Is this Australia's most co-operative town?

The Killarney Co-op – the secret behind Australia’s most co-operative town

Marissa Costello is the general manager of one of Australia’s longest-running co-operatives, the Killarney Co-op. Serving the residents of the Queensland town of Warwick and its surrounds, this co-op has been on an impressive journey over the last century.

Marissa and Michael Cavanagh reflect on the first 100 years of the co-op, from the early days as a butter factory, to its present setup with multiple retail outlets including a supermarket, an electrical appliances retailer, a hardware, a petrol station, a rural supplies store and a post office. They also talk about the generational legacy of the Killarney Co-op, as well as how the co-operative movement is placed to offer community-based solutions in our ever-changing world.

You can also read our story about how the Killarney Co-op is the hub of this small town with a big heart.

Marissa Costello - Killarney Co-operative

Listen to S2 E03

S2 E03 transcript

Michael [00:00:00] Co-ops have a long history in Australia, particularly in the areas of primary production. But even if they’ve had a long history to be able to clock up a hundred years and have a fairly bright future is very good indeed. Near Warwick, for those that don’t know where Killarney is, it’s near the town of Warwick, just across the border between New South Wales and Queensland. And the Killarney Co-op is going into its 100th year and its general manager is Marissa Costello. Marissa, before we look at the co-op and where it’s going, a little bit about the region of Killarney itself, what sort of agricultural economies they do these days?

Marissa [00:00:54] So these days, a lot of cropping, a lot of broad acre cropping, potatoes as well, big potato area, beef cattle, just dairying has pretty well finished up in the area and very few left but that’s where we are at the moment.

Michael [00:01:10] Well, a hundred years ago it was dairy, how did the co-op itself come about?

Marissa [00:01:18] So it started in 1922 when there was a pretty primitive factory in town, which was owned by businessmen and some farmers in the area, and it was struggling, really struggling. And at the time there was a manager there, Christian Peterson, who was from Europe, and he knew all about co-ops, and he sort of set about getting a group of the suppliers together and turning it into a co-op. He really saw the benefit in that and very well versed in how co-ops work. So he sort of rounded them up and got a group of the suppliers together and they subscribed share capital and purchased the old factory, 41 suppliers, initially of all the local power suppliers.

Michael [00:02:07] And so that was primarily, it was purely dairy but in fact, the butter seems to have played a fairly large part in dairy at the time.

Marissa [00:02:18] Yes, that’s right. Yes, it was a butter factory so they provided their cream to the factory, and then once it became a co-op, well, everybody was sharing in the in the proceeds.

Michael [00:02:32] And 41 shareholders then, and I understand four staff, and that’s going back 100 years. Now a lot of co-ops there seem to be that generational aspect. And even though your family, your great-grandparents started off in dairy, like a lot in the area, they moved into beef. But even with you, there was a link in relation to the operation of the co-op going back those several generations.

Marissa [00:03:06] Yes, that’s right so the co-op has had quite a few over the years of multi-generation employees. My grandfather actually worked at the co-op. He was an engine driver, so he was and he worked there when he was a young man, and then he went off to war, to training, and he then came back to the co-op. And he did a couple of stints there as the engine driver and was very loyal to the co-op over many years. You know, I remember him being very loyal to the co-op even once the butter factory had ended. We often think about how if my grandparents were in Warwick so 30 kilometres away, if they were in Warwick for an appointment, if they weren’t going to catch the co-op on their way home for milk, if it was going to be closed, they would go without until the next day because they wouldn’t buy their milk anywhere else. They’d always been very big supporters of the co-op.

Michael [00:04:03] They decided that even if they were going to have a cup of tea that night and they knew that they wouldn’t have any milk to go with their cup of tea, they wouldn’t stop at the corner store walk.

Marissa [00:04:12] Yes, that’s right, yes.

Michael [00:04:15] Was it loyalty or although I also reckon the milk tasted different?

Marissa [00:04:19] No, pure loyalty so that was brought up until after that, well, after the butter factory or anything finished. It was just a pure retail store. They wouldn’t buy it anywhere else.

