Mark Koppang, Director of Sustainability at Raley’s, shares his point of view on the future of environmentalism in the grocery industry. Mark is responsible for Raley’s innovative efforts to make its 126 stores more sustainable through technology and community partnerships. Mark joins Kane McCord to discuss sustainability challenges, opportunities, and solutions for grocery retailers who want to profitably and positively impact the environment.

A family-owned, Sacramento-based business, Raley’s is committed to nourishing people, communities, and the planet through action. To reduce its ecological footprint, Raley’s has trailblazed new ways to cut waste, conserve energy, and minimize carbon dioxide emissions. In 2020 alone, Raley’s food waste initiatives donated 4.8 million pounds of food to those experiencing food insecurity and converted 17 million pounds of organic waste into bio-natural gas.

In this episode

Kane McCord:
Welcome to Fresh Thinking, the video podcast where we explore the latest developments and trends influencing the future of the fresh foods business.

I’m joined by Mark Koppang, who is the director of sustainability at Raley’s. Welcome, Mark. And thanks for joining us on Fresh Thinking.

Mark Koppang:
Glad that be here.

Kane McCord:
Awesome. Well, Mark, let’s start out high-level. I’d love to know: How did you find yourself building a career in sustainability? And how did it lead you to your current role at Raley’s?

Mark Koppang:
It was through packaging. I was a part of the packaging industry for number of years and an important part of my efforts was getting people, or getting companies, into the right packaging—either right-sizing or getting the right material. A lot of my focus had been on cost savings, but also on optimization of materials and moving companies away from non-recyclables to recyclables. I think what I’m seeing now, especially in the realm of packaging, is there’s a lot of effort now that really is being supported in an industry-wide way that is going to lead to scalability for companies—as that was the biggest channel I saw in my career with sustainable solutions.

Kane McCord:
One of the biggest kind of misnomers I think sometimes around sustainability is that it’s going to require additional capital, or it’s going to be something where you have a trade off between profit and maybe environmental waste. What’s your take on that? Are there times where it will be more costly to do something that is more sustainable and environmentally friendly or what’s the mix between that. You mentioned cost reduction as being actually something that drove a push into sustainability.

Mark Koppang:
The answer really is all the above. We look at like refrigeration right now. Refrigeration in grocery stores been identified as one of the number one causes of greenhouse gas emissions. And so the transition to more greenhouse gas friendly, lower greenhouse gas potential gases is a big push right now. And that’s been pushed through regulation. We are working very hard to make sure that we’re leading the charge, but it does come at a substantial cost. We’ll spend more than $11 million coming into compliance with the new regulations by 2030. And that has no operational benefit to us. It all takes away from the bottom line, but the net effect is we have a more greenhouse gas friendly operation as a result.

And like food waste. We look at food waste as being a necessary part of our business. We can’t sell everything that we bring in. So what doesn’t go to food rescue or for animal feed, we send over to UC Davis to be processed in their biodigestor. And that’s turned into natural gas and ammonium oxide for fertilizer. So, in that case, we’re taking something that was going to the landfill and making it into two useful products and basically capturing the methane that’s released in the biodegrading process for use to power a portion of the campus there at UC Davis.

Kane McCord:
How do you find new and innovative initiatives like this? So how much of your time do you spend kind of just general research in the market, trade publications, trade shows? And by the way, how much of it is push versus pull? I imagine it’s both. Some of it’s you out there finding it, but what type of volume are you seeing of startups, vendors, manufacturers, et cetera, reaching out to you with these types of ideas?

Mark Koppang:
I would say it’s probably about 50/50.

Kane McCord:
Okay.

Mark Koppang:
In my role, I’m strategic. My role is strategic within the Raley’s organization. Obviously, it can affect operations at some point if any solutions that I recommend are implemented. But in that role, yeah, I’ve got to be looking. I’m always going to be looking. If I just rely on people to come to me, number one, I’m the dog being wagged by the tail. But also it doesn’t really speak to the strategic vision of where we can go.

There’s been areas of focus that I’ve had. I mean, electric vehicles—that’s emerging. And the question is whether we wanted to be a part of that or not. And, in the end, I hired a consultant to kind of help round out my understanding, because like I said, there’s more that I didn’t know. And I knew I didn’t know it, that I needed some help around…

But the thing is, there’s subject matter experts out there that can be very helpful. And I think in the process of really strategically pursuing an initiative to understand what you can and can’t do in that space, you’re going to find people and people are going to find you. It’s amazing. I think that most of the time I spent really pursuing whether or not Raley’s wanted to add EV charging as part of our operation on a for-profit basis. I’d say probably in that case, it was probably about 75/25, as far as me going out and 25% coming my way.

Kane McCord:
If I’m hearing you correctly, there’s probably more opportunities that you’re either finding or that are coming to you, that you might have time to do, or that your company might have an ability to absorb.

Mark Koppang:
Yes.

Kane McCord:
Okay, good—confirming that that’s the case. Give us a sense, then how do you think about prioritization? Which ones make the cut, which ones get explored further? How do you manage these conversations and projects across operating a hundred plus store retail chain?

