Co-operation – it's the Terang way

Michael Cavanagh with CEO Kevin Ford

The Terang Co-op is the retail heart of the small town of Terang and the lifeblood of the community, providing jobs, a sense of ownership and opportunities for local producers.

Talking to journalist Michael Cavanagh, Kevin Ford reflects on the co-op ahead of his retirement as CEO, explaining how the co-operative difference informs every decision at Terang Co-op, from daily work to the long-term vision of the organisation.

Read more about Terang, the small Victorian town with a big heart.

Kevin Ford

Listen to S2 E12

S2 E12 transcript

Kevin [00:00:00] A very strong dairy farming area and over the last 2 to 3 years that’s changed a little bit. We’ve had a number of farmers from further north move away to get away from the drought, which is an unusual thing to say after this last 12 months, which should have brought in a little bit more beef and a little bit more sheep. But predominantly, it’s a very strong dairy area from, a little bit north of Terang, right down to the coast.

Michael [00:00:31] And then if you go a little bit further, it’s also a great cropping country and good wool.

Kevin [00:00:35] Yes, correct, all not too far and not too great a distance from Terang, yes.

Michael [00:00:42] You talk about farmers coming in from the north, you’re obviously employing from across the border in New South Wales and you say they’ve come in beef, does it surprise you that they’ve come in with that part of the industry and not just moved into what is already well-established that is the dairy in the area?

Kevin [00:01:00] I guess it doesn’t really surprise me in the fact that when the start of the course, New South Wales and further north we’re in a prolonged drought and one of the advantages of this area, we get a steady rainfall every year and I guess that they’ve looked at that and say, hey, we know our beef, beef will do well in this area or this is a good area for the particular sheep we’ve had. So I think it’s just a good business decision.

Michael [00:01:30] It also strengthens the economy of the local area by widening the base.

Kevin [00:01:34] Absolutely, yes, which has been good for us, yes.

Michael [00:01:38] Now you’re only 200, just over 200 ks southwest of Melbourne, along that magnificent piece of Australia, the Great Ocean Road. Are you also seeing as a result of COVID we’ve heard this and other co-op people I’ve spoken to, are you’re also seeing younger couples or that tree change that have looked and said, look, with technology, the way things have changed is that also started to be felt in the area.

Kevin [00:02:04] In two ways, we’ve had the young couples, as you mentioned, but also that we’ve had the tree change of people coming from Melbourne and Geelong, who are closer to retirement and certainly 2020 over drove that increase, which is it’s not peculiar to this town, it’s peculiar to every small town in southwest Victoria. It’s been great for the economy.

Michael [00:02:32] And one is a plus, I notice that in the last census, the average age of Terang was 44, which you look at a lot of country towns may be so envious of the fact that you’ve got this young demographic coming in as well, where they’re looking at directly involved in farming or related industry.

Kevin [00:02:51] Yes, I’ve been in Terang for about six years and I know when I first came here there was a great concern even within the local Corangamite Shire with regard to an ageing population and in a number of ways the COVID 19 has certainly changed that and put a much more breadth to the population, which obviously as you stated, is great for us.

Michael [00:03:20] Now the co-op itself, it’s been going since 1908. Now the unusual thing about it, particularly a co-op that’s got that sort of history, co-ops tend to start, they tend to germinate, particularly going back that far from farms and farmers. But in fact, the Terang Co-op in a way went from the other direction.

Kevin [00:03:43] Yes, absolutely, it’s an interesting story. And unfortunately, in the 1940s, we had a major fire. And so we’ve lost a lot of that original history. And I haven’t been able to find out a lot of the details, but the Terang Co-op started as a retail co-op. There’s a bit of conjecture around how it started or why that started, but it started as the local retailer, grocery farm supplies, I guess back in 1908, which as I said, I’m well aware that many co-ops start off the opposite way is a real farm service business and morph into the retail side. But we’ve had a strong retail base for that 140 odd years we’ve been around here.

Michael [00:04:32] Probably the closest link to that primary background of usual start-ups for co-ops is and it’s because of the history of that area is dairy and dairy servicing, which the co-op has been involved with, along with the retail.

Kevin [00:04:47] Yes, dairies, I guess what’s happened in more recent times, the depopulation of the area that started with a lot of the smaller family-owned or small family dairy farms started getting purchased by their neighbours as the economics, along with farming, affected them. And over time, through the 60s, 70s and 80s, some of the bigger farming families got bigger and they bought out their neighbours. And just by the pure economics of farming, the small farm wasn’t sustainable. So I guess the big population caused a number of issues for co-ops such as ourselves, but we’ve managed to fight to survive that and a very strong part of the local community.