Michael [00:04:30] How much to the fact that your grandfather, he could talk about being an engine driver and you would have seen the trains and you would have seen everything going on in that area, how much of an influence did that possibly have on you because you have spent a large part of your working life at the co-op to the point now where you’re the general manager?

Marissa [00:04:49] Yes, it’s always been a special place for me. I guess it’s always been a part of, I’ve grown up in Killarney since I was a young person and just the co-op was always there and it was always a big part of our lives. And I started there when I was, I think, around 14. I initially went there, I was answering phones on a Saturday morning. I did leave in the middle, but yes, I’ve been back there for 21 years and yes, gradually made my way to general manager.

Michael [00:05:21] That involvement, there must have been times, for example, and not just at Killarney, we’ve seen this happening in most rural areas, particularly the dairy areas. You had the price fluctuations and your head going back to what was it, around, 1974? The area really started to decline when it came to the dairy industry. Was there ever that feeling amongst you and others that there wouldn’t be a future working for the co-op?

Marissa [00:05:51] That’s all well before my time.

Michael [00:05:54] Trust me on the nodding, I can remember 1974, you can’t.

Marissa [00:06:01] Yes, that’s right, exactly but it must have been just such a strange period there where they were trying to transition out of the butter factory, which was really in decline into trying to still have a co-op at the end of it all and still keep jobs in town and keeping people employed.

Michael [00:06:26] Because Killarney is a small town, it’s got to compete with Warwick, which is just down the road so people go shopping there. The schools at Killarney end early, I think, it’s what Year 10?

Marissa [00:06:44] Yes, that’s right, yes.

Michael [00:06:45] And so there’s a pool of Warwick, how have you managed to cope with that in relation to the Co-op? Because you clocking up that 100th year, so you must be doing something right?

Marissa [00:06:56] Yes, we get really good support from the town. It can be difficult being so close to work, everything is there, you know, there is competition there from all departments, but we do get really good support from the town and we try to employ a lot of b school kids. But like you say, they finish in Killarney at Year 10, which is a bit of a challenge. But we try and get them in young and teach them what the co-op is all about.

Michael [00:07:24] Well, you started off by answering the phones on the weekends, is that still done that you’re getting the kids at 14 15 and saying, look, there is casual work and it can lead on to other things.

Marissa [00:07:34] Yes, absolutely, yes and we probably have around 15 kids on at any time. And if we can turn some of those into good long-term employees, well, that’s really good. There are certainly some senior staff there now who started out as juniors like I did.

Michael [00:07:53] What about attracting because you employ agronomists as well, if I remember correctly and we’ll go into why you have people like that, is it hard to attract people into working at something like the Killarney Club if they’re not from that area?

Marissa [00:08:08] Yes, it can be, yes, Killarney is a beautiful place, and it’s nice and close to everything, but it’s tricky to drag people out of the city or just to somewhere new. It’s yes, trying to find somebody to fit those roles when they haven’t grown up in a co-op environment to know, have some loyalty to the place, it can be tricky.

Michael [00:08:33] And we talked about the dairy industry in the area itself. They dated back to 1974, declining, but that wasn’t later on, though. What made the Killarney co-op go out of dairy, around about what time and look at involving itself in other operations?

Marissa [00:08:56] Yes so if going right back right back to at least when the co-op started, it was purely a supplier co-op. So it was just a butter factory. But all of the farmers, they had to have certain equipment. They had to have separators and engines that sort of thing. So some of the spare parts for that, the rubber were bits and pieces were kept by the co-op. So initially they were just kept in the office and the suppliers could come and buy them from the co-op. And as time went on that built that there was more things that the dairy farmers needed just to keep their operation going. So over the years that turned into a full department, they had full trading, which then eventually there is hardware and we put in a feed mill. It really just evolved as the needs of the supplier changed and the needs of the town changed as different businesses closed down in town or, you know, for whatever reason, we needed them so it just built up around that. So by the time in that early 80s, around ’80, ’82, when the butter factory totally closed down by that stage, the trading side of the co-op, the goods trading was already underway, so it was nothing like it is today. But obviously the board of the day could see that there was still that need in town for the co-op to be supplying, which then continued to grow from there.

