Last year when my wife and I relocated, strolling down the main street was one of our first neighborhood activities. We were content to find a mixture of different restaurants, coffee shops, stores owned by independent clothing retailers, and professional offices.
One business model that caught my attention was a grocery cooperative (co-op). Co-ops are member-owned food and grocery stores that offer benefits like discounts and voting rights to members who invest in the business. I thought this concept was really neat, so I decided to look into it further. CSAs and co-ops are similar in that they both offer members access to locally grown, organic meats and produce.
We discovered this grocery store a while ago, and since it is the closest to our house, we shop there often. Given that we would be living in the area for two years or more, we opted to become paying member-owners of the community by purchasing a share for $100.
If you live or work close to a grocery co-op, you might be debating shopping there often or even becoming a member. So, is it worth your time and money?
What Is a Food or Grocery Co-op?
As stated by the Neighboring Food Co-op Association (NFCA), a New England co-op network, a co-op is “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.” Most co-ops derive their guiding principles from the International Cooperative Association, which is a global trade organization for cooperatives. However, keep in mind that each cooperative may have different structures and activities.
- Open Membership: Co-op membership is open to “all persons able to use [co-op] services and willing to accept the responsibilities of membership.” The only exception to the rule that discrimination based on religion, race, gender, or other protected class is prohibited is if a co-op restricts membership to residents of its home state. For example, the co-op I am a part of only accepts Minnesota residents as members even though anyone can shop there.
- Member Ownership: Members of a co-op usually have to buy their shares, which gives them an ownership stake in the company. Sometimes, though, co-ops will offer free shares to employees. Some co-ops limit members to buying a single share, while others let members buy an unlimited number of shares. Some co-ops provide financial benefits for owners, like shopping discounts and patronage refunds (monthly or annual checks refunding part of what you spent during the period). Many food cooperatives offer shareholders dividends based on the number of shares owned, though this isn’t always the case. And since state and federal laws prohibit co-ops from offering an annual return on investment of more than 8 percent, you shouldn’t expect your co-op membership to make you rich.
- Tax Considerations: The Small Business Administration reports that U.S.-based cooperatives aren’t subject to federal business taxes, however members are still responsible for personal taxes on any profits or surpluses given back by the cooperative instead of being reinvested in the company.
- Member Control: A co-op share gives its owner the right to vote for the organization’s leaders and board members, as well as the power to influence any strategic initiatives undertaken by either group. No matter how many shares an individual member owns, each one has equal voting rights within the co-op. This is known as “one member, one vote.” All members of the co-op are welcome to run for a seat on the board. The board may also create committees and subcommittees, made up of volunteer members, which govern different aspects of the co-op’s operations or strategize about upcoming initiatives. Most grocery cooperatives have a general manager, department managers, and hourly staffers who handle the store’s day-to-day operations.
- A co-op’s commitment to education, enrichment, and community development can be seen through the time and resources put into educational programming and community outreach initiatives. Our co-op, for example, has weekly cooking classes where members can share their favorite recipes and techniques with others. It also sponsors dozens of local CSAs (Community Supported Agriculture), nonprofit organizations (food banks and shelters), neighborhood development corporations, and repeating events (like National Night Out).
- Focus on Local, High-Quality Food and Products: Cooperative members and boards typically search for local, organic foods of high quality, as well as dry goods that may not be accessible or only available in small quantities at regular supermarkets. In addition, they may develop intimate relationships with local producers that do not meet the demanding sourcing standards of grocery chains such as Whole Foods which mainly carries healthy and great-tasting foods.
Advantages of Shopping at a Co-op
Local grocery cooperatives are open to everyone, though members often enjoy exclusive benefits and deals. The benefits of co-op shopping are plenty, whether you’re a regular customer or just stop in occasionally for something you forgot (or can’t find) at the supermarket.
1. Access to Healthy, Fresh Produce
Grocery cooperatives typically have large sections with seasonal produce that is of high quality. The people who buy from the cooperative work with suppliers who can provide fresh items regularly. And because co-op patrons often prefer fresh, unpackaged, or frozen varieties, the produce turnover at cooperatives is usually high, meaning the product stays fresher for longer.
In comparison, budget supermarkets with expansive produce sections, lower quality control standards, and less turnover are more likely to have wilted lettuce, browning apples, and soft carrots on display.
2. Supporting Local, Small-Scale Agriculture
While the majority of co-ops partner with national organic food distributors, they also maintain connections with smaller local producers to a greater degree than supermarkets or discount grocery stores. At your co-op, when you buy items that are grown or produced locally, you’re supporting the farmers and agricultural businesses in your area. For example, my wife and I always enjoy running into the man handing out samples of his delicious maple syrup while we’re visiting our co-op midwinter.
3. Achieving Social Responsibility
Although they’re not perfect, co-ops tend to value social responsibility more than larger supermarkets. The latter is often part of giant corporations that prioritize profit over everything else. Social responsibility can take many different shapes when it comes to co-op shopping. For example, you’ll often find many fair trade products at co-ops, such as coffee and chocolate. To earn the fair trade designation, buyers must pay reasonable prices to growers and suppliers, which are largely in developing countries. Furthermore, these producers must maintain high standards for employee treatment and compensation.
