Co-ops in the Food System: Conversions, Start-ups & Supply Chains

Erbin Crowell, Neighboring Food Co-op Association Adam Trott, Valley Alliance of Worker Co-operatives

NOFA Summer Conference, 9th Aug 2014

University of Massachusetts, Amherst

Workshop Description

We will present worker and food co-ops in the Northeast and internationally that foster economically and environmentally sustainable food systems. Participants will learn the process for co-operative business development, the advantages of the co-operative model, and steps for launching a new co-op or converting an existing business.

Outline 1.  Our Context 2.  What is a Co-op? 3.  Why Co-ops Matter 4.  Regional Impact & Potential 5.  Case Studies: Co-ops in the Food System 6.  Suggested Guidelines for Development 7.  Discussion, Questions, Ideas 8.  Resources

1. Our Context

•  A Broken (Unaccountable) Food System •  Crisis of Global Economic System •  Unemployment •  Dramatic Shifts in Wealth •  Diminished Democracy •  Hunger for Alternatives •  Relocalization & Regional Economies

What If…? There was a business model that... …was democratic? …was accountable to the people it served? …was rooted in our local communities? …was part of a values based movement? …put common good before private gain? …was flexible and innovative? …was successful and more sustainable?

England in the 1800s

•  Dislocation of local economies •  Dramatic shifts in wealth •  Concentration of economic control •  Poor working conditions •  Contaminated, low quality food •  Birth of the Co-operative Movement

Rochdale Equitable Pioneers

•  Founded 1844

•  Weavers, Unionists, Community Activists

•  Member-Owned Store

•  Pure, Affordable Food

•  Basic Co-op Principles

Co-ops & Food Security

“What was the motivation of the Rochdale Pioneers, who

codified the values and principles on which the co-operative movement has

based since 1844?

We know it today as food security.”

Dame Pauline Green, President International Co-operative Alliance

Vision: A Co-operative Economy

“Co-operative housing, worker co-operatives, even collective agricultural co-operatives, can all

look back to the original Rochdale plan for inspiration. In 1844 these pieces were not

separate… The Rochdale pioneers conceived in one association of what would now make a

multisectoral co-operative movement.” Brett Fairbairn, The Meaning of Rochdale • www.usaskstudies.coop

2. What is a Co-op?

A co-operative is an autonomous association of persons united voluntarily to meet their common

economic, social, and cultural needs and aspirations through a jointly-owned and

democratically-controlled enterprise.

International Co-operative Alliance • www.ica.coop

In Other Words…

A co-op is a business that is equitably owned and democratically controlled by its members for their common good, the good of the community and to

accomplish a shared goal or purpose.

Any surplus (profit) is distributed among members in proportion to their use of the business

(purchases, labor, or supply), as a discount on purchases, or is reinvested in the enterprise.

Values Based Business

Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their

founders, co-operative members believe in the ethical values of honesty, openness, social

responsibility and caring for others.

International Co-operative Alliance, 1995 • www.ica.coop

Co-operative Business Principles

•  Voluntary & Open Membership •  Democratic Member Control •  Member Economic Participation •  Autonomy & Independence •  Education, Training & Information •  Co-operation among Co-operatives •  Concern for Community

International Co-operative Alliance, 1995 • www.ica.coop

A Flexible Business Model: Purpose

•  Provide Employment and a livelihood. •  Purchase needed products or services as a

group. •  Produce a product or service together. •  Process and add value to raw materials

produced by members. •  Market products produced by members or by

the co-op.

A Flexible Business Model: Industry

•  Food Co-ops •  Agricultural Co-ops •  Fishing Co-ops •  Worker Co-ops •  Artisan Co-ops

•  Housing Co-ops •  Credit Unions •  Communications •  Utilities Co-ops •  Health & Insurance

A Flexible Business Model: Stakeholders

•  Worker Co-ops: Owned and operated by the people who contribute their labor to the business.

•  Consumer Co-ops: Owned by the people who purchase goods or services.

•  Producer Co-ops: Owned by producers who process and market their products.

•  Community Co-ops: Owned and governed by members of community.

•  Multistakeholder Co-ops: Owned and controlled by combination of stakeholders.

Basic Co-op Structure

MEMBERS

BOARD OF DIRECTORS

EMPLOYEES

Elect

Hire

Hire

MANAGEMENT

Worker Co-op

CONSUMERS OR PRODUCERS

Consumer or Producer Co-op

Product or Service A Multistakeholder Co-op includes a combination of member types in ownership and governance.

Collectives flatten organizational

layers, emphasizing consensus and group decision-making.

3. Why Co-ops Matter Co-operatives …are more common than we think

•  1 billion members worldwide (1 in 3 in the US) •  More people than own stock in multinationals •  Majority of US farmers are co-op members

…are innovative •  Healthy food, organic agriculture, Fair Trade,

relocalization, regional aggregation and distribution …are successful

•  30,000 co-ops in all sectors of US economy

2012: UN International Year of Co-ops

Co-ops “in their various forms, promote the fullest possible participation in the economic and social development of all people, including women, youth, older persons, persons with disabilities and indigenous peoples, are becoming a major factor of economic and social development and contribute to the eradication of poverty.”

