Cooperation in Finland 2014

Content• History

- birth of the Finnish co-operative movement- spread of co-operation- co-operatives in changing economic systems

• Co-operation in Finland – facts and figures- The co-operative Act

• Summary – Co-operation in Finland- co-operative memberships

• Producer/farmer co-ops• The co-operative hybrids• Dairy, Egg and Forest sector• Co-operative banks and insurance• Consumer co-operatives

- the S-group in brief• New wave co-operatives• Student Co-ops• The co-operative Council of Finland• Pellervo Society

2006

The introduction of co-operation in Finland was connected to the struggle for independence

Finland autonomous in the Russian empire: • own administration, languages, laws, money

February manifesto 1899 • russification • withdrawal of autonomy-->Intellectuals mobilise People of Finland need to be united

Conditions in Finland in 1900• 90 % of population bound to agriculture• Poverty especially in rural areas• Mostly exchange economy in rural areas• In Finland feudalism was never established and

serfdom did not exist, but tenant farmers (sharecroppers) were at a disadvantage

• Gebhard: farmers' cooperation is the rockupon which the major social improvementsand perhaps in the future nationhood and independence is possible to build up

2006

The birth of the Finnish co-operative movement

Hannes Gebhard(1864-1933)

“Father of Finnish co-operation”

Pellervo was established to promote free co-operation in different agricultural sectors and to spread the co-operative idea in general

TOTAL NUMBER OF MEMBERS IN PRIMARY CO-OPS in 1902–2006 in Finland

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

3 500 000

4 000 000

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2001

per

son

s

Forestry co-op Meat co-ops Co-op dairies Co-op banks Consumer co-ops

Why did cooperation spread so quickly?

Pellervo worked hard to spread cooperation. Spokesmen were sent all over the country.

Clear social demand for cooperation

No services or of poor quality, overpriced goods, weak competition and monopolies, no credit system, no market for agricultural goods

The cooperative network model was built in just a few years: central bank in 1902, central retail cooperative in 1904 (SOK), central dairy cooperative in 1905 (Valio) and also farm supply in1905

First Co-operative Act in 1901

Early development of the Pellervo Value System

Finland independent December 1917

The cooperatives in changing economic systems throughout the years

1900-1920 Free market

• Rapid foundation of cooperatives in Finland• The number of cooperatives reached its peak 6000 in the 1930’s

1920-1980 Protectionism

• strongest after World War II• Cooperatives played a special logistic role behind the border

barrier• Economic aspects of business were often disregarded in the

closed economy.

Rapid change in economy the last 30 years

1980- > Market economy, globalisation

• Financial markets started to open in the late 1980’s. Real estate bubble.

• The fall of the iron curtain leads to a harder market economy everywhere.

• Deep depression in Finland in the beginning of the 1990-ties. Exports to Soviet collapse.

• Finnish EU membership 1995 (opening of markets for agricultural products in the EU).

• WTO (wants opening of markets for agricultural products in the world)

• Globalization.

What did the Finnish EU-membership in 1995 mean for agriculture and the cooperatives?

• More open market. The change from a closed domestic market to the EU-market. Agricultural products from allover EU

• Producer prices were decided by the market. Before EU, prices were a result of negotiations between the government and the farmers

• Farmers get more dependent on subsidies. Subsidies decoupled from production

• Changing agricultural policies adjusting to WTO demands. Globalization.

The cooperatives: some thrived, some survived, some died

• Some co-ops managed to find competitive advantages in a new way and managed to change their corporation culture to fit open market economy and harder competition• Quick growth in both consumer co-ops and co-op banks since 1990 and now

they have surpassed their competitors = Market leaders• Some agricultural cooperatives began their developing processes in the 80’s and

were in good condition in the 90’s (Valio-dairy cooperatives and Atria-meat cooperatives)

• Corporate governance• Formation of hybrids to gain capital

• Some were late or lost• Those who began their developing processes in the 90’s had some difficulties,

but found their way (LSO- meat cooperative).• Some co-ops failed – the consequences were either bankruptcy (small dairies,

