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.
Buying together to benefit members and communities – A roundtable discussion
AIRDATE: 14 Oct 2020 7:45pm AEST (approx 60 mins)
This roundtable examines group buying and how co-ops add value and provide services through innovation and understanding their members, their customers and their communities. Our panelists are drawn from businesses that who have successfully harnessed the power of their members to collaboratively purchase and/or supply food, agricultural products and related services.
Instead of relying on or being dictated to by others, discover how they have created their own supply chain, by using collective buying to benefit a group. Pooling money and resources to create bigger opportunities helps to support their members and agricultural businesses with key inputs at better prices, delivering greater value and leading to increased profits and sustainability.
The power of collaboration can also be turned to ethically sourcing and procurement goods and services form the local community which is another way a co-operative creates value and generates local economic development. Co-operatives act as anchor businesses in a community, sustaining social and economic health for the long term.
Our panelists bring a wealth of practical business leadership skills within co-operatives. There are lynchpins within their local communities.
Join us to find out how these co-ops got started, how they evolved, reaching consensus, establishing community engagement and support, in order to grow and prosper.
Join journalist Pete Lewis with special guests:
- Kerry Murphy, Secretary, TAFCO rural supplies
- Dr. George Ujvary, Master Butchers Co-operative
- Donna Avery, Yolla Producers Co-operative Society
- Anthony Nehme, Yenda Producers Co-operative Society Ltd.
Pete Lewis:
Welcome to Co-operative Conversations. This is in fact the penultimate conversation in this series, and you’ll be aware that what we do is connect you with the real stories from Australia primary producers who are growing and working together co-operatively, despite all the trials and tribulations that sometimes get thrown at agriculture. I’m Pete Lewis, and one way or another I’ve been helping Australian farmers tell the great stories of food and fiber production for the past 25 years or so. I’m delighted that we are able to bring together a top flock of co-operative experts for this roundtable. We’ll be looking at buying together over the next hour or so, and those of you who joined us a little earlier will know that we caught up with Kerry Murphy who is the secretary of the TAFCO rural supplies business in beautiful Myrtleford in Victoria. Kerry will be joined on this occasion by Dr. George Ujvary.
Pete Lewis:
George is coming to us from Adelaide where he’s connected with the Master Butchers Co-operative. We’re also joined by Donna Avery all the way from Northwest Tazzie, Donna’s with the Yolla Producers Co-operative Society and last but certainly not least, from southern New South Wales, Anthony Nehme, who’s the secretary of the Yenda Producers Co-operative Society Ldt. Welcome one and all, thanks very much for your time. Before we start, if you’ve got a burning question out there as a result of tonight’s topic, ask away to our online team via our chat box, which is located to the right-hand side of this stream.
Pete Lewis:
Don’t forget you can also vote for a question that tickles your fancy via the vote button. We’ll try to get to as many questions as possible during the steam and obviously, brevity is the soul of wit, keep them short, sharp, and shiny and we’re more likely to get to them. Starting with you again Kerry, you’re nice and warmed up after that interview. You joined TAFCO Rural Supplies Co-operative, it seems like a lifetime ago, 32 years ago as secretary, and you remain there today, something must be going right for you there. Tell us a little bit about TAFCO, how the co-op is structured.
Kerry Murphy:
So TAFCO is a trading co-operative. We have 620 members, we were formed by Tobacco Growers of Victoria back in 1987, they wanted to secure the supply of agricultural goods and services to their industry. So it was formed way back then, I joined the team one year into it, and I’m still here 32 years later. Our structure is fairly normal with co-operatives, we have a dollar shares, a member needs 250 minimum shares to join. Back in the tobacco days people had to join with more than $250 if they were a tobacco grower, they had to buy 40 shares per ton of quota, that was then.
Kerry Murphy:
And today it’s just $250 to join. Our shares are capped at 600,000 and our active membership provision is that you must trade. So that’s probably our structure.
Pete Lewis:
And you’ve been able to not only survive, but thrive even given the fact that none of your members grow tobacco anymore, that was obviously a seismic shift.
Kerry Murphy:
It was a massive shift. We went from nearly $5 million to under $3 million over night when the tobacco industry ended. We had around 135 tobacco growers at the end of the industry, but we had about 400 members of TAFCO so there was definitely a shift from horticulture into a lot of niche crops, members that were trying to do different things, had a lot of cows and grass I can tell you, and we learnt a lot about seed, a lot about fertilizer, and shifted as our membership needs were different, I suppose. Yeah.
Pete Lewis:
Thanks very much for that. George, the Master Butchers Co-operative is more than 100 years old, that’s really some achievement, formed in 1905, what’s your structure and tell us a little bit about your membership?
Dr George Ujvary:
Yeah, so thanks very much. So we’re a distributing co-op which means that we distribute a portion, a fairly significant portion of our profits, in the forms of shares and cash each year to our members. We’ve got just over 400 members, most of whom are retail butchers, but also includes a number of boning rooms, abattoirs, independent supermarkets, and other meat-related entities. The co-operative is made up of two divisions, the merchandise division which supplies a manner of butcher supplies such as knives, gloves, aprons, through to ingredients and packaging, and the other division is the protein division which creates meat meals, blood and bone for fertilizers, and tallow which is used for making biodiesel and many other uses.
Dr George Ujvary:
And the raw material for this division comes largely from our members, either as butcher shop waste, or is sourced directly at market rates from abattoirs.
