Building a Cooperative Virtual Chain

The recent changes in our cooperative distribution system inspired wakeup calls to our retail sector and much debate. While the changes in many ways are not comfortable to embrace, there are new opportunities arising from these changes that must be examined for future action.

Last August, National Cooperative Grocers Association (NCGA) initiated a feasibility study of a national purchasing program for core cost of goods with a national supplier. This study incorporated analysis of current buying programs, interviews with retailers of various sizes and formats, comparisons to related industries outside the food co-op sector, and analysis of the economic potential to be gained from such a program.

The reason for this study was twofold: to determine from an informed state a feasible and preferred path for implementation of a national purchasing program, and to put the biggest "economic prize" on the table to inspire our resolve to answer the structural and organizational concerns we face in implementing a national agenda. The largest economic gain should be the best incentive to sort through the issues involved and find the most expedient and effective paths to operating as a national entity--that catchy term, "virtual chain."

In November, the NCGA board held a strategy meeting of sector leaders representing food co-ops of various sizes. The group (see sidebar) served as a broader "focus group" to add their ideas to the two important national co-op initiatives under consideration by NCGA: a move to a national operating structure in general and a specific national purchasing program. Summarizing the two initiatives:

Ultimately, what our retail stores want is results, and it is the job of our regional and national leaders to create the structure that will achieve those results.

Moving from a regional to a national operating structure

A majority of our Cooperative Grocers Association resources are pooled regionally, and a majority of our programs are developed and managed on a regional level. If the purpose of our regional and national CGAs is the same, should we not manage our combined assets in the most effective way? We might well have a regional governance structure and regional programs, but an emphasis and focus on national programs and national strategy will likely be our most effective use of resources. Ultimately, what our retail stores want are results, and it is the job of our regional and national leaders to create the structure that will achieve those results.

Establishing a national purchasing program

Until now our regional CGAs have operated independently when negotiating volume discount or cost-plus agreements with wholesalers. A very important step toward a national operating strategy is establishing a national purchasing program. The potential for us to act as a national bargaining group for better prices has been enhanced by the sale of one regional co-op warehouse and the impending sale of another.

NCGA Strategy Session Participants

NCGA Board of Directors

Holly Jarvis, President
NWCGA, Food Front Co-op, Portland, Ore.

Paul Cultrera, Vice President
PCGA, Sacramento Natural Foods Co-op, Sacramento, Calif.

Randy Lee, Secretary/Treasurer
PCC Natural Markets, Seattle, Wash.

Michelle Schry
CGAMW, Peoples Food Co-op, La Crosse, Wisc.

Dan Foley
TCNFC, Wedge Co-op, Minneapolis, Minn.

Patrice Jennings
CGANE, Greenstar, Ithaca, N.Y.

Ruffin Slater
SECGA, Weaver Street Market, Carborro, N.C.

John Mullé (acting director)
SWCGA
La Montanita, Albuquerque, N.M.

Walden Swanson, Advisor
NCBDC

Corinne Shindelar, Advisor
TCNFC and CGAMW

The NCGA board and strategy group participants wholeheartedly endorsed going forward with a national purchasing program and developed suggestions for its purpose and principles. The purpose of a national purchasing program would be to increase the relevance and economic strength of food co-ops and the system that supports them. Principles to guide the program could include:

• Co-ops will act as a buying agent for consumer members rather than as an agent selling to them.
• Participants provide necessary resources to realize potential gains; we will encourage and reward innovation and entrepreneurial activity.
• No existing participant or CGA should be left in a lesser position over the long term by any new concept of organization.
• Membership is voluntary and open to all qualified participants.
• Leadership uses a team approach to development of the program that includes the NCGA board and regional executive directors.
• All co-op participants should have equitable rights and obligations.
• Change should be induced, not forced.
• Participation and services are scaleable. The program should meet the needs of members of various sizes and types.

The strategy group further identified and grouped some critical issues to address regarding the formation of a national purchasing program. The NCGA board may address some of these critical issues through policy, to ensure that any program developed follows our values.

Small groups: big picture

To assist with thinking creatively about options for moving to a national structure, the strategy session participants formed four small groups. Two of the groups were instructed to assume that the current regional CGA systems did not exist. Two groups assumed the current structure exists but would be modified. All groups were asked to design and assess a system to address current issues facing food co-ops.

The NCGA board and regional executive directors will use the ideas from these scenarios to guide their development of possible strategies to shift from a regional focus to more of a national focus. The group also identified several fears and concerns associated with this transition, as would be expected with change of this nature, and these fears need to be addressed.

The NCGA board of directors now has the task of determining how to guide through policy the concepts of these two initiatives and the input received from the strategy session. The executive directors of our CGA organizations will work together to address the operational issues of implementing these two initiatives.

Leadership and communication are critical as we move forward with this process. The strategy group is committed to helping communicate this message to their constituents, as is the NCGA board. The strategy group expressed strong appreciation and support for the leadership that the NCGA board has provided and continues to provide.

We are at an exciting moment in the evolution of our sector. Although the issues are complex and often uncomfortable, we are making significant progress in positioning ourselves to best combat the market forces arrayed against us. Our success will depend upon our diligence and resolve in sorting through the complexities. For more information about these initiatives, and the outcomes of the meetings described, please contact Robynn Shrader, NCGA executive director; members of the NCGA board of directors; or NCGA strategy session participants.

Robynn Shrader is executive director of the NCGA.

Publisher and Editor: Dave Gutknecht dave@cooperativegrocer.coop
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