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The Basics of the Cooperative Business Model

One of the questions our staff hears asked most often is, “What’s a co-op?” That may come as a surprise to many, but to me it’s understandable to not know the difference if you weren’t raised in the co-op world.

My story is one you’ve likely heard before. I grew up in a conventional grocery household where essentially all of our food was purchased on our weekly trips to Walmart and Aldi. Our pantry was filled with national food brands, and I can just about guarantee no one in my family can name a local food supplier to this day. Learning about co-ops and the impact that supporting them could have on our local community just wasn’t made a priority, so it wasn’t until I reached adulthood and started making my own food-buying choices that I realized there was a different way to feed myself.

I, like many of our first-time shoppers, had heard about food co-ops but hadn’t ever researched them until applying for my position at Menomonie Market Food Co-op. I’d been part of a credit union for years, so I knew the gist, but if you’d asked me what the differences were, I would’ve muddled my way through an answer. Thankfully, I’ve now immersed myself in cooperatives and can tell you why they are so great.

What's a Co-op?

According to the International Cooperative Alliance, a cooperative, or co-op, is defined as “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.” In simpler terms, co-ops are businesses that are organized and operated by people who have a common need and partner together to meet that need.

Types of Co-ops

There are several different types of cooperative businesses. They can exist in any industry, but you’ll most often see them in agriculture, insurance, financial services, grocery, education, healthcare, housing, and utilities. A few examples of the different types of co-ops include:

Worker Co-ops: These are owned by the people who work for the company.

Producer Co-ops: These are owned by the producers of products who have joined together to better market their products or to streamline the production.

Consumer Co-ops: These are owned by the customers who then purchase goods and services from the co-op.

Purchasing Co-ops: These are usually made up of several small businesses that have joined together to improve their buying power and to get better discounts.

Hybrid Co-ops: These are a combination of any of the four other types of co-ops.

Co-op Values & Principles

Although co-ops often look similar to corporate businesses to an outsider, the difference is how a co-op is run. Unlike a corporation, a co-op’s purpose isn’t just to accumulate profits but rather to meet the goals of its customers or members (sometimes called “owners” like at our food co-op). Its wealth also stays in the community, instead of it going to a small group of shareholders. Co-ops are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity, and cooperative members believe in the ethical values of honesty, openness, social responsibility, and caring for others. To put these values into practice, they are all guided by the seven co-op principles:

1. Voluntary & Open Membership
Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination.

2. Democratic Member Control
Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives, members have equal voting rights (one member, one vote), and cooperatives at other levels are also organized in a democratic manner.

3. Member Economic Participation
Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.

4. Autonomy & Independence
Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.

5. Education, Training, & Information
Cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives. They inform the general public—particularly young people and opinion leaders—about the nature and benefits of cooperation.

6. Cooperation Among Cooperatives
Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional, and international structures.

7. Concern for Community
Cooperatives work for the sustainable development of their communities through policies approved by their owners.

Co-op Structure

Menomonie Market Food Co-op, for example, is a consumer cooperative, which means in its simplest definition, our business is a grocery store that’s owned by its shoppers. Because food co-ops like ours are owned by their shoppers, their business structure is also much different than a corporate grocery store’s structure. For example, our owners are essentially our shareholders with each having an equal say in how the business is run. They voice this by voting for board members they believe best represent their views. Elected board members in turn oversee our general manager who is responsible for managing the day-to-day operations of the business. Then our owners, non-owner shoppers, and local producers all benefit from our store’s success.

The cooperative business model is truly the best representation of people democratically coming together to fulfill a common need, and I’m glad I get to be part of such a vibrant community of owners who all want to see it succeed in the Chippewa Valley. If you’re not yet a Menomonie Market Food Co-op owner, learn more about all of the benefits of ownership and how to become one today by speaking to a cashier on your next grocery run or by visiting this page on our website.

This article was originally published in the October/November 2020 issue of our bi-monthly newsletter, The Morsel. If you’d like to read more stories like this one and stay up to date on the latest co-op news and events, pick up a print copy in-store on your next grocery run or find more news on our website here.

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