Cooperative strategic behaviour in organic food markets: a note

Kalogeras N., Kalaitzis P., van Dijk D.

in

Mattas K. (ed.), Tsakiridou E. (ed.). Food quality products in the advent of the 21st century: production, demand and publicpolicy

Chania : CIHEAMCahiers Options Méditerranéennes; n. 64

2005pages 115-127

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Kalogeras N., Kalaitzis P., van Dijk D. Cooperative strategic behaviour in organic food markets: a

note. In : Mattas K. (ed.), Tsakiridou E. (ed.). Food quality products in the advent of the 21st century:

production, demand and public policy. Chania : CIHEAM, 2005. p. 115-127 (Cahiers Options

Méditerranéennes; n. 64)

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Cahiers Options Méditerranéennes � no 64

Nikos Kalogeras 1,2,3, Prodromos Kalaitzis 2,3, and Gert van Dijk 2,3 1 Marketing & Decision Sciences Group, Dept. of Agricultural and Consumer Economics,

University of Illinois at Urbana-Champaign, IL, USA 2 Marketing & Consumer Behaviour Group, Dept. of Social Sciences, Wageningen University,

The Netherlands, EU 3 The Netherlands Institute for Cooperative Entrepreneurship (NICE), Nyenrode University,

The Netherlands Business School, The Netherlands, EU

ȱ

The aim of this article is to throw light on how marketing strategies are imbedded in the overall strategy of cooperative firms involved in organic agriculture. Through in-depth interviews with CEOs from 7 Dutch agri-food market-driven co-operatives, it was determined that: the theoretical taxonomy of strategies matched quite well with actual strategies. Dutch cooperatives involved in organic activity use a mix of marketing planning elements and they develop generic competitive advantages in the form of specialisation through very selective market segmentation.

Organic Agriculture, Cooperatives, Marketing Strategies, Overall Strategy.

ȱ

1. Introduction

Strategicȱdecisionȱmakingȱ isȱcentralȱ toȱunderstandingȱ theȱcausesȱofȱaȱ firm�sȱperformanceȱandȱindicateȱtheȱalternativesȱtoȱchangeȱthatȱperformance.ȱCooperativeȱfirmsȱareȱnoȱexceptionsȱtoȱthisȱprinciple.ȱCooperativeȱperformanceȱcannotȱbeȱadequatelyȱevaluatedȱunlessȱitȱisȱassessedȱinȱtheȱcontextȱofȱstrategyȱoptionsȱavailableȱandȱtheȱstrategyȱthatȱisȱactuallyȱpursuedȱbyȱaȱcooperativeȱ[1].ȱȱ

Theȱ researchȱunderlyingȱ thisȱarticleȬnoteȱ isȱaȱ firstȱ stepȱ towardȱ studyingȱ cooperativeȱ strategicȱbehaviourȱinȱorganicȱfoodȱmarkets.ȱThisȱstudyȱisȱmotivatedȱbyȱtheȱfactȱthatȱorganicȱproductionȱandȱconsumptionȱhaveȱbecomeȱstrongȱconceptsȱ inȱTheȱNetherlandsȱduringȱtheȱ lastȱdecade.ȱInȱorderȱ toȱ stimulateȱ farmersȱ toȱ convertȱ fromȱ intensiveȱ agriculturalȱ productionȱ toȱ organicȱproductionȱ andȱ toȱ increaseȱ consumerȱ awarenessȱ ofȱ theseȱ products,ȱ overȱ theȱ pastȱ yearsȱ theȱDutchȱgovernmentȱhasȱgivenȱfinancialȱsupportȱtoȱagriculturalȱenterprisesȱtoȱconvertȱtoȱorganicȱproduction.ȱTheȱsoȱcalledȱ�PlanȱofȱActionȱ1997Ȭ2000�ȱwithȱaȱ totalȱsupportȱofȱalmostȱ55ȱmillionȱeuros,ȱhasȱbeenȱfollowedȱupȱbyȱaȱpublicȱaidȬplan,ȱcalledȱ�AnȱOrganicȱMarketȱtoȱWin�.ȱThisȱnewȱpolicyȱforȱtheȱperiodȱ2001Ȭ2004ȱaimedȱtoȱenhanceȱtheȱorganicȱproductionȱandȱconsumption,ȱtoȱreachȱ10%ȱofȱtotalȱproductionȱandȱconsumptionȱinȱ2010.ȱAccordingȱtoȱtheȱrecentȱstudyȱofȱFAOȱ(2004),ȱthisȱpolicyȱaimedȱtoȱgainȱprofessionalizationȱofȱtheȱmarketȬorientedȱorganicȱchainȱandȱtoȱencourageȱstimulationȱofȱorganicȱprimaryȱproductionȱtoȱbetterȱrespondȱtoȱdemand[2].ȱAlthoughȱDutchȱcooperativesȱholdȱleadingȱpositionsȱinȱmostȱconventionalȱagriculturalȱandȱfoodȱproductȱmarkets,ȱitȱdoesn�tȱseemȱtoȱhaveȱtheȱsameȱsuccessȱinȱorganicȱfoodȱmarkets.ȱThus,ȱtheȱconcernȱforȱaȱpotentialȱ lossȱofȱ eitherȱmarketȱ shareȱorȱ competitiveȱposition,ȱ inȱ theȱ caseȱwhereȱproducers�ȱcollectiveȱactionsȱ failȱ toȱdevelopȱ theȱappropriateȱ strategiesȱ toȱ respondȱ toȱ recentȱ trendsȱ inȱ theȱorganicȱmarket,ȱmotivatedȱusȱtoȱstudyȱrespectiveȱstrategiesȱtoȱaddressȱthisȱissue.ȱȱ

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Theȱaimȱofȱthisȱpaperȱisȱtoȱprovideȱinsightsȱregardingȱstrategicȱmarketingȱfitȱinȱtheȱbusinessȱandȱcorporateȱ cooperativeȱstrategyȱ forȱagriȬfoodȱ cooperativesȱ involvedȱ inȱorganicȱproductionȱandȱmarketing.ȱBasically,ȱtheȱmarketingȱphilosophyȱofȱcooperativeȱorganicȱproduceȱisȱviewedȱasȱtheȱrangeȱbetweenȱ�makeȱ theȱproductȱandȱsellȱ it�ȱonȱ theȱoneȱhand,ȱandȱ�chooseȱ theȱvalue,ȱprovideȱ theȱvalueȱ andȱ communicateȱ theȱvalue�ȱonȱ theȱotherȱhand[3].ȱTheȱ impactȱofȱaȱ company�sȱmarketingȱphilosophyȱonȱactualȱmarketingȱdependsȱtoȱaȱlargeȱextentȱonȱhowȱcommittedȱtopȬmanagementȱisȱ toȱ thatȱ philosophyȱ [4].ȱHowever,ȱ aȱ strategyȱ atȱ theȱ cooperative�ȱ sȱ corporate,ȱ businessȱ andȱmarketingȱlevel,ȱbasedȱpurelyȱonȱcompetitiveȱpricingȱisȱnoȱlongerȱconsideredȱaȱrealisticȱoptionȱforȱ variousȱ reasons.ȱ Inȱ priority,ȱ someoneȱ mayȱ considerȱ thatȱ theȱ McSharryȱ reformsȱ haveȱpracticallyȱnullifiedȱtheȱpriceȱadvantageȱfromȱagriculturalȱinputsȱ(i.e.ȱfeedȱmaterialȱinȱlivestockȱorganicȱ sector),ȱ whileȱ theȱ envisagedȱ sustainableȱ productionȱmethodsȱ willȱ raiseȱ theȱ costȱ ofȱproduction.ȱContinuationȱofȱefficiency/lowȱcostȱpriceȱ strategyȱseems,ȱ therefore,ȱ impossible[5].ȱTheȱ agriȬfoodȱ cooperativeȱ sectorȱ facesȱ theȱ challengeȱofȱ switchingȱ toȱ financeȱ strategiesȱwhichȱfocusȱonȱoptimisationȱofȱ itsȱproduceȱaddedȱvalue[6].ȱThisȱwillȱ requireȱproductȱdifferentiationȱandȱnewȱmethodsȱofȱmarketingȱinȱresponseȱtoȱincreasingȱfoodȱandȱsafetyȱconcernsȱofȱconsumersȱworldwideȱ[7,ȱ8,ȱ9].ȱ

Fromȱaȱ theoreticalȱperspective,ȱ theȱcurrentȱpaperȱarticulatesȱ theȱ threeȱbasicȱ levelsȱofȱstrategicȱanalysis.ȱInȱeffect,ȱanȱattemptȱ isȱmadeȱtoȱgainȱ insightsȱaboutȱcooperativeȱstrategicȱmovementsȱtowardsȱorganicȱagricultureȱinȱorderȱtoȱproduceȱlegitimateȱeconomicȱbenefitsȱforȱtheirȱmembers.ȱTheȱtheoreticalȱdiscussionȱisȱfollowedȱbyȱaȱdescriptionȱofȱtheȱstudy�sȱdecisionȱcontext.ȱNext,ȱaȱqualitativeȱ studyȱ thatȱ examinedȱ theȱ strategiesȱ ofȱ 7ȱ establishedȱDutchȱ agriȬfoodȱ cooperativesȱinvolvedȱ inȱ theȱproductionȱandȱmarketingȱofȱorganicȱproductsȱ isȱpresented.ȱTheȱarticleȱ endsȱwithȱtheȱtentativeȱ inferencesȱforȱtheȱDutchȱagriȬfoodȱcooperativeȱsectorȱandȱprovidesȱresearchȱpropositionsȱforȱfurtherȱstudyȱofȱtheȱexaminedȱissue.ȱ

