Pentagon & Congress

Advocates: Tread carefully in changing the commissary benefit

Before making changes to commissary benefits, lawmakers should consider the effects they would have on military families, advocates told a panel of lawmakers Jan. 13.

Whether they’re considering raising prices on some items, or introducing a commissary private label, there are certain effects on the benefit that should be evaluated, said advocates representing military families and advocates representing the industry that sells groceries in commissaries.

Lawmakers said they are committed to keeping retaining the commissary benefit. But they want to improve the business processes of the commissary system while reducing its dependence on taxpayer dollars, said Rep. Joe Heck, R-Nev., chairman of House Armed Services Committee’s subcommittee on military personnel.

Currently the annual commissary budget is about $1.4 billion. This allows commissaries to sell groceries at cost plus a five-percent surcharge at the cash register. (A one-percent charge is added in to prices to cover the cost of spoilage and loss.)

Lawmakers held the hearing to hear advocates' views on commissary reform.

"Of all the stresses of military life, grocery shopping shouldn't be one of them," said Rep. Timothy Walz, D-Minn. Rep. Tom  MacArthur, R-N.J., agreed. "And we're talking about how many hundredths of 1 percent of the DoD budget that can be saved?" he said. Noting that Congress is about to consider changes in the military health care benefit, he said it compounds the effects when too many changes are being considered at one time.

But Rep. Mike Coffman, R-Colo., made it clear the commissary system should be examined.

"I support these reforms, and don't think it's going to compromise the benefit for the families," he said. He asked the advocates to provide ideas to make the commissaries more efficient. While understanding change is difficult, he said, "We've got to challenge government everywhere. We've got to challenge government to be able to deliver services more efficiently. No area of government should be immune."

Walz said earlier that since he has been on the House Armed Services Committee, "I've had more opportunities to look at cost savings in the commissary than the F-35."

Over the years, the Defense Commissary Agency has been pressured to cut their operating costs, to reduce the amount of taxpayer dollars. "However, at some point, we think they will be forced to find [savings] where it will be unpalatable to patrons, either through price increases, changes in service or changes in quality," testified Brooke Goldberg, deputy director of government relations for military family issues for the Military Officers Association of America.

Defense officials last year proposed a budget cut that would have reduced the days of operation and hours of operation in many commissaries, but Congress rejected that cut. Congress has required DoD to come up with a plan to completely eliminate taxpayer funding, with flexibility to try some pilot programs. The plan – and the pilot programs – would have to be approved before DoD embarks on them.

A number of proposals have been floated, including changing the way of operating to allow for variable pricing, where some items could be marked up for a profit. Another option would be offering DeCA’s own private label brand. Eileen Huck, deputy director of government relations for the National Military Family Association, and the other witnesses said there are concerns about both ideas. NMFA is concerned, she said, that the commissary agency doesn’t currently have the expertise to develop and manage a private label brand, and that it would incur extra cost.

Heck, chairman of the panel, asked about whether variable pricing would be accepted, as long as customers were getting a 30 percent savings in comparison to their local civilian community. Currently prices are uniform, regardless of where a customer is located.

NMFA's Huck said this policy could cause commissary customers in one region to pay more for groceries than customers elsewhere.

The congressman questioned whether it's reasonable to expect that a customer living in San Francisco should pay the same prices for groceries as a customer living in Tupelo, Mississippi, for example.

"Our concern is that the pay is the same, whether you're living in Tupelo or San Diego," Huck said. "We don't want to see families in high cost areas put at a disadvantage."

Asked about industry's reaction to the idea of a private label, Tom Gordy, president of the Armed Forces Marketing Council, said that the industry that sells products to commissaries currently spends a collective $500 million a year in support for commissaries, such as stocking shelves and making sure items are ordered.

One thing that makes private label brands successful in civilian grocery stores, he said, is the marketing of private label products to consumers. If DeCA offered its own private label brand, it would have to pay for everything from marketing to stocking the shelves with the product. If DeCA does that, the national brand companies would contend that DeCA could provide that support for national brands, too – thus shifting a $500 million cost back to DeCA.

And to make a private label work in commissaries, there would have to be variable pricing, so that DeCA could mark up the price in order to pay for the costs of the program.

The fiscal 2016 National Defense Authorization Act gives the commissary agency authority to test various concepts. Gordy said he's not saying that various concepts shouldn't be tested, but that they should be tested in small bits, so that if the pilot programs start to fail, they can be pulled back.

"Anytime you mess with the savings level, anytime families perceive a threat to savings, you risk losing their loyalty," Goldberg said. "Whether they're walking through the door of a commissary in Stuttgart or Guam or in Seattle, or Fort Sill, they need to rely on consistency of pricing."

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