Pete Lewis:
And George you’re not only the chairman, you’ve got your own business and very actively involved in that of course, how does this benefit do you think, from being part of the co-op and what has it done to your skillset?
Dr George Ujvary:
Yeah so I’m a member director of the co-op on account of my business Olga’s Fine Foods, so we supply value … or my business supplies value added meat products to supermarkets, and through the purchasing side of the co-op we purchase packaging, ingredients, and consumables from the co-operative at highly competitive prices, and due to our activity with the co-operative, we receive rebates which are dependent on the level of activity we undertake with the co-op, and also the co-op’s level of profitability as well, but you know, we don’t only benefit from a business perspective, we’re also a part, I would say, of a community of like-minded individuals from the same industry, and you know, as such we network together and communicate knowledge as well as providing sounding boards for each other, so it’s really beneficial from many aspects to be a member.
Pete Lewis:
A real win-win. Donna, you have a number of hats, you’re deputy chair of the Yolla Producers Co-operative Society, you’re in your second term, you’re also a farmer, an agricultural expert, and a leader in agribusiness and commercial backing with the ANZ Bank. I guess the simple question is how do you find time for it all?
Donna Avery:
They say give a busy person a job and they’ll finish it, so I’m a busy person. That’s fine. Yeah.
Pete Lewis:
Yeah, what do you value mostly about the co-operative structure given all those different perspectives that you bring?
Donna Avery:
I think true co-operatives really are becoming very rare, in reality as businesses get bigger, they appear to lose sight of the people that are designed to help, so we now have … we’ve grown from 500 members to 800 members since I’ve joined the co-op, and our core is to actually add value to our members. So do we add value by education? Do we add value by rebates? Do we add value by giving them access to products and bulk items that they wouldn’t otherwise have access to? And every decision we make in the co-op, particularly at board level, is making sure … how does this help our members, how does this decision assist our members either saving money or educating them? Yeah.
Pete Lewis:
Going back to 1977, they say necessity is the mother of invention. What was the need in north-west Tazzie that gave rise to the Yolla Co-op?
Donna Avery:
So north-west Tasmania is a highly productive area, a lot of very small farms, it’s probably not unlike Myrtleford, was just thinking of Kerry and having worked up in that area previously. A lot of small farms with very diverse income streams, probably that needed one 10 litre bucket of something and one five liter container of something else, it actually gives you no ability to negotiate price with a supplier. So a gang of farmers got together, probably at the local Yolla pub I suspect, or actually I know, and they would talk about who was going to negotiate for a particular item on the basis of everyone else, and if someone was looking to buy a particular spray or a fertilizer they would actually negotiate on the group of farmers in that area and there were actually quite a number of by-groups around the area that have all consolidated over time to Yolla Producers.
Pete Lewis:
Well that was the genesis, how’s it working now?
Donna Avery:
Well now we have … we actually have a gross revenue of over $25 million a year, about 800 members, probably about half of that is merchandising items, so we have over 2000 lines of merchandise, plus bulk goods of fuel, grain, fertilizer, we have direct relationships with some suppliers, and others we actually use a large by-group which is AIRR, which is the Australian Independent Retail Group, which is run by Peter Law up at Shepparton. He has just recently sold to Elders so that’s going to change in the future and we’re not sure exactly how that’ll impact us, but at the moment, 25% of our product is purchased through the AIRR group.
Donna Avery:
We basically give back a 1% loyalty rebate to our members, and we’ve got 21 employees, and as we grow we have more employees and more product and possibly more geographic locations. So it’s becoming a bigger business, that’s what’s changing. It’s becoming a business, but with that focus back onto our members every decision we make.
Pete Lewis:
Splendid. Anthony, you’re the company secretary of Yenda Producers Co-op, another co-op with age on its side, 100 years not out, and your members are not only farmers, tell us who they are and how they work together to move in the same direction.
Anthony Nehme:
Yeah, no definitely not all farmers. Essentially anyone that lives in the town where we’re based, can be a member, so look, predominantly it is farmers as far as our core member base, but we do service, you know, local town people, you know, local councils, sporting groups, essentially any organisation or individual can be a member and shop through us, just, you know, depending if they need anything for … that we provide them.
Pete Lewis:
Now nothing is the same as it was ten years ago, let alone 100 years ago. Talk us through the evolution and the fact as you say now, you’ve got a membership in the vicinity of 1,500, that’s obviously quite a change from the early days.
Anthony Nehme:
Yeah definitely, and look I think it just came with … the more we grew, the more sort of we realized that you know, you have to take a fairly professional approach to business, so we took the opportunity to try and obviously venture outside the main … I guess the head office, which was in Yenda, so we expanded a bit more within the MIA and obviously just as of recent times sort of ventured into northern Victoria, but also within that it’s trying to understand what our customers do, or our members I should say, but what they’re after, whether it be you know, internally or within one of our subsidiaries, so that’s probably been the main reason for growth.
Anthony Nehme:
We’ve got longterm staff who probably, you know, have grown up with a lot of the … are next generation farmers, they’ve sort of, you know, grown up coming through school, and then obviously come to know the co-op well and establish those relationships, which you know, A, enhances our position within their business, our member businesses really.
Pete Lewis:
Yeah, so obviously everybody in that town and in that region’s got a bit of skin in the game, they feel a bit of pride and a bit of ownership in it.
