Whitewater: Co-op grocery reaches second of three-stage plan; location search underway

By Kim McDarison 

Members of a group calling itself the Whitewater Grocery Co., or “GroCo,” say they have reached several milestones as they work toward bringing a co-op or “community-owned market” to Whitewater. 

Seated Friday at the Irvin L. Young Memorial Library, Whitewater, three members of GroCo’s eight-member board of directors — Ron Binning, Steve Michaelson, and Brienne Diebolt-Brown, who also is a member of the Whitewater Common Council  — offered a recap of the journey taken by the group since its inception in 2017 and plans as it moves forward.  

In 2023, they are moving through the feasibility stage, the second of a three-stage process identified by the Food Co-op Initiative (FCI) — a Vermont-based, nonprofit group which, according to its website, “provides exceptional resources for people in the U.S. working to start a retail food co-op that meets the needs of their community.” The group offers some services to startups free of charge. The FCI’s three-stage process is outlined in its 104-page guide called “Starting a Food Co-op.” 

The GroCo board has been following the guide and working with several consultants, Diebolt-Brown said Friday. 

GroCo board members said they anticipate their efforts within the feasibility stage will cumulate in the identification of a location for a store in Whitewater sometime this year. 

Additionally, board members said, this month, some 8,000 area households can expect to receive a survey questionnaire as part of an ongoing initiative to collect data within the feasibility stage.  

A $46,300 grant received by GroCo from the Wisconsin Economic Development Corporation (WEDC) in March has been instrumental in funding ongoing work within the feasibility stage, Diebolt-Brown said. 

What is GroCo? 

Whitewater GroCo is a “for-profit,” organization with ownership held by its approximately 840 members. 

Plans call for the company to bring a 7,500- to 12,000-square-foot, full-service grocery store to Whitewater. 

According to Binning, the concept of bringing a co-op to Whitewater was initially discussed in 2016, after the Sentry Foods store operating in Whitewater closed. 

The city has not had a store dedicated exclusively to the sale of groceries since, he said. 

Michaelson acknowledged that the community does have a Walmart that sells groceries, but, he said, it is not a full-service grocery store.  

Binning noted that the co-op concept became favorable with some community members after they came to the conclusion that a corporately owned grocery store was not making plans to open in Whitewater. 

“We need a locally owned grocery store that offers fresh, healthy produce, locally sourced as much as possible, and other locally sourced foods,” Binning said, adding that, according to a definition offered by the United States Department of Agriculture (USDA), Whitewater is partially located in a food desert. 

Binning said he believed the co-op would help alleviate that condition.

According to information supplied by the USDA, “some low-income communities in the United States lack stores that sell healthy and affordable food. The lack of store access in these communities —sometimes called food deserts — may contribute to poor diet, obesity, and other diet-related illness.”

Additionally, according to the USDA, a definition developed by the department, the U.S. Treasury and U.S. Department of Health and Human Services notes that low-income census tracts with a substantial number or share of residents with low levels of access to retail outlets selling healthy and affordable foods are defined as food deserts. A census tract is defined as a “small, relatively permanent subdivision of a county that usually contains between 1,000 and 8,000 people but generally averages around 4,000 people. Census tracts qualify as food deserts if they meet low-income and low-access thresholds.” 

Within the definition, low income tracts are areas with a poverty rate of 20% or greater, or a median family income at or below 80% of the statewide or metropolitan area median family income. Low access is defined as occurring within populations of at least 500 persons and/or at least 33% of the population lives more than one mile from a supermarket or large grocery store — 10 miles, in the case of rural census tracts.

According to Diebolt-Brown, Whitewater has a low median family income. 

Also, she said, people believe that a co-op store will only sell organic food and therefore be very expensive. She said the GroCo model does not embrace that concept. Instead, she said, plans call for a full range of price points within the store, offering affordability. 

Affordability is further achieved when shoppers no longer need to drive to a different community to shop, with an added benefit achieved for shoppers who don’t have access to a car, she said. 

Sharing some GroCo history, Binning said the group was organized by then-Whitewater business owner and founding member Lacey Reichwald, who organized some friends to discuss the absence of a dedicated grocery store within the city. 

