neighboring food co-op association fall member gathering presentation, 2014

4th Annual Fall Member Gathering

Neighboring Food Co-‐ops // Fall Gathering, 2014

27th Sept 2014

Co-‐op Food Stores

Hanover, NH


THANK YOU!

Thank you to the co-‐operative community for your partnership & support.

THANK YOU!

Thank you to the co-‐operative community for your partnership & support. Neighboring Food Co-‐ops // Fall Gathering, 2014

 Welcome  Glenn Lower, President, NFCA Board of Directors  Terry Appleby, General Manager, Co-‐op Food Stores

 Staff Report: We Want Your Feedback  Erbin Crowell & Bonnie Hudspeth

 Keynote Speaker  J. Tom Webb: “The Co-‐operative Difference”

 Lunch & Topic Tables  Welcome Cooperative Fund of New England Trustees

 Afternoon Workshops  Appreciations, Evaluation & Prizes!  Tour of Co-‐op Food Stores


AGENDA FOR THE DAY

Glenn Lower   President & Chair

of the NFCA Board   General Manager

Middlebury Natural Foods Co-‐op


WELCOME!

Terry Appleby   General Manager,

Co-‐op Food Stores / Hanover Consumer Co-‐op


WELCOME TO HANOVER!

We want your feedback! STAFF REPORT


…a thriving regional economy,

rooted in a health, just and

sustainable food system and a

vibrant community of co-‐operative

enterprise.


OUR VISION

Supporting shared success through…  Peer-‐to-‐Peer Collaboration

 Regional Sourcing  Marketing & Outreach

 Collaboration with other co-‐ops & co-‐operative support organizations


OUR PRIORITIES


PEER TO PEER COLLABORATION

 Vision: Branded, Regional, Sustainable, Scalable, Co-‐operative

 Cave to Co-‐op: Promote & Grow Program

 Farm to Freezer: Learn & Develop Model

 Future: Distribution? Private Label? Value Added?


REGIONAL SOURCING

•  Communicating Our Impact

•  Events & Outreach

•  Ads & Press

•  Policy Engagement

•  Educational Initiatives •  Cross Sector Collaboration

•  Promotional Materials


MARKETING & OUTREACH

…the priorities and examples of activities that we have outlined and in the summary sheets on your tables and posted on the wall.


CONSIDER…

…about the activities of the NFCA and that you think offer the most value and impact in terms of 1.  The NFCA Vision the goals of the Middlebury

Manifesto, 2.  The success of your co-‐op or organization,

and 3.  You as a staff or board member of your co-‐

op or organization. Neighboring Food Co-‐ops // Fall Gathering, 2014

THINK…

Take the next fifteen minutes to talk with people at your table. What jumps out for you? What has been most exciting or innovative? Take notes on some of the things that stand out for you.


TALK…

Place the three stickers in your nametag on the posters on the wall next to the priority areas and/or specific activities that you think are most important. (Yes – you can stack them.)


DURING THE DAY…

On the ‘Opportunities’ sheets, write down any ideas you have for activities that you think we should consider as we move forward — keeping in mind our vision.


SHARE…

Keynote: J. Tom Webb

THE CO-‐OPERATIVE DIFFERENCE IN

CHALLENGING TIMES


J. Tom Webb  Co-‐op board member, senior manager, consultant and educator

 Co-‐operative Management Education program at Saint Mary’s University

 Global Co-‐operation, Inc.

Neighboring Food Co-‐ops Fall Gathering, 2014

OUR GUEST SPEAKER

Global Co-operation Inc

The Co-operative Difference

in Challenging Times:

Why Co-operatives Matter

Neighboring Food Co-ops Fall Gathering, 2014


The Context


The long view…

Energy Crisis

Environment Crisis

Rate of Change Technology Crisis

Urban Rural Crisis

Financial Melt Down

Food Crisis Income

Distribution

Inter Related Problems of a Market Driven Investor-owned Economy

Erosion of Democracy


Trickle up theory of economics




Can a people centered democracy coexist with a capital centered economy?



