My.

Coop
Managing your Agriculture Cooperative

MODULE 4
Cooperative Marketing
Managing your Agricultural Cooperative, My.COOP, is licensed under a Creative
Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.

The legal conditions of this copyright procedure are expressed

here: http://creativecommons.org/licenses/by-nc-sa/3.0/

Design and production: International Training Centre of the ILO, Turin

Printed in Italy
Table of Contents

Acknowledgements..................................................................................v
List of abbreviations................................................................................xi
Glossary................................................................................................xii
Introduction............................................................................................1
About Module 4: Cooperative Marketing....................................................5

TOPIC 1
Marketing Services.................................................................7
Introduction to the topic..........................................................................9
Collective marketing................................................................................9
Market information................................................................................13

TOPIC 2
Strategic Marketing...............................................................19
Introduction to the topic........................................................................21
Targeting markets through upgrading.....................................................21
Marketing mix.......................................................................................26
Strategic marketing...............................................................................31

Module 4 · Cooperative Marketing iii

 TOPIC 3
Certification........................................................................39
Introduction to the topic........................................................................41
Certification....................................................................................42

Key Learning Points...............................................................................52

Bibliography...................................................................................53

iv My.COOP
Acknowledgements
Coordination
Carlien van Empel ILO Cooperative Facility for Africa

Technical editing
Anna Laven The Royal Tropical Institute

Authors
Anna Laven The Royal Tropical Institute
Caren Akomo Ouma Cooperative College of Kenya/United
States International University

Pedagogical support
Tom Wambeke ILO/ITC DELTA programme

Language editing
Editing Group Juliet Haydock Translations Ltd

Pictures
ILO/M. Crozet: pages 5, 7
Fotolia: pages 11, 13, 19, 34, 39
ITCILO/G. Palazzo: page 16
ILO/R. Lord: page 22
ILO/P. Deloche: page 49

Comments, suggestions and other input provided by Emma Allen, Susanne Boetekees, Sifa
Chiyoge, Alejandro Guarin, Marek Harsdorff, Ann Herbert, Audrey Kawuki, Nargiz Kishiyeva, Eva
Majurin, Ellen Mangnus, Albert Mruma, Sam Mshiu, Roldan Muradian, Julius Mutio, Hezron
Njuguna, Huseyn Polat, Merrilee Robson, Constanze Schimmel, Linda Shaw, Andrew Shepherd,
Monika Sopov, Giel Ton and Carlien van Empel are gratefully acknowledged.

Module 4 · Cooperative Marketing v

 This training material has been developed by the organizations listed below.

Agriterra is an organization for international cooperation founded by rural

people’s organizations in the Netherlands. Agriterra offers, among others, farmer-
to-farmer advice and direct financial support to rural people’s organizations in
developing countries so that they become strong and representative
organizations. These organizations are indispensable for the promotion of
democracy, for a better distribution of income and for the economic
development of a country. If farmers organize themselves to jointly coordinate
their production and to improve their presence in the market, they stand a
better chance to succeed in increasing
their incomes and in the creation of employment. Agriterra aims to promote
such economic activities and to stimulate, support and finance the
international
cooperation between rural people’s organizations in the Netherlands and
those in developing countries.
http://www.agriterra.org

Centre for International Development Issues Nijmegen (CIDIN) ) is an

interdisciplinary academic institute addressing issues of inequality, poverty,
development and empowerment. It carries out undergraduate and
postgraduate education in development studies, as well as research in a
variety of subjects related to development, economics, sociology and
anthropology. CIDIN has broad experience in interdisciplinary research on
rural development and value chains, collection action and market integration,
impact assessment of value chain codes and standards, and gender theory,
policy and mainstreaming. http://www.ru.nl/cidin

Cooperative College of Kenya (CCK) is located 17 kilometres from Nairobi

city centre in a serene environment. The College was established in 1952
to train government cooperative inspectors to oversee the activities of the
cooperatives in Kenya. The College has grown until now it is pursuing a
charter to become a university. The broad aim is to equip the staff of the
cooperative movement and the associative economy with appropriate
managerial and supervisory
skills in order to contribute more effectively to the development of
cooperatives. The College offers Degree Diploma and Certificate courses in
Cooperative Management and Banking. It also offers short courses that
target the employees and management of cooperatives. The College is ISO
9001:2008 certified. http://www.cooperative.ac.ke

vi My.COOP
Cooperative Facility for Africa (COOPAFRICA) is a regional technical cooperation
programme of the International Labour Organization (ILO) in support of
cooperative development. It promotes favourable policy and legal
environments, strong vertical structures (such as cooperative unions and
federations) and improved cooperative governance, efficiency and
performance. The programme covers nine countries in East and Southern
Africa (Botswana, Ethiopia, Kenya, Lesotho, Rwanda, Swaziland, Tanzania
mainland and Isles, Uganda and Zambia) from the ILO Office in Tanzania with
technical support from the ILO Cooperative Programme (EMP/COOP) in
Geneva. It was launched in October 2007 with
core funding from the UK Department for International Development (DFID).
COOPAFRICA is a partnership initiative involving a range of international and
national organizations.
http://www.ilo.org/coopafrica

