The Austin Chronicle

Keep On Shoppin'

Wheatsville Calls on Old Friends to Stay Afloat

By Amy Smith, November 8, 1996, News

Even as Wheatsville Food Co-op was planning its 20th anniversary celebration last March, the neighborhood grocery store was, in truth, hobbling along. Sales were down 10%, the store was posting its first yearly loss in almost a decade, and longtime members -- the lifeline of the co-op -- had dropped out of sight. Business was bleak last spring and worsened further under summer's heavy malaise. Around the middle of August, Daniel Poe, the general manager, decided it was time to sound the alarm. He wrote a letter to the co-op's 3,300 members, imploring them, more or less, to have mercy on the store that has given so freely to every major progressive cause in town. "Please come back to us," he intoned. "This is your store."

By most accounts, the letter-writing campaign was a good move. The store's parking lot and grocery aisles are showing signs of life again, and there are lines at the deli counter. The cash registers are ringing up sales under the warm glow of new light fixtures installed to brighten up the place. Will this renewed spark of energy continue? Poe raises his hand in mid-air, fingers tightly crossed. That's his best answer.

Living by hook or by crook is nothing new for Wheatsville, a Guadalupe Street child of the Seventies that grew up on the legacy of Sixties' counter-culture. Through collective labor and a lot of luck, Wheatsville has always managed to slither out of trouble with unconventional yet refreshingly honest aplomb. It has survived meager beginnings, an expensive move, brushes with the IRS -- even near-death experiences with powerful debt collectors. Now, the present-day challenge is just as daunting: The rise of H.E.B.'s Central Market, the monster natural foods store down the street that has taken Wheatsville's organic mission to new heights.

The question now is, can the co-op shore up its sales, which have been on a gradual decline from its $4 million mark three years ago? Wheatsville has a knack for playing the card that tugs at the community's heart strings. "Where else," Poe asks in his letter, "can you sign petitions to save Barton Springs, shop for organic vegetables, vote for a board of directors, pick up a free kitten and sing "Volare" in the aisles all in one visit?" Certainly not -- the message implies -- a few blocks down the road at Central Market, the trendy gourmet and natural foods supermarket that has come to represent one of Austin's most popular tourist stops -- and Wheatsville's greatest threat. "Big business has figured it out and gotten into the natural foods market," says Poe, sitting in his tiny office behind the co-op. "And we're the ones taking the hit."

Danny Poe, General Manager of Wheatsville Co-op
photograph by Alan Pogue

Counter-Cultural Crossroads

Indeed, Poe's letter names Central Market as Wheatsville's nemesis, observing that "We had always felt some pressure from the many Whole Foods stores around town, but we had never faced a challenge quite like this, right on our home turf." However, Central Market is not so ready to take the credit for Wheatsville's latest money troubles. "Before Central Market came along, Wheatsville was attributing its problems to a different retailer," notes Central Market spokesperson Kristy Ozmun.

Clearly, the 1994 opening of Central Market's 65,000-square-foot mecca was a turning point in the local grocery store industry; Austin very quickly became one of the most aggressive and closely watched markets in the country. And the H.E.B. chain's one-upsmanship into the beautiful, healthy food arena forced another organic icon, the homegrown Whole Foods Market, into a complete makeover.

Eighteen months ago, Whole Foods chairman John Mackey ferreted his troops out of their humble hovel at 12th and Lamar and marched them down the street to slicker quarters and a new dress code in the trendy business hub at Sixth and Lamar. A chain-reaction of supermarket reshuffling followed citywide, giving local foodies the best of both worlds -- good eats at competitive prices.

Whereas Whole Foods had corporate capital on hand to defend its natural foods turf and duke it out with the mainstream, Wheatsville was left at a counter-cultural crossroads. The co-op had grown accustomed to competition from rival Whole Foods, but with miles between their stores and Wheatsville, they didn't present quite the peril that Central Market did when it moved into the same neighborhood touting more than 500 organic products.

