CIASValues-based food supply chain casestudy: Co-op Partners WarehouseCenter for Integrated Agricultural Systems • UW-Madison College of Agricultural and Life Sciences • Feb. 2013ResearchBrief#87CIAS-sponsoredresearch onsustainable,integrated, andalternativeagricultural systemsOrigins of Co-op Partners WarehouseCo-op Partners Warehouse was established in 1999by the Wedge Natural Foods Co-op in Minneapolis,Minnesota. This certified organic wholesale distributionwarehouse serves retail stores, food servicebusinesses and buying clubs throughout the UpperMidwest. It is an important link between customersand suppliers of local produce, dairy products andother perishable foods. Because it is wholly ownedby the Wedge, Co-op Partners Warehouse carriesout the goals and vision of Wedge co-op members.In addition to seeking out efficiencies in sourcing,warehousing and distribution, Co-op PartnersWarehouse takes a special interest in fosteringmarkets for smaller scale growers.When Co-op Partners Warehouse was established,there were two other cooperatively owned naturalfood distribution businesses operating in the TwinCities: Blooming Prairie Cooperative Warehouseand Roots and Fruits Cooperative Produce. Bothwere eventually sold to United Natural Foods, Inc.(UNFI). The Wedge considered selling Co-op PartnersWarehouse to UNFI or converting it from asubsidiary of the Wedge to a cooperative owned bythe Wedge and other natural foods co-ops. WhenLindy Bannister joined the Wedge as generalmanager in 2005, she was concerned about Co-opPartners Warehouse’s ability to make businessdecisions quickly in a rapidly changing environmentif it were cooperatively owned by its customers. Shetherefore took steps to ensure that the Wedgeretained sole ownership of Co-op PartnersWarehouse.The Wedge’s acquisition of the 100-acre Gardens ofEagan certified organic vegetable farm in 2007created a unified, cooperatively owned farm,wholesaler and retail store, which has created bothopportunities and challenges.Key characteristicsIn many respects, Co-op Partners Warehouse is atypical produce distribution business. On the surface,its facilities and day-to-day operations do not differdramatically from other produce warehouses in citiesaround the country. On closer examination, however,it becomes clear that Co-op Partners Warehouse hasdeveloped some unique business practices, such asthe drop-ship program described below, that fosterthe distribution of local and regional food.The warehouse has expanded twice in its originallocation, tripling its initial capacity to 45,000 squarefeet of space. As of September 2010, Co-op PartnersWarehouse had 30 employees and served 160accounts in five states. It owned five trucks andleased another, and worked with common carriers todeliver product farther than 100 miles.Strategic partnershipsCo-op Partners Warehouse has been instrumentalin the growth of a vibrant market for locally grownproduce in the Twin Cities area. It has provided away for farmer-suppliers to retain and promote theiridentities and values in the marketplace while takingadvantage of the logistical efficiencies afforded by awholesale warehouse. Jack Hedin, farmer/owner ofFeatherstone Farm in Rushford, MN, says thatCo-op Partners Warehouse, “…has allowed us toexist and get to our current scale. It gives FeatherstoneFarm huge reach and regional recognition.”Co-op Partners Warehouse offers a unique drop-shipprogram that encourages smaller producers’ participationin the distribution of local and regional foods,while reducing their transportation costs and fueluse. Under this program, a farmer takes an orderdirectly from a customer. Then he or she consolidatesand packs the order and delivers it to Co-op PartnersWarehouse with an invoice. Co-op PartnersWarehouse stores the order until it can be deliveredwith the co-op’s next regular shipment; the co-opdoes not take ownership of the product. The bill ispaid by the customer to the farmer, and Co-opPartners Warehouse bills the farmer for thedrop-ship, typically at a rate of $20 per drop. ThisCo-op Partners Warehouse provides local food producers access to TwinCities markets and consumers.
