Executive Summary
Who We Are
The Rutland Area Food Co-op has operated successfully since 1994, and was incorporated in that same year, serving the area in and around Rutland, Vermont. It is a member-owned natural foods grocery store that provides its members and other customers with a complete line of wholesome food and consumer products and services that encourages a healthy lifestyle. It purchases many of these products from local farmers and producers (over 200 and counting), meeting the increasing demands of consumers for local food and serving to support and stimulate the local economy. The Co-op aims to be a transformative force in the community; serve as a model of a sustainable business alternative; and nurture social and economic well-being incorporating sound environmental business practices.
Our arms are only long enough to embrace immediate family and friends, but our hearts and minds have infinite reach. It is the desire of the Rutland Area Food Coop to reach, and serve, as many people as possible in order to improve overall quality of life.
The Marketplace
The modern cooperative food movement over the past 55 years has met with resounding success. Its principles have nurtured a healthy and steady growth in natural and organic foods, as well as the infrastructure to support the cooperative movement, from supporting local farms and businesses to national distribution companies. And as the decades passed, the non-cooperative segment of the food industry observed the trends, saw the writing on the wall – and the potential profit – and have capitalized on this natural and organic movement, to the point where the larger national chain stores have now captured the larger market share of those sales.
In 2005, natural food stores, including food cooperatives, claimed 48% of the market share in natural and organic foods, while conventional food stores enjoyed a 33% share in sales (e-commerce 1.5%).1 By 2020, sales among natural food stores had shrunk to 33.4%, while conventional stores have expanded that
1 Statistics from Mighty Community Markets: Tools for Small and Independent Grocers. August 2020. Columinate.
market segment to capture a 45% share. (e-commerce sales have grown to 8.5%.) The sale of natural and organic foods in the larger national chains has quadrupled over the past 15 years. Who are these stores? In Rutland, these stores include Hannaford’s (now receiving weekly deliveries from UNFI), Price Chopper, Aldi’s and Walmart (Walmart being the number 1 seller of natural and organic foods in the country). Both Walmart and Price Chopper are within two minutes’ walk from the Rutland Area Food Co-op. Analysis shows that by 2025, natural food stores will lose an additional 3% of the market share.
In addition, the Rutland Area Food Co-op lost many of its regular shoppers, including Co-op members, to the Middlebury Coop, in Middlebury, Vermont, during the height of the pandemic. Many of those shoppers have not returned to the Rutland Area Food Co-op to shop on a regular basis.
Economic Challenges: We have been accustomed to annual inflation rates averaging 3.5%. The economic climate in 2021 and 2022 saw food inflation topping off over 10%, along with the added pressures of a 40% inflation rate for energy, and approximately 12% inflation in housing costs. Food prices grew approximately 5.8%, more slowly in 2023 than in 2022 but still at above historicalaverage rates. Food inflation in 2024 is expected to slow down, estimated to hit 1.2% for the year.
These economic pressures upon the consumer means that shoppers are tightening their food budgets and looking for discounts on food shelves. Organic and natural products – including produce – are typically more expensive than their conventional counterparts, so it is incumbent upon us at the Co-op to find ways to retain our customer base.
Who Is Buying Natural and Organic Foods?
A “core” group of shoppers are dedicated to supporting, and living, a natural lifestyle. This includes people who wish to support local economies, businesses and farms. This group makes up approximately 15% of shoppers.2 Mid-level shoppers comprise the largest segment of the natural and organic foods shoppers (70%). They can best be described as consumers who wish to eat healthier foods but do not necessarily care to adopt a “holistic, ” or natural, lifestyle. They favor easy, convenient shopping at stores that are well stocked. These shoppers are not necessarily versed in the cooperative business model, and might not appreciate
2 Ibid.
its importance in their communities (so an educational component of the Rutland Area Food Co-op is to better inform the public in this regard).
What Does This Mean for Rutland Area Food Co-op?
The Rutland Area Food Co-op has occupied a relatively small retail space since its incorporation in 1994, and sits on a one-way street offering limited customer parking. In order to be competitive in this rapidly changing environment –increasing competition from the larger conventional chain stores; inflationary pressures; the growth of a class of discriminating natural food shoppers looking for convenience and choice – the Co-op needs to look at both short-term (12 month) and longer-term goals. There is ample room for opportunity and growth, and there are fundamental business practices unique to the cooperative model to drive financial success while supporting the local economy and general health of the community through product offerings and education. We also strive to support local and Vermont-based vendors and businesses.
