Start Your Own Shop Guide - Independent Food Retail At Unicorn Grocery Ltd

Introduction

Unicorn Grocery Ltd began trading in September 1996 after over 2 years of preparatory work. We are based very much on Roger Sawtell’s Blueprint For 50 Co-ops booklet (see below) and the practical experience at the Daily Bread Co-ops in Northampton and Cambridge. Admirably concise and to the point, the Blueprint and Roger’s slide rule neatly combined clear ethics and efficient trading.

While we have grown beyond the Blueprint vision, with significant fresh food sales particularly, the essence of direct buying, competitive prices and wholesome foodstuffs/values remain.

The Northampton shop drew on an even older business, Community Foods Ltd in London, and attempted to replicate its cash+carry approach and competitive prices. It soon found the most promising market in the general public rather than other traders and grew steadily with strong support from fellow Christians widening the customer profile.

The need for wholesome food in age of Smash and Sausages was clear to some but in the years since a more polarised food retailing situation has emerged: organic production of measurable volume contrasting with lower quality convenience foodstuffs and intensive input farming. Multiple supermarkets now have 80% of the UK market and diseases related to diet and poor nutrition are prevalent, almost globally.

Food retailing has not been a popular career choice while an economy of excess prevailed. Foodstuffs have often been viewed as mere commodities rather than the staff of life. The puncturing of western capitalism means career options and aspirations are now different and we must hope for progress on the meeting point between public and field, the food store.

Globalised out of town sheds may fail but businesses trading amidst, and owned by, local communities and serving fresh, uncontaminated food, must emerge. This guide is intended to help you start and successfully run such a business.

Market

After several decades when a ready market was a given due to the lack of supply, the customer base is worth reconsidering. One of the Unicorn founders Griff Dines suggested “deep green” customers might be 5-10% in an average population, perhaps another 15-20% might be mid “green” with some chance on the majority “light greens” beyond this: ie plenty to aim at. In recent years however Tesco et al have had so many 1970s wholefood shop moments that many earlier USPs (unique selling propositions - pull!) are gone.

The reassuring analysis would be that a significant minority will go anywhere but a multiple, hence perhaps the popularity of box schemes, despite their inconvenience for many. Many more customers will shop wherever they consider their food requirements best satisfied, the selfish sustenance motive is still the killer proposition. Ultimately Unicorn is on the same street as a Morrison’s site - being next door would be better still. The right food offer sold by trusted people appeals to all.

Statement of Purpose

Unicorn’s mirrors the Christian Socialist theme of Daily Bread’s through a secular filter. It has been a very popular document clearly setting out our intentions and values in a time of commercial insincerity and distrust. Many company mission statements have been lampooned such that the format is virtually redundant. Don’t say anything other than that which you intend to carry out and stick to it through thick and thin: respect is often gained slowly.
Unicorn Grocery statement of purpose

People and Skills

An initial working group may well be very small - preparatory work may be most efficiently achieved by 2-4 people. Later joiners will be assisting a vision already worked through and clearly stated. It will not require much modification by later owners or stewards if well crafted at the outset.

The challenge for small businesses is to have enough of the diverse skills necessary to operate successfully from within a small group of people. The key range of skills must encompass Personnel (Human Resources), Finance and Accounting, Trading and Negotiation, IT, Strategic Vision, Diplomacy, Determination and Graft. Strength in some areas may compensate for weaker areas in overall performance, but all areas must be covered.

Recruitment and efficient HR are key to maintaining a successful team. At this point I recall a Daily Breader some years ago pointing out that any small business co-op or otherwise has to be able to do “people decisions”: to fluff them is to fail. Doing them quickly, fairly and without excessive loss of sleep will be aided by the material above. Attending a job interview forces a judgement and outcome for a candidate with which they won’t necessarily be happy with.

Charisma, charm and sociability will all benefit a workplace but the participants must need to be there as well as want to. Idealism alone will not fuel the team although wages and respect in the community may sustain it when times are tough. The strong identification conventional small business owners make with their enterprise is the performance level that meets the competition.

Reserved Hours

The Daily Bread Co-ops offer employment to those recovering from mental illness. Unicorn employs some people with learning disabilities. Those employed are productive and earning the normal wage level. Government support can apply to top up wages of those with less than average productivity.