Capitalism Works – For 20%

1996


Crisis of the Environment




Our economy needs an alternative.


Global Co-operation Inc Why Co-operatives Matter

Our Planet needs an alternative



Human Society needs an alternative




Economy Economy

Natural World

Human Society

Can Capitalism and democracy coexist?


All serves

Capital

All depends

On Nature

The Natural

world

Humanity

Humanity

Capital Is a Tool

Can we imagine: Co-operative Economics


Theory of why capitalism works


Key Beliefs of Neoclassical Economics

Financial Gain is central Motivation

Assumed Market Perfection Progress =

Growth = Scale

“Free Trade” No barriers

for Corporations Lower

Taxation and Minimal Government

Regulation Voluntary by Market

Players


Depressing ?

Hope springs from facing reality not

hiding from it.

Here comes the hope Neighboring Food Co-ops Fall Gathering, 2014


Why Co-operatives Matter We can change the way we think about:

•  Our co-operative’s operations

•  Our economy, •  Our society •  Our planet



Values

Purpose

Principles

Justice

Understanding the Co-operative Difference

The four pillars of co-operation


Understanding the Co-operative Difference Co-operative

Investor Owned

Values & Principles

DNA

Clothing of convenience

Purpose DNA

Maximize return to mainly wealthy

Ethical stance Justice Charity

Bottom line(s) Multiple goals One overriding Others optional

People Members and workers just people

Workers are just people






A Lot of

HOPE

100 Million work in Co-ops

US Food Co-ops NFCA

CDS

NCGA

Environment! Healthy Food!

Local Food! Co-operative values!

Fair Trade!


NFCA Co-operative Links

NFCA

Low income access

Public Profile Saint Mary’s University

UMASS Co-op Certificate New England Farmers Union

Organic Farmers

Anti Hunger

Valley CBA

CFNE Workshops

HOPE!

And more…



So what can you do?


Co-operative Economics

An economy inspired by the co-op business model.

A new definition: The economy is the complex set of relationships that people use to provide themselves with the goods and services they need to live meaningful lives in their communities.

There is an alternative:




Co-operative Economics

An economics inspired by the co-op business model.

A new definition: Economics is the study of how effective the economy is at meeting human need in a manner that allows people meaningful happy lives as an integral part of a healthy planet.

There is an alternative:


Creating the Co-operative Difference

Community

Operations

Values Principles Purpose Justice

Operations Financial

Personnel

staffing

education

Marketing

Accounting

Product

Service

Buildings

Planning

Everything else

Community •  Environment

•  Justice

•  Responsibility

• Economic

• Social

•  Co-operatives

•  Global Co-operation


Educate by doing and explaining


Global Co-operation Inc Co-operative Accounting – Why Measure?

Total Annual Revenue Purchases of Local Products Purchases of Regional Products Purchases of Organic Products Purchases of Fair Trade Products Purchases from Supplier Co-ops Donations to Community

Organizations Total Members New Members Total Employees Total Payroll Percent Full-Time Employee Benefits Contribution to Local Taxes

You can’t manage what you do not measure

You can’t inform without accountable information



Key Opportunities Co-operative Accounting - Measure your differences: •  Sales per member per year •  Community income equality •  Member engagement •  Member satisfaction •  Kilos of CO2 per member •  Community health impact •  % Local food



Key Opportunities

Co-operative Accounting - Measure your differences: •  Bigger the co-op the more sophisticated •  Share with others •  Start simple and build year by year •  Think of measures during the day and

send them in to NFCA to share




Key Opportunities

Limits to Co-operative Growth? •  Market share •  Governance •  Competing amidst rampant materialism Social Media and participation in planning •  If 250,000 can create Wikipedia then?



Key Opportunities Explore Solidarity Co-operative model •  Consumers, workers, community, suppliers •  Interdependence vs Stakeholders

Vertical and horizontal co-operation •  Buy from, sell to and share with co-ops •  NFCA’s “Go Co-op!” Program

Co-op development resources that work Funeral, Phone, Internet, Worker, etc.