Novera) or debt restructuring (workers’ consumer cooperatives, one meat cooperative)

Why did some fail?• Bad economy and structure developed during the

closed period– Unable to perform structural change

• Top driven by managers– administrators and members often unaware of the situation

in the coop -> corporate governance

• Unskilled administrators– Political culture– Unable to see or accept that times are changing

2013 Amount Members PersonnelTurnover Mill.

€Market share %

Meat Co-operatives 4 7 074 12 078 3 906 77Dairy Co-operatives 23 8 552 5 206 3 351 97

Egg Co-operatives 1 171 116 47 45Vegetabel Co-operatives 5 300 60 53Forest Co-operatives 1 123 275 10 741 4 932 38Animal breeding 1 10 507 405 36 100Tradeka (Restel) 1 263 437 5 046 512 18Electricity Co-ops 7 34 775 126 84Phone Co-ops 11 100 516 2 589 484Retail Co-ops 29 2 109 025 41 784 11 353 45Co-op Banks 219 1 549 074 12 704 2 760 39Mutuals 27 3 102 568 5 850 355 9

Co-ops in total 4 626

1)

3)

4)

2)

7)

6)

Total number of cooperatives in Finland according to Trade Register was 4 626 (June 2014).

1) Meat from producers 2) Milk from producers 3) Eggs from producers 4) Share of market logging from private forests 5) Consumer cooperatives sales 6) Deposits (incl. S-Pankki)7) Premium income

5)

Cooperation in Finland

Facts and Figures

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Number of cooperatives founded each year since 1987- 1987 571988 361989 521990 831991 771992 611993 691994 761995 1231996 1741997 2621998 2721999 2212000 2572001 1312002 1422003 2432004 2012005 1862006 1982007 1932008 1582009 1722010 1732011 2132012 2282013 208

1-9/2014 1794445

The Finnish Co-operative Act• In force since January 2014

• The fourth cooperative law in Finnish legal history • First Law on Cooperation in 1901• Second in 1954 and third in 2001

• Changes in these laws can be summarized as relating to securing sufficient capitalization of cooperatives

• Terminology as close to the Limited Liability Companies Act as possible

• Improve the competitiveness of cooperatives by facilitating their foundation (1 member only required), access to financing and their management, while preserving the minimum cooperative standards

• By-law autonomy is great, a co-operative can depart quite a lot from what is suggested by the Act

Summary - Cooperation in Finland• Finland is the most cooperative country in the world with

respect to total turnover of cooperatives in relation to GNP (10%) or total number of members in relation to population.

• The total number of cooperatives reached its peak in the 1950s: 9 000. About 1 000 cooperatives in 1990.

• New rise in the 1990s of so-called new cooperatives.

• The number of cooperatives has again increased to more than 4 500 with over 4 million memberships - Finland has few, but large cooperatives

• Further more mutual insurance has 3,1 million customer-owners

Summary - Cooperation in Finland, continued . . .

• Of the Finnish adult population 84 % are members in at least one cooperative (44 % in 1993) - average 2,1 memberships per person (survey 2007)

• Over 75 % of the Finnish households are members in a consumers cooperative.

• The Finnish food chain from stable to table is very cooperative: cooperatives have a market share of 97 % in milk, 78 % in meat and 45 % in sales of daily goods

• Cooperative banks have a 40 % market share in deposits

• The forest-owner cooperative Metsäliitto (turnover EUR 5,4 Bn) one of the largest producer cooperatives in Europe. Largest 1. FrieslandCampina 2. Vion 3. Arla

Increasing number of memberships in Finland

84 %

56 %

26 %

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

At least one membership

At least two memberships

At least three memberships

Average 2,1 memberships per personFarmer: average 4,1 memberships

73%

40%

25%

16%

8%

7%

5%

1%

2%

0% 20% 40% 60% 80% 100%

Mutual insurance

Most members in consumer co-ops and co-op banks

Forest (Metsäliitto)

Local insurance

Water, energy and telephone coops

Coop banks/OP-group

Consumer/S-group

Coop banks/POP-Group

Others

Small new coops (worker, social care)

