Cooperatives: a different way of doing business

The hundreds of family farms that co-own Organic Valley are celebrating National Co-op Month this October. We attribute much of our success to the cooperative business model; it's one of the things that make us different from our competitors in the food industry. By pooling our products and resources, our cooperative is able to provide stable pricing and services that give hope to family farms. We think you'll enjoy our foods even more when you know how we work together to produce foods the way you want them produced. (Click here to learn more about how our farmer co-op works.)

If you've been buying local and organic foods for a long time, you may already be familiar with the cooperative (co-op) concept. That's because co-op grocery stores were among the first to stock local and organic foods. Today, there are many kinds of co-ops. They range in size from small storefronts to large Fortune 500 companies. In some ways, cooperatives operate much like any other business, but they have several unique characteristics:

• They are owned and democratically controlled by their members—the people who use the co-op's services or buy its goods—not by outside investors.
• They return surplus revenues to members proportionate to their use of the cooperative, not proportionate to their "investment" or ownership share.
• They are motivated not by profit, but by service—to meet their members' needs for affordable and high quality goods or services.
• They exist solely to meet the serve their members.
• They pay taxes on income kept within the co-op for investment and reserves. Surplus revenues from the co-op are returned to individual members who pay taxes on that income.
  

Types of Cooperatives

Consumer Cooperatives are owned by the people who buy the goods or use the services of the cooperative. Consumer co-ops may sell consumer goods such as food or outdoors equipment, or provide housing, electricity and telecommunications. Other co-ops offer financial (credit unions), healthcare, childcare and funeral services. Almost any consumer need can be met by a cooperative.

Producer Cooperatives are owned by people who produce similar types of products—by farmers who grow crops, raise cattle, or milk cows, or by craftspersons or artisans. By banding together, cooperating producers leverage greater bargaining power with buyers. They also combine resources to more effectively market and brand their products, connecting them to customer values. Organic Valley is a producer co-op.

Worker Cooperatives are owned and governed by the employees of the business. They operate in all sectors of the economy and provide workers with both employment and ownership opportunities. Examples include employee-owned food stores, processing companies, restaurants, taxicab companies, sewing companies, timber processors and light and heavy industry.

Purchasing and Shared Services Cooperatives are owned and governed by independent business owners, small municipalities and, in some cases, state governments that band together to enhance their purchasing power, lowering their costs and improving their competitiveness and ability to provide quality services. They operate in all sectors of the economy.

Why Cooperatives Form

Co-ops are formed by their members when the marketplace fails to provide needed goods or services at affordable prices and acceptable quality. They empower people to improve their quality of life and enhance their economic opportunities through mutual self-help. Throughout the world, cooperatives are providing their members with financial services, utilities, consumer goods, affordable housing, and other services that would otherwise not be available to them.

Cooperative Principles

All cooperatives follow seven internationally recognized principles:

• Voluntary and Open Membership
• Democratic Member Control
• Member Economic Participation
• Autonomy and Independence
• Education, Training and Information
• Cooperation Among Cooperatives
• Concern for Community

Co-ops for Everyone...

Over 120 million people in the U.S.—two out of five—are members of an estimated 48,000 cooperatives. Worldwide, an estimated 750,000 cooperatives serve 730 million members.

Learn more about co-ops

Co-op Month Website

University of Wisconsin Center for Cooperatives

National Cooperative Business Association

Learn more about the Organic Valley Co-op

Cooperatives and Our Hope

~ by George Siemon, CEIEIO of CROPP Cooperative

We often hear negative talk about corporations with their lack of long term focus
and community benefit. All corporations may not fit that description,
but there is no doubt that their focus is increasingly dominated by
their stock value today and their next quarterly results.
Basically, businesses have a mission and focus that in itself answers
a need of the consumer and can be complimentary to community
values, environmental concerns, and other ethical deliverables.
Unfortunately, that simple purpose gets complicated when you move
from delivering on the mission at a reasonable profit to “how much is
my business worth.” Therefore, maximizing profits that in turn inflate
stock value becomes a driving force especially when top management
receives a stock bonus. As a result of this drive for valuation gain,
corporations often leave behind any sense of reasonable or sustainable
profit or community benefit and adopt a “winner takes all” attitude
where stock price is the measure of success.

There has been a lot of corporation bashing with little talk about
alternatives in the 21st century. However, starting as far back as the
19th century, social movements have looked for alternatives and from
that the cooperative movement was born. Cooperatives swept through
the United States in the early 20th century, peaking in the late 1920’s
with a primary focus in rural America. Cooperatives provided services
in regions where no business would go, and provided alternatives to
limited markets.