Collective NFCA Challenges: Imagine a better world

Imagine 100 ideas for measuring the co-operative difference Imagine 10 co-operative differences your members want Imagine 80% of your members engaged beyond shopping Imagine 5 ways to get members to ask questions Imagine your co-op as the most trusted information source Imagine creating 100 workplaces/year – How? Imagine increasing co-op sourcing by 10 percent



Closing Questions

How many co-ops do you know that failed because they put too much effort into co-op purpose, values and principles? How many do you know that failed or are in trouble because they lost their co-operative identity? What is your greatest risk?



Why Do Co-operatives Matter? Because you are the

best hope my grandchildren have.

Thank you

Tom Webb



LUNCH THANK YOU,

CO-‐OP FOOD STORES!

1)  Member Engagement for Established Co-‐ops

2)  Board Member Grab Bag

3)  Measuring & Communicating our Impact

4)  Planning Successful Annual Meetings

5)  Planning a Loan Campaign

6)  Planning & Executing Successful Healthy Food Access Programs

7)  Using External Investment to Grow Your Co-‐op

8)  Food Co-‐ops & Credit Unions

9)  Food Policy Matters!


PEER-‐TO-‐PEER TOPIC TABLES

A.  Growing Our Food Co-‐ops

B.  Board to Board

C.  Start-‐Ups


AFTERNOON WORKSHOPS

 The New Normal: Growing our Co-‐ops

(In this Room)  Board to Board: Change & Alignment

(Room 212, Upstairs)  Start-‐Up Development

(Room 215, Upstairs)


AFTERNOON WORKSHOPS

THE NEW NORMAL

GROWING OUR CO-OPS AND THRIVING IN A COMPETITIVE LANDSCAPE

NFCA FALL MEETING,

HANOVER, NH SEPTEMBER 27, 2014

Market Context

$0

$2,000,000,000

$4,000,000,000

$6,000,000,000

$8,000,000,000

$10,000,000,000

$12,000,000,000

$14,000,000,000

Whole Foods Trader Joe's Sprouts Fresh Market NCGA Natural Grocers Earth Fare

Major Natural Food Competitors

Increasingly Competitive Landscape

The New “Supernaturals”

Sprouts

•  Founded 2001: –  2011 merged with Henry’s & Sun Harvest –  2012 acquired Sunflower

•  Chain of 165 stores, based in Phoenix, AZ –  Southwest U.S. and now KS, MO, GA, AL

•  IPO in 2013, traded on NASDAQ •  $2.7 B/year, 27% gross, 3% net •  “Healthy living for less” & “Responsible Retailing”

–  Produce=25% of store sales

Lucky’s

•  Founded in 2002 by Bo Sharon –  Lots of former Oats & Sunflower talent

•  Chain of 13 stores, based in Boulder, CO –  CO, MT, WY plus FL, IN, IA, MI, MO, OH, & KY –  MW focus

•  “Good food for all” •  Intersection between Sprouts and Food Co-ops

–  More natural than a Sprouts –  More price-competitive than a food co-op

Natural Grocers

•  Founded in 1955 in Golden, CO –  History as Vitamin Cottage, 2012 IPO

•  Chain of 84 stores, based in Lakewood, CO –  Rockies, Southwest, Pac NW, pushing into MW

•  $500 M/year, 25% gross, 2.5% net –  5-16k sq. ft., 1/3 of mix and ¼ of space to Wellness

•  “What we won’t sell and why” –  Strict product guidelines standards, only Organic Produce

Earth Fare

•  Founded in 1975 •  Chain of 33 stores, based in Asheville, NC

–  Southeast U.S. plus IN, OH, and now MI

•  “Connect communities and improve lives through food” –  Company has a “Food Philosophy” of “selling food as close

to the ground as it gets.” –  “Boot List” of banned ingredients, particularly HFCS &

artificial ingredients

Effective competitors

•  Know the consumers in my market – not just the ones in my store

•  Know that demographics are changing •  See mid-level shopper sales as the opportunity •  Know today’s mid-level shopper could be

tomorrows core shopper •  Set goals to attract more mid-level shoppers

Case Studies

•  Existing Co-op acquires conventional store

•  Existing Co-op merges with another co-op

•  Existing Co-op partners with a start-up group

Existing Co-op acquires conventional store

Opportunity in White River Junction

>> Collaboration & Cooperation

>> Transformation

>> Results

•  Increased sales from $100k to $180k per week •  Profitable within first three months of operaTons

