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Posted August 15, 2013 by Real Pickles

Real Pickles and the Path to a Co-operative Economy

We are excited to share a few words written by Erbin Crowell, Executive Director of the Neighboring Food Co-op Association (NFCA) and local expert on cooperative business.  Erbin was a huge help to the Real Pickles Co-op founding group as we forged ahead with our transition to a cooperative structure.  He earned his Master of Management: Co-op & Credit Unions from St. Mary’s University in Nova Scotia and serves on the boards of the National Co-operative Business Association and the New England Farmers Union. He lives in Buckland, MA, with his partner Kristin Howard and their son Elias, and may be contacted at erbin@nfca.coop.


By Erbin Crowell, Executive Director, Neighboring Food Co-op Association

The United Nations International Year of Cooperatives was celebrated in 2012

 

It’s been about five years since I first sat down with Real Pickles’ cofounder Dan Rosenberg at his home in Montague, MA.  As he considered the future of his company, Dan was interested in knowing more about the co-operative business model and its potential for preserving Real Pickles’ unique mission over time.  For my part, I wanted to better understand the perspectives of entrepreneurs like Dan who were uncomfortable with the traditional paths of business succession.  Could co-ops offer a viable alternative for business owners who see success as defined more broadly than just the bottom line?

My partner Kristin Howard – now Real Pickles’ sales manager and a founding worker-owner – and I had recently left Equal Exchange, a worker co-op and pioneer in fairly traded products, where we had been member-owners for a combined two decades.  My experience developing new initiatives within a rapidly growing co-op had been profound on a personal level.  It had also demonstrated to me how co-ops could have a dramatic impact on the economy by working together across the food system.  I wanted to be part of making the experience available to more people, and growing the wider co-operative economy.  This path had led me to studies in co-operative management and work with organizations including the Co-operative Fund of New England, the Valley Alliance of Worker Co-ops, and finally the Neighboring Food Co-op Association.

A basic challenge for the co-operative movement is that it has been largely overlooked by universities, economic development organizations, and local governments. It is easy to go through one’s academic career without learning anything about this business model, despite the global impact of co-ops. When young entrepreneurs seek out support for starting or growing a business, the co-operative model is rarely offered as an option.  Basic legal and financial support is weak at best.

And yet, co-operatives have succeeded.  For example, more than a billion people around the world are co-op members — more than directly own stock in publicly traded corporations.  Co-ops also employ more people than multinationals.  And in the quest for food security, co-operatives have been recognized as lifeline for small farmers and consumers in the developing world.

In recent years, co-ops have been recognized for their performance during the global recession that began in 2008 and continues to cause massive unemployment, dramatic shifts in wealth and austerity.  Co-ops have proven extraordinarily resilient during this period, preserving jobs, wealth and community infrastructure. And their global contribution to human development, poverty reduction and sustainability led the United Nations to declare 2012 the International Year of Co-ops.

In addition to being driven by a distinct set of values and principles, the co-operative legal structure prioritizes social needs and goals above the accumulation of profit.  Based on the principle of one member, one vote, co-ops are very real examples of the kind of economic democracy that people are clamoring for in the wake of this global recession.

Food co-ops in our region are an illustration of the potential of this model.  For the past three years, I have served as executive director of the Neighboring Food Co-op Association (NFCA), a network of over 35 food co-ops and start-ups across New England.  These are community businesses, locally owned by more than 80,000 people.  Success is not measured by investor dividends, but by factors such as environmental impact, benefits to members, and employment. Because they are not focused on maximization of profit, co-ops have been innovators in the food system and pioneers in healthy foods, organic products and Fair Trade.

Food co-ops have also been leaders in the re-localization of economies, illustrated by the fact that the members of the NFCA purchase over $30 million in local products each year.  In communities across our region, food co-ops serve as anchors for local producers and as places to experiment with new products.

However, a central challenge for food co-ops, and for the “buy local” movement in general, is that the purchasing power we invest in the local economy does not always stay in the community.  For example, our members and customers have invested millions of their consumer dollars in socially responsible businesses, only to see them bought out by large multinational corporations.  In this sense, local economies often serve as a testing ground for the investor-driven economy. Entrepreneurs create new products and services and those businesses that demonstrate sufficient potential to generate profits for investors are absorbed into this market economy through investor buy-outs, initial public offerings (IPOs) or purchase by a larger corporation.  As a result, the capital, creativity and infrastructure created by local entrepreneurs are extracted from local communities, and the stakeholders who helped create that market value are left behind.

