Co-‐opera(ve Enterprise & Sustainability: Why Go Co-‐op?
Erbin Crowell, Neighboring Food Co-‐op Associa(on (NFCA)
Adam TroG, Valley Alliance of Worker Co-‐opera(ves (VAWC)
Northeast Organic Faming Associa2on (NOFA) Summer Conference, 13th August 2016 University of MassachuseCs, Amherst
Co-‐opera(ve Enterprise & Sustainability Why go co-‐op?
How do co-‐ops strengthen our regional food system and economy?
Co-‐ops are an effec2ve model for business succession, retaining jobs, and roo2ng
businesses in communi2es. Learn about the process of start-‐up, conversion and opera2on,
and share your ideas for a co-‐op in your community.
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Your Presenters
Erbin Crowell • Execu2ve Director, NFCA • Equal Exchange, Co-‐op Fund of
New England, Co-‐opera2ve Development Ins2tute, VAWC
• Vice President, New England Farmers Union
• Board of Directors, Na2onal Co-‐opera2ve Business Associa2on
• Master of Management, Co-‐opera2ves & Credit Unions
Adam TroG • Execu2ve Director, VAWC • Worker/Member, Collec2ve
Copies • Board of Directors, Valley Co-‐
opera2ve Business Associa2on • Vice President, Co-‐opera2ve
Capital Fund (CFNE sister fund) • Former Community and
Poli2cal Organizer
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Outline
1. Our Context 2. What is a Co-‐op?
3. Co-‐ops & Sustainability 4. Case Studies 5. Suggested Guidelines 6. Discussion, Ques(ons, Ideas
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1. Our Context • A Broken (Unaccountable) Food System • Crisis of Global Economy
• Unemployment
• Drama2c Inequality in Wealth
• Diminished Democracy in Poli2cal Systems
• Hunger for Alterna2ves • Corporate consolida2on of food system
• Relocaliza2on & Regional Economies
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The Challenge of Succession
• Sole proprietorships rarely pass to the next genera2on
• Winding down of a business represents lost community social and financial capital
• Closures impacts the wider community (workers, producers, local government, etc.)
• Conven2onal 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
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What If…?
• There was a business model that... • …was democra2c? • …was accountable to the people it served? • …was rooted in our local communi2es? • …was part of a values based movement? • …put common good before private gain? • …was flexible and innova2ve? • …was successful and more sustainable?
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England in the 1800s
• Disloca2on of local economies • Drama2c shifs in wealth
• Concentra2on of economic control
• Poor working condi2ons • Contaminated, low quality food
• Birth of the Co-‐opera2ve Movement
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Rochdale Society of Equitable Pioneers
• Founded 1844, Rochdale, England
• Weavers, Unionists, Community Ac2vists
• Member-‐Owned Store • Pure, Affordable Food • Basic Co-‐op Principles
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2. What is a Co-‐opera(ve?
A co-‐opera2ve is an autonomous associa2on of persons united voluntarily to meet their common economic, social, and cultural needs and aspira2ons through a jointly-‐owned and democra2cally-‐controlled enterprise.
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In Other Words…
A co-‐op is a legal business that is equitably owned and democra(cally controlled by its members for their common good, the good of the community and to accomplish a shared goal or purpose.
Any surplus (usually called profit in private firms) is distributed among members in propor2on to their use of the business (purchases, labor, or supply), as a discount on purchases, or is reinvested in the enterprise for the mutual benefit of members.
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Co-‐opera(ve Business Principles
1. Voluntary & Open Membership 2. Democra2c Member Control
3. Member Economic Par2cipa2on
4. Autonomy & Independence
5. Educa2on, Training & Informa2on
6. Co-‐opera2on among Co-‐opera2ves
7. Concern for Community
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“Concern for Community”
• Co-‐opera2ves work for the sustainable development of their communi2es through policies approved by their members.
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Values Based Business
“Co-‐opera2ves are based on the values of self-‐help, self-‐responsibility, democracy, equality, equity and solidarity. In the tradi2on of their founders, co-‐opera2ve members believe in the ethical values of honesty, openness, social responsibility and caring for others.”
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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.
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A Flexible Business Model: Industry
• Agricultural Co-‐ops • Fishing Co-‐ops • Worker Co-‐ops
• Food Co-‐ops • Ar2san Co-‐ops
• Housing Co-‐ops • Credit Unions • Communica2ons
• U2li2es Co-‐ops • Health & Insurance
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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.
• Mul(stakeholder Co-‐ops: Owned and controlled by combina2on of member types.
