Case Study: Patronage Rebate System Initiates 50 Ways to Love Your Co-op

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Hendersonville Community Co-op
Hendersonville, NC
Founded: 1983
Members: 1,300
Equity investment:$250/household
Number of Staff: 32
Retail square feet:4,200

When the board of a profitable co-op starts singing “50 Ways to Love Your Co-op” to members at meetings, you know times must be good.

Yet in 2004, when the Hendersonville Community Co-op in Hendersonville, N.C. instituted a patronage rebate system and radically changed their discount policy, they envisioned a disgruntled membership, not four-part harmony.

For years, the co-op had marginal finances, and in the last five years had been losing money consistently. It became clear that the 5% discount the co-op gave members at the register was leaching away profits. It was hindering the co-op’s ability to thrive, and yet the board felt reluctant to change it. Would members stay happy and loyal if they got their co-op benefits through a patronage rebate system based on their purchases at the end of a profitable year, instead of a cash register discount?

“Our greatest fear was that people would think of the co-op as a buying club, like Sam’s Club. We needed to retrain ourselves and our owners in the community,” said Hendersonville’s board president Laura Miklowitz. CDS consultant Peg Nolan helped allay the co-op board’s fears, Miklowitz said. “We were in the mulling phase and she told us ‘you seem ready.’ She and others in the co-op community helped us see we couldn’t proceed and grow without making this change.”

That’s when the board knew it was also time to bring people together and engender a real sense of ownership in the co-op by making ownership fun and accessible. They worked hard over the course of a year to inform members of the necessity of the patronage rebate system via the newsletter, mailings, meetings and training cashiers. They also informed members that the co-op may not be able to declare a patronage rebate, especially at first, and that was also part of the benefit and risk of ownership

In the first full year of implementation of the patronage rebate system, however, Hendersonville posted a whopping $110,000 profit. The board elected to rebate $30,000 in cash back to the members and put the remainder in class B stock for an eventual expansion. Not only had the co-op made a profit, but in the process of implementing a system to track member purchases, they’d also improved their overall financial reporting. Doing patronage rebates wasn’t exactly simple and had big costs associated with it, but the change was certainly cost effective.

“We couldn’t have done it without the co-op community’s help,” Miklowitz said. Hendersonville’s membership in the National Cooperative Grocers Association (NCGA) and participation in CDS’ Cooperative Board Leadership Development (CBLD) program showed them that a lot of the hard work for implementing a patronage rebate system has already been done by others.

The change has rejuvenated their sagging bottom line and injected a level of energy and spirit into the co-op’s community that had been lacking. “The sense of ownership is getting stronger. We attribute it to the board communicating to the owners its dreams for the co-op.” Miklowitz said, “It’s nice to know we really can build and grow, not just the co-op, but the community. If we find a new location we feel confident it won’t slip through our fingers. We feel like we have real potential.

Attention Board Members—
Time to warm up your vocal cords!

The Hendersonville Community Co-op’s board of directors sang this ditty (and others) at their last annual meeting.

50 Ways To Love Your Co-op

With a nod to Paul Simon

The problem is all inside your head
She said to me
The answer is easy if you
eat organically
Why don’t you join our HCC Community
There must be 50 Ways to Love Your Co-op

She said why don’t you simply shop with us a while
And I believe you’ll see the merit
As you go from aisle to aisle
And then she scanned my card
And I realized it’s not that hard
There must be 50 Ways to Love Your Co-op
50 Ways to Love Your Co-op

CHORUS:
Just pick up your pill, Phil
Owner savings are huge, Fuj
You don’t have to eat soy, Roy
Just listen to me.
Got great stuff to eat, Pete
No more sugar cane, Jane
Try mango and kiwi
And build equity.

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By |January 30th, 2006|Categories: Case Studies, Solutions|Tags: |

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