Issue #24 - September 2004 A publication of Cooperative Development Institute www.cdi.coop
SPECIAL ISSUE
Featuring:
From the Cooperative Development Partners
New Dairy Co-op Initiative
Biodiesel Co-op Heats Up
Sustainable Agriculture and the Co-op Connection
Translation Co-op Business
Food Co-ops Cooperate
Final Thoughts
Got support of New England's Family Dairy Farms? A new cooperative makes the case for the community value of cows. Please see the article "Yankee Ingenuity Sparks New England Dairy Farmers" below.
Cooperative Development Institute (CDI) is the Northeast's non-pforit center for cooperative development. CDI's mission is to increase economic opportunities and benefits for people in the Northeast by fosteing the growth and success of all types of cooperative enterpirses. Please contact us if you or someone you are working with would like assistance in starting or strengthening a group-based business: info@cdi.coop.
MAKING A DIFFERENCE: SPECIAL ISSUE ON COOPERATIVE DEVELOPMENT
From the CDI Partners
This special issue of Cooperative Life Leader celebrates two milestones: Ten years of the Cooperative Development Institute's (CDI) work to advance cooperative business enterprise in the Northeast and the second anniversary of the nation's only on-line newsletter to report on all segments of the region's cooperative economy. We return to our regular format in the next issue.
Ours is a unique position at CDI because we are tasked with the responsibility to assist both start-up and established cooperatives and other group based businesses. Looking back over the past ten years it is clear that our effectiveness is integrally linked to the collaborative support of the readers of this newsletter.
Because each one of you is engaged in some aspect of the cooperative economy we rely on you to help us do our job, sometimes as partners, sometimes as a resource and still other times with your referrals. Whether within your organization or your network, you know the "co-opportunities" where people need help getting organized or where a business needs grant-writing assistance, marketing, feasibility, business or strategic planning expertise, management or board training and so on.
Below, we share some stories about how professional assistance can make a difference in the success of a cooperative business. If you know of a co-opportunity where our assistance might make a difference, please let us know. If we can't help, we will try to find someone who can.
Look for the regular format of the Cooperative Life Leader next time, complete with Northeast News, Legal Matters, Outside the Region, the Quiz, and more. Meanwhile, we hope you enjoy this special issue.
'YANKEE INGENUITY' SPARKS NEW ENGLAND DAIRY FARMERS
"Farmers don't need another investment opportunity. They need cash."
In the past 15 years, half of New England's dairy farms have gone out of business. Even with an unprecedented rise in milk prices last spring, farmers are getting 20 percent less of the consumer's dairy dollar today than they were in 1984. Economists predict that the region's farms will continue to close at the rate of 10 percent per year.
Historically, farmers went to milk processors to negotiate better prices. With the ownership of these facilities consolidating, however, farmers have lost power at the negotiating table. The same trend to concentrate ownership in the grocery industry has eroded farmers' leverage with retailers. At the same time, interest among consumers in supporting local agriculture is growing. Farmers' markets, community-supported agriculture (CSA), and other vehicles link producers more directly to their customers.
But it isn't just local food production that people are coming to value more highly. It's also the rural character of the communities they live in. And what anchors these open landscapes, these wooded hills and ponds, these picturesque views and country roads? New England's farms.
Connecting consumers and cows
During the past two years, all of the above factors played into the decision of a group of interested parties to form the New England Family Dairy Farms Cooperative. The co-op hopes to organize and administer an "asset conversion" program that will reward farm families financially for the secondary benefits they bestow on those who live in, visit, or travel through New England.
The co-op's board of directors is composed of dairy farmers and representatives from business, environmental, and educational groups with an interest in rural quality of life and local agriculture. They propose to design and implement a way consumers can express their support for these things by creating a 'made in New England' trademark that connects community benefits to family dairy farms.
Specifically, what they are looking at is a trademark that would be carried on every container of New England milk sold in the region, regardless of other differences such as the label on the front, whether what's inside is organic or has BGH or not, or who in the region produced it. The co-op will reach out to non-profit organizations whose members are natural allies to support the initiative.
The role of start-up assistance
One of the prime movers behind the concept has been Bob Wellington, a longtime advocate for New England dairy farmers who belong to the Agri-Mark cooperative. While his co-op has been a supporter of the initial effort, he emphasizes that this project is one that seeks to return benefits to every dairy farm in New England.
"We have to capture the value added by the secondary benefits of farming," he explains, adding, "Farmers don't need another investment opportunity. They need cash." He recalls that a year ago, this project was little more than a good idea that wasn't moving forward very fast, due to so many pressing priorities.
