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ERE32E Co-operative Business. Bridget Carroll Centre for Co-operative Studies, University College Cork, Ireland Session 3: Co-operative activity by type. This session.

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ere32e co operative business

ERE32E Co-operative Business

Bridget Carroll

Centre for Co-operative Studies, University College Cork, Ireland

Session 3: Co-operative activity by type

this session
This session
  • Classify co-operatives according to their prime beneficiaries and give examples of the kinds of businesses operated within each category
co ops are defined according to the type of user
Co-ops are defined according to the type of user
  • Traditionally:
    • Producer co-ops
    • Consumer co-ops
    • Worker co-ops

Now also:

    • Multi-stakeholder co-ops – may include/be called social co-ops, development co-ops, solidarity co-ops, community co-ops
defined according to user
Defined according to user…
  • Producer co-ops owned and controlled by those who produce goods/services
  • Consumer co-ops -owned and controlled by the people who consume the products and services of the business.
  • Worker co-ops owned by those who work in the co-op
producer co ops
Producer co-ops
  • Owned and controlled by independent producers e.g.
    • farmers
    • fishermen
    • taxi-drivers
    • craft workers/artisans
    • artists
  • Also known as
    • Agriculture co-ops
    • Farmer co-ops
    • Dairy co-ops
    • Fishermen’s co-ops
    • Forestry co-ops
    • Taxi co-ops
    • Craft co-ops
    • Artists’ co-ops
    • Or into sub-divisions
aims of producer co ops
Aims of Producer Co-ops
  • To serve members’ needs - improve effectiveness and profitability of members’ individual businesses.
  • Deal in commodities including dairy, beef/lamb/poultry/bees, fruit & vegetables, grain, cotton and other fibres, coffee, olive oil, wine, tobacco etc.
    • Collect, process and market products
  • Also services such as: farm supply, fertilizers etc.
world s top 10 dairy processors
World’s top 10 dairy processors

Dairy Turnover

  • Nestlé €18.5m
  • Danone €10.7m
  • Lactalis €9.3m
  • FrieslandCampina €9.3m
  • Fonterra €8.2m
  • Dean Foods €8.1m
  • Dairy Farmers of America €6.9m
  • Arla Foods€6.9m
  • Kraft Foods €5.1m
  • Unilever €4.5m

Rabobank International 2009

producer co op presence
Producer co-op presence
  • France: 40% of food and ag. production
  • New Zealand: 100% dairy market, 22% GDP
  • Brazil: 32% of agricultural production
  • Canada: 35% of world supply maple syrup, 80% dairy products
  • Slovenia: 77% potato production
  • Denmark – a/c for 10% GDP
  • US - market one third of farm commodities
  • India – co-ops made it largest milk producer in world
  • Japan - >90% of rice and fisheries production (supply and marketing)
          • Source: www.ica.coop
agriculture co ops in the eu
Agriculture Co-ops in the EU
  • >50% share in agriculture input supply
  • >60% share in collection, processing and marketing of agricultural products
          • Source: COGECA, 2011
fair trade developing world
Fair trade/developing world
  • Co-ops playing a central role in fair trade initiatives, examples
    • Divine chocolate – part owned by Ghanian cocoa producers’ co-op
    • Equal Exchange– US worker co-op which uses coffee from producer co-ops
    • Other examples you know of?
why producer co ops
Why producer co-ops?
  • Market failure
    • Prices too high or too low
    • Goods/services not available
  • Causes of market failure
    • Transaction costs
    • Non-appropriability
    • Externalities
    • Information asymmetry
overcoming market failure
Overcoming Market Failure
  • The co-op permits:
        • Pooling of resources
        • Joint processing
        • Joint marketing
        • Joint purchase of inputs
        • Provision of various services/technical assistance
        • Vertical integration in processing/distribution chain
        • Therefore economies of scale as well as member control and benefit
arguments against
Arguments against
  • Some economists argue that co-ops are not always optimally efficient
    • Members don’t control managers (principal-agent problems)
    • Higher costs of control in co-op (transaction costs)
    • “Free riders”
    • Investments can be short-term
    • Accumulated investments below optimum
benefits of producer co ops
Benefits of producer co-ops
  • Access to quality supplies and services at reasonable cost
  • Increased clout in the marketplace
  • Share in the earnings of the co-op
  • Political action
  • Local economy enhanced and protected (USDA, 1997).
public policy roles for producer co ops
Public policy roles for producer co-ops
  • Efficient production of public goods – food
  • Competition enhancing
  • Preserve jobs and farming
  • Role in rural development
factors impacting change
Factors impacting change
  • Deregulation
  • Globalisation of markets
  • Increased competition
  • Reduced subsidies
  • Need to raise capital
  • Increased power of multiples
trends in agricultural co ops
Trends in agricultural co-ops
  • Merge/acquisitions, to internationalise and to advance technology.
  • Significant changes to co-operative organisational form
  • Main difference is in ownership
  • Range from traditional co-ops to hybrids (co-ops with subsidiaries) including external shareholders
  • Also changes in entry, individual equity, voting, control, external participation, professional management, value-added activities
challenges facing co ops
Challenges facing co-ops
  • To achieve economic survival/success while retaining the characteristics of a co-op
  • To raise capital but retain control
  • To deal with globalised agri-food system but provide member benefits
  • Indifference to the co-op model
strategies
Strategies
  • External investors
  • Financial instruments
  • Market orientation/expansion - brands
  • Diversification
  • Vertical as well as horizontal integration
  • Degenerating/demutualising
  • Reassessment of objectives/strategies –large/small
  • Local markets
2 consumer co ops
2. Consumer Co-ops
  • Co-ops owned and controlled by their customers
  • Members both owners and customers
  • Examples:
    • Retailing
    • Financial services
    • Utilities
    • Social and health care
    • Leisure services
consumer co ops
Consumer co-ops
  • Emerge in context of:
    • Lack of goods/services or
    • Unsuitable goods/services (e.g. quality or cost)
    • Consumers at certain disadvantages relative to retailers/other distributors.
    • Where combined purchasing power results.
co op retailing
Co-op Retailing
  • Grocery stores/supermarkets
  • Co-op shops – farm inputs, building materials, DIY
  • Niche areas- health food shops
  • Specialist retailing – e.g. MEC
  • Retention of rural shops/pubs
co op retailing1
Co-op retailing
  • Emerged in the UK, late 1880’s
  • Basic foodstuffs initially
  • Long period of staple growth
  • Developed wholesale and manufacturing wings
  • Dividend system key
  • Decline from 1950’s. Resurgent in 2000’s

