The 11-store natural foods co-op is trying to reach newcomers who may not know much, if anything, about the 63-year-old co-op, and retain its loyal members at the same time.

Share story

On a recent weekday evening, Rebecca Harrell tasted some roasted tomato pasta salad at PCC Natural Markets’ new Bothell location and surveyed the expanse of produce, the prominent prepared-foods bars and the checkout counters off to the side.

Compared to the co-op’s Kirkland location, she said, “This one is a lot more airy, open — it’s easier to find things.”

Harrell, 24, moved to the Puget Sound area about two years ago from Cheney, Spokane County, and hadn’t even heard of the co-op before that. But these days, she’s been impressed enough that she stops in regularly at the Bothell store for a snack before her workout at a nearby gym.

PCC Natural Markets

History: Founded in 1953 as a food-buying club for 15 families in Seattle; became Puget Consumers Co-op (PCC) in 1961

Members: 56,000 households in 2015

Annual sales: $252 million in 2015

Membership: $60 for lifetime membership

Membership benefits: Includes 10 percent off one shopping trip each month, and 5 percent off on the 15th and 16th of each month. (Membership is not needed to purchase items at PCC.)

Source: PCC Natural Markets

“I like the variety of healthy options,” she says, of both the prepared foods and pantry staples.

Harrell represents a group the 11-store natural foods co-op is trying to reach in these days of explosive population growth in the area: newcomers who may not know much, if anything, about the 63-year-old co-op.

And the Bothell store, which opened in July, represents the direction the co-op is heading at a time when grocery-store competition is also growing more intense.

Sales of natural and organic foods nationwide are rising faster than for conventional food, drawing more players into a field once solely the province of grocers such as PCC.

Smaller-format stores that emphasize natural foods, including 365 by Whole Foods Market and New Seasons Market, are making their way into the Seattle area. Meanwhile, conventional stores such as Fred Meyer and Wal-Mart, as well as warehouse giants including Costco and Sam’s Club, are carrying more organic products.

“This puts pressure on chains like PCC to continue its level of differentiation,” said Neil Stern, retail analyst at McMillanDoolittle, a retail-consulting firm.

PCC, the nation’s largest natural-foods retail co-op, “certainly has tremendous credibility,” said Stern. “It was local before local was big.”

What’s more, he said, “The co-op model creates a deep bond … with the consumer that is difficult for other chains to replicate.

“The challenge,” Stern added, “will be to keep the brand relevant for the next generation of consumers who may not be as familiar with their heritage.”

PCC is aware of the challenges, said Cate Hardy, PCC’s CEO, in a recent interview at the co-op’s headquarters in Belltown, where it had recently moved after years in the University District.

Hardy took the helm at PCC early last year after nine years at Starbucks, where she had been vice president of operations.

Under Hardy’s leadership, staff say, the co-op has been willing to experiment more — and to be more consistent about trying to replicate the successful experiments in other stores.

For instance, the Columbia City store, which opened last year, tried two new prepared-foods concepts: a taqueria and a noodle-bowl bar. After six months, it became clear the taqueria was a hit and noodle bowls were not. So the store stopped selling noodle bowls, while PCC explored replicating the taquerias.

The Bothell store opened with a taqueria, and the Issaquah store will have one when it is remodeled. The Bothell store is also the site of other experiments: moving cash registers toward the perimeter of the store so they’re not the first thing people see when they walk in. Rather, fresh produce is — more like “walking into the farmers market,” Hardy said.

Its kitchen has been opened up so people can see staff working on preparing food from scratch — highlighting the store’s culinary roots, and acknowledging how important prepared foods have become to grocery-store sales these days.

“Honestly, I don’t think we get enough credit for how much care and craft goes into our prepared foods,” Hardy said. “You can walk into any grocery store and walk out with a tub of something. But we’re distinctive in culinary.”

There’s a rotisserie there too — something PCC used to have but had gotten away from.

“We’re iterating,” Hardy said. “Every store we open is getting closer to where we’re going next.”

PCC also recently partnered with delivery services Instacart and Amazon Prime Now, with customers able to select items online and have them delivered within two hours.

It’s still less than 5 percent of PCC’s business but it’s growing, Hardy said, and an important part of reaching new customers.

The co-op is also experimenting on a project with Instacart, in which customers reading a PCC recipe online for skillet lasagna can click on a button to put all the ingredients for the recipe into their Instacart basket.

