[Guy Yehiav] Hey, thank you for coming and joining us today. My name is Guy. My wife will describe me as a workaholic and customer obsessed. When we walked down the aisle, I got a call from Hatford Quality Meat at the time, that was 2000, and Tom still remember that. Being customer obsessed is why I'm so happy having our customers here. Three customers, one of them was promoted to retiree. his words still have a very heavy input to us and priority. He's on our board of advisors. Thank you, Dave. And so what we want to talk about today is the retailer's strongest revenue protector, and is it visible or invisible? Or in other words, is fresh and availability visible or not visible? And there's few discussions about fresh, quality, and food safety? Is it all the same or not? And so we will discuss today some really practical ideas on how to create freshness, availability, and then repeatable buy from customers that when they bought the first time they bought the mushroom, the mushroom actually lasts as long as they need it in their own refrigeration at home. So they will then come back and buy the produce from our grocery store every time. When you look at the revenue and margin challenges of fresh food safety and quality, there's a lot of analysis on the fact that grocers have about 2% to 3% margin at the end of the day. And a lot of customers, a lot of groceries are looking at the cost of doing business as spoilage and waste are coming and mounting up. You know, Kroger is talking about 4% of annual sales being in spoilage and waste. But I think the major pillar here is 68% of shoppers say that low quality impact their confidence and store loyalty. And so that means that if they buy something and it become broadened or is not as fresh as proposed, they will not come again to that banner, that shop. And I think that's critical. And if they come and buy and they have a whole basket, they may drop the whole basket next time that they come, the whole trip, the whole basket, or half of the basket. I think that's the most important impact, which means then translating it into revenue. But if you just look on the margin side, the calculation is very easy. Assume $1 million a weekly sale and only 0.5% of waste, that will be equal of loss of 25% of net profit. The margin impact is also very large. However, I believe that from a merchandising perspective, and loyalty perspective, the repeated buy impacts revenue even more than the margin. So you can actually look at it from a profitability margin perspective or from a merchant brand perspective and repeated buy. So the idea is take all of the data and use data for guidance and for prescriptive action to gain a competitive advantage, which is better freshness on a continuous momentum. So why quality, freshness, and availability equal revenue? Look at the quality pillar, freshness pillar, availability pillar, and the overall loss being translated as the silence, degradation of revenue into a competitive advantage. Food safety is not equal to quality. So a lot of time we give this example that if you go and buy an ice cream and the ice cream was unfrozen, liquidated, and then frozen again, those crystals on the ice cream will not kill anyone. You can actually eat them. But it's not as tasty as it was when it was actually a fresh ice cream that was held in the right temperature. The question would be, would I come and buy ice cream again from that shop or not? And so when quality or availability fails, the consumers will quietly leave. They will not call your service line. that will just quietly leave and go somewhere else. And I think that's the most critical takeaway from today is, first of all, the impact, revenue margin, repeated buy, but then now how can I take food safety and quality and elevate it in our stores? And with that, I would like to bring Zoli up from Sprouts Market.
[Zoli Stahl] Hello, everybody. Thank you, guys. So IoT has evolved and it continues to evolve, especially with AI. Again, we're just seeing the, you know, AI is... taking off. So in five years, imagine what can happen with AI. We use this as like there's a big cycle here and it all kind of resolves itself from the learning going to the monitor, the prescription to the execution, right back to the learning. So it's going to change with time, but it's going to keep on going. So it's going beyond alerts, it provides prescriptive actions. The adaptive SOPs that are triggered by real-world conditions. So again, it does change as you know, different things can happen. And we're going to use these adaptive SOPs to, you know, specify what needs to happen. Automated workflows, so it assigns, escalates, and verifies, you know, based on these SOPs. Real-time guidance and training for the frontline team. So again, kind of like with the adaptive SOPs, it's like real-time changes to make it easier for them. And I think the biggest thing here is make the right thing the easy thing. So using AI, using technology to do all the hard work for us, we want the teams on the front lines to have the easiest, you know, that should be the easiest piece is what They just take this SOP, they learn from it, bam, they're done with it and they do the right thing. Plus, it's super easy. You don't have to think about it too much.
