Nearly 80 people attended the Routes to Retail Success seminar at the Department of Agriculture and Food offices in South Perth in May 2012 to learn more about successful marketing through co-operatives.
Around a third were producers, another third were from industry bodies with the balance from universities, government and the media. Sponsored by Fruit West and DAFWA, it was opened by DAFWA Executive Director, Terry Hill. The exit surveys from the highly successful event showed that attendees rated the panel session the best segment. They liked the scope and depth of the discussion which built on the earlier presentations.
The panel consisted of John Power, CEO, Batlow Fruit Co-operative; Mike Cox, CEO, Lenswood Co-operative Cold Stores Society; and Tim Hyde, Chair, Sweeter Banana Co-operative plus Larry Brennen, former Chair of Challenge Australia Dairy, and Peter Wells from the Co-operatives Federation of WA.
For any business to generate margins it must have a point of difference that is valuable. The key point of difference with these three businesses is their control over fruit quality; these businesses promise, via their brands, to deliver quality fruit every time. To maintain margins, a valuable point of difference must be difficult for a competitor to copy or entice it away.
The three co-operatives present provide very clear final market information to their members, including daily and weekly reports via websites of market conditions, results of consumer surveys and price payments that reflect the actual returns for that segment.
Batlow Fruit Co-operative
Located in the foothills of the picturesque Snowy Mountains, Batlow is 90 years old, has an annual turnover of around $30m and is the most recognised apple brand on the east coast.
Batlow is very focused on operational efficiency, including throughput in an industry. Like many others in agriculture it has ageing members.
It is very transparent in its operational and financial reporting as this helps to identify performance. It owns 20% of its throughput and is facilitating entry into the industry by new members.
Lenswood Co-operative Cold Stores Society
Lenswood is in the Adelaide Hills. The co-operative was founded in 1933 and has 40 members.
Its strong growth reflects its investment into consolidating several packing sheds into Lenswood over the past few years. It now handles 70% of South Australia’s apples and is now one of the largest packers and handlers in Australia.
Sweeter Banana’s turnover is around $10m and it represents 60–70% of the Carnarvon industry. The industry is around 25% of the Perth market.
Sweeter’s brand premium is based on a quality difference with Queensland produce (sweeter and creamier), its local appeal and its quality assurance.
- Co-operatives are businesses that are built on a common business goal. The goal needs to be well understood by the members and communicated to new members. It also needs to be revisited so that it remains a shared goal. A co-operative is not for everyone.
- Co-operatives are businesses and they need to focus on margins (the difference between income and costs). By aggregating supply, members can exploit business advantages unavailable to individual producers (e.g. consistent supply of quality product, Batlow’s cider investment, cheaper inputs, agronomy services etc).
- Business planning is crucial, no matter how young or established the co-operative. It is especially important as a co-operative works to a common goal.
- These three businesses communicate with their consumers via their brands. The promises made by their brands and the co-operatives’ ability to deliver those promises means consumers will pay more for their fruit as they come to associate quality with the brand. Branding is useful only if it increases margins.
- The board and management need to converse with their members about their common goal and the business plan to deliver it. Their ability to deliver means members will invest in the co-operative. Investment is useful only if it increases margins.
- A common mistake is not having a plan to define how much value members will take from the business when they leave. The earlier an exit plan is agreed upon, the better.
For more information contact Brad Plunkett on the details below.