Years after pioneering the natural, organic foods movement and the radical notion of a more sustainable business model, food co-ops remain leaders in the grocery industry in ways that are increasingly important to consumers. In a study released by the National Cooperative Grocers Association (NCGA) this past August, titled “Healthy Foods Healthy Communities: The Social and Economic Impacts of Food Co-ops,“ we now have a quantified view of how food co-ops compare with the wider grocery industry on key points like the promotion of healthy, sustainable food; local economic impact; and job production.
“We wanted to put numbers to what we’ve known for decades,“ says Chief Executive Officer for NCGA Robynn Shrader, “that food co-ops generate tangible social and economic benefits for the communities they serve in ways that conventional grocers just can’t.“ The study comes at a time when many food co-ops are looking to amplify their public profiles and educate consumers about their points of differentiation from conventional stores and other natural foods retailers. Strong, focused competition continues to move in on smaller markets that have traditionally been the domain of food co-ops, and co-ops want consumers to know that there are dozens of reasons that make them the better choice.
The study, conducted by independent, nonprofit research organization the ICA Group, collects analyzed data from five areas of concentration: support/engagement in local food systems; localized economic impact; job creation/quality; environmental practices and stewardship; and the promotion of healthy, sustainable foods. Some highlights from the executive summary follow.
Supporting local food systems and sustainable foods
Although the focus on locally sourced food has been a recent one for conventional retailers,
co-ops have been building connections with local, sustainable growers and producers for decades. The study reports that food co-ops work with an average of 157 local farmers and producers, and the average co-op purchases 20 percent of the products it sells from local sources. Conventional stores, despite higher volumes and in some cases greater purchasing power, source far fewer local products than co-ops (averaging 65 local producers, and 6 percent of sales). This can, in part, be attributed to the local vs. national operations structure of the two models. Co-ops are better able to make independent decisions for their stores and buy in smaller quantities from multiple suppliers—both important capabilities when dealing with family farms and small regional producers whose product might be limited in quantity or have unpredictable availability.
In terms of commitment to organic food distribution, the study confirms co-ops greatly outperform the mainstream industry in support of organic produce and products. An average of 82 percent of produce sales at co-ops are organic, compared to just 12 percent for conventional grocers. In grocery departments, organics make up 48 percent of sales in co-ops, as compared to 2 percent in conventional stores.
Local economic impact
Economists measure the impact a business has on its community by calculating its “multiplier effect.“ This is a number that represents how much money is recirculated/generated in the local economy for every dollar spent by the business and is based on the amount of money spent on locally paid wages and on local goods and services.
Food co-ops have an economic multiplier of 1.6, and conventional stores 1.36. For a consumer, this means for every $1,000 spent at a local food co-op, he/she is generating $1,604 in economic activity locally; $239 more than if that $1,000 were spent at a conventional grocery store. On a communitywide scale, a co-op with annual sales of $10 million generates $16 million in local economic impact, whereas a conventional grocery store of the same size in the same community would have an economic impact of $13.6 million. By choosing to support a food co-op of that size, a community can increase its economic activity by $2.4 million dollars a year, which is a significant number for most small to mid-size communities.
Creating quality jobs
Food co-ops offer jobs with competitive wages and better benefits than the industry standard. And for every million dollars in annual sales, the average food co-op creates 9.3 jobs while conventional stores create 5.8 jobs, in part because national chains often have more centralized administrative structures (HR departments, purchasing, accounting). Although cooperatives tend to hold pretty close to their retail grocery peers in basic wages, when profit sharing and bonuses are factored in, employees of food co-ops earn an average of $14.31 per hour, compared to the average $13.35 per hour earned in the conventional sector.
The benefit packages offered by co-ops show a more significant contrast: whereas 61 percent of co-op workers are full-time, fewer than half (43 percent) of employees at conventional stores grossing under $10 million in sales are hired full-time. Nationally, 68 percent of co-op employees are eligible for health insurance, with 56 percent of employees eligible at conventional stores (regardless of size). Co-ops invest more capital in their workforce in general: 19 cents of each revenue dollar goes to employee wages and benefits, compared with 13 cents in the conventional sector.
The study notes that co-op employees report a high job satisfaction rate overall (averaging an employee engagement rating of 4.2 out of 5 across different drivers). Similar data was unavailable from conventional sector for comparison.
Although it is not visible to consumers, all grocery stores generate many tons of waste from packaging, prep, and product loss. The industry struggles to find environmentally sound solutions to coping with this volume. Cardboard recycling is a well-established practice across sectors, with both co-ops and conventional stores exhibiting rates above 90 percent. When it comes to more challenging materials that are lacking a readily available public recycling infrastructure, co-ops show a much stronger level of environmental commitment, recycling 81 percent of plastics (conventional: 29 percent) and 74 percent of food wastes (conventional: 36 percent). Forward-thinking alternatives to standard waste disposal appear to be a specialty of food co-ops.
Probably the most significant, yet invisible, environmental issue in the grocery industry is refrigerant leakage. To minimize energy loss, the majority of food co-ops practice preventive measures such as using night curtains on open refrigerated cases, switching to LED lighting to generate less heat in chilled cases, and installing more efficient refrigeration units. These relatively minor changes contribute to co-ops’ low overall refrigeration leak rate of 8 percent—far less than the Environmental Protection Agency’s (EPA) estimated industry average of 25 percent, and also lower than the 13 percent average rate of industry leaders that report data to the EPA’s Green Chill Partnership.
The EPA has established an Energy Star rating system for grocery stores so that individual stores can monitor and compare their efficiency across the industry. These ratings are assigned on a scale of 1–100, taking into account size, location, refrigeration capacity, and any other factors that affect energy consumption. A rating of 50 is average for the conventional industry—but co-ops’ average rating is 82. Of NCGA’s 128 member co-ops, 71 percent qualify for Energy Star certification—and if those stores are isolated and their metrics entered into the Energy Star rating system, the average score for those stores is 93.
About the study
The data in this study was compiled from industry and government resources, food cooperative financial data collected by CoopMetrics for NCGA, and previous NCGA surveys. The ICA Group conducted two additional surveys, one targeted to retail food co-ops and the other to the conventional grocery industry. The ICA Group is a national nonprofit research organization based in Brookline, Mass., focused on cooperative development, social purpose venture planning, and research and evaluation services for nonprofits. More information on this group can be found at www.ica-group.org. This study was commissioned and funded by the NCGA.
More results from the report, including a link to the executive summary, can be found on the web at www.strongertogether.coop/food-coops/food-co-op-impact-study.
This article was featured in Cooperative Grocer, Issue 163 December 2012. Click here to subscribe.
In this article
- Business models
- Chief Executive Officer
- Consumer cooperative
- Contact Details
- Environmental Issue
- Food and drink
- Food cooperatives
- Food systems
- Grocery store
- National Cooperative Grocers Association
- NCGA Robynn
- Organic food
- Social Issues
- Sustainable food system
- The ICA Group