MAY 6, 2010

Temagami Co-operative:

The Whole Story In A Nutshell

By Don Johnson

The Temagami Co-op grocery store has lost money in nine of its twelve years in business. Whether the loss has been moderate or spectacular has been due to variables in two factors: management and weather.

Unfortunately, it is almost impossible to attract talented, qualified managers to Temagami. The most experienced managers we've had at the store have all made the same mistake. They've based their business strategy on an assumption that can be made comfortably almost anywhere else: that there is a great floating mass of consumers out there, somewhere, who can be wooed to our store by special discounts, unique products or a beautiful shopping experience.

The truth is that there is no such floating mass in Temagami. In the winter, our population is small, and the local economy is even smaller. People who work out of town also shop out of town, because it is convenient, and because the Co-op cannot compete with cut-price stores such as Giant Tiger, Food Basics, No Frills and Wal-Mart. Seasonal residents are equally set in their ways. There are those who will always prefer to stock up on food on their way up here, turn left at the Mine Road and never come out until it's time to go home again. This reality is reflected in our sales history, which has been consistent at approximately $2,000,000 annually. Between our best sales year and our worst, the range is equal to 10% of our average gross sales.

Our most disastrous business years have been those when the store looked most prosperous and attractive to customers. The first of those was our second year in business, which ended with a cash deficit of $172,000, from which we've never recovered. The second was 2008-2009, which more than doubled that deficit. In both cases, managers were brought in who were sure that what works elsewhere would work here. It didn't. Our best years were those when Norm Lacroix was the manager. We made profits in-year for three consecutive years, the best one equal to 1% of our gross sales for the year.

This is not to say that the only good managers are home-grown. It just points to the fact that a store in Temagami has to be managed for the realities of Temagami. Yes, it's true that ours is not the only small northern town to lose all its large employers in less than ten years. But it must be one of very few that has several large, cut-price grocery stores within an hour's drive in both directions.

We are very fortunate now to have a manager, Kathy Waxl, who lives in Temagami and has extensive experience in the grocery business with A&P stores in Barrie. She and her husband have operated Mountain Home Lodge, in Marten River, successfully for seven years. She is assisted by our Office Manager/Bookkeeper, Cindy Salmond, who has grown up in a lodge-owning family on Lake Temagami (the Browns, at White Gables), and has years of experience as a bookkeeper with Lakeland Airways/Three Buoys and Temagami Marine. This team has been managing our Freshmart franchise store on a cost-recovery basis, and that is where our image problem comes in. Last summer's bare shelves and shortages were due in part to circumstances beyond our control, but more significantly, they were due to the fact that we bought only what we knew we could sell, because we couldn't afford to lose any more money. At the same time, we were paying off a huge amount of our debt to our supplier, Loblaws - a debt that had been incurred under our previous manager, a debt which still has not been fully paid. Over $100,000 of sales revenue last summer went toward that debt.

Throughout the past winter, our management team has continued to run the store on a cost-recovery basis. The current recession, along with two cool, wet summers in a row, have put an end to expectations that we could make sufficient profit in the summer months to carry the rest of the year.  Because the other variable over which we have no control is weather. If the winter brings good conditions for snowmobiling, we will have a little wiggle room in our operation during the "off" season. If we have a warm, dry summer, there will be enough transitory traffic to add a little gravy to our "on" season sales. In several recent years, we've had neither.

On average, the store makes 45% of its annual gross sales between June 1 and the end of the Labour Day weekend. So our ability to stock the store properly for the summer season is critically important.

At a time when we have no reserves to draw on to meet that cost, we are appealing to you for help. Our store is a viable business, but only if we all understand the limits within which it operates. So our appeal to you is not just for cash to help us stock the store this summer, but for your understanding and moral support as well. As you know, what is left of Temagami will disappear if we have to lose the store. We need an estimated $65,000, by the end of April. Please forward this letter to anyone else you know who would be willing to support us.

— Don Johnson is a concerned Co-op customer.