Episode 6 Part 2: Roundtable

Breaking the mould: How small producers can gain power and position by working together

Breaking the mould: How small producers can gain power and position by working together


AIRDATE: 26 Aug 2020 7:45pm AEST (approx 60 mins)

During this roundtable we examine how some of Australia’s most interesting co-operatives have rethought how they do business by smaller businesses joining forces and increasing their yields, the role of strategic partnerships, maximising returns and competing on
a global scale.

This was about businesses coming together to create scale, compete with the corporates and access markets they couldn’t reach on their own, and the panel will explore how to make such collaborative cohesion work. What are the processes they need to put in place?
How do they make co-operative working fair and equitable? How has it enabled them to compete on the world stage? What kind of improvements have they seen in their own businesses? And what happens when it all goes wrong?

Journalist Pete Lewis will explore how the process of different operators working together can work, along with a panel consisting of:

  • Justin Phillips, Assisting Consultant / Secretary, Limestone Coast Fisherman’s Co-operative
  • Danielle Adams, Chief Executive Officer, Clarence River Fisherman’s Co-operative
  • Greg Wall, Former Group CEO of Capricorn Society and Director of the International Co-operative Alliance
  • Melina Morrison, Chief Executive Officer, BCCM
Episode 6 Part 2 Transcript

Pete Lewis:

Hi. Welcome to Cooperative Conversations, a livestream series where we connect you to the real stories of Australian primary producers who are working and growing their businesses together co-operatively.

Pete Lewis:

Hi, I’m Pete Lewis and one way or another, I’ve been helping Australian farmers tell the great stories of food and fiber production in this country for 25 years. I’m delighted to be anchoring this round table discussion tonight. We’re looking at some really significant issues empowering people to create, sustain and build better co-operatives.

Pete Lewis:

So let me just introduce tonight’s panel, our talking guests, and we’ve been chatting about how co-operative members can join forces for good. It’s an excellent springboard to talk about how small producers can gain market power by working together specifically. To tease those issues out with us tonight we have three outstanding agribusiness leaders working with co-operative farm models. Firstly Justin Phillips from the Limestone Coast Fishermen’s Co-op. A little earlier you would have seen we spoke to Rodger Long from the Limestone Coast Fishermen’s Co-op. He’s the acting assisting consultant and company secretary there for the Limestone Fishers.

Pete Lewis:

Greg Wall is joining us from Perth in Western Australia. Greg’s a former Group CEO of Capricorn Society and a director of the International Cooperative Alliance, ICA, the global peak body of co-operatives. He’s also the chair of ICA’s Audit and Risk Committee and to add another hat to his collection, he was the founding chair of the Business Council of Cooperatives and Mutuals, an envoy for this program, co-operative farming. And if that doesn’t keep him busy enough, he’s Chairman of the Margaret River Wine Association. I’m sure that brings him an awful lot of pleasure.

Pete Lewis:

Also joining us from Maclean in Northern New South Wales, Danielle Adams, who’s Chief Executive Officer of the Clarence River Fishermen’s Co-op, the Secretary/Chairperson of New South Wales Fishermen’s Cooperative Association, the Northern Rivers Cooperative Alliance Group and a former board member of Regional Development Australia from the Northern Rivers area.

Pete Lewis:

And as usual, we’re joined by Melina Morrison who’s the CEO of the Business Council of Cooperatives and Mutuals.

Pete Lewis:

Welcome one and all and thank you so much for your time.

Pete Lewis:

Before we get down to tin tacks, if you have a burning question as a result of tonight’s topic, ask away to our online team, they’re standing by via our chat box which is located to the right hand side of this screen. And don’t forget, you can also vote for the question that tickles your fancy via the vote button. We’ll try and get to as many questions as possible during the time that we have allowed.

Pete Lewis:

Now, as I indicated Justin, we’ve just spoken to Rodger Long for some great history, a bit of background into the Limestone Coast Fishermen’s Co-op. For those tuning in, what’s the business you’re in and how long have you been doing it?

Justin Phillips:

It sounds reasonably straightforward Pete. So the Limestone Coast Fishermen’s Co-op is an exporter of premium live southern rock lobster, primarily into China. We buy our members’ catch and also some product from non-members who are willing to sell to us or supply to us and we accumulate that in our live holding facilities at Beachport and Port McDonald in South Australia and pack and export that product live to China.

Pete Lewis:

Now, in your opinion, why would smaller producers want to get together and join forces in this way?

Justin Phillips:

So, for us Pete, it’s primarily about those smaller generational fishing families in our zone and our fishery about securing our future in the industry. We’re seeing a rapid, and I guess it’s increasing every year, change in the structure of that industry through rationalisation and corporatisation. So it’s about, I guess, those smaller families within the industry clubbing together and being able to compete at the same level as some of those bigger players.

Pete Lewis:

Now, I imagine that prior to getting together with your co-operative, they would have been tenaciously competing against one another and the fact that you’ve been able to fuse them together so rapidly and you were very successful with the co-operative and growing that membership is proof that there is strength in numbers.

Justin Phillips:

Yeah. Absolutely. And I guess with the change in environment that we’ve experienced in this COVID pandemic period, particularly with the market impacts in China, we’re seeing, I guess, a lot of interest now in our structure from across the industry and even in fisheries elsewhere as well, with I guess what we’re being able to deliver for our members, working collaboratively and co-operatively together and I guess having a bit more of a say in and control over their own destiny at the moment.

Pete Lewis:

We will talk through some of the very exciting developments and innovations which are heading your way quite rapidly and the impact that that’s going to have on local jobs which is very exciting in that neck of the woods.