Empowering Smallholder Farmers in Markets (ESFIM) is a partnership

between national farmers’ organizations in eleven countries and
AGRINATURA. ESFIM’s overall objective is to generate demand-driven action
research supportive to the policy activities undertaken by farmers’
organizations to strengthen the capacities of smallholder farmers in
developing countries to generate remunerative cash income from markets by
creating an enabling policy and regulatory environment as well as effective
economic organizations and institutions. http://www.esfim.org

International Labour Organization (ILO) is the tripartite UN agency that

brings together governments, employers and workers of its member states in
common action to promote decent work throughout the world. The ILO views
cooperatives as important in improving the living and working conditions of
women and
men globally. Its Cooperative Programme (EMP/COOP) serves ILO
constituents and cooperative organizations based on the ILO
Recommendation 193 on the Promotion of Cooperatives Recommendation,
2002. EMP/COOP works in close partnership with the International
Cooperative Alliance (ICA) and is part of the Committee for the Promotion
and Advancement of Cooperatives (COPAC). http://www.ilo.org and
http://www.ilo.org/coop
 International Training Centre of the ILO is the training arm of the ILO. Its
Distance Learning and Learning Technology Applications (DELTA )
programme has a double mandate of strengthening the Centre’s internal
capacity in applying state-of-the-art learning and training methodologies and
processes as well
as providing training services to outside partners and customers. It provides
these services in line with ILO Recommendation 195 on Human Resources
Development. Its Enterprise, Microfinance and Local Development (EMLD )
programme offers training on cooperatives and the social and solidarity
economy as well as, among others: entrepreneurship education and training;
enabling business environments for sustainable small enterprise
development; value chains and business development services and women’s
entrepreneurship development.
http://www.itcilo.org

Food and Agriculture Organization of the United Nations leads

international efforts to defeat hunger. Serving both developed and developing
countries, FAO acts as a neutral forum where all nations meet as equals to
negotiate agreements and debate policy. FAO is also a source of knowledge
and information, helping developing countries and countries in transition
modernize and improve agriculture, forestry and fisheries practices and
ensure good nutrition for all.
Since its founding in 1945, it has focused special attention on developing rural
areas, home to 70 per cent of the world’s poor and hungry people.
http://www.fao.org

Kenya National Federation of Agricultural Producers (KENFAP) is a

registered non-political, non-commercial, democratic membership federation
that was founded in 1946 as Kenya National Farmers’ Union (KNFU). Its
mission is an empowered Kenyan farmer with a strong voice making
informed choices for improved sustainable livelihoods. As the legitimate
‘voice’ of the Kenyan farmers, its key role is to articulate issues specifically
affecting farmers and the general agricultural sector. KENFAP serves its
members by offering representation,
lobby and advocacy services. It facilitates cooperation and networking
among its members and with national, regional and international
associations. It also
provides consultancy services and carries out research activities in the interest
of the farming community.
http://www.kenfap.org

viii My.COOP
Moshi University College of Cooperative and Business Studies
(MUCCoBS) is the oldest cooperative training institution in Tanzania,
accumulating the experience of 48 years in the fields of cooperative
accounting, cooperative management and rural development. MUCCoBS
came into being as a result of upgrading the former Cooperative College
into a Constituent College of Sokoine University of Agriculture (SUA) in
May 2004. It offers cooperative and business education at both
undergraduate and postgraduate levels. It provides opportunities for
acquisition, development, promotion, dissemination
and preservation of knowledge and skills in cooperative, community, business,
organizational and entrepreneurship and any other area as may be
determined by the University College through training, research and
consultancy activities. http://www.muccobs.ac.tz

The Nigerian Cooperative Development Centre (NCDC) is located at

kilometre 61, Abuja–Lokoja highway. It occupies a 14-hectare plot of land
away from the city centre to ensure a conducive research and learning
environment. The
Centre provides technical backup to the Federal Department of Cooperatives
and the entire cooperative movement. It does this through research and
adoption
of global best practices in cooperative policies, legislation and training. It
also generates and analyses cooperative data to support policy and
programmes for the development of the cooperative sector, including the
training of a cadre of competent cooperative management, supervisory and
training personnel.

