Share story

Costco and organics seem increasingly intertwined these days.

The Issaquah-based warehouse giant in recent years has become a dominant seller of organic produce. And now Costco’s co-founder and a top executive are investing in a planned restaurant chain — founded by two former Costco employees — that bills itself as the first fast-food restaurant to qualify as Certified Organic under U.S. Department of Agriculture rules.

Costco co-founder and former CEO Jim Sinegal, along with Chief Financial Officer Richard Galanti, are among the investors in The Organic Coup, which opened its first restaurant in November and has two locations in the San Francisco Bay Area.

The Organic Coup, which serves a “spicy organic air chilled chicken breast” sandwich, wrap or bowl, as well as caramel popcorn drizzled with chocolate, was founded by former Costco execs Erica Welton and Dennis Hoover.

Welton, who worked 14 years at Costco, spent a dozen years there as a food buyer.

The more she became involved in buying organic food for Costco, and moving her own household toward eating and using more organic products, the more she “saw this huge hole in the market,” Welton said.

“Just being a working mom, whether traveling for business or running around with my kids, you need something quick and on the go,” Welton said. “There were no options (for quick organic food) for me and my family.”

Hoover worked for 33 years at Costco, retiring earlier this year as senior vice president for the Bay Area region.

Hoover said he approached Sinegal to say he was retiring and “asked if he would support me in my next venture. Jim has never said no to me in 33 years.”

Hoover declined to say how much Sinegal and Galanti invested but said The Organic Coup raised $7 million in its first round of financing, with Sinegal as the primary investor.

Galanti sees “a booming future in organics,” he said.

“Organic is something that’s top of mind and continues to grow. Combining it with fast food seemed novel and compelling.”

But mainly, said Galanti, he believes in Hoover and Welton: “I invest in people.”

The investment, as noted by Business Insider, will allow the chain to expand.

Hoover said the plan is to open up to 10 locations this year, then decide how many to open next year.

A location in the Seattle area is “on our target,” he said.

The USDA itself does not certify restaurants as organic. But restaurants may apply to private or public certification agents to become USDA Organic-certified “handlers,” as Organic Coup is.

Such handler certification means products sold as organic must have at least 95 percent certified organic content, and that the restaurant must prevent the mingling of organic with nonorganic products, and protect organic products from contact with prohibited substances.

— Janet I. Tu:

Seattle fund cheers on newspaper bid

A Seattle investment fund with a history of contrarian bets is caught up in an old-fashioned newspaper boardroom battle.

Smead Capital Management, a downtown Seattle firm that manages about $2.3 billion in client assets, is among the largest shareholders in Gannett, the Virginia-based newspaper chain trying to buy Tribune Publishing.

Tribune, owner of the Los Angeles Times and Chicago Tribune, has fought the takeover, bringing on a new billionaire shareholder and adopting other measures to avoid an acquisition.

No matter, says Cole Smead, who helps manage investments at the firm founded a decade ago by his father, William Smead. There are other fish in the sea.

And Gannett, the owner of USA Today and hundreds of other newspapers, may end up wearing down Tribune’s resistance and getting a better price for the company down the line, he says.

“You have quite a few shareholders, like us, who are interested” in the deal going through, said Cole Smead, who helps oversee the company’s investments.

The firm holds about 5.2 percent of Gannett’s stock, according to S&P Global Market Intelligence.

“We don’t think Tribune has a hope” of thriving on its own, Smead said.

Gannett has long been a force for consolidation in the media business, scooping up newspapers and television stations, and earning a reputation in the industry for cost cuts and corporate reorganizations. (Last year it split off its TV broadcasters, including Seattle’s KING, into a separate company called Tegna.)

That consolidation is part of what draws Smead to the company, and to a potential tie-up with Tribune.

Eventually, he says, advertisers who have flocked to online-advertising purchases will appreciate the value of the local, engaged eyeballs that follow newspapers. And with fewer two-newspaper towns left, Gannett’s network will have less competition.

“They didn’t always run their businesses well,” Smead acknowledged. “But what we think they have today is one of the premier content and advertising platforms in the U.S. Especially as people ask the question of whether online advertising is really as engaging as they’ve been taught to believe.”

That’s an unpopular bet.

The advertising business in which newspapers used to play a leading role is increasingly controlled by Google, Facebook and digital-media specialists who target ads to specific online audiences.

Gannett’s advertising revenue has plunged 68 percent since 2005, the peak year for the modern U.S. newspaper business. The company is forecasting a decline of at least 5 percent this year.

Smead makes its business investing in, and holding on to, what the firm believes are underloved companies poised for a turnaround. It’s been invested in Gannett since late 2009.

And newspapers aren’t the only elderly industry the firm would consider, Smead says. “We’re insane enough, that just for fun we looked at some radio companies a few months ago.”

— Matt Day:

Babeland’s NYC workers unionize

One of the country’s largest retail unions represents workers in department stores, grocery stores and bakeries.

Now, it has a new category: sex-shop workers.

Last week, employees at the three New York City locations of Babeland, a Seattle-based adult toy store, voted to join the Retail, Wholesale and Department Store Union, the group said Monday.

The move, workers said, would help them address a number of wage and training issues, as well as some concerns related more specifically to the nature of adult retail work and to a handful of transgender employees.

“This is the only adult sex shop that is organized,” Stuart Appelbaum, the president of the retail union, said in an interview Monday. “And I think that’s significant.”

Babeland’s Seattle location, on Capitol Hill, was not part of Friday’s vote.

Workers at the New York locations voted 21 to 4 for unionizing.

“It’s a sign of how much we love this place,” said Lena Solow, who said she had worked at Babeland for three years. “We want it to be the best place it can be.”

Babeland sells a variety of sex toys, accessories and books, and the workers proudly consider themselves sex educators.

But that also makes them a target for invasive questions and even harassment, they said.

“People don’t go into the Gap and ask what shirt fits you best,” added Phoenix Casino, who has worked at Babeland for two years.

The employees have advocated for better training and support from management to deal with problematic customers. They had pushed for caller ID, for example, to help weed out the threatening phone calls workers said they received on a daily basis.

Two of the three stores now have caller ID, Babeland said.

The company also said it had “developed a list of new trainings” based on staff feedback that would focus on how to handle difficult customers.

Claire Cavanah, a co-founder of Babeland who opened the first store in Seattle in 1993, said she was surprised to learn that the workers wanted to form a union because management had been working for a year on the issues employees raised.

In March, for example, the company raised the starting minimum wage to $14 from $12 for New York City employees. New York’s current minimum wage is $9.

“I guess it was a little bit too late for the staff,” Cavanah said.

Casino, who identifies as transgender and uses the pronouns them and they instead of he or she, and others said they also wanted management to address issues for employees who are gender-nonconforming.

In an email, Cavanah said the company “is not perfect and welcomes staff suggestions for how to make Babeland a better place to work, including how to make it more trans-positive.”

— The New York Times