News » Durham County

Durham Central Market: The challenges of launching a good idea in tough times

by

3 comments

Opinion about Durham Central Market tends to divide into two camps. The skeptics say that the co-op grocery store, already four years in the making, will never open. The other camp says: "What's Durham Central Market?"

If built, DCM could improve grocery shopping in Durham and help put the city's "buy local" money where its mouth is. It could galvanize the slowly developing northern part of downtown. It could serve as both a community gathering place and a polestar for the vibrant, nationally esteemed but still scattered Durham food constellation, whose most recognizable emblem is a moving target: the food truck.

Yet awareness of DCM, like its presence, remains dim and vague. The market's only fixed sign—literally—stands in a vacant lot at the corner of Mangum and Broadway streets south of Old Five Points. "Coming Soon!" it promises. "Soon" has been pushed back a few times: August 2012 is the current projected opening date of a 10,000-square-foot grocery and café—about the size of the Hillsborough Weaver Street Market and, like Weaver Street, community-owned.

"That's what we want to be when we grow up," says Don Moffitt, DCM's project manager. Moffitt, who worked in upper management for Whole Foods for 18 years, praises Weaver Street's financial success with the co-op model and aims to repeat it. "We have to compete," he says. "If we can't provide goods and services that are compelling to customers—at competitive prices—we won't succeed."

Moffitt was initially among the skeptics. In fact, he rebuffed DCM's job offer (paid hourly, he's the only compensated employee), thinking that small grocery stores were untenable. The Durham Food Co-op folded in 2009 after a steep decline in membership and infighting among its board—a faction of which was already planning DCM—and Moffitt doubted that Durham would embrace another co-op market. He also worried about the location, which isn't near a large, high-density residential neighborhood.

But, Moffitt says, "I wasn't aware that there's a lot of 10,000-square-foot—and 5,000-square-foot groceries—in the co-op model." Meanwhile, the DCM board responded to Moffitt's concerns about the rather dilapidated stretch of Mangum Street by hiring a market analyst to evaluate the site. "There was no foot-dragging when [the board] understood what the issue was," Moffitt says. "The market analyst came back and said, yeah, if you build a store here, it'll work. It totally blew me away. We've had these thresholds, and we've gotten over them. This store's gonna happen."

The question is when. August 2012 is still 18 months away, but it seems very soon given DCM's slow progress. The first fundraising phase, launched in July 2008, aimed to attract 1,000 "owners" (i.e., shareholders) at $100 a share; it is still 100 members short of its goal.

At a projected total cost of $4.2 million, DCM's financial needs dwarf the current $90,000 in individual investments—even with a small sprout loan ($25,000) from the National Co-op Bank and start-up funds from board members. And DCM has not actually purchased the land at Mangum and Broadway; it only has an option from the seller, which expires this year.

Ultimately the financing and execution of new construction are slowing DCM's progress. "If we could find a building and just retrofit it, it would cost us a lot less," Moffitt acknowledges. But the board was committed, for a number of reasons, to putting DCM in Central Park, between downtown and the well-established Old North Durham neighborhood. The area—bound by Morris, Mangum, Geer and Morgan streets—is small, with few 10,000-square-foot buildings on lots ample enough to accommodate a lawn or patio, a loading dock, a waste disposal area and—most crucially—parking.

"Unless people suddenly build 5,000 housing units in the area, [foot traffic] is not how we're going to succeed," Moffitt says. "Where we're going to succeed is by building a business where people will drive from all over Durham to shop."

New commercial construction is expensive. DCM board member Marilyn Butler recalls that Weaver Street Market, which she co-founded in 1988, cost less than $500,000 to open. The founders were able to use their own credit cards to help finance it. That method isn't applicable to a $4.2 million store.

Instead, DCM is raising money in phases. A "pep rally" launches the next stage—DCM's $1.5 million owner investment campaign, which offers two ways to invest: an "individual preferred share" or a "community investment note" (essentially a personal loan), at a minimum of $1,000. That's 10 times the basic $100 membership, but it's still small change for a $4 million business. Nonetheless, DCM may need to attract half again as many preferred-share owners (1,500) as they currently have at the $100 level (900) to reach its goal.

As if that isn't enough of a challenge, DCM hopes to raise the $1.5 million by the end of February.

Even if its owner investment campaign succeeds, DCM will still need about $2.5 million, for which they'll approach conventional lenders (BB&T bank has expressed interest) and the City of Durham, which Moffitt hopes will contribute $300,000–$500,000.

Ruffin Slater owns Weaver Street Market, which opened its flagship store in 1988. He says launching a co-op is "definitely a multiyear process," and that the slow fundraising pace is to be expected in the current economy.

"It's important to get the message out that it's there for the benefit of the community, not for out-of-town people to make money," Slater says. "It's a pretty strong argument based on how our local economies have suffered. The model answers a lot of the social problems that people bring up about health and nutrition, about jobs, about economic growth."

This may be a tough economy in which to start a business, but it's a ripe culinary moment: The News & Observer recently ran a front-page story about the surprising success of co-ops during the current recession. There are whispers of Harris Teeter coming to Ninth Street, and Central Durham's only current grocery store, Whole Foods, plans to expand. Even though Whole Foods would be DCM's most formidable competitor, Butler noted that "natural foods continue to be the fastest growing part of the grocery business. Basic grocery store sales are flat. Everybody's looking at natural foods and organic foods." That includes Wal-Mart, which has just launched a natural/ organic foods product line.

The desire for natural foods, plus Durham's downtown growth—and glaring lack of a market—could work in DCM's favor. The concern is that, by the time DCM makes headway, its moment will have passed. Or it will have finally raised $4 million only to find that the venture now costs $6 million; or the inchoate Durham food vogue could collapse altogether.

"We're not capitalizing on a trend," says DCM board member Nick Fox, who has ample experience in cooperative business. In defending DCM's protracted development, Fox cites Woody Tasch's book, Inquiries Into the Nature of Slow Money. "The concept is that money should move at a slower pace through our communities. We're not interested in short-term profits; there's a slow return on investments. We want to be around a long time, so we tend to make decisions very slowly. The board members first met three years ago, and we're only now getting to concrete development plans. Other folks would look at that and say, 'That's crazy,' and we say that is the pace of really building a cooperative movement which is holistic, sustainable and participatory."

One of DCM's challenges is to convince people to believe in something that exists only on paper. "It's hard to get people to become a member of something that doesn't exist," Slater says. "When Weaver Street Market opened, I think we had 200 members. [DCM already has 900.] "Now we have 15,000."

Lex Alexander, co-owner of 3CUPS in Chapel Hill, founded Wellspring Grocery in the tiny Magnolia Grill building in 1981. A decade later, it had expanded into two thriving midsizedstores, which he sold to Whole Foods. He sees three problems looming for DCM. First, he says, "I told them that retail food is the hardest business there is." Second, co-ops are difficult to make succeed (Alexander worked in one before opening Wellspring). Third, the proposed site for DCM is in a low-density residential area. Yet, Alexander adds, the second problem—the co-op business model—could actually help solve the third problem: To protect their investment, owners will do as much of their shopping at DCM as they can.

Alexander describes his own dreamy vision for the store, not the shopworn image of "people pushing their buggies up aisles" but an unconventional open-plan layout: a European-style marché built around a kitchen, where each stall offers discrete goods. "A pound of coffee, a head of romaine, a roast chicken," he muses, picturing the imaginary store. "And toilet paper."

Comments (3)

Showing 1-3 of 3

Add a comment
 

Add a comment

Quantcast