A SOCIOwECQNOMiC STUDY OF SEVERAL VEGETABLE MARKETING COOPERATIVES Thesis for The Degree of M. 5. MICHIGAN STATE UNIVERSITY 3012.111 T. Porter 1961 ; m; Univcrslt)’ LIBRAR Y chhlgan Sta ABSTRACT ‘A SQUID-ECONOMIC STUDY OF SEVERAL VEGETABLE MARKETING COOPERATIVES by John I. Porter The general objective of this study was to analyze and evaluate the operation of grower-owned and controlled fresh vegetable marketing cooperatives in order to provide helpful guides for improving existing cooperatives and to aid groups who may wish to establish similar types of organi- zations. The specific objectives of the study were the following: (a) to analyze and evaluate the operations of several vegetable marketing cooperatives in order to deter- mine some areas of strength and weakness; (b) to examine the organizational structures, personnel, services and sales outlets of several vegetable marketing cooperatives and (c) to discern weaknesses in the operation of vegetable marketing cooperatives from.the grower's viewpoint. the analytical framewerk developed to detect some areas of strength and weakness in the operation of five vegetable marketing cooperatives in.Michigan and Ohio was centered around the following seven essentials assumed necessary for the successful operation of a marketing cooperative: (1) economic need for an organization; (2) a capable sales-manager: (3) an adequate volume of business; (4) use of sound financial practices; (5) fulfillment of John 1. Porter responsibilities by the directors; (6) utilization of effective channels of communication and (7) member loyalty. rho following individuals were interviewed per- sonally in studying five active marketing cooperatives in 1960: 5 presidents, 46 other members, 30 former members, 19 non-member growers and 5 sales-managers. Twelve former members of two vegetable marketing organizations which T have failed were also interviewed. It was determined that two of the five active coop- eratives which were located the greatest average distance from markets had a greater retention of active membership and the only upward trends in volume of business. Two other variables which seemed to have a significant effect on the success of these cooperatives were: (1) the number of members involved in the decision-making process at meet- ings of the board of directors and (2) the number of per- sonal contacts among individuals within a cooperative. therefore, the following was concluded with the inclusion of all three variables: (1) the greater the economic need in terms of distance from markets; (2) the greater the number of members involved in the decision-making process at board of director meetings (within the limits of this study) and (3) the greater the frequency of personal con- tact. among individuals within a cooperative, the greater the tendency toward retention of active members and main- tenance of a high volume of business. John T. Porter The board of directors hold more responsibility for providing an atmosphere for adequate communications among members in arriving at decisions than any other indi- vidual or individuals within a cooperative. Since there is a relationship between the amount of personal communi- cations among individuals within these cooperatives and the retention of active members, the directors are partially responsible for’keeping members loyal to their cooperative. Former members of the five active cooperatives and former members of the two inactive associations blamed the shortcomings of these cooperatives more on the sales- manager than any other individual. However, since the directors are responsible for hiring and firing the sales- manager, they can be held responsible to some degree for the performance of the sales-manager. Thus, it may be concluded that the degree of success of these fresh vegetable marketing cooperatives has depended more upon the actions or inactions of the board of direc- tors than any other individual or individuals within the organizations. A.SOGIO-ECONOMIC STUDY OF SEVERAL VEGETABLE MARKETING COOPERATIVES By John T. Porter A THESIS Submitted to the College of Agriculture of Michigan State University of Agriculture and Applied Science in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of.Agricultural Economics 1961 G 6/; x [/a 5,1,», AGUOWLEDGFMEN TS Special words of appreciation are extended to Dr. W. Smith Greig, my major professor, and Dr. Robert O. Kramer, Director of the Agricultural Marketing and Utilization Center, for their thoughtful guidance in the preparation of this thesis. I wish to thank Dr. John H. Oarew of the Depart- ment of Horticulture for his interest and guidance in initiating this research project. I also wish to thank Dr. L. L. Boger for making available the financial assistance which was necessary to complete this research project and my Master of Science degree. Finally, I wish to express thanks to all other faculty members and graduate students in the Department of Agricultural Economics who have made my graduate study interesting and enjoyable. 11 TABLE OF CONTENTS ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . LI 8 I or TABLE S O O O O O 0 O O O O O O O O 0 0 Chapter I O I'TRODUOTI ON 0 O O O O O O O O O O 0 O The Nature of the Problem, . . . . . Objectives of the Study . . . . . . An Assumed Definition . . . . . . . II. PROCEDURES or THE STUDY . . . . . . . Development of the Seven Essentials for the Success of Marketing Cooperatives e e e e e e e e e e e Questionnaire Development . . . . . Sampling and Data Collection . . . III. CASE DESCRIPTIONS OF ORGANIZATIONAL ' STRUCTURES, PERSONNEL, SERVICES - AND SALES OUTLETS . . . . . . . . . Non-stock Single Commodity OrganizationA... e as s es s Non-stock Single Commodity Organization B . . . . . . . . . . Stock Type Multiple Commodity organizationAeeoeeee e es Stock Type Multiple Commodity organizationBeeeeeeeeee Stock Type Multiple Commodity Organizationo.......... Non-stock Multiple Commodity Organization Which Has Failed . . Stock Type Single Commodity Organization Which Has Failed . . 111 Page ii an. (I) own-#:- 12 16 16 17 19 2O 22 24 25 IV. ANALYSIS AND EVALUATION OF SOME AREAS OF STRENGTH AND WEAKNESS . . . . . . Economic Need for an Organization. A Capable Sales Manager . . . . . An Adequate Volume of Business . . Use of Sound Financial Practices . Fulfillment of Responsibilities by the Directors . . . . . . . . Utilization of Effective Channels of Communication . . . . . . . . Member Loyalty e e e e e e e e e Reasons for'Members Leaving the Five Active Cooperatives . . . Reasons for Growers Not Joining the Five Active Associations . Reasons for Failure of Two Marketing Organizations V. CONCLUSIONS AND IMPLICATIONS APPENDIX: Conclusions . . . . . . . Implications e e e e e e e e BI BLI OGmHY O O O O O O O O O O O O Questionnaires Used for the Collection of Data . . iv 26 27 33 41 42 49 57 64 66 71 73 81 81 84 90 94 LIST OF TABLES Table Page 1. Membership samples selected in five active vegetable marketing organizations, 1960 . 14 2. Classification of interviews taken in a sample of five active vegetable market- ing organizations, T960 0 e e e e e e e e 15 3. Interviews with former members of two vegetable marketing organizations which havefailed,1950............ 15 4. Number of acres of produce harvested for sale in counties served by five market- ing organizations, 1959 . . . . . . . . . 27 5. Average acreage of produce grown by members of each of five marketing organizations, 8 1 959 O 0 O O O O O O 0 O O O O O O O O O 2 6. Number of miles distance of five marketing organizations from the nearest city with 100,000 population, a whole-sale public market and a retail farmer's market, 1960 30 7. Percentages of former'members and non- members of five marketing organizations who said there was a real need for the magketing organization in their locale, 19 o O O O O O O O O O O O O O O O O O O 31 8. Reasons expressed by 49 former members and non-members for the need of five marketing organizations, 1960 . . . . . 32 9. .Ability rating of sales-managers of five marketing organizations by per cent of each of the following groups of growers interviewed: members, former members, non-members and all growers, 1960 . . . 34 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Reasons given by 25 growers for fair or poor ratings of sales-managers of five marketing organizations, 1960 . . . . . . Opinions of all growers interviewed in connection with five marketing organiza- tions when asked if their sales-manager had developed the necessary confidence and loyalty of the membership of their organization, 1960 . . . . . . . . . . . Months employed and estimated earnings of sales-managers of five marketing organizations, 1959 . . . . . . . . . . . Percentages of members and former members of five marketing organizations express- ing affirmative opinions when asked if their organization had paid enough in the past to obtain a satisfactory sales-manager e e e e e e e e e e e e e e Gross f.o.b. business volume of member produce sold by five marketing organiza- tions, 1955-1959. e e e e e e e e e e e s Member Opinions when asked if the present pooling system used by their'marketing organization was fair to all growers . . Reasons why 15 members of four marketing organizations said the pooling system wasn't fair to all growers, 1960 . . . . Ability ratings of bookkeepers of five marketing organizations by per cent of total members interviewed from each organization, 1960 e e e e e e e e e e s Member opinions of the major financing and operation problems of five marketing cooperatives, 1960 . . . . . . . . . . . Number of directors, terms of office, number of director'meetings held, total attendance and average attendance at board of director meetings of five marketing organizations, 1959 . . . . . . Number of membership meetings held by five marketing organizations, 1959 . . . vi 36 38 39 39 42 43 45 47 50 52 21. 22. 23. 24. 25. 26. 27. 28. 29. Percentages of members of five marketing organizations who thought their directors were taking adequate steps to keep the membership informed on the activities and problems of their organization, 19600000000000.00000000 53 Member and former member opinions when asked if the sales—managers of five marketing organizations were allowed ample freedom to use their own judgment in performing their duties, 1960 . . . . . 54 Percentages of members of five marketing organizations who thought that adequate checks were made by their directors to see that the sales-manager was conform- ing to the policies adopted, 1960 . . . . 55 Percentages of members and former members of five marketing organizations who didn't think enough public relations work had been done in the past by their organization, 1960 e e e e e e e e e e e e 55 Ratings of the most important sources of information on financial matters and activities other than strictly financial by members of five marketing organiza- t10n3,1960eeeeeeeeeeeeeee58-59 Average number of personal contacts between directors and sales-managers, members and sales-managers, directors and presi- dents and members and presidents of five marketing organizations, 1960 . . . . . . 62 Percentage trend of the original active members remaining in five marketing organizations, 1957-1960 e e O O s e e e e 64 Percentage trend of over-all active member- ship in five marketing organizations, 1957-1960eeeeeeeeeeeeeeee 65 Former members who stopped patronizing one marketing organization because they quit raw-n.8, 1956-1960 e e e e e e o e 0 67 vii 30. 31. 32. 33- 34. 35. 36. 37. 38. 39. Reasons pertaining to the sales-manager obtained from 30 former members for leaving five marketing organizations, 1957-1960eeeeeeeeeeeeeeee Reasons pertaining to the use of financial practices obtained from 30 former members for leaving five marketing organizations, 1957‘1960seeeeeeeeeeeeeee Reasons pertaining to communications, member loyalty and board of directors obtained from 30 former members for leaving five marketing organizations, 1957-1960eeeeeeeeeeeeeeee Miscellaneous reasons obtained from 30 former members for leaving five market- ing organizations, 1957-1960 . . . . . . Most frequent reasons obtained from 19 growers for’not joining five marketing organizations, 1960 . . . . . . . . . . . Reasons pertaining to sales management obtained from 12 former'members for failure of two marketing organizations, 1960eeeeeeeee'eeeeeeeee Reasons pertaining to volume of business obtained from 12 former members for failure of two marketing organizations, 1960 O O O O O O O O O O O O O O O O O 0 Reasons pertaining to financial practices obtained from 12 former members for failure of two marketing organizations, 1960 O O O O O O O O O O O O O O Q .~. 0 Reasons pertaining to communications and member loyalty obtained from 12 former members for failure of two marketing organizations, 1960 . . . . . . . . . . . Miscellaneous reasons obtained from 12 former*members for failure of two mar- keting organizations, 1960 . . . . . . . V111 68 68 69 70 72 74 75 76 78 79 CHAPTER I IN TRODUCTI ON The continued growth of large food purchasing organizations has made it increasingly more important that sellers organize to meet the demands of fewer buyers in order to provide a market for their produce. According to a Pederal Trade Commission survey,1 sales of all cor- porate food chains Operating 11 or more retail stores increased from 29 to 38 per cent of total retail food store sales between 1948 and 1958. The sales of affiliated independent retailers who are members of voluntary and cooperative buying groups increased from 22-23 to 33 Per cent of total retail food store sales between 1948 and 1958. These figures indicate that 71 per cent of the total retail food store sales were made by corporate food chains and independent retailers affiliated with coopera- tive and voluntary purchasing groups in 1958.2 1Pedez-ral Trade Connnission, Economic Inquiry Lntg z... _ - P C-acw-t ,=. o« WdIte : o _. , U. S. Government Printing Office, washington D. 0., January 1960, pp. 2-3. asources of similar estimates: Polz, William 5.3., and Alden C. Manchester, sto Me o W: Marketing Research Report No. 417, Agricultural Marketing Service, U. S. Department of 1 2 Such consolidation of purchasing functions in a few central offices has greatly reduced the number of indi- vidual buyers. The changes in food purchasing since 1948 seem to indicate further growth of buying groups of all types which are large enough to buy directly from shipping points. With the increasing size of retail operations and a larger proportion of fresh produce bought directly from the shipping point, there is increased demand for large, steady volumes of more uniformly graded and packed high quality produce. It is increasingly difficult to sell odd grades, sizes, colors and small lots of produce. The large commercial growers are sometimes able to sell to chainstores quite effectively, but small, medium and some large scale producers are finding grower marketing organi- zations very helpful in selling their produce to large scale purchasing organizations. In the fiscal year 1957-58 there were 730 fruit and vegetable marketing cooperatives in the United States with an estimated membership of 126,370. Cooperatives which market fruits and vegetables rank third in total number of farmer marketing cooperatives classified accord- ing to major product handled. Twelve per cent of all Agriculture, Washington D. 0., July 1960. Mueller. 3- Wu W 27th annual Edition, Pragressive Grocer, New York, April 1960. Mueller, Willard P. and Leon Garcian, the Market Structure of Grocery Retailing 1240-58: Re- search Report 5, Agricultural Experiment Station, Univer- sity of Wisconsin, Madison, April 1960. 3 agricultural marketing cooperatives in the United States are classified as fruit and vegetable organizations, while 3.3 per cent of the estimated membership of all marketing cooperatives is from fruit and vegetable cooperatives.3 Local and regional fruit and vegetable marketing cooperatives had an estimated $508 million and $661 million gross business volume, respectively, and remained in fourth place of commodity marketing cooperatives with a total gross business of 81.17 billion during fiscal year 1957-58. The total net value of business for these local and regional coOperatives after adjustment for duplication resulting from intercooperative business was $787 million.4 These figures represented an increase of 10.6 per cent over the gross value of nearly $1.1 billion in 1956-57 and 9 per cent over the net volume of almost $722 million in 1956-57. Fruits and vegetables accounted for more than 9.5 per cent of the net value of all farm pro- ducts marketed by cooperatives in 1957-58.5 California led in the net value of fruits and vege- tables marketed by cooperatives with almost 8337 million in.1957-58. Florida remained in second place with net sales of more than 8127 million. The two states within 3Gessner,.Anne L., t ti 3 Fa e C e - - , General Report 7 , Farmer Cooperative Ser- vice, U. S. Department of Agriculture, Washington D. 0., June 1960, p. 12. 4Ibid., p. 22. 5Ibid., pp. 29, 3o. 4 the geographical area of this study, Michigan and Ohio, had 36 and 18 cooperatives, respectively, handling fruits and vegetables with an estimated net sales value of $17.3 million and 314.8 million, respectively, in 1957-58.6 There are several advantages gained from market- ing cooperatives which help farmers increase their net income. ‘Accoroing to Abrahamsen,7 marketing cooperatives help farmers increase their'net income in the following ways: 1. "Help to increase their bargaining power’in ' the market." 2. "Help to reach. and expand existing markets - and.develop new ones." 3. "Help to improve quality production, pay- ments according to grade and orderly marketing practices." 4e "Help to interpret market trends to patrons thus improving standardization of farm products." 