to Members of the Cortes Natural Food Co-op

at the AGM August 14, 2012


Theme:  A year of change and tremendous progress


Last year’s Board of Directors was elected as a slate with the following Manifesto:

Board Manifesto – 2011

  1. to urgently address the deterioration of Co-op finances
  2. to improve visibility and management of finances for the food store and café operations, and efforts to purchase land
  3. to restore margins through better inventory control, pricing and sales systems
  4. to implement management structures that better harmonize the efforts of the Board, the workers and the membership
  5. to set out a strategic and financial framework for efforts to purchase the land
  6. to introduce strategic plans for the store and café that will enable us to best meet the challenges of a general economic downturn locally and globally, intensifying competition and imminent increases in transportation costs
  7. to enhance communication with, and loyalty of the Co-op membership


The past year has seen more change than has happened at the CNFC in a long time.

Shortly after the new Board got up to speed with the urgent issues at hand, we realized we were in a dire financial situation that was much worse than had been anticipated.

This insight plus issues of Directors Liability and inadequacies with past accounting procedures resulted in conflicts within the Board that eventually led to resignations and changes at the Board level.

The Board consisted of these members:

Jason Andrews, Julian Ayers, Ron Bazar, Marc Belanger, Mike Gibbons, Beccy Griffin, Jasmine Lawrence (voted by staff to join as staff liaison in Sept.), Krista Ma, Jude Marentette

All but Jude and Jasmine resigned either temporarily or permanently. Shortly after Krista Ma left the Board, Ron Bazar rejoined the Board, as did Julian and Jason. Richard Andrews was voted in by the Board, leaving a final current Board of six:

Jason Andrews, Treasurer

Richard Andrews

Julian Ayers

Ron Bazar, President

Jasmine Lawrence

Jude Marentette, Secretary

As volunteers, we were overwhelmed with the tasks at hand to save the Co-op from insolvency. This was a very difficult time for all, including staff and members as we had to make urgent decisions about the café and wages.

We closed the café after much anguish. The Board recognized how many members valued its staying opened in the dark of winter. Volunteers were hired at the end of the summer without any concern for declining fall revenues. With business traffic shrinking, the expenses mounted. The choice was to keep it open and risk bankruptcy or to cut our losses and plan a proper re-opening with full costing of all operations under a proper business plan, something that was lacking in the original opening.

Shortly after this decision, it became clear that the temporary exemption from regular septic regulations would not be extended.

Once the café closed, we discovered how dire our financial situation was. Jason, now the sole head of our volunteer finance committee, set up a current double entry accounting system and brought the books up to date by generating and entering thousands of transactions from bank statements, and other sources. We finally got a better current and comprehensive handle on the finances. We discovered that the Co-op had taken on over $70,000 of debt, was months behind to suppliers who were demanding payment, had not paid rent for eight months to the School Board, had spent restricted government grant money, and was running staff costs way too high to continue. If drastic action wasn’t taken, we would not be in business today.

We reduced staff hours, asked staff to take a pay cut and reduced store hours. We also put strict controls on how much we purchased and tried to move stock that had been sitting for months in the back. Staff and Board members gave a tremendous amount of volunteer time during these transitions.

In January, Julian Ayers offered to work for free as manager to help turn the business around. Most of the changes in the store and bakery that you see today were done under his direction. Jason and Julian produced a detailed business plan for the bakery, which was made available for membership review in the store for several weeks before Julian organized the re-opening of the bakery under a sound business plan. He worked more than full time for four months! Thank you, Julian!

From the start, Jason Andrews worked tirelessly to implement a financial management and control system to professional accounting standards. Without Jason’s due diligence and strict attention to financial details while bringing our accounting systems to a higher level, we would not be in business today. He has worked full time for free and for month after month to accomplish this. We owe him a huge thank you for a task that rattled many cages but was so essential to our survival.

Richard Andrews worked to secure mortgage financing while negotiating our complex land purchase deal that we hope will close in September/October, managed a federal Co-op development grant that had gone sideways and organized three work bees to enclose the rear porch for a bakery storage and staff area, to do general property maintenance, and to clean up the property.

Many changes happened this past year to improve our Co-op.


