Natural Foods Merchandiser

Local products enchant N.M. co-op's customers

C.E. Pugh, manager of La Montañita Co-op, knows a good promotion when he sees one. That's because he does his research. "I personally check out the competition in Wild Oats and Whole Foods every week, checking their prices," he says. "Mostly I'm looking for stuff on sale that I haven't seen presented to us. Then I get on the phone to the manufacturer or broker and get them to give us the same deal." Pugh says his personal goal is to have 600 sale signs in his store in any given month.

This aggressive stance on promotions is undoubtedly one of the reasons that La Montañita actually increased sales when Whole Foods entered the Albuquerque, N.M., market in 200

  • Pugh credits his savvy about promotions to the 20 years he spent managing conventional grocery stores. "You can't sit in the store and wait for the deal to come to you," he says. "I guarantee your competition are going out after them, so you have to go after them too." Another sign of La Montañita's competitive edge: In the last seven years, the co-op, which opened in 1976 as a 300-family operation, has expanded to include three more stores in New Mexico—another in Albuquerque, one in Gallup and one in Santa Fe.

    Going after promotions isn't the only trick La Montañita has borrowed from conventional stores. To better train its supervisors, the store partners with the University of New Mexico Anderson School of Business, sending department heads to the school for full-day management training sessions. The co-op is also a member of the National Cooperative Grocers Association, which offers management education programs that La Montañita supervisors regularly attend. "Training is just critical," Pugh says. "We have department heads who are managing a million-dollar deli business and supervising 20 employees. We have to give them the skills to do that."

    Before the co-op's expansion, it hired an outside firm to conduct a professional market study and determine whether it was financially feasible. In addition, the co-op regularly brings in professional consultants to improve store performance. Pugh is currently working with a consultant to help grow sales in the deli. "Our delis and prepared foods have been a great challenge. There was a lack of consistency with products, high staff-turnover rate and little to no growth," Pugh says. "We've worked with a couple of consultants, and now we have a renewed commitment and focus." As a result, one of the store's delis is receiving an infusion of cash—$100,000—that will, among other changes, transform it from full-service to self-service. It will be cheaper to run the deli as self-service, but first Pugh has to invest the money to buy the equipment to make it self-service.

    But even though Pugh says he was able to carry over lessons learned in conventional stores, he emphasizes that he works on running a better, more efficient business only to benefit members. Take the promotions, for example. "We are going after these deals in order to pass the savings on to our customers in the stores. We are not seeking these deals to boost our margins," he says. Membership in La Montañita does not give shoppers a flat discount, but instead the goal is to each year return a dividend, paying members 2 percent of purchases. For the last few years, La Montañita has come close, returning

  • 75 percent and cutting millions of dollars in checks to members, which Pugh says amount to about a week's worth of groceries for each recipient.

    Growing sales have also helped La Montañita cope with increasing costs while maintaining a living wage for its employees. "Every cost we have goes up every year. People want raises. Health care goes up. Utilities. Rent. If we don't grow our sales, we can raise prices or we can cut wages, and we don't want to do that," Pugh says.

    Just as important, he says, the savings gained from negotiating better promotions from national manufacturers also leaves the store with money to fulfill one of its central missions: increasing the presence of local products. Now, locally produced items make up 20 percent of sales. The store does business with 400 local producers and lists 1,500 locally produced items in its database. "My personal goal is to get that within five years to 30 percent sales," says Pugh. "But at the end of the day, it's the customer who decides what that percentage is." Pugh acknowledges that local produce is often more expensive than produce from California, but he says co-op members really see the value of locally produced food—both to the environment and the New Mexico economy—and demand for local continues to grow. Pugh knows this, too, because of his research: He regularly surveys members to get their suggestions and to ascertain the store's strengths and weaknesses.

    This attention to every facet of the store is all part of Pugh's business philosophy: "I call this a business of a thousand little things," he says. "There are no magic bullets. You've got to do a thousand little things well every day."

    3500 Central SE, Albuquerque, NM 87106; 50

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  • 4631
    2400 Rio Grande NW, Albuquerque, NM 87104; 50
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  • 8800
    105 E. Coal Ave., Gallup, NM 87301; 50
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  • 5383
    913 W. Alameda, Santa Fe, NM 87501; 50
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    Manager: C.E. Pugh
    200 staff members
    12,000 co-op members
    Membership fee: $15 annually
    Annual sales: $15 million
    Sales by department: bakery, 4 percent; bulk, 9 percent; cheese, 4 percent; dairy, 10 percent; deli, 8 percent; frozen, 4 percent; grocery, 25 percent; HABA, 12 percent; fresh meat, 6 percent; produce, 18 percent

  • Natural Foods Merchandiser volume XXVII/number 4/p. 58

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