The St-Albert Cheese Co-op on the South Nation River in eastern Ontario will mark its 125th anniversary next year, setting it out as an example of how co-operatives can find and sustain long-term success.
For St-Albert and about 25 other farmer-owned co-ops active in Ontario, several factors rise to the top when looking at the keys to success.
Why it matters: Co-operatively governed enterprises are a way small businesspeople can maintain decision-making power and ensure profit isn’t the only goal. But they face the same pressures as for-profit companies, which creates difficult choices.
“First and foremost, our cheese recipe has endured the test of time,” said St-Albert’s Business Development Director Éric Léveillé, when asked about the company’s continued vitality.
Léveillé was clear that St-Albert knows those outside influences well. Having survived a devastating fire in 2013, (with considerable help, from co-operative, but community minded competitor Gay Lea Foods), the 34 dairy farmer member/owners of the award-winning cheesemaker now face threats from international trade deals.
“Conditions have never been as unfavourable to small- and medium-sized co-ops as they are now,” Léveillé said. “With CETA (Comprehensive Economic and Trade Agreement between Canada and Europe) and now NAFTA (North American Free Trade Agreement) coming into play, these agreements are putting greater strain on our ability to get a return on our investments. St-Albert may have done better than most, but we are concerned about our fellow (small) cheesemakers in Canada.”
Léveillé is certain that the company’s “strong bond to the French Canadian culture of eastern Ontario” will, “protect us from being swallowed up by larger entities.”
“Our members had turned down many offers over the years to sell St-Albert because it is part of our community’s fabric and they want to preserve it as they do their culture,” he told Farmtario.
The value of community
Erin Morgan, executive director of the Ontario Co-operative Association, says being tied to a rural community isn’t confined to French-speaking farmers, or to eastern Ontario.
It’s true that back in the 1860s, French-speaking farmers were pioneers in Canada’s co-operative movement — a movement that eventually spawned over 1,200 co-operatively-run creameries and cheese factories stretching from Windsor, Ont., to Windsor, Nova Scotia and beyond. Another key piece of co-operative history in Canada came in 1900 when Alphonse Desjardins originated Quebec’s system of caisses populaires (credit unions), which operate under similar principles and now stretch across the country.
Morgan’s first job out of school was managing the OntarBio organic farmers’ co-operative, which went on to become the Organic Meadow co-op. The co-op was later forced to sell the Organic Meadow brand and Guelph-based dairy processing plant.
After stints with Ontario Bean Growers and the Grain Farmers of Ontario, Morgan returned to the co-operative sector more than two years ago as executive director of an umbrella lobby organization representing more than 1,500 co-operatively-run businesses in all sectors of the province’s economy.
“For me, I had only worked for one co-operative, so it didn’t expose me to the depth of the co-op sector,” she said.
Co-operatives don’t leave
She did, however, understand the value of farmers owning the business and being involved in the decision-making and she was already aware of the seven business principles that come along with operating as a co-operative, set out back in 1844 by a group of innovators gathered in Rochdale, England.
“It opened my eyes to how versatile the co-operative model is” and to all the different ways that organizations can incorporate those key co-operative values into day-to-day business and longer-term business strategy.
More than a year into her new position, Morgan recalls having an “ah-hah” moment when speaking with then-opposition MPP Ernie Hardeman as part of the Co-operative Association’s “provincial co-op caucus” initiative, Morgan learned of the long-serving Oxford MPP’s own experiences dealing with co-operatively held businesses in his home riding.
“What he said to me is that the value of co-operatives is that they don’t leave. They are community-based organizations that rely on the well-being of the community to remain strong, so they’re committed to giving back to that community and helping that community stay strong.”
With Hardeman now occupying the office of Minister of Agriculture, Food and Rural Affairs, Morgan hopes this places the co-operative movement on solid footing in terms of provincial government support.
The veteran MPP’s assertion that co-ops care about their communities, meanwhile, has no stronger backers in Ontario than the leadership at Gay Lea Foods. The Guelph-based co-op recently celebrated 60 years in business.
“A lot of these co-ops really strive to improve the economic landscape of rural Ontario for everybody, no matter whether you’re a (co-op) member or not,” Morgan said.
Gay Lea faced a difficult choice whether to upgrade an older factory in Teeswater, where the co-op started in 1958, or expand its Guelph plant, which was probably more cost effective. It chose Teeswater.
“It showed they have a much more holistic view of growing their business; something totally different from another kind of business that would just be looking at pure profit,” Morgan said.
After being nominated by Morgan, Gay Lea was handed the 2018 Large Co-op of the Year award by Co-operatives and Mutuals Canada.
