Disaster Preparedness • Economic Recovery • Resilience

Establishing a Seafood Cooperative


 Cooperatives offer a mutually beneficial model for organizations in the same industry. A cooperative is a legal entity that members own and democratically control by members. Cooperatives are motivated more towards meeting members’ needs and less towards profit goals. All members are entitled to one vote despite their investment in the organization. When there is surplus revenue, members receive a dividend payment proportionate to their use of the cooperative. Cooperatives are voluntarily managed and allow members to pool their resources to have stronger purchasing power and voices within the industry. Examples of cooperatives include the Alaska Seafood Cooperative, Yankee Fisherman’s Cooperative, and Walking Fish—a North Carolina Cooperative in the fisheries industry. Other American cooperatives include Blue Diamond Growers (almonds and other nuts), Group Health (health insurance), Land O’ Lakes (butter and other dairy products), Recreational Equipment, Inc. aka REI (outdoor recreation equipment), and Sunkist Growers, Inc. (citrus growers).

Establishing a Steering Committee 

Steering committee members could have a vested interest in the cooperative and be business savvy, since they are responsible for the initial organization of the cooperative. The steering committee’s main goals are to pull together prospective members to discuss issues and see what economic need the cooperative might fill, to develop a plan and a timetable for researching and developing the cooperative, and ultimately, to determine its feasibility. The steering committee could seek advice from:

  • Business and cooperative specialists from government agencies (especially the United States Department of Agriculture), nonprofit organizations, or foundations, that have knowledge in the specialized services needed for a cooperative;
  • Legal counsel familiar with state cooperative statutes;
  • Financial counsel with knowledge of capital needs and financing mechanisms;
  • Business counselors who can help create a cooperative business plan; and
  • Other who can offer technical advice for other issues regarding starting a cooperative.

Further, the steering committee could address:

  • The economic need (i.e., determine whether the cooperative will provide a needed service, preserve a market, stabilize prices, encourage better marketing, etc.);
  • Cooperative principles and terminology;
  • Cooperative operating practices;
  • Geographic scope that fits the economic need;
  • General risk capital equity and financial requirements; and
  • Various forms of member-user commitment needed.

 

Conducting a feasibility study

A feasibility study could determine the opportunities and obstacles to forming and running the cooperative. Such a study could include examining the minimum volume of business needed, the number of interested members and the financial commitment needed to begin. Cooperative members can seek financial and technical assistance from local or state governments or foundations to help with the feasibility study. If the study results show that the cooperative is not feasible, the cooperative concept should be abandoned. If the study results show that it is feasible, then the community could move forward in developing a cooperative.

 

Cooperative development steps

The following recommended steps may help the community develop the cooperative.

  • Nominating a board of directors – The board of directors could consist of members of the cooperative.
  • Drafting articles of incorporation and bylaws – Enlist the help of a lawyer to draft articles of incorporation that are structured specifically to the state. The bylaws are important because they set the guidelines for how the cooperative will operate and conduct business. They must be adopted by all members to ensure clear understanding of the cooperative’s membership requirements and business functions.
  • Preparing a business plan – A business plan needs to be prepared to lay out guidelines for the development and operation of the cooperative. It should also provide supporting documentation in order to gain member support and financial backing. Ideally, it would provide realistic business projections that show how the cooperative will succeed financially.
  • Recruiting members – Many members will already be on board for the cooperative, but additional members may be needed in order to provide the necessary products or services to keep the cooperative running.
  • Securing financing – Cooperatives require some amount of member financing, whether in the form of stock purchases or membership fees, in order to provide equity for the cooperative as well as a financial base that provides security and minimizes risk for other financial sources. In some states, the founding members may own shares by investing sufficient capital to purchase a property and build improvements to operate a business. These shares tend to be expensive and are hard to transfer to new members from departing ones. In other plans, cooperative membership shares are priced low (e.g., a few hundred dollars) to encourage a larger membership and an easier process to replace departing members. The former example tends to build cooperatives with fewer members, more out-of-pocket equity, and less startup debt. The latter example tends to build a large membership, depends on significant financing from local lending institutions, and has a higher startup debt. Additional financing can come through loans from financial institutions and local, state and federal government, and various private for-profit and nonprofit organizations’ loan and grant programs.
  • Recruiting personnel – Once the board of directors is confirmed, the board of directors should establish a job description for an executive director or day-to-day manager of the cooperative and initiate a job search. Using the job description, the board of directors should evaluate candidates and hire the first executive director. It is recommended that the board use a hiring process for the first executive director and not select a director from among the membership. Once the executive director is hired, it is his or her responsibility to launch the day-to-day operations of the cooperative and hire additional staff as needed.
  • Acquiring facilities – Consider using an existing building to temporarily house operations until more revenue can be generated. In Gouldsboro, Maine, a former sardine cannery has been turned into a lobster processing operation with the initial goal of creating 160 jobs.