Mandela Foods Cooperative: Subsidizing failure

West Oakland houses 28,000 people and does not have even one full-service grocery store. Residents with access to a car or near the Emeryville border can shop at Pak ‘n’ Save, but most of the area’s food needs are met at one of West Oakland’s 53 liquor stores, where produce is scarce and prices for staples tend to be significantly higher than at real grocers. (A 2005 UCSF School of Medicine study found that in Hunter’s Point liquor stores, a loaf of bread averaged $1.94 versus $1.09 in grocery stores elsewhere in San Francisco.) This places a serious burden on an area where the average income is only $12,000/year. Despite wonderful efforts by local groups to make produce more readily available, the food access and food security situation in the area is dire.

Enter Mandela Foods Cooperative. Mandela Foods Cooperative is going to be a worker-owned full service grocery store that will sell fresh, locally-grown organic food at affordable prices. It will also feature a health education center that provides nutrition training resources and events. It will provide job training, employ only local residents, and its worker-ownership model will provide opportunities for low-income Oaklanders to build wealth. The cooperative is going to share its profits with the community via matched savings accounts at the People’s Community Partnership Credit Union and funding other local start-up businesses.

It all sounds amazing, doesn’t it?

Okay, let’s step back. The Mandela Gateway, um, “transit village,” opened in 2004. It’s a 168 unit development that replaced a distressed 46 unit public housing project. It was financed partly with federal HOPE VI funds and has 21,000 square feet of retail space, which is doing…well, it could probably be doing better.

A woman named Dana Harvey decided that she wanted to use that retail space for a cooperative community market that would revitalize West Oakland, and told the Oakland Housing Authority Board in August of 2004 that her group, the West Oakland Food Project Collaborative, would like to own the retail space (PDF!) in the development. Since the Housing Authority wasn’t legally allowed to sell the space, they said no. Harvey then asked to lease the space, but claimed that the market rents being charged by the development’s operator, Bridge Housing were too high for her business. When Harvey failed to produce a business plan, Bridge moved on and began looking for other tenants, hoping to recruit a Walgreens or another pharmacy as their anchor tenant. Harvey objected to the idea of Walgreens coming to West Oakland, saying “OHA and Bridge were determined to create a Pseudo-Emeryville at the foot of a community visioned Mandela Transit Village project. We believe that they in fact know that they will make a considerable profit on this space by enticing outside businesses, that cause social and economic degradation in the community.”

Lucky for Harvey, Walgreens wasn’t interested in West Oakland, and neither was anyone else. Bridge entered into an exclusive negotiating agreement with Mandela Foods to lease 11,000 square feet at Mandela Gateway in 2005. Since Harvey had no experience in the grocery business, Bridge placed conditions on their agreement, asking the group to raise $500,000 to guarantee their rent for the first three years, and in return, promised to contribute $250,000 to their start-up costs. In February 2006, the West Oakland Project Area Committee (WOPAC) approved a grant of $200,000 to the co-op and agreed to guarantee an additional year’s rent, and District 3 Councilmember Nancy Nadel contributed $100,000 of her project priority funds to assist them. By March, they were promising to open by in the summer of 2006, but as Harvey’s pleas for donations grew more desperate, some people (well, me, at least) began to think that seemed unlikely. From a message she sent out in April 2006:

IF EVERYONE ON THIS LIST SENDS IN $100, WE WILL RAISE OVER $300,000! Please consider this an important investment in your community, your health, and in building strong and healthy neighborhoods. Let’s set a new model for community business…

If everyone who attended last night donated $100, we would have raised over $200,000. Please look into your hearts and pockets to see if you can increase your donation to meet that goal.

The cooperative was unable to raise the remainder of the money, and in the summer of 2006, instead of opening, as promised, Bridge cancelled their agreement after they had missed multiple deadlines and failed to provide progress reports. Bridge suggested the cooperative take a smaller, more manageable space in the development, but Harvey wasn’t interested.

