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PROPOSED FOOD CO-OP MACON, GA EVALUATION OF PROPOSED SITE AND SALES FORECAST ANALYSIS

A Market Study Conducted by: Debbie Suassuna Location Research Consultant 4691 Finch Way Dublin, CA 94568 November 2010


DISCLAIMER All information provided, and any conclusions and recommendations made, as part of this market study are provided in good faith based upon the experience and judgment of the consultant. However, it should be understood that the client remains responsible for the accuracy of all information provided to CDS Consulting Co-op, all decisions made, and all actions or inactions that result from this work.

RECOMMENDED FURTHER RESEARCH If any of the store actions contemplated in this study are carried out, it is strongly recommended that a Customer Address and Transaction (CAT) survey be conducted at the store within the first 6 - 12 months after the action is completed. The purpose of this follow-up research would be to define the store’s trade area, and determine its sales penetration levels throughout the trade area, so that its performance can be evaluated against the results of this market study. Such a comparison will enable the identification of any problem areas in the trade area, relative to the new store’s customer acceptance, sales penetration rates, and capture rates.


I.

INTRODUCTION

During the past decade or so, the natural food segment of the retail food industry has been increasing at a rate considerably faster than the conventional segment of the food industry. While no exact statistics are available, it has generally been reported in various trade journals that the size of the natural and local food market has been growing at a rate of between 5% and 10% per year. This increase has been due to several factors, including a broadening of the demographic characteristics that are positively correlated to natural food demand, an overall increase in consumer awareness relative to food and dietary issues, a greater interest among consumers relative to shopping for natural food, organic produce, hormone-free meat and poultry, etc., an increasing interest in consuming locally-grown food (and thereby supporting local agricultural), and an increasing assortment of natural food merchandise being produced and brought to market every year. In light of these developments, the Macon area seems to represent a market with sufficient demand to warrant serious consideration for a co-op food store. The remainder of this report summarizes the results of a market study conducted in the Macon area within the past few weeks.

Specifically, Section II summarizes the

conclusions and recommendations emanating from this study. Section III presents the results of the sales forecast analysis, on which the findings and conclusions have been based. Section IV reviews the trade area to be served by the proposed co-op. Section V presents an evaluation of the facility, site, and location characteristics. Section VI looks at the competitive environment within the trade area. Finally, Section VII reviews the methodology employed in carrying out the objectives of the study.

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II.

KEY FINDINGS AND CONCLUSIONS/RECOMMENDATIONS

This study of the Macon, Georgia market area has resulted in a number of findings and conclusions regarding the proposed natural foods co-op.

This section will summarize

those findings that have the most significance for the proposed co-op, as well as our recommended course of action given those findings. Key Findings: 

The co-op food store will serve a moderately large-sized trade area that extends about 10-15 miles in most directions.

The trade area for the proposed co-op contains a population base of 158,200 persons that reside in households, which is somewhat higher than the Co-op database store average of 126,400 persons. However, it exhibits a weaker-thanaverage demographic composition (particularly with respect to college education levels, per capita income levels, and the “in-profile” occupation categories).

The proposed co-op’s location just west of downtown Macon, and proximity to a large daytime population base, should enable the co-op to generate a significant amount of business from nearby office workers, as well as the faculty, staff, and students of Mercer University.

The competitive environment within which the proposed co-op food store will operate is weak with respect to natural and organic food. There are two direct competitors located within the defined trade area (i.e., Yvonne’s Natural Market and Mia’s Health Foods); however, both are much smaller than the proposed coop, thus limiting their competitive influence. There are also several conventional stores within the trade area that sell some natural/organic food (including several Kroger stores that feature a store-within-a-store concept of natural/organic food), although, the employees/staff of these stores do not offer much in the way of product knowledge.

Conclusions/Recommendations: 

Based on the population size, demographic composition, and competitive environment of the Macon market area, combined with the experiences of other natural food co-ops in similar market situations, it appears that there is sufficient sales potential to support a co-op food store. 2


Further, in light of the available sales potential that exists within the Macon market area for a natural/organic food store, it is recommended that the proposed coop have about 6,000 square feet of sales area (or approximately 10,000 square feet of total space). A store of this size would be large enough to accommodate an acceptable variety of food store departments, including dry grocery, meat, produce, frozen food and dairy, as well as specialty departments such as a deli with a café/seating area, etc. As a result, the co-op would offer the “critical mass” of food departments necessary to attract prospective shoppers (and enable them to make most of their food store purchases at the co-op) and compete more effectively with other food stores.

Given the comparatively weak demographic composition of the trade area, there may be a desire to offer a significant amount of conventional foods in the proposed store. However, there is a danger in attempting to be “all things to all people” which usually results in not serving any customer segment particularly well. Consequently, it is recommended that the proposed store’s merchandise mix be focused on natural, organic, and locally-produced foods, as there is sufficient demand within the trade area for these food categories, and it also represents the major growth area within the food industry.

