Transcript Types of Cooperatives in Wisconsin

From Eggs to Electricity: Types of
Cooperatives in Wisconsin
 I - Introduction to Wisconsin
Cooperatives
 II - A Brief History
 III - Types of Co-ops (by Industry) in
Wisconsin Today
I - Introduction to Wisconsin
Cooperatives
 What is a cooperative business?
 Historically, communities have worked together
to meet their needs for resources, products, and
services.
 While a variety of types businesses today work
towards meeting our needs, co-ops follow
unique principles
Rochdale Principles of
Cooperation
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Voluntary and Open Membership
Democratic Member Control
Member Economic Participation
Autonomy and Independence
Education, Training, and Information
Cooperation Among Cooperatives
Concern for Community
II - A Brief History
A Brief History
 Ann Pickett of Lake
Mills started the first
WI co-op in 1841
 She pooled milk from
neighbors’ farms to
make cheese.
 Proceeds were
returned to her
neighbors in
proportion to the
amount of milk they
provided
 Initially, the government ignored or was
hostile to cooperatives.
 But in 1887 Wisconsin became one of the
first states to legalize cooperative
business.
 It was soon updated with the Rochdale
cooperative principles, and in 1922 was
adapted to the federal Capper - Volstead
Act -- the “Magna Carta” of cooperative
marketing.
 Cooperatives flourished under the federal support of
the Roosevelt Administration in the 30s and 40s
 They helped establish the electric and telecom
infrastructure that connected rural and urban
communities, and, today, continues to provide services.
 While agricultural cooperatives lost territory to
corporate farms in the 20th century, new market
emphasis on organic food has helped fuel interest in
cooperatives in dairy and other agricultural industries.
Cooperatives Today
 According to the most
recent study by the USDA
Rural Development
Service, Wisconsin
cooperatives represent:
 2.7 million cooperative
memberships
 More than $5.6 billion in
gross sales
 30,000 local employees
 $200 million in state and
local taxes
Cooperatives Today
 Wisconsin has the second most
cooperatives in the nation, behind MN
 There are over 1,000 co-ops registered in
the state
 Many parents of students may serve on
the boards of local co-ops, or may be the
employees of local co-ops
Local, state, regional, national
 The cooperative structure can be used for coops that have business units at the local, state,
regional or national level
 Some larger regional co-ops have a federated
structure which means that their membership
includes both individual producers (i.e.
farmers) and local co-ops
Case Study: CHS Inc.
 CHS Inc., the nation’s largest co-op, based in the Twin Cities, is a
regional, federated co-op with both farmer members as well as
local co-ops that are members
 CHS Inc. is a diversified energy, grains and foods company
 The company is owned by farmers, ranchers, other cooperatives,
and thousands of stockholders
 In 2008, CHS owners from 48 states shared a $343 million
patronage disbursement
II - Types of Co-ops
Electric
 Most rural areas and farms in
Wisconsin, and across
America, did not have
electricity until President
Roosevelt created the Rural
Electrification Administration
(REA) in 1935
 Up to that point, people in the
countryside generally lived
without power.
Electric
 The REA loaned
money to community
energy cooperatives,
which flourished and
spread across the
state.
 Today, electric
cooperatives provide
energy to rural and
metropolitan citizens
alike
Electric
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2 types of electric co-ops
(1) Generation and
transmission (G & T) coops that create and send
power via the
transmission grid to local
distribution co-ops
(2) Local distribution coops that send the power to
businesses and households
Case Study: Adams-Columbia
Electric Cooperative
 Adams-Columbia Electric Cooperative is the largest
rural electric distribution cooperative in the state.
 ACEC serves 36,000 members/owners in 12 centralWisconsin counties. It purchases & sells approx.
500,000,000 kWh a year.
 ACEC employs 109 full-time, 13 season/part-time,
and 78 meter readers.
Grain, Farm Supply, and
Fuel
 Over 150 retail
agricultural grain and
farm supply
cooperatives provide
crop inputs, animal feed,
grain marketing and
petroleum products
Dairy
 Dairy co-ops among the
first American
agricultural
cooperatives.
