Pcc Changing With The Times -- Co-Op Updates Food Offerings, Store Image

Jennifer Naught looks coyly at the pint of Ben & Jerry's Coffee Toffee Crunch in her basket at Puget Consumers' Co-op Fremont store.

"I don't usually buy this kind of stuff," quips Naught, 24, holding up a sack of lentils in affirmation. "But it was hot today."

Debbie Columbo scans the shelves of beer and finally chooses a six-pack of amber ale. Hoisting the bottles into her shopping cart, she places them next to a head of leafy lettuce and fresh halibut wrapped in brown paper.

"I'm not really a member so I can get away with it," says the 33-year-old homemaker.

They may not be the purists you'd expect to find at one of the oldest and largest natural-food cooperatives in the country, one whose roots trace back to the ideology of the `60s.

But the times are changing, and so is PCC.

Spurred by heightened competition from conventional supermarkets and specialized health-food chains, PCC has launched a plan to expand, remodel and reorganize it stores to gain a stronger foothold in the burgeoning $7-billion natural foods market.

"Profitability is essential to the co-op's survival," said Jeff Voltz, PCC general manager. "To be successful as a business, we're constantly having to evolve and redefine our niche."

The fact is that the niche PCC has enjoyed over the past three decades is not as solid as it used to be. The Seattle-area chain, which spearheaded the natural-food cooperative concept back in the early 1960s, is encountering stiff competition not only from supersized health-food stores such as Alfalfa's Market, which recently opened in Seattle, but also from trend-conscious supermarket chains.

Thirty years ago, it would have been unthinkable that PCC, then a fledgling food-buying club, would someday mushroom into the stylish, seven-store, full-line grocery chain it is today.

But the industry isn't what it used to be. Although sales of natural-food products still account for only 1.5 percent of the nation's grocery bill, that's up 120 percent from a decade ago, according to Natural Foods Merchandiser magazine. Few other segments of the food industry have grown as rapidly.

The driving force has been a steady rise in health-consciousness among the fortysomethings, says Joan McNally, assistant editor of Health Foods Business, a trade magazine.

"The baby boomers make up the biggest portion of American consumers, and they're interested in health and longevity," Voltz agreed. "They've discovered that they're no longer immortal, but they're doing what they can to live longer."

The result is an increasingly segmented and competitive market. Big-name grocery chains such as QFC and Safeway are now stocking everything from soy cheese to organic meats.

PCC, in fact, was forced to close its South Everett store last month because competition from surrounding supermarkets proved too fierce. The store's problems led to a $209,000 loss for PCC in 1994, its first recorded loss ever.

"The area was definitely over-stored," Voltz said. "It wasn't necessarily overrun with natural-food retailers. But (PCC) was within a half-mile of a Fred Meyer and within about two miles of an Olson's that had opened up a natural-food department."

Many Northwest grocery chains have made healthy options easier to find by creating "stores within stores" for their natural selections. Larry's Market has created a special "Bio" department to showcase more than 1,000 natural products ranging from frozen, vegetarian dinners to homeopathic remedies.

"The whole `natural' category has been increasing dramatically," said Larry Andrews, director of sales and marketing for Larry's Markets. "And as long as customers want these products, we're going to meet that demand. Their dollar is their vote."

The arrival of Alfalfa's Market onto the Seattle scene could mean even greater competition for PCC. The Colorado health-food chain stocks many of the same products PCC sold exclusively not too long ago.

"I think there's room for everyone," said Ann Nicolay, Alfalfa's floor manager. "As soon as we establish our name within the community, we'll be able to carve out our own niche." Alfalfa's intends to open four or five more stores in the area within the next few years.

With so many different outlets now vying for the same customers, some co-ops have been forced to close. Co-ops in Maryland and California have gone out of business over the years because their profit margins dwindled when supermarkets encroached on their turf, said Leta Mach of the National Cooperative Business Association.

That's where PCC's updated look and expanded product line come in. PCC spent $3.4 million last year on store improvements designed to boost business through greater efficiency, convenience and full-service offerings.

The chain's newest addition, its Fremont store that opened last December, embodies the co-op's revamped style in its "urban market" layout.

The prototype store, on which all former and future PCCs will be modeled, features a deli stocked with a variety of pasta salads and prepared entrees, a health and beauty department with stacks of lotions and multivitamins and even a book section. There's also an undeniably trendy juice and coffee bar, which serves custom fruit and veggie drinks as well as espresso and capuccino - made with soy milk on request.

While there are still plenty of "healthy" items on the shelves and in the bulk bins - kerfir, tempeh and miso, for instance - the co-op is much like a conventional grocery store with its stocks of meat, beer, soda pop and even candy bars.

"We want to provide a one-stop shopping experience for our customers, and that calls for diversifying our product line," Voltz said.

Although PCC's sales climbed to $39 million in 1994, up from $10 million a decade ago, net income has slumped in recent years due to lagging sales at the former Everett store.

To raise its margins, PCC has begun selling a greater variety of high-profit items such as prepared deli foods. Many customers, Voltz said, appreciate the convenience of these ready-to-go options and are often willing to pay more for them.

The co-op still attracts an average 7,000 new members a year. But for the sake of efficiency, PCC now recruits a full-time staff to run the stores rather than have members volunteer to work several hours a month, unloading produce or stocking shelves.

In the works is a new register system - a computerized bar-code scanner - designed to help PCC understand shopping patterns and track membership better.

Voltz believes there is still room for PCC to grow.

"Society has grown to place a value on the product lines that we sell," said Voltz. "Although there's more competition, there's still plenty of market to be had. People are converting (to natural foods) all the time, and the market isn't saturated yet by any stretch of the imagination."

The natural-foods industry is expected to see continued double-digit growth in coming years, with a steady stream of new retailers entering the market, said McNally of Health Foods Business.

PCC itself is geared toward further expansion. With more than 43,000 members, the co-op is hoping to build a new store in Snohomish County to replace the one that closed in South Everett.

The chain also plans to move and enlarge its Green Lake store in early 1996.

"We're pursuing a course of cautious, controlled growth," said Kathy Blackman, board administrator for PCC. "We're always looking for ideal areas to branch out into. And we're going to continue to change as we do so."