Case For Consolidation

Three general managers share their rationales

By Amy Fields, Josh Resnik and Luke Schell

As the general managers of three Twin Cities co-ops, we want to share why we believe a consolidation of Eastside Food Co-op, Linden Hills Co-op, and the Wedge Community Co-op is the right direction for the future and why we are asking you to vote in favor of this action in your respective elections this September/October. We believe strongly in the co-op model, the need for a robust local food system, and are passionate about each of the three co-ops involved in the consolidation. We have each spent years exploring and learning how we can make our co-ops, businesses, and community institutions thrive today and in the future. Together, we believe we have a stronger future to collectively meet the challenges of a very competitive market and provide successful businesses that can deliver valuable benefits to our owners, employees, vendors/farmers, and the communities in which we have been rooted for decades.

The announcement in late June of the proposed consolidation has created a lot of dialogue in the community. We held a number of town hall meetings, listening sessions, in-store tabling, developed a website with resources, and many other avenues for discussion with our owners. We are pleased that the response so far has been very positive. But many people’s first reaction is: “Why consolidate? I like my co-op the way it is.” The goal in consolidation would be to preserve the things that people love about their neighborhood co-op, but also to establish a stronger business model that is able to thrive into the future and sustain a positive impact on the local food system and the community.

While many of you have engaged in the discussion, we know this is an important decision, and we want to share a clear and concise rationale for why each of our coops are supporting the consolidation. We want to share a little about how the market has changed, what we think we need to do to be successful and also how we think we can continue to nurture many of the things people love about their stores.

Competition

We are facing a time of unprecedented competition in the natural foods industry. As natural, organic, and local foods have become more mainstream, new retailers are sprouting up with new stores, and existing conventional retailers are starting to offer some of the products that the co-ops have been selling for decades. The challenge is that while many of these other retailers may cut corners in their purchasing and business practices, they are winning with greater resources and attractive but sometimes misleading and even incorrect signage. As co-ops, we are more challenged than ever to be better business people and better retailers in order to survive; unfortunately, “business as usual” or hoping things will go back to the way they used to be is not sustainable. This means finding efficiencies in our business without sacrificing the things that are core to our values- paying workers a fair wage, supporting small farmers and vendors with fair prices, and reinvesting in our communities.

Synergies

By coordinating our work, we believe, we can reduce waste from the system and reinvest in people and programs that will make a more positive impact for our owners, employees, farmers/vendors, and community.

Financial:
As cooperatives, we are socially responsible enterprises, but we are not nonprofit organizations. Without making a profit, we are not able to fulfill on our mission. The proposed consolidation is expected to help improve the profitability of each of the co-ops and allow us to better invest in missiondriving programs. Through consolidation, we expect we will improve our buying power on everything from groceries to employee health care to the supplies necessary for running our businesses. We would also reduce redundant costs- currently each co-op pays fees to the national co-op association, costs for annual meetings, banking fees, board expenses, and many other things that would be reduced by combining into one entity. By reallocating some of those savings into better prices for consumers, we should be a stronger retailer in an extremely competitive grocery environment and hopefully drive more sales and thus more profits- feeding the loop. And at the end of the day, with more profits we are confident we can better support our local community and build a stronger local food system.

People: We have been clear since the announcement that we have no intention of laying off any employees as a result of the consolidation. How can that be? The fact of the matter is that we have a lot of work that needs to get done, and we need everyone involved to work together to create a strong organization that serves our owners and the community. There are many positions and tasks across the three organizations that are being duplicated. By redeploying some of our administrative staff to better serve customers and the community, we can do more. Instead of having three human resource directors, as we do now, we could have one, while at the same time dedicating additional HR leadership specifically to recruitment and training, and another to staff support and development. One audit rather than three would free up time and resources for financial analytics we currently can’t do. One marketing department rather than three would sustain healthy owner and community engagement. Likewise, our central commissary can produce large batches of deli salad standards, while neighborhood stores can specialize in unique community favorites. We see the potential with these changes for more appealing jobs and increased job satisfaction, as well as to do more to serve our owners.

Programs: Each of our co-ops has invested in developing practices and programs that benefit owners. Eastside Food Co-op has innovated in community development, through regular farmers’ markets and through the Northeast Investment Cooperative. Linden Hills’ Co-op Explorer’s Program engages kids age 12 and under in exploring-and enjoying-healthful eating. The Wedge developed a Co-op Affordability Program (CAP) to increase access for customers with low incomes. In 15 months, 600 people in the program became new co-op members, and a total of 1,200 are served through CAP. Through consolidation, successful programs like these can be extended to thousands more co-op owners and community members.

