Kootenay Country Store Co-operative

Date of Incorporation: 1975

Membership: 4000 +

Activity: Whole Food Consumer Co-op

Area Served: Nelson, British Columbia and area

A brief history of the Kootenay Country Store Co-operative 1975 -2001

In the early 1970's British Columbia experienced a province-wide grass roots effort to decentralise the food supply and improve access to affordable high quality whole foods and staple household items. Club The buying clubs that emerged in both rural and urban locations around the province cut out the middleman and made use of unconventional food sources. Club members teamed up to purchase large bulk orders from a number of co-operative wholesalers in the lower mainland. The Kootenay Country Store Co-operative formed in 1975 as a product of buying clubs that had emerged in the Slocan Valley.

For the next ten years the Kootenay Country Store Co-op, commonly known as the Kootenay Co-op, operated a small retail store in an old schoolhouse in South Slocan, where it served a small group of local families. . They continued to purchase supplies from the three main wholesaling co-ops in Vancouver: Fed-Up Co-op Wholesaler, Horizon, and CRS Worker's Co-op. The store generally made small surpluses over the years, and remained small with approximately 400 members. To become a co-op member, residents purchased a five-dollar share, which contributed to the co-op's working capital, allowing it to purchase equipment and a full reserve of goods. Member commitment to the store was divided into two categories. People who could not volunteer any labour were paid a 25 percent markup on purchases, of which 15 percent went toward maintenance and upkeep of the store; working members paid only a 10 percent markup, and made up the 15 percent difference by working four hours a month assisting in the store. 5% markup, of which 15% went toward maintenance and upkeep of the store. working members paid only a 10% markup and made up the 15% difference by working four hours a month assisting in the store In 1985, a retail space became available, and Kootenay the co-op moved into Nelson's downtown core. Members welcomed the new space, but the move put the co-operative in debt. This debt necessitated changes, as Lyn Cayo outlined in the May-June, 1990 edition of the Co-operative Grocer:

With the move, the co-op was in a deficit position, and the amount of the deficit was just under the amount of member labour discounts given in 1985. The decision was made to do away with the volunteer labour and pay patronage dividends instead. At the same time, the member share capital requirements was dropped to a minimum of $5 [which had by that time risen to $50] share per member, with the understanding that everyone would eventually acquire 5 shares, either through outright purchase, or through the application of dividends to their share capital. This left the store in a precarious financial position at the time, however, even though most of the approximately 200 original members kept their shares of $25 or $50 in the co-op. (Co-operative Grocer, p. 8.)

The three years after the move were rocky ones, and by 1988 the cco-op was in trouble. When Lyn Cayo became co-manager with Dee Lerch in 1988 the store averaged $1100 daily gross income. Lyn Cayo told the whole food retailer's newsletter, In a Nutshell (February, 1990), that: The premises were shabby, with outdated equipment, an odd assortment of product on the shelves (and in the bins), a tarnished reputation (with customers and distributors), no money and three staff, who had been trained to stock and cash, but had little or no concept of co-operation (p.7).

From this low point the co-op began to rebuild, and sincerebuild; since 1988 the Kootenay Co-op has recorded steady growth and regained its position as a strong community-focused co-operative business.

This turnaround was made possible through an organised plan of action intended to reestablish community support and awareness, while the store struggled to improve weakened business practices. This was achieved by slashing prices to attract shoppers and increase volume, by establishing a regularly published newsletter, by creating an effective board of directors and by working with the local newspaper to publicise all of the changes to the store. As a result, each week saw a steady increase in sales, which in turn enabled Dee Lerch and Lyn Cayo to purchase more inventory. In a return to the Co-op's "eco" roots, Dee and Lyn also made "the decision to carry only certified organic, or local unsprayed, produce, and the store gained a reputation for clean, quality food" (In a Nutshell, February, 1990, p.7).

