Tipping the Scales for Local Foods

Co-ops play a vital role in economic recovery

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The produce department at Oneota Co-op.

Food co-ops play a pivotal role in nearly every local foods initiative I work with; they have been doing so for 40 years.

Perhaps the most dramatic ­example I’ve witnessed is Oneota Co-op in Decorah, Iowa. Former Co-manager Liz Rog had invited me to speak to the co-op’s annual meeting in June 2006. Sixty-five people turned out to discuss my study of the local farm and food economy, which highlighted significant dilemmas. The region’s 2,450 farmers were losing ground rapidly; farm income had fallen steadily since 1979. Hundreds of farmers had left the land. Collectively, they now earned $20 million less than they had in 1969, despite doubling productivity. Meanwhile, local consumers bought $70 million of food each year, almost all from distant sources. This local market was worth more than the total sales of all the region’s farms, and consumers were eager to buy food directly from farmers. It seemed this lush farm region had solid reasons to focus on feeding itself.

Farmers and townspeople were already forming a response to these findings. From an initial meeting of six farmers in a living room, sponsored by the producers’ co-op, GROWN Locally, the local foods effort had swelled to 150 active residents in two years. Organized as the Northeast Iowa Farm and Food Coalition, it was one of the more advanced regional foods efforts I had assisted. The coalition had used my findings as their core educational tool. The data helped motivate residents to get involved.

Oneota Co-op was right in the middle of this growth. Rog pointed out that they were the second-largest employer on Main Street after the town’s bank. Sales were rising 22 percent a year at the time. With $400,000 of local food sales per year (20 percent of the co-op’s total sales), the co-op was easily outpacing regional private firms with far deeper pockets.

Oneota recognized it could play a key role in strengthening this coalition since it was already buying from the local farms that sold food locally. Rog explains, “All of a sudden, we found ourselves in the surprising position—after over 30 years in this rural agricultural community being perceived as having strange and inaccessible ways and goals—of being looked to as the wise and experienced leaders in the local foods movement. In meeting after meeting with all the commodity farmers, Extension agents, and ag lenders in the room, people would look to me and say, ‘What does Oneota have to teach us about that?’”

The co-op also needed to expand since it was limited by its small storefront. Under the leadership of Rog and former Finance Manager Steve McCargar, co-op members made a bold move. They voted to triple the size of their store, so it could serve as one hub of this new regional foods effort.

The members’ decision to expand reaped immense rewards. The new storefront opened in January 2008. The local foods vision animated a larger group of customers. Sales are rising faster than national norms, new co-op Manager Troy Bond told me.

Flourishing examples
Given the uncertain economic climate, some co-ops now find their sales flattening. Yet co-ops are likely to serve as one potent place where economic recovery will be fashioned precisely because they represent a patient investment by their members in shaping their own vision.

“Co-ops weave a community web,” says Terry Appleby, manager of the Hanover, N.H., Consumer Cooperative Society. “We serve as a center of activity and education around food.” Creating such a space for democracy to flourish is key to the growth of any community-based foods vision.

Results are impressive throughout the U.S. The Hanover co-op joined with 16 other co-ops in New England to form the Neighboring Food Cooperative Association (NFCA), which boasts a total of $161 million in sales, and hires a combined 1,240 staff. The association points out that its Vermont co-ops, counted as a unit, rank among the top 25 employers in that state.

In my home state of Minnesota, which claims 10 percent of the nation’s food co-ops, co-op grocery sales total $120 million, according to Lori Zuidema of Co-op Partners Warehouse (CPW), part of The Wedge. The foundation for this growth was built by several co-op distributors that opened after Minneapolis’ first modern co-op grocery formed in 1970. Forty years later, CPW helps connect farmers with rapidly growing demand for local foods. Even though the business formed out of a need to source food from local farms, CPW trucks also regularly bring produce from California.

Other co-op trucks circumnavigate New Mexico for La Montañita’s Co-op Distribution Center, which picks up food from over 700 regional producers, delivering to over 30 stores, restaurants and institutions. La Montañita sells $28 million of products in a year to its nearly 16,000 members, about 20 percent locally produced, says Membership Coordinator Robin Seydel. The co-op handles at least 1,000 local products year-round, with others on a seasonal basis. Its distribution center handles $2.5 million of food (64 percent local) and also plays a key role in starting new food businesses—by arranging business loans, distributing new products, and mobilizing member investments.

Another sparsely populated state, Oklahoma, has given birth to a new hybrid co-op model, in which producers and consumers share leadership in a single business. The Oklahoma Food Cooperative (OFC), operating without a storefront, has amassed $500,000 of sales since opening in 2003. It runs its own distribution network that carries 3,500 foods and other items to remote locations across the state, delivered one day each month. The firm sells only Oklahoma products, primarily from small farms and processors. OFC helped inspire similar efforts in Nebraska, Kansas, Texas, Michigan, Pennsylvania and Idaho, says co-founder Robert Waldrop.

