Organic Planning

Facing declining sales and competition from national chains, the Food Conspiracy co-op thinks about the future

The windows at Food Conspiracy have reflected a parade of boom and bust businesses on Fourth Avenue since the early '70s. That's when Canary Island palms still decorated the four corners of Fourth Avenue and Sixth Street--the Dairy Queen corner--back in the heyday of ChooChoos Nightclub, a no-frills rock 'n' roll roadhouse that stood between the co-op and Caruso's Restaurant.

Today, Food Conspiracy continues to offer organic and bulk foods, attracting customers committed to healthful eating and supporting a member-owned cooperative retail grocery. Every season brings something new, and many are unaware that the co-op has weathered much in more than 30 years

Word is out that a long, dry spell could be breaking.

In 2004, two long-time employees who departed Food Conspiracy, including a department manager, turned up working at a competitor. The former department manager mentioned a lack of a business plan as one contributing factor in his departure. This refrain was repeated in a recent farewell column written by outgoing marketing director Scott McMullen, beseeching the co-operative and its board to go long-term with a business plan.

A recent conversation with Ben Kuzma, general manager of Food Conspiracy, revealed that in the last decade, the co-op has battled through a constellation of factors: shifting market forces, a shaky financial history and a board of directors which, over the years, has been disinclined to look long.

Kuzma voiced concerns about planning for the future. "At another co-op in which I was involved," he said, "I suggested a 300-year plan." He got their attention with the reminder that it is wise to prepare for the next seven generations to come. "At Food Conspiracy, we don't plan out far enough," he explained, "just the next fiscal year, and it has been based on (our) history: looking back and instead of forward. But this is beginning to change at the board level and management level."

Having managed Food Conspiracy for only the past two years, Kuzma missed some excitement in the early '90s but believes there is still some post traumatic stress disorder that prevails below the surface. "Going back to the bankruptcy and the attempt to open up a larger store ... psychologically, I think that did a lot of harm ... like going through a divorce or losing a loved one, and it put a lot of stress on the morale; (it was) a real downer."

In 1991, due to perceived competition from a new natural foods store (which has since left Tucson), Food Conspiracy and Tucson Cooperative Warehouse entered into a financial entanglement which enabled the co-op to expand to a new location, a former Safeway building. They increased their floor space fivefold, from 5,000 to 25,000 square feet. Through a plethora of misguided decisions--as well as precipitous management changes--they floundered. Within 15 months, the co-op lost $850,000 before filing Chapter 11 reorganization papers with a bankruptcy court.

Still doing business at their original location, they are facing a new struggle 12 years later. The original concern about competition has multiplied; it isn't just about other natural foods stores anymore, but large chains like Trader Joe's and Wild Oats, which also market themselves as providers of wholesome upscale food items--organic and hormone-free meats, a wide variety of vitamins and supplements, lotions and soaps--at prices the co-op can rarely match. It's all about volume.

Kuzma lays the picture out succinctly. "In 1998," he says, "after the bankruptcy and a slow climb back, we were up to about $3 million in sales that year. It might have been critical to have a longer-range plan, but things looked fine. ... It might have been a time to open up a second store when the outside competition was just beginning, and you could go with the growth. I think there are still opportunities to do that now, but at that time, when the competition began to come in, the trouble began, and sales began to take a nosedive, year after year after year. We're at $2.2 million now, six years down the line, when many other co-ops across the nation are seeing growth in the opposite direction.

"The problem is with creating a longer-range plan," he continues. "But the present board recognizes this, and now we feel we've bottomed out and are hoping to see sales increase. New competition is coming in, and this is the time to work hard and think about another store out there, because the market is increasing and more people are looking for natural products. The increase is showing up in conventional grocery stores. We can play a bigger part in that.

"We're focused on this store right now, trying to increase sales and let this be our anchor and nest egg to generate an income. And after we establish a level of profitability, we may consider expanding elsewhere. In the natural food industry, there is a share of the pie ... one pie ... and if you stay in one location, you will only have that share. We need to keep this location going because you have to show a reliable source of income in order to convince the bank to lend you the money for another store at another location."

Food Conspiracy may be seeing brighter prospects at the end of this 12-year tunnel. For years, they have been aligned with Southwest Co-op Grocers Association, one of 11 regional associations around the country that began to circle the wagons for mutual support in the changing marketplace. In April 2004, in response to growing pressures from continued changes in the food industry, co-ops across the country voted overwhelmingly to merge and restructure the godfather of grocers co-ops, the National Cooperative Grocers Association. The reorganization will insure that the $626 million in annual retail sales generated by the membership will carry more unified clout. Business services--as well as operational and peer support systems--will be shared, delivering bigger bang for the buck. In addition, this nationwide equalizing strategy will also use purchasing power to deliver lower wholesale prices while still allowing each co-op autonomy in day-to-day management.

Food Conspiracy has endured and occasionally thrived for 30 years. In the recent shifts of focus and renewal, Kuzma says, "There has been talk bout changing our name. Does our name still serve our mission? There has been discussion about how to present ourselves to the people we want to come into the stores. We're looking to change our niche and our target for customers, because that will be our future. We're not looking to abandon our old base, because we are still a neighborhood store."

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