The group began with about 200 members, and grew quickly to more than 600, and then came COVID. In March of 2020, “membership almost came to a halt,” Binning said, adding that membership has since resumed a pattern of growth. Of the 840 members, he said: “Thirty-three of them are businesses from Whitewater and the surrounding area who are members and support our efforts to open our cooperative grocery store.”

Barriers for commercial grocery stores 

“Most large commercial grocery stores are looking to locate in a community where the median family income is $65,000. In Whitewater, it is $37,000,” Diebolt-Brown said.  

“Part of the reason large commercial retail grocery stores don’t do well is because they work on small margins. Stores only make 2-4% profit on groceries. When you have a low median family income, everybody is on a budget, and they will buy the cheapest things on the shelf,” she said, adding that when stores are only able to recoup the small margin on the cheapest items, their overall profit is small.  

“For a grocery store that’s community-owned, that’s not a big deal, but for a corporation that has to pay shareholders, it is,” she said. 

In addition, she said: “Many of their potential customers are now going to Amazon or Sams Club. So we don’t need a 60,000-square-foot grocery store.”   

FCI stages

Within the FCI guidebook, three stages suggested to successfully bring a co-op store to a community are outlined. 

The process begins with Stage 1: Organizing. According to the guide, “the organizing stage includes convening a core group, assessing common interests and needs, creating a shared vision, incorporation, building leadership and accountability systems, creating community excitement and support, committing money and time, coordinating initial market research and preliminary feasibility work, developing a membership program, launching a membership campaign, and researching Stage 1 target for membership.” 

Stage 2: Feasibility and Planning,  as outlined in the guide, comes with “two aspects.” The first aspect includes “in-depth assessment of market potential, financial feasibility, organizational commitment and capacity, and preliminary design feasibility.” The second aspect “begins once the probability of feasibility has been determined through a thorough assessment. Planning includes many components, including pro forma budgets, the formal business plan, capital campaign planning, initial contracts with external lenders, general manager search, and site selection.” 

Stage 3: Implementation, according to the guide, comes with four aspects. They include: Pre-Construction, “which involves site and facility design, development bids — both construction and equipment — and financing — both internal and external”; Construction and Renovation, which “entails overseeing construction, equipment acquisition, building business relationships, developing merchandising plans and determining opening orders, store and production promotions and staffing plans”; Preparation for Opening, which “involves building organizational and operating capacity and implementing staffing, marketing, and membership plans,” and Sustaining Operations, which goes “beyond the store opening and the grand opening (and) includes preparing for the first year and beyond.” 

Binning said that as the concept develops, store profits will be shared with members and used to expand the GroCo store. 

Searching for a location for the store has been an ongoing endeavor, he said, citing COVID as among situations that contributed to slowing the pace of that progress. The hunt for a location is a top priority in 2023, he added. 

As part of the feasibility stage, Diebolt-Brown said, GroCo has been looking at two or three locations for a store in Whitewater. 

Last year, the organization looked at operating from a portion of the space within the former True Value building, she said, adding that after its recent purchase, new owners indicted that they had plans for the entire building. 

Working with the CDA

Diebolt-Brown said some city officials within Whitewater have expressed an interest in helping the co-op develop. 

“The city is very interested in helping us and the CDA (Community Development Authority) is interested in helping us buy land and utilizing land that the city already owns, and getting a developer,” she said.  

Looking at the city’s broader plans to develop housing, she said a co-op grocery store could bring an added benefit to those neighborhoods and be included within a development plan. 

She said statistics indicate that retail stores do well when they are included in shopping areas with grocery store options. 

“Customers come to the grocery store for groceries and then shop for other things they might need nearby. They complete their list of errands while they are out,” she said, adding, that for that reason, the co-op would ideally be located in a development with other stores.  

According to Diebolt-Brown, when customers leave Whitewater to do their grocery shopping elsewhere, they also tend to do their other shopping in that location. 

“Nobody wants to go out for one thing. Right now, people go to Fort (Atkinson) or Janesville for groceries and then do their other shopping there, too, so the city loses those customers, too.”  

Several members of the city’s CDA understand that dynamic, she said, adding, “the city is dedicated to helping to develop that ecosystem.”  

Diebolt-Brown noted that before the co-op group formed, the city looked at bringing a large grocery store to town. 