The hours “reserved” are not charity but offering some hours to those who can be perfectly productive if given the opportunity. The pride and improvement in self esteem achieved may be even more important than the very real wage earned.

Structure and Ownership

Daily Bread was the first use of modern Industrial and Provident Society “white rules”, straightforward and with a proud 19th century heritage. Interestingly once more the subject of some interest for the values they espouse. The absolute structure is less critical than the principles it must encompass, namely: ownership (legally and motivationally) by the participants, asset protection/lock, a social agenda, a commitment to wider society.

The ICA international principles are hard to beat as a guide. Model rules are produced by Co-ops UK and others and the Business Link/Government service can sometimes be useful. Unicorn may be able to act as advisers.

Other structures such as partnerships may offer vehicles to achieve the same and legislation could help. The customers will care less about whether it’s a co-op structure and far more about whether they trust you and what you stand for. Many Unicorn customers have only a vague idea of our structure but a relatively clear idea of what they expect from us in our trading and our ethics.

As the Blueprint emphasises working groups below 15 may have regular member/owner meetings enabling a high level of efficient transparency. Such a human sized group has other merits in familiarity and empathy that Robin Dunbar in particular has explained.

If trade level and perhaps economies of scale determine a greater number of participants then the structure becomes a representative one where views of some are carried forward by others. More information must be written down, fed back and systems employed to maintain group cohesion, while the business remains nimble enough to the quick decisions often required. Commercial decisions often do not move at ideal human speed. Basic principles such as accountability, recognition of conflicts of interest, peer judgement, and elections stand the test of time. Those given power must have a constituency, be subject to recall and remain at all times aware of it.

While Unicorn and Suma are relatively well known for having relatively flat but sophisticated structures this does not guarantee success. You can only worry about policy decisions if you are selling enough baked beans to pay for them. If the structure reflects the participant’s aspirations and locks these together with the Statement of Purpose above then it’s the right one.

Hierarchies of age, experience, knowledge and expertise may be joined by those given or appointed by consent. Stable structures also reflect the working realities.

Site and Building

If the unit of handling of many arrivals is a pallet, then a forklift friendly building is a given. This and the need for access by articulated lorries is a limitation on site choice, as is being near to a district or town centre. Site availability delayed the Daily Breads and Unicorn as much as it does Tescos so patience may be called for.

Planning permission for retail selling must also be present or obtained (not a small thing). Bankrupt big box retailers may well assist availability. Car parking immediately to hand is likely to remain critical, if reducing, for the foreseeable future.

Accessibility to sufficient population and their demographic are relevant and gut instincts can be measured against Government statistics [www.statistics.gov.uk/]. Being near enough for customers to walk or cycle and the catchment area are also important.

Roger Sawtell’s projections originally looked for 250,000 people, albeit with a smaller range of goods (most obviously the lack of fresh regular purchase items). Much smaller catchments are possible dependant on the percentage of the local populace attracted. Some spreadsheet homework, cautious variables and nous will confirm the targets.

Leasing may be the default approach but purchasing a building provides some security if cash is available. Negotiating suitable leases is always more feasible with empty property around - eg obtaining rent free period, break clause, rent reviews up or down, repair provisions. Use of a sympathetic surveyor to negotiate may be money well spent.

Building size might exceed 4000ft² (or 400m²) to encompass 1500ft² retail and sufficient on site storage and production/mixing space. White collar space may be minimal. Everything except offices must be ground floor by the nature of the product. Accessible buildings for staff have become more challenging but opinions from architects can quickly be obtained, gratis in the first instance.

Financing Your Plan

Money is never the biggest obstacle to a start-up. Successful participants have been harder to find. If registered as an Industrial and Provident Society then issuing Loanstock, (fixed term bonds) in return for cash and some interest is legally possible if little known. The challenge is of course to find people to buy them. Relatives and friends are the traditional support base but it may be that Loanstock schemes look less risky than banks in future! Building a network of sympathisers locally may help with this and other challenges. Simple news sheets or emailed bulletins can keep supporters abreast of your plans and some people may very much see the benefits of your proposed store.

Obtaining some seed capital particularly if put up by the founders will encourage other lenders, eg social banks such as Triodos or the Co-op, to consider a loan (their loan would be above the loanstock in a creditors line). 10 year+ loans provide time to build a business, 5 years can be too steep. They are unlikely to go beyond 70% of the start up costs and may well offer much less. Lending on buildings is a less complex risk for lenders than assessing the people skills in a new business.

