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Neighboring Food Co-op Association Fall Member Gathering Presentation, 2014

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Ten years after food co-op leaders in our region first gathered to discuss working more closely together, over 100 co-operators met in Hanover, NH, on September 27th for the Fourth Annual Fall Gathering of the Neighboring Food Co-op Association (NFCA). The meeting brought together representatives from more than 40 food co-ops and start-ups and partner organizations. Keynote speaker J. Tom Webb addressed ‘The Co-operative Difference in Challenging Times,’ laying out the shortcomings of conventional business and the potential for co-ops to help build a better world.

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Neighboring Food Co-op Association Fall Member Gathering Presentation, 2014

  1. 1. 4th Annual Fall Member Gathering 27th Sept 2014 Co-­‐op Food Stores Hanover, NH Neighboring Food Co-­‐ops // Fall Gathering, 2014
  2. 2. THANK YOU! Thank you to the co-­‐operative community for your partnership & support. Neighboring Food Co-­‐ops // Fall Gathering, 2014
  3. 3. THANK YOU! Thank you to the co-­‐operative community for your partnership & support. Neighboring Food Co-­‐ops // Fall Gathering, 2014
  4. 4.  Welcome AGENDA FOR THE DAY  Glenn Lower, President, NFCA Board of Directors  Terry Appleby, General Manager, Co-­‐op Food Stores  Staff Report: We Want Your Feedback  Erbin Crowell & Bonnie Hudspeth  Keynote Speaker  J. Tom Webb: “The Co-­‐operative Difference”  Lunch & Topic Tables  Welcome Cooperative Fund of New England Trustees  Afternoon Workshops  Appreciations, Evaluation & Prizes!  Tour of Co-­‐op Food Stores Neighboring Food Co-­‐ops // Fall Gathering, 2014
  5. 5. WELCOME! Glenn Lower  President & Chair of the NFCA Board  General Manager Middlebury Natural Foods Co-­‐op Neighboring Food Co-­‐ops // Fall Gathering, 2014
  6. 6. WELCOME TO HANOVER! Terry Appleby  General Manager, Co-­‐op Food Stores / Hanover Consumer Co-­‐op Neighboring Food Co-­‐ops // Fall Gathering, 2014
  7. 7. We want your STAFF REPORT feedback! Neighboring Food Co-­‐ops // Fall Gathering, 2014
  8. 8. OUR VISION …a thriving regional economy, rooted in a health, just and sustainable food system and a vibrant community of co-­‐operative enterprise. Neighboring Food Co-­‐ops // Fall Gathering, 2014
  9. 9. OUR PRIORITIES Supporting shared success through…  Peer-­‐to-­‐Peer Collaboration  Regional Sourcing  Marketing & Outreach  Collaboration with other co-­‐ops & co-­‐ operative support organizations Neighboring Food Co-­‐ops // Fall Gathering, 2014
  10. 10. PEER TO PEER COLLABORATION Neighboring Food Co-­‐ops // Fall Gathering, 2014
  11. 11. REGIONAL SOURCING  Vision: Branded, Regional, Sustainable, Scalable, Co-­‐operative  Cave to Co-­‐op: Promote & Grow Program  Farm to Freezer: Learn & Develop Model  Future: Distribution? Private Label? Value Added? Neighboring Food Co-­‐ops // Fall Gathering, 2014
  12. 12. MARKETING & OUTREACH • Communicating Our Impact • Events & Outreach • Ads & Press • Policy Engagement • Educational Initiatives • Cross Sector Collaboration • Promotional Materials Neighboring Food Co-­‐ops // Fall Gathering, 2014
  13. 13. CONSIDER… …the priorities and examples of activities that we have outlined and in the summary sheets on your tables and posted on the wall. Neighboring Food Co-­‐ops // Fall Gathering, 2014
  14. 14. THINK… …about the activities of the NFCA and that you think offer the most value and impact in terms of 1. The NFCA Vision the goals of the Middlebury Manifesto, 2. The success of your co-­‐op or organization, and 3. You as a staff or board member of your co-­‐ op or organization. Neighboring Food Co-­‐ops // Fall Gathering, 2014
  15. 15. TALK… Take the next fifteen minutes to talk with people at your table. What jumps out for you? What has been most exciting or innovative? Take notes on some of the things that stand out for you. Neighboring Food Co-­‐ops // Fall Gathering, 2014