Michael [00:05:40] While a lot of the records and history were destroyed in that fire, I do like one bit of history that obviously someone either recalled or was on paper elsewhere. Originally, the shares you could get 200 for four Bob that was, as I understand it, the way it was sold. Now and in the 1980s it was $2 a share. How does the structure for shareholders work now?

Kevin [00:06:07] We’re still at that $2 a share, and I believe it’s a minimum shareholding of 25 shares. I have $50 cost to become a member of the Terang Co-op.

Michael [00:06:19] And getting that share, what does that buy a person?

Kevin [00:06:22] It buys that person a membership into an exclusive little club really. It’s a history that the town is proud of. And we allocate points for every dollar that is spent at 1%, which is appreciated at the end of the year. And of course, some members, if they are a little bit hard up, they can pay off that membership in the region, numerous balls club, you name it; the Terang Co-op is there.

Michael [00:07:12] Now the shares, the 25 shares at $2 each, is there a limit on how many shares can be actually held by an individual?

Kevin [00:07:23] I’m afraid that’s a question that I can’t answer. There are families that hold a lot more shares than that now, but over the recent times in my times here, people have just paid the 25, the sorry, the $50 and taken the 25 shares. So by history, yes, they can accumulate more shares. But I guess in today’s world, there’s a common sense around that sort of suggests that well you know, we just take the 25 shares and we’re a member.

Michael [00:07:55] And as you say, there are benefits of being a member. What about on such things as voting rights if you’re a shareholder? Does your ability to cast a vote change with the number of shares you have?

Kevin [00:08:11] Absolutely not, as a distributed co-op, it’s one member, one vote. No matter how many shares that you have or no matter how much you spend, so there, you know, we stick to the rules of co-ops on that one.

Michael [00:08:28] You’ve got a numerous businesses in the town itself, and as you said, a population of just under 2,000. And you’ve got the IGA supermarket, hardware store, if I remember correctly, a town of that size and people commuting more and more, how do you compete with the larger towns in that area?

Kevin [00:08:54] I guess the competition is we have to be on the ball. We have to be good at retail so that’s the first prerequisite. We have to match our competition. The closest Woolworths is 20 ks away, 15 minutes drive and then you’ve got Woolworths and Coles in Warrnambool, which is about 40 minutes away. So the challenge here was to ensure that supermarket retail is up to the best standard it can be. And certainly that’s the same approach that we’ve taken with our Mitre 10 stores. The only way that we can really compete is through the partnerships we have with the Metcash-provided companies as an independent hardware, which is essentially Mitre 10 and of course IGA plus liquor without their support we probably wouldn’t have the competitive buying.

Michael [00:09:50] Kevin, often in a small town such as Terang, and when you’ve got something like the supermarket which is owned by the co-op, there’s one of two ways they can go, like make it a very basic operation, just offering the essentials for people to buy. But from what I understand, you do offer the essentials the toilet paper, the deodorant, toiletries and stuff like that. But while it may not be described as boutique, you do also offer specialties in certain food lines as well.

Kevin [00:10:22] That, to me, is part of retaining the customer base within the town and not giving them the excuse to shop outside town. So we, as you say, it would be very easy for us to be a convenience retailer and just live off that convenience shopping. But for us to survive and grow, we need to be competitive and we need to be better. We only just need to be better than their competitors in the surrounding towns. And we need to be good enough to make people think twice before they drive to a larger town to shop. So what we did, we spent just on a million dollars upgrading our IGA store. We remodeled it and part of that remodeling was an overall plan to have a shop that looks something like what you might find in South Melbourne. And we’ve been able to achieve that. And from that we’ve got a lot of pride with our members and shoppers who basically will tell us that they won’t shop anywhere else because we have everything that they need. And you know, in a real world people are going to shop elsewhere and that’s part of life. But we’re getting a much greater share of that shopping basket now than we were three to five years ago.

Michael [00:11:52] You’re listening to Meet the Co-op Farmer podcast, part of the Business Council of Co-ops and Mutuals, BCCM and my guest is Kevin Ford, the CEO of the Terang Co-op and I’m Michael Kavanagh. Kevin. We were talking about the specialty of the store in general. How do you then because you target, for example, you’ve got some of the local wineries on board and getting them to supply to you, was it difficult to convince the rest of the co-op board members and people like that that it was worth going into buying from locals and still not hurt the bottom line?

