Natural Foods Merchandiser

Co-op carves niche deep in the heart of Texas

by Karen Mitchell

Where else but in Austin, Texas, would partial funding for a natural foods co-op be raised at a ZZ Top concert? That's the legendary story behind the roots of Wheatsville Food Co-op, which has overcome operational challenges to continue offering friendly faces and unique and local food options to its community— and even plan an expansion and renovation.

A determined group of University of Texas students launched Wheatsville in 1976 with others who shared a keen interest in local collective movements, from housing to bakeries. The co-op moved from a small retail location to its present site in 1981. Its customer base continues to draw from a diverse group of university students, staff, faculty and neighborhood shoppers, says general manager Dan Gillotte.

When Austin-based Whole Foods Market opened its new 80,000-square-foot flagship store, Gillotte anticipated a drop in sales at Wheatsville. "Whole Foods was undergoing huge growth but actually, we started growing faster, too," he says. "Their size was a turn-off to a portion of their customers. There's a certain carnival aspect to their store; it's an event, a cool place to bring guests, but some customers don't want to be in there every day. Our more rigid selection is not overwhelming, and our parking is easier to deal with."

The South is not particularly friendly to natural foods co-ops. For instance, Oklahoma has none, Gillotte points out— so a big part of Wheatsville's success comes from its relationship with the National Cooperative Grocers Association, which it joined five years ago, Gillotte says. "We've worked with them to get peer support, training and feedback in honing our operation."

After "hanging on for several years with moderate success, Wheatsville now has its operational challenges firmly under control," he says, explaining that the NCGA membership has benefited the co-op through a better pricing system and better deals with manufacturers, as well as flier inserts for publications.

Careful category management has also improved Wheatsville's bottom line. "We're picky about what we carry, and we look at movement reports from the point-of-sale system to get a sense of what moves," Gillotte says. "We remove slow sellers, even if it means cutting a category down to one item."

Team training and management support from the NCGA have also been helpful, he says, particularly for challenging departments such as the deli. "Delis are historically hard to manage. They're different from other departments because you're manufacturing products rather than just putting them on shelves, and you're dealing with a lot of labor and more bodies. There's a higher margin but higher labor numbers."

Deli manager Dana Tomlin, who attended NCGA training to learn to use gross margins as financial indicators, says the deli's unique offerings and high-energy environment make it a Wheatsville favorite.

"We have a great bakery, and all sandwiches are made to the customer's specifications," she says. "We also have really popular specialty items such as popcorn tofu, a variation on our own Southern-fried tofu, and our in-house vegan queso for the microwave. It's the whole package— our twist on home-style comfort food plus attentive service."

Wheatsville has worked hard to become the friendliest store in Austin, Gillotte says. "That's our mission and we do employee training around it. It's about consistency and eye contact. You have to win on authenticity and atmosphere. It's a no-brainer that we ought to be the friendliest in town."

But what happens when a co-op makes too many friends? "Our size has prohibited us from expanding our customer base," Gillotte says, "although sales growth has been great."

To allow for more new customers, Wheatsville is planning a renovation and expansion project that Gillotte says he believes will increase sales from $9 million to $11 million after the grand opening, planned for May 2009. The project will involve rebuilding current co-op space plus adding new features such as a salad bar and hot drinks bar. The main building will increase from its current 8,000 square feet to more than 12,000, and another building onsite will be renovated for staff and meeting rooms and an employee break room.

"Our retail space will grow from 4,500 square feet to 8,400," Gillotte says, "We'll enlarge our storage kitchen, and our produce and prepared foods departments will nearly double in size. We'll offer some meat and seafood services in addition to our self-serve unit."

During construction, when parking will be a challenge, Gillotte says the co-op will shift its advertising focus to sponsorships such as the recent Austin Green Art Earth Day. "We have historically advertised quite a bit, about 1 percent of yearly net, in TV and print. [This] way our name will still be out there, but it won't draw as many new customers to us."

No matter how big Wheatsville becomes, the co-op will continue to nurture its local roots, Gillotte says. "About two years ago, we adopted the idea from another co-op of labeling items with ‘Miles to Market' information. We used Google Maps to see how far our vendors were from the co-op and we added shelf tags with the information. Customers liked that and it showcased how many local products we sell, so we posted the information on our Web site with product links."

Local is hot right now, and Gillotte hopes it will stay that way. "But these trends come and go," he says. "At Wheatsville we've always been local and have always talked about how important that is. So even if the winds change, we will still care about it— local will always be our thing."

Wheatsville Food Co-op

3101 Guadalupe St., Austin, Texas
[email protected]

General manager: Dan Gillotte
Number of employees: 85+
Number of members: 10,000
Annual Sales: $9 million
Percent of sales to members: 75%
Retail Space: About 5,000 square feet

Sales by department:
Grocery: 25%, Produce: 15%,
Prepared food including bakery: 11%,
Dairy: 10%, Bulk: 10%, Frozen: 5%,
Beer and wine: 4%, Vitamins: 4%,
Body care: 5%, Cheese: 4%, Meat: 4%

Karen Mitchell is a Boulder, Colo.-based freelance writer.

Natural Foods Merchandiser volume XXVIII/number 6/p. 74

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