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Board of Directors Update

Cooperation and Competition by Steve Maker, Board President We are a co-op, yet we must compete. The goal of a publicly held corporation, and many closely held companies, is to maximize return on invested capital. The grocery industry is heavily consolidated, with large stores nearby that would love to have our members as shoppers. They have driven down their costs and achieved high operating efficiency with hundreds of stores, massive purchasing power, economies of scale, and vertical integration. Yet in a recent year, the industry average profit was 0.77%. Our co-op, on the other hand, has a "multiple bottom line." We seek to maximize member satisfaction. We have less purchasing power, more service, and carry out a wide variety of activities, especially education, that do not add to our financial bottom line. They do, however, add to our member-satisfaction bottom line. In the year 2000, we held prices down in the face of rising costs, we continued to pay off the debt incurred by the Lebanon Store, we opened the Commissary Kitchen to serve the increased demand for prepared foods, and we invested in updating aging equipment in the Hanover store. Most importantly, we kept the Co-op financially strong and competitive; failing to do so would hardly be in the best interest of our members! Our Net Savings for the year was about 0.3%. The competitive environment is not waiting for us; it is not making allowances for our different way of doing business. As an organization, we must take responsibility for our own survival. Part of that involves making difficult choices. I am proud that at the 2001 Hanover Co-op annual meeting, our members made a wise but difficult choice, by waiving the patronage refund. They chose to avoid the added cost of sending out small refund checks, and they chose to invest that money in the continued strength of the organization. They rejected the kind of short-term thinking that requires maximizing financial payback now, rather than satisfying the more significant and human needs around food and community. As they have in Co-op Annual Meetings for many decades, they asserted their continued support for the different way of doing business that the Co-op represents. Yes, we are a business; yes, we must compete; but we are organized in a way that aligns our goals and values with that of the membership — we cooperate while competing. In the coming year, the Board of Directors will be seeking to understand more deeply how our multiple bottom lines can best benefit members. Recognizing that we embody multiple goals is still a long way from understanding just what those goals should be. Being able to clearly state our current goals is also different from the forward-looking aspect of setting new goals and redefining priorities. Yet the Co-op needs to continually change to adapt to changing member needs and to the changing external environment in which we find ourselves. The years of high patronage refunds (partly at the expense of strong investment in the business) have not helped clarify the priority of that refund among our bottom lines. It would be very easy to increase the refund by raising prices and cutting services; however, that’s not what our members want. Our policy is "fair prices," not manipulative, not lower than we can afford, yet not out of line with the competition. It’s not possible to have a policy of low prices and high patronage refunds; that’s a recipe for failure. Taking the membership as a whole, we have clearly stated that we value superb customer service more than high patronage refunds. We value an amazing selection on high-quality goods and services more. We value our honest way of doing business, of providing truthful education, and of supporting our community. Any community needs a mixture of businesses and business structures. But I like to ask myself, "If all of the Upper Valley businesses operated as we do, would our community be a better place?" I want the answer to be "Yes." I want the Co-op to continually learn how to make that "Yes" stronger. I deeply believe that multiple bottom lines is a critical part of the structure of our Co-op, that helps make it such a valuable community member. And I am inspired that at the Annual Meeting, the voting members agreed. Have a comment about this article? Send us an email.