“New Generation Honey Cooperatives:  Has There Time Come?”
Bee Culture (April 2006), Vol. 134 (4):17-19

 

By

 

Malcolm T. Sanford

http://apis.shorturl.com

 

The American agricultural cooperative has a long and interesting history.  The movement’s philosophy sprang from religious roots in the early twentieth century.  Later it took on a more pragmatic posture, characterized by advocates as a uniquely American “middle way” between Facism and Communism after World War II.¹

 

A quintessential part of American agriculture, the cooperative model makes a lot of sense for many reasons.  It would appear to be a “slam dunk” idea for beekeepers.  After all these individuals are involved with one of nature’s most social and, therefore, cooperative critters.  So why is it that many beekeeping cooperatives are short lived, few surviving to maturity?  Contributary is that the cooperation engendered by the bust side of the “boom and bust” cycle of agricultural commodities often breaks down with the next price boom, and cooperators take it upon themselves to go their own way, to the detriment of the cooperative.

 

The structure of traditional agricultural cooperatives often contributed to their demise. Although “owned” by members, many didn’t have much equity tied up in their ownership.  The membership was also fluid (members could easily come and go); returns were modest because they were tied to selling low-priced commodities; and marketing programs were not well defined nor enforced.

 

Not all failed of course.  In the beekeeping industry, some stand out as unqualified successes.  Two come to mind, one in the United States and another in Canada.  Who has not seen Sue Bee® honey on the shelf at their local grocery store.

 

“With $200 and 3,000 pounds of honey, five beekeepers located near Sioux City, Iowa, formed a cooperative marketing organization in 1921. It was named Sioux Honey Association after the city of its founding.

“Members formed the association so that they could market their honey at greater profit through sharing services and equipment, processing and packing facilities, and complete marketing and sales organizations.

“The association is a cooperative in every sense of the word. Members own the association and control its operations through an elected Board of Directors. The management of the association is responsible to the directors.

“Membership grew over the years to a peak of 1,200 but currently includes about 315 members as apiaries have grown, consolidated, and modernized like other agricultural businesses. Most of the membership hails from the western two-thirds of the United States plus Florida and Georgia. Each member is responsible for supplying the organization with honey extracted from the honeycomb. This liquid product is usually shipped to our processing plants in 55-gallon drums that hold approximately 650 pounds of honey. Collectively, our membership produces around 40 million pounds of honey annually (62,000 of these drums).

“Prior to 1964, honey was delivered to one of the associations six packing facilities located in Sioux City, Iowa; Anaheim, California; Waycross, Georgia; Temple, Texas; Umatilla, Florida; or Lima, Ohio. Sioux Honey absorbed Bradshaw Honey Company of Wendell, Idaho, in 1964 and maintained that facility as well. As transportation improved, honey-producing areas moved westward and the business streamlined. Today only the Sioux City, Waycross, and Anaheim plants have remained to serve the association.

“In the early days, honey was marketed under the "Sioux Bee" label, but the name was changed in 1964 to "Sue Bee" to reflect the correct pronunciation more clearly. Over time, other lines of honey were added, including Clover Maid, Aunt Sue, Natural Pure and North American brands.

Sioux Honey Association has become a worldwide marketing organization. Its global presence extends to the Middle East, Far East, Europe, and South and Central America, and it continues to be a leader in the honey industry with state-of-the-art facilities, which include labor and developmental research.” ²

Not as well known in the U.S. is Bee Maid:

“In 1950 a few beekeepers had a dream – a vision – that a major portion of the Canadian honey production could be marketed through one organization, completely owned and controlled by and for the benefit of the beekeepers.

“To pursue this vision, a meeting was held in Winnipeg with the representatives of the Alberta, Saskatchewan, and Manitoba Co-Operatives. They agreed to study a plan whereby their total honey intake would be sold as a national brand over a single sales desk while each organization would preserve its individual identity.

“After thorough study, Interprovincial Honey Sales Co-Operative Limited – later known as BeeMaid Honey Limited – was incorporated to act as the honey marketing agency if, as, and when two or more Co-Operatives might so desire.

“BeeMaid Honey finally commenced operation in 1959 when the Manitoba and Saskatchewan Co-Operatives agreed to market all their honey jointly. In 1961, the Alberta Honey Co-op participated with the Manitoba and Saskatchewan Co-Ops through BeeMaid Honey in developing the export market, and in 1962 began full participation in both the domestic and export markets.

“Thus, by 1976, the principle of Co-Operative Honey Marketing was fully extended beyond provincial borders and BeeMaid Honey was marketing over one desk the entire volume of the Honey Co-Ops of Western Canada, with plants in Edmonton, Bassano, Tisdale, and Winnipeg.  As time moved on the packing plant in Edmonton needed to be expanded so in 1993 the plant was moved to a new facility in Spruce Grove, Alberta.

“This large volume – the major portion of the Canadian crop – has enabled BeeMaid Honey to:

• Explore and successfully develop new markets for Canadian honey especially in the export markets.
• Reduce marketing costs through the elimination of expensive duplication of selling and promotional expenses.
• Prevent private packers, who have little interest in the well-being of the beekeepers, from dominating the market.
• Pool the intake of each plant, thus avoiding the potentially disastrous problems of local over or under supply.
• Supply any brand to any market from the plant which can supply most economically and thus maximize return to beekeepers.
• Progress towards the establishment of a single national brand marketed from coast to coast with national advertising and promotion.

