CROPP study maps paths to small-scale co-op marketing success (Research Brief #18)
Posted October 1995
The 1993 study helped us see the potentials for marketing cooperatives, and the decisions CROPP has made since then are instructive for anyone interested in that topic. — Steve Stevenson
Formed in 1988 by a handful of organic farmers, the Coulee Region Organic Produce Pool (CROPP) in LaFarge, Wisconsin, shares a philosophy of collective action and careful land stewardship.
But small-scale marketing of organic vegetables and dairy products has faced challenges over the years. With a largely successful dairy program and a struggling vegetable program, CROPP has worked hard to turn its vision into a viable business despite increasing competition in the organic marketplace. Now the farmer-owned cooperative is taking lessons from its past and charting collective marketing’s future in southern Wisconsin.
Sociologist Steve Stevenson, CIAS assistant director, says improving regional economies for small farmers can strengthen or renew rural community vitality.
“New forms of cooperatives can begin to take shape to help farmers get more profits from their efforts,” Stevenson says. “Looking at CROPP’s strategies can help uncover tactics for other marketing cooperatives in Wisconsin.”
The dimensions of marketing success
In a 1993 study supported by the Center for Integrated Agricultural Systems (CIAS) and the Agricultural Technology and Family Farm Institute, the Cooperative Development Services (CDS) of Madison examined the history of CROPP’s vegetable program to uncover what was working and what wasn’t. The study suggested a successful marketing cooperative requires a vibrant community of farmers and consumers, a stable network for distributing produce, savvy marketing, and well-planned strategies for bringing higher returns back to producers.
“The 1993 study helped us see the potentials for marketing cooperatives,” says Stevenson, a research team member, “and the decisions CROPP has made since then are instructive for anyone interested in that topic.”
Mary Myers, the CDS business consultant who authored the 1993 report, used interviews, surveys, and business records, to help CROPP determine its vegetable program’s fate and to uncover tactics for other marketing cooperatives in Wisconsin.
“CROPP was at the crossroads in 1993,” Myers recalls. “They had a very successful dairy program and a struggling vegetable program. They had to decide whether to revamp the vegetable program, make a go of it, or shut it down altogether.”
CROPP began primarily as a 25-grower vegetable cooperative, with a small pool of dairy farmers as a sideline. Growers have produced a variety of organic vegetables including potatoes, kale, cauliflower, cucumbers, squash, and tomatoes. From the outset, the cooperative avoided competing with large California organic lettuce and broccoli growers, focusing instead on labor-intensive, regional produce that grows well and is easier to market and transport in Wisconsin.
Market opportunities and challenges
With markets in Chicago, Madison, and the Twin Cities, CROPP sells vegetables to retailers and wholesalers, charging growers a percentage of the sales for marketing costs. CROPP provides Wisconsin organic farmers with alternative sales outlets to farmers’ markets and roadside stands.
Since its beginnings, however, CROPP’s vegetable program has had trouble getting off the ground. Stevenson says that’s not surprising considering the challenges of marketing fresh vegetables. “The window of opportunity to sell is so narrow in terms of spoilage and storage. Also, consumers expect cosmetic perfection and not just nutritional quality.”
Other factors pose challenges, like short growing seasons, high transportation costs, unsteady supplies, low profit margins, and a skyrocketing demand for organic vegetables that has flooded the market with new growers and fueled competition.
SWOT analysis findings
CDS’s Myers used survey and interview techniques to examine six facets of CROPP’s vegetable program: operations, management, communication, organization, marketing, and finances. CDS analyzed the Strengths, Weaknesses, Opportunities, and Threats in each area. This type of “SWOT analysis” is widely used in the business community to uncover an organization’s potential problems and unrecognized opportunities.
The analysis pointed to low production levels as a key challenge. With a small pool of growers, all producing different kinds of vegetables, CROPP cannot always supply enough produce to satisfy its customers. The cooperative must sell several partial shipments, which drive up transportation and labor costs per unit sold. This trend has held since 1993. Today, CROPP’s vegetable operation still cannot cover its operating expenses.
CROPP grants coordinator Aaron Brin said one of the main factors causing low volume of production is tiny profits for growers, which provide little incentive for production. “When farmers don’t get a high enough return for their vegetables, it doesn’t pay to do it,” Brin observes.
The 1993 study predicted low production volume could snare the vegetable program in a downward spiral, creating cash flow problems, unsteady supplies, and sliding participation. Low returns further discourage new growers from joining or for current members to increase their production.
In 1995, CROPP lost nine growers, reducing the pool to 15 and total acres farmed to around 20. Most of the remaining farmers have small-scale operations of two acres or less and are not farming as a primary source of income.
David Bruce, CROPP’s vegetable program coordinator, said another contributing problem is the high percentage of grower turnover–as high as 60 percent. That means each year, CROPP must train a new pool of (sometimes inexperienced) growers. This may cause erratic production and quality, as new growers learn the ropes.
Successful dairy program
While the future of CROPP’s vegetable program has remained uncertain for the last several years, its dairy enterprise has been largely successful and offers strategies for success for small-scale agricultural enterprises. Under the nationally marketed Organic Valley label, CROPP produces 17 kinds of organic cheeses and fluid milk, with planned expansions into organic butter, cheese spreads, and yogurt.
Brin says CROPP’s number of organic dairy farmers has tripled since 1988 from 20 to 60, with new producers from Minnesota, Iowa, eastern Wisconsin, and Washington state.
One factor in its initial success was little or no competition from other organic cheese products. Organic Valley products filled a particular niche in the organic dairy industry and enjoyed national recognition. Recently, however, the dairy program has had to brace itself for new competition from dairy cooperatives in the West.
Myers points out other factors that have contributed to the dairy program’s success. For example, unlike the vegetable program which produces only seasonal products, CROPP’s dairy enterprise produces year round, stabilizing prices, supplies, and profits to farmers.
The dairy program has also benefited from a large network of experienced dairy farmers, existing transportation, and equipment. The vegetable program, on the other hand, as had to build these costly support networks from scratch.
Brin says the dairy program’s initial success helped supplement the vegetable program. The dairy farmers purchased common warehouse equipment and supplies and jointly shipped dairy and vegetable products to lower transportation costs.
But, Brin points out, CROPP’s dairy farmers are concerned about carrying the vegetable program, especially if it continues to suffer net losses and declining participation.
The value-added boost
Important to the CROPP dairy program’s success has been selling value-added products rather than basic produce. Adding value through processing, packaging, or marketing is an increasingly important strategy in agricultural markets. Besides offering convenience to consumers, value added approaches help farmers recover more profits from their produce.
Yet this may not be an option for the vegetable program, since current levels of production may not be high enough to sustain the value added possibilities raised in the CDS report, such as marketing frozen vegetables, processed vegetable juice, or dried vegetables or soup mix.
However, Brin observes, CROPP may be able to combine their dairy and vegetable programs into higher-value products. The vegetable growers could grow strawberries or raspberries for Organic Valley fruit yogurts.
Strategic marketing … and production
CROPP’s farmer-staffed board of directors will decide by the end of the year whether to continue the vegetable enterprise. Brin said up to now, CROPP’s board of directors decided to keep the vegetable program more for philosophical reasons than economic reasons.
Brin said the vegetable program may continue, but change its strategy, perhaps with all growers focusing on one crop, like winter squash, which is fairly easy to grow, has high value, and is not as perishable as other vegetables. This approach may solve some of CROPP’s labor and production problems.
Contact CIAS for more information about this research.
Published as Research Brief #18