Struggling grocery co-op Kokua Market devises rescue plan

Oahu’s only natural foods cooperative, Kokua Market, had a near-death experience last month.

After struggling financially last year due to expanded competition and construction-related disruptions on an adjacent property, the board guiding the nearly 50-year-old Moiliili grocery owned by about 4,000 members was resolved to call it quits.

But new leadership, including founding Kokua Market member and early general manager Laurie Carlson, stepped up with a plan to not just keep the business alive but to help it thrive.

With Carlson as new board chairwoman, the co-op has a game plan that includes installing a bar serving coffee, juice, smoothies, beer and wine; expanding the selection of prepared foods and locally produced specialty items; reducing electricity costs with a photovoltaic system; and selling more food in bulk, including liquids from olive oils and vinegar to beer and wine.

The “Kokua 2020 Initiative” will require financial support from existing owners as well as from lenders, suppliers and new members. Carlson said a detailed business plan with expected costs and expenses is still being worked on, but a couple investment goals have been set.

One goal is to sell 1,000 shares in the co-op for $150 each. Existing members typically own just one share, but they are allowed to own up to 20. If share sales to new and existing members reach the $150,000 goal, Carlson said Kokua Market will be in a good position to secure commercial loans. As of Tuesday, $100,000 had been raised.

The co-op also is asking for low-interest or interest-free loans of $2,500 or more from its members, and is trying to negotiate with vendors to reduce or forgive debts.

“We are excited for the future, but we will need your help to get there,” Carlson said in a recent letter to members, who collectively own the co-op and get special shopping benefits but don’t earn financial returns from operations.

Carlson added that if capital investment goals aren’t reached, then all new share purchase payments will be returned. Share purchases can be made in the store and through joinkokua.org.

In the shorter term, Kokua Market still needs to improve its cash flow by getting supporters to shop more and donate to a GoFundMe campaign. That effort had raised $26,260 toward its $75,000 goal as of Friday.

“This short-term funding will buy needed time to put full long-term funding into place,” Donna Ching, board treasurer, said in an email. “Without it, we will likely close in mid-March.”

The new initiative represents a shift in direction and something the co-op’s new leadership describes as “jumping back into our pioneering mode.”

Kokua Market was established in 1971, and founders had to change state law to allow a consumer co-op business to exist in Hawaii.

Carlson bought the first membership share, and from 1979 to 1984 was general manager of what was then known as Kokua Country Foods on Isenberg and Beretania streets.

Back then, part of the store’s operating model was that members would contribute $10 or three hours of volunteer work monthly to reduce operating expenses in return for a 25 percent to 35 percent savings on natural foods, compared with nonmembers who also can shop in the store.

Carlson, who earned a master’s degree in public and private management from Yale University, went on to establish the alternative newspaper Honolulu Weekly that she published from 1991 to 2013. During that time, Carlson, now 67, remained a co-op member and a leader in Hawaii’s slow food movement, which favors locally produced food and traditional cooking.

Carlson said she was surprised when Kokua Market stated publicly last year that it was in dire financial straits because of aggressive expansion by its main competitors, Whole Foods Market and Down to Earth, along with road blockages created by construction of a rental housing tower next to its store on South King Street and Kahuna Lane.

Before that disclosure, Carlson said the board had characterized a capital campaign as being for renovation work. “The members were kind of deceived last year,” she said.

At a Jan. 2 board meeting, Carlson said, the board was ready to shut down the co-op after not getting much traction on its campaign to raise $250,000.

“I really felt like that wasn’t the right decision,” she said.

As an alternative, Carlson offered to lead a revitalization effort and joined the board with two others: Ching, a fellow Yale graduate and Hawaii nonprofit consultant, and local coffee business owner and consultant Shawn Steiman.

The “rescue team” unveiled the revitalization plan at a Jan. 24 membership meeting.

Kokua Market member Jorli Iwanaga said the Carlson-led plan gives new hope for Hawaii’s first natural foods cooperative.

“I think the vision of what she’s put forth to us is really positive,” Iwanaga said. “We’re excited. I think we’re all pretty positive and excited for a turnaround.”

Carlson said she’s hopeful, too, and is counting on support from a network of members and others in the community. “There’s a lot to deal with still,” she said. “We’ve got a lot of people working on this.”