Wirth Co-op will not reopen
By Cirien Saadeh | Staff Reporter
After ten months of “temporary” closure, leaders close to Wirth Co-op have confirmed that the store will not reopen.
“The co-op has permanently closed,” said Pat Paulson, who has been a co-op board member since shortly before the store opened in Oct. 2017. According to Paulson, co-op staff had put together a plan in partnership with the Northside Economic Opportunity Network (NEON) to reopen after its temporary closure. In Nov. 2018, Devean George, the co-op’s landlord abruptly decided to break the lease.
"NEON was going to put up the money to buy the produce and help the co-op get off of its feet when it reopened,” said D’Wayne Morris, who does Business Advising for NEON and worked closely on the partnership with Wirth. “The landlord decided to go in a different direction and cut the lease with Wirth Co-op."
Despite numerous attempts, Devean George could not be reached for comment.
The former co-op space now has a new tenant. According to a Dec. 6 Board Action Request from the Hennepin County Board of Commissioners, there is a lease between NorthPoint Health & Wellness, Hennepin County, and the Commons at Penn, the mixed-use complex where the co-op was located. NorthPoint will temporarily relocate its food shelf to the co-op’s former home for an estimated two years, said Stella Whitney-West, NorthPoint’s CEO. According to Whitney-West, NorthPoint’s Hennepin County real estate team had brought forth the option of moving into the space.
“We wanted to make sure that we weren’t taking the place of the co-op, because it’s our hope that the co-op would be able to come back and operate at that location,” said Whitney-West. “We do believe that it is important that, if they are able to do that, that they are able to do so. But, in the meantime, it seemed to work out since we needed to relocate the food shelf and the space was available.”
NEON was brought in as a consultant to support Wirth Co-op in April 2018. At the time it had hired an independent financial advisor who produced real financials and accurate numbers for the co-op. Prior to the co-op’s hiatus, the co-op’s finances were a mess. The business suffered from poor management, off base sales projections, and criticism from community members who felt that the co-op’s merchandise did not accurately reflect the community’s needs due to the cost of co-op products, the available options, and the mixture of both healthy products and junk food.
Paulson says the community supported the co-op, but it just didn’t make enough money. To be sustainable, Wirth needed to bring in $90,000 each month; instead it brought in an average of $30,000 a month.
“We don’t blame the community. The support was there. We could have done more research, we could have anticipated differently; maybe we could have planned for different products,” said Paulson. He said the co-op’s small size and location were also challenging.
“The grocery business was very competitive. There was a lot of high hopes for a healthy food store in North Minneapolis, but we lacked revenue. My opinion is we were not quite big enough to buy wholesale products at a good rate that would then allow us to sell those products at an affordable rate. There was also not enough population density and not enough of a population with disposable income,” said Paulson.
Those were not the only challenges Wirth faced. According to former Board President Roya Damsaz, who left the board in May of 2017, the co-op lacked parking and did not have the community partnerships it needed to sustain itself. She cites North Market, which opened in Camden in Dec. 2017, as a model that Wirth Co-op could have looked to, in terms of the grocery store’s community relationships, mixed use community spaces, and wellness clinic in partnership with North Memorial Health.
North Market is owned by Pillsbury United Communities which also owns North News.
Damsaz also holds the community partially responsible for the co-op’s failure. “The community did not seem to need or even want the co-op. Most people did not understand the concept of a co-op,” she said. According to Damsaz, many of the co-op’s supporters were from outside of the community, individuals who invested in Wirth Co-op because of their personal commitment to cooperatives.
The size of the co-op may have contributed to its issues as well. “We were not selling enough merchandise to be able to break even,” said Paulson, who notes that the co-op’s merchandising line was just too small, and that the co-op did not have the opportunity to lower its prices for buyers, because it could not buy the affordable wholesale goods that it needed because of its small size. That, alongside the other challenges the store and its leadership faced, led to the co-op’s failure.
“The challenges were beyond the normal start-up. I don’t think that within the board we had enough experience to handle that. Our general manager did not have the experience; we did not have the experience. The situation was extremely complicated,” said Paulson.
Morris and Paulson say that every effort was made to save the co-op, which they saw as a resource for Northside residents and as a community-centered wealth-building opportunity.
"We took a few feedback recommendations to the board. First, we recommended that they hire a general manager with grocery experience. We recommended a GM with ten years experience. Second, we gave them direction on merchandising, products the community actually wanted instead of what works everywhere else. We advised on them on hiring a new accountant, along with board training,” said Morris. "We would share the recommendations with the board, but it was a volunteer board who lacked time and capacity to implement the recommendations."
Members have not received any form of official communication from the board about the store’s closure and none of the leaders who spoke with North News knew of official plans to do so. Several of the board members listed on the co-op’s website are no longer on the board, including Damsaz and Kimberly Caprini, a recently elected school board member for Minneapolis Public Schools.
City of Minneapolis Councilmember Jeremiah Ellison (Ward 5) has attempted to figure our what remedies there might be for members, but those discussions have not moved ahead because of missing member data.
“I've had some engagement with the board itself on how they plan to answer questions that members have, how they plan to sort of transition out of existence, quite frankly. And I haven't been able to get much response,” said Ellison. “I know that there were some early conversations among other community members brainstorming about ways in which we could maybe help to create a little bit of a remedy for folks who lost their investment. I mean investing in the co-op maybe isn't the largest investment you could make, but members still have a membership that they lost when the co-op closed unexpectedly.” According to Ellison, one issue was a lack of Board response and another was because the Board did not have a central list of all co-op members that they could reach out to.
On Jan. 20, a Wirth Coop social media volunteer updated community members via Facebook.
“You may have already heard, but the co-op has been liquidated,” read the post from a volunteer named Aniela. “he board cannot speak about specific aspects such as the leasing and bank contract terms and employees, so when there is information that can be communicated with the members, then I am told and I am the one who then communicates with you. Because of the constantly changing board, it's been really hard to get information out since jobs were constantly being shuffled. However, it's never going to get better, so I'm temporarily taking the reins (sorry board!) to get the information of liquidation out to you.”
The food shelf will open in Feb. or March 2019. According to documents from Hennepin County, the food shelf’s rent will be $69,935 annually. At approximately $5,800 per month in rent, it is a higher rent than the approximately $4,000 per month that Wirth paid for the space.
Wirth’s closure comes after over a decade of community planning and organizing to open it. Funding sources included 700 original members who gave $100 a piece, a $500,000 federal grant, a $225,000 loan from Sunrise Banks, and other local sources, including the City of Minneapolis department of Community Planning and Economic Development, the Community Reinvestment Fund, Hennepin County, Latino Economic Development Center, McKnight Foundation, Shared Capital Cooperative, and Twin Cities LISC.
This is an ongoing story. North News will keep you updated as it unfolds.