2013 Annual Report

Annual 3 1 0 2

Report 811 I St. Arcata & 25 4th St. Eureka, CA

April 2012-March 2013

Reports from the General Manager, Board President & CFO We improved access to safe and secure employee bike parking in Arcata, doubling the number of parking spaces. See a video with the story on our You Tube channel. http://www.youtube.com/watch?v=a3Plu4AuWao

PLUS store highlights from the past year

As a part of our commitment to the community, the Co-op partners with several organizations to advance our mission and cooperative principles. Last year, our Community Kitchen Coordinator was actively involved in the Humboldt Master Food Preserver program, assisting with the curriculum planning and coordinating the free Co-op Demonstrations that took place every other month. We partnered with the Community Alliance with Family Farmers to advance Local Food Month and participated in the Humboldt Food Policy Council, which is working to address food needs in the county—everything from access for those in need to sustainable production to the distribution of local food to institutions. We also partnered with the Humboldt County Office of Education’s Nutrition Department on classes for children in the afterschool and summer programs.

We were certified as an organic retailer for the eighth year in a row.

Simply stated, that means we maintain the organic integrity of organic products from our back door to your basket.

We feature the best selection of organic, local produce of any store in Humboldt County! Our sales in local produce alone totaled more than $1 million!

Our Safety Team met monthly to address safety concerns for each store, worked on the long term vision for the safety culture of the Co-op, and created a comprehensive disaster preparedness plan. In addition, we sent 8 employees to Community Emergency Response Training (CERT).

FROM OUR

Annual Report | 2013

General Manager

By Kelli Reese, General Manager

W

elcome to our Fiscal Year 2013 (FY13) Annual Report covering April 2012 to March 2013. It’s been a few years since North Coast Co-op has created a year in review report for mailing to our membership; we feel it’s a great way to reach a broader spectrum of our members, rather than a presentation at the Annual Membership Meeting as we have done in the past for a smaller audience.

We welcomed 816 new members resulting in a total of 15,620 members owning the North Coast Co-op.

We employed an average of 190 people, creating and sustaining local jobs.

Our Cooperative Community Fund (CCF) awarded grants to 15 community groups for projects pertaining to sustainable agriculture, food security and food nutrition and education, for a total of $15,500.

CCF has grown by $1,418 through donations given directly (thru the register or as gifts) and $5,688 through paper bag sales, which go directly to CCF.

Last year was a profitable year for North Coast Co-op after years of decline. The turnaround has included hard work by every employee at the Co-op and members who have continued to support our stores through patronage, input, and loyalty. We have worked hard to get here and we hope you enjoy the look back in celebration of the accomplishments our Co-op has had in the last year.

David Lippman Retired Our Consumer Education Coordinator visited 37 classrooms at seven school sites conducting monthly lessons in fresh produce, reaching more than 8,000 kids through the Harvest of the Month program.

We conducted 20 store tours, serving roughly 400 school children. During tours they learned about where food comes from, the ins and outs of a grocery store, and how to shop in bulk.

They also got to try tasty food along the way.

In July of 2012, we began hosting cooking classes and workshops in Arcata, which allowed us to expand our total offerings to an astounding 191 classes and workshops—that’s a total of 1,500 participants!

We can’t look at the last year without taking a moment to thank David Lippman, General Manager, who retired in January 2013. He was here during a time when there were many pressing needs facing him and the fact that we are where we are right now is due in part to him.

Thank you, David.

Mermaid Sushi Introduced

One of the best things we did last year included the introduction of Mermaid Sushi in both stores. The response from our members and shoppers has been tremendous and really helped to contribute to our success throughout the year. In FY13, we had nearly $400,000 in sushi sales within both stores combined. We sure love our sushi! Thank you for responding so well and helping to make this new addition a success.

Store Improvements Made

We continued work on store improvements. In Arcata we relocated the customer service desk, painted the interior, reset the grocery department, and expanded the Wellness and General Merchandise departments.

The General Merchandise department alone has shown amazing growth of 28% year over year. In Eureka, we opened up the area in front of the Deli as it was a high traffic area. We moved Beer, reset the Wine department, and increased offerings in the General Merchandise department. General Merchandise in Eureka has also shown great growth of 18% year over year. We took our time on some of these projects and many required minimal cash outlay.

Share the Spirit Record Set

It was a record setting year for our annual Share the Spirit campaign in support of Food for People. Each year we accept register donations from shoppers during the month of December and the Co-op matches up to $5,000.

This past year the cashiers at both locations took it upon themselves to see how much they could raise by holding a friendly competition. You responded in force by “rounding up” purchases each time you shopped. When it was all said and done a total of $12,850 was donated to Food for People, including the Co-op’s match. We are so proud of our cashiers and our community for the effort.

