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«Background on NCG and Opportunities to Join and Participate National Co+op Grocers (NCG – formerly NCG) is a business services and development ...»

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Background on NCG and

Opportunities to Join and Participate

National Co+op Grocers (NCG – formerly NCG) is a business services and development

cooperative for food co-ops located throughout the United States. NCG helps unify food co-ops

in order to optimize operational and marketing resources, strengthen purchasing power, and

ultimately offer more value to natural food co-op owners and shoppers everywhere.

About NCG: The Big Picture

In the early 1990s it became clear to co-op leaders that corporate chains were aggressively pursuing the natural food market nationally and that these chains had the resources to dominate individual co-ops. Co-op managers in various regions began meeting and forming associations to provide peer support and improve operations by collaborating on activities.

By the late 1990s, regional cooperative grocers associations (CGAs) had gained momentum, and the need for a national coordination of efforts was apparent. Six CGAs developed a plan to form the National Cooperative Grocers Association in 1999. Then in 2004, this entire system was reorganized with NCG acquiring each of the regional CGAs and all member co-ops becoming a direct member of NCG.

NCG immediately accepted responsibility for a wide range of programs including negotiating group discounts on various vendor-provided services, national coordination of a monthly promotions program (now called Co+op Deals), and peer support and development programs.

In 2006, NCG negotiated a national supply contract with UNFI for all members. In 2008, NCG created a wholly owned subsidiary, the NCG Development Cooperative (DC), for the purpose of providing fee-based development services (business improvement, expansion, relocation, and start-up) to food co-ops.

NCG is incorporated in the state of Minnesota as a cooperative. Key statistics about NCG:

• Currently, NCG is made up of 143 independent co-ops that operate over 190 stores in 38 states with combined annual sales in excess of $1.7 billion.

• The largest NCG member co-op operates ten stores, generating over $200 million in annual sales, with over 45,000 consumer owners. The smallest member co-op has less than $1 million in annual sales.

• NCG currently employs close to 70 staff members, located in 10 states.

NCG is governed by a 9-member board of directors made up of six regionally elected directors and three directors elected at large (by all members). In addition, the NCG board appoints other individuals as directors. NCG’s board operates using Policy Governance™ and has the

following national ends policies (as revised in 2010):

NCG Background – updated January 2015 Page 1 of 8 Global Ends Policy NCG embodies the aspirations of its members through integration and programs that provide the capacity of a chain while supporting the autonomy of a localbusiness. The benefits of NCG membership warrant the resources and participation required of its members.

Further, on behalf of NCG members, the association accepts responsibility for these outcomes:

A1 A dynamic and transparent organization with clear and meaningful ways for members to participate.

A2 Members are successful in a competitive market and have access to:

A2.1 competitive pricing A2.2 professional development and training A2.3 product selection and sourcing tailored to common needs A2.4 operational and merchandising best practices A3 A powerful advocacy voice for food co-op issues.

A4 A development mechanism for new and expanding co-ops.

A5 Members adhere to agreed-upon program standards Why Affiliate with NCG NCG brings together co-ops to build and support a strong food co-op system and ensure strong,

community-owned and -controlled food co-ops now and into the future. NCG:

• Is a strong, unified national presence that gives the cooperative food system increased relevance in a rapidly growing and changing natural foods market.

• Represents enough aggregated purchasing volume to hire and maintain highly qualified staff to build and operate existing programs, to negotiate strong national supply agreements and to launch creative value-added programs for the benefit of food co-ops into the foreseeable future.

• Provides a vehicle that allows resources to be optimized and enables efficient and effective rollout and development of new programs and services.

• Has structures and procedures in place that ensure new programs and services are designed with full consideration of co-op needs and interests.

For individual co-ops, NCG provides a wide range of benefits, depending on whether the co-op affiliates with NCG as a member or as an associate co-op (see below). All services are designed to improve store operations by lowering costs or providing programs with direct store impact. NCG co-ops also benefit from a strong and dynamic peer network to draw upon through regional and national meetings, small working or interest groups, and regular information-sharing opportunities.

Affiliation Opportunities with NCG: Membership and Associate Co-op NCG offers two ways for interested co-ops to affiliate with it and participate in its programs and services: as members and as associate co-ops. These two levels offer different benefits, access, and carry different requirements. We offer two levels because we realize not all organizations are able to participate and adhere to our membership requirements. At the same time, we all gain by working together to strengthen each food co-op and the entire retail food coop system.





Further details on the benefits and requirements of each of these affiliation options are listed below. Additional important background materials are supplied in separate documents. Contact Karen Zimbelman or other NCG staff for additional information. In addition, the specific criteria and qualifications to join both affiliation categories are also described.

All co-ops interested in affiliating with NCG must be independent food co-ops located and operating in the U.S. In addition, co-ops interested in affiliating with NCG must agree to abide by NCG’s national and corridor policies, as well as all appropriate program agreements.

NCG Background – updated January 2015 Page 2 of 8 A. NCG Membership Membership in NCG is the same as at the local co-op level – membership is ownership. As such, membership carries the responsibility of investment in NCG, and brings governance rights (such as voting and input on the organization’s direction). In addition, NCG member co-ops are eligible for patronage distributions of NCG’s surplus, as determined by the NCG board of directors.

