Annual Meeting11/3/2018

President’s ReportEddy Jones

Welcome

1. Essential fiduciary responsibilities

2. Store leadership

3. Board perpetuation and sustainability

4. Strategic planning

5. Member engagement and transparency

The board’s five priorities

REV

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+$360KNet Income

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ET INC

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$11.3M

Cap-Ex

$49K$34K

$470K

$376K

189K

139K

90-95 Staff

“Expansion Mode”

+ Collective Bargaining

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$11.3M$11.3M

“Expansion Mode”

+$360KNet Income

-$309KNet Income

Sales per square foot

6,500 sq ftof sales space

$11.3M in sales$1,738 per square foot

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$11.3M$11.3M

“Expansion Mode”

+$360KNet Income

-$309KNet Income

Good time to expand

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$11.3M$11.3M 9

8

7

6

5

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3

2

1

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BILITY

7.3

7.8

6.86.5

8.1

100%Turnover

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$11.1M

$11.2M$11.3M

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$11.1M

$11.2M$11.3M

$-31K

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$108K

$-31K

90-95Staff

75 Staff

Cap Ex

Board Exp

$11.1M

$11.2M$11.3M

1. Having a positive net income is a good thing

• Thank you to everyone for your efforts to make 2018 a successful financial year

• It’s given the board and management some room to breathe

• You can’t get loans if you perpetually lose money

2. We can’t make progress as a co-op without investment

• Revenue growth

• Store leadership

• Board stability and development

Reflections

Revenue growth• There are obvious physical space attributes that would improve our

business:

• More retail space

• More parking

• A loading dock

• Better proximity of offices to retail space

• Our building was sold earlier in 2018; we are working with a real estate attorney and are in discussions with the owner regarding lease renewal

• We will need to hire an architect

• There are other ways to generate revenue and we are exploring them (Mercadto), but they are small and sometimes not proven to be cost effective

Store Leadership• Our former General Manager, Justin Pizzella, resigned in

October 2017

• The board instituted a Designated General Management Team (DGMT) per our GM continuity plan

• Jen Girty (HR Manager)

• Shawn McCullough (Finance Manager)

• eric cressley (Front End Manager)

• The board spent the fall of 2017 gathering input from members including staff regarding the attributes most desired in a general manager. Multiple facilitated meetings and surveys were conducted.

Store Leadership• Attributes most desired:

• Ability to positively interact with members and employees

• Commitment to cooperative values and natural and organic foods

• And the ability to operate a business in a competitive retail market

• The board also explored various team management models and through this process determined that a single general manager in increased cooperation with our management team will best serve our Co-op at this time.

• The board has engaged Pennsylvania-based The Carlisle Group to lead the executive search. Brett Myers will be on-site at our Co-op on November 7th to kick-off the process.

Board Sustainability and Development• Electing 5 candidates who will be seated in December

• In early 2017 there were 0 functioning committees; now there are 4-5

• When drafting our 2018-19 Governance Calendar, we were very intentional about time and efficiency

• Reduced # of extra meetings

• Working meetings now every other month

• Executive Team meetings now quarterly

• Reduced frequency of monitoring Ends (mission/values)

• Planning a full-day retreat for new board members to occur in January 2019

Member Engagement• The board is passionate about strengthening member

engagement, and our democracy

• Members are now making meaningful contributions on committees

• Taken efforts to make board meetings more accessible to members

• Project meeting documents

• Conducting open member session more as a dialogue

• We’ve re-aligned with Annual Meeting with the election so that we’re able to use this forum to engage with candidates

Thank You

Be sure to vote!

Voting runs throughNovember 30th

• Café: Amber Pertz

• Finance: Shawn McCullough

• Front End: eric cressley

• Grocery: Maura Holliday

• Human Resources: Jen Girty

• IT: Erin Myers

• Marketing & Member Services: Kate Safin

• Interim team management structure and GM search

• Online shopping and home delivery service

• Increased sustainability

• Sales growth

• Online ordering & home delivery for up to 16 mile radius.

• Based in New York; focus on artisan shops, small grocers, and co-ops.

• Certified Carbon Neutral Company

Will it work?

• Can our POS support this format?

