The Kootenay Bakery Café Cooperative

Date of Incorporation: April 2001
Membership: Seven worker owners
Activity: Whole-grain organic bakery and whole-foods eating establishment
Organizational Form: Worker Co-operative
Area Served: Nelson and surrounding area

The success of our business is reflected back to us through the community.  By building bridges with local businesses and by being involved in helping to fund other diverse projects centered on sustainable living, not only do we create wealth in terms of financial strength, but we help to create wealthy, healthy individuals who eat, work and/or shop at our establishment. Indicators of our success would be evident most obviously in the gross sales and the role that our co-op would play in the larger community (first proposal to the former Ministry of Community Development, Cooperatives and Volunteers, 2000, p. 4).

Background

In 1990 four sisters¹ and their families pulled up their stakes in Edmonton, Alberta and moved to Nelson, British Columbia. For four years, the sisters had owned and successfully operated a bakery in Edmonton that specialized in organic baked.  In Nelson, the family negotiated a lease agreement with the newly located Kootenay Country Store Co-operative² to use a working space inside the co-op to open a new bakery.  Len Nicoll, spouse of one of the sisters, became the sole proprietor of the bakery, the Kootenay Baker, for ten years.

Beginnings

Over these years the Kootenay Baker had developed a strong reputation based on the exceptional quality of their healthy, organic baked products; however, customers and people in the community often mistakenly identified the bakery as the Kootenay Co-op in which it was housed. In 2000, the Kootenay Country Store Cooperative announced plans to expand into the bakery's space and to discontinue the lease arrangement, thus creating an opportunity for the bakery to move out and to establish an autonomous identity in the Nelson area. In addition, this was an opportunity for the bakery to move forward and make some structural changes that had been in the conceptual stages for some time. This opened up the possibility for the bakery to expand into new markets and to further develop its business goals.

Len Nicoll began to see the potential for the bakery to increase its current retail scope, move out of its limited space in the Kootenay Co-op store, and eventually develop a wholesale arm of the business. Reflecting on his options, Nicoll realized that the potential growth would likely require more work and energy then one owner could provide.  He explains, "Being in a tight space has limited what we can do as far as the potential of the business. Now the opportunity to expand brings with it more then I can handle as a single owner."  As a result, he contemplated divesting from his sole proprietorship by shifting business forms into a legal partnership, or incorporating the business and selling shares. Neither of these options seemed to be quite the right fit for the Bakery.

Responding to an idea from his wife, Barbarah, Nicoll began to explore the possibility of transforming his business into a worker co-op where member owners have a direct stake in the business because of their own economic investment and personal commitment. He took some time to learn about worker co-op models before he approached the bakery staff to appraise their level of interest in such a venture. The staff responded positively to his proposal and the journey to the Kootenay Bakery Café Cooperative began. Len says that "the process has actually been relieving in a lot of ways," as he is now able to share the creativity and the responsibility that comes with expanding the bakery's vision.  Finally, on April 1, 2001 the Kootenay Bakery Café Cooperative purchased the Kootenay Baker, and after months of hard work and restructuring the new co-operative moved into its storefront retail space on Baker Street.

Founding the Co-op

The Kootenay Baker had employed up to 18 people on in both full-time and part-time positions. A number of these staff members had been together for more than ten years; some had worked in the previous Edmonton bakery.  During this time with the Kootenay Baker they learned how to work well together and how to maximize the various skills and abilities that each person brought to the work. Five of these long time employees (Deborah Desilets, Cynthia Olivas, Ian MacIntosh, Sheelagh Wright and Wendy Richard), along with proprietor Len Nicoll and local specialty foods entrepreneur Marc Bowes became the founding members of the co-operative; they researched the co-operative option and eventually transitioned into a single worker owned co-operative.

These people, as organizing members of the co-op, brought a diversity of skills and experiences to the process of running a co-operative. Some of their collective abilities included knowledge of entrepreneurial business development and management, baking, herbology, growing and harvesting of organic produce, community supported gardening, product development, specialty processing of quality prepared foods, retail and wholesale marketing, proposal writing, public relations and various co-operative business backgrounds.

Marc Bowes sold his specialty food business, Get Real Foods, to the co-op when he joined as a worker owner.  He brought with him his skill as a chef, his food knowledge and his well-received recipes for quality prepared food. Bowes chose to give up his autonomy as sole proprietor of Get Real Foods in order to join the co-op for both business and philosophical reasons. He saw the potential for success as a business in both the worker members and the goals of the new co-operative, and he also shared the values of co-operation and collaboration. He explained that his reasons for joining the co-op were that he wished to "work in a co-operative environment dedicated to just employment practices and to developing relationships with committed organic producers, to create value in the workplace through membership that is empowered to make decisions that further the goals and objectives of the co-operative."