Then the group contracted with the Cooperative Development Institute (CDI) to help them get organized. "CDI provided the breakthrough to put the resources together" and help them get off the dime, Wellington says. The Institute's legal staff helped them incorporate the new cooperative. Staff offered administrative expertise so the co-op could focus on its primary mission.
"When people get together to start a co-op, they don't know what's involved," Wellington points out. "It can be a nightmare of paperwork. If you have somebody like CDI who knows what they're doing, it's a godsend," he says. "Our board of directors was thrilled that CDI offered to help us go forward. If they hadn't stepped in, I think we'd still be floundering."
Valuing our farms
CDI helped secure start up funding to document and quantify the environmental, social, and economic contributions New England's dairy farms make to the region. This will be followed by the formulation of a business plan for converting the value of these assets into a means of returning profitability to the farms themselves.
As the planning process move forwards Bob Wellington will continue to provide inspiration and leadership within the dairy community. He concludes, "The farmers are at the bottom of the food chain today. But consumers are at the top. They make the decisions about where to shop and what to buy. We're trying to link more directly with them.
"I'd like to see this trademark on a banner in every grocery store in New England," he says, "so when people come to buy milk, they see it up there. And they see it on every container of milk they buy that was produced here in New England. Then they take a drive in the country, and every dairy farm they pass has a sign with that logo on it. And consumers begin to make the connection that their choice about what milk to buy is keeping New England dairy farms in existence. Because you don't bring back a dairy farm, once it's gone."
CDI will continue working with the co-op board to conduct feasibility research and business planning and to support the actions needed to help dairy farmers achieve their collective goals.
PIONEER VALLEY BIODIESEL CO-OP
From the fat to the fire
The Pioneer Valley nestles in the hills of western Massachusetts, where small towns and picturesque farms dot the wooded landscape. There are still signs of what were once thriving textile, shoe and other industries, and farming remains important, but for many people, the engine of the Pioneer Valley economy today is education, specifically, the Five College consortium of Amherst, Mount Holyoke, Smith, Hampshire Colleges and the University of Massachusetts at Amherst.
Taken together, these institutions attract tens of thousands of college students every year. In addition, the area sees several million tourists a year traveling up and down the scenic Connecticut River Valley in the 40 miles between Northampton/Amherst and the Vermont-New Hampshire border.
It doesn't take a sleuth to recognize the signs of these two demographic groups. Most of the commercial centers are filled with clothing stores, art galleries, gift shops, bookstores, and restaurants. Lots and lots and lots of restaurants. And in almost every one, whether it's Thai haute cuisine, the intrepid Miss Flo's Diner, or one of the numerous fast food joints springing up, there is grease. Or, more accurately, there is waste vegetable oil (WVO) from deep fat frying.
Eateries have to pay to have the stuff hauled off and disposed of. So do the college dining facilities, the hotels, the hospitals and other institutional kitchens. At least, until now they had to. Now, there's the Pioneer Valley Biodiesel Cooperative.
Biodiesel's benefits
Biodiesel is an alternative to petroleum diesel fuel, made from non-mineral oils such as vegetable oil or animal fats. There are two basic types of biodiesel. About 20 manufacturers in the United States, mostly located in the Midwest, are producing fuel from virgin soybean oil and other crops. There are no production facilities in the Northeastern states or Canada.
But now, in New England, a co-op of biodiesel pioneers plan to recycle waste vegetable oil (WVO) from restaurants and other sources. The fuel produced from WVO performs even better than virgin oil in terms of tailpipe emissions and stability. It also has a longer shelf life and higher energy returns on investment. Experiments have been going on for years with this technology, but as yet no refineries have been built regionally.
Nationally, biodiesel production has skyrocketed: from one million gallons per year in 1997 to 25 million gallons last year. The US Department of Energy projects sales in 2004 to top 35 million gallons. In 2002, World Energy Corporation reported 600,000 gallons were sold in New England.
What's the reason for the sudden popularity of biodiesel? There are several, actually. It's a superior fuel. It is safer than most other fuels or solvents due to a high flash point and low toxicity. It's better than petroleum diesel for cars, trucks, and off-road equipment on farms and construction sites because it leaves both the air and the engine that's burning the fuel cleaner. Its low toxicity makes it an excellent fuel for boat engines. It can be used in any unmodified diesel engine without any modifications to the fuel system. Plus, with slight modifications, biodiesel can be used to heat homes and businesses instead of conventional (petroleum) heating oil. And it comes from domestic sources, not foreign ones.
