The wait in West Oakland may finally be over: An innovative approach to funding for an ambitious full-service, mid-sized grocery store looks likely to pay off. People's Community Market, slated to anchor a vacant lot at the corner of busy West Grand Avenue and Market Street, will serve a community that is home to more than 50 liquor stores and over a dozen corner shops but lacks a supermarket. (The nearby worker owned-and-operated Mandela Foods Cooperative offers some local residents access to fresh produce and natural grocery items but the small store can't meet the needs of the entire West Oakland area.)
For many residents, especially the car-less and seniors, who can schlep two hours to get to and from a supermarket by bus, the new grocery store can't come soon enough. If all continues to go well on the fundraising front the market is projected to open in the fall of 2014. It has high-profile supporters such as Oakland cookbook author-chef-advocate Bryant Terry, who has emceed "Front Porch" fundraisers for the project, and Sam Mogannam of San Francisco's wildly successful Bi-Rite Market, and a leadership team that includes Bill Fujimoto, the beloved former Monterey Market produce whisperer.
The project is raising money for the much-needed store in a novel approach. It's selling stock in the supermarket in what's known as a direct public offering, a fundraising approach successfully employed by other Bay Area businesses like packaged mac & cheese maker Annie's Homegrown.
Brahm Ahmadi, founder and CEO of People's Community Market, checked in with Bay Area Bites about the status of the capital-raising campaign, how it ties into a food financing initiative designed to increase access to healthy, affordable food in underserved communities in California (previously reported on BAB), and the lessons he's learned in his crusade to get good grub into a neighborhood long overlooked by supermarket chains.
Why did People's Community Market decide to go the direct public offering route and how is it going?
We launched it at the beginning of November 2012 and have raised $350K so far. We’re shooting to reach $500K by the end of May as that will ignite the next key stages of the project -- securing a loan and a lease. We hope to capitalize on the growing public interest in supporting local economies and thriving communities through investment in local small businesses and mission-driven enterprises.
We first tried to raise the equity funding from foundations and private investors. The foundations couldn’t sort out how to make an investment into a for-profit venture. The private investors weren’t interested in the low-margins and timeframes for when they’d get paid back. These investors also preferred fast growth and eventually selling to a larger company -- neither of which fits with our goals of focusing on West Oakland and retaining local ownership.
We saw that crowdfunding, as a means of public financial support for small projects, was taking off and that the Occupy protest movement was signaling a public desire for something other than Wall Street. We thought these trends presented new opportunities for raising money from the public. But we wanted People’s Community Market to be a real and sustainable investment and for our backers to become true shareholders.
So with the guidance and counsel of Cutting Edge Capital in Oakland, we launched a direct public stock offering (DPO) that enables California residents of diverse economic backgrounds to buy shares in our venture and earn a modest return while supporting West Oakland families to attain healthier and more socially connected lives.
It’s hard to raise a large amount of money (most projects raise $10K-$100K) through crowdfunding and it’s a very crowded and noisy space and, therefore, pretty hard to stand out.
Can you explain how the DPO ties into the California Fresh Works Fund?
The California Fresh Works Fund will proceed with a below-market-rate loan for two-thirds of our financing once we have secured the other one-third as equity. The DPO is how we’re raising the one-third equity we need to leverage the loan opportunity. What this means is that every dollar that someone invests into our project by purchasing shares will be matched by two dollars in debt financing from the California Fresh Works Fund.
What kind of people have signed up as shareholders and what reasons have they given for investing?
The vast majority of people who have become founding shareholders are working class and middle class individuals and families. This is a very local- and small-investor based campaign. Unfortunately, most West Oakland residents can’t afford the $1,000 minimum investment. And we can’t afford to lower the minimum investment at this time. We’re planning a secondary offering that will launch in the summer that will enable West Oakland residents to contribute financially at a rate they can afford.
The most consistent theme I hear about why people invest is that people really care about the problem we’re trying to address – that 25,000 people in West Oakland don’t have access to a full-service grocer and that 48% of them are obese or at unhealthy weights. They’re drawn to the social impact we’re looking to make, as well as the economic impact in terms of job creation, tax revenue generation, etc. It seems like a lot of folks are just tired of the options of either donating to charities or investing in Wall Street. They want to be more locally engaged with their money and to do it in a more financially sustainable way that allows them to have a positive and meaningful impact.
What's in it for the investor? What level of risk are people taking on?
Investors will receive a 3% compounded annual interest rate, which is better than a 10-year treasury bill currently offering 2% or less in annual interest. Investors will also receive a 1% annual store credit. Shareholders can choose to redeem their investment beginning at the end of the seventh full year of business.
Like all investments that don’t offer guarantees (including all stock investments on Wall Street), there is risk in this investment. If the business fails the investors will lose their money. That’s why this is an equity investment. The risks are covered extensively in our offering memorandum.
This project has taken more than a decade to get up and running, why so long?
One reason some people think it has taken so long is that our nonprofit sister organization, People’s Grocery, has been talking about opening a grocery store since we founded the organization back in 2002. The reality is that we didn’t really start working on creating a grocery store until I left People’s Grocery in 2010 and founded People’s Community Market that fall. So it has really only been 2.5 years. Most mid-sized grocery stores and supermarkets take three to four years from planning to launch. So we’re pretty much on target.
Between 2002-2010 we built a strong base and social capital in West Oakland, rallying the community together toward a vision for a community food system and getting first hand-experience and knowledge by operating and testing smaller food projects and enterprises. We took this long-term approach because we knew that a strong foundation of relationships and support had to be established in order for a larger business venture to succeed. Social capital and community engagement are key assets in the success of independent grocers.
How close does it feel to actually happening and how will you measure success?
I think we’re in the final stretch toward the store becoming a reality. Just opening a store founded on the model and principles we’re backing into it will be a success. Obviously, we’ll be measuring financial performance in terms of both traditional business metrics and local economic impacts like job creation, employee retention/training, contributing to the local economy, etc. We’ll also measure health impacts, dietary change and residents becoming more socially connected and increasing their community networks.
Are there any lessons learned or advice you'd like to share with others launching a food business?
The only thing I might have done differently is not talk about the idea of opening a grocery store so early on because, in a culture of short-term thinking, most people can’t understand a long-term vision and plan. My advice to anyone who wants to open a community-based business is to make an honest assessment of the skills, resources and relationships they have in relation to what they need to succeed and then create a way of filling the gap. Give yourself time to hone your skills and networks and build your foundation. Don’t worry about the pressures of society to move at a faster rate than what enables you to optimize your project.