Michael [00:10:20] Was that a bit of a buffer because if you hadn’t had, even though it was a part of the operation, do you think that helped it survive? Whereas if it hadn’t had the manufacturing side and the whole dairy industry was collapsing, do you think the Killarney co-op would have continued to prosper like it has today?

Marissa [00:10:43] No, I don’t I think that it could have gone two ways. We could have either gone really big into the continuing in the dairy side in the butter factory, which our supplies were declining and other factories were taking over from that. So some certainly survived. But you had to be the one to survive or you have to diversify into other things that were well placed to do that. But over the years, many decisions led to it being what it is today.

Michael [00:11:15] It seems to be that the co-ops that work almost seem to be diametrically opposed. You’ve got the more with primary production routes; you’ve got large dairy co-ops like Norco or meat processing. And they’re very much focused on that one part of the primary sector. Well, then you’ve got co-ops like Killarney and in New South Wales that use the Hastings co-op as an example that have gone into more the retail and the service side and have done just as well. Do you think for co-ops to continue to survive, they’ve got to be as clear cut as going down one of two ways.

Marissa [00:11:59] I think so and potentially that’s business in general. You need a clear direction. But yes, I agree with what you’re saying. I think one way or the other, you have to really be focused on what you’re wanting to supply to your shareholders or your members.

Michael [00:12:16] Well, in Killarney’s case, you went down the retail commercial side and obviously the base was already there because the parts and the assistance you were providing for the dairy farmers. You’ve really diversified now and you’ve got supermarkets. You’ve got other retail outlets. How does that work in an area like Killarney, because as we’ve just mentioned, you’ve got Warwick down the road? Even then, that would be competition for you fairly dramatically.

Marissa [00:12:51] Yes, it definitely is. And I think for us, it’s our diversity that does keep us going. So we have all of the departments so where it might be a drought year and we’re very big on the hay and the cottonseed, those sort of products that’s all well and good because people aren’t buying TVs and fridges. But they balance each other out depending on what sort of year we’re having. And we’re able to, if one department is going really well, we’re able to not so much carry, but keep other departments going where if you were just the electrical store in town or the supermarket in town that would be much more difficult. I think in a town certainly the size of Killarney with around a thousand people, it’s hard to keep all of those things going well.

Michael [00:13:40] Well where has the co-op as moved largely away from primary production, you get the consumer but you are still involved closely with the agriculture sector because as you mentioned, it’s an area where there’s a lot of grain growing and that has provided an area that the co-op’s been involved in with the whole thing of stockfeed.

Marissa [00:14:02] Yes so that’s the biggest part of our business volumes is that we manufacture stockfeed and we purchase grain from direct from farm as well. So that’s the way that we keep it in that cooperative spirit is that we’re buying back from the farmer and finding a market for their grain or turning it into stockfeed and selling it back to the cattle guys,

Michael [00:14:24] How closely do you work with those farmers? And I assume you prefer to deal with those in the area before having to bring in grain from elsewhere?

Marissa [00:14:33] Yes, definitely, yes so we work really closely with them and in a lot of cases, it’s right from the point of that, they’re purchasing the seed of us and then they’re planting. And then we work with some agronomists to help out where the need arises and we provide the fertiliser and the chemicals that sort of thing. And then as that goes on, we eventually then we’ll buy that back off them and market the grain.

Michael [00:15:03] How much did you possibly think couple of years ago in a terrible drought getting hold of that grain? Did it ever cross your mind that this is going to go down the same direction as when dairy prices went through the floor? And you must have thought, is this part of the operation, which you now depend a lot upon? Is it going to get done?

Marissa [00:15:23] Yes, the tricky side there was that we were having to supply and having to get those supplies from further afield, where normally all of that money that would normally be going back into our local community from us buying it from the farmers that grain just wasn’t there. So we would having to buy it from quite far afield. And you worry about the flow on effects for the years to come from that all the money that wasn’t getting turned over in our local economy. But the business was strong before that, which was good. We weren’t necessarily worried about our future but just worried about how the next few years could go.