Benefits NCG’s members have access to all NCG programs and services for which they are eligible and accept the participation requirements. NCG’s services are designed to provide a coordinated national effort to harness market power, drive out costs, and build cooperative identity for

member retailers. Specific benefits of membership include:

• Participation in core national purchasing and promotional programs.

• Full participation in CoCoFiSt (Common Cooperative Financial Statements) including access to all data and tools. CoCoFiSt is a data collection and benchmarking system administered by a third-party partner organization, CoopMetrics. CoCoFiSt participants have access to comparative data from other food co-ops, as well as tools for analysis and identifying opportunities for operational improvements.

• Regional and national development activities to help co-ops address challenges and share best practices, including peer groups, store audits, working/interest groups, and related programs.

• Group discounts based on national contracts for value-added business services. Current discounted services are available on packaging and store supplies, garment rental and facilities services, credit card processing, a gift card program, inventory service, merchandising equipment, and printing/copying services.

• Access to all brand support materials for the Co+op, stronger together brand.

• Opportunity to shape national initiatives.

• Access to NCG’s Development Cooperative. The DC was created in October of 2008 as a wholly owned subsidiary for the purpose of providing fee based improvement and relocation assistance services to food co-operatives.

NCG’s member co-ops have full access to our website. The designated representative has access to governance-related and confidential documents and can then designate other staff members who can have access to other areas of the website related to specific programs.

All member co-ops are organized regionally into three corridors – Eastern, Central, and Western. These regional groups serve as the primary nexus for co-op improvement and development activities. Corridors have staff dedicated to serving development needs as well as their own oversight methods (each has a member-elected steering committee) and budget (from member dues). All co-ops have access to corridor activities and programs such as store audits, regional trainings, small working groups and regional interest groups for other staff, and peer networking.

Member rights NCG is committed to being a member-driven organization and is structured as a secondary coop (members are organizations). Each member has the following rights of participation and

access:

1. Elect those who will serve on the NCG Board of Directors.

2. Have clear opportunities to influence new and existing programs and services.

3. Receive regular and full information about the operations, plans, and status of NCG.

4. Participate in determining the use of funds and resources allocated to the member’s corridor.

NCG Background – updated January 2015 Page 3 of 8 Member influence In addition to voting rights, NCG’s structure is designed to provide members with five points of

influence:

• Board representation: Each regional corridor directly elects two directors. Additionally, the board has at-large directors elected by all NCG members.

• Staff access: Each member co-op has access to staff members – those working at the regional or national level. Each corridor has development staff with responsibilities to coordinate and support corridor meetings and decisions; monitor co-op financial, market, and operational conditions; identify and deploy direct store support, were needed; manage risk; implement regional activities and programs; and represent corridor interests to other NCG staff and departments.

• Member groups: These include working groups based at the corridor level and other groups to pursue common interests (e.g. small stores, multi-store co-ops, HR directors, etc.).

• National meetings: Designated representatives (DRs) from member and associate co-ops come together each spring and fall for national meetings (travel costs are paid by NCG).

The spring meeting also includes NCG’s annual meeting. Those meetings, as well as corridor and other online meetings, provide opportunities to influence NCG direction, programs, staff, and board.

• Conflict resolution and grievance process: NCG members have access to a process to mediate and resolve differences, issues, or disputes with NCG.

Member requirements The general manager of member co-ops, or another consistent “designated representative” (for co-ops that do not have a general manager), is required to serve as the primary point of contact.

This person, the NCG DR, is required to ensure that that co-op meets all program and policy

requirements including:

• Maintain confidentiality of information garnered through participation in NCG programs and to not share information or use it to the detriment of NCG or any of its member or associate co-ops (see separate confidentiality and disclosure agreement).

• Attend and participate in all required meetings.

• Meet program participation agreements and program standards, including timely submittal of data to CoCoFiSt, SPINS, and other programs.

• Respond to requests for more information promptly and thoroughly.

• Ensure that required programmatic contacts are updated.

Financial requirements for members NCG members are required to contribute to the co-op’s capital base, as well as pay annual dues. In addition, member co-ops may pay specific program fees, as appropriate. Program fees are generally limited to optional or add-on services to programs – e.g. for customization of the promotional flyer, for mailing coupons directly to consumers, registration fees for trainings, more in-depth technical support, etc.

Member capital Member capital provides the basic financing for NCG as a purchasing cooperative for its services. There are four types of member capital in NCG, three of which are required of all

members:

1. Common stock – one $500 voting share, required of each member co-op.*

2. Base capital – based on sales volume and adjusted every three years. The base capital requirement is 0.10% of the member’s most recent annual sales volume. New members have up to five years to complete their member capital investment after their application is approved. * NCG Background – updated January 2015 Page 4 of 8

3. Patronage based allocated equity accounts – allocations made to member co-ops, based on patronage or use, from NCG net surplus each year. The decision to allocate such surplus to members or invest it in new services, research, or development, is made by the NCG Board of Directors.

4. Allocated equity – optional investment opportunity for NCG members, most recently used to allow members to contribute to NCG’s start-up funding of the NCG DC.

* NOTE: New start-up co-ops with no current sales basis are assessed $500 for common stock and $1,000 in base capital.



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