Solidarity as a Business Model

1. Solidarity as a Business Model The use of multi-stakeholder cooperatives in a sustainable food system

2. What is a multi-stakeholder co-op? • Co-op with at least two different membership classes • Users • Workers • Supporters • Consciously built on common mission but heterogeneous base • “solidarity co-ops” are the fastest growing kind of co-op in Quebec

3. Different potential classes of members . . • USER membership classes • Consumers • Clients • Families of clients • Institutional purchasers • Producers • Groups of producers • Intermediaries – processors, distributors etc.

4. Different potential classes of members . . • WORKER membership classes • Workers • Professional employees (social workers, physicians, managers etc.) • SUPPORTER membership classes • Community members • investors

5. Variations between different classes of members . .

6. Balancing Interests . . . • Allocation of governance rights • Distribution of surplus • Transfer rights • Dissolution

7. Transformational vs. Transactional • Built upon relationships – relationships themselves are seen to have value • Dependent upon transparency, free flow of information • Patient, striving for mutual best long term interests as much as short term gains – alignment of interests at a higher level • Systemic perspective – allows for joint consideration of supply and demand • Inclusive

8. Other ways to invite participation . . . • Preferred stock • Advisory boards • Labor/management committees/Works councils • Partnerships • Limited liability companies (LLCs)

9. What does the research say? . . . (not that much but perhaps some surprises) • Theory – high transaction costs, inefficient decision-making, ultimately unstable • No real data to support this view • But . .the jury is out on institutional partners • Alternate theory – highly evolved mechanisms for the collection and coordination of disparate information in the pursuit of common objectives – + trust relationships = lower transaction costs

10. What does the research say? • Theory – membership classes will compete for resources (“zero sum” game) • Data --- Italian study of 300 social co-ops found addition of supporter class did not take a way from ability of worker class to achieve goals on pay and meaningful employment

11. What does the research say? • Theory: differences = conflict • Data – survey of 79 MSC in Quebec found high level of satisfaction with governance • MSCs in Quebec do not use mediation services more than any other kind of co-op • Ostrom research – face-to-face communication increases the level of cooperation

12. What does the research say? • Robert Putnam – “Bonding” and “Bridging” social capital • Both are important • Bridging is the harder one to do, absolutely vital to keeping a diverse democracy vigorous and inclusive • MSC are a natural ground for building bridges “social capital represents not a comfortable alternative to social conflict but a way of making controversy productive”

13. Value(s) Chain vs. Supply Chain

14. Typical Food Industry Supply Chain Producer Processor Distributor Wholesaler Retailer Consumer

15. Characteristics of supply chains . . • Inputs are interchangeable • Relationships are transactional • Participants are competitive • Price rules • Zero sum game (you win, I lose) • Advantage is manifested through control of inputs, dominance of markets or both • Benefits are unevenly distributed • Risk is born by the least powerful

16. “Value” Chains Business concept from mid-1980’s • Look at whole process together and in order • At each stop/activity the product gains some value • The chain of activities gives the products more added value than the sum of the independent activity's value • In food, “value-added” could be production-oriented (milk to cheese) or based upon attribute differentiation (organic, local) • Cost of activity not the same as value

17. Advantages of the value chain approach . . • Assist in strategic planning • Encourage information flow upstream and downstream • Support quality enhancement activities • Vertical coordination rather than vertical integration is more flexible However . . . . • Does not fundamentally challenge power/risk relationships • “partnering” may be profound or superficial

18. “Values-based” Supply Chain • Takes into consideration both the characteristics of the product and the characteristics of the business relationship . .

19. Characteristics of a values-based supply chain • Links are between strategic partners (not necessarily every link is a partner . ) • Long term relationships with win-win orientation • High levels of collaboration and trust • Partners have articulated rights and responsibilities in regard to information, risk-taking and decision-making • Commitment to “fairness” and welfare of all in terms of pricing, wages, contracts etc. • Often decentralized (respect for local input, control) • Need for common values, vision

20. Advantages of a values-based approach • Can combine scale with product differentiation • Can achieve high levels of quality, consumer trust • Can outperform other business models in rapidly changing markets – high level of information, learning • A perfect environment for multi-stakeholder cooperatives!

