The Co-op Food Stores

added 02/06/08

by Terry Appleby, Co-op General Manager

3rd Cooperative Principle: Member Economic Participation:

“Members contribute equitably to, and democratically control, the capital of their cooperative.”—From the Statement on Cooperative Identity of the International Cooperative Alliance

In January 1936, the 17 families who founded the Hanover Consumer Cooperative Society each paid a one-dollar member fee—and the original organization was capitalized.

Times have changed and so has the Co-op. The original investment of 17 dollars, joined by the equity of thousands of other members, now totals over $4 million and ownership of more than $8 million in assets. As you can imagine, most of our assets are in our buildings and equipment and is not lying around in cash.

When the Co-op needs to do big projects to expand or improve, we are forced to borrow and take on long-term debt.

The Co-op is now in the last year of payments on the long-term debt incurred when we opened the Lebanon store. The next project on the horizon is the redevelopment of the Community Market on Lyme Road. The store, originally a car repair garage, is old, small, and way over capacity for the volume of business transactions. In addition, the facility has no room for staff to take proper breaks and has no room for back stock, not to mention any space for all the new products our customers request. The gas pumps are in serious need of replacement. Finally, the neighborhood would look so much more attractive with a well-designed and well-built site. A redeveloped store will become a bigger community asset. The plain fact is, the current store needs to be replaced for a variety of reasons.

Since we are in the last year of Lebanon loan payments, we could take on more long-term debt to finance the Community Market or any future project. However, co-ops have other ways of capitalizing growth in line with the principle quoted above. Following the third Cooperative Principle, the Board could decide to ask for a larger equity commitment by the membership. Currently, a full membership in the Co-op requires the purchase of $50 worth of shares in the Society. Increasing the amount of share capital is one method of adding to the equity of the Co-op, and is certainly the cheapest for the Co-op. Voluntarily increasing one’s capital share should be considered by anyone who has the financial means and who values the work of the organization.

Two other methods of securing capital are loans directly from our members and selling preferred shares in the Co-op. Each has an advantage over traditional loans from financial institutions, primarily because the terms of such transactions can be cheaper for the organization. In addition, loans from members represent a commitment of resources from the community that the new facility will serve. Ownership of the business is enhanced. These methods of capitalization are increasingly being used by consumer co-ops to fund growth and secure member commitment.

The Co-op hopes—and strives—to be an organization that reflects the needs of its members. If it truly does this and performs a valuable service to the community, it seems that the community should support its work. So as we look out into the future and anticipate the need for other facilities in other communities, shouldn’t we also expect those communities to assume the duty of capitalizing the expansion of the Co-op?

The Co-op Community Market on Lyme Road will be the first chance to test that theory. As new capital requirements arise, the question is whether the communities that are to receive the benefits of the expanded Co-op are willing to capitalize the venture. Stay tuned to see how you might help.