2014: UN International Year of Family Farming

•  Policies conducive to family farming

•  Increase knowledge, communication, public awareness

•  Understand needs, potential, constraints, support

•  Synergies for sustainability - particularly with UN Year of Co-ops

2014: UN International Year of Family Farming

•  Co-ops strengthen bargaining power and resource sharing that lead to food security and poverty reduction for millions of small producers…

•  Offer men and women smallholders market opportunities, and services such as training in natural resource mgmt, and access to information, technologies, innovations & extension services.

•  “The importance of agricultural co-operatives in improving the lives of millions of smallholder farmers and their families cannot be overstated.”

Co-ops & Local Economies •  Community ownership & control •  Focus on service, meeting needs before profit •  Develop local skills & assets •  Ability to pool limited resources •  Regional economic efficiencies •  Difficult to move or buy-out •  Root wealth in community, not markets •  Member, customer loyalty •  Low business failure rate & are long-lived…

Because they are community owned, co-ops root jobs, wealth and infrastructure locally.

Because they are more resilient, co-ops contribute to more stable local food systems, infrastructure, employment, services, and economy over time.

Ontario Co-op Association // ontario.coop

4. Regional Impact & Potential

The vision of the Neighboring Food Co-op Association is of a thriving regional economy, rooted in a healthy, just and sustainable food system and a vibrant community of co-operative enterprise.

Neighboring Food Co-op Association

•  35 Co-ops & Start-Ups •  90,000+ memberships •  1,700+ employees •  $42+ million in wages •  $240+ million revenue •  $30+ million in local

purchases

(Updated for 2013)

Opportunities for Collaboration & Development

PROCESSING

DISTRIBUTION: MARKETING

DISTRIBUTION: TRANSPORTATION

DISTRIBUTION: SOURCING

NFCA Member

Food Co-ops

CONSUMPTION NFCA

Food Co-op Member-owners

PRODUCTION

WASTE & NUTRIENT MANAGEMENT

Based on Components of a Food System

(Nickerson, 2008) Where are the key opportunities for collaboration & co-op development?

NFCA

•  VAWC: 8 member worker co-ops in Western MA & Southern VT

•  Tradition of collective management

•  70+ worker members

•  $7.5 million revenue (2013)

•  Linked to/founded from social justice and/or environmental movements

•  Advertises in co-op movement media including food co-op and worker co-op newsletters

•  Filling needs and gaps in economy with co-operative businesses

Valley Alliance of Worker Co-ops

Mondragón Co-operative Corporation •  Located in Basque region, Spain •  First co-op in 1956 (Started with

5 employees, now has 8,000) •  $22 Billion in Sales (2009) •  103,700 Employees (2009) •  Premised on Import substitution

and social entrepreneurship •  System includes agricultural and

retail grocery co-ops

The Region of Emilia Romagna

•  Italy: Most co-ops per capita •  7,500+ co-ops in E.R. •  30-40% of GDP •  2 out 3 are members of co-ops •  10% employed by co-ops •  Vibrant food culture, small family

farms, influential co-op retailer •  Cross-sector collaboration

5. Case Studies

Co-ops in New England: •  1,400 businesses

•  Food co-ops, farmer co-ops, worker co-ops, credit unions, etc.

•  Locally owned by 5 million members

•  Earn $9 billion in annual revenue

•  Employ 22,000 people •  Pay $1 billion in wages

Source: http://reic.uwcc.wisc.edu/

5. Case Studies in the Co-operative Food System

Production & Aggregation

Processing & Marketing

Retailing & Consumption

Case Study: Deep Root Organic Co-op •  Founded 1986 •  23 members in VT &

Québec •  108,000 cases of

produce (2013) •  $2.8 mill revenue (‘13) •  Distribution across

Northeast US •  Collaboration with

NFCA on frozen vegetables

Case Study: North Country Farmers Co-op •  Began organizing 2008 •  Over 20 members in

northern NH (farmers and 2 bakeries)

•  Direct distribution to 15 patrons, including restaurants, schools, individuals, and a hospital

•  Support local farms, reduce competition, increase collaboration in reaching markets

Case Study: Broadfork Permaculture Co-op •  Two potential worker/member joined current sole proprietor in

converting to worker co-operative.

•  VAWC support centered on structure and governance; formulation of marketing and advertising programming; facilitating purchase from sole proprietor.

•  Broadfork seeks to assemble permaculturists in a format of collective co-operation over individual competition in their industry. Long term support for business co-ownership and financial literacy are important aspects to assert in the establishment of the co-op.

•  3 worker/members

Case Study: Stone Soup Farm Co-op

•  Previous part owner of LLC wanted clarity in roles, equal partnership, focus on organic CSA

•  Joined with three former workers from LLC joined Jarrett to form co-op and buy-out equipment, CSA Members, leaseholdings, etc.

