Marketing by the cooperative

Zvi Galor www.coopgalor.com 1. Cooperative Marketing A marketing cooperative is set up in order to market and sell the surplus produce of its members, being such a surplus, as they cannot consume themselves. Marketing cooperatives generally sell agricultural produce, but there are also those, which sell fish produce or handicrafts. There are also other definitions of cooperative marketing. Margaret Digby defines a marketing cooperative as a system in which a group of farmers join together in order to carry out part or all of the processes involved in bringing the produce from the producer to the consumer. The Bank of India defines a marketing cooperative as a society of farmers, organized for the purpose of helping the members to market their produce, so as to obtain higher profits than is possible by way of private marketing [1]. The reasons for the establishment of such cooperatives are: When there is a surplus in production over the consumption. In order to save expenses for middlemen who benefit from the producer in various fields, such as: bad weight, very low prices and loans at high rates of interest. When the system in force is archaic, it does not meet the requirements at all, involves many middlemen or compensates very weakly for the producer's work. Thus, a marketing cooperative must offer its members a more efficient service than that in force, so that its members obtain a greater profit from their work. When establishing a marketing cooperative, it indispensable to study various aspects and problems: is

What products shall we produce and sell on the market? Whet, experience in regard to production? What species are marketable every season, quantities and qualities that are preferred? What are the perishable items that can be stored and under what conditions? What is the present marketing system? What system of payment is practiced for the producers? Is any advance payments allowed just after the crop, or will payments be effected only after the sale of the products? What is the best marketing circle of the production? Does the product undergo a process for its improvement? To have a sound knowledge of the medium of the improvement. Financing Problems: One producer expects to get his money upon immediate sale of his products. Another producer wishes to receive a down payment. Whereas, the cooperative is paid only after the sale of its products. Sometimes, it is even necessary to store the crop for many months before it can be sold. It is also possible that the output will be sold at a distant market, which entails transportation costs-, or, sometimes, the retailer will delay payment of his bill. All these factors produce a clash of interests between the needs of the producer and the existing possibilities of the cooperative. Therefore, working capital is indispensable to meet the requirements and to comply, at least partially, with the interests of all. Possibilities: An important working capital to farmers. Financing on short-terms by a bank. Financing by a cooperative bank. Establishment of a financing enterprise where the members of the cooperative are also the shareholders. Such a financing enterprise will be established by the marketing cooperative. It is the most advantageous and cooperative solution. Cheap credit is allocated to the farmer provided he sells all his output through the cooperative.

When the cooperative has determined the exact quantities, which it will be able to sell, it is in its own interest to make agreements for sates in advance. A sound sale crowns the producer's work. This is the reason why the establishment of a cooperative is a necessity to the farmer. The cooperative prevents unhealthy competition between its members, sorts out the products conscientiously and directs the supply towards the demand. The cooperative has to cope with all the abovementioned problems when selling its production. Other problems also arise, such as: A small supply of different products; thereby small quantities for sate. The production of vegetables and poultry must be sold several times each week. As the agricultural cooperatives are far away from the market, transportation costs go up. Bad roads and high transportation costs further increase the cost price of the product. [2] The marketing cooperative was created in order -to push up the selling price as much as possible and to increase the return to the members -For their output [3]. The cooperative offers its members an improved bargaining position in regard to services such as transportation, and is capable of affecting a better sale. The better the service the more members will be keen to join the cooperative. More members in the cooperative will enable a reduction in the price for various services, as well as in running costs. The cooperative makes it possible to maintain services such as storage, bulk transport, extended credit, markets survey, cooperative education, which the single farmer is generally unable to achieve [4]. Marketing cooperatives in developing countries encounter many difficulties. G. Hyden describes some of them [5]. Many of the marketing cooperative in Tanzania was set up by local politicians who were influential at the national level. The main argument was that cooperatives would minimize exploitation. The cooperatives were set up without any
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feasibility study or field survey, and as a result they fell into considerable monetary dependence on external organizations, such as marketing organizations or financial institutions. Since the cooperatives were set up to suit external decrees (the politicians), the marketing cooperatives' fields of activity neither accorded nor covered, either functionally or regionally, the needs of the productive units at work in the rural areas. The cooperatives were troubled by grave management problems, and in parallel by lack of skilled manpower. In Bangladesh a very extended system of agricultural cooperatives was organized [6]. The marketing cooperatives, which are of the third level, are concerned with four main activities - the marketing of agricultural produce of all kinds, the marketing of semi-industrial products (handicrafts), marketing of fisheries produce, and marketing of dairy products. Agricultural villages form the base of this structure, whereby every fifteen villagers make up a secondary level unit. All secondary level cooperatives are organized into a third level cooperative. Though these cooperatives have made significant achievements, they are also faced with weighty problems. The first problem is credit. The farmer would like to sell his produce for cash, and this requires the cooperative to have command of considerable liquid resources, for which it must obviously pay dearly. One of the solutions to this problem is, of course, to sell the farmers' produce on a commission basis [7]. But as is the case in India, so in Bangladesh, the cardinal problem of the marketing cooperative is the lack of any link between marketing and credit [8]. Further problems in Bangladesh are the great distances between the cooperative branches and the farmers in the villages. The management of those cooperatives is not professional, and many of the societies are in fact reduced to waiting for things to happen [9].