Pete Lewis:

Danielle, to the Northern Rivers, how did the Clarence River Fishermen’s Co-op form and what impact has it had in that neck of the woods?

Danielle Adams:

So, incorporated in 1945, I couldn’t tell you, I wasn’t around then, so I couldn’t tell you exactly how they established, however, being seven hours north of Sydney and four hours south of Brisbane, there was a real need to bring everybody together and get the product to market because the actual opportunities of buyers coming to them was just negligible. We are an estuary and ocean environment, so we’re quite fortunate in having a very large estuary fleet as well as an ocean fleet so that covers some of our premium products such as king prawns, school prawns and our river mullet.

Pete Lewis:

In that time, since the mid ’40s, there has been an astonishing and dramatic change in the way family fishers go about what they do, all over Australia, but particularly along the Eastern Seaboard. Do you think being part of a co-operative has helped cushion some of those obviously significant blows? Obviously there’s a lot less fishing boats and fishing effort going in, but has being part of a co-operative significant do you think?

Danielle Adams:

I think it has, as you said, softened the blow. One of the, my time here has only been nine years, but what I’ve seen is that the industry, through various methods, particularly through government changes has actually moved away from being that cottage-based industry and changed more to an investor environment. So you are actually seeing that generational family orientated fisher moving away from the industry and the co-operative, in so many ways, has actually tried to cover the tracks I guess in the changes to the industry a bit, soften the blow and pulled everything together to make it that little bit more valuable to become part of a co-operative. So we’ve worked really hard to ease the pain a little bit with our shareholders.

Pete Lewis:

Sure. Greg, your previous co-operative, Capricorn, was initially formed by service station owners and it grew from lucky seven to around 22,000 small business members, obviously a model that resonated very loudly and clearly. Can you tell us how this all came about and what lessons you learnt from that that are really importantly applicable to the ag sector.

Greg Wall:

Yeah. Good evening Pete. It’s a great story really and as you said, it’s not really an agricultural story but it’s still relevant to agriculture and agricultural co-operatives. Like all successful co-operatives, it grew out of a business need. And over 40 years ago, there was 11 Golden Fleece service station owners who were having a beer in the Windsor Hotel in South Perth, straight after what was a national Golden Fleece convention here in Perth. And after a few beers, they started to compare the price they were paying for various parts that they used to repair their customers’ cars, perhaps a bit of bragging going on, not quite sure. And they were saying what price do you pay for fan belts or spark plugs or oil filters or whatever it may be. And what they discovered was that they were all paying different prices for the same parts form the same suppliers. And you can imagine the big multinationals or international companies versus small one man band mechanics, there was no great bargaining power there and they were price takers, if you like and a lot of it depended on personality.

Greg Wall:

So after a bit of research, they decided to form a co-operative to give themselves a bit of buying power and those 11 grew to 22,000 across Australia and New Zealand, buying $2 billion in automotive parts from their supply chain. They’d also developed their own insurance mutual, writing $50 million in insurance premiums, had developed equipment finance business, a successful travel business and was providing access to valuable technical support that’s internationally available, but they bought it for individual members on how to service various makes and models of cars.

Greg Wall:

So it was a unique structure, provides exceptional returns to members and in the 40 odd years I’ve been in business, I’ve never seen a business that’s had such high level of satisfaction, both for members and the supply chain who were supplying those members. It’s a great story and obviously we’ll talk a bit more about it as we go on.

Pete Lewis:

And it is, as you say, a template that, it doesn’t need to get to that size and that complexity clearly, but it is a template that works just as well in ag as it does in any other field.

Greg Wall:

Absolutely, because what you’re looking at is small individual mechanics, and perhaps in the agricultural field, farmers, grouping together to provide themselves with better buying power, or in some cases, better access to markets, it’s a similar sort of concept. Great story.

Pete Lewis:

Sadly Greg, you and I would be the only ones old enough to remember that Golden Fleece was, in fact, a brand of petrol here in Australia, so there you go.

Greg Wall:

That’s right.

Pete Lewis:

There’d be a lot of people scratching their heads out there going, “Golden Fleece, is this a wool business?”

Pete Lewis:

Melina, what’s the state of play in ag when it comes to smaller producers joining forces in the Australian context?

Melina Morrison:

Well I think it’s been brilliantly described by Greg then. It’s the same in ag as it was for those Golden Fleece operators 35 years ago or whenever they got together in the pub. If the bargaining power you have as a single entrant in a market isn’t good enough for you, if you’re not making a quid and it’s not sustainable, then co-operating with other people in business makes sense. We’re in the middle of a pandemic and there are agricultural producers out there that have been experiencing a lot of crisis and challenges around farming. Actually before the pandemic and supply chain interruptions, we had bush fires, we’ve had droughts, various other things, elements that make farming volatile.

Melina Morrison:

So the state of play is that co-ops are still a very popular model for people to come together, farmers, fishers and foresters as Justin was saying, to compete in the marketplace, but you don’t have to give up your independence to do it which is the great benefit of the co-op model.

Pete Lewis:

Do they work better in any particular agricultural commodity sectors. We’ve discussed already in this series about Co-operative Bulk Handling, a behemoth of the grain industry, right over to Norco in the dairy game and so forth. Do they lend themselves to all kinds of things or are some better than others?

