Chapter 12Chapter 12

Marketing byMarketing by

Farmer Groups:Farmer Groups:

Collective ActionCollective Action

Collective ActionCollective Action

By acting jointly, farmers can achieve By acting jointly, farmers can achieve marketing objectives they cannot achieve marketing objectives they cannot achieve by acting separatelyby acting separately

Goals:Goals:– To improve demandTo improve demand– To regulate supplies and qualities more in To regulate supplies and qualities more in

keeping with demandkeeping with demand– To improve competitiveness and efficiency in To improve competitiveness and efficiency in

the marketing channelthe marketing channel– To gain more channel control and leadershipTo gain more channel control and leadership

Generic PromotionGeneric Promotion

Promotion of a particular commodity Promotion of a particular commodity financed collectively by producersfinanced collectively by producers

Includes advertising and other activities Includes advertising and other activities to increase demandto increase demand

Purpose: to change demand and raise Purpose: to change demand and raise priceprice

Possible Short- and Long-TermPossible Short- and Long-Term Impacts of Generic Promotion Impacts of Generic Promotion

Program forProgram forGeneric PromotionGeneric Promotion

Clear, measurable objectivesClear, measurable objectives A strategy fitting commodity, marketing A strategy fitting commodity, marketing

system, buyers’ attitudessystem, buyers’ attitudes Use of professional advertising agencyUse of professional advertising agency Sufficient money to achieve objectivesSufficient money to achieve objectives A program to evaluate resultsA program to evaluate results

Marketing CooperativesMarketing Cooperatives

Cooperative: a user-owned and controlled Cooperative: a user-owned and controlled business from which benefits are derived business from which benefits are derived and distributed equally on the basis of useand distributed equally on the basis of use

Differ from investor-owned firm (IOF)Differ from investor-owned firm (IOF) Types of cooperatives:Types of cooperatives:

– FederatedFederated– CentralizedCentralized– A combination of federated and centralizedA combination of federated and centralized

Top 10 Cooperatives,Top 10 Cooperatives,by Revenueby Revenue

Goals of Goals of Marketing CooperativesMarketing Cooperatives

Provide efficient marketing outletsProvide efficient marketing outlets Expand demand for members’ Expand demand for members’

commoditiescommodities Provide better coordination between Provide better coordination between

production and consumptionproduction and consumption Provide more dependable market outletsProvide more dependable market outlets Achieve channel leadership, including Achieve channel leadership, including

vertical integrationvertical integration

Societal LicenseSocietal Licenseto Marketing Cooperativesto Marketing Cooperatives

Continues to evolve, but main features Continues to evolve, but main features cast by Capper-Volstead Act of 1922cast by Capper-Volstead Act of 1922

Fairly exempt from antitrust legislationFairly exempt from antitrust legislation– Secretary of agriculture empowered to Secretary of agriculture empowered to

intervene with any coop he finds to be raising intervene with any coop he finds to be raising prices undulyprices unduly

Income tax laws recognize unique non-Income tax laws recognize unique non-profit nature of cooperativesprofit nature of cooperatives

Problems ofProblems ofManaging a CoopManaging a Coop

Raising capitalRaising capital Recognizing that patron-owners may Recognizing that patron-owners may

make management challengingmake management challenging Distinguishing duties of directors and Distinguishing duties of directors and

managersmanagers Managing competition with other Managing competition with other

cooperatives cooperatives

Criteria for SuccessfulCriteria for SuccessfulMarketing CoopMarketing Coop

Requirements:Requirements:– Run a viable businessRun a viable business– Keep producers in control of the boardKeep producers in control of the board– Keep board in control of coopKeep board in control of coop

Expected accomplishments:Expected accomplishments:– Increased demand at farm level for the marketed Increased demand at farm level for the marketed

commoditycommodity– Assurance for members that they have dependable Assurance for members that they have dependable

market access, power and influence in marketing market access, power and influence in marketing channel that they can protect in the futurechannel that they can protect in the future

New GenerationNew GenerationCooperativesCooperatives

Distinct business from traditional coopDistinct business from traditional coop Principles of new generation coops:Principles of new generation coops:

– Closed membershipClosed membership– Upfront equity position by membersUpfront equity position by members– Delivery rights in proportion to equity positionDelivery rights in proportion to equity position– Transferability of delivery rights and existence Transferability of delivery rights and existence

of market for delivery rightsof market for delivery rights– Possibility of immediate return of profit to Possibility of immediate return of profit to

membersmembers

Farmers’ Bargaining GroupsFarmers’ Bargaining Groups

Bargaining association: coop that Bargaining association: coop that represents its members by collectively represents its members by collectively negotiating terms of trade but does not negotiating terms of trade but does not engage in physical aspects of marketingengage in physical aspects of marketing

Association has most clout when in control Association has most clout when in control of commodityof commodity

Processors may resist dealing with Processors may resist dealing with associationsassociations

Societal LicenseSocietal Licenseto Farmer Bargainingto Farmer Bargaining

Basically same as for cooperativesBasically same as for cooperatives Agricultural Fair Practices Act of 1967 Agricultural Fair Practices Act of 1967

(S.109), intended to win solid protection (S.109), intended to win solid protection for farmers, was weakened by strong for farmers, was weakened by strong processor lobbyingprocessor lobbying

Farmer bargaining purely voluntary on Farmer bargaining purely voluntary on both sides (farmers and processors)both sides (farmers and processors)

Class ExerciseClass Exercise

For assigned commodity, provide an For assigned commodity, provide an example of how producers are working example of how producers are working collectively to market or add value to the collectively to market or add value to the commoditycommodity