An urban food co-op, People’s Grocery in Oakland, Calif., also operates without a storefront. In its early years, it has focused on delivering fresh food boxes directly to inner-city residents, as a way of engaging their neighbors and building their voice without shouldering the costs and physical demands of property management.

OFC’s Waldrop adds that the co-op model is “one of the most underutilized business models in the U.S.,” despite its efficacy. Often, co-ops are given little play in the media, while corporate newcomers who trade far less in local foods get substantial publicity.

According to Annie Gaillard, of the Buffalo Mountain Co-op in Hardwick, Vt., the New York Times missed an important part of the story when they featured local food businesses. Coverage properly focused on the young leaders who are doing an impressive job of mobilizing local foods initiatives, Gaillard said. Yet the reporter overlooked 40 years of work by those who had built co-ops to serve as a foundation for this work.

Indeed, co-ops have long played an important role. In the 1970s, co-ops (and Amish communities) developed new technologies for handling bulk foods and built infrastructure for sourcing local foods from quality producers. They created local distribution businesses when private firms could not respond to consumer demand. In the 1990s, co-ops helped major chains rediscover the importance of medium-sized stores, at the very time experts said only supersized store formats could be profitable. Indeed, had it not been for the co-op’s pioneering work, the major chains might never have adopted these techniques.

“Co-ops should not be just food stores,” Buffalo Mountain’s Gaillard adds. “They are about creating community and strengthening cooperation.” Member-run, they can be more responsive to community needs than a privately held firm since they can bring more voices to the table and mobilize more people. Member equity, and access to cooperative credit sources, mean co-ops may often obtain credit more readily than small private firms.

Co-ops also serve as important showcases for new products. “We’re the kind of place local entrepreneurs bring their new products for test marketing,” Gaillard adds. Without this chance to gauge consumer response, fewer innovative foods would be marketed. Buffalo Mountain, open since 1975, sells nearly $2 million of products each year. The co-op’s by-laws specify it must purchase local foods. Gaillard estimates that one of every four products the co-op sells is produced within 100 miles.

Local distribution services
Back in New Mexico, Seydel is grateful that La Montañita members have supported the co-op in serving for 25 years as the backbone of the emerging local foods movement. Their growth has been based on what Seydel calls the “quadruple bottom line.” This means the co-op achieves financial success but also aims to build social equity and a healthier environment. The fourth goal is community, Seydel adds. “That’s why the co-op model is so important. Our benefits are far more equitably attained. That’s not going to happen under the old business model.”

Moreover, Seydel adds, “In our current economic climate, the co-op model provides a vehicle that allows the community itself to grow. We have to keep reinventing ourselves.”

As one example, she pointed out that when consumers retrenched in late 2008, beef consumption fell. The co-op brokered an agreement with its ranchers and processors. Each agreed to take a slightly smaller percentage and pass these cost savings to consumers. At these lower prices, consumers continued to buy the normal amount of beef. Everyone benefited by working together.

The co-op also loaned money to a dairy goat farm to produce chevre with its surplus milk, and persuaded local restaurants to feature these cheeses. Further, the co-op bought a mill to grind organic wheat into flour. It stores the wheat harvest in its warehouse, mills the flour, and found a local bakery to feature this freshly milled flour.

La Montañita Warehouse Manager Michelle Franklin also pointed out that in this banner year for apples, northern New Mexico producers harvested more crop than they typically can sell. La Montañita did not want to sell the apples itself since the fruit were not organic. Yet as Integrated Pest Management products, they were perfect for natural food stores. Franklin found a Texas distributor who offered to convey the apples to independent grocers. Although the co-op did not directly benefit financially, it invested staff time to help their farmer partners have a better year.

There are additional examples of such services. La Montañita also helped growers ship chili peppers to Whole Foods. The co-op buys bins and egg cartons to supply farmers who wish to make up larger loads. Its Co-op Distribution Center also shares its truck space with growers who are distributing to co-op customers.

The next frontiers, Seydel adds, are land and investment. The co-op is exploring the creation of a land trust to hold farmland and perhaps other food facilities, and also wants to build a pool of investment funds.

Sue Futrell, who advises Boston’s Red Tomato in communications, has a long history of involvement in co-op food distribution. “There was no national network when we started. Often, it was a big deal just to deliver a 50-pound bag of oats to a store. Now we have a tremendously deep set of relationships with producers all over the country. Because the whole co-op movement has its roots in local ownership and community-based resources, it built a far-reaching set of relationships in all the places where co-ops were formed. So much of the fabric of what is here now—people forget it was the co-ops that started it all.”

See other articles from this issue: #145 November - December - 2009