Commissary shoppers will see bigger savings in their stores within a few weeks, following Secretary of Defense Lloyd Austin’s new initiative announced Sept. 22.
Commissaries will no longer have to make a profit to help pay for operating costs.
“The intent is to no longer burden military families to partly pay for commissary operating costs, except for the statutory 5% surcharge used for facilities upkeep,” said Defense Department spokesman Army Maj. Charlie Dietz, in response to Military Times’ questions.
Austin directed DoD to “fully fund our commissaries to cut prices at the register, with the goal of achieving at least a 25 percent savings on grocery bills compared to the local marketplace,” in his Sept. 22 memorandum outlining initiatives to help ease the economic pain and improve financial stability in the military community. The memo outlines steps DoD is taking to boost housing allowances, benefits related to permanent change of station moves, child care, spouse employment, and others.
“Our service members and families must be able to secure affordable basic needs,” Austin stated in the memo.
For commissary shoppers, the requirement translates to a decrease of about 3% to 5% in the prices they’re currently paying on most grocery items.
The price reductions should be seen by mid-October, Dietz said. “We want to sustain this increased savings through fiscal 2023 and exceed the 25% benchmark, to the extent that our resources allow.”
In fiscal 2021, overall commissary savings were 22.7% compared to stores outside the gate, which is below the 23.7% threshold mandated by law.
Austin’s directive to achieve at least a 25% savings goes beyond the congressional mandate. The savings vary by geographic area and are based on market basket comparisons and other data with a variety of stores outside the gate.
The announcement about changes to commissary pricing “will be welcome news to military families, many of whom are struggling to make ends meet as prices continue to increase,” said Eileen Huck, government relations senior deputy director for the National Military Family Association. “We’re glad that [DoD] recognized that military families should not have to bear the burden of paying for commissary operating expenses.
“We hope these changes increase the value of the commissary benefit and help families’ grocery store dollars go farther.”
Commissaries will still be able to use “variable pricing,” to mark up some items and mark down others. The commissary agency must be able to use this “to optimize the commissary benefit for military families, particularly those who are financially struggling,” Dietz said. “Variable pricing will allow DeCA to sell essential food items, like milk, eggs, bread, etc., below cost, which will provide the greatest savings on the items military families need the most.”
Lawmakers wrote to Austin earlier this year, asking him to remove the requirement for commissaries to make a profit. They noted that commissaries generated a profit of $108 million in 2021, adding “that is $108 million out of our military families pockets.”
Removing that requirement would have an “immediate, direct impact for families, lowering their grocery bills and extending their pay as a non-pay compensation benefit, and reducing food insecurity and inflationary effects,” the lawmakers wrote.
Until 2017, commissary products were priced at the cost from the supplier, and the stores relied solely on taxpayer dollars to operate, in order to provide a cost-savings benefit to service members, families, retirees and certain others authorized to use the commissary. A 5% surcharge on customers’ purchases was — and still is — used primarily to fund construction and renovation of commissary stores. According to the Government Accountability Office, the changes implemented in 2017 have affected commissary savings.
The cost of store operations, such as employees’ salaries, are funded primarily by taxpayer dollars, typically around $1.2 billion a year, which is what the request for fiscal 2023 is. Some lawmakers have proposed increasing the funding over the administration’s request this year; those details are being worked out.
The changes in 2017 came after decades-long pressure within DoD to reduce or eliminate the amount of taxpayer dollars used to fund the commissary benefit. So DoD asked Congress to change the law to allow commissaries to start “variable pricing,” which gave them the ability to mark up prices on some products and mark down prices on others.
The goal has been to decrease the amount of taxpayer dollars required to operate stores, with profits generated by marking up the prices of items under variable pricing.
“Now industry needs to reciprocate on this show of faith in the benefit and help DeCA deliver on making this benefit all it can be,” said Steve Rossetti, president of the American Logistics Association, a trade organization made up of suppliers of products and services to the military resale agencies — commissaries, exchanges and morale, welfare and recreation programs.