Annual Report, and Business Overview for the Next 12 Months
Operations
We have identified considerable opportunities for change and expansion of product offerings:
• We replaced a 45-year-old 4-door freezer with three two-door freezers. While we continue to work with the vendor to correct frost problems with them, we have enjoyed a considerable increase in sales for freezer items. This has also eliminated, for time being, the cost of maintenance and repair.
• The Co-Op purchased two bulk nut-butter grinders, getting rid of our antiquated table-top buckets of nut butters.
• On August 26, we expect to receive two 8-foot Kysor-Warren produce coolers to replace our antiquated and inadequate present one, which offers limited space for produce and does not adequately cool, limiting sales We made use of the Cooperative Fund of the Northeast (CFNE) line of credit for the purchase of the new units. Having access to these funds also allows us to fully protect the assets of the store in case of emergencies (e.g., failure of key equipment). This, in turn, will allow us to better meet the needs of members / customers. We plan on
converting an existing four-foot cooler into a cheese case. This, in turn, opens up shelf space presently used to display cheese in the dairy cooler.
Produce traditionally occupies an important place in the successful operation of Co-Ops and the RAFC has underserved its membership in that regard. The new units hold the promise of tripling produce capacity, in addition to offering space to provide fresh meats and chicken (pre-packaged). We are hopeful that the CoOp will enjoy a considerable bump in sales as a result.
• In the past 12 months we have introduced in our grab n’ go cooler burritos and South Korean entrees prepared by local vendors, with a goal toward introducing fresh salads and sandwiches.
• WIC Program: The GM conducted initial research into introducing WIC (Women, Infants & Children) benefits into the store but concluded that, at that time, it would have been a financial burden to the store, coupled with the likelihood that very few families would take advantage of it with relatively few product offerings. We would have had to devote considerable shelf space to products from infant formula to cereals and other products we would otherwise not be carrying in the store. The GM opted instead to offer WIC-eligible families a 10% store-wide discount, without drawing down on their WIC funds.
However, management was inspired by what the Belfast Community Co-Op was able to achieve through its own state-sponsored WIC program. They not only qualified for the WIC program, but convinced the WIC administration to introduce approximately 120 organic Field Day products into its list of WICqualified purchases (the NCG-related price points for Field Day Co+Op Basics are competitively low). The result was that all Maine Co-Ops that opt into the Maine WIC program can offer Field Day products to WIC recipients.
RAFC management would like to model the Vermont WIC program in the same way. Management has been communicating with the staff at the Belfast Community Co-op in order to learn how best to approach the Vermont WIC administration and repeat the success on a state-wide level. The idea would be to increase leverage by inviting other Vermont Co-ops to speak as one integrated voice. This will require substantial time and, perhaps, resources to achieve.
• The Co-Op’s relationship with NCG: The Co-Op has entered into a relationship with the National Co+op Grocers association. This gives us access not only to deeply discounted foods and health &
beauty products, but also to the resources of NCG (from marketing and promotional tools to support with potential plans for expansion/relocation. NCG also offers educational tools for both managers and staff.).
o Store-Wide Discounts: To fulfill that part of our mission to make food affordable and accessible, and to increase customer count.
• Co-Op members enjoy 10% off all Health & Beauty products each Monday as well as select products throughout the month; all shoppers aged 62 and above can shop at a 10% discount every Wednesday; customers purchasing caseloads, and bulk purchases, receive a 10% discount; we offer a deeper 15% discount for Afghani individuals and families who have been resettled in the greater Rutland area, including our having sourced Halal-quality meat that we also offer at a discount. We participate in the Vermont 3Square program. And although the size of our store and the limited product offerings of the WIC program prevent us from participating in WIC, we offer all WIC-qualified shoppers a 10% store-wide discount. This also means they do not have to draw down on their WIC funds when shopping at the Co-op.
• A unique and refreshing aspect of the Rutland Area Food Co-op that sets it apart from its non-cooperative competitors is its ability, and desire, to accommodate its members and customers. When a customer expresses an interest in a product we don’t carry, we will have it on the shelf within two-to-seven days if we can access its distributor or purchase it directly. It is not always a product that flies off the shelf, but we exist to serve our members and the community at large. It means a lot to our customers to be heard and responded to in such a positive, and personal, way. And it makes good business sense.
