Canada's Co-op Atlantic

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From #108, September-October 2003

Canada's Co-op Atlantic

Showing the Way to Cooperation Among Cooperatives

B Y   T O M   W E B B
Co-op Atlantic illustration

For more than 75 years Co-op Atlantic has linked Maritime farmer cooperatives and consumer retail cooperatives within a single structure. (For a report on the merger of 28 Co-op Atlantic retail members, see "A Coat of Many Colors," in CG #101, July-August 2002 -ed.) CA's combination of producer and consumer co-ops makes it unusual among co-ops, and well-positioned against multinational competitors. CA's Agricultural Division has recently been a money earner for the organization and represents about 15-20% of annual volume, totaling several hundred million dollars. And with its new "agro-food strategy," using its mix of farmer and consumer members to forge new business links, CA may be showing the way for cooperation among cooperatives around the world.

Context of the agro-food strategy

The emerging and evolving strategy is a new set of products and labels that promote local production, food "traceability," and trust. The brands link the consumer retail system with producers and producer cooperatives in a growing network of cooperation.

CA's new strategy takes on one of the major problems facing cooperatives in the rapidly globalizing economy: the triple whammy of corporate concentration, horizontal diversification and vertical integration. The impact is perhaps greater in the English-speaking world, where the consumer-led thrust of cooperative business has tended to produce "cooperative silos." Each form of cooperative-housing, retail electric, funeral, insurance, and credit unions-is like a self-contained silo, focused on its own business sector. They have generally limited cooperation among cooperatives to fraternal links. They have done very little business with each other, sometimes preferring to have "more business-like" dealings with traditional corporate businesses that "ask no favors."

This has left cooperatives without many of the economies of scale enjoyed by their competitors. Compared to horizontally diversified competitors, cooperatives have also been more vulnerable when a particular industry got into trouble. A major Co-op Atlantic competitor, Sobeys, is involved in real estate development, car rentals, fish processing, manufacturing, and many other diverse ventures; the other multinational competitor is even more diversified. Co-ops increasingly find themselves facing enormous competitors able to exert growing influence and sometimes control over not just the marketplace but global suppliers as well. On the other side of the coin, because they are community-based, cooperative members and the public expect co-ops to be more supportive of local business and community than their competitors.

Beef about beef

The Co-op Atlantic agro-food strategy began with the problems facing beef farmers in Atlantic Canada. Atlantic beef lacked a strong positive consumer image compared to beef from Western Canada. An honest assessment would have conceded that Atlantic beef was inconsistent in quality. The preferred beef on consumer cooperative shelves came from Western Canada.

As part of its business, CA sold feed grains to beef and other livestock producers. The CA structure allowed an opportunity for the mutual interests of consumers and farmers to override their conflicting interests, and Atlantic Tender Beef Classic was born. The resulting cooperative business deal was pure mutual self-help.

How does it work? Farmers agree to use specified stock quality, feeding regimes, and animal care and to purchase high-quality feed mixes from Co-op Atlantic. CA in turn agrees to purchase all the beef farmers produce and to feature and promote it in co-op stores as premium quality beef. Each cow can be traced back to the calf, and the feed from Co-op Atlantic contains no animal byproducts or renderings.

Beef logo

This approach was so successful with beef that farmers and Co-op Atlantic quickly expanded the product mix to chicken and pork, rebranded as Atlantic Tender Meats. Nor did it end there. Co-op Atlantic then created the Market Town house brand, with items ranging from potatoes-further subdivided into those best for baking, boiling or fries-to peanut butter and including apple pies made by a family firm using apples from a co-operative. As with Atlantic Tender Meats, these products are sourced locally.

To make this happen required the creation of complex sets of partnerships-involving marketing boards, government agricultural agencies in four provinces, the member retail cooperatives that make up Co-op Atlantic, the newly formed beef cooperative, secondary processors who manufacture the "Market Town" and private label products, plus independent farmers and their associations. Co-op Atlantic did not wade into this based on hunches and hopes. They used a strong and growing e-flyer subscription list to determine if Atlantic Canadians were interested in what could be offered. Response to the e-survey was very strong: From 8,300 weekly e-flyer subscribers, Co-op Atlantic received almost 2,900 responses in less than 30 hours, along with 50 pages of comments from members and subscribers. It was clear from the research and the partnership discussions that the cooperative system enjoys a privileged position of trust with those producers and processors as well as among members and consumers. They trusted cooperatives to provide quality, safe food and to "do the right thing."

Traceability is key

Food safety and ethical production have become real and present issues with consumers, including animal treatment, additives, pesticides, fertilizers, GMOs, e-coli, and privatization of water. The recent move by the U.S. government to pass an anti-bioterrorism act to protect food from chemical and biological tampering has heightened awareness among North American consumers on a wide range of food issues. Consumers increasingly want to know, for both primary and secondary products, who grows their food, what happens to it chemically and mechanically, and where it comes from. They want to know what an animal was fed and its health record. Increasingly, consumers want "traceability."

The lowly potato went from being a standard commodity to being a value added product.

Survey respondents also made it clear they like locally produced goods from people they can reach and trust and that they associate such products with freshness, community well-being, and a sense of self-sufficiency. Members and consumers also have more faith that local products were not produced with health and safety risks to farmers and farm workers and that production involved a living wage. These concerns are not held by everyone, but the extent to which they are held is surprising and growing.

Co-op Atlantic allocated a significant part of its marketing effort to promotion. Beef was the lead item on many flyers for much of 2002 and beyond. Local producers were featured in flyer banners. CA produced a television brand ad and branded grocery bags. The potatoes came in smaller packages, with clear identification on what each variety is suited for along with cooking instructions, nutritional information, and recipes. Providing information about each type of potato changed the way members and shoppers bought potatoes. The lowly potato went from being a standard commodity to being a value added product. Brand signage and additional flyer activity, featuring price coupons, was supplemented with complimentary products to encourage trial and awareness.

Learning from the Co-op Atlantic example

The Co-op Atlantic agro-food strategy (as well as fair trade initiatives in the U.K., U.S., and elsewhere) provide food for thought and hope for what the future might be. Consumer concerns about food quality and safety, their trust of cooperative businesses, and the challenge of multinational growth taken together represent a daunting threat and an exciting opportunity. One can imagine an international cooperative purchasing system that, while encouraging local and cooperative procurement, has the resources to create ecological, health, safety, and social justice standards for food products and the strength to ensure that suppliers meet those standards. One can picture international cooperative brands reflecting cooperative values and principles and applying them in a thoughtful way that people trust. One can envision new cooperative-to-cooperative business relationships based on openness and trust.

 

Tom Webb is executive director of the cooperative education Management Co-operative at St. Mary's University in Halifax; he is also president of Global Co-operation, a management consulting company, and vice president of Consumers Community Co-operative (902/863-0678 or [email protected]).

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See other articles from this issue: #108 September - October - 2003