Thoughts on the Market Place - Why Enron will Never Happen Here

Two things came across my desk recently that I thought you, as owners of the country’s largest single-store natural foods co-op, would find interesting. Together, they offer valuable perspective on our place among our peers and competition.

One was the June issue of Natural Foods Merchandiser (NFM) with a lead article on the market overview (for 2001) for natural food retailers. The other was a press release from Whole Foods Market describing their growth over the past year (available at http://biz.yahoo.com/prnews/020508/daw028_2.html)

The market overview in NFM divides its survey group into various sizes and specialties. Among natural foods stores most like the Wedge, the average size is 15,005 sq. ft. the average age of the store is 17 years, and the average wholesale value of inventory is $200,000. By comparison, the Wedge has 11,700 sq. ft, we have been in business for 22 years, and we typically carry $600,000 in inventory. This means we have three times more inventory crammed into 22% less space. How can this be? It’s because the average number of customers per day for the survey stores is 355, while at the Wedge we see 2450 customers per day - 6 times as many. The survey stores average $422 in sales per square foot; at the Wedge it is $1,624. If the last time you shopped here you thought it seemed busier than other grocery stores - you were right.

In the report from Whole Foods Market, I learned that during this past January through March, the average rate of sales growth per store (over the previous year) was 9.1%. During the same quarter the Wedge grew 10%. While these figures suggest similarities, the likenesses do not go very deep. For example, during January-March Whole Foods stores earned 11% profit, compared to 5% at the Wedge. There are other enormous differences. Whole Foods has 132 stores, with an average size of 28,800 sq. ft (over the years, they bought out Fresh Fields, Bread & Circus, Wellspring Grocery, and Harry’s Farmer’s Market). They have over 23,000 employees and long-term debt of 231 million dollars. We have one store, 225 employees, and only 140,000 dollars in long-term debt. We are also owned directly by members who shop here, each of whom has an equal vote, and all profits stay here in this community. Profits are not funneled to faraway investors who may never have seen the store.

In a co-op, there is no possibility of an Enron-style debacle ever occurring. The eight shares of stock you buy to become an owner of this co-op are not traded on the stock market. Their value will never increase nor decrease. Overstating our earnings will not increase the value of the stock. "Creative" accounting practices will not increase the value of the stock. No managers are paid with stock options, because the stock has no "value" in the open market (it cannot be sold to anyone, except back to the co-op). Besides the lack of opportunities for unethical personal enrichment, there are fundamental reasons why your co-op’s name will not be festooned on the financial scandal page of the daily news.

Unlike privately owned stores, we do not exist in order to earn a profit - we earn a profit in order to exist. The Wedge was conceived in a backyard on Aldrich Avenue, by neighbors who wanted control over one of the most basic aspects of their lives: the food they ate. Margaret Lund, Executive Director of the North Country Co-op Loan Fund, says that co-ops are about "giving people the means to actively participate in the stewardship of the institutions that affect their lives." Together, we have built a wonderful thing. Thank you, and please, please actively participate - vote in the Board election this fall.