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DoD Seeking Ways to Improve Commissary Benefits

By Rudi Williams
American Forces Press Service

WASHINGTON, Dec. 24, 2003 – Finding ways to improve commissary benefits tops the Defense Department's list of things to do to enhance quality of life for service members and their families.

But when DoD announced it was studying the "variable pricing" concept being used by private-sector grocery stores and supermarkets, some media coverage painted an unfavorable picture.

"Variable pricing isn't the 'poison pill' for commissary benefits some media articles have indicated," John M. Molino said during an interview at the Pentagon. Molino is the deputy undersecretary of defense for military community and family policy.

"Variable pricing is a technical term used in the grocery industry," he explained. "All it means is not every item is marked up by the same amount to produce a profit. By law, everything currently sold in commissaries is marked up 5 percent above cost.

"So variable pricing isn't that evil animal in the shadows that it has been painted to be," Molino said. "But remember, we're not implementing variable pricing. We are simply studying the concept."

He emphasized that DoD simply is studying the concept to determine whether it will work in the commissary system and benefit customers.

"If the study says it won't work in commissaries, we won't go down that path," the deputy undersecretary said. "But if it has the potential to provide a better benefit, we're going to ask Congress for permission to go there." But, he said, DoD will go there only if variable pricing doesn't erode the 30 percent savings customers enjoy now.

There are even bigger savings on some items. Defense Commissary Agency buyers often negotiate to get money-saving deals with distributors and food suppliers. Customers reap the benefits when they purchase things that are put on shelves boasting a little sticker that reads "best value item."

"That means they've negotiated a price that's rock bottom, and they challenge you to find that item cheaper anywhere else," Molino noted.

Once a price is negotiated, the commissary still has to sell the product at 5 percent above cost, he pointed out.

The 5 percent surcharge goes right back into the stores, paying for new construction, renovations, repairs, equipment and information technology systems, such as checkout counters and cash registers.

"Before 2001, we were bleeding some of the surcharge money into commissary operations," Molino noted. "We stopped doing that because we want to guarantee that the surcharge, which is service member money, is reinvested in the commissary."

Operating expenses are paid out of about $1.2 billion of taxpayer dollars appropriated by Congress. Tax dollars pay civilian employees' salaries and for such things as butcher's uniforms and meat-packaging materials.

"We're trying to ensure that every penny of taxpayer dollars is well spent, and that taxpayers get the best value for their tax dollars," Molino said.

Many customers question why commissaries don't have special sales comparable to local supermarkets, Molino said. The answer, he explained, is that the strict 5 percent surcharge prevents commissary managers from reducing items below that amount. For example, if local supermarkets have chicken on sale for 39 cents per pound and the commissary's price is 59 cents per pound, the law prohibits managers from cutting the price to 39 cents to match the supermarket price.

The grocery industry also uses variable pricing to build customer loyalty. "The motive of those stores is profit," Molino said. "The motive of our stores is to keep it a 30 percent savings to the customer. We'd like to make the commissary benefit more attractive to people who otherwise don't shop there especially our young members and military families on a tight budget."

So, even if the variable pricing concept were implemented, it wouldn't affect the savings service members get in their grocery cart, Molino said. But he added, "You might save more on one item and a little less on another."

Molino said DoD is concerned about people who don't shop in commissaries because it's more difficult to get onto installations because of increased security after 9/11.

"We want to be able to adjust the pricing so that we can attract them to our stores," he said.

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