Is the Federated Co-op Structure
Still Viable?
Positioning for Performance
October 29-30, 2001
Larry Swalheim CEO
Cottage Grove Cooperative
Four Forms of Business
Features
Compared
Individual
Partnership
NonCooperative
Corporation
Cooperative
LLC
Operated for
profit?
Yes
Yes
Yes
Yes
Who used
services?
Non-owner
customers
Generally nonowner
customers
Mainly member Mainly member
owners, but
owners, but often
often others also others also
Who owns the
business?
The individual or
partners
The
stockholders
The member
owners
The stockholders
– could be
individuals,
private companies
or cooperatives
How is voting
done?
None or by
agreement
Usually 1 vote
for each share
Usually 1
member vote
Based upon
agreements
established when
LLC was formed
Four Forms of Business Continued
Features
Compared
Individual
Partnership
Non-Cooperative
Corporation
Cooperative
Who
determines
policy?
The individual or
partners
Board of directors
Board of
elected by stockholders directors
elected by
member
owners
How are
earnings
distributed?
The individual or
partners
To stockholders in
proportion to stock
held
LLC
Board of
directors
established by
stockholders
To memberBased upon
owners on a
agreements
patronage basis established
when LLC was
formed
Cooperative Types, Structure,and
Classification
Federated Cooperative
Local Co-op
Members Members
Local Co-op
Members Members
Local Co-op
Members Members
Voting control,ownership,flow of patronage refunds
Physical flow of products purchased and or marketed
Cooperative Types,Structure and
Classification Con’t
Centralized (multiple branch locations)
Local Branch
Station
Local Branch
Station
Local Branch
Station
Members Members
Members Members
Members Members
Voting control,ownership,flow of patronage refunds
Physical flow of products purchased and or marketed
Rural Town USA 1971
•
•
•
•
•
•
Small grocery store
Full service gas station
Mom & Pop hardware store
Small diner
Diversified family farm
40 cow dairy
Local Cooperatives 2001 –
Who Moved My Cheese?
•
•
•
•
•
•
Larger customers – new set of needs
Less loyalty
Shrinking margins
Mediocre earnings
Inadequate equity revolvement
Change is the norm
Cottage Grove Cooperative 1986 – 2001
• Sales History
• Expense History
• Earnings History
19
8
19 6
8
19 7
88
19
8
19 9
9
19 0
91
19
92
19
93
19
9
19 4
95
19
96
19
9
19 7
9
19 8
99
20
00
20
01
Millions
Cottage Grove Cooperative Sales 1986 –
2001
80
70
60
50
40
30
20
10
0
19
8
19 6
8
19 7
88
19
8
19 9
9
19 0
91
19
92
19
93
19
9
19 4
95
19
9
19 6
9
19 7
9
19 8
99
20
00
20
01
Millions
Cottage Grove Cooperative Expenses
1986 – 2001
16
14
12
10
8
6
4
2
0
19
86
19
87
19
8
19 8
8
19 9
9
19 0
91
19
9
19 2
93
19
94
19
95
19
9
19 6
9
19 7
98
19
9
20 9
0
20 0
01
Thousands
Cottage Grove Cooperative Earnings
1986 – 2001
1800
1600
1400
1200
1000
800
600
400
200
0
The Local Cooperative in the Future Federated
System to be Viable Must
•
•
•
•
•
•
Manage change effectively
Shoot all dead horses
Network with other Cooperatives
Create a clearly identified mission
Plan Strategically
Increase earnings – revolve equity
We MUST market our Cooperative
Advantage
Member Education
Public Education
Marketing
The Regional Cooperative in the Future
Federated System to be Viable Must
• Shape their future through successful long
term local cooperatives
• Contain overhead costs
• Build a strong balance sheet
• Be part of the international marketplace
• Aggressively pursue business opportunities
• Embrace beneficial change
The Successful Regional Cooperative Will
• Make it easy for the local cooperative to
do business
• Develop an accounting system that is
100% accurate
• Communicate effectively throughout the
federated system
• Develop trust
The future for the federated Cooperative
System is Bright if:
• We remember our grass roots…the one that
made it all possible – The American Farmer
• Position ourselves for performance in the
21st century
Success