• Demo with IT & Mercato

Is there interest?

• Survey via email and social media

• ~40% Yes; ~60% no (few strong oppositions; many indicated no because they personally would not use it, but still supported the concept)

Can operations support it?

• All managers invited to demo

• Collect feedback from staff

Is it a worthwhile investment?

• Expand reach

• Remain competitive and relevant in changing grocery industry

• Low-risk (no long-term contract or agreement)

REGISTER ON MERCATO.COMSend your POS

Export

MERCATO BUILDS YOUR STORE

with professional photography

MERCATO TRAINS YOUR STAFF

for seamless order fulfillment

MERCHANT LAUNCH

your store is now LIVE

MARKETING & PROMOTIONS

free discounts and targeted ads

ENABLE LOCAL DELIVERY

leverage Mercato’s courier network

We are here

~4-6 weeks away

Since September 2018, we have done independent research and worked with partner organizations to complete:

• “Responding to Recycling Changes” webinar hosted by National Cooperative Grocers (NCG).

• “Responsible Waste Management” workshop hosted by Sustainable Pittsburgh and PNC Park.

• Sustainable Pittsburgh’s Straw Forward Program.

• Eliminate use of #1 plastic cups, introduce paper straws, and provide compostable to-go containers.

• Recycling Awareness staff training by Pennsylvania Resources Council.

• Gave away 60 zero waste utensil sets during our Annual Member Drive + 75 sets during our Bulk Sale.

In 2019, we plan to….

• Focus on compostable to-go ware and utensils.

• Work with the Pennsylvania Resources Council’s ZeroWaste PA Small Business Program to identify ways to increase our waste diversion.

Annual Audit

• Clean (unqualified) opinion – this is good, and expected

• Soonest that we’ve received audited statements since 2005.

• No numbers will change between the draft and final, issued financial statements. Items that could change would be any subsequent event that could occur that could have a material impact on the financials (i.e. new lease, new GM, new debt, new customer/line of revenue).

• Calculating the tax provision proved to be a little more daunting for the current year due to (1) having net income and (2) the top-line effective corporate tax rate changing from 34% to 21%.

• Going forward, assuming we’re making net income, tax planning becomes more imperative.

Annual Audit

• Balance sheet is strong; strongest since 2012

• No long-term debt

• Cash has been increasing for three consecutive years through 2018; bottomed-out in FYE 2015 at $488,943

• Liquidity ratios look good: current ratio (current assets/current liabilities) improved

• Always looking at cash: cash ratio (cash/current liabilities) is in best shape since FYE 2012

• Total equity (net worth) increased

Looking Ahead

• As stated, tax planning becomes more important as the co-op becomes more financially sustainable

• Maintain the profit-sharing

• Excess cash – more investment options

Where are we now – expansion framework

FYE NI/(L) Profit-Sharing Wages INC/DEC Sales Wages % of Sales INC/DEC Depreciation Cap-Ex Spending Current Liabilities Cash Ratio Cash INC/DEC

2005 12,069$ 69,318$ 1,013,348$ 5,948,583$ 17.0% 94,309$ 118,481$ 403,657$ 1.15$ 465,963$

2006 50,218$ 74,790$ 1,051,668$ 4% 6,476,628$ 16.2% 8.9% 90,304$ 31,036$ 481,122$ 1.26$ 607,482$ 30%

2007 (4,516)$ -$ 1,233,383$ 17% 6,559,774$ 18.8% 1.3% 108,307$ 188,639$ 396,241$ 1.02$ 406,067$ -33%

2008 37,180$ 5,860$ 1,298,297$ 5% 7,157,211$ 18.1% 9.1% 113,527$ 44,230$ 434,994$ 1.22$ 530,831$ 31%

2009 72,743$ 26,607$ 1,294,522$ 0% 7,316,418$ 17.7% 2.2% 117,485$ 31,000$ 619,723$ 1.25$ 773,368$ 46%

2010 83,015$ 25,997$ 1,350,020$ 4% 7,476,280$ 18.1% 2.2% 116,790$ 34,364$ 477,153$ 1.59$ 760,338$ -2%