Large-scale producers that supply supermarket chains sometimes mistreat their workers by overcrowding them into company-owned shacks and withholding pay until the end of the harvest season, which effectively prevents them from seeking other employment.
4. Reducing Your Shopping Habits’ Environmental Footprint
Not only is buying local farm products at your co-op good for the agricultural economy in your area but it’s also great for the environment. The USDA defines locally grown and sold food as farm products that are both grown and sold within a 400-mile radius. These kinds of foods require less energy to ship and store over their lifetime compared to other options. The co-op I shop at defines “local” as coming from within a 250-mile radius, and although they aren’t exclusively local, they strive to work with producers that fit the bill whenever possible. Locally-sourced produce is contrastingly more difficult to come by in budget supermarkets, which instead source their fruits and vegetables from much further away places like Texas, Arizona, California, and Mexico – often 1,000 to 2,000 miles distant.
Drawbacks of Shopping at a Co-op
1. Generally Not Ideal for Whole-House Shopping
Sprawling through some grocery cooperatives may be, many have significantly smaller footprints than supermarkets (including national chains such as Whole Foods). This means that there will be less space on the shelves and, possibly, fewer products available. This may make it difficult to do all of your shopping at your local co-op.
For example, our local cooperative only sells a limited number of personal care items, like toothpaste and toilet paper. The same goes for common household staples, like laundry detergent and cleaners. If you frequently like to purchase multiple household items in one grocery trip, a co-op might not be the best option for you as they generally don’t carry these items (such as gallon-sized detergent) in bulk.
2. Seasonal Fluctuations in the Availability of Perishable Items
Because co-ops mainly buy from local suppliers, there might not be enough fresh produce and other perishable items during specific months. The shortages occurring at co-ops largely rely on the location of said cooperatives, their buying power, and how to spread out geographically their suppliers are.
For example, my wife and I were only able to find a few tomatoes at our local co-op recently. The available ones were overpriced and not good quality. If you live in a temperate climate, seasonal produce availability likely isn’t as big of an issue for you. However, I remember one particular day when the closest supermarket had half a dozen varieties of fresh tomatoes that were grown in either the U.S. Southwest or Mexico all available at reasonable prices.
3. Some Foods and Products May Be More Expensive Than Traditional Grocery Stores
Grocery co-ops are often smaller than well-known supermarket chains, such as Kroger and Safeway. Even if they belong to regional co-op networks, they still have less buying power. Because co-ops prioritize local and organic products, their standards are high, which generally leads to higher prices.
On an early January co-op trip, we spent $5.99 for a bag of organic navel oranges, $6.99 per pound for organic Brussels sprouts, $4.99 for an eight-ounce box of organic oyster mushrooms, $3.99 for a gallon of milk, and fair trade coffee cost us$12.99 per pound. To top it off, the four-pack of toilet paper rolls added another$3.98 to our spending. Once we finished at the co-op, we went to a regular supermarket to buy groceries that they didn’t have. While there, we looked at prices and compared them with what we’d just bought. We found organic navel oranges for $4.99 per bag, organic Brussels sprouts for $4.99 per pound, an eight-ounce box of organic oyster mushrooms for $4.59, a hormone-free milk gallon for $3.49, the same brand of fair trade coffee for $9.99 per pound, and a toilet paper four-pack for $2.
4. Limited Hours
If your work, school, or other commitments keep you from grocery shopping during traditional hours, you might have trouble catching your local co-op when it’s open. For example, the local co-op in my neighborhood is open from 8 am to 9 pm daily, while the big supermarket down the road has 24/7 hours.
How to Become a Grocery Cooperative Member
Most food or grocery co-ops have a similar join process. For example, my wife and I filled out the initial paperwork and paid for our share while in the checkout line at our local store. The woman behind us didn’t even get angry that we caused her to wait longer.
You begin by filling out a form with your contact information, like your address, phone number, and email. You can specify how you’ll pay for your membership share once you’ve joined the co-op. Most accept cash, personal checks, and major credit cards. Ours even lets us add it to our order total so we don’t have to remember another bill.
After sign-up, you’ll be given a member number along with a card that has your name and number printed on it. In some cases, the co-op mails these out a week or two post-sign-up. You should also get a welcome packet in the mail that contains information about the co-op’s bylaws and regulations. With some co-ops, you receive canvas grocery bags, branded clothing or material objects, and other items such as coupon books or organic chocolate bars.
You can start reaping the rewards of being a member as soon as you join. Every time you check out, give the clerk your member number so they can keep track of all your purchases, know how much money you’ve saved, and determines if there are financial benefits you’re entitled to.