Bridge went back to the drawing board and started looking for a new anchor tenant, and in December 2006, announced that they were close to an agreement with the Southern California chain, 99 Cents Only. Unsurprisingly, this did not make Nancy Nadel happy:

Oakland City Councilwoman Nancy Nadel (Downtown-West Oakland) said such a store would offer cheap merchandise nobody wants and do nothing to help the residents.

“I told (Galante) that I wish she would rethink it,” Nadel said. “The whole mission of getting people out of poverty is to build their own wealth through their own businesses. I think she doesn’t have the confidence in Mandela Foods to do it, but I hope she changes her mind.”

Harvey didn’t like it much either, telling the Trib “There is nothing redeeming about the 99 Cent store.” Harvey and a group of neighbors protested Bridge’s decision to the Oakland Housing Authority, who owned the property, but the Housing Authority board declined to stop the lease.

The WOPAC was extremely displeased with Bridge’s decision, and at their December 2006 meeting, decided to complain to Barbara Lee (PDF!) about misappropriation of federal funds by Bridge, for not leasing the space to Mandela Foods. Things were a little sunnier the following month, thanks to a $220,000 grant from the California Endowment and a New Year’s Eve fundraiser that brought in $10,000, and Mandela Foods reported to the WOPAC (PDF!) that they were considering the smaller space in Mandela Gateway after all. Project manager Wells Lawson returned to the WOPAC in February of 2007, telling the Committee that they had finally decided to lease the smaller space. The Committee decided to not pursue a complaint against HUD (PDF!), but agreed to send a letter to Bridge requesting lease restrictions on the 99 Cent store that would limit food sales, particularly dairy and produce which might compete with Mandela Foods.

It looked briefly like things were on track, but then when Eugene Market in the Jack London Gateway center closed in March, suddenly freeing up a large space, they decided that they might prefer that location. In May of 2007, they came back to the WOPAC asking for $770,000 (PDF!) to cover tenant improvements and their first year of rent in the new space at Jack London Gateway. The WOPAC agreed that since this spot wasn’t even in the West Oakland redevelopment area (it’s part of the Acorn redevelopment area), it was probably not appropriate to spend their money on it, and scheduled the request for further discussion the next month. When the June meeting rolled around, the WOPAC didn’t need to worry much about it, since Mandela Foods reported they were no longer looking at Eugene Market and were back to the Mandela Gateway spot They told the WOPAC that their start-up costs were $598,000 and they had a $200,000 gap. The WOPAC approved the $200,000 grant(PDF!).

The group grew a little more conservative with their money during summer 2007, advertising for a General Manager at only $75,000/year, $10,000 less than they were offering in 2005. Mandela Foods finally signed their lease with Bridge for a 2,300 sf space at Mandela Gateway in early September 2007. On September 18, 2007, the City Council approved WOPAC’s recommendation and voted to give Mandela Foods Cooperative $200,000 from West Oakland Redevelopment Funds. At that time, Mandela Foods Cooperative said that with the grant, they would be open by November of 2007. In December, they came back to the WOPAC to give an update, saying that the store’s opening date had been pushed back to March (PDF!)

By February 2008, the store was behind schedule, but reported to that they were expecting to submit their store plans to the City in March and hoping to open the store by June 2008. Messages posted in late April to the Mandela Marketplace Board of Directors Yahoo! Group indicate that the funding remains a serous problem, with Lawson recently telling the incubator that they need to raise $40,000 immediately in order to pay their General Manager’s salary, but have only been able to collect $1,025 towards that goal over the past few months.

The 99 cents store opened in Mandela Gateway in January, and people seem to love it. Residents praised the affordable produce selection at the store to the Trib, even though the store’s entire produce, dairy, and meat section was restricted to 50 square feet at the behest of Mandela Foods.

Meanwhile, the People’s Grocery is also working on opening a market, and unlike Mandela Foods, they actually embrace competition. They have explored creative methods of financial support, including getting sponsorship for Whole Foods. The People’s Grocery has been providing food to West Oakland since 2002. They hope to open their store in early 2009.

