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What opening a nonprofit grocery taught the former president of Trader Joe’s

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It’s not the cookie butter, chunky guacamole, or even wine as cheap as $2 that tops former Trader Joe’s president Doug Rauch’s list of favorite company products — it’s the microwavable brown rice.

“That frozen item that they carry saves like 40 minutes a day for me to have to cook brown rice,” Rauch told his audience at the March 9 MIT Sustainability Summit in Boston. “It’s always right. It’s done just perfectly. I don’t have to remember ‘oh my god, I burned the pan.’”

This “speed-scratch cooking” hits a sweet spot for Trader Joe’s customers, Rauch said, but that appreciation for a simple, healthy alternative also hints at Rauch’s driving purpose behind his most recent food endeavor, the grocery store Daily Table.

During a talk at the summit, Rauch shared lessons learned from opening the first two nonprofit grocery locations in the Boston area.

Set and understand your mission.  After 30 years with Trader Joe’s, and a six year stint at nonprofit Conscious Capitalism Inc., Rauch decided to tackle “food insecurity.”

According to the Department of Agriculture’s Economic Research Service, in 2016, about 41 million people (roughly 16 percent of the American population surveyed) lived in food insecure households.

Rauch admitted, however, that his initial plan to solve food insecurity was more of a “solution to the wrong problem.” He’d planned to go around to the Boston-area supermarkets and food banks, get food just at its expiration date — like bread — and distribute it.

“And hunger will be solved in Boston,” Rauch said to laughs.

As he learned through community meetings and talking with potential customers, being food insecure wasn’t a struggle to get enough calories — it was not being able to afford food like fruits, vegetables, healthy meats, and dairy products.

To keep prices low, Daily Table sources its food from farmers, factories, and supermarkets, through donations of excess food, “imperfect” food, and reduced purchase prices. Nothing is sold past sell-by dates, though some items are sold close to them. The Boston Globe reported Rauch initially wanted to sell food that was still safe to eat and past its sell-by date. But in 2015 the Boston Public Health Commission forbid that retail practice.

“Our model is to come in and disrupt the practice of having to consume empty calories,” Rauch said. “We do it by also creating jobs — we have 61 people who work for us, I’d say 80 percent are from areas around the store and are representative of our community.”

Be nimble.  Though Rauch had set Daily Table’s business model, he still found himself making “one constant adjustment after another adjustment.”

Through community feedback, Rauch learned that many customers wanted flexibility with meal preparation. Not everyone had the time (or wanted) to make a full meal after getting home late after work. So Rauch hired an executive chef to plan affordable, prepared meals.

And most importantly, Rauch pointed out, he learned people didn’t want handouts.

“I’m told over and over again, how good they feel: I’m providing this for my family. I can now finally come in, buy the foods I’m supposed to be eating, I feel good about what we’re feeding our families,’” Rauch said. “It is so fundamental to the human need we all have, which is for respect for dignity.”

Be mindful of culture.  Daily Table could have stocked its shelves with popular moneymaking junk food, Rauch said, but customers must go elsewhere to buy sugary juices and other sweets.

“Economically that’s a challenge for us, the dynamic for us as a business that’s trying — although we’re a nonprofit — to break even, so we don’t have to do heavy philanthropic lifting,” Rauch said. “But there’s a challenge, a dynamic one.”

It’s OK to make money while realizing your purpose, but no one should go out only wanting to get rich, Rauch said. Plus, if you only have great operations shrouded in a toxic culture, today’s marketplace of millennials and internet-savvy users “will punish you for it.”

Ask yourself, can you drive that sense of purpose, the culture, down through your company’s policies and procedures, Rauch said.

“Culture’s your DNA — it’s the one thing that nobody else can really copy,” Rauch said. “It’s the thing that will distinguish you and keep you from being an easy mark for anyone to pick off. It is integrated with strategy; it’s not totally separate from it.” 

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