  16. 16. DURING THE DAY… Place the three stickers in your nametag on the posters on the wall next to the priority areas and/or specific activities that you think are most important. (Yes – you can stack them.) Neighboring Food Co-­‐ops // Fall Gathering, 2014
  17. 17. SHARE… On the ‘Opportunities’ sheets, write down any ideas you have for activities that you think we should consider as we move forward — keeping in mind our vision. Neighboring Food Co-­‐ops // Fall Gathering, 2014
  18. 18. Keynote: J. Tom Webb THE CO-­‐OPERATIVE DIFFERENCE IN CHALLENGING TIMES Neighboring Food Co-­‐ops // Fall Gathering, 2014
  19. 19. OUR GUEST SPEAKER J. Tom Webb  Co-­‐op board member, senior manager, consultant and educator  Co-­‐operative Management Education program at Saint Mary’s University  Global Co-­‐operation, Inc. Neighboring Food Co-­‐ops Fall Gathering, 2014
  20. 20. Global Co-operation Inc The Co-operative Difference in Challenging Times: Why Co-operatives Matter Neighboring Food Co-ops Fall Gathering, 2014
  21. 21. Global Co-operation Inc The Context Neighboring Food Co-ops Fall Gathering, 2014
  22. 22. The long view… Energy Crisis Environment Crisis Rate of Change Technology Crisis Urban Rural Crisis Financial Melt Down Food Crisis Income Distribution Inter Related Problems of a Market Driven Investor-owned Economy Erosion of Democracy Neighboring Food Co-ops Fall Gathering, 2014
  23. 23. Trickle up theory of economics Neighboring Food Co-ops Fall Gathering, 2014
  24. 24. Global Co-operation Inc Why Co-operatives Matter Can a people centered democracy coexist with a capital centered economy? Neighboring Food Co-ops Fall Gathering, 2014
  25. 25. Capitalism Works – For 20% Neighboring Food Co-ops Fall Gathering, 2014 1996
  26. 26. Crisis of the Environment Neighboring Food Co-ops Fall Gathering, 2014
  27. 27. Global Co-operation Inc Why Co-operatives Matter Our economy needs an alternative. Neighboring Food Co-ops Fall Gathering, 2014
  28. 28. Global Co-operation Inc Why Co-operatives Matter Our Planet needs an alternative Neighboring Food Co-ops Fall Gathering, 2014
  29. 29. Global Co-operation Inc Why Co-operatives Matter Human Society needs an alternative Neighboring Food Co-ops Fall Gathering, 2014
  30. 30. Global Co-operation Inc Why Co-operatives Matter Natural World Economy Economy Human Society Can Capitalism and democracy coexist? Neighboring Food Co-ops Fall Gathering, 2014
  31. 31. Can we imagine: Co-operative Economics All serves Humanity Capital All depends On Nature The Natural world Humanity Capital Is a Tool Neighboring Food Co-ops Fall Gathering, 2014
  32. 32. Financial Gain is central Motivation Theory of why capitalism works Key Beliefs of Neoclassical Economics Assumed Market Perfection Progress = Growth = Scale “Free Trade” No barriers Neighboring Food Co-ops Fall Gathering, 2014 for Lower Corporations Taxation and Minimal Government Regulation Voluntary by Market Players
  33. 33. Global Co-operation Inc Depressing ?  Hope springs from facing reality not hiding from it.  Here comes the hope Neighboring Food Co-ops Fall Gathering, 2014
  34. 34. Global Co-operation Inc Why Co-operatives Matter We can change the way we think about: • Our co-operative’s operations • Our economy, • Our society • Our planet Neighboring Food Co-ops Fall Gathering, 2014
  35. 35. Global Co-operation Inc Understanding the Co-operative Difference The four pillars of co-operation Principles Values Purpose Justice Neighboring Food Co-ops Fall Gathering, 2014
  36. 36. Global Co-operation Inc Understanding the Co-operative Difference Co-operative Investor Owned Values & Principles DNA Clothing of convenience Purpose DNA Maximize return to mainly wealthy Ethical stance Justice Charity Bottom line(s) Multiple goals One overriding Others optional People Members and workers just people Workers are just people Neighboring Food Co-ops Fall Gathering, 2014
  37. 37. Global Co-operation Inc Why Co-operatives Matter A Lot of HOPE Neighboring Food Co-ops Fall Gathering, 2014 100 Million work in Co-ops US Food Co-ops NFCA CDS NCGA Environment! Healthy Food! Local Food! Co-operative values! Fair Trade!