• Sustainability Initiatives: We continue to reduce single-use plastics in the store.
o Juice and water bottles: we have eliminated 85% of single-use juice, beverage and water bottles.
o We offer compostable produce bags for use in both Produce and Bulk Departments. Customers are welcome to bring their own produce bags from home.
o We plan on re-introducing prepared salads and we have purchased compostable salad containers.
o We have recently transitioned to compostable bags for packing all Bulk repacks. We will continue searching for sustainable options as they become available.
o We will be introducing corn-based, compostable bulk containers.
• Phone System: We upgraded our store phones. The previous system utilized AT&T phones that were meant for home use and not suitable for use in the Coop. We switched carriers and now use New Horizon Communications. The phones were free and the monthly phone system charges are modestly less than our previous system.
• Water Filtration System: The addition of fluoride in Rutland’s municipal water has been a bone of contention in the community. The most recent city-wide referendum to remove fluoride from municipal drinking water was defeated. The Co-Op introduced a water filtration/refill station on August 4. The system filters out lead, chlorine, fluoride and, according to the EPA, microplastics and PFAS (aka “forever chemicals”). We sell empty, reusable BPA-free bottles at cost and sell the water for as little as possible
• Cosmetic Changes:
o The interior of the store was repainted.
o At the time of this writing, management is waiting to hear from UNFIrelated company that is estimating the cost of rejuvenating the floors of our retail space.
o All overhead fluorescent lighting was replaced with LED tubes.
o Track lighting was installed in the Bulk section to highlight the bins. Bulk has always been the darkest section of the store.
Training & Development
• The Co-op Board continues its commitment to Board development through its association with Columinate’s CBLD program.
• The General Manager continues to work with a financial consultant from Columinate. In addition, the GM attends NCG national meetings twice each year to learn about NCG initiatives, program updates, services available to GMs, and the opportunity to network with peers.
• Staff Development:
o Department Managers are taking advantage of a program sponsored by the Neighboring Food Co-op Association (NFCA) called Peer Dialogues. As one example, our Bulk Manager regularly participates in online meetings with other coop bulk managers to discuss how to improve performance of their departments, and to share their experiences and challenges.
Financial
• Increase store sales by at least 3% annually Driving sales and improving margin performance.
• Increase store sales margin by at least 4% store-wide.
• Better manage operating costs, as well as making sure information entered into the POS system is accurate and continually up to date, in order to turn a monthly profit on a consistent basis.
Marketing
The Co-Op’s relationship with NCG is now allowing us to purchase product at discounted prices. This allows us to offer these products to the community at a lower cost. One of the “side effects” of this is that we then earn less for each item we sell, which lowers our margin. Instead of seeing this as a problem, we look at it through the lens of opportunity. We need to double down on Marketing in order to increase customer traffic. We make up for that loss through volume. We need to inform people that the words “Coop” and “expensive healthy foods” are not synonymous.
Toward that end:
• The Co-op will continue advertising regularly through Facebook and Instagram, and updating our web page
• Municipal Waste Bins: Ten outdoor signs posted throughout Rutland’s historical district remain in place.
• Farmers Market: The Co-Op continues to provide waste and recycling bins during the outdoor farmers market, each bin sporting the Co-Op’s logo. This generates an awareness of, and goodwill toward, the Co-Op. We have recently set up a table that props up two large posters advertising our water filtration/refill station.
• This past winter, the Co-Op created a relationship with Rutland’s municipal bus company, The Bus. We advertised on both the interior and exterior of one bus with a visually striking advertisement designed by NCG, which promotes NCG’s Co-op Deals program. The one bus had a route restricted to the Killington/Pica ski areas. The purpose of the ad was to introduce the Co-op to skiiers throughout the season.
• Rutland Herald: NCG produces an attractive bi-weekly sales flyer promoting its Co-op Deals program. The flyer runs from 8-to-16 pages. The Co-Op arranged with the Rutland Herald, on two occasions, to include the flyer as an insert into its Saturday/Sunday editions of the paper, that was distributed to subscribers and
stores (7,000 copies). The flyer included a coupon on the back page offering a one-time 10% discount as a way to encourage readers to visit the store, most likely for the first time.
• The GM made the unilateral decision to create a marketing theme for the near term.
“Co-ops” carry a lot of historical weight and people have preconceived notions about co-ops. They generally think of coops as stores for the younger, wealthier set (organic prices vs. conventional) and not within reach for the average shopper. With food inflation being what it is, people assume our products are out of reach. In truth , our NCG-related pricing offers substantial savings, often beating out prices found in the big-box markets.
