NCG co-ops, on the whole, experienced steady financial performance in 2022. Yet, while sales and earnings improved as the year progressed, we know there will be challenges to face in the new year. As we work together as a system toward a stronger 2023, I believe co-ops can focus our efforts on identifying ways to:

• address increasing operating costs amid inflation and economic recession
• improve the customer experience and with it, perceptions of value and shopper satisfaction
• enhance the safety of co-op staff and customers and maintain welcoming spaces

Steady Financial Performance

Sales growth at NCG co-ops slowed to 2% in 2022 compared to 3% in 2021, and EBITDA declined to 2% of sales compared to almost 6% in 2021, which benefited from Federal relief funds. Both sales and earnings trends improved as the year progressed, suggesting a stronger 2023. Fifty NCG co-ops experienced a sales decline in 2022, continuing the long-term trend of two-thirds of members experiencing moderate to strong growth. System balance sheets remain strong, as total co-op cash is greater than $200 million and the system’s debt to equity declined to less than 1.0.

Inflation and Recession

NCG expects most operating costs — wages, benefits, insurance, rent, maintenance, etc. — to continue to increase in 2023 and sales to be negatively impacted by a slowing economy and rising prices. Because co-op profit margins are small, we believe co-ops must pass cost increases on to customers. We can help our customers continue to find value at their co-op by offering less-expensive options in every category possible. This is a unique challenge for businesses built on systems that are better for farmers, the environment and our communities. Our prices permit us to pay our workers better wages, support organic and sustainable practices, and offer high-quality food to our customers. So, lowering costs without compromising the key values of the system is difficult.

While not new, this challenge is increasingly urgent, and it will be imperative that co-ops continue to meet it thoughtfully. I believe this is possible and encourage us to use this challenge as an opportunity to meet people where they are and invite even more people to recognize the value that our cooperatives provide their communities.

We must also make sure co-op staff and our customers understand our values, and how they benefit our communities. Co-ops will not be the only grocery option for most people, but we can secure the second stop for many.

Customer Experience

NCG’s customer experience survey and monitoring tool provided by the Service Management Group (SMG) gives participating co-ops real-time customer feedback on their shopping experience. The tool is designed to help users improve their customers’ satisfaction and loyalty to the co-op. A recent “deep dive” overview with SMG account managers provided the following insights from surveys taken over the past six months:

• Grocery purchasing is growing as customers reduce restaurant spending
• Most shoppers prefer the in-store shopping experience over e-commerce options
• Value is more important to customers than ever before
• Customers’ perception of value at all grocers is declining, driving increased purchases at discounters like Aldi and Grocery Outlet
• 73% of co-op shoppers reported being “Highly Satisfied,” but the premium grocer group top performers report 81% highly satisfied
• Availability of products is the leading driver of satisfaction at NCG co-ops and the industry — only 54% of co-op shoppers reported being highly satisfied with product availability
• Bakery recently fell behind other departments due to lack of availability (in-store bakery)
• Wellness department scores fell in the areas of service and product availability
• While the product availability scores improved in the past six months, scores for staff availability and helpfulness declined
• Staff assistance is currently our biggest opportunity to improve — fewer customers report offers of assistance than previously
• Value is a factor of quality and service and price; customers report placing a higher value on service, friendliness and assistance than price

Improving overall customer satisfaction will support sales growth, and product availability and staff assistance is key. Value is more important than ever, and we need to improve our customer engagement to mitigate rising prices, while exploring every opportunity to reduce out of stocks. I know the UNFI out-of-stock rate continues to be unacceptable, but we can often look to KeHE and our competitors as additional sources of supply.

Safety

Many communities have seen an increase in violent crime over the past few years and we must continue to put the safety of our staff and customers first. Now is a good time to consider additional exterior lighting, video surveillance systems and training for staff on handling crisis situations. NCG has several Safety and Emergency Preparedness Resources available to assist with this, and I encourage you to review these materials as well as the links to additional resources provided there. Many local municipalities also have resources to help business managers address a wide variety of challenges.

I believe a regular staff development plan is essential to prepare co-op employees to respond appropriately to unexpected challenges — a quarterly training program would not be too frequent. While safety is everyone’s responsibility, it may also be helpful for each co-op to designate one person to focus on safety — a safety monitor to help us continually prioritize investment in the personal safety of everyone. And finally, don’t disregard the impact of a neat and welcoming space — well-maintained, bright and cheerful landscaping with flowers and signage makes a difference.

Our current challenges and those to come will continue to test our commitment and dedication.  But we know our inclusive business model provides better outcomes for every stakeholder. Our relentless focus on improving the health and wellness of our communities offers a clear choice for everyone interested in good food, better health and stronger communities. This work has never been easy — we don’t choose the cooperative form of business because it’s easier; we choose it because it’s better. I know the work is difficult, but I also know of no other endeavor with greater potential to positively impact our food system and our communities.