[Editor's note:This is part three of Jim Johnson's interview with Ben Sandel of the CDS Consulting Co-op. In this section, Ben discusses the recent explosive growth of food co-ops, cooperative responses to increased competition in the organic food market, and possible ways to expand food co-operatives beyond middle-class neighborhoods. Parts one and two can be found here and here. This portion of the interview begins at 1:07:17.]

Jim Johnson: Well I don’t know if you have numbers off the top of your head, but for a long time we hung in there at around 300, maybe 325 food co-ops in the U.S.

Ben Sandel: Ok.

Jim Johnson: And you have numbers on how many startups we have recently?

Ben Sandel: I would bet that there are 300 groups currently working on starting new co-ops.

Jim Johnson: Wow… Wow.

Ben Sandel: Yeah, it’s phenomenal. Now, a number of those will not got there, but nevertheless it’s phenomenal and there are more coming everyday. I mean, I get people calling me--ok maybe not every single day--but it’s rare that a week doesn’t go by that somebody out of the blue doesn’t come forward and say, “Hey, I’m in this community and I might like to start a food co-op.” Great, you know?

Jim Johnson: And you say largely due to Food Co-op 500 and the Food Co-op Initiative, is it also…

Ben Sandel: I think also forces in our country and in the marketplace. But I think, in the past, if you got this idea, “Hey, I might want to do this,” you would find nothing out there to help you whatsoever, whereas now, if you google “How do I start a food co-op?”, you instantly come to a whole booklet called How to Start a Food Co-op, and you come to the Food Co-op Initiative, which used to be Food Co-op 500.

You know, you instantly find that there’s a whole section on the CDS CC website for startups, that there are resources. And a lot of these groups do tap into those right away. You know, I talk to them for the first time and they say, “I’ve already watched some of your webinars,” and, you know, “I’ve already looked at this piece; I’ve been in contact with Stuart or Jake or Rosie at FCI. So having these resources is, I think, critical.

Jim Johnson: And most of this, of certain interest, would you attribute to the financial crisis? People sort of looking for alternative approaches?

Ben Sandel: I think some of it is. And have you ever read [...] Shifting Involvements? It’s a book about economics written by this economist [Albert Otto Hirschman -ed.] that basically describes this 40-year cycle of altruism and--what would be the opposite of altruism? Of greed or…

Jim Johnson: Cynicism?

Ben Sandel: Cynicism. Yeah.

There are these really well-documented cycles where you go from being very out of focus, thinking, “Things suck and we must make them better, and I’m going to work hard on that.” And you do that and you do make some progress. But what typically happens is that you don’t achieve the high ideals that you initially set out to, so [you] become disillusioned. And, at some point, a large group of people say, “Forget it. I’m just going to work for myself now. I need to look out for number one.” And things go downhill until you get disgusted again and say, “No, no, no. These things have gone too far. we need to start over.”

So I think we can chart that the initial increase in food co-op development coincided with one of those troughs where people started saying, “We got to do something.” We’re now looking and thinking, “Ok, how do we resist that disillusionment? How do we create more realistic expectations? How do we work hard to ensure that the outcomes are as positive as they can be?” You know, that’s really sort of a larger philosophical driver for those of us who are trying to serve these groups.

Jim Johnson: So we have these 300-something food co-ops now, and NCGA membership--is that in the low 100-something?

Ben Sandel: Yeah, something like that. And, again, I don’t know the numbers, but they can certainly provide them.

Jim Johnson: I think I recall a few years ago it was 110 out of 330. Something like that.

Ben Sandel: That could be, yeah.

Jim Johnson: It was roughly a third. Probably the biggest third of the food co-ops in general were in NCGA.

Ben Sandel: Probably.

Jim Johnson: Yeah, and with some exceptions, but yeah. What is our strategy for helping the lower two thirds? How do we help them? What are we doing? I know you guys are talking about this all the time, but a lot of people don’t know that the food co-op consultants are actually talking about this. And so I want to sort of expose that a little, even if it’s just broad speculation. It was like how do we help the lower two thirds of food co-ops in the country? What can we do for them?

Ben Sandel: Sure, absolutely. And I think it is something we look at and talk about, but it’s also the old 80-20 rule. And the 80-20 rule exists for a reason.

Generally the rule means that 20% of the population in a given group gets 80% of the resources. And that may sound horrible, but it actually makes a certain amount of sense in the context of, like, the food co-op, because that 20% is also doing 80% of the business. So certainly what I look at--and I think that there’s a lot of us who are thinking along these lines--is that the quality of research, study materials, training, all the resources we can put together that so far seem to work best for co-ops, developmental co-ops of a certain size and sales volume, they sure ought to work for the smaller ones, too.

