PROPOSED FOOD CO-OP

MACON, GA

EVALUATION OF PROPOSED SITE

AND

SALES FORECAST ANALYSIS

A Market Study Conducted by:

Debbie Suassuna Location Research Consultant

4691 Finch Way Dublin, CA 94568

November 2010

DISCLAIMER

All information provided, and any conclusions and recommendations made, as part of

this market study are provided in good faith based upon the experience and judgment

of the consultant. However, it should be understood that the client remains responsible

for the accuracy of all information provided to CDS Consulting Co-op, all decisions

made, and all actions or inactions that result from this work.

RECOMMENDED FURTHER RESEARCH

If any of the store actions contemplated in this study are carried out, it is strongly

recommended that a Customer Address and Transaction (CAT) survey be conducted at

the store within the first 6 - 12 months after the action is completed. The purpose of this

follow-up research would be to define the store’s trade area, and determine its sales

penetration levels throughout the trade area, so that its performance can be evaluated

against the results of this market study. Such a comparison will enable the identification

of any problem areas in the trade area, relative to the new store’s customer

acceptance, sales penetration rates, and capture rates.

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I. INTRODUCTION

During the past decade or so, the natural food segment of the retail food industry has

been increasing at a rate considerably faster than the conventional segment of the food

industry. While no exact statistics are available, it has generally been reported in various

trade journals that the size of the natural and local food market has been growing at a

rate of between 5% and 10% per year. This increase has been due to several factors,

including a broadening of the demographic characteristics that are positively correlated

to natural food demand, an overall increase in consumer awareness relative to food and

dietary issues, a greater interest among consumers relative to shopping for natural food,

organic produce, hormone-free meat and poultry, etc., an increasing interest in

consuming locally-grown food (and thereby supporting local agricultural), and an

increasing assortment of natural food merchandise being produced and brought to

market every year. In light of these developments, the Macon area seems to represent a

market with sufficient demand to warrant serious consideration for a co-op food store.

The remainder of this report summarizes the results of a market study conducted in the

Macon area within the past few weeks. Specifically, Section II summarizes the

conclusions and recommendations emanating from this study. Section III presents the

results of the sales forecast analysis, on which the findings and conclusions have been

based. Section IV reviews the trade area to be served by the proposed co-op. Section

V presents an evaluation of the facility, site, and location characteristics. Section VI looks

at the competitive environment within the trade area. Finally, Section VII reviews the

methodology employed in carrying out the objectives of the study.

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II. KEY FINDINGS AND CONCLUSIONS/RECOMMENDATIONS

This study of the Macon, Georgia market area has resulted in a number of findings and

conclusions regarding the proposed natural foods co-op. This section will summarize

those findings that have the most significance for the proposed co-op, as well as our

recommended course of action given those findings.

Key Findings:

The co-op food store will serve a moderately large-sized trade area that extends

about 10-15 miles in most directions.

The trade area for the proposed co-op contains a population base of 158,200

persons that reside in households, which is somewhat higher than the Co-op

database store average of 126,400 persons. However, it exhibits a weaker-than-

average demographic composition (particularly with respect to college

education levels, per capita income levels, and the “in-profile” occupation

categories).

The proposed co-op’s location just west of downtown Macon, and proximity to a

large daytime population base, should enable the co-op to generate a

significant amount of business from nearby office workers, as well as the faculty,

staff, and students of Mercer University.

The competitive environment within which the proposed co-op food store will

operate is weak with respect to natural and organic food. There are two direct

competitors located within the defined trade area (i.e., Yvonne’s Natural Market

and Mia’s Health Foods); however, both are much smaller than the proposed co-

op, thus limiting their competitive influence. There are also several conventional

stores within the trade area that sell some natural/organic food (including several

Kroger stores that feature a store-within-a-store concept of natural/organic food),

although, the employees/staff of these stores do not offer much in the way of

product knowledge.

Conclusions/Recommendations:

Based on the population size, demographic composition, and competitive

environment of the Macon market area, combined with the experiences of other

natural food co-ops in similar market situations, it appears that there is sufficient

sales potential to support a co-op food store.

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Further, in light of the available sales potential that exists within the Macon market

area for a natural/organic food store, it is recommended that the proposed co-

op have about 6,000 square feet of sales area (or approximately 10,000 square

feet of total space). A store of this size would be large enough to accommodate

an acceptable variety of food store departments, including dry grocery, meat,

produce, frozen food and dairy, as well as specialty departments such as a deli

with a café/seating area, etc. As a result, the co-op would offer the “critical

mass” of food departments necessary to attract prospective shoppers (and

enable them to make most of their food store purchases at the co-op) and

compete more effectively with other food stores.

