Food Co-op Initiative—Three Years

March 17, 2013, marks three years of Food Co-op Initiative (FCI), and we invite you to celebrate with us. What are we celebrating? 

Since we began our work,

• 65 retail food co-ops have opened,
• owned by 100,000 members,
• providing 500-plus full-time jobs, and 
• generating over $100 million in annual sales;
• plus 116 more communities have active co-op organizing efforts underway. 

New requests for support are coming in every week! Wherever there is a new co-op in the community, more dollars are recycled locally; more local farmers survive and flourish; more healthy organic food is available; more people are participating in a democratic process; and more materials are being recycled and reused. New food co-ops make a difference to people and communities. FCI makes a difference to new food co-ops. 

How we got here 

FCI was built on the foundation of Food Co-op 500 (FC500), the original project created to explore how the co-op community could enable faster and more successful startup efforts. During the years 2003 and 2004, Cooperative Development Services (now CDS Consulting Co-op), National Cooperative Grocers Association (NCGA), NCB and NCB Capital Impact all experienced a rise in inquiries from local communities seeking to start food co-ops.

Realizing that there was both a need and an opportunity to provide better support to these groups, FC500 was created with the goal to support the start-up of 200 or more new stores by the year 2015. With funding from Blooming Prairie Foundation (BPF) and NCB, FC500 was launched in July 2005. 

For the first year FC500 was a volunteer effort, using NCB staff to coordinate activities and teams of co-op managers, consultants, and peers to provide monthly check-in calls with startup groups. In 2006, we began making Seed Grants and contracted for a co-op development specialist, Stuart Reid, to take over the coordination and begin building a resource library. NCB and NCGA committed funds to enable this work, and the Howard Bowers Fund, BPF, and other donors supported our grant program and special projects. 

By 2010, we had helped hundreds of communities and expanded our understanding of their needs. New co-ops were opening at a record pace. Thirty new retail co-ops had opened in the last five years alone—more than in the preceding two decades. Requests for assistance were coming in from across the country (and occasionally abroad), and FC500 needed to expand to keep up. At the same time, the economy was going into a deep recession, and our support partners were forced to tighten their belts.

The FC500 task force spent many hours looking for ways to continue funding our work, but most of the options were not very promising. Things changed when BPF put forward a proposal for Food Co-op 500 to incorporate as a nonprofit, after which they would make a five-year commitment of $200,000 annually to support our continued efforts. Food Co-op Initiative became a reality on March 17, 2010. 

As a nonprofit cooperative development center, we also became eligible to apply for USDA Rural Cooperative Development Grants (RCDG.) With the grant deadline only months after our incorporation, the heroic efforts of Kevin Edberg, executive director of CDS, resulted in a USDA grant coming in a year earlier than we could have hoped. Consequently, we were able to hire a second team member, Jake Schlachter, and provide more direct support to startups. In addition, last year Rosie Weaver joined us as our part-time bookkeeper and office manager. 

FCI’s budget has come almost entirely from the Blooming Prairie Foundation and annual RCDG grants. These two sources provide about 90 percent of our income, with additional contributions coming from co-ops and individuals. BPF support has provided a great deal of stability and predictability—benefits often lacking for nonprofits. However, the Blooming Prairie grant will run out in two years, and all federal funds face an uncertain future. Our RCDG has already been cut by $50,000 for 2013. FCI is looking for other sources of funding that will enable us to continue providing tools, training, and advice at no cost to startup groups. We hope the food co-op community will become a big part of that support.

What we provide

Tools, training, resources, advice, referrals, and grants—that is how we make a difference. FCI’s website now offers a wealth of information and links that co-op organizers access as needed. Here you will find our Legal Primer, Member Equity Toolbox, financial planning tools, and a complete archive of the 28 training webinars we have presented so far. 

 It’s not just new co-ops that are using our resources—we share our publications and expertise with existing co-ops and other cooperative development centers, as well as provide data and stories for co-op advocates and reporters. By posting and linking resources on our website, we have created an on-demand reference and training library that serves a far greater number of co-ops than we could hope to assist in person. We are now exploring opportunities to collaborate with the Cooperative Grocer Network in linking these resources so even more people can find them.

Web-based delivery systems are highly efficient, but personal contact and assistance is still important. We respond to hundreds of calls and emails every week. Regional conferences and Consumer Cooperative Management Association (CCMA) workshops are another way that we meet people face-to-face while providing training and building relationships. We collaborate with local co-op development centers and co-ops to plan and present several training events every year for startup organizers, and we do presentations for many other conferences and regional associations. This year, we will be in Bloomington, Ind., Los Angeles, Portland, Ore., Boston, and in Austin, Tex., for CCMA…and those are just the major events.

Some of our best working relationships develop through our Seed Grant program. These modest matching grants of $1,000 to $10,000 help co-ops leverage additional fundraising in their communities and pay for early organizing and feasibility research costs. Including the Seed Grants made by Food Co-op 500, FCI has awarded over $350,000 to 48 startup groups. From among these recipients, 19 new retail co-ops have opened or are expected to open in the next three months, and many more are well on their way. Grant recipients report regularly on their progress, and we stay in touch through conference calls, mail, and site visits. 