0 P m The preceding statistics concerning the increased. concentration of the buying functions in the food trade, the large number and business volume of fruit and vegetable marketing cooperatives in the United States and the advan- tages gained by marketing cooperatively provide adequate justification for the need of research designed to 51bia., p. 62. IAbrahamsen,.Martin A., "Role of Farm Cooperatives 1n Efficient Distribution." We. vol. XXIII, American Farm.Economic Association, Banta Company, Menasha, Wisconsin, 1957. P. 1285. 5 improve the operation of producer'marketing coopera- tives. There are certain essential sociological and soon- omic factors necessary for the success of a cooperative which are often overlooked by members, directors and mana- gers. These essential factors for success need to be examined more closely in order to detect the areas of strength and weakness in marketing cooperatives. Members are interested in the reasons for former>members leaving a cooperative in order to combat future incidents of this kind in established and newly organized associations. Others are curious as to why producers in the vicinity of a marketing organization have not joined. Individuals concerned with agricultural marketing want to know what the shortcomings of other cooperatives have been in the past in hopes that these can be avoided in the future. Because of the above reasons and the widespread grower interest in cooperative marketing in Michigan, a socio-economic study of several vegetable marketing coopera- tives, both active and inactive, was conducted in Michigan and Ohio. W The general objective of the study was to analyze and evaluate the operation of grower-owned and controlled fresh vegetable marketing cooperatives in order to provide helpful guides for improving existing cooperatives and to aid groups who may wish to establish similar types of organizations. 6 The specific objectives of the study were the fol- lowing: (a) To analyze and evaluate the operations of several vegetable marketing cooperatives in order to deter- mine some areas of strength and weakness 3 (b) To examine the organizational structures, personnel, services and sales outlets of several vegetable marketing cooperatives: and (c) To discern weaknesses in the operation of vegetable marketing cooperatives from the grower's' view- point . WW2 There is no all-inclusive federal statutory defi- nition of an agricultural cooperative. An organization 8 may meet the conditions of the Capper-Volstead Act, but may not be exempt from the Internal Revenue Code. Although 8"The Capper—Volstead Act of 1922 authorizes the association of producers of agricultural products for the mutual benefit of the members thereof, as such producers. These associations are to conform to one or both of the following requirements: First. That no member of the association is allowed more than one vote because of the amount of stock or mem- bership capital he may own therein, or Second. That the association does not pay dividends on stock or membership capital in excess of 8 per centum per annum, and in any case to the following: Third. That the association shall not deal in the products of nonmembers to an amount greater in value than such as are handled by it for members. Source: Hulbert, L. 8., Le W, Farmer Cooperative Service Bulletin 10, U. S. Deparzcément6of Agriculture, Washington, D. 0., January 1958, pp. 1 , 1 7. 7 an organization may not meet the conditions of the Capper- Volstead Act, it may be eligible for loans from a bank for cooperatives. In a cooperative the financial benefits accrue to the member-patrons, while in an ordinary commerb cial enterprise they accrue to the stockholders who have invested their money in the business. Organizations with or without a capital stock financial structure may be cooperative, if properly organized and operated. A cor- poration may be entirely cooperative, although incorporated under a business corporation statute.9 For purposes of this report each organization included in the study was considered to be a form of cooperative endeavor. 9Hulbert, pp, cit., pp. 1-3. CHAPTER II PROCEDURES OF THE STUDY The analytical framework developed to detect some areas of strength and weakness in the Operation of market- ing cooperatives was centered around an examination of seven essentials assumed necessary for the successful Operation of these organizations. The seven essentials for marketing cOOperatives selected for examinatiOn were the following: (1) economic need for an organization: (2) a capable sales-manager; (3) an adequate volume of business; (4) use of sound financial practices; (5) ful- fillment of responsibilities by the directors: (6) utili- zation of effective channels of communication and (7) member loyalty. Adequate initial capital financing and other possible essential factors might have been studied, but the essentials selected were considered the most impor- tant for analyzing and evaluating the current operation of these organizations. The areas included in the analytical framework to discern some of the weaknesses in the operation from the grower's viewpoint were: (a) reasons for'members leaving active associations: (b) reasons for'nonmembers not joining active associations and (c) reasons for failure Of two marketing organizations. e e Es ent o S cc s The following paragraphs are devoted to a review of literature used as source material for the development of the seven essentials for the successful operation of marketing cooperatives. The existence of economic need for an organization is vitaleor the success Of any business. Sanders10 makes the following statements in regard to this essential. "The foundation upon which any cooperative rests is the economic need for it as a business enterprise. Should it be found that no economic need is present, a cOOperative might do more harm than good." In reference to the necessity of a capable sales- manager Gardner‘1 states, "The manager must be able to meet the technical requirements of the particular job to be done. In a marketing association he must know how to prepare the product for sale and where to sell it. The extent of the loyalty of the membership will depend largely upon the ability of the manager to act as a leader and to inspire member's confidence. The manager must be able to 'sell' the association." TOSanders, 8. Du W. Farm.0redit Administration Circular No. C-10 , U. 3. Depart- ment of Agriculture, Washington, D. 0., 1949, p. 2. “Gardner. Kelsey Bu 1W- 5izgg, Farm Credit Administration Circular E-21, . S. Dept. of Agriculture, Washington, D. 0., 1948, p. 7 10 A third essential which should be considered as basic for the success of a cooperative is maintenance of an adequate volume of business, because shifts in produc- tion are quickly made from one crop to another’in many areas. Buck‘2 says, "Inability to develop an adequate business volume may bring failure to your association." The use of sound financial practices is another well-known essential, fundamental for the success of a business. The use of financial statements and audits are necessary, since the members have a right to know the facts about the financial condition of their cooperative. Stokdyk‘3 says, "At the end of each season or fiscal year it is a sound practice to have an audit made by a competent account- ant, preferably a certified public accountant." The revolving capital plan of financing is another device which is considered a sound financial practice for cooperatives. Hulbert,14 Griffen and Gardner say, "Its use is regarded by many as the most effective plan for raising capital, maintaining cooperative practices, and 12Buck, Wilbur F., U n You t go-gp, Farmer Cooperative Service Circular 7, U. S. Dept. of Agriculture, Washington, D. 0., 1955. P. 6 ”Stokdyk, E. A. , o 00 Educational Circular 5, Farmer Cooperative Service, U. S. Dept. of Agriculture, Washington, D. 0., 1954, p. 10 ”Hulbert, H. 3., Griffin and Gardner, imp c n or Coo e t e , Farmer Cooperative Ser- vice General Report 32, . S. Dept. of Agriculture, Washington, D. 0., June 1957, p. 39. 11 keeping control of the association in the hands of its current members and patrons." The fulfillment of responsibilities by the board of directors is a very important essential for the success- ful performance of a cooperative, since the directors hold a vital place in management. Gardner15 states, "Members of the board of directors of cooperative associations are not chosen to serve in an honorary capacity, although some board members appear to take this point of view. The job carries with it important legal responsibility because the corporate powers of the cooperative are vested in its directors."' Utilization of effective channels of communication between the sales-manager and members, the directors and members, and the members and potential members is an essen- tial which is gaining more attention among cooperatives. Irwin Rust,16 Chief of the Membership Relations Branch of the Farmer Cooperative Service, says, "Experience has taught that the informed member is the loyal member and loyal members in turn are the foundation of strong, suc- cessful cooperatives." 15Gardner, pp, cit., p. 3. “Rush Irwin. WWW Memgg; Rglations Prggram, Notes from talks given at Kansas State University, and the Maine Cooperative Council, Far- mer Cooperative Service, U. S. Dept. of Agriculture, Washington, D. 0., February and March 1960, p. 1. 12 Bakken17 and Schaars claim, "An association must have the loyal support Of its membership. . . .Without the loyal backing of its membership, a cooperative is doomed for it cannot depend upon nonmember business for its success." e evelo men Six different questionnaires were developed in order to obtain sufficient information from six specific groups of individuals to fulfill the objectives of the study. Each questionnaire was designed to obtain specific information from these different individuals in order to obtain a cross section of facts and Opinions. Questionnaires were developed for the following groups associated with active cooperatives: presidents, members, former members, nonmem- bers and sales-managers. Another questionnaire was devel- oped for interviewing former members of cooperatives which have failed. The term ”former>members" in reference to the active cooperatives includes those growers who are either no longer*members or are stockholders who once sold produce through the cooperative but don't anymore. W The active organizations selected for the study had to meet the following criteria: (1) vegetables for 17Bakken, H. H., and Marvin A. Schaars, M- c o Coo e t M t , McGrawaHill (New York and London , 1937, p. 199. Other essential Operating practices may be found in this book also. 13 fresh market was the primary business, (2) grower—owned and controlled and (3) operating for at least three years. The only requirement for the selection of inactive organi- zations was that they not have been dissolved for more than ten years. This assured that there would be enough individuals still available in the area for interview who had been members of the cooperative. County Extension Directors were contacted to obtain a list of marketing organizations which met the criteria of the study. Six active cooperatives, including one for the pre-test of the questionnaires, and two inac- tive organizations, were selected for the sample. Lists of members, former'members and nonmembers of the active associations and former members of the inactive groups 'were obtained from county extension offices and associa- tion presidents. .After pre-testing the questionnaires and revision of questions, random samples of active members, except presidents, were drawn from lists of members who sold pro- duce through each Of the five cooperatives during the year of the study. The membership samples were stratified accord- ing to the size of active membership. The following pro- portions of the memberships were sampled as shown in Table 1: all 13 active members of the smallest organization: a one-half sample of the group of 22: and a one-third sam- ple of those three associations with over 25 active members. No attempt was made at selecting a stratified sample of 14 former members and nonmember growers, since the number of former members varied considerably among cooperatives and the number of nonmember growers in the locale of these cooperatives was not known. TABLE 1.-éMembership samples selected in five active vege- table marketing organizations, 1960. Active Proportion Sample Organization Members Sampled Size A 13 all 13 B 22 1/2 11 c 26 1/3 9 D 26 1/3 9 E 28 1/3 9 The following number of individuals were inter- viewed personally in studying five active marketing coop- eratives: 5 presidents, 46 other members, 30 former members, 19 nonmember growers and 5 sales-managers (Table 2). A.total of 105 individuals were interviewed in gathering the data on the five marketing cooperatives which have a total active membership of 119. A total of 12 former members of two inactive vegetable marketing organizations were personally inter- viewed to obtain data on cooperatives which have failed. (Table 3). Thus a total of 11? personal interviews were made in collecting data for this study. I 15 TABLE 2.--Olassification of interviews taken in a sample of five active vegetable marketing organizations, 1960. w. 0.. .— w-——~———- . Number of Interviews Sub-Total Organization Former Non- Sales- residents Members Members Members Managers Interviews A 1 12 5 5 1 24 B 1 1o 9 4 1 25 O 1 8 4 4 1 18 D 1 8 6 3 1 19 E 1 8 6 3 1 19 Sub-total 5 46 30 19 5 Total interviews 105 TABLE 3.--Interviews with former members of two vegetable marketing organizations which have failed, 1960. Organization Number A ' 6 6 Total 12 CHAPTER III CASE DESCRIPTIONS 0F ORGANIZATIONAL STRUCTURES, PERSONNEL, SERVICES AND SALES OUTLETS The organizational structures, personnel, services and sales outlets of each cooperative will be examined prior to the chapter concerning the strengths and weak- nesses in the Operation of these associations so the reader will have a better conception of the types of organiza- tions included in the study. These case descriptions will include two non-stock single commodity marketing cooperatives, three stock type cooperatives marketing several commodities, and will briefly describe two organi- zations which have failed. Egg-stock Single Commodity Organizgtiog A The first organization was a non-stock type cOOp- erative which marketed potatoes for 28 members during 1960. Membership is open to all potato growers in the area who wish to market their crop cooperatively. A non-member*may market his crop through the cooperative if the sales-manager needs an extra supply to fill an order which can't be filled by the membership. The directors are selected from the total member- ship. They receive 85.00 for attending a board meeting ' ‘ 16 17 except the president and secretary-treasurer who each 'receive 8150.00 per year for their services. Membership voting fellows the one-man, one-vote principle. A sales- manager is employed from June 21 to September 15, while the bookkeeper is employed from July 1 to September 15. The sales-manager has been employed for>nine years by the cooperative while being employed concurrently elsewhere. There is no central grading station.for the organi- zation, however an office and warehouse for supplies are maintained. An eight cent per hundredweight charge is levied for selling produce through the cooperative. Growers also pay a one dollar membership fee when they join the organization. Bags and baskets are the only supplies purchased for the members. The cooperative sells potatoes, produced in two counties, primarily to buyers in the states of Michigan, Indiana and Ohio. The percentages of potatoes sold dir- eotly through different marketing channels are as follows: 60 per cent to chainstores; 20 per cent to wholesale grocers selling to retail grocers; 10 per cent to inde- pendent retail stores; and 5 per cent each to processors and private truckers selling direct to consumers and hucksters. o -sto k 8 1e Oommo t O iz t The second organization studied was a non-stock type cooperative which marketed potatoes for 26 members during 1960. The members are selected by the board of 18 directors in order to maintain top quality producers in the organization. Non-members are not allowed to market their crop through the organization. The directors are selected from the entire member- ship but do not receive any payment for serving in their capacity as directors. Much of the decision~making is done by a vote of the total membership at their regular meetings on a one-man,one-vote basis. Each member is required to pay a fee of 35.00 per acre of potatoes grown and a $10.00 annual membership fee as his obligation in helping to finance the cooperative. This organization also has a combination salesman and manager who has been the third individual employed in this position on a full- time annual basis. He has held this position for a year. The bookkeeper is employed from August through April. The members grade and pack their own potatoes which are sold on an individual basis by the sales-manager instead of pooling the returns of all produce sold during a cer- tain period. Bags are the only supplies purchased for the members. The potatoes marketed by this association are produced in two counties and sold primarily to buyers in Ohio, Michigan and Indiana. The percentages of sales through different marketing channels are as follows: 90 per cent to chainstores, 7 per cent to Jobbers selling to retail grocers and restaurants and 1 per cent to each of the three following groups: private truckers selling 19 direct to consumers and hucksters, processors, and inde- pendent retail stores. Sto - e M le Oommod t 0 z t on The third organization is a capital stock type association with 13 active members who market four commo- dities through the cooperative. Membership is open to all vegetable growers in the area.. Non-member growers are allowed to sell produce to the