In an industry dominated by large national chains, regional grocers often struggle to maintain their market share. However, Topco, a grocery cooperative, has been instrumental in helping these smaller chains not only survive but thrive in the competitive grocery sector. Celebrating its 80th anniversary, Topco has evolved significantly, particularly in the last decade, when it initiated a commitment model that has proven to be a game-changer for its members.
Topco has built its reputation as an $18.3 billion privately held company that provides aggregation innovation and knowledge management solutions to a diverse group of members, including grocery retailers, wholesalers, and foodservice companies. This cooperative model allows members to pool resources and make collective purchasing decisions, which considerably lowers costs and increases competitiveness against larger market players like Walmart, Kroger, and Amazon.
One of the most notable changes in Topco’s operations occurred nearly ten years ago when it introduced its commitment initiative. Traditionally, Topco functioned as a voluntary cooperative. Members could choose to buy products at their discretion, meaning there was no consistency in purchasing patterns. However, with the new initiative, members who commit to purchasing a significant portion of their store brands through Topco can leverage better pricing and more strategic support from suppliers.
Randy Skoda, Topco’s President and CEO, noted that committed members report an increase in volume through Topco by over $8 billion. This shift in strategy allows these members to function as a more powerful entity in negotiations with suppliers, as they can make unified purchasing decisions and create bulk orders. For members, this means not only cost savings but also access to product lines they may not have been able to afford or negotiate for on their own.
Topco has a diverse membership, currently totaling 46 members, with its top 20 members accounting for nearly 80% of the cooperative’s volume. Remarkably, 35 of these members are now committed to the initiative. These committed members represent a staggering 91% of Topco’s overall business, underscoring the effectiveness of the strategy in attracting serious engagement and investment from members.
One of the challenges for Topco is converting non-committed members into committed partners. Skoda explained that the transition often depends on senior leadership within these grocery chains. Turnover in management can create obstacles, as new leaders may be unaware of the advantages that Topco can offer. Therefore, education and regular communication about the cooperative’s benefits are crucial. Even during economic downswings, such as when the industry faced inflation challenges, many non-committed members recognized their need for collaboration and turned to Topco for assistance.
While some might worry about competitive overlap among members, Topco has established protocols to maintain confidentiality and comply with antitrust regulations during discussions. Members often realize that their real competitors are the massive retailers, not each other. This mindset encourages collaboration rather than conflict.
Going forward, Topco sees significant growth opportunities in the development of private label products tailored to regional markets. The cooperative has invested in a strong insights team that combines national and regional data to understand customer preferences. This strategy allows Topco members to develop unique products that resonate with local shoppers. Skoda emphasizes the diverse nature of Topco’s membership as a key asset, enabling the company to cater to different market segments effectively.
Moreover, one of the areas Topco is exploring for expansion is national brand purchasing. Despite current figures showing minimal purchases of national brands, Skoda believes that if Topco can negotiate on behalf of its members, its business could potentially double without requiring new product development. This approach would elevate the cooperative’s position in the supply chain even further.
Additionally, foodservice represents another potential avenue for growth. By streamlining the purchasing of commodities for both retail and foodservice operations, Topco can create efficiencies that benefit members but have historically been neglected. For instance, collaboration on bulk purchases of common items like sugar and cooking oils could significantly reduce costs for members on both sides of the business.
In conclusion, Topco exemplifies how regional grocers can leverage cooperative purchasing and strategic commitment to improve their competitiveness in a challenging marketplace. Through innovative solutions, targeted strategies, and adherence to industry best practices, Topco is not only reshaping its own future but also the landscape of the grocery industry as a whole.
