Seward co-op's expansion marks growing trend for alternative grocers

John Klein has been shopping at cooperative grocery stores for four decades, since the first wave of co-ops were founded by anti-war activists to offer neighborhoods healthy foods that weren't readily available at the supermarkets of the day.

At a meeting this week to discuss a proposed second location for the Seward Community Co-op in the Bryant neighborhood of Minneapolis, Klein said he sometimes misses the more political and scrappy co-ops of the 1970s. But he thinks the Seward has managed to grow while still maintaining its core values.

• Previously: Proposed 2nd Seward site raises concerns

"You can always get good produce; you can know where food comes from," Klein said. "There's a lot more frills, and I suppose those cost something, but mostly Seward has grown to fit the community."

The Seward Co-op isn't alone in its plans to add a new location to meet rising demand. Many of the cooperative groceries in the Twin Cities are planning expansions or additional locations. Powered by consumer demand for organic and natural foods, it's a strong comeback for an industry whose future was shaky just a decade ago.

(Data source: Land Stewardship Project)

'The People's Pantry'

Minnesota has a long history with agricultural cooperatives. But the first of the "new wave" grocery co-ops in the state had its start on the back porch of a house in the Cedar-Riverside neighborhood of Minneapolis in 1970.

Craig Cox, author of "Storefront Revolution," which documented the area's cooperative movement, said the handful of people who founded the so-called People's Pantry learned how to buy bulk food directly from farmers while living on a commune in central Minnesota.

"They saw that as a way to live very cheaply and to control their destiny in a way," Cox said. "They started putting sacks of grain on the back porch of a house and people just showed up and paid some money."

• Related: When Twin Cities co-ops went to war over margarine

That pantry was formalized as North Country Co-op in 1971, which inspired around two dozen similar cooperative grocery stores across the Twin Cities, creating what's still today one of the most thriving cooperative business scenes in the country.

Most of the early storefronts were run purely by volunteers, or in some cases, collectively managed by the workers, with a commitment to egalitarian and environmental values.

"It was this wonderful little bubble of alternative economic and social justice movements that developed here that I think were different from anywhere else," Cox said. "And the food co-ops, in a big way they were kind of the glue that bound it all together because everybody has got to eat."

A violent schism called "the co-op wars" erupted in the scene in 1975, and involved hundreds of co-op activists. It included occupations of co-ops, the firebombing of a truck and beatings, as Marxist-Leninist activists tried to take control of the stores.

"Their whole idea is that 'You're just a bunch of hippies playing store, you really need to use these co-ops to reach out and build a revolutionary movement,'" Cox said.

The co-op wars scared some people away from the political side of the co-op groceries, but it also brought to the surface an issue that co-ops, including the Seward Co-op at its proposed location in the low-income Bryant neighborhood, are still dealing with: "Who are we serving here?"

Co-op expansions planned across state

Minnesota is the country's most cooperatively organized state, with more than 1,000 businesses identifying themselves as co-ops in industries as diverse as banking and childcare.

Despite some setbacks in the last few decades, cooperative grocery stores, which are owned by members and operated by democratically-elected boards, have managed to pull themselves back from the brink of irrelevance, with some local co-ops now doing tens of millions of dollars in business every year.

C.E. Pugh, chief operating officer for the National Cooperative Grocers Association, said co-ops hit their low point about a decade ago. They were facing competition from companies like Whole Foods and new natural foods sections at supermarkets like Rainbow Foods.

In the wake of these new pressures, many smaller co-ops in the Twin Cities closed, including the original Twin Cities co-op grocery, North Country Co-op, which finally shut its doors in 2007. Other co-ops embraced change and survived.

"There was a shaking out if you will," Pugh said. "People got serious, and also just the learning curve, co-ops get better as management gets better and operates more effectively, and they kept building on that."

In the last decade, Pugh said about 50 co-op groceries have opened across the country and dozens of co-ops have expanded their operations.

His organization now represents 136 independent cooperatives that operate 180 stores across the country. Sales nationwide have tripled in the last decade to about $1.6 billion a year.

Many of the newer co-op stores are being opened by existing organizations, much like the Seward Co-op, Mississippi Market and Lakewinds Natural Foods in the Twin Cities are now proposing.

Pugh said a new store operated by an existing co-op is more efficient than opening a co-op from scratch. But it wasn't easy for co-ops to make the leap.

"It took a while for people to get comfortable with that idea," Pugh said, "to see that demonstrated and see that we can do that and not compromise our values and not compromise what makes us a co-op."

Pugh said there are about 50 new cooperative grocery stores being planned across the country.