cooperative. Preferred stock is authorized in the amount of 100 shares at a par value of $50 per share while 300 shares of common stock are authorized with a par value of 850 per share. In 1960 only 162% shares of common stock had been issued while no preferred stock had been issued. Each stockholder is allowed one vote per share of common stock, but he is limited to holding not more than 10 per cent of the total common stock issued. The directors are selected from.the total member- ship and receive a small token payment for their work. This organization has a salesman at a large wholesale market where all of its produce is sold. The present sales- man has been employed only during the harvest season, July to November, during the past two years. This sales- men.is really a broker-shipper who does most of his busi- ness with growers other than those in the cooperative. The bookkeeper is responsible for most of the financial management since he is employed on a part-time basis through- out the year. The plant manager's responsibility includes 20 hiring and supervising the employees who work in the central packing shed in addition to managing the grading, waxing and packaging operations of the shed. All commodities except cauliflower are sold through the pooling system. Sales and operating expenses are paid by deducting 10 per cent from the gross f.o.b. price of member's produce. Members must also pay the transporta- tion expense to a large wholesale market nearby. Contain- ers are the only supplies purchased cooperatively by the members. The commodities marketed by this association are produced in two counties. Since all of the produce is sold through a broker at a large wholesale market, it is difficult to estimate the percentage that is sold in different states. Stock-type Multiple Commodity Organization B The fourth organization is a capital stock cooper- ative with 26 active members who market both fruits and vegetables. However, 65 per cent of the dollar volume sold consists of vegetables. Members are selected by the board of directors after application is made for member- ship. Membership requirements include purchasing 8800.00 of common stock and signing a marketing agreement. Produce may be marketed through the organization by non-member growers. The amount of capital stock authorized includes 500 shares of preferred stock at $100 per share and 1500 shares of common stock at 3100 per share. Each stockholder 21 is limited to purchasing not more than 5 per cent of the total common stock issued. A stockholder only has one vote regardless of the number of shares of stock he has purchased. Since this organization handles both fruits and vegetables, it is specified that a minimum of three vege- table growers or three fruit growers be on the board of directors at all times. The directors receive no payment for their work. The present sales-manager is the fifth one employed on an annual basis, since the organization began operating. The sales-manager also operates a retail nursery garden center at night and on weekends. The book- keeper works part time on an annual basis. The plant manager is hired to work during the harvest season, June to November. The president and another member were employed as the plant manager and salesman, respectively, for a few years previous to 1960. The association sells 12 kinds of vegetables, 3 tree fruits and several small fruits for growers through a pooling system. Many of the commodities are graded, waxed, hydro-cooled and packaged at the central packing shed. Six of the vegetables are designated as basic commodities, which means members should market all of their production of these commodities through the associa- tion. Packages are the only supplies purchased for members by the organization. 22 A sales charge of 10 per cent of the gross f.o.b. price is deducted for sales and operating expenses plus 5 cents a container for handling charges and 7 cents per container for hydro-cooling. This system of charging members is quite equitable, since those members whose produce doesn't require hydro-cooling aren’t charged for this service. All growers pay the 5 cent handling charge which is deducted to pay off the mortgage. The cooperative sells produce for growers of three counties to buyers in the three states of Michigan, Ohio and Pennsylvania. The percentages of produce sold through different marketing channels include the following: 88 per cent to chainstores, 6 per cent to commission merchants selling to Jobbers and chainstores, 5 per cent to independent retail stores, about 1 per cent to Jobbers selling to retail grocers and restaurants and less than 1 per cent direct to hotels, restaurants and institutions. - M t le ommo t 0 zatio C The last active organization to be examined is a capital stock cooperative with 22 active members who market 14 different vegetables. This cooperative began operations in 1955. The members are selected by the board of directors. Produce may be purchased from non- members to help fill orders when the supply is small. Although 250 shares of preferred and 250 shares of common Class B stock are authorized at 8100 per share, 23 none of it has been sold. Seven hundred and ninety-three shares of common Class A stock have been issued while 1500 shares are authorized at 8100 per share. Not more than 10 per cent of the Class A common stock issued may be held by one person. Voting privileges are limited to one vote per share of common Class A stock held by the members. Each township in the area of production is repre- sented by a member on the board of directors. Directors are not paid for their work except by reimbursement for mileage when they must travel to represent the associa- tion at a meeting. The sales-manager has been employed from July through the middle of November every year since the organization began Operating. He is a partner in a produce-sales firm, but devotes full time to his Job as sales-manager of this cooperative during his period of employment with it. The manager of the packing shed is employed during June to January 15 on a full-time basis and on an hourly basis during the remainder of the year. The association handles 14 vegetables, eight of which pass through at least one of the following operations at the central packing shed: grading, waxing, icing, vacuum cooling, hydro-cooling and packaging. The other 6 vegetables are packed at the farm and taken to the packing shed for shipment. The charge for selling pro- duce through the organization is 10 per cent of the gross f.o.b. price. Seed and packages are the only supplies which are purchased by the co-op for the members. 24 Commodities handled by this association are pro- duced in three counties and sold mostly in the following 8 states: Michigan, Indiana, Ohio, Alabama, Georgia, Florida, Illinois, Kentucky. A minor percentage of the produce is sold as far east as Boston and New York and 'west to Tulsa, Oklahoma. The percentages of produce sold directly through different market outlets are the follow- ing: 50 per cent to chainstores, 20 per cent to commis- sion merchants selling to Jobbers and chainstores and 10 per cent to each of the three following groups: processors, Jobbers selling to retail grocers and restaurants, and brokers selling to Jobbers and wholesalers. Since there have been many failures of agricul- tural marketing cooperatives in the United States during the past four decades, it is of great value to examine some of the inactive associations, while appraising the five active organizations of this study. Ngg-gtock Multiple Commodity Oyganization flhich Has Failed The first inactive cooperative studied had a non- stock capital structure. The organization had been operat- ing during 1950 to 1954 with about 50 members the first year and 35 members during the final year. The sales- manager was employed on an annual basis, but he also had another Job. Ten fresh vegetables were sold through the cooperative while tomatoes were canned at the co-Op's canning plant. 25 o k- S n e Commod t 0 an zatio Which Ha F 1 ed The second inactive cooperative had a capital stock financial structure. There were nine members who marketed a 335,000 annual volume of fresh onions through the organi- zation during 1957 and 1958. The sales-manager was a local producer and member of the organization. Only 84,000 to $5,000 worth of capital stock was sold from an author- ized amount of 320,000. This cooperative also had a cen- tral packing shed for its members. Since some of the members still hold meetings intermittently, the group may be revived in the future. Since the production pattern has been changing in that area, the cooperative would probably market a different commodity. After analyzing the organizational structures, personnel, services and sales outlets of several coop- eratives, it's apparent that each organization has a different combination of these factors. It is difficult to establish which particular combination is the optimum one, since this depends on the social and economic environ- mental conditions of the geOgraphio area of production. CHAPTER.IV ANALYSIS AND EVALUATION OF SOME AREAS OF STRENGTH AND WEAKNESS The analysis and evaluation of data collected pertaining to seven essentials assumed necessary for the successful Operation of marketing cooperatives will be the main Subject of discussion in this chapter in order to determine some of the areas of strength and weakness in the Operation of five active vegetable marketing coop- eratives. Weaknesses in these five organizations from the grower's viewpoint will be detected by examining the reasons for members leaving and reasons for*non-member growers failing to Join these cOOperatives. The reasans obtained from.former'members of two vegetable marketing cooperatives which have failed will be examined in order to determine weaknesses in their operation. The numbers referring to the five marketing coop- eratives in this chapter don't correspond to the listing of organizations in Chapter III by case description, but are coded to prevent disclosure of individual firm Opera- tians. 26 27 Eco c Ne o O z t on Economic need for an organization is a basic essential for the success of these marketing cooperatives. One indication of the economic need for a marketing coop- erative is the total number Of acres of the type of produce handled by an organization which is harvested for sale in the counties served by an association. The numbers of acres of produce harvested for sale in the counties served by each of the five organizations was over 6,000 acres (Table 4). The first and fourth cooperatives have the largest potential acreages of 13,942 and 11,638 acres, respectively. These figures indicate that there is a good potential in terms of possible business volume for all five organizations. TABLE 4.--Number of acres of produce harvested for sale in counties served by five marketing organizations, 1959. Acres of Produce in Counties Organization Served by the Organizations 1 13.942 2 6,438 3 6,855 4 11,638 5 6,894 Source: Bureau of the Census, 1252 Pyelimingyy Census of Agyigglygyg, U. S. Department of Commerce. Further substantiation of the economic need for these marketing organizations is revealed upon examination 28 of the average acreage of produce grown by the coopera- tive members interviewed in the study. The average acre- ages Of produce grown by members of each of the five organi- zations were 60, 145, 86, 18 and 29 acres, respectively (Table 5). Producers with acreages in this range may derive certain benefits from cooperative marketing, such as obtaining chainstore accounts which might not be possi- ble as individuals. TABLE 5.--Average acreage of produce grown by members of each of five marketing organizations, 1959. Average Acreage Organization Grown Per'Member d 60 145 86 18 29 Ul-F'UID Another indicator of economic need in the case of all five cOOperatives is that there are no other grower owned marketing organizations within a 70 mile radius of any of these associations which handle the same commodi- ties. With adequate potential acreages of produce grown in the counties served by the cooperatives, the most. important factor in determining economic need in this 29 case may be the distance of the production areas of the cooperatives from cities with terminal receivers, whole- sale public markets and retail farmer markets. Since Jobbers, commission merchants and warehouses for retail units of corporate chains, cooperative and voluntary pur- chasing groups of independents may be found in practically all cities of 100,000 population or over, these cities are likely markets for local produce. If a terminal mar- ket is located more than 30 or 40 miles from the produc- tion area, growers may save time and expense by marketing their produce cOOperatively. It is estimated that the total cost of time, vehicle use and market fees represent between 5 and 20 per cent of total load value of produce sold at wholesale public markets and between 10 and 30 per cent at retail farmer markets in Michigan.18 The distances of each of the five cOOperatives from the near- est city with 100,000 population, a wholesale public mar- ket and a retail farmer's market are shown in Table 6. The second and third cOOperatives are located an average distance of 47 and 61 miles, respectively, from the three nearest places with a 100,000 population, a wholesale public market and a retail farmer's market. The first, fourth and fifth organizations are located much closer to these three market outlets with an average 18Matte, George 11., Marketing Hangbook :9; Michi- d Va 9 ble , Special Bulletin 1 , Depart- ment.of Agricultural Economics, Michigan State University, East Lansing, December 1957, p. 43. g, F‘s :izath r\;r ’0‘. r") 30 distance of 27, 35 and 11 miles, respectively. On the basis of distance from these three major outlets for fresh produce the second and third cooperatives serve a greater economic need than the other three. MUEE 6.--Number of miles distance of five marketing organizations from 1me nearest city with 100, 000 population, a wholesale public market and a retail farmer' a market, 1960. Distance from Nearest City with Average Distance Mganization 100, 000 Wholesale Retail from the Population Public Market Farmer's Market Three Places - - - - - - - - ----- Miles ------- - ------ 1 27 27 27 27 2 41 6O 41 47 3 62 62 6O 61 4 51 27 * 27 35 5 14 6 14 11 * This large wholesale public market can easily dispose of all 'um produce grown in the counties served by this organization, thus the custance from the nearest city of 100, 000 population and a retail 1hrmer' s market are rather insignificant in determining the economic need for'this organization. Opinions expressed by former members and non-members, as a group for each marketing association, indicate there is a real need for all five organizations (Table 7). The following percentages of former members and non-members interviewed from each of the five organizations claimed that there is a real need for their respective cooperatives: 89, 92, 88, 80 and 100 per cent. 31 TABLE 7.--Percentages of former members and non-members of five marketing organizations who said there was a real need for the marketing organization in their locale, 1960. _._._._ -. . . . ”g..- ... A. .— --_ _-- -.- —— Percent of Total Former Organization Members and Non-members 1 89 2 92 3 88 4 80 5 100 There were nine different reasons expressed by the 49 former members and non-members of five vegetable marketing organizations for the need of group marketing in their locale (Table 8). To meet the demand of fewer buyers for large volumes of quality packed produce and to obtain more market outlets were reasons given by 35 per cent and 24 per cent of the growers, respectively. Twenty per cent of the producers said a marketing organization was needed to help stabilize prices of produce in their area. The need for fewer sellers to bargain with fewer buyers and a good market outlet for smaller producers were reasons expressed by 10 per cent of the growers. The sales Organization reduces the time a grower must devote to marketing tasks, 8 per cent of the growers claimed. Irour per cent of the producers said it helps some growers obtain a better price for their produce. Two per cent 32 thought the cooperatives helped reduce marketing costs and the excess supply of produce at relatively nearby city markets. TABLE 8.--Reasons expressed by 49 former members and non- members for the need of five marketing organizations, 1960. Percent of Total 49 Growers* Reasons for the Need Of Five Associations Frequency 1. To meet the demand of fewer buyers for large volumes of quality packed produce................. 17 35 2. To obtain more market outlets........................ 12 24 3. To help stabilize prices in the areaeeeoeeeeeeeeeeooeeee 1o 20 4. Need fewer sellers to . bargain with fewer buyers...... 5 10 5. Good market outlet for smaller producers.............. 5 1O 6. To reduce grower's time spent on marketing............. 4 8 7. Helps some growers obtain a better price.......... 2 4 8. To reduce marketing costBIO0.0COOCOOOOOOOOOOOOOOOOO 1 2 9. Helps reduce excess supply at city markets......... 1 2 *The percentage figures do not total 100 per cent, since some growers gave more than one reason. From.examination of the various facts in the :previous tables and testimony of former members and non- members, it is apparent that an economic need exists for 33 all of these cOOperatives. However, there appears to be more of a need for the second and third cOOperatives than the other three on the basis of one of the better indicators of economic need - the distance from the near- est city with population of 100,000, a wholesale public market and a farmer's retail market. 