Natural Foods Merchandiser

Arkansas co-op finds success in shadow of giant

An ethnically and culturally diverse college town with a thriving arts scene, Fayetteville, Ark., at first seems like the quintessential setting for a natural foods cooperative. Except for one thing: Wal-Mart. The world?s largest retailer was founded in Bentonville, the town next door, and Fayetteville, despite having a population of only 60,000 people, is home to two Wal-Mart Supercenters and two Wal-Mart Neighborhood Groceries. So how does a co-op stuck in the middle of Wal-Mart country stay in business? By learning from the retail giant and capitalizing on the co-op?s differences.

?A lot of people shop with us simply because we?re not Wal-Mart,? says Jerry Huddleston, Ozark Natural Foods? marketing manager. ?When you buy cheap food, that?s exactly what you?re getting. Your diet and your nutrition are not where you want to cut the budget. We try to promote that.?

Ozark distinguishes itself from Wal-Mart by doing the things that co-ops do best, such as offering a 100 percent organic produce section, patronizing local businesses and farmers, and providing a friendly, knowledgeable staff who give customers detailed information about the products they?re shopping for. ?When you shop with us, there?s not a human being somewhere getting rich off what you eat,? Huddleston says. ?We?re really getting that message out to people, and people are coming around to our way of thinking.?

But Huddleston stresses that Wal-Mart is not the enemy. ?A lot of times we take models and ideas that have worked for Wal-Mart and tailor them to fit our needs,? he says. ?Wal-Mart is incredibly good at inventory and volume control. Those are lessons that all retailers can learn from.?

Some of those lessons came into play in 2000 when the co-op moved to its current, and much bigger, location and started bleeding money because of overestimated shopper numbers and underestimated staffing needs. To remedy this situation, it did what Wal-Mart might have done: It hired a turnaround consultant. In this case, it was natural foods store expert John Newman, who came in for a year and a half and straightened out the finances.

Next the co-op hired Mel Braverman and Bill Gessner, of Madison, Wis.-based Cooperative Development Services, to conduct an overall store audit. Braverman and Gessner recommended a reset that, when implemented, helped the store to better utilize its space. The redesign also included a move toward more attractive product layout, an idea that manifested itself in everything from how the fruit was stacked to a switch in the HABA department from white Lozier shelves to black ones.

Thanks to these changes, the store has been profitable for the last few years, coming a long way from where it began in 1971 as a food-buying club of 55 members. In 1974, when the club got its first storefront, the manager was paid $5 per day, plus free food and a place to sleep at the co-op. Members were expected to check themselves out and make their own change. By 1975, wholesale operations had grown considerably, and Ozark was supplying food to 15 smaller co-ops. When the wholesale and retail operations split in 1976, the co-op started its transformation to a retail store. In 2000, after several moves to bigger and bigger spaces, Ozark moved to its current 12,000-square-foot location.

Ozark now boasts 3,526 member- owners and 85 employees—who, incidentally, are paid and make change for customers. ?For a long time, customers who shopped at co-ops had this mind-set that it wasn?t about money,? Huddleston says. ?But those profits are important so that you can grow and continue to meet customer demand.?

While member-owners don?t get the flat-rate discount typical of most co-ops, they do benefit when the store achieves a profit. Eighty percent of any profit gets reinvested in the store and 20 percent is distributed to members. ?The more you shop, the more you get back,? Huddleston says. ?It helps us get people to really start thinking of the co-op as a long-term commitment.?

Another way that Ozark has gotten the local community to think of the store as an enduring institution is by giving back to it. Between October 2003 and October 2004, the co-op spent $1,176,200 with local merchants, donated $3,550 to local charities such as Habitat for Humanity and Seven Hills Homeless Shelter, and gave out $8,000 worth of free food at health fairs and other public events. And it?s been able to successfully extend its reach beyond Fayetteville as well, attracting customers from Oklahoma and Missouri.

The next challenge for Ozark: Whole Foods Market. Huddleston predicts the supernatural chain will soon move into the area, and the store?s similar draw may in fact provide more competition than Wal-Mart. Still, Huddleston is unfazed and says the co-op?s loyal ownership base and competitive pricing will keep people shopping there.

The co-op is also in the midst of revamping its deli, which will soon provide Whole Foods standards including prepared foods, a hot bar and a soup and salad bar, as well as fresh meat, poultry and seafood.

It seems that Ozark Natural Foods has managed to prosper despite Wal-Mart, and maybe, in part, because of it. ?Wal-Mart has definitely given us something we can measure ourselves against,? Huddleston says. ?But more than anything, we have tried to be more like successful stores around us. If the idea doesn?t have a copyright on it, we?ll use it.?

O?rya Hyde-Keller is a freelance writer in Madison, Wis.

Ozark Natural Foods
1554 N. College Ave.
Fayetteville, AR 72703

Store size: 9,000 square feet of retail space; 12,000 square feet total space
Number of employees: 85
Number of member-owners: 3,526
Manager: Alysen Land
Marketing/human resources manager: Jerry Huddleston
Annual membership: $20
2004 sales: $5,858,700
Sales by department: grocery, 52 percent; HABA, 25 percent; deli, 10 percent; produce, 13 percent

Natural Foods Merchandiser volume XXVI/number 4/p. 66

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