Stormy Weather in California

The past year has been a difficult one for Associated Cooperatives Inc. (ACI), the wholesale in Richmond, California, and for some of its member retail co-ops.

Consumer Cooperative of Berkeley (CCB), the largest member of ACI and the largest retail food co-op in the U.S., has been in a period of retrenchment since closing several of its supermarkets early in 1984, and showed a loss again in 1985. Of the remaining CCB stores, the Telegraph Av. and Shattuck units are doing well, but (judging by board and management reports in the CCB Co-op News) the University Av. supermarket and CCB's newer stores -- North Point Co-op in San Francisco and Savories in wealthy Marin County -- are not doing well.

The Berkeley Co-op formerly accounted for 75% of sales by the Associated Cooperatives warehouse, and CCB cutbacks, along with measures by Associated to correct its own prior financial mismanagement, have been weakening relations between the two organizations. ACI, for many years the largest U.S. consumer co-op wholesale and now the last of the co-ops from the 1940s to cease warehousing, has been on a decline since a peak in sales of over $50 million four years ago. It has been the largest distributor of CO-OP Label groceries.

Substantial losses by ACI in 1984 ($250,000) and 1985 ($1,200,000) led to retroactive charges to Berkeley and the other member co-ops for underbillings by ACI, and for inadequate member contributions to working funds through which the warehouse was capitalized. Much of CCB's part of this remains to be paid.

In late December, ACI put the Berkeley Co-op on COD, whereupon CCB stopped purchasing from the warehouse, switched to another wholesaler (Certified Grocers) as its main supplier, and threatened to withdraw its membership in ACI. Although CO-OP Label items purchased through ACI later returned to the shelves in CCB stores, management relations between the two organizations have been acrimonious.

Associated, meanwhile is (still) alive and -- well, kicking. Since his November 1 starting date, General Manager and Chief Executive Officer Lawrence Johnson, and the controller he brought with him, have had to administer the losses to members, negotiate with creditors, cut staff drastically, and plan for repositioning ACI in the Bay Area and northern California markets. Initial plans for a turnaround based on warehousing natural and specialty foods and the regional CO-OP Label products became, in time, decisions to stop warehousing and to lease the Richmond building, Associated's principal asset.

In Johnson's view, the keys to extricating ACI from its perilous financial position were some kind of joint venture with another distributor, and lease or sale of the building, which in past accounting had been significantly overvalued. In late February (just before this issue went to press), the ACI board gave Johnson authority to negotiate a lease with another Bay Area company and to have warehousing and sales to ACI members transferred to Sierra Natural Foods (formerly part of Rainbow Grocery in San Francisco). Sierra will be a sub-licensee for CO-OP Label items brokered by Associated. Since lease revenue will exceed mortgage costs, the building arrangement will create desperately needed cash and help forestall creditor action against ACI. But warehousing at Associated has ended. Except for a core handful, all staff have been dismissed.

Whether the arrangement will work well, of course, remains to be seen. Johnson said that ACI intends to actively continue promoting the CO-OP Label, which he feels is "excellent" because of its quality and for its ties with other issues such as labor and farm conditions and the lineage of the products.

Other noteworthy changes have been wrought by the problems of the recent past: Two of the formerly large and successful computerized preorder cooperatives, which relied on ACI both for supply and management services, have closed; two retail co-ops also closed in the past year. And the Associated Cooperatives Resource Center, the country's most extensive source of technical and educational literature for retail food coops, is changing its home. The Resource Center's manager, Bonnie Fish, was among those cut from ACI staff. At least temporarily, however, the service will continue out of her home. Interested persons may obtain a copy of the current resource list (I recommend it) by contacting: Bonnie Fish, 18821 Carlton Av., Castro Valley, CA 94546.