Improving Producer Cooperatives: Best Practices in Marketing, Distribution and Governance

Final report for ONE19-332

Project Type: Partnership
Funds awarded in 2019: $23,750.00
Projected End Date: 12/31/2021
Grant Recipient: CISA (Community Involved in Sustaining Agriculture)
Region: Northeast
State: Massachusetts
Project Leader:
Margaret Christie
Community Involved in Sustaining Agriculture (CISA)
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Project Information

Summary:

Vegetable and dairy farmers in our three-county region of Massachusetts have benefited from two long-standing producer marketing cooperatives, the Pioneer Valley Milk Marketing Cooperative, doing business as Our Family Farms (OFF), and the Pioneer Valley Growers’ Association (PVGA). Both coops play critical roles in sustaining farms in our region, and both were at critical transition points at the beginning of this project, due to market shifts, aging members, rising costs, and stagnant prices. This project supported these producer cooperatives in identifying challenges, prioritizing solutions, and implementing improvements.

This project unfolded during the height of the COVID-19 pandemic, which had significant impacts on our partner cooperatives, their members, and our work together. Both the cooperatives and the farm businesses that make up their membership were managing rapid change in markets, labor supply, supply chains, and worker and food safety. This project allowed us to provide targeted technical assistance and support to these producer coops at a particularly challenging and unstable time. Rather than proceeding in a linear fashion through research, evaluation, review, goal-setting, and implementation, we worked more iteratively as the partner coops assessed fluctuating markets and new funding opportunities while making real-time decisions about how to operate during a pandemic. In the end, this more flexible approach allowed us to respond to real needs as they evolved and to help both partner coops take advantage of new funding opportunities.

Both partner cooperatives have made significant investments in new or improved facilities during the period of this project. Support from state and private foundation grants, some of it newly available because of the Covid-19 pandemic, was essential to funding these improvements. In the report below we detail how the technical assistance provided through this project also supported these investments and other improvements at each coop. These improvements position each cooperative to enter new markets and expand their product lines, which should leave to increased sales. Following the challenges of the last two years, however, which include both the pandemic and a prolonged period of heavy rain in summer 2021, both coops and their members are acutely aware of the potential for unforeseen circumstances and derailed plans.

This project benefited the 35-40 farms that are current members or shippers with Our Family Farms and PVGA by ensuring that these coops continue to operate and thrive, providing services that producers depend on, including marketing, branding, aggregation, processing, invoicing, payment, inventory management, distribution and access to discounted supplies.

A case study detailing the work that we completed with each cooperative can be found here. We’ve completed the case study to inform to inform business technical assistance provided to other producer cooperatives and farm and food businesses. 

This work was funded by the Northeast Sustainable Agriculture Research and Education program and the Massachusetts Department of Agricultural Resources through the Federal-State Marketing Improvement Program.

Project Objectives:

This project sought to support two producer marketing cooperatives in order to ensure profitability, increase sales, and expand participation. In addition, we planned to identify best practices that could benefit other producer cooperatives, or those considering forming a producer cooperative. This project coincided with the COVID-19 pandemic, which had significant impacts on our partner cooperatives and their members. The pandemic resulted in changes to our process, which are reflected in these modified objectives.

Objective 1: Work closely with partner cooperatives to identify needs, prioritize solutions, and act on opportunities by providing expert assistance and on-going support. Continue to reassess challenges and identify solutions through changing circumstances during the life of the project.

Objective 2: Support implementation of improvements at each cooperative. 

Objective 3: Write a case study of these cooperatives and our work together to inform business technical assistance provided to other producer cooperatives and farm and food businesses. 

This project benefited the 35-40 farms that are current members or shippers with Our Family Farms and PVGA by ensuring that these coops continue to operate and thrive, providing services that producers depend on, including marketing, branding, aggregation, processing, invoicing, payment, inventory management, distribution and access to discounted supplies. Both cooperatives made substantial investments in infrastructure and added new products during (or shortly after) this project. Both cooperatives also experienced significant new challenges due to the COVID-19 pandemic and the extended rainfall in summer and fall 2021.