- currently growing market share

  • Retail co-ops have survived and prospered as conglomerates in a number of countries
from decentralised co ops to unified national retailers
From decentralised co-ops to unified national retailers:
  • UK – largest consumer co-op in world
  • Sweden- 21% market share (groceries)
  • Switzerland – Migros 32% retail market, Coop Suisse 17% food/consumer goods market
  • Finland- S-group 40% grocery trade
consumer co ops financial services
Consumer co-ops:Financial services
  • User-owned financial institutions
  • Emerge in a context of
    • Lack of adequate access to financial services
    • Poverty
    • Banking mergers and acquisitions
    • Branch closures
main types of co operative savings and credit institutions
Main types of co-operative savings and credit institutions
  • Ireland
    • Credit unions
  • UK and Rest of Europe
    • Co-operative banks (e.g. Rabobank)
    • Building Societies
    • Insurance
  • Developing countries
    • Credit unions
    • Savings and Credit Co-operatives (SACCOs)
  • North America/Australia/New Zealand
    • Credit unions
co op banks
Co-op Banks
  • Often emerged as rural credit institutions
  • In the EU today:
    • 4,239 co-op banks
    • >175m clients, >50m members
    • 18.8% market share (deposits), 20.1% (lending)
    • Some market leaders:
      • Rabobank: 38% deposits, Netherlands
      • Credit Mutuel & Credit Agricole: 60% deposits, France
      • Various: 33% deposits, Austria
  • European Association of Co-operative Banks- http://www.eurocoopbanks.coop/
  • International Co-operative Banking Association -http://www.icba.coop/
credit unions
Credit Unions
  • World Council of Credit Unions (WOCCU)
  • Member Statistics
  • http://www.woccu.org/
  • Africa: http://www.accosca.org/
main characteristics
Main characteristics
  • Help build up a habit of savings
  • Provide access to affordable loans
  • Reduce the extent of money-lending
  • Provide access to financial services
  • Educate in the wise use of money
  • Provide a means for people to sustain a living
fermoy credit union http www fermoycreditunion ie
Fermoy Credit Union http://www.fermoycreditunion.ie/
  • Consumer co-op established 1956
  • Common bond: Fermoy town and surrounding parishes
  • Legal status under Credit Union Act 1997
  • 12,000 members approx.
  • Governance: Voluntary Board (strategy/mission), paid staff (operations), committee system
  • AGM
  • Member benefits include: financial dividend, access to financial services, community benefit, ownership, control
application of co op principles
Application of co-op principles?
  • Open membership - subject to “common bond” and legislation/regulation
  • Democratic member control through Annual General Meeting (AGM)
  • Minimum shareholding, distribution according to savings
  • Each credit union is independent
  • Education, training and information?
  • Co-operation among co-operatives – through chapter and league,
  • Concern for community – many examples
    • E.g. social lending, money advice
consumer co ops utilities
Consumer co-ops - Utilities
  • Utility co-ops – delivery of public utilities such as
    • housing
    • water
    • electricity
    • telecommunications (e.g. phone) using a co-op model.
  • Owned by consumer -members
  • Reliable service at affordable cost
  • Surplus: to members or reinvested in co-op
housing co ops
Housing Co-ops
  • Not-for-profit co-ops
  • Provide
      • ownership and/or rental housing
      • the management of housing estates or apartment blocks,
  • Improve the supply of housing
  • Improve the housing and living conditions of their members and families.
energy co ops
Energy Co-ops

