An enduring business model: New Zealand’s cooperative sector

New Zealand’s 40 biggest co-operatives, mutuals and societies generated more than $45.47 billion in revenue over their respective 2016/17 financial years, equating to 17.4 percent of New Zealand’s GDP. And while it boasts some 1.4 million members, this sector of the business landscape appears somewhat under-recognised. By Annie Gray.

 

Imagine a world where the prevailing economic model is one of building a multi-generational business which, while focusing on the needs of its current members, works for the sustainable development of their communities with the next generation of members in mind.

While many iwi-owned businesses do take a strong multi-generational view, it is not generally the norm in global business, but this principle is also part of a ‘reimagined economy’ that the global cooperative sector has been pursuing for more than 170 years.

Globally and nationally the cooperative sector of the economy is one which doesn’t always receive the recognition it deserves, despite many of the individual businesses involved being household names.

Craig Presland, the CEO of Cooperative Business New Zealand, agrees the sector does not always gets the recognition it deserves, in terms of its scale and contribution towards the local economy, the longevity of its member businesses nor the fact that there is no other business model globally which is more closely aligned to supporting the United Nations’ 17 Sustainable Development Goals. 

As to why that might be Presland says it has perhaps been taken for granted to a degree as two thirds of its 65 full members in New Zealand are more than 25 years old and five are more than 100 years old, so they have been a big part of the New Zealand business landscape for many years. 

But, he says, the member businesses all show endurance over many generations and because of their business model they take a very long-term view with social responsibility as a core principle. 

One of the benefits in co-ops is that they are trusted brands, products and services that New Zealand has known for decades – not here today and gone tomorrow. “It is about trust and consumer respect over decades, or even centuries.”

Globally cooperatives all stem from the Rochdale Pioneers who founded the modern cooperative movement in England in 1844, to provide an affordable alternative to poor-quality and adulterated food and provisions, using any surplus to benefit the community. Amongst the seven founding Rochdale principles social responsibility featured heavily.  As it does today.

In New Zealand, the country’s top 40 co-operatives, mutuals and societies generated more than $45.475 billion in revenue over their respective 2016/17 financial years, equating to 17.4 percent of New Zealand’s GDP.  And they have a total of around 1.4 million members.

Globally there are around 2.5 million co-operatives which turn over more than $US3 trillion while serving more than one billion members.

In New Zealand the sector employs more than 50,000 people and globally that number is more than 250 million people. 

While in recent years sustainability, corporate responsibility and giving back to the community have gained increased prominence in New Zealand’s business sector, Presland says his members have been doing it for years, going back to the very first producer cooperative in New Zealand, thought to be the Otago Cooperative Cheese Co founded in 1871 (now part  of Fonterra Co-operative Group). 

Essentially cooperatives and mutuals are organisations owned and controlled by their members which distribute benefits based on use/patronage. Amongst the bigger Cooperative Business New Zealand members are Fonterra, Foodstuffs, Silver Fern Farms, Alliance Group, Farmlands Cooperative, Ballance Agri-Nutrients, Ravensdown, Farmers Mutual Group, Mitre 10 and Southern Cross Healthcare Society.

Presland says Fonterra is a good example locally of adhering to the aim of giving back and leaving the world in a better place for future generations, with its $10 million a year Milk in Schools programme. This has been running for six years and is now in 70 percent of NZ’s primary schools benefitting more than 140,000 children each school day. This is reportedly the largest social responsibility programme ever driven by a Kiwi commercial business. 

Presland also points to the many millions of dollars being invested by another member, Foodstuffs South Island, to support Cantabrians disadvantaged by the earthquakes. 

Farmers Mutual Group (FMG), was awarded the inaugural Co-operative Business of the Year Award in 2016 for making a significant and positive impact within the co-operative community. 

Presland says co-operatives return value to their shareholders in many different ways, not just the bottom line, and FMG is a good example with its concern for the well-being of farmers and growers nationwide in tough economic times, through its Farmstrong programme. This aimed to shift the focus of mental health from depression and illness to one of well-being.

In terms of smaller co-ops Presland points to a new start-up called Combined Building Supplies Co-op which was launched in April this year in Christchurch by its founder Carl Taylor.

This is a buying co-op operating within the Canterbury building industry formed by a group of smaller builders and tradesmen as its members. 

The co-op says on its website that its goal is simple: “To obtain the best possible prices on building materials and services by combining the buying power of small, medium and independent building companies.” Since launching on April 24 this year CBS Co-op has brought on more than 100 building companies together (both residential and commercial), and their combined volume spend makes it one of the most significant buyers of building materials.   

 

WHO OWNS CO-OPS?

Co-ops come in different forms and the CBNZ website points to: 

Producer cooperatives: Owned by people who produce similar types of products.

Purchasing/shared services cooperatives: Owned and governed by independent business owners that come together to enhance their purchasing power.

Banking cooperatives: Financial entities which belong to their members, who are at the same time owners and customers. They can be set up as a bank, a building society or a credit union.

Insurance mutual: Owned entirely by those who take out policies. Surpluses are either used to reduce future premiums or rebated to policyholders as a dividend.

Consumer cooperatives: Owned by the people who buy the goods or use the services of the cooperative. 

Worker cooperatives: Owned and governed by the employees of the business. 

 

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