It is also recommended that the proposed store include space for class rooms, and make educating consumers about the relationship between food, their health, and the environment a primary component of the entire project.

The sales forecast for the proposed site that was evaluated as part of this market study is as follows (refer to Section III for a more detailed discussion of the sales forecast analysis): Annual Sales Forecast

Year of Operation 2013

1305 Hardeman Avenue Site $3.05 million

2014

$3.47 million

2015

$3.92 million

2016

$4.41 million

The proposed co-op will benefit from a relatively weak competitive environment, good site characteristics and favorable regional accessibility. However, overall

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sales

would

be

tempered

by

the

weaker-than-average

demographic

composition of the trade area. 

Due to its proximity to a relatively large daytime population base, it is recommended that the co-op have a strong deli/prepared foods department with a grab and go section, hot/cold food bars, and a café/seating area, etc. in order to better serve this customer segment.

The “in-profile” nature of this

daytime population base, which includes downtown office workers, the students, faculty, and staff of Mercer University, and the employees of various hospitals and medical offices, is viewed as very important to the success of the proposed coop. The deli/café will also enable the store to “showcase” the quality and taste of its prepared foods to potential customers that have not yet purchased their groceries at the co-op. 

If it is determined that one of the two direct competitors located within the defined trade area (i.e., Yvonne’s Natural Market or Mia’s Health Foods) has a strong reputation within the community (for vitamins and supplements, or some other product category), it is recommended that proposed co-op consider hiring the owner as a means of acquiring an “established” customer base for that sales category, and avoiding any negative backlash that might stem from driving a well-liked local competitor out of business.

It must be remembered that the sales forecast is based on an assumed sales area size of about 6,000 square feet. It is based on the concept of a co-op food store in the normal sense of the term, with an emphasis on natural, organic and locally-produced merchandise. It is based on a store format that will feature a relatively complete array of food store departments. It is based on a program of sales promotion and advertising that will permeate the trade area on a regular basis, in order to convey information about the store, its location, and its product mix. It is based on an overall image of quality merchandise and knowledgeable customer service, provided in a facility that conveys an environment of ambiance, intimacy and community. Finally, it assumes a level of store management that is knowledgeable and experienced, with a significant amount of market and marketing savvy.

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III.

SALES FORECAST ANALYSIS

Based on the sales forecast analysis, it appears that if a 6,000 square foot (sales area) natural foods co-op were to open at 1305 Hardeman Avenue in Macon, Georgia, it will likely achieve an average trade area sales penetration rate of $21 at maturity. The sales penetration rates are projected be highest for the residents of the immediate area (i.e., from downtown Macon, northwest to approximately Pio Nono Avenue/Pierce Avenue) due to their proximity to the site, combined with the relatively weak competitive influences affecting this area. Conversely, sales penetration rates for the proposed site are projected to be lowest in the southern portion of the trade area, given the relative lack of close-in convenience to those residents, combined with the comparatively weak demographic composition of this area. In addition, the proposed site will likely obtain 23% of its business from beyond the trade area (i.e., residents from outside the trade area, and tourists, travelers, or passers-by who travel to or through the trade area). While there is no definitive open date for the proposed site evaluated as part of this market study, it is presumed for now that the new natural foods co-op will open in 2012, thus making 2013 its first full year of operation. Also, because it will be a new store in a new market, it will likely take several years for it to reach its mature sales level. Based on numerous co-op food store studies, it is likely that the proposed co-op food store will take at least four years to reach its maturity level of volume. Therefore, the sales forecast for the proposed co-op would be: Annual Sales Forecast Year of Operation 2013

1305 Hardeman Avenue Site $3.05 million

2014

$3.47 million

2015

$3.92 million

2016

$4.41 million

The proposed co-op will benefit from generally good site characteristics (including ample parking capacity), good regional access, and a relatively weak competitive environment. However, overall sales would be hampered by the weaker-than-average demographic composition of the trade area.

Specifically, the proportion of college

educated persons, per capita income levels, and persons employed in an “in-profile� 5


occupation exhibited by the Macon trade area are significantly lower than the Co-op database average.

These relatively weak demographic characteristics reinforce the

importance of (and need for) educating consumers about the relationship between food, their health, and the environment, which should a primary component of the entire project. Given the proposed site’s proximity to a relatively large daytime population base that includes the students, faculty, and staff of Mercer University, and downtown workers (combined with the site’s favorable parking capacity), it is expected to generate a strong lunchtime business, as well as a relatively strong evening business as office workers may shop the co-op on their way home from work. Therefore, it is recommended that the co-op feature a strong deli department and café/seating area to serve this “inprofile” daytime customer segment (particularly during the lunchtime hour), and focus a significant amount of its marketing efforts (e.g., emphasizing its prepared foods, take out lunches/dinners, and possibly catering services for nearby businesses) on this daytime population base, as this would represent a key competitive advantage for the proposed co-op. Over time, and as the projected sales for the proposed co-op reach their mature levels, co-op management may consider expanding the size of the store.

