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Food co-ops brace for arrival of giant rivals

By John Miller

Associated Press

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

Whole Foods, which boosted second-quarter profit a third to $117 million and whose stock is valued at $18 billion, won't say when it hopes to crest the 1,000-store mark.

But Joe Rogoff, Whole Foods' Seattle-based manager for Northwest stores, insisted the Austin-based retailer isn't trying to muscle out smaller rivals. Rather, he hoped it turns on a whole new audience to natural, organic food.

One indicator for a new market's potential is a successful co-op, said Rogoff, a co-op volunteer in Sonoma, Calif., in the 1970s. "I hope they stay vital," Rogoff said. "They represent ... the foundations of where we come from."

Trader Joe's didn't return phone calls and emails seeking comment.

In Boise, Ben Kuzma hired on as the local co-op's general manager in 2011, just as the store in the capital city's oldest neighborhood was about to be drenched by a wave of competition.

Two regional chains, Spokane, Wash.-based Huckleberry's and Denver's Natural Grocers arrived this year, while Whole Foods opens its 35,000-square-foot store a mile away in November.

So far, Kuzma said 2012 revenue growth has been cut in half, to about 3 percent, for a store that last year grossed $26 million. The impact could be even more significant when Whole Foods opens and lures curious shoppers away.

A veteran of California, Maine, and Arizona co-ops, Kuzma said looming competition forced him to cram a three-year store transformation into just one.

He joined the National Cooperative Grocers Association in February, to take advantage of the group's national buying power. The company has also adopted new accounting standards and boosted employee training.

Others changes are more visible: Fast-growing organic pet supplies now have a separate storefront.

And Kuzma hired a chef to remake the deli — and abandon use of an outside supplier, Sysco Food Services, for prepared items. Kuzma wanted to use the organic food sold elsewhere in the store in the "grab-and-go" section because customers probably figured the store was doing that anyway.

"It's more honest," Kuzma said. "I felt like we weren't walking the walk."

In Austin, the Wheatsville Food Co-op opened in 1976, four years before Whole Foods Market got its start across town. Whole Foods now has more than 300 locations, while Wheatsville stuck with a single store.

That's changing. It plans a second location amid increasing competition: Whole Foods has three stores, including its flagship; popular gourmet grocer Central Market is down the street. Trader Joe's is coming, too.

Like the Davis co-op, Wheatsville hired a designer.

"We're looking at what makes people want to shop at Whole Foods and Traders Joe's, and trying to bring pieces of it to our next location," brand manager Raquel Dadomo said.

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