At both the League of Women Voters forum and the HarriOak candidate forum, Nancy Nadel used Mandela Foods Cooperative as an example of something she’s doing to improve West Oakland. I’m sorry, but this is not impressive. I have no problem with worker-ownership and I certainly support access to local, organic produce and meat and all that. But having access to fresh food at all should the priority. I find it disgusting that Mandela Foods and WOPAC intentionally limited the availability of fresh food to the residents of West Oakland because they didn’t want the competition. I have absolutely no problem with subsidizing grocers in underserved neighborhoods if that’s what it takes to make food available. But it appears increasingly clear, and it should have been clear by 2006, that what we’re doing with Mandela Foods is simply throwing money away. These people just can’t get their act together and appear to lack even the tiniest clue about how to operate a business. Nancy Nadel should not be pointing to her continued support of Mandela Foods as an accomplishment. It’s an embarrassment.

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23 thoughts on “Mandela Foods Cooperative: Subsidizing failure

  1. Deckin

    V, thanks for providing a detailed story that serves as an abject lesson in all that is wrong with Oakland. This sad tale, in a rational city, would be a primer for all that should be avoided in the future, but, we know that won’t happen. Let’s see, we have Ms. Harvey who, if she had half the business acumen as does the ability to mau-mau taxpayer money out of soft skulled bureaucrats and politicians, would have been a billionare already by now. We have the other side of the equation, a bunch of endlessly guilty operatives and hacks only too willing to hand out money that the rest of us had to earn with the sweat off our brows. What a complete shock that a private company, with less lead time, with no in kind handouts, and little fanfare, moves in and actually begins to bring valuable goods to the people of the community. How the Stalinists must be fuming. ‘Why, they’re making a profit!’ The horror! The horror!

  2. Max Allstadt

    dto,

    I’m guessing that means the workers own the debt? Control the business somehow? It sounds like a lot of that investment was a giveaway, no?

    V-isn’t there something besides groceries we can talk about here? I mean I appreciate the details and the research. But it’s election time! Soundbites! Shallowness! Polemics!

    That transit village really is poorly plotted. A little rezoning or incentives around the other side of the BART station could go a long way. I mean at Fruitvale I can have a cup of coffee with a pretty girl, away from car traffic, and stroll over to the BART entrance. That’s what a transit village is supposed to do. I’m getting worried about MacArthur now. Gotta go have a look at those plans. Pedestrians! Plazas! Planning! How did that get missed?

  3. oakie

    Um, exactly how much grant money has been given away at this point? I can’t seem to get a handle on that.

    It is pretty clear these people are not business people, but they are in the business of collecting grant money.

    Grant money is not loaned. It is handed over and never repaid. Taxpayer’s money thrown away. And Nadel and Brunner tell us we can’t have more cops because the city has no money.

    Do you think our tax money is being spent wisely? If not, vote out all incumbents. Get rid of Brunner and Nadel, they are a curse.

    Anyone interested in starting a petition to RECALL DELLUMS?

  4. Californio

    In an area where average income is $12,000 per year, what kind of business can you run, really? The people at Walgreens aren’t dummies; they’d love to open a new store anywhere if they thought it could make a profit, but here, it won’t. No matter what kind of new housing, etc., etc., you provide for West Oakland, the level of income and education determines what the community will be like, including the businesses that will establish themselves there. That’s the real problem, not whether one store or another locates there.

    There’s a website set up to recall Dellums. Visit recalldellums.org

  5. V Smoothe Post author

    All of Mandela Foods funding has come from grants (government and charitable) and donations. It’s funny – you’d think that if their rosy financial projections (PDF!) had any relationship to reality, they’d be able to find someone other than the government will to invest in their business. In any case, they are, as far as I know, debt free.

    Max –

    I think West Oakland’s food access problem should be an election issue, but I can see how some people might be getting tired of it after three posts in a week. Fine, I’ll save my liquor store and bus line maps for another time.

    Absentee ballots get mailed next week, so I’m expecting next week to be 100% election coverage – I’ll finish my debate recaps, make endorsements, and provide some other election-related treats. If things go as planned, I’ll even get some coverage of the school board race in there. You’ll have all you asked for. Except shallowness. Elections are serious!