Melina Morrison:

Look, I think the truth is that you’ll find a co-op in every sector and that includes agriculture that you can think of. In Australia, we’ve got a co-operative of truffle growers and garlic growers right up to the behemoths of our ag industry like the big grain co-op in Western Australia, CBH. The truth in business is if it’s not broken, you don’t have to fix it. So if you’re making a quid, if you’re sustainable, if you’re profitable in your business model, then you’re not going to necessarily change it.

Melina Morrison:

Co-ops work really well where there is some market inequality or issue that you just can’t solve on your own and it’s rational self-interest, in that case to get together with other people. So I would say, in agriculture, particularly in commodity markets where there’s a lot of volatility and you need to even out the ups and downs of price fluctuations or export markets being turned off overnight, for example, it can make a lot of sense to be sharing that risk, trying to smooth it out with other people.

Pete Lewis:

Now obviously there are various paths to the mountain, does the co-op structure make it necessarily make it easier for primary producers to combine their resources and get together, rather than another company structure?

Melina Morrison:

I think the people on this call who are actually working in co-ops at the moment are well placed to answer that. From a theoretical point of view, the co-op model is a legal model for co-operating. So you have an active membership test. It’s not just about what you’re going to take out, it’s what you put in. And that does make it easier to co-operate through time, because if you’re not playing your part, there’s reciprocity involved, then the co-op’s not going to thrive and survive. So it’s really about skin in the game. I guess that’s one thing that does actually make it more viable over the long term to stay in business together.

Pete Lewis:

Justin, the Limestone Fishermen’s Co-op has only been up and running for the past couple of years and it was formed to create bigger market scale. Has it worked? Notwithstanding some of the disruptions we’ve heard about already.

Justin Phillips:

I can safely say I think it is working Pete, and it’s been amazing, I guess, how quickly we’ve seen that change come in within the industry. I think that’s evidenced mostly by our continuing growth in membership. Just in the last few weeks as we lead up to the start of our next season, we’ve taken on a number of new members now and I think that’s related largely to the point I made before about a lot of those industry people can now see there’s a fear of uncertainty and a value in working with their peers and counterparts in the industry about having some further control over that.

Justin Phillips:

I think it also, it has worked because of, I guess, the mode of operation demanded by a co-operative in terms of open and transparent process, the way in which we involve our members in our decision making process and also, to a degree, I think, the way we’ve communicated openly with the broader industry and non-members about what we’re doing, what we’re hoping to achieve and where we’re looking to head in the future. So, from that perspective, in our short life, it’s been a great success.

Pete Lewis:

And since yours is overwhelming an export oriented business, particularly looking at the Chinese market, I guess that scale is really important to, if you like, an important part of the risk management profile of the business you’re in. That must be a big attraction, given the ups and downs of trade, particularly with China over the past six months.

Justin Phillips:

Yes, certainly. I think that creating that scale amongst fishermen and then, I guess, being able to enter a market as primarily as China, that having control over how, when, in what way we’ve been able to do that as opposed to selling to as a fisherman and existing exporter, and then being at the whim, if you like, of what price they’re able to return to the fisher in our industry, I think that the creation of the structure that we’ve put in place has really appealed to industry members from that perspective as well.

Pete Lewis:

And look, at the risk of laboring the fishing and scale metaphor, Danielle, how has joining forces really affected your members’ capacity to get the supply chain side of things right?

Danielle Adams:

So one of the things that we’ve worked really hard, is to get the ability for them to collaborate to get product to market quickly, effectively and more importantly, cost efficient. Things like transportation, where we’re situated is very expensive. As you can imagine, an individual fisherman trying to load 100 kilos onto a truck becomes a very cost-

Pete Lewis:

Inefficient.

Danielle Adams:

Draining and inefficient way, whereas a co-operative actually does it where we consolidate all the product. We actually choose the market that’s, I guess, the best return for them and we do all the hard yards for them. And again, just talking about Melina’s mentioning of COVID previously, we did have fires, floods and COVID here. As individuals, I really think they would have been challenged to continue to work. However, as the umbrella for the fishing industry in this region, the co-operative’s goal was just to continue to trade, no matter what, so those 120 businesses could thrive through the challenges that we’ve faced.

Pete Lewis:

Look, I’m sure, in the course of this discussion, we’re going to look at and get the questions from you all about how significant a co-operative can be in the life of your community and you indicated three or four upheavals there that the co-op has played an extraordinarily important role in.

Pete Lewis:

Greg, from your point of view, what are the benefits in terms of group marketing? How did Capricorn do that for mechanics?

Greg Wall:

Yeah, Pete. Capricorn didn’t actually market the services of our members to the general public. We see that as their role, because they’re independent mechanics and this is a co-operative not a franchise model. But because we had 22,000 mechanics, we’ve created a sizable marketplace ourselves but many of the supply chain is absolutely keen and desperate to get access to our marketing database, if you like. So what we’ve done is use that market power to negotiate an excellent deal for our members. But at the same time also creating value for the supply chain and that also creates great value for the members in terms of dividends and whatever.

Greg Wall:

And the deal we negotiated with our supply chain is that a Capricorn member would get the very best trade price available, despite the size of their business or the volume of product they purchase. And then, because we guarantee the payment to the suppliers and we pay the suppliers on time, the suppliers pay Capricorn a service fee and that service fee is almost the sole revenue that drives value to the members and becomes, it comes out of the supply chain’s pocket, not the members’ pocket. So it’s again, quite a unique model where the supply chain actually pays a service fee to the purchasers for the services that we, Capricorn, provide to them.

Pete Lewis:

A self fulfilling prophecy.

Greg Wall:

It is. Very strong model.

