Using the Co-op Model to Supply

Local Food to Institutions

Wisconsin Local Food

Summit January 27, 2012

Margaret Bau Cooperative Development Specialist

USDA Rural Development – Wisconsin

Courtney Berner Outreach Specialist

UW Center for Cooperatives

Presentation Overview

• How co-ops are engaging

with the local food movement

• How co-ops are connecting

institutions with local foods

• Two Wisconsin examples

Retail: Consumer Owned

• 400+ consumer owned food co-ops

– Most in natural foods

– Tend to be upscale

• Model tends to struggle in other situations

– Conventional foods

– Food deserts

Retail: Worker Owned

• Just Local Food, Eau Claire – Worker-owned grocery store

and delivery service in Eau Claire

– Mission is to connect Chippewa Valley to local producers and fair trade items

– Founded in 2004

– Started with home delivery of milk then expanded to include other local foods

Retail: Consumer + Worker Owned

• Chapel Hill, NC

– Founded in 1988

– 3 grocery stores

– Restaurant

– Food production

– 14,000 members

Distribution:

Producer Owned

• Grown Locally

• Based in Decorah, Iowa

• 16 members farm, but source from 20+ producers

• Deliver to a 6 county region in NE Iowa, SE Minnesota, and Western Wisconsin

Distribution:

Multi-stakeholder Model

• Brings two or more members of the local food chain into one co-op.

• Examples • Producers & Buyers Co-op

(4 member classes)

• Fifth Season Co-op

(6 member classes)

• Eastern Carolina Organics (LLC, but run like a co-op with 2 member classes)

An in depth look at

a recent failure…

The Situation

• Low quality, cheap food in institutions

– Get whatever you want, when you want

– Mystery food trucked from distant shores

• Risk management issue

– Flu pandemic or oil embargo

– Tracing food borne pathogens

Bright Idea

Spend 10% of

$2 million food

budget on local

food

– Sacred Heart Hospital CEO, Stephen Ronstrom

Explore the Idea

Rick Beckler, Director of

Hospitality Services • Searched for a farmer

– But one farmer can’t fill demand

– Overwhelming for hospital to

work with multiple farmers

• Need to aggregate

– Searched for partners at the 2008

Value Added Ag Conference

– “Who wants a piece of $200K?”

Gather Information

Barriers to purchasing

local food:

– Seasonal production

–Quantity

–Transportation

– Processing

– Pricing

–Delivery

“Form follows function.”

“Form and function should be one,

joined in a spiritual union.”

-Frank Lloyd Wright

So what co-op model (form) to use?

• Traditionally either: – Producer co-op: just of farmers

– Purchasing co-op: just of institutions

• Realized we need all stakeholders

– In theory: ongoing learning and trust

– Mere customer relationship not sufficient

The Stakeholders

• Producers – Strict requirements on feed, handling,

safety, sustainability

• Buyers – hospitals, technical colleges, nursing

homes, schools

– pledge to buy 10% local foods

• Processors – be picky – no mixing mystery meat

• Distributors and local transportation

• “Friends and family” – patient capital investors – want to

support local food

– Nonvoting

Lessons Learned

Lesson #1

• Raise sufficient capital before launching

– Resist temptation to “just do something”

– Do a thorough equity drive

– If you can’t raise $ - that tells you something!

Lesson #2

• Hire an experienced manager

– Don’t try to get by on the cheap

– Initial position is not the place to “grow”

someone into this field

– Lost time in personnel issues

– Board took on operational and managerial

functions

• Burned out board members!

Lesson #3:

• Require contracts between parties

– Institutional reality

• Personnel churn

• Policy churn

– Clash of cultures

• Small business handshake

• Corporations respect contracts

– Require $ down when placing orders

• 50% down, 50% upon delivery

Lesson #4

• Educate and train members at all levels

(Co-op principle 5: ongoing education)

– Benefits of local food that outweigh costs

• Longer shelf life, less waste

• More sales from better taste

– “buy-in” from all levels of institution

• Doctors, CEO, board

• Front line kitchen staff

– Learn directly about their needs

– Teach new ways to prepare foods

Lesson #5

• Multiple members are needed in each

membership class

• A.k.a. Don’t become identified as one

member’s “project”

– Be wary of the public relations blitz

What DID work?

• Co-op as coordinator

– Buyers want one point of contact

– Producers want to focus on production

– Co-ops can assure

• level of quality

• Aggregate product

• Assure follow through on delivery and invoicing

• Producers and processors got paid in full

Fifth Season Basics

• 6 membership classes

• Community Supporters

• 7 member Board of

Directors

• Advisory Council

• Operate in the 7 Rivers

Region

Learning by Example

• Lesson #1: Raise sufficient capital

– In addition to member equity, Fifth Season has

raised over $90,000 in equity through the sale of

Class B Preferred Stock.

• Lesson #2: Hire an experienced manager

– The Co-op hired an operations manager with

institutional food service experience and a

successful track record with farm to school

programs.

• Lesson #3: Require contracts between parties

– The operations manager is working with buyers and producers to create growing plans for the 2012 season.

• Lesson #4: Educate and train members at all levels

– From the beginning, one of the Co-op’s goals has been education and training for members.

• Lesson #5: Multiple members are needed in each membership class

– The project has never been seen as the pet project of one business or individual and most membership classes have several members.

Ongoing Challenges

• Matching buyer and seller prices

• Matching supply and demand

• Minimizing cost of operations

• Ensuring the product is sourced and

delivered per contract

Questions?