Management initiated a series of 30-second radio promotions with the overarching theme: “Rutland is a working class town, the Rutland Food Co-Op is the store for the working family.” The promotions introduce listeners to NCG pricing, our artificially low prices on local milk, stretching the food budget by purchasing in bulk… as well as the water filtration/refill station This is initially a three-month advertising commitment. At the end of that period, management will evaluate its effectiveness.
Membership Engagement
• We will continue to regularly offer our members information on sales, new products and Co-op meetings and events. In addition, Since the inception of our relationship with NCG, we have sent out biweekly announcements to our membership highlighting the bi-monthly sales. We have also sent out two seasonal newsletters with the intention of continuing that practice seasonally. These newsletters include Board contributions as well.
• Surveys: One of the unique features of being a coop is that the store is member owned. To take advantage of this feature, and increase member awareness of that benefit, we need to reach out to our members to solicit their opinions and preferences for what they would like their store to look like: from product mix to layout. Member response could dramatically affect how the Co-op conducts business going forward. Toward this end, the first membership survey was shared with members, with a response deadline of August 15, 2024. Plans are for the results to be available in time for the annual meeting.
Two-to-Three-Year Aspirations
Given the trends in sales, and ever-increasing competition, the RAFC will, in the not-todistant future, need to consider relocating to a larger space with adequate parking or expanding its existing retail space. We need to meet the demands of a changing demographic (the Co-op’s core customers is an aging demographic) and this will allow us to reach more people and better serve the health and needs of the greater Rutland community.
Anecdotal evidence points to young families moving to the Rutland area, both from out of state and as a more affordable alternative to the greater Burlington region. We are experiencing an uptick in co-op membership over the past few months. Consumer demand is growing and we need to anticipate, and serve, those customers. Commercial grocers (national chains) are claiming an increasing share of natural and organic sales, and the RAFC is currently surrounded by that growing competition. At the same time, Vermont shows strong support for, and awareness of, supporting local and Vermontbased businesses. This is just one area where Coops shine.
First Steps: A strategic Planning Committee has been formed at the Board level to explore the feasibility of expanding/relocating store operations Management is reaching out to NCG and Columinate to discuss the same and to explore the resources they have to offer the RAFC
Community Outreach
The Co-op has, over the past couple of years, pulled back from offering classes / educational opportunities to its members and local community. As we turn our vision toward expanding our services, we should reintroduce classes on food & diet, personal health and sustainability, as an in-store initiative and co-sponsoring classes/workshops with outside interests. Short video segments would be helpful in this regard.
In order to meet the growing demands of shoppers, the Co-Op will need, over time, to increase staffing (Kitchen, POS point person, dedicated Marketing…). Present sales numbers, and costs, prohibit us from hiring for those positions at this time.
Appendix: External Support
Columinate: CBLD
Columinate is a national consulting cooperative serving mission-driven organizations, including food co-ops. The Rutland Area Food Co-op’s Board continues its relationship with Columinate by renewing its commitment to its CBLD program, working with its governance specialists to optimize its performance in supporting the mission of the Co-op and its members.
Columinate: General Management Support
The General Manager of the RAFC has been working on a weekly basis with a Columinate Consultant to strengthen overall financial and management skills. In addition, he is currently participating in a monthly online seminar conducted by Consultant Jeanie Wells, Mighty Community Markets.
Neighboring Food Co-op Association (NFCA)
The Neighboring Food Co-op Association (NFCA) is a federation of food coops across New England and New York State that work together toward a shared vision of a thriving co-operative economy, rooted in a healthy, just and sustainable food system, and a vibrant community of co-operative enterprise.
The NFCA has been generous in its time and resources. The Rutland Area Food Co-op staff have also been taking advantage of the NFCA’s Peer Dialogue Meetings (via Zoom) held on a regular basis for members of the NFCA. Department Managers get to hear from other coops and share their experiences and suggestions.
National Co+op Grocers association (NCG)
NCG is a business services cooperative for retail food co-ops located throughout the United States. NCG was formed by co-ops and its member co-ops are owners of NCG. NCG exists to maximize members’ success, inclusivity, and impact, and to grow the cooperative grocery sector in size and scope in an environmentally regenerative manner. NCG offers a variety of purchasing, management, development and marketing services, and facilitates direct co-op-to-co-op support and peer networking.