1 -Man 6 The sales-manager refers to the individual hired by the board of directors who is primarily responsible for selling the produce grown by the members of the cOOp- erative. The sales-managers of all the organizations, except one, are responsible for the financial management of their cOOperatives. In order to help evaluate the capability of sales-managers, members, former.members and non-members of each marketing cooperative were asked questions concerning their sales-managers' ability and performance during his period of employment. Each group of members, former members and non- members was asked to rate the ability of the sales-manager of their cOOperative as excellent, good, fair or poor. The sales-manager of the first co-op received fair or poor ability ratings from 22 per cent of the members, 17 per cent of the former members, 33 Per cent of the non-members and 23 per cent of all growers interviewed (Table 9). Members and former members thought the sales- :manager Of the second cooperative well qualified for his Job, since all of the members and 89 per cent of the 34 former members rated him excellent or good. Non-members apparently didn't know him very well, since 75 per cent didn't care to comment on his ability. Eighty-three per cent of all growers rated this sales~manager as excel- lent or good. TABLE 9.--Ability ratings of sales-managers of five marketing organizations by per cent of each of the following groups of growers interviewed: members, former’members, non-members and all growers, 1960. Ability Rating Former Non- All Organization of Sales-Manager 1Members Members Members Growers ---------Peroent of total--------- Excellent or Good 67 17 34 44 1 Fair or Poor 22 17 33 23 Don't Know' 11 66 33 33 Excellent or Good 100 89 25 83 2 Fair or Poor 0 11 O 4 Don' t Know 0 O 75 13 Excellent or Good 78 50 O 53 3 Fair or Poor 22 O 0 12 Don't Know' 0 50 100 35 Excellent or Good 76 6O 40 66 4 Fair or Poor 24 O 40 21 Don't Know 0 4O 2O 13 Excellent or Good 33 O O 17 5 Fair or Poor 67 100 33 72 Don' t Know 0 O 67 1 1 The third sales-manager received fair or poor ability ratings from 22 per cent of the members but none from the other groups of growers. Apparently, this 35 individual is doing a good Job for the association, since 78 per cent of the members rated him excellent or good. Former members and non-members weren't well acquainted with the sales-manager, since 50 per cent of the former members and none of the non-members knew which ability rating to give him. The fourth sales-manager received fair or poor ratings from 23 per cent of the members, none of the former members, 40 per cent of the non-members and 21 per cent of all the growers interviewed. The fifth sales-manager received fair or poor ratings from 67 per' cent of the members, 100 per cent of the former members, 33 per cent of the non-members and 72 per cent of all the growers interviewed. It may be worth noting that all five sales-managers ‘were rated as excellent or good by 67 per cent or more Of the members of all cooperatives except the fifth organi- zation. All members of the second cooperative rated their sales-manager as excellent or good. Since many of the former members and non-members didn't know what rating to give the sales-managers of the first and fourth coopera- tives, it is hard to draw any valid conclusions in their cases. However, 89 per cent of the former members of the second association rated their sales-manager excellent or good, while 100 per cent of the former members of the fifth cooperative gave their sales-manager a fair or poor rating. 36 The 25 growers who indicated either fair or poor ratings for their sales-manager were asked why they had given these ratings in order to determine some of the shortcomings of these individuals (Table 10). The state- ment that the sales-manager is emplOyed only on a part- time basis, which doesn't allow him to devote enough time to his job as sales-manager, was given by 36 per cent of the growers. TABLE 10.--Reasons given by 25 growers for fair or poor ratings of sales-managers of give marketing organizations, 19 O. Reasons for Fair or Poor Per cent °f 25 Sales-Manager Ratings Frequemy Iniigfified 1. Employed only part-time . . . 9 36 2. Personality conflict with growers . . . . . . . . . . . 6 24 3. Poor salesmanship . . . . . . 6 24 4. Enjoys too much freedom in making dealsions O o O o O O 5 20 5. No personal contact with growers at their farms . . . 4 16 6. Poor knowledge of crop production practices . . . . 3 12 7. Inexperienced . . . . . . . . 3 12 8. Not dependable in price quotations to growers . . . . 3 12 9. No interest in cooperative. . 2 8 10. Favoritism to certain mem- bers . . . . . . . . . . . . . 1 4 11. Not enough personal con- tact selling . . . . . . . . 1 4 37 The sales-manager's personality conflict with growers and poor salesmanship were reasons listed by 24 per cent. The sales-manager's excessive freedom in making decisions was stated as a reason by five members of one cOOperative. Four members of another association claimed their sales-manager.never personally contacted members at their farms in order to understand their prob- lems in production. Poor knowledge of crop production practices, inexperience and undependability in giving price quotations to growers were reasons listed by 12 per cent of the growers. Two members of one cooperative claimed the sales-manager didn't have any particular interest in the association. Other reasons included favoritism to certain members and not enough personal contact selling. All of the members, former members and non-members of each cooperative were asked if they honestly thought the sales-manager had developed the necessary confidence and loyalty of the membership (Table 11). The largest group of opinions by per cent Of total numbers of growers evaluating the five individuals were: 50 per cent--yes; 46 per cent--yes: 47 per cent--yes; 48 per cent--not sure; and 67 per cent--no, respectively. The quality of sales-manager a cooperative will obtain depends to some extent on the salary and commission offered to him. The largest amount paid for sales man- agement by any asSociation was 819,775 for a sales-manager 38 and his assistant who were employed for 4 months full- time in 1959 (Table 12). These individuals received a 4 per cent commission Of the gross f.o.b. sales. One sales-manager received a straight salary of $8,700 for 12 months full-time employment, while another received a 86,000 salary for 12 months part-time employment. One sales-manager was guaranteed 83,000 plus a 1 per cent commission on all produce sold over a certain busi- ness volume. He received 83,200 in 1959 for 3 months part-time employment. The lowest amount received by any of the five sales-managers was $2,200 for 4 months part-time employment. This individual is paid on the basis of 10 cents per bushel of produce sold. TABLE 11.--Opinions of all growers interviewed in connec- tion with five marketing organizations when asked if their sales-manager had developed the necessary confidence and loyalty of the membership of their organization, 1960. W Opinions of Membership Per cent of organization Confidence in SaleséManager Total Growers Yes 50 1 No 5 Not sure 44 Yes 46 2 No 25 Not sure 29 Yes 47 3 No 12 Not sure 41 Yes 30 4 No 22 Not sure 48 Yes 11 5 No 57 Not sure 22 39 TABLE 12.--Months employed and estimated earnings of sales-managers of five marketing organizations, 1959. W Months of Sales-Managers' Estimated Employment Earnings 4 full time 8 19.775 12 full time 8,700 12 part time 6,000 3 part time 3,200 4 part time 2,200 The majority of members and former members of each of the five cooperatives said that their organization had paid enough in the past to obtain a satisfactory sales-manager (Table 13). All growers interviewed from the second and third asSociations answered yes, and 90 per cent of the fourth, 86 per cent of the fifth and 57 per cent Of the growers of the first cooperative also stated affirmative opinions. TABLE 13.--Percentages of members and former members of five marketing organizations expressing affirmative opina ions when asked if their organization had paid enough in the past to obtain a satisfactory sales-manager, 1960. _ , __ ._" m.._.,_.~_._ m _.._.. Per cent of Total Members and Former'Members 57 100 100 90 86 Organization U'l-F'UIO‘ 40 Previous employment and experience have a bearing on the quality of work a sales-manager might be expected to perform. The 1960 sales-managers of these associations had the following types of employment previous to their present jobs: partner in a grower-processor produce business, owner and manager of a retail nursery garden center, radio farm editor and two were produce salesmen. In summarizing this section on sales management, it is noted that 67 per cent or more of all the members of all cOOperatives, except one, rated their sales-managers as excellent or gOod. The most frequent reasons given by 25 growers for rating the sales-managers fair or poor were (1) employed only part-time, (2) personality conflict with grOwers and (3) poor salesmanShip. Only 50 per cent or less of all grOwers interviewed in each of the five associations thought that their sales-manager had developed the necessary confidence and loyalty of the membership in their organizations. In all cooperatives except the first one, 86 per cent or more of the members and former members thought that the cooperative had paid enough in the past to obtain satisfactory sales-managers. This analysis and evaluation of five sales-managers points out the need for more evaluation of sales-managers by the board of directors and the increased concern members must take in securing and evaluating their sales-managers if they expect to obtain top rate personnel for this job. 41 e u 70 ume 0 u iness An adequate dollar volume of business is quite essential for the successful Operation of any business. Although it is impossible to state a satisfactory minimum dollar volume of business because of great variations in individual organizations, it is important that the coop- erative have enough business to benefit from the economies of reasonably large scale operation so that its fixed costs will be kept in proper relationship to its variable costs. Since financial statements weren't made available from some of these organizations, and those organizations submitting statements wished them to be kept confidential from publication, there was no financial ratio analysis and percentage trend analysis done on these associations. However, some insight of the success of these marketing organizations may be gained by examining the trend of the gross dollar volume of business over a period of years. The trend in gross f.o.b. dollar volume of busi- ness of members' produce sold by all five organizations, except the second and third, has been downward during the years indicated for each association in Table 14. The volume of business for the first cooperative dropped from.$500,000 in 1956 to $247,000 in 1959. The second association had a rise in business volume from.$570,000 in 1955 to a high of $973,000 in 1957 but experienced a drop to $735,000 in.1959. Organization three has had a steady increase in volume of business from 378,000 in 42 1956 to $585,000 in 1959. The fourth cooperative experi- enced a decline in business volume from $111,000 in 1957 to 349,000 in 1959, as did the fifth organization from $250,000 in 1957 to $210,000 in 1959. The volume of business has been decreasing fairly steadily for three of the five cOOperatives. Such a downward trend can even- tually be a basic cause for dissolution of an association. TABLE 14.-~Gross f.o.b business volume of member produce sold by five marketing organizations, 1955 - 1959. Gross f.o.b. Business Volume of Organizations Year Co-op 1 Co-op 2 Co-Op 3 00-6374 Co-op 5 --- ------------- -- ( 81,000 ) ------ ------ ~---------- 1955 3570 . . 1956 *8500 ‘738 8 78 1957 "325 973 '434 8111 *3250 1958 175 885 499 ° 77 * 220 1959 247 735 585 49 * 210 Note: Where there are no figures for certain years, the organization either was not operating or no figures were available. * Indicates an estimate by the sales-manager. U o P c c The use of sound financial practices is another essential for the successful operation of any business organization. The pooling system of financial payment is considered a good practice by many cooperatives. In using the pooling system of payment the complete payment to members for commodities marketed is deferred until the commodities are sold by the organization and the 43 expenses are ascertained and deducted. The returns received by the members are based on an average price of the total amount of an individual commodity sold during the pool period. Members of the four marketing organizations using the pooling system of payment were asked if the pooling system used by their organization was fair to all growers. Opinions expressed by members of the first organization which has a weekly pool show that 63 per cent thought the pOol system was fair to all growers (Table 15). Members of the second cOOperative with a weekly pool answered "yes” by only 30 per cent. Members of the fourth one with adaily pool voiced affirmative Opinions by 83 per cent, while 63 per cent of the members of the fifth organiza- tion with a weekly pool indicated the method was fair to all members. TABLE 15.--Member Opinions when asked if the present pooling system used by their marketing organization was fair to all growers, 1960. Organization Length Opinions of Per cent of Total of Pool System' s Fairness Members Interviewed Yes 63 1 Daily No 37 2 Weekly Yes 30 No 70 4 Dell Yes 83 y No 17 5 weekly Yes 63 N0 37‘ 44 The high quality producer doesn't receive the higher price he deserves and payment for produce is too slow were two reasons stated by 67 per cent and 27 per cent of the members, respectively, of the four coopera- tives who said the pooling system wasn't fair to all growers (Table 16). Accounting costs are higher and no exact informatiOn on the true price which individuals receive for their produce were reasons given by 7 per cent of the members. TABLE 16.-- Reasons why 15 members of four marketing organi- zations said the pooling systgm wasn't fair to all growers, 19 O. '___,__ _-_. v- - i *— Reasons for Pooling Per cent of Total System being Unfair Frequency Members Interviewed a. 1. High quality producer doesn t receive the higher price he deserves . . . . . . . 1O 67 2. Payment for produce is too slow . . . . . . . 4 27 3. Accounting costs are higher . . . . . . . . 1 7 4. No exact information on the true price in- dividuals receive for produce . . . . . . . 1 7 The ability of a bookkeeper to perform his job satisfactorily has a bearing on the use of financial practices by an organization. Members, former members and non-members of the five organizations were asked 45 to rate the ability of the bookkeepers. Since 57 Per cent of the former members and 79 per cent of the non- members did not know enough about the job which the book- keepers were doing to rate them, only the ability ratings given by members are shown in Table 17. TABLE 17.-~Ability ratings of bookkeepers by five market- ing organizations by per cent Of total members interviewed from each organization, 1960. Ability Ratings Given by Members Organization Excellent Good Fair Don't Know - ----- Per cent of total - - - - - - 1 ' 0 33 44 23 2 0 50 0 50 3 11 67 11 11 4 55 45 0 0 5 13 87 O O None of the members rated the bookkeepers poor. Only 33 per cent and 50 per cent of the members of the first and second organizations, respectively, rated the book- keepers good with neither receiving excellent scores. The third and fourth bookkeepers were rated excellent or good by 78 per cent and 100 per cent of the members, respectively. All members of organization one rated their bookkeeper either excellent or good. The revolving capital plan of financing is consi- dered a sound financial practice by many cOOperatives. 46 The use of this plan of financing requires that members contribute annually to the organization's capital in pro- portion to the business done with the association by a per unit or percentage deduction from the proceeds of their produce sales. Each year the member receives repay- ment of the capital contribution made in an earlier year.19 Only the first and third cOOperatives are using the re- volving capital plan of capitalization. Sending financial reports to the members is another sound financial practice. All five cOOperatives except organization five sent annual financial reports to the members for the 1959 fiscal year. All of the organizations made vocal financial reports at their annual meetings, but none of the five associations sent financial reports to the members during the year except the annual reports. Having annual audits of the financial records of a business made by certified public accounts is another sound financial practice. Only organizations two and three always have annual audits made by certified pub- lic accountants. These accountants are selected by the board of directors. The first organization sometimes has audits made by certified public accountants. Other- wise, audits are only made by the bookkeepers and board of directors of these organizations. Cost and efficiency studies of handling produce have only been carried out by the second cooperative. 19Stokdyk, Op, Cit., pp. 5, 6. 47 The most frequent financing and operating prob- lems which members of the five organizations mentioned were: slow payment on produce sold, mortgage debt to pay and low volume of business (Table 18). Problems mentioned by two members were: ‘not enough working capi- tal at peak seasons and a poor bookkeeping system. TABLE 18.