North Dakota Rural Electric Cooperative Foundation
Report date
January 2022
What has been most instrumental to your progress?
Work involved bringing competitors (retail grocers) together to learn how they can work cooperatively for mutual benefit. The cooperative was developed by a group of people that are fully employed in other areas but intend to operate the cooperative for the benefit of their community and for the sustainability of their business. The time they have available to work on developing the business is limited. It is important to have access to technical assistance providers that can move the project forward by scheduling meetings, keeping records, reporting, and following up on work as necessary. The TA providers have gained experience from the development of other projects that can be transferred to the cooperative, for example, the business development process to ensure the emergence of a stable business, awareness of cooperative governance and structure, ability to bring diverse groups together for a common vision, and identification of funding sources. The ongoing evaluation work by NDSU has elevated issues felt but not openly expressed by the cooperative members in a timely manner so they can be addressed, such as the need to do a strategic plan as the opportunities continue to grow
Worked to gain support of vendors and the wholesale food industry. Suppliers have designed their business model around profit-driven scenarios which typically exclude very small grocery stores (lack of profit) or result in higher costs and fees to deliver supply (resulting in lack of competitiveness for the small store and high prices for the customers). Cooperative members educated a major supplier on the need for change and negotiated a modified plan to serve smaller stores by setting those stores up as “sister” accounts under the larger hub store at a much-reduced weekly fee. The cooperative is continuing these negotiations with other vendors, currently milk supply which is also heavily regulated. The cooperative’s sustainability will depend on its ability to aggregate wholesale supply from as many suppliers as possible.
During this past year we have actively shared the story of the emerging cooperative through media channels and networking/speaking opportunities. The effort has led to other connections that have improved what the cooperative can offer and how it will operate. Through Stanford University we were connected to FTS Solutions, an IT company that is focused on affordability for small retailers. They offered an online shopping platform to the cooperative for the cost of one retailer, essentially providing an online shopping platform to all its members for the cost of one. This helped bridge challenges associated with affordability of needed technology. Because of the attention, wholesalers are watching the progress with some asking how they can be involved. The story is emerging as an effort to support community which has led to a local trucking company offering to drive the cooperative’s delivery truck for a charitable fee because they wanted to support the effort.
Key lessons learned
This type of development is atypical. Usually, cooperatives are developed by those who wish to operate the business. Through the development phase, the steering committee would typically engage in a feasibility study and business planning. In this case, the concept emerged as an idea that could help with the sustainability of grocery stores and the financial feasibility was prepared prior to engaging a steering committee that had the desire to develop the cooperative. It would have been helpful to pause once we engaged the steering committee and re-addressed the financial feasibility and strategic plan. This would have helped the development become the “members” business more quickly.
How powerful data can be to engage people in change. Real data connecting trends in sparsely populated areas is hard to come by and many times the people living there accept their loss of access to necessary services as a consequence of population decline rather than detrimental policies (both government and free market). By sharing data through media, it gave wholesale supply sectors an opportunity to analyze challenges and assess how their business models will impact them. Wholesalers have reached out to the Foundation to confirm that there is a problem with the supply chain for small grocers in small towns. As a rural development professional, we witness the trends as we work to keep businesses operating in small towns, but rarely do we have a chance (i.e. capacity) to document trends and solutions with interaction from those affected. Our involvement in the learning is as important as a steering committee’s involvement in the learning as they launch their business.
Reflections on inclusive, collaborative or resourceful problem-solving
Collaborative! The project goal is to illustrate how collaboration within a rural region and among what may typically be considered competitors (retail grocery/suppliers) can strengthen rural economies and improve access to goods and services. It is important to have everyone working toward the same goal with the same vision. The Foundation entered this project not fully knowing what the participants wanted to achieve individually from the development of the co-op, either operate as a for-profit for the economic benefit of the retailers or operate at cost for the good of the community. The cooperative’s decision to operate for the good of the community has attracted the participation of others, such as the truck driving company, the local health district and local funders. Residents are commenting that they are proud to live in a place where people care about one another, and the project has generated excitement about the potential for a new shopping experience. As the cooperative moves moving forward, the wholesalers and vendors (including locker and software vendors), have a shared vision and are playing an active role in creating efficiencies and finding solutions to barriers.
Other key elements of Community Innovation
Empowerment. Through the support and dedication of technical assistance providers and other stakeholders, local people and business owners are being empowered to lead the project – and are being recognized for their accomplishments. This type of support can build confidence that will also prepare cooperative members for other roles, leading to stronger and healthier communities.
Understanding the problem
As word of this pilot project spreads, it has helped other rural areas understand the reasons behind their supply dilemmas and we are receiving requests for help to replicate the work. The Nebraska Grocery Association is drafting a bill to their state legislature for funding. The cooperative development center in Illinois is rolling out smart-sized fresh rural markets but is having trouble solving the supply problem. They have asked for help in transferring the work to their state. This fall, 103 (of 204) school districts lost their food service supplier. The school within the service area of the cooperative was able to easily connect to the cooperative to help address their supply chain issues, although, a few schools have yet to find a supplier for food. If proven successful, this model can include other businesses, such as restaurants or hospitals, as more efficiencies are gained through aggregating supplies. This work is illustrating the need for more regional coordination and collaboration on the purchase of wholesale food in rural areas.
If you could do it all over again...
Although simple on paper, shifting how product is supplied is quite complicated and affects more than those developing the cooperative. Understanding the technology piece is far more complex than just putting in a “system” and we were unable to find a system scaled to a small store that could integrate the lockers. It did not exist; it needed to be created. Also, scaling down available and widely used on-line order systems and platforms can be challenging. Most systems and prices are scaled to service larger retailers. Further, each step in the process has taken longer than anticipated and a timeline with deadlines creates undo stress. More beneficial is recognizing milestones and celebrating the achievements.
One last thought
The cooperative has experienced delays in receiving the lockers due supply chain disruptions as a result of the pandemic which has delayed the full launch of the project. We anticipate having the lockers installed in March. We have also experienced increases in costs leading to the need for additional fundraising. Our major expenses will begin this year. Rather than staffing we will be contracting for some of the initial, more specialized work such as setting up an accounting system, programming and strategic planning. Lessons learned from this project are feeding into another project the Foundation is working on where the Foundation will collaborate with cooperative development centers from MN and SD to model a distribution system that integrates rural purchasing cooperatives with existing warehousing (food banks) and the USPS (for expediting) to determine whether we can provide fair access to food for all by calling on collective purchasing power and utilizing trucks that already travel to every town in the US. The USPS and food bank are engaged and interested in the concept. The name of the cooperative is Rural Access Distribution Co-op (RAD).