[Guy Yehiav] Good. Yeah, so we'll actually discuss a little bit more around how to make it easy on the team. Speaking about the team and facilities overall, because food safety and quality, facilities, refrigerations are all coming together. Matt from Lowe's, Lowe's Food.
[Matt Bunker]Hey, thank you, Guy. My name is Matt Bunker. I'm the safety and asset protection director for Lowe's Food Stores, a little small retail food store chain in North Carolina, South Carolina, and Georgia. A couple of things that I wanted to mention in relation to how revenues kind of flow through to the bottom line and get impacted by these kinds of one-off incidents and excursions from temperature. So one of ourselves on the refrigeration loss front was how do mitigate all of the losses, not only product loss at the cost level, but when we really started to drill into some of these events, how do we mitigate those soft cost losses and some of the replenishment losses that we were experiencing? And then Taking it to another step, how much consumer confidence were we losing because of those refrigeration losses when guests would come into the store and either not find the items that they were looking for to begin with, or to Guy's point, when you find that ice cream that has congealed and then refrozen and then you're eating the ice crystals on top. And I don't know about you, but if you've ever tried to scoop out some of that dense frozen milk mess that you try to put on a warm brownie, it just doesn't work. And so you're just probably never going to go to that location and buy that ice cream anymore. And so that lost confidence has lost that guest and probably lost any revenue from that household that we would have ever captured because of this unknown refrigeration event that we had to solve for. So take a look at that. We We went through the process of vetting solution providers that could give us real-time information about our temperature excursions and how those temperature excursions might have been affecting product quality first, but also product safety second. Because the one thing that we could not stand to do is we are a regional supermarket chain that is very isolated into a very specific part of the country is we could not risk a foodborne illness outbreak. That kind of an event would have hit the news cycle in every market that we operate, and we would have never have survived that had we had a foodborne illness outbreak because of a temperature excursion event. So the first thing we did is we developed an SOP that said, here is what you do with any temperature excursion alert monitoring system that you have. And so before we even selected a temperature monitoring solution, we wanted to have a really well-defined SOP for all of our store operators to follow so that anytime that there was an excursion alert, we had a set of standards that we lived by that would prevent that alert from causing a refrigeration loss and then in turn some downtime for the store. That helped us to To be more proactive on the refrigeration side, it was really interesting to us that all of our refrigeration cycles had defrost built in, built defrost cycles built into these. to this, we call it an EKG. You read the graph on the temperature excursion and that EKG goes up and down depending on your defrost cycle. But what was happening was is that during the middle of the night, sometimes these excursions that would affect product quality were happening. And we didn't know why. is our temperature excursions from midnight to 6 A.m.? And what we found that was happening was that in a lot of our older locations, the lights are on a controller timer. And if you've ever been by a grocery store in the middle of the night, the lights inside the store are kind of half lamped. And that's all controlled by a timer, a controller timer. And what we didn't know was that some of the circuits for the fan banks inside of the refrigeration cases were controlled also by that light timer. They were on the same electrical circuit. Nobody ever knew that because we were not there at night in some of our older, smaller market locations. And so at midnight, whenever all the lights would go down, the banks of of fans would go down and the temperatures of the cases would go up, unbeknownst to the rack system, because the rack monitors were saying, oh, all the refrigeration is pumping out appropriately, so there's no temperature excursion. And so to me, it's like that in and of itself helped us to solidify why we performed this operation and this process of vetting out a solution provider for temperature monitoring in our building. And again, we are marketing heavy on holidays. And if the food business and the food industry right now, we are pressured on all sides, a soft economy, a high cost of goods. If you've tried to buy a package of hamburger lately, you know what I'm talking about. Like it's just ridiculous how much beef has gone up in the last year or two. So we're pressured on all sides and we have to win every holiday. We have to win every special weekend event and we can't miss on those kinds of things. So being