So, another reason: if you are an existing co-op that is chugging along at a much smaller size but is facing real challenges--or you want to serve your market better or your owners more, so you want to expand--these materials, these resources we’re creating are going to totally be applicable for you to start a path. However, you’ve got to come forward and say, “Yes, we want to engage in this. Our board is going to have to be supportive of this [and] our management and staff and our owners. So, again, there’s resources for that, too--for creating that alignment, for getting all of your stakeholders on board so that you can do this really effectively.

Jim Johnson: And so--I think you mentioned this a few minutes ago--you said the four cornerstones and the three stages is a developmental model that works for any size of co-op. If I’m hearing you correctly, it’s the financial model is where the limits come in.

Ben Sandel: Absolutely correct. And part of the four cornerstones and three stages is you do the feasibility work, which may lead you to the conclusion that your project is not viable.

Jim Johnson: Or it could lead you in the direction of TPSS [Takoma Park Silver Spring Co-op] which was 1,000 square feet, $2 million a year, and after we survived our own mistakes in the expansion, you know, TPSS seems to be doing very well now, and maybe in spite of itself, but it’s doing very well. Yeah.

Ben Sandel: Right. And yes, you may come to that. But again, if the research shows that that is a viable strategy, then fantastic. The problem is generally you need an urban environment to create--and look at what TPSS’s, at least the TP side of it, you know, what do you think the median income is?

Jim Johnson: Yeah, oh yeah. Way upscale, yeah.

Ben Sandel: Right. And your education level is off the charts. You know, the numbers of PhD’s...You couldn’t swing a dead cat, if you’ll pardon the expression, without hitting a PhD, at least in the parking lot or inside the store.

Jim Johnson: [laughing]

Ben Sandel: So in order to generate that volume of sales out of that small of footprint, you need some fairly special circumstances. The problem we see is with stores that do open very small--or what we see more often, what I see personally more often--is they start with thinking, “We’ll start with a buyers club or a little buying group, and we’ll use the proceeds from that to finance the rest of our project.” Well, that just doesn’t happen. I’ve just never seen the proceeds be anything that’s even close to financing it.

And what seems to happen more often is it actually drains the energy because the founding group puts all their effort and resources into that initial project, whatever it is. And then, in the mean time, they’re not doing financial feasibility work, they’re not going through the stages and assembling the cornerstones, so they’re not making any progress on their larger goal of a store. And, again, if they don’t want a store, that’s different. Great. Open a buyers club; open a farmers’ market.

Jim Johnson: They’re too busy keeping the wheels turning in order to actually achieve the larger goal, basically.

Ben Sandel: Correct. And those wheels are not generating the return that they possibly naively expected. Friendly City cost about $1.7 million to get open. There’s no possible way we would have generated that from the proceeds of a buying club. No way. It would have taken 1,050 years.

Jim Johnson: So the lower two thirds, they can look at the four cornerstones and three stages, they can do their feasibility, they can do their research, so they can see what their options are. And a lot of that--correct me if I’m wrong--would come down to the size of their market in the end. They would be discovering how big their market is, what their potential for growth is, and they’re going to get an answer one way or the other.

Ben Sandel: Correct. Yes, and the market size, I think, is less limiting than what they choose--than the financial situation in their market. I mean, we’ve seen co-ops that can be viable in fairly small towns.

The market size, I think, is to some degree--I mean, especially via the triple whammy of really small markets with a really low median income [and] really low education level, that’s a problem. But that’s somewhat unusual. And it’s somewhat unusual, at least in my experience, to see a group that has all of that. Even some of these urban groups I’m seeing still have--especially if they’re situated at kind of an edge between an underserved neighborhood that might be more challenged in terms of its economic position, but also on the edge of a neighborhood that’s more stable or higher up in that regard, that could be a great way to situate a co-op that can really do some great things in that community. So it’s more a matter of can we generate the amount of sales…

Jim Johnson: Which is more of a strategic question in a way.

Ben Sandel: Absolutely. It’s a strategic question…

Jim Johnson: As opposed to a static question of either we’ve got it or we don’t. There is a bigger question of we might be able to get it even if we don’t have it.

Ben Sandel: Absolutely. And does our vision need to be adjusted so that it suits a level of financial viability?

