Why Twin Cities food co-ops haven't fared as well as supermarkets in pandemic

When pandemic-related panic buying began in March, supermarkets planted their flag on the front line as essential retailers for the nation's food supply.

Report after report came out about their safety procedures, employee wage hikes and shortages of toilet paper, cleaning supplies and more than a few foodstuffs.

Nearly lost in the discussion were food co-ops.

A small but seminal link in the food chain, their sales impact — now less than 1% nationally but about 2.5% in Minnesota — has been eaten away for nearly a decade as conventional supermarkets and discounters expanded their natural and organic selections.

As COVID-19 took hold in the U.S., conventional supermarkets saw sales increase about 12% in April and in May, according to Supermarket News, a trade publication.

Co-ops, on the other hand, experienced a 5.7% sales decrease nationally in April and a 1.4% decrease in May, according to Census.gov. Twin Cities co-ops fared better than their national cohorts, with a nearly 3% decrease in April and 1% sales increase in May, according to National Co-op Grocers in St. Paul.

Why did stores such as Cub, Hy-Vee, Lunds & Byerlys, Safeway and Kroger do better than many neighborhood co-ops since the pandemic?

Experts say it was a combination of customers not wanting to wait in line to get in the store, switching to a larger supermarket for one-stop shopping and price sensitivity due to the recession.

"Some of the safety steps that co-ops took worked to their disadvantage," said C.E. Pugh, chief executive at National Co-op Grocers, an advisory group for 147 co-ops nationwide. "We had early adoption of shopper metering [limiting the number of people in the store]. People leave when they see a line outside the door."

Geevie Wood of Minneapolis said she hasn't seen any lines with 10 people waiting since she's been shopping at Lakewinds Co-op in Richfield.

"I'd leave if I saw that," she said. "I feel less safe standing in a line where people aren't social distancing than I do in the store."

With stores about one-tenth the size of a Hy-Vee superstore, co-ops can't admit as many shoppers and still maintain proper social distancing. Some shoppers irritated by waiting in line shifted to larger stores.

Three-fifths of U.S. consumers worry about the safety of shopping in stores during the pandemic, according to Shopkick, a reward app provider. As a result, many shopped fewer stores.

"People started to think they needed a one-stop shop," Pugh said. "Some of them thought, 'I can't do all my shopping in a specialty shop, and I'm in Hy-Vee anyway so maybe I'll skip the co-op this week,' " he said.

Valley Natural Foods co-op in Burnsville saw its sales decline nearly 15% in April.

"Shoppers went from shopping at multiple stores to one store," said Nick Seeberger, chief executive at Valley. "It helped that basket sizes were through the roof for people shopping here, but we had fewer shoppers."

Many consumers chose to order online, either for delivery or pickup, something that most supermarkets already had in place on their own or through partnerships with Shipt or Instacart.

Most co-ops, though, were caught unprepared for a surge in online shopping when the pandemic hit.

Only about one-tenth of stores in the National Co-op Grocers group had ventured into e-commerce before March. More than half of them have it now, Pugh said.

"We had to fast track our curbside click-and-collect program," said Josh Resnik, chief executive of the Wedge and Linden Hills co-ops in Minneapolis. "What normally would take six months we did in four weeks."

The e-commerce options added a vital element to customer service, but online sales for co-ops and supermarkets still make up only about 5% to 10% of total sales.

And online ordering remains a work-in-progress for co-ops.

"We rolled it out at the E. 7th Street location and it's accounted for 8% of sales there," said Catherine Downey, interim general manager at Mississippi Markets in St. Paul. "It's an expensive undertaking, and it takes labor. Expanding it to all three stores is still to be determined."

Another disadvantage for co-ops was price.

With more than 44 million unemployed since the pandemic, many Americans also have shifted their buying to less-expensive foods. Co-ops stock a larger percentage of organics than conventional supermarkets, and often have higher prices as a result. They also stock local or regional items that usually come with a higher price tag than national brands.

To combat the perception of price insensitivity, co-ops have started to make changes. Many have added more private-label items similar to Target's Good & Gather or Cub's Essential Everyday.

Seward Co-op and the Wedge added Nurture, and many others put Field Day on the shelves. The Field Day line was created for co-ops by wholesaler United Natural Foods Inc., which purchased Eden Prairie-based Supervalu in 2018.

Adding more conventional items in the co-op, which are less expensive than organic, is an option that some co-ops are considering.

"With 20 million Americans still receiving unemployment benefits, co-ops need to be sensitive to that," Pugh said. "Some consumers are taking the approach that they can't afford local and organic, but they still want to support their co-op."

Wood and her twin sister, Sophia, agree that co-op prices may be higher, but there are other advantages that makes the stores worthwhile.

"Co-ops have had less of an issue with out-of-stocks," Sophia Wood said. "They were the last ones to run out of toilet paper and hand sanitizers."