Bumps in the road

With all the good work that has been accomplished, there have also been some disappointments. Of the 65 co-ops that opened since we began keeping track in 2006, we know of 13 startups that subsequently closed. Eighty percent is an impressive success rate for new businesses. Still, we hate to see any co-op fail. See "Why (Some) New Co-ops Fail," CG Nov.–Dec. 2012, for more on our analysis of the causes of these failures. 

Even successful startups often struggle to reach their sales potential as quickly as the new stores of existing co-ops. Inexperienced management and insufficient investment in marketing seem to be the two biggest causes of sluggish startup growth. 

NCGA membership requirements have left many startups without the support that this strong association could provide. The good news is that startups that have been able to partner with the NCGA Development Cooperative have reached their goals more quickly.   

Every startup has had challenges raising the capital needed to open a competitive grocery store. Many communities have raised significant member investments in the form of equity, loans, and preferred shares, but more is needed to convince bankers and other lenders that new food co-ops are a good risk. 

What’s next for FCI?

Personal contact with startup groups has always been the most effective (and fun) way to develop strong working relationships and our best opportunity to learn what tools, training, and support are needed. Having ongoing support helps startup groups avoid costly mistakes, maintain focus, and reduce burnout. We will continue to participate in live training events and visit as many communities as we can, but the future will also include more personal web-based connections. Video conferencing allows us to meet with distant groups and feel more connected than just over the phone.

 We recently opened a discussion forum on our Facebook page where co-op organizers can exchange ideas and ask questions (www.facebook.com/FoodCoopInit—see the Startup Forum). And by the time you read this, FCI plans to have a Group Discussion for startup co-ops and their supporters set up at CGN.coop in the new interest group forums. Anyone working with new co-ops will be welcome to post questions and share insights.

Webinars have become increasingly popular, and FCI has sponsored a series every year. Starting in 2013, we are expanding the program into a monthly event. Sessions will include presentations on all aspects of new co-op development and occasional open forums on requested topics. Many of our webinars have been useful for established co-ops that are planning expansions and capital campaigns. Recordings of all of our webinars can be downloaded from our website at: www.foodcoopinitiative.coop/resourcestoolbox/webinars.

New co-ops have also formed with the intent of building membership and raising the capital to buy a store that is already operating. This seems like a great way to speed up the startup process and eliminate some of the uncertainties around finding a site and customer base. We want to know more about these "conversion" startups to see how their experience differs from co-ops that open new stores. We have been assisting and following the progress of two groups that now have completed their acquisitions and are open and operating as consumer co-ops. The Old Creamery Co-op in Cummington, Mass., and the Placerville Co-op in California are helping us to prepare a case study of their organizing processes. Along with their stories, we will publish an introductory toolbox for other co-ops to use when considering a conversion startup. 

We are very excited to have been asked to edit the next revision of "How to Start a Food Co-op." This free training guide has long been one of the most popular CGN publications and has been used by almost every startup group out there. With all the new development over the last years and the ever-changing face of the grocery industry, the handbook will evolve to keep pace, keeping its place as the go-to resource in the CGN library.

FCI often works with other development centers to leverage our resources and share expertise. The Cooperative Development Institute in Massachusetts provides support for co-ops of all kinds in the Northeastern states. We are working with them to design a peer mentoring study and a proposal for implementing effective mentoring relationships between new co-ops and their experienced peers. We know that the right mentor can make a big difference, and with guidance on how to create effective, accountable relationships, more co-ops will be encouraged to get involved. We hope to create a model and training resources that can be used for new food co-op support and mentoring among co-ops at all stages of development in many sectors. 

Planning the future of co-op development

It has been nearly 10 years since coordinated efforts to support new food co-ops began. Visionary leaders created an organization that could bring that expertise together in one place, where co-op founders could access it, and where new tools could be created and shared. Food Co-op Initiative continues to evolve as we learn. Where will we be 10 years from now? Are there new opportunities to collaborate and become more effective? Can we find better ways to raise capital for increasingly expensive storefronts? Where will we find experienced co-op managers for all the new stores that are coming? 

Last year, during FCI’s strategic planning session, we recognized the imperative to focus our resources and ensure we are providing the best, most coordinated support to startup food co-ops. The new development wave continues to grow, and we believe that there may not be another opportunity like this in our lifetimes. Now is the time to bring together all the people and organizations that have been developing support systems during the current wave of new food co-op interest.

 Representatives from NCGA, CDS Consulting Co-op, Howard Bowers Fund, and NCB/NCB Capital Impact are working with us to host a Co-op Development Summit this spring. The summit’s objectives are to:

• create an alignment of industry resources to support and promote the growth of food co-op development in the United States;
• celebrate the success of food co-op development over the past 10 years; and
• formulate a strategy for the future of food co-op development, answering the questions, Where do we need to be in 10 years? What resources are needed to get there? 

This is an exciting opportunity that will help shape the future of retail food co-ops. Stay tuned for great things.