.
    • These two calculations are balanced to generate a regional savings number.
  • U.S. – To calculate the overall U.S. savings level, DeCA follows the same steps as for the regional calculation, rolling up all individual regional savings into one U.S. figure and incorporating national average prices on all 38,000 items sold in stores.
  • Overseas – DeCA uses a cost of living index to estimate market prices of groceries in the specific area around each overseas commissary. These estimated prices are then used to calculate an overseas savings level. This approach is used because outside of the U.S., many products in the commissary are not sold in local grocery stores, so DeCA can't measure savings by directly comparing prices in specific overseas locations like it does in the U.S.
    • Cost of living index: The Cost of Living Allowance (COLA) index used is a widely accepted index developed by the Defense Travel Management Office. The index compares prices on a large set of goods and services to measure how market prices in overseas locations with military installations compare to prices in the U.S.
  • Global – To measure global savings, DeCA combines the U.S. savings level with the savings level of overseas commissaries. U.S. and overseas savings levels are weighted by sales. For instance, U.S. commissaries generally comprise 80 percent of total commissary sales, so the U.S. savings level is 80 percent of the weight of the global savings level.
Question Answer

What additional adjustments are used to determine the cost savings comparisons?

  • Commissary prices used in calculations are inclusive of the 5 percent surcharge.
  • For stores in the continental United States (CONUS), market prices include the relevant local tax.
  • Promotional prices are included, both at commissaries and in the market.
  • For our stores overseas (OCONUS), DeCA uses a cost of living index to estimate market prices of groceries in the specific area around each overseas commissary.
Question Answer

How often are prices compared?

  • Average regional and national prices for all 38,000 SKUs are refreshed monthly.
  • Regional store price comparisons are done on a rotating quarterly basis.
Question Answer

How are the more than 1,000 SKUs chosen for comparison?

The SKUs chosen are based on the most common patron purchases within a relative sales category (produce, meat, etc.) and include different brands of same type of products. These SKUs also take patron purchases at commercial grocers into consideration.
Question Answer

How are the stores for comparison chosen?

The group of comparison stores for each region contain three stores (including a supercenter where available) closest to where the greatest proportion of patrons shop and within a 20-mile radius of the commissary.
Question Answer

How do I know I will experience the savings level that's reported?

  • DeCA has put a lot of work into designing the cost savings methodology to reflect actual patron savings. It will never perfectly calculate the exact amount an individual patron saves on a given shopping trip, but there are several factors that make it representative. It is applicable to most people because it:
    • Incorporates local product price comparisons for each commissary, focusing on over 1,000 most-purchased items within different sales categories.
    • Compares prices on all 38,000 grocery items in DeCA's assortment against other commercial grocers.
    • Combines these two methods to give an overall cost savings percentage that is comparable to commercial grocers in the area.
Question Answer

Why are savings in my region lower than other ones?

DeCA is required by law to set the same prices in all stores, whereas commercial grocers typically set different prices for products depending on the region where they are sold.
Question Answer

What does this change mean for the value provided by DeCA?

  • The new methodology will more accurately track actual savings provided to commissary patrons. This, in turn, will better enable us to calculate your level of savings in the future.
  • This change is indicative of DeCA's commitment to our patrons and our desire to provide the greatest savings possible to our nation's service members and their families.
Question Answer

What are private label products?

  • Private label products are a store brand alternative to brand name products.
  • Private label has evolved from the generic, low-priced products of the past to a wide selection of items at every tier – from value to premium. There are even private label niche brands, such as organic lines of products.
  • Private label products are sourced directly from a supplier by a retailer. They are often of similar quality to national brand items, but can be sourced and sold much more cheaply.

Private Label

Question Answer

Why is DeCA introducing private label products?

  • DeCA's patrons have been asking for the introduction of private label products. In a recent survey, 60% of patrons said they would be interested in a DeCA private label offering. DeCA patrons are savvy shoppers who know they can get the same quality as national brands at a lower price through the introduction of private label products.
  • DeCA is introducing private label products to expand the set of quality options for DeCA's shoppers and to create savings for customers and taxpayers.
  • Private label will create savings for customers. Private label products can offer the same quality as national brands at lower prices by cutting out the marketing costs that inflate brand name prices. Customers can think of this as cutting out some of the overhead built into national brand prices.
Question Answer

Do other commercial and military resale organizations release private label products?

  • Almost all major retailers offer private label products, with private label representing 15 to 20% or more of total commercial grocery sales. Other military retailers, such as the Exchange, already offer private label products.
  • By releasing private label products, DeCA will be taking a step to match retail best practice.
Question Answer

How will DeCA ensure that private label products are of high quality?

  • DeCA is modeling its private label products to match well-known national brands. DeCA has set the bar high for quality.
  • Many of the private label products will be produced on the same manufacturing lines as national brands. They will meet the same specifications as those national brands.
  • DeCA has gone through a rigorous selection process – including quality assessments – to identify the right or responsive supplier partner and ensure the ongoing quality of the products.
Question Answer

Will introducing private label mean that patrons will no longer have an excellent selection of national and value brands?

  • Patrons will still be able to find many of the name brands they know at DeCA.
  • DeCA will continue to optimize its assortment, as it always has, to ensure patrons get the competitive prices on a wide range of product options.
Question Answer

Does this mean DeCA will manufacture its own products?