Lyn and Dee's dynamic management style resulted in both increased sales and a larger customer base. In 1989 sales increased to an average of $2500 daily, and by 1990 this average was up to $3500. With a $65,000 loan from KREDA Corporation, a provincially guaranteed and locally administered loan program, the Co-op was able to purchase more modern equipment and plan a major renovation to increase retail space (Co-operative Grocer, May-June, 1990, p. 10).

In 1991, the co-op realised it needed more space and decided to move to the other end of Baker Street. The Kootenay Co-op agreed to share some of this new space with the Kootenay Baker, a whole foods bakery, and the two businesses opened together in September 1991 ("Grand Opening for Kootenay Co-op and Kootenay Baker", Nelson Daily News, September 5, 1991). The 1990s brought continued success for Kootenay Cco-op, which grew and expanded product lines. For ten years, these two businesses shared space, until the Kootenay Co-op decided to expand in into the space occupied by the Kootenay Baker in Spring 2001. The decision not to renew the bakery's lease is viewed by many to have had mutually beneficial outcomes one, as the Kootenay Baker became a worker's co-op and made its new home a few doors down on Baker Street.

The Kootenay Co-op Today

The Kootenay Co-op has had a tremendous impact on the economic and social well being of the community. In 2001, the Co-op reported more than 4000 members and over $4 million in sales. Kootenay Co-op Board President Fred Easton explains that revenues at the store are growing at an astounding rate. Noting that they havethe store had surpassed the its projected 12 percent growth rate for 2000, he says the co-op has been "beating or exceeding our expectations for three years." What is the stimulus behind current market demand?

Success may be attributed to the co-op's community image. The store's continuous commitment to healthy whole food and organics, and its continued support of agricultural and environmental awareness makes it a local leader in the expanding sustainability movement. The general public is increasingly concerned about genetically modified food and the mounting pressure to globalise the food system. The Nelson area continues to be home to many consumers whose purchasing trends are, in part, a conscious resistance to corporate influence over their food choices.

Fred Easton describes a "second wave of migration of alternative new age people coming into Nelson," members of what he terms the "eco-boom" generation - the daughters and sons of Baby Boomers, American draft dodgers and Hippies who came to the Kootenay region in the 1960s and 1970s seeking simple rural lives. These 20 to 30 year-olds represent "an informed and aware group of young people" whose purchasing patterns are largely based on their learned values.

Yet even before social and political issues are considered, any retailer will tell you that a strategic approach to merchandising and marketing is the key to the continued success of a business. Managers at the Kootenay Co-op, from Lyn Cayo to current manager Deirdrie Lang, have taken this principle very seriously. Deirdrie has been with the co-op since 1987. She started at the store as a cashier and has since held several, mostly administrative, positions. Before becoming the general manager in 1996, Deirdrie was the Co-op's assistant manager and was also part of a three-person management "collective." She has seen the Co-op through both peaceful and tumultuous times, and is a major reason why the store is so successful today.

Deirdrie directed many of the co-op's successful changes. They include: receiving a new fully integrated Point of Sale computer system; completing renovation projects in each department, including sizeable changes to the Deli section; and overhauling all staff positions and descriptions, training and evaluation procedures, and compensation packages. A five-year planning process as well as annual reviews was also mapped out.

Additionally, over the years, co-op staff members have become expert floor planners, building attractive displays of goods that have a direct impactdirect influence on customer sales. More importantly, the co-op has closely observed the changing patterns in the whole food industry, responding to the desires of their customers. For example, trends in Nelson (and elsewhere in British Columbia) show an increasing demand for healthy pre-packaged and processed food, such as washed and packaged salad greens, and "bridge" products such as boxed organic macaroni and cheese similar to the popular non-organic versions. The coop pays close attention to customer demand and stocks shelves accordingly.

Facing challenges to member satisfaction and participation

Despite growth in revenue and member purchasing activity, one of the biggest challenges the Kootenay Coop currently faces is cultivating and maintaining member satisfaction. Some members feel the co-op may be losing touch with their needs. With over 4000 members, finding meaningful ways to engage with each person can be tricky. Some members want a closer connection to the co-op,, thus but find the large membership prevents the inginpersonal benefitssatisfaction they expected from membership in a co-operative organization..