2. Strategic analysis: a concise review

Strategicȱ analysis,ȱ decisionȱmakingȱ andȱ implementation,ȱ takesȱ placeȱ inȱ threeȱ hierarchicallyȱclassifiedȱ levelsȱ (seeȱ figureȱ 1).ȱAtȱ theȱ first,ȱ theȱ corporateȱ level,ȱ theȱ corporationȱ analyzesȱ theȱmarketȱ environmentȱ inȱwhichȱ itȱ operates,ȱ inȱ orderȱ toȱdecideȱ inȱwhichȱ partȱ ofȱ theȱmarketȱ itȱshouldȱallocateȱitsȱeffortȱandȱresourcesȱforȱobtainingȱoptimalȱmarketȱposition.ȱVariousȱanalyticalȱtoolsȱ likeȱ SWOTȱ analysis,ȱ marketȱ segmentation,ȱ competitorȱ andȱ customerȱ analysis,ȱ areȱemployedȱinȱorderȱtoȱreplyȱtoȱtheȱquestionȱ�whereȱdoȱweȱstand?�.ȱSubsequently,ȱandȱinȱorderȱtoȱfindȱ�whereȱdoȱweȱwantȱ toȱbe?�ȱ theȱ firmsȱhaveȱ toȱanalyzeȱ theirȱmissionȱandȱobjectivesȱusingȱstructuralȱ marketȱ andȱ environmentalȱ analyticalȱ tools,ȱ alongȱ withȱ marketȱ segmentation,ȱtargetingȱandȱpositioningȱelements[10].ȱAgribusinesses,ȱ inȱparticularȱcooperatives,ȱ inȱorderȱ toȱmaintainȱanȱefficientȱmarketȱstrategyȱmayȱcreateȱassuranceȱsuppliesȱschemesȱorȱmarketȱoutlets,ȱthroughȱcrossȬsubsidizationȱofȱdifferentiatedȱproductsȱ [11].ȱThisȱmayȱbeȱconsideredȱasȱaȱbasicȱcomponentȱofȱaȱmissingȱmarket�sȱstrategy.ȱForȱinstance,ȱcooperativesȱmayȱproduceȱdifferentialȱreturnsȱ ifȱ moreȱ efficientȱ informationȱ flowsȱ withinȱ theȱ organisationȱ allowingȱ aȱ missingȱ orȱincompleteȱmarketȱ toȱ beȱ servedȱ profitably.ȱ Likewise,ȱ theȱ needsȱ ofȱ consumersȱ areȱ identifiedȱdirectlyȱinȱtheȱmarketȱchain.ȱThisȱstrategyȱwouldȱcreateȱvalueȱifȱtheȱimprovedȱcommunicationȱresultsȱ inȱchangesȱ inȱproducerȱoperationsȱwouldȱserve,ȱ inȱaȱprofitableȱmanner,ȱtheȱmissingȱorȱincompleteȱconsumerȱmarketȱ[12].ȱ

Atȱ secondȱ levelȱ (businessȱunitȱ level)ȱ theȱ firmȱ repliesȱ toȱ theȱgenericȱquestionȱ�Howȱdoȱweȱgetȱthere?�ȱ andȱ selects,ȱ therefore,ȱ theȱwayȱ itȱ shouldȱ internallyȱ organizeȱ andȱ defineȱ itsȱ businessȱstrategy.ȱHence,ȱitȱwillȱachieveȱcertainȱcompetitiveȱadvantages.ȱAnalyticalȱtoolsȱsuchȱasȱindustryȱcompetitiveȱforcesȱbyȱnewȱentrants,ȱsuppliers,ȱbuyersȱandȱsubstitutesȱandȱvalueȱchainȱanalysisȱ

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areȱusedȱtoȱdefineȱtheȱoptimalȱgenericȱbusinessȱstrategyȱinȱtheȱformȱofȱcostȱleadership,ȱproductȱdifferentiationȱorȱfocus/segmentationȱ[13].ȱThroughȱdealȱcostȱstrategyȱanȱagriculturalȱcooperativeȱattemptsȱtoȱgenerateȱinformationȱefficienciesȱinȱmakingȱandȱenforcingȱdealsȱwithȱitsȱmembersȬinvestorsȱ thatȱ ariseȱ inȱ theȱ normalȱ courseȱ ofȱ exchange.ȱ Theseȱ efficienciesȱ allowȱ contracting,ȱproductionȱandȱmarketingȱplanningȱandȱcommunication,ȱandȱmonitoringȱinȱorderȱtoȱkeepȱcostsȱatȱaȱlowȱlevel[1].ȱȱ

Business Unit A

Business Unit B

Business Unit C

Product management

Branding Channel management

Sales

Corporate level

Functional Level

Business Level Finance

Business Unit AHRM

Three hierchical levels of strategic analysis

Atȱtheȱthirdȱlevelȱtheȱfirmȱrepliesȱtoȱtheȱquestionȱ�whichȱisȱtheȱbestȱwayȱtoȱgetȱthere�ȱandȱselectsȱstrategiesȱ withinȱ itsȱ variousȱ functions.ȱ Here,ȱ formulatingȱ andȱ selectingȱ aȱ marketingȱ strategyȱbecomesȱtheȱfocalȱpoint.ȱDesigningȱaȱmarketingȱstrategyȱmightȱcombineȱelementsȱofȱproductȱlifeȱcycleȱanalysis,ȱpricing,ȱpromotionalȱplanningȱandȱdistribution,ȱinȱorderȱtoȱformulateȱaȱstrategyȱforȱleaders,ȱfollowers,ȱchallengersȱorȱnichersȱ[14].ȱ

Moreȱspecifically,ȱinȱorderȱtoȱachieveȱmarketȱleadershipȱtheȱfollowingȱoptionsȱareȱavailableȱforȱeachȱtypeȱofȱfirmȱ[3]:ȱȱ

a)ȱȱ expansionȱofȱ theȱoverallȱmarketȱ throughȱ targetingȱnewȱ finalȱusers,ȱ identifyingȱnewȱusesȱ forȱexistingȱproducts,ȱandȱincreasingȱusageȱrates;ȱȱ

b)ȱȱ guardingȱ theȱ existingȱ marketȱ shareȱ throughȱ strongȱ marketȱ positioningȱ andȱdevelopment/refinementȱofȱmeaningfulȱcompetitiveȱadvantages.ȱContinuousȱinnovationȱisȱaȱ preȬrequiredȱ conditionȱ here.ȱ Highȱ investmentsȱ onȱ advertisingȱ andȱ maintenanceȱ ofȱspecificȱdistributionȱ/customerȱrelationshipsȱareȱalsoȱessentialȱmarketingȱelementsȱforȱeveryȱfirm�sȱmarketȱstrategy;ȱȱ

c)ȱȱ expansionȱofȱtheȱcurrentȱmarketȱshareȱbyȱcoordinationȱprocessesȱandȱqualityȱcontrolȱthroughȱtheȱmarketingȱchannelȱwillȱsupportȱtheȱeffectivenessȱofȱbasicȱmarketingȱstrategiesȱsuchȱasȱfocus/segmentation.ȱSuchȱaȱstrategyȱcanȱbeȱ implementedȱthroughȱ i)ȱheavyȱadvertising,ȱii)ȱimprovedȱ distributionȱ (moreȱ distributorsȱ andȱ geographicȱ expansion),ȱ iii)ȱ priceȱ orȱ otherȱincentives,ȱiv)ȱnewȱproductȱdevelopment,ȱv)ȱmergersȱandȱacquisitions.ȱTheseȱareȱimportantȱelementsȱ forȱsettingȱ theȱmarketingȱmixȱofȱaȱcooperative�sȱ strategicȱbehaviour.ȱ Itȱ requiresȱ

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thatȱ cooperativesȱ addȱ valueȱ toȱ theȱ agriculturalȱ product,ȱ whichȱ willȱ beȱ particularlyȱappreciatedȱ byȱ aȱ specificȱ marketȱ segmentȱ andȱ byȱ potentialȱ consumerȱ segments.ȱCooperativesȱmayȱalsoȱbeȱencouragedȱtoȱchooseȱsuchȱaȱstrategyȱofȱfocus/segmentationȱ inȱorderȱ toȱ expandȱ itsȱ existingȱ marketȱ sharesȱ becauseȱ focusingȱ onȱ aȱ specificȬmarketȱcombinationȱwillȱincreaseȱitsȱcompetitiveȱpotential.ȱȱ

