Where Are New Co-ops Emerging? The Changing Map of Co-op Development

These days, the presence of cooperatives across the United States is nearly universal. The largest sector is financial cooperatives, better known as credit unions. As of September 30, 2021, the National Credit Union Administration reports that 128.6 million Americans are member-owners of federally insured credit unions, which works out to about 38.6 percent of the nation’s population.

But the extent of cooperative business activity varies widely across regions and business sectors. Why have cooperatives been more successful in some areas than others? What are the most important ingredients for creating new co-ops? And how does the newest generation of co-ops differ from previous ones?

These were some of the questions that my colleagues at the University of Wisconsin Center for Cooperatives and I sought to address in a recent report titled Collective Action in Rural Communities. In that report, we identified 945 cooperatives that were formed between 2011 and 2019, including 195 in rural communities and 750 in urban areas.

The findings are intriguing, including rapid growth of worker cooperatives and the emergence of sector-specific development strategies. There has been considerable innovation in the field of food co-op development. Additionally, the use of cooperative land ownership has provided increased economic security for tens of thousands of families living in manufactured housing (mobile home) communities. The demographics of who creates co-ops has also shifted. Increasingly, co-ops are being used by people in communities of color—especially Black, Indigenous, and Latinx communities—as tools for community wealth building and economic development.

 

Putting the Findings in Historical Context

Before delving further into what is new, it is helpful to understand some of the waves of co-op development that have preceded our own. One of these waves involved the development of rural electric cooperatives, which today provide power to over 40 million Americans. Back in the 1930s, however, only one out of every ten rural households enjoyed the benefits of electricity, even as electric power was already nearly universally available in cities. Children did their schoolwork by the light of kerosene lamps at kitchen tables, household chores were accomplished by hand or horse, and food had to be preserved to last the entire year. In 1935, President Franklin Delano Roosevelt established the Rural Electrification Administration (REA), which provided loans and assistance to groups of farmers who wanted to build and own their own electrical distribution systems. The Rural Electrification Act of 1936 established a lending agency to finance this effort. Farmers, familiar with the cooperative model, quickly established rural electric cooperatives to take advantage of the program. The REA provided ongoing organizational support to these cooperatives, which contributed to the overall success of the program. By 1953, more than 90 percent of rural homes had access to electricity, which brought profound changes to rural life and agricultural practices.

The story of rural electrification exemplifies the power of cooperative action—what is possible when a group of people work collectively to meet a shared need. Many of the country’s largest and most prominent cooperative sectors have equally impressive origin stories rooted in a combination of social upheaval, government intervention, coordinated support, and personal gumption. Credit unions are another example of a successful systematic public and private intervention to create new opportunities for consumers to access credit. The concept of cooperative credit gained popularity during the 1920s, and a national association was formed to organize credit unions, promote state-level authorizing legislation, and eventually win passage of the Federal Credit Union Act in 1934 (Moody & Fite 1971). Today, as noted above, the nation’s 5,000-plus credit unions collectively have 128.6 million members.

Large numbers of farmer-owned grain and dairy cooperatives were organized and sustained with the support of social movement organizations like the Grange, in response to critical market failures. Beginning in the 1840s, farmers formed dairy cooperatives to process cheese and butter, and to market fluid milk in urban areas. By 1909, there were more than 2,700 dairy cooperatives. During the same period, farmers organized cooperatives to build thousands of elevators to store and market grain (Schneiberg et al. 2008). Today, dairy cooperatives handle approximately 85 percent of the total milk marketed in the United States, and in 2020, agricultural cooperatives as a whole employed over 185,000 workers, with revenues exceeding $200 billion.

 

Co-op Development Today: The Growing Prominence of Worker Cooperatives

Consumer cooperatives—such as credit unions, rural utilities, and mutual insurers (e.g., Nationwide)—are by far the largest segment of cooperatives, with over 90 percent of US cooperatives identifying as consumer owned. Consumer co-ops remain a common form for cooperatives started between 2011 and 2019, but their share is declining, while the share of worker co-ops is rising. This can be seen over the course of the decade since we conducted two surveys. In the first survey, which covered the period from 2011-2016, 40 percent of newly incorporated cooperatives were consumer owned, which was more than any other single category. By contrast, in the second survey period of 2016-2019, worker co-ops were the single most common type of cooperative, constituting 47 percent of the new co-ops. That is an extraordinary figure, given that only one percent of US co-ops formed before 2010 are worker co-ops.

This trend, nonetheless, is not surprising, as it fits well with the historical pattern of development highlighted above. Cooperatives typically emerge when people’s needs are not being met by the market—and it would be hard to argue that late-stage capitalism is meeting the needs of most workers in America. From wage stagnation and the emergence of the gig economy to retiring business owners, employee ownership has been identified as a solution to many of our socioeconomic ills.

It is also important to note that the overall growth of worker cooperatives is not at all unrelated to the growing popularity of co-ops in Black communities, Indigenous communities, and communities of color. According to the 2015 State of the Sector report by the US Federation of Worker Cooperatives and the Democracy at Work Institute (DAWI), “Two-thirds of worker cooperatives in 2015 were less than 15 years old and 39 percent were less than five years old. Almost 70 percent of all employees are female, about 60 percent are non-white and [Latinxs] are the largest plurality of any race (43 percent).” And that trend has continued—according to the 2019 State of the Sector report, “The racial demographics of worker owners continue to show a majority of people of color, with a concentration of Latinx workers.” Of the 450-plus worker cooperatives in the US, approximately 38 percent of the membership is Latinx. And according to UWCC’s 2020 study Latinx Co-op Power, approximately three-quarters of the Latinx cooperatives incorporated between 2014 and 2019 are worker-owned.