Partnerships Made for Labeling GMOs

We took a leadership role in the community by actively participating in the Prop 37 CA Right to Know campaign in favor of GMO (genetically modified organism) labeling. The Co-op partnered with Label GMOs, Eureka Natural Foods, Chautauqua Natural Foods, Humboldt Healthy Foods and Central Market to share advertising resources to both gather signatures to put the initiative on the ballot and to get out the vote. While Prop 37 didn’t pass, we opened up a bigger conversation about GMOs and have continued to revise our approach on the GMO issue as we have moved forward this year.

Open Book Management Implemented

We implemented Open Book Management (OBM), creating greater employee engagement and understanding of how the Co-op operates. OBM is a way of running a company that gets everyone focused on building a better business by fully sharing financial information with employees and giving them the tools to better understand and influence the Co-op and their department’s success.

Each employee knows enough about the company to understand how their actions will affect the business and everyone shares in the success.

Employee Training Continued

We continued employee trainings with a series devoted to healthy communication in order to help create a more cohesive workplace. We have seen an increase in cooperative spirit with direct feedback from employees who have worked to implement the tools to begin to create a new culture of respect and compassion at the Co-op.

As we approach our 40th Anniversary Celebration in October, I can’t help but feel that we are embarking on a future that includes a bright outlook for North Coast Co-op. We are on our way to our stated goal of 2% net income where we feel we would be a healthy organization that can take care of its employees, offer benefits to our members, operate with competitive prices and invest in our infrastructure. As we move into a new five year planning cycle with the implementation of the 20142018 Strategic Plan, I’m excited about the opportunities ahead and want to thank you for our continued success.

Stay tuned, the best is yet to come.

Awards & Recognition Ti mes-Standard Readers Choice award for: • Best Meat Department • Best Green-Friendly Store • Best Independent Grocer N orth Coast Journal Best of Humboldt award for: • Best Grocery Store Four and five star ratings on Yelp

Best Earth Friendly Products Display, thanks to our Merchandising Team

Celebrated 26 years of the Co-op’s Pumpkin Patch. Just last year 3,597 kids from 50 area schools attended the Pumpkin Patch, each receiving a free pumpkin.

We donated all of our excess food resulting in 48,001 pounds of food going to feed people in need in our community!

We re-envisioned our newsletter as a monthly publication and promoted the option for members to “go paperless.” We had 900 members switch to paperless newsletters! [ You can switch to a paperless newsletter by sending an email with the subject line of Go Paperless to co-opnews@northcoastco-op.com. ]

FROM OUR

Board of Directors

By John Woolley, Board President

Y

our North Coast Co-op Board of Directors is pleased to provide this summary of Board activities and accomplishments as part of the Annual Report. The North Coast Co-op Board has policy-based responsibilities as determined by the North Coast Co-op bylaws, and the Administrative Policies which result from the agreements made between the General Manager and the Board of Directors. Once policies are determined, the operation and management of such become the responsibility of the General Manager. Therefore, under the long term general personnel policy rule, the Board’s primary role is the hiring and evaluation of the North Coast Co-op General Manager.

This past year, General Manager David Lippman retired. After a nationwide search, the Board interviewed and selected Kelli Reese as the new General Manager. Mrs. Reese was the North Coast Coop’s Arcata Store Manager for more than three years, and prior to that was the Durango Natural Foods Co-op General Manager in Colorado.

Under the 3rd Cooperative Guiding Principle: Member Economic Participation, the Board directed attention to amending “C” Shares.

By capping the amount of dividend-earning shares that any one member can own, the Board allowed for a more balanced approach and enabled more equitable member participation. The Board also updated and standardized Fair Share status. This past year was noted as a time to update the North Coast Co-op five-year Strategic Plan.

With the help of nationally experienced cooperative consultant, Holly O’Neil, the Board initiated the strategic planning process, including input from members as well as a day-long workshop which included employees and members. The data generated from all the input has been developed and will be presented to the Board for approval this fall. The Strategic Plan will help set the tone and direction the North Coast Co-op will follow to meet new challenges in the coming years.

The Board attended its annual facilitated board retreat. Besides setting in motion the strategic planning process, the retreat assists with new board member orientation and communication, as well as

helping probe into the role of the Co-op in the community and what challenges lie ahead.

These annual retreats are helpful in building the board team and enthusiasm for the future.

Each board member serves on one or more committees, which are essential working groups that do the detail research and development for the future policies the Board needs to consider.

