Editor's Note: Everything You Wanted to Know About Expansion
As you may have heard, Weavers Way is working on opening a third store, in Ambler, PA, just 6 miles up Bethlehem Pike from Chestnut Hill.
While no dotted lines have been signed on, or even initialed, this process is pretty far along, as General Manager Jon Roesser has explained in a presentation he’s made several times recently — to staff, at a member forum April 27 and, most recently, at the spring General Membership Meeting on May 15.
Having heard Jon’s spiel several times, I can assure those of you who haven’t — and I know there are a lot of you, because I know how many people were at those meetings and I know how many people belong to the Co-op — that Jon gives a good presentation. So in the coming months, if you hear he’s firing up the old PowerPoint, you ought to attend.
But just to get you up to speed, here’s my, ah, reconstructed summary of what Jon has already put out there about expansion, and about Ambler.
First, there are the external, or marketplace, considerations.
- The natural grocery industry — where Weavers Way competes — is being flooded with private equity dollars. “People with money have figured out that they can make more money in our sector,” Jon told folks at the April meeting.
Take Fresh Market. Our new neighbor down the Avenue in Chestnut Hill was just bought by Apollo Global Management for $1.4 billion. Maryland-based Mom’s Organic Markets is opening a new store on Market Street. Everything Fresh, Giant Food Stores’ entry in the natural food segment, is about to open its second Center City store at 2nd and South. And talk about giants: Walmart and Target are figuring out there’s money to be made in the natural-food biz.
There are going to be a lot more natural grocers whether Weavers Way expands or not. So, the argument goes, shouldn’t the good guys make sure we have a piece of the action?
“We believe that growing the cooperative economy is a good thing. So instead of all these natural chains moving in, what if we carved out for ourselves a piece of this bigger marketplace for the co-op model?” Jon asked.
- Meanwhile, expanding an existing co-op is a lot easier than starting a new one. The Co-op’s industry trade group, the National Cooperative Grocers, has scads of data showing that most startup co-ops fail, and even if they don’t, they struggle. The reasons are obvious — without a proven track record and a known brand, new co-ops have a hard time raising money, getting and developing staff and attracting shoppers outside their base.
Then there are internal advantages to expansion.
- “In our current size, we struggle with administrative overhead,” Jon noted. “We need it, but we’re a little too small to support what we have. Our IT, finance, communications provide tremendous value, but it comes at a cost.”
- “If you like our farms, growth makes them happen. With one store, like Mt. Airy alone doing $8 million-$9 million in sales, there is simply no way we could support them.”
- “Prepared foods and catering. We’d like to have a commissary kitchen. But two stores aren’t enough ‘internal customers.’ Three probably would be.”
- Additionally, there are the economies of scale and discounts available to larger purchasers. “There are buying-power considerations in addition to what we already have with UNFI and our other suppliers,” Jon said.
- Opportunities for staff development. “That matters a lot to staff, but it should matter to everybody,” Jon said. “We attract great people, but sometimes we have a hard time keeping them because there’s nowhere for them to grow.”
- The future. The Co-op is a mature business in a highly competitive market, already doing about as much sales volume as is physically possible in our limited square footage. So basically, to keep from declining, we have to keep growing. “We have done incredibly well as an organization,” Jon noted. “From a business growth perspective, we’ve done phenomenally — $22 million in sales in two tiny stores, a growth rate of 5-7 percent over the last few years. If we were a publicly traded company, the Wall Street guys would be going crazy. . . . We should not expect we can continue that level of growth.”
The consequences of not expanding that Jon enumerates are pretty grim. With more competition, “We’ll have to make sacrifices to gross margin to compete on price. …We’ll have less and less to spend on operations — meanwhile, operating costs will increase, with older equipment and buildings, staff raises and benefits. . . . Unless I’m wrong and unless everything I’ve read and researched is wrong, we need to grow. And the alternative is scary. And it wouldn’t necessarily be scary next year or three or four years down the road. But without growth, our organization will not be able to keep up.”
- It’s what members want. Stakeholders queried during our strategic planning process in 2013 said they wanted the Co-op to become a more influential organization, to touch more people’s lives, to effect change on food issues.
So Why Ambler?
- It’s close geographically — 6 miles from the Chestnut Hill store. (Mt. Airy and Chestnut Hill are 2.5 miles apart.) And it’s got SEPTA trains and the Wissahickon Creek, just like our current environs.
- It’s a dense, diverse community with a walkable downtown.
- A market study in done in 2015 and updated this spring by Dakota Worldwide, market analysts who know the the natural and cooperative grocery business, was very favorable. It concluded that a Weavers Way store in Ambler would reap first-year sales of about $6 million. “There is a lot of grocery competition around Ambler — Whole Foods in North Wales, Wegman’s in Montgomeryville, Giant in Flourtown — but there is currently zero competition in Ambler,” Jon noted. “Unless you count the CVS.”
- Then there’s the Ambler Food Co-op, led by President Kathleen Casey: “280 members have already put money in the bank and said, ‘We want a co-op.’ ”
“The Ambler Food Co-op is a group of people who have been working for four years to start a food co-op. They have been outstanding partners throughout this process,” Jon said. With a Weavers Way in Ambler, the Ambler Co-op would dissolve itself and its members would, if they choose, join Weavers Way.
Questions? Of course.
Will there be a vote?
As it turns out, opening another store is fundamentally a business decision and not subject to a member vote under Co-op governance. “I have certain limitations as a GM — I cannot sign a lease, I cannot buy a building, I cannot take on debt without the approval of the Board,” Jon explained. “This is no different from a decision to buy a truck or replace a compressor. Although buying a truck wouldn’t keep me up at night.”
Will there be debt?
Certainly. “We took on quite a bit of debt for Chestnut Hill — about $5.8 million. That’s now down to $3.3 million.” Stu Katz, departing Board member and Finance Committee regular added in the April meeting that discussions with lenders suggest Weavers Way will not have a problem borrowing or merging loans with good terms. “We’re in good shape and we have a good track record,” Stu said. In addition, as was the case in Chestnut Hill, the Co-op is pursuing economic-development funding and will be offering incentives for Weavers Way members to increase their equity payments and commit to member loans. Lots more info will be available about that in coming months.
Will there be culture change?
To some extent. “I am well aware there are pitfalls when it comes to expanding,” Jon said. “I understand there will be cultural consequences — there already are cultural consequences. As a 6,000-household operation, it’s already hard to connect with our members. So we should be aware, and do everything we can to keep members engaged and make sure Weavers Way remains a co-op not just in name only.”
Will there be parking?
If you’ve been to Ambler, you know there are parking lots all over the place. The store itself comes with a whopping two spaces. And we’re working on an agreement with the borough that would give us 16 “Weavers Way Only” spaces until 6 p.m., when the meters go off.
Ok, is there a location, and where is it exactly?
Yes, it’s on the main drag of Ambler’s adorable downtown, not far from the fabulous Ambler Theater. The plan is to obtain a contingent agreement that will allow Weavers Way to send in the engineers, and the architects, and Norman, to make sure everything is as advertised. Then we either back out or sign a real lease — likely in September — and start construction. Inshallah and the Wissahickon don’t rise, Weavers Way Ambler would open in April 2017.
Weavers Way’s Board and management are not prepared to disclose the location just yet. But I’ll tell you this: It’s NOT the vacant Bottom Dollar store on Butler Avenue.
Let the guessing begin.