Member-owners of Durango Natural Foods will vote later this month on whether to dissolve the cooperative or elect a new board in an attempt to make the nonprofit financially stable.
DNF is $150,000 in debt to vendors, of which about $75,000 is owed to local farmers and producers. Additional liabilities include $231,500 in mortgage debt and a $70,000 line of credit, according to a letter sent to members.
DNF is a member-owned grocery store that welcomes all shoppers but offers special benefits, such as discounts and voting rights about operations, to members who buy a share in the business. The co-op offers access to local and organically grown meats and produce that might not be available at regular grocery stores and supermarkets. It has more than 2,000 members.
“After exploring all the options and the financial state, the board thinks the best thing would be to close,” said Kate Husted, DNF board president. “But we’re also leaving room for a miracle. The decision won’t be made for a while, and if a million people decide to shop at the co-op, that could change things.”
Husted said the board realizes shuttering the co-op could be opposed by its members, so it is giving them the option to recall the entire board and replace it with new members willing to assume legal responsibility for the co-op in an effort to give it new life.
Initially, a meeting was called to discuss ideas to turn around DNF’s finances.
But Husted said conditions have accelerated the time line and “turned it into a more urgent matter.”
The board meeting will serve as a member-owner “State of the Co-op” meeting, said Jules Masterjohn, who serves as interim general manager of the cooperative.
Financial struggles, she added, “are nothing new.”
“For the past 10 years, we’ve been on this course,” she said.
DNF, 575 East Eighth Ave., has suffered financially since the arrival of Natural Grocers and as City Market, Albertsons and Walmart have all increased their selection of organic and natural foods, Masterjohn said.
“This is a David and Goliath story,” Masterjohn said, “but in this case, David isn’t winning.”
Masterjohn said she has cut 44 hours of staffing from DNF and trimmed hours of operation, closing at 7 p.m. Monday through Friday instead of 8 and dropping three hours from its Sunday business hours. It is now open from 9 a.m. to 6 p.m. Sundays. It had been open from 8 a.m. to 8 p.m.
In addition, one afternoon shift has been eliminated from its staffing schedule.
Since mid-December, the average dollars spent by members is up, but total customer count is down, according to the letter sent to members.
“Members have been totally rallying. The energy of people is positive. They want us to be here, and that’s encouraging. Whether that’s enough to deal with our shortage is unknown,” Masterjohn said.
The cooperative, established in 1974, began last year exploring options to boost sales, such as expanding its deli and seating area, focusing on more local products and offering premade meals. The first five months of 2018 had increasing sales, according to the letter sent to members. However, the expected recovery from a slump that coincided with the 416 Fire has not materialized.
The letter also said that DNF has been denied loans by four banks and local lending entities, and the cooperative hasn’t been able to tap into its equity from its mortgage because of poor financial performance. A lack of cash reserve has left the co-op unable to weather the slump, according to the letter.
The cooperative has set up a GoFundMe page to raise $150,000 to pay its vendors. As of Friday, the page had raised $3,814.
Jamie Matthews, a DNF board member and its treasurer, told The Durango Herald earlier this month that money raised through the GoFundMe page will go to pay local vendors first and then to national vendors.
Matthews said another problem is the nonprofit cooperative is established as a 501(c)(12), not a 501(c)(3), and is not eligible for many grants set up to help 501(c)(3) nonprofits.
In 2015, DNF members opposed a proposed merger with La Montañita natural food co-operative which operates in Albuquerque, Santa Fe and Gallup, New Mexico.
At the time, many members characterized the proposed marriage of the two cooperatives as a takeover by La Montañita rather than a merger.
“This has been difficult for all the board members,” Husted said. “We are here because we love it, and we don’t want to be in this position, but here we are.”
parmijo@durangoherald.com