What’s the Value of Cooperatives?
Farmer’s Cooperative Conference
Tropicana, Las Vegas
Tom McKenna, President
United Sugars Corporation
October 30, 2001
Sugar Industry Model
Snapshot of Domestic Sugar Industry
– Past & Current Trends
– Competitive Positioning
» Coops & Other Participants
Coops - Do they have an advantage?
Characteristics of Success for the Future
Changing Customer Landscape
Industrial Market
Consolidation of Food Processing Industry
– Top 5 users buy 20% of Industrial volume
– Customer concentration increasing
Changing Customer Landscape
Consumer Market
Continued consolidation of retail grocery wholesalers
and chains
10 year trend
– 12 down to 5 today represent 35% of total grocery sales
Retail grocery sugar sales continue to decline
Competitive Environment
Rapidly Changing
Imperial bankruptcy
– Imperial closes and offers to sell beet sugar assets
Tate & Lyle
– selling all U.S. beet and cane sugar assets
Interest in Coop structure increasing
– “processing”
– “marketing”
Midwest Beet Sugar Price Comparison
November, 1999 - October, 2001
28.00
26.00
cents/pound
24.00
22.00
20.00
18.00
16.00
14.00
Nov99
Jan00
Mar- May00
00
Source: Milling and Baking News
Jul00
Sep00
Nov00
Jan01
Mar- May01
01
Jul01
Sep01
Nov01
Industry Consolidation
Estimated Sales Volume by Supplier
0
10
20
30
40
0
50
10
20
30
40
0
50
Domino/Western
C&H
Savannah/Michigan
USC
Revere
Imperial/Holly
FS/RSI/Dominoe
Great Western
American Crystal
Amalgamated
American Crystal
Amalgamated
C&H
Godchaux-Hend
C&H
Rocky Mt.
Savannah
RSI
Other
Colonial
North Central
National
Spreckles
Imperial
Supreme
Monitor
U&I
Flo-Sun
Holly
Delta
20 30
40 50
Imperial
Amstar
Spreckles
10
Amalgamated
RSI
Supreme
Southdow n
Michigan
Everglades
Southcoast
Minn-Dak
So. Minn.
Union
Florida Sugar
I.S.I
Monitor
Gulf & Western
Buckeye
1978
28
1991
13
2002
8
60 70
Why Sugar Beet Coops?
Marketing Coop structure responds to:
– slow growth opportunities
– increasing buyer consolidation
– need to reduce costs & increase productivity
Processing Coop structure responds to:
– need for producers to preserve processing facilities or exit from
market
View of future is positive
Characteristics of Success
Strategic Rational for existence
Fit with market realities
Vision beyond just producing raw material
Decisions made on creditable information
Sound Financing
Characteristics of Success
Coop owners/Board of Director’s ability to “Govern”
Ability to source Professional Management
Desire to be “Best in Class” Vs “investing up the value
chain”
Commitment to go “all the way”
0
