The Co-op in 2017: A beacon of hope

As a new year dawns on a troubled nation, I am pinning my fondest hopes on my favorite institution:  the Hanover Consumer Cooperative Society.

You see a grocery store (or, more accurately, four of them – two in Hanover, one in Lebanon, and one in White River Junction).  I see the practical embodiment of all the great virtues – aspirations that transcend even the most fervent partisanship . . . or the crap I sometimes buy at the Co-op.  (I have a weakness for Diet Cherry Coke.)

According to the International Cooperative Alliance, co-ops are “based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.”  That such lofty ideals can be successfully brought to bear on so prosaic but essential an activity as supplying people with food – this gives me hope and reassurance even in the face of concerns that we are turning our national government over to reckless fools with authoritarian impulses, racist inclinations and misogynistic tendencies.

Such hope might seem misplaced in light of what the Hanover Co-op announced last week.

The Co-op’s new general manager, Ed Fox, announced on December 19 that the cooperative will finish 2016 “in the red.”  According to Fox’s announcement on the Co-op’s web site, “that can sound scary, I know. ‘In the red’ is often used in a way that can need clarification. It simply means income has fallen behind expenses. It’s time to get back on track.”

Fox and his CFO, Paul Guidone, offered further perspective and details two days later at the monthly meeting of the Co-op’s Board of Directors.  They projected a loss of more than $300,000 for the fiscal year, on sales of roughly $71 million, once the Co-op has paid its state taxes.  No one could remember the last time the Co-op ended the year in the red; Fox said he asked his recently retired predecessor, Terry Appleby, who confirmed there had been no such results dating back to his arrival in 1992.

Naturally, the Board asked Fox and Guidone to explain why the Co-op is losing money this year.  Both blamed overly optimistic sales forecasts with which the Co-op began 21016 – and Guidone went as far as using the phrase “arbitrary and capricious” to describe sales projections that proved to be a whopping $2.6 million too big.

Why, then, am I looking to the Co-op as a source of optimism and inspiration for 2017?  I have seven reasons.

1.      New and inspiring leadership.  Ed Fox had to some somber things to say to the Board at the December meeting --  but the look on his face and the tone of his voice confirmed that he is a CEO who is not afraid of, and might even enjoy, the difficult conversations a general manager must sometimes have with his board.  His relaxed and confident bearing is calculated to inspire trust.

2.      New and vastly improved Board culture.  A year ago – indeed, two years ago as well – the Board was riven by discord, obsessed with secrecy, and angry over controversial personnel decisions.  Now the Board faces even greater challenges than improving the workplace culture, but Board members are collaborative, focused, mutually respectful and yet still diverse in their perspectives.  In his rookie year as leader, Board President Tony Roisman deserves a lot of credit for his fairness, his decisiveness, and his diplomacy.

3.      Credible claims that 2016 was an anomaly.  Guidone explained that the irrational exuberance that guided the 2016 sales forecasts grew out of business-as-usual thinking with respect to the sales “bounce” the flagship Hanover store could expect in the wake of the $5 million store renovation of the previous year.  According to Guidone, the “bounce” projection overlooked the growing degree of cutthroat competition in the grocery business from aggressive supermarket chains and online retailing.  Nobody is counting on “bounce” for 2017.

4.      Signs of creativity, flexibility and responsiveness in the way the Co-op reacts, at the operations level, to sales fluctuations.  If your sales are $2.6 million less than you expected but you only lost $300k, you know how to cut trim expenses and redeploy resources when you have to.  There were no layoffs in 2016, remarkably and laudably.

5.      Fresh faces on the management team.  It’s not just new faces like Paul Guidone, who seems energetic and forthright, but also ‘old’ faces who seem newly influential.  It was great to see Cathy Maloney, manager of the thriving White River Junction store, invited by her boss to attend a Board meeting.  As the holdover manager from the store’s prior existence as a dismal outpost in a failing supermarket chain, Maloney is cooperative success personified because she’s proven what a store manager can do when freed to operate according to the cooperative values mentioned above.  One hopes she will continue to be visible and influential in the highest circles of the Co-op.

6.       A 2017 business plan, presented at the December Board meeting, that acknowledges the centrality of member trust to the future success of the cooperative.  “Member loyalty and affinity is largely a result of frequent positive engagement,” the report notes.  “As members are given more information and choices, engagement is the primary channel to ensure that our Co-op is ‘top of mind’ when a purchase, decision and action needs to occur.”  Of the seven Cooperative Principles, the most chronically underappreciated throughout the movement is No. 5:  Education, Training and Information.  This is the only way to beat the supermarket chains, which know how to sell organic food but must manipulate and fool customers as they strive to maximize return on shareholder investment.

7.      The certainty that when times get tough – as they may in 2017 and beyond – people turn to cooperatives for help and progress.  We are fortunate to have one that has been the thriving heart of our community for 80 years.

There are always things to worry about, of course.  Guidone’s use of the phrase “arbitrary and capricious” in relation to the budget forecast of the prior administration is noteworthy in that regard.  At the Board meeting, he sought to walk back any implied criticism of his predecessors, but what I heard was not a critique but a (possibly unconscious) challenge to the Board.  “Arbitrary and capricious” is actually a legal term that refers to when it is appropriate for an appellate court to overturn the decision of an administrative agencylike the EPA or a state utility regulator.  So calling the 2016 budget forecast arbitrary and capricious was, perhaps, a roundabout way of suggesting that the Board – as an appellate tribunal of sorts – must figure out how to scrutinize management’s plans thoughtfully and rigorously.  It is not an easy task, given the need to avoid micromanagement, and I cannot claim to be any wiser than the Board is on such questions.

Finally, the last paragraph of Fox’s 2017 business plan is a troubling one.  It reads:  “One idea that should be considered is the merging of cooperative organizations.  British consumer cooperatives have been merging since the 19th century and represent one of the largest chains in Britain.  While the negatives of mergers, like the loss of local control, are obvious, there are also advantages that may make sense at some point, especially on a regional level.”

One of my New Year’s resolutions will be to convince Ed Fox that he should forget about merging the Hanover Consumer Cooperative Society with other co-ops.  There are certainly those in the food co-op movement at the national level who think that One Big Cooperative Grocery Chain is the best way to assure the survival of consumer co-ops.  They are wrong.  Federation opportunities are worthy of consideration, but what builds member devotion to food co-ops is the certainty that they are locally controlled and locally responsive.  A big national co-op grocery chain would look and act like every other grocery chain.  I am sure that is not the future of the Hanover Consumer Cooperative Society, which is another reason I have such high hopes for the Co-op in 2017.