Food cooperatives play an important role in local food networks as business organizations that use innovative business strategies to market local foods to their members and consumers. We utilize data from a national study of the members of eight food cooperatives in the U.S. The objective of this study is to understand the innovations and system dynamics of food co-ops as they are promoting and marketing local foods to their members/owners. Our findings show that food co-ops are much better rated by their members than mainstream grocery stores are rated by their consumers, especially in terms of store characteristics and quality of products offered. Food co-ops face significant competition from other grocery stores especially in terms of offering lower prices. We find that most consumer heterogeneity is among food co-ops, while periphery, mid-level, and core consumer groups seem more homogeneous in their perceptions. The results highlight that some local food promotion strategies that work well at some food co-ops may not work well at others because of different consumer composition and co-op size. Our conclusion is that food co-ops are an important player in local food supply chains, mostly in a niche, highly-differentiated markets.