Grants are occasionally available in some regions although often offering more work in obtaining than the value of the money……any useful help is obviously to be taken. The Daily Bread store at Northampton was renovated by workers under the MSC programme as part of a Government recession measure.

If Unicorn started with £45,000 (in 1996) then one could assume a comparable business with more refrigerated equipment might need £150,000 (2009). Much depends, as cashflow projections will show, on the business’s ability to grow sales sufficiently quickly. A Unicorn 18 month break-even point fortunately proved a little cautious but the journey there is always consuming precious cash.

Fitting Out and Equipment

That cunning mix of frugality, functionality, durability and aesthetics. End up with relaxed place of commerce without trashing your budget.

Functional points to bear in mind;
Level concrete floors that pallet trucks will negotiate
Lorry and customer access
Sunshine/daylight and glazing
Store temperature steady sub 20ºC all year round – ideal, but challenging
Heating in winter
Security of structure - how much metal to get through, plus alarms
Tough floor coatings or coverings
Merchandising (display+shelf filling) is not a dark art, homework?
EPOS tills and conveyors get customers through briskly

Aesthetic points;
Wood is preferable to plastic wherever possible
Tiled floors are retail floors, Lino is a maybe
Lighting is to light the goods not the ceiling, daylight the ideal
Consistent signage and logos work, handwritten signs rarely do
Eye level is buy level, not too high, not too low with the shelves
End Caps (the ends of shelf runs) are often prime selling space
Blackboards are good communication devices, if fresh
Clean windows, floors and shelves are a – challenging - given

Basic Equipment List (at 2009 prices);
Pallet trucks x2 (s/h £300 each)
Forklift, min 1 tonne lift (lease for reliability)
Store Racking (s/h £1-4,000)
EPOS Software and 2-3 till units with linked scales (£20,000ish)
Cold Storage, min 100ft² with external heat exchanger (£5,000)
Display Fridge, 10ft with external exchanger (s/h £5,000?)
Shopping trolleys, baskets, etc, s/h maybe (£2000)
Alarm System, monitored for police response (£2-4,000)
PCs/laptop/backup (£2000)

Production/Packing Equipment;
Stainless steel tables x2 (s/h £2-500 each)
Weighing Scales up to 10kg, x3 (new electric £200 each) Light-heavy mechanical ones still a good buy
Mixing Tubs, food grade, x5 (£1000)
Label Printer, SATO type, x 1 (£1000). Cheap Inkjet possible with good quality label paper.

Deli Unit
Optional perhaps but would require sinks, serveover fridges and worktops (£15,000)

In general equipment is not as expensive as buildings, fitting out and paid time, but every site is different. Use contractors known or recommended where possible.

Trading

Price rules. For a while in recent years commentators tried to argue that convenience and presentation mattered more. Perhaps they didn’t do the shopping.

Curtailment of western affluence has offered new relevance to the whole model, namely good value not delivered by the forces of doom. We are using some economy of scale and buying as near to source as possible to achieve market prices ie the same or better than the competition. Price checking is second nature in grocery.

Paying on time is the basis of a trading reputation, doing otherwise is dishonest and often associated with the UK. We are establishing relationships with companies that may endure for many years, to mutual benefit. “Trade” Prices (that which say a wholesaler sells on at) still exist (as do wholesalers, just) but are most useful in being a reference point from which to arrive at the real price.

The unfortunate sight of remaining small shops often paying higher prices to subsidise very large ones has not been an edifying one through the 1980s and 90s. The real price is usually expressed in percentages off the trade price but most critically is related to volume. It still costs say £45 to send a pallet whether it carries £200 of goods or £2000 but the servicing costs (invoicing, handling, processing) are diluted on the larger. We may well offer to pay within 7 days in return for a further price reduction.

Telephones are still a great negotiating tool, shielding the enquirer. A website to refer to gives concise background. Getting past initial push offs can be frustrating but if you need the product than keep at it. Homework beforehand makes for confident negotiations (selling price elsewhere, rival brands, ingredient details). Mention of a rival brand is often the key point to interest a seller and key to having a strong position. If you do have a Plan B you can walk away if you don’t it’s difficult not to give that away.

