Competition squeezes out Ravenna PCC

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Cynthia Zatloukal pushed a grocery-laden cart out of the Puget Consumers Co-op in Ravenna, unaware of the sign on the entrance announcing the store would close on Jan. 13.

"I didn't even know... ," Zatloukal said, jarred back by the news of the impending shutdown. "I think it's a darn shame. I mean, it's a landmark here."

Such reaction is spreading throughout Seattle as the homey natural-foods outlet at Northeast 65th Street and 20th Avenue Northeast, the city's original PCC market, heads for closure on Saturday.

The flagship store's closure comes just a little more than a year after PCC opened its biggest outlet, a 24,000-square-foot store in Issaquah. Both moves are part of a strategy for survival - and growth - for one of the nation's largest and most successful food cooperatives. The co-op, which began as a buying club in the basement of one of its founders in the 1950s, now boasts 40,000 active members who shop at stores throughout the region for everything from free-range meat to exotic olives and natural-fiber clothing.

While the Ravenna store has been a neighborhood institution for some 25 years, in recent times it has been increasingly hemmed in by larger supermarkets that also carry the organic produce, hormone-free meats and Earth-friendly dry goods that have been the Ravenna store's hallmark.

Sales dropped nearly 20 percent in the last year as the Ravenna store faced competition from the QFC flagship store in University Village, the new 50,000-square-foot Whole Foods Market at Roosevelt Way Northeast and Northeast 64th Street, and even two other PCCs in View Ridge and Green Lake, according to PCC officials.

In an industry notorious for tight earnings margins - some supermarkets return a penny or less of profit for every dollar of sales - the 7,000-square-foot Ravenna store couldn't keep up.

The store's closure will leave PCC with seven stores in Seattle and on the Eastside. Co-op officials have placed a large map by the entrance to the Ravenna PCC to show where the nearest PCCs are in View Ridge, Green Lake and Fremont.

That came as little comfort to shoppers such as Aiko Watson, who lamented the store's closure. "All the PCC markets are very community-oriented. It's too bad. If we don't support the good things, they'll go away."

Co-Chief Executives Tracy Wolpert and Randy Lee said PCC officials haven't determined what to do with the Ravenna store property. Lee called the decision to close the Ravenna store difficult, but said ultimately it was a "very good, healthy" call, allowing the member-owned company to direct its resources to expanding and improving its other locations.

Customer Jonathan Pasley, from the nearby Meadowbrook area, said he couldn't disagree. "I'm not going to miss the store because it's so small and the selection here is really limited."

Wolpert and Lee said size alone was not the cause of the Ravenna store's closure.

"It's still very feasible for a small store to be successful," said Lee. "View Ridge and Seward Park (PCCs that are only slightly bigger than the Ravenna store) have every reason to expect to be profitable for the foreseeable future," he said.

Those outlets are surrounded by fewer competing stores and have strong neighborhood followings. By contrast, said Lee, "Too many stores have taken a bite out of Ravenna."

Though still small compared with QFC, which is now part of the Cincinnati-based Kroger supermarket chain, or to Austin-based Whole Foods Market, PCC pulled down $58 million in sales in 1999 and will surpass the $60 million mark when it reports its 2000 results, according to Wolpert.

While declining to give individual store sales, Wolpert said the Green Lake PCC, which moved to an expanded space in 1996, was the sales leader, followed by the Issaquah PCC, which opened in November 1999.

"This to me is the store of the new millennium," said Brad Gunn, a customer at the Issaquah PCC. "It's nice to see a viable, beautiful store like this with everything a person needs."

Gunn began shopping at the Ravenna PCC in the late 1970s and recalls how people used to flock there because it was the only natural-foods supermarket in the area. Wolpert and Lee said the PCC still is playing a pioneering role in the natural-foods industry. It's what a niche player has to do to stay ahead of its larger competitors, they said: Be nimble enough to discover new offerings ahead of the pack.

On a recent tour of the Issaquah store, Wolpert showed how that plays out in the grocery display cases. He pointed to packages of Beeler's Pork, Oregon Country Beef and Umqua Valley Lamb, all free of antibiotics and growth hormones - brands of "clean" meats that PCC has launched in this area.

"This is the kind of edge we need to keep ahead of the QFCs and other traditional supermarkets," said Wolpert.

Lee Pate, PCC's meat and seafood merchandiser, said food producers often call PCC directly because they know they share the same values. They see themselves as stewards of the land, and don't believe in using hormones or antibiotics in their products, Pate said.

PCC still is probably best known for its fresh fruits and vegetables, deli and bakery. Wolpert said PCC will expand the bakery in all its stores in the coming year,

The Issaquah store is probably Exhibit No. 1 that a PCC can succeed in today's diverse and competitive food environment.

At the end of a row of chain stores in Issaquah's Pickering Place, it's a stone's throw from a giant Costco warehouse and a Trader Joe's food store. But it offers goods that the others don't.

Genet Alemu of Bellevue said that while she shops at Trader Joe's for products such as juice, PCC has a wider selection of other items. Costco may be good for buying in large quantities, she said, but she doesn't like to shop there for food.

"We're a small family, just me and my husband. I don't like to buy gigantic things," she said.

Many families make joint trips to Costco and PCC, said Debbi Montgomery, the Issaquah PCC store director. The Issaquah store is light-years removed from the old Ravenna store. With its green metal exterior, it's modern and spacious with an open industrial ceiling and islands of produce, cheeses and sliced meats. The Ravenna store is cozier and kind of funky, with an atmosphere that lends itself to PCC's old image of being a place for "granola eaters."

But Lee noted, "I think most of the PCC members would be surprised at how broad a cross-section they've become. The first and main commonality is that they care about the food that they eat. You go every direction from there."

Despite the success of the Green Lake and Issaquah stores and encroaching competition from other stores carrying natural-food products, Wolpert and Lee said PCC would not be undergoing rapid expansion; It plans no new store openings in 2001.

"I think our growth curve is more likely to be a single store in a strategic neighborhood that just looks sensible for our balance sheet," said Lee. "Every time we take on bigger bites than that, we are putting the whole shop at substantial risk because our balance sheet is only so big," he said.

As one measure of how much an impact a new store can have on the bottom line, PCC went from a profit of $1.2 million on $52.8 million of sales in 1998, or a little over 2 cents on every dollar of sale, to only $484,000 of profit in 1999, when sales were nearly $58 million but the company also logged costs associated with opening the Issaquah store.

It made less than a penny of profit for every sales dollar that year.

"The world is changing. Co-ops across America over the last 30 years really cultivated and supported organic agriculture. Now it's becoming mainstream," said Jeff Voltz, said PCC's former longtime CEO.

He said PCC has to walk a line between being a community-oriented store and having a large- enough facility to service the needs of today's consumers.

Scott McCormick, the Ravenna PCC's store director, said PCC has found a way to succeed in a marketplace dominated by large chains.

"If we don't change, we don't survive," he said.

"The other perspective that I think is important is that as a company, we have made a conscious decision to grow a bit," he added. "That growth - to bring more organic food to more people - is good."