--Member opinions of the major financing and operation problems of five marketing cOOperatives, 1960. Financing and Operation Problems Frequency 1. Slow payment on produce sold ....................4 2. Have mortgage debt to pay .......................4 3. Low volume of business...........................3 4. Not enough working capital at peak seasons.......2 5. Poor bookkeeping system..........................2 6. No written annual report.........................1 7. Books need auditing by a public accountant.......1 8. Need storage facilities..........................1 9. Haven't received any dividends yet...............1 10. Not informed of financial status during the year.1 11. Inefficient packing..............................1 12. Use poor quality containers......................1 13. oBookkeeping costs too high.......................1 14. Difficult to negotiate loans with banks..........1 48 Other problems voiced by members included: no written annual reports, books need auditing by a public accoun- tant, need storage facilities; haven't received any divi- dends yet: not informed of financial status during the year, inefficient packing, use of poor quality containers, bookkeeping costs are too high and difficulty in nego- tiating loans with banks. In summarizing the important points in this sec- tion, it may be noted that 63 per cent or more of all members in each of the four associations with a pooling system, except one, thought this method of payment was fair to all growers. The two most frequent reasons obtained from members who stated that the pooling system.wasn't fair to all growers were: (1) high quality producers don't receive the higher prices they deserve and (2) pay- ment from the cOOperative for produce sold is too slow. Fifty per cent or more of the members of each of the five association, except the first one, rated their coopera- tive's bookkeeper excellent or good. Only two associa- tions are using the revolving plan of capitalization. The fifth association was the only one which hadn't sent an annual financial report to members during the year of 1959. Only the second and third cooperatives always have annual audits made by certified public accountants. The most frequent financing and operation problemsstated by members of the five associations were the following: (1) slow payment on produce sold, (2) have mortgage debt to pay, and (3) low volume of busineSs. 49 This analysis of some of the financial practices used by the five cooperatives illustrates the need for more attention to financial matters by all segments of the cooperatives' management: directors, sales-managers and members. Fulfillment of Responsibilities by the Qirectogg Much too often members blame the shortcomings of their association on the sales-manager and fail to real- ize that part of the shortcomings may be due to neglect of the board of directors in fulfilling their responsi- bilities as a segment of the management team. The direc- tors have the responsibility to hire or fire the sales- manager and to establish the policies under which he will operate. The directors also have certain responsibi- lities to the membership, since they are a vital link between the members and the operation of the association. The number of members on the board of directors varied ma 6 to 16 for the five associations (Table 19). The numbers of directors representing the membership in the five cooperatives were 9, 7, 16, 7 and 6, respectively. All the associations have 3 year terms of office for their directors except the third organization which has a one year term. The numbers of meetings held by the directors of these five cooperatives in 1959 were 17, 25, 8, 8 and 10 meetings, respectively. The total member attendance figures for all of the director's meetings of each of the five associations were 135, 151, 167, 74 and 50, 50 respectively. The average numbers of members attending the meetings of the board of directors of the five associa- tions in 1959 were the following: 8, 6, 21, 9 and 5 members, respectively. .Apparently some members who weren't directors attended some of the meetings of the third and fourth cooperatives, since the total attendance figures at their meetings were higher than could have been possi- ble from.director attendance alone. TABLE 19.--Number of directors, terms of office, number of director meetings held, total attendance and average attendance at board of director meetings of five marketing organizations, 1959. M Board of Director Meetings Organization Number Years in Number Total Average of Directors Office . Held Attendance Attendance 1 9 3 17 135 8 2 7 3 25 151 6 3 16 1 8 167 21 4 7 3 8 74 9 5 3 1O 50 5 With the assumption that most of the major policy decisions are made at meetings of the board of directors, these data point out that there were more members involved in making decisions in the third cooperative than any of the other associations in 1959, since the average attend- ance at director meetings was much greater than in any other organization. The greater average member attendance 51 at director meetings in the third cooperative also provided more opportunity for personal contacts among more members in a decision-making atmosphere than in any of the other associations. A responsibility which many directors tend to neglect is enforcement of penalties on members for selling produce to markets outside of their cooperative. Members of the first, second and fifth organizations have sold produce to outside markets after making an agreement with their cooperative to sell 100 per cent of certain pro- duce through the association. Presidents of the first and fifth associations claimed that the penalties for selling to outside markets have not been enforced in all cases. The second cooperative has enforced the penalties to the best of the directors' abilities, depending upon the situation. All directors interviewed from the second and fourth cooperatives signed marketing agreements with their organizations in 1960. The other three associations don't require the member's signature annually for their market- ing agreements. Directors are responsible for keeping members informed on the operation, pregrams and policies of their cooperative and to hear views of members before important decisions are made. Members should also vote on the more important decisions which are made. These responsibili- ties can be partially fulfilled by holding regular 52 membership meetings. The number of membership meetings held by the five organizations in 1959 varied from 12 for the first cooperative to 1 for the fifth organization (Table 20). The second and third associations each held 3 membership meetings and the fourth cooperative had four meetings. TABLE 20.--Number of membership meetings held by five mar- keting organizations, 1959. W Organization Number of'Membership Meetings Held mama) #UUN Members were asked if the board of directors was taking adequate steps to keep the membership fully informed on the activities and problems of their organization. Affirmative Opinions expressed by members of the five organizations varied from 88 per cent in the third coop- erative to 12 per cent in the fifth organization (Table 21). Members of the first two associations stated affirmative opinions by 38 per cent and 20 per cent, respectively. Fifty per cent of the members of the fourth association said they had been kept adequately informed on the organization by the directors. 53 TABLE 21.--Percentages of members of five marketing organ- izations who thought their directors were taking adequate steps to keep the membership informed on the activities and problems of their organization, 1960. W Members who thought directors had Organization adequate membership relations ‘ prOgram - - - -Per cent of Members- - - - 1 38 2 20 3 88 4 50 ‘5 12 Another examined responsibility of the board of directors was the freedom allowed the sales-manager in the use of his own Judgement in performing his duties. The percentages ofnembers of the five organizations who thought their sales-manager was allowed ample freedom in the use of his own judgement ranged from 88 per cent to 100 per cent (Table 22). The percentages of former members who gave-an affirmative answer were 67, 87, 50, 40 and 83 per cent, respectively, for the five organiza- tions. A counter responsibility of directors is to make adequate checks to see that the sales-manager is conform- ing to the policies adopted by the coOperative. The fol- lowing percentages of members of the five associations 54 thought that adequate checks were made on the sales- manager: 50, 40, 63, 50 and 13 per cent, respectively, (Table 23). TABLE 22.--Member and former member opinions when asked if the sales-managers of five marketing organizations were allowed armple freedom to use their own Judgement in per- forming their duties, 1960. ' W Organization Opinions Members FormeriMembers (Per cent of total interviewed) 1 Yes '88 67 No 0 0 Don't Know 12 33 2 Yes 100 87 No 0 0 Don't Know' 0 13 3 Yes 100 50 No 0 ‘ 50 Don't Know' 0 ' O 4 . , Yes .2 '92 40 No 8 0 Don't Know' 0 6O 5 ' Yes . 100 83 No 0 0 Don't Know’ 0 17 The directors also have a responsibility to see that adequate public relations work is being done by the organization to acquaint growers and buyers with their cooperative. Many members and former'members didn't think enough public relations work had been done by their 55 marketing associations in the past (Table 24). Members who held this negative opinion consisted of 50, 50, 37, 59 and 50 per cent of all those interviewed in the five organizations, respectively. The percentages of former members of the five groups who stated a negative reaction were 67, 56, 50, 80 and 83 per cent, respectively. TABLE 23.--Percentages of members of five marketing organ- izations who thought that adequate checks were made by their directors to see that the sales-manager was conform- ing to the policies adopted, 1960. Members who thought adequate checks were made on the sales-manager Organization (Per cent of'Members) 1 ' 50 4O 63 50 13 U'l-P'UIN TABLE 24.--Percentages of members and former members of five marketing organizations who didn't think enough pub- lic relations work had been done in the past by their organizations, 1960. Organization Members Former Members (Per cent of total) 1 so 67 2 50 56 3 37 50 4 59 - 80 5 .50 83 56 In concluding this section it is noted that the third cooperative had more members involved in making decisions at board of director meetings in 1959 than any of the other associations by average attendance at meetings held. The responsibility of enforcement of penalties on members for selling produce to markets other than through the cooperatives tended to be neglected in most instances. All directors did set the example by signing marketing agreements in those two cooperatives requiring such signa- tures. All cooperatives except the fifth one held 3 or more membership meetings in 1959. The third cooperative had a much higher percentage of members (88 per cent) who thought their directors were taking adequate steps to keep the membership informed on the activities and problems of 'their organization than any of the other associations. Members of all the five associations almost unanimously agreed that their sales-managers had been allowed ample freedom to use their own Judgement in performing their duties. The third association had the highest percentage of members (63 per cent) agreeing that adequate checks were made by their directors to see that the sales-manager was conforming to the policies adopted, while the percent- age varied from 13 to 50 per cent for the other organiza- tions. Thus, members seem to feel that the directors haven't been fulfilling the responsibility of checking and evaluating the work of the sales-manager in many cases. 57 The maJority of members and former members of all five organization, except members of thethird coopera- tive, thought that the associations had not done enough public relations work in the past. Partial responsibility for public relations may be delegated to the sales-manager but again it is a maJor responsibility of the directors. A comparative evaluation of this data leads one to conclude that the board of directors of all associations except the third one have not been fulfilling their responsibili- ties to these cooperatives and their members in many instances. utilization of Effective Channels of Communication Utilization of effective channels of two-way com- munication among different groups within an organization is very important for the successful Operation of a coop- erative. In order to determine the most important channels of communication which members have with their organization, they were asked what source of information was the most important to them for knowledge of financial matters and activities other than strictly financial (Table 25). The sources of information used by members of one or more of the five marketing cooperatives included the following: the written annual report, regular member meetings, per- sonal contacts with the directors and sales-manager, phone talks with the directors and the sales-manager, the annual meeting, social gatherings and television. 58 TABLE 25.--Ratings of the most important sources of information on financial matters and activities other than financial by'nemp bers of five marketing organizations, 1960. M Organization 1 Organization 2 Sources of Information Other Other Finances Activities Finances Activities (Per cent of Total Members) Written annual report 67 i 11 . 46 9 Regular member meetings 0 33 9 73 Personal contacts with directors & sales- manager 11 23 18 9 Phone talks with directors & sales- manager 22 33 0 9 Annual meeting 0 0 27 0 Social gatherings * * * * Television * i O 0 TOTALS 100 100 100 100 *Indicates sources of information not used by the par-. ticular marketing organization. O-Zeroe indicate this source of information was used but wasn't considered the most important by anyone. TABLE 25.--ngt1gued Organization 5 Organization 3 Other Organization-4 Other Other Finances Activities Finances Activities Finances Activities (Per cent of Total Members) 44 11' 76 56 89 8 O O O O O O O O 16 O 0 e e e e 100 100 100 0 62 38 100 it it 33 11 56 100 56 11 33 100 60 Members of the first marketing organization rated the written annual report as the most important source of information on finances by 67 per cent, while regular member meetings and phone talks with directors and the sales-manager tied in votes for the most important source on activities other than strictly financial with 33 Per cent of the total votes. The annual report was considered the most important source of information for finances by members of the second marketing cooperative by 46 per cent of the members, while regular member meetings was voted the most important for activities other than strictly financial by 73 per cent of the members. Regular member meetings were considered the most important source of information for both finances and other activities by 56 per cent and 89 per cent of the members of the third association, respectively. The annual report was voted the most important source of information for finances in the fourth cooperative by 76 per cent of the members, while regular member meetings were considered the most important source for other activities by 62 per cent of the members. The annual meeting was voted the most important source of information on finances in the fifth organization by 56 per cent of the members, while personal contact with directors and the sales-manager was considered the most important source for other activities by the same percentage of members. 61 The written annual report was considered the most important source of information for finances by members of three cooperatives, while regular member meetings and the annual meeting were considered more important by members of the third and fifth associations. However, the written annual report and regular member meetings were not used as sources of information in the fifth coopera- tive. Regular member.meetings were considered the most important source of information for activities other than strictly financial by all four organizations holding them, except for the first cooperative which considered phone talks with directors and the sales-manager Just as impor- tent. The amount of direct personal communications between the following four sets of groups: (1) directors and the sales-manager, (2) members and the sales-manager. (3) dir- ectors and the president, and (4) members and the president of each of the five cooperatives was measured by asking the directors and members how many times yearly they saw their sales-manager and president to talk with them. The average numbers of personal contacts annually between directors and sales-managers of the five associa- tions were: 16, 45, 66, 16 and 24 times, respectively (Table 26). The average numbers of personal contacts annually between members and sales-managers of the five organizations were : 22, 31, 41, 3 and 12 times, respec- tively. The average numbers of personal contacts between 06 62 directors and presidents of the five organizations annu- ally were: 6, 25, 31, 15 and 12 times, respectively. The average numbers of personal contacts annually between members and presidents of the five organizations were: 5, 11, 23, 8 and 9 times, respectively. TABLE 26.