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Co-Opted by Chains, Grocery Co-Ops Search for Niche

Marketing: Once the sole source of organic fare, they face competition from upscale stores offering same products with no obligation.


PROVIDENCE, R.I. — "Food for people, not for profit" remains the theme of the nation's cooperatives, but they face increasing competition from stores where the food is for the people, and the money is for the owners.

Food co-ops, with their roots in the 1960s, once dominated the organic goods market. Members enthusiastically swept floors, stocked shelves and bagged groceries to ensure they were getting natural foods and to make a political statement against big business.

Now, upscale grocery stores that offer the same food but don't require their customers to do anything but pay are sprouting up. The situation has many co-ops searching for ways to remain viable while adhering to their ideals.

"For most stores it's pretty unnerving," said Jeff Voltz, general manager of Seattle's Puget Consumers Co-op, which expanded to seven stores and last year had $47 million in sales. "To face those competitive pressures and challenges, you have to change the way you do business. You have to reinvent yourself."

Here's how co-ops work: Each customer becomes a member by buying a share ranging from $25 to about $200. Earnings from the investment are channeled back into the store.

No member can own more than one share and each gets a vote at general membership meetings. Depending on the co-op, members can decide issues as varied as stocking a kind of tofu to opening a second store. When a membership ends, the original investment is returned.

Most co-ops at one time required members and other adults in their families to work at least one hour a month stocking shelves, ringing a cash register or organizing store records. The idea was to keep costs down and develop loyalty to the store.

But many soon discovered their members were better at shopping than shelving. Some members inflated their hours and others lowered their work requirement by failing to report all the adults in their family.

"When we opened up, we were very naive and thought everybody would voluntarily work," said Joe Holtz, who runs the 23-year-old Park Slope Food Coop in New York's Brooklyn borough.

The store closed twice in its first three years to reorganize its work plan and is one of the few that continues to require members to work.

While some co-ops foundered or folded, others have held their own.

--Co-opportunity in Santa Monica reached sales of about $12 million last year.

--Boston-based Harvest Co-operative Supermarkets generated about $10 million in sales last year.

--The Food Communities Organization of People in Cleveland --known as the Cleveland Food Co-op--posted about $5 million in 1996 sales.

Still, the figures pale next to the for-profit natural food chains. Whole Foods Market, based in Austin, Texas, had $892 million in sales. The chain, which owns the formerly independent Bread & Circus markets in New England, expanded from 41 to 68 stores last year.

Wild Oats, based in Boulder, Colo., has 47 stores and saw 1996 sales of $192.5 million.

"We consider all people that are selling natural and organic foods competitive with our company," said Peter Roy, Whole Foods president. "In the '70s and '80s, frequently co-ops were the best retail outlets for natural food products. But the marketplace evolved and now there are better alternatives."

The competition has divided a once-intimate industry, said Steve Hoffman, editor of Natural Business, which tracks the natural foods market.

"Ten years ago, all these top retailers would gather at conferences and sit in a hotel room and party and talk about business," Hoffman said. "Now, they're cutthroat competitors. They don't talk to each other anymore."

To survive, some co-ops began stocking conventional market items next to natural goods. The major co-ops replaced volunteers with paid staff and changed their approach from "Get it yourself" to "Can I help you?"

"We bag groceries now. We'll take groceries to your car. That's been true for several years and we're working on people knowing that's available," said Betty MacKenzie, education and marketing manager for Harvest, which competes with several nearby Bread & Circus Whole Foods Markets as well as with two major supermarkets that carry natural foods.

Co-opportunity drew on its buying power as the largest purchaser from its food distributor to cut prices, said general manager Will Simon.

"We have gone across the board and reduced everything below suggested retail," said Simon, whose store competes with two natural food chain stores--Whole Foods and Wild Oats.

"I'm not worried about going out of business," Simon said.

In Providence, major supermarkets carry natural foods and a Bread & Circus does brisk business, but people often turn to the Staff of Life Food Cooperative to save money, coordinator Helen Montague said.

"We have people who go to Bread & Circus and check out an item, try it, then order a case of it from us," she said.

Roy, of Whole Foods, called the co-ops lower price claims "ludicrous . . . We have stronger buying power in terms of overall pricing."

As aggressive as the co-ops have become, none believe they will change their core philosophy. Some will expand to avoid being overtaken, others will specialize in certain products, but most will capitalize on their image as the little guy struggling against big business, MacKenzie said.

"With the massive consolidation going on in the natural foods industry, the nice thing for co-ops is the 'small is beautiful' notion," MacKenzie said. "If you buy at a chain, the money doesn't stay . . . in the community. People are aware of that."

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