Market Share: The Rise of the Co-op Grocery Store

Are co-op grocery stores hippie throwbacks or the sustainable economy of the future?
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Illustration by Thomas James

Within the space of a few years, two old Cincinnati neighborhoods lost their grocery stores. Gaslight Clifton wept openly at the shuttering of Keller’s IGA on Ludlow, and Northside said goodbye to its Save-a-Lot. It’s something of a trend. From Avondale to College Hill, smaller grocery stores are closing. Neighborhoods are left with empty eyesores, and residents have to travel farther and farther to procure fresh food. Unless a new store can be enticed to open, an ugly pattern establishes itself: longer commutes to more distant shopping venues, and funds flowing out of the community instead of recirculating. Call it the Age of Food Desertification.

Clifton and Northside, just minutes down the road from each other, felt this shift occur and decided, independently, to address it. Over the past several years, both have been fighting to launch cooperative grocery stores. Each neighborhood has marshaled countless man-hours of (mostly volunteer) labor, raised large sums of money, and found ways to maintain energy and optimism despite a steady stream of delays, cost overruns, and setbacks. And while the end goal remains the same, they are each pursuing different models and very distinct vibes. Clifton Market will host wine-and-cheese parties; Apple Street Market, in Northside, inclines more toward bingo night fund-raisers. Clifton Market’s business plan (they call it “uptrend”) anticipates touch-screen kiosks and a fair amount of razzle dazzle. Apple Street, more than anything else, is intent on meeting the pricing needs of its poorest residents. Both are learning from each other, though, and simultaneously showing that neighborhoods do not need to resign themselves to the cost-benefit analyses of enormous corporations.

Clifton Market began construction in April 2016; as long as there are no unpleasant surprises, it should open by the end of September. Apple Street, in the middle of one of those difficult periods that general manager Christopher DeAngelis identifies as the “groan zone,” will take longer. There are no guarantees. But if these two markets can thrive—or even just survive—they have the potential to send a powerful message to other parts of the city that feel their vitality, not to mention intrinsic character, slipping away: Rally fellow concerned citizens, pool pennies, then bug your neighbors for a couple years—you might be more powerful than you think.

In December, Clifton Market closed on its loan from the National Cooperative Bank, giving it the funds necessary to proceed. At the subsequent celebration at Ludlow Wines, the atmosphere was giddy. It had been an up-and-down couple of years for the market. “It’s like giving birth to a child,” one woman said, laughing. After Keller’s IGA closed in early 2011, Steve Goessling, a local grocer and developer, tried to resuscitate the store. Goessling invested a great deal in the site, most notably a new roof, before his financing fell apart and he backed out. Ultimately, concerned citizens decided to take matters into their own hands. Marilyn Hyland, a former Cliftonite and public relations consultant now living in Indian Hill, led the effort. Thirty years ago, Hyland worked to save the Esquire Theater from being turned into a Wendy’s. This time around she brought in her son, Adam Hyland, to help with the project. “This whole business district is a community development project,” he told me. From the theater to the local plaza to the new market, the character of the district is not an accident.

After it incorporated as a co-op in early 2014, Clifton Market began selling shares and amassing community loans. Conventional grocery stores rely on saved capital and bank loans, and answer to shareholders or private owners. Co-ops raise money through community shares and loans, as well as bank loans (often from specialized cooperative banks); return profits, if there are any, to local shareowners; and answer to a board made up of community and/or worker owners. Occasionally, co-op shareowners actually need to work a certain number of hours in the store, but neither Clifton nor Apple Street is using this model. For a city used to private enterprise, everything about the co-op process has a strange feeling. For example, for those community loans, participants can choose their desired interest rate, anywhere from 0 to 2.5 percent.

Although a cooperative is just another form of business incorporation—“and a smart one,” Marilyn Hyland says, pointedly—its very existence indicates a certain skepticism towards the open market.