Introduction:

Agricultural marketing cooperatives allow their members to work together on key activities related to marketing and distribution, rather than fulfilling these activities individually or relinquishing their products to a non-farm distributor or processor. In order to continue to succeed, cooperatives need to maintain and improve their facilities, update practices and systems, invest in marketing, and retain and grow membership.

Nationally, producer cooperatives have faced obstacles to success. Margins in most agricultural sectors are very low and, in many cases, cooperatives are made up of competitors. The pressures on cooperatives, combined with a decrease in the total number of farmers, has meant many cooperatives have closed or been consolidated. Since 2000, the US has seen a 40% decline in agricultural cooperatives, with only 1,953 remaining in 2016 (Demko 2018, p. 7-9). Fruit, vegetable, and dairy cooperatives saw the greatest decline, with an average of 23 fruit and vegetable cooperatives closing per year, followed by dairy cooperatives (Demko 2018, p. 1).

In a report on best practices for niche meat cooperatives prepared by NCGrowth at the University of North Carolina, the authors note that “agricultural cooperatives allow small scale and larger scale farmers, producers, and processors to strategically pool resources and capital in ways that allow them to capitalize on their collaboration to collectively foster opportunity and success” (De Groot 2018, p. 1). Our project was based on a similar understanding of the power of cooperatives to support farm profitability and success. Although the focus of this North Carolina study was on young cooperatives, our experience suggests that many of the same factors can influence the on-going success of mature cooperatives, especially at moments of transition or challenge.

The USDA has also supported significant research and assistance for producer cooperatives, much of it relevant to our partner cooperatives. A 1997 publication, for example, focuses on “Decision-Making in Cooperatives with Diverse Member Interests” (Reynolds 1997), and suggests a process for managing a situation which PVGA has been wrestling with: members who sell product through the cooperative and directly to the cooperative’s buyers, thus providing competition from the coop’s own members.

Several recent SARE-funded projects have focused on early-stage marketing cooperatives and food hubs. We believe that many of the challenges faced by start-up marketing cooperatives also apply to some mature coops. “Food Hub Development in the Rural Midwest” (FNC17-1093), for example, addressed issues of food safety, traceability, and branding (Nixon 2019). Managing new food safety requirements, both in their own facility and on member farms, is an important challenge for PVGA. During this project, we discussed marketing and branding with both coops; it formed to core of our work with OFF and is on the list of next steps for PVGA.

The farms participating in “The Minnesota Hmong Agriculture Cooperative Aggregation and Value-Added Program” (FNC17-1102) were much smaller than most of the farm members of our producer cooperatives, but faced some similar challenges related to entering value-added production and exploring new institutional markets (Thao 2018).

This research supports one of our key findings: skilled, personalized and in-depth technical assistance and facilitation support is enormously valuable to producer cooperatives, as it is for other farm and food system businesses. Most farmer cooperatives are under-staffed and rely heavily on contributions from farmer board members and members who are extremely busy with their individual farm businesses. 

Introduction to the participating cooperatives:

The Pioneer Valley Milk Marketing Cooperative, doing business as Our Family Farms (OFF), was founded in 1997. During a period of high economic stress and significant loss of dairy farms, OFF has played a critical role, allowing member farms to retain a greater share of the consumer milk dollar. Processing and product expansion have been long-standing challenges for OFF and were a focus of their planning work over the past two years. OFF has two member farms.

The Pioneer Valley Growers Assocation (PVGA) is a farmer-owned marketing cooperative based in Whately, Massachusetts, with 20 member farms and 15-20 non-member shippers. Founded in 1978, PVGA aggregates locally grown produce and distributes it to major supermarket chains, independent grocers, food banks, and local distributors across New England.

Dairy farms and wholesale vegetable growers, while dissimilar in many ways, share key attributes relevant to the work outlined here. Both have little or no control over the price of their products in traditional large wholesale marketplaces, and both are often in a low-price position. Efforts to achieve marketing or distribution efficiencies or to implement or improve branding that conveys a market advantage are very important to their success.