“Indirectly, all Canadian beekeepers benefit through the stabilization of markets. Directly, the greatest benefit accrues to the Co-Operative member through increased returns due to the more efficient and economical marketing of his honey crop.

“BeeMaid – truly a dream come true.”³

 

I  have not done a  rigorous  study on both these outfits, but from casual conversation and  observation, these cooperatives appear to have survived principally because of a committed membership and professional management.  It is particularly noteworthy that both have changed over time from simply marketing a commodity to distributing more value-added products.  This process, called “vertical integration,” seeks to take advantage of increased profit margins available through marketing products directly to consumers.  With this concept in mind, another kind of agricultural cooperative has taken root in the Canadian prairies, and now being adopted across the United States. 

 

This entity, known as the “New Generation Cooperative” (NGC), seeks to take advantage of the modern marketing environment. Unlike traditional cooperatives, in which start-up expenses are minimal and growth is financed through members’ retained earnings, permanent equity to fund NGC start-up and growth is financed through the sale of delivery rights. There are several primary characteristics of NGCs: ⁴

1. Defined membership:  Sometimes referred to as “closed,” the membership size is determined at the outset of the enterprise.

2. Delivery rights:  A right and an obligation to deliver.  This is a legal contract and as such carries penalties if broken.

3. Up-front equity required from producers.  Potential members fund the cooperative startup costs.  They may enter into partnerships with similar enterprises to reduce expenses.

4. Delivery rights are transferable and may fluctuate in value.   They can be bought and sold under specific federal trading regulations.

5. Marketing agreement entered into between member and cooperative.   This can include how the product is delivered and includes such things as lab tests and lot traceability. 

 

Recently, an NGC initiative has been formed that is in part a collaboration between the division of Marketing, Florida Department of Agriculture and Consumer Services (Fresh From Florida) and the Florida State Beekeepers Association.  Its goal is to provide members with an alternative market for quality Florida-produced honeys at above cost of production.

 

Guiding principles include marketing only “top of the line” table-grade honey produced in Florida (both varietals and seasonals) using niche marketing to outlets like farmers markets and specialty stores.  The following scenario has been distributed for guidance:

 

 

1.      Coop buys 500 barrels of honey from the membership (300,000 lbs) for $375,000  (estimated $1.25/pound).

2.      Producer members commit 80% of their production (5,000 colonies from 40 producers at 75 lb = 375,000 X .80 or 300,000 lbs as delivery rights) to the cooperative under specified conditions.

3.      Coop purchases all members’ committed honey at 10% above USDA published price.

4.      Coop packs, sells and makes a net profit of 50% on honey purchased. (estimated $187,000 returned to the membership or retained for growth).

5.      Coop raises initial capitalization of $290,000 from members and applies for $150,000 assistance in kind from the Florida Department of Agriculture (grants, marketing assistance), total initial equity = $440,000.

6.      Possible membership consists of:  40 producer beekeepers (delivery rights for an aggregate of 5,000 colonies yielding 75 lbs per colony) $4,000 each; 30 associate investing members, $2000 each ; 10 allied industry members, $2000 each, 100 friends and wannabees $500 each.

 

Funds are being solicited from interested potential members to support a feasibility study for this potential NGC.  There is a good level of excitement and interest in the project at the moment, however, it is wise to keep in mind the remarks of Randall E. Torgerson at a recent meeting on cooperatives:

 

“There is a lot of momentum and energy in the value-added arena as farmers seek to strengthen income and keep themselves in the driver's seat at a time of rapid consolidation and concentration in the food industry. How will it all turn out? Are these efforts too late? Or, are they on the cutting edge of new institutional market development?  The outcome will be determined by the strength of leadership offered, careful development of business plans and marketing strategy, and proper capitalization.”⁵

 

 

References:

 

1.        Lawless, Greg, 2003.  Historic Foundations of Cooperative Philosophy.  Bulletin 3, University of Wisconsin, Center for Cooperatives, Bulletin 3, accessed February  20, 2006 <http://www.wisc.edu/uwcc/info/uwcc_bulletins/bulletin_09_03.pdf>.

2.        History of Sue Bee Honey Cooperative, accessed February 20, 2006, <http://www.suebee.com/history.asp>.

3.        History of Bee Maid Honey Cooperative, accessed February 20, 2006 <http://www.beemaid.com/BeeMaid/Company/history.htm>.

4.        Hackman, Dean.  2001 “What is a New Generation Cooperative?” Nov./Dec. 2001, newsletter of the Ag Innovation Center, Jefferson, MO 65102, accessed February 20, 2006 <http://www.extension.iastate.edu/agdm/wholefarm/html/c5-112.html>.

5.        Torgerson, Randal. “A Critical Look at New Generation Cooperatives,” accessed February 20, 2006 <http://www.rurdev.usda.gov/rbs/pub/jan01/critical.htm>.