Sustainable small businesses: making dollars and sense, organically speaking

I started wondering more about small businesses and whether a small business can be sustainable from the start and still be successful in the long-term. I realized that it is indeed possible as I started to think more about the organic food markets and how the market has evolved in the States, in particular in the Washington, DC/Maryland region.

In the States, natural foods started to gain popularity in the late 1960s as part of that era’s “pop” culture. In the late 1960s and 1970s, small businesses began to appear as individual natural foods stores started up. These were small standalone “mom and pop” shops that were not always at convenient locations, and many failed because the stores were poorly managed and unprofitable. However, one such store in Washington, DC was the Yes! Organic Market (http://www.yesorganicmarket.com) that was first established in 1970. This has now grown into 7 locations throughout the local region (in Washington, DC and Maryland). Another chain of stores which I hadn’t even noticed until recently was My Organic Market (MOM) (now re-branded as Mom’s Organic Market (http://www.momsorganicmarket.com)). MOM’s was established in 1987 as a single location, but this business has blossomed into 11 local locations in Maryland, Virginia, and Pennsylvania. Interestingly, MOM’s larger locations even provide “re-fueling” charging stations for electric automobiles in the MOM’s parking lot. In 1991, the local Fresh Fields market was founded, and it grew into a larger chain with locations in the Maryland/Washington DC area, Philadelphia, the New York/New Jersey/Connecticut region, and Chicago. However, in 1996, the Fresh Fields chain of stores was acquired by Whole Foods Market, the most successful natural foods market in the States today.

Since most natural foods markets seemed to start as small businesses, it was interesting to learn about the growth and success of the Whole Foods Market. Whole Foods started in 1980 as a successful local natural foods supermarket. The business continued to grow by building new locations, but also by strategically merging with and acquiring of other already-established and successful natural foods stores throughout the States, including the acquisition of the Fresh Fields chain in 1996 for $135 million as noted above. Having acquired its closest rival Fresh Fields for these markets, it does not appear that Whole Foods will acquired other local chains in the same region. However, Whole Foods Market continues to identify other business opportunities and markets for expansion and continued growth.

When I was last in London, I was surprised that I could only find one Whole Foods Market shop. I naively attributed that to organic foods being more common in the United Kingdom. Therefore, I thought that a US-based business like Whole Foods Market would not be as successful competing in the international markets. However, I later learned that Whole Foods Market did indeed “go international” in 2001 in Canada, and even acquired seven Fresh & Wild stores in 2004 in the United Kingdom. Currently, Whole Foods Market has over 350 locations in the States, 8 locations in Canada, and 8 locations in the United Kingdom. They also have plans to open another location in London, so the international market continues to grow.

This made me realize the naiveté of earlier thinking, that is, that small businesses would always need to sacrifice its sustainability standards in the short-term to achieve sustainability as part of its long-term goals. Although it may be partially dependent on the specific circumstances of the small business and the specific field, the organic foods market has shown that small businesses can indeed be sustainable from the start and still achieve national and international success and prominence if done with the proper business expertise and acumen. Sustainable small businesses require all the skills required of any successful business, including proper business planning and management, as well as commitment, strategic thinking, and knowledge/insights of the markets. Operating sustainably may be more challenging in the startup phase for a small business, but depending on the specific circumstances and business field, it could be achieved.

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3 Responses to Sustainable small businesses: making dollars and sense, organically speaking

  1. rbp046 says:

    Hi Hotelchocam, You pose a really good question. I wondered as I read your blog whether sustainable business practice or the establishment of a business providing organic food had any real impact on the early failures of these retailers. Could it be that the reason the organic and natural foods business is successful now as opposed to in the 60’s and 70’s has more to do with the market having developed sufficiently, and thus creating the demand to allow these businesses to become commercially viable. In some respects the market has come of age. Clearly market demand will impact on earnings and is a common challenge that any business will have to address, whether or not they purported to engage in sustainable business practices or to supply organic food stuffs. Do you think that in the 60’s and 70’s it was possible that there wasn’t sufficient consumer demand or public interest to support these businesses? They were too niche to be viable at that time, and therefore failed, but maybe provided the template for today’s organic food retailers, who with good earnings have been able to re-invest across all business functions to create scale and reach?

    • hotelchocam says:

      Hello Roger, As usual, your insights are spot on. Whilst it is true that the market for organic and natural foods may have only recently developed sufficiently, I believe Whole Foods sought the markets, then built those markets into their overall market strategy. Basically, rather than take the risk of building a business in an area with a future “projection” of market success, Whole Foods appears to have acquired existing and successful businesses which already penetrated local markets. Thus, ensuring continued success in that mnarket. By expanding and working in volume, they were also able to take advantage of economies of scale and bulk purchasing power to make their store offerings and prices more competititve with the traditional supermarkets. So again, I agree that there wasn’t sufficient market demand in the 60′s and 70′s, but it was likely due to the lack of public awareness of public health benefits, lack of marketing of these businesses, and higher prices. They were definitely niches, and Whole Foods seems to have identified the niche markets and acquired an already-existing presence in each niche market. Now, they have achieved a critical mass and scale to be able to take advantage of being fulloy viable. They may no longer be a small business, but they are definitely successful and appear to have grown very well from the humble beginnings of a sustainable small business. As you said, it appears that they could be the template or perhaps a poster child for how to grow a sustainable small business into a successful conglomerate. Thank you so much for your insights!

  2. hoppinggreen says:

    The idea of organic food is really interesting. For myself I would rather support my local farmers market, than purchase from a big chain when it comes to fresh produce. I am not sure if the food I am buying is organic (from the farmers market), but I know I would rather have my cash go to the little guy rather than the big corporate (even if they have the organic label).

    I am aware that in the UK, you can get various organic delivered veggie boxes of in season food. These cost between 10 – 20 pounds a week. For me as a young professional I don’t think I could cope with the unknown veg. arriving at my door each week. I mean what on earth do you do with a Swede? I would be putting more food in my compost bin than I do now.

    I have been in Wholefoods in London, and I think they are the exception to the rule. They have been really successful from humble beginnings. But if you are in this type of ethical retail, I think you need to be whiter than white. I was surprised to see FIJI water in their shop (this was a while ago). Fiji has really be lambasted in the media regarding some of their claims (http://www.telegraph.co.uk/earth/earthnews/8585182/Fiji-Water-accused-of-environmentally-misleading-claims.html). I guess what I am saving is that if your business model is driven by green consumerism you need to step up and take ownership of your supply chain.

    From my perspective organic implies that you have a closer relationship with your food and where it came from. The best way to achieve this, is to grow it yourself, if you can!

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