Food co-ops brace for arrival of giant rivals

By John Miller

Associated Press

Published: Thursday, Sept. 6 2012 9:45 a.m. MDT

In a photo made Monday Aug. 27, 2012, Boise Co-op general manager Ben Kuzma, left, speaks with flooring contractor Emilio Bengoa, right, in Boise, Idaho, about plans to redo the floors at the 39-year-old organic and natural grocer in Idaho's capital city. Remodeling is one of the ways that the co-op is gearing up for competition from Whole Foods Market, which opens its first Boise store in October.

Associated Press

BOISE, Idaho — The Boise Co-op eliminated thousands of slow-selling items, sweeping away the claustrophobic effect that accompanied too many offerings. The Wheatsvile Food Co-op in Texas is opening its second store after 40 years.

And in California, the Davis Food Co-op turned to a designer to revamp its look.

It's no coincidence food cooperatives across the U.S. are making big changes. Many are preparing for the arrival of a Whole Foods or Trader Joe's, two organic- and specialty-food industry giants that are opening new stores nationwide.

Some co-ops are even dispatching camera-toting, intelligence-gathering crews to poach ideas from the big guys.

With demand for organic, natural and specialty food continuing to outpace other segments in the grocery industry, co-ops say they must improve their stores, identify trends and appeal to a changing audience as the competition moves in.

Whole Foods Market Inc. aims to triple stores to 1,000, including in Boise and Davis, Calif.; German-owned Trader Joe's is expanding, too, with a 19 city "coming-soon" list.

"Co-ops had it easy for years" when customers had few other places to go, said Robynn Shrader, head of the 125-member, 164-store National Cooperative Grocer's Association. "It's more complicated being a retailer today."

The modern co-op movement dates back to the 1970s, when customer-owned food stores — including in Boise, Davis, Calif., and Austin, Texas — were organized to provide an alternative to national grocery chains. Despite typically higher prices, shoppers often feel as if they're buying more than groceries, that they are supporting a lifestyle.

They emphasize community roots and, though they've evolved from when nearly everything came in big bulk bins, they still stock an average of 20 percent local products, compared to 6 percent at conventional stores, according to a study released in August by Shrader's group. About 80 percent of co-ops' produce is organic, compared to 12 percent for conventional grocers.

Over the years, demand for natural, organic foods has only grown. The Organic Trade Association reports 2011 sales rose 9 percent to $31.4 billion.

Brent Hueth, director of the Center for Cooperatives at the University of Wisconsin-Madison, said he'd expected an increasingly crowded landscape of organic purveyors, including from conventional stores, to be tougher on co-ops.

That hasn't materialized. "Demand is growing faster than supply," Hueth said. "It's not saturated yet."

Even so, some co-ops have been hurt. In West Des Moines, Iowa, for instance, the Tall Grass Grocery Co-op closed in August, a year after opening and a month after Whole Foods' arrival.

At the 40-year-old Davis Food Co-Op in Davis, sales slipped 7 percent after Trader Joe's October 2010 opening, forcing wage freezes and retirement-plan cuts, manager Eric Stromberg said.

Though revenue has recovered, Whole Foods opens in October in this university town near Sacramento, so additional austerity measures are planned to navigate another dip.

"Honestly, the emotion I felt was anger," he said. "I worked really hard to give our employees good benefits. And I hate to see that nibbled away."

The Davis co-op is going on the offensive, too, enlisting a store designer who also works with Whole Foods to spiff up the place. Stromberg isn't bashful about "shoplifting" ideas from his bigger rivals.

"The goal is you walk away with at least one good idea we can use in our store," he said, describing how one crew was politely asked to leave a San Francisco Bay-area Whole Foods.

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