Start with about 200 people. Add a pinch of intrigue. Stir in a lot of capital. And, maybe in two years, Wasatch Cooperative Market will rise.
Planning began in April for a northern Utah grocery cooperative, which would operate as a for-profit company with owner-members who would receive refunds based on store profits and the amount of food they purchase each year. The cooperative would emphasize organic and local foods. Once opened, it would be the only grocery cooperative in the state in recent years, although Utah has a rich history of cooperative retailers dating back to ZCMI, which began in 1868.
The Wasatch Cooperative organizers are among 20 different groups throughout the United States in the process of forming grocery co-ops. If successful, they would join 325 grocery co-ops in operation nationally that account for nearly $2.1 billion in revenue, provide 15,000 jobs and $252 million in wages and benefits. Since they tend to focus on local and healthful or organic foods, grocery co-ops are a movement gaining popularity in a nation beleaguered with obesity-related health problems. Coupled with health concerns is an increased concern for the environment and estimates that grocery-store food travels an average of 1,500 miles from farm to plate. People who eat locally produced foods are known as "locavores," and locavores are driving the grocery co-op movement.
"The idea is to bring in healthy foods, natural foods, bring in as many local foods as possible and be organic as much as possible," said Alison Einerson, a Wasatch Cooperative steering committee member and executive director of Local First Utah.
Purchasing produce and meat from farms in Utah is more environmentally sustainable than buying food from, say, Washington state or Chile, said steering committee member Ben Gaddis. He is an environmental consultant who was inspired to form a grocery co-op in Salt Lake City after belonging to one in Burlington, Vt.
People who are attracted to grocery co-ops are those who would prefer their money support local farmers than unfamiliar companies outside the state. And the money the farmers receive tends to stay in the community. "Sixty cents on every $1 spent stayed in the state of Vermont," Gaddis said about the grocery co-op in Burlington.
"We really have a keen interest providing markets for local producers that right now cannot produce in large enough quantities for, say, a Smith's or a Whole Foods or something like that," Gaddis said. Some food will have to be shipped from out-of-state, he said, since shoppers prefer produce year-round.
Zion's Cooperative Mercantile Institution was also the result of a sort of localism, according to "ZCMI; America's First Department Store," by Martha Sonntag Bradley, dean of the Honors College at the University of Utah.
In the 1860s, then-LDS Church President Brigham Young accused non-Mormon merchants who were doing business in the territory of gouging Mormons and he encouraged Mormons to form a cooperative market. "The small investor could buy even a single share for five dollars and be part of the cooperative enterprise," Bradley wrote. "Many paid for shares with eggs, bushels of tomatoes or other produce."
Young purchased $25,000 — about 49.5 percent of the entire stock. The goal of the store was, as Young said at the time, "to bring goods here and sell them as low as they can possibly be sold and that the profits be divided with the people at large."
Prices at ZCMI outlets were to be lower than at non-Mormon stores and were to be uniform throughout the entire store system. In 1868, when ZCMI's board was elected and bylaws were written, only church members "of good moral character and (who) have paid their tithing," could belong.
A handful of Salt Lake City merchants joined the cooperative, which offered dry goods, clothing, hats and caps, boots and shoes, groceries, hardware, stoves and farming tools, Bradley wrote. By 1870, there were 150 cooperatives in Utah, Wyoming, Idaho, Nevada and even South Dakota.
In 1869, ZCMI was able to pay out a cash dividend of 10 percent.
Young formed ZCMI at a time when grocery co-ops first gained legs in America, according to a report by the University of Wisconsin Center for Cooperatives, with the first co-ops formed in the 1850s. The grocery co-op trend has waxed and waned in the past century and a half.
By the 1930s, grocery co-ops began to specialize in natural foods and consumer education.
They again became popular in the mid-1960s and 1970s with 3,000 stores or buying clubs in the United States and Canada. In the 1990s, however, many co-ops closed doors or consolidated as health-food chain stores expanded nationally. During the first decade of the 2000s, grocery coops have again become popular as "alternatives to a market system that might not serve their needs," the study said.
Indeed, ZCMI changed throughout the years, and in a period of retail consolidation in the 1990s, Meier & Frank acquired ZCMI stores in 1999. In 2005, Macy's acquired Meier & Frank.
Fast-forward 140 years, and the proposed cooperative market in Salt Lake City. As envisioned by members of the steering committee, the co-op would have about 100,000 member-owners who each pay a one-time fee of $200 to $300 for an "owner unit," that entitles them to vote for board members, bylaws and other issues related to the store, said Gaddis. Even the name "Wasatch Cooperative Market" was the result of an Internet vote.
Members will receive "patronage refunds," Gaddis said, a sort of rebate, depending on how much is spent throughout a year.
"REI (a recreation goods retailer) is a cooperative," he said. "They run the same way. They call it a dividend. It's the same thing."
Wasatch Cooperative may not pay member refunds for at least three years after opening. And it could take three to six years to open, meaning the soonest it could open would be April 2011, said Gaddis, who attended the Consumer Cooperative Management Association Conference in Pittsburgh, Pa., in June with other steering committee members and discussed the basics about starting and operating a grocery co-op.
The most immediate goal is incorporation. The steering committee is working with an attorney. "There's a lot of debate in the cooperative community about the best legal entity to become," Gaddis said, including corporations, limited cooperative associations, partnerships and limited liability companies. Each format comes with rules and restrictions on raising capital.
The steering committee has estimated that it would cost $2 million to open a leased 8,000-square-foot store.
Depending on the type of incorporation Wasatch Cooperative selects, capital could come from ownership fees, member loans and investors, Gaddis said.
The long-term goal is 10 stores across northern Utah, with the first being in Salt Lake City. Getting owners to fork out membership fees before doors are open could be a hurdle, but Gaddis said the money is needed for start-up costs such as buying and remodeling a building and purchasing food to stock the shelves.
For instance, with 1,000 owners each paying $300 for ownership, the cooperative could generate $300,000. Right now, there are about 200 people on an e-mail list. People can join the list at wasatchcooperativemarket.com.
"A lot of people say, 'I'd love to be an owner of a cooperative, so come to me when you open doors and then I'll sign up,'" Gaddis said. "To which the response is, 'Then we can't have a cooperative because the capital you provide as an owner is the key capital which allows us to get the other capital.' "