In a week's time, a burgeoning Boulder-based natural foods grocer changed in a big way.
A senior leadership upheaval last week at Alfalfa's Market — a two-store local grocer that is a reboot of the popular natural foods chain of the 1980s and '90s — resulted in the firing of three managers and the forced resignation of CEO and Chairman Mark Retzloff, an industry veteran who co-founded both iterations of Alfalfa's.
While Retzloff claimed the move was of a personal nature, Alfalfa's remaining directors say it was purely business: With two stores and 200-plus employees in a highly competitive natural retail field, Alfalfa's had reached an operational position where it needed to head in a new direction.
"The kind of management it takes to start a company is different than the kind of management it takes to run a company," said Barney Feinblum, Alfalfa's co-founder and chief financial officer.
The turning point for Alfalfa's, however, comes with a few complexities.
The abrupt nature of the turnover left a sour taste among those affected, and created fear among some employees.
The move also stirred concern among some longtime industry members that not only could the business rift spread through the tight-knit local natural products industry, but Alfalfa's could face future consequences if its founding vision is lost.
"We're witnessing a big change within the natural products industry in Boulder," said Steve Demos, founder of White Wave, the Boulder-based company credited with the creation of the multimillion-dollar refrigerated soymilk category.
Early bumps
The shake-up at Alfalfa's came just five years after Retzloff and Feinblum made an attempt to resurrect the natural grocery brand that was founded in 1983 and sold to Boulder's Wild Oats Markets in 1996.
Mark Retzloff, a founder of both iterations of Alfalfa’s Market, was forced out as CEO last week.
Mark Retzloff, a founder of both iterations of Alfalfa's Market, was forced out as CEO last week. (Mark Leffingwell / Daily Camera)
In 2009, the two formed a company and placed a bid on a grocery store at 1651 Broadway. The former Wild Oats store — which, originally, was an Alfalfa's — was one of 32 properties the Federal Trade Commission prodded Whole Foods to shed as a result of the Austin, Texas-based grocer's $565 million acquisition of Wild Oats two years earlier.
Retzloff and Feinblum's A-M Holdings ultimately was successful in its bid for the store and Alfalfa's intellectual property, and the partnership moved forward on the "Alfalfa's of the 21st century."
Alfalfa's 2.0 was expected to have similar, if not stricter, standards than the Alfalfa's of 1983. The new store would have a strong commitment to local products, organic items and non-genetically modified food.
The Alfalfa's approach of small stores, a large percentage of organic products, strong community involvement and a high level of customer service was enough to spur original Alfalfa's employees and investors such as Frank Hagan to become shareholders once again.
"I was excited about it; I knew it would be more difficult (for Alfalfa's to compete), but I still think there's a niche that Alfalfa's can fill," said Hagan, a one-time employee of the original Alfalfa's. " ... Whole Foods has become the Costco of natural foods."
The new Alfalfa's, however, faced some choppy waters in its early days.
Eight months after the grocer's Earth Day 2011 opening, Alfalfa's laid off nearly three-dozen employees — about 15 percent to 20 percent of the total workforce — and the company delayed expansion plans as the Broadway store's sales did not meet expectations, officials said at the time.
It took a couple years for the Broadway and Arapahoe store to hit its stride, and Alfalfa's eventually followed through with the second store.
Now, six weeks after Alfalfa's opened a market at 785 E. South Boulder Road in Louisville, the axe came down again. This time around, it was Retzloff and at least three other managers on the chopping block.
Steve Root stocks grapes in the produce area on Tuesday at the Alfalfa’s on Broadway and Arapahoe Avenue in Boulder.
Steve Root stocks grapes in the produce area on Tuesday at the Alfalfa's on Broadway and Arapahoe Avenue in Boulder. (Jeremy Papasso / Daily Camera)
Minutes after Alfalfa's announced last Monday the resignation of its chairman and CEO, Retzloff told the Daily Camera that his dismissal was a surprise. He claimed that he was let go after a dispute with Feinblum.
"Basically, I'm the fall guy on this," he said.
Retzloff, who is Alfalfa's largest shareholder with a 24 percent stake in the company, will remain on the four-person board of directors. He said he is still bullish on Alfalfa's business plan, but not so much the management.
The departure of Retzloff and the firings of three managers resulted in feelings of fear and uncertainty among Alfalfa's workers, one employee told the Camera last week.
It didn't settle well either with shareholder Hagan.
