Developing  Successful  Coopera3ve  Enterprise  The  New  Zealand  Way  

Ramsey  Margolis  

Execu3ve  Director,  New  Zealand  Coopera3ves  Associa3on  

DEKOPIN  Fes3val  IYC  2012  •  Lombok,  Indonesia  •  23  May  2012  

Important  New  Zealand  dates  

!   1840  –  Treaty  of  Waitangi  –  a  Bri3sh  colony  

!   1907  –  became  self-­‐governing  

!   1947  –  formal  independence  

Some  figures  

!   Popula3on  of  New  Zealand  =  4,400,000  

!   Most  recent  GDP  figure  =  $161bn  (US$126bn)  

!   6,000,000  dairy  cows  +  31,000,000  sheep    

!   Less  than  200  coopera3ves  with  more  than  500,000  memberships  

!   Co-­‐ops  employ  43,000  people,  their  members  employ  200,000  more  

!   19  of  the  200  largest  businesses  are  coopera3ves  

!   2010–11  turnover  of  coopera3ves  and  mutuals  =  $43bn  (US$31bn)  

New  Zealand’s  largest  co-­‐op  

!   Fonterra  Coopera3ve  Group  

!   New  Zealand’s  largest  business  

!   owned  by  10,500  dairy  farmers  

!   25%  of  New  Zealand’s  exports  

Agricultural  coopera3ves  

!   Half  of  New  Zealand’s  coopera3ves  are  in  the  agricultural  sector:  !   Meat  =  Silver  Fern  Farms  +  Alliance  Group  

!   Dairy  =  Fonterra  +  Tatua  +  Westland  +  LIC  +  Dairy  Goat  Co-­‐op  

!   Farm  supply  =  CRT  +  Farmlands  +  Ashburton  Trading  Society  

!   Fer3liser  =  Ballance  Agri-­‐Nutrients  +  Ravensdown  

!   Fruit  &  vegetable  =  MG  Marke3ng  

!   Packhouses  =  Satara  +  Eastpack  +  Nelson  Apple  +  Future  Fruit    

!   Insurance  =  FMG  +  Unimed  +  Southern  Cross  

!   Seasonal  labour  =  Seasonal  Solu3ons  

Keeping  the  wealth  onshore  

!   Coopera3ves  ensure  that  the  wealth  produced  in  New  Zealand  remains  in  New  Zealand    

!   Coopera3ves  are  locally  owned  businesses  

!   Each  co-­‐op  has  a  single  focus,  there  are  no  mul3purpose  coopera3ves  

!   Members  of  most  New  Zealand  coopera3ves  are  small  businesses  

Success!  

!   Why  do  people  join  coopera3ves?  What  are  they  looking  for?  

!   Lower  commodity  prices  

!   Lower  service  costs  

!   Higher  returns  on  produce  

How  people  operate  their  co-­‐ops  

!   Share  in  the  ownership  of  the  business  

!   Manage  the  business  themselves  in  a  very  direct,  democra3c  fashion  

!   Elect  their  board  of  directors  

!   Have  a  transparent  set  of  financial  accounts  

!   Reinvest  in  the  community  and/or  pay  patronage  to  people  in  the  community  

The  things  that  maker    

!   Coopera3ves  

!   Deliver  a  service    

!   Are  democra3cally  run    

!   Inclusive  of  all  members  

!   Keep  the  profits  in  the  community  

Otago  Dairy  Farmers  Coopera3ve  

!   1871  –  New  Zealand’s  first  farmer-­‐owned  coopera3ve  

!   Seven  farmers  got  together  

!   Milk  collected  daily,  processed  into  buker  and  cheese  

Beker  than  mul3na3onals  

!   Ravensdown  Fer3liser  Coopera3ve  –  NZ$930m    

!   New  Zealand,  Queensland  and  Western  Australia  

!   Capricorn  Society  –  over  AU$1bn  

!   New  Zealand,  Australia  and  South  Africa  

!   Interflora  Pacific  Group  

!   members  in  15  different  Asia  Pacific  countries  

Necessary  ques3ons  

!   What  is  the  problem  that  we’re  facing?  

!   How  do  we  come  together  to  solve  that  problem?  

!   What  is  the  business  model  that  will  work  for  us  as  a  community  to  do  this?  

!   Could  it  be  a  coopera3ve?  

In  a  capitalist  world,  what  makes  for  a  successful  coopera3ve?  

Working  together  

!   Markets  fail  

!   Individuals  and  small  businesses  get  together  and  pool  resources  

!   IMPORTANT:  the  co-­‐op  has  to  operate  effec3vely  and  efficiently  

!   purchasing  co-­‐ops  reduce  dependency  on  powerful  suppliers  

!   marke3ng  co-­‐ops  reduce  dependency  on  powerful  buyers  

!   Greater  returns  for  the  member’s  primary  business  

Governments...  

