Wedge, Eastside and Linden Hills co-ops exploring merger

Is bigger better? That's the question facing three Minneapolis natural foods co-ops.

After months of study, the boards of Wedge Community Co-op, Linden Hills Co-op and Eastside Food Co-op are asking their members/owners to consider a proposal for the neighborhood grocery stores to merge into a single organization that would have more than 32,000 members and $75 million in sales.

Wedge Chief Executive Josh Resnik said that pooling accounting, human resources, technology, marketing, purchasing and other administrative functions would save money, and that the combined stores' accumulated buying power would result in lower prices for shoppers. Resnik also emphasized the similarity in business philosophies.

"There's so much overlap between our mission statements and values," he said. "We all stand for community, sustainability, organics and supporting local farmers. We think we will have a greater impact on all of these values by eliminating a lot of the work that's repetitive from one co-op to another."

According to the plan, stores will retain their names, and no jobs will disappear. The stores' three separate boards would consolidate into one, and a single general manager would run the revamped operation.

"We have made the commitment that there will be no layoffs due to consolidation," said Eastside general manager Amy Fields. "None of us run such massive operations that we have extra staff. Integration will be a challenge, but we're on what we believe is a growth trajectory. We intend to continue to grow, and we'll need all the staff that we have."

Employees were informed of the proposal Monday afternoon, and members will receive an announcement via mail.

Should the consolidation proposal pass, members of one co-op will become members of the new, merged entity, and member benefits — which include discounts and profit-sharing — will transfer across all stores. The plan would take effect Jan. 2, 2017.

Linden Hills and Eastside would also both benefit from a closer association with Co-op Partners Warehouse, the Wedge's certified organic wholesale distribution service, as well as the co-op's commissary/catering operations.

"What makes this situation unique is that this is a marriage of three strong partners," Resnik said. "We are all in the midst of remodeling our stores, and we're all in strong financial positions. We see this as an opportunity to be proactive, from a position of strength."

The Wedge opened in 1974 and has 16,500 members; its grocery business has annual sales of $32.5 million, and its warehouse and commissary businesses post an additional $22.5 million in annual sales. Linden Hills dates to 1976 and has 8,900 members and $13.6 million in annual sales. Eastside, the youngest of the three, opened in 2003, and has 6,700 members and posted $9.7 million in annual sales. The three co-ops employ a total of 500 people.

The Twin Cities has seen a recent spike in the growth of natural foods co-ops.

In 2014, Lakewinds Food Co-op opened a Richfield store, its third. Last year, Mississippi Market opened its third outlet, in St. Paul's Dayton's Bluff neighborhood. The Wedge debuted Wedge Table, a cafe/market not far from its south Minneapolis store. Seward Co-op opened its second store, in south Minneapolis. It also launched Co-op Creamery, a restaurant a few blocks west of the co-op's E. Franklin Avenue store.

Further heating up the grocery market, the Hy-Vee and Fresh Thyme Farmers Markets chains — both featuring extensive organics offerings — entered the Twin Cities metro area in 2015.

The consolidation proposal has several precedents. In 1993, five Twin Cities natural foods co-ops — the Wedge, Seward, Mississippi Market, Lakewinds and Valley Food Co-op — explored a merger. But the proposal did not come to fruition; two of the stores' members voted to approve, but three did not.

The Wedge, Linden Hills and Eastside boards have carefully scrutinized a more recent example: the successful 2012 marriage between People's Food Co-op in La Crosse, Wis., and Good Food Store Co-op in Rochester.

"It's a model that shows that, when we work together, we can grow stronger organizations," said Linden Hills general manager Luke Schell.

Next up: several months of information and listening sessions, culminating in annual meetings — and votes — at the three co-ops. Minnesota statute requires that two-thirds of co-op voters cast ballots in favor for consolidation to pass.

"I have no idea how the vote is going to go, but I'm very excited about starting engagement," said Fields, who originated the merger discussion with her fellow co-op leaders. "In some ways, it's very freeing that it's up to the members. They're the owners of these businesses. At the same time, we feel a huge obligation to engage with them, and explain why this is such a great opportunity for all of us."

Rick Nelson • 612-673-4757

@RickNelsonStrib