  38. 38. Global Co-operation Inc NFCA Co-operative Links NFCA Low income access Public Profile HOPE! Saint Mary’s University UMASS Co-op Certificate New England Farmers Union Organic Farmers Anti Hunger Valley CBA CFNE Workshops And more… Neighboring Food Co-ops Fall Gathering, 2014
  39. 39. Global Co-operation Inc So what can you do? Neighboring Food Co-ops Fall Gathering, 2014
  40. 40. Global Co-operation Inc Co-operative Economics There is an alternative: An economy inspired by the co-op business model. A new definition: The economy is the complex set of relationships that people use to provide themselves with the goods and services they need to live meaningful lives in their communities. Neighboring Food Co-ops Fall Gathering, 2014
  41. 41. Global Co-operation Inc Co-operative Economics There is an alternative: An economics inspired by the co-op business model. A new definition: Economics is the study of how effective the economy is at meeting human need in a manner that allows people meaningful happy lives as an integral part of a healthy planet. Neighboring Food Co-ops Fall Gathering, 2014
  42. 42. Global Co-operation Inc Creating the Co-operative Difference Values Principles Purpose Justice Operations Community Operations Financial Personnel staffing education Marketing Accounting Product Service Buildings Planning Everything else Community • Environment • Justice • Responsibility • Economic • Social • Co-operatives • Global Co-operation Educate by doing and explaining Neighboring Food Co-ops Fall Gathering, 2014
  43. 43. Global Co-operation Inc Co-operative Accounting – Why Measure? Total Annual Revenue Purchases of Local Products Purchases of Regional Products Purchases of Organic Products Purchases of Fair Trade Products Purchases from Supplier Co-ops Donations to Community Organizations Total Members New Members Total Employees Total Payroll Percent Full-Time Employee Benefits Contribution to Local Taxes You can’t manage what you do not measure You can’t inform without accountable information Neighboring Food Co-ops Fall Gathering, 2014
  44. 44. Global Co-operation Inc Key Opportunities Co-operative Accounting - Measure your differences: • Sales per member per year • Community income equality • Member engagement • Member satisfaction • Kilos of CO2 per member • Community health impact • % Local food Neighboring Food Co-ops Fall Gathering, 2014
  45. 45. Global Co-operation Inc Key Opportunities Co-operative Accounting - Measure your differences: • Bigger the co-op the more sophisticated • Share with others • Start simple and build year by year • Think of measures during the day and send them in to NFCA to share Neighboring Food Co-ops Fall Gathering, 2014
  46. 46. Global Co-operation Inc Key Opportunities Limits to Co-operative Growth? • Market share • Governance • Competing amidst rampant materialism Social Media and participation in planning • If 250,000 can create Wikipedia then? Neighboring Food Co-ops Fall Gathering, 2014
  47. 47. Global Co-operation Inc Key Opportunities Explore Solidarity Co-operative model • Consumers, workers, community, suppliers • Interdependence vs Stakeholders Vertical and horizontal co-operation • Buy from, sell to and share with co-ops • NFCA’s “Go Co-op!” Program Co-op development resources that work Funeral, Phone, Internet, Worker, etc. Neighboring Food Co-ops Fall Gathering, 2014
  48. 48. Global Co-operation Inc Collective NFCA Challenges: Imagine a better world Imagine 100 ideas for measuring the co-operative difference Imagine 10 co-operative differences your members want Imagine 80% of your members engaged beyond shopping Imagine 5 ways to get members to ask questions Imagine your co-op as the most trusted information source Imagine creating 100 workplaces/year – How? Imagine increasing co-op sourcing by 10 percent Neighboring Food Co-ops Fall Gathering, 2014
