Board Corner: Our Comprehensive Process in Considering Consolidation

For the last three years, the LHC board and leadership team has worked on our strategic plan, as we map the course for our cooperative. We have sought to define success in appropriate terms for our business, considering broadly our ability to execute our mission while maintaining our core values. We have explored important topics, including:

> Our value proposition to our stakeholders: member/owners, staff, community, partners;

> Our financial position and outlook including the key consumer trends impacting revenue and rising operating costs such as healthcare and wages;

> The competitive landscape including 24 grocers within four miles of LHC, multiple new local entrants and new outlets for traditionally cooperative championed products,

> Relevant retail grocery industry, food system and regulatory trends.

We have used this shared knowledge to assess our threats and opportunities and set the course. In the 2014-2015 timeframe, several growth options developed. At the same time significant new local competition including competition from expanding local cooperatives emerged. The board and management sought to gain a greater understanding of the mindset and plans of our peer group and assess the implications. With solid foundational values, in 2015 our management started a dialogue with other like-minded cooperative leaders to find ways to work together in cooperation versus competition. Those discussions culminated in a broader conversation about a collective opportunity that would build on our strengths. The leadership team agreed to explore this strategic course while ensuring LHC was on great footing and maximizing its potential on a standalone basis.

such a significant consolidation. We spent many hours researching and discussing the feasibility, merits and the concerns of what a consolidation would mean for us. We examined other examples of cooperative consolidations nationally, while closely questioning the internal financial, cultural and operational impacts of such a decision for us. The LHC board determined there were enough positive attributes of a combination with these two co-ops to vote unanimously to move forward with the recommendation to complete further due diligence and analysis and to engage member-owners. The start of this engagement phase was announced in the June 20th letter to Linden Hills Co-op member-owners.

The process is designed to be thoughtful, transparent and inclusive. After gathering member-owner input and extensive planning work, LHC along with the other boards will review the feedback and the final consolidation plan and vote whether to put consolidation on the October 2016 Annual Meeting ballot. Town hall meetings at each co-op, and board listening sessions are all opportunities for our community to gather input, ask questions and share information. Alternatively, more information is available on the LHC website, and feedback may be left at the comment box at the store and at board tablings at the store. An Annual Meeting announcement and the legal owner information packet outlining the details and information to make an informed vote will be mailed to each member-owner at the end of September.

Today, each of these cooperatives is individually strong within a shifting marketplace, and we believe that LHC’s strongest path into the future is through more cooperation. Throughout this process, the LHC board will continue to be guided by its duties to its stakeholders and the core principles of shared values, fairness, feasibility, and commitment to represent our identity and our neighborhood. We look forward to your participation.