Why There's A Push To Grow Cooperative Businesses In Arizona

By Christina Estes
Published: Friday, January 4, 2019 - 5:00am
Updated: Friday, January 4, 2019 - 9:35am

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Participants at coop business workshop
Christina Estes/KJZZ
Suggestions and feedback from a cooperative businesses workshop on Dec. 7, 2018, will be used to plan training events and possibly a statewide conference.

Ace Hardware, Ocean Spray and Land O’ Lakes are some of the most popular business names in the U.S. They’re also among the most successful cooperatives.

Co-ops are owned and controlled by members, not outside shareholders, and there's a movement underway to grow co-ops in Arizona.

On a sunny December morning dozens of people gathered at Gateway Community College’s Central City Campus to learn about Arizona’s co-op landscape.

Nigel Forrest, a postdoctoral research associate at Arizona State University’s School of Sustainability, hosted the day long workshop with support from the Arizona Cooperative Initiative and volunteers.

Forrest said out of approximately 50 to 60 co-ops in the state, credit unions dominate. Worker co-ops are the least common.

“Out of 500,000 small businesses in Arizona, there’s only one or two worker cooperatives,” Forrest said.

Technicians for Sustainability is a worker cooperative formed in 2017. The Tucson-based solar design-build firm has 17 employee-owners, including Travis Kendall who is a lead installer

“What I really like about the worker co-op business is that it allows you to scale up a business to a larger size but still have the value of having an owner like owners of small businesses who are still out on the job overseeing work every day,” Kendall said.

A Democratic Method

Nationally, agriculture is the top co-op sector with the three top financial performing businesses reporting more than half a billion dollars in revenue in 2016, according to the National Cooperative Bank (NCB).

The NCB Co-op 100 is an annual report that tracks profits. The most recent list of top 100 cooperatives puts their total generated revenues at $208 billion in 2016.

While definitions vary, co-ops are governed on the principle of one member, one vote.

In Phoenix, Cindy Gentry hopes to attract more members to Sun Produce, a cooperative focused on increasing sales of locally-produced fruits and vegetables. She told workshop participants trust can be a tough sell to small farmers when profits are marginal at best.

“From what I hear it’s always like, ‘Oh, I’m going to go belly up, this is too scary, it’s too hard,” Gentry said.

Pam Chandler understands the uncertainty. She spent five years convincing people to invest $200 each in a dream. That’s what it took to get enough members and equity for a bank loan.

Today, the Sierra Vista Food Co-op has 1,300 members and a grocery store that competes with the national chains.

“Anything that you see changing in the business atmosphere you can grab a hold of faster than they can because they’re tied down in bureaucracy,” Chandler said. “They can never touch that and we’ll always have an edge in that area.”

Community Centered

Another edge, she said, is a co-op’s community involvement.

“That’s the playing ground of all cooperatives,” she said. “You have the opportunity to become embedded in the community. You have the opportunity to support other small businesses and education system.”

Recent legal changes could make it easier for co-ops to form and grow in Arizona. In 2016, the state changed its rules to allow a broader range of cooperatives to incorporate. This year, the U.S. Small Business Administration is expected to open its loan guarantee program to employee-owned firms.

And, there’s another reason supporters of co-ops think now’s the time to push the business model: a wave of baby boomers retiring.

Cooperative: "An autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise."
— International Co-operative Alliance

Kimber Lanning, with Local First Arizona, described a situation involving a rancher in southern Arizona.

“His kids don’t want to own his ranch,” she said. “So he created a model that if you come and work with him on his ranch, every year you stay with him you get an additional 10 percent ownership. We need to look long and hard about how to get money and businesses into new owners.”

During the workshop’s breakout sessions, participants shared a common view: the need to increase awareness about cooperatives.

With more than 5,000 faculty and 150,000 students at Arizona’s three public universities, Arnim Wiek said the resources are there, but not the curriculum.

“Currently we have thousands of business students coming out of ASU knowing nothing about cooperative businesses,” he said. “I mean literally nothing.”

Wiek teaches a graduate level course that covers alternative business models at ASU’s School of Sustainability. With the help of others, he would like to create an educational program for people interested in cooperative businesses.

Wiek and Forrest hope to form what they call a “pollination program” which would involve creating ideas for co-ops and presenting them to the entrepreneurial community.

“The ultimate goal is we want to see more co-ops and employee-owned businesses in Arizona,” Forrest said.

A 2006 census conducted by the University of Wisconsin Center for Cooperatives found nearly 30,000 co-ops operating at 73,000 places of businesses throughout the U.S. With more than $3 trillion in assets, the co-ops generated over $500 billion in revenue and $25 billion in wages.

The International Co-operative Alliance promotes seven principles that serve as guidelines. They are:

  • Voluntary and open membership
  • Democratic member control
  • Member economic participation
  • Autonomy and independence
  • Education, training and information
  • Cooperation among cooperatives
  • Concern for community

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