Dear Seward Co-op owners,

We are writing to provide a financial update and detailed information about recent operational changes, including layoffs that occurred on March 27. We wanted to first communicate with staff members and participate in the required effects bargaining meetings with our union. We always strive to include co-op owners in these communications as early as possible when faced with major operational changes. However, the timeline for completing these meetings took longer than expected.

Background and Financial Update

Seward Co-op experienced significant losses in our most recent financial quarter—more than a half a million dollars under what we had budgeted. Two factors drove these negative financial results: sales were under budget, and labor costs were far over budget. Wages alone have increased by 16% since the previous quarter, and our sales are failing to support this increase.

Seward Co-op leadership shared this information with staff this spring in a series of email communications. It was clear we needed to implement a course correction to adapt to this new financial reality. We made the very difficult decision to eliminate 11 positions at the co-op as part of a broader approach to reduce expenses, increase sales, and align our labor costs with sales. These decisions were balanced with what was in the best interest of the nearly 25,000 households our co-op serves.

In determining the best path forward for the future success of the co-op, the Board of Directors has been in contact with leadership and has been informed of the changes throughout the process. The board and Seward Co-op leadership continue to work together to align our spending with our budget necessities and available resources. The board and management team take our fiduciary responsibilities seriously as we address financial issues impacting the co-op. That requires trying to balance competing needs for the benefit of our employees, shoppers, and owners.

Positions Impacted by Layoffs

Both union and non-union positions were affected by the layoffs, including:

2 Sausage Maker positions at Creamery

1 Meat and Seafood Sausage Production Lead position at Creamery

1 Meat and Seafood Sausage Production Supervisor position at Creamery

1 Facilities Assistant position at Creamery

1 Human Resources Generalist position at Creamery

2 Front End Customer Service positions at Franklin

1 Front End Assistant Manager position at Franklin

1 Front End Assistant Manager position at Friendship

1 Front End Customer Service positions at Friendship

Contractual and Legal Requirement Regarding Layoffs

We would like to directly address a variety of owner inquiries about the layoffs. Some co-op owners have expressed concern about how the layoffs were communicated and conducted. We want to assure you that we thoughtfully considered the manner in which we shared these difficult decisions with staff. We followed all contractual and legal requirements. According to our union contract, only one of the impacted staff members would have qualified for severance pay. However, Seward Co-op Leadership acknowledged that these layoffs would likely create financial hardship for those involved. With this in mind, we went beyond our contractual requirements and provided each impacted staff member an 80-hour severance package regardless of years of service or whether they were part of the bargaining unit.

We’ve been asked if an impacted employee was entitled to union representation during the layoff conversation. The Weingarten rule does not apply in such situations.  Meetings informing impacted staff about layoffs are not covered by this rule as they did not have an investigatory purpose.

Layoffs were determined by job title/classification and those positions were eliminated.  We had, and still have, no plans to rehire for those roles.  We invite laid off staff members to apply for any open positions and will consider them based on the required skills and ability to perform the work.  This was communicated to impacted staff during the layoff meetings.

Our employee union filed multiple grievances concerning the layoffs. This is not unexpected. Filing grievances is a process under the labor contract for resolving disputes. Filing a grievance initiates a dialog between the union and management to determine if the grievance is valid. These conversations took place on May 14 and May 21. As a result of these meetings, the union and the co-op reached an agreement resolving all of these grievances.  In the agreement, the union acknowledged that co-op management adhered to the terms and conditions of the collective bargaining agreement. In turn the co-op agreed to a union request to change the recall process as outlined in our labor contract. No violation of the labor contract was found in the grievance process. We are grateful that the union and management are working together in a cooperative way.

Other Operational Changes to Address Financial Challenges

We acknowledge how challenging this time has been for everyone involved—in particular the impacted staff members—and want to assure our community that the very difficult decision to move forward with layoffs has been part of a holistic approach to reduce expenses, increase sales, and align labor costs with sales revenue.

The leadership team completed a comprehensive expense audit in conjunction with the layoffs. We identified opportunities to reduce other overhead expenses by 1% (compared to sales). We have taken action to implement these changes. We estimate this will result in an additional $400K in annual savings over the next year.  All staff were made aware of this audit during our all staff email communications on both March 8 and March 27.

To reduce expenses and generate more income in the short-term, we are currently working with a broker on leasing options for the entire first floor of the Creamery building. This important step will allow us to generate income while we determine a longer-term plan that allows for input from owners, staff, and community members.

Meat and Seafood departments at our two stores will produce sausage moving forward. In the short-term, production will take place at the Friendship store with plans to add sausage production at the Franklin store in the near future. When we developed the sausage making department back in 2014 plans assumed sausage department sales growth, with a strong focus on sausage wholesaling.  To date, that vision has failed to come to fruition, and we have continued to experience year-over-year sales decline.  It’s more efficient and fiscally responsible to produce sausage alongside our whole-animal butchery operation at both stores.

Moving Forward: Focus on Sales

This is a challenging financial landscape for our co-op, but it can also be a turning point. The most important thing our community can do is to continue shopping at the co-op. Our sales support great jobs in our neighborhoods and provide opportunities for local farmers and businesses in our wider communities to thrive.

We are proud to be a great place to work with industry-leading wages and benefits. This is reflected in our staff turnover rate, which is at an all-time low of 8%, compared with an average turnover rate of 48% among grocery retailers nationwide, according to the food industry association, FMI.

We are proud of our 50+ year history as a community-owned cooperative. Our analysis of sales revenue and expense audits dictated the changes that we have implemented. Our interest is sustainability and the steps we took were necessary to ensure that the co-op will be around to provide access to nutritious food and community employment opportunities for the next 50 years and beyond.

We can all help to grow sales and know that when everyone participates in any way they can, our co-op thrives. We need to adapt in order to ensure the long-term financial sustainability of our community-owned co-op.

Seward Co-op’s Board of Directors and leadership team will continue to discuss how to best update owners about the co-op’s financial condition and will communicate to the members as that develops.

In cooperation,

Ray Williams, on behalf of Seward Community Co-op Leadership Team

Cassandra Meyer, on behalf of Seward Community Co-op Board of Directors