•  Increase in memberships •  Increase in staff morale – beWer pay, benefits

•  Expansion of the cooperaTve model with no impact on our friends at Upper Valley Co-‐op

CO-OPERATIVE MERGER: STRENGTHENING TWO COMMUNITIES

Testing our Values

People’s Food Co-op La Crosse: Established as a buying club in 1973. FY2010 Sales: $10.9 Million FY2010 Members: 4124

Rochester Good Food Store Established as a buying club in 1975. FY2010 Sales: $3.4 Million FY2010 Members: Annual dues paying members ~ < 500

La Crosse, WI

Rochester, MN

Bachelor's degree or higher 24.1% 38.1% Married residents 39.1% 57.6%

Family households 48.4%

(WI 66.5%) 63.0%

(MN 66.2%) % Ethnically white 91.1% 82.0% % Living in poverty 25.2% 8.8%

July 2011 unemployment rate 7.6%

(WI 7.8%) 5.8%

(MN 7.2%) Daytime population change (commuters) 19,395 27,477

Household income $37,476

(WI $49,993) $62,420

(MN $55,616)

Some statistics of interest to the People’s Food Co-op (these are 2012 stats):

•  There are always a lot of good reasons NOT to do something.

•  Our challenge is to weigh the COSTS vs BENEFITS of any given strategy.

•  Being a good manager is as much about knowing what NOT TO DO as it is about knowing WHAT TO DO.

•  Start with a gut check. List the obvious benefits versus challenges.

•  ARE THERE ANY DEAL BREAKERS ON THIS LIST?

We dug in and tried to approach this opportunity systematically –

•  First we created an “OPPORTUNITIES & CHALLENGES”* assessment.

•  Then a “GOALS” sheet

•  From there the board asked me to layout a “MODEL TIMELINE” based upon the development limitations we were operating under.

•  Once the board had a chance to review those items they asked me to generate a “MEMBER ENGAGEMENT TIMELINE” that included a “DRAFT LETTER” that would go to all members explaining the opportunity, the actions taken to date, as well as what we saw as the benefits and challenges.

*Note: Documents bolded above are available from the NFCA by e-mailing [email protected].

At the same time I was working on an “EXPANSION PLAN”* that included market research conducted by two outside consulting firms. A “SOURCES & USES BUDGET” was drawn up that was used to create a set of “FIVE YEAR PRO FORMA BUDGETS” to demonstrate the financial feasibility of the plan. Discussions began between the Rochester and La Crosse BODs in early February 2011. By mid-July I had to present a well formulated case demonstrating a solid plan for the merger AND expansion.

*Note: Documents bolded above are available from the NFCA by e-mailing [email protected].

Process Successes:   The La Crosse store was operating at a high level so that when my attention was turned to focusing 90% on the merger and expansion planning the co-op didn’t suffer. (I eventually hired a store manager for La Crosse, but not until 18 months in to the project.)

 The boards of both organizations found trust in one another and didn’t turn on one another during times that were difficult.

 We over-communicated. We took our lumps and found comfort with open disagreement and hostility toward the proposal. (It was small but very loud.)

  The board and management expressed our support and belief in the proposal, but we didn’t do the hard sell. The vast majority of members saw the benefits clearly.

Process Successes, continued:  We did our homework. We anticipated to the best of our ability what the questions would be and worked to find answers to them wherever we could. We did not however make promises we couldn’t keep, and we were comfortable saying, “We don’t know.”

  When the first vote in Rochester failed to reach the required threshold for passage (it passed with 66.2% in favor – MN statute requires a 67% threshold) the Rochester board conducted a listening tour, called every member, and investigated and decided that there were enough “anomalies” to warrant another vote.

 Once the decision was made to move forward those who were opposed got behind the co-op to help us find success.