--Average numbers of personal contacts between directors and sales-managers, members and sales-managers, directors and presidents and members and presidents of five marketing organizations, 1960. Classification of the Average Number Groups D0138 th' of Personal Contacts Between Groups Communicating in Five Organizations Oo-Op 1 Co-op 2 Co-op 3 Co-op 4 Oo-op 5 Directors & sales- managers 16 45 66 16 24 Members & sales- managers 22 31 41 3 12 Directors & presi- dents 6 25 31 15 12 Members & presi- dents 5 11 23 8 9 TOTALS 49 112 161 42 57 Bren an examination of the data in Table 26, it is apparent that the second and third cooperatives con- sistently had a larger average number of personal contacts between the four sets of communicating groups than the other three organizations in 1959. In examining the totals of the average number of contacts in each organi- zation it is discerned that the fourth cooperative had 63 the lowest cumulative number of contacts (42), while the third organization had the greatest number of con- tests (161). ‘ It may be noted in summarizing this section that the written annual report was considered the most impor- tant source of information for financial matters by members of three of the four organizations utilizing this type of communication. Regular member meetings were considered the most important source of information for activities other than strictly financial by three of the four organizations holding them. The second and third organizations had a consis- tently greater average number of personal contacts between the four sets of communication groups in their organiza- tions. These two organizations had a greater cumulative number of personal contacts (based on average numbers) for all four sets of communicating groups than the other three cooperatives, while the fourth cooperative had the lowest cumulative figure of contacts annually. After examination of the channels of communica- tion used by members and the amount of communications between the different groups in these cooperatives, it is apparent that much more effective use of communica- tive methods could be applied in many instances. This is a definite area of weakness in the first, fourth and fifth cooperatives. 64 M Lo t Members often fail to recognize that one of the main causes for the weakness of their marketing coopera- tives is the lack of loyalty as members of their organi- zation. The members and directors are directly responsi- ble for any deviation from the essential of member loyalty in cooperative marketing. There has been a pronounced downward trend in the number of original members who have kept marketing their produce through the five organizations, since these cooperatives were first founded (Table 27). In calcula- ting the percentage trends in Table 27 the number of members in the first year of operation of each organi- zation was used as a base of 100 per cent. The third organization had retained a high of 76 per cent of the original members in 1960, while the fourth cooperative has the lowest percentage of charter'members, 19 per cent. The first, second and fifth associations had retained 51, 43, and 21 per cent of their charter members, res- pectively, in 1960. TABLE 27.--Pereentage trend of the original active members re- maining in five marketing organizations, 1957-1960. Percentage Trend of Original Membership by Organizations Year 1 2 3 4 5 (Per cent) First 100 100 100 . 100 100 1957 59 87 100 43 64 1958 61 70 93 39 50 1959 53 50 86 37 37 1960 51 43 76 19 21 65 The downward trends in the total number of mem- 'bers who remained actively marketing produce through the five cooperatives hasn't been quite as pronounced due to the periodic acquisition of new members (Table 28). The second association is the only one that experienced any upward trend in membership from the first year of operation. It reached a peak of 147 per cent in 1957 and regressed to 73 per cent in 1960. The percentage trend for the first organization remained the same as in Table 27, since the inflow of’new members equaled the drOp out rate of old members. The last three cooperatives retained the following percentages of their total active membership in 1960 in comparison to their first year: 90, 28 and 31 per cent, respectively. TABLE 28.--Peroentage trend of overall active membership in five marketing organizations, 1957-1960. Percentage Trend of Total Active Membership by Organizations Year 1 2 3 4 5 (Per cent) First 100 100 ' 1OO ' too 100 1957 69 147 100 46 67 1958 61 130 93 46 56 1959 53 83 9o 43 44 1950 51 73 9O . 28 31 66 It may be concluded that the loyalty of the mem- bers in their continuance to patronize these cooperatives has been far from perfect in most instances. The third organization has retained a higher percentage of its original active members and has a greater percentage of overall active membership remaining in 1960 compared to the first year of operation than any of the other four associations. The fourth cooperative had the lowest per- centage retention of original active members and overall active membership of the five organizations. Lack of member loyalty is a definite weakness which three of the five associations have experienced. WW There have been many reasons advanced for member's failure to continue patronizing these cooperatives. How- ever, probably one of the most important reasons is that many of these fomer members have stopped farming entirely. The total number of members who left one cooperative for various reasons from 1956 through 1960 was 34 (Table 29). However, 35 per cent of these 34 former members stopped} patronizing the cooperative because they had quit farming entirely. The 30 former members interviewed who are still growing produce gave many reasons for no longer selling their crops through the five associations. The percen- tages of former members who gave the following reasons 67 pertaining to the sales-manager were as follows: not enough market outlets, 33 per cent: dissatisfied with sales-manager, 20 per cent; showed favoritism to large growers, 17 per cent and inaccurate price quotations, 13 per cent (Table 30). Ten per cent said the sales- manager is only an order taker and has too much author- ity. TABLE 29.--Former members who stopped patronizing one mar- keting organization because they quit farming, 1956-1960. Total Growers Former'Members Quitting Farming Tear Leaving the Organization Number Per cent 1956 2 1 50 1957 2 O o 1958 11 ' 3 23 1959 15 6 40 1960 4 2 50 TOTAL 34 1 2 35 Reasons stated by 7 per cent included: the sales- manager’only works part-time and suspicious of his honesty. The following 3 reasons were given by 3 per cent of the former’members: to strict on quality sold, employed too long and never checked on crops in the field. Reasons pertaining to the use of financial prac- tices given by former members for leaving the five mar- keting cooperatives included: dissatisfaction with pooling 68 system by 17 per cent, double commission on produce sold to a commission house and slow on payment for produce by 10 per cent (Table 31). Other former members thought the membership fee was too high and the bookkeeping sys- tem was poor. TABLE 30.--Reasons pertaining to the sales-manager obtained from 30 former'members for leaving five marketing organizations, Per cent of Reasons for Former Members Leaving Frequency Total 30 . - Former'Members a. 1. Not enough market outlets . . . . . . 1O 33 2. Dissatisfied with sales-manager . . . 6 2O 3. Showed favoritism to large growers. . 5 17 4. Inaccurate in price quotations. . . . 4 13 5. Only an order taker . . . . . . . . . 3 10 60 Has 1300 much authoritye e e e e e e e 3 10 7. Only works part-time. . . . . . . . . 2 7 8. Suspicious of his honesty . . . . . . 2 7 9. Too strict on quality sold. . . . . . 1 3 10. Employed too long . . . . . . . . . . 1 3 11. Never checked on crops in the field . 1 3 TOTAL 38 TABLE 31.--Reasons pertaining to the use of financial practices ob- tained from.30 former members for leaving five marketing organiza- Per cent of Reasons for Former’Members Leaving Frequency Total 30 Former Members 1. Dissatisfied with pooling system . . . 5 17 2. Double commission on produce sold to a commission house .p. . . . 4 1O 3. Slow on payment for produce. . . . . . 4 1o 4. Membership fee too high. . . . . . . . 2 7 5. Poor bookkeeping system. . . . . . . . 1 3 TOTAL 16 69 The reasons which pertained to communication difficulties for 7 per cent of the former members leaving some of the marketing organizations included: poor-com- munications between individuals in the organization and not informed on costs of the organization (Table 32). One grower claimed he wasn't kept informed on business at board meetings. TABLE 32.--Reasons pertaining to communications, member loyalty and board of directors obtained from 30 former members for leaving five marketing organizations, 1957-1960. Classification of Reasons for Per cent Of Former Members Leaving Total 30 _ Frequency Former Members QQEEERLEEILEBE 1. Poor communications be- tween individuals in the Organization e e e e e e e e 2 7 2. Not informed on costs of the organization . . . . . . 2 7 3. Not informed on business at board meetings. . . . . . 1 3 EEEEEHLJEHEHJHE 1. Members wouldn't sell all of their produce through organization . . . . . . . 2 7 2. Members didn' t deliver produce when promised. . . . 1 3 W 1. Inactive board of directors. . . . . . . . . . 1 3 Reasons given pertaining to member loyalty for growers leaving these cooperatives included: members wouldn't sell all of their produce through the organization 70 and members didn't deliver produce to the sales-manager when promised. Another former member said the board of directors of his cooperative was rather inactive. Some miscellaneous reasons given by the corres- ponding percentage of 30 former members for leaving the five marketing groups included: prices received did not reach expectations, 40 per cent; always had to use new' containers, 13 per cent and large growers had too much control, 10 per cent (Table 33). TABLE 33.--Miscellaneous reasons obtained from 30 former members for leaving five marketing organizations, 1957-1960. Per cent of Reasons for Former Members Leaving Frequency Total 30 Former‘Members 1. Didn't meet price expectations. . . . . 12 4O 2. Always had to use new containers. . . . 4 13 3. Large growers had too much con- trOIOOOOO O. 0.00.. 3 10 4. Poor packing and handling of produce . . . . . . . . . . . . . . . 2 7 5. Fixed costs too high. . . . . . . . . . 2 7 6. No uniformity in field packing. . . . . 2 7 7. No benefits from organization . . . . . 2 7 8. Plenty of family labor to pack produce...............1 3 9. Dissatisfied with by-laws and marketing agreement . . . . . . . . . 1 3 10. Poor quality produce grown hurt organization' 8 reputation . . . . . . 1 3 11. No extra payment for washed pro- duce. . . . . . . . . . . . 1 3 12. Packing labor costs too high. . . . . . 1 3 13. Marketing agreement didn't allow outside sales . . . . . . . . . . . . 1 3 14. Poor cooperation among members. . . . . 1 3 TOTAL 34 71 Seven per cent of the growers listed the following reasons: poor packing and handling of produce, fixed costs too high, no uniformity in field packing and no benefits from the organization. Other reasons given included: plenty of family labor to pack produce, dis- satisfied with by-laws and marketing agreement, poor quality produce grown hurt the organization's reputation, no extra payment for washed potatoes, packing labor costs too high, marketing agreement didn't allow for sales to outside markets and poor cooperation among members. In concluding this section concerning reasons for members leaving the five cooperatives, it may be noted that the single most important cause for member drop out was probably due to members finding employment in an occupation other than farming. Thirtybnine per cent of a total of 97 reasons for leaving the five marketing associations, given by 30 former members still growing produce, pertained directly to the sales-manager. This was the largest percentage of reasons obtained from for- mer members, which could be directly related to any one factor. The most frequent reasons stated by growers for leaving the cooperatives were as follows: (1) coopera- tive didn't meet price expectations, (2) sales-manager didn't have enough market outlets and (3) dissatisfied with the sales-manager. so 3 o G owe 8 Not oinin The most frequent reasons for not Joining the five marketing associations given by the corresponding 72 percentages of 19 growers were the following: have a market outlet with equally favorable prices, 89 per cent; and poor sales-managers, 21 per cent (Table 34). Six- teen per cent gave these two reasons:. (1) operations on Sunday are against their religion and (2) have to use new containers all the time. The following reasons were stated by 11 per cent of the non-members: poor quality growers in the association, haven't been asked to Join, loss of membership is discouraging, fixed costs are too high, treasures independence of selling, grading isn't uniform and not enough market outlets. TABLE 34.--Most frequent reasons obtained from 19 growers for'not Joining five marketing organizations, 1960. Per cent of Reasons for Growers Not Joining Frequency Total 19 Growers 1. Have market outlet with equally favorable prices 1 89 2. Poor sales-manager 21 3. Operations on Sunday are against their religion 16 4. Have to use new containers 16 5. Poor quality growers in it 11 6. Raven t been asked to Join 11 7. Loss of membership is dis- couraging 8. Fixed costs too high 9. Treasures independence of selling 10. Grading isn't uniform 11. Not enough market outlets 101010 MN NMUU #51 Other reasons given once by growers for*not Join- ing one cooperative included: another cooperative recently 73 failed in the area; prefers not to sell through the coop- erative since it doesn't have good market outlets in early fall when he must sell; acreage fee is too high and can't pack potatoes at cooperative's request, since he has to rely on another grower's grader. Non-members of another association listed the following reasons: the cooperative has no personal interest in its members, a relative went broke when selling to the association, my business part- ner is a good salesman at the city market, the cOOpera- tive isn't interested in small growers Joining and the small grower doesn't have a voice in the organization with only one vote per share of capital stock. Growers of another cooperative listed these three reasons: a few large growers have a selfish interest in the organi- zation: can obtain better service at the broker's packing shed, and the cooperative was started by individuals whom the brokers refused to do business with, since they grew poor quality produce. Reasons obtained from two growers who didn't Join two other marketing cooperatives were: too many small part-time growers in the cOOpera- tive and had a sad experience with a previous cooperative. o o T 0 Marks 1 O z tions In order to confirm the importance of employing a capable sales-manager, reasons pertaining to this essen- tial, given by 12 former members of two marketing organi- zations which have failed, shall be examined (Table 35). 74 TABLE 35.--Reasons pertaining to sales management obtained from 12 former members for failure of two marketing organ- izations, 1960. Per cent of Reasons for Failure Frequency Total 12 Growers 1. Dissatisfaction with sales- manager............10 80 2. A part-time sales-manager. . . . 8 . 67 3. Poor market outlets. . . . . . . 6 5O 4. Didnit pay enough to obtain a capable sales-manager. . . . 6 50 5. Too many sales-managers in a short time period. . . . . . . 3 25 6. Sales-manager didn't have the confidence and loyalty of membership . . . . . . . . . . 2 17 7. Dishonest sales-manager. . . . . 2 17 8. Sales-manager was a member grower . . . . . . . . . . . . 2 17 9. Sales management cost 15% of the total gross volume of business . . . . . . . . . . . 1 8 TOTAL 40 Dissatisfaction with the sales-manager and a part- time sales-manager were reasons given by 80 per cent and 67 per cent of the growers, respectively. Poor market out- lets and not paying enough to obtain a capable sales? manager were given as reasons by 50 per cent of the growers. Twenty-five per cent of the former members claimed their cooperative had employed too many sales-managers during too short a period of time for any one of them to put the organization on a sound financial basis. Reasons given by 17 per cent of the growers included: the sales-manager didn't have the confidence and loyalty of the membership, 75 dishonest sales-manager and the sales-manager was also a member-grower of the cooperative. One grower said the sales management charge of 15 per cent of the total gross volume of business was too high for the members to make any profits. Several former members of two marketing organiza- tions thought an inadequate volume of business was an important reason for the failure of their cooperatives (Table 36). Not enough members to obtain necessary busi- ness volume and lack of potential acreage in the area were reasons stated by 67 per cent and 33 per cent, respectively, of the 12 former members. Another 17 per cent of the growers claimed the fixed costs were too high in relation to the volume of business done by their organization. TABLE 36.--Reasons pertaining to volume of business ob- tained from 12 former members for failure of two marketing organizations, 1960. Per cent of Reason for Failure Frequency Total 12 Growers 1. Not enough members to obtain necessary business volume . . . 8 67 2. Lack of potential acreage in thearea............4 33 3. Fixed costs too high in rela- tion to volume of business. . . 2 17 TOTAL 14 76 A.number of reasons pertaining to the use of financial practices were expressed by 12 former members for the failure of two vegetable marketing organizations (Table 37). The most frequent reasons stated by the corresponding percentages of the 12 former members inclu- ded: had to wait too long for crop payment, 58 per cent; lack of enough reserve funds for bad years, 42 per cent; member dissatisfaction with the pooling system, 33 Per cent; and the pool period was too long, 25 per cent. Reasons expressed by 8 per cent of the former members included: sound financial policies weren't used, no pay- ment for produce one year and dividends paid only in form of fertilizer one year. TABLE 37.--Reasons pertaining to financial practices ob- tained from 12 former members for failure of two marketing organizations, 1960. Per cent of Reason for Failure Frequency Total 12 Growers 1. Had to wait too long for crop Payments e e e e e e e e 7 58 2. Lack of enough reserve funds forbadyearSeeeeeeee 5 42 3. Member dissatisfaction with pooling system. . . . . . . . 4 33 4. Pool period too long. . . . . . 3 25 5. Sound financial policies weren't used. . . . . . . . . 