Commissaries, one of the military's most prized benefits, are in a struggle this year to cut operating costs and, at the same time, attract and keep patrons who increasingly are lured off base to shop for groceries at Wal-Mart or other discount "super" stores.
Air Force Major General Robert J. Courter, director of the Defense Commissary Agency (DeCA) since December 1999, came to the job with two goals: make commissary shopping more valuable and attractive (particularly to young enlisted families), and turn DeCA—with its 300 stores and 17,000 employees—into a more "business-like" operation.
Counter said too many commissaries need repairs, some staffs need to be streamlined, and prices are not delivering the value patrons expect from the benefit. He wants DeCA to turn that around through new sales programs and fiscal discipline.
Counter, known for his hard-nose management approach, is unpopular with some DeCA employees, as measured by complaints made to members of the House Morale, Welfare, and Recreation Panel, which oversees commissary operations. Courter has been criticized as being demanding and abrasive.
"I'm aggressive," he said, during an interview at DeCA headquarters at Fort Lee, Virginia. "I want people thinking about whom they serve.... I want managers to commit to things. I want them to be accountable. And I want them to deliver. That, I think, has affected some people's comfort zone. I probably struck some nerves."
But Counter, a civil engineer by training, also enjoys the full confidence of Air Force Lieutenant General Michael Zettler, chairman of the Defense Department's Commissary Operating Board. "[Courter] is a very aggressive manager and he sets very high standards," said Zettler. DeCA needs Counter's toughness and organizational skills, he added.
Commissaries are fighting both a funding problem and an image problem, Zettler suggested. The younger generation of service members is the first to grow up shopping for bargains at stores such as Wal-Mart and Target. When they see them now outside an installation's gate, it is "a touch of home," Zettler said. They have to be educated on the value of their commissary benefit.
But it also is true that commissary savings are not as competitive as they once were because of discount retailers. A market basket of commissary goods still delivers average savings of 25% compared with prices at traditional grocery chains. But the discount narrows to 10% or even less when prices are compared to groceries sold at Wal-Mart "super" stores.
Amid such competition, said Counter, commissaries stand to lose more sales if stores are allowed to decay, if customers cannot get in and out quickly, and if produce is not kept fresh. Most important, prices need to reflect the best deals that manufacturers can offer. DeCA is pressing to improve its performance on all those fronts, he said.
Counter and his staff have adopted a "best value" program, working deals through name-brand manufacturers to provide hundreds of products to commissary shoppers at prices lower than even private-label brands outside the gate. They also have adopted a strategic vision, with a goal to increase savings to customers from 25% to 30%, increase sales by 10% or more, and reduce operating costs by 7%—all over the next several years.
DeCA plans to operate more like a business, including shifting from a budget-based system to a cost-based system—which means measuring success not by the size of its budget but by its cost per unit of "output" or dollar of sales. Counter promises this new cost discipline will deliver a better benefit to customers while freeing money to modernize stores.
Commissaries rely on two sources for funds. An annual appropriation (in effect a subsidy from taxpayers) of $1.1 billion covers operating costs and salaries for 17,000 employees. With defense budgets stretched tight, said Zettler, that $1.1 billion is "about all we can afford." Store patrons provide the second funding stream by paying a 5% surcharge on all purchases. Otherwise, commissary goods are sold at cost. The surcharge dollars are intended to be used for store repairs and renovations and to replace old facilities.
Because of a recent failed attempt to automate commissary operations, tens of millions of dollars of surcharge money was lost. DeCA has had to use a large slice of its surcharge account to cover current operations, leaving the agency short of funds for repairs and new construction.
It is difficult to persuade service members that "you're providing them with quality benefits," said Zettler, "if you've got floor tiles buckling, the aisles are very crowded, and the roof is leaking." Counter said he gathered his own evidence of stores in disrepair during inspection tours after becoming DeCA director.
One of his first priorities, he said, was to work with his headquarters and regional staffs on a plan to recommit the flow of surcharge dollars to improving store appearance. Because such a move threatens the flow of operating dollars, DeCA convinced the services to loan it about $90 million a year over the next two years. In return, the agency promises to cut operating costs by 7% by 2002, by becoming more efficient and streamlined. Zettler conceded that in an agency with 17,000 employees, cost cutting must include payroll—and that will mean some staff cuts.