Risky Business: Commissary Savings Redefined to 20% Stateside

Military Update: Year after year the Defense Commissary Agency (DeCA) told Congress and store patrons that commissary shoppers saved an average of at least 30 percent on brand name groceries over prices in commercial stores and supermarkets.

The claim lost some credibility over time with the rise of big box discounters and retail supercenters. Also, DeCA’s price-tracking methodology lost support in Congress and at the Pentagon amid a push to transform commissaries into more business-like operations, using commercial tools such as variable pricing and private label brands to try to reduce DeCA’s $1.3 billion annual appropriation.

DeCA officials now concede the 30-percent savings figure didn’t include price comparisons at Walmart Supercenters. Nor did it consider the popularity of private label goods that outside grocers find so profitable. Nor did DeCA adjust its own estimates to give greater weight to products in highest demand with lower savings.

On Monday, in response to a congressional mandate, DeCA released new set of “baseline” estimates of commissary savings that reflect these factors and more.

Without reducing the value of the shopping benefit, DeCA says, it has redefined how it measures savings. Global savings across all 238 commissaries, are calculated now at 23.7 percent and savings stateside at 20.2 percent. At 61 overseas commissaries, average savings are 44.2 percent against local food prices.

To be able to shift to variable pricing, DeCA also is publishing average savings by seven U.S. commissary regions. The 36 commissaries operating on New England bases, for instance, provide average savings of 21.4 percent. Across 30 commissaries in the South Atlantic states, savings average 19.9 percent.

The combined region of Alaska/Hawaii, with nine commissaries, offers the highest savings for patrons at 32.6 percent. Twenty commissaries in the Rocky Mountain region, which runs south from the Canadian border through Arizona and New Mexico, had the lowest savings of 17.6 percent compared to prices off base.

The Pacific coastline states, with 31 commissaries, provide average savings of 20.9 percent while 18 military grocery stores in North Central states save shoppers an average of 20.2 percent.

“This enhanced way of calculating savings doesn’t change the actual dollars that patrons save, but it will give patrons a better understanding of price comparisons in their local area,” said DeCA Director Joseph H. Jeu in a press released Monday unveiling revised savings estimates.

A day later Jeu announced that, effective June 3, he will retire after six-and-a-half years at DeCA’s helm and more than 38 years’ total federal service.

“The transformation is well on its way and the right people are in place to see it through,” said Jeu’s statement on Tuesday.

Military exchange executives, said industry sources, were surprised and upset by DeCA’s announcement on the new baseline savings. Exchange directors have argued for years that their own store traffic and sales performance are linked to the popularity of commissaries, and commissary sales are falling.

Since last October, start of fiscal 2017, DeCA sales are down 7.6 percent and by more than 10.5 percent in January compared to January last year.

“It’s just really bleak,” said one representatives for manufacturers serving the military resale system. “If your sales are down, the last thing you want to do is send out a press release saying that people are saving 10 percent less than they thought they were. That’s just going to drive sales way down.”

Some might challenge Jeu’s timing but he was on the clock. Congress first ordered DeCA to produce more realistic baseline savings, including across regions, in 2015. The due date to report was March 2016 so DeCA was 11 months late.

Brooke Goldberg, director of family policy and spouse programs for Military Officers Association of America, said senior defense officials have given assurances if the revised savings rate “drops even 1 percent, DeCA will begin evaluating a corrective measure.” The hope is that a more glanular approach to tracking savings will “be good for patrons as it provides a more definitive benchmark on a regional basis rather than national scale,” Goldberg said.

Some advocates for military families fear that the mere perception of lower savings could put commissaries at greater risk, despite DeCA’s vow that it only has clarified current savings in order to preserve them through the changes ahead.

“I do think it means less certainty for families moving forward,” said Eileen Huck, government relations deputy director for National Military Family Association. “Families have always been told they could expect a certain level of savings when shopping at the commissary, regardless of where they happened to be stationed.

“Now the rules of the game have changed somewhat. Although DeCA has stated its commitment to preserving this new level of savings, there are many more factors in play” including variable pricing of products and introduction of DeCA branded products later this year. So, said Huck, “it is fair for families to question what this will mean for the value of the commissary benefit in the long run.”

For years DeCA measured shopper savings by comparing a 26-week average of brand name prices, always set at cost, against average market prices across the country. It used Nielsen price data and filled in any gaps — for Alaska, Hawaii and overseas — with limited manual price comparisons in those locales.

That method of calculating savings for 38,000 branded items at the national level has been replaced by a new method more suited to the transformation.

“We are adding more geographic specificity, since cost of living varies by region,” said a DeCA official. “Adding a regional savings level will provide a better sense for how much our patrons save by shopping at their local commissary, compared to retailers in their particular region.”

DeCA has also updated the products it uses for our price comparisons, emphasizing “the most common patron purchases” within sales categories like produce or meat. The new savings benchmark also take into consideration patron purchases at local commercial grocers, as manually gathered in every region.

Critics have raised concerns about how DeCA is relying more heavily now on “clipboard” pricing methods rather than Nielsen data to benchmark local savings across regions. But the greater worry is how patrons will react to the results.

“It certainly has the potential to adversely affect patronage,” said Tom Gordy, president of the Armed Forces Marketing Council. “But what I think people have to fully understand is the prices have not changed. It’s just the way the savings are calculated has changed.”

Another industry analyst was more skeptical, suggesting new baseline savings leave headroom for Defense officials or Congress to slash DeCA’s $1.3 budget while still claiming to preserve customer savings. He also pointed to a new Government Accountability Office report on DoD construction projects that showed DeCA surcharge dollars used to fund only one construction project in fiscal 2015.

“Construction is the best manifestation of the health of the resale system,” he said. “This report indicates that the system might already be faltering.”

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