New Agrofood Marketing Strategies for Agricultural Cooperatives a case from a Dutch European point o

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New Agrofood Marketing Strategies for
Agricultural Cooperatives a case from a Dutch
/ European point of view
Chiang Mai, Thailand - November 30,
2004 Richard van der Maden National Cooperative
Council for agriculture and horticulture The
Netherlands
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(No Transcript)
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Agriculture in The Netherlands (1)

• Total area (land and water) 41.528 km2
• Agricultural use 56
• Water 19
• Woodland 12
• Residential area 8
• Infrastructure 3
• Recreation area 2

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Agriculture in The Netherlands (2)

• Agricultural land use
• Grass land 51
• Arable land 42
• Horticulture 6
• Open land 5,5
• Glasshouses 0,5
• Other 1

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Agricultural sector, some figures

• Gross domestic product (GDP) 454 billion
  (2003)
• Contribution to GDP
• Primairy sector 2,2 (10 years ago 4)
• Total agricultural sector 10
• Agricultural employment
• Primairy sector 3
• Totale agricultural sector 10,1
• Net agricultural export 20 billion
• The Netherlands are the 3rd largest exporter of
  agricultural products
• The Netherlands are market leader in exporting
  floricultural products

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Cooperatives in The Netherlands

• More than 125 years of cooperative history
• More than 6.000 cooperatives
• 50 in the agricultural sector
• Single purpose
• Economic goal / marketing function
• Not a goal, but a means

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• NCR
• National
• Cooperative
• Council
• for agriculture and
• horticulture

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Mission NCR

• Being a center of expertise and knowledge
  network for board members, directors and
  professional employees of cooperative
  enterprises.

But also looking after interests of
cooperatives and representation in the political
scene, science and other sectors, both national
and international
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Categories of cooperatives

• supply co-operatives
• marketing co-operatives
• co-operative banks
• co-operative auctions
• co-operatives providing other services

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Largest Dutch cooperatives (2003)
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Market shares of cooperatives (2002)
60
Fruit and vegetables
Starch
100
63
Sugar
Products
87
Credit to farmers
85
Milk
54
Supply
95
Flowers
0
10
20
30
40
50
60
70
80
90
100
Market shares ()
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In the top 20 of world dairy firms 8 are
cooperatives
Nestle Dean Foods Dairy Farmers of
America Fonterra Kraft Foods Danone Parmalat Unile
ver Lactalis Meiji Arla Foods Morinaga Friesland
Coberco DF Bongrain Land OLakes Campina Snow
Brand Sodiaal National Dairy Holdings Nordmilch
Cooperative Non cooperative
Mrd turnover
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In the top 20 of world dairy firms 8 are
cooperatives
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20
slaughterings in mln p.a.
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10
5
0
Excell
Hormel
Dumeco
ConAgra
Tyson/IBP
Smithfield
Farmland
Seaboard
Grampian
Maple Leaf
Nordfleisch
Westfleisch
Socopa S.A.
Nanjing Yurun
Danish Crown
Swedish Meats
Olymel/Fletcher
ShenZhen Food
ShineWay Group
Premium Standard
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Number of farms decreases

• Decrease in the number of farms 4 to 5 per year
• Each day 11 farms disappear

x 1.000
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Number of farms (according to size)
Very small
Small
Average
Large
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Number of cooperatives and turnover(in millions
of )
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The five (historical) reasons for setting up
co-operatives

• Countervailing power
• Access to the market
• Economy of scale
• Risk management
• Social reasons
• - preservation of employment
• - development of the country
• - preservation of the countryside

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Primary cooperative marketing
value added
market
max price
cooperative firm
max price
farms of members
labour land capital
max ROI
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Cooperative as a form of entrepreneurship
Basic model
members/owners member community member
administration
business connection
member financing
business operations
customers
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Auction clock

• Cooperative auctions
• Price formation auction clock
• Flowers / plants auction clock is still dominant
• Fruit / vegetablesauction clock ? contract
  mediation

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Cooperative as a form of entrepreneurship
A typical model of a modern large cooperative
members/owners member community member
administration
member financing
business connection
business operations of the cooperative owner
administration
business operations of the limited company
equity financing
purchase
External financing
customers
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Traditional marketing channel
retail wholesale farmer controlled
businesses (auctions) producers
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Changing market conditions

• Stronger competition
• Concentration in food retailing
• Higher quality standards
• New structures farmer controlled businesses are
  necessary

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Dissatisfaction with the auction system

• Purchase costs too high
• Buying large quantities drives up the price
• Buyer prefers stable prices
• Specific demands are not negotionable

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VTN The Greenery
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History The Greenery

• 1996 Merger of 9 auctions into The Greener
• ? concentration of supply
• 1998 Take over 3 trading groups
• ? concentration of sales
• 2000 Integration auctions and trading groups

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Development of The Greenery
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Consequences

• Importance of auction clock reduced
• Asymmetric information problems
• Interests members become heterogeneous

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Advantages

• Economies of scale in marketing
• Broad product portfolio

Value added and control of markets
Second line activities of coops first
line activities of coops
Value added and control of markets
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Disadvantages

• Large growers
• High tariffs
• Cross-subsidization of small growers
• Innovative growers
• Investments in marketing needed
• No direct contact with retailers

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Number of new producer organisations (per year,
1993-2000)
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Reasons new cooperatives

• Guarantee of product quality
• More bargaining power
• Continues supply
• Brand name

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Differentiation among cooperatives

• Countervailing power cooperative
• Generic products
• Private label brand
• Specialty product cooperative
• Vertically integrated into wholesale
• Incentives to marketing agents
• Making sales
• Long term relationship retail customers
• Information on customer needs

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• Thank you for your attention!