Given the comparatively weak demographic composition of the trade area,

there may be a desire to offer a significant amount of conventional foods in the

proposed store. However, there is a danger in attempting to be “all things to all

people” which usually results in not serving any customer segment particularly

well. Consequently, it is recommended that the proposed store’s merchandise

mix be focused on natural, organic, and locally-produced foods, as there is

sufficient demand within the trade area for these food categories, and it also

represents the major growth area within the food industry.

It is also recommended that the proposed store include space for class rooms,

and make educating consumers about the relationship between food, their

health, and the environment a primary component of the entire project.

The sales forecast for the proposed site that was evaluated as part of this market

study is as follows (refer to Section III for a more detailed discussion of the sales

forecast analysis):

Annual Sales Forecast

Year of Operation

1305 Hardeman

Avenue Site 2013 $3.05 million

2014 $3.47 million

2015 $3.92 million

2016 $4.41 million

The proposed co-op will benefit from a relatively weak competitive environment,

good site characteristics and favorable regional accessibility. However, overall

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sales would be tempered by the weaker-than-average demographic

composition of the trade area.

Due to its proximity to a relatively large daytime population base, it is

recommended that the co-op have a strong deli/prepared foods department

with a grab and go section, hot/cold food bars, and a café/seating area, etc. in

order to better serve this customer segment. The “in-profile” nature of this

daytime population base, which includes downtown office workers, the students,

faculty, and staff of Mercer University, and the employees of various hospitals and

medical offices, is viewed as very important to the success of the proposed co-

op. The deli/café will also enable the store to “showcase” the quality and taste

of its prepared foods to potential customers that have not yet purchased their

groceries at the co-op.

If it is determined that one of the two direct competitors located within the

defined trade area (i.e., Yvonne’s Natural Market or Mia’s Health Foods) has a

strong reputation within the community (for vitamins and supplements, or some

other product category), it is recommended that proposed co-op consider hiring

the owner as a means of acquiring an “established” customer base for that sales

category, and avoiding any negative backlash that might stem from driving a

well-liked local competitor out of business.

It must be remembered that the sales forecast is based on an assumed sales area size of

about 6,000 square feet. It is based on the concept of a co-op food store in the normal

sense of the term, with an emphasis on natural, organic and locally-produced

merchandise. It is based on a store format that will feature a relatively complete array of

food store departments. It is based on a program of sales promotion and advertising

that will permeate the trade area on a regular basis, in order to convey information

about the store, its location, and its product mix. It is based on an overall image of

quality merchandise and knowledgeable customer service, provided in a facility that

conveys an environment of ambiance, intimacy and community. Finally, it assumes a

level of store management that is knowledgeable and experienced, with a significant

amount of market and marketing savvy.

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III. SALES FORECAST ANALYSIS

Based on the sales forecast analysis, it appears that if a 6,000 square foot (sales area)

natural foods co-op were to open at 1305 Hardeman Avenue in Macon, Georgia, it will

likely achieve an average trade area sales penetration rate of $21 at maturity. The sales

penetration rates are projected be highest for the residents of the immediate area (i.e.,

from downtown Macon, northwest to approximately Pio Nono Avenue/Pierce Avenue)

due to their proximity to the site, combined with the relatively weak competitive

influences affecting this area. Conversely, sales penetration rates for the proposed site

are projected to be lowest in the southern portion of the trade area, given the relative

lack of close-in convenience to those residents, combined with the comparatively weak

demographic composition of this area. In addition, the proposed site will likely obtain

23% of its business from beyond the trade area (i.e., residents from outside the trade

area, and tourists, travelers, or passers-by who travel to or through the trade area).

While there is no definitive open date for the proposed site evaluated as part of this

market study, it is presumed for now that the new natural foods co-op will open in 2012,

thus making 2013 its first full year of operation. Also, because it will be a new store in a

new market, it will likely take several years for it to reach its mature sales level. Based on

numerous co-op food store studies, it is likely that the proposed co-op food store will take

at least four years to reach its maturity level of volume. Therefore, the sales forecast for

the proposed co-op would be:

Annual Sales Forecast

Year of Operation

1305 Hardeman

Avenue Site 2013 $3.05 million

2014 $3.47 million

2015 $3.92 million

2016 $4.41 million

The proposed co-op will benefit from generally good site characteristics (including

ample parking capacity), good regional access, and a relatively weak competitive

environment. However, overall sales would be hampered by the weaker-than-average

demographic composition of the trade area. Specifically, the proportion of college

educated persons, per capita income levels, and persons employed in an “in-profile”

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occupation exhibited by the Macon trade area are significantly lower than the Co-op

database average. These relatively weak demographic characteristics reinforce the

importance of (and need for) educating consumers about the relationship between

food, their health, and the environment, which should a primary component of the entire

project.