“It’s important that we have good economic jobs in communities (like Teeswater)… It’s way too easy to be able to consolidate plants, move them into the greater Toronto area and ignore what happens north of Highway 401. But it’s not what our values are. It’s not what we’re investing in,” said Gay Lea chief executive officer Michael Barrett in his acceptance speech.
“It’s about recognizing that we’re of the community, by the community and for the community.”
The others of the original seven co-operative principles are voluntary membership open to all socio-economic strata; one member one vote; patronage dividends to member/owners; autonomy for member/owners; support of training and education; and co-operation among co-operatives.
Financial rewards for owners
The practice of paying annual dividends is sometimes cited as a drawback to co-operative business models because in years when the company loses money, co-op bylaws require that the executive at least consider rewarding owners financially.
But Appin-area crop farmer Richard Tanner, who has served on the board of directors of the AGRIS farm-inputs co-operative (or on the board of one of its two predecessor organizations, the Orford Co-op) every year except two since 1995, insists declaring dividends makes co-ops stand alone in the marketplace.
“It may not always have been in cash, sometimes it has only been in new shares in the co-op, but I believe for every year in recent memory we’ve paid patronage. It’s not something you see nearly as much in the private sector,” he said.
The past few years has seen AGRIS pay out a combination of cash plus new shares to the owners of the co-op, with the amount based on how much business they do with AGRIS and its affiliates.
Co-operation among co-operatives is critical, Morgan said. She cites Gay Lea’s granting of processing capacity after the St-Albert fire, as well as AGRIS’s financial start-up support for the Cellulosic Sugar Producers Co-operative.
She said 22 companies are classified under provincial guidelines as “agricultural co-ops,” representing $455 million in annual revenue. This makes them the fifth largest co-op sector in the province, behind Insurance, Credit Unions, Manufacturing and Wholesale Trade.
Gay Lea is currently classified as a manufacturing company under the government’s tracking system. If Gay Lea is moved into the agricultural sector, it becomes the third largest co-op sector in Ontario.
Keys to success
Other keys to success, according to Tanner, are good employees — and good customers.
“And in order to have loyal customers, you’ve got to be competitive in the marketplace.”
A business can’t expect to charge significantly more for products and services just because it’s a co-op.
Co-ops are prone to the same economies of scale that influence for-profit businesses. As in many other sectors of the economy, there has been a trend in agricultural co-ops for mergers leading to larger and fewer companies.
Morgan’s former employer, Organic Meadow, is now owned by British Columbia-based, farmer-owned co-operative Agrifoods International. The Ontario-based co-op that formerly owned the Organic Meadow brand and processing facility continues under the name Ontario Organic Farmers Co-operative, but without the benefit of what used to be its predominant source of income.
Amalgamations, not takeovers
Many former members of the United Co-operatives of Ontario group of companies are now part of the massive United States-based Growmark network of co-ops. AGRIS is an amalgamation of two farm-input co-ops that resisted that Growmark trend, the former Orford and Pointe-aux-Roches co-ops, which joined in 2006.
But this is a positive trend, said Tanner, especially if the alternative is to sell into the private sector or cease operations altogether. Amalgamations, he said, allow the companies to maintain frontline staff and maintain economic presence in their communities, while decreasing middle and upper management costs — something that might not be good for all middle and upper managers, but generally is good for the financial health of the co-op and its owners.
“In today’s world, if I had another Pointe-aux-Roches co-op that came along and wanted to amalgamate, I would do it in a minute,” he said. “It’s not like in the private world where you might buy another company and totally change it. We’re buying another co-op, and they’re just like us. We’re exactly the same.”
Five keys to success for agricultural co-ops
1. Good employees
Business is business. With co-ops, the only staffing decision typically made by the board of directors is for the top job, but from that top job trickles down the message to all other staff people. So it’s crucial that the board of directors gets it right.
2. Co-ops helping co-ops
This is one of the original seven principles of co-ops first set out in 1844 in Rochdale, England. Ask St-Albert Cheese after Gay Lea Foods offered processing capacity following a devastating 2013 fire: Help from other co-ops, even if they’re direct competitors, can be a lifesaver.
3. Active in the community
Whether you view community as the town and region in which you operate and provide employment, or you view community as the entire farm sector that you’re a part of, being supportive is a signal that you’re here for the long term.
4. Competitive in the marketplace
It might be good public relations to sponsor community projects and help out other small businesses, but that only takes you so far. If you charge significantly more for products or services than private competitors, you can’t expect financially strapped customers to remain loyal.
5. Annual dividends
It’s what sets co-ops apart. Member/owners buy shares, usually inexpensive, with the expectation that they’ll share at least a small part of the bounty on an annual basis.