We like the *idea* of Cooperatives, but we can’t cooperate (in this iteration of late stage capitalism)
As I tell you about our failed attempt to organize and cooperate to create a more robust regional food distribution business in Central Oregon, I want you to know I think it’s possible, but there are significant barriers in this iteration of late stage capitalism where we are all sprinting through life trying to make enough money to stay afloat. There are major mindset shifts that will be required to make cooperative efforts work, but I don’t know what’s the chicken and what’s the egg, economic security or cooperative capacity. It’s been about a year since I had to surrender my efforts and I’m just now starting to unpack why I think it failed, how it could have been approached better, and whether I think purely egalitarian efforts are actually viable vs other models of representative shareholder models which still maintain a hierarchy of ownership and responsibility.
As I participate in the rat race, running businesses and raising a family, a core value of mine is to participate in community organizing and I’m on a journey to find how I do this without giving too much, without running my own tank empty, and without my family paying the price for my visions. I’ll be brutally honest because I think the only way to learn is through direct communication and honest feedback.
In the summer of 2020 Chris and I sat on a patio with two fellow farmer in Central Oregon, and our friend Andrew Gunther who was the ED and founder of A Greener World. We had an idea to either take over Agricultural Connections, our region’s only wholesale food distribution business which focused on locally sourced products, or to start our own distribution business. At the time, our farm Casad Family Farms was scaling our Organic potato, onion and winter squash enterprises. During COVID shutdowns we had pivoted our restaurant accounts toward supermarket distribution across the state of Oregon, and we among others felt the exhaustion that was hitting the original operater of the Ag Connect business. Ten years of fighting upstream to keep the business going and growing, it was clear the owner/operator was waning in the fight it takes to make these types of small to mid sized regional food businesses survive.
Here is the timeline of our efforts:
2021 Started the process of forming a cooperative and getting the money to take it over from the owner with owner financing
2022 we made the purchase
2023 we former the board, onboarded the member-owners and operated it
2024 it “failed” and we sold to the General Manager Erin
One of my first observations I’d like to share is that we consulted with one of the only entities that advises and consults with Cooperative entities and their “services” and support was terrible. I was astonished at the lack of effective technical assistance. A clear sign that the mechanisms for success are not in place.
I want to give Andrew Gunther credit here. When we started these conversations Andrew was very skeptical that our idealistic vision was possible. Andrew had been involved in producer organizing for a long time, he was a part of the early days of Whole Foods and had created the early producer standards for animal welfare. He left when the company started making significant departures from it’s early ethos and he went on to establish A Greener World. Andrew was very British with a dry sense of humor and a soft spot for young farmers, he wasn’t going to withdraw his support of our vision but he was direct (and funny) in his warnings to us. We believed we were different! We could do this! Onward we went.
We set up the ownership structure with four member-owner classes. Producer member-owners which would hold the majority of board seats, founder member-owners (five of us), employee member-owners, buyer member-owners (we never got to on-boarding many, indicative of the lack of commitments) and finally supporter member-owners (who held no voting power on the board).
We kept the buy-in very low for producers, this was perhaps a mistake in retrospect because ultimately one of it’s main downfalls was the lack of commitment from producers to fully funnel their wholesale accounts through the distribution business. As a producer, I understood the hesitation. Producers who had direct relationships with buyers held those relationships as sacred and the business had failed them in some ways in the past, and so the producers both feared fully handing over those buying relationships and also for the buyers who were willing to go direct, they resisted letting go of the margin that selling direct allows for. The trade off in theory is that a higher volume of wholesale business would be unlocked through cooperating with the business, making up for the loss of margin on the direct sales.
The issue with direct farmer-buyer sales in a wholesale model is that most buyers (restaurants, grocers, institutional buyers) don’t want to deal with 5, 10 or 15 individual farms. It makes ordering/invoicing/ A&R high touch and thus more complex/ takes more time/ is more costly because time is money.
Our timing was also unlucky. COVID shutdowns put all our restaurant accounts in survival mode. Tourism was way down in Bend, Oregon which was the majority of the market the business serviced. Overall order volume was down for 2020-2022 as the economy limped along, and then 2023 saw historic fire season in the PNW and the perpetual smoke that summer continued the reduced tourism during peak season.
Another major issue in these types of food system scaling efforts always seems to be this “chicken or the egg” dilemma. Large institutional buyers are looking for a guarantee of volume to commit, and producers are looking for institutional commitment before they commit to scaling. We never got far enough along to actually execute on organized crop planning whereby we could get (for example) 10 farms to commit to growing 10,000# of lettuce per week to service X institutional buyer, get the contract in place and get the growing season off with the grower-buyer commitments in place.
For these reasons above, I believe our failure was premature and with more time and more financial backing we perhaps could have gotten beyond the hardest years of economic recover post COVID and gotten crop planning and contracts set up.