Pete Lewis:

Justin, one of the really interesting things that we picked up in the chat with Rodger Long was the really significant role of hooking up with the Geraldton Fishermen’s Co-op. So you had two lobster fishing groups on different sides of the continent, actually hooking up and having a co-operative approach, a mentor role, I guess you’d say the Geraldton Fishers provided, which is one of the great strengths that we’ve heard in the series so far of like-minded souls learning from one another.

Justin Phillips:

Absolutely Pete. To be blunt about it, I found it one of the most odd things in terms of becoming involved with the co-operative and never having, I guess, had that experience in the past, about how a business who is essentially possibly in a different product category, but essentially is a competitor in the same market originally, was then we’re finding them going out of their way to assist us and not just in a commercial sense, but the non-financial benefit that we’ve received since collaborating with the Geraldton Fishermen’s Co-op has been massive for us in terms of just general advice, whether it be around administrative processes or more operational things, like our tanking systems and those types of set-ups, having people come down to South Australia from WA or across to actually run through that with us in person. It is quite an amazing thing I think. You’ve got the seven principles under which we operate, but that collaboration and cooperation is something I’ve not found elsewhere and it’s one thing I’ve described to most people I come across is that it’s quite odd, but odd in a good way, Pete. That’s for sure.

Pete Lewis:

Well, it is. It’s a generosity in spirit that is sometimes wanting in other parts of business.

Pete Lewis:

Danielle, with 120 odd members that you’ve got in your co-op, how do you get agreement from such a large and disparate group of, I guess, rugged individuals on things like price?

Danielle Adams:

So, that is the million dollar question. Look, I guess, it’s not about getting agreement, it’s about getting consistency and making sure that that return is always there for them. There are going to be times where you do have situations where you’ve got glut and things happen whereby, and again I’ll mention COVID, the market shrunk overnight and the ability for them to still keep catching was a real challenge in moving the product. However, we actually sat down with them and spoke to them about what they wanted to do. Getting them on board. Getting them to tell us what prices they would accept if the worst case scenario came about.

Danielle Adams:

You are never going to get 100% satisfaction with any prices, however, we just keep chipping away. And we’re finding that the consistency for them is probably the biggest win that we’ve had. So we took the approach that if we could keep the prices consistent almost all year round, that seemed to satisfy them better than the highs and lows, peaks and troughs that tends to happen throughout the year. You’re never going to keep everybody happy. Prices are prices.

Pete Lewis:

Melina, I guess the key to this is communication. It’s actually, from the co-op leaders and the board, getting the message across about what the practical realities are, whether it’s a pandemic or whether it’s a drought or trading issues, it’s that open communication with the people who’ve got an interest in the strength of the co-operative.

Melina Morrison:

Yes, it’s transparency and accountability is at the core of the co-operative structure. But it’s commercially based, so it’s not all Kumbaya. You don’t have to get 100% agreement around the whole membership sort of cohort. What you’re trying to do, as Danielle said, is arrive at the best possible position that everybody can mutually agree is actually in the end in their own self-interest, their best interests as individual members. And collectively they’re going to work it out.

Melina Morrison:

But co-ops also have a bit of an advantage around their governance structure. They’re one member, one vote, which means that you can have members that have different sized businesses but when it comes to decision making on the really big things, everybody has the same influence. So there’s less opportunity, I guess, for breaking the business apart because people can’t democratically come to a decision. Not everyone might agree with it, but the majority have to agree with it.

Melina Morrison:

The other thing that co-ops do is that the members elect the directors or the majority of the directors so it’s delegated authority, right from the base, right up through the board.

Pete Lewis:

Greg, from your vantage point and your experience and obviously that now ranges right across Australia and now internationally, how difficult is it in some context to get that working together thing happening effectively and sustainably?

Greg Wall:

Yeah. A lot of our members are very different independent operators, but they all have the same driving need. And I think it’s the same in most co-operatives. If your co-operative is formed on a business need, a driving business need, well then it’s imperative that the co-operative focuses on that. In the case of Capricorn, for example, was that there was an imperative for them to buy automotive parts and oils and tires and all the things they need, at competitive prices. And the system that we used, and I think has some relative advantage, is that members have access to a co-operative account number and they would contact their supplier, and there’s over 2,000 suppliers in the Capricorn network, and order their parts. The parts would get delivered automatically to the mechanic. Capricorn doesn’t see them; doesn’t touch them. But the invoice for that supply of that part, it’s invoiced to Capricorn electronically. We’ve been able to connect to all the suppliers electronically.

Greg Wall:

So the way the collaboration works is that the mechanics right across Australia and New Zealand order their parts, get the parts delivered, but the invoices get sent to Capricorn. Then at the end of the month, Capricorn send a statement to the mechanics listing every part they purchased from every different supplier, and there could be 30 or 40 or 50 suppliers in one month, and the mechanic pays Capricorn and Capricorn pays suppliers.

Greg Wall:

So the advantage is at the end of the month they get a statement. He knows he gets the best trade price. We’ve talked about that before. And he only has to pay one bill, instead of 30 to 60 bills that he might have to pay in the month. And on the other side, the advantage to the supply chain is, firstly as I said, the guaranteed payment and so there’s no bad debts. We pay on time so they’ve got cashflow management. But instead of having to process 22,000 cheques or payments, they get one cheque from Capricorn with an electronic tape to reconcile all their purchases from Capricorn.

Greg Wall:

So it makes it easier for the supply chain, much easier for the mechanics and, as I mentioned, the service fee from the supply chain funds the operation, pays a patronage dividend to the members, as well as a financial dividend based on their capital, but also provides a whole lot of other benefits that we’ve driven in terms of trade shows and bi-annual conferences and things like that. So the whole system works because all the members collaborate in putting all their buying power through Capricorn, rather than running off and trying to do little deals on the side. So that collaboration is the key to the strength of Capricorn.