Private label products are sourced by a retailer, directly from a supplier, but not usually manufactured by the retailer. In other words, DeCA will not manufacture the products in-house, but instead will work with a supplier to source the products
Question Answer

How can DeCA be sure that its patrons want private label products?

DeCA's patrons have been asking for the introduction of private label products. In a recent survey, 60% of patrons said they would be interested in a DeCA private label offering.
Question Answer

How will private label benefit DeCA patrons?

  • The introduction of private label products gives DeCA's patrons a cost effective alternative to lowering the cost of their shopping baskets while giving them access to high quality products.
  • Private label products can be sold at lower prices than their national brand equivalents because they cut out many of the marketing costs built into national brand prices.
Question Answer

What capabilities does DeCA have to launch private label products?

DeCA has dedicated private label and pricing experts, in house, who possess a combination of commercial and military resale experience. DeCA has extensive experience selecting suppliers, designing assortments, and overseeing distribution. DeCA has selected SpartanNash, a private label supplier, who is a leading expert in this space.
Question Answer

How did DeCA select SpartanNash as the supplier?

DeCA used a rigorous selection process to select a supplier that can deliver high quality products at competitive prices for DeCA's patrons. Key selection criteria included quality, cost savings, ease and efficiency of implementation, and ability to support and grow the program in the future.
Question Answer

Who will be stocking private label products on commissary shelves?

Private label products will be stocked by DeCA's current shelf stocking contractor and/or in-house personnel where applicable.
Question Answer

Will private label products be available in all commissaries?

Yes
Question Answer

When will private label products be on commissary shelves?

DeCA will launch private label products in the May 2017 timeframe.
Question Answer

What about the DeCA Brand?

The launch of a DeCA exclusive brand is contingent upon further discussion with SpartanNash to ensure specifications can be met, including cost/timeframe. To ensure effective delivery to stores, timed with resets, it may be necessary to begin with a control brand then ramp up the introduction of a DeCA-exclusive brand.

Variable Pricing

Question Answer

What is variable pricing? How will this change savings for patrons?

  • Variable pricing is a strategy where multiple factors are considered in determining the price of a product – such as market price, cost of acquiring the product, importance to customer, etc. This is the standard pricing method used by grocery retailers.
  • This strategy differs from DeCA's traditional cost-plus approach, which adds a flat 5 percent surcharge to the cost of a product.
  • In the current environment, prices fluctuate periodically based on changes made by manufacturers. In the future, prices will continue to change periodically just as they do today, but your overall out-of-pocket cost of groceries will not increase. Although variable pricing will adjust some individual item prices up or others down, variable pricing will not impact the level of savings you can expect to receive. In fact, the 2016 NDAA guarantees no change to patrons' overall level of savings.
Question Answer

Why is DeCA moving to variable pricing?

  • Variable pricing allows DeCA to capture cost savings through the Category Performance Improvement negotiations, thereby reducing its reliance on appropriated funds without impacting the patron benefit.
  • Variable pricing will also improve your overall shopping experience. Today, savings can be very inconsistent across the store, with some categories at very high savings to market, and others cheaper outside the gate. Variable pricing will help us fix some of these inconsistencies.
Question Answer

When will these changes take place?

  • DeCA is in the early stages of the category-based pilot (Category Performance Improvement effort), and discussions with suppliers will not take place for another few months.
  • DeCA recently released an official notice to the trade (NTT) to announce our intention to partner with a private label supplier(s). Over the next few months, DeCA will be meeting with suppliers to decide which specific products will be launched and when.
  • Analysis to support variable pricing is underway. The earliest possible date for a store-based pilot is November 2016, but a specific timeline has not been determined.
Question Answer

What does success look like for this transformation effort?

  • DeCA's goal through this entire effort is to maintain the savings benefit provided for future generations of patrons, to stay relevant to shoppers, and to generate savings to help reduce the need for appropriated funds.
  • Through the introduction of private label, DeCA also wants to improve your opportunities to buy additional quality products at better prices.
Question Answer

Where can I find out more about DeCA's transformation initiative?

Information will be posted about this transformation effort and other topics of interest on Customer Service tab.

Mythbusters

Question Answer

Is DeCA merging with the military exchanges? Myth!

No – this phase of work focuses exclusively on DeCA's operations. DeCA leadership continues to explore different levels of cooperation with the military exchanges. To the extent the Defense Department plans to implement any of those options in future, DeCA is committed to ensuring that employees are well-informed and equipped with information to understand any potential impacts.

Question Answer

Are we piloting privatization? Myth!

No – upcoming pilot programs will not be exploring potential privatization (i.e., a private sector company taking over DeCA operations). Privatization was not a part of the changes proposed in the 2016 NDAA and is not planned for DeCA at this time.

Question Answer

Does this effort change DeCA's overall mission? Myth!

No – DeCA's mission has always been to offer the right products at the right prices as a critical benefit to its patrons. This effort does not change DeCA's mission - however, it does offer more flexibility in how DeCA delivers that benefit, and positions the agency to be more cost-effective, efficient and better able to protect the benefit for future generations of patrons.

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