•  Incorporated in Massachusetts as co-operative under M.G.L. 157A

•  2014 is first summer of co-op CSA shares, also offer fruit, egg and winter shares at variety of pick up sites

•  Shift to formal co-op structure addresses farm's succession, •  clarifies employment structures and member participation

Case Study: Real Pickles Co-op •  Founded as sole proprietorship in 2001 •  Naturally fermented foods (pickles, sauerkraut, etc.) •  Incorporated as a worker co-op in 201, with 5 founding members,

including original owners •  $500,000 outside investment raised to fund transition •  $700,000 revenue annually •  Core goals: Preservation of mission, local ownership and control,

retention of staff over time

Case Study: Hunger Mountain Co-op •  Montpelier, VT •  Founded 1972 •  7,200 members •  160 staff •  $20 million revenue •  $6.7 million local

purchases

Case Study: Monadnock Food Co-op •  Began organizing in

2008 •  Opened doors in 2013 •  1,900 members •  57 employees •  $5.8 mill revenue (13) •  $500,000 in local

purchase in first year

Case Study: Old Creamery Co-op •  Founded as dairy co-op,

1886; Rural grocery since 1930s

•  Recent owners operated for 12 yrs

•  Converted to co-op in 2010

•  670 members •  40 employees •  $1.5 mill revenue (‘13) •  $150,000 in local

purchases

6. Suggested Guidelines…

For… •  Launching a new co-op •  Converting an existing business

Launching a New Co-op Activities: •  Define overall purpose or goal •  Create steering committee •  Raise pre-development funds •  Hire a coordinator, if possible •  Conduct feasibility study •  Establish the founding board •  Incorporate and adopt by-laws

Launching a New Co-op

Activities, continued: •  Develop a business plan •  Create membership agreements •  Recruit members and equity investment •  Access necessary debt financing •  Hire appropriate management •  Open for business

Basic Development Process

Timeline •  12-18 months to incorporate (varies widely!) •  Open doors – 2 yrs, 4 yrs, 12 yrs •  Existing facility or business can be faster Resources needed •  Committed, visionary leadership •  Co-op business, legal, and financial support •  Member equity investment •  Start-up financing •  Peer support & guidance

Concerns for Co-operators

•  Understanding group dynamics •  Facilitation of process, shared vision •  Defining roles and responsibilities early •  Professional standards •  Participatory but focused environment •  Recognizing strengths and weaknesses

Concerns for Co-operators

•  Engagement of members •  Encourage and develop broad leadership •  Ongoing training in:

•  Co-operative values & principles •  Board leadership and accountability to members •  Fiscal oversight •  Project & strategic planning •  Communication, facilitation, conflict resolution

Conversions Basic Questions: •  Is there a willing seller? •  Are there potential member owners? •  Is the business viable? •  Is there a support system? •  Designing the transaction •  Completing the transaction •  Ongoing investment in education and training •  Linkage with existing co-op networks

Suggested Guidelines for Success •  Strong, committed member leadership •  Set realistic goals and focus on them •  Base decisions on concrete market research

and business planning •  Invest in member education and keep

members informed and involved •  Use technical assistance from co-op networks

and reputable co-op developers •  Join regional co-op networks and seek out

peer support from other co-ops

Legal Statutes

From “Growing a Food System for the Future” New England Farmers Union (www.newenglandfarmersunion.org)

Connecticut: Conn. Gen. Stat. 33-183 •  Co-operative Associations •  Co-operative Marketing Associations •  Workers Co-operatives Maine: 13 M.R.S. 1501 •  Consumer co-op •  Agricultural Marketing & Bargaining Co-operative •  Employee Co-operative Corporations

Legal Statutes

Massachusetts: ALM GL Ch. 157 •  Co-operative Corporations •  Co-operatives without Stock •  Employee Co-operative Corporations (157-A) New Hampshire: RSA Title XXVII, Ch. 301 •  Co-operative Marketing & Rural Electrification

Associations •  Consumers Co-operative (Ch. 301-A)

Legal Statutes

Rhode Island: R.I. Gen Laws 7-7-1 •  Producers Co-operative •  Consumers Co-operative Vermont: 8 V.S.A. 31101 •  Marketing Co-operative •  Consumers Co-operative •  Worker Co-operative (Title 11, Ch. 8) Other Options •  Incorporate in neighboring state with appropriate

statute

Why a Co-operative Food System? Co-operative enterprises: …put people before profit, …are community owned, …are accountable to their members, …are successful businesses, …strengthen local economies, …are more sustainable and resilient, …build a better, more sustainable food system.

7. Discussion

Your… •  Questions •  Feedback •  Ideas for Future Workshops

Basic Resources

Neighboring Food Co-op Association www.nfca.coop

Valley Alliance of Worker Co-operatives www.valleyworker.org

New England Farmers Union www.newenglandfarmersunion.org

Erbin Crowell • erbin@nfca.coop

Adam Trott • adam@valleyworker.org