Given the proposed site’s proximity to a relatively large daytime population base that

includes the students, faculty, and staff of Mercer University, and downtown workers

(combined with the site’s favorable parking capacity), it is expected to generate a

strong lunchtime business, as well as a relatively strong evening business as office workers

may shop the co-op on their way home from work. Therefore, it is recommended that

the co-op feature a strong deli department and café/seating area to serve this “in-

profile” daytime customer segment (particularly during the lunchtime hour), and focus a

significant amount of its marketing efforts (e.g., emphasizing its prepared foods, take out

lunches/dinners, and possibly catering services for nearby businesses) on this daytime

population base, as this would represent a key competitive advantage for the proposed

co-op.

Over time, and as the projected sales for the proposed co-op reach their mature levels,

co-op management may consider expanding the size of the store. Therefore, it is

recommended that the co-op food store be designed in such a way as to make it

relatively easy to expand the store in the future (i.e., in about 7 years).

The sales forecasts for the proposed co-op are based on the following assumptions:

The proposed site will have a retail sales area of about 6,000 square feet;

The proposed store will feature a relatively broad selection of natural and locally-

produced food, to include traditional departments such as dry grocery, fresh

meat and poultry, dairy and frozen food, fruits and vegetables, beer/wine, bulk

foods, a deli with a self-serve hot/cold food bar and a grab and go food section,

a coffee/juice bar, baked goods, a café/seating area, vitamins/supplements,

and a selection of personal, health, beauty, and body care products;

Population in the trade area is projected to remain relatively stable throughout

the forecast period;

It is assumed that the competitive environment will remain unchanged

throughout the forecast period;

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Growth in the natural food market at-large has been occurring at a rate of

between 5% and 10% per year, and is expected to continue;

Store maturity is not expected to occur for at least four years.

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IV. TRADE AREA CHARACTERISTICS

A co-op food store trade area is generally defined as that area, closest to the store,

within which the store obtains the majority of its sales volume (usually between 65% and

85%). Further, it is defined as the geographic area within which the store has its highest

levels of sales penetration (or sales per-capita). In short, it is the geographic area within

which shoppers tend to gravitate toward a retail focal point in order to satisfy most, if not

all, of their shopping needs.

A food co-op’s trade area is shaped by several factors:

Co-op food stores, including those that emphasize local products, typically have

trade areas that are larger than those served by conventional supermarkets.

The appeal of co-op food stores is generally defined as much in terms of

demographic characteristics as it is with respect to its convenience of location.

As such, their trade areas are typically defined on the basis of where there are

concentrations of demographically in-profile customers, rather than just

geographic convenience.

Trade areas are often defined in terms of patterns of access (such as major

highways) or barriers (geographic or man-made).

Finally, a co-op store’s trade area is often defined by the presence – or absence

– of directly competitive units.

The trade area to be served by the proposed co-op food store in Macon extends about

10-15 miles in most directions. Specifically, the trade area extends 10 miles to the

north/northwest along I-75 (to the Bibb-Monroe County line), with further extension limited

by declining population counts as well as a shifting orientation northward toward the

greater Atlanta area. To the east/southeast, the trade area extends about 8 miles along

I-16 (to the Bibb-Twiggs County line), with further extension limited by declining

population counts. In fact, the presence of the Ocmulgee National Park, Lamar Mounds,

and Bond Swamp National Wildlife Refuge, located to the east and south of downtown

Macon, limits the population levels in both of these directions. To the south and west, the

trade area extends approximately 10-15 miles along I-75 and US Highway 80 (State

Highway 22), respectively. Further trade area extension in both of these directions is

precluded by increased distance, as well as declining population counts. Given the

patterns of accessibility that exists within the market area, it is estimated that about 77.5%

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of the store’s sales will emanate from this trade area. The remaining 22.5% of the store’s

volume will come from beyond the trade area, as well as from travelers, tourists, and

visitors to the market.

Within the trade area, there reside an estimated 163,400 persons. Of these residents,

5,200 live in some type of group quarters – institutions such as prisons, nursing homes,

hospitals, military barracks, college dormitories, etc. The group quarters population is

removed from the total population base because they are typically “immobile”, and

usually eat institutionally; therefore they do not constitute a significant pool of

prospective shoppers – at least not for food to be consumed at home. As a result, there

are an estimated 158,200 persons within the defined trade area that reside in

households. This trade area population is projected to remain relatively stable

throughout the forecast period.

The Trade Area Demographic Summary table for the proposed co-op food store

attached to this report illustrates the population and key demographic characteristics for

the trade area, at the census tract level. The census tract numbers listed on the table

correspond to the census tracts shown on the trade area map attached at the end of

this report. The key demographic characteristics listed on the table are those that have

been found to be most closely associated with strong sales penetration rates for co-op

food stores. In general, the higher the levels of these demographic characteristics –

singly, and more importantly in concert - the higher the sales penetration rates (or sales

per capita levels) tend to be.

The Sales Forecast Summary table for the proposed site, also attached to this report,

compares the key metrics of the proposed co-op’s trade area with those of the overall

database store average.

