Brattleboro Food Co-op: Coming of Age

In 1988, its thirteenth year, the Brattleboro Food Co-op more than doubled its size, changed its membership structure, remodeled an entire store and changed locations. You could say it was a busy year for the co-op. Changes which have taken place within the organization are reflected in the physical changes of the storefront, and in the sense of new energy and accomplishment shared by those who guided the cooperative through those changes.

Laying the groundwork

Why did the co-op undertake these major steps? As in many other cases, changes in the competitive market environment prompted changes in the cooperative's internal environment. During the period prior to 1988, according to former President Donald Freeman, the board of directors of the Brattleboro Food Co-op received a "dose of reality" when the food co-op in the Hadley/Amherst area, less than an hour away, closed under pressure from a larger natural foods chain, Bread and Circus. Another such dose, much closer at hand, was the remodeling of the Grand Union store in Brattleboro, increasing its floor space and drawing customers with new products and attractive displays as well as supermarket convenience. There was pressure to change if the co-op was to survive.

The Brattleboro market

Although a city of less than 15,000, Brattleboro has a market population of some 60,000. Its scenic southern Vermont surroundings and location within two hours of Hartford and Boston bring a sizeable number of alternative culture and summer residents, and support a larger than normal natural foods market. Suppliers in the area include After the Fall, Stow Mills, and Northeast Cooperatives. Northeast, which last year moved to Brattleboro from its old location in Cambridge, is the co-op's major supplier and the region's largest distributor of organic produce. Northeast also provided additional assistance, including consulting by its former manager, Fred Stapenhorst, prior to and during the Brattleboro Food Co-op relocation.

An additional catalyst for change during this period was Carl Hirth, a co-op founder and a strong presence throughout its earlier growth, who resigned his store coordinator position and encouraged the implementation of a better management structure. The co-op had been run by co-equal coordinators, with the board being actively involved in decisions such as what products to sell, as well as policy and planning. The co-op was growing quickly, open more days per week, and the management needed to catch up.

Outside consultants and an in-house study pointed to problems of inefficiency, friction among staff due to duplicating functions, and a mostly volunteer work force requiring training and retraining. In the fall of 1986, the board voted to hire a general manager, conducted a job search, and in December hired staff memher Alex Gyori as general manager. There was some resistance to the change in the management system, and there also was much discussion over whether or not it was a waste of resources to hire outside consultants.

With the hiring of a general manager, new personnel policies were needed, and the board had to decide what its function was in the new system. Assisted by formal training of the entire board, President Freeman pushed for clearer procedures, clearer financial reports and increased effectiveness of the board, and attempted to strengthen the flow of information to the board and membership. Thus, the evolution and maturing of the organization laid the groundwork for the more rapid changes required to meet the opportunities which arose during 1988.

One outcome of these changes was a new mission statement, which had not been revised since 1975, and which helped the board to clarify what the co-op is.

 

Mission Statement

The Brattleboro Food Cooperative strives to provide quality products, at reasonable prices, in an environment which is organized fairly and honestly for its members, employees and the community. The Co-op:

  • supports the active involvement of its members;
  • supports local and regional growers/producers, as well as other cooperatives
  • promotes awareness and education of social, poltical and economic issues as they relate to food.
  •  

The pace accelerates

By the beginning of 1988, everyone in the co-op agreed that growth had produced a space crisis in their 5000 square foot facility. On January 30, the pace of events accelerated when Finast, a local supermarket, closed. Speculation ran through the community as to what business would move into that space. The co-op board heard the report of its own space options committee, then authorized Gyori to prepare a plan for renovation of the current co-op space and also to look into leasing a building across the street. But the latter idea was dropped because the building would have required extensive adaptation for the co-op's use.

Speculation was widespread that the empty Finast would be occupied by P & C, an 11,000 square foot supermarket located very close to the co-op. In February, that move was announced, and P & C auctioned its equipment. Gyori bought it -- cases, freezers, shelving -- for $3500. "Produce cases which normally sell for $10,000 were selling for $125," he said. Transportation and storage of the equipment cost another $5000. All this on speculation, since the co-op's direction was yet to be determined.

At its February meeting, the board gave its consent to bringing in Rex Stewart of the Renovations consulting and design firm. He spent three days in mid-March studying the situation, and asked the critical question:

Is the co-op concerned about longevity? The options he saw were: (1) Remain in the current space and renovate it; he estimated that the co-op would outgrow the space in eighteen months, but that if competition moved into town, such as Bread and Circus, the co-op stood to lose a large part of its membership. (2) Move to the P & C space and sublet a portion to a complementary business, such as a bakery or tofu operation, to help pay the rent. (3) Move into the full P & C space.

A committee analyzed the options, with the goal of making recommendations to the board prior to the annual meeting slated for May 1. They settled on the third option, keeping open the possibility of sharing space with another business.

