Types of Co-operatives

Pick the right model.

Selecting the appropriate type of co-operative is important for an organization’s strategy and shareholder recruitment. Here’s an overview of the types of co-operatives.

Producer/Marketing Co-operatives

The thinking behind these is simple: the whole is greater than the sum of the parts. These co-operatives are created by producers (i.e. farmers, artists, businesses). These producers recognize the cost of inputs and administration can be reduced through group purchasing. Likewise, they may be able to increase the value of their products by using a unified brand. Less money and time spent on doing these tasks individually means more money and time for the producer to produce.

Producer co-ops are a great way of achieving economies of scale. They are also an efficient way to acquire resources. Some examples of these types of co-operatives include Home HardwareOcean Spray, and the Ashern Cattlemen’s Association.

Consumer Co-operatives

The most recognizable of the types of co-operatives in Canada is the consumer model. In this type of co-op, those that use the service are also the shareholders.

In Canada, this is a popular model for organizing banking services (credit unions) and gas and grocery stores (Co-operative Retailing System). But the model can be applied to other sectors. Some of these sectors include telecommunications, child care, other forms of retail, and infrastructure services (e.g. water). Co-op examples include Mountain Equipment Co-op (MEC), Desjardins, and the La Ronge Daycare Co-operative.

These co-ops employ thousands of Canadians and contribute billions to the Canadian economy.

Worker Co-operatives

Worker co-operatives are owned and operated by their employees. This model has been used for succession planning in rural and Indigenous communities. In this case, business owners are retiring, which creates an opportunity for employees to acquire the business.

Being worker-owned does not restrict the co-operative’s ability to hire non-member staff or contract workers. Moreover, worker co-operatives have been formed in all industries, usually as an alternative to a partnership business model. Most often found as consulting firms, breweries, retails and manufacturing facilities, the model is versatile and can be adjusted to fit most situations. The major benefit being limited liability through incorporation.

Some examples include: the London Brewing Co-opALIF Partners, and Planet S Magazine.

Investment Co-operatives

Investment co-operatives are formed to create an opportunity for people to invest locally. Instead of local dollars going to Wall or Bay Street and supporting unknown entities around the globe, this platform provides local investors the chance to purchase shares and see a return on their investment.

Many investment co-operatives serve another purpose than simply wealth creation, such as solar energy and small business financing. The returns may not be as high as other investment opportunities. But, for people living in the area, the benefits are many. Job creation, investment readiness and attraction, business creation and increased social supports can all be the results of this type of co-operative.

Moreover, investment co-operatives often sell shares and some allow shareholders to invest a portion of a RRSP or TFSA in the business.

Some examples include the Alberta Solar Co-op, the Sangudo Opportunities Development Co-operative, and the Creston and District Community Investment Co-op.

Multi-Stakeholder Co-operatives

Multi-stakeholder co-operatives deal with multiple different interest groups well. An opportunity may develop where there are people with money, those with knowledge and others with capacity. In this case, creating different classes of shareholder makes sense. For example, executive, employee and producer “classes” of shareholder.

The governance of these co-operatives can be contentious. Different groups may have conflicting visions for the organization or interests. But having a good set of bylaws that provide clarity for procedure can help minimize conflicts.

Some examples include Stocksy United and the Weaver Street Market.

New Generation Co-operatives

New Generation agriculture co-operatives have their own legislation in the western provinces.The model provides greater flexibility in combining characteristics of both co-operatives and investor-owned firms. They are complex entities, but can do very well when done right.

New Generation Co-operatives often require a significant capital investment from shareholders. Most often this is required to create a value-added agriculture facility, such as a grain terminal or processing plant.

These unique businesses generally provide delivery rights to producers (ranchers, farmers, etc.), which better guarantees a stable price for their products. Plus, the business processes the products to add value, create jobs in the community and increased wealth for shareholders. In some cases, the businesses help retain vital infrastructure, such as rail, paved roads and electrical grids.

Some examples include Westlock Terminals, the Alberta Egg Producers Co-operative, and the North American Bison Co-operative.

Housing Co-operatives

As you might expect, the primary function of housing co-operatives is to provide housing. Housing co-ops can be structured as for-profit (individual ownership of unit) or non-profit (collective ownership of facility). That said, many provincial regulations require housing co-operatives to incorporate on a non-profit basis.

Housing charges are determined by the collective cost of the co-operative and are shared equitably among the co-op’s members. This type of co-op is often used as a solution for low-income housing.

The Co-operative Housing Federation of Canada (CHF) upholds a list of all Canadian housing co-ops, as well as vacancies.

Community Service Co-operatives

These co-operatives are typically non-profit and often perform a social function in the community. Usually formed with an open, non-share capital membership, community service co-operatives allow anyone to participate in their governance. Common uses of the model include community halls, recreation centres, and social programming.

These co-operatives often rely on volunteers to lead their governance and therefore require a large membership to ensure continuity.

Some examples include Crocus Co-operativeAccess Communications, and the Association of Co-operative Counselling Therapists of Canada.

Questions to consider in making a decision on which model to use.

Here are a few questions to consider when forming a co-operative. Finding the answers will help make clear what type of co-op to choose.

  • Deliverable. What product or service will it provide?
  • Purpose. Who will benefit from this co-operative?
  • Market. Who should pay for the services?
  • Ownership. Who should share the profits?
  • Decision-making. Who should make up the board of directors?

As always, if you have further questions or would like to request support, please contact us.

“Heather and the team at Co-operatives First are top-notch. Not only their knowledge but their understanding of the project. They have truly helped us along every step of the way. Their timely response and knowledge of the steps are extraordinary. They are forthcoming with information. This is one of the most knowledgeable and friendliest teams I have ever had the pleasure of working with.”

Weyburn Theatre

“Co-operatives First made the process of establishing our Artisan Co-operative a very clear and easy process. The expanse of available tools and resources provided by Co-operatives First answers many questions and lightens the workload. Greatly appreciate having the connections made with Trista and Kyle, they keep the co-operative moving forward.”

Nehiyawaskiy Indigenous Peoples Art Co-op

“Our experience working with the Co-operatives First team was absolutely fabulous. The staff was accommodating, knowledgeable and patient. It was truly a breath of fresh air to have such a wealth of skill and resources available to a non-profit. They were invaluable to our successful launch!”

Heart Linked Community Services Cooperative

“Working with Co-operatives First was fantastic! We are still new to the cooperative world, and we relied heavily on their advice and expertise when drafting our rules/bylaws, and our memorandum of association. The team has experience with many different cooperative models, so they provided advice on what has and hasn’t worked for other cooperatives. We wouldn’t have been able to incorporate without their help!”

Ananda Cooperative

“We have had a very positive experience with everyone at Co-operatives First. They have helped us in multiple ways. Right from the first step in knowing how to incorporate, how to set our business and offering ideas for us to help steer us in the right direction plus allowing us to really make our own decisions. If our decisions go off track, they have gently guided us back to where we needed to be. The Co-operatives first guys are always eager to answer questions, and give ideas to us that got us off the ground.”

South East Butcher Block