With billions in sales, some co-ops are big business

  • Article by: ERIC WIEFFERING , Star Tribune
  • Updated: January 14, 2012 - 10:16 PM
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Chingwell Mutombu of Golden Valley is a regular shopper at the Wedge in Minneapolis.

Photo: Joel Koyama, Star Tribune

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When Brent Heuth and a team of researchers at the University of Wisconsin decided to measure the economic impact of cooperative-owned businesses in the United States, they didn't figure it would be too hard.

After all, co-ops have been around for centuries, and tens of millions of Americans are either members of a co-op or, at one time or another, customers.

HealthPartners is a co-op. The organic milk you buy at the grocery store likely came from Organic Valley, the Wisconsin-based co-op that's on track to do $700 million in sales this year. Depending on where you live, the electricity powering your home or business might be coming from Maple Grove-based Great River Energy, a cooperative that is itself owned by 28 co-ops.

REI, the popular outdoor retailer based in Seattle? Co-op.

But Heuth's team found that nobody, including the U.S. Census Bureau, had ever really tried to quantify the co-op economy.

"There was no longitudinal data at all," said Heuth, a professor of agriculture and applied economics at the University of Wisconsin-Madison. "So what we came up with is a snapshot of how big the cooperative economy is today."

Using conservative methodology, the Center for Cooperatives at the University of Wisconsin estimates that cooperatives account for nearly $654 billion in revenue, more than 2 million jobs and $75 billion in wages and benefits.

And more are on their way. The health care reform act includes more than $3 billion in loans and grants to form new nonprofit health cooperatives that will begin operating in 2014.

In general, co-ops are owned by their members, who have a direct say in governance and share in the profits. Otherwise, they can come in all sizes and types. Some are nonprofit, but many are not. Some pay no taxes on their profits or surplus, others do. Some permit limited outside ownership, but most do not.

The United Nations has designated 2012 as the International Year of Cooperatives, but I don't want to leave you with the impression that cooperatives have a lock on virtue. They can be as badly run as their for-profit, publicly traded peers, or as brazenly defensive of their interests. Regulators have dinged some of Minnesota's farmer-owned ethanol plants for repeated pollution violations. American Crystal Sugar spends up to $2 million a year in Washington to preserve sugar tariffs and quotas that limit competition and drive up prices for consumers. Last year, the company locked out 1,300 union workers, which seemed directly at odds with Principle No. 7 of the cooperative code, Concern for Community.

Minnesota has a bigger co-op economy than any other state. Its 1,024 cooperatives employ 46,000, have 3.5 million members and control combined assets of $90 billion. Those numbers defy the stereotype of Birkenstock-wearing, granola-crunching do-gooders. Sure, they can still be found, but Minnesota is also home to the country's two largest co-ops by revenue. Net income at CHS Inc. neared $1 billion in the most recent fiscal year, and in 2010 Land O'Lakes returned a record $125 million to its owners.

The economy has been tough on all businesses, but Bill Oemichen, CEO of the Cooperative Network, a trade group representing Minnesota and Wisconsin co-ops, believes his members have weathered the times better than traditional businesses. "Our capital is patient," he said. "There's not the same pressure to meet quarterly earnings. And we stick to what we know. We didn't make the kinds of investments that got a lot of other businesses in trouble."

Credit unions, for the most part, avoided making the kind of risky housing loans that capsized some of the big Wall Street banks, and spend a comparatively paltry sum on marketing. Still, assets at credit unions have almost doubled in the past decade, and membership has surged in recent years as consumers become increasingly fed up with their banks.

When some of the nation's biggest banks tried to raise fees on debit cards last year, a social media campaign called Bank Transfer Day encouraged people to take their accounts to a credit union. The National Credit Union Association estimates that almost 451,000 new members signed up in the last three months of 2011 alone.

And even though consumers have been pinching pennies, the Wedge Co-op, an organic food retailer in south Minneapolis not known for its low prices, has added nearly 4,000 members and boosted revenue and net income by more than two-thirds since 2004.

On Tuesday, the Wedge will donate $60,000 to local nonprofits as part of its annual WedgeShare program. More than $500,000 has been donated since the program began in 1998.

"We have obligations because of our cooperative business model to give back to the community that other businesses might not be required to," said the store's general manager, Lindy Bannister. "But we're a grocery store first and foremost. We can't do those things without being financially successful."

ericw@startribune.com • 612-673-1736

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