Testimonials…

Brianna Darling
Wedge Outreach and Event Planning Coordinator

“As an employee at the Wedge, a lover of good food, an avid supporter of a vibrant local economy, and someone concerned about healthy food access in the Twin Cities, I am thrilled about the possibilities that would come with the consolidation of our three co-ops. We are stronger together, period. Seriously, working together is how we live, grow, expand and transform.

As the Outreach and Event Coordinator, I’ve had the pleasure of working with several Twin Cities co-ops over the last year to brainstorm new ways to reach the community, to plan the Eat Local Farm Tour, and to provide support to Midwest Food Connection (an educational non-profit many co-ops partner with). This consolidation would allow us to partner in a stronger way, by sharing more ideas and resources. I shop at co-ops and work here because I want to play a part in creating a vibrant and healthy new world. This consolidation would be another step in that direction.”

Local Identity

There is a strong business case for consolidation. The biggest concerns have been a fear of losing the local identity of the stores, becoming “too corporate,” and of losing the connection between owners and the boards and leadership of a consolidated cooperative. These concerns have been at the forefront of our discussions with the boards of the three co-ops from the outset of our exploration.

Focusing on neighborhood identity, a key decision of the boards and managers was to keep the existing names on each storefront. We know the importance of the connection owners and customers have with each store and with store employees. Most employees will remain at their current store for the near future.

We have built in a number of measures to ensure neighborhood representation and control. We will form store councils that will report to the board of directors on concerns specific to each of the individual stores and neighborhoods. Each store council will have a budget to support initiatives and programs important to each neighborhood. While central purchasing from large national entities will bring savings, each store will retain discretion on a percentage of purchasing decisions to maintain unique items important to its customers and neighborhood.

Attention to owners’ voices in the business will continue to be a central priority. Surveys of co-op owners around the country show there is often little correlation between the size of the co-op and its responsiveness to owners, and in fact, we will be able to allocate increased resources to owner outreach and engagement.

Summary

At their cores, our three co-ops share very similar missions, values, and beliefs in the importance of connection, community, and the co-op model. We can create a stronger business model that works towards building on this foundation. We can achieve the benefits of better buying power, organizational stability, accelerated growth, and community building. We can work together to create a great model for survival. We can work together to thrive in the rapidly changing economy and increasingly competitive world of natural and organic foods.

Testimonials…

Elka Malkis
Wedge Finance Director

“When I started working at The Wedge in 1979, we had 22 staff (coordinators) and annual sales under $1 million dollars. Now the Wedge has over 300 staff, a warehouse, a commissary kitchen, a catering team and a market/café. We have annual sales of close to $60 million dollars.

‘Yes, a lot of things have changed but the core of what we do and why we do it has not. I truly believe that the proposed consolidation directly feeds that commitment to what we do and why we do it.

‘What do we (co-ops) do? We are the best at selling local foods; We don’t just sell local-we are local Our owners, shoppers and staff are passionate We offer a curated food supply Our staff are highly educated about what we sell and why We know how to run small stores (7,000 to 12,000 sq. ft.) serving distinct neighborhoods Effects on farmers and the environment are an integral part of our decision making processes

‘Why do we (co-ops) do it? What does success of the consolidation look like? More owners Increase the market share going to co-ops More opportunities for employment and career advancement Improve pay/benefits packages we can offer to staff Increase sales and support to local farmers and producers Easier path to financing future expansions and/or additional stores Affordability of implementing new technology

‘The things we stand to gain will benefit our owners, benefit our staff, and benefit the farmers and producers who have supported the co-ops over the decades. From a purely Wedge-centric point of view, this is a game changer for our commissary by “instantly” giving us the scale we need at that facility. From both a co-op movement and Wedge point of view, I would so love to be able to do this. I can see so clearly how giving up those things that are not our core competencies will allow us to redeploy resources in order to better fulfill our mission. Why have three accounting departments, three HR departments, three marketing departments? We could redirect those costs to hire a local farmer liaison. We can use the savings to improve working conditions and opportunities for staff. We can pare back and simplify the “back office” so that more funds are available to upgrade the retail experience for our shoppers.

‘That is why I am enthusiastically voting yes for consolidation.”

 

* Luke Schell resigned as Linden Hills Co-op General Manager effective September 13, 2016. He remains committed to the consolidation and gave permission to use his words.