A presentation of some issues in cooperatives for a seminar at the HCCA in Paris. Focus on the issue of transnationals and the new CAP

1. Defi pour les cooperatives
Internationalisation of Coops under a changing CAP
Presentation at HCCA, Paris, October 2018
Krijn J. Poppe

3. Cooperatives add value in different ways:
 Realise efficiency of scale (if owners don’t want to
merge): joint machines, cheese factory
 Create a market / realise access to the market that is at
a distance
 Increase market efficiency by competition with traders
with a high mark-up
 Reduce transaction costs for the food industry by
standardising contracts, organising farmers and their
quality control.
 Manage risk for farmers (pooling)
 Organise innovation e.g. in niche products

4. --Marketing and processing---Input supply
Production
d
,
-
Clustering
F/H.
Regional
niche
coop.C.
Bargaining
coops
D.
Specialzd
Processing
coops
E. Large
Agribiz
coops.
Scale/branding/capitalintense
Selling (or buying)
Clustering of 500 European Cooperatives, clustered on characteristics
(excluding region and policies of the region relevant for those coops)
A.
Secondary
coops
B. Supply
coops
G.
Emerging
coops
Production
proces

5. Structures of cooperatives are changing
 Cooperatives go international
 Cooperatives obtain hybrid organisational structures
 Cooperatives give more room for managerial
entrepreneurship
 Cooperatives (have) become more product-based and
less region-based (in member-representation)
 In order to attract additional equity capital, cooperatives
change their ownership structures
 Federated cooperatives are likely to disappear or become
farmer-owned instead of user-owned

6. Overview of the situation in EU
(circa 2010)
Transnationals
1 (members in
all supplying
countries)
Transnationals
2 (members in
some but not
all supplying
countries)
Inter-
nationals
Cereals 4 7 7
F & V 12 3 15
Dairy 6 3 8
Sugar 2 0 3
Other
sectors
8 1 12
Total 32 14 45

7. Internationalisation is closely related
to growth
 In several countries the domestic merger process
within a sector has, more or less, been completed
=> ‘national champions’
 European food processing companies are still small
compared to the retailers as well as to American
food processing companies (Wijnands et al, 2007)
 More international consolidation can be expected
 Internationalisation seems to be the goal, not a
transnational cooperative movement

8. How to create a transnational cooperative:
1. a national cooperative invites members from another
country (e.g. Avebe)
2. through acquisitions in foreign countries (Campina)
3. via establishment of a new cooperative (examples?)
4. by merging two (or more) national cooperatives (e.g.
Arla Foods)
It is not easy; Danish Crown Annual report 2011:
● “Much of the year has been spent discussing Danish Crown's
ownership structure - and considering the options should
foreign capital one day be needed to ensure future growth.
And thereby want a say in the decisions made. This
discussion is ongoing.”

9. Transnationals: in conclusion
 The 46 transnational cooperatives can be found in a
limited number of sectors (mainly dairy and fruit &
vegetables) in northwest Europe.
 They often also own companies that source from non-
members in other countries, like the other 45
international cooperatives.
 Most cooperatives prefer to internationalize by acquiring
foreign IOFs, not by merging with other cooperatives.
● To prevent dilution of ownership (income, control)
● There are no legal barriers in merging across
borders
 The SCE (European Cooperative Society) can be used to
merge cross-border but is not used.

10. Will the new CAP influence cooperatives ?
The EU proposals for the future CAP – relevant aspects:
 Subsidiarity with national strategic plans
 More attention to climate and environmental issues
● 40% CAP payments on climate
● 30% EAFRD on AECM
 Obligation to have an eco-scheme in Pilar 1
 Option to shift up to 30% from Pilar 1 to Pilar 2
● (or 15% of Pilar 2 to Pilar 1)
 Budget cuts more on Pilar 2 than 1

11. Effects for farmers: differentiation ?
 Differences in basic payment between regions already
exist and will not disappear
 Income effects of farmers will differ between regions as
national (and regional) governments will be more farm-
lobby oriented or more environment-lobby oriented
 Within (some) regions farmers with an environmental
friendly farm system will benefit (higher payments,
options for new farm systems) and others will face a
drop in income

12. Will the new CAP influence cooperatives ?
 Increased heterogeneity between members ?
 Climate- / environmental schemes of food processors
might satisfy the criteria of an eco-scheme
● Governments might want to leverage their
investment by promoting such systems
● If farmers get a higher price for their more
sustainable products, a lower payment by the
government is needed – more leverage
 Collectives in AECM are now accepted
● There might be chances for new cooperatives /
producer organisations / commons
● “3rd wave of cooperatives” as part of the transition

13. Thanks for your
attention
Merci pour votre
attention
krijn.poppe@wur.nl
www.wur.nl
Thanks to:
EU / Support for Farmers’ Cooperatives
Perttu Pyykkönen (PTT) 2013 presentation