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V. FACILITY, SITE, AND LOCATION CHARACTERISTICS

This section will put forth an evaluation of the facility, site, and location characteristics of

the proposed site which is situated immediately west of downtown Macon. More

specifically, the site is located on the western side of Arlington Place (a 2-lane road),

between Hardeman Avenue (a 3-lane road with on-street parking on the eastbound

side) and Georgia Avenue/State Highway 19 (a 2-lane, one-way, westbound road).

Facility Characteristics. The facility of the proposed food co-op store is assumed to

occupy approximately 10,000 total square feet of space within a 26,000 square foot,

single-story building. It is also assumed that the proposed co-op will have about 6,000

square feet of sales area. The parking lot for the store wraps around the northern,

eastern, and southern sides of the facility. Finally, the main entrance for the proposed

store will face east toward the main parking field, and toward Arlington Place. Overall,

the proposed facility is rated good – in terms of its size and its layout on the site.

Site Characteristics. Visibility of the proposed co-op from Hardeman Avenue, Arlington

Place, and Georgia Avenue is excellent. The site’s parking lot, which wraps around the

northern, eastern, and southern sides of the facility (with most parking spaces located on

the eastern side), provides for a total of 212 parking spaces which would be shared with

the other tenants of the building. It is assumed that at least 60 parking spaces will be

allocated to the proposed co-op, as a 10,000 square foot co-op food store would

typically require at least 60 “co-op only” parking spaces for both its customers and staff

(and there are 70 parking spaces located in the main parking field on the eastern side of

the facility). Ingress/egress for the proposed store is provided by two access points along

Arlington Place, two access points along Hardeman Avenue, and one access point

along Georgia Avenue (the access point along Georgia Avenue and one of the access

points along Hardeman Avenue are located on the opposite/western side of the site

property). None of these access points is controlled by a traffic signal (although Georgia

Avenue is a one-way street), nor is the Arlington Place/Hardeman Avenue intersection

signalized, thus making left-hand turns to/from Hardeman Avenue difficult during peak

commute hours. Overall, the site characteristics for the proposed site are assumed to be

good, with the only drawback being the lack of a traffic signal at the Arlington

Place/Hardeman Avenue intersection.

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Location Characteristics. With respect to population density, the trade area contains

158,200 persons that reside in households, which is somewhat higher than the Co-op

database average of 126,400 persons. However, most of the key demographic

characteristics associated with the defined trade area (i.e., college-education, per

capita income levels, and “in-profile” occupation levels) are below the Co-op database

average. Fortunately, the proposed co-op is located proximate to a significant amount

of “in-profile” daytime population, as it is situated between downtown Macon and

Mercer University.

In terms of regional accessibility, the proposed site’s location is very good. The site is

located along Georgia Avenue (which is a heavily travelled State Highway), and

Hardeman Avenue, which merges with Georgia Avenue just west of the site. In addition,

the proposed site is located only ¼ miles east of the I-75/Hardeman Avenue interchange.

In terms of retail synergy, the proposed co-op’s location is considered weak, as there is

very little retail development in the immediate vicinity of the site. In fact, most of the

development around the site consists of a large, regional US Postal center, residential

uses, as well as some medical offices located between the site and I-75.

Recommended Facility, Site, and Location Considerations. This market study has

centered on one site that is being considered for the proposed food co-op store.

Experience has shown that there is no guarantee that any site considered will actually

come to pass. That is, there are numerous reasons why the reviewed site may not

become a reality (a lack of successful lease negotiations, unsatisfactory site conditions,

development costs that are out of line in terms of expected store profitability, etc.).

Therefore, it is entirely possible that the co-op planning group may have to seek

additional sites for the contemplated food store. In light of that possibility, the remainder

of this section puts forth several suggestions as to desirable facility, location and site

characteristics to be sought. In order to maximize sales, it is recommended that the

proposed co-op occupy a location (with adequate visibility, parking, and ingress/egress)

along Vineville Avenue (US Highway 41), between Pio Nono Avenue/Pierce Avenue and

Tucker Road. A site located in this area would benefit from a more central location with

respect to the areas exhibiting the most “in-profile” demographic characteristics, as well

as favorable retail synergy (however, real estate costs would undoubtedly be much

higher for a site in this area v. the proposed Hardeman Avenue site).

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There are three primary types of characteristics to evaluate when looking at potential

food store locations. The first of these has to do with the facility itself, and includes such

things as size (gross and sales area), layout on the site (relative to frontage streets,

parking, adjacent tenants, etc.), condition, etc.

The size of a food store is something that needs to be evaluated in terms of the sales

potential that is available, the size and configuration of the site, and the format to be

implemented. Generally speaking, a food store sales area accounts for about 60 - 65%

of a store’s gross size; for example, a 10,000 square foot store would typically have a sales

area of about 6,000-6,500 square feet.

