How will independent grocery co-ops weather the cost of living crisis?

‘We very much see ourselves as custodians of this business … We will dig deep and try and make things work’

The cost of living crisis is putting pressure on the UK’s co-operative grocers – so much so that some have already had to shut their doors. 

Wild Thyme Wholefoods, a workers’ co-op in Portsmouth, announced on 7 September “the sad truth” that it could no longer carry on trading. “Increased rent, rising rates and higher energy prices coupled with lower sales mean we cannot cover our basic costs any more,” a statement on Facebook read. 

Rice Up Wholefoods in Southampton put out a similar statement in August, saying that rent demands and energy bills, “along with all the other challenges we have faced in the last few years as an independent has culminated in us having to reach the terribly difficult and sad decision to close for good.”

Those still in business face a perfect storm of soaring running costs, increased wholesale prices and smaller takings.

The 8th Day worker co-op, a health food shop and cafe in Manchester, celebrated its 52nd birthday this month. It opened in a decade facing similar challenges to the present day – such as fuel shortages, inflation and mass industrial action. More recently, 8th Day has weathered upheavals such as the 2008 financial crash, Brexit and the Covid pandemic. 

Related: Co-ops, community business and the energy crisis

Worker member Jeniya Marsh says that while the co-op has always experienced “dips and troughs”, the current crisis feels somehow different. “I’ve kind of got the feeling that this might be a bit longer lasting.…It’s so many different things at the same time.”

Energy costs for businesses like 8th Day have doubled. The prospect of further increases has prompted the government to place a cap on household energy bills for the next two years, and businesses’ bills for the next six months, as part of its Energy Bill Relief Scheme. But with millions of households still being left in fuel poverty, coupled with the 11.4% increase in food prices in the past year, customers will be making some very difficult spending decisions.

 Reduced footfall as customers face the squeeze is a particular concern for stores like 8th Day, which can be seen as non-essential spending by some customers. While 8th Day has its regulars, other customers are better described as “fair-weather” buyers. 

“When they’ve got disposable income, they’ll come and spend it with us,” says Marsh, “but if they’re short of cash, then of course they’re going to just go and do their shopping at the cheapest supermarket they can find.”

Recent research from Kantar has found a drop in “eco-active” customers – the kind of shoppers likely to be found in a store like 8th Day, seeking sustainable and organic products. In the UK, eco-active shoppers have reduced by 3% in the past year. To make matters worse, suppliers have been forced to put up prices, as raw ingredients and transport become more expensive.

“The cost of bringing products into the UK has also gone up,” says Ms Marsh. “Obviously, that’s not just to do with inflation here. That’s to do with Brexit and increases that have been passed on to wholesalers and importers. Especially when you’re bringing in goods from the EU now.”

Co-operative wholesaler Essential Trading, in Bristol, supplies a number of shops and cafés in the city and across the UK. Essential’s Lee Nottle explains that while the current situation is challenging, Essential’s experience during the 2008 crash has left it in a more resilient position.

Related: Co-op Group announces 400 head office job cuts as inflation bites

“Since then, there’s been a lot of effort made to make sure that we have some sort of financial safeguarding in place,” he says, “so that if something similar were to happen, we wouldn’t be impacted in the same way. So we’re in a fortunate position at the moment.”

Essential’s stockists are concerned about the situation, says Nottle. “The Energy Bill Relief Scheme is probably going to help a lot of our customers a lot. For some however I think this announcement came too late. We’ve seen a few closures this year as the predictions for the winter months were looking fairly bleak. However, I do feel it may help the unease surrounding small businesses right now.”

The ethical food co-op sector also faces growing competition from supermarkets, as well as health chains such as Holland and Barrett. Marsh says 8th Day is keen to champion independent health and wholefood businesses. 

“We regularly pass customers on to other independent businesses, who we think suit their needs better. And we encourage customers to look for more environmentally friendly businesses, which are generally smaller.”

In a similar vein, Essential has launched the Support Our Independents campaign, working with customers to promote their work, share their stories and highlight why it is important to shop with independent businesses.

“We just wanted to share what makes these businesses really unique and wonderful,” says Nottle. “We’ve got such a range of customers, all of which are different.”

The first business to be profiled in the campaign is Bristol vegan doughnut shop Future Doughnuts, and more will be profiled in the coming weeks. 

“I think we all just want to help each other,” says Nottle, “and we want to help our customers and our local community. I think that’s a large part of what being a co-op is.”

Both 8th Day and Essential are worker co-ops. Sometimes this can mean difficult decisions, such as 8th Day’s agreement to take a voluntary pay cut at the beginning of the pandemic – which is still in effect. 

“It was a decision we made collectively, because we wanted to make sure we could keep as many staff employed as possible,” says Marsh. “Decision making can be laboriously slow. But at the same time, because you’ve got a shared ownership of the business, there’s a shared will to try and make things work. And so in that sense, we probably dig a bit deeper than most other companies. Most other companies, they’ve probably got one boss, two bosses maximum, and a whole load of workers who are probably not paid properly, who are a bit disgruntled … Whereas within a co-op… we try to treat each other really nicely.”

Considering the challenges co-ops now face, a collective will to survive is needed more than ever.

“We very much see ourselves as custodians of this business,” says Marsh. “It’s 52 years old and it’s been built on the back of the hard work of so many other people. The desire to pass that on in a good shape means we will dig deep and try and make things work.”