Anthony Nehme:
Absolutely, and I think that is a very good selling point being able to say to someone look, our member investment is $10, you know, so for the sake of a sandwich you can become a member of a co-op, you know, you’re going to buy those goods and services as long as, you know, they’re happy with the service and the quality of the product. Well, they’re going to get a reward as well as being a member, so for a little amount of investment, they become an owner within the business … like a hundred year old business like you mentioned.
Pete Lewis:
Well look you all started life as buying groups, a question for all of you, outline why there was a need in your area for this kind of approach. Donna, how does one actually go about starting a buying group?
Donna Avery:
I think most buying groups actually start up because of discontent with price, service, availability of various products, so the only way to overcome that is actually to form a collective, and collectively go towards the suppliers and say, “Hey we want this but we don’t want to pay that price, we want to pay a better price than that.” So I guess the most important thing is having someone in the community that actually wants to push these things, and drive them, because there’s an awful lot of time and effort volunteering, administration, and coordination that needs to be dealt with to get a good outcome.
Donna Avery:
So hats off to those people that start very early on, it’s usually on a voluntary basis for the betterment of their fellow farmers and themselves.
Pete Lewis:
George how do you build momentum into a buying group? Because presumably you competition won’t just take things lying down, they’ll strike back and try and win people’s business back.
Dr George Ujvary:
Yeah well look, I think Donna touched on it earlier when … you know, I think you build momentum by adding value for your members. This means you’re offering a product or a service that fulfill your members wants and needs, and they make the lives of your members easier or more profitable. You also need to ensure that you maintain relevancy with your product or services, and maintain that relevancy with your members, and I think you know, the key difference between a co-op and I guess, another business, is that they’re member-owned. So you’re building a sense of camaraderie between members. You know, I think co-ops are … and I can’t sort of lay claim to own this comment, but I think I heard it at a dinner last year for the BCCM, but you know, co-ops are a great business story because politically they’re inherently bipartisan, they’re loved by capitalists because of their inherent entrepreneurialism, but they’re also loved by socialists because of their collectivist nature.
Dr George Ujvary:
So you know, for us it means that we’re open for business, but we’re also there for our members, and by remembering these values and by having a good value proposition, I think that’s basically how we build momentum.
Pete Lewis:
Yeah Anthony we’re all driven by the value proposition, how do you distribute that back to your members in the case of Yenda?
Anthony Nehme:
Yeah look, there’s probably two ways of answering that one. First and foremost is probably the direct benefit or values I guess, or benefits if you will, where through the payments of rebates and dividends, what most, I guess, distributing co-ops do, but look, we try and sell that as a benefit or a bonus more so than value. So the value that we see is more about the relationships that we establish with our members through their farming practices. Look, our values internally are about sustainability and making sure that our farmers are here for the long term, they’re here for the long term not just for, I guess, a quick sale if you will.
Anthony Nehme:
So that’s where we try and build value just to, you know, be the leaders within any industry that we work within, but then obviously then you’ve got the value of the collective nature of a co-operative where you can invest into assets, and you can invest into assets that allow them to utilise, you know, some equipment for the short-term when they may need it, obviously not going to do it … buy that bit of equipment on their own just for the sake of a small-term, I guess job, and yeah, that’s where another bit of value does come into our business for our co-operative.
Pete Lewis:
Kerry Murphy, what do you see as the co-operative advantage when it comes to attracting and keeping members, and giving them the value that … as Anthony said, that they are looking for?
Kerry Murphy:
Well I think in our case, we’re very similar to the other co-ops with distributing our profits back to our members by way or rebate and dividend. Since we’ve been here we’ve distributed four million back to members, which is a pretty good number for a little business in a small town. We engage with our members through offering some different services rather than just the core business of the retail store and their inputs. So when there’s been needs we’ve been able to, in a lot of cases, meet those needs through training and education. So we’ve put probably 700 people through the AgVic Chemical User course through partnerships with registered training organisations.
Kerry Murphy:
When our grape growers needed crane licenses years ago we got crane licensing in the region for them. Early days backhoe, front-end loaders, when you needed I license we used to do stuff like that, and an example recently where a member came to us and said, you know, Q fever’s an issue again, I didn’t even know what Q fever was, something cows gave you, we put on an information night with the local GP, talked about Q fever, then we ran like a bulk blood bank if you like where everyone went and had their blood tested, and a week later came back and had their Q fever shot based on the cost of the actual vaccine. So just some different things like that.
Pete Lewis:
It’s an incredibly debilitating thing once you get it, so I’m sure they’d appreciate getting the heads up on … it’s a very simple test as you said, and yeah, so that’s an interesting … now look you’re also working on some very innovative changes to get members, including attracting like Anthony’s co-op, people who are not necessarily farmers. Tell us about that.
Kerry Murphy:
Yeah so currently there’s a paper before the board, we’re actually rather than reducing the minimum membership, looking at introducing a membership without shares, which would be much easier Anthony from a share register point of view as well, to maintain, but very similar to a loyalty program in many ways, and similar to Yolla with a discounted point of sale if you like, but it’s, I suppose picking the eyes out of what Yolla do and Yenda do and what will work for our community, but yeah, looking at introducing this new class of members without shareholding, where they’ll still be able to vote and have input, and be a member even if you only want to buy a bag of dog food a couple of times a year. Yeah.
Pete Lewis:
Anthony, your co-op has a lot of members, around 1,500, obviously as we know in any community and in any walk of life there are a lot of free spirit and strong, independent people in that mix, how do you keep them all sort of pointed in the right direction and working for the common good?
