Who Profits When Co-ops Succeed?

By Elizabeth Archerd, Member Services Manager

Who benefits when co-ops succeed? This is one of the most complex things to explain to people who are new to co-ops. When a cooperative is obviously thriving, some shoppers voice suspicions that it is not a "real co-op," suggesting that co-ops are only "real" when they are badly run or barely making it.

A successful co-op is proof that a community can care for itself by developing a self-sustaining business to provide the goods and services it needs. Co-op success means that an essential part of the local economy reinvests much of its wealth back in to the community.

There is no profit motive in consumer co-ops. There is, or should be, profit. Co-op profit is a measure of performance; it indicates that management and staff control expenses, offer products the members need, and manage the members' money well. Profit is a way for members to know that their business is in competent hands.

In the traditional terminology of co-ops, profit was known as "surplus." The surplus generated by a well-run co-op is a resource for the co-op membership as a whole. A large chunk of the profit is reinvested in the business itself—true in any well-run business—or used to fund new services for the members. Any remainder can be distributed to the members at the end of each fiscal year.

An important cooperative tradition is that no member profits at the expense of any other member or of the co-op as a whole. This means that co-ops should not offer member benefits that put them in a risky financial position. The unique way that co-ops handle profit was designed to institutionalize this tradition: the proportional patronage refund means that every member gets back only the profit generated by his or her own purchases.

The concept of the co-op as community wealth can be lost if members regard their co-op merely as a source of immediate savings. Co-ops are at risk when little thought is given to long-term business health. Only healthy co-ops can become major players in the economy, nudging the food industry toward a more service-oriented, environmentally friendly ethic.

It is increasingly important for members to understand that the crucial difference between co-ops and other stores does not lie in the product line, pricing or management style, but the very purpose of the business itself. Co-ops exist to provide service to their members. Co-ops are a way for communities to fulfill their aspirations to become economically healthier and more equitable.

To the founders of the modern co-op movement, cooperation was more than "getting along": it was interaction for a purpose. Competition is about getting ahead of others, but cooperation stresses getting ahead with others on behalf of the common good.