Brattleboro Food Co-op

Brattleboro, Vermont

New store opening:November 28,1988
Square feet:(total) 11,000
(selling) 7,000
Members:1500
Sales (first half 1989):$1,362,308*
Total discounts:6.1%
Gross margin:26.3%
Total labor expense:18.7%
Total occupancy expense:5.4%
Total operating expense:4.0%
Other Income/expense:-0.7%
Netmargln:-2.6%

 

DEPARTMENT SALES

 marginpercent of sales**
Meat18.4%9.0%
Groceries30.1%35.4%
Produce28.9%19.2%
DaIry22.8%6.2%
Liquor23.9%4.1%
Bulk37.4%13.3%
Dell60.3%4.1%
Cheese32.3%4.3%
VitamIns45.1%2.4%
HABA35.4%3.2%
Taxables19.2%4.8%

 

*All financial performance figures are preliminary and are for the first half of 1989.

**gross sales before discounts

A decision on the move was not on the agenda for the annual meeting. Rather, the move was discussed, said Gyori, "as a kind of test of the waters." Of the approximately 150 people attending, some raised concerns about the move, largely about the physical plant of the P & C space. No vote was taken at the meeting, but Gyori says the board perceived a mandate to proceed with negotiations, and describes the general reaction to the idea of a move as one of excitement.

In June, Gyori announced that he had completed negotiations on the P & C building and had a tentative contract for the space. The agreement called for rent payments beginning August 1, two months before the store was scheduled to open for business in the new location. Following board approval, the contract was signed in July. The commitment was made for a ten-year lease with option to renew for an additional five years.

Membership role

The prospect of an imminent move brought to the fore the limitations of the co-op's old membership system, which required labor but little equity investment by the members. The old system required a small deposit and a quarterly work contribution. The board proposed dropping the labor requirement and establishing a $55 member share. Focusing on the need for communication with and education of the general membership concerning the proposed changes, the board formed a six-member liaison committee. They distributed "Why Move," a brochure describing the choices, and sent a letter to all members calling them to a special meeting on July 7 to discuss changing the membership system to an equity system. "It was a fast pace, but all issues were considered," says the present board President, Ruth Tilghman. At the meeting, some members opposed the amount but approved the concept. The share amount was set at $40 at the August board meeting.

 

The Membership Package

Becoming a member of the Brattleboro Food Co-op requires purchase of a lifetime share for $40, payable in full upon joining or by paying $20 down and the remaining $20 over two quarters. The share Is refundable upon leaving the CD-Op, less a $10 administrative fee. Member benefits indude the following:

  • 2% discount off the shelf price;
  • ownership and voting privileges in a community business;
  • free child care while shopping;
  • check cashing;
  • extra 8% discount for working members;
  • additional case lot discounts;
  • discounts at some local businesses;
  • seminars and other forms of consumer information.
  •  

The plan for increased member capital helped leverage additional debt capital. In late July, the co-op received permission from the state of Vermont to get loans from members, of $2,000 or more in three- or five-year notes. The loan drive started August 7, and by the end of September the co-op had raised $50,000. Vermont National Bank agreed to a substantial business loan, and the Cooperative Fund of New England also assisted.

Blueprints for the new store, drawn by Renovations, were not ready until the middle of July. Moving date was set for late October. But that was delayed by a month when large cavities were discovered under the floor. Plans to pour a leveling layer of concete on top of the old surface were abandoned, and the entire floor had to be taken out and rebuilt. At that point, Gyori and Tom Rowe, floor manager and the coordinator of volunteer labor for the move, began to twist the co-op slogan, "We own it," to "It owns us."

Volunteers contributed a significant effort in creating the new store. Some 200 people responded to a mailing sent prior to the special meeting in July. Plumbing, framing, and most of the sheet rocking were done by contracted crews, while volunteers took out old ceiling tiles, which were painted and replaced, and built shelves. Gyori and Rowe poured the concrete for the compressor room floor, a job which looked small, according to Rowe, but which became a Laurel and Hardy affair as they staggered down planks with tilting wheelbarrows of cement.

The move was finally scheduled for Thanksgiving weekend. Volunteers packed up the old store Friday, and about a hundred members helped move on Saturday and Sunday. Northeast Cooperatives lent a truck and driver, and one member had a 20-foot truck. On Monday, November 28, the Brattleboro Food Co-op opened for the first day of business in its new location. On the following Saturday, December 3, they celebrated the official opening.

The new co-op

In planning the new store, the board shared a strong desire to make the co-op a continuing vital presence in the community, and wanted to ensure that the co-op did not have a "narrow focus," serving a small segment of the community. For example, the meaning of the co-op was challenged by such issues as whether or not to sell meat, which was hotly debated at member meetings. A member survey clearly pointed up the need for growth and change. "Growth was bad, to some members," Tilghman recalls. Former President Freeman agrees: "There is always a certain mourning in losing some of the old things." Now that the move has been accomplished, Tilghman looks at the new co-op as "a larger intimate space."

