Winston-Salem food co-op ramps up fundraising push

Share Cooperative of Winston-Salem needs to raise $1.3 million to open the planned Harvest Market food co-op on Peters Creek Parkway.

The Rev. Gary R. Williams, a
cofounder of Share Cooperative of Winston-Salem, walked through the storefront
in West Salem Shopping Center handing out Envy apples, a hefty red varietal
developed in New Zealand in the late aughts that is a cross between a Royal
Gala and a Braeburn.

The apples came courtesy of Vernon
Produce, a local wholesaler that Share Cooperative plans to buy from when it
opens the planned Harvest Market in the shopping center’s 9,000-square-foot
anchor space at the end of the year.

Addressing the first membership
meeting of the Share Cooperative, whose members will own the future store, Williams
told the roughly 20 people in the room that venture was ready to move into its
third phase — construction. He said they already have a 10-year lease in
place with the landlord of the shopping center.

“The thing that stops us from
getting to Phase 3 is we’ve been counseled repeatedly that we need to make sure
that we’ve got most of our funding in place so that we have enough operational
money for the first year, so that we’re not struggling right away,” Williams
said.

The estimated cost of preparing the
site, purchasing equipment, stocking the store and hiring staff for the planned
cooperative grocery is $2.3 million, and Williams said the cooperative has
raised more than $1 million to date. But only $27,600 of that amount comes from
276 members who have bought in at $100 per share. During a recent visit to the
National Cooperative Association in Milwaukee, the founders learned that in
order to build the collateral needed to be considered a safe bet for lending
institutions, roughly 50 percent of their start-up capital needs to come from
member-owners. Williams asked the people in the room to each go out and recruit
one additional member, but he added, “To be honest, membership fees alone are
just not going to do it.”

It fell to Ralph Peeples, the
cooperative’s legal advisor and a retired professor at Wake Forest University,
to make the hard sell — a good called preferred shares. Preferred shareholders
won’t have any additional voting privileges; that would run counter to the
cooperative model of governance. But they will be qualified to receive
dividends — 3 percent on a $500 share, 4 percent on $1,000 and 5 percent on
$5,000 — if the cooperative earns a profit. Peeples explained that
profitability is generally defined as a condition when assets exceed
liabilities and the company — or cooperative, in this case — can make timely
payments on debt, but ultimately under North Carolina corporate law, it’s up to
the board of directors to determine when the company is considered profitable.

“The beauty of the preferred shares
is it’s not a legal obligation,” Peeples said. “The board of directors will
want to pay dividends on preferred shares, but it’s up to the board to decide
when to pay the dividends once the store is profitable.”

No one in the room was naïve about
the potential yield of a preferred share; Williams had already explained that
the profit margin of selling food “is very low.”

“The benefit is you become a social
investor, a social entrepreneur,” Peeples told the members. “You’re doing good,
which I still think counts for something. As an investor, you can find better
investments; there’s no question about that. But I don’t think you’re going to
find a better investment for making you feel like you’ve made a difference in
Winston-Salem.”

After settling down to a catered
meal of stir-fried rice, snap peas and chicken, with salad and bread, Williams
called up Mike Sakellaridis, formerly the general manager of the defunct
Renaissance Cooperative in Greensboro and a consultant for the planned Harvest
Market. Sakellaridis told the members a 1-2-percent efficiency could determine
whether a grocery survives or fails. And efficiency depends on correctly
anticipating demand so that the store doesn’t lose a customer by not having the
product in stock or have to write off inventory because it doesn’t sell.

Members are juggling a number of principles,
including affordability and healthfulness. Local sourcing is an important one.

Sakellaridis suggested they might
have to sacrifice affordability if they want to focus on local sourcing.

