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.”