What is a Co-op?

by Mia Hanneken

Common Ground Food Co-op has existed since 1974. Since its inception, the Co-op has been a small, independent entity serving the Champaign-Urbana community. It’s been around for 47 years, but so many in the area aren’t familiar with Common Ground. Most notably, there is still a lot of confusion about what a cooperative business even is. 

Fundamentals of Co-ops

The official definition of a co-op is a farm, business, or other organization which is owned and run jointly by its members, who share the profits or benefits. What does that actually mean, though? 

Think of it in terms of how a traditional business operates. One or two people have a vision for a good or service. They start up a small business, employing a small staff to execute the vision. Those one or two people are the voice, vision, and decision makers of the company. They, probably, make the highest salaries. If the business is successful, they may acquire some investors who also share in the profits. The patrons and staff of the business have no decision-making power or voice in the company’s choices. 

In a co-op, though, instead of one or two people with a vision, there’s a whole group. That group recruits more people, growing the vision and spreading the decision-making power. As the group grows, funding is acquired, and oftentimes the cooperative business comes to fruition. Depending on the type of co-op it is, day-to-day operations vary. Read on for more information on some of the different types of cooperative businesses!

Different Kinds of Co-ops

Co-ops are everywhere! Did you know that there are over 47,000 cooperative businesses in the US alone? There are several different types of cooperatives out there. Some of the most common types are outlined below. 

    Producer & Worker Cooperatives

Producer and worker co-ops are owned and governed by the workers within the co-op. An example of this is the Organic Valley company. Organic Valley is a cooperative based out of Wisconsin that is owned by over 2,000 family dairy farms. As owners of this co-op, the farmers share the cost of producing their products and share in the profits when the co-op thrives. In a world where huge corporations have taken over a huge number of family farms, co-ops like Organic Valley ensure that food is produced ethically and sustainably without exploiting farm laborers. 

    Housing Cooperatives

Housing co-ops are entities that own a collection of housing units, sometimes apartments in a single building or a series of single-family houses in a certain area. The co-op, then, sells shares of the co-operative in exchange for rights to live there. The residents of the property don’t actually own the property where they’re living, but rather they own part of the housing co-op business entity. Owners of the housing co-op collectively help with maintenance and upkeep of the units, along with cost of amenities. Housing cooperatives are self-governed by an elected board of directors, and most co-ops have specific bylaws each owner must follow when living in cooperative housing.

    Credit Unions

Credit unions, in the simplest terms, are cooperative banks that are owned by their account holders. Similar to most co-ops, they’re governed by a board of directors elected by the owners. Credit unions do much of what the typical bank does -- offers checking and savings accounts, loans money with interest rates, etc -- but the key difference lies in where the profits go. In a typical bank, profits made from interest are distributed to their exclusive group of shareholders. In a credit union, profits are reinvested back into the products and services offered by the credit union.

    Retail & Wholesale Cooperatives

Retail cooperatives are generally consumer-owned co-ops. Common Ground, and other food co-ops, fall into this category. Consumer-owned co-ops mean that the business is owned by those who buy its goods. At Common Ground, our owners are anyone in the community who want to invest in the co-op! Much like housing co-ops and credit unions, retail cooperatives are governed by a board of directors that are elected by the consumer-owners. The board of directors, then, hires a professional general manager to oversee the store operations. In this way, retail co-ops like Common Ground appear to operate very similarly to the standard store, just on a smaller scale. 

How Co-ops Operate Differently

To the public, cooperative businesses may seem like any typical business, but the inner-workings are actually quite different. Between the widely accepted ideals and the democratic nature by which it operates, cooperatives have always sought to meet the needs of those they serve rather than prioritizing profit.

    Rochdale Principles

Co-ops around the world are guided by seven cooperative principles. These principles are the foundation around which the business is built, reminding the owners and staff exactly what the business stands for and how they intend to operate. They’re called the Rochdale Principles, named after the Rochdale Society of Equitable Pioneers that have since been widely adopted by co-ops around the world. 

The principles are:

  1. Voluntary and open membership

  2. Democratic member control

  3. Member economic participation

  4. Autonomy and independence

  5. Education, training, and information

  6. Cooperation among cooperatives

  7. Concern for community

    Democratic Elections

As outlined in the Different Kinds of Co-ops section, cooperative businesses are governed by an elected board of directors. The board of directors serves as representatives of the ownerbase, whether those owners are the workers, consumers, or residents of the co-op. Much like political elections, the owners have the opportunity to elect a representative who aligns with their ideas of how the co-op should be governed. In the case of Common Ground, our consumer-owners have the chance to participate in an election each September to elect their representatives to the board of directors. 

The board of directors not only govern the policies and long-term direction of the co-op. In many retail co-ops, the board also oversees the performance of the general manager, the professional who manages the entire operational side of the business. While there are lines drawn between the governing side and the operational side, the board of directors still have great influence on the co-op as a whole.

 

Cooperative businesses have been around for centuries. We at Common Ground Food Co-op are lucky to have over 13,000 community members who have invested in our co-op since 1974. If the Rochdale cooperative principles and participating in the longevity of a local business sound appealing to you, we are always welcoming new owners! 

For questions about co-ops or ownership, feel free to contact marketing@commonground.coop 

Sources:

https://smallbusiness.chron.com/advantages-cooperative-business-23592.html

https://www.fiscaltiger.com/what-is-a-co-op/

https://www.organicvalley.coop/about-us/organic-food-co-op/

https://homeguides.sfgate.com/definition-cooperative-housing-6754.html

https://coophousing.org/resources/owning-a-cooperative/buying-into-a-housing-cooperative/

http://www.sarahkaplanlaw.com/the-rochdale-cooperative-principles/