    As while back, I wrote a short feature for Novometro about the MacArthur BART transit village. It has some renderings.

    oakie –

    From City money, they’ve gotten $300,000.

  6. AK

    $300,000 from the City!

    I love to start a business – and I know that with a $300K grant I could easily start one, and employ many people! Where do I sign up.

  7. Robert

    Has Mandela Foods actually received the $300,000? or just been awarded a grant for money at some future time. If they have received it, where the heck has it gone, since there doesna’t appear to be an actual storein place yet?

  8. jarichmond

    I know as a first time poster, this may not carry much weight, but I’d be really interested in a post with bus line and liquor store maps. I know we have a massive oversupply of them, and I’ve seen maps linking liquor stores to homicides, but I’ve not seen anything relating them to transit.

    Also, I just wanted to say that as a relatively long time reader, thanks for all the work you put into this site! This has become my go-to place for getting local Oakland-focused news.

  9. Joanna/OnTheGoJo

    I did some research on Mandela Foods over a year ago and I heard then how rediculous and unrealistic their business plan is/was. I was told then that the 99 Cent Store had offered a better payment guarantee and that MFC had found another home that was opening in “just a few months”, but obviously that never happened.

    What I didn’t understand then (or now) is why the person leading the effort didn’t find another grocery store to partner with. I was on the phone to Bi-Rite, Andronicos, Molly Stones, etc asking why they weren’t interested in our part of town. I’m a nobody and people were willing to talk. Some said that they’d run the numbers and it just didn’t make sense, while others like Bi-Rite were too busy opening up other stores in SF.

    But how MFC got $300K is totally beyond me. I own a business in Oakland and all I ever get are rising fees and new fees that are wearing thin. If I hadn’t planned long in advance for the parking permit situation, I’d be having to fork out another $150/yr for a freaken parking permit for each employee, while Rockridge gets business permits for $50.

    The funny thing about the complaints on corner stores (aka liquor stores?) is that five plus years ago I would have loved to see one in the Jack London District! Instead, I had long since figured out how to make a meal out of items purchased from BevMo or Cost Plus. That was in the days of the Alameda tube closing at 9pm. Now, we have the Sierra Deli and it’s the best thing since sliced bread. When people around here complain about not having a grocery store I can easily laugh in their face. Cash N Carry, Sierra Deli, and even BevMo has added limes to their cheese area.

    Crack’n Crave, er, Pack N Save, is a tough grocery store, imho. I hate that the lights on Mandela aren’t timed and I always regret going there once I’m halfway there. If the weather is nice and it’s not too late I’d rather bike to Nob Hill Foods in Alameda. I suppose I could go to the stores around Lake Merritt, but I have to admit that I am not comfortable riding my bike anywhere near the lake.

    I do have a funny Gateway Foods story to pass along… when the most recent owner(s) took over – just after the previous owner had really fixed it up nice – they took out a lot of the items and turned it into more of an Asian market. I was in line to pay for two limes when the guy behind me starts yelling at the cashier. “Where’s the food? This ain’t food! This is shi*! You ain’t got real food. I want to know what happened to the real food.” It was so hilarious. And for at least the first month they didn’t take food stamps, and that also caused drama. I finally stopped going because they never seemed to have all the items on my shopping list. So while I’m not so sorry that the most recent owners are gone, it is sad that they can’t manage to put a market back in that space. All over $.39? I just can’t believe… but then I think about the players and I can.

