Innovations in Development or 101 Practical Reasons to Do a Merger

dan-litwiller-415The People’s Food Co-op in La Crosse, Wis. gets approached by communities all the time to expand their operations in their area. Some of these proposals are seriously considered, but up until now, none of the opportunities have panned out. Either the communities are too small or another location would cannibalize sales in the current one. So when a developer in Rochester, Minn. (60 miles from La Crosse) contacted them about expanding there, their response was that there was already a co-op there.

But the Rochester Good Food Co-op, it turned out, was in no position to relocate and expand. While the co-op’s sales were growing, the co-op was losing money due to lackluster operations. Financing a move would be nearly impossible despite the welcome opportunity.

Yet both co-ops saw a win-win opportunity to elevate the profile and operations of Good Food in a community hungry for what they had the potential to offer, while allowing People’s Food Co-op a very viable development prospect. Rochester is home to the Mayo Clinic and a highly educated population. People’s Food Co-op could leverage its balance sheet strength and resources to support Good Foods through a very important growth transition. Therefore, Good Food formally approached the People’s Food Co-op board to merge with their co-op. The merger would allow the Rochester co-op to expand its operations and enter a lease agreement to serve as an anchor tenant in a new downtown Rochester mixed-use development.

The merger proposal was important to both board’s development process as well. According to Bentley Lein, president of People’s board, their discussions in the past had been focused on “what’s good for us,” which he said led to some parochial thinking about the co-op’s role. “We are about something more now. The conversation now is what’s good for the co-op movement. We had a lot of Ends conversations trying to answer those questions,” Lein said.

In Rochester, the board had been focused on reinvesting in their co-op. The development opportunity made them realize all the more that they were operating in a very big untapped market, and that their co-op had been drastically under-resourced to meet those needs. It was now or never.

An accelerated timeline, based on the developer’s deadlines, gave the co-ops two months to educate members to vote on the merger. The vote occurred in August this past year, and passed at People’s, but fell short by 10 votes at Good Foods. But the Good Foods board got right back at it, learning how to better communicate with members and management staff. “There was this perception among members that things were fine and that we could do this on our own. They didn’t have a grasp of what was at stake,” said Dan Litwiller, Good Foods’ board president. “We stumbled with that.” The co-ops launched a revote and the merger passed in October.

“We’re really excited about this,” Litwiller said now that the merger passed. “It gives us the opportunity to leverage our shared values and strengths. We’ll be able to serve customers at a high level, pool our buying power, improve member services, and sell more local food. There are 101 practical reasons to do this,” he said.

Lein said that as the merger benefits the co-ops themselves, it is also demonstrates big-picture benefits, too. “Co-ops all over this country have strong balance sheets. How do we be deliberate and strategic about the world we want, and not be victims of larger concentrations of power? We have to keep board members thinking about the larger context.”

For more details about the vote and the merger, go to www.pfc.coop and www.rochestergoodfood.coop.

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By |December 2nd, 2011|Categories: Connections|Tags: , |

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