Along with changing the membership structure, pricing was changed as well. Whereas the shelf price formerly was that for working members, with a surcharge for others, now the shelf price is for non-members, with discounts for members. Working members nevertheless did not experience a price increase and still comprise about 40 percent of sales. According to consultant Rex Stewart, there is a continuing need to streamline labor and reduce prices.

The new Brattleboro Food Co-op is cleaner, bigger, easier to shop, accessible to the handicapped, and offers a wider range of products than before. Advertisements on local radio stations spotlight departments such as health and beauty aids, well stocked with vitamins and herbal products, and the meat section, carrying custom cut natural and organic meats. Interestingly, in planning the new store, the board eventually decided that carrying meat, like other product line issues, was a management decision. Originally slated to be self service, the meat section became full service after an experienced person was found, and the department now accounts for over 8 percent of total sales.

Other changes include a vastly improved honey and oils section, replacing dripping five-gallon drums with a nitrogen flush pump system designed by Rowe. Child care space has increased, as has the number of cashiers. The co-op also now offers a deli and a 20-seat cafe (see sidebar). The newsletter, "Food for Thought," continues to provide a forum for member communication.

The co-op emphasizes services provided to customers, remembering that it's not quite the same as when everybody is a friend or neighbor. While some members may regret the loss of the funky old space, it is hoped that the new vitality of the co-op will banish regrets, and that the efforts to keep open the lines of communication will prevent loss of intimacy.

Adding a deli

Manager Alex Gyori commented on the new department:

The new store provided an opportunity for a deli, a feature that we wanted for a long time but never had room for. Now we have a deli as well as a 20-seat cafe, and despite an initial period of concern are very happy to have it.

The main thing going for us is that one of our staff had had training and experience in setting up this kind of an operation. The quality of the food is excellent; everything is prepared on the premises. The result, at least from the customers' point of view, is a classy and healthy alternative to traditional deli fare.

There are three points, though, that were not given adequate consideration: First the deli offered fare that was familiar to our members, but they had always prepared it themselves. The necessary change in "shopping culture" that was needed took us a little by surprise, but is totally understandable in hindsight. Secondly, many people who used supermarket delis looked forward to our new deli, but were put off by the price differential. The old adage, "You get what you pay for," was certainly true in this case; to get excellent quality food, excellent ingredients and work were required. Potential customers had to get used to paying more, and appreciating what they were getting. Lastly, our location proved an inhibiting factor to fast growth. That is, as a lunch destination we are a little off the beaten track, and there is not a population surrounding us here that pays much attention to deli food.

The net result is that the deli had a pretty slow start, and we were very concerned about whether it was going to make it. Eight months later it is thriving and is close to paying for itself, plus making some money for the store. I suspect that if we were in a larger urban area, the sales volume would have grown faster. We opened the store at the beginning of December, which may have slowed the initial growth. Sales averaged under $2000 per week during the first quarter; eight months later, they were averaging $2600. We feel that the deli will be a profitable department when it starts averaging above $3000 per week.

Post script on finances

Manager Alex Gyori offered some additional comments by way of an informal mid-year evaluation of the move:

The second quarter report shows that despite a much greater volume of sales than we expected, we are following the general projection for the first year of business in the new store and have shown a loss again, as in the first quarter. I actually expected to come close to breaking even this quarter, based on the tremendous increase in sales but assuming that we would do better on our margins in this quarter than in the first. However, we fell 2 points short of the needed 28 percent. That is probably the most important factor, because achieving the target margin in itself would have taken us to the edge of a profitable quarter.

The second factor is of course expenses. We decided late in the day to have an official "grand opening" in June, and we spent over $3000 for that. Payroll was very close to what we projected, but I did let it grow slightly to fill some of the still outstanding cracks in the staffing pattern. Also, a very low staff turnover in the last three years, much to our benefit in many senses, has put half the staff at the top of the pay scale. I actually think that this is to our long term advantage, but in the short term it is not helping our efforts to control spending.

Other expenses are fairly well in line with projections, except supplies (office, cleaning, small equipment), which were more than twice what we had budgeted.

We should stabilize during the third quarter, because many move related expenses should slow to a trickle, then stop. The fourth quarter has the best chance of being profitable, provided the sales at least stay the same.

Our cash flow has of course been of concern, and we have been running in the red since the end of January, when our capital funds ran out. Spending $74,000 more than projected for the move put us into a hole which we are working hard to crawl out of. Our general projection for the first year was that we would lose money, but I feel that we have the raw material -- sales -- with which to do better than that. Obviously, some measures must be taken to assure us of profitability soon, and we are in the process of doing this.

The new store is a big leap for us, but it should be a sound one. The response from the members has been overwhelmingly positive. As of the end of the first quarter 1989, member equity was over $50,000, and member loans totaled even more than that. We mainly get raves and compliments for what we have accomplished and are accomplishing. That's what makes it worth the effort.

See other articles from this issue: #024 September - October - 1989