Anthony Nehme:
Yeah no fair enough.
Pete Lewis:
With that many people in the tent.
Anthony Nehme:
Look I think the two things that allow us to do that is we listen to our members, I think you try and engage with them as much as possible and whether it be through just one-on-one discussions or surveys, it’s just about ensuring if you do ask them a question they give you an answer that you’ll listen to it, whether you choose to, you know … whether you choose to actually action that or not, you’ve given them the opportunity to put forward their thoughts, but I think the other … the main part is obviously our staff. Two parts to that is we try and retain staff within the business to allow them to understand the co-operative, and I think that’s another area where we try ensure that our staff understand what a co-operative is about, you know, it’s not just a … it is a co-operative, you’ve got to have a different value set to how the business works.
Anthony Nehme:
So within that … so yeah, try and keep long term staff so they can understand the customer, get to know the customer fairly well, and then obviously within the staff we have our key expert groups, whether it be agronomists, horticulturalists, or livestock production, so then they obviously have a fair wide ranging understanding of the area that they work within, they get to understand what the customers are after, and essentially whether there’s any services that they’re seeking that we’re not currently providing, we try and fill the gap there wherever we can. So I guess we’ve come to be a sounding board to a fair extent.
Pete Lewis:
Donna, you started off with just a few members in relative terms in a small, discrete part of Tasmania, and now you’ve got 800 spread right across the state, I guess that throws up its own challenges to keep them all informed and keep them all involved, how have you managed that and how do you cope with that?
Donna Avery:
So the bulk of our members are actually in two geographic locations, around Smithton, or Circular Head, and around the Wynyard area. We now have retail outlets in both of those locations, and it’s a long way from the old farm shed that was at the back of Yolla, which was apparently freezing in the winter time and they had to climb over the fence to use the toilet and the footie grounds behind it for the staff. So we’ve come a long way, were now … and I guess it’s the old real estate thing, location, location, location. We’re sited in the Wynyard site on the highway with a very good parking and big showroom and warehousing area.
Pete Lewis:
How did you manage that growth? Was it incremental or was there like a sharp … did you make a particular membership drive to get the numbers up or how did it work?
Donna Avery:
Yeah. Okay so it’s basically been an organic growth over time, and we had a fairly small membership for a very long time when they were located up at Yolla in the farm shed, but once we moved down to the highway we actually had a lot more growth. Because it’s a thoroughfare, we were then able to service a lot more farmers as, you know, kids were dropped off to various sporting events and things, the farmer’s wife or the farmer themselves would call in and pick up what they needed or ring in an order and pick it up on the way past.
Donna Avery:
We’ve also expanded with some transport, so we’re actually doing deliveries out to more remote areas, and we’ve also grown a fair bit because we are also open to the public, but they get non-members prices, but when they see what the members prices are, often they’ll join up. It’s only 250-odd dollars to become a member, so it’s not a lot, and it’s only a one share. So that’s … basically it’s been organic, and just clever location, locating the stores in clever places.
Pete Lewis:
George, there are members, and there are members. What due diligence should smart co-operatives put in place when they go out recruiting members? Because I guess you just don’t want to invite people in who are going to cause trouble?
Dr George Ujvary:
Well I think that’s certainly a very important thing to do and I think it’s important that you look at it from, I guess, two sides. There’s two sides of it, there’s the co-op side, and you know, and we’ve touched on it already but you know, value proposition and relevance for members, and you know, once you’ve done that as a co-op then you have to look for, I guess, a defined set of people. So you know, and members need to have a set of needs that aren’t met, and ultimately it’s the coming together of the provision of a product or a service, and you know, a defined set of people which is going to determine whether or not the co-op’s going to be relevant.
Dr George Ujvary:
So you know, for a … you know for Master Butchers, I guess we’re sort of attractive as a co-op because we provide financial incentives to members, but I think you know, unless you create that sense of community you’re just another supplier, so I think you know, it’s like-minded individuals who are members together, which I think also helps to avoid some of those issues, you know, with regards to, I guess, squabbling between members, but if you define the type of member you want to have, just enables you to sort of also just really strengthen your offering to the members, because if you just market to everyone you’re not really creating anything with any sense of definition, and that’s … the definition of your members in generally one of the first things that’s written into your rules.
Dr George Ujvary:
But if you can align both the financial incentives and the sense of community, I think you’re really getting to the heart of what defines a successful co-op.
Pete Lewis:
And look one of the universal themes that’s emerged throughout this series, both in the interviews and in the round table, is how intrinsically important co-operatives are within their local community. Kerry, how important is it to get the community onboard, and obviously how important is communication to that succeeding?
Kerry Murphy:
Oh, communication’s the key to everything with your members, customers, whole of community I think, all together. Something that we’ve done which is a different way of communicating, a different way of looking at gaining partners and providing a service to community that’s of definite interest to farmers, but to everyone, is we established a series of online weather stations, so we’ve managed to raise $100,000 through partnerships, not needing to put in any of our members’ money, and set up four weather stations in locations on our members’ farms, and anyone can go on at any time and have a look at what the weather’s doing, and if you ever want to start a conversation up with a farmer, weather’s a good starting point.
