Food Co-operative Store

We Own It! Might a food co-operative be the solution to Hampshire’s grocery store dilemma?

Jeff KlingbergHampshire

As most people in Hampshire by now know, the owners of the Block’s Country Market and Butcher Shop want to retire and have put the store up for sale. There have been a couple of nibbles, but for one reason or another prospective buyers have backed out.

Couple this with the bankruptcy of Central Grocers, who was Block’s major supplier, and Hampshire has become somewhat of a food desert, as numerous members of the Hampshire IL Community Network Facebook Group have mentioned.

Is this a temporary or more of a perpetual issue for Hampshire? No one knows at the moment.

The complaints about the lack of grocery outlets in town and having to travel 15 miles or more to go to a store like Jewel-OSCO, Woodman’s, Aldi, or Wal-Mart Super Store are not new. For years, I heard residents ask what would it take to get a ‘big box’ or even a ‘smallish’ grocery store like the Blue Goose Market to come to Hampshire.

Additionally, residents have wished out loud and privately that they wished Block’s had more organic and healthier food choices.

Too small. Too close.

Hampshire is in a unique situation.

It’s growing, but not enough population (6,247 in 20161 with approximately 1,950 homes and apartments2) to warrant a big box retailer or even a small chain store.

According to Dr. David Rogers of DSR Marketing Systems, a grocery store consultant I spoke with, today’s grocery store needs 10,000 people to be successful. He said Hampshire’s population makes problematic for any chain store, especially when you have big retailers 8 – 15 miles away.

It has a major highway (Route 72) that runs along its southern border generating relatively high traffic volumes (7150 – 9350 vehicles per day see below, click to enlarge), but not enough land to build a typical, or traditional, big-box retail shopping center.

And, to top it off, it’s too close (only 4 miles) to Route 47, the next bastion of retail commerce. At least that is what the 2040 comprehensive plans I’ve seen indicate.

So, big box retailers will wait until this corridor develops before moving in. Or, they may not move in at all for fear of cannibalizing existing operations.

Key Retail Attraction Factors

Traffic Counts: The average number of vehicles that pass a specific location on a street or highway and are usually reported for an average 24-hour period. Traffic counts indicate activity levels.

Workforce Concentration: Employment centers with a critical mass draw retailers and are major activity generators. These include industrial parks, colleges, and alike.

Transportation Hubs: Historically, transit hubs like railroad stations and airports are areas of actitivity retail seeks to help generate and capture customers.

Source: Positioning the Community for Retail: The Marketing Power of Generators

It’s a quality-of-life issue.

Does Hampshire need a grocery store? Absolutely!

As one Minnesota-community administrator ─ who had been seeking a grocery store option for over 10 years ─ said, “having a grocery store is a quality-of-life issue for our residents.”

Emily Northey, coordinator of Minnesota Main Street, an economic development program that helps Minnesotan communities revitalize their downtowns said: Healthy commercial districts need to have traffic generators that hopefully complement each other, and grocery stores are a very important ingredient in that mix.

While the community administrator and Ms. Northey are correct, companies see a high risk of failure.

With the above in mind; I think the residents of Hampshire need a better understanding of the grocery industry to help them comprehend why in the end we may need an alternative idea to satisfy our grocery needs.

The Economic Impacts of Fresh Food Retailers

Direct Economic Impacts:
• Job opportunities
• Local tax revenues

Indirect Economic Impacts:
• Revitalized neighborhood housing markets
• Asset-building for low-income homeowners (via appreciating real estate assets)
• Workforce training and development
• New businesses surrounding the store
• Additional spending in the local economy generated by the store and the new jobs it creates (the “multiplier effect”)

Source: The Grocery Gap Who Has Access to Food and Why It Matters. The Food Trust

Highly competitive. Narrow margins.

The constant pressures on cost and logistics and the evolution of technology will cause mom-and-pop, and mid-tiered grocery stores to consolidate to stay competitive in the marketplace according to multiple sources.

According to the Progressive Grocer Magazine, 2016 supermarket sales were slightly less than $669 billion. While there are 38,441 stores with $2 million or more in annual sales, the industry, especially independent grocers are consolidating and will continue to for some time.