Pete Lewis:

It’s worth repeating. You went from seven members to 22,000, so it really did have something going for it.

Greg Wall:

Yeah, and as I said, $2 billion in purchases the 12 months to last year, during that period. Not only just building that buying power of parts, they then realized that they were getting very expensive rates of insurance, so they decided to form their own insurance mutual and there’s a mutual now writing $50 million in premiums to insure the businesses of those mechanics and they’re getting the very, very best pricing because they own the mutual. They own the insurance company. And we so price comparisons right across the insurance industry and no-one can beat the Capricorn mutual for insurance premiums.

Greg Wall:

So the mechanics have really got it. They really understand. If they collaborate together; they’re all independent businesses. They operate totally autonomously from each other. As I said, there’s no franchising arrangement, but collaborating together, they’ve been able to get the best buying power, great financial benefits, best insurance premium and so on and so forth.

Pete Lewis:

Danielle, in the context of the Clarence River Fishermen’s Co-op, what kind of improvements have your members seen in the way they go about their business co-operatively?

Danielle Adams:

I think one of the things is seeing them invest back into their own businesses. So they’re investing more into equipment, investing more into, I mentioned the restructure that the government has forced onto the industry over the last number of years. At one point there, a lot of them were extremely concerned about purchasing additional work days, additional quota. We’re seeing a lot more where they’re actually reinvesting back into buying things themselves, so they’ve got that confidence that the industry is rebuilding, I guess.

Danielle Adams:

One of the things that we try to do too is look at streamlining our processes so that just takes the pressure off them and really, at the end of the day, our goal is to keep them working. So if we can take that little bit of pressure in helping them operate their businesses in any way, that seems to work. And it keeps them coming back.

Pete Lewis:

That’s the proof of the pudding isn’t it. Justin, how does collaboration help your members get Limestone lobsters into the markets they need to get into and would like to get into?

Justin Phillips:

Absolutely. So, we’ve now, I guess, in collaboration with the Geraldton Fishermen’s Co-op, we work closely with our members now and I think it’s one of the strengths in our industry and Melina touched on it before around communication. And I think it’s an advantage we have over other, if you like, business types doing a similar role within our industry is just the close communication we’ve got with our members, communicating about, I guess, the challenges that we’re facing in a market, the timings to which we’re trying to work, literally now down to the flights we’re trying to meet, out of which port of origin in Australia to find the destination in China. All of those things come down to really clear communication.

Justin Phillips:

And I think that because of the member owner structure that we have, there’s real buy in to that. They know it’s not just something that’s being said for the benefit of a private business who happens to be buying their product and you know, working that into an export market. This is their business and they know that we’re genuinely trying to achieve the best result, the best return, lower those costs and maximise the return back to them as members.

Pete Lewis:

And, as we’ve seen over the past six months, one of the really effective things about working co-operatively is that you can go to government, whether it’s state or federal and say we have got a particular need, in this case, transport and logistics, to important markets and you are representing a whole swag of people in industries rather than one-off. It’s simply something an individual operation, no matter how significant it was, could do on its own.

Justin Phillips:

Yeah. Absolutely. And we’ve seen that play out as a co-op individually ourselves with the fishermen and the members that we represent, being able to put that forward. But then also in conjunction with the co-operative, like the Geraldton Fishermen’s Co-op because of that relationship and facing the same challenges, I think that’s served us really well in terms of having that push federally, particularly in relation to the flight issue that you mentioned and getting some good results. And that’s an ongoing thing for us as an industry at the moment as it is for every other exporter in the country at the moment as well. So we’ll wait and see what plays out in that space in the coming few months, but obviously we hope programs like the [inaudible 00:36:48] Extension are extended beyond Christmas.

Pete Lewis:

Melina, I guess this is a really excellent year, with all the challenges that have been thrown out on top of the last few years, it’s a really excellent example of how co-operatives can prove to be a very effective structure, particularly in the ag space, to absorb some of these shocks.

Melina Morrison:

I think that we’re hearing a lot about the need to increase our export markets, diversify our export markets and also create some supply chain resilience and sovereign capacity is the other thing that gets bandied around. What does that actually mean? Well, if we’re subscale as farmers, fishers or foresters, then if we really want to get into those global markets, we’re going to have to co-operate somehow and if we don’t want someone clipping the ticket, then you have to jointly and democratically, or otherwise, own your corporate entity.

Melina Morrison:

So we are seeing that opportunity. The government’s also talking a lot about re-animating manufacturing and we’ve been thinking a lot about those great food processing value-added products that Australia used to put out, Safcol, Goulburn Valley, Golden Circle, SPC. You remember the names. Those businesses were co-operatives and even quite recently, we’ve seen the Lion’s group of marketing brands around dairy, once again, kind of being passed around like a chess piece.

Melina Morrison:

So if we want those businesses to be domestically owned and operated and the value adding going back to Australian producers, we have to rethink the business models.

Pete Lewis:

It certainly has been a reset year. And as you say, it’s given not only producers but I think a lot of consumers as well some pause to think about what we used to be able to do and maybe what we could do again.

Pete Lewis:

Listen, don’t forget, if you have a question about tonight’s topic, make sure you ask it via the chat room on the right hand of this stream. The BCCM team is there and will answer as many questions as possible. So let’s ask a few questions for example that have come through to us.