Survey 2007TOTAL (n=1113)

Why producer / farmer coops? (1)• strengthen the farmers role in the food chain• leaves the value added in the chain• long term membership saves time and energy• services and advice from cooperatives• the cooperative is a social community• farming in Finland is family farming• advantages of mass production in both quantity

and quality + information are canalised to the member farmers

• secure the markets for the agricultural products

Why producer / farmer coops? (2)

• producer cooperatives set standards and prices on the market, which also the private companies in the sector are compelled to follow

→ also correct distorted markets

• The producer coops have market shares from 40 % to 97 %. They have gone through strong structural change, especially in dairy and meat sectors

The cooperative hybrids• Model with primary cooperatives controlling a plc (limited

company on the open stock market)• Formation of hybrids to gain capital • The plc is vital for the function of the primary cooperatives• Control managed by shares with graded voting rights

• Hybrids occur:• Atria and HKScan in the meat sector. Controlled by primary

cooperatives• Metsä Board in forest and paper industry. Controlled by

primary cooperative Metsäliitto• Pohjola-Pankki. Central bank for primary cooperative banks and

controlled by them.

Meat cooperative hybrids• Two cooperative groups in the meat sector with a public

limited company (plc) on the open stock market

• Atria plc is controlled by three northern primary cooperatives. Atria´s turnover 1 400 million euros. Members in cooperatives 6000.

• HKScan plc is controlled by one southern primary cooperative. HKScan has a turnover of 2 500 million euros of which a mayor part comes from the activities abroad. The cooperative has 1400 members.

•  The plc:s process and market the farmers´ produce.

HKScan: public company controlled by a cooperative. Has meat prosessing companies in Sweden, Denmark, Estonia, Latvia and Poland. Sales companies in Lithuania, Germany and England + representation in Russia.

Atria: public company controlled by three cooperatives. Operates is Sweden, Denmark, Estonia and Russia.

Atria. Turnover €1,3 Bn

Finnish meat cooperatives have internationalized

HKScan Turnover € 2,5 BnMeat markets

Estonia 35 %

Latvia 18 %

Lithuania 10 %

Poland 10 %

Sweden has lost most of its meat processing to the Finnish co-operative-hybrids

Valio Group• 8 000 milk producers

• 8 dairy cooperatives

• Valio Ltd, 100 % owned by cooperative dairies

• turnover EUR 2 billion. More than 1/3 abroad

• Personnel 4600

• Invesments in 2013: 118 million euros

• functional foods

• Subsidiaries in 5 countries (Sweden, Estonia, Russia, China and USA), exports to over 100

Eggs & Vegetables Small in turnover compared to milk and meat

• Eggs. one cooperative Munakunta with 220 members. Market leader with a 40 % market share. Turnover 60 million euros.

• In June 2014 Danish HEDEGAARD foods acquired 50% of the shares of Munakunta. A new company will be formed called Muna Foods Oy. All business activities in Munakunta will be transferred to the new company.

• Eggs are protected from import because Finland is salmonella free.

• Vegetables. Two major cooperatives one specialized more on tomatoes and cucumber, the other on open-field cultivation (leek, lettuce etc.). Small potato cooperatives.

• Total turnover 60 million euros and 350 members.

Forest sector Metsä Group 124 000 forest owners as members in the cooperative

Metsäliitto

Once the largest producer cooperative’s in Europe, now 5th

Metsäliitto controls Metsä Board plc on the Helsinki stock market

Tissue and cooking papers, board, pulp, wood products and wood supply

Turnover EUR 2 billion (2013)

Employes 3100

9 production units in three European countries

Cooperative banks and insurance• Cooperative banks

• two competing cooperative bank groups

• 1,5 million memberships

• OP-Pohjola group, including Pohjola Bank plc, biggest Finnish owned finance group

• market share over 37 % of the deposits

• increasing bonuses

• S-bank ltd owned and run by consumers´ coops has2,8 % of deposits

• Mutual insurance

• mutual fire insurance started in 1660s

• strong indemnity (damage) insurance

• nearly all obligatory pension insurance is mutual

Consumer cooperatives

The S-Group- consists of 20 independent, regional cooperatives and the SOK which is owned by them - 8 local cooperatives are also included in S Group - market share in daily goods 44 %- biggest hotel and restaurant owner in Finland