Most people don’t know that there are many cooperatives in our
society today. Some know of the farmer cooperatives with brands like
Ocean Spray and Welch’s but may not know that many of the farmer
support infrastructure entities, such as Land ‘O Lakes, are actually
cooperatives. Other common cooperatives are utilities, some retail
stores, distribution services, feed services, housing, and energy. Most
consumers don’t realize how many independent retailers have formed
cooperatives to access larger buying capacity. Worldwide, the number
of cooperatives has tripled in the last 20 years.

So, how are cooperatives different from corporations? Primarily,
a cooperative’s purpose may have the same delivery function as a
traditional corporation but the focus is to benefit the member-owners
in providing a valuable service with a sustainable profit and not by
increasing stock value. The cooperative member-owners are building
a vehicle that will provide ongoing service for generations—not a
business dedicated to maximizing profits. This does not mean that
profits are not important, but it does mean that those profits are
based on a long term purpose and not short term profits or stock
value. Another key difference is that management cannot own stock
in cooperatives so the motivation to maximize stock bonuses is
eliminated.

Cooperatives practice democracy in their governance allowing the
member-owners to maximize their understanding and involvement in
their business. Most cooperatives, like CROPP Cooperative, designate
each member with one vote regardless of size which is a completely
opposite approach compared to corporations.

If we want business to be about long-term sustainability and social
responsibility, then the cooperative model is the strongest option.
In fact, cooperatives are quietly prospering in modern times with
many ‘behind the front line’ developments that are empowering
people and businesses to be competitive and build long-term
prospering communities.

I feel very fortunate to have been part of founding a cooperative
in 1988 with a group of pioneering organic farmers. This effort has
blossomed into CROPP Cooperative, more commonly known as the
brand, Organic Valley Family of Farms. Through this experience it has
become clear to me the potential cooperatives have as alternatives to
corporate greed. Organic Valley has grown from a dream to a vision,
and now represents a movement of organic farmers from around
the nation working together to deliver top quality organic foods to
consumers, and economic sustainability to family farmers. Working on
a minimal profit of 2%, and free of the constant stock value concern,
Organic Valley is able to focus on long term considerations and
able to pursue the interests and values of the organic family farmers
we represent.

Our cooperative’s legal name is CROPP, which stands for
Cooperative Regions of Organic Producer Pools. We now are
comprised of nearly 900 farmers in 24 states. Specializing in only
organic products, with farmers producing organic dairy, eggs,
produce, citrus juices, soy beverages, beef, pork and poultry, CROPP
is the nation’s largest organic cooperative, representing nearly 10%
of all certified organic farmers in the U.S. We are dedicated to the
highest organic standards, the best tasting organic foods, and to
encompassing organic principles and environmental stewardship in
all aspects of our business. We are proud that these core values have
been embedded in our mission from the beginning. We have chosen
to develop our brands, Organic Valley and Organic Prairie, with the
same core values and mission that characterizes our cooperative.
But most critical to achieving these higher, long term goals has been
CROPP’s dedication to paying farmers a fair and stable pay price for
their products, and providing meaningful and fair employment.
The public is generally unaware of the changing face of agriculture.
In my life time, over four million farmers have gone out of business.
It has been a long time since farmers were able to set their own pay
prices. U.S. agricultural policy has favored the corporitization of
food, often resulting in the sourcing of raw ingredients overseas at low prices in order to satisfy their ever demanding short-term stock
valuation goal. We are fortunate that as a cooperative we can do
things differently.

Our cooperative is governed by an all farmer-member board
elected by the farmer members at large. In addition to the Board,
CROPP has Executive Committees (ECs). These ECs are like our
Congress. Each region selects a farmer to represent their “pool” in
monthly “pool” meetings. At these meetings, farmers review all the
issues that are of concern to them including their pricing structure.
It is this democratic process that is at the heart of what makes our
cooperative so unique.

We know that the cooperative model and the USDA organic
standards provide an excellent foundation but do not represent all
of the values that are important to us and to our customers. Values
such as food miles, whole foods, domestic fair trade, and farm scale
are not inherently addressed. We have developed a pyramid of values
to help us all remember where organic and cooperative fit into the
hierarchy of the way we think about food and farming as a whole.
The pyramid is also a visual way of communicating to our customers
and partners how their personal food choices fit into a sustainable
model. It is personal food choices that greatly impact the evolution
of sustainable eating and farming practices. Becoming aware of the
subtle differences behind the food we purchase, and staying true to
brands that match as closely as possible to our value systems, will
help to support the sustainable food system for future generations.

Organic cooperatives are our hope. They give us a democratic
model of working together for a common cause. This is perhaps the
most difficult challenge we humans face—how to work together
most effectively for the good of the whole. If we can do this, then we
can succeed at fostering community, protecting the environment, and
returning our water, soil, and air to purity.