Co-op Market business plan, take 2

An earlier, abbreviated version of the proposed business plan is posted below. Here’s an updated, more comprehensive plan. Please comment and provide us with suggestions!

Introduction

Fairbanks Community Cooperative Market (Co-op Market) is a proposed natural foods grocery store for the Fairbanks area operated as a cooperative. We have incorporated, have a vision statement, and now have a Market Study completed by the G2G Research Group.

Our vision statement: Fairbanks Community Cooperative Market works for community health and sustainability by providing natural foods and products, promoting local suppliers, and offering consumer education in an open community center environment.

Fairbanks has not had a natural foods store for over 8 years now since the Whole Earth Exchange closed. Our only outlets here for natural foods and natural living products are two Fred Meyer stores and two Safeway stores. Fred Meyer has a limited supply of these for sale and Safeway has even less, similar to their stores in the Lower 48. There is also a vitamin/health food store, Sunshine Health Foods, here. They primarily stock vitamins and supplements. The Whole Earth Store was open for over 20 years and closed primarily due to owner burnout, mismanagement and new competition from Fred Meyer. We believe a town the size of Fairbanks’ over 80,000 population including the home of the University of Alaska has and can support a natural foods store.

Fairbanks is at the end of the long hydrocarbon based food distribution system. We desperately need to stimulate more local food production and storage if we are to have a secure food supply in the future. There is the potential in the Tanana Valley to produce food that can be stored all year round thereby having local food available in the winter. Root cellars can hold carrots, cabbages, potatoes, turnips, rutabagas, kohlrabis, and other similar vegetables throughout the winter. That is the way the Russian people survived the collapse of the Soviet empire and the infrastructure associated with it. Our co-op can help to develop such a system here by offering a market for locally produced food and helping to develop large root cellars to store the food for year round sale.

We believe that there is a potential for membership here based on the customer base of the old Whole Earth Store. We are confident that a town of our size can support a natural foods store. We are at the end of the road literally in the middle of the wilderness. We have to develop our own food sources due to the expense of importing food which will grow more expensive.

Description of Firm

Co-op Market is envisioned as a natural foods grocery selling traditional grocery goods and other so-called green goods in a traditional grocery store setting. The store will be operated as a cooperative with a democratically controlled board setting the direction and management of the store. There will be a store manager and other personnel responsible to the Board for the successful operation of the store. Co-op Market will be a cooperative but that does not mean that the co-op will not have to maintain profitability to stay in business. Co-op Market will operate like any other business with customer service the top priority. The customers will have the opportunity to be owner-members of the co-op and thus have a vote in the management of the co-op.

Description of Products and Services

The proposed co-op store will have a retail sales area of about 3,500 square feet. The proposed store will feature a relatively broad selection of natural and locally produced food, to include dry grocery, meat and poultry (possibly fresh seafood), dairy and frozen food, fruits and vegetables, a self-service deli with a grab & go section, a coffee/juice bar, a deli/cafe seating area, a fairly strong selection of vitamins/supplements and body care items with a customer service counter, a small reference library section, and a a limited selection of non-food and general merchandise. The products will be of high quality with knowledgeable customer service provided in a facility that conveys an environment of abidance, intimacy and community.

Customers

Co-op Market’s customers will be drawn from the greater Fairbanks area who are interested in supporting local businesses, food production, and natural foods and products that may or may not be available in the stores offering indirect competition such as Safeway and Fred Meyer. Generally natural food store customers are better educated in areas of nutrition and health. Customers will also be drawn from the immediate surrounding area which does not have a grocery store nearby. The closest store is the Safeway on College Rd. which is a fair distance from the whole south side of Fairbanks. There are a number of government offices and other businesses in the nearby area that will provide customers.

Market Area, Size, and Trends

The market area for Co-op Market will be the greater FNSB area and surrounding railbelt communities plus some mail order business with the surrounding roadless communities. The market area has experienced a steady growth in population in the post pipeline years. The local economy has been anchored by the UAF, Fairbanks being the Prudhoe Bay supply center, Ft Knox Mine,Fairbanks’ role as the industrial center of Interior Alaska, military spending at the two military bases near Fairbanks, and a strong tourism industry. In the future the national economy’s downturn will affect Fairbanks as military spending may be cut, the tourism industry will suffer as discretionary income declines, and nearby mines may be affected by low mineral prices. The overall trend is for the economy to level off in interior Alaska. Growth will probably slow or be nonexistent. Competition for retail sales will increase. The price of imported products will probably go up with the increase in the price of oil. Local food and industrial production should be stimulated by this. Also the trend is for the sale of natural food and related products to be on the upswing as more questions arise as to the appropriateness of our current food system and its sustainability.