Pete Lewis:

Question for all of you. Once up and running, how do you ensure that the co-operative stays member driven as opposed to perhaps when a co-operative gets really big, just being directed by its board and its CEO? Who’d like to have a crack at that first up?

Pete Lewis:

Go for it Greg.

Greg Wall:

Look, I think Pete that’s a really important point as we’ve seen some bad examples of this over the years. I think you’ve really got to focus on what was the original need of the co-operative, to make sure you stay relevant to your members. And keep testing that because sometimes your relevance change. So make sure the co-operative stays relevant to members.

Greg Wall:

I think it’s also important to make sure that you have strong member elected directors. There’s always a need to have independent directors who bring particular skills to the board, but have strong member elected directors to make sure that management is on song too. Because we have seen times when management, it’s grown to a big organisation, they have their own ambitions and they’ve taken their own direction. So it’s incumbent upon a board to make sure that they’re keeping management to account, making sure that the business is still relevant to the members. And of course, part of that is making sure it’s still profitable because if you’re not driving a profitable enterprise, it’s very hard to reinvest and keep the entity fresh. I think they’re just a couple of ideas.

Pete Lewis:

Danielle, the Clarence River Fishing Co-op’s had a lot of skin in the game now for a reasonable amount of time. From your understanding, how have they dealt with that particular issue of making sure that each and every member, you mentioned there’s 120 of them, feel as though they’re getting their point of view, having their say and getting a fair crack at the decision making process?

Danielle Adams:

Look, I tend to agree exactly with what Greg has put on the table. Making them feel as if they’re engaged and they can actually have input in where the direction is or what’s important to them is a critical part. But again, at the end of the day, the business has to maintain profitability and maintain some level of success for them to be comfortable with how the business is being operated and knowing that the business is there for them. Simple.

Pete Lewis:

Justin, it’s still a relatively fresh concept I imagine, two years in. Clearly, I guess, as the last kids on the block, you’ve been able to look at lots of others, including Geraldton and, to a certain extent, learn from their mistakes.

Justin Phillips:

Yeah, Geraldton, using that as an example Pete, the one thing it did bring to us instantly that relationship was for our members, and I think as a start-up this was something that could have been a problem for us but I think we combated that through the relationship that we were able to establish with Geraldton was instant confidence and credibility that an organisation and the relationship we put in place brought to our own co-op. Just in terms of the processes that we had in place and it literally boils down to how our members understand that then they’ll be paid at the end of the day for the product they sell through the co-op. And being able to instill the confidence and the credibility from that point of view. And that is effectively what Greg and Danielle have already talked about from a good management perspective.

Justin Phillips:

But then, for us, we’re an industry built largely on trust and it goes a long way, and it should everywhere, but fishing and my experience has always been that trust counts for a lot. So it’s about staying true to our goals and our objectives, doing what we’ve said that we would do and delivering on that so that’s been something that we’ve taken great care in making sure that we achieve that. But coming back and just involving the members openly in decision making processes and communicating with them about that. That’s just been critical for us in our short lifetime.

Pete Lewis:

Look, one of the other questions we’ve had submitted really relates to one of the seven key principles by co-operatives and that is the wider benefits. Beyond your industry and into your local community, the impact that a co-operative can have on the ground, not only just generating jobs but just in a whole lot of very important and tangible ways. It does take the co-operative model to beyond a normal company set-up doesn’t it Greg?

Greg Wall:

Yeah, look I think so. And I think money that stays in the community’s important. Particularly in rural communities that rely on businesses to support some of their activities, whether they be sporting activities or social activities, so particularly for rural co-operatives to support their own community. And also to support the community of their members. And some of the ways I’ve seen this happen is that they’re sponsoring awards within the community, they might sponsor apprenticeships. I know Capricorn did that. Or sponsor training with young people within the community, particularly if it’s a rural community. It’s really important and they don’t need to be spending money externally in the broader sense sponsoring a helicopter or something like that. It’s more about really operating within the community of people that you service.

Greg Wall:

And the other area where, we used to when I was at Capricorn support, and that was both the BCCM and the ICA because that is about co-operatives supporting other co-operatives. And so we’re big supporters in that area. But money staying within the community of people that generate that revenue is very important, particularly for agricultural communities.

Pete Lewis:

And Danielle, is that the experience in the Northern Rivers of New South Wales where there are a couple of really substantial and significant long term co-operatives, both yours and, say, Norco’s.

Danielle Adams:

I think one of the other important things is employment as well. You are actually creating the roles within the community. I think our business directly affects over 200 families both from the fishermen and our employees. We also tend to work, and you mentioned Norco, I’m part of a group, the Northern Rivers Alliance Group and it’s a group of co-operatives that all come together regardless of what primary producing or what background we have. And basically we all talk about how we can make a difference. And I think we’re small fry compared to some of the other co-operatives that are part of the group but it’s important for us to also work together and we are seen as a group within the region that does, I think it’s over 4,500 jobs that the whole entire group creates for the region. So employment is a really big thing, particularly from a regional perspective.

Pete Lewis:

And Justin, the Limestone Coast footprint is about to get a little bigger as well. You’re putting the finishing touches, the last lick of paint on an important facility in Beachport, which is going to add a significant number of jobs in that town?

Justin Phillips:

Yeah, absolutely Pete. We were the lucky recipients of a grant through the Primary Industries and regions in South Australia that Regional Growth Fund recently. It was interesting listening to Greg’s comments just then about, I guess the, call it an ancillary benefit of being a co-operative and the benefits that come from the co-ops, particularly in regional areas being good corporate citizens. And our application for that grant money was largely, it was pinned on that. It was pinned on what we do deliver for the region. Across our zone, the Limestone Coast, we’ve got seven small coastal towns or ports and communities from which our operators and fishermen live and work.

