The Path of Change

By Laurene Sorensen, Moscow Food Co-op Board President

Our Co-op's current growth path goes back to the 2013 strategic planning process. Many owners gave input, both informally and at a festive all-ages event in the parking lot. We posted a large map of the Palouse and environs and invited owners to mark where they lived. We also provided a message board where owners could offer feedback and suggestions in different topic areas.

The strategic planning process resulted in a new strategic end: "The Moscow Food Co-op grows and expands to serve our mission."

Means to this end are: 

  •  Developing criteria for growth and growth scenarios.
  •  Educating the Co-op community about growth.
  •  Engaging in growth opportunities. (Strategic Plan 2015–2020)

Let's take a look at how the Board and General Manager have been doing these things.

Developing criteria for growth and growth scenarios.

Criterion 1: Have the financial resources to grow.

The Co-op historically has operated with a strong cash position and very little debt. However, revenues are down this year. This correlates with recent big changes in the ways consumers shop for food. Organic produce, meat, and packaged foods are now available at large commercial grocers and discounters and online. Using this criterion, the Co-op is less ready at the end of 2017 for a major capital investment than it was in 2015.

But even in 2015, the Co-op's cash on hand was not enough to undertake a large project, such as a new full-size store in Pullman, without external financing. Therefore, the Board took steps to ready the Co-op for a major capital campaign. One way to do this is to allow owners to invest in the Co-op in a different way from ordinary membership fees. Another is to borrow money from outside sources such as banks or loan programs in and out of the co-op world.

With the aid of Dorsey and Whitney, a national law firm that works with agricultural, industrial and consumer co-ops, we learned that the Moscow Food Co-op, as an Idaho nonprofit, can raise $1,000,000 through owner loans or preferred stock. If we incorporate a separate entity in Washington, it will be able to raise another $1,000,000 from its owners. That'll get us halfway to the $4,000,000 it will cost to build a second store of comparable size to our current one.

Criterion 2: Do it legally.

The Board engaged in an intense study process of federal and state securities laws (laws that regulate investment and protect investors) to see how we could raise funds, both inside and out of Idaho, and who could be an investor. We also revised our bylaws to bring them into compliance with current law. Dorsey and Whitney reviewed our bylaws and suggested a few changes.

They also suggested ways to structure the expanded business, and suggested we start by creating a Washington business entity that can borrow money and have its own legal identity (which means it will be a separate corporation from the Moscow Food Co-op).

Criterion 3: Demonstrate readiness

Our audited financial statement is a document investors and lenders will look at to guide their decision to provide capital for our growth. Wegner, CPAs, a nationally recognized firm that specializes in co-ops, has just concluded a process that took three years. The result: a letter certifying that the Co-op's financial position is stated in accordance with accepted accounting principles used in the co-op industry. In the first year Wegner studied the Co-op's business processes and practices and came up with suggestions. The second year they conducted a pre-audit. The actual audit only happened this year.

 In addition, management worked with consultants to identify efficiencies and opportunities in the current store's operations. The final audit of the 2016 financials was released last month and the Board and GM had a conference call with the auditor in which she explained the meaning of the numbers and how we compare to other food co-ops on key indicators of financial soundness.

Educating the Co-op community about growth.

From now until Christmas, the Tasteful Thursday program offers owners an informal opportunity to converse with Board members about growth. The Board and its committees publish updates in Community News.

The Board's main vehicle for owner education on growth (and everything else) is our business meetings, which all owners are welcome to attend. Time is reserved at the start of each meeting for owner communication. We publish an agenda in advance so owners can see what we will discuss. If you would like to receive the agenda in your inbox, please contact boardadmin@moscowfood.coop. In addition, we have held a series of owner forums in Moscow and Pullman on the proposed Pullman location, the revised bylaws, and Washington business formation.

Engaging in growth opportunities

The Co-op believes that responsible business growth that fits within our mission is good for our owners and the larger community. (Strategic Plan 2015–2020)

What's a "growth opportunity"?

A chance to expand revenue from the current store. In 2016, consultants from the Development Cooperative strongly urged management to rework the traffic flow in our current location. We anticipate this will improve sales per square foot by improving the shopping experience and making it easier for Co-op staff to keep the shelves and fridges full of good things. Construction on this project will start early in 2018. The Co-op will stay open while this is going on.

A chance to serve the larger community. The Co-op has long wanted to serve the University of Idaho community through an on-campus location. However, opening a Co-op outpost in a campus building would conflict with the University's current food service contract. The Co-op is now collaborating with The Center, a campus group whose headquarters is owned by a private foundation. The Center's board needed funds to repair the building's roof. The Co-op is leasing space from the Center and constructing a "grab and go" shop. The Center now has funds to make needed repairs. University students and workers soon will have a new source for coffee or a quick bite

A responsible undertaking. Through the Strategic Planning process, owners expressed a strong desire for expansion into Pullman. Many were more specific: they want a Pullman store with a walkable downtown location akin to what we have in Moscow. However, the Board has a fiduciary duty to act responsibly, and we have put this project on hold until store revenues improve and we have the right space, financing, and expertise (general contractor, project manager, etc.). In the meantime, opening a limited-service store at WSU, or elsewhere in Pullman, could take us one more step on the path to growth.