GM Update - October 2022
It’s been a while since I’ve given you an update on your Co-op. As you have all experienced in your own lives, the last couple years have been anything but normal. The same can be said for the Co-op. After two years of wild swings in sales and customer traffic, both are starting to level out. For the last six months we have seen a steady growth in sales and customer count. Sales for the first six months of 2022 were over $11 million, up 11.3% compared to $9.9 million in pre-pandemic 2019. It is interesting to note that customer count for the first six months of 2022 was down 28% from the same period in 2019. So, it’s plain to see a significant shift in shopping habits. We are seeing less frequent visits to our store, but with a greater amount of goods being purchased at each shop. This has been a consistent trend throughout the grocery industry nationwide.
This change in shopping habits is not the only impactful change we are experiencing. The pandemic has had a significant impact throughout supply chains and our regional workforce. Below are a few of those effects:
Cost Increases - Impacts from the pandemic have contributed to food and supply inflation rates that are higher than we’ve seen in decades. Higher costs for all grocery retailers have led to significant increase in the retail prices that the consumers are now paying. Here at our Co-op, we have seen similar cost increases and have had to adjust many of our prices, as a result. Raising prices at is something we are always reluctant to do. In the past, we may have held back increasing retail prices when we experienced short term inventory and supply cost spikes, so as not to pass those through to you. This time around the increases we are dealing with are very different: the cost increases we’re seeing are higher than what we’ve previously encountered, and there is no sign they will decrease. Starting in the fourth quarter of 2021, food and supply costs increased across the board. Our manufacturers and vendors increased their cost of products and supplies by a minimum of 10%, and in some cases, as high as 40%. They were also clear that this was not a temporary increase.
Deli Price Increases – The cost of inventory and packaging supplies (packaging costs are up 32%) for the Deli has experienced the most dramatic increases. All of the products that we make in our deli are just that: handmade, which means they’re labor-intensive. It should come as no surprise that production labor at the Co-op has increased significantly, and at the supplier level for some of our most essential ingredients. All of that is to say, we are doing our best to produce the quality products you know and love in the most efficient manner with prices that are fair and representative of the true cost of production.
We are currently converting the former Third Street Café space into a high-power production kitchen. We hope to have the project completed by the end of the year. The new production kitchen will allow us to become even more efficient in our production process. We also expect to develop new products and programs in 2023 to further delight our members and shoppers.
Out of Stocks – The amount of “out of stock” items is significantly higher than the norm. It is frustrating for you as a shopper and for us, too. We take pride consistently procuring the items you’re after. However, the industry is dealing with long-term out of stocks on numerous popular items, including some sale items. There are supply chain shortages of raw ingredients at the manufacturing level, challenges with shipping products, and securing labor to consistently satisfy demand. We will continue to work to secure these products. However, when it isn’t possible to do so, we can help you find alternatives.
Labor cost increases and shortages – The Co-op, like most other businesses, is dealing with moderate to severe staffing shortages. We typically have several positions open with a very low number of applicants. Many people who left the workforce during the pandemic have not returned. Experts have speculated about why that is, but no matter the reason, it is challenging to find people willing to work. The good news is, our success rate in hiring and retaining staff is higher than the grocery industry as a whole because of our commitment to providing a great workplace. Over the last two years, we have significantly increased the wages of our entire staff. We are utilizing a “living wage” calculator to dictate our minimum rate of pay, and part of our commitment includes continually reviewing that pay structure. As a value-centric organization with guiding principles, we’ll continue to do the best we can financially for our staff, especially now with the ballooning cost of living and inflation.
Profitability & Earnings – And yet, despite all of the aforementioned challenges, your Co-op is healthy. We have budgeted to earn approximately $500,000 for the year, including a planned pay increase for staff at an additional cost of $325,000. I am pleased to say that as of the end of June, we were right on target to hit our budgeted net earnings. We are in a very strong position financially and have a lot of capacity for resilience, whatever the future may hold.
Thanks to you all for your continued support. Because of you, we are able to provide our staff with a good workplace and fair wages. In return, they help us deliver a great shopping experience. The combination of member-owners and staff are two of our most important stakeholder groups. Together, foster an amazing Co-op community, and our dedication to good food with an emphasis on our local economy, is what makes your Co-op so special!