As to layout on the site, a grocery store facility can benefit from adjacent tenants –

especially those types of tenants that appeal to the same customer profile. Tenants such

as bookstores (Borders, Barnes & Noble), coffee shops (Starbuck’s, Peet’s, Seattle’s Best

Coffee, Dunkin’ Donuts), office supply stores (Staples, Office Depot, OfficeMax), specialty

bakeries or bagel shops (Einstein’s, Bruegger’s, Noah’s) and other types of somewhat

upscale specialty stores represent co-tenants that appeal to the same customer

demographic characteristics as natural food stores, and therefore make desirable co-

tenants. On the other hand, there are certain types of tenants that, while they may

produce a certain amount of synergy, should not be situated too close to the food store.

Sit-down restaurants, movie theaters, physical fitness clubs, or other large retail tenants

that have high parking requirements tend to usurp food store parking spaces if they are

situated too close to the food store customer entrance.

The second set of characteristics to be evaluated involves the site itself, relative to

visibility, ingress/egress, and parking. Visibility should be as good as possible, in both

distance and direction. That is, the store (or at a minimum its exterior signage) should be

visible from as many directions as possible, and from as far away as possible. This is

especially important with respect to the major access routes by which prospective

shoppers would arrive at the store, for two primary reasons. First, it has been found that

over 16% of the American population moves (changes residence) every year. Second,

research has found that, upon moving to a new community, the average food shopper

selects his/her new food store within just a few weeks of making their move. Taking these

two findings into account, it is evident that a store’s visibility is an important factor in

determining whether it is included in – or excluded from – such consideration.

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Another element of site characteristics is ingress/egress – the ease or difficulty with which

shoppers can enter or leave the food store site. In this instance, consideration should be

given to the position and orientation of major drive lanes in the food store parking lot; the

number of entry/exit points; the type of traffic controls that exist to facilitate entry to or

exit from the site; speed limits along frontage streets; the presence or absence of

medians, left-turn lanes, and deceleration lanes; congestion along major frontage

streets; and any other factors that either facilitate or hamper shoppers in their efforts to

enter or leave the food store site.

Parking is another site characteristic that is very important to a food store. There are two

aspects of parking to be reviewed: configuration and capacity. As to configuration,

food store shoppers typically prefer to park within about 300 – 350 feet from the front

door of the food store, and within sight of it. Drive lanes between rows of parking should

be perpendicular, rather than parallel, to the food store façade. Parking capacity

likewise is an important consideration. Numerous food store parking studies have

demonstrated that ideal food store parking, especially for a suburban-type store, can

require up to 8 spaces per 1,000 square feet of food store GLA (gross leasable area). This

many spaces provides for employees as well as shoppers. While this represents ideal

parking, very few food stores actually have this amount of parking. However, it does

represent the optimal number of spaces that may be appropriate. As a practical

matter, most food stores are considered to have adequate parking if they have at least

6 parking spaces per 1,000 square feet of food store GLA (or 60 parking spaces for a

10,000 square foot co-op). Obviously, the greater the ratio of parking spaces to store

size, the better (within reason).

The third set of characteristics involves the location of the food store (which is different

from the site). In this context, the word location is a marketing term, whereas the word

site refers to physical characteristics in a real estate sense. Location characteristics to be

evaluated include population density (and proximity of the store to it), demographic

characteristics of the trade area population (and the extent to which the trade area is

in-profile), trade area accessibility (the ease or difficulty with which trade area

consumers can find and get to and from the store), nearby retail concentrations (and

the extent to which they provide beneficial synergy), barriers (such as rivers, cemeteries,

freeways, railroads, industrial corridors, etc.), and so forth.

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VI. COMPETITIVE ENVIRONMENT

Direct competitors are defined as those stores that have essentially the same type of

merchandise mix as the proposed co-op will carry, and whose primary appeal is toward

the same type of customer clientele. Direct competitors would include such stores as

other natural and co-op food stores.

Indirect competitors, on the other hand, are defined as food stores that, as part of their

merchandise mix, carry certain products (or groups of products) that may compete

directly with the type of merchandise that will be carried by the co-op food store, but

whose primary thrust is more conventional in nature. Conventional supermarkets

generally fit this category, depending upon their emphasis on natural and local food,

their formats, and their customer clientele.

Within the indirect competitor group, there tend to be three levels of competition. The

strong ones tend to be stores that carry natural and organic food in a “store within a

store” concept, which usually constitutes 1,500 square feet or more of sales area space.

Medium indirect competitors generally have a selection of natural and organic food

scattered throughout the sales area, in 4-foot, 8-foot or 12-foot sections in their related

gondolas. For example, along the juice aisle there may be the usual selection of V-8,

Hawaiian Punch, Cranapple, HI-C, etc., but there will also be a 4-foot section of

Knudsen’s and perhaps a 4-foot section of Hansen’s natural/organic juices. Further,

these sections are generally identified with some type of shelf talker or hanging banner.