21. Where do co-ops fit in? • Horizontal collaboration may be needed to assemble sufficient volumes • Co-ops may be needed to provide missing links between existing actors in a system • Co-ops can provide a specific role for community supporters • Can add a link to employees which is missing in both supply and value chain models • Can articulate and reinforce a specific set of values along a continuum . . • A community solution to a community issue

22. Co-ops could fit in anyplace along here . . Producer Processor Distributor Wholesaler Retailer Consumer In a single-member model, co-op exists at one juncture . . .in a multi-stakeholder model, can exist at more than one if desired . . .

23. Recent USDA local Food Hub study . . • Majority has started within the last 5 years • Over a quarter were started as cooperatives • Another 20+% were formed as LLCs • Changing market -- significant percentage of new food hubs formed during the year of the study

24. Are we a marketplace or are we an ecosystem?

25. Examples of MSCs in Sustainable foods . . • Local Roots – producers and consumers • Fifth Season – producers, producer groups, processors, distributors, buyers, workers • Weavers Street Market – workers, consumers • Maple Valley Co-op – producers, buyers, workers, community supporters/investors • Eastern Carolina Organics – producers, managers • Sandhills Farm to Table -- Producers, consumers, workers

26. Eastern Carolina Organics

27. Eastern Carolina Organics (ECO) • Started in 2004 as a project of a local nonprofit with a mission to support organic farmers • Issue was established “foodie” culture but lack of volume, variety and seasonality of product • “Farmer-owned” is key element of identity • 2005 there were 13 growers and 2 staff owners; 2011 - ECO has 17 farmer-members, 40 growers • Members are farmers and two managers who oversaw the launch of the business • No desire to involve customers in actual ownership . – “simplicity is key to our success”

28. Value-add of ECO • Provide a stable market for organic product for farmers (growth more from expansion of existing members than adding more members) • Key to attracting larger producers needed to meet customer demand for organic • Can mix producers, product and provide seasonal food choices throughout the year • Facilitate collaboration with customers, planning for each season

29. Value-add of ECO • Field to customer in matter of days • Can assist farmers in transition to organic • Quality control is vital and having employees engaged and empowered as part of the organization helps facilitate this • Support farming as a dignified living • Lots of related ancillary activities – biofuels, CSA, composting, solar panels, local currency, foundation

30. Iowa Valley Food Co-op, Cedar Rapids, IA

31. Iowa Valley Food Co-op • 270 consumer members, 55 producers • Internet-based orders, monthly pick-up • Open source software, developed by Oklahoma food co-op • 2 producers, 2 consumers on board, rest can be mixed • Patronage split half and half • Plans for growth – more pick-up sites, more often; no plans for a store

32. Local Roots, Wooster, OH

33. Local Roots • Storefront operates as almost a year-around farmers market • Farmers bring their own products, sell on consignment • Artisans can also be members, sell product • Consumers, producers, businesses are members; same cost • No specific board representation, but most are farmers • Next step – kitchen in back for value-added

34. Weaver Street Market • Hybrid worker-consumer cooperative since its founding in 1988 • Cost for worker members is $500; about half join. • Patronage can add $1 an hour in good years • Seven member board – 2 workers, 2 consumers, 2 appointed by the rest and GM • Advantage: “grounding the board in reality”

35. Case studies . . Industries • Local food production and distribution • Brewing • Healthcare • Social services • Arts, photography • Retail grocery • Forestry/lumber milling Countries US – France – Spain – Italy - Canada

36. Learnings . . • Can combine formal ownership-sharing with meaningful partnerships – no “perfect” MSC • “Form follows function” --what is the problem you are trying to solve? -- A complication to one is an enhancement to another • Information, communication (facilitator), sunshine all are necessary for success

37. Want to learn more?

38. See the real thing . . . • Case study session at 3:45

39. Forthcoming . . . “Multi-stakeholder Cooperatives:  Engines of Innovation for Building A Healthier Local Food System and a Healthier Economy” by Margaret Lund In the special “Green Economies” issue of the Journal of Cooperatives, UK

40. “Solidarity as a Business Model: A Multi-stakeholder Cooperative Manual” http://oeockent.org/index.php/library/category/46/cooperatives Publication # 20 on the list Margaret Lund 612-750-1431 lundsteller@iphouse.com