in stock, being ready to go and having the product available for sale is critical. And then finally, that facilities team closed loop workflow partnership that we've been able to develop because we've been able to find some things that our maintenance and facilities teams maybe had overlooked in the past. The light timer scenario was one of those. We've been able to more closely partner with our facilities and contract maintenance teams and not be so adversarial to them. If you have ever been in operations or have ever been in asset protection or safety, you always have this sort of adversarial relationship for the folks who are supposed to fix things. because sometimes they get fixed at a lot slower pace than we would like them to be fixed. So instead of having that kind of adversarial relationship, we really built a partnership because we were able to find things that were affecting their side of the business that they didn't know about before. And so we became a trusted resource. And I'm going to talk over these. are some facts and figures, but there was a supermarket news report not long ago that came out is maybe a couple of few years ago now, but it's still relative today. And one of the things about freshness and quality and guest confidence that I think it's overlooked is one of the numbers that I read that was really surprising to me that when they did a freshness perception survey of shoppers in supermarkets across the country, 76% of respondents included that they felt that well-stocked shelves and displays were a measurement of their freshness perception. And so we wouldn't think that necessarily that well-stocked shelves and well-conditioned displays would be a freshness perception for shoppers and consumers and guests. But 76% of respondents said that if you are well-stocked and if you're in stock on the items that they want and your displays are well-maintained, that perception of freshness was boosted by that. And we would have always thought that freshness depends on whether you buy A quality or B quality produce. Freshness depends on how often you call your B beef case. Freshness might have to do with your quality control around temperature excursions, but no, your display cases in your shelving and how your store looks to them aesthetically is a basis of their perception of value of your business. So we decided that we have to be in stock. We cannot afford ourselves to be out of stock condition at any time whatsoever because our business is so close and tight that we cannot lose one guest. And so staying in stock conditions, staying on time, staying with the right amount of product at the right times, especially in perishables and in fresh, is paramount to the success of our business and perpetuating our brand and our markets and making our brand the brand of choice with all of the different food options that guests have. repeat trip rates and freshness perception scores, when they rise, you do get that repeat guest and you do get that loyalty built in. The other really interesting nugget from that supermarket news study that I read was that 88% of all consumers thought that your freshness perception was impacted by your reputation in the community. That was word of mouth and also social media and Google reviews and open source information. So if you're open source information, has folks on platforms that are talking about your out of stock conditions or the fact that you got the half gallon of ice cream that with the crystals with the special crystals on top, right? The magic crystals that you can't dig a scoop into. If you got that kind of ice cream in your shopping basket, if your produce is going back in your fridge after a day of purchasing it. All these things that are evidences of temperature abuse that are out there on open source platforms, social media, or just word of mouth is a huge impact to your freshness perception. And why you're not generating the revenue that you think you should in fresh may have something to do with how you're presenting your storefront, your brick and mortar store from a shelving and display perspective, but also how is that product getting back to the end consumer and how is your perception within all of those platforms that didn't exist 25 or 30 years ago? It's very important. It's extremely important to your freshness perception score as to how people view you and what they're saying out there on the worldwide interweb.
[Guy Yehiav] Thank you. Yes, and part of the freshness, perception and longevity of the produce, so it will not go bad in the refrigerator. Scientists found out that every one hour of an excursion of any produce will actually reduce longevity by one day. And the gaps are when you're receiving, you're receiving lettuce, you're receiving meat, how long does it take until it goes into the walk-in cooler? And then when from the walk-in cooler, how long does it take to actually be placed in the refrigerator? And so that's what our customer also reduce that time. And so you maximize longevity. And Dave can speak about it from an IT perspective and other opportunities of potential freshness.