At the other end of the scale we have examples of marketing cooperatives, which have been successful. In Jordan, the olive marketing cooperatives have changed the farmers methods of cultivation. The farmer was obliged to pick the olives carefully and in a selective manner, so as not to harm them. The olives were transported directly to the oil press, without interim storage. The farmer could step up production, but he was required to supply better quality and cleaner produce. The produce was graded into various quality levels, and this grading also increased the demand on the part of the consumers. The cooperative also succeeded in influencing prices. The cooperative led to an increase of the return to the farmer by 1% over the market price, with customers being on the look out for the cooperatives olive oil, as they were confident of its quality (10). The carob marketing societies in Cyprus have also been successful, and so have other marketing societies. Among the reasons for this success we may note the fact that the farmer was more exploited in the past. The marketing cooperative, on account of its size advantage, has attained lower marketing costs than the private traders, on top of the high level of management [11]. Another example is the agricultural marketing system in Algeria. This system, which had been influenced by the socialist dogmas, which placed the State above all. Is an example of severe failure in everything that concerns marketing? The system has tailed in all that concerns transfer of information, packing, transport and storage [12]. 2. Models of Marketing Cooperatives Marketing is the process that an agricultural product goes through on its way from the producer to the consumer. Traditional marketing involves several intermediary stages within this process. The result is, of course, that the consumer pays an exorbitant price and the producer
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receives a very low price for his production. Naturally, it is in the interests of both producer and consumer that the number of steps in the marketing process be reduced as much as possible. The result: the producer will earn more and the consumer will pay less. The first form of marketing is the traditional marketing circle I he peasant sells his production at a local market which is held in his village every 5 or 6 days - this is the first stage. The intermediary who buys this production transports it. Usually on overloaded small open trucks covered with a tarpaulin, to a regional market. Another intermediary will buy these goods and transport them to an urban market. The production will then be sold and distributed at the neighborhood markets where the retailers will come to get their supplies for sale to the consumers. This way agricultural produce has undergone too many stages from producer to consumer. All intermediaries have benefited -From this process, but not the producer nor the consumer. The solution to this state of affairs: a marketing cooperative owned by the producers. This cooperative's aims are to reduce to a minimum the number of marketing stages between producer and consumer. In Israel, the Tnuva cooperative is a marketing cooperative belonging to all moshavim and kibbutzim, and today has the fourth largest turnover among Israeli enterprises. Tnuva has organized a national network, which takes upon itself the collection, transportation, storage, processing and sale of approximately 75% of agricultural output earmarked for the local market in Israel. The setting up of Tnuva has reduced the number of steps in the marketing circle, but not enough. Agricultural produce leaves the farm, passes through "Tnuva" and is then sold in the local market and in various small shops. Another alternative reduces the number of steps even more. This alternative involves direct contact between the marketing cooperative owned by the farmers and the
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consumer cooperative owned by the consumers. Thus, the sale of agricultural products takes place from one cooperative to another, and in principle, the profitability for the producer increases while the purchase price for the consumer decreases. This situation, though far removed from the traditional marketing circle, does not go far enough. It is still necessary to try to eliminate superfluous steps in the marketing circle. Two solutions have been found: The first consists of consumer sale centers, belonging to the marketing cooperative, an example of which is Tnuva in Israel. These sale centers link producers directly to consumers. The second solution consists in supply centers for agricultural produce, which are owned by the consumer cooperatives, the latter belonging to the consumers. In this example the consumers have organized themselves in order to acquire their consumer goods directly from the producers. The last marketing method, which we shall discuss, concerns the organizations which belong to the farmers and the government and which deal with the export of agricultural products [13]. The last stage in our model is the stage at which selling takes place directly from the producer to the consumer. This is the preferable stage because it produces the best results of all, both as far as the producer is concerned, as well as for the consumer. An example of this is direct selling outlets, which have been set up by moshavim and kibbutzim at roadsides all over the country, which sell their produce directly to the public. This solution is beset with problems and is not always possible of implementation - but this is the solution we strive for. Figure 2.