 More dairy farmers have
relied on cooperatives to
market their product
than any other industry.
 Co-ops provide a market
outlet, help bargain for
better prices, and
represent farmers’
interests in public policy
Dairy
 Today, there are
approximately 220 dairy
cooperatives in
Wisconsin
 83% of milk sold by
Wisconsin farmers is
marketed through dairy
cooperatives
Case Study: Organic Valley
 Organic Valley works
exclusively with family farms.
 Their mission is to allow
families to retain
independence via the
cooperative model. 600,000
family farms have been taken
over by corporations since
1960.
 Of its 1,652 farms across the
US and Canada, Wisconsin
has the most (523) of any state
Farm Credit & Credit Unions
 Wisconsin’ federally
chartered farm credit
cooperatives serve farm
families.
 Credit Unions are a popular
means of keeping credit
within a community, paying
out $289 million in dividends
annually to members.
 Together, cooperative credit
employs 5,349 people and
generates $157 million in total
income.
Insurance: Town Mutual
Insurance Companies
 Town Mutual Insurance Companies are a type of
cooperative insurance company owned by the policy
holders
 These “mutuals” primarily offer property and casualty
insurance
 Some of the oldest cooperatives in America are mutual
insurance companies. The Philadelphia
Contributionship for the Insurance of Houses from Loss
by Fire was organized by Benjamin Franklin and his
colleagues in March 1752
 Today, there are 105 Town Mutuals in WI, most of
which were founded before 1900.
Case Study: Sugar Creek
Mutual Insurance Company
 136 year old cooperative
in Southeast Wisconsin
 Three full-time employees
run the co-op, along with
nine agents.
 Covers 1,904 policies,
with a total of
$580,860,696 of risk-inforce.
Food
 Food cooperatives
employ fewer people
(659 jobs) than other
industries
 However, they still
generate a total income
close to $20 million
 Historically, co-op
grocers raised the profile
of cooperative principles
in metropolitan areas
Case Study: Willy Street Co-op
 Willy Street Co-op is a full-service grocery cooperative
specializing in locally made, natural, and organic foods.
 Over 16,000 cooperative members produce $17 million of
sales annually.
Consumer
 Includes grocery and
worker-owned
cooperatives
Telephone/Telecommunications
 Local telephone co-ops offer advanced
telecommunications services to help rural
Wisconsin compete in a world economy
 Telecomm co-ops serve many
communities in Wisconsin
New Generation Co-ops
(NGC’s)
 Farmers started first NGCs when Minnesota
and North Dakota sugar plants were closing
(American Crystal Sugar Co, Minn-Dak
Farmers Co-op, and others)
 The new approach to cooperatives developed as
a defensive strategy against unstable markets
 NGC’s created, replaced, or stabilized markets when
the markets failed, such as in plant closings
Evolution of NGCs:
“Offensive” market responses
 The NGCs shifted into offensive strategies of capturing
greater market value
 Increasing value of local goods and services
 Ex: Ethanol co-ops raise value of area corn crop; raise
investor-member income from value-added processing
 Both protecting and increasing value of member
investments
 Ex: Protect and increase value of investment in senior
housing co-ops by making markets for resale, provide
higher quality member services
The NGC Model Continues to Evolve
 Traditional Cooperatives are adapting NGC strategies,
while NGC partner with other investors
 Capital needs often require outside investors and
“hybrid” business models
 Ex: Co-op members may partner with other investors in
Limited Liability Companies (LLCs)
 Newer business models define profit expectations,
which helps eliminate investor conflicts
 Ex.: Minnesota 308(b) Model; Low-Profit, Limited Liability
Company (L3C) Model. Both define expectations and returns
for cooperators and outside Investors
For more information
 To find out more about cooperatives in Wisconsin,
particularly those located in your community, please
visit the Cooperative Network
 This material is made possible by the CHS Foundation