Staff and board members describe an overall need for continued member participation. As Lyn Cayo recalls, "wWhen member work commitment stopped, the member involvement level fell." Part of the problem was that when the co-op discontinued the practice of volunteer labour it had no plan of action for keeping members actively involved. The management and board let the situation continue for quite a long time before recognising there was a problem that needed to be addressed. And once it was recognised, staff and management still were frustrated with failed attempts to get the co-op's members to participate. More recently, the co-op initiated regular member appreciation days and monthly discounts as a means of promotinge a sense of belonging andto increasinge member loyalty. The co-op also started paying patronage dividends, which were few and far between in the expansion years. Fred Easton maintains patronage dividends are a key way to "feed the benefit of the co-op's growth back to the members."

There has been some comment that the Kootenay Co-op's prices are too high. Fred Easton acknowledges that, although the store originally committed to provide reasonable prices to its members, the co-op's financial success has not yet been reflected in pricing practices. Despite this, the co-op leads is the community in retail wages, working conditions, and staff benefits. Members can be proud that they are contributing directly to someone's quality of life, to their own health and well being, and to the local economy.

Moreover, the market position of the community's large grocery retail outlets allows them to buy in very large quantities and leverage lower terms with their suppliers. Consequently, they can afford to sell their goods cheaply - something Nelson residents, like most Canadians, have come to expect. Yet low prices at the local supermarket often do not guarantee living wages for farmers, nor do they assure fresh, quality foods. In an indirect way, the co-op's practices (and the prices it charges) are a result and a reflection of its commitment to local sustainability.

With this in mind, the co-op could address both price concerns and the issue of member benefits by developing an education campaign, promoting the many hidden benefits members receive by paying a fraction more for the food that goes on their table. The store could also highlight the multiple benefits the community receives as a direct result of its spending activity at the store. By linking dollars spent at the coop to responsible life choices, members may be willing to pay more for carrots grown in the local region as opposed to carrots shipped thousands of kilometers from California,, which contribute almost nothing to the local economy. This woulds encourage a membership identity that is once again linked to the co-operative model. The co-op can be viewed as a way for members to actively participate in sustainable daily living. This kind of an education campaign would be a means of differentiating the Kootenay Country Cooperative Store from other grocers in the same market. A similar approach to local organic food defined the co-op in the mid- 1980s.

However, some Kootenay Co-op members still purchase food in large quantities directly from wholesalers such as Horizon. These members collaboratively put in their order and receive their deliveries as they come off the truck. Recently there has been a resurgence of buying-club style activity in the Nelson area. The Coop does not oppose this activity, but does points out that neither the Co-op nor the community sees any direct benefit from buying clubs. In fact, according to an interview with Lyn Cayo, (March 2001), the argument that this practiceit "ties up one's money in the pantry" has challenged the notion of buying in mass quantities to save money. Household cash flow is restricted when money is invested in the pantry for food that is not consumed from months or even years.

Re-evaluating Governance

The Kootenay Co-op has recently revised its method of governance. From its founding, the co-op has been committed to building a harmonious relationship between its bBoard, sStaff, and mManagement and has always had a style of governance that includes all members. Despite this, fact, the co-op had little technical experience in effective governing. In the early years, the store had a voluntary board. Lyn Cayo explains that during her tenure as co-manager, the board/staff relationship was often inefficient and "unhealthy." She recalls asking the board to take on tasks such as administering personnel policy and signing off on staff holiday time. At times, the board even administered the affairs of the co-op alongside staff and management - unusual activities for a governing body.

At one point, the co-op decided to institute a management style in which everyone was paid the same amount and shared equally in the operational responsibilities of the store. As a result the Co-op lost many employees and board members. In response the board assumed a more directive role and increased its presence in the everyday activities of the store. Fred Easton explains that over time, current manager Deirdrie Lang began to resist the amount of oversight that was coming from the board. She found difficulty acting in a full managerial capacity. Directors would come and go, and she would have no continuity in terms of her relationships as a staff advisor. Easton says, "She was uncomfortable with [the] relationship because she really knew what was going on in the store and the directors didn't." This information gap was not resolved until the board hired a consultant from California to review the board and suggest restructuring ideas.