"I think Mark, more than anyone, understands the culture of Alfalfa's, the soul of the store," Hagan said. "I'm concerned. It needs to keep some of that original feeling to do well."
Upheaval consequences
Steve Demos has seen this before.
Starting from humble beginnings of selling tofu off a red wagon, Demos built a soy empire. His White Wave Inc. became a leader in the vegetarian foods business and then essentially created a refrigerated soymilk industry with the launch of Silk.
After Dallas-based dairy goliath Dean Foods snapped up White Wave in 2001, later coupling the business with a few other holdings — International Delight and Boulder's Horizon Organic, among them — Demos would resign four years later.
"I didn't necessarily agree with all the changes when I had to leave," he said. "When you're working with public funds or other people's money, it becomes a danger that an entrepreneur becomes very well aware of."
Demos has known Retzloff for the better part of 20 years and referred to his compatriot as a visionary with a strong track record of starting successful companies, including Horizon Organic.
Retzloff's forced departure from the day-to-day operational helm of Alfalfa's could have negative effects on the grocer in the future, Demos said.
"When you're looking down on the ground, working on the fundamentals, you're not necessarily keenly aware of where five steps out are, and that becomes the downfall," Demos said.
Consequences, he said, include the unintentional erosion of the spirit, drive and passion that were instilled in the company, its mission and employees.
"Whether the new management team can step in and replace that becomes the big question," he said.
The Alfalfa's moves also could have unintentional ripple effects, said Steve Hoffman, president of Compass Natural Marketing and a longtime member of the region's natural products industry.
"I'm sure that the principals are looking to do the best by the shareholders, the company and the customers," he said.
Alfalfa's directors hope to install a chief executive officer with a history in the natural products industry, said James Searcy, an Alfalfa's director and interim CEO.
"We're really looking for someone that relates to what we're doing, our mission statement and has the executive intellect," he said.
Both Searcy and Feinblum said they "absolutely would welcome" Retzloff's involvement and insight at the board level.
Retzloff on Friday said he would remain a shareholder of Alfalfa's and would continue to participate on the board level, including providing feedback on financial performance and strategic initiatives.
"I still believe in the mission and in Alfalfa's," he said. "I still feel that it has potential in this bullish retail marketplace for organic and natural foods, and I'd like to see us take advantage of where the marketplace is today."
Future vision
Alfalfa's Louisville location may be performing below initial expectations, but officials say new natural foods stores can take anywhere from 18 to 24 months to be profitable.
Alfalfa's also likely will not stop at two stores, Feinblum said, adding that the company has received many proposals across the state for locations.
"We think it'll be a good long while before we outgrow the opportunities that Colorado offers us," he said.
Whether the management changes would have an effect on those plans remain to be seen, said Compass Natural Marketing's Hoffman.
The highly competitive environment within the natural grocery industry and, especially, in the local natural grocery industry, likely puts greater pressures on operators to succeed, he said.
"In today's economy, it's hardball out there," he said.
Last year, natural products retailers posted $45.4 billion in sales, a 10.3 percent increase from the year before, according to the Natural Foods Merchandiser's 2013 Market Overview, which was released in June.
At conventional retailers, such as Safeway, Kroger and Walmart, sales were $44 billion, up 10.7 percent, according to the publication of Boulder-based New Hope Natural Media.
The natural channel has remained quite strong despite natural grocers facing growing competition not only from others within their industry and mass-market retailers, but also from Internet-based and delivery-focused retailers such as Door To Door Organics and Abe's Market, said Carlotta Mast, senior director of content and insights for New Hope Natural Media.
"Over the past few years, the competitive landscape has just really intensified," she said.
In Boulder, a city home to three Whole Foods, natural and specialty grocery stores outnumber conventional groceries, giving consumers plenty of choices.
Jenna Sampson, 29, of Boulder, lives near the Whole Foods off Alpine Avenue, but also frequents the Alfalfa's at 1651 Broadway.
"It feels like in between a Trader Joe's store and a Whole Foods," she said of Alfalfa's. "But I think the cafe adds a lot more of a community vibe."
Natural products stores already run on small margins — in 2013, the average net profit margin was 4 percent — so in order for independent natural retailers to compete, it's beneficial if they can drive customer loyalty via an authentic mission and vision, Mast said.
"There are a lot of rising stars within the natural products industry on the retail side looking to do things in a new way and focused on how to help a brick-and-mortar retailer remain relevant," she said. "There could be a focus (from Alfalfa's) on finding someone who brings those skills."