The process of incorporating into a worker co-op, including the development of short- and long-term business goals, determining internal membership and board structure, and translating and understanding the new co-op legislation, was supported by local co-op developer and consultant Lyn Cayo of DEVCO³. With Lyn's guidance, application for a feasibility study was made to the Co-op Advantage Program under the Ministry of Community Development, Cooperatives and Volunteers in November 2000. At this time the developing co-op was planning to move into a prime new location in April 2001, only four months away.

Purpose and Vision

In the proposal to undertake a feasibility study the group explained that the purpose and vision guiding the formation of the co-operative was as follows:

• to continue offering outstanding products locally and to expand into regional and national markets with local producers, while emphasizing commitment to organic agriculture and sustainability;
• to further develop and expand into a deli/juice bar/café, which both local and tourist customers are demanding;
• to create a lasting, meaningful, profitable work experience by choosing to form a workers cooperative;
• to form a New Generation Cooperative (NGC) for marketing and a shared use production facility for value added food products that create more local jobs in produce growing, production etc. when a larger market is cooperatively reached (proposal to the former Ministry of Community Development, Cooperatives and Volunteers, 2000, p. 2).

Over the next few months, the co-op's vision continued to take shape; the seven worker owners designed the retail space for their new business enterprise. This required many weeks of long hard hours of work at the old bakery site, followed by hours of physical labour cutting beams, dry walling, laying flooring, pulling nails, painting, and so on.

Members expressed pride in their accomplishments and linked the outcome to the benefits of being in a co-operative. As one member, Deborah Kranenburg, expressed, "Well, we're all working together; we're not just looking out for ourselves, we're actually responsible for each other's business too." Another member, Wendy Richard, states, "It's really important to be working somewhere where I believe in what we are doing, and to believe in the people I'm working with, and that's definitely the bakery co­op."

Other benefits to the co-op structure as stated by the members included the "emotional buy in" to the business; the collaborative energy and enthusiasm that co-operativism brings to the work environment; the cumulative skill-set; the democratic structure; fair and equitable employment practices; the connection to community and sustainability; the learning that comes from having to take on new or unfamiliar roles; the potential to "align active participation in the economy with human values;" quality of life and enjoyment of work; empowering workers as owners; and appropriate use of skills and experience.

Worker member Marc Bowes explains further:

We've all had jobs working for other people and corporations where your labour is an expense at which they want to bargain with so that you are paid the least amount for your time. Just watching other people profit from your work and [being part of] a co-operative is fundamentally different.  The effort that we're putting forward is building up a business that we all own, that we all share revenue and experience.

Another member stated, "As individual owners we are 100% responsible; as a co-op we are 700% accountable".

Organizational Structure

The legal form of the Kootenay Bakery Café Cooperative is that of a worker co-op. Since the bakery incorporated under the new 2001 Co-op Act it had considerable scope with which to determine its membership and share structure. Each of the seven founding members purchased two one-time-only membership shares, worth $4000.00 each. This allowed the co-op to buy the existing bakery business, and provided capital for the co-op itself.

The criterion for membership is that you must be a full-time working employee of the bakery and be willing to take an active role in the daily activity and administration of the business. However, the cooperative is also structured to allow non-member employees to work on-site. Full-time positions are considered to be 30 or more hours per week and those employees who wish to consider buying into the co-op as a worker owner must go through a six month probation period in which both the employee and the current co-op members will decide if a membership is appropriate and workable. The next step would require a prospective member to purchase the two $4000.00 member shares.

Members of the Kootenay Café Bakery Cooperative decide what to do with any financial surplus at the business year-end.  Their options are to reinvest in the co-operative, distribute the dividends to the members, or create a combination of the two. If monies are to be paid out, "Allocation of profit will be in proportion to the member's participation, defined as the total hours worked for the co-op during the fiscal year" (The Kootenay Bakery Café Cooperative Business Plan, 2001, p. 15). The members anticipate that early surpluses will be returned to the co-op for reinvestment into business operations.

In addition, the bakery became the first co-operative in BC to create and utilize a class of investment shares that are available for purchase by the non-member public. These "redeemable preferred investment shares" (The Kootenay Bakery Café Cooperative Business Plan, 2001, p. 15) are available in $1000.00 increments and are a means for outside investment in the co-op for the purpose of providing further capitalization of the venture. As a critical business development tool, a pool of investment capital increases the co-op's chances of leveraging into a business development loan from the Federal Government and other potential funding sources. The shares receive an investment rate of 1% below prime, which is a higher rate of return than is usually available through a bank or credit union.

The bakery marketed the shares as a way for Nelson's health- and environmentally-conscious community to invest in a growing business that will support local produce growers and suppliers. This strategy was extremely successful, and the number of purchases of investment shares far surpassed the expectations of the founding co-op members.