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Basic Co-‐op Structure
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MEMBERS
BOARD OF DIRECTORS
EMPLOYEES
Elect
Hire
Hire
MANAGEMENT
Worker Co-‐op
CONSUMERS OR PRODUCERS
Consumer or Producer Co-‐op
Product or Service A Mul(stakeholder Co-‐op includes a combina2on of member types in ownership and governance.
Collec(ves flaCen organiza2onal
layers, emphasizing consensus and group decision-‐making.
3. Co-‐ops & Sustainability
…are more common than we think • 1 billion members worldwide (1 in 3 in the US) • More people than own stock in mul2na2onals • Majority of US farmers are co-‐op members …are innova(ve • Healthy food, organic agriculture, Fair Trade, relocaliza2on, regional aggrega2on and distribu2on …are successful • 30,000 co-‐ops in all sectors of US economy
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2012: UN Interna(onal Year of Co-‐ops
Co-‐ops “in their various forms, promote the fullest possible par2cipa2on in the economic and social development of all people, including women, youth, older persons, persons with disabili2es and indigenous peoples, are becoming a major factor of economic and social development and contribute to the eradica2on of poverty.”
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UN Sustainable Development Goals for 2030
1. No Poverty 2. Zero Hunger 3. Good Health & Well Being 4. Quality Educa2on 5. Gender Equality 6. Clean Water & Sanita2on 7. Affordable & Clean Energy 8. Decent Work & Economic
Growth 9. Industry, Innova2on,
Infrastructure
10. Reduced Inequali2es 11. Sustainable Ci2es &
Communi2es 12. Responsible Consump2on
& Produc2on 13. Climate Ac2on 14. Life Below Water 15. Life on Land 16. Peace, Jus2ce & Strong
Ins2tu2ons 17. Partnerships for the Goals
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Co-‐opera(ves & the Sustainable Development Goals
“Co-‐opera2ves can be seen as an inherently sustainable business model, with their ‘triple boCom line’ of social, economic and environmental sustainability…”
Interna2onal Labour Organiza2on (2016)
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Why Co-‐ops & Sustainability?
• Community ownership & control • Focus on service, mee2ng 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…
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Co-‐opera(ves & Resilience
• 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 2me.
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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: hCp://reic.uwcc.wisc.edu/ (2008)
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The Mondragón Co-‐opera(ves
• 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
subs2tu2on and social entrepreneurship
• System includes agricultural and retail grocery co-‐ops
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Case Study: BraGleboro Holis(c Health Co-‐op
• Holis2c health business owner moving on
• Six current tenants organize to form a co-‐op and take on business
• VAWC support includes assembling financial resources; facilita2ng loan applica2on; mee2ng support; Member rights and responsibili2es; benefits development; Ar2cles of Incorpora2on and Bylaws.
• Massage, chiroprac2c, acupuncture and herbalist services along with an apothecary.
• 6 worker members • Currently entertaining expansion
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Case Study: Broadfork Permaculture Co-‐op
• Two poten2al worker/member joined current sole proprietor in conver2ng to worker co-‐opera2ve.
• Structure and governance; formula2on of marke2ng and adver2sing programming; co-‐op movement history and connec2on; facilita2ng purchase from sole proprietor.
• Seeks to assemble permaculturists in collec2ve over individual compe22on 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
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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 transi2on
• $700,000 revenue annually
• Core goals: Preserva2on of mission, local ownership and control, reten2on of staff over 2me
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Valley Alliance of Worker Co-‐ops
• 8 member worker co-‐ops in Western MA & Southern VT
• 70+ worker members • $10+ million revenue (2015) • Member Supported & Owned
Loan Fund • Supported six conversions in
seven years • Collabora2on with other sectors
– co-‐founded VCBA. • UMass Co-‐op Enterprise
Collabora2ve
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Co-‐op Food Stores / Hanover Consumer Co-‐op
• Founded 1936 – Wholesale buying co-‐op
• 30,000 members • 400 employees • 4 loca2ons in NH & VT,
including buyout of closing supermarket
• $70 million revenue • $14 million local
purchases (2015)
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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
• 670 members • 40 employees • $1.5 mill revenue • $150,000 in local purchases
(2015)
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Monadnock Food Co-‐op
• Keene, NH • Opened 2013 • 2,370 members • 67 employees • $8.5 million in revenue • $1 million in local purchases • Sustainability ini2a2ves:
Green Team, green building, solar panels, compos2ng, reuse and recycling
(2015)
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Neighboring Food Co-‐op Associa(on
• 25 Co-‐ops – Majority in opera2on 30+ yrs
• 11 Start-‐Ups – New jobs, infrastructure for
local suppliers
• Locally owned by 107,000+ members
• Employing 1,800+ people • $42+ million in wages • $260+ million revenue • $50+ million in local
purchases
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5. Suggested Guidelines…
For… • Conver2ng an exis2ng business • Launching a new co-‐op
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Conver(ng an Exis(ng Business
Basic Ques(ons: • Is there a willing seller? • Who are the poten2al member owners? • Will current owner(s) stay on as member(s)? • Is the business viable and sustainable? • What does the transac2on look like? • Is there a plan for ongoing investment in educa2on and training?
