GreenStar’s expenses and income

By Brandon Kane, General Manager

Here at the Co-op, we spend a lot of time talking about how the mechanics and outcomes of cooperation are superior to those of conventional businesses in many ways. A conventional business’s job above all others is to return maximum profits to a small group of owners and investors, while the workers and majority of customers may receive minimal benefits.

By comparison, GreenStar’s financial structure is incredibly equitable and transparent. From looking at our statements, it should be clear that a large emphasis of profit distribution goes to the many components of our other bottom lines, people and planet. While this striking difference sets cooperatives apart from business as usual in the US, I think we often overlook another critical co-op differentiation — the fact that a cooperative is a force of shared community wealth.

Put simply, if the Co-op is enjoying a profitable year, the owners receive a percentage refund on their purchases. With a financial benefit for our active owners tied to the successes and failures of our cooperative, we are all more deeply invested in the Co-op.

This concept may be obvious, but I think its power is often understated. Can you think of a non-cooperative business where the shoppers are also the owners? Our ownership frequently decides on the future of our major enterprises. The purchase of our Space/Central Kitchen property and opening of the Collegetown store were the result of an owner vote for approval. GreenStar’s owners literally shape their town through the Co-op. When you think of GreenStar as a tool our owners use to improve their quality of life both individually and in community, it becomes clear what a unique opportunity we have with cooperation.

Patronage refunds are another example of this shared-wealth perspective. Put simply, if the Co-op is enjoying a profitable year, the owners receive a percentage refund on their purchases. With a financial benefit for our active owners tied to the successes and failures of our cooperative, we are all more deeply invested in the Co-op.

With these advantages come significant disadvantages. Not only do our conventional counterparts — Target, Aldi, Wegmans, etc. — operate on a scale that’s exponentially larger than that of the Co-op, and their financing structure is simply incomparable. These businesses have access to millions or even billions of private equity dollars, which are regularly invested in expansion and improvements. If a new market is identified by our competitors, they generally proceed to open a new store without concern for financing.

Cooperatives don’t share this financial advantage. The $1.2 million GreenStar has in the bank is almost entirely needed to keep on hand as a financial best practice. This cash represents collateral for our financing and accounts payable and nothing more. If we were to stop being profitable, this balance would not last more than a month. So, we keep most of our cash on hand for a safety net at any given time.

If you read my monthly article regularly, you’ve seen my breakdown of how we go from $22 million in annual sales to $100,000 or less in profit each year. A quick summary looks like this: 60 percent goes to the goods we sell; 3 percent to discounts at our registers; 27 percent to wages and benefits; and about 10 percent to the remaining overhead. Within those expenses are all the great outcomes we’re so proud of — such as a great wage and benefit structure and $6 million in goods purchased from local farmers and producers. This typically leaves the Co-op less than 0.5 percent for net income.

If we assume that expanding our West End store as a means to our survival is a given, we’re faced with a financing conundrum. We have limited access to cash and no traditional investment block like that of our competition.

The solution to this is staring us in the face! Our 11,500-plus owners are our investors. Almost all cooperative growth is in large part directly financed by the owners themselves. This can take many forms, including equity drives (individual owners paying their $90 on an accelerated schedule), owner loans (investments with a predetermined rate of return, usually better than market rates), or even non-voting shares (owners can invest a larger amount of cash in the Co-op and receive dividends while still adhering to the one member-one vote principle). These are all commonplace vehicles that co-ops use to leverage the collective financial power of their communities. Owners receive a vibrant cooperative and interest on their investments in return.

This is the foundational idea of shared community wealth. Cooperatives across the US have used this tool to expand and thrive. The membership of Lexington Co-op in Buffalo, NY, for example, raised over $2 million for their recent second store expansion. They shared a quote from Helen Keller in their materials sent to owners that I think sums it up quite eloquently: “Alone we can do so little; together we can do so much.”