2011 113,576$ 47,203$ 1,397,626$ 4% 7,986,874$ 17.5% 6.8% 106,617$ 49,200$ 524,659$ 1.94$ 1,016,173$ 34%

2012 (2,598)$ 16,564$ 1,566,878$ 12% 8,553,885$ 18.3% 7.1% 111,649$ 470,641$ 554,173$ 1.60$ 887,043$ -13%

2013 (17,181)$ -$ 1,806,657$ 15% 9,573,147$ 18.9% 11.9% 173,638$ 376,524$ 542,995$ 1.19$ 643,968$ -27%

2014 (166,442)$ -$ 2,073,447$ 15% 10,562,983$ 19.6% 10.3% 184,393$ 189,811$ 555,785$ 0.90$ 501,926$ -22%

2015 (23,241)$ -$ 2,234,063$ 8% 11,077,517$ 20.2% 4.9% 170,212$ 139,465$ 524,334$ 0.93$ 488,943$ -3%

2016 (99,572)$ -$ 2,268,195$ 2% 11,346,851$ 20.0% 2.4% 171,069$ 48,452$ 589,287$ 0.88$ 516,625$ 6%

2017 (31,769)$ -$ 2,281,778$ 1% 11,102,371$ 20.6% -2.2% 173,040$ 33,754$ 569,983$ 1.03$ 584,484$ 13%

2018 107,988$ 44,744$ 2,131,778$ -7% 11,228,344$ 19.0% 1.1% 177,304$ 125,260$ 554,429$ 1.47$ 814,202$ 39%

"Expansion"Mode

• 696 New Members FY2017-18

• Average ~13 new members/week

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NET MEMBER GROWTH

• 27 Events with 39 Partner Organizations & 12 Co-op Members

• 15 Free Events, 8 Paid Events, 3 Sales/Promotions, 1 Farm Tour

• + 4 Co-op Orientations and 1 Member Forum

• Local Business Community Partner Expo

• Delicious Plant-Based Sauces• Wild Edible & Medicinal Plant

Walk• Healing Spirit Through Time• Pittsburgh Urban Farm Tour• Local Food Sampling Session• Proactive Health & Wellness• Medical Marijuana in PA• Healthy Holidays 101• Don't be Shy About Pie• Member Forum• Wake Up to Your Need for Sleep• Farm to Table Western PA

Connections: Brunch & Learn• Ancient Ways Cleansing

Techniques• Community-Owned Healthcare• Intro to Elimination Diets• Fair Trade Beads & Beans• How to Kick the Sugar Habit• Beyond Cancer: The Powerful

Effect of Plant-Based Eating• Nutritional Support for

Childbearing Years• Container Gardening• Gardening Resource Fair• Get Ahead of Lead• Gardening for Beneficial Insects

• $19,141 through Register Round Up

• $7,037 in General Donations

• $1,000 to Farm Aid, $1,965 to PASA through the Pittsburgh Urban Farm Tour

Month Organization $ Raised

July Greater Pittsburgh Community Food Bank $2,139.47

August Assemble $1,586.02

September Pennsylvania Association for Sustainable

Agriculture

$1,350.09

October Let's Move Pittsburgh $1,118.75

November One World Everybody Eats $1,106.15

December Afro-American Music Institute $1,350.10

January Braddock Carnegie Library $1,637.36

February Healthy Start, Inc. $1,394.13

March Building New Hope $1,604.63

April 412 Food Rescue $1,784.02

May Landforce $2,050.22

June Dreams of Hope $2,020.31

• Host events, contribute to our newsletter, serve on the board, vote for the board, share your thoughts and concerns.

• Our bi-Annual Member Satisfaction Survey will take place in mid-to-late January. Please make sure we have a current and valid email in our Member Database if you want to participate!

• Sign up for a board committee. We need help planning a member event for the Spring!

voting.eastendfood.coop

• Username = Your Member Number

• Password = Your last name + Your 5 digit zip code

NOTE: Names are all lowercase with no hyphens, spaces, or special characters.

Examples:

• Joe Smith, Jr. = smith12345

• Jane O’Rochester = orochester12345

• John Weaver-Cooperator = weavercooperator12345

voting.eastendfood.coop