Those kinds of changes and experiments are needed, since “organic is no longer a niche market,” said Tom Murphy, global retail and consumer packaged-goods lead for North Highland, a consulting firm.

Food co-ops are no longer competing just with other grocers but also with restaurants and delivery services from restaurants for “stomach space,” Murphy said.

The PCC markets, which “have the products but don’t have the scale and supply chain to do the last-mile delivery,” are smart to partner with the delivery services, he believes. “I don’t know if they’ll start to rent space on drones but who knows.”

But even as PCC makes these changes, Hardy says its core values and practices remain the same: a focus on high-quality foods, high standards for sourcing, transparent labeling and concern for workers.

PCC’s employees, of which there are some 1,500 now in several cities across the region, all make at least the Seattle minimum wage and receive benefits at 28 hours a week. Store staff are unionized.

PCC also labels much of its products with information such as “organic” “non-GMO” (genetically modified), “local” and “gluten free.”

As a co-op, it’s not beholden to shareholders or funders but to members and the local community, Hardy said. Each PCC location gives, on average, $90,000 a year back to the community.

“What we’ve always done is becoming much more mainstream,” she said. “More and more people are becoming more aware of, and concerned about, where food is grown and the treatment of workers. That niche group is becoming more mainstream.”

The challenge, though, she said, is how to get that message of what PCC does out to newcomers.

“Maybe we’ve had a little bit of Northwest humility around us and assumed the people who care about what we do will find us,” Hardy said. “I think it’s OK to talk to people about who we are and what we do.”

Toward that end, the co-op recently hired a vice president of marketing and retained Wexley School for Girls, a branding and ad agency, to “figure out how we can tell our story in a way that is true and authentic,” Hardy said.

That challenge is hardly unique to PCC.

For years, natural-food co-ops, most of which opened in the 1970s, enjoyed sustained double-digit growth, said C.E. Pugh, chief operating officer of National Co+op Grocers, which serves 150 co-ops nationwide.

But now that’s flatlined at about 5 percent growth a year, Pugh said.

The turning point was around the early part of this decade, when sales of natural and organic foods began to exceed 10 percent of all retail food sales.

That tipping point was when “conventional grocers got serious,” Pugh said. “Once it exceeded that 10 percent threshold, conventional industries said: ‘This is not a fad. This is here to stay. We’d better get committed.’”

Now, conventional stores’ share of natural and organic retail sales is at 43 percent, beating the 40 percent market share held by pure-play natural-foods retailers.

To jump-start their growth rates again, co-ops simply must “tell our stories better,” Pugh believes. “There’s increasing interest in local, in knowing where food comes from, in transparency. Co-ops excel at that.

“For years, we didn’t have to think about ‘how did we grow.’ We had to think about ‘how do we keep up with the growth,’” Pugh said. “We didn’t develop the muscles to tell our stories.”

These days, about a third of National Co+op Grocers’ members are seeing strong growth of 10 percent a year or greater, a third have growth in the single digits, and a third are seeing declining sales.

PCC is doing well, with annual growth ranging from the high-single to mid-double digits over the past five years.

Last year, the company logged $252 million in sales, up 9.6 percent from the year before, with net income of $5.5 million.

The co-op says it’s seeing sales growth in the high-single digits for stores open at least a year, and its average sales per square foot is $1,380.

Whole Foods, in comparison, logged sales per square foot of $935 in its most recent quarter. Kroger doesn’t disclose its sales per square foot but one research report put it at $672.

PCC’s sales figure per square foot is “damn good,” said David Livingston of DJL Research, which provides analysis for supermarkets. “This puts them in probably the top 1 percent of grocers in the USA.”

What’s allowed PCC to succeed at a time when other natural-foods retailers are seeing sales slowdowns, said Pugh, of National Co+op Grocers, is that it’s well managed.

It’s also benefited over the years from Seattle being “one of the more competitive natural and organic markets in the country,” he said. “So they faced earlier and more sustained competition. It probably influenced their approach to the business.”

PCC has also grown earlier and more aggressively than most other co-ops, Pugh said.

There’s a 12th PCC location, planned for Madison Valley, and Hardy declined to talk about any future stores that might be in the works.

But she did say this: “We are noticing the growth of the city and we want to participate in that … I think there’s more demand for PCC than there are PCCs right now.”