Co-op to distribute $44,000 in Patronage Rebates

2009 will be noted by many as a great year for witnessing memorable and historical events. In the annals of the food co-op world, a footnote will read that in 2009, Food Conspiracy Co-op reached another milestone in its rich 38 year history by distributing its first ever patronage rebate to its member-owners. We missed an opportunity to achieve this during the previous year because we did not show a profit. Last fiscal year was different and the Board has declared a 100% distribution of “profits” generated from member-owner patronage back to you.

Technically we don’t actually generate profits from our member-owners if we provide them with a patronage rebate. Profits a corporation makes as income are usually taxable. There is a major underpublicized benefit for being organized as a member owned food cooperative. In many ways it is a cutting edge business model that allows (and more importantly the Internal Revenue Service requires) food co-ops to consider the excess income generated from member-owner purchases as overcharges that may be returned to their rightful owners – you. In principal food co-ops provide goods and services for the benefit and enjoyment of owners at cost. Charges to owners above cost are allowed to be returned to the member-owners as a rebate. It’s a great deal because neither the member-owner nor the food co-op pays taxes on the patronage rebate checks. I’m surprised that there’s not a food co-op in every community!

Our Articles of Incorporation as a cooperative allow the Board of Directors to retain up to 80% of member-owner generated income, but they must distribute at least 20% every year there is sufficient income. Management recommended to the Board that a 100% rebate distribution be declared rather than retaining a (taxable) portion of member-owner revenue for operational use for several reasons: We didn’t issue any rebate checks the year prior, income from non-member customers is sufficient for our near future operational needs and distributing rebate checks could spread good will among current and potential member-owners.

Last year the “profits” from member-owner purchases came to over $44,000. It was an unusually good year for operating our store for many reasons. Because of last year’s sales increases we qualified for unanticipated discounts from our main distributor through our membership in the National Cooperative Grocers Association.

The extra income from our lower cost of goods has allowed us to distribute a rebate check to 994 member-owners. The largest checks issued to a few of our most frequent shoppers will be over $350.00. About 300 member-owners will receive checks for over $50.00. There will be no checks issued that are under $2.00. Rebates are determined by the total amount of household member-owner purchases during the fiscal year (October 1, 2007 to September 30, 2008). This rebate check is equivalent to about a 4.5% discount at the register.

We are hopeful that the patronage rebate checks will be used by member-owners to make purchases at the Co-op store although they are under no obligation to do so. Go ahead, pay down that credit card. I plan to convert my rebate check into a Co-op gift card which can be recharged periodically to make purchases throughout the year. Gift cards are especially great for small, under $5.00 purchases because there is no fee to the Co-op attached to gift card use unlike debit/credit cards.

As you might imagine the Co-op benefits greatly from member-owner purchases and it is in the Co-op’s best interest to expand the size of our membership base. A very wise cashier at the Co-op told me recently about a renewal message she received from the publisher of a magazine she used to subscribe to that said “we miss you.” Although she didn’t renew her subscription to the magazine, she was touched by its directness and simplicity. She felt that a simple message like that to former member-owners who canceled their membership when we switched from a discount at the register to our present patronage rebate system could bring some of them back. So here goes…We miss you!

Thank you for your support.

Ben Kuzma

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