ȱTheȱ shiftȱ fromȱ supplyȱ drivenȱ toȱ marketȱ drivenȱ competition,ȱ pressȱ forȱ strongerȱ marketȱorientationȱ andȱ challengeȱ cooperativesȱ toȱ adoptȱ aggressiveȱmarketȬorientedȱ strategies[15,ȱ 16,ȱ17].ȱ Thisȱ impliesȱ thatȱ innovationȱ hasȱ becomeȱ aȱ permanentȱ characteristicȱ ofȱ agribusinesses�ȱmarketȱstrategy[ȱ18].ȱEconomicȱbehaviourȱunderȱconditionsȱofȱ incrementalȱ technologyȱchangeȱdiffersȱ accordingȱ toȱ theȱ conductȱ ofȱ firmsȱwhenȱ facingȱ discontinuities.ȱKyriakopoulosȱ (2000)ȱappliedȱ theȱ conceptsȱ ofȱ explorativeȱ andȱ exploitativeȱ marketȱ learning.ȱ Differentȱ marketȱconditionsȱrequireȱdifferentȱapproaches[19].ȱExploitativeȱmarketȱlearningȱfitsȱinȱwithȱsustainingȱinnovation.ȱItȱisȱaȱtopȬdownȱapproachȱinȱwhichȱorganisationsȱallowȱtheirȱpreviousȱexperiences,ȱencodedȱinȱ�knowledgeȱstructures�,ȱtoȱguideȱpresentȱaction.ȱExplorationȱhowever,ȱinvolvesȱtheȱdevelopmentȱ andȱ utilisationȱ ofȱ newȱ knowledgeȱ thatȱ extendsȱ existingȱ routinesȱ ofȱ theȱorganisation.ȱ Itȱenablesȱandȱenforcesȱdisruptiveȱ innovation.ȱExplorativeȱmarketȱ learningȱ isȱanȱapproachȱ requiringȱ firmsȱ toȱ stayȱ aheadȱ ofȱ competition,ȱ beingȱmarketȱ orientedȱ andȱ cherishȱsustainableȱ competitiveȱ advantagesȱ [3,ȱ 13,ȱ 16].ȱ Innovationȱ thereforeȱ hasȱ toȱ beȱ regardedȱ inȱ aȱbroaderȱ context.ȱTheȱ conceptȱofȱ innovationȱ isȱbroaderȱ thanȱ technicalȱ improvementsȱandȱnewȱtechniquesȱonly[20].ȱInnovationsȱoccurȱinȱeveryȱaspectȱofȱtheȱfirmȱandȱsimilarlyȱinȱeveryȱaspectȱofȱtheȱagriȬbusinessȱsystem,ȱi.e.ȱmarketingȱtoolsȱlikeȱlabellingȱandȱbranding,ȱnewȱconceptsȱlikeȱorganicȱfoodsȱandȱfoodȱadditives,ȱnewȱbusinessȬtoȬbusinessȱcontractsȱandȱbusinessȬtoȬconsumerȱmarketing.ȱ

Followingȱ Vanȱ Dijkȱ &ȱ Vanȱ Boekelȱ (2001),ȱ organicȱ foodȱ productionȱ mayȱ beȱ viewedȱ asȱ anȱinnovativeȱprocess,ȱthatȱ��.wasȱonlyȱ introducedȱasȱpieceȱmealȱbecauseȱofȱclearȱseparationȱonȱresponsibilitiesȱbetweenȱtheȱprivateȱfirmsȱandȱtheȱgovernmentȱonȱtheȱissueȱofȱtheȱfoodȱqualityȱandȱsafetyȱfood,ȱ�...,ȱinȱparticular,ȱfoodȱsafetyȱwasȱtakenȱasȱtheȱnormȱbyȱconsumersȱthereforeȱitȱwasȱ notȱ anȱ attributeȱ thatȱ couldȱ enjoyȱ aȱ priceȱ premiumȱ inȱ theȱ market�ȱ [5].ȱ However,ȱ theȱgovernmentȱregardedȱfoodȱsafetyȱasȱtheȱprimeȱresponsibilityȱofȱtheȱagroȬindustry.ȱTheȱprimaryȱsector,ȱi.e.,ȱtheȱfarmers,ȱwasȱofȱtheȱopinionȱthatȱifȱtheȱmarketȱdoesȱnotȱpayȱandȱtheȱgovernmentȱinsistsȱofȱimposingȱsafetyȱasȱaȱprerequisite,ȱthenȱtheȱgovernmentȱshouldȱhaveȱtoȱpayȱforȱit�ȱ(vanȱDijkȱ&ȱ vanȱBoekel,ȱ p.17).ȱTheseȱ attitudesȱ andȱ perceptionsȱ ofȱ cooperativeȱmembersȬinvestorsȱresultedȱ inȱ theȱ soȬcalledȱ �dilemma�ȱ (earlyȱ inȱ theȱ 1990�s)ȱ ofȱ whetherȱ cooperativesȱ haveȱ toȱdevelopȱ strategicȱ actionȱ plansȱ towardsȱ anȱ organicȬorientedȱmarketȱ orȱ not.ȱ Focusingȱ onȱ thisȱissue,ȱ itȱ isȱ believedȱ thatȱ cooperativeȱ strategicȱ behaviourȱ inȱ organicȱ foodȱ marketsȱ requiresȱempiricalȱandȱsystematicȱanalysis.ȱȱ

3. Decision context

Inȱ currentȱ timesȱ organicȱ farmingȱ systemsȱ haveȱ attractedȱ theȱ increasingȱ attentionȱ ofȱ Dutchȱcooperatives.ȱThisȱis,ȱtoȱsomeȱextent,ȱcausedȱbyȱpoliticalȱsupportȱforȱorganicȱfarmingȱasȱaȱtypeȱofȱenvironmentallyȱ friendlyȱ agriculturalȱ systemȱ whichȱ ensuresȱ foodȱ andȱ safetyȱ forȱ theȱ finalȱconsumer.ȱ Inȱ responseȱ toȱ theseȱchallenges,ȱorganicȱ foodȱbusinessȱactivityȱseemedȱ toȱhaveȱ theȱpotentialȱ toȱprovideȱbenefitsȱ inȱ termsȱofȱquality,ȱreductionȱ inȱoutputȱofȱsurplusȱproductsȱandȱtheȱ reorientationȱ ofȱ agriȬbusinessȱ sectorȱ towardsȱ demandȱ [21].ȱAsȱ aȱ consequence,ȱ sinceȱ theȱ1990�s,ȱorganicȱ foodȱproductionȱandȱconsumptionȱhaveȱbeenȱgainingȱprominenceȱ inȱEuropeȱ�amongȱ EUȱmemberȱ statesȱ asȱwellȱ asȱ nonȬmemberȱ states.ȱ TheȱwellȬknownȱ ECȱReg.ȱ 2078/92,ȱ

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whichȱ includesȱ theȱ measuresȱ accompanyingȱ theȱ 1992ȱ CAPȱ reform,ȱ isȱ oneȱ exampleȱ ofȱ theȱpoliticalȱboldȱinitiativesȱundertakenȱbyȱEUȱ[22,ȱ23].ȱȱ

Aȱ recentȱ studyȱ ofȱ LEIȱ (2003)ȱ reportsȱ thatȱ inȱ 2002ȱ theȱ numberȱ ofȱ organicȱ farmsȱ inȱ TheȱNetherlandsȱincreasedȱbyȱ3,5%ȱ(Tableȱ1)[24].ȱTheȱshareȱofȱorganicȱfarmsȱinȱtheȱtotalȱnumberȱofȱDutchȱfarmsȱwasȱ1,7%ȱinȱ2003.ȱTheȱgrowthȱinȱareaȱusedȱforȱorganicȱproductionȱwasȱaboutȱ12%,ȱbringingȱtheȱtotalȱareaȱinȱTheȱNetherlandsȱusedȱforȱorganicȱproductionȱatȱ2,2%.ȱTheȱaverageȱsizeȱofȱ organicȱ farmsȱ increasedȱ fromȱ 25ȱ haȱ inȱ 2001ȱ toȱ 27ȱ haȱ inȱ 2002.ȱHowever,ȱ theȱ differencesȱbetweenȱ theȱvariousȱ sectorsȱareȱ large.ȱOnȱaverage,ȱorganicȱdairyȱ farmsȱhaveȱaȱ largerȱ surfaceȱthanȱtheȱ�regular�ȱdairyȱfarmsȱasȱtheseȱfarmsȱproduceȱtheirȱownȱfeed.ȱInȱtheȱarableȱsectorȱtheȱorganicȱfarmsȱareȱusuallyȱsmallerȱinȱtermsȱofȱareaȱthanȱtheȱnonȬorganicȱfarms.ȱ

Organic farming statistics, 1999-2002

1999 2000 2001 2002

Number of farms 1,216 1,391 1,507 1,560

under conversion 280 270 305 327

Area (1000, ha) 27.0 33.0 38.0 42.6

Share in total agricultural area (%) 1.4 1.7 2.0 2.2

Source: LEI, 2003; Statistics Netherlands

Likeȱ inȱ allȱ Europeanȱ countries,ȱ Dutchȱ farmersȱ realizedȱ overȱ theȱ pastȱ yearsȱ thatȱ theȱ mostȱeffectiveȱ wayȱ toȱ increaseȱ theirȱ incomeȱ wasȱ byȱ growthȱ inȱ efficiencyȱ achievedȱ throughȱspecializationȱ andȱ concentration.ȱ Thisȱ developmentȱ wasȱ madeȱ possibleȱ byȱ stableȱ andȱpermanentȱmarketȱ relationshipsȱwithinȱ theȱ CAPȱ framework,ȱ andȱ farmersȱ operatedȱ asȱ ifȱ inȱsellersȱmarkets.ȱUnderȱ theseȱconditions,ȱ investmentsȱ inȱnewȱ technology,ȱbothȱatȱ theȱ farmȱandȱcooperativeȱ levelȱ wereȱ attractiveȱ [25].ȱ Today�sȱ Dutchȱ cooperativesȱ involvedȱ inȱ theȱ organicȱsector�sȱproductionȱandȱmarketingȱareȱissuedȱbyȱsupervisoryȱorganisationsȱwhichȱguaranteeȱtheȱcharacteristicsȱ andȱ originȱ ofȱ theirȱ produce.ȱTheȱDutchȱMinistryȱ ofȱAgricultureȱ andȱ FisheriesȱappointedȱSKALȱasȱ theȱorganizationȱaccreditedȱ toȱcertifyingȱorganicȱproducers.ȱSKALȱ isȱalsoȱresponsibleȱforȱtheȱinspectionȱandȱqualityȱcontrolȱofȱtheȱproduction,ȱprocessingȱandȱtradingȱinȱorganicȱ foods.ȱOrganicȱproductsȱ thatȱ satisfyȱ theȱnecessaryȱ requirementsȱ carryȱ theȱEKOȬlabel.ȱOrganicallyȱgrownȱvegetablesȱcarryȱtheȱDEMETERȱlabel.ȱȱ

