The Cost of Food

by Tim Sullivan, Interim GM

from the January 2018 Newsletter

Most people are aware the percentage of our income that we spend for food is the lowest in the world. One reason is because our incomes are some of the highest in the world. I think most people would also recognize the low costs we see in food stores is not the true cost of our food. One hidden cost is taxpayer subsidiaries which mostly go to large industrial farms. However, by far the largest hidden cost comes from the ways we produce, process, and consume food. It will come as no surprise that the largest of these is healthcare costs resulting from our unhealthy diets; by some estimates as high as $1 trillion a year. Over-consumption of products with refined sugar contributes the largest share of these healthcare costs. Possibly of even greater concern is the costs associated with our industrial farming methods. It is not difficult to find research that reveals the damage done by our chemical usage or our large confined livestock operations for example. Our nation's farm policies have clearly been designed to support large industrial agriculture, processed food, and to keep our food costs low.

At Common Ground we occasionally hear from customers that the cost of our products are higher than our competition. I would like to share a few reflections on our food costs and what we are doing to control them. As you know most of my career was spent with a conventional supermarket, so I really understand their cost structures and pricing tactics. The 1st difference is, at this point in time organic and local products are more expensive than conventional products. I believe in the old saying "you get what you pay for". For example there is no comparison in the taste between locally grown tomatoes you buy in the farmers market and the ones that come from California. Many local products cost more because of processing costs. It just costs more to process one or two head of beef versus the thousands big Ag slaughters in a day. Is it worth it? If better quality, knowing where your food comes from and how it was produced, and supporting the local economy are important to a person, then it is absolutely worth paying more.

The costs of running an operation like Common Ground are also higher. In my old conventional store my produce or meat buyer ordered all of our product from one supplier. We would order today and it would show up tomorrow. In our produce department at Common Ground we've bought from over 20 different local producers in 2017. At my old store the produce manager spent maybe 6 hours a week ordering, but at Common Ground during peak season it is close to a full time job. Now spread that to every department in the store. Common Ground purchased local products from over 90 different producers in 2017. Over 18% of our store sales came from local producers in 2017, the conventional stores national average is less than 2%. This is one of the reasons it is so difficult for our big chain competition to do a good job with local food. No other food store in the C-U area does close to what Common Ground does with local producers.

Our Food for All program is one way Common Ground helps to make our food affordable for all families. The Co+op Basics line of organic food we carry is priced competitively with any of the organic products you will find at conventional stores. Everyday our buyers are looking for values for our customers. We are constantly looking at operations to see where we can reduce costs without compromising on quality or service. Since our owners are our customers and they care more about healthy food, we do not have to make huge profits as our competitors do. We do need to have some profits on the bottom-line though if we want to be here in 10 years. The net profits of the grocery industry as a whole are less than 1% of sales, so there is a fine line between making profit or going out of business.

Can we do better? Absolutely; we can work with local producers to help them lower their costs, expand their operations, promote them as a local food steward, and bring their products to you as efficiently and conveniently as possible. We can continue to improve our customers shopping experience which will attract more customers. Higher sales really does lower our costs by spreading our fixed costs over more sales. We can continue to explore ways to improve operational excellence in the store. We have a long list to work on in the New Year. It is work that never ends, and we hope that you will continue to share the journey with us.