The weakest level of indirect competition consists of those conventional supermarkets

that carry a minimal amount of natural food, in which it is generally integrated with the

conventional merchandise without any specific product identification.

The competitive environment within which the proposed co-op will operate is relatively

weak. There are currently only two direct competitors within the defined trade area:

Yvonne’s Natural Market and Mia’s Health Foods. Yvonne’s Natural Market has about

2,700 square feet of sales area and sells natural/organic foods including produce, dry

groceries, a very limited amount of bulk foods, vitamins/supplements, health/body care

items, and some home products. It also has smoothie/juice bar and a limited selection of

sandwiches and salads. Mia’s Health Foods is a 1,400 square foot (sales area) store that

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predominantly sells vitamins/supplements, but has a small amount of natural/organic dry

groceries.

There are several indirect competitors within the proposed site’s trade area, with the

most notable being: Food Lion, Fresh Market, Kroger, Piggly Wiggly, Publix, and Save-A-

Lot (although Food Lion, Piggly Wiggly, and Save-A-Lot do not carry a significant amount

of natural/organic food). Fresh Market, which operates one store in Macon, sells some

natural/organic food but is considered to be more of an upscale gourmet food store.

Kroger operates several stores within the defined trade area which typically feature a

1,000 square foot section of natural and organic foods in its stores called “Nature’s

Market”. Finally, Publix operates two stores in Macon, which have modest selections of

natural/organic foods located throughout the store, segregated into 4-to-8 foot sections

that are identified with overhead “GreenWise Market” signage.

In summary, the competitive environment within which the proposed co-op will operate

is weak. There are two direct competitors located within the defined trade area (i.e.,

Mia’s Health Foods and Yvonne’s Natural Market); however both are much smaller in size

relative to the assumed size of the proposed co-op (i.e., about 6,000 square feet of sales

area for the proposed co-op), thus tempering their impact on the projected sales

performance of the proposed co-op. Lastly, there are several conventional stores within

the trade area that offer some natural/organic food, however, the staff/employees for

these stores tend not to promote or offer any product knowledge for these items.

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VII. STUDY METHODOLOGY

There were several activities carried out as part of this market study, the first of which

involved conducting fieldwork in the Macon, Georgia market area. There were several

purposes for this fieldwork:

To meet with representatives from the co-op planning group;

To evaluate the Macon market area and define the trade area to be served by

the proposed co-op food store;

To define and observe the patterns of access that exist within the market area;

To evaluate the facility, site, and location characteristics of the proposed site;

To identify and evaluate all direct and indirect competitors;

To obtain local data and make first-hand observations regarding shopping

patterns, the distribution of population, patterns of access, etc.; and

To evaluate levels of retail synergy throughout the market area.

Upon completion of the fieldwork, all primary and secondary data were reviewed and

analyzed. This included a review of the trade area definition in light of the fieldwork

observations, a review of the competitive environment, and forecasting the sales for the

proposed site. In order to develop the sales forecast, a proprietary database of co-op

food store sales penetration levels was used, and the trade area performance levels of

analogous co-op food stores were reviewed. This database contains trade area

definitions, capture rates, and sales penetration levels for approximately 100 co-op food

stores across the U.S. These database stores represent many different regions of the

country, market area sizes, location types, facility sizes, merchandising images,

operational practices and market area demographic characteristics. For each of the

analogous database stores, trade area sales penetration rates were studied and

adjusted on the basis of relevant differences between the database stores and the

proposed co-op, in order to determine the estimated levels of sales penetration likely to

be achieved by the proposed co-op. More specifically, after determining the

anticipated trade area to be served by the proposed site, the population and

demographic characteristics for each census tract in its trade area was assembled.

Then, using analogous information from other co-ops in the proprietary database, an

estimated sales penetration rate was projected for each census tract. This rate, when

multiplied by each tract’s population, would result in an estimate of the sales dollars to

17

be derived from each trade area census tract. Then, after summing these census tract

sales for the defined trade area, the level of sales that would likely be achieved from

beyond the trade area was determined. The total of trade area and beyond-trade-area

sales would constitute the total sales forecast for the proposed co-op. Once the sales

forecast analysis was completed, this report summarizing the key findings and

conclusions, as well as the recommended course of action, was prepared.

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DESCRIPTION OF COLUMNS IN TRADE AREA DEMOGRAPHIC SUMMARY TABLE

CENSUS TRACT: The census tract as defined by the U.S. Government in 2009. DRIVE DIST: The driving distance (in miles) from the population center of the census tract to the site/store. 2009 POP: The total population in the census tract in 2009. 2009 GROUP QTRS: The number of persons in the census tract that reside in group quarters (such as nursing homes, hospitals, prisons or other institutions); in general these persons do not shop for food at home. 2009 POP IN HH: The population in the census tract in 2009 that resides in households (i.e., the total population less those living in group quarters). % ANN POP GROWTH: The annual percentage increase in population in the census tract.