1 8 6. No payment for produce one year.............1 8 7. Dividends paid only in the form of fertilizer one year............. 1 8 TOTAL 22 77 Poor utilization of effective channels of com! munication was the subJect of reasons given for the fail- ure of two vegetable marketing organizations by 12 former members (Table 38). The lack of effective communications between the salesemanager and the directors was a reason given by 25 per cent of the growers. The following two reasons were expressed by 17 per cent of the growers: lack of effective communications between the sales-manager and members, and members weren't kept informed on opera- tions and problems. Another reason listed by one former member was the lack of effective communications between directors and other members. The lack of member loyalty was the subject of some reasons given for failure of two marketing organi- zations by 12 former members interviewed from these organi- zations. Forty-two per cent said one reason for failure was members selling to markets outside the organization when the price was higher. Members not always being loyal in delivery of produce promised to the sales-manager was another reason stated by one grower. Many miscellaneous reasons for the failure of the associations which are not easily classified were given by the 12 former’members of two marketing coopera- tives (Table 39). Forty-two per cent of the former'mem- bers reported dissatisfaction with the grower's sales agreement. Dissatisfaction with services offered and higher prices elsewhere were reasons given by 33 per cent. 78 The following seven reasons were listed by 17 per cent of the growers: (1) not enough services offered, (2) too much disagreement on obJectives, (3) didn't like group marketing, (4) brokers boycotted the organization, (5) lack of initial Operating capital, (6) lack of coop- eration among growers and (7) Poor quality produce sold the first year. Eight per cent of the former members stated the following four reasons: (1) many growers had good marketing outlets, (2) didnit need a central grading system, (3) membership fee too high and (4) growers paid by check couldn't evade income taxes easily. TABLE 38. --Reasons pertaining to communications and member loyalty obtained from 12 former members for failure of two marketing organizations, 1960. Per cent of Frequency Total 12 - Growers Classification of Reasons for Failure mm on 1. Lack of effective communi- cations between sales- manager and directors. . . . . 3 25 2. Lack of effective communi- cations between sales- manager and members. . . . . . 2 17 3. Members weren't kept ade- quately informed on oper- ations and problems... . . . . 2 17 4. Lack of effective communi- cations between directors and other members. . . . . . . 1 8 Member Lo§?;ty 1. Members so 0 outside mar- kets when the price was higher . . . . . . . . 5 42 2. Members weren 't always loyal in delivering produce pro- mised to the sales-manager . . 1 8 79 TABLE 39.--Miscellaneous reasons obtained from 12 former members for failure of two marketing organizations, 1960. Per cent of Miscellaneous Reasons for Failure Frequency Total 12 Growers 1. Dissatisfaction with grower's sales agreement. . . . . . . . 5 42 2. Dissatisfaction with services offered............4 33 3. Received higher price else- where. . . . . . . . . . . . . 4 33 4. Not enough services offered. . . 2 17 5. Too much disagreement on Obectlves..........2 17 6. Didn t like group marketing. . . 2 17 7. Brokers boycotted the organi- zation........ e002 17 8. Lack of initial operating capital............2 17 9. Lack of cooperation among growers. . . . . . . . . . . 2 17 10. Poor quality produce sold . firB'tyear...... e 2 17 11. Many growers had good outlets. . 1 8 12. Didn' t need a central grading Stationeeeeeeeeeeee1 8 13. Membership fee too high. . . . . 1 8 14. Growers paid by check couldn t evade income taxes easily . . . . . . . . . 1 8 TOTAL 31 In summarizing this section, it should be noted that 33 Per cent of the 121 reasons (some stated more than once) obtained from.12 former members for failure of two cooperatives pertained directly to the sales- manager. The three most frequently stated reasons for failure of these two organizations were as follows: (1) dissatisfaction with the sales-manager, (2) had a 80 part-time sales-manager and (3) not enough members to obtain necessary volume of business. These growers seemed to feel that the failure of their organizations was due to sales management more than any other single factor. CHAPTER 7 CONCLUSIONS AND IMPLICATIONS With the previous analysis and evaluation of some areas of strength and weakness in the operation of several vegetable marketing cooperatives, it is now possible to draw some definite conclusions which may be of value in recommending some guides for the successful operation of marketing cooperatives. By the following indicators of economic need (Table 6)--distance of a cooperative from the nearest city with . 100,000 population; a wholesale public market and a retail farmer's market-~it was deter- mined that the second and third cooperatives served a greater economic need than the other three associations. Upon examination of the percentage trend of overall active membership in the five cooperatives (Table 28), the results show that the second and third cooperatives have retained much higher percentages of their active membership (73 per cent and 90 per cent) since their first year of oper— ation, than the other three associations. The volume of business in the third organization has increased steadily since the first year of operation (878,000 in 1956 to $585,000 in 1959). The volume of business of the second cooperative has increased and 81 82 then decreased but was still at a higher level in 1959 ($735,000) than the business volume of $570,000 in 1955 (Table 14). However, the business volumes of the other three associations have had decidedly downward trends with.no upturns for those years in which figures were available. Therefore, it might be concluded that the greater the economic need for a cooperative in terms of distance from.markets, the greater the tendency toward retention of active members and maintenance of a high volume of business. However, there seems to be more than the one fac- tor of economic need responsible for the retention of active members and the maintenance of a high volume of business. There also seems to be some relation between the number of members involved in the decision-making process at meetings of the board of directors and the retention of members and maintenance of a high volume of business. It was determined in Table 19 that the third cooperative had more members involved in the decision- making process at board of director meetings in 1959 than any of the other four organizations. The third organization also retained the greatest relative percen- tages of their active membership and maintained the highest volume of business. Thus, if it is assumed that an equal economic need exists for all five cooperatives, the fol- lowing oonclusion may be valid within the limits of this study: the greater the number of members involved in 83 the decision-making process at board of director meetings of a cooperative, the greater the tendency toward reten- tion of active members and maintenance of a high volume of business. Another area closely related to the number of mem- bers involved in decision-making which seems to bear some significant implications is the amount of personal communi- cations among individuals within a cOOperative. In Table 26 it was determined that the second and third 000pera- tives consistently had a much higher average number of personal contacts annually between four sets of communi- cating groups (directors and the sales-manager, members and the sales-manager, directors and the president and members and the president) than any of the other three associations. This is also brought out in totaling the average number of personal contacts among the four sets of communicating groups, since the second and third organi- zations had totals of 112 and 161 personal contacts while the fourth cooperative had the lowest total number with 42. The second and third cooperatives also have retained much higher percentages of their active membership than the other three associations, while the fourth organiza- tion has the lowest percentage of overall active member- ship remaining since the first year of operation (28 per cent). The volumes of business of the second and third associations have been rising, while all the other 84 ccoperatives' business volumes have been declining. However, the business volume of the fourth cooperative has declined much more rapidly than in any of the other associations ($111,000 in 1957 to 349,000 in 1959) There- fore, if it is assumed that an equal economic need exists for all five cooperatives, the following conclusion has some validity: the greater the frequency of personal contact among individuals within a cooperative, the greater the tendency toward retention of active members and main- tenance of a high volume of business. Finally, the following may be concluded with the inclusion of all three variables: (1) the greater the economic need in terms of distance from markets; (2) the greater the number of members involved in the decision- making process at board of director meetings (within the limits of this study) and (3) the greater the frequency of personal contact among individuals within a coopera- tive, the greater the tendency toward retention of active members and maintenance of a high volume of business. m l c In view of these conclusions it can be stated that the existence of economic need for a cooperative must be carefully analyzed and evaluated before other essential operating factors are held responsible for the shortcomings of a marketing association. However, it appears to be very probable that the amount of personal communications among individuals within these organizations and the 85 number of members involved in the decision-making process are also major factors for the success of two of these cooperatives in retaining active members and maintaining upward trends in volume of business. But who is responsible for the number of members involved in the decision-making process and the amount of direct personal communications among individuals? This is a difficult question to resolve, but it can be argued that the board of directors should share a larger portion of the responsibility for communications with members than any other individual or individuals within a cooperative. . The board of directors is charged ultimately with the responsibility of seeking members' opinions on the operation, programs and policies of a cooperative, allowing members to participate in making decisions and informing members of decisions which are made. If direc- tors are held responsible for providing an atmosphere for adequate communications among members in arriving at decisions, they can also be held partially responsible for helping maintain member loyalty. They may be held responsible for member loyalty, since retention of active members seems to be partially related to the number of members involved in the decision-making process and the amount of personal communications among individuals within the associations. One way to seek members' Opinions is by holding several regular membership meetings throughout the year, 86 if only a few members are on the board of directors. Some thought should be given to increasing the number of members on the board of directors of these associations so that more members could participate in decision-making and policy formation. Members who aren't directors might be invited to attend directors' meetings more often. Directors should be paid for attending board meetings, since they are greatly responsible for the man- agement of their marketing cooperative. Many growers fail to realize that their total net returns might be increased more and their time used more efficiently if greater concern were taken with the operation of their cooperative marketing program than spending most of their time with production alone. There is reason to believe that members might profitably schedule board meetings during daytime hours as most businessmen do, in order to eliminate the possibility of physical and mental fatigue from.hindering individuals' thinking and reasoning processes, since making right decisions is most important. The responsibility of keeping members informed may be partially delegated to the sales-manager, but it is the directors who are then responsible to see that the sales-manager is carrying out the assigned duty. Fifty per cent or more of all the members interviewed in each of the five cooperatives, except number three, thought that adequate checks were not made by their directors to see that the sales-manager was conforming to the policies 87 adopted by the organization (Table 23). Thus, many mem- bers feel that their directors have not been fulfilling the responsibility of checking on the sales-manager. The members of the board of directors are also responsible for the use of sound financial practices. This responsibility may be delegated to the sales-manager and bookkeepers, but the directors are responsible to. see that the proper practices are being carried out. It is necessary to send written annual financial reports to members and to have the financial records audited by a competent certified public accountant. The two coop- eratives with greater retention of active memberships and maintenance of higher volumes of business are the only cooperatives of the five surveyed which always have had annual audits made by a certified public accountant. Thus, the shortcomings of several of these cooperatives seem to stem from failure of directors to fulfill their responsibilities . This evaluation of the major areas of weakness in the Operation of the cooperatives seems to be in con- flict with the evaluation made by fomer members. Thirty- nine per cent of the reasons given by 30 former members for leaving the five marketing associations pertained to the sales-manager. Likewise, 33 Per cent of the reasons given by 12 former members for failure of two marketing cooperatives were directly concemed with the sales-manager. Evidently, many of the former members of these cooperatives 88 felt that the sales-manager of a cooperative should be held responsible for'most of the shortcomings of their organizations. Only one of the thirty former members of the five active cooperatives stated that there was an inactive board of directors in his association. Thus, members don't seem to understand the responsibilities which they have as members of the board of directors. Members of cooperatives should make a list of responsibilities which they expect their directors to fulfill, if these responsibilities aren't stated clearly in the by-laws. It was observed in the course of the survey that most members of the five active cooperatives didn't have a copy of the by-laws of their association. If the members don't have a copy of the by-laws, how can they be expected to know what constitutes the rules and regulations of their association? Cooperatives should consider seriously the employ- ment of full-time sales-managers who will have time to conduct public relations work with chainstores, coopera- tive and voluntary puchasing groups in order to develop market outlets. A sales-manager should have personal A contact with members at their farms in order to gain more insight into their problems and views concerning the association. Members will have to pay better salaries than in the past to obtain a capable full-time sales- manager. However, it may be concluded from the analytical framework used in this thesis that the degree of success 89 of these fresh vegetable marketing cOOperatives has depended more upon the actions or inactions of the board of direc- tors than any other individual or individuals within the organizations. Members tend to overlook the most impor- tant segment of management of their cooperatives - the board of directors. BIBLIOGRAPHY Abrahamsen, Martin A., "Role of Farm Cooperatives in Efficient Distribution,".Jou;ial 0; Farm Ecogomicg, Vol. XXXIX, American Farm Economic Association, Banta Company, Menasha, Wisconsin, 1957. Abrahamsen, Martin A. and Claud L. Scrcggs, Coo e at on S cte ea n , University of Minnesota Press, Minneapolis, 1957. Bakken, Henry H. and Marvin A. Schaars, zhe Eccgogigg WWW. McGraw-Hill. New York and London, 1937- Blum, Martin A., Fresh Fggit and Veggtgble‘Mgghetigg Ozganizgtiogs in the Nggtheggtegg 32d Centggl Sigigg, Farmer Cooperative Service General Report , U. S. Department of Agriculture, Washington, D. 0., 1960. Buck. Wilbur In. W. Farmer Cooperative Service Circular 7, U. S. Depart- ment of Agriculture, Washington, D. C., 1955. Bureau of the Census, Pzeiiminggz ngggg g: Agriculiggg, U. S. Department of Commerce, washington, D. C., 1959. Call, David L., :he Ozggiiggtion gig Opeggtiogg o; 3;; Y C C c G one s Coo erat c., unpublished thesis, Cornell University, Ithaca, New York, 1958. Farmer Cooperative Service, gegegrch i3 iggicgitgrii Cgopgzgtiog Pgoblgm Azegs, General Report , U. S. Department of Agriculture in cooperation with American Institute of Cooperation, washing- ton, D. 0., January 1958. Federal Trade Commission, E 0 cm 0 n into Foo Mgzkgting, P313 1, Concentggctiog gig igtegxg- tion ii §et§iligg, . S. Government rinting ffice, ashington, D. 0., January 196C. 90 91 F012, William E. and Alden C. Manchester, W Mercaaagising and Pmcgement Enacticea, Market- ing Research Report No. 17, Agricultural Market- ing Service, U. S. Department of Agriculture, Washington, De Ce, July 1960. Gardner, Kelsey B., M er co Farm Credit Administration Circular E-21, U. S. Department of Agriculture, Washington, D. C., 19 . Geesner, Anne L., Statisticg 0% Fame; Coopegiixaa, 1251- 5Q, Genera epcr , Farmer ocperative Service, U. S. Department ongriculture, Wash- ington, D. C., June 1960. Hulbert, H. H., Griffin and Gardner, MW e Coo t ve , Farmer Cooperative Service General Report 32, U. S. Department of Agricul- ture, Washington, D. C., June 1957. Hulb.rt, Le Se, 313. P,‘€3 : _ L 009413 ' -,F Farmer Cooperative Service Bulletin 10, U. S. Department of Agriculture, Washington, D. C., January 1958. Motts, George W., Eng} aad Vegetable Coopezai'ivaa ia W, Special Bul etin 317, Department of Agricultural Economics, Michigan State Univer- sity, East Lansing, June 1942. Motts, George W., Mazkgting Hggbook go; Michigg Fmita a; Vegeiabies, Special Bulletin 1 , Department of Agricultural Economics, Michigan State Univer- sity, East Lansing, December 1957. Mueller, R. W., Facts in Grogem Distgibutioa, 27th Annual Edition, Progressive Grocer, New York, April 1960. Mueller, Willard F. and Leon Garcian, Chaages in the Magket Structuges of Games; Retailing 12 0-58, Research Report 5, Agricultural Experiment Sta- tign, University of Wisconsin, Madison, April 19 O. Rust, Irwin, Communicatiga - Key to g Efgective Membe; Relations Pgogrg, notes from talks given at Kansas State University and the Maine Coopera- tive Council, Farmer COOperative Service, U. S. Department of Agriculture, Washington, D. C., February and March 1960. 