The financial barriers were significant. Social lending institutions were not interested in it until total revenue was larger, and they were not experienced with or interested in a Cooperative model. Traditional lending was not viable for the same reasons. We went after some grants which frustratingly were denied. We simply did not have enough runway for the time needed to work on building up infrastructure capacities, along with developing the markets. Had that USDA development grants we applied for been granted, we would have had the time and resources, so I really am so frustrated with those grant reviewers and I hope this failure gets back to them and they evaluate their process of evaluation in the future.
The social/ impact lenders who were interested were adametendly against egalitarian cooperative organizational leadership models. Many of them had seen efforts start, try and fail before us, for many of the reasons we ultimately faced. Looking back, their warning came from well informed evidence that most cooperative models do not work.
Of all the barriers to success one of the largest in retrospect was the organizational arcitecture. We wanted egalitarian representation, we wanted farmers to have the majority voting power, and we structured the board to be primarily dependent on volunteer efforts by the producers. Farmers are asked to carry way too much of the load as it is. Most mid-sized and small farms which was our entire demographic of member-owners are too financially and energy strapped to give significant time on a volunteer basis. As much as they all believed in the idea, when it came down to it everyone had to look out for their operation first and foremost and that, I believe is the heart of egalitarian cooperative distribution efforts failures.
In businesses that succeed, most often there is one or several owner-operators who’s necks are truly on the line for the success or failure of the business. Those owners might have a board of advisors, but ultimately they carry the risk and liabilities and they operate the business with that level of pressure and responsibility driving effectiveness.
I am paying close attention to other efforts such as the Old Salt Cooperative in which there is a producer-led board with voting power and profit share built into the bylaws, but they have a primary President who operates as owner-operator of an LLC which preferred investors whose investments are guaranteed to be services first before profits are shared among producer members. In this model there are cooperative elements built into a traditional LLC structure which I believe made fundraising more successful. They have confidence in the President and the organizational structure he is building.
We felt like it was the best move to sell the cooperative entity to Erin the General Manager. They are continuing to operate Agricultural Connections in Bend and scaled down the wholesale side of the business and focus on the DTC Weekly Box program which was the more profitable side of the business. I’m due to catch up with Erin and see how things are going, and see how they envision the future of wholesale distribution in Central Oregon.
I want to add that when the entity “failed” and wholesale distribution was elimated, it placed increased burden back onto the farmers. Even the farm businesses that held a handful of direct relationships had significant wholesale accounts and support through Ag Connect, so when that side of it crumbled the work that goes into managing and delivering those accounts landed back onto the shoulders of the small farms. Some are set up to carry that burden, many are not. Additionally many of the restaurant accounts who ordered through the wholesale business were not going to make the extra effort to coordinate with multiple small vendors. The failure of wholesale distribution mechanisms increases the burden on farmers and it reduces the actual purchasing volume of local food. It makes regional food systems more insecure all around.
I have optimism that our failure is not the end of this effort for Central Oregon. I think our approach was flawed, our timing unlucky, and important lessons were learned for a future rebuild. I’m by no mean an expert and obviously we failed. I’m glad we tried and I take with me these important lessons. I also take with me continued optimism that we can figure out how to increase and scale wholesale distribution in Central Oregon, but the model and financial runway, infrastructure and contracts will have to be more developed to make it work.
Community organizing is damn hard when people are so strapped trying to survive, and that is one of the biggest threats of late stage capitalism. I don’t have answers, I’m in a chapter of reading, thinking, reviewing past efforts and writing my way through it all with honesty.
When you think about buying your food which you will cook this week, hold in the back of your mind just how fragile our local food systems are, and just how much we are up against. Support local food systems like our communities depend on their resilience. Most have no idea just how fragile it all is.
Please support Agricultural Connections if you live in Bend Oregon, Erin is a warrior and I’m grateful they have continued to operate the business and I hope to support their efforts more in the future.
I personally reject the use of “failure” because of its connection to old systems I’m trying to shake off. I understand your use of it here, as it’s a well known business concept/approach to evaluating “success” and its attachment to profitability. The amount of rich data and the discoveries you gathered from the first iteration of this endeavor, to create a resilient food system in Central Oregon, is a huge success. My pull toward the dream of a healthy robust thriving food system in CO is powerful and your learnings fuel it. Onward. Outcreate my friend!
There's such a survivorship bias in co-operatives. For every great one, there's hundreds you never hear of, for the reasons you explained so well. Its almost the default position for development funders (I'm in Belize), but they just set it up and leave because that's what they did in Peru or Nigeria. Then its a "people problem" when they don't succeed. And as someone who's done those weekly deliveries to restaurants for years, I'd love a solution. The supply chain is a killer. Never stop trying to work it out. It's only people with skin in the game that will.