Another challenge for the local movement is business succession.  What happens when an entrepreneur decides to retire or simply move on to something new?  As we invest our consumer dollars in local businesses, are there ways to ensure that those businesses don’t fade away or get sold to corporate interests?  Is there a way to engage other stakeholders — workers, producers, consumers and the wider community — in the mission and long-term success of local enterprises so that they are more sustainable and accountable to the people who depend on them?

This question has been at the root of the co-operative movement since its beginnings.  In response to the concentration of wealth and control that characterized the Industrial Revolution, community activists created a democratic business model, rooted in social values, and oriented toward the meeting of human needs rather than accumulation of profit.  For the first food co-ops, the goal was food security and rooting a source of healthy, affordable food in the community.  For farmers, it was pooling resources to invest in the shared infrastructure needed to compete with larger growers and corporations.  And for workers, it was gaining more control over our work-lives so that a company couldn’t just up and leave in search of higher profits.

Certainly, these goals speak to many entrepreneurs today for whom the ideals of economic democracy, sustainability and human fulfillment are integral to their vision of success.  What has been missing is a roadmap for succession that provides an alternative to the traditional corporate buyout.  Real Pickles founders, Dan and Addie Rose, may have part of the answer.  Five years after we sat down to talk co-ops, their company is on the cutting edge of a trend toward a new way of thinking about the basic purpose and priorities of local business.  For an emerging group of entrepreneurs, conversion to a co-operative structure may be driven by the desire to root their business in the community, to safeguard their mission, or simply to share ownership, risk and reward with their co-workers.  For others, “co-operation” was always what they had in mind – they just needed a formal business structure for it.

This is not to say that there is not an important role for outside investors in this effort.  What is needed is a new way of thinking about this role.  Some have used the term “social investor,” and “slow” or “patient” capital.  Tom Webb, former manager of the Master of Management, Co-operatives and Credit Unions Program at Saint Mary’s University in Halifax, Canada, has called for something a little more specific: “co-operative capital.”  For Webb, the financial crisis of 2008 and the accompanying global recession has demonstrated the problems of an economic system built on maximization of profit.  “We need capital that is socially constructive rather than destructive and more stabilizing rather than destabilizing,” he writes.  “We need capital that is restrained, limited and controlled and directed to meeting human need rather than human greed.”

In fact, some of the most successful contemporary co-ops have relied on this kind of capital to grow their businesses.  Equal Exchange and Organic Valley, for example, offer investment opportunities for non-member individuals and organizations.  This capital is constructive in that it is driven by social and environmental impacts as opposed to maximization of return; it is restrained because investment shares are non-voting, with control remaining with the membership; and it is stabilizing in that share value is based on cash value rather than the theoretical market valuation employed by the stock market and employee stock ownership plans (ESOPs), rooting wealth in the community.  Over time, many have insisted that investors would not accept these limitations on their influence and returns.  And yet, year after year these co-ops have had little trouble attracting sufficient capital to support their growth.

What is particularly exciting about Real Pickles is that they have demonstrated a model in which people can invest in the conversion of a privately held business into a co-operative enterprise.  Essentially, investors are using their financial resources to secure a business within the local co-operative economy, as opposed to the market economy.  This represents a compelling shift in our conception of what is possible.

Over the years, food co-ops across the Northeast have invested substantial purchasing power in the success of local businesses like Real Pickles.  And I am proud that the Neighboring Food Co-op Association has been able to play a small part in the transition of the company, becoming an investor in Real Pickles as part of our vision of “a more healthy, just and sustainable food system, and a vibrant community of co-operative enterprise.”

On a personal level, it has been inspiring to work with the member-owners of this new co-op in this process.  In my role as the first staff person for the Valley Alliance of Worker Co-ops, I began to see the importance of co-op led development and the potential of peer-to-peer collaboration in supporting the success of co-operative enterprises.  While my primary work is now with the NFCA, there is a clear overlap in the vision of our food co-ops and that of companies like Real Pickles.  Moving forward, my hope is that co-ops and local entrepreneurs will be able to see the potential in this kind of collaboration in growing the co-operative movement in our region.

Dan Rosenberg and Addie Rose Holland have not only chosen an inspiring path for Real Pickles.  They, along with the other founding member-owners of the Real Pickles Co-op, have laid a path for local business succession and the transformation of individual entrepreneurship into what would be more accurately described as co-opreneurship: creative economic development with the goal of strengthening economic democracy, sustainability, and community wealth.

Tagged: CO-OPERATIVES, COMMUNITY, investing, LOCAL, Real Pickles, small business, WORKER CO-OPERATIVES

Posted April 8, 2013 by Dan

A Community Perspective: Investing in a Better Food System!

