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Jim Kenyon: Co-op & Competitor

If you want the management team and the governing board of the Co-op Food Stores to break into a cold sweat, mention the “H” word. Since the Hannaford supermarket chain arrived on the Route 12A strip in West Lebanon a few years ago, the Hanover Consumer Cooperative Society’s leadership has been quaking in its oatmeal.

At the Co-op’s annual meeting in April, General Manager Terry Appleby told members the Hannaford store was registering $600,000 a week in sales. The implication being that a good chunk of the sales was coming at the expense of the Co-op, which operates four stores in the Upper Valley.

At the same meeting, Dartmouth-Hitchcock pediatrician Tricia Groff, who was finishing up her stint on the governing board, explained to members the difference between the two supermarkets. At Co-op stores, young children are handed a free piece of fruit. At Hannaford in West Lebanon, kids get a sugar cookie, she said.

“I only know this” about Hannaford, said Groff, “because my nanny told me.”

Does that mean only families who can afford nannies can afford to shop at the Co-op?

I doubt it was her intention, but Groff spoke to the core of the Co-op’s dilemma. The Co-op wants to think it’s a socially responsible, blue collar grocery store that Cesar Chavez would have patronized. But it also wants to appeal to shoppers who can pay $33 for Italian olive oil.

Catering to the Upper Valley’s upper crust while persuading working-class families to shop at the Co-op was a lot easier before Hannaford came along. Last week, the Co-op issued its annual patronage refund checks. I have a friend who bought $10,000 worth of groceries last year and his patronage refund came to $46.

That’s not a big carrot. And price is the decisive factor for many people who buy large amounts of groceries.

The Co-op these days smells of disarray. At the Lebanon store, nothing is where it used to be. I’m just not sure how moving the ketchup to a different aisle will bring in new customers. In January, shoppers had to start showing their membership cards to get special deals. The policy lasted about a month before management acquiesced to disgruntled members who didn’t take kindly to having to prove they were who they said they were whenever entering the checkout line.

Competition from grocery store chains along 12A is nothing new. The Co-op, however, could always make the case that it offered local fruits, vegetables, meats and dairy products not found at corporate mega-chains.

The argument still holds — sort of. Hannaford, which has 184 stores in five states, is part of Delhaize Group, an international grocery retailer based in Brussels, Belgium. But Hannaford has more of an upscale, natural-foods-feel than its 12A counterparts.

On Monday, I did some price checking at Hannaford and the Co-op in Hanover. I picked five healthy (at least by my standards) breakfast foods and drinks: Tropicana orange juice, Special K cereal, Organic Valley milk, red seedless grapes and bananas.

By shopping at Hannaford, I would have saved $8.30. Imagine if I had filled an entire grocery cart.

Last week, I attended the Co-op governing board’s monthly meeting. While going over the most recent financial statement with board members, Tony Alongi, the Co-op’s finance director, mentioned that sales for the prior week at the Lebanon store were down $19,000 from usual. But the number of shoppers increased slightly.

How could that be?

“People are cherry-picking,” explained Alongi.

I gathered that to mean shoppers are still coming to the Co-op for its high-quality meats and fresh seafood. But they’re going elsewhere — Hannaford, perhaps — for their bread and butter items.

After the meeting, Appleby said it would be OK for me to stop by the next day to look at the financial statements that had been shared with the board. Later, he changed his mind. “It’s not the board or Co-op management’s duty to feed you with that information,” he said. “It’s not something that companies typically give out to the public.”

I’m glad that Appleby concedes the 18,000-member Co-op, while not a typical supermarket, is still a business. In an attempt to ward off competition, the Co-op is offering three “discount days” this month. Expect also to hear much in the near future about the Co-op’s charitable contributions. That’s an “answer to why we’re not like Hannaford,” said board member John Rosenquest, a retired attorney.

When I asked about the Co-op’s not-so-subtle digs, Hannaford spokesman Eric Blom took the high road. “I’m not comfortable talking about any particular competitor,” he said. Although food sales declined last year, the Co-op’s three largest stores remained profitable, said Appleby. The same can’t be said of its convenience store on Lyme Road in Hanover. Last year, the Co-op lost $250,000 on the operation.

The Co-op seems to be banking its future on an upcoming $5.3 million makeover of the Hanover store. To help cover the cost, the Co-op plans to borrow nearly $4 million. That’s a lot of smoked trout, particularly when the Lebanon Co-op is 2 miles away.

“In the grocery store business, if you’re not getting bigger, you’re going to go out of business,” Appleby told me. “That’s why mom-and-pop stores aren’t around any more.” (Don’t tell that to Dan & Whit’s in Norwich.)

I have a hard time believing the revamped store will attract many new customers, so the Co-op must be betting that its regulars will buy more. I suppose if the Hanover gamble doesn’t pay off, the Co-op can hope to get bailed out by Dartmouth College. The store sits on prime real estate the college probably wouldn’t mind adding to its portfolio.

To sweeten the deal, the Co-op could throw in a few sugar cookies.

Jim Kenyon can be reached at jkenyon@vnews.com.