Co-ops & Economic Democracy: Why Go Co-op?
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Co-ops are an effective model of economic democracy, spreading ownership, retaining jobs, and rooting businesses in our communities. How do co-ops strengthen our regional food system and economy? Learn about the process of start-up, conversion and operation, and share your ideas for a co-op in your community. Erbin Crowell: Executive Director, Neighboring Food Co-op Association. Adam Trott: Executive Director, Valley Alliance of Worker Co-ops.
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Co-ops & Economic Democracy: Why Go Co-op?
- 3. Your Presenters Erbin Crowell • Executive Director, NFCA • Equal Exchange, Co-op Fund of New England, Co-operative Development Institute, VAWC • Vice President, New England Farmers Union • Board of Directors, National Co-operative Business Association • Master of Management, Co- operatives & Credit Unions Adam Trott • Executive Director, VAWC • Worker/Member, Collective Copies • Board of Directors, Valley Co- operative Business Association • Vice President, Co-operative Capital Fund (CFNE sister fund) • Former Community, Union and Political Organizer 3
- 4. Outline 1. Our Context 2. What is a Co-op? 3. Co-ops & Economic Democracy 4. Case Studies 5. Suggested Guidelines 6. Discussion, Questions, Ideas 4
- 5. 1. Our Context • An unaccountable food system & economy • Crisis of global economy • Unemployment • Dramatic inequality in wealth • Diminished democracy in political systems • Hunger for alternatives • Corporate consolidation of food system • Relocalization & regional economies 5
- 6. The Challenge of Succession • Sole proprietorships rarely pass to the next generation • Winding down of a business represents lost community jobs and infrastructure • Closures impacts the wider community (workers, producers, local government, etc.) • Conventional path for successful business is selling off to a larger business or to investors • Community investment in the success of these local enterprises is unrecognized 6
- 7. What If…? There was an alternative 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? • …was accessible for everyday people? 7
- 8. 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 8
- 9. Rochdale Society of Equitable Pioneers • Founded 1844, Rochdale, England • Weavers, Unionists, Community Activists • Member-Owned Grocery Store • Pure, Affordable Food • Basic Co-op Principles 9
- 12. Co-operative Business Principles 1. Voluntary & Open Membership 2. Democratic Member Control 3. Member Economic Participation 4. Autonomy & Independence 5. Education, Training & Information 6. Co-operation among Co-operatives 7. Concern for Community 12
- 17. 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. 17
- 18. A Flexible Business Model: Industry • Food Co-ops • Worker Co-ops • Agricultural Co-ops • Fishing Co-ops • Artisan Co-ops • Housing Co-ops • Credit Unions • Communications • Utilities Co-ops • Health & Insurance 18
- 19. 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 purchase inputs, process and market their products. • Community Co-ops: Owned and governed by members of community. • Multistakeholder Co-ops: Owned and controlled by combination of member types. 19
- 20. Basic Co-op Structure 20 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.
