Defining Community Food Enterprise

What exactly do we mean by CFEs? The businesses studied in this report meet four basic tests:

• Enterprise: A CFE must be capable of achieving a positive cash flow. We did not include nonprofit projects that, by design, are perpetually dependent on grants and government subsidies. We were only interested in self-financing businesses, whether for-profit or nonprofit, that can plausibly grow local economies through the marketplace. The nonprofits that we included, such as Appalachian Harvest Network in Virginia and Fundación Paraguaya, meet this test.
  
  

• Food: A CFE must be involved in the growing, harvesting, processing, packaging, marketing, distributing, wholesaling, retailing, or serving of some kind of foodstuff. Some of our case studies feature enterprises with one or more departments running non¬food businesses, but each makes food a central part of its identity. The Weaver Street Market in Carrboro, North Carolina, for example, has linked housing and public radio broadcasting businesses, but everyone in the community knows they are primarily a food cooperative with three big grocery stores.
  
  

• Local Ownership: A CFE must be more than 50% owned by people residing in the immediate geographic community. The owners can be individuals, shareholders, partners, proprietors, or cooperative members, and they also can be local institutions such as other businesses, banks, investment funds, churches, or charities. Some ownership in a CFE can even be held by a public agency—as long as it’s not a controlling interest.[1]  In the one public-private partnership we examine, Kasinthula Cane Growers Limited in Malawi, the government played an important role in starting the business but today is a minor player and has no financial stake in the enterprise.
  
  

• Local Control: A CFE must place most of the legal rights and responsibilities of running the company in local hands. It can therefore include franchise operators as long as they have some ability to shape the business. A good test of a locally controlled franchise is whether the operator is permitted to source foodstuffs locally. A CFE also can include regionally proximate chains, where the owners of the parent company live close to all the links in the chain. Cabbages & Condoms in Thailand is an example of both. It runs a chain of restaurants and resorts in Thailand, all owned by Thais, but has begun to loosely franchise its business model and name to partners in France and Japan.
  
  

Admittedly, these do not fully resolve questions about whether certain businesses are CFEs. The term “locally owned,” for example, means that more than 50% of the ownership is held by people who live proximate to a company. But what exactly is proximate? A neighborhood? A city? A metropolitan region? A state? A country? For our purposes, we generally consider a firm local if a majority of the shareholders live within 100-200 miles of the company. When the owners live no farther than three or four hours drive from the company, they probably have more than a passive relationship to their investment. They are likely to know the managers, inspect the company, and take personal responsibility for its success and failure.

Several of our case studies are of businesses that are quite large, which underscores that locally owned does not necessarily mean small. Zingerman’s Community of Businesses in Ann Arbor, Michigan, for example, represents eight separate enterprises with annual sales over $27 million, yet each enterprise, by design, is owned by partners residing in or near Ann Arbor. Larger still is Cargills in Sri Lanka, a chain of 130 food markets linked with 10,000 smallholder farmers and 2,000 small businesses involved in processing and distributing its food products. Even though Cargills employs 5,600 people, has annual sales of $112 million, and has become publicly owned, we considered it local because it’s still majority family owned in a country the size of West Virginia.

Tricky questions are also raised by large producer cooperatives. The Cooperative Regions of Organic Producer Pools (CROPP), better known by its Organic Valley and Organic Prairie brands, has more than 1,300 farmers spread over 32 U.S. states and one Canadian Province. Its annual sales exceed $500 million. Yet the real power of the enterprise resides in the farmers, who each own their own farm. While CROPP sets high standards for the raw foodstuffs they buy, each farmer retains independence in how the standards are achieved. They are welcome to buy cheap supplies, seeds, equipment, and other inputs from the cooperative, but they are not required to. They can quit the cooperative whenever they choose. CROPP also ensures that local raw and value added products are marketed within the region they are grown. We concluded that producer cooperatives, even very large ones, are best understood as institutions created by and for local businesses, and therefore qualify as CFEs. And, as it happens, most of the day to day management of CROPP also occurs in La Farge, Wisconsin, where the cooperative was started 20 years ago.