Mark Koppang:
You know, it’s an interesting challenge. Part of my background certainly was in sales and I’d say I’m still selling. It doesn’t stop. But I think to come up with solutions is one thing and they can be great solutions, but I think a good solution before its time is a bad solution. It’s got to have time to germinate and grow. And I think part of my job is definitely to take those great ideas that come in that I think have the potential to be developed and basically push through, I like to call it, “the tyranny of the immediate” and try to get some head space for people around a new way of doing things. And that’s a battle. And I think in the grocery industry as a whole, we really are looking at how we can optimize, how we can involve technology, how we can basically reduce costs by being more efficient without negatively impacting our customers’ experience in our stores. So there’s a lot of things that go into that.

Kane McCord:
Can you give us a couple of examples of things that have been top of mind for you recently in terms of how does Raley’s benefit in its core business around delivering a great consumer experience, around earning an appropriate profit for its shareholders? What types of things have you done on the sustainability side, for example, that you think maybe has influenced consumer demand positively into your stores, or has helped you recruit and develop talent? Have there been things like that that you can point to that say, “You know what? This started as a sustainability issue, but it became something bigger as we implemented it.”

Mark Koppang:
Well, I’d say that the first annual publication of our impact report I think has had a real substantial impact on a number of different areas of our business. I think what the impact report is is basically an equivalent of an ESG type report or CRS type report. And we talk about the planet, we talk about our people, we talk about our community and how we’re serving. Initially it was more of a, “Let’s tell our environmental story” and then, “Well, why don’t we add what we’re doing in the community? Why don’t we add what we’re doing for our people?” and really what became just kind of a sustainably focused document really became much more than that. And rightfully so.

Mark Koppang:
I think we have some great things that we’ve done to move our employees forward in their careers. We’ve got a lot of internal opportunities and we look at our team members as our number one resource and their interaction with the customers, certainly, but their innovation and their care for the business overall, it’s essential to our success.

Mark Koppang:
But then also looking at our community engagement. We spent a lot of time, I think, really doing the right thing when it came to being a member of the communities that we serve, but we really didn’t talk about it. So in a lot of cases, it was a secret. I think talking about it is a little bit contrary to our culture here. I think we’re more of a company that likes to put our head down and just do the right thing, because it’s the right thing to do, as opposed to saying, “Look at me” and “Look what we’ve done”.

And that carried over to our sustainability story too, with our focus on the planet and what we’re doing. In most of the cases, sustainability has proven to be good business—period. It’s just, it’s something that is top of mind for our customers more so than it’s ever been. I like to say that customers oftentimes buy in to a company before they buy from the company. And I think that buy-in process is really bolstered by a good sustainability story that is actually believable. And I think when you walk into a store and understand the efforts that we’re taking to keep things clean, like we did through COVID, or have it well lit and pleasant, looking at our shelves and understanding that we’re really focused on health and wellness, not just selling groceries—there’s a lot of things that we do that I think really do demonstrate our commitment in a way that’s tangible for our customers.

Kane McCord:
How do you envision grocery stores looking differently over the next 6 to 12 to 18 months based on current things that are in your pipeline that are maybe less well known?

Mark Koppang:
We continue to look at the integration of technology into our stores to basically kind of bridge the gap between the customer and ultimate delivery of product. We’ve got software to do that that we’re working on. So there’s a lot of different things. But it really is focused around omnichannel and how do we get the product to the customers the way the customer wants it to be received? And for any grocery store that says “We’re just going to be brick and mortar”—I think they’re making a mistake. Looking at the way the tide is turning and whether you’re driving to the store to pick something up or you’re getting it delivered to the house, those are both things that have become more and more commonplace, certainly through COVID. But I think it’s really, it’s pushed people—pushed companies—to innovate. And I think that effort to innovate really is going to pay long term benefits in providing options for consumers. I think for our customers, we’re always going to have our stores be as pleasant as possible because we look at that as the foundation. And really, I think in the communities that we serve, they perform a vital role. We’re not going to step back from doing the things that we need to do.

But I would say that related to food waste, one of the things that I’m interested in is how do we reduce food waste? I think the number one way we do it is by buying more effectively. And I think there’s a lot of things that we’re doing already that have allowed us to be able to do that. But that’s an area that I will continue to say is probably the source of most of the waste is just not being able to be as efficient in our purchasing. There’s always going to be a challenge with buying too much and wasting it or not buying enough and missing opportunities to sell because there’s nothing on the shelf. And obviously we want to have that happy medium. And how do you do that? And there’s a lot of companies that are looking at that and finding creative ways to do it. So that’s one area that I’m really interested in.

Kane McCord:
You know, Mark, I realize your role is sustainability and then you’ve got your merchandising and your ordering systems, which are colleagues of yours. Given that that’s been a known problem for a couple of decades, can you give a sense for folks that maybe aren’t as close to it as you are? I think a lot of people look at that and would say, “You mean a retailer as sophisticated as Raley’s, or a large national grocer, still struggles to understand the precise amount of food to order?” Can you help our listeners understand the level of complexity that’s involved and why that still remains such a hard problem?