Benefits of Co-op Membership
If you want to enhance your co-op experience and become a member, you’ll not only get all the great benefits of shopping at a co-op but also these membership advantages:
1. Being Part of a Like-Minded Community
When you buy a membership share in a grocery cooperative, you’re not just supporting local food systems and sustainable agriculture—you become part of a community that believes in those things. Cooperatives operate with the view that there’s more to business than money. Co-ops are part of an economic network that ensures workers throughout the entire supply chain, from those who labor in fields to those who process the harvest and deliver food, are treated fairly. The co-op is seen as a source of good employment practices by being transparent about where their products come from and ensuring decent conditions for all workers involved.
2. Shopping Discounts, Deals, and Patronage Refunds
There are many different financial benefits to being a member of a grocery cooperative, such as shopping discounts (for example, 2 percent off each purchase or five percent off once per month), members-only sales on certain items, and monthly or annual refunds based on how much you spent during the designated period. You can offset the cost of your membership share by taking advantage of member benefits.
3. Potential Access to a Larger Co-op Network
Many co-ops are part of larger networks that offer numerous benefits for members, such as discounts on merchandise and classes at all participating locations. For example, we are part of a network that includes around six other food cooperatives in our town. If we want to cook at our friends’ place on the opposite side of town, it would be convenient to stop by their local co-op for last-minute ingredients and save money simultaneously.
4. Influence Over the Co-Op’s Activities and Strategic Direction
If you’re a co-op member, you have the opportunity to compete for a seat on the board or join a subcommittee. These roles would allow you to help create partnerships with other community groups, find new products, and start classes or programs for members. If you’re not interested in being an active participant, you can still use your voting rights to promote people you trust usually your neighbors to influential positions within the organization.
As a supermarket shopper, you don’t have this type of influence. Even as a retail shareholder in a company that is publicly traded, your ability to affect the company’s direction is probably close to none because of the rule for-profit corporate governance has about “one share, one vote.”
5. Opportunities to Share and Absorb Knowledge
Our grocery cooperative frequently offers classes on cooking and other crafts (like a recent seminar we sponsored on making your own essential oils), as well as insightful seminars about food production and distribution. Plus, we have educational film nights where everyone is welcome! Events held by co-ops usually either come with a free or very low fee, which is often waived for members. They’re typically led by experienced members so that those with knowledge and skills can share them.
Drawbacks of Co-Op Membership
1. Requires a Financial Investment or Employment Relationship
If you’re not a co-op employee for whom membership is an employment perk, it costs money to join. My wife and I paid $100 for our membership, though some shareholder-owned companies can be as little as $35 or up to $200. If the payment sum is large, some co-ops offer a payment plan. For example, we have a membership that costs $10 per month for 10 months. However, you can’t join without paying or becoming an employee. It is your responsibility to decide if the benefits are worth the investment of money or time.
2. No Guarantee of Discounts, Patronage Refunds, or Return on Investment
Even though your local grocery co-op may offer financial incentives to members, like shopping discounts and refunds, there’s no guarantee that they will. It’s understandable that your co-op might not prioritize financial rewards, and may instead choose to direct its resources towards improvements like a wider range of products, increased employee wages, or bigger payments to suppliers. In addition, since membership shares’ face values don’t waver much, you likely won’t earn a return on your investment by selling your share for more than what you paid for it.
3. Could Be More Expensive Than a Supermarket
Even though you may get discounts, deals, and refunds for being a member of your co-op, it is highly unlikely that shopping at your co-op will ever be cheaper than shopping at a supermarket. Let’s say, for example, that it costs 20 percent more to buy your weekly groceries at a co-op in comparison to the supermarket. Even after taking member discounts and refunds into account, your membership will never make financial sense.
4. May Feel Obligated to Shop There Despite Better Options
There’s no minimum shop frequency or spending amount required to be a member of a grocery cooperative. However, you might still feel the need to do it anyway, whether it’s for financial benefits such as refunds or discounts, or because you’re a member and feel guilty about not supporting it. The sense of duty you feel could negatively affect your home’s budget or diet.
For example, we joined a local co-op soon after we moved here and have been doing most of our food shopping there ever since. There have been times when we haven’t made a particular dish because we couldn’t find the ingredients at the co-op, and didn’t want to make another stop at the supermarket.
Before we encouraged others to do the same, my wife and I made sure that joining a member-owned food cooperative close to our home was the best decision for us by weighing the pros and cons. Would being a member be worth the cost? Could we even afford to do most of our shopping there, given that prices were generally higher than at the supermarket? Would we take advantage of other benefits of membership, such as voting in board elections and joining advisory groups?
We became members of the co-op community because we wanted to feel like part of our new neighborhood and desired the close relationships that come with it. (The decision to join the cooperative brewery across the street wasn’t quite as tough.)
However, not everyone shares their experience. Before deciding to join a grocery co-op, think about whether it would be beneficial for your family. If you choose not to become a member of the co-op, you can still shop there. If your local supermarket doesn’t have the product you’re looking for whether it’s a specific type of pear or an exotic root vegetable – you can see if the co-op has it before going somewhere else.
Are you a member of a food or grocery co-op?
This was originally published on MoneyCrashers.