Through this process it became evident that over the years no one had ever actually created a governance model for the Kootenay Co-op. The consultant presented a form of the Carver Model of Board Governance, which proposes that the managing role and the governing role should be kept separate. The Carver Model is premised on the notion that there are distinct roles and responsibilities for each sector in the Cco-op that are derived directly from the vision and values that have been determined by the members.

A brief overview of the Carver Model:

• The co-op 'members' are the "owners" of the store.
• As "'owners"' the members are responsible for determining the vision and the values of the cco-op. The members do this by participating in the AGM and voting on resolutions and for nominating and electing delegates to the board.
• The board's responsibility is to set goals for the cco-op based on the vision and values that have been determined by the members.
• The board's authority comes directly from the members.
• The board reports directly to the members.
• The management develops a plan of action to achieve the goals that are set by the board as determined by the vision and the values of the members.
• The board signs off on the plan of action allowing the management to move ahead and conduct the detailed business of the store.
• The board's responsibility is to monitor and evaluate the effectiveness of the actions taken by the management.
• Over time, the board reviews the results of the management activities against the goals of the cco-op that have been set by the board and determined by the member's values and vision.
• The staff members are empowered to make day-to-day decisions based on the plan of action that has been set out by the management and signed off on by the board.

The Carver model shifts the directors'role from micromanaging the co-op's activities to monitoring management decisions. According to Fred Easton, the co-op adopted a reformed governing style "which is based loosely on the [Carver model] concept, which is that the responsibility of management lies with management, and the responsibility of oversight lies with the board." This gives management the scope to do what it knows best - attending to the business of running a whole food retail store. The board guides the overall process by setting the goals and evaluating the progress of the management in achieving these goals. The Kootenay Co-op board has agreed to adopt a loose version of the Carver model for a two-year term after which they will review the effectiveness of this method. Although just recently implemented, this approach seems to be working fairly well; the management and board appear to be operating more as a partnership than in the past. Furthermore, Deirdrie Lang believes "defining both the board's role as well as my role has been an invaluable process."

Contributions to Co-operative Values in British Columbia

The co-op's impact on co-operative values and development in the Nelson community and the rest of the province is significant. Many individuals involved in the co-op continue to support and teach co-operative values throughout the broader community. For example, long time co-op manager Lyn Cayo is now an active member of DEVCO, a co-op of co-operative developers in British Columbia. Lyn taps into her many years of co-operative experience both within the Kootenay Co-op and with a number of other cooperatives to teach the nuts and bolts of starting and running a co-op. Lyn says the Kootenay Co-op's inspirational environment provided her with the opportunity to learn the 'ins and outs' of the co-op world.

Abra Brynn is another person who took her work in the Kootenay Co-op a step further by developing a co-operative style of organisation in the local food sector.Abra's focus on food security issues, GMO labeling and sustainable local/organic food systems have all influenced and been influenced by the Kootenay Co-op. She continues to carry the co-operative torch in both informal and formal ways. Under Abra's guidance an exploration of the potential for a co-operative structure that would distribute and market a cross section of local produce and value-added foods under a unique Kootenay label is has begun.

The Kootenay Country Store Co-op's organic connections

The Kootenay Co-op is a promoter of local organic agriculture:

We are committed to providing the best quality organic produce possible with the priority to buy from local certified organic farms. Supporting local, organic growers not only strengthens our local economy but also ensures the produce we sell is as fresh and nutritious as it can be. (Kootenay Country Store Co-op)

According to long time organic grower Park Cowin, the main stimulus for organic agriculture in the Kootenays came from the Kootenay Country Co-operative Store. In 1988 the co-op decided all store produce would be organic and if possible, would be purchased from local growers. Not only was this a way to further its original vision of "providing members quality natural foods at reasonable prices", (In a Nutshell, February, 1990, p.9), but it also distinguished the co-op from other grocers in a competitive market environment.  Managers Lyn Cayo and Dee Lerch kept an eye on the environmental, health, and social concerns that were influencing rapid change in the marketplace.