- second largest in petrol stations

- S-bank has 2,8 % of deposits - first and only in-store bank in Finland

- in 2014 S-bank and LocalTapiola Bank merged

The Tradeka cooperative- one cooperative with 270 000 members- strong in hotels and restaurants; turnover 580 million euros - has no retail anymore

The S Group in brief, 2014

• SOK (Suomen Osuuskauppojen Keskuskunta) operates as the central firm for the cooperatives and produces procurement, expert and support services for them

• SOK is also in charge of S Group's strategic steering and the development of the various chains

• S Group has operations throughout Finland, in the Baltic Countries and in St. Petersburg, Russia

• Retail sales: EUR 12 billion (excluding VAT)• Profit before exceptional items: EUR 212 million• Bonuses etc. paid: EUR 420 million• More than 2 million members• Over 1 600 outlets• 47 400 employees

S-Group business structure

S Group Grocery Trade Chain management

Cars andautomotive goods

Hotels and restaurants

Service station storesand fuel sales

Grocery sales

Agribusiness

Department storesand speciality goods

Other S Group’s restaurants S Group’s car dealerships

S- bank

The OP-Pohjola Group in brief• Finland's largest financial services group• Consists of some 180 independent member cooperative

banks and OP-Pohjola Group Central Cooperative which they own, including its subsidiaries and closely related companies

• Cooperative bank federations are member banks' regional cooperation bodies. There are 16 federations, taking the form of registered associations. The federations nominate their candidates for the OP-Pohjola Group Central Cooperative Supervisory Board

• OP-Pohjola Group Central Cooperative carries out control and supervision duties from its position at the head of the financial and insurance conglomerate formed by OP-Pohjola Group. It also acts as the Group's strategic owner institution.

The Corporate Governance of OP-Pohjola

New wave cooperatives

• Co-ops play a significant role in community services in rural areas

• New wave of co-ops started in early 1990s, when Finnish economy was in depression and unemployment rose up to 17 %

• Ministry of Labour and Pellervo had a common project to increase co-operative entrepreneurship

• Since then every year about 200 new cooperatives have been established (228 in 2012, 208 in 2013)

Reasons for the rise of new cooperatives• Economic restructuring• Redefinition of welfare policies (radical cuts in services

provided by municipalities) • Changes of values in society• Massive unemployment• Alternative way of self-employment • Changes in agriculture• Local solutions to local problems• Networking• Evolution and development in the third sector area• Better advisory services for cooperatives

New Cooperatives in Finland31.12.2010

Sources:

Finnish National Board of Patents and Registration, andPELLERVO Confederation of Finnish Cooperatives

Worker, service and expert co-ops  855

Marketing co-ops 355

Culture, publishing and media  235

Purchasing co-ops 98

Social, health and welfare co-ops  92

Travel services co-ops 67

Energy co-ops 78

Development co-ops 49

Water co-ops 1039

Others 122

TOTAL 3.020

Cooperatives in colleges and schools• Cooperatives are used as a tool for training in

entrepreneurship in Finnish colleges • Educational model where students form, run and

develop cooperatives for marketing their skills has proved to be very successful

• Students learn how to run a business and how markets in their own field function

• The model has been exported to colleges and universities in several other European countries

• There are around 50 student co-ops

Co-op Network Studies= university network of co-operative and social economy studies

• Established in 2005• The network consists of 8 universities and it is co-ordinated and

administrated by the University of Helsinki Ruralia Institute. • CNS-coordinating team works with the board composed of the members

nominated by the member universities and Finnish Co-operative Council.

