Commissary Savings – Recalculating

 August 26, 2016

Over the last year, MOAA has been vigilantly monitoring ongoing DoD and congressional efforts to make the commissary system more efficient and reduce its dependence on taxpayer subsidies.  

Congress and the Pentagon have agreed maintaining patron savings at current levels is the first priority. Any efforts to chase efficiency must not diminish the savings. As such, that benchmark of current savings must be established to measure the impact of future changes.   

Current savings relative to commercial grocery stores - long reported by commissary officials as 30 percent - are calculated as a worldwide average.  

Last year, a report from the Boston Consulting Group (BCG) estimated it to be 16-21 percent in CONUS locations. This discrepancy - largely due to a much more limited market basket of goods used by BCG - raised MOAA's concern about the sensitivity of such calculations to the size and variety of the market basket sample.

Why is this important? Because the measure of merit in pursuing commissary operation changes is whether they preserve the same level of patron savings. So how you measure savings is a key issue. 

This week, DoD announced it will continue using the same current worldwide savings benchmark and also introduce a new system to measure locality-based savings for various US regions.

Worldwide: For years, the Defense Commissary Agency's (DeCA) savings calculation has been done annually, comparing DeCA's prices (Cost + 5 percent surcharge) for 38,000 products against a massive database of national average prices (including sales tax) in commercial grocery stores for those same products. This will continue, but will be done monthly.

Regional: Commissaries will be divided into seven regions for comparison against popular regional retailers. DoD will begin market analysis to identify the three greatest competitors in the area of each commissary, based on patron preferences in those regions. Direct comparison will be made of 900 items across the commissary to the same items in those three competitors' stores, to establish a regional savings calculation.

These two measurements will be used together to establish standards for both national and regional savings, and ensure that they do not decrease going forward.

Commissary officials say the new method will help commissary patrons better understand the savings the commissary provides. Many patrons don't understand that commissary prices are standardized nationwide, which means patron savings in different localities can vary, because commercial store prices vary by region.

So patron savings are generally greater in high-cost regions and less in low-cost regions, relative to local grocers' prices.

Officials emphasize the new system of measuring savings won't have any effect on what commissary shoppers pay. It will just make it clearer what patrons' current savings are by region.

Some questions remain about how the seven regions will be divided and how the 900 items in the new regional market baskets will be selected.

But MOAA appreciates DoD efforts to establish explainable benchmarks of national and regional patron savings to ensure patrons' current savings level is maintained as new commissary efficiency initiatives are implemented.

 

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