Can co-ops survive in a price-driven grocery industry?
- As conventional grocers offer more organic and local foods at competitive prices, a recent article on Civil Eats asks if food cooperatives can survive.
- C.E. Pugh, chief operating officer of National Co+op Grocers (NCG), told Civil Eats that competition with traditional retailers started in 2013. “The conventional grocers got very serious for the first time about natural and organic and added lots of products,” he noted, calling it an almost overnight impact for co-ops.
- In order for co-ops to remain relevant, experts say they can't lose sight of their core identity, which centers on customer service and community involvement. At the same time, they must become more nimble to meet changing consumer demand.
The last few years have been hard on co-ops, especially ones that had grown accustomed to being the only outlet for local and organic food products. Many food cooperatives, like the Good Earth Market in Billings, Montana, have been forced to shut their doors after decades in business.
There are a number of disadvantages facing co-ops in 2018. Conventional retailers, from Kroger to Costco, now offer what used to be their exclusive merchandise: locally sourced and organic products. Costco, a discount warehouse store that is the antithesis of a co-op, is now the nation’s largest retailer of organic food.
There is also the recent Amazon acquisition of Whole Foods, which will likely drive down the price of the chain's organic products and make them much more accessible online.
Co-ops do have some significant advantages over their well-capitalized competitors, though. They can offer a higher level service. They also stand behind values around health and sustainability, and have a committed consumer base they can leverage.
It's a challenge for mainstream competitors to match co-ops' sourcing and product standards. Reports have noted that under Amazon, Whole Foods is centralizing its buying system and scaling back its supply of local and niche products. The company also recently added in-store merchandising fees that have hit small suppliers hard.
These advantages are helping keep co-ops alive amid increasing competition, but it may not be enough to make them relevant even a few years down the road.
Some co-ops are taking a proactive approach to set themselves apart from conventional grocers, while also modernizing their offerings. PCC Community Markets, the nation’s largest natural foods retail cooperative, has introduced new private label offerings, including a value-priced line called Field Day. It has also announced new services like a produce butcher, and products like private-label meal kits, that meet consumer demand for convenience.
One common thread many of the co-ops Civil Eats spoke with is the need to give consumers a new reason to shop their stores. The solution they propose is to offer a greater sense of community and empowerment to the shopper. By hosting community events, inviting local farmers they buy from to speak at the store, and organizing local fairs, co-ops can offer consumers something national chains can’t.
This commitment to community would be an affirmation of everything co-ops stand for, and a key differentiator in an increasingly competitive industry. Still, price is often the final determining factor for where consumers spend their grocery dollars. If co-ops can show shoppers that there is value in what they offer, they have a good chance of staying open.