Kevin [00:12:37] No, it wasn’t that was part of the IGA brand and certainly part of the co-op. We should be encouraging to do as much business with our members and our community as we can. There is another side of that too, in that we’re really asking those farmers and those suppliers to shop with us as well. So it’s a double-sided coin. So every dollar that is spent with the co-op, there’s a substantial amount remains in the town. So when we looked at encouraging something beyond the normal let’s say IGA offer, we would try to get as much local product as we can that works in two ways. It certainly helped local shoppers, they get the opportunity of purchasing products that they would normally get in a city supermarket at a lower price, but also something that they can get local if they’ve got visitors or they want to spend that extra dollar. They know that the extra dollars are going back into the local community through local producers.

Michael [00:13:51] Do you actively go to those producers and say, look, we’re thinking about a possible line, whether in wine, you say look, Sauvignon blanc is going okay at the moment, or is it the producers come to you and say, look, we’ve got this particular product, we reckon it will go okay.

Kevin [00:14:07] Works both ways, initially, of course, where we didn’t have too much local products, we went out and approached as many people as we could or as many suppliers as we could. It was certainly not difficult getting them on board there. I think they were only too pleased to come in and support the co-op, as I said that works both ways. And we’ve seen a sustained substantial growth in local product sales since we’ve done that.

Michael [00:14:36] You made the comment about buying locally and we just seem there is this resurgence and loyalty increasingly, particularly in regional centres, about buying, shopping, selling and producing locally. You’ve been involved in co-ops, not just at Terang there, you said the last six years, but you’re also involved in WA and you’re from New Zealand, which has a very strong co-op culture and like different in different areas. Or do you think overall, particularly with the growth in support of co-ops, that there’s a greater understanding and also a clearer picture of what co-ops do?

Kevin [00:15:21] I think there’s a growing understanding of what co-ops do and I think those of us within the co-operative industry, so to speak, need to continue to have our voices heard. There are a lot of similarities from what I’ve seen in WA and New Zealand and here. But it’s over to us as co-ops to continue to remind our members that it’s essential that they shop with us and it’s essential that the dollars that they spend come back into the community. There’s a lot of, I guess, incentive where farmers may be under pressure, they may be price driven to go elsewhere. But we’ve got to be able to build the benefit for that farming community as to what keeps the community together. And as soon as you start to lose your small towns, which we’ve all seen, that’s where the community falls apart. And I have focused really on my role and in this business is to ensure that we are the best retailers that we can be and people want to shop with us that keeps us going in the market. And what I have seen both in West Australia and here is the success of the co-op has led to other small businesses starting up in the main street where not too long ago the main street was getting pretty empty. There were a lot of empty shops. We’re now seeing people have a shot at starting up their own business and you get some variety. And of course that really grows the community even more. So it’s really important that our members of the wider farming community do as much of the shopping with us as we can, and the onus on us is to be as good as we can be to make it worthwhile shopping with us.

Michael [00:17:22] How closely you work with those new businesses as the co-op and being very conscious, you have to make a quid but at the same time be part of the community. How closely do you work with those other businesses?

Kevin [00:17:36] With start-ups, we are well aware of in the community. And I guess the way I see it is they have to stand on their own two feet and things do get a little awkward where we run a supermarket and you might have a specialty type shop start-up, which comes into one of those categories. I guess the approach I take to that is we need to be as good as we can be and the start-up there that will drive the start up to be as good as they can be. And with that, the community wins. So we certainly don’t try and prevent anybody starting up, we, with the team I work with, I make sure and try and set the highest standards that we can set and hope that the start-up takes those standards and actually does it better than we can and that’s a win-win for the community.

Michael [00:18:48] I like the fact that in the early part of last century, a messenger used to go out to the farms and he or she would take an order from that farm. And in those days it would have been the wife of the farmer and it would be next day delivery that’s a pretty good record. Now in these days have you gone down the line of online shopping where in fact it’s the messenger, but through the joys of technology and computers.

Kevin [00:19:23] We’ve been doing home delivery for a long, long time. I don’t know how long probably since the start of the game. And yes, we do have online ordering and we also have phone-in ordering, which is pretty much what you described originally. We have to match the two centuries. We’re trying to build into the 21st century with our online ordering and our home deliveries. But essentially, that hasn’t changed from what it was. It’s just a means of taking the order and the delivery has changed. I have a manager here who can recall his father doing deliveries to farms on his bike. I think if I suggested to any of our staff today that we were going to buy a few bikes and they were going to start making deliveries, it probably wouldn’t go down too well. But yes, look; it’s been a successful part of the co-op for a long time. It’s not a major part of it. I guess you’d see it as a service. And we’re now at a stage where we’re trying to transition away from the phone orders, which can be very time consuming and try and get more online ordering. But as a percentage of our business, it’s still quite low, very low but the offer is there and we do everything that the big boys in the industry do.