Michael [00:16:01] As a co-op, how do you work at the cost of shares? What sort of financial involvement is required of anyone that wants to be a part of the co-op?

Marissa [00:16:12] So initially, our shares are $2 and people need to buy a minimum of 25 shares. So it’s not a huge investment for $50 up to a maximum of 500 shares and to retain their active membership, they need to spend $50 a year, so they need to just keep that involvement in the co-op.

Michael [00:16:30] And as a member, if you’re a grain grower, what sort of benefit would they get as opposed to a person that lives in town and uses as a shareholder, the retail outlets?

Marissa [00:16:43] So we offer a shareholder discount, which is across, varies a little bit across all of the departments but if you’re a shareholder, you can access that and there are certain times where products are hard to come by in the rural side, we might be cottonseed, for example, is a good one that when it’s dry, everyone’s looking for it. Well, all preference goes to our shareholders. There are times where we can’t supply anybody else,

Michael [00:17:11] And there’s the minimum the 25 ownership maximum of 500, where does that play it also in decisions by the co-op in the sense that if you’ve got those 500 shares does that give you five hundred votes?

Marissa [00:17:27] No, so the nature of the co-op is that every member has one vote, so it doesn’t matter what sort of investment you’re putting in, you might get better dividends because you’ve got more invested, of course, but you just get one vote.

Michael [00:17:43] And what about disposal of shares? If someone that’s been a shareholder for a long time been a farmer in the area or someone that’s buying supplies from you in other ways and they decide, time’s Up. What’s the disposal of shares? How does that operate?

Marissa [00:17:57] Yes, application to the board to have them cashed in so you can just if you have left the area or if you’re not dealing with the co-op anymore, you can apply to have those shares cashed back in.

Michael [00:18:11] Now we’ve talked about the fee and providing that in the buying of grain, but you’re also in the retail side. You’ve mentioned white goods and supermarket. Does that work exactly the same in that, obviously, people get discounts, what about buying in product like you like to buy the grain from the local area in the other parts of the operation of the co-op, obviously, Killarney, you mentioned what a population of a thousand, you must have to look further afield.

Marissa [00:18:43] Yes, definitely so we buy local where we can if there is local fruit and veg, local flowers that sort of thing, we will buy in locally and resell. But for most of the retail departments, of course, yes, we do have to buy. We are a member of a lot of different buying groups, FoodWorks, Home Hardware, Betta Electrical, Australia Post and CRT. So we purchase through those groups to get the best buying power for the members.

Michael [00:19:14] And in the co-op, you mentioned FoodWorks, which is a supermarket, does that mean that you’re competing against other outlets or is there a deal with the co-op dealing with FoodWorks? Are you treated in any way differently?

Marissa [00:19:31] No, just another customer to them, yes, and then we’re able to then provide to our members whatever benefits we can get through the group, but we don’t get anything better from them, in particular for being a co-op.

Michael [00:19:44] Killarney, a small town, you’ve got Warwick just down the road, you’re going into the centenary of the co-op, certainly a change from when they set down in 1921 and looked at the dairy industry. How do you see co-ops? They seem to be enjoying a bit of a resurgence. Some people talk about how COVID has in fact made people look closer to home. How do you see something like the Killarney co-op? Why is it doing well?

Marissa [00:20:18] I think the co-op movement is popular at the moment whether that’s something specific to us, I don’t know, because the co-op’s been a part of Killarney for, like you say, 100 years. I think that there’s definitely a real feeling in Australia of buying local and supporting locally, which I think has certainly helped us and has helped many small businesses

Michael [00:20:43] And the actual co-op itself, its involvement in the community and you look at some of the aerial shots of the co-op on your website, you can’t miss it. It’s a dominating feature of Killarney. What’s its involvement in the community? There are some co-ops that channel the surplus into such things as scholarships or sporting facilities, or the money goes back into the shareholders. What involvement does the Killarney co-op have with the town of Killarney? Apart from being obviously the place that you can buy from?

