ITHACA, N.Y. — If you’ve been in GreenStar Co-Op recently, you’ll know it’s a bit cramped. That’s not necessarily a bad thing, right? Lots of stock, lots of shoppers translated to a successful operation and plenty of revenue per square foot, right?
Well, yes. But also no. It’s really a double-edged sword. That became very clear when GreenStar was mulling options, and decided a feasibility study was in order, to help determine if it was time to move on to to a bigger space, or stay in place.
The results were a bit ominous. It wasn’t that moving would break the bank, though it would be expensive. It’s that not moving might push them into insolvency and out of business.
That might seem a bit strange, but a lot has changed since GreenStar opened on the West End after its disastrous 1992 fire destroyed their original flagship store. Back then, organic foods were still kinda viewed as some new-age quirk of the crunchies and the former hippie crowd. Joe and Jane Ithacan went to P&C or Wegman’s, and the back-to-the-earth types could have their organic fruits and expensive vegetables.
Well, a funny thing happened over the following 25 years; mainstream went organic. In 2016, sales of certified organic foods hit $43 billion, an increase of 8.4% from the previous year – compare that to the overall grocery market, which grew 0.6%. Also, given that GreenStar now sells organic/sustainable meat, alcoholic beverages and pet food, perhaps the growing membership became a bit more mainstream.
The growth in organic food sales means other grocers want in on GreenStar’s market. Wegman’s has their organic and sustainable and cage-free and the like; so do Tops, P&C Fresh and even Wal-Mart. Product lines once unique to GreenStar can now be found down the street. If you specialize in one market, and suddenly everyone wants in on it, and they’re bigger guys who can afford to buy in truly bulk size, that can spell trouble.
That was exactly what the study noted. The West End store’s retail floor occupies only 5,600 square feet of space, but generates 76% of the Co-Op’s sales. Any grocer has to turn over a lot of product to generate profit, or in GreenStar’s case, income for its owner-members. For co-ops and most grocers, normal profit on sales is 2-4% of total revenue. GreenStar’s income/profit from revenue is 0.5%.
This has been the case for a while, and it was fine because their membership and sales were growing by leaps and bounds, so that supplemented the tiny income on sales and covered rising expenses. But now, with increasingly fierce competition at hand, the Co-Op’s sales growth has slowed, while expenses have continued to grow. The sales per square-foot are double that of a typical co-op, which sounds great, but it really means they’re in a pickle. Cramped aisles are practically at capacity, and not many folks want to be stuck in crowds on their weekly grocery run. Every month in this pattern puts GreenStar at more risk. The store that pioneered food sustainability, now has to worry about financial sustainability.
Picture it like this – GreenStar’s a boat so loaded with people (shoppers) that it’s barely above the water line. Bigger ships, the other stores, are sailing closer and closer and making waves. Add more people to GreenStar’s boat, and it may slip below the water line and sink. Let the big ships get closer, and the waves might sink the Co-Op’s boat. Start pushing people out (say, higher prices), and the boat might capsize. At this point, it’s time to invest in a bigger boat.
Another factor in all this was that GreenStar occupied its West End store on a 25-year lease due to run out at the end of 2019. So if there was a time to move, it was going to be now.
It happens that while GreenStar was reviewing options, Sayre-based Guthrie Clinic had purchased a pair of industrial buildings at 750 and 770 Cascadilla Avenue – a printing press building and a warehouse. While Guthrie really wants a presence in Ithaca city, the buildings purchased aren’t optimal for the medical service provider; however, the developers of City Harbor are offering to do a purpose-built building for them just a few blocks away. That presented GreenStar an opportunity.
The plan is to renovate 770 Cascadilla, a 29,978 square-foot warehouse, into the latest and greatest GreenStar flagship. 750 Cascadilla would come down for a 160-space store parking lot and landscaping. The new space would have an edible garden, outdoor cafe, mezzanine stairway and classrooms. The building would be refinished, insulated, and potentially net-zero energy compatible, meaning all the energy it consumes comes from renewable sources. The $3.7 million project would take a little over a year, from July 2018 to September 2019 (the store itself wouldn’t open until December 2019, after the equipment is in, shelves are stocked and electronics are tested). Local architecture firm STREAM Collaborative is in charge of exterior design, and architect Pam Wooster will handle the interior layout.
The sales floor would triple in size, while merchandising space would double – the difference in space allows for wider aisles, and much better for those in wheelchairs. The fresh foods areas will be larger, the cafe larger, the administrative, catering, warehouse and sale functions will be under one roof and thus limit the need for truck transport and coordination, and there will be an expanded frozen foods area. The Co-Op will be able to stock kitchenwares, ibuprofen, batteries, and culture-specific foods like expanded African and Latino cuisine options.
GreenStar is the sum of its parts, and those parts are thousands of owner-members. No bigger store could move ahead without a vote, held over three weeks in March. The vote was a resounding yes to move forward – 92% of voters approved the move to a new location.
Now, it’s not to say there aren’t any drawbacks. The Space @ GreenStar would be moved to within the new store, and shrink from a 225-person capacity, to 125. The old location will be put up for sale. The Space isn’t much of a revenue generator for the Co-Op, and is rarely utilized at full capacity. Also something that is likely to cause at least a few grumbles, GreenStar will be applying for a tax abatement; although unlike the residential projects that have drawn the most ire as of late, GreenStar’s project would add at least 43 full-time equivalent positions paying an average wage $17.20/hour (GreenStar has previously been certified as a living wage employer, though they appear to have been just below it in 2017).
According to GreenStar, the project may be $3.7 million to build, but the overall project costs are $6.67 million. Along with 11% in bank and credit union financing, the Co-Op expects to launch a capital campaign to sell investment shares to owners to help cover the project costs. Members will be invited to open forums to obtain feedback on design and services, refining the expansion plan, and meetings will also be scheduled with neighbors and eventually the community at large.
It’s a very ambitious plan, but pragmatically speaking, it’s also necessary if the Co-Op wants to continue building off their success as well as keep its finances above water. The project will visit the planning board this month, and apply for tax abatements no earlier than next month.