She cited a study performed by a contractor in 2016 which was presented to the CDA. 

After receiving the study, she said, the CDA gave $10,000 to the GroCo group to help pay for its startup costs. Monies also were used to send GroCo representatives to an annual FCI convention which was held in Indiana. 

Board members continue to attend the convention annually, Diebolt-Brown said. 

Funding mechanisms 

According to Diebolt-Brown, a potential for further support from the city exists as GroCo considers the option of buying land and developing a building. It is plausible, depending on where the land is located, that tax incremental financing money could be made available to help fund the project, she said.  

The grocery store could be considered as a component of housing needs, she added. 

Citing additional opportunities for funding, Diebolt-Brown said the USDA offers guaranteed loans that can be procured through local banks.  

There is a potential to offer stock options and seek opportunities through low-interest loans, she said. 

Before land options and development can be explored, she said, GroCo would need to organize a capital campaign. 

Federal grants are available, she said, especially in areas that are considered food deserts. 

Looking ahead 

Looking at a timeline, she said: “If we could get a lease signed or buy land, theoretically we could be built in a year. But right now, supply chain issues make it right now about 18 months out.”  

As they move forward, Diebolt-Brown said, the company is following a schedule and steps as developed by its consultant. 

Aided by a grant from the WEDC, the co-op group has been able to move through the steps within the feasibility stage and begin a feasibility study with guidance from Seven Roots, a Vermont-based organization, which, according to its website, is “dedicated to co-ops and natural foods stores,” listing “design and operational support,” as among its services. 

Diebolt-Brown said GroCo has been working with Seven Roots since June. 

Michaelson said Seven Roots will be working with GroCo through the site selection process. 

WEDC grant monies also have been used to cover costs associated with the group’s pro forma, which, Diebolt-Brown said, is a “very detailed” 20-year business plan. 

GroCo also has employed the services of a second consultant, Minneapolis-based Columinate, which created a pro forma for the group six years ago and will continue its efforts through updates made to the plan. 

The GroCo group is moving through a multi-step process to complete a feasibility study, the three board members said. WEDC procured funds will be used to offset those costs. 

A feasibility study must be completed before a site for the store can be secured, Diebolt-Brown said. 

In past years, GroCo has completed several proprietary market studies, which also have been updated, to help determine the needs and location of a site, she said. 

Further, she said, with help from the University of Wisconsin-Whitewater, a community survey will be distributed to some 8,000 households this month to develop a better understanding of the community’s needs.  

Also under development through the feasibility study is a rough design of a building and how it might match to a site, she said. 

Once the feasibility stage is completed, Michaelson said, board members will turn their attention to a capital campaign, with a goal set at raising approximately $1 million. 

The board members said they anticipated that a capital campaign could begin as early as June of this year. 

Additionally, the three board members said, a goal of achieving a membership of 1,200 before the store opens has been identified. 

Looking ahead to the opening of the store, Diebolt-Brown said: “A lot of people might have a misconception that the members will run the store. This will be a real business, with a CEO, and a manager. When we hire a manager, it will be someone who knows how to serve a small community, and the kind of volume we need to get up and running, and then that person will hire. 

According to Binning, the group envisions that it will need at least six or seven full-time employees who will serve as store managers and department heads, and another 20 to 25 people who will serve as part-time employees. 

As GroCo looks to develop its consumer market, the three board members said they are hoping to attract members and customers from a 25-mile radius surrounding Whitewater. 

Anyone can shop at the co-op, the board members said. One does not need to be a co-op member. 

The three board members said that when they begin sourcing local product to sell in the store, they hope to draw from a radius of 100 miles.  

Noting that his father worked as a grocery store manager, Michaelson, a resident of Williams Bay, said: “I envision an old-fashioned store with customer service.” 

For more information about GroCo, and becoming a member, visit: https://www.whitewatergrocery.co.  

A link to the FCI website is here: https://fci.coop. 

A link to the full FCI guidebook is here: https://fci.coop/the-fci-guide-to-starting-a-food-co-op/. 

A link to the website of consulting company Seven Roots is here: https://www.sevenrootsgroup.com. 

A link to the website of consulting company Columinate is here: https://columinate.coop/consultants/don-moffitt/.