Securing funding for co-ops is usually an enormous patchwork process that includes grants and help from local governments. The City of Cincinnati granted Clifton a 12-year tax abatement. Just short of the finish line, in June 2015, City Council also approved a $400,000 grant for the Clifton Market, which Mayor John Cranley promptly vetoed, saying he couldn’t see why city money should be spent on this enterprise. (In a similar show of civic pride, the Mayor recently said of the tug-of-war over the Dennison Hotel, “I’d rather let the market decide.”)

Although a cooperative is just another form of business incorporation—“and a smart one,” Marilyn Hyland says, pointedly—its very existence indicates a certain skepticism towards the open market, and whether its workings result in the best outcomes for a community and its residents. According to Keith Wicks, a national grocery consultant who is advising Clifton Market, it’s likely “you could put six floors on there and do much better” than you could with a grocery store, in terms of the return on investment. “Condos?” I ask. “Something like that,” he responds. “But then what would that have done to the district? What would that have done to the character of Ludlow?” These are not the sort of questions typically posed by developers. It is a thriving neighborhood, after all, that makes a luxury condo attractive to prospective buyers; luxury condos on their own do not make a thriving neighborhood.

Question Cliftonites about their co-op and they immediately talk community and the health of the district. According to Wicks, revenues for stores on Ludlow have fallen between 38 and 50 percent since the IGA closed, and several storefronts have sat empty for months. The street is palpably losing its energy. And while Apple Street talks about economic health as well, its focus is almost always on the needs of the community’s poor. Kristen Barker, the president of the Cincinnati Union Co-op Initiative (CUCI), which is helping organize the Apple Street Market, said that as soon as the Save-A-Lot closed in November 2013, Northsiders’ first concern was how their lower-income neighbors would manage.

About a fifth of the Northside community lives below the poverty line; a significant proportion does not have access to a car. Northside meets the USDA’s definition of a food desert, although it is certainly no Sahara. The Queen City Kroger is just under two miles away (and roughly the same distance from the Clifton business district). The No. 16 bus, however, is not all that frequent. For some residents, it’s a two-and-a-half hour round trip just to pick up groceries. Others shell out $12 a pop to unlicensed gypsy cabs.

The bus is even less convenient from Kroger to Clifton. No public transportation runs up Clifton Avenue. Last summer, walking down that same street, I saw an elderly man struggling with 10 bags on his way back from Kroger. He explained that he was waiting for his pension check to come in so he could fix his car.

Meanwhile, Northside, unlike Ludlow Avenue, is rapidly changing. There is a ferment of new stores, restaurants, and development, and prices continue to rise. A common anxiety is that the soul of this mixed-race, mixed-income neighborhood will be lost as it grows and (by most standards) prospers. Anything that makes a neighborhood a better place to live, though—from walkable streets to a convenient grocery store—will also make it more expensive. So what is a group of idealists to do?

As it turns out, several things. First, Apple Street’s shares are half the price of those sold by the Clifton market, $100 rather than $200. They also ask for donations to subsidize $10 shares for lower-income residents. According to Heather Sturgill, who leads Apple Street’s outreach efforts, 22 percent of their shareholders are subsidized, slightly more than the percentage of people living in poverty in Northside. Apple Street, Sturgill says, is determined to be representative of the neighborhood, which has one of the most extraordinarily even distributions of income in the city.

Apple Street also chose a form of grocery co-op that is largely unknown in America: a worker-owned/consumer-owned hybrid. The model has its roots in the Basque region of Spain, home to the Mondragon Corporation, the world’s largest worker-owned cooperative. The seeds for the Mondragon model were planted in 1956 by a local priest, José María Arizmendiarrieta, who helped workers set up the region’s first cooperatives. Over the ensuing 50 years one of the poorest regions in Spain virtually eliminated poverty and long-term unemployment. In 2009, Mondragon partnered with the United Steelworkers in America to help start worker-owned cooperatives, and the Cincinnati Union Co-op Initiative emerged from this relationship. After launching a worker-owned farm in College Hill (Our Harvest) and an energy retrofitting company in Northside (Sustainergy), CUCI started to incubate Apple Street.

