BOULDER — Just days before it announced the closure of its Longmont store, Alfalfa’s Market Inc. was behind on payments to the tune of millions of dollars on merchandise from vendors, which could hamper its attempts to turn around its fortunes after shuttering two of its three stores.
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Internal documents obtained exclusively by BizWest showed that the longtime natural-foods grocer was past due in paying hundreds of its vendors and potentially putting those businesses at risk of carrying bad debt or losing cash flow that’s critical for staying in business.
According to a list of companies that provide goods and services to the Market, as of mid-March, Alfalfa’s owed more than $4.18 million to 273 vendors. Almost half of that amount was more than 90 days past due.
The company shut down its longtime Boulder store in the last week of February, attributing the closure to decreased sales and high rents. At the time, Alfalfa’s said it would keep its Longmont store open, but then shuttered that location in late March. That store was open for just longer than five months.
Alfalfa’s Market declined to make president Mark Homlish or anyone else available for an interview and declined to comment specifically on any particular vendor relationship, citing confidentiality.
In response to detailed questions about the company’s obligations and its strategy to manage that debt with only the Louisville store, the Market called the figures obtained by BizWest an “incorrect and incomplete” picture of the company’s financial health at any given time.
The company said it would not provide financial information because it is privately held and would not comment on its obligations to vendors.
“Any financial information shared … does not reflect the current financial situation of the company, nor would it have provided a complete picture of our financial health at any given point in time. We are doing everything we can to work with our vendors and ensure they are paid,” the company said in its statement.
Editor’s note: the full statements from Alfalfa’s Market are published at the end of this article.
The vendor list is a “moment-in-time” snapshot, and it’s possible that the company has made payments to suppliers since then.
The documents are a rare look inside a business credited as one of the linchpins of Boulder’s natural-foods scene and how the company’s financial difficulties have affected a number of small vendors that survive on timely cash flows.
BizWest verified the authenticity of the documents by speaking to five vendors that divulged how much they were owed at the time by Alfalfa’s. In each case, those figures were within a few hundred dollars of what the specific vendor is listed as being owed in Alfalfa’s documents, and in one case exactly matched the figure.
Not all of the vendor balance is specifically owed to natural-foods producers and suppliers. The documents showed the company owing Louisville Alfalfa’s LLC $674,853, with just more than $546,000 of that more than 90 days past due. That entity owns the Louisville location.
That’s separate from the $67,310 Alfalfa’s owed to the landlord of the Longmont store, and the $501,861 listed in back rent for the longtime Boulder location.
While the company’s other key financial documents such as its balance sheet or profit-and-loss statements are private, the closure of its Boulder and Longmont stores provides some signs that the company was struggling and ultimately passing some of those struggles to its suppliers.
Hundreds of vendors past due
The majority of the unpaid accounts were held by vendors owed less than $5,000, with 196 suppliers being owed $260,932.
Several of those accounts were months past due, which stretched the credibility of the Alfalfa’s name in the eyes of its vendors.
Kurt Hans, the founder and CEO of Ampersand Coffee Roasters LLC in Boulder, told BizWest that his company stopped supplying Alfalfa’s several weeks ago because it had $12,333 in outstanding invoices, including $3,342 that was 90 days past due as of March 23.
That $3,342 figure exactly matched the amount the vendor documents listed as being owed to Ampersand.
Alfalfa’s was about $22,000 past due with Ampersand in the fall of 2019 but caught up during the earlier months of the pandemic due to grocery stores in general having more business, Hans said.
However, he said the Market stopped paying invoices in late November 2020.
Hans said that Homlish has apologized to him personally for the lack of payment; Hans anticipates restarting its deliveries to Alfalfa’s in Louisville once it sees a turnaround in the existing debt.
He also said that several smaller retailers that Ampersand supplies along the Front Range have left invoices unpaid as a way to manage cash flow during the economic woes generated by the pandemic.
Hans believes that the Market’s financial struggles are part of a broader shift in consumer sentiment and the waning relevance of Alfalfa’s compared with other national natural-foods brands.
“We wanted to hang on because we value the relationship and share their beliefs, but at this point we have been burned too many times by too many people,” he said.
Another vendor said Alfalfa’s was failing to pay on time well before the pandemic shook the world and forced changes in business strategies across the board.
Tim Thwaites, the founder of Coda Coffee Co., told BizWest that Homlish convinced him to put cafes in its stores by showing what the Market claimed to be foot traffic in each location. The idea was that if shoppers were in the store, some of them might stop to buy a coffee.
But when the cafes were set up, Thwaites said none of the stores had traffic anywhere near comparable to what Alfalfa’s had projected because the figures he was given were of foot traffic before Homlish and his partners bought the brand.
“(The cafes) were doing terrible, right out of the gate, so we felt like we were fooled a little bit when we did this,” he said.
Thwaites also said he spoke to Alfalfa’s employees, who told him that the stores were struggling to pay their vendors on time and keep products on shelves.
