Co-op­er­at­ing for suc­cess

The Orchardist - - Contents - By Ram­say Mar­go­lis Ram­say Mar­go­lis is a man­age­ment con­sul­tant spe­cial­is­ing on co-oper­a­tive start-ups and de­vel­op­ment. He ad­vised ta­mar­illo grow­ers on es­tab­lish­ing their co-oper­a­tive.

In ru­ral New Zealand, how­ever, there's no doubt that well set up and pro­fes­sion­ally man­aged, a co­op­er­a­tive re­mains an ef­fec­tive way for small play­ers to de­velop mus­cle in the world of big business.

Most or­chardists are mem­bers of one or more co­op­er­a­tives. Few will be un­aware of the ad­van­tages that mem­ber­ship of ATS or Farm­lands brings, and those who use fer­tiliser will be among the mem­ber own­ers of Ravens­down or Bal­lance Agri-Nu­tri­ents.

When you're sell­ing the pro­duce of your or­chard on your own, you have lit­tle or no bar­gain­ing power. As costs con­tinue to go up with­out a cor­re­spond­ing rise in re­turns, this is be­com­ing ever more ev­i­dent. You could do bet­ter.

In­creas­ingly grow­ers are mar­ket­ing col­lec­tively through a co­op­er­a­tive. 'By be­com­ing part of a co­op­er­a­tive, grow­ers lever­age their bar­gain­ing power on the sup­ply side – a lot of agri­cul­tural co-ops around the world do that quite well,' ac­cord­ing to Pro­fes­sor Tim Maz­zarol of the Univer­sity of Western Aus­tralia.

Pro­fes­sor Maz­zarol is of the view that it's also worth tak­ing a good look at ba­sic sup­ply chain the­ory. ‘Sup­ply Chain 101,' he notes, ‘is that the suc­cess of a business de­pends to a large ex­tent on the bar­gain­ing power it has with sup­pli­ers at one end and cus­tomers at the other.'

Much of the world's agri­cul­tural out­put flows through a small num­ber of ‘choke points' on its way from the coun­try­side to the con­sumer. At th­ese points, trade is con­trolled by a small num­ber of large com­pa­nies, such as Archer Daniels Mid­land (ADM) or Glen­core and re­tail­ers such as Pro­gres­sive and Food­stuffs.

The only way for small grow­ers to have real business lever­age at th­ese choke points is through co­op­er­a­tives. It doesn't mat­ter how many shares an orchardist holds in an ADM, a Glen­core or a Pro­gres­sive, those busi­nesses see you as sim­ply a sup­ply cost.

Co­op­er­a­tives ex­ist for the ben­e­fit of their mem­bers, and be­cause as or­chardists you would own the business, your grower-owned co-op would aim to pay mem­ber own­ers the high­est pos­si­ble price.

Join­ing an ex­ist­ing co­op­er­a­tive is quite dif­fer­ent from start­ing one. How would you come to­gether as or­chardists to set up a co­op­er­a­tive, not just to pack and mar­ket your pro­duce but also with a view to ex­tract greater value from your fruit in fu­ture years? As a first step, read 'Start­ing a Co­op­er­a­tive, One Step at a Time' – for a copy send an email to ram­sey@huia.coop. Set­ting up is a dif­fi­cult process and needs to be done well if the business is to sur­vive and pros­per. ‘There are nu­mer­ous ex­am­ples of suc­cess­ful co-ops in hor­ti­cul­ture,' says Craig Howard, Gen­eral Man­ager of Marl­bor­ough Grape Pro­duc­ers Co­op­er­a­tive. ‘Peo­ple who think co-ops are a good idea may not know what's in­volved in get­ting one go­ing. It's not a text­book ex­er­cise,' he said. Howard told a co-op con­fer­ence in Wellington in Novem­ber, 'Your co-op will be­come a mul­ti­mil­lion dol­lar business up against some se­ri­ous business peo­ple. It's got to have the right business model, the right peo­ple, the right rea­sons for ex­ist­ing, some cap­i­tal be­hind it, the abil­ity to have mar­ket share, and qual­ity prod­uct.'

DE­VEL­OP­ING THE MAN­AGE­MENT OF YOUR CO-OP

‘The suc­cess of a co-op lies be­tween the com­mit­ment of its mem­bers and the qual­ity of its man­age­ment,' says Pro­fes­sor Maz­zarol. ‘As co-ops get big­ger,' he said, ‘they can do down­stream val­ueadding. They start to build their own re­tail brands and open up ex­port chan­nels, which mean pro­duc­ers, are no longer stuck in their lo­cal mar­ket. With R&D they can process their mem­bers' out­put into in­gre­di­ents and neu­traceu­ti­cals. All that helps to build greater mar­ket­ing power.' ‘There is a prob­lem with get­ting pro­duc­ers to col­lab­o­rate, be­cause a lot of pro­duc­ers are in­her­ently free mar­ke­teers and in­de­pen­dently minded. A farmer's hori­zon rarely goes beyond the farm gate, and their farm is their port­fo­lio,' Pro­fes­sor Maz­zarol said. ‘But the big­ger story is what's go­ing on around the coun­try or the world.The man­age­ment of a co-op has to look at that, and con­sider all the farms in the co-op as their port­fo­lio.' Dr Maz­zarol is Winthrop Pro­fes­sor at the Univer­sity of Western Aus­tralia (UWA) and a di­rec­tor of the Cen­tre for En­tre­pre­neur­ial Man­age­ment and In­no­va­tion and founder of the Co­op­er­a­tive En­ter­prise Re­search Unit at UWA. Sup­ported by CBH Group, Aus­tralia's largest co-op, UWA is of­fer­ing an Ex­ec­u­tive Lead­er­ship Pro­gramme for co­op­er­a­tives and mu­tu­als in col­lab­o­ra­tion with the Aus­tralian In­sti­tute of Man­age­ment in Au­gust 2015. In­for­ma­tion on this pro­gram can be found at http://s.coop/aimwa.

Co-op­er­a­tives nearly dis­ap­peared dur­ing the dereg­u­la­tion frenzy of the 1980s and 1990s.

Ram­sey Mar­go­lis

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