All seven founding members serve as current members on the board of directors. In the future however, they have agreed that the numbers may be reduced to a minimum of five, or increased to a maximum of nine with 20% of those members potentially coming from non-member investment shareholder representation.

Market Served

The Kootenay Baker developed and maintained a specialty niche market during its ten years with Len Nicoll. The Kootenay Bakery Café Cooperative will continue to serve the same local base of people who seek quality natural organic products.  "Our customer base is conscientious, discerning, and health minded. These individuals consider factors such as natural and organic ingredients, food preparation methods, and earth conscious sustainability issues when making purchases and supporting businesses" (The Kootenay Bakery Café Cooperative Business Plan, 2001, p. 4).

At the same time, the new co-op has identified the need to diversify its retail products and services in response to shifting consumer demands. "Nelson is rapidly becoming a desirable tourist destination attracting greater numbers of urban-based customers, who naturally frequent businesses that offer contemporary food service options mirroring those available in larger centers"(The Kootenay Bakery Café Cooperative Business Plan, 2001, p.4). Consequently, the bakery's goals for the new retail space includes an upbeat atmosphere, expanded seating, and a menu of healthy ready to eat food such as wraps, salads and pizza slices as well as chef prepared curries, stir-fries, vegetarian dishes, and a full coffee and juice bar.

In addition to the above retail focus the co-operative intends to tap further into the growing wholesale market demand for foods that address special dietary needs such as wheat and gluten free products. They are also capitalizing on the emerging market demand for quality organic prepared and packaged fresh and frozen food. When Marc Bowes of Get Real Foods joined the co-op he sold it some commercial equipment that will assist the co-op to develop a quality product-line that meets regulatory requirements allowing it to enter the market on the local, provincial, and national level.

Future Plans

The Kootenay Bakery Café Cooperative plans to eventually develop a separate venture, which would be a New Generation co-operative (NGC) marketing business that it would operate in conjunction with the worker co-op. A New Generation co-op has the potential to address some of the challenges the co-op expects to face.

The packaging and marketing components of the business have been the most difficult hurdles to jump. Many small producers in this region have been stumped, stalled and discouraged by the lack of facilities, packaging possibilities and the cost of sending the product to the larger city centres.  Potential retailers in larger centres will only consider carrying your product line if you have a minimum inventory of six products that they want. A unified Kootenay area product line and label opens up much more potential for all of us here in the area (addendum to the proposal to the former Ministry of Community Development Cooperatives and Volunteers, 2001, p. 3).

The NGC model would permit a reciprocal relationship between the co-op's supplier and producer members. This is achieved by establishing a closed membership structure and a delivery share system that ensures the co-op will have enough products to achieve its goals. Additionally, it would guarantee the producers a baseline volume of sales. The relationship has the potential to benefit all parties involved; it would also help to stimulate local food production and processing.

The members of the Kootenay Café Bakery Coop envision that the NGC could support a shared use production facility for value-added specialty food products, a shared packaging and labeling system, shared bar codes, co-operative product marketing and distribution, and shared cost and administration. The Kootenay Café Bakery Cooperative believes that this would result in an increased number of local jobs for growers, secondary processors, and retailers by providing a comprehensive strategy for production and marketing through the local food loop from seed to table.

The Kootenay Bakery Café Cooperative is in its first phase of development. The word from people in the Nelson area is that it is a sure winner.  Co-op members will be participating in board development and training in the next year.  The member owners all have a high level of personal commitment to the co-op and are willing to participate in future training.

More Fresh Ideas

The Bakery Cooperative has developed an innovative working relationship with Shavi Shavi, a small non-profit fair trade folk-art co-operative.⁴ The Bakery is sharing its retail space with Shavi Shavi Folk Art Co-operative, which imports art and craft work from Southern countries. This relationship creates a unique environment where people can patronize the bakery and learn about of different cultures, view craftwork from other places in the world, and support fair trade principles at the same time. Shavi Shavi fits with the values of the Bakery and provides an aesthetic that is earthy and appealing. Members of both co-ops hope that this will serve as an example of the possibilities that are available to the community through co-operation. Following the continued progress of the Kootenay Bakery Cafe Cooperative will be both exciting and informative. It certainly has all the ingredients to make it work!

Endnotes

¹ Barbarah Nicoll, Deborah Kranenburg, Ariah Desilets, Jackie Desilets.
² See the story of the Kootenay Country Store Co-op, also available on the BCICS website.
³ DEVCO is a worker co-operative comprised of co-operative developers.
⁴ A study of the Shavi Shavi Folk Art Co-operative is available on the BCICS website.

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:

Researcher: Colleen Shepherd

Date of research: 2001

Author: BCICS editorial group

Date of writing: 2001-2002

Editing: BCICS editorial group

Supervision: Kathleen Gabelmann, BCICS Research Co-ordinator

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