Address by Mr Ross McLaren
President & CEO of Shaws’ Supermarkets – USA

To a series of Agribusiness Association lunches
Sydney, Melbourne and Canberra - March 27. 28 & 29, 2000.

I am personally delighted and very proud to be here as the incoming president of IAMA charged with holding our Annual World Congress here in Australia during June 25 - 26, 2001.

So, if nothing else today, do take note of these dates as we intend to make that event a real milestone in creating a forum to debate the complex issues that impact the global food and fibre chains

I cannot stress the word "Forum" too highly as the vision Ray Goldberg and a few colleagues had back in 1990 when they formed IAMA is of critical importance today. IAMA is not an industry body, global trade association, or policy group but an infrastructure to facilitate reasoned debate between all with interests or concerns that affect the global food and fibre chains.

I say "all" with some passion as I believe IAMA must take a positive lead in broadening its membership beyond its normal horizons. Perhaps it is the nature of an agribusiness association to hide its light under the proverbial bushel but if the complex issues are to be saved, or even explained in a rational fashion, our forum must embrace all views be they environmental, consumer concerns, or political.

When I was asked to speak today, I was a tad concerned as I am no industry guru or global visionary.

However, I am an agricultural graduate and I run supermarkets. As such, I interface with the end user, the consumer. I have also been privileged to operate on both side of the Atlantic so I cheered up when it was suggested that the topics of e-commerce and food safety were of interest this side of the Pacific.

Obviously, one cannot do justice to such mighty subjects over lunch but I would like to share a few views and observations from an American and European perspective and hope they have some resonance here today. Both topics are intertwined and actually reinforce the critical need for a forum such as IAMA.

Let me start with e-commerce by stating that its definition 'Trade taking place over the Internet’ is only the tip of the iceberg as to how the Internet is changing all our lives.

When people ask me my thoughts on e-commerce they expect me to focus on home shopping for food and it's related supermarket items.

So let me take that piece first, as it is not, in my opinion, the important part, despite media attention and the seemingly limitless supply of venture capital that it devours.

Obviously, there is a demand, food shopping is a time consuming chore, and busy families would love to have a home delivery service. I, like most food retailers, get paranoid about the subject because if the "dot.com" outfits find the right economic model and drain off even 5% of our most profitable customers our bricks and mortar model is in trouble.

Consequently, we are all dabbling in the conundrum. And it is a conundrum for it questions all the efficiencies inherent in supermarket retailing.

Many years ago, the consumer wandered up and down the High Street shopping at specialist outlets, often submitting a list to the proprietor and quite often having it delivered.

But the world changed, our expectations have changed, we demand enormous choice, we pay scant regard to seasons, we want fresh food, exotic food, we want to know its nutritional value, and a raft of other issues spanning its source and environmental impact.

I see some current developments emerging.

First, there will always be "the rich" who are prepared to pay a true economic rate for home delivery and some models are targeting rich high-density city suburbs in the states. Interestingly, they keep clear of the high-density cities where this delivery model just plain fails.

The second area emerging is where the web order is picked by specialists in a supermarket and processed ready for collection by the customer. This holds promise in another way as it allows the time precious customer to "top up" on perishables when making the collection.

Perishables, even to complete "Internet junkies," have always been a problem.

Humans like to prod, sniff and use their senses when making their selection.

A variation on this pick and bundle for collection is where the "bundles" are consolidated by us and delivered to a central pick up point such as a place of work.

We are evaluating several experiments or pilot schemes in this regard. We see employers with HQ's or plants employing several thousand workers joining forces with us to offer this service as a benefit to their employees.

Thirdly, and although not home shopping, the activity in the sector has promoted us to look more closely at what our offer is. Sometimes we focus too closely on our traditional business and forget that a very large chunk of the food dollar is outside our channel.

In the USA, almost 50% of this is in the hands of what I will call "food service.

In terms of share of "belly" my competitors are McDonalds, Burger King, Pizza Hut and the myriad places that want to feed you day and night. Structural meals with families sitting down to eat a meal prepared from scratch in the home are now rare. The inhabitants of the developed world have become a tribe of snackers. Cooking is reinventing itself as a leisure activity not a necessity.

So we, in the supermarket business, are moving closer and closer to prepared or semi prepared foods for the time precious consumer.

