To get a better understanding of the mechanisms that co-operatives have developed to fund their strategic goals, this report firstly discusses the co-operative model and the five fundamental issues and constraints that they commonly face. One of their main constraints is their ability to raise capital.
In the agricultural sector there are two basic co-operative models, the marketing or output co-operative and the supply or input co-operative. This report primarily focuses on the marketing and output co-operative, especially in the meat industry sector.
Globalization has seen some very significant changes in the value chain, between producer and consumer, with power shift changes giving supermarkets significant advantages.
Supermarkets have been consolidating and are increasingly operating across borders. Consumer preferences for their food requirements are moving towards the so called ‘ready made meal’ or ‘quick food’ range of products.
Meat marketing companies, which supply supermarkets, and other outlets, with consumer products, have had to adapt to remain competitive. They have and are currently adopting strategies that revolve around:
- Economies of scale ( horizontal integration)
- Increasing control in the value chain ( vertical integration)
- Product Development
- Diversification
- Specialization
Many of these strategies are capital intensive.
Co-operatives operating in this sector have all adopted one or more of these strategies, but to overcome the co-operative problem of raising capital they have developed a range of solutions.
These solutions often involve some form of structural change and tend to move the co-operative away from the traditional model towards the investor owned firm (lOF) model( which is not a co-operative), with many alternatives in-between.
As the co-operatives progress away from the traditional model towards the IOF, issues arise around the level of control the co-operative members retain and in some cases the conflicting demands for profit distribution.
Finally, this report briefly looks at seven case studies of co-operatives (in their various forms) which give an insight into the mechanisms which have been adopted to fund their strategic goals and how the potential friction between member shareholders and investor shareholders are managed.
Herstall Ulrich