92 Sanders, S. D., O anizin a Farmers' Coo e tiv , Farm Credit Administration.Circular.No. C-103, U. S. Department of Agriculture, Washington, D. C., 1949. Stokdyk, E. A., Financing Farmegs' Cooperatizes, Educa- tional Circular 5, Farmer COOperatives Service, U. S. Department of Agriculture, Washington, D. 00,1954. PPE 94 QONFIDENTIAL Department of Agricultural Economics, Michigan State University QUESTIONNAIRE FOR THE PRESIDENT OF THE BOARD OF DIRECTORS OF A GROWER-OWNED FRESH VEGETABLE MARKETING ORGANIZATION 1. Name of the organization 2. Post Office address 3. How many acres did you grow of each commodity which was marketed through this organization in 1959? Commodity Number of Commodity Number of Commodity Number of acres acres acres 4. a. How many members are on the board of directors? b. What is their length of office? 0. What is the method of election? Area representa- tive Soil type“ Commodities_ Other d. Are the directors paid for their Job? (1) Yes No e. How often are total membership meetings held? 5. a. What type of membership do you have? Open or selective b. If selective, who determines the selection? c. What is the basis for selection? 6. Can produce be marketed through the organization by non-member producers? a. Yes b. No - 7. 8. 9. 10. 11. 12. 13. 14. 95 a. Are all of the member growers required to market through the organization all of the commodities produced by them that can be handled by the or anization? (1 Yes_____; (2) No__ b. If yes above: Have all growers complied in mar- keting all produce through the organization? (1) Yes (2) No“ c. If no above: Have the penalties been strictly enforced in all cases for'members selling out- side the organization? (1) Yes (2) No d. If no for item.7a:. What commodities grown are not required to be 100% marketed through the organization, and what percentage of these commodities are required to be sold through the organization? Who selects the bookkeeper? During what month dates did the following employees _ work for your organization in 1959? a. Sales-manager b. Plant or floor manager c. Bookkeeper What percentage of the gross f.o.b. sales price does the sales-manager receive as a commission? How many sales-managers have been employed since the operations of the organization began? How would you rate the ability of the present Excellent Good Fair Poor a. General sales manager. . b. Bookkeeper . . . . . . . If any of the above positions were rated as fair or poor, why are you rating them this way? a. Are complete monthly operating reports and balance sheets required from the sales-manager? (1) Yes_ (2) No b. If no: How often are they required? 15. 16. 17. as be c. d. e. f. g. h. i. 18. 19. 96 Are annual audits made by a certified public accountant? (1) Yes (2) No Do you honestly think your present sales-manager has developed the necessary confidence and loyalty of the membership? a. Yes b. No ' c. Not sure Which of the following channels, through which members receive information about the activities of an organization, are used by your market organization? (Note rank here for question 18) Other Elasssisl. :AEIIILE‘QE Radio-Tsv. P10311318 H. be Personal contacts with the board of directors and manager b. b. Annual reports (written) c. c. Annual meetings d. d. Newsletters or'newscards e. e. Educational tours f. f. Social gatherings g. g. ' Regular member meetings h. h. Phone talks with the directors and manager 1. i. How would you rank the methods of member information used by your organization in their order of effective- ness and.importance to you as a member, first for finances alone and secondly, for activities other than strictly financial? Do you have the attendance figures for the board of directors' meetings during 1959? 1959 Meetings Jan Feb Mar Apr May Jun Jul p. ug Sept Oct Nov Dec Regular Special L 97 20. We would like to find out something about the trend in growth of your organization during the years desig- nated in the table (below) on the basis of membership patronage, dollar volume of business, etc., as indi- cated in the table. Definition of terms in the table: M ket o uce refers to numbers of members who sold their produce through the organization. No -marke n roduce 8 refers to the number of mem- bers who did not sell any of their produce through the organization that year but still retained stock in the company or were still considered members. a. What was the first year of operation? Member Dollar volume Members turnover of business Hon- Marketing_ Non- NeW' Members Gross f.o.b. Year producers producers marketing members drOpped member produce pgoducegs garkatag 1st Year 1954 1955 1956 1957 1958 1959| 19601 21. What would you say are the major problems that this organization faces now in financing and operations? 98 22. Since we would like to get some idea of what sales- managers of market organizations are paid, would you mind giving me some idea of what the total earn- ings, including commissions, were that your sales- manager received in 1959 for being employed by this organization? 23. Do you have anything else to say about the organiza- tion, its policies and personnel which has not been covered in previous questions? 99 COEFIDENIIA; Department of Agricultural Economics, Michigan State University QUESTIONNAIRE FOR THE SALES-MANAGER OF A GROWERrOWNED.FRESH VEGETABLE MARKETING ORGANIZATION _ 1. Name of organization 2. How many years have you been employed as the sales- manager for this organization? 3. What type of employment did you hold before starting work here? 4. Do you have any other part-time Job besides this? 5. Which vegetablesare put through the following opera- tions at the packing shed and what is their length of pool? “ Vacuum Steri- Pack- Storage Length Commodity Grading waxing Icing cooling cooling aging prior of 1959 . to sale pool a.Beans b.0abbage c.0arrots do 081111- flower e.0elery f.Corn g.Cucum- bers hoEgg" plant i.Lettuce 3.0nions 100 Commodity Grading waxing Icing Vacuum cooling 1 Steri- cooling Pack- asins Storage prior tosfle Length of 1959 pool k.ParsnipJ 1.Peppers m.Potatoea n.Radishes o.RutabagaF p.Spinach q.Squash 6. 7. 9. 10. the pool? a. Yes ' b. No Are there any commodities which are not sold through c. (If yes) What ones? If yes for 6: What is your sales policy regarding these vegetables not sold through the pool? What is the percentage of the gross f.o.b. price charged members for sale of produce? What is the peroentage of gross f.o.b. price deducted by the organization for the revolving capital fund? Since we would like to get some idea of what sales- managers of market organizations are paid, would you mind giving me some idea what your total earnings including commissions were for being employed by this organization in 1959? 11. 12. 13. 14. 101 What supplies are purchased by the organization for use by members in production or the organization in marketing the commodities? In what counties is the produce grown which is sold through your organization? What percentage of the produce is sold in the different states of Michigan Indiana Illinois Ohio Others (specify) What percentage or dollar volume of the produce marketed during 1959 was sold directly to the following outlets? a. Private truckers selling direct to consumers or hucksters b. Wholesalers selling to auctions and jobbers c. Brokers selling to Jobbers and whole- salers d. Commission merchants selling to Jobbers and chain stores e. Auctions f. Processors g. Jobbers selling to retail grocers and restaurants h. Wholesale grocers selling to retail grocers 1. Chain stores 3. Independent retail stores k. Hotels, restaurants and institutions 1. Other 2. 3. 4. 102 CONFIDENTIAL Department of Agricultural Economics, Michigan State University QUESTIONNAIRE FOR THE MEMBERS OF A GROWER-OWNED FRESH VEGETABLE MARKETING ORGANIZATION - Name of organization Post Office address During which years have you been a member of this organization? Are you a member of the Board of Directors? a. Yes— b. No a _ How many acres of each commodity did you grow in the 1959 crop which were marketed (a) through the organization? (b) outside the organization? Commodity Acres Acres Total Commodity Acres Acres Total through outside acres through outside Acres 6. 7. 8. a. Do you think the present selling (pooling) system is fair to all growers? Yes . No b. If no. Why do you think that it isn' t? Did you sign a sales agreement with the organiza- tion this year? Yes No How would you rate the ability of the present organi- zation employees? Excellent Good Fair Poor a. General sales-manager. . b. Bookkeeper . . . . . . . 9. 10. 111. 12. 13. 14. 15. 16. 17. 18. 103 If any of the above positions were rated as fair or poor, why are you rating them this way? Do you honestly think your manager has developed the necessary confidence and loyalty of the mem- bership? a. Yes b. No. 0. Not sure Do you think your marketing organization has paid . enough in the past to obtain satisfactory manage- ment? Do you think the board of directors allows the sales-manager ample freedom in the use of his own Judgment and experience in performing his duties? a. Yes b. No Do you think that adequate checks are made by the - board of directors to see that the sales-manager is conforming to the policies adopted by the organization? a. Yes b. No Do you feel there has been enough public relations work done in the past? _a. Yes b. No Do you think the board of directors is taking ade-' quate steps to keep the membership fully informed regarding the activities and problems of the organi- c. Not sure zation? a. Yes b. No About how many times a year do you think you see the sales-manager to talk with him? About how many times a year do you see the president of the board of directors to talk with him? Which of the following channels through which members receive information about the activities of an organization are used by your market organization? a. b. T.V. or radio programs Personal contacts with the board of directors and manager (Note rank here for question 19) Finaaciai a. b. Other Agtizitiea 19. 20. 21. 22. 104 Other Financiai ct t es c. Annual reports (written) c. c. d. Annual meetings- ' d. d. e. Newsletters or cards e. e. f. Educational tours f. f. g. Social gatherings g. g. h. Regular’member meetings h. h. 1. Phone talks with the directors and manager 1. i. How would you rank the methods of member information used by your organization in their order of effec- tiveness and importance to you as a member, first for finances alone and secondly, for activities other than strictly financial? a. Do you receive reports on the financial status . of your organization within the year besides the annual report? (1) Yes (2) No What would you say the major problems are that this organization faces now in financing and Operations? Do you have anything else to say about the organiza- tions, its policies and personnel which hasn't been covered in previous questians? 105 CONFIDENTIQ Department of Agricultural Economics, Michigan State University QUESTIONNAIRE FOR FORMER.MEMBERS WHO HAVE WITHDRAWN FROM MEMBERSHIP IN A GROWERPOWNED FRESH VEGETABLE MARKETING ORGANIZATION Name of organization Post Office address During what years were you an active marketing member? If stock company, do you still own stock in the com- pany? a. Yes b. No What acreages of what commodities did you formerly sell (1) through the organization in your last year as an active marketing member? (2) Outside the organization? A Commodity Acres Acres Total :’ Acres Acres Total through outside acres 6. ,7. What would you say are the reasons for your with- drawing from marketing or membership in this organization? How would you rate the ability of the present organi- zation employees? Excellent Good Fair Poor a. General sales-manager b. Bookkeeper . . . . . 9. 10. 11. 12. 13. 106 If any of the above positions were rated fair or poor, why are you rating them this way? Do you honestly think the present sales manager has develOped the necessary confidence and loyalty of the membership? a. Yes b. No c. Not sure ' Do you think this market organization has paid enough in the past to obtain satisfactory management? Do you feel there has been enough public relations work done in the past? (1) Yes (2) No Do you think the board of directors allows the sales- manager ample freedom in the use of his own Judg- ment and experience in performing his duties? a. Yes b. No c. Don't know ' Do you have anything else to say about the organi- zation, its policies and personnel which hasn't been covered in previous questions? V—fi ‘— 1. 2. 3. 5. 107 CONFIDENTIAL Department of Agricultural Economics, Michigan State University QUESTIONNAIRE FOR NON-MEMBERS OF A VEGETABLE MARKETING ORGANIZATION Name of organization What acreages of what vegetables did you grow in 1959': Vegetable Acres Vegetable Acres Have you ever marketed produce through the organiza- tion? a. Yes b. No What would you say are the reasons for your*not becoming a member of this marketing organization? How would you rate the ability of the present organi- zation employees? Excellent Good Fair Poor a. General sales-manager be Bookkeeper e e e e e If any of the above positions were rated as fair or poor, why are you rating them this way? Do you honestly think the present manager has deve- loped the necessary confidence and loyalty of the membership? a. Yes______ b. No______ 0. Not sure 108 8. Do you have anything else to say about the organi- zation, its policies and personnel which hasn't been covered in previous questions? 4. 5. 7. 8. 9. 109 CON Fi DEN gig Department of Agricultural Economics, Michigan State University QUESTIONNAIRE FOR.MEMBERS OF A GROWERPOWNED FRESH VEGETABLE MARKETING ORGANIZATION WHICH HAS FAILED Name of former organization Post Office address During what years was the organization operating? What commodities were handled by the organization? Did it have a central packing shed? a. Yes b. No How many members were in the organization? a. The first year of Operation? b. The last year of Operation? What was the volume of business (a) the first year of Operation? . (b) the last year of operation? Since we are interested in finding out why some fresh vegetable marketing organizations have failed in the past, I would like to ask your opinion on why this particular one failed. WOuld any other possible reasons for failure of the organization stem.from any of the following cate- gories?. a. Member dissatisfaction with the services of the " -" ' organization b. ' " operation of the h d h h packing shed c. n n u " sales-manager d. - - - - floor manager 110 e. ' Member dissatisfaction with the grower sales agreement f. " " " " pooling system 3. ” U 9 U length of pool - - - . period h. " " " " prices received 1. 9 9 U 9 control of - - - - planting dates 3. " " " " policies of the . - - - board of directors k. Members didn' t receive enough services from the organization 1. Members weren 't kept properly informed on the operations of the organization. m. Time for payment was too long n. Not enough large growers in the organization 0. Not enough growers, large or small, in the organization to obtain necessary volume p. Sound financial management policies weren 't used q. Bad news was being spread about the organi- zation through rumors r. Had a part-time sales-manager s. Had a part-time floor manager t. Poor working relations between the manage- ment team and the board of directors u. Not enough acreage grown in the area for potential expansion in volume of business of the organization v. Didn' t have a good market outlet for produce w. Received higher price elsewhere x. Too much disagreement on the objectives and goals of the organization by the members y. Members Just didn t like this type of mar- keting . z. No real need for the market organization z(2) Lack of effective communications between the manager and board of directors 2(3) *Lack of effective communications between the board of directors and other’members z(4) Sales manager not given ample freedom to do his job 2(5) “Lack of effective communications between the sales-manager and the membership z(6) Sales-manager didn' t have the necessary confidence and loyalty of the membership ‘ 2(7) _Members weren 't kept adequately informed on the activities and problems of the organization z(8) _Didn t pay enough to obtain a well-qualified sales manager z(9) *Dishonest management 111 z(10) Dishonest bookkeeping z(11) Too rapid a turnover of managers for any - one of them to put the organization on sound financial basis z(12) Not enough money in reserve fund to carry . organization over in bad years z(13) Other reasons: 10. Do you have anything else to say about the former organization, its policies and personnel, which hasn't been covered in previous questions? HICHIGRN STQTE UNIV. LIBRQRIES 31293105787810