Marissa [00:21:18] Yes, that’s right, we support many organisations through town. We have got a community support programme which has been running for more than 10 years, where customers can actually choose which beneficiaries in town they would like their distribution to go to and will support those groups based on how many of our members would like the support to go to them. But we certainly sponsor all of the local schools and the community groups and clubs and sporting groups that local show and have done for, of course, 100 years. So we support as much as what we can.

Michael [00:21:58] Where do you see the actual Killarney co-op itself doing in the sense that you’re now going into your second centenary? Everything moves, we’re seeing a lot more shopping online, for example, probably because of COVID, you’ve got click and collect those sort of things. How’s that playing out in such a small town such as Killarney that’s got this very traditional business name there that’s well known generationally? How’s that playing out with you as general manager having to think about the second hundred years?

Marissa [00:22:33] Yes, it’s certainly a challenging time for retail across most of our departments. We offer an online presence. We offer online grocery shopping, for instance, and we do click and collect or delivery. And that’s also through the hardware store and the electrical store. And so that’s opened up some more opportunities for us as well, where people wouldn’t necessarily be supporting us otherwise, but are able to through those channels. And then also, we do, we probably have a lot of information in that we also have the post office. So the volume of parcels that come into town is pretty eye opening as well. So we, to a degree, know what we’re missing out on as well.

Michael [00:23:16] That’s actually a good indication, probably when you’ve been what you say to people, why did you buy that way or do you go out and actually because you’ve got the thing, I suppose, to co-op members, are they more partial to tell you where they think you’ve got it wrong and also where you’ve got it right?

Marissa [00:23:34] Yes, they are. We often say to potential staff, you need to be watching. It’s not just one person walking through and seeing how you are interacting with customers. It’s 2,200 members, who are seeing it day in, day out, and they can be much more critical of the service that they might get from us than they would from a big chain store. But at the same time, a lot of them, it’s looked just like family, and they are very supportive and happy to give us a bit of feedback, good or bad.

Michael [00:24:08] How is Killarney, the town and the co-op coping with the fact that a lot of country towns, the population is getting older? And you were talking about how you like to get the young people in to start off? Is that a problem just in not so much the moving away, but people not coming to the area?

Marissa [00:24:29] Yes, it’s a tricky time, I think, to try to find staff once people leave, whether they come back or whether they only come back to retire can be tricky. The town itself is going really well. We’ve got a real tourist presence at the moment, but people who are actually wanting to stay here and wanting to work, it’s pretty hard.

Michael [00:24:52] I think people are really aware, like, as you say, people are seeing a resurgence. And an interest in co-ops, the general public still, do you think that they understand the role that co-ops play, particularly in towns of Killarney’s size with strong rural roots?

Marissa [00:25:10] No, not always, we find even our members, they don’t necessarily know the backstory or anything about the co-op principles. All they know is that if they buy shares, they get a bit of a discount. We certainly see it more in our shareholders, who are also members of other co-ops that they probably understand a bit better. I think everyone just looks at it as what they can, you know, how their personal experience is with the co-op.

Michael [00:25:39] You talked about how you’re buying grain locally and you try to support local producers. You have things like a market. You’ve got the involvement with FoodWorks, the supermarket operation. Are you also trying to possibly deal like you’ve got your agronomist dealing with local horticulture and possibly trying to get as much of the local veggies and fruit as possible?

Marissa [00:26:07] Yes, we’re probably already doing that as much as we can, just from our local side because there isn’t a lot, but the ones who are around, we try to support where we can but always looking for opportunities.

Michael [00:26:21] One hundred years down the track, what sort of things do you expect to be implementing over the next few years that you would see as still being a part of the foundation and helping it to grow?

Marissa [00:26:37] Yes, I think most of what we’ve got now is hopefully able to stand the test of time. And I think looking back, I’ve done a fair bit of history research on our co-op and it’s always been just what the shareholders need and what the town needs that it’s we’ve never gone out of our way to pick up business that is available elsewhere. We’ve always just looked to try to just compliment what we’re doing now. So that is just continual progression with adding new products and new lines that the customers need. So hopefully we’ll be able to continue to do that over the next 100 years and as the town grows. I’m sure it was the same for the men who were doing this 100 years ago. There’s no way that they could have imagined that it is what it is now and probably the same for us.