Therefore, it is

recommended that the co-op food store be designed in such a way as to make it relatively easy to expand the store in the future (i.e., in about 7 years). The sales forecasts for the proposed co-op are based on the following assumptions: 

The proposed site will have a retail sales area of about 6,000 square feet;

The proposed store will feature a relatively broad selection of natural and locallyproduced food, to include traditional departments such as dry grocery, fresh meat and poultry, dairy and frozen food, fruits and vegetables, beer/wine, bulk foods, a deli with a self-serve hot/cold food bar and a grab and go food section, a coffee/juice bar, baked goods, a café/seating area, vitamins/supplements, and a selection of personal, health, beauty, and body care products;

Population in the trade area is projected to remain relatively stable throughout the forecast period;

It is assumed that the competitive environment will remain unchanged throughout the forecast period; 6


ďƒ˜

Growth in the natural food market at-large has been occurring at a rate of between 5% and 10% per year, and is expected to continue;

ďƒ˜

Store maturity is not expected to occur for at least four years.

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IV.

TRADE AREA CHARACTERISTICS

A co-op food store trade area is generally defined as that area, closest to the store, within which the store obtains the majority of its sales volume (usually between 65% and 85%). Further, it is defined as the geographic area within which the store has its highest levels of sales penetration (or sales per-capita). In short, it is the geographic area within which shoppers tend to gravitate toward a retail focal point in order to satisfy most, if not all, of their shopping needs. A food co-op’s trade area is shaped by several factors: 

Co-op food stores, including those that emphasize local products, typically have trade areas that are larger than those served by conventional supermarkets.

The appeal of co-op food stores is generally defined as much in terms of demographic characteristics as it is with respect to its convenience of location. As such, their trade areas are typically defined on the basis of where there are concentrations of demographically in-profile customers, rather

than

just

geographic convenience. 

Trade areas are often defined in terms of patterns of access (such as major highways) or barriers (geographic or man-made).

Finally, a co-op store’s trade area is often defined by the presence – or absence – of directly competitive units.

The trade area to be served by the proposed co-op food store in Macon extends about 10-15 miles in most directions.

Specifically, the trade area extends 10 miles to the

north/northwest along I-75 (to the Bibb-Monroe County line), with further extension limited by declining population counts as well as a shifting orientation northward toward the greater Atlanta area. To the east/southeast, the trade area extends about 8 miles along I-16 (to the Bibb-Twiggs County line), with further extension limited by declining population counts. In fact, the presence of the Ocmulgee National Park, Lamar Mounds, and Bond Swamp National Wildlife Refuge, located to the east and south of downtown Macon, limits the population levels in both of these directions. To the south and west, the trade area extends approximately 10-15 miles along I-75 and US Highway 80 (State Highway 22), respectively. Further trade area extension in both of these directions is precluded by increased distance, as well as declining population counts. Given the patterns of accessibility that exists within the market area, it is estimated that about 77.5% 8


of the store’s sales will emanate from this trade area. The remaining 22.5% of the store’s volume will come from beyond the trade area, as well as from travelers, tourists, and visitors to the market. Within the trade area, there reside an estimated 163,400 persons. Of these residents, 5,200 live in some type of group quarters – institutions such as prisons, nursing homes, hospitals, military barracks, college dormitories, etc. The group quarters population is removed from the total population base because they are typically “immobile”, and usually eat institutionally; therefore they do not constitute a significant pool of prospective shoppers – at least not for food to be consumed at home. As a result, there are an estimated 158,200 persons within the defined trade area that reside in households.

This trade area population is projected to remain relatively stable

throughout the forecast period. The Trade Area Demographic Summary table for the proposed co-op food store attached to this report illustrates the population and key demographic characteristics for the trade area, at the census tract level. The census tract numbers listed on the table correspond to the census tracts shown on the trade area map attached at the end of this report. The key demographic characteristics listed on the table are those that have been found to be most closely associated with strong sales penetration rates for co-op food stores. In general, the higher the levels of these demographic characteristics – singly, and more importantly in concert - the higher the sales penetration rates (or sales per capita levels) tend to be. The Sales Forecast Summary table for the proposed site, also attached to this report, compares the key metrics of the proposed co-op’s trade area with those of the overall database store average.

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V.

FACILITY, SITE, AND LOCATION CHARACTERISTICS

This section will put forth an evaluation of the facility, site, and location characteristics of the proposed site which is situated immediately west of downtown Macon.