The jump in worker co-ops as a percentage of total cooperatives incorporated between our two survey periods was particularly notable in Colorado, a state better known for rural electric and farmer-owned cooperatives. While there are regions with much higher concentrations of worker cooperatives and more developed cooperative development ecosystems, the timing of Colorado’s growth in worker ownership is interesting in that it coincides with the state’s shift to an ecosystem approach to increasing employee ownership.

In 2012, the Rocky Mountain Employee Ownership Center (RMEOC) launched with the mission to build a more just and sustainable economy through employee ownership. RMEOC has taken a holistic, ecosystem approach to their cooperative development work. In addition to supporting cooperatives directly, they engage with policymakers, service providers, state leadership, and other stakeholders to strengthen the region’s employee ownership ecosystem. The approach has paid off. There has been a recent flourishing of state level policy supporting cooperatives in Colorado including the creation of the Colorado Employee Ownership Commission and a Colorado Employee Ownership Office within the Colorado Office of Economic Development and International Trade. The Commission was charged with educating the public on the benefits of employee ownership, establishing a network of technical support for employee ownership conversions, and generating a list of recommendations for removing barriers to the development of employee-owned businesses. The Office supports these initiatives and channels grants, loan guarantees, and technical assistance to worker cooperatives.

Around the same time, Colorado’s legal environment became friendlier to cooperatives as the state strove to become known as the “Delaware of Cooperatives.” In 2011, the state adopted a new cooperative statute that allows outside investor-members within certain parameters and is flexible enough to be used by cooperatives in many sectors. And in 2014, a new law firm launched that serves and actively promotes cooperatives and other social enterprise models.

Colorado is one small example of what is possible through an ecosystem approach to cooperative development—it is also exemplifies a broader national trend. The ecosystem of support for worker cooperatives exploded in the last decade. Two prominent national employee ownership organizations, DAWI and Project Equity, launched in 2013 and 2014, respectively; and in 2012 The Working World, which provides non-extractive financing and technical support to worker cooperatives, added a US-focused loan fund. Additionally, several longstanding cooperative development centers and community economic development organizations added or enhanced programming on worker ownership during this time. Private foundations and municipalities such as New York City; Madison, Wisconsin; Oakland, California; and Minneapolis, Minnesota, began investing in employee ownership to create good jobs and build community wealth. And investment capital is now starting to flow—a 2020 study by the Democracy Collaborative identified a dozen new or emerging investment funds focused on supporting employee ownership transitions.

 

 

Sector specific strategies

Another notable finding was the effectiveness of sector-specific strategies to scale specific segments of the cooperative economy. In the early 2000s, two national organizations emerged with sector-specific approaches in retail grocery and housing. These organizations served as national leaders that worked closely with local cooperative developers to spread their model, practices, and expertise on the local level. We’re now seeing the fruit of their labor.

Food Co-op Initiative (FCI) started in 2005 as Food Cooperative 500, a pilot project launched by leaders from the grocery cooperative community who wanted to “test the theory that new food retail cooperatives could open more quickly and successfully if they had appropriate guidance.” FCI connects food co-op organizers across the country with a suite of industry-specific resources including organizing tools and best practices, training and technical advice, peer learning opportunities, and seed capital. Since its founding, 157 new retail food cooperatives have opened in the US and nearly 100 additional communities are currently working to open new stores.

ROC USA—the “ROC” stands for resident-owned communities—is another example of an organization that has successfully developed cooperatives in a specific sector: manufactured (“mobile”) home communities. Launched in 2008, ROC USA works in partnership with a formal network of nonprofit affiliates and has a national technical assistance team. It also provides financing through ROC USA Capital, a community development financial institution (CDFI). The technical assistance and financing—along with third-party legal counsel and engineers—facilitate the conversion of manufactured home communities to cooperative ownership. ROC USA is headquartered in New Hampshire where the model was pioneered and market-tested for more than two decades before expanding nationally. In New Hampshire and Vermont alone, approximately 39 new housing cooperatives were formed in the past decade. Today, the network represents nearly 300 co-ops and 20,000 member-owners in 21 states; in the past three years, the network has developed 20 new co-ops a year.

 

The Next Wave of Cooperative Development

Cooperatives are not a panacea, but they are a time-tested strategy for improving social and economic wellbeing. Cooperatives have the potential to build community wealth, empower workers, and help small businesses thrive in an increasingly competitive world. While cooperative businesses can be challenging to launch, they are a solid long-term investment. Studies from the across the globe have shown that once established, cooperatives last longer than other forms of business and are more resilient during times of crisis. Many of the cooperatives established during earlier waves of cooperative development are still serving their members decades later—as of 2020, 76.5 percent of all agricultural cooperative were more than 50 years old, and 17.5 percent were more than 100 years of age.

As Andrew Crosson explained in a recent NPQ article on Appalachia, an ecosystem approach is required to overcome barriers to shared prosperity and to create an economy that works for all. The same argument applies to the development of strong, networked cooperatives that meet the needs of individuals and communities. Historical examples, as well as the cooperative development success stories of today, demonstrate the power of taking an ecosystem approach to building a resilient cooperative economy. Co-op development trends reflect social and economic trends; they also reflect trends in philanthropy and public investment. This begs two questions: What collective needs must we most urgently address? And what investments can we make today that will usher in the next wave of cooperative development?