Producer Cooperatives Integration and Growth Strategies in Nordic Countries

Transcription

1 71 st INTERNATIONAL DAIRY SHOW FIFTH EUROPEAN DAIRY FORUM Cremona October 28 th 2016 Producer Cooperatives Integration and Growth Strategies in Nordic Countries Petri Ollila Professor University of Helsinki, Finland

2 Outline of presentation Producer cooperatives in Nordic countries Cooperative growth Cooperative governance Internationalization Concluding remarks

3 Market share of producer cooperatives PTT

4

5 2012

6 Most important co-operative commodities Finland Sweden Denmark Italy Forestry Cereals Cereals Fruits&Veget. Meat Dairy Meat Dairy Dairy Meat Dairy Meat Cereals Fruits&Veget. Frits&Veget. Wine

7 Five largest cooperatives turnover million euros Finland Sweden Denmark Italy

8 Dairy cooperatives market share

9 MARKETS Competition Negotiation power Growth CAPITAL Membership capital Invested capital External capital Member investments Scale economies Need of capital Structural changes MEMBERS

10 Alternative Cooperative Models: an ownership rights perspective Traditional cooperatives Ownershiprights New Generation Coperatives Memberinvestor Cooperatives Proportional Memberinvestment Cooperative Cooperatives with Capital- Seeking Entities Investor Share Companies Chaddad&Cook 2001 (R) Petri Ollila Investor-Owned Firms

11 Governance of HK Ruokatalo Two sets of shares: % of shares No of votes A 90 1 K Processing Slaughtering External investors 12 % of shares 12 % of votes Collecting 52 % of shares 18 % of votes Sveriges djurbönder Production LSO cooperative 36 % of shares 70 % of votes LSO Petri Ollila 2016

12 Valio s strategic alternatives in 1985: 1. Development of the present structure having larger units 2. Development of a regional structure with only a few production units. 3. Only one national cooperative Valio as federated unit.

13 Valio at present Valio Ltd. is owned by 17 dairy cooperatives The Board of Trustees consists of 24 members. All are dairy producers. The Board of Directors consists of four dairy farmers

14 MARKETS Competition Negotiation power Growth CAPITAL Membership capital Invested capital External capital Member investments Scale economies Päätösvalta Need of capital ja -kriteerit Structural changes Decision-making power and criteria MEMBERS Increase of size Heterogeneity Increase of knowledge

15 MARKETS Competition Negotiation power Growth CAPITAL Membership capital Invested capital External capital Member investments Scale economies Päätösvalta Need of capital ja -kriteerit Structural changes Decision-making power and criteria MEMBERSHIP RELATIONS Member vs. producer Patronage refund vs. interest for capital Patronage vs. ownership Life cycle, producer organizations

16 Co-operative life-cycle Mergers? Share company Capital

17 Co-operative life-cycle Size Mergers Capital Time

18 Why to take members money abroad? MARKETS Competition Negotiation power Growth Internationalization CAPITAL Membership capital Invested capital External capital Member investments Scale economies Päätösvalta Need of capital ja -kriteerit Structural changes Decision-making power and criteria How to treat memberships in different countries? Members and non-members? MEMBERSHIP RELATIONS Member vs. producer Patronage refund vs. interest on capital Patronage vs. ownership Life-cycle, producer organizations Equal/fair treatment Receiving obligation vs. restrictions of supply Member services

19 Four strategies to become international (Nilsson&Madsen 2007) 1. National cooperative recruits members from other countries 2. National cooperative acquires foreign company/cooperative and invites customers/producers as deliverers/members 3. A cooperative establishes a new cooperative abroad 4. Cooperatives in two countries merge (c) Petri Ollila 2016

20 Arla has 13,474 members in seven European countries UK 21.9% Denmark 23.4% Sweden 24.9% Netherlands 0.3% Germany 20.5% Belgium 7% Luxembourg 1.8%

21 A democratic dairy cooperative DENMARK SWEDEN GERMANY LUXEMBOURG BELGIUM HOLLAND UNITED KINGDOM DISTRICT COMMITTEE REGIONS LOCAL ORGANISATION LOCAL ORGANISATION BOARD OF REPRESENTATIVES NATIONAL COUNCIL NATIONAL COUNCIL BOARD OF DIRECTORS 10/27/ CENTRAL EUROPEAN COUNCIL NATIONAL COUNCIL

22 Concluding remarks Competitive situation has forced to gain economies of scale and market power Need of capital has initiated new organizational structures New structures challenge traditional cooperative institutional models Cooperatives become closer to Investor-Owned governance structures Internationalization of cooperatives created new governance challenges Despite of expectations, cooperatives have managed the situation quite well In this competitive situation, cooperatives are not able to maintain all the traditional cooperative principles One member one vote Equal treatment Patronage refund only to members Cooperatives must consider, which are the most important cooperative characteristics to be maintained!

23 Thank you for your attention!