Half Full -- and Half Empty
Results from this year's Retail Cooperative Operations Survey show that 1992 was another year of strong growth and overall profitability for these stores. Sales for all retail cooperatives grew on average by 13 percent over the previous year, and five out of six stores were profitable.
Scott Beers and I, collaborators on this annual Cooperative Grocer report, are pleased to present another set of statistics and commentary on the practices and performance of cooperatives. We hope that our readers working in and with cooperative food businesses will appreciate and use the data and analysis presented here. It offers a unique tool for comparison with other co-op retails as well as with privately owned businesses.
Attempting to evaluate the performance of retail cooperatives shown by the survey brings to mind the old saw about whether the bottle is half full or half empty. With over 90 percent of reporting cooperatives showing sales growth and with over 80 percent of them profitable, certainly the overall results look good -- at least half full.
Additional strong positive indicators of retail co-op performance are found in their across the board increases in gross margins, and in a common measure of productivity, sales per square foot, where our medium and large stores report figures well above those by natural foods retailers at large.
Yet even on their own terms, cooperative's results give cause for concern, and comparison with figures reported by other retailers shows that co-ops lag behind in several key respects. For the natural foods industry, the niche in which most (but not all) retail co-ops compete, 1992 was a tumultuous year. In an industry with overall strong growth, sustaining a long term trend in natural and organic foods, chains of retail stores expanded in a dramatic fashion while the market share captured by independents, especially small ones, declined. Whereas in previous years cooperatives recorded sales increases somewhat ahead of privately owned stores, this time they fell slightly behind. Net margin among profitable cooperatives actually declined from the previous year, and bottom line figures fell well behind that of private stores.
Additional indicators of weak performance are found in the very low ratios for return on assets and return on equity. As we comment in our survey analysis, the return ratios as well as other measures of asset management point to weaknesses and conservatism that do not serve the member owners well nor position co-ops for growth in a rapidly expanding market.
The more we look at the market context of co-ops' performance, the more their survey results make the bottle look half empty. That context may be difficult to see at many stores, since as noted they continue to grow strongly and profitably, and since they are mostly single independents without other cooperatives nearby. But growing numbers of retail co-ops, having once led their local market, now face sharper competition from privately owned retails, many of them new stores featuring better selection and locations. With growth rates and profitability that are lower than those for natural foods retailers at large, and with overly conservative asset management also holding them back, cooperatives will capture less and less of the expanding natural foods market.
These troubling measures reflect a conservative organizational culture common to many co-ops, stemming from their democratic structure and an ethos that de-emphasizes profit and new development. How can the growth of existing businesses be strengthened, and where will new cooperatives come from? If we believe that cooperatives are a great idea and a model for ownership of business resources, we must be committed to their growth in order to ensure their survival.
Reflecting on past performance, retail co-ops have much to be proud of. Looking to the future, there is much to be concerned about. These accomplishments and concerns are reflected not only in the survey results and commentary but also in this edition's other pages -- and in the intended editorial direction.
As much as hard numbers and news, cooperatives need an evolving and shared set of goals. Cooperative Grocer, through my efforts and those of its other contributors, continues to promote greater sharing and improved professionalism among retail cooperatives. Toward that end, your further suggestions and reports are welcome. Clearly, you are welcome to mine! I find it increasingly appropriate to exercise my editorial position so that these pages contribute to development of business practices and a distribution system that seem most likely to sustain and expand consumer cooperatives. Therefore (with a wink at FDA prohibition of claims made on labels), here is my- DISCLAIMER -
We offer no disclaimers.
Material in these pages is shaped by a perspective obtained from today's cooperative leaders. Yes, these businesses and individuals are out there -- and also in these pages.