By Russell Libby
What do you do when you keep running into the same farmers while you're delivering to the local restaurant trade? Often, you work hard to try to build better connections with the chef so that you can be sure that your produce is in demand. However, when your competition is mostly your friends, you might try another approach. A group of Hancock County farmers is now in the second year of a different solution – working together to supply a broader range of product over an extended season through a marketing cooperative.
The Hancock Organic Growers Cooperative now supplies nearly 20 restaurants in Blue Hill, the Blue Hill Coop, and a local grocery store. In addition, it operates The Organic Harvest retail stand in Blue Hill The combination makes it a major player in the summer produce business in the area. This year, the cooperative has eight members, down from eleven last year, and is focusing on ways to increase its volume in its key restaurant markets. Its experience might prove helpful to others considering ways to work together to produce the volume and scale required by many markets today.
The cooperative came together during the winter of 1995-96 as the result of an unexpected opportunity. For a number of years Dennis King of Penobscot marketed produce through Jean Hay's farmstand in Blue Hill. When Jean decided to sell, Scott Howell, a former apprentice, purchased the farm, located near the Blue Hill fairgrounds. He was interested in finding a way to reinvigorate the retail stand and began talking with Dennis and other area farmers. Instead of creating a new farmstand, the farmers came up with a solution that involves them all in the future success of the group – an agricultural marketing cooperative.
Working together isn't new to many of the farmers in Hancock County. Historically a MOFGA stronghold, many farmers in the area have long cooperated on seed orders through FEDCO, the purchase of organic fertilizers through Organic Growers Supply (now part of Moose Tubers), and swapping work and equipment. The Hancock County chapter's monthly meetings have often been the place where these activities were organized.
That winter, the chapter spent time talking about the possibility of marketing together, using the stand in Blue Hill as a base of operations. The critical point came when Dennis King and Jo Barrett decided that they would cede their Blue Hill restauranl markets to the cooperative to assure a sufficient volume market. Others agreed to do the same, and the focus of the coop became clearer – marketing to Blue Hill. This enabled people to commit to the coop because they could retain their non-Blue Hill markets as a buffer against any marketing problems the coop might have.
The cooperative organized in late spring of 1996 with eleven members. One requirement of the cooperative is that all full members must be producing certified organic foods. In 1996, all produce and consumable items sold through the stand were certified.
Nicolas Lindholm of Penobscot was hired as parttime manager. Members helped upgrade the stand with a new produce cooler and provided staffing for the retail part of the farmstand on a rotating basis. Nicolas was responsible for wholesale sales, for setting prices in the market, and for the basic accounting and recordkeeping that goes with a successful business.
The first month was difficult because the wet growing season in 1996 set most production back. The stand opened in late June and ran through October. Although production was late and quantities low, the cooperative came close to budget projections. The end of the season shortfall was covered by an assessment against members' sales, which caused several members to reconsider their participation for this year.
The marketing agreements that members sign are critical for making the coop work. They cover several major parts of the business – pricing arrangements, payment schedules, volume commitments, and "noncompete" clauses.
The marketing agreement formulated by Hancock Organic Growers (HOG) is based on trying to ensure a commitment from the members to the success of the coop. Agreements like this can only be put together under two specific circumstances: if a majority of the growers of a crop in the state work with the Department of Agriculture to put together a marketing agreement by majority vote, which can cover everything from grade standards to marketing schedules; or if, like HOG, they actually formalize a cooperative. Any informal agreements that farmers (or any other businesses) make about supplying or allocating markets, or about setting prices, are technically violations of many of the nation's antitrust laws. The Capper-Volstead Act specifically exempted agricultural cooperatives from these requirements.
Farmers in the cooperative are paid 67% of retail price. Wholesale accounts who pick up pay 80% of retail; those who receive delivery pay 85 percent. The difference between the farmer price and the sales price goes toward the costs of operating the coop.
Every growing business, cooperative or not, makes changes and adjustments. This year the coop rearranged the retail space at the stand to make more attractive displays. Jessie Schmidt of Bucksport has been hired as manager, replacing Nicolas who became produce manager at the Belfast Co-op Store last winter. Jessie will be a senior at College of the Atlantic this year. Several growers from last year decided that they would try different marketing approaches, or scale back their farms altogether, while another decided to try the coop as a marketing outlet. Altogether, eight farms currently are full members, and the coop buys from several others to supply gaps in the retail store.
According to Jessie, "The cooperative has decided to focus on local (Blue Hill) markets. After those markets are saturated, then the cooperative might move out to other pieces of the market and other places." Fortunately, because over two dozen restaurants, several retailers, a caterer, and other locations offer substantial potential, the cooperative still has plenty of room to grow in the local community.
Business is good early in the season, with favorable weather producing a wider variety of produce than the 1996 damp growing season. Most of last year's restaurant customers are back, with a few more beginning to get involved as the variety of local ingredients increases.
Retail sales at the stand are up compared with a year ago, with daily sales starting to head towards the targets that member Scott Howell sees as critical. "If we can get to $1 per square foot per day in sales, we'll be doing well," he observed.