These cooperatives are important assets to our local food economy. In our region, both wholesale vegetable and dairy farms tend to be larger than average, in terms of acreage and jobs, and therefore their profitability disproportionately impacts our agricultural land base and economy. In this competitive environment, marketing coops can provide farmers with an essential sales outlet, but they must adapt their practices and structures to stay relevant.  

Citations

de Groot, Juliana, “Niche Meat Cooperative Structure: Risk Mitigation through Bylaws, Member Equity Investment, and Stakeholder Collaboration,” NCGrowth, Chapel Hill, North Carolina, 2018, p. 1. http://www.ncgrowth.unc.edu/wp-content/uploads/2018/12/NCGrowth_Niche_Meat_Cooperative_Structures_10152018.pdf

Demko, Dr. Iryna. Trends of US Agricultural Cooperatives (1913-2016). CFAES Center for Cooperatives, 2018, p 1.  https://cooperatives.cfaes.ohio-state.edu/sites/coop/files/imce/Research/Trends%20of%20US%20Agricultural%20Cooperatives%20Branded%20Final%20November2018%20PUB.pdf

Nixon, Katie, “Food Hub Development in the Rural Midwest,” Final Report for FNC17-1093, USDA Sustainable Agriculture Research and Education program, 2019. https://projects.sare.org/project-reports/fnc17-1093/

Reynolds, Bruce J., “Decision-Making in Cooperatives with Diverse Member Interests Rural Business-Cooperative Service,” RBS Research Report 155, USDA Rural Business-Cooperative Service, April 1997. https://www.rd.usda.gov/files/rr155.pdf

Thao, Phenli, “The Minnesota Hmong Agriculture Cooperative’s Aggregation and Value- added Program,” Final Report for FNC17-1102, USDA Sustainable Agriculture Research and Education program, 2018. https://projects.sare.org/project-reports/fnc17-1102/

Cooperators

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  • Gary Gemme (Researcher)
  • Angie Facey (Researcher)
  • Mike Wissemann (Researcher)

Research

Materials and methods:

In planning this project, we anticipated a clear step-by-step process:  research best practices, prioritize needs with each cooperative, develop plans for improvement, and support implementation. In practice, our approach changed. First, both coops continued to assess their needs and make plans during the period between grant submission and project start. Second, and more importantly, this project largely coincided with the COVID-19 pandemic. Both cooperatives, and their member businesses, experienced significant disruptions to their markets and operations. Instead of making careful plans in a familiar market environment, they were reacting to major changes and on-going uncertainty.

The pandemic also brought opportunities to both cooperatives; most notably, access to new grant funds for equipment and facilities. Both benefitted from Massachusetts’ Food Systems Infrastructure Grant program, established in response to the pandemic to support food access and food system resilience.

In this uncertain environment, we developed a more iterative approach to supporting these producer cooperatives, checking in regularly to assess needs, identify resources, and provide support for planning and implementation, as appropriate. From this regular interaction, we identified areas for further support and provided assistance through CISA staff members or consultants.

We worked with PVGA and OFF in the following areas:

Governance, board management, and communication: Jonah Fertig-Burd of the Cooperative Development Institute worked with the PVGA board on these topics, developing an action plan for growth and improvement. CISA staff member Margaret Christie supported the on-going implementation of parts of this plan through regular attendance at PVGA board and planning meetings. In addition, PVGA completed some overdue activities, such as reviewing and updating their by-laws with a lawyer to ensure compliance with current law and best practice and reflection of PVGA’s actual practices. Changes made during that process will allow them to invite a few non-farmers with specific expertise to sit on their board.

Facility investments: CISA staff worked with PVGA to plan and prioritize needed facility investments and we supported grant writing to partially fund these investments. PVGA received grants totaling $703,586 which supported:

  • The addition of a new 40x80 foot storage space and purchase of refrigeration equipment for this new cooler (installation pending).
  • Reconfiguration and improvements to existing coolers.
  • Expansion of and significant improvements to their food processing room (see below

Some of the grants PVGA received required bridge or match financing which their current lender would not provide. We introduced PVGA to two new lending partners, the Massachusetts Food Trust, funded by the Massachusetts Department of Agricultural Resources and administered by the Franklin County CDC, and the Cooperative Fund of New England. These mission-focused lenders provided bridge and match financing that allowed PVGA to accept grant funds. They also required improved financial record-keeping that led to PVGA to hire a new bookkeeper and improve these important systems.