Central Market's demographic profile is a retailer's dream: The shoppers fit nicely into the disposable income market niche, giving rise to rumors that the prototype store pulls in about $1 million per week in sales. The store generally appeals to higher-end shoppers -- many of them ex-hippie baby boomers who once fit the profile of the Wheatsville customer. Some of these shoppers routinely divide their dollars between Central Market and Wheatsville. "I know that we do share a lot of the same customers," says Nona Evans, a spokeswoman for Central Market. "But Wheatsville, to their credit, certainly serves a special niche in their community and we [in the retail business] could all learn from what they've been able to accomplish."

Perhaps Wheatsville's biggest accomplishment is staying true to its co-op roots. "The chain stores are kind of anxiety-inducing," says Kim Dean, an 11-year member who counts herself as a hard-core Wheatsviller. "I like the fact that Wheatsville is small and independent, and you can easily get in and out of the parking lot. And," she adds, "they play groovy music on the sound system."

Cesar Chavez Stood Here

No longer able to claim organics and healthy foods as their own, Wheatsville, like food co-ops everywhere, has fallen into a bit of an identity crisis: Should we lower our prices? Spruce up customer service? Increase advertising? Change our focus? Or maybe, some Wheatsville veterans reason, we should just get back to our roots. There is talk now of reviving the enthusiasm that members shared during the annual boycott vote. While Wheatsville still refuses to carry the boycotted products, the old political fervor just isn't there anymore, Poe says. Used to be, if it was Nestles, Styrofoam, tobacco, tuna, veal, or grapes you were looking for, you weren't likely to find it at Wheatsville. But if it was tofu or a box of Kamut Flakes you wanted, well, Wheatsville was, and still is, the place.

And it's not too many store keepers who can point to their produce section and say Cesar Chavez stood here. The late farmworker rights leader considered Wheatsville a good friend for honoring the United Farm Workers' grape boycott, a deed that put the little co-op on the map as the only retail store in Texas to stand up for labor. Wheatsville today is the only grocery store in Austin that continues to boycott grapes. Whole Foods, for instance, continues to sell organic grapes despite the UFW's inclusion of them in the boycott.

Central Market touts 15 kinds of mushrooms versus two at Wheatsville
photograph by Alan Pogue

Central Market, on the other hand, operates on the notion that boycotts are not "reflective of Austinites' shopping practices," explains Ozmun. "Central Market doesn't pre-determine choices for its customers," she says.

Therein may lie the crux of what sets Wheatsville apart from the others. As a community-owned store, the co-op mirrors the collective social conscience of its members. They have a voice in what belongs on the shelves, and in what causes to support. Poe's letter makes the difference clear: "Most stores exist simply to support their owners; and while there is absolutely nothing wrong with that, this co-op has a wider agenda than profitability alone... We try to stand up for what our members believe in as well as provide them with what they want to buy... (we) give voice to as many of our members' political, environmental and economic concerns as we can."

That difference may mean slimmer profits, but it also leads to staunch loyalty. This loyalty was deeply entrenched in the so-called "New Wave" of co-ops that sprouted across the country in the early- and mid-Seventies. This movement was preceded by the first wave of co-ops, between 1933-1940, that swept the nation in response to the Great Depression. Whereas the early co-ops were borne out of economic constraints, the New Wavers grew out of a disillusionment brought on by Vietnam. In addition to an overall distrust of government and business, the New Wave organizers had a keen interest in health and nutrition. All of these factors combined came to represent the counter-cultural environment in which co-ops came into being.

Even before the birth of Wheatsville, Austin in the early 1970s was a hotbed of co-op activity. The Austin Community Project (ACP) formed in 1972 to serve as an umbrella for the food and housing co-ops and farming collectives. "The ACP," recalls John Dickerson, a co-op pioneer and early Wheatsville organizer, "was one of the most developed of what was going on in the rest of the country about that time. In our heyday we had a few thousand members and a pretty good system of shared labor between the housing and food co-ops and the farms."