We are honored to feature this guest post from the leadership team of the Pioneer Valley Slow Money chapter.  The burgeoning Slow Money movement is about “investing as if food, farms and fertility mattered.”  We at Real Pickles are excited to be offering a local investment opportunity of this kind as we work to transition our business to a worker-owned co-operative.  And, we are thankful to our local Slow Money chapter for its support!


 

by Paul DiLeo, Joe Grafton, Kyra Kristof, Spirit Joseph, Jeff Rosen, Sam Stegeman, and Tom Willits

 

“As long as money accelerates around the planet, divorced from where we live, our
befuddlement will continue. As long as the way we invest is divorced from how we
live and how we consume, our befuddlement will worsen. As long as the way we invest
uproots companies, putting them in the hands of a broad, shallow pool of absentee
shareholders whose primary goal is the endless growth of their financial capital, our
befuddlement at the depletion of our social and natural capital will only deepen.”
 -Woody Tasch, Inquiries into the Nature of Slow Money

The leadership team of the Pioneer Valley Slow Money Chapter has been working diligently to support Real Pickles in its efforts to raise capital through its community investment campaign.  When Dan and Addie asked us to share our reasoning behind these efforts, we responded with equal zeal.  So, here goes:

Photo credit: Paul Wagtouicz

 

Living where we do, in the Pioneer Valley of Western Massachusetts, nestled within the regional community of New England, we are participants in an exciting movement.  Over the past several decades, we have seen an increase in the number of farms and farmers in the region, reversing decades of decline.  Many of us have ample opportunity to join a local CSA and to shop at one of the many new farmer’s markets that are now part of our daily economic life.  Both producers and consumers are driving positive changes in the food system, as more producers build businesses with a deep commitment to their local food system and more consumers shift their buying patterns in support of local food.

And, while we are all pleased with the positive trends, few, if any of us, feel satisfied with that pace, or the current scale of the local food economy in our region.  So, what’s slowing us down?

As Woody Tasch suggests above, there is a missing piece to this economic equation.  We are missing the investors in our local food system.  Slow Money, as a movement, is growing alongside of the local food movement, designed to help that movement obtain the type of investment capital it needs.  Many of us have been engaged in heated conversations, where we decry our inability to move a portion of IRAs or other investments out of the traditional investment world and into our local economy.  There is a lag, a logjam of intent, when it comes to finding a way to match our consumer commitment to local food with an equally straightforward investor commitment.

But, as people who have been engaged in this space have learned, it’s not easy to match our mission zeal up to investment opportunities.  For one thing, there are not many opportunities.  For another, as movement leaders, we are asking for our businesses to be mission-focused in a way that supports a local (food) economy.  We want them to treat their suppliers and employees well, use best ecological practices, and maintain a long-term commitment to local ownership and place.  Yet, such mission requirements do not typically provide investors with the kinds of returns they seek, or a quick way to get their money back.

Slow Money seeks to provide patient investment dollars that can finance businesses.  These dollars would not pressure them to sell out on their mission commitment.  The Slow Money movement rests on a thesis that there are good, viable businesses that can scale up to the size of the local economy which houses them.  The movement seeks businesses who can demonstrate the principles we all seek, who really need this new kind of patient, or “nurture” capital.

The Pioneer Valley Slow Money Chapter – operating as a working group within the PVGrows network – is pleased to be working with Real Pickles to assist them in meeting their finance challenge.  Real Pickles has demonstrated commitment and business competence in light of the mission elements we all seek.  They buy from local/regional family farmers, paying them fair prices.  Their transition to a worker co-operative continues a tradition of fair and equitable treatment for its employees.  Real Pickles is committed to organic agriculture in the field, and energy efficiency and solar power at its facility.  And long-term commitment to local ownership and place is what their co-op transition deal is all about.

The team at Slow Money is excited to support Real Pickles because they are the real deal.  Their commitment to principled business makes it hard for them to offer investors the kind of return they are accustomed to seeing in the world of Fast Money.  But, they embody the change we seek, and offer supporters of local food an opportunity to invest in a way that is consistent with their consumer commitment.  Real Pickles has worked hard to make this offer viable and available.  We are proud to help them get the word out.

For more information about Real Pickles’ co-op investment campaign, visit www.realpickles.com/invest. 
 

Tagged: CO-OPERATIVES, EQUITABLE, investing, LOCAL, Real Pickles, SLOW MONEY, SOCIAL MISSION, SOCIAL RESPONSIBILITY, WORKER CO-OPERATIVES

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