Is Chico Nat on the brink? Maybe…

Will Chico Natural Foods survive the year? Perhaps not, says Rachel Oriana Schraeder, the store’s general manager.

In her small office overlooking the sales floor of the co-op on Main Street at Eighth, Schraeder was direct and straightforward in discussing the store’s future. She said the board of directors would know by July if the store—which, in its more than 30 years, has been at the forefront of offering organic products in Chico—will have to close its doors.

A string of bad luck followed by the arrival of competition in the form of Trader Joe’s, Schraeder said, has wounded the co-op, which was already suffering financial losses. The numbers look grim, but “with increased community support, it will easily survive this year and move forward to continue on [its] path of forward momentum,” she added optimistically.

Chico Natural Foods, which for most of its history operated as a traditional nonprofit run by a board of directors, finally lived up to its popular nickname, “the co-op,” when it became a member-owned cooperative in June 2004. In 2004 CNF experienced good profitability and good sales growth, Schraeder said. Since then, a string of bad financial luck and unforeseen setbacks has caused it to lose a great deal of money.

Record sales growth in 2004 encouraged CNF to make much-needed but expensive upgrades within the store that year. But the first six months of 2005 proved to be a trying time. During the remodeling of its walk-in refrigerator in June, the store unexpectedly needed to be closed for eight days due to airborne dust and mold particles.

“During that time we lost over $70,000 in gross sales. That was an enormous unexpected cost,” said Schraeder.

Then other expensive problems occurred. “Basically, a lot of things went wrong,” Schraeder explained. Two out of three rooftop air-conditioning units required replacing, and some old cooling equipment leaked on newly installed flooring. Then new scanning cash registers were installed, and daily business slowed as clerks learned the new system.

The store slowly began to get back on its feet at the end of 2005. “We moved on,” Schraeder said. Then Trader Joe’s moved into town.

“Trader Joe’s had an immediate and noticeable impact on our sales,” said Schraeder. “Practically since the day Trader Joe’s opened, our sales have been down an average of 12 percent. That represents in excess of $25,000 per month in lost sales.”

CNF has taken measures to restructure and emerge from the debt it’s accrued. Schraeder said the store has reduced its total number of employees by relying on attrition and not rehiring in order to offer competitive wages to current employees. It will continue to offer the wide variety of specialty foods available only at the co-op and has been reaching out to present members of the co-op and members of the community.

While the store is currently “financially stable,” according to its most recent newsletter, it is projecting a loss in annual sales of almost $400,000 for 2006 and will not survive without support from people in the community.

CNF is asking for new members to join the co-op and current members to buy membership in advance. An interest-earning member loan program is in place, and the store is asking the community to seriously consider where they spend their money on natural foods.

Interestingly, S & S Natural Foods, the third natural-foods store in town, has not been as affected by the arrival of Trader Joe’s as CNF has been, even though it’s in the same north Chico area as the newcomer and therefore would seem to be in more direct competition.

Yes, the first several weeks of Trader Joe’s’ opening caused noticeable losses in sales, said Joyce Rogers, the store’s general manager, but “we really haven’t noticed an impact” since then. With approximately 80 employees, a specialty butcher shop, a deli and a barbeque outlet, the store has enough breadth to maintain its “loyal customer base,” Rogers said. Sales are close to normal, she added.

She expressed concern for the cooperative, however, expressing what many other Chicoans no doubt feel: “It would be a real shame to lose Chico Natural Foods.”