• TASKS• Production and coordination of multidisciplinary university degree studies in

co-operative studies• * 25 credits (basic studies) + 25 credits (intermediate studies),• * 100 % university education through eLearning

• Dissemination of experiences and know-how• * Searching for international partnerships• * Applications to adult education and training• * Annual research, exchange and innovation seminars

The cooperative council of Finland• Formed in 2001• Coordinates the promotion of cooperation and mutual cooperative

interests in Finland • Members from all cooperative organisations • Works on cooperative research, cooperative development and as lobbyist

in all questions concerning cooperation in Finnish society • The aim is to improve operational preconditions for cooperation in Finland

and internationally • By combining scholarship funds the council has improved the financing of cooperative

research projects more effectively and this has resulted in several doctoral theses in the field of cooperation

• The set up and financing of Co-op Network Studies an internet based academic training program at Helsinki University

• Coordination of activities for the United Nations’ International Year of Co-operatives 2012 and the Co-operative Decade 2011-2020

• Endowed a new professorship in Co-operative Management established at Lappeenranta University of Technology

• From 2005 almost 2 mil € directed to co-operative research and 255.000 € given to co-operative education

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

The Co-operative Decade in Finland

Project on Co-operative Entrepreneurship Yhdessä yrittämään

Taxation

Representation in the ICA board (Santamäki)

Project on Co-operative Education (Yvi)

Virtual environments on co-operative knowledge

Professorship on Co-operative Management

Co-op Network Studies

Working groups for the IYC and the Co-op Decade

Hedvig 150Hannes 150

Co-op Law

Journal of Cooperative Organization and Management

Blueprint for a Co-operative Decade

Governments’ Plan of Action 2015-2019

Representation in the board of Cooperatives Europe (Näsi)

Targets for the governmets’ plan of action 2011-2015

IYC

The Finnish Co-operative Council

Commitee of research and education at University of Helsinki - Supporting co-operative education and research

• Founded in 1899

• Today 265 members. 2/3 of the members are cooperative banks

• All producer cooperatives in Finland are directly or indirectly members.

• Personnel 7 (+ 11 in magazines)

• Turnover about 5 million euros

• Pellervo –name comes from the national epic of Finland Kalevala where Sampsa Pellervoinen is the patron of field and harvest

PellervoCONFEDERATION OF FINNISH COOPERATIVES

According to its by-laws: Pellervo

1. Promotes and develops competitive operational conditions for cooperatives (lobbying)

2. Improves the professional and intellectual skills of the administrators in cooperatives (training, publications)

3. Promotes and develops the cooperative idea and the strategic advantages of user-owned enterprises and encourages the foundation of new cooperatives in all sectors of economy (develop cooperatives, give advice to small new cooperatives)

Pellervo’s strategy 2012-2017 ”Giving cooperation a positive spin in society”

Promoting cooperativecompetitiveness in society

Making cooperation interesting and known

Improvingconditions for cooperation

Strengtheningcooperativeentrepreneurship

JOINTLY OWNED ASSOCIATIONS

ANNUAL MEETING

MEMBERS’ COUNCIL (25)

BOARD OF DIRECTORS (9)

MANAGING DIRECTORSami Karhu

ADMINISTRATIVESERVICES

Juhani Lehto

BRUSSELS OFFICE

Jonas Laxåback

FOOD & FARM FACTS LTD (TNS Gallup), Market research

Anne Kallinen

PELLERVO TRAINING INSTITUTE LTD.Kari Huhtala

PTT - Pellervo EconomicResearch Institute

Pasi Holm

COOPERATIVE COUNCIL

Otto Mikkonen

PELLERVO PUBLICATIONS SERVICES LTD.

Antti Äijö

Chairman Timo Komulainen

Chairman Martti Asunta

MEMBER ORGANISATIONS (265)

CONFEDERATION OF FINNISH COOPERATIVES

SWEDISH COOPERATIVESERVICESPer-Erik Lindström

OSUUSTOIMINTA (Co-op) MAGAZINE: Riku-Matti Akkanen

NEW COOPERATIVES: Juhani Lehto

INTERNET SERVICES: Matti Ketola

INTERNATIONAL RELATIONS: Hanna Muukka

www.pellervo.fi

LEGAL SERVICES

Anne KontkanenTeemu PakarinenTeemu Pakarinen

PELLERVO MAGAZINECOOPERATIVE SERVICES

Sami Karhu

Tiina Huvio

FFD Finnish Agri-Agencyfor Food and Forest Develop.