% SELF/FEDGOV EMPL: The percentage of the workforce in the census tract that is self-employed in own incorporated business, or employed by the Federal Government (defined in terms of Bureau of the Census employment categories). % EDUC/HEALTH OCC: The percentage of the workforce in the census tract engaged in educational occupations, or health diagnosing/practitioner/technical occupations (defined in terms of Bureau of the Census employment categories). % COLLEGE GRAD: The percentage of adult persons in the census tract with at least a four-year college degree. % NON FAMILY HH: The percentage of the households in the census tract that are not occupied by families. % WHITE POP: The percentage of the population in the census tract that is racially white.

% AGED 40-54 YRS: The percentage of the population in the census tract that is between the ages of 40 and 54.

2009 PER CAPITA INC: The per capita income level for the census tract.

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GLOSSARY OF SELECTED TERMINOLOGY

CAPTURE RATE: A number that represents the percentage of a store’s sales

base that is derived from a specifically-defined geographic area (a town, a county or a census tract).

DIRECT COMPETITOR: A store that is similar to the study store in terms of its

merchandise mix, its customer clientele, its image and its customer appeal.

INDIRECT COMPETITOR: A store that may carry some of the type of merchandise

carried by the study store, but where the main thrust is with a different merchandise mix, a different customer clientele, a different image, and a different customer appeal.

MARKET AREA: A term used to describe an overall area of influence, such

as the “City/Town Market Area.” MATURITY: That point in time when a new store has reached its

forecasted level of sales; generally fairly soon (for the nth store in an existing market area) to several years (for a new store in a new market).

SALES PENETRATION: A store’s sales that are derived from a specific geographic

area (such as a town, county, census tract or trade area) divided by the population of that geographic area; also called sales/capita or sales/person.

SALES POTENTIAL/FORECAST: For a proposed store, given certain assumed facility, site,

and location characteristics, the sales level it could be expected to achieve.

TRADE AREA: The geographic area from which a retail store typically

obtains at least 65%, and perhaps as much as 85%, of its sales.

Co-op Database

Proposed Site Store Average

Sales Area (Sq.Ft.) 6,000 6,662

Analog Sales per Selling Sq. Ft. $697 $1,285

2010 Q2 Year-Ending Sales $9,242,284

Key Forecasting Variables

Total Population 163,409 132,535

Group Quarters Population 5,209 6,106

Total Population in Households 158,200 126,429

% Self-Employed/Federal Govt Worker 19% 26%

# Self-Employed/Federal Govt Worker 8,315 10,187

% College Graduate 25% 39%

# College Graduate 21,932 26,753

% Non-Family Households 38% 43%

Population in Non-Family Households 26,539 31,364

% Education/Health Occupations 10% 12%

# Education/Health Occupations 7,021 6,974

Per Capita Income $20,632 $27,754

% Aged 40-54 Years 22% 21%

% White Population 48% 80%

% Annual Population Growth -0.2% 0.9%

% Pop Equally/More Convenient to other Co-op 0% 14%

% Pop Equally/More Convenient to Direct Competitor 64% 26%

Analog Sales Forecast

Analog Trade Area Sales per Capita $20.50 $53.10

Analog Trade Area Sales $3,243,100 $6,713,920

% Trade Area Sales 78% 80%

Analog Sales from Beyond Trade Area $941,545 $1,843,770

% Sales from Beyond Trade Area 23% 20%

Analog Total Sales $4,184,645 $8,557,690

Final Sales Forecast

2013 Total First-Year Sales $3,051,227 *2014 Total Second-Year Sales $3,470,586 *2015 Total Third-Year Sales $3,924,223 *2016 Total Fourth-Year Sales $4,414,516 *

* This sales projection assumes the following:

Annual Population Growth of = -0.2%

Future Annual Sales Growth of = 5% (Based on historical sales growth trends of existing co-op stores)

First-Year Maturity Impact of = 60%

Second-Year Maturity Impact of = 65%

Third-Year Maturity Impact of = 70%

Fourth-Year Maturity Impact of = 75%

November 15, 2010

SALES FORECAST SUMMARYProposed Natural Foods Co-op

Macon, GA1305 Hardeman Avenue

Trade Area Demographic SummaryProposed Natural Foods Co-op

1305 Hardeman AvenueMacon, GA

2009 2009 % Ann % Self/ % Educ/ % % Non % % Aged 2009Drive 2009 Group Pop in Pop FedGov Health College Family White 40-54 Per Capita