Michael [00:20:55] That is something that co-ops probably have to sell and again it’s a bit of a fine line. Is that personal service being able to get out and make sure that you can deliver and I like that idea or that story you mentioned about, you’ve got a person in the store whose father was also an employee of the co-op, and you do see that with co-ops often it’s multi-generational.

Kevin [00:21:23] Yes, I think I’ve got more than one employee like that. Yes, certainly going back in time and even today, we probably are one of the largest employers in the community. But we’ve had a tradition of loyalty of local people being employed at the co-op starting at 14 or 15 and working their whole life through with the co-op. It’s really unusual in the 21st century to be able to talk about things like that, where many of us have had a number of careers. But within our community, it’s been almost tradition that when you start at the co-op, you’re their for life, that is changing. And one of the big motivations that really excite me is what we bring into the business of afterschool workers. And this has been traditional for a long, long time within the co-op. Every year we get a an influx of 15, 16-year-olds, who are with us for two, three, sometimes four years before they go on to do the studies. And the records of achievement that those students have in their longer life is quite amazing to know that they started with us nowadays on a check out or 8, it’s quite exciting, particularly when you see them come in shy, hardly say a word, and three months later they know everybody in the town. They chat away at the checkouts in a hugely friendly manner. It’s really exciting to just see the town and our people develop like that.

Michael [00:23:24] I’m Michael Kavanagh and this is Meet the Co-op Farmer, part of the Business Council of Co-ops and Mutuals podcast and my guest today is Kevin Ford, the CEO of Terang Co-op, which is a town around about 200 kilometres southwest of Melbourne. Kevin, you’ve got the [00:23:43]Mitre 10. [0.1s] You’ve got the IGA. You’re still involved in dairy work not as in providing butter making and that sort of thing, but more the after farm service. You’ve got to keep pace with business and change and everything like that. And as we talked about, you’ve got towns nearby that can offer much more services than what Terang can. Are you looking at any change in direction for the overall operation or do you think you’ve got it pretty all right?

Kevin [00:24:19] We operate it as well as the Mitre 10 and the IGA. We operate a rural store, which we have done for a number of years, it’s little as a rural store back in the 90s, I think, when it split out from the general operation. It’s a tough business rule and we keep looking strategically as a business that we should be in. There are people; there are businesses that do it better than us. And of course you’ll understand that all of us also understand that there is a strong will from farmers to retain the rural business. But when we sit down and look at things, we’re very good at the retail business of business to customer; we’re not quite as good at business to business. So that’s something that we’re looking at now and will continue to look at. But there’s also no sitting still. We can’t afford to think that we’ve got things all set up and we’re right for life now. We’ve got to continue to evolve and grow and to look at other opportunities. And those opportunities may be a little bit further afield. I guess what we look at the moment is trying to work to our strengths and rule as I said, it’s a very difficult customer for the likes of ourselves.

Michael [00:25:48] Now you’ve got over just over 3,000 members in a small town. And people are shareholders and they go in and buy. Do you also get confronted by the fact that they’re not just shareholders? There’s more than just being a shareholder and people are quite willing to give you their opinion of what’s going on in relation to the co-op and how its place is in the town.

Kevin [00:26:14] That could be a yes or no question. I’ll answer, going back to my time in West Australia and back here in West Australia and looking at the drawing customers, yes, every one of our members or co-op members with their 25 shares have ownership in the business and they are very open in sharing their thoughts and what we should be doing. At times, I guess what I’m saying is we listen to everybody and what we’ve worked on is looking at the business they’re in, what do we do? We’re in retail, so we have to be the best we can be at retail and ignore the fact we’re a co-op. So let’s get our service right and let’s get our products right and get our pricing right. And with that, we build that customer business, a customer relationship. I think the good thing is the ownership that the members have in the business and they care enough to come and talk to us if they see that there’s something that they don’t understand or they don’t think is right. The onus is back on us to be able to explain what we’re doing, why we’re doing it, and hopefully that satisfies the query. But this is working within a co-op is nothing like a general retail. Everybody owns the business. And although I might be CEO, there are times when I say, let’s get these 3,001 CEOs that’s the fun of it and that’s the challenge. The huge amount of satisfaction is when your members start telling you, hey, look, this is the best that is has ever been or this is the best shop. Once those compliments start coming back, you’ll realise that the membership have bought in to what we’re doing.

