The slipping viability of the food co-op model

My wife and I belong to a cooperatively run grocery store in a nearby city.  It was founded in 1976, and the city in question is a college town of the Ithaca-Madison-Berkely variety. So, as you'd imagine, the aroma of leftism hangs heavy in the air at its five locations around town. The magazine rack at the checkout area is heavy on titles having to do with intentional communities, honoring the goddess within, sustainable gardening, living off the grid and Buddhist meditation. And Mother Jones.  We belong because you do find cool stuff that isn't available just everywhere, even though we're aware we're paying a fairly hefty price for it.  And we use our wild card, which helps.  And the sesame cashew noodles in their deli are a party for your mouth.

But times are catching up to the way this organization is structured.  Got a letter today saying that "major renovations of two Kroger stores [I've been to those, and they indeed rock] and Lucky's opening on the south end of town . . . have significantly changed our competitive landscape.  We recognize that our shoppers and owners now have many more choices for organic and natural foods."

The store sees that it "needs to make make a number of changes in how we do business in order to remain relevant and continue to provide a cooperatively owned option . . . "

Buh-bye senior discount, for instance.

The letter cites some noteworthy stats, such as that, while sales of organic and "natural" groceries have been rising, co-ops have seen significantly less growth.

They have company: "All food co-ops around the country are having to adjust to this more competitive environment and lower sales growth."

Indeed they will, if they want to retain the patronage of Generation X Finance contributing writer Jeremy Vohwinkle:

In my case, virtually all of the downsides are financial. If you sign up for a food co-op and expect to save money, you might want to think again.

The first financial issue that stuck out was the membership fee. I had to pay $35 just to become a member. Of course I realize it’s going to a good cause so it didn’t bother me too much, but still, shelling out almost a week’s worth of groceries toward a membership fee just for the privilege of buying this food was a bit tough.

Second, raise your hand if you think that food will be cheaper if it’s sold to you directly by the farmer, cutting out the middle man, and not having to be shipped halfway across the country. Yep, that’s what I thought too. Common sense would tell you that if a local farmer can sell food directly to the consumer without needing to wholesale to a grocery store and ship up their product that it would be cheaper than the store. Wrong. I know that depending on the size of the co-op, your location, and the membership size that this may differ, but I was in for quite a shock when I went shopping for the first time.

A dozen eggs were $4.00. A pound of bacon was $8.50. A head of iceberg lettuce was a shocking $3.00. To give you an idea, I can get the those at the supermarket for $1.49, $3.00, and $0.99 respectively. I know, I know, but you’re supporting local farmers and this stuff is probably organic, right? That’s true, but I can actually still get the organic equivalents of those items for less than the co-op right at the grocery store.

Of course, a lot of stuff costs an arm and a leg at, say, Whole Foods or Fresh Thyme, too.  But they seem to profitable.
And therein lies a key fact: They are organized like normal-people corporations. 

Again, we see narrative - in the case of business models for grocery stores, the narrative that a co-op is morally superior to a corporation - coming back to bite those perpetuating it in the tail end.

And that narrative is even manifest within the realm of the corporate model.  Why do you see breakfast-cereal brands like Kashi at "health-food" stores and not Kellog's or Post?  Allow me to cut to the chase: because the former is, according to the narrative made my groovy hippies dedicated to a fair and clean world, and the latter is made by square old suit-wearing white males obsessed with profit.

News flash for the tofu-and-sprouts crowd: you do better when your focus is on what is happening with the money. Staff tends to stay employed, customers tend to get greater value, and owners tend to get maximum return on their investment.

And, actually, the corporation is really a lot like the co-op model.  The first corporations, the groups chartered by European royalty to venture forth and procure tea and sugar and such, were the pooled money of folks who were willing to see if those big ships sailing for India and the Americas could get something going.  The words even sound somewhat alike: Cooperative. Corporation.

So get over it.  Be a real-world organization and make lots of money.  I want to know that those sesame cashew noodles will be around for the foreseeable future.