Theȱmajorityȱofȱorganicȱproductsȱreachȱtheȱmarketȱthroughȱspecializedȱshopsȱwhichȱhadȱbeenȱtheȱmainȱ retailȱ channelȱ untilȱ 2000[26].ȱ Theȱ biggestȱ supermarketȱ chain,ȱ Albertȱ Heijn,ȱ whichȱlaunchedȱitsȱownȱorganicȱbrandȱinȱ1998ȱ(�AHȱBiologish�)ȱheldȱaȱ78%ȱshareȱofȱtotalȱorganicȱsalesȱinȱ supermarketsȱ inȱ 1999.ȱBesidesȱ theȱ negativeȱ attitudeȱ ofȱDutchȱ consumersȱ towardsȱ organicȱproductȱprices,ȱthereȱareȱotherȱfactorsȱthatȱmayȱfurtherȱlimitȱorganicȱmarketȱexpansion.ȱAȱwideȱrangeȱofȱbottleȬnecksȱ inȱ theȱDutchȱorganicȱ sectorȱ includes:ȱ a)ȱ lackȱofȱ coordinationȱofȱmarketȱplayers;ȱb)ȱnoȱguaranteeȱofȱ theȱ salesȱpossibilities;ȱandȱ c)ȱpoorȱcommunicationȱamongȱmarketȱactorsȱ[27].ȱOnȱtheȱproductionȱside,ȱobstaclesȱareȱtheȱlackȱofȱ(seasonal)ȱlabourȱandȱtheȱdropȱinȱincomeȱduringȱ theȱ twoȱyearȬconversionȱperiod,ȱ inȱwhichȱ theȱ farmerȱ isȱnotȱallowedȱ toȱsellȱhisȱproductsȱasȱorganic[24].ȱ

However,ȱ theȱ extensiveȱ experienceȱ ofȱ theȱ authorsȱwithȱ theȱ cooperatives�ȱmarketȱ behaviourȱwouldȱsuggestȱthatȱlargeȱsizedȱDutchȱcooperativesȱwithȱstrongȱbrandȱnamesȱandȱlargeȱmarketȱsharesȱ inȱ nationalȱ andȱ internationalȱmarketsȱ isȱ anotherȱ restrictiveȱ factorȱ forȱ furtherȱmarketȱdevelopmentȱofȱ theȱDutchȱorganicȱ foodȱmarket.ȱDutchȱ foodȱcooperativesȱareȱconfrontedȱwithȱtheȱdilemmaȱofȱwhetherȱorȱnotȱ toȱ takeȱ theȱ riskȱ toȱ investȱ inȱ theȱorganicȱ supplyȱ chainȱ andȱ toȱdevelopȱ specificȱ brandȱ namesȱ orȱ notȱ (inȱ theȱ potentialȱ expenseȱ ofȱ theȱ strengthȱ ofȱ theirȱ

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conventionalȱproducts).ȱInȱthisȱpaper,ȱtheȱstrategicȱbehaviourȱofȱ largeȱsizedȱfoodȱcooperativesȱinvolvedȱinȱorganicȱproductionȱandȱmarketingȱisȱoutlined.ȱȱ

4. Research design

Theȱaimȱofȱthisȱempiricalȱstudyȱwasȱtoȱdetermineȱtheȱbasicȱelementsȱofȱcorporate,ȱbusinessȱandȱmarketingȱ strategiesȱ ofȱ Dutchȱ agriȬfoodȱ cooperativesȱ involvedȱ inȱ organicȱ productionȱ andȱmarketingȱ ofȱ organicȱ products.ȱ Theȱ CEOsȱ (executives)ȱ ofȱ 7ȱDutchȱ cooperativesȱ involvedȱ inȱorganicȱproductionȱ andȱmarketingȱwereȱ interviewedȱusingȱ aȱ seriesȱ ofȱquestionsȱdesignedȱ toȱexploreȱ theȱ corporate;ȱ businessȱ andȱmarketingȱ strategiesȱ theirȱ cooperativesȱ pursue.ȱAȱ deskȬresearchȱ techniqueȱ aimingȱ toȱ identifyȱ theȱdegreeȱ ofȱ examinedȱ firms�ȱ involvementȱ inȱ organicȱproductionȱandȱmarketingȱwasȱ conducted.ȱTheȱannualȱ reportsȱofȱactivitiesȱofȱ eachȱ examinedȱcooperativeȱwereȱusedȱasȱaȱdataȱbase.ȱTheȱ contentsȱofȱ theȱquestionsȱ includedȱ inȱaȱ shortȱandȱstructuredȱquestionnaireȱwasȱbasedȱonȱtheȱresultsȱofȱtheȱdeskȬresearchȱandȱtheȱexperienceȱofȱtheȱauthorsȱ inȱ thisȱ fieldȱ priorȱ toȱ thisȱ study.ȱ Inȱ particular,ȱ theȱ interviewȱ questionsȱ coveredȱ suchȱtopicsȱ asȱ cooperativeȱ corporateȱ orientationȱ toȱ organicȱ produce,ȱ cooperativeȱ businessȱ organicȱdivisionȱthatȱisȱbasedȱonȱaȱprofitȬorientedȱaspect,ȱandȱtheȱnatureȱofȱmarketingȱstrategiesȱusedȱbyȱcooperatives.ȱ

TheȱdataȱcollectedȱwasȱqualitativeȱinȱnatureȱandȱreliedȱonlyȱonȱtheȱperceptionsȱofȱtheȱexaminedȱagriȬfoodȱcooperatives.ȱAfterȱ theȱ firstȱcontactȱwithȱ theȱexecutivesȱofȱ theȱsevenȱexaminedȱ foodȱcooperatives,ȱonȱbehalfȱofȱ theȱNationalȱCooperativeȱCouncilȱ forȱAgricultureȱandȱHorticultureȱ(NCR),ȱ(theȱcentralȱorganisationȱofȱDutchȱagriculturalȱandȱhorticulturalȱcooperatives),ȱtheȱfirstȱphaseȱofȱ theȱ interviewȱbeganȱwithȱ aȱdiscussionȱ aboutȱ theȱ examinedȱ cooperative�sȱ interestȱ inȱorganicȱ productionȱ andȱ supplyȱ inȱ theȱ foodȱ chain.ȱ Furthermore,ȱ intervieweesȱwereȱ askedȱ toȱconsiderȱ theȱquestionnaireȱasȱ sentȱ toȱ themȱandȱ toȱ feelȱ freeȱ inȱaskingȱ forȱ furtherȱexplanationsȱconcerningȱtheȱmoreȱspecificȱopenȬendedȱquestionsȱincludedȱinȱtheȱquestionnaire.ȱIntervieweesȱwereȱaskedȱtoȱprovideȱaȱwrittenȱreportȱincludingȱtheirȱresponsesȱwithinȱoneȱweekȱ(September,ȱ2004).ȱThusȱcareȱwasȱtakenȱtoȱposeȱtheȱquestionsȱinȱtheȱmostȱobjectiveȱmannerȱpossibleȱandȱtoȱavoidȱleadingȱintervieweesȱinȱaȱtimeȬframedȱdiscussion.ȱȱ

Theȱ sampleȱ includedȱ threeȱ dairyȱ marketingȱ cooperativesȱ involvedȱ inȱ theȱ organicȱ dairyȱproductionȱ (FrieslandȱFoodsȱ ȬȱFrieslandȱCombercoȱDairyȱFoods,ȱandȱCampina),ȱoneȱ investorȬsharedȱ firmȱ acquiringȱ aȱ cooperativeȱ backgroundȱ involvedȱ inȱ theȱ organicȱ meatȱ industryȱ(Dumeco),ȱ oneȱmarketingȱ cooperativeȱ involvedȱ inȱ theȱ organicȱ fruitȱ andȱ vegetableȱ produceȱ(VTN/TheȱGreenery),ȱoneȱ cooperativeȱ involvedȱ inȱ theȱorganicȱwareȬpotatoȱ industryȱ (Agrico),ȱandȱfinally,ȱoneȱcooperativeȱbusinessȱunitȱ(UNIZON/Cosun)ȱwhichȱisȱtheȱfirstȱcompanyȱinȱtheȱNetherlandsȱ toȱ produceȱ organicȱ sugarȱ (forȱ aȱ moreȱ detailedȱ descriptionȱ ofȱ theȱ examinedȱcooperativesȱ seeȱAppendixȱ I).ȱTheseȱ 7ȱ caseȱ studiesȱ representȱ almostȱ 80%ȱofȱ theȱ cooperativesȱinvolvedȱinȱtheȱorganicȱproductionȱandȱmarketingȱofȱorganicȱproductsȱinȱTheȱNetherlands.ȱAllȱtheȱexaminedȱcooperativesȱareȱmarketȱleadersȱinȱtheirȱownȱsectorȱatȱtheȱnationalȱandȱsomeȱevenȱinȱ theȱWesternȱEuropeanȱ level.ȱSmallȱsizedȱcooperativesȱ involvedȱ inȱorganicȱproductionȱwereȱnotȱconsideredȱforȱparticipationȱinȱthisȱstudy.ȱȱ