  10. Another Westoaklander

    Oh you guys are SO RIGHT about MFC. Just look at who’s behind it and you will be enlightened. On the flip side of it is that we tried tried tried so very hard to get a store over there and nobody bit: we were close to a Longs Drugs at some point. But everyone eventually walked. The same poverty pimps that have been around West Oakland for decades, who get grants for projects they never do, and scream about racism when they are the racists, are pushing for more and more low-income rental housing here. This in a neighborhood that has somewhere around 40% of the low-income housing for all of Oakland (or was that for all of Alameda???). If you want to change things then first get rid of the East Bay Community Law Center which claims to “represent the community” (read: of poverty pimps who mostly don’t even live here!) and which pushes now for even more super low income housing next to the train station. Even the city’s staff report says that a) no more is required and b) it should be ownership housing to increase a stake in the community. Want to know why stores don’t come here: look no further! And this leads back to MFC which had no chance in hell of getting funding for that location (and also because they didn’t know what they were doing) , and they got money from redevelopment funds. Remember that redevelopment funds are to be used for projects that benefit the public for which private money can’t be found… so MFC, hopefully, will get it together. I thought they should have been asked to repay the 300k once they start making a profit, but nobody asked me.

  11. Ken O.

    V, thanks for posting about WO food situation.

    I have been really curious!

    Cheers.

    KO

  12. JAMMI Journalist

    The WOPAC knew MFC was a gamble, but thought the promises of a locally owned enterprise (as opposed to an out-of-town chain like 99cents), of organic, fresh produce, and of focus on grocery rather than grocery being a sideline (as it is at 99cents) made the venture worth the risk.

  13. Hayden

    I have a tough time understanding all the (planned) bells and whistles around Mandela Foods when the neighborhood would’ve been happy to get a grocery store, period. Health education center? Job training? Worker-owned coop? All wonderful things, but heck, we’d be happy to get one of the soulless big box pharmacies here.

    Such co-ops do exist–for example, the Hyde Park Co-op was around for the better part of 75 years on Chicago’s South Side (albeit in Hyde Park, near the University of Chicago), and successfully filled the roles put forth by MFC, before it went downhill in the last 10 years. But it had a lot of advantages (i.e., presence in Hyde Park, location near the U of C) that MFC does not.

  14. Joanna/OnTheGoJo

    But Jammi J, it seems to me that the promises and ideas of MFC were pie in the sky – never very realistic – and that makes it not really worth the risk. $300K is a good chunk of change. Wouldn’t it be better to risk City funds on something that had a considerably better chance?

    In hindsight, they could have given F&E the $300K to put towards the $0.39 difference in labor costs…

  15. Andrew

    Food co-ops are a lovely vision but a very difficult business. The Berkeley Co-Op began in the depths of the Depression, when many others did, and they are high-maintenance. I served in one of the Center Councils during the Berkeley Co-op’s last years and it was a sad time. I broke my butt trying to start a new local co-op when Berkeley failed. Launching a co-op takes a large body of committed shareholders, led by skilled visionaries who can inspire people rather than harangue public meetings.

    A West Oakland co-op that works would be a wonderful thing.

  16. Andrea G

    I agree they’re a challenging business, but here’s one that my family was involved in from it’s beginnings: http://www.coopfoodstore.coop/about It started, just as you said, in the Depression – because a small group of poor people decided they wanted better, cheaper food – last year it did sales of $66.1 million. My grandpa was the manager for his entire career, then my great uncle became manager – I worked there as a cashier. One key thing, I believe, is that it is a Consumer’s Coop – meaning every member gets a “patronage refund” at the end of the year. So – rather than a workers coop, where the team of workers owns it – the neighbors own it instead and – with continued education about the cooperative principles (check the URL above) – people feel invested. Just as you’ve said, it takes continued commitment from members of a community, and it takes strong leadership and management. But God I wish we could do an urban, consumers coop here in our neighborhood. I’ve seen it work, and it can be so, so powerful and good.

  17. David

    There are various coop models that have been successful with the right people and the right strategy. For instance, the relatively new Cooperative Grocery on the Emeryville/Berkeley border is based on the model of the Park Slope Food Coop in Brooklyn, which has thrived for several decades.

  18. Becks

    Wow V – thanks for the in depth reporting. I had heard bits and pieces of this debaucle but it’s even more disapppointing to see it all put together.

    By the way, I’ve love your grocery/food access and other issue-based reporting. Elections are interesting too, but you can’t really consider who to vote for until you know the issues