Farmfront Board Director
Not long ago, we interviewed Shaun Tyson of Market on the Hill in Mt. Pulaski, IL about the wave of opening co-op grocery stores in rural Illinois. Co-ops are common in rural farmland regions in the United States. They are also common in towns that may be usually described as “crunchy”.
So what is this business concept that can bring these two different American cultures together? Most American consumers are unlikely to be familiar with co-ops or what that means for them.
Below we break down what a cooperative is in the context of grocery stores like Shaun’s. In that breakdown is how co-ops bring value to you as a consumer and can diversify your financial assets.
You read that last part correctly by the way.
What’s a co-op?
“Co-op” is a shortened word to describe a cooperatively owned business entity. Some parts of rural America have what is called an “electric co-op.” That means an electric power supply company that its customers own. It is the same idea for cooperatively owned grocery stores. The people who shop there own them. It is that straightforward!
How does ownership work?
In the case of a grocery store or food store co-op, you directly apply for ownership. Then you pay a set amount of money into the store. You could still shop at a grocery store and not own it, but you have the opportunity to do so.
Ownership comes in different forms. It is important to keep in mind that every co-op varies. Ask lots of questions before you want to join! Co-ops are usually ecstatic to oblige.
Market on the Hill: A Co-op Example
Using Market on the Hill as an example and looking at their website, they have several levels of ownership. Let’s look at the first one!
It is common for a co-op to have a lower-level of ownership focused on consumer perks. It also encourages folks to become involved in the co-op. Market on the Hill has a great example.
The benefits you get in ownership at Market on the Hill is like a supped up Sam’s Club membership. Of course, unlike Sam’s Club, you don’t have to be a member to shop there. Like Sam’s Club, owners at Market on the Hill get exclusive perks like discounts and exclusive sales.
Also, just because your a member of Sam’s Club, doesn’t mean you can help steer the business. Walmart does. With Market on the Hill? You can have a say in the way things run. Ownership means voting power at company business meetings. You even become qualified to become a part of the board itself.
Getting Even More Out of Ownership
Let’s say though you want to kick up your investment a notch or several hundred notches. That’s also possible with Market on the Hill and other co-ops.
When it comes to assessing investment risks, co-ops are unique. You can develop close relationships and involvement in the business. There’s a lot of accountability available. These are your own neighbors, not some hedge fund on Wall Street you don’t know.
Again, we check out Market on the Hill who has a great example of this. You have the option to buy stock in their store and become a “Co-op Owner” with Common A stocks.
For now, both Preferred and Common A are both sold out due to high demand at Market on the Hill. With time and profitability, the business will seek additional investment for expansion purposes and more shares will open up.
“Preferred” shareholders get a return on the money every year. This amount is a percentage of return determined by the co-op board until the loan is paid off in a timely fashion. This is because a Preferred share is a kind of loan for Market on the Hill.
Co-ops like this one may have no collateral, which means they cannot use banks for loans. So that is where the community can come in and give major support.
As money is paid back to preferred investors, an equal dollar amount of Common A is issued as well. For example, if a shareholder gave $5,000, the business gives them dividend-bearing Common A shares valued at $5,000. So the financial returns continue.
It is somewhat comparable then to the idea of public stock ownership. The financial reward though concentrates on your life and community directly. Your investment doesn’t only pay you in returns. It also pays out, too, increasing your community’s wealth.
The Value Proposition of Local Co-ops
When you support your co-op grocery store, they pay forward their growth in local taxes.
All that local funding goes towards…
- your local schools
- your public parks
- your afternoon walking down the manicured streets in your downtown
- your bridges
- your local roads
Supporting co-ops like the Market on the Hill doesn’t only strengthen your finances. It improves your community’s infrastructure, quality of life, and desirability. Your investment amplifies both your wealth and the wealth of your community. It is hard to beat that return on investment.
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