It's not just time precious that drives this move, but demography. For all sorts of reasons our consumer base of single person households is growing, we are also seeing the baby boomers grow old and live longer. These consumers see economic value in prepared portion-controlled foods.

Let me now park home shopping with one final observation as a consumer. I may be very uncertain about food, but the web has totally changed the wider retail world.

I would not wish to be a traditional bookseller, banker, stockbroker, insurance agent or travel agent in today's world. There has been a true Paradigm shift.

Let me now quietly turn to the really important pieces of e-commerce, Business to Business and Information. The Internet is truly the Mother Lode when it comes to business dealings. I grew up with telephones and Telex machines.

I thought the fax was the greatest thing since sliced bread and EDI nothing short of miraculous. Now, I have Internet and Intranet and cannot live without my cell phone.

The scale of possibilities is almost frightening and I have sympathy with the Harvard professor who coined the words "disruptive technology." Disruptive because we are going to have to scrap the traditional ways of doing business.

Let me give you an example from my small world of retailing. We, together with other retailers, are working with our supply base through the Uniform Code Council of America to develop an interactive and secure database that will allow us to deal seamlessly without the inefficiencies of back offices that drown in paper due to lack of data integrity.

The next few years will see a complete revolution in the flow of goods as we more closely relate supply to demand in cost-effective ways.

The global reach of the Internet will allow both growers and manufacturers to reach the consumer interface and be alert to change without the filters of middlemen, brokers and distributors.

Agribusiness is actually a leader in this New World, indeed an IAMA member, Rabobank is in the vanguard of creating electronic marketing places for farmers giving them access to inputs and outputs.

In my industry we employ a lot of people and the very nature of the business with high levels of part timers creates high staff turnover. Managing "leavers" and 'joiners" is a data collection industry in its own right and open to myriad errors.

Now with the web, we have found that the most accurate person on such data as name, tax code, social security number, etc., etc., is the person to whom it applies. So now we say to our people, on screen, here's what we need to know. They can do it in their time, unstressed and not as is usual verbally across a desk with a harassed U.K. person. Not only do we serve the employee better, but also it allows the HR Department to give time to the individual on career moves, training, etc.

So far Business to Business is throwing up win - win situations for all concerned.

Let me quickly turn to Information and Food Safety and why I see a linkage and a need for forums such as IAMA.

The web has made knowledge, and I use the word advisedly, available to anyone with a PC, access to a phone line and minimal skill to become an instant expert. This is both good and bad. At the same time so good have the search engines become you can select what you want to know very clearly.

Not so long ago, new scientific approaches to the food business were conducted firstly in an academic forum. In such a forum, it was expected that "A" would challenge "B" and healthy debate would generally give rise to a reasoned response that would emerge into the population.

Concerns about the environment and human health are prominent in society in the developed world and yet most people have limited knowledge of science or agriculture and to them food is both a personal and emotional issue.

Working in the States and in Europe, I have tried to puzzle out what makes each country react so differently to food safety issues.

The answer is, I believe quite complex, but starts with America being a young country fuelled by migrants wishing to better themselves.

They have, therefore, embraced advances in technology as part of their culture. They also have land and far from being a country, they are more like a continent.

There is virtually nothing in the food business, other than bananas, that America cannot provide for itself Availability of land allows for low inputs and less environmental impacts. Even if there is impact it is often located in remote areas.

Europe, by contrast, was old in culture and increasingly dependent on imports. World War IT and the U-boat blockade showed the leaders that they needed to support a European agricultural base. So high input agriculture was promoted and subsidised. This exacerbated the public's awareness of high risks inherent in intensive farming and opened up an awareness that was seized upon by the green lobby in all its shapes and guises.

If you then compound this with huge errors of judgement by central government, you need look no further than the UK and its handling of the BSE issue to see that public trust has been lost and will take time to restore.

Will Europe infect the best of the world? - Well yes to some extent because it suits interested parties to make mischief, but it also because below the hysteria lie some real issues. These issues do require us in the business to address them in an open forum where trust can be built.

However, the burden of the debate does fall to us, there is not room for scientific or business arrogance we have to carry the consumer with us.

Hopefully, our work in IAMA will play a role and I am looking forward to our Australian Congress.

Thank you.