Competition

Competition for Co-op Market comes from the large national chain box stores Safeway, Fred Meyer, and Walmart. Safeway and Fred Meyer have two stores one on the east and one on the west side of town while Walmart has one store located on the east side of town. These stores have a grocery section that includes a nutrition or health section that sells organic produce and other related products. They are indirect competitors.

There is only one direct competitor located within the trade area, Sunshine Health Foods.

There is indirect competition from buying clubs in town whereby a group of people get together and place an order for food from a warehouse in the Lower 48. There was also a local business here that would place the order and then distribute the goods at a prearranged location. That business closed but another similar could reopen at any time.

Description of Industry

During the past decade or so, the natural food segment of the retail food industry has been increasing at a rate considerably faster than the conventional food industry. While no exact statistics are available, it has generally been reported in various trade journals that the size of the natural and local food market has been growing at a rate of between 5% and 10% per year. This increase has been due to several factors, including a broadening of the demographic characteristics that are positively correlated to natural food demand, an overall increase in consumer awareness relative to food and dietary issues, a greater interest among consumers relative to shopping for natural food, organic produce, hormone-free meant and poultry, etc., and increasing interest in consuming locally-grown food and an increasing assortment of natural food merchandise being produced and brought to market every year.

Overall Marketing Strategy

The marketing strategy for Co-op Market is based on the concept of a co-op food store in the normal sense of the term, with an emphasis on natural, organic, and locally-produced merchandise. It is based on a store format that will feature a relatively complete array of food store departments. It is based on a program of sales promotion and advertising that will permeate the trade area on a regular basis, in order to convey information about the store, its location and its product mix. It is based on an overall image of quality merchandise and knowledgeable customer service, provided in a facility that conveys an environment of ambiance, intimacy and community. Finally, it is assumed that there will be a level of store management that is knowledgeable and experienced, with a significant amount of market and marketing savvy.

Location

We are working with the owner of the old Foodland store to lease up to 8000 sq. ft. on the east end of the building, Co-op Market has signed a Letter of Intent with the building owners. The owners will donate any of the grocery equipment that is still there to the Co-op Market. The Foodland location was a popular location during its day as a grocery store. It is near the downtown area where many people work in the state, court, borough, and city offices and other downtown based private sector businesses. It is near to south Fairbanks which has no grocery store other than a couple of convenience markets. The Vision Fairbanks plan calls for a downtown grocery store and Co-op Market can fill that niche.

Advertising and Promotion

Co-op Market will engage in a program of sales promotion and advertising that will permeate the trade area on a regular basis. Co-op Market plans on hiring an experienced natural food store manager who will be familiar with marketing strategies that are successful for natural food stores. Co-op Market will join the national co-op organization (National Cooperative Grocers Association) that schedule and promote sales events and specials throughout the year such as the CO-OP Advantage program. Co-op Market can engage in community events and activities that will bring awareness to the store.

Key Personnel

Co-op Market is currently being governed by an interim board but a loosely-assembled working group is doing most of the work now. Co-op Market has/is working with the Northwest Co-op Development Center in Olympia, WA. Dave Lacey of the working group attended two workshops on co-op development put on by the NWCDC. The material from the workshops is on the Co-op Market web site at www.fairbankscoop.org. Co-op Market has/is working with the CDS Consulting Co-op in Putney, VT. CDS Consulting Group is a group of consultants with many years of experience in operating and starting natural foods co-ops. They have the expertise to assist Co-op Market  in every aspect of getting started and operating in the future. Co-op Market can use these two groups to assist Co-op Market in acquiring a good, experienced general manager to manage the store opening and the subsequent operation of the store. Hopefully our local folks can be trained to take over store management at some future point.

Critical Risks and Assumptions

FCCM is assuming that there will be community support that will enable FCCM to be capitalized at a level that will support the startup and operation or the co-op. FCCM is assuming that the national recession does not affect Fairbanks as much. FCCM is assuming that as imported food gets more expensive due to transportation and fertilizer costs consumers will want to shop locally to eliminate some of the carbon miles from the imported food sold locally. FCCM is assuming that consumers will want to shop at a local co-op and be supportive for community and environmental reasons. FCCM is assuming that the competitive environment will be relatively unchanged in the future. FCCM is assuming that the demand for natural, organic products will continue to grow as consumers become more aware of their responsibility toward Mother Earth and their own health. FCCM is assuming that the government employees who work downtown will continue to be employed and that there are no big layoffs in state and local government coming in the future.

Pricing

FCCM’s pricing strategy will be to price competitively with the indirect competition such as Safeway and Fred Meyer. FCCM will work with the national co-op association (National Cooperative Grocers Association) on price specials and promotions under the CO-OP Advantage program.

Sales Forecast

FCCM hired G2G Research Group to do a sales forecast analysis for the co-op at the Foodland site. That study concluded that FCCM could have sales according to the following: Year of Operation (Foodland Site)
2011 $2.32 million
2012 $2.66 million
2013 $3.22 million
2014 $4.28 million