A Bumpy Path
Forming a cooperative has not been without its growing pains. Several members dropped out over the winter, citing the need for higher sales volumes or the lack of time to make the labor commitment needed for the retail stand. Paying part of the margin to cover the costs of the cooperative is definitely a financial expense, particularly for smaller farms with relatively low sales. The year-end assessment to cover lower than expected sales hurt all coop participants. Members have met nearly every week through the winter to learn more about how to work with each other to make their joint business successful.
In addition, the Blue Hill market is a competitive one. The Blue Hill Coop, a retail food coop, recently expanded to include a deli, and it takes some of the customers who used to frequent the retail stand when it was the only local place to buy organic produce, as does Mainescape, a local landscape nursery that offers retail produce. Several brokers buy food at the Boston Terminal Market and resell it to restaurants along the coast at very competitive prices. Several buyers haven't wanted to switch their accounts from individual farmers to the coop.
Is a Coop Right for You?
That depends. Cooperatives can be an important part of a farm's marketing strategy, but the farmer needs to be involved in the activities of the coop. Marketing can't be ignored. All of the farmers in HOG are active in making decisions and in work at the retail stand.
The issue of scale is important. While small growers with a relatively narrow product range might benefit most from access to markets they couldn't otherwise supply, they need to be able to produce a consistent volume through the growing season and develop specialties that are not in large supply from other coop members. The labor and time requirements of helping with the stand and participating in the coop may be more than the farm can meet. Many small farms need to sell all their product at full retail price to survive.
Finally, capital is important. Because the cooperative doesn't have a lot of capital, the farmers need to pitch in with labor at busy times of the year. Putting together the basic infrastructure (coolers, transportation, telephone, retail space) can make or break the finances of the coop. Luckily, much of this was in place or easily accessible in Blue Hill. Blue Hill presents an ideal opportunity to test a regionally-focused coop. While many coops and individual farmers are trying to serve large markets, HOG is working hard to show that a commitment to local growers can benefit everyone involved – retail customers, restaurant chefs, and farmers.
The Department of Agriculture is trying to schedule a fall meeting for farmers who are interested in cooperatives, particularly along the lines of the valueadded cooperatives now being formed in the Plains states. We'll let MOFGA members know the dates (mid-November) as soon as they're finalized through our newsletter.
1997 Cooperative Members
Many of the farmers involved in HOG are familiar to MOFGA members, such as Dennis King and Jo Barret of King Hill Farm in Penobscot; Mollie and Paul Birdsall of Horsepower Farm, Penobscot; Paul Volckhausen, Happytown Farm, East Orland. Others are new to their particular farms or to the cooperative: Nancy Veilleux and Chris Hurley, Lazy C Farm, Penobscot; Scott Howell, UnderHill Farm, Blue Hill; Jennifer Schroth and Jon Ellsworth, Carding Brook Farm, Brooklin; Sam and Toby Klein, Run Water Farm, East Sullivan; and Jim Baranski and Charlotte Young, Shalom Orchard, Eastbrook. Several farms are participating this year as outside suppliers, with the coop buying their items and selling retail with a markup. This is done to supply items that are otherwise unavailable through the coop, such as local free-range chicken from Carl Woodward's Island Acres Farm and Flossie Howard's locally famous cinammon rolls.
Maine Cooperatives for Organic Farmers
Hancock Organic Growers Cooperative. Contact Jessie Schmidt at 326-5905. Sales at Organic Harvest retail stand and to Blue Hill restaurants and retail outlets. Eight members. Established 1996.
Maine Organic Blueberry Growers Cooperative. Contact Tom Taylor-Lash at 469-3003. MOB sells fresh blueberries wholesale to Northeast Cooperatives and helps arrange group supply orders and joint trucking. Established c. 1979.
Aroostook Organic Farmers Cooperative. Contact Jim Cook, 895-5234. A group of farmers producing specialty organic potatoes for wholesale markets in Maine and beyond. This year expanding to other storage crops (onions, carrots). Markets with Aroostook Garden labels. Established 1996.
CROPP (Coulee Region Organic Produce Pool). Local contact, Greg Harriman, 948-5612. A Wisconsin-based cooperative that has established local pools of organic dairy farmers across the country, including one in Maine. Markets under Organic Valley label. Established c. 1985.
Notes on Forming an Organic Farmers Coop
A dozen farms, some are more equal than others,
Idealists and biznessmen,
Potluck junkies weaving an awkward cloth.
Gentlemen, says ol' Ben, if we do not hang together we shall most assuredly have to find real jobs.
Don't hog the biscuits.
But really this committee thing seems a long row to hoe.
How can such a mixed flock ever come together?
"You're my lover, not my rival."
Keep it separate; you might have to talk to these people some day.
Are we really in a lifeboat?
Is there life after bizness?
Can potlucks cure, or do we need a bigger bang?
Potlatch the mofo.
Sacrifice a little more to the almight compost.
It's an organic thing so you got to understand.
Cooperation contains and conquers competition.
We may have more in common than we seem to think.
Revolve. Evelove. Revalue.
Hold together, it … could … work.
© 1997 Bill Melendy