Today’s rapidly changing marketplace requires food co-op managers to be nimble and make critical decisions amidst changing conditions. There is tremendous pressure on general managers to develop strategy with consideration to finance, marketing, operational processes and project management. It was within this context that Oneota Community Food Co-op General Manager David Lester reached out to NCG in the summer of 2018. Faced with a nearly $2 million budget for a possible expansion, David wanted a partner to help think through all his options before moving forward.

We started out by taking a deep dive into the co-op’s financial performance and condition. The co-op was experiencing declining sales growth for the first time since they relocated their store into downtown Decorah, Iowa, and labor costs as a percent of sales had reached unsustainable levels. The co-op struggled to generate income and did not have the cash reserves necessary to take on the project under consideration as originally conceived.

We worked through each department’s performance and identified areas where the co-op was under-performing against similar sized co-ops. We then established some financial goals for each department, an action plan for how to improve financial performance within the existing store, and a project timeline.

David’s biggest priority was to upgrade the refrigeration system from 18 separate compressor units located in a tunnel under the store to a modern rack system. From there, we built a plan around opportunities for growing sales in the store:

• A fresh meat department to supplement the co-op’s frozen options.
• An expanded cheese venue to build on one of the co-op’s best differentiators
• A revamped deli that would leverage an existing strength while also redeploying labor where it could provide the greatest return.

By focusing on the opportunities within the co-op’s existing space — ones the co-op could make without significantly expanding project costs — we would deliver a higher return on investment.

At this point we brought in additional resources to support and inform the project:

• We worked with the co-op to generate a pro forma budget.
• We providing the co-op with a marketing assessment that would lead to a brand refresh.
• We provided planning and technical support to managers in deli, meat, produce and center store.

Our final plan had a budget of $600,000. Once we had a plan that had tested well against a budget forecast, David and I met with the board of directors and encouraged them to look to their members for the necessary investment. 

It was at this point that we got the news that Hy-Vee would be coming to Decorah. Hy-Vee is a tough competitor with significant experience in small, rural communities. Rather than back off our project and hunker down in the face of a shiny new competitor, David convinced his board that it was more essential than ever to move forward with their “refresh” and business improvement plans.

The co-op’s staff executed beautifully against the plan. The co-op raised $625,000 from members, which covered the entire cost of improvements. Construction took just over four months and was completed in time for the co-op to capitalize on the summer tourist season. In addition to a new floor plan, new refrigerated cases and a new refrigeration rack, the co-op unveiled a new interior décor package.

Along with an immediate improvement in sales, the co-op enjoyed additional benefits from the refresh:

• The refresh eliminated the co-op’s customer service desk, which the co-op sometimes used for service, but more often than not was used for storage. This led front-end staff to assume more responsibility for customer service. David described it this way: “We don’t miss it [the customer service desk]. It has made us more efficient and more engaged on the front end. Instead of one person being seen as responsible for customer service, everyone understands they’re responsible for customer service.” 
• When the co-op converted 18 separate compressors to a refrigeration rack, they enjoyed some spectacular energy savings. From April to August of 2019, the co-op saved over 50,000 kilowatt hours of electricity — a 24.5% savings over the same period in 2018. Air handlers now more efficiently cool and heat the store and humidity problems have disappeared.

David Lester and his team managed to make critical improvements and prepare the co-op for new competition. “This refresh has helped us stay relevant and current in the market as competition ramps up,” David said. “The changes made us more efficient and enabled cross-training that has helped us tackle our personnel costs. I really appreciated the partnership approach that Michelle and her team have lent to the work.”

Congratulations to David and the entire Oneota Community Food Co-op team!