The East End Food Coop drama
Behind the cut you will find my e-mail to the co-op's general manager regarding the increasing costs in products, as well as other disturbing changes. Following that is his response, as well as an explanatory document he included. This is FYI if you are a co-op member/shopper. It's a lot of reading, but well worth it.
Rob,
As a longtime member, I've continued to watch with alarm some of the changes that have taken place in the Co-op. In particular, prices on many of your items are totally out of line with what other co-ops and your local competitors charge. On top of that, I was disturbed by how the whole union drive was handled by management.
It now appears that you will be continuing this trend, raising prices in the cafe. About a year ago, you and I had a discussion about why prices were sometimes 50% higher (and more) for many items. I gave you specific examples, including certain cereals and Emergen-C products. You said that you needed to re-examine some items as loss leaders. You never addressed whether you really did pay so much more than Whole Foods or Trader Joe's for these items that pricing them fairly would actually cause the Co-op to lose money.
I've continued to shop at the Co-op because I take the ideas of ownership and cooperatives seriously. Unfortunately, my visits are becoming less frequent, and I fear you will price me out all together.
If you are going exclusively for the upscale market in order to take market share back from Whole Foods, my opinion is that it will be a losing battle and the death knell for the Co-op. You will not be able to compete. The Co-op is not like other businesses, responsible to shareholders for continued growth. It is a true community property, supposedly dedicated to fair pricing and a living wage. If you deviate from this mission, all we will ultimately have left in this community are large chain stores subservient to outside interests and rapacious shareholders.
I urge you to reconsider the Co-op's change of direction.
Thank you.
Sincerely,
His response:
Dear,
please read the attached file to better understand what is going on with the Cafe/Deli. In addition, I can assure you we are not price gouging our shoppers. Sometimes it can be very difficult to understand, but we generally charge a basic margin across the board for product like cereal and EmergenC. While we have narrowed the gap in recent years, we often still struggle to get the same kind of deals as our much larger competitors and have to pay more because of our lower volume of sales. If we had not banded together with over 100 other co-ops to get the deals we do, we would be a lot more expensive.
Our overall store margin (what is left of the money you give us once we pay our cost for those products) is in the bottom half of the pack for the 30+ Northeast Co-ops that we affiliate with through NCGA. Over the last year, we have consistently been at or near the bottom of the list on margin in the cafe when compared to these other co-op's cafe/deli performance. This is an issue of waste and disorganization as well as pricing in the cafe.
We had a profitable summer quarter (3 month financial period), making under $10,000, but are likely to have a loss for the present quarter that will offset that. We are just getting by right now. The primary reason we are not as profitable as in past years is that we have raised our wages, and labor costs (which account for almost a quarter of our expenses and is the largest expense after the cost of goods) over 17% since April of 2006 in order to get closer to a living wage. We also have a few more staff than we used to. Please keep in mind, competitors like Whole Foods are always under 15% of expenses on labor. As a
percentage, they pay less than we do to our staff.
Edward, if we don't run our co-op more efficiently, than our future WILL be in doubt. That is what this is all about in the end. Those co-ops that balance being a business and being a co-op are succeeding. That's what we try to do. Those that were co-ops first and businesses second are generally not around, as at least 300 our our fellow consumer co-ops went out of business in the 90's alone as competition arrived. Just this spring, the only consumer co-op in Pheonix, AZ closed it's doors.
I am working to assure our future and improve our co-op, and I hope you can understand how necessary this all is. Ultimately, the mission I am responsible to is the ends policy our board has created. They feel I am doing a good job there.
I have no interest in going more "upscale" to challenge Whole Foods. I think improved service, creative marketing, and quality product will do that just fine.
If you have any more comments or questions, I would really appreciate it if you could email me back.
Regards
Rob Baran
GM-EEFFC
The attached document:
Rob’s Corner-December
It’s a very busy time with heavier-than-expected sales this fall and lots of work on the table as we continue laying the groundwork to get out of the basement and into a new location within the neighborhood, hopefully sometime in the next five years.
With that in mind, I wish to speak for a moment about our Café/Deli Department. We make good food here at EEFC and are blessed with some really talented cooks. It’s hard to find at other places the kinds of foods we offer here. Unfortunately, and in spite of our product, at the end of the day, we usually lose a pretty penny in our kitchen as it has been the department seeing the greatest loss for many, many years. If we are to be successful in relocating the Co-op, this cannot continue.
