Case studies of Cooperative Development: Food Hubs

 I just posted a series of reflections on the CooperationWorks! co-op development training, and I’ll wrap up here by sharing a series of case studies on different kinds of cooperatives in development. During this research, I found the array of models and issues to be fascinating — yet the challenges appear to be quite similar.

This one’s about food hubs.



Last September, I attended the CooperationWorks! cooperative development training in Madison, Wisconsin. It was a great workshop that I recommend to anyone interested in developing cooperative enterprises. One of the training’s strengths was the presentation of a variety of real-life examples that illustrate the many different possibilities for cooperative solutions, and the many benefits and challenges thereof. In particular, I found a set of food cooperatives (at all different points of the chain, from growing to eating) that suggest a growing array of viable and desirable alternatives.

In the world of cooperatives, two of the most familiar models are agricultural coops and grocery coops. Even as over the last century the percentage of people employed in farming in the U.S. has shrunk dramatically, the cooperative share of the agriculture economy holds strong, and today is estimated at about a third of all inputs and sales. Cooperative grocery stores experienced a boom in the 70s (which saw an estimated 3000 cooperative stores and buying clubs in North America); by the 90s those numbers were decimated, but in the past decade that trend has swung back into rapid growth.

However, E.B. Nadeau notes in The Cooperative Solution that these agricultural and retail components of the cooperative food system have historically been separated from each other, and that they even “sometimes work at cross-purposes.”

Much can be gained from strategies that integrate different branches of the food system, from production to distribution to retail, etc. In the course of the CooperationWorks! workshop, we saw several exciting examples of new cooperative models that bring together multiple stakeholders from across a food system, organize resources and actions around clearly defined needs, and work in solidarity for mutual benefit.

What’s a Food Hub

Margaret Lund spoke to our group about emerging cooperative food hub models, and for what it’s worth I’ll say that her presentation was more exciting than I could have expected a data-driven talk about integrated food system infrastructure to be. (You can see slides from a similar presentation of hers here, and a blog post here.) Lund started off by noting that in recent years there’s been a tremendous boom in food hub development, with as much as 60% of the country’s food hubs having been launched in the last five years — ten percent in 2011 alone! (In part, this is thanks to support in USDA funding for the development of local food hubs: Lund’s studies suggest that 60% of food hubs received government support to launch, and 30% are still receiving government funding.)

This new crop of food hubs consists of a broad diversity of models, with different combinations of local/regional producers and wholesale/retail/institutional consumers, and different methods of distribution, processing, marketing, etc. The gist is that they help producers scale up and expand options for consumers; these benefits are usually accompanied by array of other positive social and environmental impacts.

Lund notes that not all food hubs are coops; though the data isn’t conclusive, she suspects (with an obvious stake in the matter, as a cooperative developer) that the cooperative models are performing better on the whole. Here are some examples that we heard about.


Case studies of Food Hubs

The Iowa Valley Food Coop is essentially an Internet Food Hub. The Coop has developed an open-source web-based software to manage inventory and ordering, and this platform connects hundreds of consumer members and with scores of producers. They deliver to one place, at one time each month; all orders are simple, packaged in big boxes. Their customers are mostly large institutions (hospitals, schools, etc), with some secondary distributors. Their board consists of at least two producer members and two consumer members. They have plans for more growth — more pickup sites, more frequent deliveries — but they have no plans for a store. “They don’t want to invest in infrastructure; they want to invest in each other.” (It may be worth learning more about their software platform; I didn’t catch the name, but could reach out to Ms Lund.)

Local Roots in Wooster is a storefront that operates as a year-round farmers market. Farmers and artisanal producers can bring their own products and sell on consignment. Consumer members and producer members all pay the same membership fee of $50 a year, and Local Roots also receives 10% of all sales. The coop keeps costs low by having a light approach to labor: farmers maintain their own stalls, consumers add bar codes themselves via self-applied stickers. Local Roots’ offerings are almost entirely local, but to ensure a comprehensive inventory the coop does feature a small pantry in corner with non-local staples (baking soda, etc). The benefits of the market seem to be percolating up the chain: since the storefront can sell year-round, some farmers have begun to invest in greenhouses and other technology that extends their growing season.

