Dishing up answers

Dishing up answers

Struggling to open store, Pasadena’s Arroyo Food Co-op explores its financial options

By Christina Schweighofer 12/12/2013

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In the works since 2009, the Arroyo Food Co-op in Pasadena is still struggling to secure the funds necessary to open its store. “We are considering a range of options,” said Alex Berrie, co-op treasurer and interim board president. In the best-case scenario, a loan from the California FreshWorks Fund would enable the co-op to become a fully functional grocery store within the next few months. Other possibilities include folding operations as well as developing a transitional model in which the co-op would initially function as a pre-order, prepay program similar to a buyers club. Members will be asked to vote on the future of the grassroots enterprise at a general meeting scheduled for Saturday.

So far, the Arroyo Food Co-op has raised $260,000 in member loans and equity as well as from other sources. But for the store at the corner of Villa Street and Wilson Avenue to open, an additional $320,000 is needed. Berrie said in an interview last week that she is cautiously optimistic that a large loan from the California FreshWorks Fund will come through before the holidays. FreshWorks supports new and upgraded grocery stores in California’s underserved communities. Berrie pointed out that the area around the location of the Arroyo Food Co-op is considered a food desert, meaning the co-op could qualify for the program. The US Department of Agriculture defines a food desert as a low-access community where at least 500 people or 33 percent of the population must reside more than one mile from a supermarket or large grocery store.

Supermarket consultant Daniel Tellalian, a spokesperson for FreshWorks, confirmed that FreshWorks has received the Arroyo Food Co-op’s application but declined to go into details. He said that one way or another a decision could be expected by late March, the end of the first fiscal quarter of 2014. FreshWorks loans generally start at $250,000 and need to be repaid within five to 10 years. In its two-year history, FreshWorks has financed more than a dozen grocery stores but no co-ops. That’s because it can be hard for them as start-ups to prove that they are ready for business. “We do not give loans to people who are not ready,” Tellalian said.

At an Arroyo Food Co-op board meeting last Saturday members discussed what should happen if the FreshWorks loan does not come through or the decision takes longer than expected. One option would be to pursue alternative sources of capital. Another would mean folding operations and returning as much equity as possible to current members. “My hope is very much that it will not come to that,” Berrie said. ”Pasadena deserves a grocery store that is really responsive to the needs of everybody in the community. It would be a real shame if we are not able to open.”

That the food co-op model can work has been proven repeatedly. The National Cooperative Grocers Association (NCGA) alone represents 136 member-owned organizations in 37 states. Together they operate almost 180 stores with combined annual sales of over $1.5 billion and with more than 1.3 million consumer-owners. Many stores that have been around since the 1970s, which was a boom decade for food co-ops, are doing extremely well. At Co-opportunity Natural Foods in Santa Monica — the only operating food co-op in the LA area — more than 12,000 active members shopped within the last year, and the co-op pays year-end dividends to its members. “The store and the parking lot are overcrowded,” Marketing Director Ricardo Chavira said in an interview last week. Founded in 1974, Co-opportunity is in fact so successful that it plans on opening additional locations on the Westside.

The Arroyo Food Co-op is one of about 120 start-ups of its kind in the country. In California alone 11 new co-ops are emerging. Two of them, the co-op in Pasadena and the South Los Angeles Food Co-op, are in the LA area. Stuart Reid of the Food Co-op Initiative, a nonprofit organization that specializes in food co-op development, told the Pasadena Weekly that interest in the model has picked up over the last 10 years. One reason is that people nowadays want more control over their lives than they used to desire. Add to that a trend toward more healthful foods and toward goods sourced from local suppliers, and the time seems perfect for the idea to catch on.

Why then is the Arroyo Food Co-op struggling to land additional investments or loans from its members? “The reality of the situation is this is still a time when we are in a recession and not a lot of people have extra cash to lend to organizations right now,” Berrie said. Membership in the Pasadena based co-op costs $300 but currently less than 40 percent of its 693 members are fully vested. The average investment for the remaining members is $49.

The goal of the Arroyo Food Co-op is to provide healthful and if possible locally sourced food to the community and especially to the underserved people who live in the neighborhood of the store. Products should be made ethically and shoppers have a say in how the store operates. Berrie joined the co-op in October 2009. She and her husband believe so strongly in the enterprise that they cashed out their 401K account early and took about a 10-percent penalty to make a substantial loan to the co-op. “If that is not a good testimonial that we think the organization is sound and the mission is sound then I don’t know what is,” she said.

One idea that will be proposed at the upcoming all-member meeting is for the co-op to leverage its purchasing power to establish a pre-order, prepay program. With this model, the store would not open, but members could place prepaid orders with the co-op and pick up their items from the parking lot once they become available. This option would allow the co-op to improve its balance sheet while keeping its members interested in the project. The solution would be temporary until the store can open.

Whatever the future path for the co-op, it became clear at last week’s board meeting that the resources of the members who are currently volunteering on behalf of the grassroots organization are pretty much tapped out. At the all-member meeting on Saturday — invitations that went out this week labeled it as “critical” — current board members will make sure to get one message across: More members need to become actively involved in the project if they want to see the store open.
The Arroyo Food Co-op’s all-member meeting will take place from 2 to 3 p.m. Saturday at the site of the future store, 494 N. Wilson Ave., Pasadena. 

Christina Schweighofer is a freelance writer in Pasadena. Her Web site is christinaschweighofer.com.

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