Heron's Toni Johnson sits down with Robynn Shrader, CEO of National Co+op Grocers (NCG), and gets talking about how the food co-op operate's with a triple bottom-line model — financial, social and environmental. She covers NCG's business model and revenue stream, talks about the recession period when working as a group helped retain suppliers as well as what she thinks needs more attention in the social impact community.
NCG is a cooperative for retail food co-ops throughout United States. Its mission is to provide leadership and systems to help food co-ops rise to a position of prominence. At present, they represent 148 food co-ops operating over 200 stores in 38 states with combined annual sales of over $1.8 billion and over 1.5 million consumer-owners.
So Robynn could you tell us a little bit about what is a co-op grocer, how does it work and what is the value of it?
My membership is made up of entirely consumer-owned food co-ops, which means that these are stores, retail grocery stores — most focusing on primarily natural and organic food but some with a conventional mix that are owned by the members of their community. Consumers buy a share of ownership, they participate in governance, they receive dividends from the business if the business is profitable so they are very empowered to be in charge of what that co-op is going to do. Our co-ops operate with what we call a triple bottom line. First of which is financial because you have to be successful at running a business to do anything else. The second is social impact and what kind of good, what kind of change can they make in the community, based on what that community wants to see. And the third is environmental. And so there’s a real emphasis on sustainable agriculture, environmental practices. Our stores go as green as they can, given that many of them were founded in the 60s or 70s when there wasn't the technologies and how they come together is through our cooperative.
So each co-op is a member of NCG. They pay in capital, they pay dues every year and they receive patronage dividends at the end of the year based on what NCG is able to produce. Our revenue streams come from a variety of places – dues of course but dues are frankly less than 5% of my income stream. Our revenue comes from purchasing contracts and promotional marketing that we do with industry partners. Some pay for service programs and it comes through sharing information with industry partners. So we have a lot of different ways.
We've really grown and the reason we have grown is because these stores banding together have gotten some really, really good supplier contracts that they never would have gotten on their own. So their costs go down and there's a revenue stream through that, through managing those contracts, back to NCG. And really the foundation and cornerstone of what we've been able to do in all of this is the fact that we compile an awful lot of data and we share an awful lot of data amongst our businesses and we leverage the knowledge that comes from that sharing of data.
We have a very robust system called CoMetrics and 100% of my members participate in it, and what they're able to learn about their own business and about other businesses their size, about other businesses that have the same profile, same product mix that they do has just been an enormous help in them getting better. The data collected and provided by CoMetrics also helps us understand the group that we represent so that we can go out to industry and get much better contracts for them, lower their costs and for us to be able to look at that data and see where we need to design programs to help them elevate their game and really compete in this marketplace.
Now you have almost two decades of experience, what have you learned in terms of what makes for a good, robust co-op grocer vs where co-op grocers that still might be struggling right now?
I think it's very important that a co-op have a propensity for change, like looking to change, looking to evolve. We went through a period where there were still many of, what we call, sacred cows, and all of those 'well we can't do that because we've never done it', kind of things like we can't sell wine, can't sell sugar or sweet products because that isn't pure enough — we're a co-op. And just getting past some of that. We went through a period when that was very, very difficult. That has gotten a lot better and I wouldn't say there is not still pockets of that. The ideology versus the business reality. But just a real robust willingness to innovate and learn and change. And change quickly.
One of the things that co-ops have not historically done is change quickly enough to meet market pressures. And so we work on that a lot. We've focused on growth and tightening down costs in just about every meeting we've had with our members for the past 3 and a half years. And coming together and learning and sharing with each other, I will say that through the recession, we did a lot of work in the sixth month that everyone was predicting we were going to have this horrible crash.
We did a lot of work with our members and they tightened up, they hoarded cash and as a group we never fell below zero. There were a lot of retail businesses out there that dipped down 30% and 40% and our aggregate sales, I'm not going to say no one individually didn't dip below, but as a group we never dipped below zero. That was critical for our suppliers. Our suppliers stuck with us and they didn't penalize us for not having the same sales volume. They saw that we were doing something that everyone else wasn't and the reason we were able to do that is because we had built this trust and community that listens to each other and learns from each other.
Earlier we were discussing sort of your vision and plans for the future for NCG. Could you talk a little bit about how you want to grow the business and co-ops more generally in the United States and the grocery business?
We just took on our newest member, Park Slope in Brooklyn, New York, which none of us thought would happen because they are a very unique animal in the co-op world. But they even saw the value of working together with others. So there are some co-ops out there not among our membership but we have what we believe is about 80%, if not 90%, of the existing co-ops in the US. So what we need to do is develop more co-ops. We can either do that through our stores opening more stores and serving more communities. We can do that through brand new grassroots start-ups, which are difficult, time consuming and usually hard to get funded. Or we can do that through a different model and something that we haven't yet tried before, which is converting independently owned grocery stores to consumer cooperatives through acquisitions.
We are in the process of developing a program where we would have a national cooperative that would have retail locations in multiple states and build an infrastructure of operations and scale that we can plug new stores into quickly, much like the larger chains that we are up against every day do, and also provide a safe haven for some of our smaller stores that wouldn't reach those economies. Just based on the size of their community they wouldn't reach those economies on their own but we want to preserve them and so if we can build this greater model we can not only advance the number of co-ops serving communities but we can also preserve the ones that are existing.
My final question is, we're sitting here on the SOCAP conference sidelines in San Francisco. We talked about that there is a lot of interest in food and investment and there is talk about working in food deserts, or talk about improving agriculture, there's talk about providing healthier foods. Is there anything that you think is missing or should be the one focus area where we should be spending more of our time?
I think access to healthier foods for me would be the number one thing and by access I mean investment in the supply chain. We have a very monolithic supply chain in conventional and even now in organic. Investments in the supply chain, making the supply chain more accessible to more communities at a cost that makes sense instead of having large, large hubs of distribution centers that are traveling all this distance and small business paying for that. We need a more disparate distribution system but that's going to require investment because consolidation has been the name of the game for the last 10 years. So if I have my choice for everybody in this building to start working, it'll be working on improving the supply chain for quality food. Not cheap food, but quality food.
Check out more from thought leaders in impact investing and philanthropy in our Influencer Series.