• Is there a support system among exis2ng co-‐op networks?
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Poten(al Challenges
• Financing and capital: Is business sustainable over 2me? What will the transac2on look like?
• Is the current owner suppor2ve? Will they stay involved or will the business lose their experience and exper2se?
• Shif from sole proprietor governance to a co-‐opera2ve culture.
• Lack of member financial literacy, governance experience and management experience.
• Expensive, irregular and ofen bad advice from professionals unfamiliar with co-‐opera2ve model.
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Launching a Co-‐opera(ve
Ac(vi(es: • Define overall purpose or goal • Create steering commiCee • Raise pre-‐development funds • Hire a coordinator, if possible/desired • Conduct feasibility study and create marke2ng plan • Establish the founding board • Incorporate and adopt by-‐laws
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Launching a Co-‐opera(ve
Ac(vi(es: • Define overall purpose or goal • Create steering commiCee
• Raise pre-‐development funds
• Hire a coordinator, if possible/desired • Conduct feasibility study & create marke2ng plan
• Establish the founding board • Incorporate and adopt by-‐laws
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Launching a Co-‐opera(ve
Ac(vi(es, con(nued: • Develop a business plan • Create membership agreements
• Recruit members and equity investment
• Access necessary debt financing • Hire appropriate management
• Open for business
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Basic Development Process
Timeline • 12-‐18 months to incorporate (varies widely) • Open doors – 2 yrs, 4 yrs, 12 yrs • Exis2ng business can be faster! Resources needed • CommiCed, visionary leadership • Co-‐op specific business, legal, and financial support • Member equity investment • Start-‐up financing • Peer support & guidance
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Concerns for Co-‐operators
• Understanding group dynamics • Facilita2on of process, shared vision • Defining roles and responsibili2es early • Professional standards • Par2cipatory but focused environment
• Recognizing strengths and weaknesses
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Concerns for Co-‐operators
• Engagement of members • Encourage and develop broad leadership • Ongoing training in: – Co-‐opera2ve values & principles – Board leadership and accountability to members
– Fiscal oversight – Project & strategic planning – Communica2on, facilita2on, conflict resolu2on
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Some Guidelines for Success
• Strong, commiCed member leadership • Set realis2c goals and focus on them • Base decisions on concrete market research and business planning
• Invest in member educa2on 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
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Co-‐opera(ve Statutes
CT: Conn. Gen. Stat. 33-‐183 • Co-‐opera2ve Associa2ons • Co-‐opera2ve Marke2ng
Associa2ons • Workers Co-‐opera2ves ME: 13 M.R.S. 1501 • Consumer co-‐op • Agricultural Marke2ng &
Bargaining Co-‐opera2ve • Employee Co-‐opera2ve
Corpora2ons
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Growing a Food System for the Future:
a manual for co-operativeenterprise development
Six States with One Voice at the National Table
Co-‐opera(ve Statutes
MA: ALM GL Ch. 157 • Co-‐opera2ve Corpora2ons • Co-‐opera2ves without Stock • Employee Co-‐opera2ve
Corpora2ons (157-‐A) NH: RSA Title XXVII, Ch. 301 • Co-‐opera2ve Marke2ng &
Rural Electrifica2on Associa2ons
• Consumers Co-‐opera2ve (Ch. 301-‐A)
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RI: R.I. Gen Laws 7-‐7-‐1 • Producers Co-‐opera2ve • Consumers Co-‐opera2ve VT: 8 V.S.A. 31101 • Marke2ng Co-‐opera2ve • Consumers Co-‐opera2ve • Worker Co-‐opera2ve (Title
11, Ch. 8) Other Op(ons • Incorporate in a neighboring
state using appropriate co-‐opera2ve statute
Why Go Co-‐op?
Co-‐opera(ve Enterprises… • …put people before profit, • …are accountable to their members and communi2es
• …retain local economic infrastructure, • …are successful and resilient, • …strengthen local economies, • …build a beCer, more sustainable food system and economy.
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6. Discussion
Your… • Ques2ons • Feedback • Ideas for Future Workshops
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Contact
Erbin Crowell [email protected]
Adam TroG
Neighboring Food Co-‐op Associa(on www.nfca.coop
Valley Alliance of Worker Co-‐opera(ves
www.valleyworker.coop
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