Harnessing Cooperative Power

In 2012, University of Wisconsin research counted nearly 30,000 cooperatives in the United States operating at 73,000 locations. Seven million memberships exist in producer and purchasing cooperatives. Credit unions, which are essentially banking cooperatives, have 92 million members. Electrical utility co-ops reach 42 million Americans. Agricultural cooperatives have three million members. In truth, cooperatives mean incredible market power—if its members harness the potential of collaboration.

US co-ops by sector

Case in point, the Co-Operative Grocer Chain of Japan (CGC). Small to medium-sized grocers join CGC to realize purchasing and branding power on products and brands. CGC has proprietary branded products here in Japan, (just like mega corp 7-11). CGC signage appears at the entrance of member stores, and a full range of CGC branded products stock the shelves here. Top management of affiliated members gather each month to exchange ideas and hear presentations from companies interested in partnerships and exchange information.

CGC logo

The group emerged from the 1973 Japan oil crisis, when Japanese supermarkets faced a sudden shortage of daily necessities, which in turn led to skyrocketing prices for consumers. At this time, the numerous independent supermarket operators (there are a LOT of grocers and supermarkets in Japan to serve the huge population with the fresh, healthy food they demand) felt a strong need to secure nation-wide purchasing power, so they could offer their customers a similar stable supply and price, like their competitor “big-box” chains could. Today, 225 companies, operating more than 3,600 supermarkets, with total sales of more than 4.2 trillion yen, belong to CGC (I just had to Google how many zeros there are in 1 trillion–the answer is 12 for those of you wondering. The exchange rate is roughly 98 yen to 1 USD today. Let’s just call it a LOT of money and be done.). The group maintains international offices in Seattle, Shanghai, China, Paris, Bangkok and Thailand.

Yesterday, I visited the CGC trade show, and had a few moments to speak to more than 200 supermarket chain presidents at their meeting about U.S. beef. With a history of strong support for U.S. beef, the group constantly seeks new ways to purchase and brand our product for wider availability to Japanese consumers. Needless to say, the Feb. 1 Under Thirty Month (UTM) rule made pleased the group immensely and their enthusiasm to grow the market here was evident throughout my visit.

IMG_0533[1]

At the trade show, National Beef rolled out the Black Canyon brand, developed for, and marketed exclusively to, CGC Japan. The Japanese market values products made specifically for Japan, and National’s offering was extremely well-received by the more than 200 companies present.

An under-appreciated characteristic of co-ops is that nearly all of them fit some definition of locally owned—that is, roughly 99.9 percent connect to a particular place and owned by geographically proximate members. This means cooperatives offer enormous potential to rural community sustainability. Even large co-ops that sprawl across the country have many of the characteristics of local businesses. Farmer cooperatives handle process and market almost every type of agricultural commodity, furnish farm supplies, and provide credit and related financial services. Earnings from these activities return to their farmer members on a patronage basis, helping improve their income from the marketplace. In the U.S., where the farmer population constantly shrinks, and small businesses on main street shutter windows in favor of box stores every day, the power of cooperatives cannot be denied. Studying success at CGC and other successful cooperatives could be a beacon to beef producers who wish to take advantage of cooperative purchasing and marketing power.

“It is the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed.” ~ Charles Darwin

My special interest in this topic is longstanding—some of my graduate research focused on comparing attempted beef industry cooperatives with crop cooperatives. In the beef industry, we seem to have a problem with making cooperatives successful, in comparison to seed or other agricultural cooperatives, for example. Results of the research indicated that, particularly when it comes to management decisions and marketing decisions, beef producers show unwillingness to relinquish a bit of control over these decisions to a collaborative group, in favor of retaining independent control at all levels—even if ceding control means producers have a more predictable profit margin at marketing, or a more consistent product.

“The secret is to gang up on the problem, rather than each other.” ~ Thomas Stallkamp

In today’s beef business environment, I believe beef producers could benefit greatly at collaboration with the goal of increasing market power. The current situation of low supply equaling higher prices provides an excellent example of how a modicum of supply and marketing control might benefit producers.

Random photo of the day:

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Wiener art at the CGC trade show.

 

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