Café/Deli has been the fastest growing segment of the co-op market for many years. It’s quite literally the future of our Co-op and is a department that needs to be expanded, developed and improved, rather than downsized or closed. Moving a business like ours is pretty expensive, and it will not happen unless we improve the Co-op’s profitability (we are around break-even these days) and build a large nest egg in the upcoming years. Ultimately, we need a Café/Deli that is as good as or better than our awesome Produce Department--one that provides great products, great service, and is profitable. This can be done, and has been done, at other co-ops around the country.
The biggest issues in the Café are systems/organization, and pricing, and consistency. We have not costed out all the food we make and as we get caught up on this we are likely to find we’re charging a lot less than we need to on some products--juices and smoothies likely being a prime example. For instance, we have recently discovered that we are paying more for wheatgrass than we charge. Before labor, rent, utilities, or any other expenses are considered; we have lost money on wheatgrass.
Additionally, we generally have not been raising our prices in tandem with our cost increases in the Café for several years. We have in the rest of the store; otherwise we would be in big trouble. Café prices today are more reflective of what it cost to do business in 2004, as opposed to in 2007, and we all know everything is more expensive now than it was three years ago. For instance, we presently charge 5.99/lb for the salad bar/hot bar. Our closest competitors are charging 7.99/lb and they don’t usually have any organic or local products on their bar like we often do. Doesn’t make sense does it? Our labor costs are also higher and we have much more expensive ingredients, yet we charge significantly less. That’s obviously a recipe for disaster--financial disaster at least--and that’s what our Café/Deli has been for years--a financial disaster.
We also have big issues around systems and organization. When you look at other successful co-op cafés around the country (we have access to up-to-date financial data for over 100 stores as part of our membership in the National Cooperative Grocers Association), one thing defines the good ones and that’s systems. Everything done in those kitchens comes from a plan, with detailed job descriptions and task lists for everyone, along with clear expectations for productivity and schedules of menus based on what has been proven to sell in the past. This kind of organization can dramatically reduce waste, but unfortunately, we are pretty lacking in this area as we have chosen instead to support a more hectic and unorganized creative process that sometimes produces amazing food, but with a loss in the consistency of our product and a loss in efficiency.
And consistency is definitely an issue with our products. We give our staff too much leeway in how they use the recipes and this creates an environment where product can have very different quality and taste depending on who cooked it. Obviously, we would like our food to have the same high quality and taste every time we make it.
So we have to raise some prices, and we have to get organized--literally changing the way we do business in the Café across the board. This is not going to be easy for us, for you, for staff, for the café manager (we have had several this year already) as we struggle to find the right ingredients for cultural and structural change in the Café.
I would ask several things from you as we begin to make some necessary changes. Try to be understanding if we don’t have that favorite item of yours because we found out it costs us more to make it than what we have been charging. Moreover, I would not be surprised to see us hit some bumpy spots with out-of-stock items as we are sure to have some staff turnover during this difficult transition. And remember, it is not the staff person to whom you may be talking who is at fault, but the managers, including myself, who have allowed this to continue to the point that radical change is the only alternative.
Once again, I ask for your patience and your belief in what we are doing. For EEFC to be a vibrant and thriving business 5 or 10 years down the road, we have to accept change now. The Café/Deli has to be our best department, not our weakest. It has to have the best products, the best service, and be profitable. That is my commitment, worst to first, and if I did not make these changes now, I would be failing in my job, which includes ensuring a bright future, and giving the best possible service to you--our loyal members/owners. Thank you for your consideration.
Edit: My original issue was that they were charging $14-$16 for packages of Emergen-C that could be had at Trader Joe's and Whole Foods for $9-10. There were similar price disparities on some cereals my family uses. These are pretty dramatic differences, and you'd think that by banding together to enhance their purchasing power, co-ops would be able to at least be a bit more competitive with WF and TJ. I don't mind paying a little premium to keep the co-op locally owned and healthy, but I'm sure not going to pay that much more!
Fact is, someone needs to go to the co-op and make a list of prices for all of the items they share in commmon with WF and TJ and see just how dramatic the price differences are. (I'm just the idea guy, by the way!) :-p
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pittsburgh,