- 24. What Co-ops Can Contribute • Community ownership & control • Focus on service, meeting needs before profit • Develop local skills & assets • Ability to pool limited resources • Build 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… 24
- 26. Co-operative Enterprises …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 26
- 27. 4. 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/ (2008) 27
- 28. The Mondragón Co-operatives • 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 28
- 29. Case Study: Broadfork Permaculture Co-op • Two potential worker/member joined current sole proprietor in converting to worker co-operative. • Structure and governance; formulation of marketing and advertising programming; co-op movement history and connection; facilitating purchase from sole proprietor. • Seeks to assemble permaculturists in collective 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 29
- 30. 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 2014, 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 30
- 31. Valley Alliance of Worker Co-ops • 7 member worker co-ops in Western MA & Southern VT • 70+ worker members • $12+ million revenue (2015) • Member Supported & Owned Loan Fund • Supported five conversions in seven years • Collaboration with other sectors – co-founded VCBA. • UMass Co-op Enterprise Collaborative 31
- 32. Co-op Food Stores / Hanover Consumer Co-op • Founded 1936 – Wholesale buying co-op • 29,300 members • 400 employees • 4 locations in NH & VT, including buyout of closing supermarket • $70 million revenue • $7 million local purchases (2016) 32
- 33. Conversion 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, NFCA food co-ops provide peer support • 740 members • 35 employees • $1.8 million revenue • $500,000 in local purchases (2016) 33
- 34. Monadnock Food Co-op • Keene, NH • Start-up opened 2013 • 2,600 members • 85 employees • $9.8 million in revenue • $1.7 mill in local purchases • Sustainability initiatives: Green Team, green building, solar panels, composting, reuse and recycling (2016) 34
- 35. Neighboring Food Co-op Association • 25 Co-ops across New England and New York – Majority in operation 30+ yrs • 11 Start-Ups – New jobs, infrastructure • Locally owned by 130,000 members • Employing 2,150 people • $49.5 million in wages • $315 million revenue • $60 million in local purchases 35
- 36. 5. Suggested Guidelines… For… • Converting an existing business – Existing customer base, systems – Retain existing jobs, infrastructure – Current owners’ skills and knowledge • Launching a new co-op – Can be a longer process – More flexible in terms of mission and purpose – New jobs and infrastructure 36
- 37. Converting an Existing Business Basic Questions: • Is there a willing seller? • Who are the potential member owners? • Will current owner(s) stay on as member(s)? • Is the business viable and sustainable? • What does the transaction look like? • Is there a plan for ongoing investment in education and training? • Is there a support system among existing co-op networks? 37
- 38. Potential Challenges • Financing and capital: Is business sustainable over time? What will the transaction look like? • Is the current owner supportive? Will they stay involved or will the business lose their experience and expertise? • Shift from sole proprietor governance to a co- operative culture. • Lack of member financial literacy, governance experience and management experience. • Expensive, irregular and often bad advice from professionals unfamiliar with co-operative model. 38
- 39. Launching a Co-operative Activities: • Define overall purpose or goal • Create steering committee • Raise pre-development funds • Hire a coordinator, if possible/desired • Conduct feasibility study & create marketing plan • Establish the founding board • Incorporate as a co-op and adopt by-laws 39
- 40. Launching a Co-operative Activities, continued: • Develop a business plan • Create membership agreements • Recruit members and equity investment • Access necessary debt financing • Hire appropriate management • Open for business 40
- 41. Basic Development Process Timeline • 12-18 months to incorporate (varies widely) • Open doors – 2 yrs, 4 yrs, 12 yrs • Existing business can be faster! Resources needed • Committed, visionary leadership • Co-op specific business, legal, and financial support • Member equity investment • Start-up financing • Peer support & guidance 41
- 42. 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 42
- 43. 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 43
- 44. Some 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 44
- 45. Co-operative Statutes CT: Conn. Gen. Stat. 33-183 • Co-operative Associations • Co-operative Marketing Associations • Workers Co-operatives ME: 13 M.R.S. 1501 • Consumer co-op • Agricultural Marketing & Bargaining Co-operative • Employee Co-operative Corporations 45 Growing a Food System for the Future: a manual for co-operative enterprise development Six States with One Voice at the National Table
- 46. Co-operative Statutes MA: ALM GL Ch. 157 • Co-operative Corporations • Co-operatives without Stock • Employee Co-operative Corporations (157-A) NH: RSA Title XXVII, Ch. 301 • Co-operative Marketing & Rural Electrification Assocs • Consumers Co-operative (Ch. 301-A) NY: Consolidated Code • Co-operative Corporations 46 RI: R.I. Gen Laws 7-7-1 • Producers Co-operative • Consumers Co-operative VT: 8 V.S.A. 31101 • Marketing Co-operative • Consumers Co-operative • Worker Co-operative (Title 11, Ch. 8) Other Options • Incorporate in a neighboring state using appropriate co- operative statute
- 47. Why Go Co-op? Co-operative Enterprises… • …put people before profit, • …are accountable to their members and communities • …retain local economic infrastructure, • …are successful and resilient, • …strengthen local economies, • …build a better, more sustainable food system and economy. 47
- 48. 6. Discussion Your… • Questions • Feedback • Ideas for Future Workshops 48