More

specifically, the site is located on the western side of Arlington Place (a 2-lane road), between Hardeman Avenue (a 3-lane road with on-street parking on the eastbound side) and Georgia Avenue/State Highway 19 (a 2-lane, one-way, westbound road). Facility Characteristics.

The facility of the proposed food co-op store is assumed to

occupy approximately 10,000 total square feet of space within a 26,000 square foot, single-story building. It is also assumed that the proposed co-op will have about 6,000 square feet of sales area.

The parking lot for the store wraps around the northern,

eastern, and southern sides of the facility. Finally, the main entrance for the proposed store will face east toward the main parking field, and toward Arlington Place. Overall, the proposed facility is rated good – in terms of its size and its layout on the site. Site Characteristics. Visibility of the proposed co-op from Hardeman Avenue, Arlington Place, and Georgia Avenue is excellent. The site’s parking lot, which wraps around the northern, eastern, and southern sides of the facility (with most parking spaces located on the eastern side), provides for a total of 212 parking spaces which would be shared with the other tenants of the building. It is assumed that at least 60 parking spaces will be allocated to the proposed co-op, as a 10,000 square foot co-op food store would typically require at least 60 “co-op only” parking spaces for both its customers and staff (and there are 70 parking spaces located in the main parking field on the eastern side of the facility). Ingress/egress for the proposed store is provided by two access points along Arlington Place, two access points along Hardeman Avenue, and one access point along Georgia Avenue (the access point along Georgia Avenue and one of the access points along Hardeman Avenue are located on the opposite/western side of the site property). None of these access points is controlled by a traffic signal (although Georgia Avenue is a one-way street), nor is the Arlington Place/Hardeman Avenue intersection signalized, thus making left-hand turns to/from Hardeman Avenue difficult during peak commute hours. Overall, the site characteristics for the proposed site are assumed to be good, with the only drawback being the lack of a traffic signal at the Arlington Place/Hardeman Avenue intersection.

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Location Characteristics. With respect to population density, the trade area contains 158,200 persons that reside in households, which is somewhat higher than the Co-op database average of 126,400 persons.

However, most of the key demographic

characteristics associated with the defined trade area (i.e., college-education, per capita income levels, and “in-profile” occupation levels) are below the Co-op database average. Fortunately, the proposed co-op is located proximate to a significant amount of “in-profile” daytime population, as it is situated between downtown Macon and Mercer University. In terms of regional accessibility, the proposed site’s location is very good. The site is located along Georgia Avenue (which is a heavily travelled State Highway), and Hardeman Avenue, which merges with Georgia Avenue just west of the site. In addition, the proposed site is located only ¼ miles east of the I-75/Hardeman Avenue interchange. In terms of retail synergy, the proposed co-op’s location is considered weak, as there is very little retail development in the immediate vicinity of the site. In fact, most of the development around the site consists of a large, regional US Postal center, residential uses, as well as some medical offices located between the site and I-75. Recommended Facility, Site, and Location Considerations.

This market study has

centered on one site that is being considered for the proposed food co-op store. Experience has shown that there is no guarantee that any site considered will actually come to pass.

That is, there are numerous reasons why the reviewed site may not

become a reality (a lack of successful lease negotiations, unsatisfactory site conditions, development costs that are out of line in terms of expected store profitability, etc.). Therefore, it is entirely possible that the co-op planning group may have to seek additional sites for the contemplated food store. In light of that possibility, the remainder of this section puts forth several suggestions as to desirable facility, location and site characteristics to be sought. In order to maximize sales, it is recommended that the proposed co-op occupy a location (with adequate visibility, parking, and ingress/egress) along Vineville Avenue (US Highway 41), between Pio Nono Avenue/Pierce Avenue and Tucker Road. A site located in this area would benefit from a more central location with respect to the areas exhibiting the most “in-profile” demographic characteristics, as well as favorable retail synergy (however, real estate costs would undoubtedly be much higher for a site in this area v. the proposed Hardeman Avenue site).