  49. 49. Global Co-operation Inc Closing Questions How many co-ops do you know that failed because they put too much effort into co-op purpose, values and principles? How many do you know that failed or are in trouble because they lost their co-operative identity? What is your greatest risk? Neighboring Food Co-ops Fall Gathering, 2014
  50. 50. Global Co-operation Inc Why Do Co-operatives Matter? Because you are the best hope my grandchildren have. Thank you Tom Webb Neighboring Food Co-ops Fall Gathering, 2014
  51. 51. LUNCH THANK YOU, CO-­‐OP FOOD STORES! Neighboring Food Co-­‐ops // Fall Gathering, 2014
  52. 52. PEER-­‐TO-­‐PEER TOPIC TABLES 1) Member Engagement for Established Co-­‐ops 2) Board Member Grab Bag 3) Measuring & Communicating our Impact 4) Planning Successful Annual Meetings 5) Planning a Loan Campaign 6) Planning & Executing Successful Healthy Food Access Programs 7) Using External Investment to Grow Your Co-­‐op 8) Food Co-­‐ops & Credit Unions 9) Food Policy Matters! Neighboring Food Co-­‐ops // Fall Gathering, 2014
  53. 53. A. Growing Our Food Co-­‐ops B. Board to Board C. Start-­‐Ups AFTERNOON WORKSHOPS Neighboring Food Co-­‐ops // Fall Gathering, 2014
  54. 54. AFTERNOON WORKSHOPS  The New Normal: Growing our Co-­‐ops (In this Room)  Board to Board: Change & Alignment (Room 212, Upstairs)  Start-­‐Up Development (Room 215, Upstairs) Neighboring Food Co-­‐ops // Fall Gathering, 2014
  55. 55. THE NEW NORMAL GROWING OUR CO-OPS AND THRIVING IN A COMPETITIVE LANDSCAPE NFCA FALL MEETING, HANOVER, NH SEPTEMBER 27, 2014
  56. 56. Market Context $14,000,000,000 $12,000,000,000 $10,000,000,000 $8,000,000,000 $6,000,000,000 $4,000,000,000 $2,000,000,000 $0 Major Natural Food Competitors Whole Foods Trader Joe's Sprouts Fresh Market NCGA Natural Grocers Earth Fare
  57. 57. Increasingly Competitive Landscape
  58. 58. The New “Supernaturals”
  59. 59. Sprouts • Founded 2001: – 2011 merged with Henry’s & Sun Harvest – 2012 acquired Sunflower • Chain of 165 stores, based in Phoenix, AZ – Southwest U.S. and now KS, MO, GA, AL • IPO in 2013, traded on NASDAQ • $2.7 B/year, 27% gross, 3% net • “Healthy living for less” & “Responsible Retailing” – Produce=25% of store sales
  60. 60. Lucky’s • Founded in 2002 by Bo Sharon – Lots of former Oats & Sunflower talent • Chain of 13 stores, based in Boulder, CO – CO, MT, WY plus FL, IN, IA, MI, MO, OH, & KY – MW focus • “Good food for all” • Intersection between Sprouts and Food Co-ops – More natural than a Sprouts – More price-competitive than a food co-op
  61. 61. Natural Grocers • Founded in 1955 in Golden, CO – History as Vitamin Cottage, 2012 IPO • Chain of 84 stores, based in Lakewood, CO – Rockies, Southwest, Pac NW, pushing into MW • $500 M/year, 25% gross, 2.5% net – 5-16k sq. ft., 1/3 of mix and ¼ of space to Wellness • “What we won’t sell and why” – Strict product guidelines standards, only Organic Produce
  62. 62. Earth Fare • Founded in 1975 • Chain of 33 stores, based in Asheville, NC – Southeast U.S. plus IN, OH, and now MI • “Connect communities and improve lives through food” – Company has a “Food Philosophy” of “selling food as close to the ground as it gets.” – “Boot List” of banned ingredients, particularly HFCS & artificial ingredients
  63. 63. Effective competitors • Know the consumers in my market – not just the ones in my store • Know that demographics are changing • See mid-level shopper sales as the opportunity • Know today’s mid-level shopper could be tomorrows core shopper • Set goals to attract more mid-level shoppers
  64. 64. Case Studies • Existing Co-op acquires conventional store • Existing Co-op merges with another co-op • Existing Co-op partners with a start-up group
  65. 65. Existing Co-op acquires conventional store
  66. 66. Opportunity in White River Junction
  67. 67. >> Collaboration & Cooperation
  68. 68. >> Transformation
  69. 69. >> Results • Increased sales from $100k to $180k per week • Profitable within first three months of operaTons • Increase in memberships • Increase in staff morale – beWer pay, benefits • Expansion of the cooperaTve model with no impact on our friends at Upper Valley Co-­‐op