Process successes, continued:  PFC La Crosse has built a culture of cooperation among co-ops for many years. Our management team got behind the merger proposal and helped wherever they could. Our members also got it – the merger proposal passed in La Crosse by 83%.   When the first vote missed the threshold (by 11 votes!) the board parted ways with their GM. I worked with them to find an interim GM who I hoped to eventually hire as Rochester Store Manager should the merger become a reality. She was key to building bridges with staff and members.   PFC La Crosse provided operational assistance throughout the merger period when GFS was financially struggling, continuing a history of 5 years of outreach with that co-op during a time of great leadership turnover and upheaval. It was also a time when the co-op emerged from decades of stagnation.

Process Weaknesses:   GFS had a GM who was at odds with his Board prior to the merger proposal and expansion opportunity. The inability of his Board to manage his performance along with my failure at managing his ego led to his undermining of much of the process with staff.   We did not anticipate the level of paranoia that would evolve among the GFS staff. The GFS Board and I met with them on multiple occasions to keep them informed of the process and the plan, but we couldn’t counteract what was going on between visits. We saw everything from a Front End Manager who quit to picket against the merger outside of the store, to ballot tampering during the voting period.   GFS was an annual fee co-op rather than equity based. Determining a member joining date for vote eligibility and finding a way to allocate equity to a loosely defined membership was a challenge.

Process Weaknesses, continued:  As a fee-based co-op that had for nearly 25 years been run as a privately controlled business, there was not a strong tradition of member participation and investment.

  Our collective balloting systems were loose and did not provide for adequate security during high stakes election. We have since revamped – we no longer collect ballots in the stores for any election. All election counts are now conducted by our auditor. We are moving toward electronic balloting within the next two years.

  Cooperative mergers are relatively common, but not in the food co-op world. We were lucky in that we were able to find attorneys with experience in ag co-op mergers, but sadly, the way many ag co-op mergers are handled aren’t necessarily the ones we wanted to emulate.

At the end of September when FY2014 ends for PFC and the NEW Rochester People’s Food Co-op celebrates its first anniversary: FY2014 Consolidated La Crosse Rochester Sales $23.0 M $13.0 M $10.0 M Sales Growth 33.28% 4.00% 90.00% Total Members 7,603 5,180 2,423 Total Employees 210 119 86 FY2011 Pre-Merger Consolidated La Crosse Rochester Sales $15.6 M $11.5 M $4.1 M Sales Growth 8.94% 5.72% 18.98% Total Members 5,118 4,364 754 Total Employees 156 120 36

Existing Co-op & Start-up Partnership

•  Case Study: Gateway start-up group dissolves & members join Mississippi Market. MM opens store in start-up community.

•  Much quicker to open •  Significantly easier to get financing •  Stronger balance sheet & cash flow •  Strong operations from day 1

What does this mean for my Co-op

Questions & Discussion

Thank you

Dave Blackburn: [email protected] Michelle Schry: [email protected]

Terry Appleby: [email protected]

 Thanks to our attendees, guests and supporters  Please fill out a meeting evaluation form to be entered in our end of the day raffle


EVALUATIONS & APPRECIATIONS

 Meeting highlights  Raffle prizes for early registrations and meeting evaluations  Save the date for our 4th Annual Meeting, 21st March 2015.  Please return your nametags at the registration desk!


HIGHLIGHTS & RAFFLE PRIZES

Co-‐op Food Stores Teaching Kitchen Tour Directions:  Leave the Black Center  Drive past Hanover Co-‐ops and Mobil Service Station (rte 120).

 Go through the next two sets of lights.  Be in the left hand lane at the third set of lights and turn left into Centerra Plaza

 Take 2nd right into store parking lot. Neighboring Food Co-‐ops // Fall Gathering, 2014

THANK-‐YOU!


WELCOME!

Thank you to the co-‐operative community for your partnership & support.

WELCOME!

Thank you to the co-‐operative community for your partnership & support. Neighboring Food Co-‐ops // Fall Gathering, 2014

neighboring food co-op association fall member gathering presentation, 2014

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