Anyone who wondered just who the Eastside Food Co-op (EFC, or Eastside) might be marrying had a chance to size up the suitors when they comfortably but not completely filled Ukrainian Center banquet hall August 15. The managers from Wedge, Linden Hills and Eastside co-ops each took a role in the tightly organized affair, giving attendees a glimpse of their personal styles and different angles on themes that had been brought up in earlier sessions on possible consolidation.
Eastside and Wedge were about equally represented in the audience, with Linden Hills at about half compared to either. In the handful of comments/questions posed later, four identified with Eastside as their primary co-op, three with the Wedge. By the rules set out at the beginning, the questions were taken to be answered in about 7-10 days on the website, coopsconnect.com.
Wedge general manager Josh Resnik presented a case emphasizing market share statistics. Four years ago, there were five stores offering organic foods, now there are 30-plus options. They’re not really the same, but not every customer perceives the important distinctions that local co-ops offer, he and other speakers reiterated.
The average co-op shopper spends only 10 to 15 percent of their grocery dollar at co-ops.
In US grocery sales, Wal-Mart has the biggest share at $187 billion, Whole Foods at $15.389 billion, National Co-op Grocers at 1.5 billion. In Minnesota, Supervalu is the giant at 47 percent of the market, Lunds & Byerly’s at 5 percent, Hy-Vee at 5 percent and other retailers (which includes co-ops) at 1 percent.
The three co-ops’ managers and boards have concluded that offering better prices is key to attracting more of the co-op shoppers’ dollars, and Resnik promised better prices through combined buying power and cost savings of consolidating back-shop functions. Earlier official statements hedged on that issue.
The Wedge brings a warehouse, Co-op Partners Warehouse, and a commissary (where large batches of prepared food can be made) to the formula.
The in-store experience won’t change, Resnik said, “I don’t want identical shopping experiences. If they do go away, we’ve failed. We want to tap into what makes us each unique and centralize the complexities.
Amy Fields, Eastside’s General Manager, said she was tasked with presenting answers to questions of “what are we likely to lose” in a consolidation, “fears that local control will be lost.” She said store names won’t change, familiar faces will stay, newly-formed store councils with real budgets will assure connection to individual communities.
Fields said community is “in the co-ops’ DNA.” The power of community ownership is what distinguishes co-ops, “We serve our neighborhoods’ unique needs.”
Luke Schell, general manager of Linden Hills Co-op also talked about pricing and competition, saying, “One of the biggest questions we’ve collected is price.” He said, “Much of the country is considered 30 percent oversaturated [with grocery stores] but the Twin Cities market is not seen as saturated.
“A lot say you can’t survive on one location. Co-ops are 2-3% of the Twin Cities food market. We want to be their third or second shop…we are all three [financially] healthy [co-ops] and don’t want to kick the can to the next generation. If we do not look at the landscape and invest…We will see a lot of co-ops closing. If you ignore it, it will come for you,” Schell said.
Linden Hills Co-op board member Alex Slichter tempered that comment in his talk on “why are the boards on board?” by saying, “There’s no scare-mongering, we won’t go under in six months if we don’t do it.”
To the question: “could we be one monster co-op?” (referring to adding in other co-ops at the same time), Slichter, to much laughter, said, “Even with three entities it’s like getting married but adding a third person.” No one will be excluded, he said, and as others mentioned, the structure will be planned to easily add others if they choose.
Questions or statements from the audience included these themes, paraphrased here (to be addressed on coopsconnect.com):
“I can’t help but be sad about losing my co-op. Couldn’t you look at a CPW-type collaboration instead?”
A later speaker explained that CPW, Co-op Partners Warehouse, owned by Wedge, has 400 customers, 57 percent of which are retail co-ops representing 73 percent of CPW’s volume.
“A unique shopping experience is not the same as local control.”
“We want to see the books so we KNOW you will be lowering prices. And will all the stores have unions? There needs to be more worker power on the board.”