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There are three primary types of characteristics to evaluate when looking at potential food store locations. The first of these has to do with the facility itself, and includes such things as size (gross and sales area), layout on the site (relative to frontage streets, parking, adjacent tenants, etc.), condition, etc. The size of a food store is something that needs to be evaluated in terms of the sales potential that is available, the size and configuration of the site, and the format to be implemented. Generally speaking, a food store sales area accounts for about 60 - 65% of a store’s gross size; for example, a 10,000 square foot store would typically have a sales area of about 6,000-6,500 square feet. As to layout on the site, a grocery store facility can benefit from adjacent tenants – especially those types of tenants that appeal to the same customer profile. Tenants such as bookstores (Borders, Barnes & Noble), coffee shops (Starbuck’s, Peet’s, Seattle’s Best Coffee, Dunkin’ Donuts), office supply stores (Staples, Office Depot, OfficeMax), specialty bakeries or bagel shops (Einstein’s, Bruegger’s, Noah’s) and other types of somewhat upscale specialty stores represent co-tenants that appeal to the same customer demographic characteristics as natural food stores, and therefore make desirable cotenants. On the other hand, there are certain types of tenants that, while they may produce a certain amount of synergy, should not be situated too close to the food store. Sit-down restaurants, movie theaters, physical fitness clubs, or other large retail tenants that have high parking requirements tend to usurp food store parking spaces if they are situated too close to the food store customer entrance. The second set of characteristics to be evaluated involves the site itself, relative to visibility, ingress/egress, and parking. Visibility should be as good as possible, in both distance and direction. That is, the store (or at a minimum its exterior signage) should be visible from as many directions as possible, and from as far away as possible. This is especially important with respect to the major access routes by which prospective shoppers would arrive at the store, for two primary reasons. First, it has been found that over 16% of the American population moves (changes residence) every year. Second, research has found that, upon moving to a new community, the average food shopper selects his/her new food store within just a few weeks of making their move. Taking these two findings into account, it is evident that a store’s visibility is an important factor in determining whether it is included in – or excluded from – such consideration. 12


Another element of site characteristics is ingress/egress – the ease or difficulty with which shoppers can enter or leave the food store site. In this instance, consideration should be given to the position and orientation of major drive lanes in the food store parking lot; the number of entry/exit points; the type of traffic controls that exist to facilitate entry to or exit from the site; speed limits along frontage streets; the presence or absence of medians, left-turn lanes, and deceleration lanes; congestion along major frontage streets; and any other factors that either facilitate or hamper shoppers in their efforts to enter or leave the food store site. Parking is another site characteristic that is very important to a food store. There are two aspects of parking to be reviewed: configuration and capacity. As to configuration, food store shoppers typically prefer to park within about 300 – 350 feet from the front door of the food store, and within sight of it. Drive lanes between rows of parking should be perpendicular, rather than parallel, to the food store façade. likewise is an important consideration.

Parking capacity

Numerous food store parking studies have

demonstrated that ideal food store parking, especially for a suburban-type store, can require up to 8 spaces per 1,000 square feet of food store GLA (gross leasable area). This many spaces provides for employees as well as shoppers. While this represents ideal parking, very few food stores actually have this amount of parking. However, it does represent the optimal number of spaces that may be appropriate.

As a practical

matter, most food stores are considered to have adequate parking if they have at least 6 parking spaces per 1,000 square feet of food store GLA (or 60 parking spaces for a 10,000 square foot co-op). Obviously, the greater the ratio of parking spaces to store size, the better (within reason). The third set of characteristics involves the location of the food store (which is different from the site). In this context, the word location is a marketing term, whereas the word site refers to physical characteristics in a real estate sense. Location characteristics to be evaluated include population density (and proximity of the store to it), demographic characteristics of the trade area population (and the extent to which the trade area is in-profile), trade area accessibility (the ease or difficulty with which trade area consumers can find and get to and from the store), nearby retail concentrations (and the extent to which they provide beneficial synergy), barriers (such as rivers, cemeteries, freeways, railroads, industrial corridors, etc.), and so forth.

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VI.

COMPETITIVE ENVIRONMENT

Direct competitors are defined as those stores that have essentially the same type of merchandise mix as the proposed co-op will carry, and whose primary appeal is toward the same type of customer clientele. Direct competitors would include such stores as other natural and co-op food stores. Indirect competitors, on the other hand, are defined as food stores that, as part of their merchandise mix, carry certain products (or groups of products) that may compete directly with the type of merchandise that will be carried by the co-op food store, but whose primary thrust is more conventional in nature.

Conventional supermarkets

generally fit this category, depending upon their emphasis on natural and local food, their formats, and their customer clientele. Within the indirect competitor group, there tend to be three levels of competition. The strong ones tend to be stores that carry natural and organic food in a “store within a store” concept, which usually constitutes 1,500 square feet or more of sales area space. Medium indirect competitors generally have a selection of natural and organic food scattered throughout the sales area, in 4-foot, 8-foot or 12-foot sections in their related gondolas. For example, along the juice aisle there may be the usual selection of V-8, Hawaiian Punch, Cranapple, HI-C, etc., but there will also be a 4-foot section of Knudsen’s and perhaps a 4-foot section of Hansen’s natural/organic juices.

