Our Community Market: A New Kind of Food Store A Feasbility Study Prepared by: The ICA Group 1330 Beacon St., Suite 355 Brookline, MA 02446 www.ica-group.org TABLE OF CONTENTS Acknowledgements ......................................................................................................................... iii Executive Summary .......................................................................................................................... iv Our Community Market: A New Kind of Food Store ........................................................................ 1 Introduction ..................................................................................................................................... 1 Store Overview ................................................................................................................................ 3 Value Proposition ............................................................................................................................. 3 Competitive Landscape .................................................................................................................... 5 Cost Structure .................................................................................................................................. 6 Distribution ...................................................................................................................................... 9 Our Community Market Produce Prices ...................................................................................... 9 Cross Dock Facility ..................................................................................................................... 10 Cross Dock Facility Costs ............................................................................................................ 12 Operations ..................................................................................................................................... 13 Annual Store Costs ..................................................................................................................... 13 Store Labor ................................................................................................................................ 13 Administration ........................................................................................................................... 15 Merchandising ............................................................................................................................... 17 Limited Selection........................................................................................................................ 17 Limited Selection: Chicken Example........................................................................................... 18 Store Format .............................................................................................................................. 18 Co-Branding ............................................................................................................................... 20 Financial Feasibility ........................................................................................................................ 22 Sales Projections ............................................................................................................................ 22 Basket Size & Customer Visits .................................................................................................... 22 Gross Margin .............................................................................................................................. 25 Cost Structure ............................................................................................................................ 26 Participation & Governance ........................................................................................................... 27 Multi-Stakeholder Cooperatives .................................................................................................... 27 Development ................................................................................................................................. 31 Capitalization Strategies ................................................................................................................ 31 Market Analysis .............................................................................................................................. 35 Appendix A: Pricing Strategies ....................................................................................................... 38 Appendix B: Distribution ................................................................................................................ 39 Appendix C: Weekly Operational Data ........................................................................................... 43 Appendix D: Annual Store Operations Costs at Maturity ............................................................... 44 Appendix E: Consolidated Financial Projections ............................................................................ 45 Appendix F: Central Administrative Expenses ................................................................................ 47 Appendix G: Typical Employees per Hour ...................................................................................... 49 Appendix H: Community Engagement Strategies .......................................................................... 51 Appendix I: Employee Engagement Costs ...................................................................................... 54 Appendix J: Governance Models .................................................................................................... 55 Appendix K: The Cooperative Think Tank....................................................................................... 58 Our Community Market - Feasibility Study Page ii Acknowledgements We want to acknowledge the groups that helped make this work possible with their generous donations, the Eastern Corridor of the National Cooperative Grocers Association, NCB, and Capital Impact Partners, as well as cooperatives that provided funds: Seward Co-op, Mississippi Market, New Pioneer Food Co-op, Outpost Natural Foods, and Equal Exchange. We would also like to acknowledge the many groups and organizations that helped work on this project. Our thinking on the difficult questions around distribution was headed by a team that included Michael Rozyne, Jesse Singerman and Sue Futrell from Red Tomato, while the work on governance and consumer participation was led by Mark Goehring and Leslie Watson from the CDS consulting cooperative. Finally, we would like to thank the members of the think tank for their willingness to share information and provide feedback on this highly collaborative project. We would also like to thank Cabot for generously allowing us to use their “Our Community” name and logo, which was designed in house, but never commercially used. And finally, we would like to thank Ruffin Slater of Weaver Street Market and Walden Swanson of CoopMetrics for generously giving of their time and expertise on every aspect of this project. About the ICA Group The ICA Group is a national not-for-profit consultancy whose mission over that last 36 years has been to promote human and economic development through the creation of employee-owned businesses and community-based projects that save and create jobs for low-income people. ICA believes that all people should enjoy economic self-determination as a means to foster an environment where workers’ livelihoods and the communities where they live are stable and secure. We strive to facilitate such a society by acting as a catalyst for groups working to ensure workers have a meaningful say in their own economic future and through the development of firms that put these ideals into practice. www.ica-group.org This Project was made possible by the generous donations of the following organizations: Our Community Market - Feasibility Study Page iii Executive Summary Despite increased consumer demand, not enough people have regular access to locally sourced, high quality natural foods at their local grocery store. The problem is two-fold. On the one hand, most grocery stores stock very little local food because they are unable, or unwilling, to deal with the limited volumes and less predictable supply from local producers. On the other, many low income consumers live in areas with limited grocery options and where local products are available, they are usually priced beyond reach. To address these challenges, we need a store that provides year round access to high quality, healthy produce and prepared foods at a reasonable price. This requires the purchasing power that comes with economies of scale, but also a structure that aligns the interests of the firm with those of the communities in which it operates. Food coops, with their commitment to health education, locally sourced fresh produce, and support of small farmers and producers are already part of the solution. However, new food coop development isn’t keeping pace with the grocery sector overall and the cost structures of stand-alone co-ops create price barriers for many consumers – a new kind of food store is necessary. Our goal was to assess the feasibility of a cooperative grocery store that features How Our Community Market fresh, local foods at prices that match or beat Will