Coda pulled out of its partnership with Alfalfa’s about a year and a half ago. Thwaites wasn’t surprised to hear of the two store closures, and he said he isn’t certain about how the overall business is staying solvent.
“If I’m an investor, I sure as hell wouldn’t invest in Alfalfa’s,” he said.
Alfalfa’s did not respond to a specific question about its relationship with vendors when contacted by BizWest.
Employees bear vendor anger
A fair amount of the pressure from unpaid vendors has fallen on employees at the store.
Several unhappy vendors would call the store locations every day asking for information on when their invoices would be paid, said Morgan Collins, a former front-end manager at the Boulder store for about a year and a half.
The slew of missed invoices led to unfilled purchase orders, shelves left empty and customers grumbling about the quality of the store declining.
Collins said that took a toll on the staff’s morale, which was already tested by working a public-facing job during the pandemic.
“Even the guy that watered the plants wasn’t getting paid, so it was weird to say the least,” Collins said. “It took a toll on everyone, for sure. I think everyone could tell what was going on, even if we weren’t being told. But the employees definitely still tried to uphold those core values.”
Major suppliers, back rent and back tax
Many of its larger outstanding debts belonged to distributors. According to the March vendor list, Alfalfa’s owed $633,643 to United Natural Foods Inc. (NYSE: UNFI), one of the largest natural-foods distributors in the country, and at least $489,000 to other wholesalers and distributors. Approximately $57,000 of that was owed to Big Sky Trading LLC, which sued Alfalfa’s for failure to pay for produce it supplied on credit. While that lawsuit was settled soon after being filed, Big Sky claimed in its complaint that Alfalfa’s was insolvent, which Homlish denied at the time.
The March vendor list also showed Alfalfa’s owing $313,192 to the Boulder County Treasurer’s Office, all of which was more than 90 days past due. It’s unclear what these unpaid amounts entailed, but county records showed that the company owed a combined $525,095 in taxes and interest on business property at the Louisville and Boulder stores as of April 6.
A bruised brand
In its statement, the Market said it’s committed to keeping the Louisville store open and doing everything it can to pay its vendors.
However, the Market’s image as a business that puts its values above its bottom line seems tarnished among one group that it relies on the most: the vendors that provide the products on the store’s shelves.
One vendor that was still owed several thousand dollars by Alfalfa’s told BizWest that its relationship with the store changed abruptly after the new ownership group took over.
The vendor’s owner, who was granted anonymity by BizWest to discuss internal business matters, had supplied the Market for more than a decade and said there had always been issues in getting Alfalfa’s to pay on time. But when the current executive team took charge, it was like starting over with a brand new client. The owner of that company said Alfalfa’s wouldn’t return queries about missed payments, and it eventually halted sending goods to the stores several weeks before the Boulder store closed its doors.
While the vendor didn’t rule out the possibility of supplying Alfalfa’s in its Louisville store in the future, it felt that Alfalfa’s had acted in a way that’s opposite to the values that separated the store from its corporate competitors.
“They’re not living up to their values, and we like to work with people who are truthful and honest and have integrity,” the vendor said. “I think without them providing some of that to us, I don’t think we would be jumping back in bed with them, to be honest.”
Pain for startups
Even if Alfalfa’s were to pay the amounts it owed its vendors overnight, the damage could already be done for some of the most vulnerable businesses that live and die by their cash flow.
Smaller and newer enterprises without a track record likely don’t have as much access to credit or have developed relationships with their vendors, said Sharon King, the director of the Boulder County Small Business Development Center. Without that financial flexibility, getting paid on time could mean the difference between thriving, surviving, downsizing or failure.
King said the pandemic led businesses across sectors to preserve cash as much as possible, so it’s not surprising to see longer times until invoices are paid.
But withholding that cash flow has a ripple effect throughout an industry, as the suppliers to that vendor are likely to not get paid on time either.
“It doesn’t work if everybody’s trying to do the same thing, and the small businesses sometimes are in last position,” she said.
The following are verbatim responses from Alfalfa’s Market when reached by BizWest for this story. The responses were sent after BizWest asked for an interview with Alfalfa’s president Mark Homlish and sent a set of questions.
“We cannot comment specifically on confidential information regarding our payment terms and agreements with our vendor community. Alfalfa’s is committed to doing everything we can to work with our supplier partners, as we know this past year has been difficult for many of them, much like it has been difficult for our business. We are committed to our Louisville location, and appreciate the community’s continued support of our store and the Alfalfa’s legacy. “
“As a privately held company, Alfalfa’s does not publicly share financial information about its operations. Therefore, we cannot provide you with the details you have requested regarding our vendor obligations. We can confirm that the information you have is incorrect and incomplete, and it would be irresponsible for you to publish this information. Based on your follow up questions, we believe the information has been provided by a former employee who has obviously violated a confidentiality agreement with Alfalfa’s. Any financial information shared with you does not reflect the current financial situation of the company, nor would it have provided a complete picture of our financial health at any given point in time. We are doing everything we can to work with our vendors and ensure they are paid.”
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