Kerry Murphy:
And that network has grown to seven weather stations which we own, they’re fully maintained through local government, catchment management authorities, industry groups that fund a small amount each, managed by TAFCO, and we’ve even got the local CFA putting in because they value them because at a time of, you know, potential bushfires, they can actually see what the weather’s doing, what the wind’s doing at specific locations, not based on data created by some logarithm somewhere out in the bigger world, so just something different that we’ve done in that space.
Pete Lewis:
That’s a great initiative. George you started off, started as a butchers co-op, but now your organization provides value-adding services and a truckload of innovations. What do you group by for your members these days?
Dr George Ujvary:
Well I think you know, we’re most sort of well-known within our industry for group buying, you know, things that support the meat industry. So it might be sort of knives, gloves, equipment, you know, everything from sausage fillers and bandsaws, and we also supply ingredients, and ready-made meals, so we’ll either produce perhaps a sausage meal that might be produced by us, which can get a butcher started, but once they … or they might have their own secret recipe and we can blend to order, because we also have a number of independent supermarkets which have their meat departments as members, we also purchase a significant amount of packaging, which comes directly from … you know, it’s either produced here or in some cases comes from overseas, but the innovation sort of occurs directly as a result of the needs of the market, and recently particularly in retail markets, that’s come in the form of recyclable packaging, where members are really trying to improve their environmental footprint to increase their … I guess their reputation with their customers.
Dr George Ujvary:
And there’s also been a lot of, I guess, innovation helping our members increase things such as their shelf life or the durability of meat products. You know, on the protein side, you know, we collect waste products from our members and render it into meat meal and tallow, which is sold by the co-op in international protein and tallow markets. You know, and we’ve found a number of ways to increase the value of that product, you know, either in the markets that it’s sold to or in the actual product that we’re producing by differentiating it from … you know, from just straight out meat meals, we’re finding that we can now produce products out of waste which achieve much higher prices and the profits of those are distributed out to members, so you know, across a wide range of areas we’re finding innovation which is adding value to our membership.
Pete Lewis:
Anthony the Yenda Co-op’s a very entrepreneurial co-op, people can buy not only inputs but services too, tell us how that works.
Anthony Nehme:
Yeah, so the services again, probably really is about listening to our member base, so services probably … I’d break them up into two areas, one, the services that we provide just as the main co-operative which is obviously the on-farm services and the cartage services, so I guess carting our member produce, but also on-farm spreading of fertilizers, manure, adoption of any of the latest technology, variable spreading rates, to ensure that obviously where they need it they’ll get it, as opposed to just doing a broadcast of, you know, X amount of tonne and getting it sort of emphasises the efficiency and the insurance and sustainability of our farm, and then within services as well we have sort of expanded … or have expanded, sorry, a lot of our services to our subsidiaries, which we sort of … yeah, again, the areas of which the grower, or our members are keen to see us invest in, so that’d be through the irrigation design installation, stock agency, grain trading and accumulation, so that’s pretty much where it’s what our entrepreneurial keenness is about, and the last point there is that our staff are quite keen on seeing the business push ahead, so they’re very enthusiastic about making sure that we try and take advantage of any opportunity, and our board’s very supportive of that as well.
Pete Lewis:
Well to that end you’re not quite a one-stop-shop yet, but you’re really heading in that direction. Tell us about the businesses you’ve purchased and why this is important for the future of your co-op.
Anthony Nehme:
Yeah no look, the businesses we’ve purchased have been … obviously have to fit our strategy, I mean essentially they’ve got to be part of our core business, or core business of our subsidiaries. So we have made a few purchases of recent times, and again, the focus has to be that they’re … you know, obviously a profitable business within their own right, that the key staff remain with the business, because obviously that’s what the clients that they’ve been servicing are keen to continue using, so the businesses have been through throughout the last, yeah, 10 years I guess. Yeah, one within the local area, which was Yenda Fruit and Case, which was a … I guess a predominantly fuel service station that was within our local area.
Anthony Nehme:
We acquired another smaller local stock and station agency, Breed & Hutchinson which was part of our … which is fitted in with our subsidiary Spencer & Bennett. We have acquired a couple of grain sites within the last few years that sort of complimented grain, so that’s one within Coleambally Irrigation Area, and we’ve acquired an equity stake within Origin Grain which is a niche trading business, and most recently, yeah, a two-branch business within northern Victoria, NorMac Rural, which one within Wodonga and one within Wangaratta, which again, is basically our fifth and sixth branches of Yenda Producers.
Pete Lewis:
So Donna, you’re vastly experienced in terms of agriculture, and I guess when it comes to growth, the secret of the success of that is in the timing, how’s your co-operative innovated and how do you decide when and where to grow?
Donna Avery:
Good question Pete. Our members obviously want their return … you know, they want to get the best return they can for the money that we spend, so as a board we’ve got to make sure of a number of things. One is that when an opportunity presents itself, we’ve got to be in a position to be able to take that opportunity, we also need to make sure that we’re not just doing the growth for the sake of growing, because it doesn’t necessarily give our members a return, just being bigger doesn’t mean better. So all of those things need to be weighed up before we look at any expansion.
Donna Avery:
Our opportunities going forward probably over the next two or three years will be to move east because we’ve got an increasing number of members that are joining up over that side, and they probably would benefit from having a physical location rather than just having a truck deliver them what they think they need when they possibly could have access to a lot more expertise within the staff, and a lot more … just little things like education days, field days, all of those things that we run for our members. The more locations we have, the more members we’ll reach.