Biodiesel is perhaps the "greenest" of liquid fuels. Government certified results show biodiesel reduces soot and unburned hydrocarbons by nearly 60 percent. Global warming exhaust gases are reduced by almost 90 percent, and toxic exhaust by even more than that. Acid-rain causing sulfur is almost completely eliminated. And its users prefer the French fry odor of the exhaust to conventional diesel fumes!
Fund raising, feasibility and business planning support
The Pioneer Valley Biodiesel Cooperative (PVBC) and Co-opPlus of Western Massachusetts, a consumer cooperative, are now moving forward with plans to start a community-based "biorefinery" which will utilize one of the region's waste products to produce fuel. The fuel will be sold within the same 50-mile radius where the WVO is collected.
Co-op member Erik Hoffner comments that without CDI's help "I think we'd still be trying to get the ball rolling. We didn't have any access to the kinds of resources needed to do this project. We had plenty of information and expertise, but no ability to raise money." To attract investment the group needed a feasibility study and business plan, both of which cost money. CDI helped the group obtain a USDA Rural Business Enterprise Grant to do the feasibility study, "Lynn [Benander] was at the table with us many times and helped us produce the nuts and bolts feasibility study. We couldn't have done it without her."
Among other things, the feasibility study revealed that profitability lay in production of refined fuel rather than bulk purchasing of WVO. They expect to gain market share rapidly by offering to collect the WVO at half the current rate. So they are looking at converting an existing plant that has been unoccupied for some time, in essence recycling a building to make the recycled fuel.
The study also concluded that PVBC fuel could be marketed wholesale at least 15 cents per gallon below any other source in the Northeast, the lowest published price in the country. Packaged biodiesel can be sold for about 80 cents per gallon below any other source in the country.
Golden future for 'yellow grease'
In its first year the co-op will produce at least 420,000 gallons of pure biodiesel (B-100), marketing it primarily to wholesale buyers and vehicle fleet operators. Although the business will require working capital during its start up period, projections indicate a strong cash flow once the business is established, with profitability projected to occur within less than a year and a half. The co-op anticipates returning dividends within four years, with the possible option of a stock re-purchase plan.
The brain behind the biodiesel operation is Tom Leue, president of Homestead Engineering, Inc. in Ashfield, Massachusetts where he has been experimenting for six years with a pilot refinery that has produced 10,500 gallons of "Yellow Brand Premium" fuel.
Leue is enthusiastic about the project. "The proposed biorefinery uses waste fryer oil, known as yellow grease or WVO, and in the process reduces landfill waste, reduces disposal costs for restaurant owners, decreases illegal disposals, increases local employment with high-paying manufacturing jobs, and reduces demand for petroleum to be drilled, transported, and imported. It keeps more money circulating in the local community, while helping restore manufacturing jobs for this area. Everyone benefits from biodiesel, whether you use it or not."
Biodiesel is a new fuel, and the public is still learning about its qualities and uses. With a new, multi-million dollar national marketing campaign being initiated by the National Biodiesel Board, it is rapidly gaining acceptance and market share in New England. PVBC's next steps will be to work with CDI to prepare a business plan, develop the required business structure, raise capital, and finalize refinery site selection.
TRANSLATING CO-OP BUSINESS
Theory to practice
Besides individual consultations, CDI has over the years earned a national reputation for the design and delivery of educational programs tailored to the specialized needs of cooperatives. Programs run the gamut from the entry level Co-op 101 which covers basic cooperative legal and accounting principles with the goal of assisting participant understanding of the steps needed to start a cooperative and determine whether a cooperative is the best structure for their business concept, to conferences, study tours and formal courses which focus on advanced business topics for managers, boards, members and/or development professionals. Networking practical application are key components of a CDI educational experience.
Sustainable agriculture
In 2002, the Cooperative Development Institute created a series of training workshops linking cooperative and group based business development to sustainable agriculture. Scholarship funds from the USDA's Sustainable Agriculture Research and Education program (SARE) enabled the participation of farmers and development professionals from the Northeast. The SARE workshops were part of an on-going Co-op Developer Certification program CDI designed and conducted on behalf of CooperationWorks!, a national network of cooperative development centers (which CDI helped form in the late 1990s).
Lorraine McBride came from Vermont to check out the co-op option for her network of family farms. The group had grown to 50 members in seven years in part because of a Heifer Project that helped them upgrade their stock and start an 'equipment library' where members could 'check out' items like a rototiller, goat castrator, or honey extractor.