“The trouble is price versus
product,” he said. “If we want to serve everybody, we have to find a way to
make the local products accessible because a lot of times the price point is
difficult. In the same concept that one store has certain values to maintain
for profitability, the same thing goes for the small farmer. The small farmer
is two or three people trying to make their mortgage payments sometimes off of
spring mix. That’s a lot of spring mix! And
so you end up with a $6 price point for a pound of spring mix. Whereas you can
go buy the Earthbound Farm stuff for $3.99 for the package, and if you don’t
have a real good reason, you need both customers to be served. So, we’re going
to definitely keep them in mind and do our best to represent that.”

Rather than projecting what they
think prospective customers from community need, Sakellaridis urged members to
copy down their shopping lists or hand over their receipts so that the
cooperative can order exactly what customers want down to the brand. Even
before the store opens, he said, members can immediately start a buyers co-op
in the temporary storefront, and start ordering produce, dry goods and various
nonperishables in bulk. With little to no overhead, including labor, they can realize
a 40 percent profit, and put the proceeds towards the store.

The recent closure of Renaissance Cooperative
in northeast Greensboro after only two years in business inevitably came up as
a cautionary tale, and, organizers in Winston-Salem hope, an opportunity to
learn from others’ mistakes.

Ultimately, Sakellaridis said,
Renaissance couldn’t figure out the right balance between product quality and
price point.

“When I stepped in, the selection
was actually kind of interesting, and I had talked to many people who would pop
in after having been gone for a few months,” he recalled. “And they would be
like, ‘Oh, this is better.’ Or, ‘Oh, you’ve got this. I used to try to come in,
but this thing that I love was never here, or this thing had a quality issue.’
So, for those certain people, that matters. For folks in the neighborhood, they
were like, ‘Look, 18 years we didn’t have a grocery store here, and I went to
Walmart. And I come in here and it’s more expensive.’ And, yeah. And you can
rattle off all the excuses, but for the customer for whom the price is the only
determining factor, you can’t have everything.”

For Harvest Market to succeed,
Sakellaridis suggested, it needs to find a niche.

“What you can have is the things for
which price is not the only determining factor, and hope they’re willing to
commit those dollars to shopping here,” he said. “Whether it’s a food-service
moment, where they just want to get lunch here with some friends and family. Or
maybe it’s that healthier thing — that crustier loaf of bread, or that one
alternative milk that’s not at the other store. I could get half my groceries
at Walmart, but my wife only wants the Silk French vanilla creamer. And if it’s
not there, I’m going to another store. We could be that store for a lot of
people.”

In one significant respect, the
planned Harvest Market is markedly different from its shuttered counterpart in
Greensboro: While Renaissance Cooperative was located in the most acutely
food-scarce part of the city, Harvest Market will be located on Peters Creek
Parkway, a busy thoroughfare, and only a couple blocks south of downtown
Winston-Salem.

The location is technically
considered a food desert, but it will be less than two miles away from Acadia
Foods (formerly Washington Perk & Provision) in the heart of Washington
Park, Compare Foods Supermarket on Silas Creek Parkway and Whole Foods on
Miller Street. When Williams went to city officials to request assistance for
the cooperative, he said he resisted suggestions that he choose a location with
a steeper need on the east side of Winston-Salem. He said it’s important to
position the store to build its assets early, and then they might consider
expanding into the east side.

Peters Creek Parkway runs between
two neighborhoods, West Salem and Ardmore. Shalom Project, a project at Greene
Street Church, is building an affordable housing and retail complex across the
street from the planned cooperative grocery. A half-mile to the north, downtown
Winston-Salem is experiencing a housing boom, and still lacks a full-service
grocery store. And when Business 40 reopens in 2020, the Peters Creek Parkway
exit will provide a major access point for additional customers from across the
city.

For Williams, the lesson learned
from Renaissance Cooperative’s failure comes down to an old real-estate saw.

“Location, location, location,” he
said. “We won’t be off the beaten path like the store on Phillips Avenue. The
traffic there was not what it could have been. Here, we’re more visible. We’re
on a main thoroughfare. We’re at the apex of three neighborhoods and many
ethnic communities. It creates a more inclusive community.”