5. Results & discussion

Tableȱ 2ȱ providesȱ aȱ summaryȱ ofȱ theȱ frequenciesȱwithȱwhichȱ theȱ threeȬhierarchicalȱ classifiedȱlevelsȱofȱstrategicȱbehaviourȱareȱpractisedȱamongȱtheȱexaminedȱfoodȱcooperatives.ȱȱ

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Summary of frequencies of strategies used by sample cooperatives

Cooperative Corporate Level

Price Premium/Extra Support 3 43

Serving Missing Markets 7 100

Cooperative Business Level

Differentiated Production Line 3 43

Dealing with Cost Efficiencies 3 43

Cooperative Functional Level

Specific Promotion Measures 7 100

Differential Brand Name 6 86

Expansion of Market Share 4 57

Source: see text

Beforeȱ theȱ individualȱ resultsȱofȱeachȱofȱ theȱstrategiesȱareȱdiscussed,ȱ twoȱgeneralȱobservationsȱareȱworthȱconsidering.ȱFirst,ȱallȱtheȱstrategiesȱatȱeachȱofȱtheȱthreeȱstrategicȱ levelsȱappearȱtoȱbeȱutilisedȱbyȱatȱleastȱthreeȱcooperatives.ȱSecond,ȱcooperativesȱseemȱtoȱpursueȱaȱmixȱofȱcorporateȱandȱ functionalȬorientedȱ strategiesȱwhileȱ itȱ seemsȱ thatȱ theyȱ provideȱ riskȬaversionȱ behaviourȱtowardsȱinvestmentsȱatȱtheȱbusinessȱlevel.ȱȱ

a) Cooperative corporate strategies

Allȱ7ȱcooperativesȱclaimedȱ toȱserveȱunmetȱconsumerȱdemandȱ regardingȱorganicȱ foods.ȱThreeȱcooperativesȱ(twoȱofȱtheȱexaminedȱdairyȬcooperatives,ȱFreshȱFoodȱandȱCampina,ȱandȱoneȱplantȱproductȱcooperativeȱUNIZON/Cosun),ȱreportedȱtoȱbeȱengagedȱinȱanȱaidȬstrategyȱforȱtheȱcrossȬsubsidizationȱofȱorganicȱproductsȱinȱorderȱtoȱmotivateȱtheirȱmembersȱtoȱinvestȱmoreȱinȱorganicȱfoodȱproduction.ȱAnȱaverageȱpriceȱpremiumȱ(basedȱonȱsurveyȱdata)ȱisȱ6,5ȱeurocentȱperȱkiloȱofȱproducedȱoutput.ȱBecauseȱaȱconsumerȱdemandȱstrategyȱarisesȱfromȱcommunicatingȱconsumerȱspecificationsȱ backwardȱ throughȱ theȱmarketȱ chain,ȱ onlyȱ largeȬsizedȱmarketingȱ cooperativesȱseemȱ toȱhaveȱ theȱopportunityȱ toȱ implementȱ aȱ strategyȱ toȱdealȱwithȱmissingȱmarkets.ȱOfȱ theȱsevenȱcooperatives,ȱonlyȱthreeȱclaimedȱthatȱtheyȱhaveȱaȱproductȱofȱsuperiourȱnutritionȱandȱhighȱqualityȱ standardsȱ toȱ offerȱ toȱ theirȱ finalȱ consumers.ȱ Theirȱ executivesȱ explainedȱ thatȱ theirȱcooperative�sȱcorporateȱstrategyȱ isȱ toȱenforceȱ theȱabilityȱofȱcommunicationȱ regardingȱproductȱspecificationsȱmoreȱcompletelyȱfromȱtheȱconsumerȱtoȱtheȱproducer.ȱFollowingȱtheȱtypologyȱofȱPetersenȱandȱAndersonȱ(1996)ȱsuchȱaȱstrategyȱisȱanȱoffensiveȱreturnȱstrategyȱ[1].ȱȱ

b) Cooperative business strategies

Onlyȱ threeȱ cooperativesȱ (43%ȱ ofȱ theȱ sample)ȱ claimedȱ thatȱ theyȱ followȱ aȱ totallyȱ separateȱproductionȱ lineȱ forȱ producingȱ organicȱ productsȱ (3ȱ examinedȱ dairyȱ cooperatives).ȱ Theȱqualitativeȱanalysisȱofȱtheȱresultsȱdoesȱnotȱprovideȱanyȱevidenceȱthatȱcooperativesȱengagedȱ inȱorganicȱproductionȱmayȱ improveȱ costȱefficiencies.ȱFourȱexecutivesȱ (57%ȱofȱ theȱ sampleȱwhichȱdidȱ notȱ claimȱ cooperativeȱ businessȱ strategiesȱ application)ȱ reportedȱ thatȱ cooperativesȱ couldȱapplyȱ moreȱ costȱ efficienciesȱ andȱ becomeȱ moreȱ profitableȱ ifȱ implementedȱ aȱ moreȱ flexibleȱdecisionȬmakingȱschemeȱwhenȱmarketȱchangesȱarise.ȱHence,ȱcooperativesȱmayȱ failȱ toȱcaptureȱforegoneȱ investmentȱ opportunitiesȱ andȱ channelȱ powerȱ intoȱ theȱ marketingȱ channelȱ ofȱ theȱproductȱ dueȱ toȱ theȱ stiffȱ competitionȱwithȱ IOFs,ȱ especiallyȱ inȱ oligopolisticȱ andȱmonopolisticȱmarketȱsettings.ȱȱ

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RiskȬmanagementȱstrategiesȱorȱdefensiveȱinȱnatureȱstrategiesȱareȱthoseȱthatȱinvolveȱlowȱlevelȱofȱriskȱandȱ areȱmostȱ frequentlyȱ appliedȱ byȱ foodȱ cooperativesȱ [1].ȱ Thisȱ setȱ ofȱ strategiesȱ reflectsȱ theȱtraditionalȱcooperativeȱstrategiesȱofȱsecuringȱmemberȱmarkets.ȱȱ

c) Cooperative Marketing Strategies

Onȱtheȱwhole,ȱtheȱresultsȱprovideȱpromisingȱevidenceȱthatȱcooperativesȱengagedȱinȱproductionȱandȱmarketingȱofȱorganicȱproductsȱhaveȱdevelopedȱandȱfollowedȱaȱveryȱselectiveȱandȱcompleteȱfocus/segmentationȱstrategy.ȱAllȱtheȱexecutivesȱreportedȱthatȱcooperativesȱhaveȱassembledȱtheȱoutputȱ ofȱmanyȱ smallȱ producersȱ intoȱ anȱ attractiveȱ volumeȱ forȱ processorsȱ andȱ henceȱ haveȱmaintainedȬtheȬmarketȱ substantiallyȱ forȱ suchȱ smallȱproducersȱwhoseȱ smallȱ sizeȱmakesȱ themȱlessȱ desirableȱ forȱ noncooperativeȱ firms.ȱ Allȱ examinedȱ cooperativesȱ useȱ specificȱ promotionȱmeasuresȱ(e.g.,ȱheavyȱadvertising)ȱforȱmaintainingȱaȱspecificȱdistributionȱ/customerȱrelationship.ȱInȱ orderȱ toȱ targetȱ strongȱ marketȱ positioningȱ andȱ development/refinementȱ ofȱ meaningfulȱcompetitiveȱadvantages,ȱ theyȱuseȱdifferentȱbrandȱnamesȱ forȱmarketingȱ theirȱorganicȱproduceȱratherȱ thanȱ theirȱ conventionalȱ produce.ȱ Fourȱ ofȱ theseȱ cooperativesȱ (57%)ȱ claimedȱ thatȱ theyȱforeseeȱtheȱexpansionȱofȱmarketȱsharesȱthroughȱheavyȱinvestmentsȱinȱResearchȱ&ȱDevelopmentȱofȱnewȱproductsȱwhoseȱ aimȱ isȱ toȱ satisfyȱ theirȱ endȱuserȱdemands.ȱClearly,ȱ cooperativesȱhaveȱadoptedȱappropriateȱmarketingȱelementsȱandȱ tacticsȱforȱservingȱcurrentȱandȱpotentialȱspecificȱmarketȱsegmentsȱwithȱtheȱaimȱtoȱestablishȱconsumerȱloyalty.ȱȱ