Space itself offers major benefits to members of Local Roots. Consumers can feel personally connected to the farms they’re purchasing from, and farmers can receive daily feedback about what is being sold. The space is also evolving into additional functions: some folks have organized a cafe in the market (reportedly a “quasi” worker cooperative). Local Roots’s next steps include plans to develop a kitchen for value-added production and other community uses.

In her presentation, Lund noted that Local Roots has a loose model that ‘breaks all kinds of rules,’ at least from a traditional cooperative developer’s perspective. They don’t have much formal structure, the board seems quite loose (most board members happen to be farmers, but there is no set proportion), and decision-making is somewhat fluid. Lund wondered whether this will change in time and as the features of the market expand. But for now, the fact that they have a deeply held common vision, with some level of social interconnection, seems to have enabled them to succeed without a lot of the organizational development processes that one would normally expect.

Sandhill’s Farm lies somewhere between the previous two models. It’s a coop that manages the distribution of CSA packages to a set of scheduled distribution points, mostly at schools and churches. (The drop-off sites are typically offering up their space for free during times when it is otherwise unused; they receive a donation from the sales as well as donations of food and good feelings in the community.)

The coop is just two years old, but it already includes almost 40 farmer members and 1,600 consumer members — with three full-time and five part-time employees, who also act as members, voting on board representation and generally having an equal say in decision-making. The coop got a big boost in startup capital through pre-paid consumer subscriptions who stepped up to guarantee an initial core of membership in “an exercise in consumer goodwill.” They are approaching a break even point after only the second season. Profits, when made, will be split evenly among the member groups.

Already, the coop has demonstrated galvanizing effects on the local system. “In addition to expanded production, people are starting new businesses because they now have this place to sell.”


Hub to Hub Comparison

Lund outlined a comparative analysis of these three different models.

The internet-based exchange is consumer-driven, and can work well both locally and across a large geographic region. It has a low overhead, and relatively low barriers to entry, but it also lacks any social component — prioritizes convenience over community.

The indoor year-round farmers market requires the most capital and commitment of the three, as it requires a building and considerable staffing costs; it also demands a lot from farmers in terms of resources and risk. But its community impact may be the largest, with many benefits to all parties in terms of social capital.

The multi-farm multi-site CSA model requires the most commitment from the consumer; but they also benefit from social engagement during the drop-offs and with the community anchor institutions that host them. (This was also the only food hub in Lund’s sample that included a formal membership role for workers.)


Also: Fifth Season Cooperative

We learned about two additional examples of cooperative hubs that I think are worth sharing widely.

One was the Fifth Season Cooperative, in Viroqua, Wisconsin. The Fifth Season Coop is utterly unique in the country: it has six member classes, including producers, producer groups, processors, distributors, buyers, and workers. And this complex model emerged from an extensive, participatory needs assessment conducted with the stakeholders from the area.

Viroqua is located in a region of Wisconsin (and Iowa, Minnesota and Illinois) called the “Driftless Area,” with a challenging topography — steep forested hills and valleys — that pose challenges and limitations on agriculture in the region. Nevertheless, the area has a deep heritage and wide variety of small farmers. Yet much of the food produced here leaves the region for the nearby cities; there has been growing concern about food insecurity.

In 2007, the Valley Stewardship Network (a sort of rural community development and conservation organization) launched a “Food and Farm Initiative” to assess the needs, assets, and opportunities facing the local food system. The Initiative concluded that the region had a potential market for local food that was currently untapped; that the producers in the region lacked access to processing, marketing, and distribution infrastructure; and that there existed many stakeholders (non-profits, businesses, institutions, etc) who were committed to improve the local food system. Having convened the table and reached a shared understanding among diverse food system participants, leaders concluded that there was potential for a multi-stakeholder coop — and applied for a grant to launch a feasibility study.

Housed by the Vernon Economic Development Association, the Feasibility Study entailed two groups: a steering committee and a ‘slush group.’ The Steering Committee met approximately once a month, and was a large group consisting of representatives of potential Co-op member classes and other people who were interested in rebuilding a regional food system. The slush group, meanwhile, consisted of key players who were highly invested in the project and had relevant expertise to figure out the minute details about the workings of the potential co-op; this group met more often and worked more intensively. The slush group developed proposals for mission statement, vision statement, and bylaws, and the steering committee worked to reach consensus on these matters. They next developed an interim board of directors, and an advisory council.