"I came back on Cloud Nine," says McBride of her first training, adding that this was in part because she got to drive down and back with USDA-VT development specialist Dick Foster. And also because she met people at the workshop who offered to connect her with others who were a few steps further along the road.
"It was a lot of information crammed into a short time," she admits, "but I came away with a strong sense of what's involved in organizing a co-op." She adds that the information she gained and the skills she sharpened will be useful in all of her professional work, not just to develop a co-op.
Lead trainer of that session, CDI's Lynda Brushett, underscores this sentiment." We stress basic skills that allow people to be more effective: planning, communications, group dynamics, conflict resolution, and matching goals with resources." She adds, "Co-op development does not follow from a series of discrete separate, linear steps. It's an 'alive' process. There are so many things that can happen. For the co-op development professional, project engagement is uniquely challenging because your client is a group of owner decision-makers. There are layers of interests and objectives. You're trying to get a bunch of individuals to evaluate risk that will depend on their collective commitment to address. Are they willing to pitch their lives together? To commit to owning a business together?"
From Montana to Massachusetts
Also at the 2002 workshop was Anne Boothe of the Montana Cooperative Development Center. She told the story of a new wave of cooperatively owned and operated retail stores in rural Montana that began in response to community need--"an inability to buy socks and underwear any place in town." Mid-sized chains were moving out, and 'big box' stores had little interest in small, isolated towns that once served as the centers of vibrant farming communities.
When a neighboring town was threatened with its own store closing until a group of investors formed a company to keep it going, some Malta business owners took heart. They offered shares in a downtown retail store for $500 apiece. They quickly raised $282,000 and opened 'Family Matters' in August of 2000. "It has rejuvenated our downtown," said Boothe, who stressed the importance of having leadership come from the existing business community.
Among workshop participants listening to this Montana success story was Bob Rottenberg who had recently joined CDI. He was inspired, and contacted some people in his own community of Greenfield, Massachusetts. They formed a steering committee and began a preliminary business plan with CDI's help.
"Bob [Rottenberg] and CDI have been unbelievably valuable," says committee member and former town councilor Tom Murphy. "We share a strong sense of optimism. None of us is skeptical that we can compete against a big box. Getting an experienced banker on board was a big piece, and we hired a consultant who's worked as a professional buyer for major department stores, so we know we can compete with discount retail stores." The vision they are forging is more than a single group-based business in downtown Greenfield.
"Optimally," says Murphy, "I would like to see this be a for-profit venture owned by the residents of Greenfield." Sole proprietors can't compete with the larger box stores, so they are reluctant to invest in the communities where they are located. If the residents owned the stores, however, there would be a much stronger motive to shop in them. And there'd be more direct benefit to developing sustainable downtown commercial and cultural centers. With deeper ownership in the town, residents would be more apt to invest in things like schools and infrastructure, Murphy reasons, and they'd be less likely to leave. "We have to be profitable," he emphasizes, "but we think we can be. And this is about so much more than making money."
GETTING FOOD CO-OPS OUT OF THE BOX
Staying on top of the retail food business
Hanover Consumers Cooperative in Hanover, New Hampshire, is nearing its 70th year of operation and has become one of the region's most successful food co-ops. It has grown to include two retail stores and a convenience store (with gas bar) and enjoys a reputation for locally produced edibles in its fresh produce, bakery, deli, and "grab 'n go" departments.
The co-op has an extensive education program that offers classes, an informative newsletter, and community activities designed to position it as a source of information about nutrition and food safety issues, as well as of natural and organic foods, and household, health and beauty items. An unusually high percentage of employees have worked at the co-op for 10-20 years, some of them joined by a second generation of family members.
In short, Hanover does it right. One reason for this is that general manager Terry Appleby and his staff are dedicated to staying on top of one of the toughest industries in the world-the retail food business. They have weathered plenty of rough patches with creativity, resourcefulness, and best business practices. They have climbed a mountain range of learning curves.
But the journey never gets easier. The niche that natural food co-ops established in the 1970s has been invaded not only by for-profit chains like Fresh Fields and Wild Oats, but also by supermarkets, even Wal-Mart. In return for leading the transition in our national diet towards whole, healthy, untreated foods, some food co-ops have had to close their doors in the face of cutthroat competition.
Learning from study tours
Cooperation among food co-ops may be key to their long-term health. It has however been a long journey toward unifying the nation's food co-ops, and Terry Appleby is one of those who's traveled it the whole way. He recalled how, up until the mid-1990's, food co-ops operated independently, with little collaboration. The idea of pulling them together surfaced during the first study tour of Atlantic Canada's "integrated cooperative system" in 1993, led by CDI's founding director Andy Ferguson and Ann Hoyt, director of the Center for Cooperatives at the University of Wisconsin in Madison.