6. Tentative inferences

Fromȱtheȱresultsȱderivedȱfromȱthisȱmodestȱstudy,ȱtwoȱmajorȱtentativeȱinferencesȱcanȱbeȱdrawn.ȱFirst,ȱitȱseemsȱthatȱcooperativesȱareȱinȱfavourȱofȱadoptingȱaggressiveȱmarketȬorientedȱstrategiesȱandȱ reȬthinkingȱ theirȱ corporateȱ focus.ȱTrendsȱ inȱ theȱ environmentȱofȱ foodȱmarketingȱ systemsȱinfluenceȱ Dutchȱ cooperativesȱ throughȱ theirȱ influenceȱ onȱ theirȱ foodȱ marketingȱ strategies.ȱIncreasingȱ concernsȱ aboutȱ healthȱ andȱ safetyȱ inȱ relationȱ toȱ agriculturalȱ andȱ foodȱ productsȱenhanceȱthisȱeffect.ȱEthicalȱandȱsocialȱissuesȱrelatedȱinȱfoodȱproductionȱandȱtheȱsustainabilityȱofȱagriculturalȱ productionȱ processesȱ challengeȱ cooperativesȱ toȱ respondȱ toȱ theseȱ trendsȱ byȱdevelopingȱstrategiesȱandȱimplementingȱthem.ȱFromȱtheȱresultsȱofȱthisȱstudyȱoneȱcanȱ indicateȱthatȱcooperativesȱforeseeȱtoȱcompetitionȱinȱorganicȱmarketsȱusingȱaȱmixtureȱofȱexplorativeȱandȱexploitativeȱstrategies.ȱTheyȱseemȱ toȱadoptȱexplorativeȱcorporateȱandȱmarketingȱstrategiesȱbyȱinvestingȱ inȱ continuousȱ innovationȱ whichȱ willȱ enableȱ themȱ toȱ developȱ aȱ specificȱ productȬmarketȱ combination.ȱOnȱ theȱ otherȱ hand,ȱ theyȱ seemȱ toȱ faceȱ aȱ dilemmaȱ concerningȱwhetherȱinvestingȱ inȱorganicȱmarketsȱ isȱ aȱprofitableȱ activityȱ orȱnotȱ (i.e.ȱ aȱ totallyȱ separateȱproductionȱline).ȱTheirȱconcernsȱareȱrelatedȱtoȱwhetherȱcooperativeȱfirmsȱareȱcapableȱorganisationalȱformsȱdealingȱwithȱ costȱ efficienciesȱofȱorganicȱproduceȱ (and/orȱproductionȱ andȱmarketingȱorȱotherȱnovelȱ foods).ȱOnlyȱ theȱdairyȱ cooperatives,ȱwhichȱareȱ stronglyȱ internationalȬoriented,ȱ seemȱ toȱuseȱexplorativeȱmarketȱorientedȱstrategies.ȱTheȱrestȱofȱtheȱexaminedȱcooperativesȱ(involvedȱinȱtheȱhorticulturalȱsector)ȱseemȱtoȱuseȱtheirȱownȱ�existingȱknowledgeȱstructures�ȱtoȱfaceȱorganicȱmarketȱtrends.ȱInvestmentȱ incentivesȱofȱtheseȱcompaniesȱseemȱtoȱbeȱambiguousȱregardingȱtheȱadoptionȱofȱorganicȱproductionȱandȱmarketingȱatȱtheirȱbusinessȱlevel.ȱItȱshouldȱbeȱstressedȱhereȱthatȱ theȱaboveȱmentionedȱreasoningȱwasȱdevelopedȱpurelyȱ fromȱ theȱmarketingȱpointȱofȱviewȱandȱthisȱisȱclearlyȱonlyȱaȱpartialȱanalysisȱofȱtheȱexaminedȱissue.ȱ

Second,ȱtheȱtheoreticalȱtaxonomyȱofȱtheȱthreeȱclassifiedȱlevelsȱofȱstrategicȱanalysisȱappearsȱtoȱbeȱaȱusefulȱtoolȱforȱanalysingȱtheȱestablishedȱstrategiesȱofȱcooperatives.ȱSuchȱaȱresearchȱframeworkȱrequiresȱmoreȱsystematicȱdevelopmentȱandȱelaboration.ȱTheȱaimȱofȱthisȱpreliminaryȱstudyȱwasȱtoȱ attemptȱ toȱmatchȱofȱmarketingȱ strategiesȱ toȱ theȱoverallȱ corporateȱ andȱbusinessȱpoliciesȱofȱcooperativeȱ firms.ȱ Itȱ isȱwithoutȱquestionȱ thatȱ theȱ fundamentalȱ researchȱquestionȱ is:ȱWhyȱ areȱ

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agriȬfoodȱcooperativesȱpursuingȱtheseȱstrategies?ȱTheȱargumentȱofȱadoptionȱofȱnewȱstrategiesȱatȱtheȱstrategic,ȱbusinessȱandȱmarketingȱlevelȱreliedȱonȱtheȱargumentȱthatȱinvolvementȱinȱorganicȱproductionȱandȱmarketingȱentailsȱsomeȱdegreeȱofȱcooperativeȱreȬdesignȱratherȱthanȱtheȱextremeȱsolutionsȱ forȱquickȱmodificationȱofȱcooperativeȱstructuresȱandȱstrategies.ȱFutureȱresearchȱmayȱutiliseȱ thisȱ argumentȱ byȱ developingȱ quantitativeȱ inȱ natureȱ frameworksȱ toȱ studyȱ theȱ riskȱinvolvedȱ inȱ suchȱ typesȱ ofȱ decisions.ȱ Riskȱ strategicȱ analysisȱ isȱ builtȱ inȱ theȱ decisionȬmakingȱprocessȱ [28,ȱ 29].ȱ Weȱ believeȱ thatȱ memberȬproducerȱ investmentȱ incentivesȱ andȱ preferencesȱ(utility)ȱrequireȱempiricalȱinvestigationȱregardingȱstrategicȱdecisionsȱ(i.e.ȱtheȱtransitionȱprocessȱfromȱconventionalȱ toȱ sustainableȱproductionȱpractises).ȱThisȱwouldȱbeȱaȱ challengingȱ researchȱtopicȱ forȱ quantitativeȱ economicȱ analysis[30].ȱ Modernȱ researchȱ inȱ marketingȬmanagementȱliteratureȱ (e.g.,ȱ Bettmanȱ etȱ al.ȱ 1998)ȱ supportsȱ theȱ viewȱ thatȱ preferencesȱ areȱ constructedȱ andȱreflectȱ theȱ dynamicȱ characteristicsȱ ofȱ theȱ externalȱ environmentȱ (e.g.,ȱ aȱ perfectȱ competitiveȱmarketȱenvironment)[31].ȱTherefore,ȱthisȱapproachȱcanȱprovideȱagriculturalȱpolicyȬmakersȱandȱagriȬfoodȱcooperativesȱstrategicȱbehaviourȱinȱtheȱorganicȱmarketsȱwithȱusefulȱinsightsȱandȱtoolsȱrespectively.ȱȱ

Acknowledgments

Theȱ authorsȱ gratefullyȱ acknowledgeȱ Cynthiaȱ Griffioenȱ (Nationalȱ Cooperativeȱ Councilȱ forȱAgricultureȱ andȱHorticultureȱ �NCR,ȱTheȱNetherlands)ȱ forȱherȱvaluableȱ commentsȱ andȱdataȬcollectionȱcontribution.ȱȱ

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ȱ

125

Appendix I

Theȱ presentationȱ ofȱ theȱ examinedȱ cooperativeȱ firmsȱ isȱ derivedȱ fromȱ theȱ recentȱ publishedȱmaterialȱ ofȱNCRȱ (NationalȱCooperativeȱCouncilȱ forȱAgricultureȱ andȱHorticulture,ȱ 2004)ȱ andȱcurrentȱsurveyȱresults.ȱDifferentȱinformationȱisȱavailableȱforȱeachȱtypeȱofȱexaminedȱcooperativeȱ(dueȱ toȱ lackȱ ofȱ availableȱ records).ȱ Anȱ outlookȱ ofȱ theirȱ business,ȱmarketingȱ andȱ developedȱorganicȱactivitiesȱareȱbrieflyȱpresentedȱbelow.ȱȱ

i) Friesland Food

FrieslandȱFoodsȱ (FF,ȱknownȱ asȱFrieslandȱCombercoȱDairyȱFood)ȱ isȱ aȱmultinationalȱ companyȱthatȱprofitablyȱdevelops,ȱproducesȱandȱsellsȱaȱwideȱrangeȱofȱbrandedȱdairyȱproductsȱandȱfruitȬbasedȱdrinksȱ forȱconsumers,ȱprofessionalȱusersȱandȱ foodȱproducers.ȱ Itȱ isȱ100%ȱownedȱbyȱ theȱcooperativeȱ�ZuivelcooperatieȱZevenȱProvinsienȱUA)ȱandȱwasȱ formedȱ inȱDecemberȱ1997ȱasȱaȱresultȱ ofȱ theȱmergerȱ betweenȱ fourȱ cooperatives.ȱ Theȱ brandedȱ productsȱ ofȱ FFȱ haveȱ aȱ strongȱpresenceȱ onȱ internationalȱ dairyȱmarkets,ȱ especiallyȱ inȱWesternȱ Europe,ȱCentralȱ Europe,ȱ theȱMiddleȱEast,ȱWestȱAfricaȱandȱSoutheastȱAsia.ȱTheȱcompanyȱoperatesȱ inȱ90ȱ locationsȱglobally.ȱTheȱ activitiesȱ areȱdividedȱ overȱ fourȱ productȱ groups:ȱ freshȱ andȱ longȬlifeȱ consumerȱ products,ȱcheese,ȱ ingredientsȱ andȱ foodȱ serviceȱ products.ȱ Theȱ companyȱ hasȱ aȱ cooperativeȱ background.ȱDairyȱfarmersȱwhoȱareȱmembersȱofȱtheȱcooperativeȱownȱtheȱcompanyȱandȱareȱ itsȱsuppliersȱofȱmilk.ȱ Asȱ such,ȱ theyȱ areȱ atȱ theȱ foundationȱ ofȱ theȱ qualityȱ ofȱ theȱ products.ȱ Regardingȱ itsȱproductionȱactivity,ȱFFȱusesȱtheȱsameȱbrandȱname.ȱTheȱwordȱ�organic�ȱisȱcarefullyȱplacedȱonȱitsȱproductȱ packaging.ȱ Nowadays,ȱ FFȱ promotesȱ aȱ rangeȱ ofȱ sixȱ freshȱmilkȬproductsȱ underȱ theȱFriescheȱ flagȬbrand.ȱTheȱcooperativeȱpolicyȱ supportsȱorganicȱ farmer�sȱproductionȱwithȱaȱpriceȱpremiumȱequallyȱ5.9ȱeurocents.ȱTheȱorganicȱmilkȱisȱproducedȱinȱaȱseparateȱfactory,ȱnamelyȱFrieseȱEcologisheȱZuivelȱ inȱDrachten,ȱNL.ȱThisȱ factoryȱhasȱ succeededȱ inȱachievingȱaȱmarketȱ shareȱofȱ14%ȱofȱtheȱtotalȱproductȱcategoryȱofȱFFȱproducts.ȱȱ

