New Generation Cooperatives: Case Study Home Grown Wisconsin: The Story of a New Producer Cooperative by Greg Lawless Illinois Institute for Rural Affairs The New Generation Cooperatives: Case Studies are made possible with support from the Illi- nois Council on Food and Agricultural Research (C-FAR) and the Illinois Institute for Rural Affairs (IIRA). Published by Illinois Institute for Rural Affairs Stipes Hall 518 Western Illinois University 1 University Circle Macomb, IL 61455-1390 [email protected] www.iira.org A collection of ten case studies with an introduction is available from IIRA in print and on the IIRA web page. Quoting from these materials for noncommercial purposes is permitted provided proper credit is given. Home Grown Wisconsin: The Story of a New Producer Cooperative by Greg Lawless The seeds of Home Grown Wisconsin (HGW) Cooperative were planted back in the spring and summer of 1994 with a series of lunch meetings at L’Etoile, a nationally renowned, upscale restaurant in Madison, Wisconsin. It would be fully two years before HGW would make its first sale of organic produce, and another two years before the co-op would really show a profit. The four intervening years offer many lessons and insights into the process of cooperative business development. This case study presents a chronological summary of the efforts that resulted in a new farmer-owned marketing company. The Beginnings of Home Grown Wisconsin The meetings at L’Etoile in 1994 were sponsored by a short-lived, informal organization called Local Organic Agriculture for Markets (LOAM). The mission of this Wisconsin group was to “work with farmers, restaurants, retailers, distributors, processors, etc. to improve the marketing infrastructure for handling local and sustainable agriculture products.” The core of the group included L’Etoile owner and chef Odessa Piper, organic vegetable farmers Richard DeWilde and Linda Halley, organic foods distributor Mark Dupre, his employee Joe Sonza- Novera, and Greg Lawless from the University of Wisconsin Center for Cooperatives (UWCC). One of the main results of LOAM (which essentially disbanded later that year) was a $1,500 survey of 301 sustainable farmers in Wisconsin, funded by Dupre and conducted by Lawless. The survey targeted farms that direct marketed fruit and vegetables, meat products, and processed foods, plus a number of organic dairy farms. The 126 farms that responded were presented in the 1995 Directory of Wisconsin’s Sustainable Direct Market Farms. The farmers, who self-identified their status as “organic,” “transitional,” “low chemical,” etc., also indicated strong interest in a variety of marketing initiatives that were suggested. Sixty- two percent, for instance, expressed interest in a farmer-owned enterprise that processed and marketed organic produce. Lawless used this data to support a grant proposal to the state’s Sustainable Agriculture Program (SAP) in November 1994. Titled the “Farmer-Food Buyer Dialogue Project,” its purpose was to bring together farmers and food buyers (a term used to encompass restaurateurs, retailers, and institutional food service providers) to explore ways to increase local sales and consumption of locally and sustainably produced foods. The $10,000 proposal was funded through June 1996. Over the next 18 months, Lawless would also receive significant in-kind support from another unit on the University of Wisconsin-Madison campus, the Center for Integrated Agricultural Systems (CIAS). A research team, consisting of Steve Stevenson, John Hendrickson, Jasia Chitaranjan, and Doug Romig from CIAS, joined Lawless in a yearlong 1 market research and development (R&D) effort. The goal of this research was to find out (1) whether Wisconsin food buyers valued locally-grown food products, (2) how much local food they purchased, and (3) what kept them from buying more. The team surveyed 300 food buyers, and also conducted focus group interviews with dozens of farmers, chefs, retailers, and food service providers. Sixty-four of the surveys were returned (21 percent). After defining “local” on their own terms, 78 percent of the food buyers agreed that there was some market value in being able to tell their customers, “This food is locally grown.” The focus group interviews revealed that restaurateurs also value “sustainable” and “organic,” but more on a personal level—that is, those labels do not translate as easily into a value for most of their customers. The food buyers also indicated what was preventing them from purchasing more local farm products (see Figures 1 and 2). The absence of a central supplier of these products was second only to seasonal availability as the number one obstacle. Price was also a limiting factor, but less so for some of the higher-end restaurants or the natural food groceries. Figure 1. Why Don’t You Buy More Locally Grown Food Products? Consumer Indifference to Food Source Insufficiently Processed Retailers Restaurants Restrictive Contracts with Current Suppliers Absence of Central