Further,

these sections are generally identified with some type of shelf talker or hanging banner. The weakest level of indirect competition consists of those conventional supermarkets that carry a minimal amount of natural food, in which it is generally integrated with the conventional merchandise without any specific product identification. The competitive environment within which the proposed co-op will operate is relatively weak. There are currently only two direct competitors within the defined trade area: Yvonne’s Natural Market and Mia’s Health Foods. Yvonne’s Natural Market has about 2,700 square feet of sales area and sells natural/organic foods including produce, dry groceries, a very limited amount of bulk foods, vitamins/supplements, health/body care items, and some home products. It also has smoothie/juice bar and a limited selection of sandwiches and salads. Mia’s Health Foods is a 1,400 square foot (sales area) store that

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predominantly sells vitamins/supplements, but has a small amount of natural/organic dry groceries. There are several indirect competitors within the proposed site’s trade area, with the most notable being: Food Lion, Fresh Market, Kroger, Piggly Wiggly, Publix, and Save-ALot (although Food Lion, Piggly Wiggly, and Save-A-Lot do not carry a significant amount of natural/organic food). Fresh Market, which operates one store in Macon, sells some natural/organic food but is considered to be more of an upscale gourmet food store. Kroger operates several stores within the defined trade area which typically feature a 1,000 square foot section of natural and organic foods in its stores called “Nature’s Market”. Finally, Publix operates two stores in Macon, which have modest selections of natural/organic foods located throughout the store, segregated into 4-to-8 foot sections that are identified with overhead “GreenWise Market” signage. In summary, the competitive environment within which the proposed co-op will operate is weak. There are two direct competitors located within the defined trade area (i.e., Mia’s Health Foods and Yvonne’s Natural Market); however both are much smaller in size relative to the assumed size of the proposed co-op (i.e., about 6,000 square feet of sales area for the proposed co-op), thus tempering their impact on the projected sales performance of the proposed co-op. Lastly, there are several conventional stores within the trade area that offer some natural/organic food, however, the staff/employees for these stores tend not to promote or offer any product knowledge for these items.

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VII.

STUDY METHODOLOGY

There were several activities carried out as part of this market study, the first of which involved conducting fieldwork in the Macon, Georgia market area. There were several purposes for this fieldwork: 

To meet with representatives from the co-op planning group;

To evaluate the Macon market area and define the trade area to be served by the proposed co-op food store;

To define and observe the patterns of access that exist within the market area;

To evaluate the facility, site, and location characteristics of the proposed site;

To identify and evaluate all direct and indirect competitors;

To obtain local data and make first-hand observations regarding shopping patterns, the distribution of population, patterns of access, etc.; and

To evaluate levels of retail synergy throughout the market area.

Upon completion of the fieldwork, all primary and secondary data were reviewed and analyzed. This included a review of the trade area definition in light of the fieldwork observations, a review of the competitive environment, and forecasting the sales for the proposed site. In order to develop the sales forecast, a proprietary database of co-op food store sales penetration levels was used, and the trade area performance levels of analogous co-op food stores were reviewed.

This database contains trade area

definitions, capture rates, and sales penetration levels for approximately 100 co-op food stores across the U.S. These database stores represent many different regions of the country, market area sizes, location types, facility sizes, merchandising images, operational practices and market area demographic characteristics. For each of the analogous database stores, trade area sales penetration rates were studied and adjusted on the basis of relevant differences between the database stores and the proposed co-op, in order to determine the estimated levels of sales penetration likely to be achieved by the proposed co-op.

More specifically, after determining the

anticipated trade area to be served by the proposed site, the population and demographic characteristics for each census tract in its trade area was assembled. Then, using analogous information from other co-ops in the proprietary database, an estimated sales penetration rate was projected for each census tract. This rate, when multiplied by each tract’s population, would result in an estimate of the sales dollars to 16


be derived from each trade area census tract. Then, after summing these census tract sales for the defined trade area, the level of sales that would likely be achieved from beyond the trade area was determined. The total of trade area and beyond-trade-area sales would constitute the total sales forecast for the proposed co-op. Once the sales forecast analysis was completed, this report summarizing the key findings and conclusions, as well as the recommended course of action, was prepared.

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DESCRIPTION OF COLUMNS IN TRADE AREA DEMOGRAPHIC SUMMARY TABLE CENSUS TRACT: The census tract as defined by the U.S. Government in 2009. DRIVE DIST: The driving distance (in miles) from the population center of the census tract to the site/store. 2009 POP: The total population in the census tract in 2009. 2009 GROUP QTRS: The number of persons in the census tract that reside in group quarters (such as nursing homes, hospitals, prisons or other institutions); in general these persons do not shop for food at home. 2009 POP IN HH: The population in the census tract in 2009 that resides in households (i.e., the total population less those living in group quarters). % ANN POP GROWTH: The annual percentage increase in population in the census tract. % SELF/FEDGOV EMPL: The percentage of the workforce in the census tract that is selfemployed in own incorporated business, or employed by the Federal Government (defined in terms of Bureau of the Census employment categories). % EDUC/HEALTH OCC: The percentage of the workforce in the census tract engaged in educational occupations, or health diagnosing/practitioner/technical occupations (defined in terms of Bureau of the Census employment categories). % COLLEGE GRAD: The percentage of adult persons in the census tract with at least a four-year college degree. % NON FAMILY HH: The percentage of the households in the census tract that are not occupied by families. % WHITE POP: The percentage of the population in the census tract that is racially white. % AGED 40-54 YRS: The percentage of the population in the census tract that is between the ages of 40 and 54. 2009 PER CAPITA INC: The per capita income level for the census tract.

