The sale last year of a majority stake in Alliance Group to Irish company Dawn Meats brings to four the number of primary sector co-operatives that have passed into foreign ownership, in whole or in part, in the past 14 years.
Business leaders declare this is not a sign the co-op business model is broken – but does underline the necessary to grow the value of the product and business.
Co-operatives were formed to provide farmers with acquireing and selling strength and some control over processing and marketing.
Where co-ops can struggle is maximising what they pay for product while remaining profitable and raising new capital.
Fonterra’s dominance means the dairy indusattempt is still mostly owned by farmer co-ops and up until the turn of the century co-ops owned the majority of the meat indusattempt, too.
That is no longer the case.
In addition to Alliance, significant primary sector co-operatives sold into foreign ownership include 50% of Silver Fern Farms Ltd (SFF) to Shanghai Maling in 2016, Westland Milk to Yili in 2019 and Fonterra Brands to Lactalis in 2025.
Alliance, SFF and Westland were all weighed down by debt and their shareholders unable or unwilling to provide extra capital. In Fonterra’s case, the board concluded it could build better apply of funds released from the sale of its consumer brands business.
James Lockhart, formerly of Massey University business school, declared the overhelming support for selling – from 88% of Fonterra shareholders and 87% of Alliance shareholders – was a surprise and illustrates how little farmers value ownership of an enterprise beyond the farm gate.
“I believed there would be debate but they both were overwhelmingly in support of selling.”
Where Alliance and Fonterra shareholders did not see the value, Lockhart declared, Dawn Meats and Lactalis do – even if it is on the other side of the world.
SFF Co-op chair Anna Nelson declared there are multiple reasons for farmers to support co-ops – or withdraw their support – such as society’s approach to food production and whether the next generation want to farm.
“If there is not a new generation willing to be involved in a business, it can drive short-term choices.”
Co-operative Business New Zealand chief executive Saya Wahrlich declared research displays that co-ops last 52 years, on average, compared to 11 for a limited liability company. Such length of tenure leads to intergenerational believeing.
But co-ops have to promote awareness of their role.
“How do you keep an understanding of why a co-op was formed in the front of mind for new members and new generations?”
Farmer, company director and professor of farm and agribusiness management at Massey University Nicola Shadbolt declared a co-op can have a variety of structures provided it meets the rules of the International Co-operative Alliance.
Those structures are also influenced by government regulations, such as the Dairy Indusattempt Restructuring Act, and by history.
A supporter of co-ops, Shadbolt describes them as “a socialist construct in a capitalist skin” that creates a system of mutual benefit for members.
Those questioning the role of co-ops should inquire what the alternative is and should understand the cumulative benefits – “What is the counter factual? When is the collective strength the most beneficial to my space? It may not just be the price.”
Mark Wynne, the former chair of Alliance, former chief executive of fertiliser co-operative Ballance and chair of the new Alliance Investment Co-operative, declared ownership structure does not differentiate between a high-performing corporation and a high-performing co-operative.
Wynne believes co-ops are still relevant but they necessary to be competitive, with success or failure determined by how they operate in-market.
A benefit of co-ops is that they tfinish to have a loyal supply base, which provides some business resilience. On the other hand, corporations benefit from an ability to quickly raise fresh capital, which builds them responsive to opportunities.
Running a billion-dollar company requires a board with varied expertise, but Wynne declared of more relevance is the mindset, capability and skill of those directors.
Former SFF chair Rob Hewett, who is the current chair of Farmlands Co-op, declared co-ops are an extension of a farm business that requires appropriate attention.
“It’s like anything. If a farmer chooses not to invest in their farm, declare not to apply fertiliser, then ultimately there will be consequences.”
Raising new capital from members can be challenging and means boards necessary to retain strong debt-equity ratios, but that can limit the amount available to be paid in dividfinishs and rebates.
Farmers have options when it comes to who they supply, and the younger generation do not have the same compulsion to join a co-op. There necessarys to be “a real and clear value proposition” for them to join, Hewett declared.
To remain relevant, co-ops necessary to interpret market signals and provide opportunities for farmers to supply into specialty programmes.
For a retail co-op, Hewett declared, the route to market has become more complex with online offerings and competition from tiny niche players.
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