Thinking Outside the Co-op

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Welcome to a new era, one of expanded possibilities for cooperatives as well as overall economic decline. Readers will be familiar with this message, even if resisting its conclusions.

Here’s a partial confirmation from an unlikely source, the front page of the Wall Street Journal (3/15/2008):

"There you have it: continuing high energy and food costs, contracting credit, stagnant wages and increasing property debt. Highly leveraged or poor American consumers—this is just about everybody who isn’t among the richer rich—are about to get nailed. The day of debt reckoning has arrived as the U.S. receives a long overdue margin call."

As we are learning week by week, the impact of the economic breakdown will be felt at all levels of society. Atop high debt loads and inflation, add high fuel costs and heightened environmental costs.

Is your co-op capable of continued further growth during strong food inflation while jobs and earning power shrink? You may need a marketing approach that recognizes much greater financial stress among your members and customers.

As for sales growth plans, food inflation is so strong that currently a retail grocery store has apparently stopped growing if its sales increase only 4 or 5 percent above the previous year. And next year’s statement may require 8 to10 percent sales “growth” just to maintain present volume. Call it: real food, real inflation.

Reviewing the list of topics to be addressed at this June’s food co-op training and networking conference in Portland, Oregon, one track stands out from the other management, human resources, and board governance titles: “Thinking Outside the Co-op.” I do believe most everyone is doing a bit more of that by now. The events unfolding outside the co-op are unprecedented, they are monumental, and they will change what is inside.

Along with trends and events with global and local impact, we have great opportunity to promote cooperative enterprise. In order to do so, cooperative leaders must learn “best practices” in promoting cooperative possibilities.

The following are passages from an excellent summary by Paul Hazen, CEO of our National Cooperative Business Association, in addressing a United Nations panel on February 11, 2008 (thanks to Elizabeth Archerd at Wedge Co-op for editing and a good example of co-op education):

"Co-ops are not simply an alternative business model. They are a better business model. Let me give you some reasons why.

"Cooperatives distribute capital widely among average Americans, while stock companies make the rich richer. Surplus revenues earned by cooperatives are either reinvested in the business or returned to members. With more than 130 million cooperative members nationwide, this distributes co-op revenues broadly among average Americans. Investor-owned businesses, on the other hand, distribute profits to shareholders based on how much stock they own. That means those with the most shares generally wealthy investors receive the most, while average Americans get little.

"Cooperatives keep capital in the community where it was generated, while stock companies export capital elsewhere. Since they give surplus revenue back to their members, cooperatives keep wealth in their communities. Stock companies do the reverse. By distributing profits to shareholders, they take capital out of the community.

"Cooperatives exemplify the Ownership Society, while stock companies concentrate ownership among the investor class. Cooperatives are owned by those who buy their goods or use their services. Ownership of stock companies, on the other hand, is concentrated among a small group of outside investors.

"Cooperative governance is open and democratic, while stock company governance is closed and easily manipulated. Cooperatives are run democratically, on a one-member, one-vote basis. Board members do not have a business relationship with the co-op, other than being customers of it. In a stock company, boards include members of management and those with financial ties to the organization, such as major contracts.

"Cooperatives have both economic and social goals, while stock companies are motivated solely by the need to maximize shareholder returns. This has positive consequences for co-ops and negative ones for stock companies. Cooperatives have multiple bottom lines. In addition to meeting the economic needs of their members, they often have social objectives, such as widening participation in the economic system or promoting sustainable development. Stock companies’ focus on shareholder returns often leads to negative outcomes.

"Cooperatives largely police themselves while government must provide extensive oversight and control over stock companies. Members provide oversight of cooperatives, assuring that the business adheres to good business practices and cooperative principles. Stock companies must be highly regulated to protect their customers. Still, the stock company world is plagued with scandals, while co-ops are virtually scandal free.

"One of the persistent myths about America is that rugged individualism built this country. Don’t you believe it. If you look at the critical moments in our history, starting with the Revolutionary War and the writing of our Constitution, it’s when we came together that we have been most successful. People working together built our schools and our religious institutions. People working together built our industries, defended us in two world wars, and sent men to the moon.

"Cooperatives are part of this. They built our farms, brought power and light to our rural areas, and provided a place to deposit money in the 1930s when the banking system failed.

"Rugged individualism didn’t build America—cooperation did. And it’s needed now more than ever."

If Paul Hazen can present this argument to a U.N. commission on economic development, this magazine’s readers can bring the message to their organization’s newsletter, to the local editor, to mayors and commissioners and local economic development committees.

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Dave Gutknecht is editor of Cooperative Grocer ([email protected]).

See other articles from this issue: #136 may - june - 2008