Co-op Advantage Program: Midwest Stores Cooperate

Not a day goes by when the savvy retailer hasn't asked: How will my store continue to compete in an industry as dynamic as natural foods? Smart co-op retailers are looking to increased cooperation with each other for the answers. One key area examined by stores in the Midwest region was how to leverage the buying power of area co-ops.

The Co-op Advantage Program (CAP) was developed through the combined efforts of fifteen cooperative natural food retailers from the Twin Cities Natural Food Co-ops and the Midwest Co-op Grocers Association, creating a unique partnership with manufacturers and distributors that strengthens cooperative buying power. CAP retailers represent a regional viewpoint that offers product vendors access to 13 diverse metropolitan areas in six states with combined sales of $75 million, giving consumers competitive price breaks as well as enhancing buying efficiency at participating stores.

The goals are as follows:

• Create a model of collaboration that allows natural foods co-ops to leverage buying power.
• Present a high-quality, high-profile image to consumers, including improved price image.
• Protect the co-op network and find innovative ways to do business together.

The TCNFC and MWCGA hammered out an agreement after 16 months and $2,500 dollars. The time and money was spent on research, negotiations, and program development, the results being a well thought out proposal, presented to both organizations. It included a contract for the individual stores for a two- year financial and participation commitment, coordinator job description, and contract for services. Two committees were formed: an oversight committee with representation of one manager from both Cooperative Grocers Associations (CGAs), the buyers committee, with representation from each participating store, and the CAP coordinator and supervisor. We wrote a two-year contract between MWCGA and TCNFC for program administrative and supervision, provided by the TCNFC Executive Director.

It was determined early on in the budgeting process that dues would be assessed to support the program. We decided to assess equal portions to each CGA, since the combined sales volume of each group was very close. The individual members of the CGAs were assessed CAP dues as determined by their CGA.

We also agreed that dues would be reduced as program-generated income was realized, but that the program would never be totally self-supporting. Two reasons led us to this conclusion: 1) it would be important to continue showing retail support through financial participation to our partners in the program (vendors and wholesalers); 2) we would want to expand and improve as quickly as possible, thus returning generated income to program growth.

In May 1999, the group hired CAP Coordinator David Butterfield, a natural foods industry veteran of 25 years. In the six months since the program was launched, it has already doubled its buying capacity, giving individual store buyers leverage in the marketplace at a time when consolidations and mergers dominate the industry landscape. Midwestern co-op retailers now have greater capacity to compete with chains and mass market stores through the competitive prices available via CAP on high-volume products.

The full potential of the program is still a work in progress, although it has achieved a number of successes. Co-op Grocers Associations considering implementation of a buying program should consider the following challenges of a program of this scope:

• Store-specific needs often clash with the impetus toward program centralization.
• Communication is needed within all aspects of cooperative hierarchy.

Given the range in volume of the 15 participating organizations, meeting the needs of the various stores has been difficult. For many of our participants the program has yet to seem much different then the warehouse specials program (Healthy Advantage/Blooming Prairie). However, there is understanding that to make this more then a specials program, a base needed to be set to achieve other identified directions, i.e. demo's, category management, andEDLPs. Specific store challenges range from the number of endcaps to the marketing of the product in print material. For some stores the program is happening too fast and for others not fast enough. A recent survey was conducted to establish both satisfaction and adjustments at the six-month point. Some of the comments from the individual stores:

• Best part of CAP for you?

"The prices are great. Low out of stocks."
"Involvement with other stores."
"The additional choices for determining my monthly specials."
"David's responsiveness, the use of e-mail, especially the new e-mail order forms!"
"Support/participation in alliance with other co-ops. Believe it is absolutely imperative for long term survival and appeal to broader natural food market."

• Most frustrating part of CAP

"A lot of new work/time to distribute and review with up to five individual buyers -- we're gradually streamlining, but still takes more time/energy than previous work on promos."
"Manufacturers that don't want to play ball with us."
"Too much like Healthy Advantage program. Not enough spread between product selection, too often the item was just on special through Healthy Advantage. Line drive promotions very difficult."
"The flier -- I would like to be able to modify it, as we do not carry everything."
"Out of stocks and timing of product. Scrambling to fill when product does not arrive for my endcaps."

• Additional support that would be helpful?

"Category management and demo support."
"Demo support. We need to discuss this with other CAP members to define needs more clearly."
"We are small and can't order big so demos are pretty well out of the picture for us."
"Work with best selling labels. Keep up with plenty of lead time."
"Additional promotion materials -- like signage that matches the flier logo."
"More buyers meetings and stronger communications."

Flow of information is a critical aspect of the ultimate success of the CAP program. Individual co-op leadership needs to endorse the program to buying staff to foster a spirit of collaboration and cooperation. Within participating CAP stores, there still remain pockets of staff members unclear about CAP's role.

Within the day-to-day realm of communication, we discovered early on the need to put more resources into facilitating this. The program's promotional flier distribution underscored this need. At every store we are often interfacing with up to three or four people--general managers, merchandisers, marketing departments, and newsletter editors--depending on a store's size and job descriptions. Keeping track/finding out who is responsible for what decision in the marketing and buying realm at fifteen stores takes an enormous effort. Fear of technology or the lack of its use compounds the problem when store personnel don't have access to or use e-mail.

Geographic challenges also limit the ability to have face to face meetings among the buyers. We conducted one all day session early on in the program that everyone found extremely helpful. The group worked on creating a vision of what the program can do for the buyers and discussed benchmarks for success.

All the buyers agreed that initially the program will take more time, but saw time savings in the future. Being a premiere program in the Midwest and industry recognition were two of the top benchmarks set.

The ability to work through issues and ideas as a group heightens everyone's understanding of CAP. The buyers will continue to meet twice a year, perhaps with regional meetings in between.

We have exceeded our expectations in the first six months of the program, and finding that other stores would like to participate. Given that more volume is a definite goal for our stores, our warehouse and the manufacturers, we want to figure a way to bring others in the Midwest area into the program.

An associate membership idea is being developed along with an updated budget and program changes, given what we have learned to date.

The two CGAs (TCNFC and MWCGA) own the CAP program, and all changes will be presented to both groups for future developments.

We are excited about the potential that this collaboration offers and its ability to help strengthen natural food cooperatives in the market place. Our hope is that we can create a model with the CAP program that can be applied to other areas of operations and marketing in our stores.

Said David Butterfield: "As CAP Coordinator, I'm very proud to be part of something so exciting. In the natural foods industry, we are seeing the natural evolution of business. As our industry grows, the specialization needed to compete becomes more apparent every day. My excitement is that co-ops should be and will be leaders in the development of where our industry is going and how we get there.

"The CAP program is helping its members to see the opportunity in combining their strengths, purchases, and cooperative visions to develop a cohesive identity and strength in the marketplace. From this strength we can build our relationships within our industry. These relationships will enable us to influence and become partners with our vendors, distributors, media, educators, and government agencies. This influence will help us to protect and expand our cooperative visions. Through cooperatives cooperating we can be recognized as innovators and leaders in the natural foods industry. This is the real opportunity that the CAP program provides its members."