Good Foods Co-op, locally owned for more than 43 years by its customers, is exploring a second location in Lexington.
The store — which will be in addition to its grocery and cafe on Southland Drive — is necessary in part to boost declining sales, according to a letter sent to owners this week.
“The best way to cure sales decline is to add new customers,” said Bill Bickford, general manager, in the letter. “And the most effective way to attract significant numbers of new customers is to open a location near them.”
Last year the co-op conducted a market study that identified four potential areas of town that might support a new store, said Bickford.
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He can’t identify the areas yet, he said, but the co-op has had discussions with representatives of more than one possible location and has zeroed in on one spot.
The co-op has commissioned a market feasibility study to analyze the site, he said, and if that comes back favorably later this quarter they will enter into a lease negotiation.
The co-op hopes to have a second store open by the end of 2017, Bickford said.
The expansion comes as the co-op has faced slipping sales. Its nine-member board said in a separate letter to owners that “sales have been impacted significantly since early this year (2015) as conventional stores have rebuilt, renovated and enhanced their organic and local foods offerings. With more competition coming in the near future, we must prepare our current store for additional impacts while at the same time finding a growth strategy that will allow us to serve more owners and shoppers through our cooperative principles and values.”
It’s a problem that many cooperatives around the country are experiencing as mainstream groceries branch out into territory that used to be exclusive to co-ops, offering more organic and natural foods, locally sourced produce and bulk buying options, the letter states.
Bickford acknowledged that sales have dropped but declined to say by how much; the sales figures will be reported to owners in March. To mitigate the drop, the co-op has implemented increased owner recruitment efforts in 2015 (adding 560 new owners last year and 90 so far this year) and announced biweekly owner deals to entice current customers to shop there more often.
“We are growing our owner base but what we need to do is find ways to get people to commit more of their grocery dollars at the co-op,” Bickford said.
The store “had challenges with our profitability last year and that will be shared with our owners in March,” he said. But overall the financial health of the co-op is strong, he said. “The co op is still in a strong cash position and is still stable.”
The Southland Drive co-op location is not going to go under without a second store, but “it’s critical that any second store opportunity succeed to continue the co-op’s growth.”
The potential investment also will vary by site; the co-op may undertake a capital campaign to raise money from owners as well as seek bank financing, he said.
The second store likely also would offer food service but it might look different from the current cafe, which is a popular draw for customers with soups, salad bar and a hot buffet with meat and vegetarian options, Bickers said.
“I think the format will depend heavily on the location. The type that might work in a more downtown location would be very different from a store along, say Man O’ War. ... But (the store’s) product selection and focus would remain – strong on natural and organic food. Local products and farmers are primary commitments for us no matter where we are. ... Natural foods have become common, but our business model does set us apart.”
Co-op board president Alicia Hullinger said that the expansion will help to meet a goal, defined by the owners, to increase access to healthy food for all.
“We also have to be smart because we are having increased competition, so we have to get out there and tell our story,” she said. “We believe a second store is an option for that growth.”