Justin Phillips:

I lived on the west coast of South Australia as a young boy and spent a lot of time on the York Peninsula and that’s what appealed to me in terms of getting involved with the co-op initially was that… Don’t get me wrong, I love the people involved. You spoke with Rodger earlier who’s a fantastic example of our membership, but it’s also regardless of the people involved, it’s what the structure delivers. And so just to really have that in place, working together as a cluster of small businesses, that helped us achieve success with that grant funding. And as a result, we’re about to finish off the construction of a new facility in Beachport, as you’ve highlighted and that will generate further benefit for the region and all those communities across those seven small towns and coastal ports too in which we operate.

Pete Lewis:

And you’re just getting a little bit more control over the quality and the logistics and the handling of that very perishable commodity.

Justin Phillips:

Correct. It’s about maximizing that return for the product. So a facility like this; it’s only going to contribute more to maximizing the quality and the subsequent market return we get for that product. So this is another key link in our supply chain and it’s certainly going to contribute to adding value, not just to our co-op but to the region in which we operate.

Pete Lewis:

Look, we’re running a poll in conjunction with today’s Co-operative Conversations. The question we’re posing is what is the biggest motivator for starting a farming co-operative? There are a number of options for you to choose from. Just click on the poll on the live chat to the right of this screen to select your answer.

Pete Lewis:

Greg, I imagine one of the things, one of the motivations is to manage risk. How do you manage and minimize it and is the kind of structure you’ve got an important part about that?

Greg Wall:

Yes, Pete. Co-operatives are businesses and therefore they have the same sort of risk profile as other businesses, financial risk, operational risk, market, political and so on and so forth. And so it’s incumbent upon board and management to have risk mitigation strategies, just like any other business and we are a business. But perhaps what’s a little bit unique to co-operatives is the real need to focus on members and to focus on their needs and I’ve been talking about that before. Don’t divert from what the original need of the co-operative was, unless of course it changes. We’ve seen co-operatives that go off that and tend to lose their way. It’s making sure that what, is it still relevant today, the rationale for the co-operative to be formed, is it still relevant today? Or has management and the board taken the organisation in another direction.

Greg Wall:

One of the big risks in co-operatives is access to capital. But unlike other businesses that perhaps listed companies go to the market or proprietary companies through their proprietors. Access to capital is not as easy for co-operatives as a lot of other businesses and it’s fair to say that the BCCM, and I know the ICA have been doing a lot of work in this space and I know Melina and her team have access to some great new capital instruments and I think co-operatives that are looking to start should be looking at what’s available in terms of capital instruments.

Greg Wall:

In the initial stages, the capital must come from the members and perhaps from retained earnings, but as you grow, one of the real risks is how do you grow without access to capital in the normal sense and I recommend you contact BCCM because they know all about that.

Greg Wall:

And the other risk is the balance of board members. I talked earlier about the need to have independent directors who bring skills to the board, they might be accounting skills or legal skills or technology skills that perhaps, in my case, the mechanics don’t have. They’re not chartered accountants or lawyers. But it’s really important to make sure that you have the major percentage of your board is member elected directors. You should have a rotation policy for those member elected directors to keep the board fresh but make sure the board is in the hands of the member elected directors and it doesn’t get taken off into some corporate entity.

Greg Wall:

They’re just a couple of risks I think co-operatives need to look out for.

Pete Lewis:

Danielle, in your context, how does the Clarence River Fishermen’s Co-op ensure that open and transparent structure and how important is that to maintaining and attracting members, keeping them on board and providing comfort and safety to them in the face of all the different threats and challenges that they face?

Danielle Adams:

One of the, at board level of course there’s always this open transparency. So at the board level, they are always aware of exactly how their business is operating. However, one of the challenges that we found is that when you are going down the path of complete and open transparency, you are at risk of actually losing critical protection of commercial in confidence information. And it’s a real struggle to be open and transparent but also protect the umbrella business that’s representing, and in our case, 120 other businesses. We have found, in the past, that we were quite transparent with a lot of low level information including sales and product direction and it created a challenge for us in actually our shareholders then went out and competed against us. So bringing them along, showing them comfort in how the business operates through the annual reviews, management reports, regular newsletters, any shareholders’ updates. Having staff available for them to meet with them and discuss things but there still has to be that level of protection of commercial in confidence because that one business is protecting or representing 120 other shareholders in our case.

Pete Lewis:

Look, I guess your business is like most, they’re only limited by their imagination and money. It gets us to the important issue of capital raising for co-ops. Justin, do you get a sense that financial institutions now are more amenable and more open to discussions about lending to co-operatives and agricultural co-operatives and, in your case, a fishing co-operative? Is there a level of literacy now about what you do and what you need to do it better? Are you picking up that it’s easier to approach financial institutions for the kind of capital you need to go to where you want to be?

Justin Phillips:

It’s a timely question Pete. We’re just entering into conversations now and I guess we’re only just in a position to be able to do so with, I guess, the larger financial institutions. Being young and in the position that we’re in now, we’ve got there primarily through members putting their hands in their own pocket. We were lucky enough to form a relationship and without it, I don’t know where we would have been with a financier which served us well in terms of a lot of our capital requirements early on. And we’re able to address that.

