Introducing the Patronage Refund System

Introducing the Patronage Refund System

Dear Co-op Members,

Since 1995 the Rutland Area Food Co-op has served as the leading food cooperative of the greater Rutland region. Over the years, we’ve supported our local farmers and food producers, our community organizations and given back to our beloved member-owners.

However, along the way we haven’t always prioritized reinvestment back into our co-op. Often, this makes it difficult for us to carry out basic store needs such as purchasing new equipment, making store repairs, and preparing for the future.

In order for us to remain stable and continue to grow, we’ve recognized the need to do things differently. We need a smart approach for reinvesting our profits while still rewarding faithful members for their support.

That’s why most food co-ops today – nearly all in Vermont, actually – have adopted what’s called the patronage refund system. With this approach, a return of excess profits are distributed back to members each year. But first, the co-op reinvests a portion of the profits back into the business. That way, we’re helping to ensure that the co-op is financially sound and can carry out what needs to be done to meet member needs, whether it be installing a new floor, purchasing a properly working freezer, or expanding the business to offer a greater selection of products.

After the co-op’s needs are accounted for, the remaining profits are distributed back to you, our members, in the form of a check. Each year, the board sets what percentage of profits are to be returned to members. This money is then divvied up among the members based on their patronage at the co-op throughout the year. In other words, the more members shops at the co-op, the more they will get back.

Of course, the co-op must first have a profitable year in order for this to happen. If we’re not doing well, we simply cannot afford to give a discount. Some years, when our needs are high, we might have to reinvest all of the profits back into the business. Though in other years, when our needs are less, more profits can go back to members.

Unfortunately, like most co-ops when they first started, we prioritized giving back over profitability. And we’ve done this through a discount on every member purchase since our very first days. Although this is just a two percent discount, over the course of a year, this adds up to thousands of dollars. Since 1995, this has no doubt added up to hundreds of thousands of dollars. With the switch to the patronage system, this discount would go away and instead, refund checks would be issued in its place. We would continue to offer our member only sales.

The patronage refund system is a not a new concept. Food co-ops that have implemented this structure find themselves in good financial standing and are able to more easily grow to meet member needs and demands. The patronage system puts the needs of all co-op members first and helps safeguard the continued success of the business. As co-op members, we all benefit from this approach.

Over the course of the next few months keep an eye out as we provide additional information about the patronage refund system. Please let us know your questions and allow us to explain why we believe this change is in the best interest of the Rutland Area Food Co-op. In June, we will hold a vote on the matter at our annual meeting and we hope you will consider voting in support.

Interested in learning more? Stop by the Co-op on Wednesday, February 7th, between 3 and 5, to chat with board members Matt Poli and Steve Peters. More opportunities to talk with board members will come in the next few months. Keep an eye out in the newsletter for dates and times.

You can also send us your questions via email at board@rutlandcoop.com.

Sincerely,

The Rutland Area Food Coop’s Board of Directors

Vote yes for patronage!

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