This hybrid co-op is not simply a matter of paying decent wages; workers in this model have to opt in by investing $5,000. (Though they can start participating after making an initial $500 payment.) They receive training from CUCI on the nuts and bolts of running a business, from reading a balance sheet to conducting an effective meeting. And yes, there are lots of meetings (you get paid to attend) with plenty of joint decisions to be made. When I ask whether American workers will embrace such a system, Apple Street’s general manager Christopher DeAngelis has a simple answer: If workers can see their decisions impact the success of the store, and then eventually see it affect their paycheck, they “will commit to the long haul.” Unlike Clifton Market, whose workers receive an ordinary consumer share after 60 days in good standing, Apple Street’s worker-owners receive 60 percent of the profit dividend, with consumer-owners sharing the remaining 40 percent. If the store thrives, the workers could see their compensation increase drastically. If everything works the way it’s supposed to, it can result in a built-in gentrification-management system. But those are two big ifs.

For stores that are barely two miles apart, there exists an unusual amount of camaraderie between the Clifton and Apple Street markets. They invite each other to parties, share ideas, and attempt to learn from each other’s mistakes. “One of the principles of co-ops,” Hyland says, “is cooperation.” Still, they will undeniably affect each other, and not always in helpful ways.

On April 2, Apple Street had a community meeting. Plywood was removed from the entrance vestibule and the automatic doors were forced open. After snacks were shared, there was bad news to digest: Apple Street’s original sales projections had only taken Kroger into account. New estimates were coming in significantly lower, and roughly 8 percent of the loss in future sales could be attributed directly to Clifton Market.

The site was also problematic. Clifton Market is directly adjacent to a well-traveled intersection. Apple Street, at Knowlton and Apple, with a front entrance on Turrill, is much less trafficked. And price quotes from contractors for rehabbing the space, particularly the HVAC system, were coming in much higher than anticipated: $1.2 million instead of the original $375,000 estimate. Should the co-op spend so much on a building they were only renting?

Ideas flew around the room. Could they make the building more visible? Afford the repairs? Buy this building, or change direction and find another one? As projected costs continued to climb, the opening date in various scenarios kept moving back, one all the way to 2019.

“Who is frustrated about this?” DeAngelis finally asked, and several people raised their hands. Finally, Kristen Barker from CUCI took the microphone. “One way or another,” she said confidently, “this project is going forward.”

Days after the Mayor vetoed the $400,000 grant for Clifton Market, Marilyn Hyland points out, he also approved $6.2 million for a parking garage in Oakley (Oakley is also home to the world’s largest Kroger—at 145,000 square feet, it is roughly five times the size of either Clifton Market or Apple Street). Cranley’s decision is telling. For years, American cities have been much more willing to spend to accommodate the needs of cars than individuals on foot. One of the assumptions behind these grocery co-ops is that a neighborhood whose inhabitants drive outside the immediate area to work and shop (or have supplies delivered via Amazon or Target) becomes something other, and somehow less, than a true neighborhood.

Clifton Market is currently a hardhat zone. Apple Street, post community meeting, is free of graffiti that had covered some of its walls and the store logos have been spray-painted on the building and the crosswalk on Hamilton Avenue, pointing people in the right direction. Across both neighborhoods, bright orange and green shareowner signs continue to sprout from the lawns, raising awareness and showing support.

The big chains aren’t sure there’s money to be made in these neighborhoods, and the mayor clearly has his own doubts. If Clifton Market and Apple Street succeed in the face of these market (and political) realities, they would do more than serve their neighborhoods. They would be living symbols of the viability of a new kind of development—development from within, based on a community’s own resources and ideals. That can of peas might cost a bit more, but maybe it’s worth it.

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