program allows smaller producers to take advantageof the logistical efficiencies that larger suppliers enjoy,while maintaining and managing direct contacts withtheir customers.Co-op Partners Warehouse is flexible, offering avariety of services and business arrangements to itssupply chain partners. For example, FeatherstoneFarm leases warehouse and office space from Co-opPartners Warehouse for its Community SupportedAgriculture (CSA) program and operates its owntrucks out of the warehouse facility. FeatherstoneFarm also does contract hauling for small farms thatparticipate in the co-op’s drop-ship program.The Wedge’s ownership of both Co-op PartnersWarehouse and Gardens of Eagan is a unique integrationof a farm, distribution business and retail storeunder ownership of a consumer cooperative. Thisstructure is set up with a strong focus on the retailcustomer. It creates the potential for a supply chainwith consumer demand pulling products throughthe food system rather than producers and supplierspushing their products through to the consumer.Gardens of Eagan was a major supplier to Co-opPartners Warehouse and natural foods cooperativesin the area before its purchase by the Wedge in2007. During 2008, the two entities operatedindependently, with Co-op Partners Warehousecontinuing to buy some produce from Gardens ofEagan. In 2010, Co-op Partners Warehousepurchased Gardens of Eagan’s entire production,creating new opportunities and challenges for themanagers of these once-independent businesses.One of the challenges was to spread profits equitablybetween the entitites. The Wedge instituted anaccounting arrangement for sharing net gainsbetween the farm and the warehouse and gaveGardens of Eagan more autonomy in marketingits production. In addition, Co-op Partners Warehousehired a new employee to proactively find newmarkets for the increased amount of produce thatbecame available because of the purchases fromGardens of Eagan.Future directionsCo-op Partners Warehouse is large enough to achievethe operational efficiencies necessary in a highlycompetitive marketplace. It has developed uniquecapabilities that allow producers to maintain theiridentities and links with their products all the wayto Twin Cities’ consumers. It will be difficult forcompeting produce distributors in the area toreplicate these capabilities. Co-op Partners Warehousealso has the advantage of being owned by anatural foods cooperative. This provides a directlink to a dedicated base of consumers committed togrowing the market for local, organic produce.The relationship with Gardens of Eagan is stillevolving. There is the potential for considerablegrowth and efficiency gains through this relationship.Realizing these benefits will be more likely ifcommunication between the entities is made moretransparent about fast-changing circumstances onthe farm and in the marketplace.Over the next five years, Co-op Partners Warehouseplans to continue helping small producers access theTwin Cities market. They aim to increase the useof the drop-ship program and grow sales to institutionalfood service operations. They hope to addressthe limitations of the single Wedge location throughsales from refrigerated trucks in urban markets andfixed-price bags of produce offered for sale at transitstops.One of the biggest challenges for the future will bethe development of a growing workforce. This is abusiness that requires a combination of creativity,flexibility and teamwork, along with a willingness todo hard physical work. The key to this challenge maybe in fostering employee engagement in an exciting,dynamic enterprise that significantly impacts the wayfood is produced and consumed.A longer version of this case study (and relatedresearch) is available at two locations:www.cias.wisc.edu/economics/case-studiesprofile-mid-scale-food-enterpriseswww.agofthemiddle.orgThe Co-op Partners Warehouse web site is:www.cooppartners.coopFor more information, contact:Robert P. King, University of Minnesota,email@example.com, 612-625-1273Larry Lev, Agricultural and Resource Economics,Oregon State University, firstname.lastname@example.org,541-737-1417This Research Brief was produced in cooperation with the Unviersity of Minnesota-Twin Cities and supported by the National Research Initiative of theCooperative State Research, Education and Extension Service, USDA, Grant #2010-85211-2057.The Center for Integrated Agricultural Systems (CIAS) brings together university faculty, farmers, policy makers and others to study relationships between farmingpractices, farm profitability, the environment and rural vitality. Located in the College of Agricultural and Life Sciences at the UW-Madison, it fosters multidisciplinaryinquiry and supports a range of research, curriculum development and program development projects. For more information on the Center or on theresearch in this Brief, contact: CIAS, 1535 Observatory Drive, UW-Madison, Madison, WI 53706 Phone: (608) 262-5200 E-mail: email@example.com, www.cias.wisc.edu. This Research Brief is part of a series. Contact CIAS for other titles. CIAS staff members are grateful for the reviews of this Briefby UW-Madison and UW-Extension faculty and CIAS Citizens Advisory Council members.February 2013.