Here is a list of our accomplishments for your consideration:


  1. Set up a local producers system that ensures:
    1. local Producers are paid promptly and in full for their produce
    2. local Producer produce is integrated into the Co-op ordering system
    3. detailed current invoice and payment details are made available to Local Producers
    4. payment is made via direct deposit, eliminating cumbersome record-keeping.
  2. Created faster checkout payment card processing to retail standards.
  3. Organized a proper and sanitary bulk packing operation to Health Department standards.
  4. Set up a produce cleaning station with sinks to Health Department standards.
  5. Brought organic meat and chicken into the store that many members wanted.
  6. Rationalized store merchandising in all areas
  7. Implemented an industry standard Inventory Management system, to help reduce waste, provide better product choices, and provide visibility of current stock levels.
  8. Implemented a Point-of-Sale system that supports important functions such as pre-pay accounts, membership discounts, itemized till receipts, and accurate information about sales.
  9. The POS & IM system will enable better ordering, dynamic pricing, and much better inventory management.
  10. Cleaned up years of clutter and old stock in the warehouse and improved warehousing operations.
  11. Removed the dangerous clutter of the pre-order area to a more efficient spot in the warehouse.
  12. Improved merchandizing and checkout flow in-store.
  13. Re-opened the cafe as a viable in-store bakery, providing year-round jobs, with summer take-out service.
  14. Implemented proper accounting system and now produce current financial reports on a weekly basis for each Board Meeting.
  15. Worked with the Health Department to bring all aspects of the store and cafe up to health standards.
  16. Implemented management and organizational structures to implement goals decided by the Board. The first step was the hiring of an assistant store manager, Bianca Lee, and the search began for hiring a store manager which happened in June with Eric Hargrave. At the same time, we improved our hiring and staffing practices.
  17. Implemented a web-based payroll system to ensure that:
    1. staff get paid every 2 weeks, instead of monthly
    2. pay is promptly made directly to staff bank accounts
    3. staff have online access to current, complete payroll records and deductions.
  18. Improved the efficiency of the bakery operation and enclosed the bakery storage room to Health Department standards.
  19. During this period, we were able to arrange a $15,000 line of credit with the CCCU. We have not tapped into this source of funds, but it is there for important or urgent financial needs.
  20. Committed to never bounce a cheque again.
  21. Overall improved the store operations so that information is timely and helpful in making decisions.
  22. Arranged for mortgage financing from VanCity for the land purchase deal.
  23. Built a functional office, added desks, implemented proper filing systems and record-keeping, and upgraded computers.
  24. Paid down some of the overwhelming debts and brought all accounts payable up to date.
  25. Paid eight months back rent to the School District.
  26. Paid outstanding fines to Revenue Canada.
  27. Hired a professional bookkeeper.
  28. Improved store lighting, purchased a meat cooler, and increased shelving capacity in the coolers.


On communications with the members:

1. Sent out a professional monthly newsletter often containing updates from the Board

2. Posted in-store notices as well as on Tideline

3. Organized two meetings of members to update our situation last winter

4. Posted minutes of Board meetings available to the members at the Co-op

5. Announced special updates and notices

6. Organized a Special General Meeting re-mortgage and operational member fees.


All these efforts take a tremendous amount of Board and staff volunteer time.


With sales at the Co-op continuing to decline from the prior fiscal years, there is a great danger to think that prepaid deposits can be used to finance projects just because there are “extra funds” in the bank. With a declining sales base, the use of pre-pay funds to cover operating losses could quickly jeopardize the Co-op. It is important for members to understand that pre-pay is the same thing as debt, albeit at a favourable cost to the Co-op. When we reintroduce that capability, we must be very careful to manage the liability of pre-pay loaned money.

Store sales are down from last year again. Some of this has been offset by new sales from the meat department and bakery, but both of these areas have low margins and the bakery increases labour costs, affecting our profitability. We must be careful to ensure that we do not slip again close to the edge of insolvency. Cortes Island is still in the midst of recession as fewer jobs are found, people move off the island and many cannot afford the luxury of organic foods, or choose to shop off island for lower prices for their food purchases.

Freight challenges have been an issue with changes in our past arrangements. Freight costs have risen considerably this past year.

The Co-op must continue on a path of strict financial management to survive. The extra funds that a busy summer brings in must be carefully guarded to cover winter operational costs and one-time expenses that will be incurred.