Leverage or negotiating power is related to volume, hence the seriousness of the UK oligopoly situation. Once 1 or 2 buyers dominate a manufacturer’s options the latter is in a weak position. This may account for the enthusiasm of many existing Unicorn suppliers, although some of the largest manufacturers will now only deal with multiples. Ideas such as overriders, retrospective discounts, funded promotions, etc might, we hope be regulated or illegal in the future.

Sourcing

Fortunately innovation always appears in food production if only in returning to basic ingredients at times. Change always offers small organisations the opportunity to be swift on their feet and new lines or sources are receptive at launch, less so when established.

Unicorn tends to attract product submissions of stuff we don’t want to sell (50 types of Olive Oil, ever more processed versions of foodstuffs) but valid products have to be tracked down. You should be a “foodie” to be working in a food business therefore the whole working team is eyes and ears on other people’s shelves, kitchens, conversations, etc.

Many cultures have foodstuffs that they sell in their shops and which grow perfectly well in the UK Eg field beans (Fava) feature heavily across Arabic Cuisine as cheap protein easily flavoured, whilst in the UK they have featured heavily in horse food. Original ideas are few but adding a twist to something existent is everyday life.

The public wants foodstuffs that taste good with non-toxic ingredients whilst larger food manufacturers can often add profit only by more process or input. A large company is not intrinsically bad but may have bias towards poor food. Rich food cultures Eg Italy, Lebanon, Sri Lanka, Thailand are all reference points. If you haven’t (or someone you trust) tasted something, don’t sell it: rushed introductions may well trip you up later.

Product gaps become obvious but finding someone to make that product can be slow and painstaking. Receptive bakers or processors may be scarce. Longer life versions of something made fresh at home may be harder to produce than it first appears.

Supermarket buyers visit us and we visit them. We all offer product ideas to be harvested and tweaked. No food store offer is static and sourcing is a permanent state of mind. Unicorn’s 3500 food lines may prove nearer to a durable offer than the 25,000 common at the time of writing. Hyperchoice hasn’t necessarily led to happy shoppers.

Marketing

In Unicorn’s case we add Education alongside as want to impart information of real value as well as make the sale. The most valuable tool might be word of mouth and therefore our internal offer, the experience for each customer is critical because we rely on regular return visits, not occasional ones. Worker-owners should offer the motivation and sincerity that impresses the public. Customer service is a timeless notion.

We do produce newsletters and have leafleted door to door for specific purposes but paid for advertising is usually a no-no for food retailers (although heavy spends to change perception and image do occur, eg in recessions). Building loyalty, improving food knowledge and enhancing our food reputation must all be taken seriously. Customer feedback Eg Unicorn’s comment book is valuable material. A randomised customer survey every couple of years can provide evidence to confirm or deny perceptions.

Training

Easy to say a good idea, but maintaining consistency and building a good organisational culture is one of the Forth Rd Bridge tasks of commerce. Success means less reliance on key individuals and longevity of trading. The techniques to achieve this are not based on buying in consultants.

Formal induction, structured programmes to teach skills and testing all have their place. Bigger still are fortnightly slots to review and discuss regular tasks and any new product before public appearance. Participation and contributions from all must be the approach.

A path of career and personal development means individuals taking on new challenges and responsibilities, even for the reluctant. Courses and formal training Eg in Excel skills are part of this. A small or zero risk job description is not an option for the owner of a business.

Financial Management

Most businesses now use accounting software for recording but also increasingly for forecasting. Suitably numerate, trained staff will succeed if also conscientious. A 1p error can take as long as a £1000 error to trace. The business must have up to date management accounts at all times, although the expense of stocktaking will hamper how accurate assessments can be for much of year.

The owners need to know that cashflow as well as profitable trading is sound, and that projected activity is plausible. Interpreting accounting material, such that all owners have a reasonable grasp of the financial position, can be hard but necessary work. The temptation to leave it to the “experts” should make the outline of the iceberg visible. Resist this tendency.

The need for up to date information becomes apparent as tricky or time sensitive spending decisions land. Roger Sawtell’s original pallet of Brazil Nuts trading moment may prove more straightforward than capital investment decisions. The long term payback and risk can be hard to assess particularly for commercially conservative working groups. Today’s investments are however determinants of tomorrow’s pay level.

