Recently, a VistaComm client decided to challenge the idea that cooperatives are becoming too big to care about and serve their customers-members. In a magazine article titled “The Big Bad Wolf,” this local cooperative pointed out that members can become obsessed with size and see growth as a reason to fear and quit doing business with their own company.
This company recently built a large fertilizer and chemical warehouse in partnership with regional cooperatives that needed wholesale distribution facilities in the area. Both organizations benefited from this partnership, but the size of the project prompted some of the local cooperative’s members to regard their own company a monster that had grown too big to have the farmers interests at heart.
How big is too big?
From what I hear, many of our clients are facing the same issue with their customer groups. Some members believe their co-ops have gotten too big for its britches. They contend that the cooperative system is gobbling up the competition and becoming a beast too large to control. They yearn for the old days when small farmers patronized small local co-ops.
Yet, many VistaComm clients feel they must grow, either through acquisition of existing businesses or so called “organic growth” of their trade territories. They believe getting bigger is an important component to remaining relevant to their members.
“How big must a cooperative get in order to serve its customers well in the current economy?”
Perhaps a more important question is, “How big must a cooperative get in order to serve its customers well in the current economy?” Here’s what I’ve learned while helping our clients communicate.
A co-op must be big enough to:
- Attract exceptional talent
- Overcome government regulations
- Differentiate from the competition
- Collaborate with others
Attracting exceptional talent
In an economy where unemployment is at its lowest level in decades and Baby Boomers are retiring, a company must be big enough and offer the kind of benefits and challenges necessary to attract bright new people.
With the flood of technologies knocking at farmers’ doors, there is a great need for talent schooled and experienced in agronomy, animal nutrition, marketing and energy to help farm customers make good choices. There is also a great need for talented operations personnel, with experience and knowledge in products and the equipment necessary to apply them.
Many of VistaComm’s clients have relationships with universities and vocational schools that can supply these exceptional employees. Moreover, some of our best clients offer internship programs that offer students experience and give the co-op an opportunity to look at the pool of full-time employees that follow graduation.
But to attract that kind of talent requires an exceptional workplace that is well-regarded in the industry, has competitive wages and benefits, and offers a sufficient challenge for bright, tech-savvy people just beginning their careers. These requirements are usually found in growing companies.
The federal government’s Food Safety and Modernization Act (FSMA) has forced many feed milling firms out of business.
To continue serving their livestock customers, the rest are engaged in some sort of expansion—usually involving closing small, older mills and building large modern mills. These mills not only meet regulations and allow these cooperatives to stay in the animal nutrition business, but they also produce a higher quality of feed and more choices for their livestock producer patrons.
However, to afford the depreciation on these large new facilities, the cooperative must hire more sales personnel and spread their services over a larger market area—including manufacturing feed for other companies. This requires a commitment to grow.
Differentiating from the competition
Remaining relevant to the customers in these times of surging technology, big box stores, and on-line giants may also necessitate growth.
That growth will depend on what the competition is offering? One VistaComm client in the power equipment business is faced with stiff competition from big box stores. The way that co-op differentiates itself is to “set up, gas up and deliver” the mowers and four-wheelers it sells, ready for the customer to use. It also picks up and repairs that equipment when it breaks down.
Other VistaComm clients, particularly those who deal in commodities like fertilizers, are finding the need to expand their speed and space to serve their farmer-customers who are also growing and getting faster at planting their crops.
One CEO told me “Agri-business has got to become like Amazon to our customers, because they’ve come to expect that kind of selection and instant gratification in other areas of their lives.”
All this requires growth—getting bigger in facilities, rolling stock and staff.
Collaborating with others
To build some of these larger facilities, like fertilizer plants or feed mills, cooperatives must have grown to a sufficient size and have sufficient human and financial resources to partner with other cooperatives or private companies on projects that will be mutually beneficial.
As I mentioned, one of VistaComm’s clients is a local cooperative which recently collaborated with a regional cooperative to build a large agronomy center. This center provides speed and space—both for the local cooperatives farmer-customers and for other local cooperatives that are customers of the regional.
Cooperatives must be big enough for other reasons than the few I’ve stated above, but you get the idea. The challenge is pointing out to your farmer customers the need to grow and convincing them that, as member-owners, you still have their best interests at heart.
One VistaComm client tells its customers, “Our goal isn’t to be the biggest—it’s to be the best for you. In our world, becoming bigger is an outcome of striving to be the best.”
One way a cooperatively owned business can strive to be the best is by keeping a close ear to the pulse of customer/owners. VistaComm can help you do this, by third-party administration and results analysis of professionally designed surveys that reveal what your customers need and value.