Michigan Federation Folds, Business Sold to North Farm

Members of the Michigan Federation of Food Co-ops voted on February 29 to consolidate with North Farm Co-op, based in Madison, Wisconsin. The Ann Arbor warehouse has been closed and the federation dissolved. The co-ops flour milling business, Daily Grind, is expected to be sold to a new entity, the Michigan Milling Co-op.

The six-hour meeting, with nearly 40 percent of the membership represented, was attended by a large crowd from numerous buying clubs and a handful of retail co-ops (plus one observer from the national co-op press). Federation members overwhelmingly voted down (138-7) a final effort to save the business through recapitalization a proposal sponsored primarily by members of the warehouse staff union. After presentations by North Farm General Manager Randy Schwartz and President George Wilbur, Federation members voted overwhelmingly in favor (140-10-9) of consolidation with North Farm. They then agreed to end the federation and appointed five trustees from the board of directors to oversee the dissolution.

The recent events ended major operating losses and a nine-year decline in what was once the largest of the new consumer co-op warehouses. Consolidation with another co-op distributor had been proposed in some quarters for years, but the threat of extinction loomed very near before this would actually happen. Some $600,000 in member equity had by the end shrunk to a small fraction of that amount, and sales were half their level of 1983.

The board of directors had also solicited a consolidation proposal from Blooming Prairie, based in Iowa City, which acquired co-op warehouses GIP-C (Chicago) in 1985 and DANCe (Minneapolis) in 1988. Blooming Prairie, by the evidence presented, was financially stronger and better able to serve Michigan, but the Federation board preferred North Farm's governance structure.

Perhaps it was inevitable that the governance issue would be crucial in deciding the fate of an organization that itself appeared ungovernable. The Michigan Federation, in the course of its twenty years, was often very divided among members, directors, management, and staff-- so much so that any description of it requires an assessment of responsibilities that others will dispute.

But it seems clear that the Michigan Federation, beyond the first flush of easy growth once available to natural foods co-ops, never grew to become a market-driven, management-led business with a focused mission. Staff job protection and job conditions acquired a grossly disproportionate weight, and the worker tail wagged the co-op dog. While a soft but protected buying club market nursed the business along, a majority of the retail co-op members, once numerous and growing, either closed down or eventually began buying from other distributors.

Where was the member-elected board of directors during all this? While the board itself turned over, they were hiring a succession of general managers beginning in 1986, fighting with the staff union, and overseeing losses. In 1990, addressing proposals to consolidate with another co-op, the board adopted criteria, in order of importance, that listed protection of member equity as ninth out of eleven. Perhaps the ongoing decline in equity had already dulled their attention to it.

North Farm Co-op, under new management, faces serious challenges by taking on a major service expansion in territory that already is served by competing distributors. North Farm's Wisconsin business has shown growth; its national cheese sales continue to decline as a portion of total co-op volume. The new North Farm members were welcomed, and new directors were elected, at an April 11 special meeting held in Michigan.

See other articles from this issue: #040 May - June - 1992