A natural foods boom

At the heart of the current success for local co-op groceries is the changing attitudes towards food in the country as a whole, with first lady Michelle Obama and authors like Michael Pollan urging people to add more produce to their diets and be more conscious of the food system.

Sean Naughton, a senior analyst for Piper Jaffray, said natural and organic foods are some of the strongest overall trends in the grocery industry right now.

"When you look at the organic baby food category, that's one where it's ground zero, that's one where the consumer and the mom that comes in is always buying the organic, the mom is just not willing to bend on that," Naughton said. "I think that's starting to extend into all these different areas."

Even supermarkets are seeing growth from organic produce these days, Naughton said. But co-ops may also be benefiting from the direct relationships they've developed with farmers over the last few decades, as consumers seek out more "authentic" foods, even if they sometimes cost more.

"As people get more indoctrinated and start to learn more about how their food is produced and how that food gets to their table and the actual costs associated with it, I think people are willing to pay," Naughton said.

The Wedge Community Co-op on Lyndale Avenue is among the Twin Cities co-ops that are planning expansions. The co-op plans to build a kitchen and retail space on Nicollet Avenue in and is also in the early stages of planning another full-service location in south Minneapolis or the nearby suburbs.

"I wouldn't say that we're maxed out, but that we're fairly close to capacity at our current location," Wedge CEO Josh Resnik said.

Wedge customers appear to be drawn to the store's organic produce and longtime relationship with local farmers, Resnik said. But people are also drawn to The Wedge by its cooperative business model, which he says keeps more money in the community than corporate chain stores.

"People come to us for a number of different reasons, they may evolve over time," Resnik said. "People will often come in through one of those and then over time there's a merging, and we may end up serving several of those needs for them."

The co-ops still account for just a fraction of grocery sales in the Twin Cities. But they're aiming to spread their influence and distinguish themselves from chains like Whole Foods and Trader Joe's that also carry natural foods.

"As more food retailers are getting into selling natural and organic food and touting local, I think the onus is on us to keep up our game and deliver excellent product and excellent customer service," Resnik said. "Then really tell our story about how we do things differently, and what the advantage is of shopping at the co-ops."

'Growing with purpose'

Although co-ops have long ceased to be centers of radical activism, they're still better able than corporations to consider the social impacts of their business choices, according to Minnesota 2020 fellow Lee Egerstrom, who's written extensively about cooperatives.

"In the case of cooperatives, there's always more than just financial return," Egerstrom said. "You can end up with three different goals making a bottom line for why are you a member, as opposed to a securities-type firm where the purpose is to maximize profits from your investments, a single bottom line."

Egerstrom said co-ops appear poised to benefit from an emerging social consciousness among consumers.

"It's not well articulated yet in the general public, but there is increasing awareness about being socially-responsible purchasers," Egerstrom said. "Buying local campaigns are probably at the forefront of that."

Tom Vogel, marketing manager of the Seward Co-op, said co-ops haven't abandoned the principles they started with. The Seward Co-op's day-to-day functioning is dictated by an "end statement."

"It says that Seward Co-op will sustain a healthy community that has equitable economic relationships, positive environmental impacts and inclusive socially-responsible practices," Vogel said. "That is what in some form or another we look at when we make any type of decision."

When the Seward Co-op moved into a new building in 2009, the management team predicted it would take a decade to reach $30 million in annual sales.

Instead, they passed that threshold last year, Vogel said. But Seward Co-op's board didn't want to add another store just for growth's sake.

"It's recognizing, not fighting against, growth," Vogel said. "It enables us being financially successful and enables us to do a lot of the other good things we do."

One example of the co-op sticking to its values, Vogel said, is how it dealt with a dilemma posed by the fact that the federal WIC (Women, Infants and Children) program does not subsidize cage-free eggs. The co-op does not sell conventionally-produced eggs.

"We didn't want to compromise on that and carry a product that we didn't believe in, that could possibly include the inhumane treatment of animals," Vogel said. "At the same time, we felt that people should be able to afford good eggs, so Seward Co-op subsidizes WIC so we can provide good, cage-free eggs on WIC for people on that program."

The values of those scrappy, political co-ops that formed four decades ago to offer neighborhoods inexpensive brown rice isn't immediately obvious in today's large, successful co-ops, said author Craig Cox. But perhaps that's because some of those same issues that first animated co-ops are now part of the mainstream food conversations.

"They're distributing good food to a very large audience and working with sustainable farmers and sustainable agriculture and other ecologically friendly vendors -- it's a huge triumph," Cox said. "The co-op pioneers here would be proud of what they see now."