Board Committees included: General Manager Evaluation, Board Nominating Process, and Bylaws Review. This past year, with the Strategic Plan underway, an additional committee was established to secure the process and to assist in general review of the Strategic Plan.

BOARD OF

Each Board member also carried the shared responsibility to produce monthly articles for publication in the Co-op News. Additionally, the Board examined the process utilized to respond to the various member letters, either online, via mail, or in person and began the process of updating these procedures so that members receive a quick response from the appropriate level. In all the Board duties and activities, the Seven Cooperative Principles are kept in mind.

We work at keeping the principles in front of each decision, as they are important in helping us to maintain the unique distinction the cooperative business model has in our community. It is not always easy, but is always critically necessary.

Board Members from left:

The Board thanks the members for its attention to the operations of the stores, welcoming your input and suggestions, participating in the community events, and in general being supportive of your member-owned cooperative. As the North Coast Co-op grows into the next years ahead, your participation will be as crucial as ever.

DIRECTORS

2013

Steve Suttell, Treasurer Fred Moore, Board Member Kate Lancaster, Secretary Tim Silva, Board Member Melanie Cunningham, Vice President John Woolley, President

FROM OUR

Chief Financial Officer

By Kelli Costa, Chief Financial Officer

Eureka $12,636,053

T

his last year of the Co-op has had some personnel changes in the accounting department. With me coming on to replace Jeff Peacock and Abby Quenzer replacing Bud Culberson, half the department changed. With these types of changes there is always a transition time for new staff to learn the current methods and implement some new and fresh ideas. As we moved through the year there have been a number of areas we have really tightened up the controls by putting new policies and procedures in place, along with looking for areas to streamline and make some processes more efficient. These changes take time and the patience of all to start, work out the kinks and come to a great end result. We are continuing with this process in this new year and anticipate more changes.

I’m excited to be a part of the growth of the Co-op. With this last year the stores together increased sales by 2.77% from the prior year. This equates to $823,462.

Something I found very interesting is that in the prior year our sales to members were 56% of our total sales and in this year-end our sales to members came in at 53.9%. With the prospect of us starting to project profit and paying patronage refunds it’s so important to give your member number to the cashier no matter how small the purchase. The patronage refund we give you is tax free and also lowers the taxable income for the Co-op, so it’s a win-win.

I can tell that the Co-op has been working on maintaining and monitoring expenses for a few years now and it really is starting to show. The Cost of Goods (COGS) only increased over prior year by 2.27%. If the sales go up, the COGS are going to go up. With sales increasing 2.77% we were buying smart.

This increased our margin by .3% or $105,000.

Payroll was budgeted at 26.9% of our sales and final year-end we came in at 26.1%. This is a variance from the anticipated budget at $231,000; every little bit makes a difference.

Our general operating expenses and occupancy expenses finished the year at 9.1% of our sales. The budget was 8.9% so a bit more than budgeted, but down from 9.4% the previous year. There really was not any one area that seemed high in expenses overall. There were some necessary unplanned repairs to refrigeration and equipment but nothing else was excessively high. With budgets, we plan for what we hope is going to happen and sometimes it works out and other times we have to have an explanation for what happened.

We finished the year with a positive net income of $447,431 before taxes. Our tax payment was $161,090, which brought us to a final net income of $286,341.

This is .9% of our annual sales. In the prior year our final net income was .2% of our sales so growth of .7% is positive and shows everyone is working hard to better life at the Co-op for all. To be a healthy Co-op we have a goal of 2% of our sales, so we are on the right path to keep the positive momentum going. It’s always great to show a positive net income. In looking at our needs going forward with building maintenance and aging equipment, along with technology needs always changing, it’s so important to build cash for our future.

I can’t wait to see what is coming ahead in the new fiscal year with the membership always growing, the projects that are happening and the growth we anticipate for the Co-op. It’s so great to be part of such a fantastic group of passionate people who love the Co-op and what is stands for. 

ANNUAL SALES

BY STORE

April 2012-March2013

Arcata $17,924,370

Bakery 3.5% Produce 16.8%

Deli 7.5%

Sushi 1.3% Meat 8.4%

Floral 0.5% Wellness 7.6%

PERCENTAGE OF SALES BY DEPARTMENT

General Merchandise 1.9%

Cheese 4.8%

April 2012-March 2013

Frozen 3.1%

Dairy 8.4%

Grocery 22.6%

Beer Wine 2.8% 3.2%

Bulk 7.6%

The North Coast Co-op became profitable and paid patronage refunds to 10,964 of its members—the first time since 1994.

We worked with EnergySmart Grocers to reduce our energy usage and saved more than $17,000!

As a part of our commitment to the community, more than 200 local organizations received a total of $21,878 in donations and sponsorships.