Vanderhoof Co-operative Association

Background

The Vanderhoof Co-operative Association (VCA) is a large consumer co-operative and is part of Western Canada's Federated Co-operatives Limited (FCL).  It was incorporated in August 1944 in Vanderhoof, British Columbia (B.C.). Vanderhoof, which has a population of 4000, is situated in the Nechako Valley (population 22,000), in the province's Central Interior region.  In the Vanderhoof area the primary industry is forestry, which is supplemented by agriculture and tourism respectively. The Nechako Valley is the second largest forage-producing region in B.C.; the total number of beef cattle in the region is 39,000 (District of Vanderhoof information).

The co-op was originally an egg polling station, which was formed in 1942, during World War II.  At the time most farmers kept chickens, and they formed the egg polling station to transport their eggs by rail to the 60,000 U.S. soldiers stationed in Prince Rupert, 627 kilometres northwest of Vanderhoof.  The egg operation transformed into a co-operative in 1944. VCA had ten original co-op members, the minimum number necessary at the time to incorporate as a co-operative. Most of these were farmers, but a few lived in the town centre.

General manager Cliff Irving's grandfather was one of the original ten members who helped to form the co-operative in 1944, and was president of the board for several years. Irving himself started working in the co-op in 1966 as a packer and worked his way up. He managed co-op stores in Prince Rupert and Houston before returning to Vanderhoof.  Other co-op employees have also been involved in the business on a long-term basis; one employee recently retired after working for the co-op for thirty-five years.

Growth of the Co-operative

Initially VCA was a producers' co-op, but it quickly developed into a consumer co-op to meet the changing requirements of the community: the agriculture sector was growing and Vanderhoof was becoming more established as a central town in B.C.'s Interior.  The co-op began to supply consumer goods and products needed by local farmers, including food, petroleum, fertilizers, and seeds.

VCA's original food store was housed in an older building close to the post office, with the dry goods stored on the second floor.  The co-op store expanded in subsequent years, and it moved locations several times. From 1973 to 1978, the co-op's operations, including its petroleum business and service station, were spread around the town.

A developer arrived in 1976 to build a shopping mall on a piece of property owned by the CNR. He intended the grocery store Overwaitea to be the anchor store at one end of the mall, with a People's Drug Mart at the other end. However, his plans failed, and he lost the million dollars that he had invested in the structure. Co-op members then became interested in the building and looked into purchasing it. However, at the time some of the downtown merchants opposed VCA's potential expansion because they feared the competition would threaten their own businesses. Co-op board members twice unsuccessfully attempted to convince members to change the co-op's borrowing by­laws and purchase the building. On their third try, they managed to pass the resolution and the co-op bought the mall in 1977. It brought in an outside developer to finish the building.

At the time of this purchase, the Canadian National Railway (CNR) owned the property on which the shopping mall was situated. However, the federal government of the time was pressuring the railway to sell some of its assets. The co-op took advantage of this opportunity and eventually bought the property from the CNR. The entire process of buying the property took approximately five years.

Structure and Membership of the Co-op

There are nine board members, each of whom are elected for a three-year term. Three of the terms come up during any given year, so there are always six experienced board members on the board. This system keeps both the board and the co-op running smoothly, as the majority of the members have some idea of VCA's functioning and most recent activities.

The co-op has a turnout of approximately 200 people at the annual general meetings, which is held in the spring, and includes a member dinner.  It has a members-only sale twice each year.  Dividend cheques are distributed near the date of the AGM.  These events all help to advertise the benefits of co-op membership; as Irving comments, "people waving equity cheques around is a pretty good incentive to become a member."

VCA rents out a number of shops in the mall to other businesses, and the co-op itself has a food store, a hardware store with lumber and building materials, and an agro division for farming and contracting businesses. It also has a petroleum operation, which gets the majority of the fuel busi­ness from the farms in the region and provides a substantial portion of the co-op's income; in 2001 over half of its estimated $32 million came from petroleum sales.

Challenges and Success

During the early 1980s, the co-operative faced some financially difficult years.  Half of the money that it had borrowed to purchase the mall was at a fixed interest rate, but the other half was at a floating rate. When interest rates rose dramatically in the early '80s (to 20+ %) the co-operative's balance sheet was severely compromised and it came close to closing its operations. Instead, the co­op persevered, scaling down its operations to a more affordable level by closing some departments and reducing staff numbers.  In Irving's words, "everybody took a roll back and employee numbers were trimmed right down to bare bones."

The co-op survived those difficult years, interest rates dropped somewhat and to help matters, the economy improved eventually.  In 1982, after the co-op completed its cuts, retail sales had dropped to approximately ten million dollars; by 2000, this number had risen to just under thirty million dollars. Some of this increase resulted from inflation, as petroleum prices in that year soared by 30%, but much of it was due to the co-operative's success.  Ten years after it was almost forced to close, the co-op had rid itself of deficit and in 1991 it offered its first package dividend.

More recent challenges have arisen from competition, as large, multinational 'big box' stores like Costco have moved into the area and the grocery chain Extra Foods recently established itself in Vanderhoof.  This has created some competition for the co-op that has led to a decrease in sales.

Nonetheless, the co-op is thriving, and will have a 4.8% package dividend for its member from purchases in 2000. It is just under 80% member owned and approximately 20% is supported from outside money. VCA has successfully met the challenges that it has faced, and is now a lucrative consumer co-op with 5500 members total, including 3578 active members.