[Dave Steck] Thanks, Guy. Dave Steck, I was with Schnucks up until May of last year, retired, and I was VP over store and emerging technologies at the end, but I had a whole bunch of other stuff along the way. Spent about 11 years there. I think one of the perceptions too, before I even, I always go off script, so you can't control me. One of the things that I think a lot of people think when they go in the grocery store, you know, we're all here, right, is, oh, well, the refrigeration stuff is monitored by our facilities people, we're good. at the same time, the store teams usually are going around the store with a laser gun and they're pointing in the case and they're getting a temperature reading and then they're writing that down on a paper log and they're moving around. So you got a couple of things there that's a problem. Number one, the facilities team is measuring through their Danfoss systems or their CPC systems. They are measuring the refrigerant going into the coolers. They're getting it off the coil. So that's the temperature coming into the case. When you get 12 feet down, what's that temperature? And you're not monitoring that. So that's where people with laser guns come in. And I was, I've spent a lot of time in the stores and I talked to people that were using the laser gun. I'm like, well, how do you know what to do with this? Because they're not trained. I'm like, I don't know. I just point until I get the right temperature. And then they log that down. And worse, They just write a temperature down so that they can get the job done and they don't have to open a ticket and they move on. And it was a discussion that we were having yesterday is the importance of fresh in grocery now. The center store is getting commoditized and more and more of that is going to Amazon. It's, you know, you name it, it's coming, it's coming to the customer at their house. But fresh is a differentiator. So we really have to, as we go forward, we have to focus on fresh and maintaining that freshness and getting that freshness in it, or you're just going to lose sales, period. So we use this thing at Schnucks, what we call automate the hate, right? The store teams don't want to do this. Put a sensor in and put it in every door. Because as you move down, if somebody put an air dam because they stack product too high, That refrigerant's not getting down. The cool air's not getting down to the end of that case. So we automate that. We take the gun out of their hand. They're not using it anymore. We get rid of the paper log. When the auditors come in, and that's your food inspectors, they come in, they ask for the logs. Well, it's a lot better if you can just hit a button and you print it. and you produce that to the auditor, rather than giving them this paper log that they can look and they can say, oh, look at that. That's the same handwriting for the last seven days. How's that happen? So you can tell that it's made up. So you solve that problem. Now that you've got the sensors, and you can use the SmartSense tools if you want, Or you can integrate into additional tools as well. So you've got ServiceNow, you've got FEXA. There's other integrations viewpoints. So if the store teams are used to using ServiceNow for their ticketing and task management, it just gets integrated. That feed comes in through SmartSense. Then that all ties into your zebra guns. You got the zebras for Honeywells, whatever you happen to use in the store. It's all in the store team's hands. Then if you go a little bit further in talking more about fresh and also trying to keep things a single pane of glass, a single ecosystem, that's when the Jolt acquisition comes in. And now you can start to tie in your labeling and your printers and your allergens and expiration dates and get all of this from a single ecosystem. And then integrate if you need to, but that's where the Jolt acquisition comes in. And I already mentioned about third-party validations and the audits that go on with that.
[Guy Yehiav] And since we didn't mention enough acronyms on integration, we're using MCP, which is Model Context Protocol. Gilawa CTO asked me to mention MCP. And we can also mention DPP and a lot of other AI and acronyms. But the nice thing about this panel is the practicality of your insights. So thank you for that. We have a few questions for you to go through. And if anyone in the audience have a question, please raise your hand. But the first one that comes to mind, and Zoli, you mentioned it before, but how do you then avoid overwhelming store teams? Because the store teams are therefore mainly serve the consumer. obviously maintaining fresh and maintaining in stock and all of that. But if we can take that, automate that as much as we can, just treat the consumer better, what did you do with the implementation of SmartSense and that?
[Zoli Stahl] So one thing over the past years, let's take, get ourselves in a time machine. Let's go back 30 years in a grocery store. You know, obviously we wouldn't have the same technology. So what do we have more of? We have more people. to do more of the tasks. Again, a lot of that was paper driven. Now we do have, it's much more digital now. So we have way less people in our stores. So we still have the same amount of tasks, if not more. So what are we using? Because obviously we're not going to be gaining more people. I mean, labor is like across the board in every industry is going down. So we're using the technology to make up for the loss of labor there. So, and we do also get a bunch of, competing priorities. So the frontline teams that are helping the customers out they have so many priorities and a lot of them, they're brand new. They might be, this is a high school, job for them. So they're learning. And, one thing that, I talked about before was, making the right way the easy way. So using technology, using AI to help cut the time down when we have all these competing priorities. So again, we're, we're still an ops-driven industry. So we don't just have, like on my side, food safety. We have, again, we have to watch labor. We have to fill the shelves. We have to, if we're in the produce department, we have to make sure the produce is called and we have the freshest product out there. So again, so many competing priorities. Let's use technology. Let's use AI in the future to help cut down, to make it super easy, but not having shortcuts, which is kind of what we tend to do. If we have too many things on our plate, let's kind of do some shortcuts. And, this is where, the compliance, we're focused on compliance a lot of times, making sure we're checking a box, you know, doing those temperature checks, you know, walking the cases, But are we, we're compliant, but are we committed to doing the right things for the customer? Because what can happen is, foodborne illness outbreak, smaller companies especially, that's going to hurt them really, really bad. So again, let's automate as much as possible and, you know, make it super easy for the teams.