So, you know, a lot of groups, I think, start thinking about a 2,000 square foot store because it’s hard to imagine. I think if you went today and just like told somebody in any situation, said, “How big do you think the Shoppers Food Warehouse is in square foot?” They’re not going to have any conception. If you do it in the co-op, I don’t think they’re going to have any conception. You know, “Oh, the co-op is 500 square feet.” Well no, it’s 1,000 square feet. Or they’re going to say, “Oh, I think it’s 100,000 square feet.”

So some of it is just a lack of understanding of what is the size, so they say 2,000 because that’s a nice number. But the strategic question is: can a 2,000 square foot store be made to be financially viable and serve our owners? So again, maybe it could be if it’s a really high-end specialty wine and cheese store. That might be really viable. Does that serve our owners? Maybe it does. But that’s a question, versus do you want this to be a place where people can do a lot of their family shopping in a very healthy, just way? And that then becomes a bigger strategic question of how much space do you need to do that?

Jim Johnson: Well, speaking to that, you said 50k to 150k [as a median income] with higher education levels?

Ben Sandel: Yeah, and that can vary because your market may--like our market is not as expensive to exist in. So, for us, $44k is--you know, we’re making it there, but our rent is not what it would be in an urban area and some of our other costs--you know, we don’t have to pay our GM quite as much as if we were in an urban area.

Jim Johnson: And so, are we stuck with that?

Ben Sandel: Don’t know.

Jim Johnson: You guys must talk about it though. Because, you know this, the lefties in particular are going to say, “Hey, shouldn’t we be having co-ops for working class people?” And how do we do that?

Ben Sandel: Yes.

Jim Johnson: The working class people need cheap, healthy food maybe more than anybody else does.

Ben Sandel: Absolutely.

Jim Johnson: So how do we help them? How do we do that for them?

Ben Sandel: Absolutely. And that’s where, like, looking at the British model where, you know, not every co-op is independent. It’s “The Co-op,” it’s the national co-op.

Jim Johnson: More like a chain?

Ben Sandel: Yeah. So you can use these massive resources to open up a co-op anywhere you need it and want it. And of course there is still some element of you want your community to be organized behind it, you want your community to really desire this co-op, but if you can draw on those kinds of resources then you don’t have to get all of the money from within the community to open it, which can be very challenging in lower income communities.

Jim Johnson: You’ve got deep pockets because it’s essentially a chain?

Ben Sandel: Yeah, because it’s got a large central organization, which the U.S. model has really been counter to that, where it’s always been decentralized. And you know, UNFI and NCGA provide a little bit of a central infrastructure, but not like The Co-op in England where you’ve got a really robust central infrastructure.

So that would be one way to think about this model, and i think there are some people who are thinking about is that something that we should look at in the US, going to a national model like that? And that’s a whole other conversation, but that would be one way to think about it.

Another way to potentially address it is you’ve got your super-achieving co-ops out there, your Bloomingfoods, your Wheatsvilles, your People’s, you know, or PCC Market. So if we can start unlocking some of the equity and strength of these larger co-ops to create satellite stores in underserved communities, you know that would be another way. Now of course that depends on having a strong co-op nearby. You’re not going to do it two states away.

But you know, I think that, for instance, Outpost in Milwaukee, [...] I don’t know how they did it, whether they had to bid on it, but they now have a little commissary-type--very, very small, little place--inside the big hospital in Milwaukee.

Jim Johnson: Wow.

Ben Sandel: So they’re the snack bar now, basically. Instead of getting in Marriott institutional food, you’re getting stuff that was prepared at the co-op and brought over, you know, sandwiches that have organic ingredients. You’re having you know high-quality stuff as what you can grab there if you’re going there to visit your brother-in-law who just had his hernia operated on. So yeah, and to me that’s a model that would potentially work for a small group where, again, you’re leveraging the strengths and the resources of this much larger co-op.

And even if it is an independent store, even still it would be awesome to see. And we are seeing, like, Bloomingfoods is doing an enormous amount of work at their expense at helping out other nearby co-ops that are strruggling. Now it would have probably been much better if relationship could have been created before they ever opened to make sure that they didn’t get in that situation. But nevertheless, again, these are the kinds of things that I think could work and that certainly are being looked at in the co-op world as to how we could get co-ops in these locations that might not be as financially perfect or desirable.

Jim Johnson: I seem to recall that Willy Street in Madison was also doing a lot to try to help some of the smaller co-ops there in Madison.

Ben Sandel: Yeah, I think many of them do. And again, it’s that sixth principle in action.

Jim Johnson: Yeah. You mentioned Wegmans, and this is very much--almost a worst case scenario. But I’m also thinking about some of the things I’ve heard out of Canada, and whether you know are we looking at the food co-ops in the U.S. losing natural and organic as their differentiator, as their unique selling proposition?