The process all seems very balanced and the membership seems diverse, though — having re-read the case study and the web site — I’m still not exactly sure exactly what it is that the coop does. At the very least, it seems like it is providing education for members, coordination between members, collaboration on specific problem areas like processing facilities and transport, and a level of standards for quality and labor, etc. It may be that Fifth Season functions essentially like a food systems network, bringing the entire supply chain to the same table, which is no small task and brings no small benefit….


Finally: Mercado Central

Perhaps the most impressive cooperative example of the workshop was Mercado Central, a project of the Latino Economic Development Center in Minneapolis. John Flory of LEDC presented the long story behind its development.

John was originally approached by a veteran social worker who had grown disillusioned with the social service model for simply providing assistance without cultivating self-sufficiency and community wealth. Together with a local church, they initiated a long series of listening sessions where they talked to low-income Latino families about their histories and interests and hopes. (This was a shift in approach from a needs-focused service perspective toward asset-based community development.)

Through these dialogues, they explored the immigrant community’s culture of entrepreneurialism, especially around food vending. Many families were interested in starting their own small businesses. So the organizers arranged for entrepreneurship classes designed for low-income people with low levels of education. These classes were fine, but as people graduated a new vision emerged. People here had skills and vision, but they lacked the capital required to start up a new business on their own; if they could bring many businesses together, it would make it easier for any one to start up. Together, they developed a shared vision for a cooperatively-owned building that would contain an entire market of community-owned businesses.

Flory says that he was initially skeptical. A large project like that would be a challenge for well-resourced and experienced developers; add cooperative management into the mix, and participants with low levels of capital, and it becomes much harder to imagine. But he committed to work on the idea, and discovered that there was strength in the numbers. The initial church community had already served up a number of ready participants, and other parishes soon came to the table.

When they finally put out a request for proposals, they received 200+ applicants. To qualify as members, businesses would have to be at least 51% Latino-owned; they would have to buy $1k shares of stock in the coop, and go through a business course; each of them could then apply for microloans. All together the financing from this came out to $200-300k, which made the market possible. That and a fortunate break from the city, which had a particular property in a blighted neighborhood that it was happy to see developed.

Out of the entire applicant pool, 45 businesses were accepted into the market. By combining the scarce resources of all these individuals, the developers had not only raised a tidy sum to get started — they also established widespread community buy-in to the market, literally and emotionally. Almost everyone in the Latino community had a personal connection to one of the businesses, and they knew that this idea had been something that the community itself had come up with. As a result, the opening day was swarmed — more successful than anyone had anticipated — and set the tone for an auspicious early period.

Today Mercado Central has 0% vacancy, and an estimated annual sales of $10 million. (A tamale stand is the highest grossing business, and it has the smallest space.) There are 165 employees working there. Incubator of other small businesses. Similar markets have arisen across town in the time since, and the entire surrounding neighborhood is rapidly developing new small business and community life. And LEDC claims that Mercado Central has generated a surge of confidence in the Latino community and respect in the city at large.

The market now hosts an array of business classes on-site.

This is one of the few public markets in the country that developed not as a real estate project, but as a business incubator. They have a large manual in case people are interested in the nuts and bolts — though Flory adds a disclaimer: “it’s very challenging.”

He also ended with a note of caution: Mercado Central is a successful engine of business today, but the cooperative culture that made its launch possible is now struggling to survive. Factions have formed within the organization, and threaten to break down the democratic processes. This, Flory notes, is actually par for the cooperative course — all of the coops he’s been involved in have struggled with “serious issues of conflict among members.”

“Maintaining the democracy, sustaining the relationships, is very difficult.” The key, he says, is transparency. Without regular and comprehensive reporting, accusations of favoritism (or worse) can quickly erode trust. “You need to develop a culture that can work out its differences, even if that means plans for breaking up partnerships,” he says, pointing out that all partnerships break up eventually, so there needs to be agreement on how this should happen.

Flory also notes that the success of Mercado Central is in part due to the community’s strong cultural affiliation and homogeneity. “The most challenging environment in which to develop a cooperative is in a community with many different cultures and mixed income levels.” Coops need to be carefully organized to meet specific needs, and governance should reflect the makeup of the community. If the right balance can be struck, the benefit is potentially tremendous.

16. December 2013 by
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