Co-ops fill gaps from free market

by Kane Loukas

Cooperatives like North County Co-Op on the West Bank won’t steal food from the mouths of traditional for-profit businesses, but they look more formidable by the day.
The National Cooperative Bank in Washington, D.C., reports that the top 100 largest U.S. cooperative businesses increased their revenues by 33.2 percent from 1991 to 1996.
Co-ops in agriculture, hardware, lumber, supermarkets and finance grew the most, despite their sluggishness in the economy at large. During the same period, many small and mid-sized co-ops grew 50 percent.
In Minnesota, co-ops handled $7.3 billion of the total $8.7 billion in farm production last year.
Closer to home, the North Country Co-Op grocery store on Riverside Avenue made a recent $600,000 expansion and renovation to supply the growing niche for organic food products.
The co-op model consists of a company owned and operated by the people who use its services and products. They fill a demand that businesses operating under the auspices of free enterprise have overlooked.
Frank Blackburn, an administrator with the Minnesota Association of Cooperatives, explained: “Usually a co-op will come up where there’s been a market failure.”
Without the potential for wealth or high customer traffic, most companies wisely turn up their noses at building a rural grocery store, gas station, or a costly grain mill.
Co-ops live off those economic table scraps deemed unsavory by the strictly money-minded.
Lately, tighter operating regulations have turned little scraps into full meals as the cost of meeting environmental standards push costs higher, repelling more and more for-profits from partaking in rural economies.
To get the service they need, rural consumers look to each other and start cooperatives that respond directly to their needs.
Little phones, big service
In Erskine, Minnesota, the small co-op Garden Valley Telephone Co. — located four hours north of the Twin Cities — thrives by providing services a large phone company wouldn’t bother to give rural customers.
“They beat the socks off of US West up in that part of the country … They’ve been very aggressive on customer service,” Blackburn said. He added that customer service alone generates all kinds of business for Garden Valley and other co-ops.
“It’s not a really lucrative area because it’s so rural,” said Sue Gunderson, an administrator with Garden Valley, one of six telephone cooperatives in the state. However, “the fact that the co-op is in a rural area makes it an important business. Our customers feel like they have a say in what’s going on.”
Though customers don’t have a choice between local phone services, Garden Valley’s popularity runs high since it provides basic service at lower rates than US West, the major regional carrier. Garden Valley makes ends meets with revenues from all the Internet and phone service extras its 14,000 customers longed for with US West.
If Garden Valley members want something more, they can vote on the services. To top it off, if the company does well, every customer receives share of company profits at the end of the year.
Bosses on permanent vacations
Members of North Country Co-Op grocery store also choose the products that fill the shelves and coolers, making sure they meet organic standards. To receive their discount of up to 17 percent, members have to put in time at the store stocking shelves, investing some sweat equity. It’s not too stressful, though.
“As an employee, the biggest part is not having a boss,” said Frank Trnka jokingly, a two-year North County employee. “There is an intellectual component as an alternative business that members are drawn to … there’s a lot of concern about the corporate takeover of farming and its effects on quality.”
Trnka foresees North Country chugging along at its current size, not growing into a 2 million square foot co-op super store.
Big co-ops might be uncommon, but they’re out there. Land O’Lakes of Arden Hills racked up more than $4 billion in sales last year and ranked as the fifth largest co-op in the country. HealthPartners in Minneapolis comes in at 26th with upwards of $1.2 billion in revenues.
Size, however, doesn’t change co-ops much, said Blackburn. He explained that despite some minor changes in job titles and organization, even at Land O’Lakes, every farmer has the phone number of company president John Gherty on their speed dial.