Alternative Co-ops Are Taking Root

[imgbelt img=coopcasket530.jpg]Rural co-ops aren’t just for electricity anymore. Now small towns, hospitals, schools — and rural residents, too — are joining forces to save on everything from paper to funeral services.


[imgcontainer left] [img:coophospital320.jpg] [source]Courtesy of Producers & Buyers Co-op

Rick Beckler, right, hospitality director of Sacred Heart Hospital, works with farmers like Vic Price to make local produce a bigger part of the hospital’s food service.

In rural America, most of us are familiar with cooperatives—businesses owned by the people they serve. Farmers, along with rural electric and telecom customers, have reaped the benefits for decades. You’ll also find rural credit, housing and grocery co-ops. But increasingly the cooperative model is changing. It’s evolved into hybrids that combine two or more business interests, and it’s expanding into new and unlikely service sectors.

Stephen Ronstrom forecasts that in five years his concept for bringing together farmers and institutional food buyers will go mainstream. Ronstrom, CEO of Sacred Heart Hospital in Eau Claire, Wisconsin, was recognized by the state of Wisconsin and the Wall Street Journal for buying local farm products for hospital meals.

“Local food is good medicine for everyone,” Ronstrom wrote in a 2008 newspaper editorial that got the ball rolling. “It preserves and expands family farms, provides jobs in production and processing, and keeps money in our community.”

Sacred Heart committed to spending 10 percent of its $2 million annual food budget on local products. In 2009, after dozens of planning meetings with farmers, the hospital and farmers formed Producers & Buyers Co-op. The state and the Cooperative Foundation provided start-up grants, and the U.S. Department of Agriculture awarded additional funding. 

Sacred Heart produces as many as 2,600 meals a day, making it impossible to use local ingredients only. Still, says Rick Beckler, director of hospitality services, “We’ve had a tremendous outpouring of warm compliments from patients and employees about our food. Local food has a longer shelf life, is more nutritious, tastes better and is environmentally sustainable.” In the past two years, the hospital purchased $400,000 of local beef, pork, chicken, dairy, eggs and produce.

The change hasn’t been simple to accomplish. Institutional food buyers maintain long-standing relationships with suppliers, making it difficult for other producers to break into the market. Buyers can face limited local product availability, as well as problems in food processing and transportation infrastructure. “The co-op removes these barriers,” Beckler says, “because the organization is itself a mid-tier value-added food chain made up of producers, processors, transporters, and institutional buyers.”

He contends that the co-op enhances food safety. “Sacred Heart knows that each tube of ground beef came from a single animal and knows where and how that animal was raised.”  Producers agree to practices that are good for the land, animals and consumers. Processors, while small, meet government food safety standards. 

Eileen McCutchen’s family began farming in 1994 and now sells poultry through the co-op. “It’s been a constant struggle between the elements and the economy,” she wrote in an Oct. 2009 letter urging USDA to fund the co-op. “It would be easy to abandon farming altogether if it were not for the stabilizing elements Producers & Buyers Co-op brings to the table.” Co-op sales have helped her son, Michael, pay for college.

Shawn McMartin, an accountant and co-owner of Promise Farm Buffalo, sits on the co-op board. She says the co-op is in the black but needs to increase its sales volume to cover expenses. Future goals include added processing and storage. 

At least one new job has been created—a part-time position at the co-op. And the co-op already helps producers. “The premise is to assure a fair price to all members, McMartin says. “To producer-members, that’s cost plus reasonable profit.” McMartin says. Local food costs more, but Ronstrom, the hospital CEO, believes it’s worth it.

Sacred Heart fields calls from other hospitals around the country asking about the co-op. “Our advice is to start small with one product and refine a process,” says Beckler, who’s in charge of the hospital’s food system. The local Resource Conservation and Development Council, a public-private partnership found in many communities, helped reach farmers, he adds.

Two other area hospitals now have joined in, and the co-op hopes to attract more buyers, including schools, universities, nursing homes and cafeterias, as more products can be sourced.

Cost savings for a Minnesota town

Purchasing co-ops serve all types of organizations, from hospitals to fast food chains, but it’s rare that governments participate. Lakes Country Service Cooperative (LCSC) is one of eight regional purchasing co-ops created by the Minnesota legislature in 1976. LCSC and the other seven began as health insurance pools for school districts, but over time, the infrastructure for cooperative purchasing has grown to include cities and other members.

Mark Sievert, city administrator for Fergus Falls, attests that the idea works.

Producers and Buyers Co-op
Lakes Country Service Cooperative
People’s Memorial Funeral Co-op

Journalist Nancy Jorgensen writes about food, agriculture, telecommunications, finance and a variety of rural issues. She lives in Pomerene, Arizona. This article was edited and excerpted with permission from a version originally published by the National Cooperative Business Association in its July/August 2010 Cooperative Business Journal.