DOD PLAN WOULD ‘DESTROY’ COMMISSARIES, SAY INDUSTRY REPS
The Defense Department’s fiscal 2016 budget request would slash taxpayer support of base grocery stores by $322 million in 2016 and by $1 billion next year, enough to “destroy” the shopping benefit, warns the American Logistics Association.
ALA, which represents manufacturers, distributors and brokers of products sold in commissaries and base exchanges, released a position paper that contrasts DoD’s plan to “wreck” commissaries with less onerous recommendations of a blue-ribbon panel to consolidate all base store operations in order to gain new efficiencies.
That would seem to leave Congress with an easy choice. But the Army and Air Force Exchange Service warns in its own position paper that the store consolidation path laid down by the Military Compensation and Retirement Modernization Commission won’t produce the savings it touts.
AAFES says requiring the three exchange services, including Navy and Marine Corps store systems, to merge with Defense Commissary Agency (DeCA) into a new Defense Resale Activity would add near-term costs of $466 million, which wouldn’t be recouped through efficiencies for “85 years.”
That is no typo. AAFES says the commission’s plan to integrate four “companies” that provide shopping discounts on base could take six to nine years to execute. Meanwhile, it says, AAFES stores alone would suffer “lost improvements” over that span of $45 million to $80 million a year.
On the commission idea that exchange profits be used to fund commissary and other store operations that historically have been backed by defense appropriations or tax dollars, AAFES warns it lower or eliminate exchange “dividends” which for decades have paid for base morale, welfare and recreational activities such as gymnasium and libraries.
Analysts at the Pentagon are studying whether to recommend replacing or modifying DeCA budget plans based on the commission’s report.
Other commission ideas also would have unintended consequences, AAFES says. For example, trying to preserve shopper savings at commissaries by allowing base grocers to sell items now sold only in exchanges would “cannibalize exchange sales, earnings and MWR dividends.”
AAFES cites studies showing that up to 60 percent commercial store mergers “destroy or fail to create value as expected.” Such mergers typically save the equivalent of a third of one percent of sales. AAFES warns to expect even less savings from consolidating military systems, which have no brands to merge, no tax relief to gain and no unprofitable stores to eliminate.
And yet the military resale industry nearly howls with delight at the consolidation idea versus DoD’s budget plan to gut commissary funding.
“The President’s own Commission report stands in stark contrast to the President’s own 2016 budget” which “would destroy these valuable benefits,” ALA argues. “The Commission seeks to sustain these benefits and calls for management efficiencies to be implemented instead of diminishing the savings that patrons now realize.”
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