From Eggs to Electricity: Types of Cooperatives in Wisconsin

1. From Eggs to Electricity: Types of Cooperatives in Wisconsin

2. I - Introduction to Wisconsin Cooperatives • II - A Brief History • III - Types of Co-ops (by Industry) in Wisconsin Today

3. I - Introduction to Wisconsin Cooperatives • What is a cooperative business? • Historically, communities have worked together to meet their needs for resources, products, and services. • While a variety of types businesses today work towards meeting our needs, co-ops follow unique principles

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

5. II - A Brief History

6. A Brief History • Ann Pickett of Lake Mills started the first WI co-op in 1841 • She pooled milk from neighbors’ farms to make cheese. • Proceeds were returned to her neighbors in proportion to the amount of milk they provided

7. Initially, the government ignored or was hostile to cooperatives. • But in 1887 Wisconsin became one of the first states to legalize cooperative business. • It was soon updated with the Rochdale cooperative principles, and in 1922 was adapted to the federal Capper - Volstead Act -- the “Magna Carta” of cooperative marketing.

8. Cooperatives flourished under the federal support of the Roosevelt Administration in the 30s and 40s • They helped establish the electric and telecom infrastructure that connected rural and urban communities, and, today, continues to provide services. • While agricultural cooperatives lost territory to corporate farms in the 20th century, new market emphasis on organic food has helped fuel interest in cooperatives in dairy and other agricultural industries.

9. Cooperatives Today • According to the most recent study by the USDA Rural Development Service, Wisconsin cooperatives represent: • 2.7 million cooperative memberships • More than $5.6 billion in gross sales • 30,000 local employees • $200 million in state and local taxes

10. Cooperatives Today • Wisconsin has the second most cooperatives in the nation, behind MN • There are over 1,000 co-ops registered in the state • Many parents of students may serve on the boards of local co-ops, or may be the employees of local co-ops

11. Local, state, regional, national • The cooperative structure can be used for co-ops that have business units at the local, state, regional or national level • Some larger regional co-ops have a federated structure which means that their membership includes both individual producers (i.e. farmers) and local co-ops

12. Case Study: CHS Inc. • CHS Inc., the nation’s largest co-op, based in the Twin Cities, is a regional, federated co-op with both farmer members as well as local co-ops that are members • CHS Inc. is a diversified energy, grains and foods company • The company is owned by farmers, ranchers, other cooperatives, and thousands of stockholders • In 2008, CHS owners from 48 states shared a $343 million patronage disbursement

13. II - Types of Co-ops

14. Electric • Most rural areas and farms in Wisconsin, and across America, did not have electricity until President Roosevelt created the Rural Electrification Administration (REA) in 1935 • Up to that point, people in the countryside generally lived without power.

15. Electric • The REA loaned money to community energy cooperatives, which flourished and spread across the state. • Today, electric cooperatives provide energy to rural and metropolitan citizens alike

16. Electric • 2 types of electric co-ops • (1) Generation and transmission (G & T) co-ops that create and send power via the transmission grid to local distribution co-ops • (2) Local distribution co-ops that send the power to businesses and households

17. Case Study: Adams-Columbia Electric Cooperative • Adams-Columbia Electric Cooperative is the largest rural electric distribution cooperative in the state. • ACEC serves 36,000 members/owners in 12 central-Wisconsin counties. It purchases & sells approx. 500,000,000 kWh a year. • ACEC employs 109 full-time, 13 season/part-time, and 78 meter readers.

18. Grain, Farm Supply, and Fuel • Over 150 retail agricultural grain and farm supply cooperatives provide crop inputs, animal feed, grain marketing and petroleum products

19. Dairy • Dairy co-ops among the first American agricultural cooperatives. • More dairy farmers have relied on cooperatives to market their product than any other industry. • Co-ops provide a market outlet, help bargain for better prices, and represent farmers’ interests in public policy

20. Dairy • Today, there are approximately 220 dairy cooperatives in Wisconsin • 83% of milk sold by Wisconsin farmers is marketed through dairy cooperatives

21. Case Study: Organic Valley • Organic Valley works exclusively with family farms. • Their mission is to allow families to retain independence via the cooperative model. 600,000 family farms have been taken over by corporations since 1960. • Of its 1,652 farms across the US and Canada, Wisconsin has the most (523) of any state

22. Farm Credit & Credit Unions • Wisconsin’ federally chartered farm credit cooperatives serve farm families. • Credit Unions are a popular means of keeping credit within a community, paying out $289 million in dividends annually to members. • Together, cooperative credit employs 5,349 people and generates $157 million in total income.

23. Insurance: Town Mutual Insurance Companies • Town Mutual Insurance Companies are a type of cooperative insurance company owned by the policy holders • These “mutuals” primarily offer property and casualty insurance • Some of the oldest cooperatives in America are mutual insurance companies. The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire was organized by Benjamin Franklin and his colleagues in March 1752 • Today, there are 105 Town Mutuals in WI, most of which were founded before 1900.

24. Case Study: Sugar Creek Mutual Insurance Company • 136 year old cooperative in Southeast Wisconsin • Three full-time employees run the co-op, along with nine agents. • Covers 1,904 policies, with a total of $580,860,696 of risk-in-force.

25. Food • Food cooperatives employ fewer people (659 jobs) than other industries • However, they still generate a total income close to $20 million • Historically, co-op grocers raised the profile of cooperative principles in metropolitan areas

26. Case Study: Willy Street Co-op • Willy Street Co-op is a full-service grocery cooperative specializing in locally made, natural, and organic foods. • Over 16,000 cooperative members produce $17 million of sales annually.

27. Consumer • Includes grocery and worker-owned cooperatives

28. Telephone/Telecommunications • Local telephone co-ops offer advanced telecommunications services to help rural Wisconsin compete in a world economy • Telecomm co-ops serve many communities in Wisconsin

29. New Generation Co-ops (NGC’s) • Farmers started first NGCs when Minnesota and North Dakota sugar plants were closing (American Crystal Sugar Co, Minn-Dak Farmers Co-op, and others) • The new approach to cooperatives developed as a defensive strategy against unstable markets • NGC’s created, replaced, or stabilized markets when the markets failed, such as in plant closings

30. Evolution of NGCs: “Offensive” market responses • The NGCs shifted into offensive strategies of capturing greater market value • Increasing value of local goods and services • Ex: Ethanol co-ops raise value of area corn crop; raise investor-member income from value-added processing • Both protecting and increasing value of member investments • Ex: Protect and increase value of investment in senior housing co-ops by making markets for resale, provide higher quality member services

31. The NGC Model Continues to Evolve • Traditional Cooperatives are adapting NGC strategies, while NGC partner with other investors • Capital needs often require outside investors and “hybrid” business models • Ex: Co-op members may partner with other investors in Limited Liability Companies (LLCs) • Newer business models define profit expectations, which helps eliminate investor conflicts • Ex.: Minnesota 308(b) Model; Low-Profit, Limited Liability Company (L3C) Model. Both define expectations and returns for cooperators and outside Investors

32. For more information • To find out more about cooperatives in Wisconsin, particularly those located in your community, please visit the Cooperative Network • This material is made possible by the CHS Foundation