Solidarity as a Business Model

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Solidarity as a Business Model

• The use of multi-stakeholder cooperatives in a
  sustainable food system

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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

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Different potential classes of members . .

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

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Different potential classes of members . .

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

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Variations between different classes of members .
.
  Short Term Need Long Term Objective Non-financial Contribution Equity Contribution Stake in Outcome
Consumers Accessible location and price Access to specialized good or services predictable pricing, supply Purchasing power Generally Low Low-High depending on alternative supply sources
Producers Production costs covered Reduced risk sustainable source of income market development Industry knowledge specialized product Medium high Low High depending on alternate distribution channels
Workers Reliable work fair wage Safe, respectful, gainful employment Industry knowledge firm specific knowledge Low-medium High
Community Members Existence of resource in community Healthy and vibrant local economy Possible special expertise Low sometimes quite high Low - Medium
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Balancing Interests . . .

• Allocation of governance rights
• Distribution of surplus
• Transfer rights
• Dissolution

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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

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Other ways to invite participation . . .

• Preferred stock
• Advisory boards
• Labor/management committees/Works councils
• Partnerships
• Limited liability companies (LLCs)

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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

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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

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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

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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

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Value(s) Chain vs. Supply Chain
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Typical Food Industry Supply Chain

• Producer Processor Distributor
• Wholesaler Retailer Consumer

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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

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Value Chains

• Business concept from mid-1980s
• 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

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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

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Values-based Supply Chain

• Takes into consideration both the characteristics
  of the product and the characteristics of the
  business relationship . .

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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

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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!

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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

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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 . . .

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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

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Are we a marketplace or are we an ecosystem?
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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

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Eastern Carolina Organics
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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

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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

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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

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Iowa Valley Food Co-op, Cedar Rapids, IA
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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

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Local Roots, Wooster, OH
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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

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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

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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

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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

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Want to learn more?

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See the real thing . . .

• Case study session at 345

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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

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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_at_iphouse.com