Neechi Foods fighting to fill gaps left by major grocers in inner city

As major grocery stores follow the increasing number of sprawling residents to the suburbs, smaller players in the food industry like Neechi Commons are fighting tooth and nail to carve out a niche in a largely over-looked markets.

Staff-owned co-operative gaining sales momentum in recent months, despite setbacks

Neechi Commons building on Main Street is set to be auctioned off July 12. (Jacques Marcoux/CBC)

As major grocery stores follow the increasing number of sprawling residents to the suburbs, smaller players in the food industry such as Neechi Commons are fighting tooth and nail to carve out a niche in largely overlooked markets.

A CBC analysis of locations of major food retailers across the city revealed nearly a 30-square-kilometre area at the heart of the city in which no major grocers currently operate. Neechi Foods, an aboriginal worker co-op with a 10,000-square-foot grocery retail space, has been increasing food security and offering fresh, healthy foods for residents in the North End and Point Douglas.

Since their grand opening in 2013, Neechi Foods said it went from about $1 million in gross sales in the first year and are on par to achieve approximately$2 million in sales two years later.

Russ Rothney, volunteer treasurer at Neechi Foods, said this past November was a financial milestone for the co-operative.

Neechi Foods offers customers in the inner-city healthy food options. (Neechi Foods)

"Although our sales are steadily climbing, it's only in the last few months that they've really started to move forward, at rates that have propelled us into the black," he said.

Last month, Neechi Foods grossed about $260,000 leading to their first break-even month since their grand opening. Rothney said if they can maintain this level of sales going forward, they will generate surpluses and eventually reach their annual break-even figure estimated to be around $3.5 to $4 million in annual sales.

Customer cash-flow a challenge

One challenge unique to one of Neechi Foods' primary markets is the unique cash situation for many of its customers.

"It's around income-assistance days or child tax credit days. So what happens, when people get their total month income in one lump sum, the temptation is very high to jump into a cab and find some cousin who has a car and head to where they think they're going to get the best deals. That's part of what we're up against," said Rothney.

Last spring, Loblaws opened a No Frills discount grocery store about 2.5 kilometres north on Main Street and Rothney said the impact on their bottom line was felt right away.

"That day put a stop our grocery sales growth," he said. "[Sales] actually went into decline and kept declining all the way deep into the summer; we'd lose one or two per cent a month, and that was pretty darn serious. We knew we had to find a way to distinguish ourselves from the chains."

He says Neechi Foods' growth strategy revolves around filling the small market gaps that large grocers will not fill by selling local foods such as fresh caught fish, wild blueberries and competing on price where possible with major grocers.

Rothney said it's possible to make a profit in the core area. "It's not a matter of whether you can make a profit, it's where can you make the highest rate of profit. So that's what motivates stores to move out of the area. Even if they're actually still doing better than break even."

Upcoming expansion

Neechi Commons is in the process of expanding its meat department, which is part of their overall growth strategy. Gilbert Coleman, Neechi Foods newest meat manager, said he has years of experience in the industry and has been leveraging his existing relationships will local meat producers.

Gilbert Coleman is Neechi Foods' new meat manager. (Jacques Marcoux/CBC News)

"When I took over, centre-cut pork chops at that time where $4.99. They're now $2.99," he said. "The price of beef has been coming down in the last couple of weeks, so by getting the price of beef back down, I'm putting it back into the counter for the consumers," said Coleman.

Neechi Commons said it plans to offer a new class of non-voting investment shares to the general public in an attempt to raise sufficient capital to move forward with certain projects. Their goal is sell between $200,000 and $300,000  worth of $200-shares.