Published on: June 19, 2003Reporting in from the 2003 CIES World Food Business Summit…by Kevin Coupe
BARCELONA -- As the 2003 CIES World Food Business Summit opened for business here on Wednesday afternoon, there were two subjects that clearly seemed to hang over the proceedings.
It was, after all the first Summit to take place since the somewhat ugly rift began to form with a number of European nations and the United States over the war in Iraq, and subsequent trade-related arguments over issues like genetically modified food. What started as a rift shows signs of becoming a chasm.
At the same time, it was the first time the Summit has convened since the "financial irregularities" that forced the resignation of former Ahold CEO Cees van der Hoeven; so far, Ahold's accounting issues add up to a $880 million overstatement of profits, and the investigations aren't over yet.
Unfortunately, the reality and potential consequences of both issues were not addressed in the forceful manner that might have expected.
Rather, the moment that seemed to perfectly symbolize the avoidance of specifics was when Daniel Bernard, CEO of French retailing giant Carrefour, announced that while last year he spoke in English because CIES was in Atlanta, this year since it is in Europe, he would speak in his native French. (The comment earned some applause.) And then, as he delivered his remarks, the English translation stopped working, and those of us who do not speak French were left without a clue of what he was talking about. Ten minutes or so into his talk the translation returned, but the implied message, however accidental, was clear. (Actually, it may not have mattered; it seemed to us that the speech was similar to the one he delivered last year in Atlanta. Perhaps next year, when CIES is scheduled to be in Rome, he can give it again but in Italian…)
As for the ethical and financial issues, there was some acknowledgement of the problems that have plagued the retail food sector. Bernard at one point said that "we live in a whirlwind" that can cause companies and executives "to lose track" of ethical landmarks and make short-term decisions with long-term consequences. "I won’t mention the name of my competitor," he said, leaving the audience to wonder why he didn’t just come out and say "Ahold," which is dealing with an overstatement of $880 million in profits.
To be fair, CIES didn't promise a head-on approach to issues of US-EU rifts and ethical/financial malfeasance, so perhaps it is unreasonable to demand it of the conference. Rather, the theme of the three-day event is "Success in an Age of Skepticism"…though, of course, we would make the argument that consumers are skeptical about business leaders and companies precisely because of the headlines and news reports they see each day. It's hard to be optimistic and trusting when it sometimes seems that the world is going to hell in a handbasket.
Pierre-Olivier Beckers, CEO of the Delhaize Group and chairman of CIES, framed the issues in excellent opening remarks:
"In the last 18 months, skepticism towards society and business has reached unprecedented levels.
"For example, the Word Economic Forum has recently interviewed 34,000 people across 46 countries to assess their trustworthiness of 17 different types of institutions. The result was that companies are today among the least trusted of any of the 17 institutions. In fact, only national legislative bodies like Parliament or Congress are seen as less trustworthy by citizens. Isn't that frightening…
"Indeed, the years of euphoria, of excesses of all kinds for society, companies, and stock markets have been replaced fairly abruptly by a display of great skepticism by citizens and consumers all over the world," and he noted that political and economic uncertainties fuel the lack of ease among consumers.
"If we now look at the corporate environment, one must admit that the corporate and financial scandals of the recent years have seriously eroded the confidence of the investors towards companies. We must also say that the high multiples paid for the acquisitions of the last 4-5 years have led to a general decrease of the returns on invested capital.
"And when we look at our sector more precisely, we can see here too a situation that creates skepticism :
• A saturation of stores in many markets
• A slow natural growth of the total sales of the industry
• A competition based on very aggressive and costly promotions in order to capture the remaining consumer spending
• And the extension of competition to retailers who traditionally were non-food retailers resulting a significant amount of channel blurring.
"The short term consequences of skepticism to this very challenging situation of the corporate world are understandable but as very often, probably extreme in their own sense. Indeed, all kinds of legislations are being born to regulate everything and some of them can even send executives in jail. By trying to stop the few crooks, these legislations could at the same time, I am afraid, slow down the entrepreneurial spirit."
For Carrefour's Bernard, the answer to issues of skepticism seemed to be to teach the world that capitalism begets choice and low prices, and that the ability to choose results in a yearning for democracy. He stressed that the real power of globalization is that it brings retailing choice to people who never had it before, and instills in them a desire for that which they have not had. "It’s not a question of whether globalization will take place, but what kind of globalization it will be," he said.
Not surprisingly, considering Carrefour's commitment to the hypermarket format, Bernard said that "small retailers are no longer connected to the local market," because understanding the local market requires global systems they do not have. "Size is good," he said, sounding remarkably like Gordon Gekko in "Wall Street," who quite memorably said that "greed is good."
"You can't build a global economy on corner shops," he said.
(We didn't get a chance to ask them, but we suspect that men like Norman Mayne of Dorothy Lane Markets and Feargal Quinn of Superquinn might have disagreed. Both are here at CIES, and both have built world-class retailing businesses by being small and in touch with the consumer. It would be our perspective that all the global systems in the world don’t necessarily put you in touch with the consumer, no matter how big and well financed you are. For us, "size is size." It's what you do with it that counts.)
It may seem like we are slamming CIES, but that certainly is not our intention. We have great respect for both its people and its mission, and have consistently appreciated its willingness to deal with tough issues at the Summit.
In fact, CIES has launched an initiative dealing with the Image of the Food Business that is designed to focus on a wide variety of key image-related issues facing the food retail industry today. These range from food quality and safety through sustainable development and corporate responsibility, community relations, and functional issues of human resource management (low wages, boring jobs, no career opportunities.
CIES's stated goal is to build a global web-based knowledge resource center with best practice information and cutting-edge campaigns that can enable CIES members to improve their public image and relations with both political
and civil society and to enhance their ability to attract and retain talent.
All of which makes absolute sense, and is laudable for its "big picture" approach to the industry.
We would be remiss if we didn’t point out, however, that the stated emphasis on ethics and consumer skepticism was leavened somewhat by the introduction of Juan Antonio Samaranch, the former president of the international Olympic Committee (IOC), who was here to listen to remarks by his successor, Jacques Rogge. The question we heard a number of people asking at the evening cocktail party was, "Didn't Samaranch leave the IOC under a cloud?" (The answer is yes; he was in charge of the IOC during a bribery scandal centering on Salt Lake City's bid for the 2002 Winter Games; 10 IOC members were ousted for receiving cash, gifts and other favors.)More tomorrow from Barcelona, as MNB continues to be the only US food retailing publication on location at the CIES Summit.