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GLOSSARY OF SELECTED TERMINOLOGY CAPTURE RATE:

A number that represents the percentage of a store’s sales base that is derived from a specifically-defined geographic area (a town, a county or a census tract).

DIRECT COMPETITOR:

A store that is similar to the study store in terms of its merchandise mix, its customer clientele, its image and its customer appeal.

INDIRECT COMPETITOR:

A store that may carry some of the type of merchandise carried by the study store, but where the main thrust is with a different merchandise mix, a different customer clientele, a different image, and a different customer appeal.

MARKET AREA:

A term used to describe an overall area of influence, such as the “City/Town Market Area.”

MATURITY:

That point in time when a new store has reached its forecasted level of sales; generally fairly soon (for the nth store in an existing market area) to several years (for a new store in a new market).

SALES PENETRATION:

A store’s sales that are derived from a specific geographic area (such as a town, county, census tract or trade area) divided by the population of that geographic area; also called sales/capita or sales/person.

SALES POTENTIAL/FORECAST: For a proposed store, given certain assumed facility, site, and location characteristics, the sales level it could be expected to achieve. TRADE AREA:

The geographic area from which a retail store typically obtains at least 65%, and perhaps as much as 85%, of its sales.

19


SALES FORECAST SUMMARY Proposed Natural Foods Co-op 1305 Hardeman Avenue Macon, GA

Co-op Database Proposed Site

Store Average

Sales Area (Sq.Ft.)

6,000

6,662

Analog Sales per Selling Sq. Ft.

$697

$1,285

2010 Q2 Year-Ending Sales

$9,242,284

Key Forecasting Variables Total Population

163,409

Group Quarters Population

5,209

Total Population in Households

158,200

132,535 6,106 126,429

% Self-Employed/Federal Govt Worker

19%

26%

# Self-Employed/Federal Govt Worker

8,315

10,187

% College Graduate

25%

# College Graduate

21,932

% Non-Family Households

38%

Population in Non-Family Households

26,539

39% 26,753 43% 31,364

% Education/Health Occupations

10%

12%

# Education/Health Occupations

7,021

6,974

Per Capita Income

$20,632

$27,754

% Aged 40-54 Years

22%

% White Population

48%

80%

-0.2%

0.9%

0%

14%

64%

26%

% Annual Population Growth % Pop Equally/More Convenient to other Co-op % Pop Equally/More Convenient to Direct Competitor

21%

Analog Sales Forecast Analog Trade Area Sales per Capita Analog Trade Area Sales

$20.50 $3,243,100

% Trade Area Sales

78%

Analog Sales from Beyond Trade Area % Sales from Beyond Trade Area Analog Total Sales

$941,545 23% $4,184,645

$53.10 $6,713,920 80% $1,843,770 20% $8,557,690

Final Sales Forecast 2013 Total First-Year Sales

$3,051,227 *

2014 Total Second-Year Sales

$3,470,586 *

2015 Total Third-Year Sales

$3,924,223 *

2016 Total Fourth-Year Sales

$4,414,516 *

* This sales projection assumes the following: Annual Population Growth of = Future Annual Sales Growth of =

November 15, 2010

-0.2% 5% (Based on historical sales growth trends of existing co-op stores)

First-Year Maturity Impact of =

60%

Second-Year Maturity Impact of =

65%

Third-Year Maturity Impact of =

70%

Fourth-Year Maturity Impact of =

75%


Trade Area Demographic Summary Proposed Natural Foods Co-op 1305 Hardeman Avenue Macon, GA

2009 Group Qtrs

2009 Pop in HH

% Ann Pop Growth

Trade Area Demographics % Self/ % Educ/ % % Non FedGov Health College Family Empl Occ Grad HH

% White Pop

% Aged 2009 40-54 Per Capita Years Inc

Census Tract

Drive Dist

2009 Pop

106.00 108.00 107.00 114.00 101.00 102.00 103.00 115.00 105.00 112.00 104.00 113.00 119.00 110.00 123.00 127.00 111.00 118.00 125.00 124.00 128.00 122.00 126.00 120.00 129.00 130.00 117.01 117.02 132.02 121.00 132.01 131.02 133.01 131.01 133.02 301.02 134.02 134.01 135.01 301.01 136.01 136.02

