CO-OP GROUP GAINS EDGE WITH CONSOLIDATED BUYING POWER 2004-10-11 (2)

JULIE GALLAGHER

Co-operatives may have helped establish the natural foods retail business -- but they no longer own it.

The small, locally owned and operated stores have seen their product lines and formats adopted by conventional retailers, including natural foods markets, conventional supermarkets and even Wal-Mart Stores. In the process, co-ops have lost substantial buying clout.

In an effort to level the playing field and give the co-ops a better chance to compete in this evolving marketplace, a new natural foods buying group was formed as part of a restructured National Cooperative Grocers Association.

The new NCGA represents the unification of 94 independent natural food co-ops with 111 retail locations, representing $626 million a year in retail sales. It transforms what had been a federated model consisting of 11 regional associations into a single direct-membership co-op. The revamped organization is designed to harness its market power, build a co-operative identity and act as an individual purchasing agent.

"We felt like it was the most expeditious way to maximize our collective buying power," said Robynn Shrader, spokeswoman for Iowa City, Iowa-based NCGA. "There is strength in numbers. Now we're directly pooling our resources rather than splitting them among 11 associations. We're more equipped to respond to market pressures."

Shrader said it was still too soon to quantify the new paradigm's results.

"Our same-store volume continues to grow at a rate that exceeds our competitors," said Holly Jarvis, president of the NCGA board of directors, in a statement. "Our move to a reorganized NCGA will provide us the necessary tools to continue our rates of growth for our existing and new members and aid in the development of new cooperatives."

Leading up to the restructuring, NCGA engaged its co-op members in a 10-month proposal development process. A proposal was presented in January and voting began in early March. Eighty-nine of the 91 natural food co-ops voted for the new structure, which went into effect on July 1.

When making purchasing decisions, "we look for commonalities among co-ops," said Shrader. "Co-ops are responsible for their own product mix, but we try to respect the differences in product lines, while supporting the co-ops."

Co-operatives are business entities owned by their users, and the owners set the tone of what they want from their business, products and services. Although co-op structures vary, they typically require equity contributions from members, and sometimes volunteered time. The natural and organics categories were prime motivators in the creation of these retail outlets, since many were formed when access to certain food products weren't available in mainstream channels.

The average age of a NCGA natural food co-op is 20 to 30 years, with the oldest at 60, and some start-up co-ops still undergoing construction, according to Shrader.