Zehr: Austin becoming ‘hotbed of the cooperative economy’


Like most of his partners at the 4th Tap Brewing Co-ops, Dariush Griffin started dabbling with beer and mead production back in college.

They got older and settled into careers and life, but never stopped brewing. Soon enough, friends started asking them to whip up a batch for weddings and other celebrations.

“After all the weddings,” Griffin said over lunch at Black Star Co-op, another Austin brewing cooperative, “we started thinking: ‘We’ve been doing this every weekend for about six or eight months now, why don’t we do it as a business?’”

And thus, 4th Tap was born—named after the fourth tap that, in many a brewpub, delivers a more experimental craft beer.

The beer isn’t the only thing novel about 4th Tap. After deciding to take a run at turning their hobby into a business, Griffin and his colleagues decided that a cooperative business structure was the best way to go.

“The truth is, not a lot of us are rich (and) could just invest a bunch of capital,” he said. “It would be great if we all were, but we’re not. So we wanted a way to represent our labor … and a cooperative model was the best way to do that.”

They worked through a training program at Cooperation Texas, a local nonprofit that helps foster the creation of co-ops in Austin, and now hope to have a brewpub open sometime in 2014.

In the meantime, 4th Tap has become the latest in a small but burgeoning crop of cooperative businesses coming out of Cooperation Texas—and part of a growing collection of co-ops in Austin that’s gaining notice from around the country.

The metro area is now home to 67 cooperatives that generate almost $1.2 billion in annual revenue, according to data compiled by Cooperation Texas. They include everything from credit unions to housing co-ops, and from Wheatsville (the state’s only food co-op) to the sprawling electric cooperatives outside the city.

But the new generation of cooperative startups—including 4th Tap, Black Star, Red Rabbit Cooperative Bakery and Dahlia Green Cleaning Service—has started to draw keener interest from around the country.

While the Central Texas co-ops scene hasn’t reached the levels of the Pacific Northwest or the Upper Midwest, it might be the cool new kid on the block.

“There’s a sense within the cooperative community that Austin right now is kind of a hotbed of the cooperative economy,” said Brent Hueth, director of the University of Wisconsin Center for Cooperatives. “There’s a young, new energy expressing interest in cooperatives there.”

Cooperative members and owners from around the country got a sample of that energy at the Consumer Cooperative Management Association’s annual conference held here two weeks ago. Also in recent weeks, local co-op leaders and representatives from the National Cooperative Business Association signed an agreement that will create a new organization designed to help cultivate that growing cooperative economy in Austin.

The Austin Cooperative Business Association will be the first such alliance to have a formal agreement with the national organization. It’s an 18-month pilot project, backed by $50,000 and other in-kind services from the national association.

If all goes well, the NCBA hopes to replicate the program with national chapters around the country, said Tom Decker, the association’s director of cooperative development.

“Austin is very interesting because there are a number of nascent groups that want to have a sort of cooperative chamber of commerce, and they’re in a different stage of growth,” Decker said. “But what struck us as different about the Austin group is they’ve figured out what they want to be. They’ve figured out some of the structures of leadership—those things you can really apply. … To their credit, they understand that cooperatives can have a much larger impact on the local economy.”

The Austin chapter hoped to have an executive director in place to announce at the conference but held off in favor of making sure they had the local funding and organizational details in place first, said Kate Vickery, a board member at Wheatsville and one of the leading forces behind the local alliance. She said they hope to have a full-time leader in place later this summer.

The association hopes to bring together all the area’s cooperative businesses, both the small startups and the larger credit unions and electric co-ops.

“They’re huge, but we don’t always see them as being connected to the local co-op community, which are a bunch of hippie people trying to make the world a better place,” Vickery said with a laugh. “We want to pull it all under this umbrella … to say that being a member of any of these is an alternative view of what the economy can look like.”

In the near term, organizers hope to simply create more robust set of interconnections and activity between the area’s cooperatives. Over the longer term, they hope those networks and a more formal set of processes can help foster even more cooperative startups in the area.

“Everyone typically plays in their own sandbox,” said Carlos Pérez de Alejo, founder and executive director of Cooperation Texas. “This is a chance to see how we could work together.”

The guiding example might come from Red Rabbit, which was founded in 2010 by Cathy Ruiz and a few of her coworkers. Before launching, Ruiz and her colleagues at the vegan bakery went through the Cooperation Texas training program.

Once ready to launch, Wheatsville helped them with some technical details and signed on as their first and biggest customer. For the food co-op’s general manager, Dan Gillotte, it was a chance for the grocery to pay it forward.

“Wheatsville was partially started by people who were involved in Austin housing co-ops in the ‘70s,” Gillotte said. “We are connected to the University Federal Credit Union. We had people from Wheatsville help found Black Star Co-op.”

The cooperation amongst cooperatives, one of the groups’ guiding principles, will be a critical piece of the Austin association’s long-term goal—to help make the cooperative business model a more influential piece of the economy and community, both in Austin and around the country.

The Census Bureau and other federal agencies typically do not break out cooperative business data. However, a 2009 study produced by the University of Wisconsin found more than 29,000 co-ops nationwide with revenues of more than $514 billion.

While barely a drop in the bucket compared with the revenue generated by more traditional business models, Hueth, Decker and other researchers who study the cooperative economy said those figures have increased in the years since.

The United Nations named 2012 the International Year of Cooperatives, which prompted a noticeable bump in co-op formation, they said. The financial crisis helped nudge many bank customers toward credit unions. Throw those factors into the mix with a recession and many consumers’ constant search for the best alternative, Hueth said, and co-ops got a boost over the past three years.

“When you look at the long history of cooperatives in the economy, they’ve always been kind of a reaction or a response to periods when laissez faire capitalism goes through some kind of crisis,” he said. “People are looking for an alternative that’s not as volatile.”

That hasn’t made it much easier for co-ops to get off the ground, though. Because the cooperative business model doesn’t fit neatly into traditional risk profiles, funding can be difficult to come by. But even here, Austin co-ops have come up with some fairly novel approaches that could be formalized by the association.

Given the comparatively high costs of brewing equipment, Black Star Co-op needed a sizable chunk of capital to get a proper brewpub up and running. It worked with local credit unions, including the A+ Federal Credit Union, to develop something similar to a certificate of deposit.

Member-owners could contribute money into the CD-like account, which served as a sort of collateral for the business line of credit.

“Ideally, that would really be what (the local co-op association) would be,” said Kelsey Balcaitis, the youth financial education coordinator at A+ and one of the early forces behind the formation of the alliance. “The cooperatives could come to the credit unions, and the credit unions, whether the members or the employees, would go and support the cooperatives as well.”

Walk into Black Star on almost any evening these days, and the place is packed.

“The good thing about the cooperative model in that is, like, Black Star came out of the gate and they’ve never not had a busy day,” said Gillotte, of Wheatsville. “They had 2,000 people on Day One who’d put money in and said, ‘I’m going to shop at this place.’”

He expects to see the same support when Wheatsville opens its second store, in South Austin, this year.

“We know when we open our second store, there’s 1,500 owners south of the river who are going to be regulars,” Gillotte said. “It’s not just a rough idea that maybe they’ll become shoppers. They’re committed. They want to shop here. So there’s some power in that part of the model.”

And that’s what all the organizers of the Austin Cooperative Business Alliance are counting on to help bring more customers to area co-ops, spawn new co-ops and expand the local cooperative economy as a whole.

“We think that as people start up businesses, they think about being cooperatives,” Gillotte said. “When somebody opens the next bar on Sixth Street, maybe it’s a cooperative.”


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