Stateside co-ops are big business

At the end of the Second World War, most Americans did their grocery shopping at an independently owned grocery store. However, tremendous shifts took place in food retailing...

The independent grocers began to lose market share to the regional chains. Independents began to close stores and the future of retailing seemed bleak for the locally owned grocery store. 

However, today, grocer-owned retailer co-operatives are a $41 billion (£26bn) a year contributor to the US economy and locally owned, independent grocers continue to play an important part in food retailing in the USA. 

What role did the retailer-owned co-ops play in helping independent grocers to retain a place in the marketplace?

Some of the independent grocers saw that if they strengthened their co-operatives they could obtain savings and services equal to the purchasing power of the chains. Throughout the USA, retailer-owned co-operatives designed group programmes to give their retail members new powers. The co-operatives transformed activities such as distribution, buying alliances, branding, co-op advertising, financing, marketing, location analysis and other services. In turn, the local retailers began to use the power of the wholesale co-operative to strengthen their back-room activities. 

On the other hand, a number of other privately owned wholesalers have bitten the dust. The Fleming Companies, once America’s largest grocery wholesaler, has gone out of business. The main competition is between the remaining giant private wholesalers and retailer-owned co-operatives. 

After the end of the Second World War, chains fought each other for market dominance. As a result of the battle, a number of chains had to either merge or go out of business. In many cases this has been to the benefit of independent retailers and the retailer-owned co-operatives. 

As part of the merger process, regulatory authorities said a number of stores had to be sold off to spur competition at the local level. In some cases, the local retailer bought a few surplus stores but, in most cases, the retailer-owned co-operative bought a large number of stores and parcelled them out to its members. In some situations, the retailer-owned co-operatives retained direct ownership of the stores to build corporate volume or to enter territories where there were no local members. Many of the retailer-owned co-operatives now own many stores of their own. Purchasing power in a dynamic market requires grabbing one-time-only retail opportunities and deciding what to do later. 

The largest grocery retailer-owned wholesaler is the Wakefern Corporation based in New Jersey. Its volume in 2008 was $8.3bn (£5.4bn). It serves 45 different member grocers who operate stores in six eastern states. More than 200 Wakefern Stores operate under the same “Shoprite” fascia. More than 20 of the stores are owned by the Wakefern Corporation. PriceRite Supermarkets, a wholly-owned subsidiary of Wakefern, operates 40 stores in Connecticut, Massachusetts, New York, Pennsylvania and Rhode Island.

The second largest is Associated Wholesale Grocers (AWG) based in Kansas. Associated’s 2008 volume was $6.9bn (£4.4bn). AWG and its affiliates support and deliver to 2,500 retail outlets in 24 Mid-Western states and its stores operate under ten different retail formats.

Behind them comes California-based Unified Grocers. It is the largest retailer-owned co-operative in the Western United States and covers all of the Pacific states. Unified’s 2008 volume was $4.1bn (£2.1bn) and it serves more than 3,000 retail stores owned by more than 500 members.

These top three retailer-owned co-operatives are numbers five, six and ten in a survey of the top 100 co-operatives in the USA. Grocer-owned co-operatives make up 14 of the top 100 US co-operatives, they also make up eight of the top 19 food wholesalers on the Supermarket News list. 

Topco Associates made number four on the Co-op 100 list by virtue of its $.9.4bn (£6bn) volume for 2008. This was a 12.5 per cent increase in volume over the previous year and a lot of business for a co-operative with only 500 employees. 

Topco is a member-owned co-operative whose members are retailer-owned co-operatives and chains. Topco’s motto is Collective Strength — Mutual Benefits. It provides services for retailers, wholesalers and food-service companies. It also focuses on building discounts for its own brand or the brands of its members through its purchasing power. However, the co-operative is mainly a purchasing co-operative and pays a patronage dividend to its members based on their transactions with the organisation.

Closing the loop on co-operation among retailer-owned co-operatives is the Retailer Owned Food Distributors & Associates, which serves 17 member retailer co-operatives throughout the United States. ROFDA believes that, in the world of supermarket distribution, there is a need for a co-operative-only organisation to meet the needs of the independent retailers who are their members and owners.

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