Mark Koppang:
Yeah. We have so many choices on our shelves. So many. If we narrowed our selection down substantially and said, “There’s one bean. There’s one white bean, there’s one red, there’s one black bean” and went through that and just limited choices, we could probably (if we stayed in business) be more efficient. But consumer demand changes. It’s dynamic. There’s not one point, ever. I mean, it’s like, we’ve seen it in our own lives. We try something new and say, “Oh, that’s great.” Well, it replaces something.

And I think that the dynamic nature of food in general, there’s always innovation. There’s always something that’s coming. People want fresher, they want more flavorful, they want innovation, they want new spices. That’s always going to be a driver. And something’s going to get replaced in the process of new innovations in food taking hold. So it’s really about us trying to be as responsive as we can to the changing needs of the consumer so that we can continue to be successful, but also understanding that that comes at a cost in that there are going to be things that we did for a long time—that we kind of hung our hat on as being successful—that have to take a backseat or have to be deemphasized.

And the other thing too is that you don’t buy a can of beans. You buy 12. You buy 24. You buy a pallet. The unit of measure for a consumer and for a grocery store are completely different. For us, we’re not a big retailer. I mean, 126, well, actually we’re at 124 stores right now with another 115 we just purchased down in Arizona, New Mexico, and some of the sovereign Indian nations when we acquired the Bosch’s organization, which we’re very excited about. Great organization. We’re really, really looking forward to partnering with them and seeing greater success for both of our companies as a result. But again, we’re going to be looking at how they’re doing things down there and what may work for them that we didn’t really implement here and vice versa. But again, it’s like innovation and change are constant in this business. So, I think that’s the biggest driver.

Kane McCord:
Folks that are less close to perhaps grocery retail that might be listening might not fully appreciate one thing you said, which is SKU proliferation—which of course leads to supplier or vendor proliferation—meaning you have thousands and thousands of suppliers that you’re coordinating with. And one interesting question I wanted to put in front of you, there is this. Manufacturers, and you know this because you have worked at manufacturers, they’re working on their own sustainability initiatives as well. So how much of your time is spent either responding to things that they want to do or proactively taking collaboration to them? And perhaps if you have an example or two of either a specific manufacturer or a category of food or produce that you sell and things that you guys either have already built and delivered or things that you’re working on currently.

Mark Koppang:
I would say that the biggest focus that I’ve been involved with for our vendors has been on incorporating our humane treatment standards into their operations through new questionnaires which were developed over a year in collaboration with industry experts and our suppliers. But for us, a big portion of our business is animal protein. To ensure that the animals are humanely treated in the process is very important to us and something that has really been a focus for a lot of people in the industry. Our pork now is in compliance with the California requirements that have been delayed in implementation. We’re already there as far as making sure that we’re sourcing pork that’s gestation free, large cages, or large pens…

And chickens—free range, antibiotic free, cage free for the eggs. That’s something that’s universal now for all the eggs that we have in our store. So those are things that are important to our customers, but they’re also important to us. And I say that’s probably the biggest area of pushback that we’ve had. As things continue to evolve, we’re going to continue to look at how we can work with our suppliers to reduce packaging, to go to more efficient or more effective packaging options that are either recyclable or compostable, or just use less material. So those are things that are on the horizon. But I think that, initially, our animal proteins were a big area focus and recalibrating our approach to those commodities.

Kane McCord:
The other supplier topic that comes to mind as I’m listening to you walk through a few of those recent developments is local sourcing. And I think this is something that’s been pretty visible to consumers so it appears that there’s a fairly high degree of consumer demand. What’s your experience and evaluation of maybe the last 3, 5, 10 years on local sourcing? I know carbon emissions is something that nearly every major business and every major retailer’s tracking. So how much have you been able to identify sources of supply that are just frankly in closer proximity to the store to cut back on last mile delivery or last 50 mile delivery?

Mark Koppang:
Well, I joke that everything we want to eat is grown in California. So we do have some local suppliers, certainly. (We source food products from across the country, so I’m just being a little provincial in that comment.) But we have, and this really is, quite frankly, something that the produce departments, the produce managers and merchants have really worked on—local sourcing, specifically at the store level. Sacramento is the Farm-to-Fork Capital. And that culture, I think, really permeates our sourcing for produce in particular and that we really do want to have local partners as much as is practical. And those are actually managed by the store produce managers. So, there’s great opportunity for local farmers to work with stores and get their products on our shelves. That’s one thing that we certainly have been very focused on.

Kane McCord:
I want to thank you for joining us today. We really appreciate all of your insights and I’m sure our viewers are going to enjoy hearing what you had to share in terms of how they can incorporate some of these sustainability initiatives into their own business. So I want to thank you again for joining. We really, really appreciate it.

Mark Koppang:
Kane, I was happy to be invited and glad to participate—and I hope there’s a nugget in there for somebody.

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