Justin Phillips:

But looking to refinance and restructure things where we sit now, in terms of literacy is a good word. I think it’s growing amongst the financial sector but I think there’s still a way to go. And this is across a range, whether it be a financial institution or a government agency in terms of understanding the co-operative structure, what it means, how liability might best be handled, all those types of questions. They’re things that we’re being faced with right now as we enter into those discussions with some of the larger financial institutions as we’re trying to restructure ourselves at the moment.

Justin Phillips:

That has been a challenge for us and making sure that we’ve got the right information to hand. And don’t worry, we’ve called on and they’ve been fantastic, BCCM at certain times to help us provide that information and support. That’s been important.

Pete Lewis:

Melina, does the big end of town get it? Do the banks and the other financial institutions get it about co-operatives and how they can operate and how they need just as much money to operate as any other company structure?

Melina Morrison:

I think they get it when there’s money to be made and that’s the way it should be. It’s a great motivator for commercial partnership. There is a big problem with education and awareness amongst the professionals that we need to run our businesses, like accountants and lawyers. No fault of their own but we’re still not teaching the co-operative business model in mainstream curriculum. So you can become a lawyer in Australia and not have studied the co-operative business model. So when Justin or Danielle go out to talk to a lawyer, an accountant, about capital raising or how their balance sheet looks, they’re often facing a wall of ignorance. So we have to close the gap.

Melina Morrison:

But as many small scale co-ops and start-ups there are, there are really large co-operatives and they’ve managed to forge a path through the years to get the commercial understanding they need to run their business. Collectively, we have to deal with the education problem; that’s for sure.

Pete Lewis:

Well, as we’ve seen today, and indeed throughout this series, there are a lot of very determined, very persistent people when it comes to making their co-operatives work and it’s terrific that three of them were able to join us today. We’ve really enjoyed a roaming discussion and it’s really swept right across from WA, right through South Australia and onto New South Wales. We cannot be accused of being stuck behind any borders whatsoever in this discussion. We do appreciate each and every one of you, Danielle, Greg and Justin for joining us here today.

Pete Lewis:

This livestream, Co-operative Conversations, is part of something bigger. It’s part of the Co-operative Farming, a new online educational resource for farmers and also through co-operative farming, farmers, fishers and foresters, as well as members of co-operatives, can access a whole range of educational assistance, including some bursaries to cover up to 90% of course costs for relevant co-operative education or courses. So that would pay for the price of watching today, if nothing else.

Pete Lewis:

You can jump online if you want to get some more information at coopfarming.coop to learn and find out more or email coopfarming at coopfarming@BCCM.coop.

Pete Lewis:

A big thank you once again to our special guests and of course to Melina Morrison who joins us on each and every program.

Pete Lewis:

Coming up later this month, we’re going to be talking to Stephen Dandy from the Innovative Aus Group and find out how primary producers can use paddock to plate and farmer owned advantage in their co-operatives. For details of all our episodes that have come up, that are coming up and the ones that we’ve already played, head to Conversations.coopfarming.coop and remember the entire series will be available, both now and on demand for the future.

Pete Lewis:

It’s been a great discussion today. I look forward to the next one with you. Thanks very much for joining us. See you next time.

Episode 6 Q&A

Why would one co-operative give up their secrets to help a new competitor?

Anthony Taylor: Co-operatives operate true to the co-operative principles. One of these is the principle of “Co-operation among Cooperatives” BCCM member Geraldton Fishermen’s Co-op has provided ongoing assistance during the formation of Limestone Coast Fisherman’s Co-op. Of course, it needs to make commercial sense for the members of each co-ops too. The two co-operatives have a commercial agreement in place for the marketing of LCFC product through GFC’c channels.

How does that conversation about starting a co-op with others in your sector start?

Melina Morrison: That conversation can start in any arena, in the community, amongst business owners, even online, but as a collaborative business model, it means proactively seeking out others that might share your dilemma, concern or challenge. Co-ops typically need 5 members to be registered.

Forming a co-operative to compete seems a bit odd because then you’re all working together and not competing with each other as fishers?

Anthony Taylor: Co-ops can help independent fishers to buy inputs together for a cheaper price, to sell for a better price and meet demands for product from bigger purchasers they might not be able to supply from their catch alone. They still get rewarded for their catch and their individual efforts, and still need to manage their own businesses, but are stronger together and more able to compete with big companies.

How many independent directors should a cooperative have?

Anthony Taylor: Co-operatives registered under Co-operatives National Law must have a majority of member directors. Beyond that, it is really a choice for each co-op. One of the factors is whether you have skills gaps in the membership that are needed on the board. It is common for co-ops to have 1-2 independent directors.

What, if any, capital investment is needed by prospective members to start up a co-op?

Anthony Taylor: One of the seven international co-op principles is Member Economic Participation – each member should contribute to the capital of their co-op. This gives members “skin in the game”. What you can’t get from members through shares, you can look to a range of other sources such as bank finance, grants, and bonds/debentures. There is also a unique investment instrument for co-ops called a Co-operative Capital Unit that can bring in investment capital from members or non-members. Further information in Raise Finance.

Melina Morrison: Fundraising for the business starts with members and their investment of member share capital depending on what the business plan requires. There are lots of other ways co-ops raise capital – we have info on this on the coopfarming.coop website. we have a manual on fundraising and soon there will be online courses on capital raising.

Episode host, Pete Lewis

Join Pete Lewis for an inspiring interview series as he explores the journeys of some of Australia’s most interesting and successful co-operatives. Pete’s long and varied experience as a journalist specialising in agriculture will ensure he gets to the heart of the issues you want to hear about.

Pete Lewis

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