Co-op Distributors Close: Mountain Warehouse and WholeFood Express


Two more cooperative food distributors disappeared in 1991: Mountain Warehouse, a small operation formerly serving a large Southeast region -- that story is related in the accompanying story by former board member Joel Landau; and WholeFood Express, a subsidiary of North Coast Cooperative in California -- below is a slightly abbreviated version of an article reprinted with permission from "The North Coast Cooperative Newsletter," a publication of the Arcata, Eureka and Fortuna Co-op stores.


WholeFood Express, the wholly-owned subsidiary of North Coast Cooperative, has been sold to Mountain People's Warehouse, a privately owned natural foods distributor and warehouse located in Grass Valley, California.

WholeFood Express grew naturally out of the need for trucking and warehousing to deliver and store groceries for Arcata Co-op and the many local buying clubs. From the very beginning, when we were just a tiny storefront called the "Humboldt Common Market," the co-op was making truck runs up and down the north coast, picking up and delivering food for the store. Eventually the Arcata Co-op purchased its own tractor trailer and hired a trucker to ensure prompt and regular delivery of fresh groceries.

After another Eureka-based natural foods distributor went out of business, the North Coast Cooperative board made the decision to open a warehouse, anticipating a growing natural food chain. That warehouse opened in 1981 along with [a second store, Eureka's] Second Street Co-op. WholeFood Express experienced rapid growth and after only five years moved to a location with 24,000 square feet of warehouse space. By 1991 it had seven trucks that delivered groceries regularly to natural food stores and food co-ops from San Francisco to Portland. WholeFood Express has also been instrumental in helping many local entrepreneurs distribute their products beyond Humboldt County.

Throughout its history the subsidiary served our three stores completely. But its own ability to turn a profit fluctuated. There were many problems, not least the isolated warehouse location and the other local retail stores not understanding the role of the warehouse in Humboldt County. Also, according to general manager John Corbett, the trend in the natural foods distribution industry is towards mergers and acquisition of smaller companies in order to compete more effectively with larger companies in the standard grocery industry. So when Mountain People's, a growing natural food distributor, offered to buy the warehouse that North Coast Co-op had hatched, the board of directors accepted the offer.

North Coast Co-op will retain a truck in order to maintain continuity with other outside specialized suppliers. We also hope to continue to encourage local entrepreneurs by aiding them with the marketing of their food products whenever possible.

 

Phil Ricord, Director of Marketing for North Coast Cooperative's three stores, was interviewed in October after the announcement of the sale of WholeFood Express and just prior to the closing of its facility in Eureka.

Dave Gutknecht: The article in the North Coast newsletter refers to other local retails not understanding the role of a distributor in Humboldt County.

Phil Ricord: Many local stores who might have purchased from WholeFood Express recognized its link to the North Coast stores. Any support for WholeFood Express was perceived as supporting the North Coast Co-op stores, with which they compete. They saw the health of WholeFood Express benefitting our stores and therefore threatening their business. Also, however, our warehouse was in the natural foods business, and most of the stores in this area have very poor natural foods selection. In that sense the competition from North Coast was somewhat limited.

DG: Certainly the geographic barriers were a factor in the warehouse difficulties. Do you have comments on other factors in the WholeFood Express situation?

PR: There are a number of factors that affect the success of any business, and I'm sure that several of these came into play. Level of capital certainly was one. WholeFood Express may not have been an adequately capitalized operation. There was no capital coming from customers. There were bank loans. There were attempts to sell some part of the warehouse to private investors. WholeFood Express was created as a wholly owned subsidiary of North Coast Cooperative to allow for private investment. Unfortunately, none was forthcoming. Other than that, their only source of capital was profits, and in a very low margin industry.

DG: Would you describe selling WholeFood Express as a healthy change that will allow North Coast to focus on its retail side?

PR: I think that for the long range health of the organization, it's probably for the best. There's going to be some negative impact in terms of trying to solidify what's left of our company into a lean, food-selling machine. It's all one pie: half of our volume was coming from WholeFood Express sales. There's also the human loss, people losing their jobs. There's the service end of it for the stores: delivery, products, computerized services -- all that will be missed.

We hope to get the service we want. We'll be Mountain People's largest customer. Our agreement with them requires us to purchase from them only when their price is the lowest price available on comparable items -- with a number ofexceptions, including produce and bakery ingredients.

DG: Any thoughts on the future of co-op development for your organization and in the region?

PR: In terms of retail grocery sales in our isolated immediate region, any expansion is likely to take place through our corporation or be promoted by us. We are looking with a critical eye at our present expansion into a third store in Fortuna. We realize that any potential cooperative enterprise linked to North Coast Co-op may be somewhat limited because of a widespread perception in the community that the co-op is not in support of basic logging-related industries that have sustained this area for over a hundred years. That perception is going to be a major stumbling block until those issues are resolved, and I don't see them being resolved in the near future. The reality is that this area does need to come up with a new base of industry that is sustainable. Basically, we're living in a very divided community where people find it difficult to be "on the fence." The word "co-op' raises the hair on the arms of a large segment of our community. I'd like to say that the future is bright, but we're going to need to dig in our heels, to make every effort to educate the general population about what the co-op stand

See other articles from this issue: #037 November - December - 1991