Northern Star Cooperative helps rural communities thrive
Northern Star Cooperative Services played an integral role in keeping a pharmacy in Deer River, Minn., to serve residents including Vic Williams Jr.
By Matthew Wilde
Vic Williams Jr. is thankful he only needs to drive a couple of miles to pick up medications at the Essentia Health pharmacy in tiny Deer River in northern Minnesota. When the local drug store’s former owner announced plans to retire and close the business four years ago, the town faced the possibility of losing an essential service.
“Our community is aging,” says Williams, a recent retiree. “Medication is an integral part of our existence, including mine. Convenience is important.”
The former Itasca County sheriff could easily drive 15 miles to Grand Rapids, Minn., the closest city with a drug store. But that trip would be burdensome for many elderly Deer River residents, he says, especially during harsh Minnesota winters.
Northern Star Cooperative Services, based in Deer River, played a key role in keeping the pharmacy. While cooperatives are mainstays in rural communities, medications and health care products are not traditional co-op offerings. But Northern Star leaders say they are willing to do whatever is necessary to help area residents.
“We do things to ensure our community remains alive and well,” says Williams, a co-op board member. “It’s one of the main missions of Northern Star Co-op. The strength of our business relies on the strength of the people around us, our customers.”
Northern Star Cooperative Services at a glance
- Energy and consumer/retail cooperative
- Headquartered in Deer River, Minn., with a service area from International Falls to Alexandria
- 8,000 members
- 13,000 propane customers
- Sales of $67 million in 2022
- Since 2009, Northern Star has paid nearly $19.4 million in cash dividends and equity retirements to member-owners, including more than $1.2 million in January 2023. The co-op’s average annual dividend over the last 10 years was nearly 6%.
- Businesses include fuel, propane and lubricants, convenience stores, Northern Star Market Place, storage units, Launch Marketing
- Focused on community, supporting other local businesses and emphasizing philanthropy
The co-op initially signed a purchase agreement to buy the pharmacy business, but not the storefront. Shortly after that, Essentia Health, based in Duluth, Minn., offered to buy the enterprise to complement its hospital and clinic in Deer River. Knowing Essentia Health has considerable pharmacy expertise — the company operates 25 pharmacies in the Upper Midwest — Northern Star struck a deal that’s a win for all.
With the co-op’s blessing, Essentia Health bought the pharmacy and relocated it to Northern Star Market Place, a co-op-owned and -managed retail operation that was being remodeled and expanded at the time. Essentia Health signed a long-term lease for $3,000 per month. The town kept its pharmacy, Essentia Health expanded, and Northern Star generates more revenue through rental income and extra foot traffic in the store.
“Access to pharmacy services is important to providing high-quality health care and ensuring continuity of care,” says Kenzie Hohman, who heads up ambulatory care pharmacy services for Essentia. “We are proud to offer our patients these services in the communities we are privileged to serve.”
The pharmacy is just one example of Northern Star’s willingness to adapt and provide products and services area residents need.
Growing rural businesses
Rural communities often struggle to retain businesses and essential services as demographics change. Young people move out to find better opportunities and small farms and businesses dissolve and consolidate.
Michael Darger, a University of Minnesota Extension community economic specialist and business retention and expansion expert, says health care, grocery, hardware and lumber businesses are often the hardest for small towns to keep. Competition from online and big box retail giants have contributed to rural business struggles, he adds.
“Once a business leaves a rural community, it’s not likely another will take its place,” Darger says. “I won’t call it a crisis, but a lot of business owners at the end of the baby boomer generation are getting ready to retire and communities need to deal with that.”
Northern Star has embraced change to survive, says CEO Brad Box. Established as an agricultural co-op 100 years ago, Northern Star has transformed into an energy and consumer/retail operation to meet the needs of its changing customer base.
Small farms, especially dairy farms, mostly disappeared near Deer River in the 1980s, Box says. With them went the need for livestock feed and crop inputs.
Tourism, timber and mining industries became the driving economic forces in the region. Itasca County is a wooded area that’s home to more than 1,000 lakes and is a popular vacation and weekend destination. The need for fuel, propane, lubricants and convenience stores grew.
“For the cooperative to survive, we had to adapt and figure out ways to provide value to member-owners,” Box says.
In the early 1990s, Northern Star took on debt to acquire the Solar Gas propane plant in Deer River from CHS. “That started our meteoric rise as a cooperative,” Box says. Other energy acquisitions followed. Today, Northern Star business ventures include:
- Four convenience stores
- Three bulk petroleum facilities
- Seven propane branches
- Mini storage buildings with 174 units
- Northern Star Market Place with a pharmacy, deli and foodservice; merchandise ranges from gifts made by local artisans, clothes and home decor to locally produced foods
- Launch Marketing, a full-service social media, marketing and e-commerce management company that helps local businesses build brand and product awareness
Northern Star sales grew from $7 million in 1993 to $67 million in 2022. Co-op membership increased from hundreds to 8,000, Box reports. The propane customer base grew from zero to 13,000.
“Sometimes it can be a big hurdle to get co-op boards to understand the need for change,” says Box. “Our board has always been very good at figuring out what we need to do to survive and thrive.”
As a consumer-driven co-op, Box realized aggressive marketing and social media efforts were needed for continued success. The cooperative hired his daughter and former intern, Shelby Box, three years ago to develop a marketing program that was productive and cost-effective. This includes regular social media posts to boost brand awareness, ad campaigns, a revamped website and an e-commerce site for Northern Star Market Place.
Recently, Shelby Box incorporated digital advertising into the cooperative’s marketing plan. Sales have grown by millions of dollars in the past few years, and a focus on marketing is a big reason why, Box says. He hopes to parlay that success with a co-op-owned business called Launch Marketing, which began taking on clients in March 2023.
“Many small businesses don’t have the know-how or time to do marketing and things necessary to be successful,” Box says. “We can use our expertise to help.”
Blueberry Hills Golf Course and Blueberry Hills Campground in Deer River, owned by Northern Star Office Manager Nikki Osse and her husband, Jordan, served as a beta test in 2022 for Launch Marketing. The goal was to boost business by increasing awareness through targeted advertising and social media posts on Facebook and Instagram. It worked. Social media views increased from 3,000 views to nearly 11,000 per month. Ad campaigns and specials also helped draw customers.
“We’ve never been as busy as we were last year,” reports Nikki Osse. “It’s hard to know how much it was because of Launch, but it helped.”
Box adds, “If our community succeeds, we succeed.”
Check out the full spring 2023 C Magazine with this article and more.