The coming year – a partial list of things to do:

  1. complete the land purchase
  2. implement land management functions as a landlord
  3. create a business plan in consideration of the increased expenses associated with the land purchase
  4. explore the potential for a new organization to manage the land for multiple community uses and provide a long-term lease to the Co-op
  5. do first level of septic system: fund raise, etc.
  6. improve proper Board structure, board functions and responsibilities for greater efficiency
  7. staff discounts
  8. update the Co-op rules of incorporation
  9. physical structure — an offer to build a new store is on the table or keep fixing a very inefficient and costly structure forever
  10. increase sales volumes in every way possible at the Co-op
  11. become more efficient with better margin control
  12. increase member benefit programs
  13. grant money oversight
  14. increase bulk foods area and selections
  15. improve Human Resources area with a committee of the Board
  16. review communications committee recommendations and implement feedback mechanisms as required

Members of your Board will not be seeking re-election this next term. It is time for the mantle to be passed to new volunteers.

Ron Bazar

President of the Board of CNFC


My Personal Message


Dear Co-op Members,

This message is from my own personal perspective and does not include others on the Board who may have different views than what I express here. I will not be seeking re-election.

When I joined the Board, I did so because to me it was obvious what was needed to turn the Co-op around as a business. I had no idea how much effort would be required dealing with people’s emotions and viewpoints.

I decided early on that I did not want to dwell on what prior boards, management, or staff had done. Decisions were made with the best interests of the Co-op as they saw them at the time. We would not have a Co-op without the tremendous sacrifice and leadership role of Alex and Krista and many, many volunteers over the years.

I see no real gain to be had by pointing fingers at others. In fact, I went out of my way to focus on moving ahead and on the Co-op’s survival. What had quickly become obvious to those of us with an understanding of operational finances was that we were heading to bankruptcy rather quickly last fall.

We had to make decisions and often very unpopular ones. They were not easy to do, especially around the cafe, staff wages, or pre-payments.

I am completely uninterested in blaming or accusing others who did their best.

So here we are today. There are some very disgruntled members.

My perspective is simple. If you see a problem, offer a solution, and then, best of all, volunteer to help implement it. We have many areas that we could do better in and help was/is needed. The reality is that this is our Co-op, we the members. It is time for others to step up to the plate and build upon what has been done this past term.

The Board has been overwhelmed with the job to get us onto a sound financial footing at a time of declining sales and profits. What was easy to overlook when sales are increasing cannot be done in these difficult economic times. It is no longer easy to get financing or donation funding, and the Co-op is not in a position to take on additional debt, as we will soon have a mortgage to pay.

We were initially turned down at the CCCU for a line of credit by head office. It was only in my offering an undertaking of strict financial responsibility that the decision was overturned. We want that Line of Credit in case we have an emergency and do not have the cash flow to fund it. A simple example would be a cooler that goes down and needs replacing immediately. We cannot do this with the tight financial condition we are in. We have not touched this LOC to date, although we came close a few times. We must be diligent in the management of our cash and must respect every dollar, unlike earlier days.

Speaking for myself, I have felt overwhelmed with the amount of time and effort it takes to manage all the sensitive dialogue that being on the Board has taken. The personal toll has been great. I did it because I could not sleep well if the Co-op had failed and I had stood by without helping. We have managed in a very short time to institute profound changes that if followed will give the Co-op a fighting chance to survive, but if not adhered to will easily put at risk a valued community asset.

Some members want more dialogue and want to go backwards to challenge some of what we have done. I personally do not have more to give and am happy to turn over my responsibilities now to those who want to do better. It is your turn to build on what we have done.

Offer your expertise in this area and seek election to the Board with a clear message of what you want to do.

I ask those who are disgruntled to let go of the past and find a way to help the Co-op thrive now. Volunteer your efforts, find solutions and join the Board or a committee.

Certainly we could have done better as a Board. But this Board has saved the Co-op from disaster. You may disagree with that perspective, but take a look at the achievements and the spirit of the staff when you shop today at your Co-op. Measure us by the results we have done and not what we haven’t done. Join the Board and lend a hand. Volunteer for a project that you see needs being done. Bring your expertise in communications and member dialogue. Find solutions. Inspire others to help. Bring positive and happy energy so we can build a thriving socially conscious and profitable business, owned by its members and responsive to them.

It’s our Co-op. Our future is not guaranteed with declining sales and profits. It needs all of us to help more by shopping more here, by seeing how incredible an institution we have here on the island, that empowers and appreciates its local producers and delivers the best food possible to the island. We would all lose if the doors were to close. It is up to us, now, more than ever.

We still have many challenges ahead. It is your support, your positive contributions that will make the difference in what the Co-op will be.

Ron Bazar

Member of CNFC