Sustainability transformations involve processes of social change that are carried by people. In the area of food systems, researchers have studied local food groups as an emerging phenomenon driving collective action toward systems change. A central question in this regard is how agency develops in a dynamic alignment between individual actors and collective action. Identity dynamics, as a result of social interactions at the individual and collective levels, help to understand processes vital to the functioning of local grassroots initiatives. This study provides an empirical examination of the interplay between individual and collective level identity in the formation, operation, and impact of local food groups. Using a case study of a food cooperative in northern Germany, we apply a conceptual framework around identification, verification, and formation dynamics. Results show that identity dynamics are well developed and important for the functioning of the food cooperative. Trust is central to the group, as it enables the various activities of the collective, which in turn is facilitated by the interaction and identity dynamics. Understanding initiatives not just as niches for individual political action or as alternative sources of sustainable products, but as social spaces of self-expression and community building, contributes to the discussion of how local initiatives can help to advance sustainability transformation.