Our Family Farms planned their new processing facility and applied for grant funding without our support. However, as detailed below in the sections on new product development and marketing, work conducted through this project on marketing and branding will contribute to the success of the new processing facility.

New product and markets: PVGA identified the need to expand their product line and specifically to increase their value-added processing through business planning work that CISA supported before the onset of this project. During this project, we introduced them to Sodexo, the dining services management company at the University of Vermont and other Vermont colleges. In addition to peeled butternut squash, which PVGA was already producing, Sodexo was interested in diced butternut and peeled and diced sweet potatoes. PVGA became a partner on a successful Kendall Foundation Food Vision Prize project spearheaded by Sodexo and their campus partners. That grant partially funded the expansion and improvement of PVGA’s processing room and the purchase of new processing equipment.

CISA convened a meeting of food safety experts to provide support for planning the layout, food safety-related improvements, and equipment priorities for the improved and expanded processing room. Participants included Michael Botelho from the Massachusetts Department of Agricultural Resources Produce Safety Team, Lisa McKeag from University of Massachusetts Extension, and Chris Callahan from University of Vermont Extension. Through this meeting, PVGA was also connected to Amanda Kinchla from the University of Massachusetts Department of Food Science, who supported the creation of a food safety plan for value-added processing and training for one PVGA board and one PVGA staff member.

OFF’s new processing facility provides them with the opportunity to expand their product line, an option they did not have at their previous processor. CISA supported market assessment and review and prioritization of new product options for OFF, completed by marketing consultant Sara Talcott. Our Family Farms expects to begin on-farm processing in May 2022. They have decided to focus their initial product expansion on additional fluid milk products, including flavored milk products, heavy cream and half-and-half, and additional sizes of unflavored milk.

Marketing and Branding: OFF continued to work with Sara Talcott in preparation for the launch of their processing facility and new products. This outcomes of this work include the identification of new target customers and strategies to reach them; a rebrand; new marketing materials and a new website; and a marketing plan they will implement at launch.

Please see the case study for more detail about the activities undertaken by each cooperative during this project.

Research results and discussion:

We have discussed the unusual conditions of the pandemic and the resulting changes to our methods above.

The new and improved facilities described above and in the attached case study will allow both OFF and PVGA to expand their product lines and enter new markets. Additional benefits at PVGA include: increased ease and efficiency in managing inventory, leading to improvements in quality control; more options for different temperature and humidity zones, allowing for better storage of more products; the ability to add higher-value processed products and access new markets, such as colleges and other institutions; and simpler and more efficient management of food safety requirements.

Processing has been a long-standing challenge for Our Family Farms. Processing options have limited their product line and package sizes, which also limited the types of markets they could serve. During the pandemic, they were forced to dump milk and were unable to get enough product from the processor to fill all of their orders. Operating their own processing plant allows them to manage quality and offers appealing “cow to customer” marketing narratives.

The extensive planning and management required to make these changes at both cooperatives, as well as specific investments in improving board functioning and integrating new, younger board members (at PVGA), have strengthened both boards and improved their operations.

As noted above, OFF’s processing plant is scheduled to begin operations in May 2022. PVGA’s facility expansion and improvements were largely completed by the end of 2021. In fall 2021, they did limited runs of processed squash and sweet potatoes while learning the new equipment, training staff, and optimizing management of vegetable and water waste. The real impact of these improvements on sales and systems will not be felt until 2022 and following years.

Research conclusions:

Our goals in this project were to improve our understanding of best practices for producer cooperatives and to use that knowledge to strengthen two long-standing producer cooperatives in our region. Going forward, we hope to be better positioned to support existing or emerging producer cooperatives. Despite changes in our approach due to the pandemic, these goals have largely been accomplished. As noted above, the long-term benefits of improvements at the partner coops are not yet clear.