Pellervo works through:• Pellervo, the society itself

* Information, cooperative development, lobbying, Brussels’ office * Legal services

• Pellervo-Media Oy* Magazines and other publications

• PI Leadership Academy/Pellervo Institute* Training

• Pellervo economic research, PTT* Economic forecasts 4 times per year: economics, agriculture, forestry

* Reports etc.• Finnish Gallup, Elintarviketieto Oy * Market research• Finnish Agri-agency for Food and Forest Development (FFD) * Projects in developing countries• Finlands Svenska Andelsförbund

* Pellervo’s services in the Swedish language• International organisations

* COGECA, ICA, Cooperatives Europe, NBC, WFO

PELLERVO’S SERVICES AND PRODUCTS

Eu

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Time

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TAB

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Co-op consulting service

                      

www.pellervo.fi

-annex

                                                                  

Handbook for

bookkeeping in co-ops

§PTT

Gallup Elintarviketieto

                      

§

Publications in English

Members of Pellervo (265)161 co-operative banks

20 Local mutual insurance companies = LocalTapiola

19 dairy co-operatives + Valio Ltd

38 co-clubs, vocational schools and rural and domestic Societies

6 phone co-ops

4 saw-, machine- and mill co-ops

4 meat co-operatives

4 electricity co-operatives

2 cooperative retail societies

Central Union of Agricultural Producers and Forest Owners (MTK)

Finlands Svenska Andelsförbund r.f. (Swedish-speaking Pellervo)

Metsäliitto Osuuskunta (Forest cooperative)

Munakunta (Egg cooperative)

FABA Osuuskunta (Animal Breeding cooperative)Osuustoiminnan Kehittäjät - Coop Finland ry (new-wave co-ops)

SVOSK (Central organisation for water cooperatives)

Anu Puusa Pohjois-Karjalan Ok (consumer)Ass. Prof./Ph.D. Member of the Board of Joensuu

Directors

Seppo Paavola Atria Ltd. (meat) Farmer, Kaustinen Board of Directors

Lars Björklöf Andelsbanken Raseborg (bank) M.Sc.(Econ. & Agr.) Managing director

Also participating in Board meetings:

Chairman of the Members’ council:

Timo Komulainen Lihakunta (meat)Agr.Counsellor/farmer Chairman of the Nurmes Board of Directors

Board of Directors of Pellervo (January 1st 2014)

President:Martti Asunta Metsäliitto Osuuskunta (forest) M. Sc. (Agr.& For.) Kuru Chairman of the Board of Directors

Vice-President:Tiina Linnainmaa Osuuskunta Länsi-Maito Dairy farmer, (dairy), Dairy farmer Member of the Board of DirectorsHämeenkyro

Jan Lähde Munakunta (egg)M.Sc.(Econ.), Turku CEO

Petri Pitkänen LähiTapiola (insurance)M.Sc. (Agric.), Espoo director

Kirsti Kirjonen Lounaismaan Osuuspankki (bank)M. Sc. (Ekon.), Chairman of the Board of Directors Salo

Pentti Santala Valio Ltd. (dairy)Farmer, Ruokolahti Chairman of the Supervisory Board

Pellervo represents its members in international organisations

• COGECA (Brussels)• General Confederation of Agricultural Co-

operatives in the European Union, founded in 1959

• Pellervo member since 1995 (observer from 1992)

• Organisation for agri-cooperatives in the EU. It works together with COPA, the producers organisation in the EU

• Secretary General Pekka Pesonen• Pellervo’s Brussels office is working tightly

with COGECA.

• NBC• Confederation for Nordic farmers’

organisations, founded in 1934• Circulating secretariat• Meetings and seminars.

• ICA (Brussels)• International Co-operative

Alliance, founded in 1895• Pellervo member since 1902• Secretary General Charles Gould • ICA's European organisation is

Cooperatives Europe (Brussels).

• WFO (Rome) • World Farmers’

Organisation, founded in 2010

Thank you!