i i) Campina

CampinaȱisȱanotherȱwellȬknownȱworldȬwideȱdairyȱcooperativeȱfirm.ȱItȱwasȱformedȱinȱ1990ȱafterȱtheȱmergerȱbetweenȱDMVȱCampinaȱandȱMelkunieȱHolland.ȱItȱhasȱpursuedȱaȱvalueȬaddedȱandȱinternationalȱgrowthȱstrategy,ȱrealizingȱthatȱinterventionȱpricesȱareȱdecliningȱandȱinternationalȱdairyȱcommodityȱmarketsȱareȱleadingȱtoȱincreasingȱcompetition.ȱCampinaȱaddsȱvalueȱtoȱmilkȱinȱaȱwideȱrangeȱofȱproducts,ȱfromȱtheȱbest,ȱnaturalȱliquidȱmilkȱtoȱadvancedȱingredients.ȱCampinaȇsȱexpertiseȱcoversȱ theȱentireȱdairyȱchain,ȱ fromȱwaterȱandȱ feedȱ forȱcowsȱ toȱ theȱ latestȱ technologyȱandȱtheȱbestȱprofessionalȱskillsȱforȱproducingȱtheȱbestȱendȱproducts.ȱInȱSpring,ȱ1998ȱandȱAprilȱ1999ȱitȱpurchasedȱtwoȱsmallȱDucthȱorganicȱfirmȱprocessorȱandȱsalesȱorganisations.ȱCampinaȱisȱaȱleadingȱplayerȱinȱtheȱecologicalȱdairyȱsegment.ȱInȱtheȱNetherlands,ȱCampinaȱisȱtheȱuncontestedȱmarketȱleaderȱwithȱitsȱecologicalȱfreshȱdairyȱbrandsȱ(DeȱGroeneȱKoeȱforȱsupermarketsȱandȱZuiverȱZuivelȱforȱhealthȱfoodȱstores).ȱInȱGermany,ȱCampinaȱsuppliesȱecologicalȱschoolȱmilk.ȱEcologicalȱdairyȱproductsȱbyȱCampinaȱareȱalsoȱavailableȱoutsideȱtheȱNetherlandsȱandȱGermany.ȱSeparateȱbrandsȱ (Deȱ Groeneȱ Koe,ȱ Zuiverȱ Zuivel,ȱ Ecomel)ȱ areȱ usedȱ forȱ theȱ organicȱ produceȱmarketing,ȱespeciallyȱforȱcheese,ȱvanillaȱyoghurt,ȱandȱbutter.ȱMoreover,ȱaȱproductionȱlineȱunderȱtheȱprivateȱlabelȱ ofȱ oneȱ ofȱ theȱ biggestȱ retailersȱ ofȱ organicȱ produceȱ inȱWesternȱ Europe,ȱ AlbertȱHeijn,ȱ isȱretained.ȱDeȱGroeneȱKoeȱ producesȱ 25ȱ productsȱ forȱ superȱmarkets.ȱ Itȱ isȱ theȱ productȱ categoryȱleaderȱwithȱaȱmarketȱshareȱofȱ21%ȱ inȱtheȱtotalȱproductȱcategory,ȱandȱwithȱboth,ȱturnoverȱandȱmarketȱ shareȱ increasing.ȱ Ecomel,ȱ anotherȱ subsidiaryȱ ofȱ Campina,ȱ producesȱ andȱmarketsȱ aȱvarietyȱofȱseveralȱorganicȱCampinaȱproducts.ȱCampina�sȱfarmersȱreceiveȱaȱ6,13ȱeurocentȱorganicȱmilkȱpriceȱpremium.ȱCampinaȱfacesȱorganicȱproductsȱ�asȱaȱdifferentiatedȱproductionȱline�ȱbutȱdoesȱnotȱseemȱtoȱsupportȱtheȱviewȱthatȱtheyȱareȱ�better�ȱthanȱitsȱconventionalȱproducts.ȱȱ

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i i i) Dumeco

TheȱnameȱDumecoȱisȱanȱabbreviationȱofȱtheȱDutchȱUnitedȱMeatȱCompany,ȱwhichȱwasȱestablishedȱinȱ1995ȱasȱaȱresultȱofȱanȱamalgamationȱofȱactivitiesȱstemmingȱ fromȱ theȱCovecoȱandȱEncebeȱcoȬoperativeȱ organisations.ȱ Thisȱ businessȱ unitȱwasȱ formedȱ asȱ partȱ ofȱ aȱ businessȱ rationalisationȱprogrammeȱ initiatedȱ byȱ pigȱ andȱ cattleȱ slaughterhousesȱ (Stichtingȱ SaneringsfondsȱVarkensslachterijenȱ andȱ Stichtingȱ Saneringsfondsȱ Runderslachterijen).ȱ Aȱ keyȱ objectiveȱ inȱestablishingȱtheȱcompanyȱwasȱtheȱretentionȱandȱconsolidationȱofȱitsȱcompetitiveȱpositionȱonȱtheȱinternationalȱ market,ȱ theȱ reasonȱ beingȱ theȱ highȱ levelsȱ ofȱ dependencyȱ ofȱ theȱ Dutchȱ meatȱindustryȱonȱexportȱsales.ȱDumecoȇsȱactivitiesȱwereȱinauguratedȱatȱsixȱdifferentȱsitesȱmadeȱupȱofȱfiveȱporkȱproductionȱunitsȱandȱoneȱbeefȱproductionȱunit.ȱThisȱamalgamationȱofȱpartnersȱmeantȱthatȱfromȱtheȱveryȱonsetȱDumecoȱhadȱanȱinfrastructureȱinȱplaceȱforȱtheȱestablishmentȱofȱqualityȱassuranceȱ schemes.ȱTheseȱ schemesȱ includedȱ theȱMeatȱProgramme,ȱGoodȱFarmingȱ andȱGoodȱFarmingȱ Crown.ȱ Additionallyȱ Dumecoȱ alsoȱ operatedȱ qualityȱ assuranceȱ schemesȱ suchȱ asȱIntegralȱQualityȱControlȱ(IKB),ȱKCRȱandȱNENȬISO.ȱTogether,ȱtheseȱschemesȱformȱtheȱbasisȱforȱDumecoȇsȱintegratedȱchainȱstrategyȱ(GoodȱFarming).ȱ