Pete Lewis:
Kerry, TAFCO has been forced by circumstances and adversity to innovate, what are some of the add-ons that you’ve brought to your co-operative and why are these important? And I guess critically important, how have they impacted your bottom line?
Kerry Murphy:
So probably the most recent example would be the formation of … or the startup of the Myrtleford Farmer’s Market, which is an accredited Victorian farmer’s market in Victoria. TAFCO was successful in attracting some funds from Regional Development Victoria to do a feasibility study on why would you start up another farmer’s market, they are often a dime a dozen in lots of places, so let’s make sure that we get it right. Is there a need and can it be viable? The report showed that it would only be viable if it became … was an event as well as a farmer’s market, so we looked at how we could support local entertainers as part of the farmer’s market and looked at how we can support our members in a different way.
Kerry Murphy:
We decided we’d have a hero product of the month and we would feature that hero product that would be part of our marketing and perform cooking demonstrations so that people knew how to use that product. So we got $10,000 to do the feasibility, we were then successful in getting $30,000 to actually start the market and get the infrastructure that you needed, get your marketing right, get your website right, all those sort of things, which was terrific, and then we’ve had ongoing support through local government and through local philanthropic funds and through Bendigo Bank, because the market’s never going to make a fortune as an add-on to TAFCO, but it’s a great community event, and as long as it runs at revenue neutral, we’ll do it and be able to support our farmers through a new outlet. Yeah.
Pete Lewis:
And as we can see over your shoulder, the tagline is primary producer proud, you’ve trademarked it.
Kerry Murphy:
Yeah, love it.
Pete Lewis:
You’ve trademarked it.
Kerry Murphy:
We did. It’s an old tagline from the tobacco days, every tobacco farm had a sign out the front that had a picture of a tobacco leaf on it, and the words primary producer proud, so we were very proud to be able to take that and trademark it and use it for TAFCO and with our farmer’s market. Yeah.
Pete Lewis:
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 side of the stream, the BCCM team is there standing by and they’ll answer, and we will answer as many questions as we possibly can get to. There is one other question, obviously not surprisingly, 2020 has thrown up a whole lot of curve balls, for the whole country to be honest, but particularly for food and fiber suppliers and agriculture more generally, question for all of you, how have you responded? How has it affected your operations? And I guess it’s a case very often of both changes but no inconsiderable opportunities as well. Who wants to go first?
Anthony Nehme:
I can.
Pete Lewis:
Go for it Anthony.
Anthony Nehme:
Yeah, no look I think obviously when we were all faced with the uncertainty of COVID, probably our biggest challenge is obviously the uncertainty of supply of inputs, you know, we had COVID but we also had pretty good change in weather events where obviously the weather was now favored, plenty of good rains, and you know, a lot of optimism, but then that sort of got a lot of uncertainty with … you know, the chemical supply, particularly because a lot of them are imported, so that was a challenge, the biggest challenge we probably faced but we’ve managed to get through that quite well.
Anthony Nehme:
But I think as far as opportunities, look, you know, from our business it really is probably a good chance to recognise the quality of produce that our farmers, you know … I think all the co-operatives that are here represented today, farmers and produce providers, you know, our quality is second to none, so that’s a message I think we need to try and push out quite well if we can, but I think probably yeah, a key note that our farmers are all…as far as isolation’s concerned, well when they’re on the tractor they’re fairly isolated anyway, so it really didn’t change their day-to-day, so they didn’t really see much of a change anyway.
Pete Lewis:
George, anecdotally, my butcher shop mates tell me that it’s been a reasonably good pandemic for them, people have rediscovered the joy of dealing with the personal service of a butcher shop.
Dr George Ujvary:
Well that’s right, absolutely. You know, I think firstly there was a situation where restaurants and cafés, you know, were closed for some time, so that essentially forced business into butcher shops, and of course into supermarkets, which meant that they were doing better. We had a … I guess my own business, just as an example, we did five weeks worth of business over a two week period, so that sort of gives you an idea of the change in demand as a result of, you know, the structural changes that were happening in the economy, but also I think we’ve been fairly … in south Australia we’ve been fairly lucky, we haven’t sort of seen some of the stuff, you know, the closures that Victoria’s still seeing now.
Dr George Ujvary:
So business, you know, even in the city has been relatively … for retail shops and especially in retail food, has been, you know, pretty good. Yeah.
Pete Lewis:
Donna I guess Tasmanians have never been more thankful for Bass Strait than they are right now, but you did have a little bit of a blip there with Launceston, I think in the COVID states, in the cases, a bit of a spike there, but generally speaking, how has Tazzie, and particularly your part of Tasmania coped with the last nine months?
Donna Avery:
Well I think we … at Yolla Producers we’re right in the heart of the first lockdown, because we’re very close to Burnie and the Northwest Hospital and just about everybody around the area or district knows someone or was locked down with the hospital lockdown, so we had some real challenges in terms of how we physically opened up the store, being an essential service, how we actually physically opened up the store and keep our staff members safe, so there was a lot of time and effort spent on that because it was actually running reasonably rampant through the community at the initial outset with the Ruby Princess outbreak.
Donna Avery:
We saw change in what people were buying, and ammunition and big bags of flour for a few weeks, ammunition I’m not sure exactly why, maybe someone was going to shoot the virus, I’m not exactly sure, but that was our big ticket item. I’d just follow on with Anthony’s point about supply, we’re having issues with some of our supply chains going forward, and I guess keeping our staff motivated, safe, and feeling valued has been a challenge during all this time too, because you know, some of them had family members that were very unwell, some of them you know, very concerned about catching the virus themselves, so it’s been a challenging time.