“After the beginning, board balance will be lost through attrition. Potential for cronyism. If hiring is done through one central place it will naturally discourage those who don’t live near that place.”
“Our skill is in leading, looking at different co-op models. We need to grow in a new way; this is not co-op innovation, it’s capitalism.”
“What does increase in purchasing power going to do for local producers? What will it really mean for staff? People may choose to leave, so you’ll accomplish the savings through attrition. What do the other co-ops think of this? We’re not seeing evidence the co-ops are losing money.”
“I wish I’d known a year ago that the co-op was doing so badly, and wish the process had more involvement. Do I misunderstand that?”
“How will I feel shopping at my co-op after consolidation? Who are we trying to bring in, in this increased market share? Do I want people who live 30 minutes away investing and making decisions about my co-op? How will we bring in diverse members of the community who are not in this room?”
A half-dozen employees were asked to prepare and present three-minute speeches on their feelings about consolidation. They described various experiences doing price comparisons in competing stores, working at competing stores, accepting pay cuts to work at co-ops because they believe in co-ops, some initially fearing change but now embracing the consolidation concept.
The last to testify, Zoe Levin, owner of a tree-free paper company making, for example, bamboo-based toilet paper, described how large corporations tell her what she’ll have to do to get their business. “Co-ops don’t squeeze me…I want co-ops here, it makes me proud that the Twin Cities has more co-ops per capita.”
Various co-op officials stayed around for individual conversations. Former Wedge employee Christopher Loch indicated that opponents could gather at his table; a handful started a discussion and one of the Facebook pages questioning consolidation.
Eastside’s followup
A couple days after the Aug. 15 joint town hall meeting, EFC members received letters thanking people for participating in meetings, tabling, listening sessions and other feedback.
The letter stated that the formal consolidation agreement and plan would be completed, along with legal review by their lawyer, by end of August. The EFC board will decide Sept. 12 whether to bring the measure forward for final member vote Oct. 24 at the annual meeting. (Voting would begin in mid-October; votes can be cast without attending the annual meeting.)
The EFC board letter acknowledged members concerns about maintaining local identity that honors and strengthens deep roots in Northeast Minneapolis; having a governing body that values and seeks out diversity of all kinds, including geographic; wanting a clearer expanation of impact on employees; and asking for a clear statement of the consolidated co-op’s core values, especially around commitments to strengthening the local food system, enhancing access to healthy foods, and maintaining meaningful connections between each store and its home community.
Some consolidation detractors have said the leadership is too concerned with attracting the fickle shopper and that the natural foods mission is getting lost. In a followup email to the Northeaster, EFC manager Amy Fields wrote: “As a triple bottom line business, Eastside’s vision addresses people, planet, profit.
“To serve people and planet, we need profit. To be profitable, Eastside has to respond to the marketplace. Nationally, there has been incredible growth of consumer interest in natural and organic foods; co-ops no longer have market differentiation. The grocery market in the Twin Cities has caught the attention of regional and national retailers since Roundy’s/Rainbow exited in 2014.
“While the impacts of that market shake-up haven’t yet been felt in Northeast, the announcements this year that both Costco and Hy-Vee will open in 2017 is sobering. Hy-Vee in particular has proven to be a strong direct competitor…because it is a full-service grocery store with many specialty offerings, including a large natural and organic selection.
“Our message has been consistent since we began – although as a triple bottom line business, it’s easy to sometimes focus on one bottom line and not the others. What we hope to achieve through this strategic initiative:
- Activate the power of scale to extend community connections
- Buying power and pricing
- Accelerating growth to leverage existing investments to broaden impact
- Organizational stability through diversification.”
A handout at the Aug. 15 meeting disclosed some of a March 2014 document the boards and staffs used to guide their discussions about consolidation, along with “grocery landscape at a glance,” and “a closer look at combined sales.” An industry overview document was handed out July 18. The Wedge’s annual meeting and vote deadline is Oct. 18, Linden Hills meets Oct. 27.