!   Coopera3ves  need  good  legisla3on  

!   does  not  discriminate  against  coopera3ves  

!   accommodates  the  special  needs  of  a  coopera3ve  enterprise  

!   proper  taxa3on  policy  

!   government  to  make  available  exper3se  and  resources  

!   Co-­‐ops  are  privately-­‐owned  business  that  are  independent  of  government  

Ensuring  sustainability  

!   A  co-­‐op  has  to  be  a  genuine  business,  efficient  and  profitable  

!   Owned  and  governed  by  its  members  –  who  transact  with  it  

!   First  and  foremost  businesses,  the  social  objec3ves  are  equally  important  

!   Providing  access  to  services  

!   Strengthening  cohesion  in  the  community  

!   Reducing  poverty  

Governments  can  help  

!   Outside  help  and  a  cri3cal  perspec3ve  to  ensure  

!   Good  governance  

!   Transparent  elec3on  processes  

!   Transparent  financial  accounts  

!   Management  is  nurtured  

Crea3ng  a  value  chain  

!   Members  of  the  coopera3ve  are  producers  

!   Ver3cal  integra3on  to  create  a  value  chain  

!   Also  minimises  risk,  making  credit  available  to  small  farmers  

DEKOPIN  ...  NZdotCoop  

!   What  exactly  is  the  role  of  a  coopera3ve  apex  body?  It  should  

!   Offer  training  and  educa3on  for  coopera3ves  

!   Work  on  behalf  of  coopera3ves  as  an  advocate  

!   encourage  coopera3on  among  coopera3ves,  e.g.  branding  

!   assist  small  coopera3ves  that  wish  to  merge  

!   help  new  coopera3ves  to  start  

Essen3al  business  principles  

!   Propor3onality  

!   Service  at  cost  

!   Self-­‐financing  

Propor3onality  

!   In  New  Zealand,  coopera3ves  allocate  

!   revenues  

!   costs  of  transac3on  

!   member  rights  and  du3es  

!   capitalisa3on  

!   liabili3es  

!   vo3ng  rights  

•  according  to  how  much  business  the  member  does  with  the  coopera3ve  

Service  at  cost  

!   Except  when  dealing  with  members,  New  Zealand  coopera3ves  akempt  to  minimise  costs  and  maximise  revenue  

!   Dealing  with  members  though,  a  coopera3ve  either  

!   sells  to  members  for  as  likle  as  possible,  with  a  small  margin,  or  

!   buys  from  members  for  as  high  a  price  as  possible  

!   Coopera3ves  are  profit  conscious  not  profit  maximising  

Self  financing  

!   To  survive  as  a  coopera3ve,  the  business  needs  to  be  self  financing  

!   Equity  has  to  come  from  transac3ng  members  

!   New  Zealand  law  allows  for  up  to  40%  outside  investors  —  DON’T  DO  IT!  

!   Retained  earnings  in  a  general  reserve  or  in  member  accounts  

Coopera3ve  principles  

!   Keep  to  your  coopera3ve  principles  and  the  co-­‐op  will  thrive  

!   Forget  your  principles  and  the  co-­‐op  will  disappear  eventually  

!   Members  need  to  work  hard  to  keep  the  coopera3ve  as  a  coopera3ve  

Interna3onal  Year  of  Coopera3ves  

!   Opportunity  for  governments  to  strengthen  an  enabling  environment  

!   NZdotCoop  asked  member  businesses  for    sponsorship  

!   Launch  at  Parliament  a  tremendous  success  

!   Research  project  looking  at  the  contribu3on  of  coopera3ves  to  the  economy  

!   Briefing  pack,  media  kit,  fact  sheets,  research  results  and  more  

Educa3on  campaign  

!   Young  people  don’t  appreciate  what  a  coopera3ve  can  do  for  them  

!   Newspapers  +  the  radio  +  the  internet  

!   youtube.com/nzdotcoop  +  twiker.com/@nzdotcoop  +    linkedin.com  +  www.newzealand2012.coop  

!   New  Zealand  Law  Society  +  New  Zealand  Ins3tute  of  Chartered  Accountants  

Interna3onal  Conference  

!   Two  panel  sessions:  banking  and  agriculture  

!   Professional  development  sec3on  

!   Coopera3ve  research  sessions  

!   Register  through  a  website  at  www.nzascm.coop  

!   Par3cipants  from  Australia,  Belgium,  Canada,  Egypt,  India,  The  Netherlands,  New  Zealand,  the  USA  ...  and  more  …  people  from  Indonesia?  

Coopera3ves  contribute  

!   Coopera3ves  make  a  HUGE  contribu3on  to  the  New  Zealand  economy  

!   They  do  so  because  they  are  

!   Responsive  

!   Responsible  

!   Innova3ve  and  proac3ve  

Responsive  

!   Coopera3ves  are  responsive  to  members  and  the  market  

!   There  are  no  government  subsidies,  nor  any  protec3on  

!   Ac3vely  listening  to  what  members  want  

!   Offering  effec3ve  leadership  

!   Ahead  of  the  market  with  quality  products  

Responsible  

!   Coopera3ves  are  responsible  to  local  interests  

!   People  are  beker  served  in  a  global  economy  by  a  local  coopera3ve  than  by  global  capitalism  

Innova3ve  and  proac3ve  

!   Coopera3ves  need  to  be  innova3ng  constantly  

!   Fonterra,  the  Dairy  Goat  Coopera3ve,  Silver  Fern  Farms  –  all  have  significant  research  budgets  

!   The  Coopera3ve  Bank  was  the  first  in  New  Zealand  to  offer  telephone  banking  and  cellphone  text  banking  

Final  thought  

!   Your  farm  is  your  business  

!   Your  coopera3ve  is  your  other  business  

Thank  you