0.6 0.6 0.8 0.8 0.8 1.0 1.3 1.4 1.7 2.1 2.1 2.3 2.6 2.9 2.9 3.0 3.1 3.3 3.4 3.9 4.2 4.3 4.4 4.5 4.8 5.1 5.5 5.6 5.9 6.1 6.4 7.4 7.5 7.9 8.3 9.4 9.8 11.2 11.7 11.7 14.9 15.2

1,845 1,393 410 611 1,913 2,235 1,352 1,625 3,348 975 2,616 1,277 2,146 4,707 2,715 2,298 2,505 3,185 3,535 4,103 3,101 2,382 4,297 3,996 2,156 1,285 1,877 4,728 2,347 7,188 5,511 4,224 1,129 6,018 4,407 9,096 11,954 10,277 9,962 3,015 10,667 8,998

414 96 72 156 0 0 6 35 1,316 0 0 96 15 0 0 19 18 61 173 138 0 0 0 0 165 96 0 126 0 321 18 155 0 5 271 93 49 90 125 0 87 993

1,431 1,297 338 455 1,913 2,235 1,346 1,590 2,032 975 2,616 1,181 2,131 4,707 2,715 2,279 2,487 3,124 3,362 3,965 3,101 2,382 4,297 3,996 1,991 1,189 1,877 4,602 2,347 6,867 5,493 4,069 1,129 6,013 4,136 9,003 11,905 10,187 9,837 3,015 10,580 8,005

-2.0% -2.0% -0.2% -2.0% -1.5% -0.8% -2.0% -1.9% -0.2% -1.0% -1.5% -2.0% -2.0% -0.6% -2.0% -2.0% -1.4% -0.2% -1.6% -1.6% -0.8% 5.5% -1.9% -1.6% -1.9% -2.0% -1.7% -1.8% -1.6% 2.9% -1.0% -0.6% -0.6% -1.4% 0.9% 0.1% -0.6% 2.4% 2.8% 0.5% -0.1% -0.7%

20% 31% 60% 29% 23% 30% 29% 12% 15% 6% 12% 11% 22% 27% 14% 8% 13% 29% 11% 12% 7% 13% 17% 26% 17% 15% 27% 11% 10% 26% 14% 15% 26% 8% 12% 17% 19% 25% 16% 33% 18% 20%

7% 15% 0% 4% 7% 18% 8% 7% 6% 4% 6% 4% 12% 13% 9% 4% 5% 14% 6% 3% 5% 2% 5% 17% 2% 1% 8% 11% 4% 17% 7% 9% 5% 5% 5% 10% 17% 16% 10% 12% 10% 8%

13% 52% 10% 4% 10% 40% 9% 8% 11% 6% 9% 7% 33% 33% 14% 6% 7% 39% 10% 13% 7% 10% 9% 42% 7% 6% 16% 18% 10% 45% 10% 13% 9% 6% 11% 13% 49% 48% 20% 32% 28% 15%

67% 79% 94% 55% 49% 59% 47% 42% 43% 45% 44% 31% 47% 56% 44% 34% 37% 51% 38% 36% 38% 42% 39% 40% 46% 44% 31% 32% 36% 44% 39% 32% 40% 30% 32% 24% 40% 28% 28% 19% 33% 38%

30% 67% 34% 12% 2% 63% 12% 3% 26% 2% 1% 6% 51% 41% 23% 9% 4% 72% 10% 13% 26% 27% 25% 81% 42% 33% 17% 11% 26% 71% 23% 38% 50% 27% 27% 71% 68% 75% 79% 85% 72% 65%

19% 17% 25% 24% 21% 20% 21% 19% 8% 21% 20% 12% 18% 20% 22% 16% 20% 19% 17% 22% 18% 21% 21% 23% 20% 22% 23% 20% 17% 21% 19% 19% 20% 18% 21% 22% 23% 26% 23% 27% 26% 25%

$8,719 $28,706 $10,012 $7,850 $8,465 $26,370 $12,250 $6,637 $7,812 $7,738 $8,438 $11,155 $19,650 $27,409 $12,179 $10,585 $11,013 $28,970 $9,799 $13,530 $15,912 $9,838 $12,360 $27,218 $12,856 $9,140 $22,452 $13,881 $13,666 $33,711 $13,191 $15,420 $17,258 $11,284 $17,141 $23,501 $31,740 $37,813 $23,723 $30,205 $24,434 $18,731

163,409

5,209

158,200

-0.2%

19%

10%

25%

38%

48%

22%

$20,632

Trade Area Totals:



College Hill Co-op Market Study