Donna Avery:
Our figures are actually up, probably a bit like George, they … you know people are actually more likely to stay at home. It appears every winter half of Tasmania disappears off on a cruise ship, but this year they’ll stay home, so yeah, turnover’s actually up, and your primary industries largely are doing very well at the moment. The dairy’s fine, beef’s probably as good as it’s ever been, the crop guys are going really well, so you know, we can only look forward to a good future, but supply chain’s probably our biggest outstanding issue at the moment.
Pete Lewis:
Look I suspect for Tasmanians the only boat ride they’ll be having any time soon is on that car ferry to Victoria when they open the borders. Kerry, from your point of view, how did Myrtleford hold up? And how did TAFCO’s business hold up?
Kerry Murphy:
To be honest we felt like Coles, we were really … COVID just brought us more business. We were very, very busy, we’ve had our biggest turnover year in the history of TAFCO, I think everybody’s upgrading their fences at the moment, cattle’s good, so you know, there’s more fertilizer going out than before. The challenging part has been putting in place our COVID safe plan, and making sure that our staff … made sure that our staff are safe and are comfortable with it, because it’s quite scary, you know, what is going on our there, even though there’s no outbreaks in regional Victoria where we live, but it still plays on your mental health and all the rest of it. It’s all just a bit uneasy, but you know, from a point of view of the business and trade and the rebates, yeah, fantastic.
Pete Lewis:
And I guess for all of you, this sort of pause button that the world is currently undergoing, if nothing else, probably gives you a little bit of thinking time, there’s probably slightly less pressure on everybody and you can probably start to address some of those longer-term strategy things. Look just a reminder, we are running a poll in conjunction with today’s Co-operative Conversations, tonight’s poll question is why are co-operatives important to agriculture? Have a go, click on the poll in the live chat to the right of this stream to select your answer. There are some rather predictable suggestions, but I think you might get to the pitch of the ball.
Pete Lewis:
Kerry, a core part of the success of your co-op has been its uncanny ability to raise funds, and you’ve become to good at it over the years that you now give seminars and tell others how to do it. Talk us through that.
Kerry Murphy:
Only if they ask. We’ve just been very successful at attracting funding from external sources, whether that be, in the case of our weather stations it was with our local water authority, and our catchment management authorities and our local government. [inaudible 00:50:08] Be looking at improving agribusiness in the area, we’ve worked with local government again and put prospectuses for the area about you know, why would you move a new agricultural business here. So we put a really good prospectus which is on our website, which has collected data from our weather stations as well about why you would start up here.
Kerry Murphy:
This is trying to fill the whole once, you know, tobacco left. Our workshops and our events, our seminars are all based on, you know, members’ needs. So one of the most recent ones was managing pastures through drought, and we don’t have an agronomist here at TAFCO, we’re not quite at that level, although we would like to be, but through raising funds elsewhere we were able to bring in, you know, the best experts in the state, and look at soil health, look at pasture varieties, look at, you know, managing your pastures in drought. Offered free soil samples, given, not advice, but had professionals come and talk with our farmers about interpreting soil test results and working out your fertilizer requirements et cetera, so they’re just some of the things that we’ve been able to do.
Pete Lewis:
George, how important is capital raising for you?
Dr George Ujvary:
Look, it is a very important part of … or important aspect of the co-op’s future. You know, running rendering operations, protein division, and our warehousing, nothing is cheap, and you know, from our perspective it’s all generally about the business case, and you know, really from our perspective it’s all done through, you know, the financial institutions and it’s … we ensure that we have a … you know, like everyone, you’ve got to have a good relationship with your bank manager, but it’s also, I think, very important to understand or appreciate the difference between a co-operative and a business.
Dr George Ujvary:
You know, a co-operative is member-owned, and as such, you know, you don’t just … you know, you don’t really take the same risks, I think, that you would perhaps take as a business, because you know, as a board we’re trading on behalf of the members, so it’s important that every single financial decision that we take, takes this into consideration.
Pete Lewis:
Donna, one of the challenges we’ve learnt in the course of this series is for co-ops to find financial institutions and banks that are co-operate literate. Now I imagine the case of yours, that’s not so much of a problem?
Donna Avery:
Well I’ve probably got a conflict of interest there with the fact that our bank is also the one I work with, so I excuse myself from the board meetings when that’s the case, but aside from that, Yolla’s got a very strong balance sheet, it’s got an exceptionally strong profit and loss line, we’re very careful to maintain and retain our funds, so we’re very careful with things like bad debts, I mean you don’t need much of a bad debt to unwind a whole year’s profit for a co-op where, you know, we’re trying to minimize our profit, so if someone takes that by not paying us back what they owe us, it can undermine a year’s profit very quickly.
Donna Avery:
We capital raise through bank loans when we need to, but back in the bad old days, or not so much the bad old days, but in the early days, the members themselves would actually drive the capital raising, for example the business that we operate out of out of Wynyard was actually purchased by two of the members and leased back to the co-op. We’ve subsequently purchased that off them only last year, and have actually paid that building off now, so we’re in a position to be able to go and do something else. So I guess it’s being just mindful, risk averse, and making sure that every decision you make actually makes money and that money is then available to be used for the members either by funding growth, which is always expensive in terms of inventory and staff and all of those things, but also in being able to return our members a higher rebate when we need to and when things are not so good, droughts, fires, whatever we will actually give the members the one-off rebate if they need it.
