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The Rise of the Grocery Co-op

From CNN/Fortune. We used to have an organic co-op here in downtown, but after 30 years in business, membership dwindled to the point of failure, and they closed up shop. Our CSAs have too.

"It turns out that one of the most successful grocers around by some measures isn't really in it for the money."

True--ours was in it for spreading the health.

"Traditional supermarkets should pay attention, and not just to those stellar financials. Under the coop model, the owner and the consumer are one in the same. "A coop has to make money but also has to have the best interest of its owners, who are also its shoppers, at heart," says Robynn Shrader, CEO of the National Cooperative Grocer's Association (NCGA).

As a result, as PSFC notes on its site, it is "responsive to the membership rather than to the companies trying to sell their products." Because coops don't need shareholders or executives to back initiatives, they answer customer-member demands quickly and are often ahead of national trends. Take grocery bags -- PSFC stopped handing them out (both paper and plastic) altogether two and half years ago."

Ours did too--that's what started my laundry basket grocery shopping. I had a laundry basket hooked onto an old luggage cart, and would wheel it around like a dolly. Our co-op was a BYOC (container) for everything except the bulk bins, but they would charge an extra fee if you used their baggies at the bulk bins.

"The two biggest expenses for a grocer are labor and the cost of goods. But PSFC's members provide about 75% of the store's work, which translates into big savings. The PSFC estimates that shoppers spend 20% to 40% less on their grocery bills than they would at a traditional supermarket. Gutknecht says that PSFC operates at a lower margin than any other conventional coop, which yields lower prices. It marks up products 21% over the cost of the goods delivered, for a gross margin of 17%.

"The volume makes it work," says Herpel. The coop handles so much money that it deposits its cash in the bank every two hours for security reasons. Similar to Trader Joe's or grocer Stew Leonard's, the Food Coop has a limited selection of items (9,500, vs. about 50,000 in a typical supermarket) in a relatively small store footprint (6,000 square feet), which allows it to buy in bulk and produces a high turnover on goods. Herpel says that the Coop turns over its inventory 60 or 70 times a year."

...

"Much like a Trader Joe's, which also doesn't use slotting fees, goods are on the shelves because members want them, not because manufacturers essentially rent shelf space through extra charges. The store can therefore capture most of the money its customers spend on food in any given week.

Herpel says that when Trader Joe's came into town, she expected members would leave the coop, but its numbers have remained steady. Gutknecht says that's because when a Trader Joe's or Whole Foods enters a market, a coop can sometimes benefit. "The shopper gets exposed to organics and then wants more -- more information, selection, and confidence."

...

"One of the loudest complaints Fortune heard from Trader Joe's shoppers: They don't know who's making many of the chain's branded products or where they come from. PSFC tries to be as transparent as possible, listing its suppliers on its site and the farm of origin on the label in the store. It buys local whenever possible. Say you buy beef at PSFC. You're purchasing part of a whole cow that the coop buys every week in upstate New York and has slaughtered."

Ours was tied to a farm--they'd raise all their own veggies, eggs, chickens, and beef. Needless to say, the selection was limited, but you didn't have to limit your shopping to them. It was funky cool to shop there, but then they disappeared. Now a normal retail health food store (with buyer club) has replaced it (but not at the same location)--it too is tied to the same farm, as well as area and regional suppliers.

Posted by Cute at 7:25 PM

Labels: financial (non-tax), food purchases