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”