Local Community Connections

The VCA has a number of ties to the local community.  The co-op's rules and regulations state that the co-op must purchase goods from the area if it can buy local products at a comparable price to those brought in from the outside. The co-op's food store regularly purchases some farm products, particularly produce and some grains, from growers in the area. It also buys from a local mustard grower and a honey producer.

Although beef is the most significant agricultural product of the area, the co-op buys little local beef because the region lacks the required facilities. Although there is a feedlot in Vanderhoof there is no a slaughterhouse or inspection facility available. Currently, local cattle are shipped to Alberta or Washington state for processing.  This situation is awkward: it seems to make little sense to ship the animals out of the area for processing, then import the finished product back to Vanderhoof.  The co­op is able to buy a limited amount of local cattle, which it purchases at the 4-H auction at the annual fall fair, but its members would like the store to carry more local beef.  Cliff Irving's view though is that Vanderhoof does not have the population base to support a local slaughterhouse.

The co-op carries farming products that appeal to a broad customer base. A number of agricultural activities are held regularly in Vanderhoof, including the cattle auction, and foal and calf sales.  These activities help to keep the farming community active in the area, which results in a substantial client base for the co-op. VCA also serves many outlying farming communities, including Fort St. James to the north of Vanderhoof, Fraser Lake and Fort Fraser to the west, and nearby Cluculz Lake.  For the past eight years, it has been the only major supplier for the farming sector in the Prince George area, and has benefited greatly from that situation.

VCA also provides fuel services for the Vanderhoof area, and offers delivery service to farms and industries in Burns Lake (129 kilometres northwest of Vanderhoof).  It has card lock stations in Burns Lake, at the Slocan Mill, and in two other locations in Vanderhoof, and is looking into putting an additional station in Prince George.

The Co-operative Community

The co-op is a strong supporter of community events. It sponsors seniors' events, sporting events, such as the senior Vikings basketball and volleyball teams at the high school, and the military cadets. In many situations the co-op will not offer an outright donation, but instead barters exchanges.  For example, local youth will work at VCA's members' only sale, and for each hour that they work, the co-op will donate ten dollars to a local sports team. The VCA also sends two 12 to 14-year-old co-op members (their family must have a co-op membership) to Camp Rainbow every year.  Altogether, it gives approximately $50,000 annually in local donations and community sponsorships.

VCA also supports the co-operative sector.  It bought a class-B share in the Touch Wood Co-op² and endorses the local credit union. The co-op also provides retail services to smaller consumer co­operatives. For example, it provides accounting services to the North Cariboo Growers Co-op (lo­cated in Quesnel), and the Mackenzie and Houston Co-operatives. This resource includes adminis­trative staff and electronic equipment for a fee.  Hiring a high quality accountant is expensive for individual consumer co-ops, and the larger co-ops like VCA are more able to afford this expense.

VCA also plays a role in the co-operative sector through its membership in Federated Co-operatives Limited (FCL). Just as the local members are autonomous and own the VCA, the co-operatives in Western Canada came together to form the FCL, which functions as a wholesaler to consumer co-ops such as the VCA.  Based on the profits FCL makes from purchases from the co-ops in a particular year, it pays a dividend back to its member co-ops, which in turn put this surplus into their operating incomes. This contribution provides a stronger economic base that allows co-ops to pay out divi­dends to their members.

FCL has two meetings a year, both of which are attended by VCA representatives.  There is a fall conference for the directors from all the co-operatives in British Columbia; the number of votes allotted to a particular co-op is based on the amount of purchases that the co-op has made from the FCL. In March, three co-op members representing the VCA go to the FCL general meeting, and have voting rights there.

VCA has learned that in order to maintain the loyalty of its customer base, it needs to focus on its role as the "community builder store." Thus, it has expanded by developing commodities in areas in which there is a local consumer need. Petroleum is one such area; the convenience of fuel delivery and the card lock stations have provided security for the co-op in this lucrative industry.  Co-op members also recognise the importance of co-operation beyond their own store, so they work with both co-operative and non-co-operative organisations in the community.  Its strengths have allowed the VCA to be a significant partner in the province's co-operative movement, which in turn has contributed to its own success.

2003 Update:

Since this research was undertaken the Vanderhoof Co-operative Association the Houston Co-opera­tive Marketing Association have amalgamated to become the Vanderhoof and Districts Co-operative Association (incorporated 2002).

End Note

² The Touch Wood Co-op is a value added wood co-op in the Nechako Valley. See the Galleria on the BCICS website for more information.

Case Study Information

This case study was developed for a report entitled Situating Co-operatives in British Columbia - 2000 - 2001, which was prepared for the Province of B.C. (Ministry of Community Development, Co-operatives and Volunteers) by the British Columbia Institute for Co-operative Studies, University of Victoria.  To obtain the information for the case study BCICS and the co-op entered into a partner­ship agreement. BCICS is grateful to the co-op members for their contributions and time. The case study is published with the approval of the co-operative. Further information regarding this study includes the following:

Researchers:  Gabe Haythornthwaite, Lloy Wylie

Date of research: 2001

Authors:  Lloy Wylie and BCICS Editorial Group

Date of writing: 2001 (finalised 2003)

Editing: BCICS editorial group

Supervision: Kathleen Gabelmann, BCICS Research Co-ordinator

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