Michael [00:27:31] Well, a hundred years, what’s the feeling about the towards that they realise that it has been there in one form or another for the past century?

Marissa [00:27:41] Yes, they’ve just starting to build a bit of excitement now, we had our 99th birthday last week, so we’re just starting to really hit that and turning our 100th year, and that’s starting to be quite a bit of talk about it and what will happen and what celebrations there are going to be.

Michael [00:27:57] You mentioned about the men involved. What’s the feeling because you must be fairly happy? The granddaughter of the engine driver for the co-op is a woman as the general manager?

Marissa [00:28:10] Yes, it’s pretty crazy. It’s probably still a lot of shareholders who are of that, my grandparents’ age that would never have thought that they would see the day. It’s certainly different now, and I definitely don’t feel like any different by being a female in this position than a man being in it. But it has certainly created a bit of interest being first, first female general manager in the hundred years.

Michael [00:28:38] With a hundred years, how important is it also for the other businesses in Killarney to kind of know that the co-op is there? Like, as you say, you don’t want to do things that would impact upon the other businesses at the same time. How do they react and do you hear from other businesses them telling you what you should be doing?

Marissa [00:29:03] Occasionally, yes, we get really good support and we’ve got great relationships with the other businesses in town. No doubt if you came to start a business in Killarney, you’d have to be looking at what else is there and seeing what the likes of the co-op is doing and obviously could be seen as a bit of the threat. But the businesses who are in town, we have great support from, yes, works really well.

Michael [00:29:28] Do you have much dealings with other co-ops, whether they look at you and think, geez, they’ve been doing something right for the last hundred years or you go to a co-op and say, look, we’re thinking about this. Do you find much discussion in that field?

Marissa [00:29:43] Not really, no, there has been over the years, but not, we don’t have many places that are really similar to us, of course, so it can be tricky like that.

Michael [00:29:55] Is that one of the reasons you think you’ve done well? Is that because you are a little bit different? Both the area and the way the co-op is situated, both physically and economically in the town.

Marissa [00:30:09] Yes, I think so. I think all the decisions have, obviously, they haven’t got everything right over the years, but everything’s just been about making sure that the right decisions are made for the shareholders and what we can bring to them. So I think our diversity and making sure that what we’re doing fits our town is what has made us different.

Michael [00:30:28] Well, Marissa, you won’t be around for the second centenary, but you’re obviously out enjoying what sort of things are planned for the acknowledgement of an operation, which must be doing something right.

Marissa [00:30:45] Yes, it’s early days at the moment, but we’re planning trade shows and celebrations with big centenary dinner just, yes, probably a week long, I would think, week of celebrations.

Michael [00:30:59] Well, as a celebration and centenary dinners, you’re not yet there but I assume that good dairy products cheese will be on the menu?

Marissa [00:31:09] You would think so, yes.

Michael [00:31:11] Marissa, thank you very much for your time and enjoy the second 100 years.

Marissa [00:31:16] Always, thanks for your time.

Michael [00:31:27] Clocking up a hundred years for help in the primary sector is not a bad achievement, going to the second 100 years and being optimistic is certainly very good and that’s the case of the Killarney co-op near Warwick in Queensland. Started as a dairy co-op back in 1921, and I’m now talking to the general manager of the Killarney co-op, Marissa Costello.

Subscribe to Meet the Co-op Farmers

Other Episodes

Episode 5: The farmer-owned berry company making $200 million a year
The biggest blueberry supplier in Australia formed out of a different fruit, with a reluctant leader from a completely different business. And it thrived.
The co-op difference: Empowering farmers and communities together
The co-operative difference informs and strengthens the business strategy of the co-ops and mutuals executive coach Stephen Shepherd of AltusQ works with.
Episode 6: How travelling the world’s farms helped Emma discover the best way to run her huge cattle business
Emma’s massive 55,000-hectare farm is based in the remote area of Charters Towers but she is a big believer that farmers who share insights, knowledge and work together can thrive, even in such isolated environments.