End of an era
Co-op Market to close after 66 years

by Don Kazak

One of the community's most venerable businesses--and a piece of what helped define Palo Alto as singular--will come to an end April 7 when the Co-op Market on Middlefield Road closes its doors for the last time.

Mounting losses after losing money for 18 straight years forced the Consumers Cooperative Society of Palo Alto to bite the bullet and sell the property to a developer.

Other Stories From humble beginnings in troubled times The Co-op Markets More than a place to shop A Farewell to Co-op (published May 23, 2001)

After two months of negotiations with a real estate developer, the store's board of directors approved the sale of the Middlefield Road store and the 1.1 acres of land.

The board actually voted back on Jan. 3 to go ahead with the sale, but negotiations bogged down in offers and counter-offers until mid-February, when a deal was struck. As of last Thursday, a three-week "due diligence" period ended.

Duane Bay Sr., longtime Co-op board president, said the sales contract keeps the name of the developer private for the time being, along with the developer's plans for the property.

"But I can tell you that it's retail," Bay said of the plans.

The sale still must be approved by the Co-op membership.

Ballots were mailed out to the 13,599 families still on the membership list on Tuesday (many believed to be inactive). The Co-op needs a majority vote from its membership to approve the sale.

Failing membership approval, the store would be in dire straits.

"I don't want to use the "B" word," Bay said, referring to bankruptcy.

The store has been rumored to be closing for some time.

A cash flow problem in 1999 caused some bare shelves, fueling the rumors.

The Co-op had verbal agreement with a lender last October for a loan, Bay said, but word leaked out, newspaper stories were written, and the lender backed out.

The Co-op Markets The Co-op Market began in the downstairs portion of a house on Bryant Street in Palo Alto in 1935, moved to a small storefront in 1937, and moved to what would be its flagship store site on California Avenue in 1941. The other Co-op stores and dates of operation are listed below: 1935-37: Bryant Street, Palo Alto 1937-41: Florence Avenue, Palo Alto 1941-88: California Avenue, Palo Alto 1954-86: San Antonio Road, Mountain View 1959-82: Fremont Corners, Sunnyvale 1969-01: Middlefield Road, Palo Alto 1971-71: Bay Road, East Palo Alto 1978-88: Menlo Avenue, Menlo Park See photos of the Co-op Markets

The Co-op also tried to put a deal together last October to redevelop its block on Middlefield Road by combining with adjacent property owners. If successful, it would have resulted in a new market.

But Bay said that deal would have taken too long to put together.

"Fairly early on, it became painfully obvious that time was money, and we didn't have much time or money," Bay said.

While redeveloping the block initially looked promising, Bay said that planning and construction would take about two years, making it unworkable.

The sales price is not being disclosed. But the ballot to the Co-op membership states that $3.75 million in various obligations, including a $1.6 million bank loan, would be covered by the sale, with $300,000 to $500,000 in cash surplus afterward. Some future cooperative venture could then be explored, Bay said.

Born during the Depression when the idea of a cooperative buying society meant lower prices, the Palo Alto Co-op had six stores over the years between Sunnyvale and Menlo Park.

For many, April 7 will undoubtedly be a painful day.

"Everyone was crying and sad at the (January) board meeting," Bay said.

"We're like a family, in a sense," said Bay's wife, Mary. "Many of our employees have never worked anyplace else."

The Co-op Market has been struggling financially for the last 18 years. In 1988 the cooperative society decided to sell its California Avenue and Menlo Park stores to keep the Middlefield Road store afloat. But time finally ran out.

"The crux of the problem is we've been running a deficit for 18 years," Bay said.

While the Co-op Market has its debts, it also owns commercially valuable property in the heart of Midtown. Bay said the proceeds from the sale of the 1.1-acre property will more than cover the debts. After the store closes, Bay said the cooperative society will have to decide what it does with the remaining money.

The Co-op has 13,000 members on its rolls, many inactive. Bay estimates that about 5,000 to 6,000 members still shop there. The store is open to non-members as well.

A shopper pauses in an aisle while shopping at the Middlefield Road store. Photo: Don Feria

Mary Bay is worried about the fate of the Co-op's home delivery system, which has been going for 26 years. About 100 people have their groceries delivered by volunteers. Many of those in the program are elderly. Three are more than 100 years old and several more are in their late 90s, she said.

She was scheduled to meet yesterday with the two dozen volunteers who deliver that food.

"We hope we can figure something out to help them," she said.

It's not easy to figure out how many members the Co-op had at its height, since people stayed on the rolls after they moved away. In other cases, the same membership number was used for several generations of members. There were 28,000 members--families--on the rolls at the Co-op's 50th anniversary in 1985, an event Mary Bay coordinated.

Duane Bay came on the board in 1988 and was immediately made board president--just in time to face the financial crisis that led to selling the Menlo Park and California Avenue stores.

One of the innovations that all Co-op stores had was a "kiddie korral" where a paid child care worker would take care of children while their parents shopped.

"So few people realize how many things in town were initiated by the Co-op," Mary Bay said, including a downtown child care center.

The Cable Co-op, for instance, was born in a member's living room in the early 1980s. The cable cooperative sold its system to AT&T Broadband last year and went out of business, so the Co-op Market outlived the cable cooperative it spawned.

"I was keeping my eye on that last year," Duane Bay joked, to see which would outlast the other.

"In the last few weeks, I've begun to internalize what it means," Duane Bay said of the market's demise. "It's a cutthroat business because the margins are so tight."

An especially well-run supermarket won't own anything on its shelves, he explained, because the bills for the food are due from seven to 30 days after delivery. If the product turns over fast, the store stays ahead of the due dates on the bills.

The Co-op, which often special-ordered items for members with dietary needs, often didn't stay ahead of the due dates on the bills. "Things that members used, we would buy a case (the smallest quantity) and sell it back to them week by week," Mary Bay said.

"This is about being responsive to our members," Duane Bay added.

Among other things, the Co-op kept a "crisis fund" which it used to provide food to needy people referred by churches or the Salvation Army. Donations and used book sales funded the fund.

Duane and Mary Bay have been Co-op members since 1962. One thing Mary Bay learned was "anything is possible. Two people can make a difference."

The Co-op received a blow last year when its general manager, Bob Claxton, collapsed and died at work. Bay stepped in and did some of that work himself, but the sometimes bare shelves gave rise to rumors that the store was going out of business.

Bay and other Co-op board members did all they could to come up with a new plan for the Co-op's future and quell the rumors of the store's demise, but the rumors finally turned out to be true.