3. Conclusion The central problem to which we have been confronted was the quest to know how to establish marketing cooperative in a traditional village, existing in the traditional rural areas of any developing country. We should remember that marketing is a system designed to transfer, in the most effective way, the production from the producers to the consumers. We know that the existing marketing system in the traditional rural areas is a system, which highly exploits the producers and at the same time the consumers. This marketing system pays to the producers the lowest possible price, and at the same time, sells to consumers at the highest possible price. This system is composed of too many intermediary stages, and each of these stages takes its part from the total payment by the consumers. We find, in the traditional areas, farmers who present their merchandises on the side roads, and waiting for clients going on the road with their cars and stopping over to purchase their produces directly. We observing here a stage of marketing where the producer sells his produce directly to the consumers, without any intermediary. Both parties stand to gain here. In Israel we know this phenomena where many Kibbutzim and Moshavim which opened on side road of major axes small shops where they sell their produce directly to consumers drivers, going over for their daily needs. Once again, we observe here the direct sale from producers to consumers, without any intermediary. This is the role of marketing cooperative: to reduce the number of intermediaries stages to the lowest number. . Notes et references 1) Dfinitions de Mathur , ibid. pp. 349-350 .

2) Galor. Z (l982), ibld. ibid. 3) Hardis, I.W.: "Cooprative Theory and Market Implications: A selected review". p.49 dans; Anschel,ibid. 4) Whetham. E.M.; "A Comparison of Marketing Structures for Agriculture Produce in Developing Countries". . pp. 26-27 Dans Digby M. and Mccready. K.J. (Ed): Year Book of Agriculture Coopratives l970 Basil Blackwell. Oxford. l970 5) Hyden. G: "The struggle for success in coopration: Kabuku Noani UJamaa Cooprative Society, Tanzania". 2l22l3 Dans Webster. F.H. (Ed); Year Book of Agricultural Coopration. l977 Parchment. Oxford. l977 6) Andreou. P, et Islam. M.M.: "La commercialisation cooprative au Bangladesh". Revue des tudes coopratives No. l99 Paris l980 PP.lll-ll5 7) Patel. M.S.: "Cooprative Marketing In India" Review of International Coopration Vol. 69 No. 2 l976. p.52 8) Galor Zvi: "Towards the Cooprative Development of Tradltlonal Rural Areas". IIDCLS. Tel Avlv l985. 9) Considrations supplmentaires sur les problmes des coopratives de mercatique, dans: Callar, D: The Social and Cultural Factors Involved in Production by Small Farmers In Wedza Communal Area, Zimbabwe, of Maize and Its Marketing Unesco, Paris. RRD l7. Dec l982 P. 6l Vinyor, T.R.: Les Facteurs socioculturels qui orientent la production et la commercialisation de certaines
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denres alimentaires par les petits fermiers dans la Rpublique populaire du Bnin Unesco, Paris. RRDl6. Aot l982 pp. 64-69 Semana, A.R.: The social and cultural factors involved in small scale farmers food crop production and marketing in Malawi Unesco. Paris. RRD 20. aot 1983, p. 15 Macbaney, F.E.: The social and cultural Factors Involved ln production by small Farmers ln Cameroun of plantain and cassava and thelr marketing Unesco. Paris. RRD 2l. Sept. l983 p. 4l 10) Tayeh. A.K.: Cooprative Olive 0ll Processing and Marketing ln Jordan". PP. 67-68 : Digby. M. (Ed): Year Book of Agrlcultural Coopratives l969 Basil Blaewell. Oxford l969. 11) Andrew. P.: "The Cooprative Marketing of Carobs ln Cyprus". P. 233 Webster, F.H. (Ed) : Year Book of Agrlcultural Coopratives l976 Oxford. l976 12) Paris. A: "Une enqute sur les cooperatives cypriotes de commercialisation des agrumes et autres fruits de tables" Revue des Etudes Coopratives Paris, No. l83, l976. pp. 45-54 13) Granier. J.C.: "La Commercialisation des fruits et lgumes en Algrie" Revue des Etudes Coopratives Paris. No. l94 l978. pp. 69-88

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