But co-ops, like large corporations, are just as capable of growing fat and unwieldy. "I have great memories of a lot of the things that we did, but in the long run I came to frankly disagree with the way the way co-ops operated. They were supposed to be very progressive, but it was almost impossible to get things done," says Dickerson.

Purist Foods and Politics

ACP folded in 1976 amid heavy debate over control and financing; eventually, some co-ops withered away. The year before, in 1975, another co-op movement began taking shape -- the Third Wave -- whose believers included Dickerson, who is now a co-owner of Hidden Cellars winery in Berkeley, California, and Wheatsville founders Gary Newton and Burgess Jackson. The Third Wave movement formed as a protest against the New Wave's narrow view of the world, says Dickerson. "There was an awful lot of puritism in both politics and food that we didn't agree with. For the New Wavers, there could be only purist foods and an anarchic organization," he says.

What Wheatsville founders Newton and Jackson envisioned early on was a co-op that was much more inclusive of the community and one that would operate under a sensible business plan. In that vein, they took a bold new step outside the realm of New Wave thought.

"Wheatsville was a reaction against the New Wave co-ops that were vegetarian-oriented and very, very exclusive," says Newton, owner of the wholesale distribution firm, Texas Specialty Foods. What Newton and Jackson, now an attorney with the Texas Attorney General's office, envisioned at the time was a co-op with a more inclusive customer base and a broader line of groceries that strayed from the strict vegetarian diet -- a politically dicey move in those days.

About the time Newton and Jackson were cooking up the Wheatsville plan in 1975, the University of Texas Students Association brought ZZ Top to town. Concert attendance topped all expectations and the student group found themselves sitting on a tidy sum of money. So Newton and Jackson went before the association seeking seed money to start a new food co-op, and walked away with a $5,000 interest-free loan. They brought in Dickerson (largely regarded as Wheatsville's guiding light) and another co-op veteran, Walden Swanson, and the small group of idealists went to work building a co-op grocery out of the remnants of two earlier "new wave" food co-ops, Woody Hills and Avenues.

The new co-op leaders signed a lease on a warehouse at 29th & Lamar (today it's a Schwinn bicycle shop), and opened for business on March 16, 1976, with a small but growing number of members. Bearing out their commitment to inclusiveness, the founders christened the store Wheatsville -- named after James Wheat, a minister and freed slave who founded Wheatsville, one of several local "freedom towns" that came to life after the Civil War. In 1869, Wheat bought a plot of land at 24th & San Gabriel and the neighborhood -- bounded by Rio Grande Street, Shoal Creek, 24th, and San Gabriel -- quickly grew into a thriving community with two churches, an original Wheatsville store, and a school. The area flourished well into this century until white residents, as well as the university, began forcing black landowners out of the community to make way for new developments.

To Hunter Ellinger, an original long-haired Wheatsville member who later headed the co-op's board of directors, the Third Wave philosophy closely matched his own beliefs that a co-op could run as an efficient business while upholding democratic principles. "I was more interested in the political aspect of co-ops rather than the food. I thought it was possible to have a co-op that could run on efficient democracy, not on whoever could talk the longest about democracy," says Ellinger, who today wears his hair closely cropped as the chief scientist at Scientific Measurement Systems and an Austin Community College board of trustees member.

Eventually, Wheatsville outgrew its warehouse location and began scouting around for a new site, settling on the Guadalupe building, a former Kash-Karry grocery. Funding for the 1981 move came from a Co-op Bank loan of $145,000 and some $200,000 in loans from members. Once the remodeling was complete, the Wheatsville staff loaded the store's belongings onto U-Haul trailers and hit the road for Guadalupe.

Near-Death Experiences

Once settled into its new digs, the co-op fell very quickly into debt. A year later, Mary Jude Peterson took over as the co-op's general manager. Poe lovingly refers to Peterson as a cross between Henry Kissinger and Mother Teresa, and credits her conservative business skills for bringing order to economic flux. Indeed, Peterson tightened the purse strings and kept track of every Wheatsville penny. "If you wanted a pencil, you had to request it from Mary Jude Peterson. And the answer was usually no," Peterson recalls of herself with a laugh. "Things were so tight then, nothing could be spared. We could hardly afford to buy groceries."