Currently, the Illinois Senate District 33, which Hampshire is part of, has 8 independent grocery stores that generate a combined $80.71 million in annual sales according to the National Grocers Association (NGA).

What is an independent grocer?

An independent supermarket is a privately owned or controlled food retail company operating a variety of formats. Most independent operators are serviced by wholesale distributors, while others may be partially or fully self-distributing. Some independents are publicly traded, but with controlling shares held by the family and others are employee owned.

Source: National Grocers Association

Peter J. Larkin, president and CEO of NGA states “The supermarket business is not for the faint of heart. Low profit margins and constantly changing consumer preferences make it challenging even for the best operators. But as independents continue to invest in their local communities and work diligently to stay ahead of rapidly changing consumer trends, they are differentiating themselves in a fiercely competitive marketplace to become shoppers’ stores of choice.”

The supermarket business is a deflationary, highly competitive, and low-net-margin industry with a typical 1% – 2% average profit. Natural, organic and gourmet food stores typical earn a 3.5% – 6% average profit.

The 2017 Independent Grocers Financial Survey shows independent grocers saw an average decrease in same-store sales of ‐1.62% and a decline in net profit to 0.98% in 2016. Labor is a grocery store’s the largest expense. For independent stores, it reached a new record of 14.84% of sales, in 2016.

Dr. Rogers said at least 50% of a Hampshire grocery store’s revenue would have to come from within the village limits and at least 40% from the surrounding area.

The US grocery industry will continue to see an upheaval in the coming years putting, even more, pressure on profitability.

First, a major European grocery discounter, Lidl, has entered the market with stores in North Carolina with a goal of having over 600 stores throughout the country.

Next, is e-commerce. The 2017 “Nielsen FMI Digitally Engaged Food Shopper” reports the share of online grocery was 1% in 2016 and could reach $100 billion in sales by 2025. The Nielsen findings were released before the announced $13.7 billion Whole Foods purchase by Amazon. If the federal government approves the Amazon/Whole Foods purchase, the dynamics change dramatically.

Converting Block’s to a food co-operative would be a unique solution.

Over and over again in the Hampshire Facebook group, residents say they moved to Hampshire or had stayed here because it is unique.

I heard the same thing in various forms during the 2017 election cycle and when I interviewed for a seat on the Business Development Commission.

Trustee Ryan Krajecki has talked about volunteerism adding to society and a community’s quality-of-life. And he is currently pulling together a list of non-profit organizations and volunteer opportunities.

Dr. Rogers told me it will be difficult to find a chain or other independent grocer to buy Block’s and the best scenario for Block’s would be to find a person(s) in the community to own and operate it because it would go a long way to building local loyalty.

What is a food co-operative?

A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

Source: Neighboring Food Co-op Association

A food co-operative would combine non-profit volunteerism with community ownership to solve the need for a grocery store. Dr. Rogers thought that a food co-op would be an ideal solution, and said it would need a custom plan to make it successful.

Having a food co-op would also go a long way to reinforcing Hampshire’s uniqueness.

Since members of the community would own the store, the community would have a say in the types of products sold. So if the community wanted organic, natural food options they could get them if community-owner members voted for them.

Beyond volunteerism, a food co-operative would also offer employment opportunities for residents and internships for high school students.

In many communities, a food co-operative is also the food pantry, and the farmers market since the community is growing the food sold in the store. Furthermore, since it is a non-profit, the profits it does earn are put back into the community.

The last I knew the FFA, owned the plot of land between Heartland Bank and the carwash along Route 72. While that property might eventually be better suited for some retail/commercial opportunities, it could be used to grow fruits and vegetables for the store.

Or, a section of the land at the SE corner of Allen Road and State Street could be the community farm plot.

Or, local farmers could become members of the co-operative and supply produce or just supply it.

In 2014, a group of people started the process of creating and opening a food co-operative in downtown Elgin in the old portion of the Zeigler Ace Hardware store.

Residents and businesses could ─ and still can ─ purchase shares of stock in the Shared Harvest co-operative co-operative for $100 per share with a maximum of 10 shares per person or business. They will open the store when they have 1,000 shareholder households. Today, they have 854 families as members.

Who’s ready to invest in Hampshire’s future?