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FIGHTING FOR SURVIVAL

Tribune photo by MICHAEL SPOONEYBARGER

David Taylor, owner of Nature’s Harvest Market, 1021 N. MacDill Ave., will turn his store into a deep discounter in January. The revamped store will carry a limited assortment of natural and organic food products, but will offer the lowest prices on them.

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By MICHAEL SASSO, The Tampa Tribune

Published: November 27, 2007

TAMPA - Filing bankruptcy was a way to get out from under a crushing bank loan and turn around his slumping natural food store, Nature's Harvest Market.

David Taylor never saw it as the end of his business.

But in the days after his Oct. 9 Chapter 11 filing, Taylor noticed people sizing up his store shelves wondering whether they could buy them. Their assumption was that Nature's Harvest Market would be shutting its doors.

"People were coming in saying, 'Can I buy this fixture?'" a frustrated Taylor said.

Chapter 11 bankruptcy protection allows businesses to reorganize their finances without harassment from creditors and, hopefully, remain in business. However, people often mistakenly see it as a synonym for "going out of business," which added to his problems.

A month and a half later, Taylor is battling back by changing his store's format to a low-price business model. Taylor hopes it will help him better compete against food industry titans Whole Foods Natural Market and Publix. His story shows the challenges facing independent retailers when big chain competition moves in down the street.

Quiet and modest, Taylor, 49, pokes fun at himself by wearing a name tag at his store that reads, "David Taylor, head honcho." He's respected enough in the small natural food industry that he's a past president of the Natural Products Association, a nationwide industry trade group.

Still, his 22 years of industry experience and goodwill didn't prevent him from running into financial trouble recently.

Three years ago, Taylor began planning to expand Nature's Harvest Market to take on powerful new competitors.

Looming large was the Tampa debut of Wild Oats Natural Marketplace, which would eventually open about a mile away at Interstate 275 and Dale Mabry Highway.

Part of his plan was to buy his building at 1021 N. MacDill Ave., because he had already put so much money into the building. He took out a $2.6 million bank loan backed by the property and the Small Business Administration and began expanding his store to 18,000 square feet from 13,000 square feet.

Then a series of unforeseen events hit at once. Among them:

•Skyrocketing interest payments. Taylor said he made a mistake by taking out a variable-rate business loan, which shot up when interest rates started rising. Where he originally paid $14,900 a month on his mortgage, it eventually rose to $22,700 a month.

•Taxes and insurance. Like other small-business owners, Taylor was whacked by rising property taxes, which rose to $50,000 a year from $35,000. Meanwhile, his property insurance more than doubled to $27,000 from $12,000 a year.

•Brutal competition. Taylor was prepared for Wild Oats opening, but couldn't have foreseen Publix getting into the natural foods game by creating a new store concept called Greenwise. Neither could he have foreseen Fresh Market, a gourmet grocer, opening up on Henderson Boulevard near his store.

The convergence of those three problems was too much to handle, and by this fall he was 90 days behind on his mortgage, Taylor said. Worse, he felt his bank, which he declined to name, abandoned him when things got tough. He filed for bankruptcy protection in early October to regroup.

His first move after filing for bankruptcy was to assure his food suppliers that he wasn't going out of business. His second: convincing his customers of that. Taylor realizes now he should have done a public relations campaign along with filing for Chapter 11, because he lost customers after word of his bankruptcy got out.

"We have people automatically assume that if you file Chapter 11, you're out of business," Taylor said.

Today, he is trying to revamp his store to compete against Whole Foods and Publix Greenwise.

Whole Foods bought out the Wild Oats chain and plans to turn the Tampa Wild Oats store into a Whole Foods location.

In January, Taylor will turn his store into a deep discounter that carries a limited assortment of natural and organic food products, but offers the lowest prices on them.

He got the idea from an Atlanta-area natural food retailer called Natural Foods Warehouse, which operates two natural foods stores by using a deep discount formula.

His new strategy will include a promotional campaign called Y-Buy Savings, which will be similar to Wal-Mart's "every day low prices" strategy, he said.

He knows some customers will be turned off when they can no longer find their items, but he has to change to survive, he said.

Taylor's strategy could work, but will be a challenge to pull off successfully, said Jay Jacobowitz, a natural foods industry consultant with the firm Retail Insights.

Often, when small retailers try to adopt a low-price model, their sales and customer counts go up. However, so do their labor costs, because doing a higher sales volume requires more help. Ultimately, they wind up making less profit even with higher sales, Jacobowitz said.

"If you do the math, you can easily create a squeeze," he said.

Still, Taylor said that with all the new competition within a two-mile radius of his store, he had little choice but to change.

"There's no way I can beat the Whole Foods experience or the Fresh Market experience," Taylor said. "I don't have the money to throw at it."

Reporter Michael Sasso can be reached at msasso@tampatrib.com or (813) 259-7865.

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