Conversation Starter

Below is an excerpt from an email that I received from a co-op supporter and my response. Gary's comments are in blue and mine are in black. What do you think?

I am sorry, but I need to take a moment to call into question some of the assertions that Gary has made about PCC, which will also be insightful for those who would like to know more of my perspective about the prospects for our own co-op...

I see PCC Natural Markets as our number one competitor.

I don't believe that the majority of natural and organic grocery dollars being spent in Tacoma/Pierce County are being spent at PCC. It is more likely that spending is spread around between the competitors that the feasibility study identified - Fred Meyer, Met Market, Marlenes, Trader Joes, etc. If PCC ever ventured into Tacoma, well, that would be a different story. But that would be antithetical to one of the seven principles of cooperatives and I don't believe they would ever make that move. Unless, of course, our effort fails and they want to expand their market area.

They are big business with a very good marketing approach. They will give the appearance of being “like” a food coop.

Yes, they have 9 stores with a tenth coming on in the middle of this year. Yes, they have excellent marketing and advertising skills. The fact is: they are a food coop. They are not whole foods. They are simply one version of a food co-op, and they are "big" in every sense of the word.

They get their customers to sign up as “members”. They say they give back 3% of your purchases to local charities to give the appearance of being “locally friendly”.

They have over 40,000 members - the largest in the country for food co-ops. (Incidentally, co-ops want to get their customers to sign up as 'members.') If it is true that they give back 3% of their annual sales to local charities, that translates into over $3 million in donations for 2007. That is more than smoke and mirrors can do to support the local community.

They are big enough to give the appearance of being low cost with “lost leaders”.

The use of loss leaders in a retail setting is the norm. Basically, it means that they sell certain items at reduced or absent margins in order to encourage spending in other parts of the department/store that have "regular" margins.

They like to make claims of supporting local farmers.

They do make those claims and they can back them up with the actual dollars that they spend buying from local farms. They actually recently liberalized their policy so that individual stores can now make their own purchases directly from individual farms, as opposed to their previous arrangement where a farm had to be able to sell to all of the stores in order to get a contract. This means that smaller farms now have access to the shelves at a PCC.

To me they are snakes in our back yard as they are primarily going to push long distance processed foods at a high cost. The working class cannot afford them.

Mmm... don't know how to respond here. This is a complicated issue. Yes, they stock processed foods on their shelves. But are processed foods more expensive than fresh foods? (don't get me started.) By using merchandising tactics like "loss leaders" they can subsidize the lower prices of fresh foods with higher margins on processed foods (theoretically; don't know whether they are actually doing this). My belief is that we should do what we can to make "long distance processed foods" unaffordable - and at the same time, reduce the cost of fresh foods - so that segments of our population that have been marginalized in the fresh/local/organic food movement in this country can gain access to "real" food.

We can beat them with the “open source” business model where we get the membership to volunteer their talents like you and I are doing to provide the functions that will keep overhead low and basically manage the business with a higher level of local knowledge and insight.

What does this mean, exactly? I want my co-op to be managed as a business. Sure, "local knowledge and insight" is desirable, but not at the expense of a well-run, sophisticated business. Membership provides capital and governance (through an elected BOD) - and a few volunteer hours here and there, if that's the majority opinion - and then should let those with the skills and abilities to run a grocery store create a highly functional operation.

We can also get creative to keep the distribution costs low by actually being local and working with other local establishments like the restaurants or schools to give us the volume we need to be competitive with PCC. We can also team up strategically with other local businesses like Marlene’s and Dave’s Produce to work against the likes of PCC and Whole Foods.

Again, your line of reasoning assumes that PCC and Whole Foods are our main competitors, which I don't believe to be the case. Competition is the name of the game when it comes to markets. Markets reward firms that are successful and punish those that fail (to be competitive in the market). Co-ops are not immune to this fact of capitalism. Unfortunate as it may be for some, Marlenes and Daves (along with Safeway and Kroger) would be our competitors. As far as working with other establishments like restaurants and schools: definitely! We would certainly be an asset to them, especially restaurants, who will typically order through co-ops at a bulk discount rate. That is, assuming they are members. Individuals would be eligible to receive the same discount.


That feels better. I love the fact that Gary has given us the opportunity to have this discussion. These opposing viewpoints are representative of some of the finer points of cooperative businesses. This is also an example of what makes the open, democratic nature of co-ops so appealing to me. We can have these discussions, but in the end one paradigm is going to have to emerge over the other. Which will it be? How much overlap of the two is possible?

I can't wait to find out.

In cooperation,

Dan