[Dave Steck] Let me interject real quick. So the US birth rate last year was 1.6. In order for us to just replace our current population, it needs to be 2.1 or 2.2. I forget the exact number. So if you look at the world population, we're worried about as many people that are going to be in the world today as we're going to have. And it's world population is going to decline. Birth rate across the entire world is decreasing. So you're going to have fewer and fewer people. that are going to be available to do this work. So you're going to have to automate it.
[Guy Yehiav] And Matt, do you want to add anything? And I think the second question, you're primed to answer on the, I guess, misconception about IoT, because I remember that you had everyone as a committee to approve that project overall.
[Matt Bunker] Yeah. My first thought is, why is Dave Steck worried about the birth rate in this? That's a He didn't need to worry about it.
[Dave Steck] Oh, so you're calling me old?
[Matt Bunker] That's the inference. Okay. Just to make sure you're the only one retired here, right? So, yeah, the biggest misconception, I think, about IoT and retail, if you're like me, whenever you first heard the term IoT, you had to probably go Google it and understand what it meant. And then you started to think, well, how does this, it sounds complex. It sounds like a big IT pool. It sounds like something that probably my team or my company wouldn't be able to pull off. I think the misconception is that it's really not very complicated at all. It's just figuring out what your ecosystem is. How can you live in that ecosystem with solutions that innovate and that automate? And then how do you sell that to the company that you work for, to the organization that you work for, as an ROI win. And so in our ecosystem, we are a family-owned 150-store grocery store chain in the Southeast. But we do a lot of things that a lot of more sophisticated retailers do. So how do we bring in innovations and automation into that sort of, I won't say old-fashioned grocery store mentality, but certainly a chain that isn't a Kroger or a Walmart-sized organization. The misconception, I think, is that it's hard and that it's difficult and that it's going to require a lot of IT pull and that your IT department and team is already stretched pretty thin. For us and for this particular solution that worked for us, and I'm not selling SmartSense, I work for grocery stores, but this particular solution for us sort of insulated us from any IT pool because it actually worked within sort of its own ecosystem itself with communication and being able to manage all of that hardware and software within the framework of of their own communication system. So to be honest with you, like this was one of the easiest IoT solutions that we ever implemented because it required 0 pull from our IT department. which they didn't have the bandwidth to pull on anyway, right? So I think the failure of some of our leaders in this industry, especially food service industry and in food retail, is tackling the challenge of finding those innovations that you can champion and innovate and implement yourself rather than awaiting some IT demand for an innovation. This was It seemed complex, but it wasn't very complex at all. And so utilize your ecosystem that exists now to innovate and to challenge your internal leaders to bring new technologies.
[Guy Yehiav] Sure. And so just to summarize from a quality, freshness and availability drives up uptick in revenue and repeated by, right? Prescriptive analytics and workflow create flawless execution, what I like to call excellence in the ordinary. It's like excellence every time because the system actually just guide you in what you do as the best SOP solutions. And then the uptime and integration, as Matt just mentioned, because it's using the our IoT solution, using cellular, doesn't touch your Wi-Fi, doesn't touch your IT infrastructure. It's bulletproof on security because it's its own system, creates that resilient stores. And basically, it's actually there to make you money. And so that's kind of summarizing what we just discussed. And if you have any more questions, since we're running out of time, please visit our booth. We have two booths. We have the 3456, very easy to remember, 3456. I told my kids would have said, why you don't have a 67 at the end? That would have been easier, but 6456. And then at the food service booth on the 1st floor, 1502, as soon as you come down, you have the food expertise there, a lot of brain power. And we'd like to thank you for coming today. Hopefully you enjoy NRF 26. Kudos to the team that came here on stage. And thank you for joining us.