With the store having over-borrowed heavily to pay for its relocation and remodeling, bill collectors came calling all too frequently, it seemed. At the same time, there was heady debate over how the co-op should be governed. While cooperatives need profit to operate, they don't operate for profit. On that premise, the co-op leaders tried to develop sound business practices without losing sight of their idealistic goals. There were some hard lessons learned in those days, but Wheatsville veterans look back on their foibles in good spirit.

Once, when staffers discovered a $20,000 tax error in the books, they didn't breathe a word to the Feds. Instead, they quietly began sending monthly checks to the Internal Revenue Service. By the time the tax man finally caught on, they had already put a pretty good dent in paying down the debt. Bare shelves were another problem after the move to Guadalupe; if not for the humor that was kept up, the store would have surely worn the look of Dickensian despair.

This was also about the time of the shop's near-death experience, when a series of overdue payments ultimately led to a bank representative and a sheriff's deputy driving up one day armed with shiny padlocks. Luckily, a sympathetic courthouse employee had tipped off the Wheatsville crew of the impending visit. The co-op workers met their makers at the door with a fat check and smiles all around. They managed to come up with the money the old-fashioned way -- by passing a hat among comrades a few days earlier at a co-op convention in Chicago. It wasn't small change, either; the hat-passing episode netted Wheatsville $7,000 toward paying off its debt to the National Consumer Co-op Bank. (This year, incidentally, when Wheatsville needed to buy a new cash register system, the store bypassed the bureaucratic Co-op Bank and obtained a $25,000 loan in short order from Bank One.)

Those troubled times after the move prompted Peterson to take matters into her hands the Wheatsville way -- by writing a letter to members. Time and again, Wheatsville staffers have drawn on their wits, and their command of the language, to rally the support of members when the co-op starts to falter. By sounding the alarm early enough, as Poe did last August and as others have done before him, Wheatsville always manages to keep itself from going under.

Niche It Tight

But Emily Esterson, an editor of the national trade publication, Natural Foods Merchandiser, says it's going to take more than a series of beseeching letters to stay afloat. With natural foods so accessible in the mainstream, there are fewer reasons for people to go to co-ops any more, she says. "So the co-ops need to reach out beyond their demographics. The ones that are going to survive are the ones that know how to niche market," she says. "Go after the people who are tired of shopping in the big stores. Spruce up those discounts for members. Just get in there and work on that niche market and niche it very tightly."

Even with the erosion of their specialty food niche, co-ops can still survive by moving from a product-driven to a member-driven operation. At least that's the advice of co-op analyst Dave Gutknecht, who edits and publishes the Ohio-based Cooperative Grocer. "In Wheatsville's case, it's not surprising they're having some problems because Austin is such a competitive market," Gutknecht says. "What this means is that they're going to have to work hard to keep the customers and the members they have. Co-ops in general have a very loyal customer base."

Al St. Louis, consummate defender of Barton Springs, chooses among countless varieties of olive oil at Central Market
photograph by Alan Pogue

Loyal or not, customers are in a buyers' market, and just as Central Market and the giant chains have learned that organics aren't such a nutty concept after all, Wheatsville could also learn a thing or two about customer service from their competitor down the block. At Central Market, the employees (or partners, as they're called in the chain) practically fall over themselves in their eagerness to please. At Wheatsville, there are times when non-member customers feel as though they have stumbled into a private club. "We're working on that," Poe acknowledges. "We're trying to stress that it's okay to be strange-looking, just be polite."

What Wheatsville does have over the rest of the bunch is a history rich in idealism and democracy. Little did Wheatsville's founders know then that they were pioneering a growth market for organics in Austin. "Now that they've gotten into organics," Poe says of the corporates, "I only hope that they can maintain the same integrity that we've always tried to uphold."

Copyright © 2024 Austin Chronicle Corporation. All rights reserved.