Report on ONFC Annual General Meeting (May 3rd, 2003)

Attended by: George Ashcroft and Maria Hatzipantelis

Hello fellow Ebytowner's.
We have placed a copy of the AGM package in the store manager Board member mail slot. Included in the package is the agenda for the meeting, the President, General Manager, and Finance Reports, and Member Feedback that the ONFC received from members in response to the six questions they posed to the membership. George and I believe that it would be a good idea for Ebytown (perhaps the Board) to create our responses to the six questions and send them along to ONFC. (The six questions were included in the previous email you received from Maria and are on page 11 of the orange slide presentation sheets in the AGM package.)

The President's Report

Basically, the President stated that the Board is primarily concerned with the protection of the interests of the membership. The day-to-day operations of the organisation are left to the General Manager. The Buying Club, Information Technology, and Education committees disbanded. The Advisory Committee that consists of members interacting with staff was created. The President also talked about the increased competition in the food distribution market, increased consolidation of food distributors, and the increased demands by health food consumers for low prices, brand names, and one-stop shopping convenience. The ONFC has also decided to not implement the loan structure across all members because of the resistance from some Group B members (which are health food retailers) at last year's AGM and the increased competition in the food market.

The General Manager's Report

The ONFC took on a number of new dairy product lines after the closing of Organic Choice early in the year. A new computer system designed to improve the efficiency of the organisation and reduce errors (sound familiar?) was implemented at a much greater cost than was originally estimated. In addition, ONFC was chosen by Whole Foods Market (a large U.S., natural foods supermarket) to be the primary supplier for its first Canadian store in Toronto. Unfortunately, the store has not done very well and the ONFC has lost a lot of money because of this. Lower sales also contributed to the decision to cut staff, and reduce inventory. This resulted in the inventory shortages and reduction of service to members that we as Ebytown have experienced. ONFC continues to look at new ways to cut costs.

The Finance Report

ONFC had a net deficit of $229,000 in 2002, despite doing $17 million in sales. Factors that contributed to this net loss were the following: increased bad debt, the very high cost of the changeover in the computer system, the lack of expected profits from the supplying of the Whole Foods supermarket in Toronto. To turn the organisation around, ONFC will continue to carry a very low inventory. We also need to generate new capital for the ONFC from the following sources: 1) retained earnings, 2) member equity (loans or shares), 3) commercial loans (which the ONFC cannot apply for anymore), 4) private investors (wanting to invest in ONFC but not control it).

While ONFC finances appear to be in dire straits, it is only as a result of financing long-term costs with short term funding. In reality a good work out case. Examples of this type of financing included: the computer system financed out of working capital; the build up of inventory to supply Whole Foods in Toronto, which after a short flare up, dropped like a mill stone; and the hiring (and later firing) of extra staff to cover increased business from Whole Foods, which of course resulted in a large payroll it took time to trim. ONFC have basically run out of a line of credit with the Credit Union. To some extent they have relied on their suppliers who in some cases may be tired of waiting for payment and not shipping. On the financial statements their accounts payable exceed the accounts receivable. Frankly, a $700,000 loan which should be long-term would place them in a reasonably good position. This will have to come from somewhere for them to survive, which, they will. A wholesaler, in a niche market with $17 million in sales, will not fold. [I must credit George for his brilliant analysis of the ONFC financial statements which I of course, did not understand at all!!!]

Following the reports of the President, General Manager, and Finance Director, the ONFC gave a "Strategic Direction" presentation, which was essentially the same as the document Maria emailed out to the Board prior to the AGM. After the presentation, there was a general discussion by the membership of the information presented. The consensus was that the membership did not support a merger (sell out) with a for profit company. Most members supported a commitment to whole, natural foods and the values we have come to associate with the ONFC. There was also support for a joint venture with a for-profit company as long as the co-op status of the organisation was maintained. The ONFC did not reveal the names of the companies that they had been talking with, nor did they present an outline of what a joint venture would look like. We were left with many unanswered questions.

In the upcoming months, another meeting will be called and presumably, the Board will then offer a recommendation for the membership to vote on.