Census Tract Dist Pop Qtrs HH Growth Empl Occ Grad HH Pop Years Inc

106.00 0.6 1,845 414 1,431 -2.0% 20% 7% 13% 67% 30% 19% $8,719108.00 0.6 1,393 96 1,297 -2.0% 31% 15% 52% 79% 67% 17% $28,706107.00 0.8 410 72 338 -0.2% 60% 0% 10% 94% 34% 25% $10,012114.00 0.8 611 156 455 -2.0% 29% 4% 4% 55% 12% 24% $7,850101.00 0.8 1,913 0 1,913 -1.5% 23% 7% 10% 49% 2% 21% $8,465102.00 1.0 2,235 0 2,235 -0.8% 30% 18% 40% 59% 63% 20% $26,370103.00 1.3 1,352 6 1,346 -2.0% 29% 8% 9% 47% 12% 21% $12,250115.00 1.4 1,625 35 1,590 -1.9% 12% 7% 8% 42% 3% 19% $6,637105.00 1.7 3,348 1,316 2,032 -0.2% 15% 6% 11% 43% 26% 8% $7,812112.00 2.1 975 0 975 -1.0% 6% 4% 6% 45% 2% 21% $7,738104.00 2.1 2,616 0 2,616 -1.5% 12% 6% 9% 44% 1% 20% $8,438113.00 2.3 1,277 96 1,181 -2.0% 11% 4% 7% 31% 6% 12% $11,155119.00 2.6 2,146 15 2,131 -2.0% 22% 12% 33% 47% 51% 18% $19,650110.00 2.9 4,707 0 4,707 -0.6% 27% 13% 33% 56% 41% 20% $27,409123.00 2.9 2,715 0 2,715 -2.0% 14% 9% 14% 44% 23% 22% $12,179127.00 3.0 2,298 19 2,279 -2.0% 8% 4% 6% 34% 9% 16% $10,585111.00 3.1 2,505 18 2,487 -1.4% 13% 5% 7% 37% 4% 20% $11,013118.00 3.3 3,185 61 3,124 -0.2% 29% 14% 39% 51% 72% 19% $28,970125.00 3.4 3,535 173 3,362 -1.6% 11% 6% 10% 38% 10% 17% $9,799124.00 3.9 4,103 138 3,965 -1.6% 12% 3% 13% 36% 13% 22% $13,530128.00 4.2 3,101 0 3,101 -0.8% 7% 5% 7% 38% 26% 18% $15,912122.00 4.3 2,382 0 2,382 5.5% 13% 2% 10% 42% 27% 21% $9,838126.00 4.4 4,297 0 4,297 -1.9% 17% 5% 9% 39% 25% 21% $12,360120.00 4.5 3,996 0 3,996 -1.6% 26% 17% 42% 40% 81% 23% $27,218129.00 4.8 2,156 165 1,991 -1.9% 17% 2% 7% 46% 42% 20% $12,856130.00 5.1 1,285 96 1,189 -2.0% 15% 1% 6% 44% 33% 22% $9,140117.01 5.5 1,877 0 1,877 -1.7% 27% 8% 16% 31% 17% 23% $22,452117.02 5.6 4,728 126 4,602 -1.8% 11% 11% 18% 32% 11% 20% $13,881132.02 5.9 2,347 0 2,347 -1.6% 10% 4% 10% 36% 26% 17% $13,666121.00 6.1 7,188 321 6,867 2.9% 26% 17% 45% 44% 71% 21% $33,711132.01 6.4 5,511 18 5,493 -1.0% 14% 7% 10% 39% 23% 19% $13,191131.02 7.4 4,224 155 4,069 -0.6% 15% 9% 13% 32% 38% 19% $15,420133.01 7.5 1,129 0 1,129 -0.6% 26% 5% 9% 40% 50% 20% $17,258131.01 7.9 6,018 5 6,013 -1.4% 8% 5% 6% 30% 27% 18% $11,284133.02 8.3 4,407 271 4,136 0.9% 12% 5% 11% 32% 27% 21% $17,141301.02 9.4 9,096 93 9,003 0.1% 17% 10% 13% 24% 71% 22% $23,501134.02 9.8 11,954 49 11,905 -0.6% 19% 17% 49% 40% 68% 23% $31,740134.01 11.2 10,277 90 10,187 2.4% 25% 16% 48% 28% 75% 26% $37,813135.01 11.7 9,962 125 9,837 2.8% 16% 10% 20% 28% 79% 23% $23,723301.01 11.7 3,015 0 3,015 0.5% 33% 12% 32% 19% 85% 27% $30,205136.01 14.9 10,667 87 10,580 -0.1% 18% 10% 28% 33% 72% 26% $24,434136.02 15.2 8,998 993 8,005 -0.7% 20% 8% 15% 38% 65% 25% $18,731

Trade Area Totals: 163,409 5,209 158,200 -0.2% 19% 10% 25% 38% 48% 22% $20,632

Trade Area Demographics