  70. 70. Testing our Values CO-OPERATIVE MERGER: STRENGTHENING TWO COMMUNITIES
  71. 71. People’s Food Co-op La Crosse: Established as a buying club in 1973. FY2010 Sales: $10.9 Million FY2010 Members: 4124
  72. 72. Rochester Good Food Store Established as a buying club in 1975. FY2010 Sales: $3.4 Million FY2010 Members: Annual dues paying members ~ < 500
  73. 73. Some statistics of interest to the People’s Food Co-op (these are 2012 stats): La Crosse, WI Rochester, MN Bachelor's degree or higher 24.1% 38.1% Married residents 39.1% 57.6% 48.4% Family households (WI 66.5%) 63.0% (MN 66.2%) % Ethnically white 91.1% 82.0% % Living in poverty 25.2% 8.8% 7.6% July 2011 unemployment rate (WI 7.8%) 5.8% (MN 7.2%) Daytime population change (commuters) 19,395 27,477 Household income $37,476 (WI $49,993) $62,420 (MN $55,616)
  74. 74. • There are always a lot of good reasons NOT to do something. • Our challenge is to weigh the COSTS vs BENEFITS of any given strategy. • Being a good manager is as much about knowing what NOT TO DO as it is about knowing WHAT TO DO. • Start with a gut check. List the obvious benefits versus challenges. • ARE THERE ANY DEAL BREAKERS ON THIS LIST?
  75. 75. We dug in and tried to approach this opportunity systematically – • First we created an “OPPORTUNITIES & CHALLENGES”* assessment. • Then a “GOALS” sheet • From there the board asked me to layout a “MODEL TIMELINE” based upon the development limitations we were operating under. • Once the board had a chance to review those items they asked me to generate a “MEMBER ENGAGEMENT TIMELINE” that included a “DRAFT LETTER” that would go to all members explaining the opportunity, the actions taken to date, as well as what we saw as the benefits and challenges. *Note: Documents bolded above are available from the NFCA by e-mailing info@nfca.coop.
  76. 76. At the same time I was working on an “EXPANSION PLAN”* that included market research conducted by two outside consulting firms. A “SOURCES & USES BUDGET” was drawn up that was used to create a set of “FIVE YEAR PRO FORMA BUDGETS” to demonstrate the financial feasibility of the plan. Discussions began between the Rochester and La Crosse BODs in early February 2011. By mid-July I had to present a well formulated case demonstrating a solid plan for the merger AND expansion. *Note: Documents bolded above are available from the NFCA by e-mailing info@nfca.coop.
  77. 77. Process Successes:  The La Crosse store was operating at a high level so that when my attention was turned to focusing 90% on the merger and expansion planning the co-op didn’t suffer. (I eventually hired a store manager for La Crosse, but not until 18 months in to the project.)  The boards of both organizations found trust in one another and didn’t turn on one another during times that were difficult.  We over-communicated. We took our lumps and found comfort with open disagreement and hostility toward the proposal. (It was small but very loud.)  The board and management expressed our support and belief in the proposal, but we didn’t do the hard sell. The vast majority of members saw the benefits clearly.
  78. 78. Process Successes, continued:  We did our homework. We anticipated to the best of our ability what the questions would be and worked to find answers to them wherever we could. We did not however make promises we couldn’t keep, and we were comfortable saying, “We don’t know.”  When the first vote in Rochester failed to reach the required threshold for passage (it passed with 66.2% in favor – MN statute requires a 67% threshold) the Rochester board conducted a listening tour, called every member, and investigated and decided that there were enough “anomalies” to warrant another vote.  Once the decision was made to move forward those who were opposed got behind the co-op to help us find success.