Business Strategy

The owners must periodically meet to review strategy, perhaps annually. Implementing a strategy through operational decisions is daily life, revising plans is far less often, even if awareness of them is almost constant. While some participants may be drivers of ideas more than others, all must buy into the eventual agreed plan and objectives. Consent and consultation have to be achieved in cost effective timescales, a great learning experience for those who have never experienced the pressure of commercial life. The time we want to plan and operate is unlikely to be what is available, or be at a necessarily human pace.

Meetings and Chairing Them

Effective meetings rely on basic bureaucracy such as concise and available minutes, punctual attenders and briefing papers where necessary. Chairing meetings is something most people haven’t done. Blood new people in small, convivial settings and build confidence from there. Basic ground rules Eg hands up to speak if more than say 6 participants, welcoming newcomers, critique of actions not the individual, curtailing anyone off the immediate subject, these help to get the business done.

Holding people to account and recording who is responsible for decisions may be less important than owners acting as that. Any non-participation or unwillingness to be responsible must be dealt with promptly. Prompt and alert chairing here may avoid individuals having to point the finger.

Reporting and Communication Systems

Smaller working groups need less formal systems due to the greater proportion of time they see and hear one another. However a diary, wallcharts, blackboard(s), pigeonholes, minutes, filing cabinets all have a role at any size. Be clear what is mandatory to read and be aware of and how this changes over time.

Trading economies of scale can be reduced by communication diseconomies. Eg a working group of 20+ may well need a weekly newsletter and someone to produce it. Email particularly has speeded up the volume of information that can be delivered but this has to be matched by an awareness of how much people can absorb. Keep to the point and concentrate on getting home on time.

Good informal communication (where most innovation and creativity takes place) is rooted in good formal systems. Security is provided and trust built by knowing financial data and colleagues activities and planning. A common organisational failure is to make decisions without awareness of how to deliver them and who needs to know.

The principle of accountability and culpability is essential in joint enterprise. Everyone really does need to know the sales, top sellers, new lines, overspends, lateness, sickness, successes, visitors, press coverage, etc, etc. Appendix Electronic Diarysample+offer to sell?,newsletter sample?

On-Site Production or Not

The Daily Breads pioneered the simple but clever system of repacking bulk foods onsite into small retail sized bags. This system adds value/local wages, minimises cash (as lower value bulk is turned into higher value as required) and significantly helps deal with the grocery bane of variations in customer flow. Short term fluctuations of up to 5 days make seasonal planning seem small beer. The weekly numbers may well be steady but when exactly people land at the till is not. Having a buffer of labour that can be readily moved and always have a productive task to return to is attractive.

This has to be balanced against the managing of another specialism that requires expertise, kit, training and commitment. The more specialisms under one roof the greater the complexity of the overall enterprise but the greater the potential attraction to customers if all are done well. Bags packed offsite means double handling/evaporation of margin of course. Bags bought in can be competitive if less flexible. Unicorn and Daily Bread mix recipes have so far proved superior or better value than the competition and often very profitable.

Opportunities/Summary

The opportunities outlined in Blueprint For 50 Co-ops remain despite the deterioration in diet and retail environment since. It really is our hands to grab hold of food supply as 19th Century Co-operators did. They needed to (chalk was often added to flour, etc) but also wanted to as believers in social justice and stability. Reacting purely out of necessity is usually too slow and acting out of anticipation will be far more of a powerful act. Humans may not be very good at planning, rationality and systematic empathy but survival pressures provide the need to apply them.

The mechanics of selling groceries remain achievable and as Roger Sawtell was saying 20 years ago entirely graspable. The rising cost of energy, notably oil and gas, are likely to change much around us and produce new opportunities. Globalised sourcing and nitrate fertiliser based food production will be curtailed which may favour operators of a more regional outlook. Co-operatively or socially minded entrepreneurs have ample cause to act and take up the market.

Adam York, October 2009

references:

Blueprint for 50 Co-ops - Roger Sawtell (Unicorn website)

Daily Bread co op

Community Foods

Unicorn Grocery statement of purpose

Suma

International Co-operative (ICA )Principles

Cooperatives uk

Robin Dunbar

More about Glebelands and Unicorn in an article by Andy Jones: The Glebelands - Unicorn Model, a Cooperative Approach to Sustainable Urban Food Supply

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