Ben Sandel: Maybe so. But I think it’s time for them to change. I don’t think that should be their primary differentiator. I think the service to community, cooperative principles, the justice side of it, I think that needs to be their differentiator. They need to do everything else just as well. And their service level, and I think that is an area that they still absolutely can excel competitively at, their ability to actually help a person understand how this food works and what it means to them.

Jim Johnson: I’m thinking this might be the lead or the heart of one of my angles here because I agree with you, and I think it’s kind of obvious if Walmart has become the biggest organic retailer. Ok, then the co-ops--whether they’re complacent or not--need to look at this and say, “How do we differentiate ourselves in a world where you can get organic at Walmart?”

Ben Sandel: Sure, absolutely.

Jim Johnson: Ok. What does that look like?

Ben Sandel: What’s our real value then?

Jim Johnson: Yeah.

Ben Sandel: And it may be that some of these markets that have a substantially lower income level--that those stores would be substantially less natural and organic, maybe more conventional, but with certain key areas or certain key educational components--say, "you know, if you’re on a very limited budget, here are the five organic items that really make the biggest difference in your health or in your exposure to toxins."

Jim Johnson: Yeah because, you know, poor folks get food allergies, too.

Ben Sandel: Exactly. Absolutely. And again to me this is the differentiator. It’s not so much, “Yeah, we got this great food,” it’s what do we do with this food.

Jim Johnson: Right. And it reminds me: the value of the Berkeley Co-op was they had a home economist at the customer service center.

Ben Sandel: Exactly.

Jim Johnson: Right? And the people--the members and the customers, the people in the community--didn’t know how to prepare food for whatever social reason, socio-economic reason. There was a lot of food education that needed to be done.

Ben Sandel: Absolutely. I mean, there was a jingle--you can find it online--for bananas because American housewives didn’t know what to do with a banana. When is it ripe? How do we store it? How do we eat it? So there was a jingle that was written that’s really clever and funny about "don’t put it in the refrigerator; here’s what it looks like when it’s perfect; here's different ways you can use it."

Jim Johnson: You still see we still have this terrible need for food education, maybe even at the lower income levels and more at the lower income levels.

Ben Sandel: We do. And the food education not only serves a great purpose, but it creates connection between people. And, at least for me, that’s like my personal thing That’s where co-ops can thrive. Especially if you’re living in a community that may have a higher crime rate.

That access to the things that many of us in our affluent communities take for granted: parks and public pools and all these kind of shared resources--if you’ve got fewer of those and they’re in less good condition, having really good solid human connection where you can come in and somebody says, “Hey, Joe. How are you today? How are your allergies? Did that food--that stuff that you tried last week--how did it go for you?” that’s what I think has a value that far exceeds the food itself: that human connection, that care, that mutual understanding.

A co-op is a mutual aid society, so you’ve got all those pieces, the social piece, the mutual piece, and I think that is where I think we can still absolutely serve all kinds of markets. It’s just how do we get the numbers to work so we can continue to serve those markets rather than do it briefly and then flame out?

Jim Johnson: It’s interesting to think that the bright future of U.S. food co-ops may lie outside the strictly natural and organic sector, that that’s not necessarily our unique selling proposition going forward anymore.

Ben Sandel: Yeah, and I think that’s still an important piece, you know. We still love that, and [...] there’s no denying that that food is a higher value overall. But if you want to look at how we’re going to reach the maximum number of people in the world or in our country, it’s probably going to be a mix.

Jim Johnson: Weah. Well ok, last thing. I’m going to another devil’s advocacy question about the consumer co-op model in general. If you’re familiar with Tom Webb or you covered some of his perspectives on consumer co-ops.

Ben Sandel: I haven’t read a lot of them, but I’m familiar with him. I mean, I know who he is, yes.

Jim Johnson: I attended a seminar he gave at the 2007 Worker Co-op conference in North Carolina, and he was really down on consumer co-ops. And I think he may have been discouraged about what was going on in Canada, in particular, but he felt that the consumer co-op movement--at least in Canada--had essentially lost its principles, did not see itself as providing significantly different or greater value, and that that’s why it was failing.

But he also he tended to say that there’s some fundamental problems with the consumer co-op model that tend to take it in that direction in the long run, and things like, for example, low voter turnout for board elections and low member turnout for general meetings. I’ve seen plenty of that first-hand, as well, and it concerns me greatly. And so I’m fishing for more general perspectives from you about this angle that I’ve heard from Tom Webb and others about consumer co-ops, and does the model have fundamental issues that we’re not successfully addressing or that can’t be successfully addressed?

