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Associated Press photos
Boise Co-op General Manager Ben Kuzma, left, speaks with flooring contractor Emilio Bengoa about plans to redo the floors at the 39-year-old organic and natural grocer in Boise, Idaho.

Co-ops brace for giants’ arrivals

Whole Foods, Trader Joe’s plan new stores

Zach Jones poses next to the pet food space at Boise Co-op, which opened a separate storefront for the fast-growing pet food segment to counter competition from Whole Foods Market.

– The Boise Co-op eliminated thousands of slow-selling items, sweeping away the claustrophobic effect that accompanied too many offerings. The Wheatsville Food Co-op in Texas is opening its second store after 40 years.

And in California, the Davis Food Co-op turned to a designer to revamp its look.

It’s no coincidence food cooperatives across the U.S. are making big changes. Many are preparing for the arrival of a Whole Foods or Trader Joe’s, two organic- and specialty-food industry giants that are opening new stores nationwide.

Some co-ops are even dispatching camera-toting, intelligence-gathering crews to poach ideas from the big guys.

With demand for organic, natural and specialty food continuing to outpace other segments in the grocery industry, co-ops say they must improve their stores, identify trends and appeal to a changing audience as the competition moves in.

Whole Foods Market Inc. aims to triple stores to 1,000, including in Boise and Davis, Calif.; German-owned Trader Joe’s is expanding, too, with a 19-city “coming-soon” list.

“Co-ops had it easy for years” when customers had few other places to go, said Robynn Shrader, head of the 125-member, 164-store National Cooperative Grocer’s Association. “It’s more complicated being a retailer today.”

Over the years, demand for natural, organic foods has only grown. The Organic Trade Association reports 2011 sales rose 9 percent to $31.4 billion.

Brent Hueth, director of the Center for Cooperatives at the University of Wisconsin-Madison, said he’d expected an increasingly crowded landscape of organic purveyors, including from conventional stores, to be tougher on co-ops.

That hasn’t materialized. “Demand is growing faster than supply,” Hueth said. “It’s not saturated yet.”

At the 40-year-old Davis Food Co-Op in Davis, sales slipped 7 percent after Trader Joe’s October 2010 opening, forcing wage freezes and retirement-plan cuts, manager Eric Stromberg said.

Though revenue has recovered, Whole Foods opens in October, so additional austerity measures are planned.

“Honestly, the emotion I felt was anger,” Stromberg said. “I worked really hard to give our employees good benefits. And I hate to see that nibbled away.”

The Davis co-op is going on the offensive, too, enlisting a store designer who also works with Whole Foods to spiff up the place.

Stromberg isn’t bashful about “shoplifting” ideas from his bigger rivals.

“The goal is you walk away with at least one good idea we can use in our store,” he said, describing how one crew was politely asked to leave a San Francisco Bay-area Whole Foods.

Whole Foods, which boosted second-quarter profit a third to $117 million and whose stock is valued at $18 billion, won’t say when it hopes to crest the 1,000-store mark.

But Joe Rogoff, Whole Foods’ Seattle-based manager for Northwest stores, insisted the Austin-based retailer isn’t trying to muscle out smaller rivals. Rather, he hopes it turns on a whole new audience to natural, organic food.

In Boise, Ben Kuzma became the local co-op’s general manager in 2011, just as the store in the capital city’s oldest neighborhood faced new competition.

Two regional chains, Huckleberry’s in Spokane, Wash., and Denver’s Natural Grocers arrived this year, and Whole Foods will open its 35,000-square-foot store a mile away in November.

So far, Kuzma said 2012 revenue growth has been cut in half, to about 3 percent, for a store that last year grossed $26 million. The impact could be even more significant when Whole Foods opens and lures curious shoppers away.

A veteran of California, Maine, and Arizona co-ops, Kuzma said looming competition forced him to cram a three-year store transformation into just one.

He joined the National Cooperative Grocers Association, to take advantage of the group’s national buying power. The company has also adopted new accounting standards and boosted employee training.