Why cooperatives like the one in Gnowangerup, WA, are key to saving business in the bush – ABC Rural
The small Western Australian community of Gnowangerup is a world away from the cooperative breweries and wholefood stores dotting inner-city streets.
But the 600-strong community, 350 kilometres south-east of Perth, is using the same cooperative business model used by these trendy ventures to save its ailing businesses.
With many of the town’s main street shopfronts empty, Gnowangerup has formed its own cooperative to combat a lack of basic services.
While investor-owned companies focus on returning profits for shareholders, cooperatives have a shared ownership and benefit for the community.
Governance is democratic, giving each member one vote.
But with so much focus on market deregulation and multi-national corporations’ influence on the economy, the crucial role of cooperatives in regional Australia has never been more important.
‘Our community will slowly disappear’
Gnowangerup’s cooperative GNP 360 was officially formed in October.
Founding director Richard House said the community was spurred into action after losing its bank branches, hairdresser, bakery and other shops.
“People want their kids to come home, they want to bring husbands and wives back to this community. You’ve got to have facilities otherwise they just won’t come,” Mr House said.
The group plans to transform a vacant building on the main street into a retail hub.
“If we don’t help ourselves our community will slowly disappear,” he said.
The project needs about $500,000, and $175,000 of shares have already been sold, with $200,000 pledged in kind.
Gnowangerup’s story is not unique
There are about 2.6 million cooperatives worldwide, generating about $3 trillion each year and employing an estimated 250 million people.
From humble beginnings in Australia in the 1840s cooperatives have evolved to give “the little guy” collective bargaining and buying power, according to University of Western Australia’s School of Business professor Tim Mazzarol.
“It’s a form of collective action by small-business owners, farmers, fishermen to get better pricing in selling their goods as a collective or perhaps building infrastructure collaboratively,” Dr Mazzarol said.
“It’s not to exclude the investor-owned businesses, but they tend to be footloose.
Dr Mazzarol pointed to WA’s Co-operative Bulk Handling (CBH) as an example of success.
Established in 1933, CBH is now Australia’s biggest cooperative and one of the largest bulk grain handling operations in the world.
Annual revenue is $3.9 billion and it is owned and controlled entirely by 4,200 WA grain growers.
A fishing industry success story is the Geraldton Fishermen’s Cooperative (GFC).
Formed in 1950, it has built a lobster supply chain that handles 60 per cent of the WA rock lobster catch, an industry recently valued at $500 million.
GFC chief executive Matt Rutter credits the success and growth to continual improvement and adaptation to new markets.
“We’ve moved from a canned product, through to frozen markets, through to servicing the Japanese market, the Taiwanese market and China, which has come on in the last decade,” Mr Rutter said.
Cooperatives versus corporates
Mr Rutter said the other key element to the GFC’s success was having a strong member board grounded in the cooperative’s core values of patronage — a difficult task in a global marketplace.
“We’re competing against corporates. It’s quite easy to get caught up in that world and forget why we’re here and why we’re doing things,” he said.
“But for me, it’s really important that we don’t because that’s core to our success,” he said.
As cooperatives grow, so does the pressure to behave like a big company.
That is when demutualisation, or a shift towards a corporate structure, occurs and cooperatives collapse.
This was the case with South Australian Co-operative Bulk Handling in 2000 when it merged with the Australia Barley Board.
It was eventually floated on the ASX and bought out by the Canadian company Viterra in 2009.
A more recent example can be seen in Victoria-based Murray Goulburn Cooperative, which, at its peak in 2014-15, processed more than 3.6 billion litres of milk from Australian dairy farmers.
The company partially listed on the stock exchange in July 2015, but its new structure failed as milk markets went south.
It was forced to cut milk prices and farmers began to desert the cooperative. Canadian dairy giant Saputo finished a takeover of Murray Goulburn in May.
“At the end of the day, the [corporate] board has to make a decision about what is best for their shareholders,” Dr Mazzarol said.
“That’s not the case for cooperatives, their whole focus is on what’s good for the members.”
Co-ops’ role in rural development
The end of a cooperative has consequences for the industry and community.
CBH employs 1,100 permanent and 1,800 casual staff across WA.
“If something happens to that cooperative, not only do all the direct jobs go but if the [former] members struggle, the total number of businesses in the community drop,” Dr Mazzarol said.
As cooperatives fight against the tide of an increasingly deregulated market, Dr Mazzarol would like to see a renewed focus on their importance.
“Some countries around the world see the cooperative as a major vehicle for helping the little guy get ahead, and Australia talks about it but doesn’t do enough,” he said.
“I’d like to see politicians taking more interest in the cooperative and mutual sector and start talking about it as a mechanism particularly for regional and rural development.”