  79. 79. Process successes, continued:  PFC La Crosse has built a culture of cooperation among co-ops for many years. Our management team got behind the merger proposal and helped wherever they could. Our members also got it – the merger proposal passed in La Crosse by 83%.  When the first vote missed the threshold (by 11 votes!) the board parted ways with their GM. I worked with them to find an interim GM who I hoped to eventually hire as Rochester Store Manager should the merger become a reality. She was key to building bridges with staff and members.  PFC La Crosse provided operational assistance throughout the merger period when GFS was financially struggling, continuing a history of 5 years of outreach with that co-op during a time of great leadership turnover and upheaval. It was also a time when the co-op emerged from decades of stagnation.
  80. 80. Process Weaknesses:  GFS had a GM who was at odds with his Board prior to the merger proposal and expansion opportunity. The inability of his Board to manage his performance along with my failure at managing his ego led to his undermining of much of the process with staff.  We did not anticipate the level of paranoia that would evolve among the GFS staff. The GFS Board and I met with them on multiple occasions to keep them informed of the process and the plan, but we couldn’t counteract what was going on between visits. We saw everything from a Front End Manager who quit to picket against the merger outside of the store, to ballot tampering during the voting period.  GFS was an annual fee co-op rather than equity based. Determining a member joining date for vote eligibility and finding a way to allocate equity to a loosely defined membership was a challenge.
  81. 81. Process Weaknesses, continued:  As a fee-based co-op that had for nearly 25 years been run as a privately controlled business, there was not a strong tradition of member participation and investment.  Our collective balloting systems were loose and did not provide for adequate security during high stakes election. We have since revamped – we no longer collect ballots in the stores for any election. All election counts are now conducted by our auditor. We are moving toward electronic balloting within the next two years.  Cooperative mergers are relatively common, but not in the food co-op world. We were lucky in that we were able to find attorneys with experience in ag co-op mergers, but sadly, the way many ag co-op mergers are handled aren’t necessarily the ones we wanted to emulate.
  82. 82. At the end of September when FY2014 ends for PFC and the NEW Rochester People’s Food Co-op celebrates its first anniversary: FY2014 Consolidated La Crosse Rochester Sales $23.0 M $13.0 M $10.0 M Sales Growth 33.28% 4.00% 90.00% Total Members 7,603 5,180 2,423 Total Employees 210 119 86 FY2011 Pre-Merger Consolidated La Crosse Rochester Sales $15.6 M $11.5 M $4.1 M Sales Growth 8.94% 5.72% 18.98% Total Members 5,118 4,364 754 Total Employees 156 120 36
  83. 83. Existing Co-op & Start-up Partnership • Case Study: Gateway start-up group dissolves & members join Mississippi Market. MM opens store in start-up community. • Much quicker to open • Significantly easier to get financing • Stronger balance sheet & cash flow • Strong operations from day 1
  84. 84. What does this mean for my Co-op Questions & Discussion
  85. 85. Thank you Dave Blackburn: dave.blackburn@ncga.coop Michelle Schry: michelle.schry@pfc.coop Terry Appleby: terry@coopfoodstore.com
  86. 86. EVALUATIONS & APPRECIATIONS  Thanks to our attendees, guests and supporters  Please fill out a meeting evaluation form to be entered in our end of the day raffle Neighboring Food Co-­‐ops // Fall Gathering, 2014
  87. 87. HIGHLIGHTS & RAFFLE PRIZES  Meeting highlights  Raffle prizes for early registrations and meeting evaluations  Save the date for our 4th Annual Meeting, 21st March 2015.  Please return your nametags at the registration desk! Neighboring Food Co-­‐ops // Fall Gathering, 2014
  88. 88. THANK-­‐YOU! Co-­‐op Food Stores Teaching Kitchen Tour Directions:  Leave the Black Center  Drive past Hanover Co-­‐ops and Mobil Service Station (rte 120).  Go through the next two sets of lights.  Be in the left hand lane at the third set of lights and turn left into Centerra Plaza  Take 2nd right into store parking lot. Neighboring Food Co-­‐ops // Fall Gathering, 2014
  89. 89. WELCOME! Thank you to the co-­‐operative community for your partnership & support. Neighboring Food Co-­‐ops // Fall Gathering, 2014
  90. 90. WELCOME! Thank you to the co-­‐operative community for your partnership & support. Neighboring Food Co-­‐ops // Fall Gathering, 2014

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