iv) VTN/The Greenery

AfterȱaȱmergerȱofȱnineȱfruitȱandȱvegetableȱauctionȱhousesȱandȱtheȱCentralȱBureauȱofȱtheȱDutchȱAuctionsȱ�ȱTheȱGreeneryȱ(TG)ȱB.V.ȱwasȱestablishedȱinȱ1996.ȱTGȱisȱoneȱofȱtheȱleadingȱconcernsȱinȱEuropeȱinȱtheȱvegetable,ȱfruitȱandȱmushroomȱsector.ȱTheȱcompanyȱhasȱaȱturnoverȱofȱcircaȱ�ȱ1,6ȱbillion.ȱ Itȱ isȱ aȱdistribution,ȱ salesȱ andȱmarketingȱ companyȱofȱ freshȱproduceȱwhoseȱ sharesȱ areȱownedȱ byȱ theȱ horticulturalȱ cooperativeȱ Voedingsȱ Tuinbouwȱ Nederlandȱ (VTN).ȱ Sinceȱ 1998,ȱ aȱnumberȱofȱprominentȱtradingȱcompaniesȱhaveȱmergedȱwithȱTG.ȱAsȱaȱresult,ȱcustomersȱcanȱnowȱbeȱ suppliedȱ throughoutȱ theȱyearȱwithȱ aȱ completeȱ rangeȱofȱvegetables,ȱ fruitȱ andȱmushroomsȱfromȱsourcesȱatȱhomeȱandȱabroad.ȱTheȱextensiveȱrangeȱofȱproductsȱisȱbackedȱupȱbyȱTGȱwithȱanȱexcellentȱ logisticalȱorganizationȱandȱextensiveȱmarketingȱsupport,ȱallȱgearedȱtoȱtheȱcustomer�sȱneeds.ȱ TG�sȱ activitiesȱ includeȱ sellingȱ theȱ productsȱ ofȱ itsȱ 2,500ȱ affiliatedȱ producerȬownedȱcompanies,ȱ activelyȱ andȱdecisivelyȱdrawingȱ theseȱ productsȱ toȱ theȱ consumer�sȱ attention,ȱ andȱworkingȱtoȱensureȱaȱhealthyȱfutureȱforȱthisȱDutchȱfoodȱsector.ȱTGȱconsidersȱorganicȱproductionȱtoȱ beȱ anȱ importantȱ partȱ ofȱ theȱ totalȱ rangeȱ ofȱ freshȱproductsȱ thatȱ itȱ suppliesȱ toȱ supermarketȱchainsȱandȱgreengrocers.ȱTheȱcooperative�sȱpolicyȱstronglyȱsupportsȱtheȱgrowingȱofȱvegetablesȱaccordingȱ toȱ theȱ organicȱ guidelinesȱ asȱ aȱ sustainableȱ productionȱmethod.ȱ Inȱ earlyȱ 2001,ȱ TG,ȱtherefore,ȱstartedȱdevelopingȱaȱseparateȱorganicȱ lineȱcalledȱGreeneryȱOrganics.ȱThisȱ lineȱisȱnowȱavailableȱinȱaȱnumberȱofȱsupermarketsȱinȱtheȱNetherlandsȱandȱabroad.ȱTheȱrangeȱcoversȱmoreȱthanȱ25ȱproductsȱofȱDutchȱandȱforeignȱorigin,ȱfromȱtomatoesȱonȱtheȱvineȱtoȱoranges,ȱkiwisȱandȱcucumbers.ȱ Theseȱ productsȱ canȱ beȱ recognizedȱ inȱ theȱ shopsȱ byȱ theȱ labelȱ onȱ theȱ packaging.ȱNeedlessȱtoȱsay,ȱtheyȱalsoȱhaveȱtheȱorganicȱhallmark,ȱsoȱthatȱcustomersȱcanȱbeȱassuredȱthatȱtheȱproductsȱhaveȱbeenȱproducedȱorganically.ȱTG�sȱmarketȱshareȱofȱGreeneryȱorganicsȱinȱtheȱtotalȱproductȱcategoryȱwasȱ10%ȱinȱ2004.ȱȱ

v) Agrico

Agricoȱ isȱ aȱ Dutchȱ horticulturalȱ cooperativeȱ ofȱ overȱ 1,300ȱ specialistȱ potatoȱ growers.ȱ TheyȱproduceȱmoreȱthanȱoneȱmillionȱtonsȱofȱseedȱandȱwareȱpotatoesȱperȱyearȱandȱtheseȱproductsȱareȱmarketedȱbyȱAgrico.ȱAgricoȱ isȱcommittedȱ toȱbreedingȱandȱgrowingȱqualityȱproductsȱ focusingȱonȱ theȱ customers�ȱ specificȱ preferencesȱ andȱ demandsȱ anywhereȱ inȱ theȱworld.ȱ Itsȱ produceȱ isȱmarketedȱunderȱ theȱbrandȱCêlaVítaȱandȱ itȱownsȱsaleȬofficesȱ inȱFrance,ȱ Italy,ȱUnitedȱKingdom,ȱHungary,ȱ theȱCzechȱRepublic,ȱCanadaȱ andȱRussiaȱ asȱwellȱ asȱ agenciesȱ inȱpracticallyȱ allȱ seedȱimportingȱcountries.ȱAllȱpotatoȱvarietiesȱareȱtestedȱforȱtheirȱquality,ȱresistanceȱagainstȱillnesses,ȱ

127

andȱotherȱconsumptionȱcharacteristics,ȱsuchȱasȱtaste,ȱcolourȱandȱsmellȱafterȱtheȱboilingȱetc.ȱTheȱorganicȱpotatoesȱareȱofferedȱtoȱretailersȱbyȱBioselectȱandȱbyȱvariousȱwholesaleȱbusinessesȱinȱtheȱNetherlandsȱunderȱdifferentȱbrandȱnamesȱ (Ekosante,ȱEkoagria,ȱEkoditta,ȱEcoȱVita).ȱAllȱpotatoesȱduringȱandȱafterȱtheȱharvestȱareȱalsoȱtestedȱbyȱtheȱDutchȱGeneralȱTestingȱService,ȱNAK.ȱȱ

vi) UNIZON/Cosun

Cosunȱproducesȱandȱsellsȱnaturalȱingredientsȱandȱfoodstuffsȱforȱtheȱinternationalȱfoodȱindustry,ȱfoodserviceȱchannelȱ (restaurants,ȱcaterersȱandȱwholesalers)ȱandȱ retailȱoutlets.ȱ Itsȱactivitiesȱareȱorganizedȱintoȱthreeȱgroups:ȱi)ȱbasicȱingredients,ȱincludingȱsugar,ȱindustrialȱalcohol,ȱandȱfructose;ȱb)ȱpotatoȱproducts,ȱincludingȱchilled,ȱfrozenȱandȱdriedȱpotatoȱproductsȱandȱaȱwideȱrangeȱofȱotherȱpreparedȱ potatoȱ specialties;ȱ andȱ iii)ȱ compoundȱ ingredients,ȱ includingȱ fineȱ bakeryȱ specialties,ȱtoppings,ȱ sauces,ȱdressings,ȱmixes,ȱ andȱ spices.ȱAsȱ aȱ specialistȱ inȱ theȱ taste,ȱ functionalityȱ andȱhealthȱ ofȱ ingredients,ȱ Cosunȱ developsȱ productȱ conceptsȱ andȱ applicationsȱ thatȱ meetȱ itsȱcustomers�ȱ specificȱwishes.ȱCosun�sȱmarketingȱ andȱ researchȱ expertiseȱ focusȱ atȱ theȱ serviceȱ ofȱtoday�sȱ andȱ tomorrow�sȱ foodȱmarket.ȱ Thisȱ expertiseȱ hasȱ beenȱ concentratedȱ aroundȱ specificȱcustomerȱ groupsȱ andȱ applications.ȱ Forȱ researchȱ andȱ qualityȱ control,ȱ UNIZON/Cosunȱ hasȱestablishedȱ itsȱ ownȱ researchȱ andȱ developmentȱ center,ȱ namedȱ Cosunȱ Foodȱ Technologyȱ Centreȱ(CFTC).ȱ Theȱ homeȱmarketȱ ofȱ theȱ cooperativeȱ isȱ Europe.ȱ Theȱ groupȱ asȱ aȱwholeȱ achievesȱ aȱturnoverȱ ofȱ EURȱ 1.3ȱ billionȱ perȱ year.ȱ Suikerȱ Unieȱ isȱ theȱ mainȱ businessȱ unitȱ ofȱ Cosunȱcooperative.ȱInȱadditionȱtoȱtheȱproductionȱofȱhighȱqualityȱsugarȱproduction,ȱanȱorganicȱcrystalȱsugarȱwasȱ launchedȱ inȱ1999,ȱunderȱ theȱbrandȱnameȱUNIZON.ȱSuikerȱUnieȱ isȱ theȱonlyȱDutchȱorganicȱsugarȱsupplierȱinȱtheȱnationalȱmarket,ȱbutȱitȱfacesȱveryȱstrongȱandȱintensiveȱcompetitionȱbyȱotherȱimportedȱproducts.ȱȱ

vii) CZ Rouven

CZȱRouveenȱisȱaȱdairyȱcooperative,ȱapproximatelyȱoneȱhundredȱyearsȱoldȱbutȱstillȱwithȱaȱvitalȱandȱdynamicȱpresenceȱinȱtheȱDucthȱdairyȱindustry.ȱTheȱdairyȱcooperative�sȱfactoryȱȈRouveenȈȱwasȱestablishedȱ inȱ1987.ȱMoreȱthanȱthreeȱhundredȱstockȱbreeders,ȱallȱofȱthemȱmembersȱofȱtheȱcooperative,ȱ offerȱ freshȱmilkȱ andȱ cheeseȱ specialitiesȱ toȱ Ducthȱ consumersȱ whichȱ areȱ partlyȱproducedȱecologically.ȱTheȱcooperativeȱfirmȱpursuesȱitsȱmarketingȱpolicyȱandȱbusinessȱidentityȱinȱtheȱdairyȱDucthȱmarketȱemphasizingȱonȱtheȱhighȱqualityȱcharacteristicsȱofȱitsȱproducts.ȱFinalȱconsumersȱ inȱTheȱNetherlandsȱ easilyȱ recogniseȱ theȱ brandȱRouveenȱCheeseȱ Specialitiesȱ andȱ theȱmarketȱsharesȱofȱ theȱcooperativeȱareȱwellȬestablishedȱ inȱ theȱDucthȱ foodȱmarketȱandȱspecialtyȱgroceriesȱandȱ stores.ȱTheȱecologicalȱcheeseȱproducedȱbyȱRouvenȱ isȱmarketedȱwithȱaȱ separateȱbrandȱnameȱ(BastiansenȱEkoȱKaas).ȱTheȱpriceȱpremiumȱforȱRouvenȱmembersȱwhoȱareȱengagedȱinȱorganicȱproductionȱmethodsȱisȱ5.9ȱeurocentȱperȱkilo.ȱȱ