Supplier for Locally Grown Lack of Grower Professionalism High Price Erratic Availability 0 5 10 15 20 25 30 35 40 Scale Food buyers were asked, “Why don’t you buy more locally grown food products?” They were asked to rank each of the seven suggested obstacles presented above on a scale of 0 to 40. The higher the score, the greater the perceived obstacle. The bar chart shows averages of responses for retailers and restaurants, respectively. Source: UW Research Team, R&D Survey 1996. About the time this data was collected, the UW research team became aware of a farmer- owned cooperative wholesale business in Georgia that was marketing organic produce to upscale restaurants in Atlanta. This co-op provided a model for how many of the marketplace obstacles identified by Wisconsin food buyers could be overcome. For that reason, SAP grant funds were 2 Figure 2. How Likely Are You To Buy More Local Food . ? More Promotion and Education Retailers Restaurants More Processed “One Phone Call” Go Through Current Supplier More Dependable and Professional Lower Prices 0 5 10 15 20 25 30 35 40 45 50 Scale Food buyers were asked, “How likely are you to buy more local food if each of the six improvements presented above were made in the local ‘marketing infrastructure’?” Each corresponds to the obstacles in Figure 1, with the exception that no improvement was suggested to address erratic availability. Source: UW Research Team, R&D Survey 1996. used to bring the founder of Georgia Grown Cooperative, Cynthia Hizer, to Wisconsin to speak to farmers at the Urban-Rural Conference on October 29, 1995. Hizer’s presentation to a crowd of producers was far more persuasive than any survey data that the research team could provide. Her detailed and colorful description of how they were “really doing it” generated a lot of discussion at the workshop. One farmer who was very impressed was Steve Pincus, an organic vegetable producer from Fitchburg, Wisconsin. Pincus would later play a lead role in forming HGW, and would serve as its first board president. On December 15, 1995, significant progress was made at a meeting of farmer wholesalers on the UW campus. In arranging the meeting, the UW research team targeted only producers or producer groups that were marketing fresh organic produce directly to restaurants and/or retailers. After months of research, the team had judged that this group of farmers might be ready to cooperate, and that local, organic produce would be the easiest product to get into new markets with a “buy local, buy sustainable” marketing strategy. The participants at the December meeting included David Bruce, vegetable marketer for CROPP Cooperative; Renee Randall, marketer for an informal group of Amish producers; and four individual producers: Dan Deneen, Linda Haley (former LOAM member), Reggie Destree, and Steve Pincus. Most of these individuals already knew each other. The purpose of the meeting was to determine if, through cooperation, and with initial support from the UW, these farmers could break into new markets together that they couldn’t achieve separately. They were presented the data from the food buyer research, and they discussed several options for new marketing initiatives. Cooperatively, they could (1) market to mainstream grocery stores in Madison (several were already hitting the natural food stores), 3 (2) market to upscale restaurants in Madison, (3) market to upscale restaurants in Chicago, or (4) explore value-added or food processing alternatives. While there was interest in all four options, the group felt that (1) and (4) were more difficult, requiring more capital and more momentum than the group could muster in the short term. In the restaurant market, Haley (with her husband DeWilde) was already marketing a small portion of their production to Madison restaurants, and suggested the group target Chicago. Randall, however, was already marketing most of her Amish farmers’ produce to chefs in Chicago. By the end of the meeting, consensus was reached that both Madison and Chicago restaurant markets were worth exploring, with the possibility that any new efforts in Chicago could be merged with Randall’s current business. Pincus, Deneen, and Randall agreed to work with UWCC and CIAS staff to explore these options, and a steering committee was formed. The fact that six separate farmer-wholesalers could come to agreement on exploring a cooperative strategy may be explained in the following ways. First, the “organic community” in Wisconsin is fairly small, and these individuals had come to know each other, with some level of trust and respect. This provided an opening for collaboration. Second, while these farmers were competitors in a number of markets, it was not a fiercely competitive environment. By their own account (and bolstered by industry statistics), demand for organic foods was growing by as much as 20 percent a year. Even if some individuals eventually opted out of the cooperative effort, there was room for more players, so most did not feel threatened.