CISA staff members have learned a great deal about the needs of producer coops and how to support them. We continue to receive inquiries from growers interesting in exploring cooperative business options and have provided some support to existing coops. We planned to create and disseminate a document exploring best practices for producer cooperatives but decided that our experience supporting these coops at this exceptional time was better conveyed through a case study, which is attached.

As noted above, both partner cooperatives have made (or are currently completing) significant investments in infrastructure during the period of this project. These investments position them to expand their product lines and enter new markets. In addition to product expansion and new or improved facilities each cooperative has also made other important improvements supported by this project, including (all items do not apply to both coops):

  • New lending partnerships with mission-focused lenders committed to local food systems and cooperative businesses;
  • Improved food safety plans and systems;
  • Improved book-keeping and financial reporting;
  • Improved governance, board management, and member alignment with mission;
  • Market assessment and identification and prioritization of new products; and,
  • Rebranding, new packaging and marketing plan in place for new product and processing launch.

Both coops have experienced two very challenging years, due to the pandemic and to an extended period of heavy rains in summer and fall 2021. Sales at both cooperatives in 2021 were lower than pre-pandemic levels. The facility and systems investments that each cooperative has made should provide opportunity for needed growth in the next few years but the real impact of these improvements on sales and systems will not be felt until 2022 and following years.

This project demonstrates the value of in-depth technical assistance and on-going relationships with service providers for farm and food system businesses, and indicates that technical assistance is useful in combination with grant funds. Our partner coops benefited from the public funds made available to them because of their importance in a resilient food system. The ability of PVGA and OFF to respond effectively to those grant opportunities, however, was enhanced by the working relationships with CISA and other service providers made possible by this project. Many of our project activities either helped secure grant funds or will help to ensure that those funds have the largest possible positive impact. At PVGA, these activities include: planning for needed improvements, grant writing, introductions to lenders who provided essential bridge and match financing, and introductions to a grant program and new buyers for processed products. At Our Family Farms, these activities include: extensive market assessment and product review through which they identified and prioritized new products, and rebranding, development of marketing materials, and a marketing plan for product launch that will significantly strengthen the launch of their new products and processing facility.

Participation Summary
12 Farmers participating in research

Education & Outreach Activities and Participation Summary

40 Consultations

Participation Summary:

12 Farmers
Education/outreach description:

Because the core of our project was technical assistance, research and outreach was essentially one and the same - please see the Materials and Methods section for a detailed discussion of the technical assistance provided. We consulted with two producer cooperatives directly and extensively and that included direct outreach and education for 12 farmers participating in the cooperatives as well.

Learning Outcomes

12 Farmers reported changes in knowledge, attitudes, skills and/or awareness as a result of their participation
Key areas in which farmers reported changes in knowledge, attitude, skills and/or awareness:
  • Board governance and management
  • Member communication
  • Grant management
  • Marketing
  • Branding
  • Food Safety
  • Value-added production

Project Outcomes

8 Grants applied for that built upon this project
6 Grants received that built upon this project
$1,626,962.00 Dollar amount of grants received that built upon this project
7 New working collaborations
Assessment of Project Approach and Areas of Further Study:

Many agricultural technical assistance providers have shifted towards offering more in-depth farm business assistance, recognizing that the many and varied challenges facing farmers are not easily addressed. In our region, for example, the Agricultural Viability Alliance, a network of agricultural technical assistance providers, was formed to advocate for more in-depth technical assistance, following research in which “farmers report[ed] a significant need for expanded one-on-one business and technical assistance to ensure they can weather the economic storms created by climate impacts” (Agricultural Viability Alliance 2021). This project allowed us to provide long-term, in-depth support to two businesses that provide key services to several dozen farms. Over the course of more than two years, we were available to these businesses during a time of great challenge and uncertainty and were able to help them address pre-existing needs and respond to the challenges and opportunities that arose from the pandemic. Our experience validates the importance of flexible and in-depth technical assistance for farm businesses.

Citation:

Agricultural Viability Alliance, “Climate Change and Agriculture in the Northeast and Hudson Valley,” https://www.thecarrotproject.org/wp-content/uploads/2021/06/Alliance-Climate-Agriculture-in-the-Northeast-and-Hudson-Valley_2021.pdf, p. 1.

Information Products

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.