In the U.S. an estimated 25m people get their power through co-ops

  • Often in isolated rural areas by-passed by private companies
  • Purchase wholesale and deliver to members or
  • Generating and transmitting on national grid or could be small scale generating and gathering for local use.
  • Other examples:
    • Danish wind energy co-ops
    • Phone Co-op, U.K.
consumer co ops links
Consumer co-ops links
  • www.eroski.es
  • www.co-op.co.uk
  • www.united.coop
  • www.eastofengland.coop
  • www.midcounties.coop
  • www.creditunion.ie
  • www.nabco.ie
3 worker industrial co ops
3. Worker/industrial co-ops
  • Owned and controlled by those who work in them
  • Emerge to provide jobs but also concerned with the type of working environment
origins types
Origins - types
  • Philanthropic business owners converting their businesses into co-ops (e.g. Scott Bader Commonwealth in the UK)
  • Takeovers, otherwise known as defensive co-ops or phoenix co-ops.
  • Alternative collectives or idealistic co-ops are set up by those who may embrace ideals of collective ownership and worker democracy and who share a “commitment to participatory democracy, equality and production for need rather than profit” (Cornforth et al 1988).
worker industrial co ops
Worker/Industrial Co-ops
  • The European Confederation of Workers’ Co-operatives, Social Co-operatives and Participative Enterprises (CECOP) represents:
    • 37 national and regional federations of co-operatives in Europe.
    • Mainly in Spain, France and Italy.
    • In turn these federations represent 1.3 million workers and 83,000 enterprises.
    • Spread across a number of sectors: services (38%), industry and crafts (33%), construction (14%), social services (13%) and education and culture (2%).
mondrag n
Mondragón
  • 1950’s, Basque region of Spain
  • 7th largest business group in Spain
  • >83,000 employees, 86% of whom are co-op members*. 44% women.
  • Turnover €14,000 million (MCC, 2010).
  • Industry, co-op bank, co-op university, supermarkets….
  • Teams, flat hierarchy within co-ops
  • www.mcc.es
orkli s co op
Orkli S. Co-op
  • http://www.orkli.es
  • Created in 1982, Orkli has 440 members and 550 employees.
  • Produces components for heating and domestic appliances.
  • Formation was spear-headed by parents wishing to create employment for young women in the area.
  • The co-op is a spin-off from another co-operative in the area. The members helped financed the co-op by reinvesting part of their salaries for four years. The support of other co-operative firms in the area was crucial for a number of years.
  • 30 years later, Orkli has sales in excess of €100m.
suma wholefoods
SUMA Wholefoods
  • U.K.’s largest independent wholesaler and distributor of vegetarian, fair traded, organic and natural foods.
  • > 25 years wholly owned and run by its 120 workers, each of whom are equally paid.
  • Suma does not see this large number as a problem but as an asset. “General Meetings” to decide strategy, business plans and major policy decisions are held six times a year.
  • Participation is not only encouraged but mandatory at these meetings.
  • Flat hierarchy & considerable job rotation and multi-skilling.
  • Annual turnover > ₤20m.
  • www.suma.coop
union cab taxi co op
Union Cab – taxi co-op
  • 1979 Madison, Wisconsin
  • >200 member-workers
  • Work on commission basis, guaranteed a minimum wage
  • 2.5:1 mgt/work pay ratio
  • Healthcare provided
  • Member-run committee system
worker co op links
Worker Co-op Links
  • www.mcc.es
  • www.suma.coop
  • www.loch-fyne.com
  • www.johnlewispartenership.co.uk
  • www.tullis-russell.co.uk
  • www.scottbader.com
  • www.walescoop.com
employee ownership business succession sites
Employee Ownership & Business Succession Sites
  • www.business-succession.coop/
  • www.jobownership.co.uk
  • www.walescoop.com
  • www.successionlondon.co.uk
  • www.eos.coop
multi stakeholder co ops
Multi-stakeholder co-ops
  • Co-ops owned by more than one group of users e.g. customers and workers
  • All groups represented on board
  • Examples:
    • Eroski Co-op Group = Spain’s leading food retailer (47 hypermarkets, 800 supermarkets & 2023 self services stores)
    • Health care co-ops
    • Consumer/farmer/fisher co-ops in Iceland
    • Childcare co-ops (social economy co-ops)
health social services leisure services
Health & social services& leisure services
  • Case for/against private providers involved in social care
  • High quality, cost effective healthcare, childcare, elder-care,
  • Examples –
    • Social care co-ops, Italy
      • Health care co-ops in Japan, the US and Canada
      • Childcare co-ops in Sweden
    • In Ireland a broad range of co-ops that organise cultural and heritage events such as fairs, shows, festivals and museums, leisure and sports co-ops and tourism co-ops.
    • These may be not-for-profit.
homework
Homework
  • Work on your presentation for Friday
  • Co-ops in your country?
  • http://www.coopscanada.coop/en/orphan/InnovativeCoops
  • http://www.uk.coop/
  • http://www.coopseurope.coop/spip.php?article838