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February 5, 2024
Few consumers have heard of it. It’s probably even a mystery to most people who work at natural and organic retailers. But National Co+op Grocers (NCG) is a big player in the natural and organic products industry ecosystem. And after years of its members—member-owned food co-ops across the country—experiencing low growth, business is now picking up again.
“It’s astonishing,” said C.E. Pugh, CEO of NCG. “We’ve had the strongest same store sales growth since 2015. And the number of transactions is up 5% over a year ago, and average transaction size is down 2%. So, we are generating this growth by appealing to more people. Food co-ops continue to grow. Many see double-digit growth.”
One of those success stories, Roanoke Co-op in Roanoke, Virginia, ended 2023 with 9.6% growth over the previous year.
“I wish the reasons were more exciting, but I attribute growth to our people, the staff, the way we hire and train, the way we reward our staff,” said Bruce Phlegar, general manager of the nearly 50-year-old shop. “We offer them a deeper understanding of the business, why they matter, rather than just being a cog in a machine. It’s rewarding seeing someone able to buy a home, buy a car, live their life so they can see a future for themselves that is better than before.”
Part of the co-op’s success, too, revolves around its close relationship with NCG.
Prior to the creation of NCG 25 years ago, individual co-ops had to manage their own inventory and pricing with distributors like KeHe and UNFI. As each co-op didn’t generally generate large orders, they had a difficult time negotiating competitive prices for everything from cases of organic black beans to bags of oatmeal.
C.E. Pugh, CEO of National Co-Op Grocers
NCG changed the dynamic between co-ops and distributors. NCG negotiates directly with distributors on behalf of its more than 160 member stores. It manages $2.5 billion in sales and is UNFI’s second largest customer after Whole Foods Market, Pugh said.
Until 2013, natural foods co-ops experienced double-digit growth for 20 years, Pugh said. That year, sales of natural and organic reached 10% of overall retail food sales in all channels. That’s when the big chains, such as Kroger, “got serious about natural and organic and they expanded dramatically,” Pugh said. “And that marked the end of double-digit growth.”
Pugh attributes the co-op bounce-back to many factors. First, awareness about the importance of supporting local food has grown since the pandemic. Among co-ops, an average of 25% of sales are tied to local products such as dairy, meat, produce, baked goods and coffee roasting, he said.
Second, consumers are paying more attention to the connection between health and nutrition in the wake of COVID. Food co-ops benefit as they proudly champion their products as health-forward, Pugh said.
He also credits, in part, the Field Day brand, a natural and organic store brand owned by distributor UNFI. NCG was involved in the brand’s launch, and sales of the brand increased 31% year-over-year, Pugh said.
The Minneapolis, Minnesota-based organization offers more than inventory management for co-ops, though. Its 120 employees provide a variety of services to food co-ops, which are owned by their communities and often operated by general managers who oversee everything from accounting to marketing to talent development. NCG specialists provide advice and assistance in those areas and more: Specialists in meat, dairy, deli, retail technology and other areas help co-ops understand all facets of their businesses.
“They have expertise in operations, merchandising, HR, finance, you name it,” Phlegar said. “They push you in the right direction, they give you guidance. They offer lots of training and best practices. Most co-ops can’t afford to have a CPA on staff, or even on call for that matter. Same with HR. I know we would not be nearly as successful as we are now without NCG.”
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