Pete Lewis:
Anthony, in terms of capital raising, do you think it’s easier or harder under a co-operative structure compared to, say, a normal company structure?
Anthony Nehme:
I think the easy answer is to say it’s definitely harder, but you know, a business is only as good as the … I guess the performance of the business and the management within it, so it’s harder to raise capital compared to … and particularly part of the listed company, but we’ve got all the mechanisms in place to raise capitals through, you know, debetures or CTUs, but we’ve just been conscious of making sure that we’ve got a strong balance sheet, obviously we’ve got a very good working relationship with our bank, I guess when you look back in … when their first accounting centres came in they changed the whole structure of the balance sheet for the co-operative, and then ultimately you know, we changed the way we distributed out our funds on an annual basis where we probably did distribute most of those … any profits back to members, but we took a bit of a change to our policy where we retained some to build up our balance sheet, which has been in place whilst still rewarding our members.
Anthony Nehme:
So the simple answer is yeah, it probably is harder, but it’s just what you make of it really.
Pete Lewis:
Look we are pretty much out of time, we could continue this almost indefinitely, but we really do thank you very much for the time that you’ve given us today and the insights and the experiences you’ve brought with it. A reminder, this live stream Co-operative Conversations is part of Co-operative farming, it’s a new online education resource for farmers and other stakeholders. Also through Co-operative Farming, farmers, fishers, and foresters, as well as members of co-operatives, you can access educational bursaries to cover up to 90% of the cost of courses that are relevant to co-operative education. You can jump online at coopfarming.coop and learn more about all the things you do, or you can email Co-op Farming at coopfarming@bccm.coop.
Pete Lewis:
A big thank you once again to Donna, to George, to Anthony, and of course Kerry Murphy who joined us for the round table discussion and the interview earlier. A big thanks to all of you, thanks so much for being involved, and thank you for taking the time out to join us. A little look forward to our next episode, our final episode in this current series of Co-operative Conversations, and it’s picking up from that theme that we were developing towards the end of this talk, and it is the capital conundrum, probably one of our most requested and talked about subjects, how to raise the money and manage the capital. We have some great guests sharing what they know, so head to conversations.coopfarming.coop to find out more about that one, and remember, all of our episodes, the entire series, they’re available … they’ve live streamed of course, but on demand as well, but for the time being, that’s all we have for you. Thanks again.
Are there many co-op buying groups for rural supplies in Australia?
Anthony Taylor: There are more than 30 rural supplies co-ops around Australia. Many processing and marketing co-ops also seek to add value for their members by bulk buying farm inputs as an extra activity.
What other types of cooperatives are there, outside of farming producers?
Anthony Taylor: Co-ops can be formed by groups of consumers, businesses (other than farmers), employees or a community of interest. You can also have a mix of these stakeholders. Well known examples outside farming include credit unions and not-for-profit health insurers.
If co-operatives are so good, why aren’t there more of them?
Anthony Taylor: There are 2,000 co-operatives in Australia. The sector has combined memberships of 31 million (i.e. more than one per person living in Australia). Around a quarter of Australian farmers are a member of a co-op. While the sector is reasonably large, there is low awareness in the community and in government. Research has shown many co-op members don’t realise they are members! Governments, similarly, have had a low understanding of coops, and this means policies, regulation and the education system have gaps that have discouraged greater use of the model.
What’s the benefit of working for a cooperative? Do you automatically become a member?
Anthony Taylor: Your eligibility to be a member of a co-op will depend on the ‘active membership’ requirement of the particular co-op. In most farmer-owned co-ops you will need to either supply commodities to the co-op or purchase inputs through the coop to be eligible. Employment with the co-op doesn’t make you a member automatically. Co-operatives are businesses with a social purpose. Working for a co-op may be rewarding because it aligns with your values. Co-ops also seek to provide a good working environment for their staff, in line with the Co-operative Principle of Concern for the Community.
Do all co-ops give money back to members?
Anthony Taylor: Co-operatives can be distributing (for-profit) or non-distributing (not-for-profit). Distributing co-ops may share surpluses with their members, but don’t have to. It will depend how the co-op is performing. Like other not-for-profits, non-distributing co-ops are prohibited from sharing surpluses with members. They need to reinvest all surpluses back into improving the business, or to community causes and charities.
What is the best type of co-op?
Anthony Taylor: We like all forms of co-op! Co-ops can be owned by customers, by businesses like farmers, by employees, by a community of interest, or by a mix of these groups. They can be for-profit or not-for-profit. They can be large or small. They can operate in retail, in wholesale, in manufacturing, in service provision, insurance and banking or any other industry. The real test is whether the chosen structure of co-op is meeting the needs and aspirations of its members.
Reece Kinnane: The business model for your co-operative enterprise needs to reflect your business idea. Visit getmutual.coop and click on the business planning tab to work your way through the options.
Are co-operatives allowed to borrow from banks?
Anthony Taylor: Co-ops can borrow from banks like any other entity. Like for anyone else, the bank will only lend if it believes the co-op will repay the loan. This means the co-op needs to demonstrate it operates a strong business. Sometimes bankers do not have high awareness of co-ops, and the co-op will need to address any basic misconceptions about their structure.