Michael [00:28:13] Kevin Ford, who’s the CEO of the Terang Co-op, a town 200 ks southwest of Melbourne, and he’s my guest in today’s Business Council of Co-ops and Mutuals’ Meet the Co-op Farmer podcast. Kevin, co-ops in Europe and in particular places like the Netherlands, have got a really long tradition, very much part of the community, part of the business sector, very much accepted by the rest of the business community, and they carry a fair bit of weight in some of those countries, and not just in the primary sector, in banking and that sort of thing. And in Australia, do you think and you’ve worked across the continent when it comes to co-ops, are the co-ops themselves aware that they can be as strong a player and are they accepted as a voice by government and the rest of the business community?

Kevin [00:29:11] I think that’s changed considerably in the last 12 years of my time being in Australia, 12 or 13 years. The formation of BCCM has taken us to another level, I think, before BCCM even existed, we were a group of lost souls, all doing the things around Australia. Nowadays there’s this unity where we seem to be hitting the right notes politically and we need to continue to build on that. The awareness of co-ops across the society isn’t huge. A lot of people don’t realise just where co-ops are and what they’re doing, and also they’re not fully aware of the advantages of a co-op and having a co-op in the community or being, you know, their bank is a co-op. I would like to see the awareness and the growing of co-ops continue to grow a lot more in the future. I think they’ve tried pretty near every model of economics. They haven’t really tried the co-op one and I’d really like to see co-ops continue to grow and become stronger.

Michael [00:30:30] In that growth, have you got a cap on how many people can be a shareholder in the Terang Co-op? Or it’s just if you turn up and you live in because usually co-ops, you’ve got to shop so many times a year at that co-op, have you reached the threshold of members or it’s always open to people that are willing to buy shares?

Kevin [00:30:58] There isn’t a threshold. We’d have as many members as we got and if they continue to become current members, we’d love to keep them for life. The challenge for those current members is within this co-op, it differs with different co-ops, is to remain a member, they need to spend $50 a year, and with that they spend $50 a year. If they’re a current member, they can stay as a member as long as they like. So we don’t have a cap on the number of members. And in fact, we do a lot of work to try and continue to grow our membership. We could probably do a little bit better in cleaning up the bottom, the tail end of the customers who maybe don’t spend $50 a year but that’s a work in progress for the next 12 months or two years.

Michael [00:31:55] A co-op like the Terang Co-op close to the community and it looks and you’ve talked about how kids come in and keep coming back, whether it be working part-time or in fact, several generations. After all these years, you’re about to ride off into the sunset, does that mean that the co-ops got in place a succession plan of someone that actually understands co-ops? And is it important that a person that comes in as CEO, even if they’re not from Terang? How important is it to have that understanding of co-ops as opposed to just straight retail?

Kevin [00:32:35] It’s very important to be honest and people, who know a little about co-ops are few and far between. The good thing today is that there are learning opportunities. There’s great support across the co-operative world in Australia. I was very fortunate to learn a lot of about co-ops from West Australia and co-ops WA. They helped form some of my opinions and understanding of where we stand in the community and what we could do and what we can’t do. But I don’t hold any fears for an incoming CEO. It’s certainly an incoming CEO would need to want to learn about co-ops because it’s not straight retail. And one of the things that is different about a co-op is sometimes good things take time and you don’t only have to communicate with your staff and boards, you’ve got an obligation to bring members along with you. And it’s understanding that it’s not a corporate world. You can’t go out and change things overnight, but you can change things and that makes it a bigger challenge. But there’s a lot of support and assistance. Again, I’ll come up with BCCM as always there to help educate the future CEOs of the co-operative world.

Michael [00:34:25] Well, Kevin, you’re living in fairly strong position and as the CEO of the Terang Co-op, best of luck with the future for yourself and for the co-op and thanks very much for your time.

Kevin [00:34:37] Thanks very much, Michael. I really enjoyed it.

Key links

The Terang Co-op is the retail heart of the small town of Terang and the lifeblood of the community, providing jobs, a sense of ownership and opportunities for local producers.

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Episode Notes:

Talking to journalist Michael Cavanagh, Kevin Ford reflects on the co-op ahead of his retirement as CEO, explaining how the co-operative difference informs every decision at Terang Co-op, from daily work to the long-term vision of the organisation.

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