The Business Council of Co-operatives and Mutuals (BCCM) CEO Melina Morrison said that the industry association is advocating for government incentives to encourage more primary producers to be involved in value-added food production and ultimately, more co-op ownership of advanced food manufacturing businesses.
“We’re asking for an enabling policy environment through legislation and regulatory structures to put co-ops at a level-playing field to other business models. Like any ordinary businesses, primary producers need to invest or raise capital. However, they’re not going to invest as much as corporate entities might when the operating environment does not support [co-op] businesses as much as other corporate entities.
“The main problem is the lack of awareness of the business model. We don't have lawyers and accountants that are adequately trained to be able to support people to start their businesses as co-ops. There is a lack of deep knowledge and expertise right across the government and industry of co-ops.”
It is now calling on policymakers to explore new tax models and create a positive environment for co-ops.
“We see in other jurisdictions in the US where there’re very attractive tax incentives for agricultural co-ops that encourages them to value-add their business. We also see that in some areas of Asia, such as India where there’re large, co-op-owned agricultural, F&B manufacturers. Co-ops there are recognised as a viable business model where they can flourish and grow.”
Citing the example of the National Reconstruction Fund – an initiative by the Australian Government to invest in the industry to build onshore capabilities in high-value sectors, Morrison hopes that some funding could be channelled towards co-ops to build advanced food manufacturing capabilities.
“Modern, ethical consumer” driving rise of the co-op business model
Morrison highlighted that consumer demand for more sustainable and ethical products is driving the rise of the co-op-owned businesses.
“Today’s consumers want provenance and high quality in their food and beverages. They want supply chain transparency and are increasingly buying from domestically owned businesses.
“A co-op-owned business is 100% farmer owned, which potentially means shorter supply chains and brings consumers closer to the food source. There’s also value from a food security point of view when international supply chains are disrupted.”
Our sister title FoodNavigator-Asia earlier published an article on the opportunity for locally owned, emerging food businesses in Australia and New Zealand to pitch directly to Woolworths supermarkets through an FMCG accelerator programme.
Morrison added that a co-op business model consolidating small, independent producers producing niche products can bring about a more diverse food production that ultimately benefits consumers.
“Consumers want more choices. So, in order for smaller producers to be able to still be able to compete in larger, global markets, they do need to collaborate with other producers to share assets like trading expertise and investments into deep technology.”
It cites the likes of co-op multinational corporations (MNCs) like New Zealand’s Fonterra, Denmark’s Danish Crown, and Ireland’s Kerrygold to compete on a global level.
Current situation
During the national level meeting held earlier this year, BCCM had asked for Australia’s food processing capability to be based onshore and its rationale was due to maintaining food security during crises, including the pandemic and flood disasters in the country.
“Co-ops and mutual businesses are very often on the front line of economic and social crises, as well as natural disasters. And this is where their unique business model comes into its own,” its press statement highlighted.
Agricultural co-ops in Australia were increasingly getting corporatized in the 1980s and 90s, Morrison said, with most co-ops today involved in low-value, primary production of food staples.
“When we place producers in the situation of just being price takers on their commodities, they’re not going to be rewarded sufficiently through their farm gate value to be [financially] sustainable.
“Unless we reward these producers – by getting them involved in the value-adding part of their business, they’re not going to get enough returns on investment. We need to incentivise these primary producers to not lose our onshore sources of important food staples like protein, dairy and grain,” she explained.
