Plans to merge the operations of three prominent natural foods co-ops in Minneapolis are moving forward, but with only two of the original participants.

In June, the boards of the Wedge Community Co-op, Linden Hills Co-op and Eastside Food Co-op proposed to their member owners that the three enterprises merge their operations. The idea was to strengthen their stores in an increasingly competitive and crowded grocery landscape.

Voting among the co-ops’ members began in September and closed Thursday. The result: Wedge and Linden Hills will consolidate, and Eastside will remain independent.

“The grocery landscape is competitive, and it’s only getting more so,” Wedge CEO Josh Resnik said. “Consolidating will help stabilize and sustain our business by creating more efficiencies and allow us to operate better stores. We would have loved to have had Eastside join us, but this is a step in the right direction.”

Member-owned co-ops occupy a unique consumer niche, with a focus on organic and locally raised foods. Underscoring the challenge that they face, Anoka’s six-year-old GrassRoots Cooperative abruptly closed on Wednesday.

While the Twin Cities metro area is known as one of the nation’s most robust co-op grocery markets, co-ops make up only a tiny slice of the area’s overall grocery market, which is led by Cub Foods, Target and Wal-Mart. Further heating up the grocery market, the Hy-Vee and Fresh Thyme Farmers Markets chains — both featuring extensive organics offerings — debuted in the metro area in 2015.

The huge size and number of those stores give them enormous pricing power.

Even a relatively small chain, Edina-based Lunds & Byerlys, with about two dozen stores in the metro area, dwarfs the co-ops in market share.

The Wedge opened in 1974 and has 16,500 members; its grocery business has annual sales of $32.5 million, and its warehouse and commissary businesses post an additional $22.5 million in annual sales.

Linden Hills dates to 1976 and has 9,200 members and $13.6 million in annual sales. Eastside, the youngest of the three, opened in 2003, and has 6,700 members and posted $9.7 million in annual sales.

The three co-ops employ a total of 500 people.

“We’re disappointed with the decision but we will continue to serve our community and dedicated owners,” Eastside general manager Amy Fields said in a statement.

Members at Wedge and Linden Hills overwhelming favored the measure, with an 80 percent approval.

A majority of Eastside members — 51 percent — voted in favor of the consolidation, but a two-thirds majority was required. Turnout was high.

“In co-op elections, we’re lucky if we get a 5 percent response,” said Resnik. “Eastside got more than 20 percent.”

Implementation of the Wedge-Linden Hills consolidation will not officially take place until June 2017, and changes in governance, staffing, operations and purchasing will roll out gradually over a three-year period. The stores’ names will remain.

 

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