Ben Sandel: Yes, I do agree that there are some challenges there. I don’t agree that they cannot be addressed. I think that this model takes more work, plain and simple.

If you want to just open a store and put sale signs in the window and negotiate how you pay your employees as little as possible and how you pay your vendors as little as possible, you can kind of have a successful store, at least for you as the owner of the store and potentially for the shoppers. But it’s a false success, and it’s a false economy.

And I think that’s where one of the messages that we need to get across is that when a co-op is really doing it well [...] it ought to be the values behind it, too, that we’re saying. I mean, I think pay per hour in a food co-op versus a conventional grocery--you know, you get paid a lot better in a food co-op if you’re an employee. And to me, that’s a really important piece is employees and suppliers. There was just a great piece in one of our local blogs here in town about how the food co-op is in the same building as the Dollar General and in between the two businesses is the food pantry from the Catholic church.

So you know, you got this picture of intense hunger and you got this totally false economy of “Made in China,” extremely low quality, extremely inexpensive goods in contrast to this “expensive” food co-op. But the reality is Dollar General makes far more profit per dollar than the food co-op does. You know? We’re paying our employees fair wages. We’re paying our vendors a fair price for their goods. We’re willing to pay more to encourage our suppliers to use better practice, you know? So, to me, that’s where the real meat of this difference comes in: it’s not just how much is our price versus Whole Foods or Safeway, it’s can we begin to get people to think more about it all the way back down, because, basically, it comes back down to them.

Jim Johnson: But I’m trying to speak more specifically to how is the consumer co-op model in the U.S. doing in terms of member participation.

Ben Sandel: I don’t think that it’s doing superbly, but I think that the number of members...it’s the sleeping giant. You know, the number of members is there and, I think, growing. Now the challenge is to begin to really get this message out there and--

Jim Johnson: You have examples to cite of the proven models out there, about some of the larger co-ops or any of the co-ops that are really successfully energizing their membership bases?

Ben Sandel: You know, the kind of things that come to mind--I don’t know if these are really proven yet, but we are seeing cross-sector cooperative activities as one aspect. So, like Austin, Texas has their--

Jim Johnson: Austin Think Tank.

Ben Sandel: Yes, the Co-op Think Tank, correct, where they’ve got the food co-op, credit unions, housing co-ops, bakery co-ops, their brewpub co-op, you know, all these different groups coming together with a primary focus being that they want to raise awareness of cooperatives in the city so that anyone who’s thinking about starting a business starts thinking, “Do I want to open a conventional business or a cooperative business?”

And I think that’s one really great area where it takes it out of the stereotype of, “It’s just those hippies. I don’t want to listen to them from the food co-op world.” And you start connecting with things like electric co-ops, and you start connecting to a massive number of people. So I think that’s one that could be a really great place to start is those. And we’ve started a group here, our local inter-co-op alliance that has been really wonderful so far.

I think [...] the benefit, so far, has really mostly been to us, to the cooperators themselves, but it’s so great to sit down and have lunch once a quarter with the beef co-op, and the electric co-op, and the water co-op, and the collective restaurant, and the food co-op, and the credit unions. It’s a start. From there, we begin to figure out--then we are consciously thinking about how do we spread this message out, and look at what we’re doing, look at how different we are, look at how much this mutual effort benefits us all and our community and our society.

So, you know, that to me is a tangible way that I think groups can begin to look at it [...]. I think that education information and training principle has often been interpreted as "those are all geared towards the product," when really that was not the intent of the original writers of the principles. It was education about cooperatives, and that’s something that I think there’s more help needed all the way around, but that I think can happen.

There [are] great stories that can be told. There [are] more and more excellent materials. There’s that absolutely wonderful video on Youtube that I think the Rochdale Co-op in England put together about the Rochdale Equitable Society--the history of it narrated, beautifully done graphically and everything. You know, the more and more that kind of stuff to spread the word that “this is why we exist” and “this is the value that we bring” can help make that connection and also get people thinking more about these bigger questions about, you know, what is economic justice?

Jim Johnson: Right.

Ben Sandel: What is fair, you know? Is buying at Walmart, where I can get the most for my dollar, fair? And actually am I getting the most for my dollar when you consider that my factory job may be lost because of Walmart’s desire to have the lowest possible prices? You know, I think closing that loop or creating that sense of “this is a loop” is really important.

[Part One] [Part Two]

transcription by Rob Brown