Patronage dividends are a traditional way for Co-ops to share profits back with their members. As Member-owners of the Co-op, you also own the profits, and a patronage dividend system allows us to share and reinvest those profits in a transparent, mutually beneficial way.
Member-owners receive a share of the profits in proportion to how much they purchased during the fiscal year (April – March). The more you shop, the more you are eligible to earn. At the end of the fiscal year, if the Co-op is profitable, your Board of Directors will review any anticipated projects and financial needs for the Co-op. They will use that information to determine how much of the profits to retain, and how much to give back to the member-owners.
The amount retained stays in the Co-op, it belongs to the member-owners as a group, and becomes part of what we own together as an investment in community ownership. The remaining profits are then returned by check or voucher to the member-owners. Law requires that at least 20% of patronage be returned to member-owners.
- How does this affect my other discounts and member benefits?
All discounts (ex: Senior Discount, Working Member, Food For All, etc.), in addition to member-owner benefits such as the Member Deals and Co-op Connection are unaffected by patronage dividends.
- Do other co-ops do this?
Yes, the majority of food co-ops in the US have implemented a patronage dividend system, including our peer co-ops in Burlington, Montpelier, and Brattleboro.
- When will I receive my patronage dividend?
Dividends will be distributed at the end of our fiscal year. Our first dividend will be paid out to member-owners in June!
- How much will my dividend be?
This will vary from year to year based on the Co-op’s profits, your annual expenditures at the Co-op, and the Co-op’s anticipated capital needs.
- How is my dividend calculated?
Here is an example calculation for Member-owner Jane X, who spends about $50/week at the Co-op:
At fiscal year end, Co-op sales = $12 million
Year-end profit = $500,000 before taxes and dividends
Members account for 75% of store sales = $9 million
of that $9 million, profits = $375,000
The Board decides to retain 60% and rebate 40% to members
Jane X has made $2,600 in purchases for the year ($50/week)
$2,600/$9 million = 0.02889% of total sales
Jane X’s dividend = 40% x $375,000 x 0.02889 = $43.33
Here’s another way of looking at it:
Example calculation for Member-owner Jane X, who spends an average of $50 per week:
- Can I donate my dividend to a good cause?
Yes, we will have options for donating dividends. Specific organizations have yet to be determined, but likely they will go toward helping improve access to healthy foods for those in need, such as our local food shelves and the Food For All program.
- What do the Co-op’s By-laws have to say about patronage dividends?
Member-owners voted to approve the following by-laws in May of 2015:
Article VIII – Fiscal Matters and Patronage Dividends
8.5 Allocations to Member-Owners. The Cooperative shall allocate and distribute to Member-Owners the net profit from business done with them in such a manner as to qualify the net profits as patronage dividends consistent with cooperative principles, applicable state and federal laws and generally accepted accounting principles. The Board of Directors shall determine when and how such allocations and distributions will be made.
8.6 Consent of Member-Owners. By obtaining or retaining membership in the Cooperative, each member-owner consents to take into account, in the manner and to the extent required by federal and state tax law, any patronage refund received from the Cooperative. By obtaining and retaining membership in the Cooperative, each member-owner agrees that if his or her patronage refund is not cashed within 90 days of the date on which it was issued by the Cooperative, the Cooperative shall have the right to make a contribution in the name of that member-owner to support the local food system in a manner as may be directed by the Board.
8.7 Retained Amounts. Patronage dividends not currently distributed by check shall be credited or charged to capital accounts in the names of recipient member-owners. These retained patronage dividends shall accrue no dividend or interest. Retained amounts that are no longer needed for capital purposes of the Cooperative may be redeemed in such amounts and at such times as may be determined by the board. At that time they shall be redeemed only in the order of the oldest outstanding amounts and only on a pro rata basis among such amounts for each fiscal year, except that redemptions may be made payable only to member-owners who are then in good standing or become so within a period of time determined by the Board.
- Additional questions or concerns?
Please feel free to contact your General Manager, Glenn Lower. You can reach him by calling 388-7276, or emailing email@example.com