As food co-op leaders traveled to Atlantic Canada year after year in CDI's ongoing program of study tours, they learned more about how a linked system of food cooperatives could work, and they built ties with powerful leaders in the Canadian co-op movement. Increasingly, they recognized that only by working together could the co-ops bring their members the value they were looking for.
"Also on that tour," Appleby adds, "Ann Hoyt first told us about this book by John Carver [Boards that Make a Difference] and the idea of board policy governance. This has had a profound effect on the consumer cooperative movement."
Appleby credits the "synergy among people on that study tour" (a number of co-op grocery leaders still active today) with subsequent 'fast tracking' of discussions about forming other regional or national initiatives. These included purchasing economies of scale, shared accounting software, and a national co-op brand.
"We brought back ideas about management, and integrating our systems," he explains. Learnings from the CDI study tours "certainly had a big impact on improving operations at co-ops like City Market [the former Onion River Co-op, in Burlington, VT], paving the way for their expansion. We'd already been talking with Midwestern co-ops about pooling our resources, forming stronger ties; the tour opened our eyes to a lot of possibilities."
Co-op to co-op networking
Appleby, along with Hanover's education director Rosemary Fifield and five of her staff, plus three co-op directors, also attended the first forum on Marketing Our Cooperative Advantage (MOCA) in Boston in 1995, co-sponsored by CDI, and came back full of ideas. "MOCA has had a pretty far-reaching effect," he says. "For one thing, it got people who were doing cooperative marketing for all different types of co-ops together, and through the networks created by MOCA conferences people developed things like the group 'CoCoMamas', or Consumer Cooperative Marketing Managers. The work around developing a national brand really had its start in MOCA."
Four years ago, Hanover co-hosted one of CDI's popular regional MOCA forums, along with Cabot Creamery. Fifty people gathered at Pierce's Country Inn in Hanover, New Hampshire to analyze market research on consumer attitudes toward cooperatives and look at some success stories of marketing based on co-op identity. Cabot's Jed Davis reported on their phenomenally successful "Hi Neighbor, have you tried my cheese?" marketing campaign, which sprang from a conversation in an elevator at that first MOCA forum, between Agri-Mark's Bob Wellington and Roberta MacDonald, marketing guru of Cabot Creamery. Cabot is owned and operated by Agri-Mark dairy co-op members.
Fifield recalled her experience at the first MOCA event in a previous CL Leader: "It was a great opportunity to connect with other kinds of co-ops. We're good at promoting Hanover Co-op, but that's not the same as saying to our members 'Have you thought about joining an electric co-op?' We're used to the idea that we work for the folks who shop here, but we don't think in terms of a bigger movement. This makes me think more about recommending co-ops for many things-pre-school, energy, credit unions."
CDI's commitment to applied education and networking has helped turn information and connections into new ways of thinking and acting.
FINAL THOUGHTS
CDI looks forward to being of service to you
We applaud the vision and drive of all the aforementioned organizations and individuals and all those with whom we have had the privilege to work. Together we are building a sustainable economy in the Northeast, one in which people work together to meet their needs, have access to quality jobs and affordable products and services, and share ownership of essential resources. We look forward to learning about your co-opportunities.... and to featuring your stories in upcoming issues of the Cooperative Life Leader.
CDI SERVICES
FMI: (413) 774-7599 or info@cooplife.coop
The Cooperative Life Leader is produced as a service to the regional community by the Cooperative Development Institute, which is dedicated to developing and strengthening cooperative enterprise in the Northeast. CDI staff and consultants provide comprehensive support services, including the following:
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* Membership development
* Cooperative start-ups
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* Legal and personnel issues
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Cooperative Life Leader is supported by a grant from the United States Department of Agriculture's Rural Development program. In accordance with federal law and US Department of Agriculture policy, this Cooperative Life/Cooperative Development Institute is prohibited from discrimination on the basis of race, color, sex, religion, age, disability, marital or familial status. To file a complaint of discrimination write USDA, Director, Office of Civil Rights, Room 326-W, Whitter Building, 1400 Independence Avenue SW, Washington DC 20250 or call 202.720.5964 (voice and TDD). USDA is an equal opportunity provider and employer.
Cooperative Leader Staff
Lynda Brushett, Senior Editor, brushett@metrocast.net
Jane Livingston, Principal Writer and Editor, mejane@gwi.net
Laurie Siggillino Broussard, Production Manager, lbroussard@cdi.coop