The Kootenay Co-op responded to these market shifts by actively educating its members about multiple effects of buying and eating organic foods. As stated in In a Nutshell, (February 1990): Wherever possible the Co-op strives to sell high quality, organically grown foods as close to their original state as possible. Today this commitment has evolved to encompass a broader merchandising concept, based on the belief that organically grown foods are better for the health of the consumers, farm workers and the environment. (p.9).

The Kootenay Country Store Co-op was the first retail store in Canada to exclusively sell organic produce.

This commitment encouraged growers like Park Cowin. Park began experimenting with varieties of organic vegetable crops, selling everything he grew to the Kootenay Co-op. At the time there was only two other organic growers in the Nelson region, both growing for the co-op. With the newly established market for organic produce in the West Kootenay region, the small group of growers organised to develop a set of organic standards to guarantee the quality and authenticity of the produce it was growing. The growers temporarily adopted a model for organic standardisation from Ontario until the local certifying body, Kootenay Organic Growers Society (KOGS), was formed a number of years later.According to Park, by the time KOGS came into being there was about six part-time and six full-time people growing for the store.

The Kootenay Co-op opened up the market, creating an ideal environment for growth of the emerging organic sector, and "directly stimulat[ing] a whole segment of the economy." Now that the organic producers have experience supplying the local produce shelves and farm-gate operations, they are exploring province-wide markets.

Exploring organic marketing co-ops

While the organic farmers laboured to secure their own separate markets and promotion, they are considering ways to collaborate in order to gain wider access to potential markets. KOGS is a very cooperative organisation. KOGS growers recently explored the concept of co-op marketing but found that they were not at the optimum point in their process to have a co-operative marketing presence. Park reflects a commonly held standpoint in BC's British Columbia's farming community when he explains that farmers need outside organisers who can focus on the marketing aspects of farming if they are going to successfully expand their production. Modern farming, especially small-scale organic ventures, require the grower to spend a tremendous amount of time researching and developing a niche in the markets. In small operations, farmers sacrifice marketing to the need to spend time and energy on the land.

Although the organic growers have not yet determined the kind of business structure they want to market and promote their products, the organic growers in the Kootenays have the Kootenay Co-op to thank for stimulating the development of their sector.

The Future

The Kootenay Country Store Co-op is currently in transition. It has recently taken over the floor area occupied by the Kootenay Baker for the past ten years. The expansion will ease the co-op's space crisis, acute for several years. It generated $1.2 million in revenue in just 1200 square feet of retail space during the year before they it moved to the new Baker Street location. In the year 2000 the co-op grossed $4 million in 3600 square feet of space. The extra 1200 square feet will likely translate into more revenue for the co-op. The expansion and renovations have given the store a fresh new look, and staff will have to adapt to shifts in product volume and a potential increase in customer traffic.

The board, staff and management are also in transition; the new governance model is being tested and evaluated this year.Adjusting to this new style and adapting it to work in the context of the Kootenay Coop will be an ongoing challenge. All these new activities present themselves as ideal opportunities for the coop to re-connect with its members. It can do this by keeping members well informed about all the changes and by asking for member input wherever possible. The Kootenay Country Store Co-op has always been a trendsetter in the whole food industry. They It can continue its success by further developing ties with the growing sustainability movement in North America. The co-op continues to be an important part of the social and economic fabric in Nelson and the surrounding trade area.

Appendix

The Mission of the Kootenay Country Store Co-operative is to promote community involvement by cultivating a co-operative, sustainable, organic way of life by:

Providing a workplace that reflects these values.

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-operative 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: Colleen Shepherd, Kristen Sinats

Date of research: 2001

Authors: Colleen Shepherd & BCICS Editorial Group

Date of writing: 2001

Editing: BCICS Editorial Group

Supervision: Kathleen Gabelmann, BCICS Research Co-ordinator

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