retail news in context, analysis with attitude

The San Francisco Chronicle has a story about how a group of community leaders and business people in West Oakland, California - a community where 50 percent of the residents don't have cars and the closest full service supermarket is a mile and a half away - are raising money to open a local food store.

According to the story, the group "plans to build a full-service grocery store, the People's Community Market, in a vacant lot at the corner of West Grand Avenue and Market Street. But the entrepreneurs, headed by Brahm Ahmadi, are using a nontraditional method to raise funds.

"They're selling stock in the supermarket on the People's Community Market website without using an underwriter. The method, known as a direct public offering, was used by companies such as Ben & Jerry's ice cream, Annie's Homegrown foods and Costco when they were still fledgling businesses, and it is growing in popularity.

"So far Ahmadi, the founder and former executive director of the nonprofit People's Grocery, has raised $240,000 from investors who are disillusioned with Wall Street and want to put their money toward building a better community."

The goal is $1.2 million, which will then allow the group to obtain a $2.4 million low interest loan to complete the project.

Here's some of the interesting financial details:

"The direct public offering is regulated by the California Department of Corporations, a government agency that oversees business and financial transactions. The offering is only available until the end of September and is limited to Californians, as the federal Securities and Exchange Commission is not involved, Ahmadi said.

"The investment minimum is $1,000 for people who have less than $1 million in net worth - excluding the value of their primary residence - and $5,000 for investors who have more. After seven years, shareholders can choose to get back their original stake, plus 3 percent compounded annual interest, according to the terms of the offering. An investor will also receive an annual credit to the store worth 1 percent of his or her investment."

It is estimated that local residents spend close to $58 million annually on groceries, with seven out of ten dollars going to stores outside the area; while there may be no supermarkets, West Oakland is said to have 53 liquor stores and 14 mini-markets.
KC's View:
Good for them. This strikes me as a worthy cause, and I hope the neighborhood organizers are able to pull together the $1.2 million.