Food Co-op Financial Overview
Our Introduction
Why are we starting a Food Co-op, to Start a Farm?
- Affordability – People just don’t have affordable food.
- Land Owners Won’t Lease Land to Us – To establish a farm in Napa where farm property costs are the highest in the nation, require a consistent source of income to lease lands we are seeking. The owners of these are cautious about leasing to us and demand a long-term solution. The Buying Co-op will provide that.
- Customers Retention – Farms are subject to fluctuations, failures, catastrophes, law changes, and various other regulatory issues. We needed a way to ensure our members have food 365 days a year. People often lose focus and take the easier route to obtain food; the co-op will be the easier route. The strength of the farm will be based on the community’s will.
- True Sustainability – Whether we like it or not, we waste a lot of energy and resources get food to our dinner plate. Our plan is to reduce that as much as possible. This in turn will make quality food sustainable. Farms and Producers talk about how sustainable their products are, but in most cases they’re not cost effective. A product is not sustainable unless all can afford it.
- Money Spent in Napa Needs to Stay in Napa! Not a single corporate retail food outlet spends any of their profits in Napa. The community of Napa County spends over $800 Million dollars on food annually. Not a single tax dollar is raised, or dollar of profit is returned back to this community by the corporate retailers. The co-op will invest their profits in the farm and our non profit. Most of the money made by this venture will be spent locally, improving Napa County.
The Financial Aspects of the Co-op
The financials are pretty easy, our two year goal is to build this co-op to over 14,000 General Members. The USDA states the average family of 4 spends roughly $1900 a month on food. We would like to provide $500 of that. We are averaging about $200 right now with 50 active members.
Members – Napa County has over 140,000 Residents and Workers in the county. We plan to go to every door every worksite and market directly to our community. Of that within a year we hope to build a community of 14,000 buying members.
- Milestone 1 – 500 Buying Members averaging $500 a month, equals $250,000 Gross Sales Monthly
- Milestone 2 – 1,000 Buying Members averaging $500 a month, equals $500,000 Gross Sales Monthly
- Milestone 3 – 10,000 Buying Members averaging $500 a month, equals $5,000,000 Gross Sales Monthly
Gross Profit – If we maintain a gross profit of 30% across all our lines of food we can achieve:
- Milestone 1 – 500 Members Gross Profit at 30% equals $75,000 Monthly
- Milestone 2 – 1,000 Members Gross Profit at 30% equals $150,000 Monthly
- Milestone 3 – 10,000 Members Gross Profit at 30% equals $1,500,000 Monthly
Product Costs – To start we buy food at about 50% of the cost that a supermarket sells it for. Our goal is to stay under the supermarkets by 10-30%.
- We buy a product for $1.00 a pound
- The store sells it for $2.00 a pound.
- We mark it up 30% to $1.30
- We are 65% less than the store
- We will pledge to stay under a 35% Markup on all goods.
Labor Costs – As we primarily operate as a volunteer organization, labor costs will be significantly reduced. Volunteers will contribute six hours per month in exchange for food savings at cost. Initially, we aim to keep labor costs below 30% gross sales, with a goal of reducing labor costs to 12-15% by our third milestone.
- Milestone 1 – 500 Members Gross Profit $75,000, Labor Budget 30% $25,000 Monthly
- Milestone 2 – 1,000 Members Gross Profit $150,000, Labor Budget 25% $37,500 Monthly
- Milestone 3 – 10,000 Members Gross Profit $1,500,000, Labor Budget 15% $225,000 Monthly
Assumptions for Reducing Labor Costs
- We will have Area Leads that manage areas like Meats, that are paid based on net profits of that area. Draw against commission type of deal. Sales in each are area expected to exceed $500,000 a month within two years.
- Volunteer Labor – 30% of our proposed members will be “Working Members”. Most areas will be staffed with volunteer labor. Based on our initial goals, during the third milestone, we will have equal to 176 full time employees volunteering monthly at any time. We will have overstaffing at most times, allowing us to work towards a higher customer satisfaction. While also transferring a lot of this labor to the farm.
- Specialty labor – Each department will require some paid specialty labor. The percentage of this labor per department will vary, with meat departments requiring a higher level of trained labor compared to produce. However, basic everyday tasks will be covered by volunteer labor.
Facilities – Our facilities overhead will be reduced as much as possible, utilizing the most cost effective solution for both processing & packaging VS retail & fulfillment. Here are our 1 year goals.
- Milestone 1 – 500 Members – Facility Temporary Rental and Farm Lease, at this time we plan to short term rent a 10,000 SQFT Facility in American Canyon. The cost of this facility is in the neighborhood of $10,000 a month, we will have portable coolers leased also for an additional $9,000 per month, as well as 2 Superstores in Napa with a lease cost of $5000 a month. The total facilities expenditures for this stage will exceed $24,000.
- Milestone 2 – 1,000 Members Lease a 20,000 SqFt Facility for all processing the cost associate for this facility is about $40,000 per month. The site is already built out for meat processing so minor capital improvements will be our only expenses. At this point we would like to add 3 more Super Stores to St Helena and Calistoga, and American Canyon. We will be doing direct to home deliveries and to drop point throughout the county. We will have portable produce markets rolling to areas for purchasing. We most likely will build our own stores by this time. There will be a capital cost associate with this stage. The total facilities expenses for this stage will be estimated at $47,500 for Sites
- Milestone 3 – 10,000 Members: the lease on the Canyon Facility, add an additional 40,000 SqFt packaging and distribution facility estimated at another $50,000. This stage’s Facilities Expenditure will $97,000. We will have additional distribution capital and recurring fees for delivery vehicles and portable produce and meat markets of over $40,000. The total facilities expenditures for this stage will exceed $137,000. We will continue with the growth of the farms we have operation. At this point, we be expending a significant amount of capital on farm-related expenses and improvements.
Conclusion: This is just Simplified View of the overall plan. The number will change and be fluid based on opportunities and pitfalls. These are just our goals.
- Milestone 1 – GP $75,000 The total expenses for this stage will be over $24,000 for facilities, $25,000 for Labor, leaving us under $26,000 to pay expenses (Leased Land for Superstores, Utilites, Etc), grow and negotiate on our first stage of 100 acres of and to start the farm.
- Milestone 2- GP $150,000 The total expenses for this stage will be over $47,500 for facilities, $37,500 for Labor, leaving us under $65,000 to pay expenses (Leased Land for Superstores, Utilites, Etc), grow and negotiate on our first stage of 100 acres of and to start investing in the Stage 1 of the farm
- Milestone 3- GP $1,500,000 The total expenses for this stage will be over $137,000 for facilities, $225,000 for Labor, leaving us under $1,138,000 to pay expenses (Leased Land for Superstores, Utilites, Etc), grow and negotiate on our continued stages of growth in farm products.
We are always looking for two things, investment and leaders, both have to start by being members!
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What They Say
We are so excited to join The Napa Valley Farm Co-op! With the high prices at the grocery stores this just makes sense for our family as well as supporting our local farmers.
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