The Royal Tropical Institute (KIT) in Amsterdam is an

independent centre of knowledge and expertise in the
areas of international and intercultural cooperation. The
Institute aims to contribute to sustainable development,
poverty alleviation,
and cultural preservation and exchange. Within the Netherlands, it seeks to
promote interest in and support for these issues. KIT conducts research,
organizes training activities, and provides consultancy and information
services. Central to KIT’s approach is the elaboration of practical expertise in
policy development and implementation. The Institute stewards cultural
heritage, organizes exhibitions and other cultural events, and provides a
venue for meetings and debate. A key objective underlying the Institute’s
work is to enhance and exchange knowledge of and understanding for
different cultures. “KIT is a not-for-profit organization that works for both the
public and the private sector in collaboration with partners in the Netherlands
and abroad” (Mission Statement).
http://www.kit.nl
 Uganda Cooperative Alliance Ltd. (UCA) is an
umbrella organization of cooperative organizations in
the country. It was registered in 1961 with the aim of promoting the economic
and social interests of cooperatives in Uganda. It was formed for the purposes
of promoting, advocating and building the capacities of all types of co-
operatives in the country (primary societies, district and national unions). In
its development activities, UCA has concentrated on six key areas: capacity
building in primary societies and area cooperative enterprises; development of
a strong cooperative financial system based on members’ savings; technology
transfer; women’s empowerment; creation of youth self-employment and
environmental protection and improvement.
http://www.uca.co.ug

Wageningen University & Research Centre (WUR)

explores the potential of nature to improve the
quality of life. A staff of 6,500 and 10,000 students from over 100 countries
work everywhere around the world in the domain of healthy food and living
environment for governments and the business community-at-large. Its Centre for
Development Innovation (CDI) works to create capacities for change. It
facilitates innovation, brokers knowledge and develops capacities with a focus
on food systems, rural development, agri-business and the management of
natural resources. The Centre links Wageningen University Research Centre’s
knowledge and expertise with processes of society-wide learning and
innovation. http://www.wur.nl/UK and http://www.cdi.wur.nl/UK
List of abbreviations

AMCOs Agricultural Marketing Cooperatives

CLU Central Lanera Uruguaya (Uruguayan Wool

Central)
CTC Cooperative Training Centre

FLO Fairtrade Labelling Organization

NCMF National Cooperative Marketing Federation

NGO Non-Governmental Organization

RSPO Roundtable on Sustainable Palm Oil

TEASEC Tea Sector Service Centre

 ABC
Glossary

Certification
Formal procedure by which an accredited or authorized
person or agency assesses and verifies (and attests in writing
by issuing a certificate) the attributes, characteristics, quality,
qualification, or status of individuals or organizations, goods
or services, procedures or processes, events or situations, in
accordance with established requirements or standards.
Source: http://www.businessdictionary.com/definition/certification.html
(accessed 19 Oct. 2011).

Chain operator
A cooperative providing services to enhance the efficiency,
effectiveness and quality of the activities and products of its
members (and possibly non-members), buying their products
and adding value to them before selling.

Chain supporter
A cooperative providing services to enhance the efficiency,
effectiveness and quality of the activities and products of its
members (and possibly non-members) without buying or
owning the product.

Consumer
The consumer consumes the product. His/her satisfaction is
the objective of all other customers.

Cooperative
Regrouping various marketing services a cooperative can provide,
marketing
i.e. collective marketing as well as marketing services that
support the individual marketing of its members.

Customer
The cooperative’s customer is the individual or organization
that actually pays for and takes delivery of the goods from
the cooperative. This can be, but is often not, the final
consumer, whose satisfaction is the objective of all other
customers.

Fair
A trading partnership, based on dialogue, transparency and
Trade
respect, that seeks greater equity in international trade. It
contributes to sustainable development by offering better trading
conditions for, and securing the rights of, marginalized
producers and workers – especially in developing countries.
Source: Fair Trade Glossary, http://www.fairtrade.net/fileadmin/user_
upload/content/2009/about_fairtrade/Fair_Trade_Glossary.pdf (accessed

xii My.COOP
19 Oct. 2011).

Marketing
Marketing is everything related to selling the product:
assessing needs, defining markets, storing, certifying,
promotion, and so on.

Module 4 · Cooperative Marketing xiii

Marketing A marketing mix is composed of 5 elements: product, price,
mix promotion, packaging and place. These elements are also
referred to as “the 5 Ps”.

Market
Market development is the expansion of the total market for a
development
product or company. This can be achieved by (1) entering new
segments of the market, (2) converting non-users into users,
and/ or (3) increasing usage per user.

Market
Any information used or required to support marketing decisions
information

Market
Newly identified trend in terms of needs, wants, or demands a
opportunities
firm can exploit because it is not being addressed by
competitors.
Source: http://www.businessdictionary.com/definition/market-opportunity.
html (accessed 19 Oct. 2011).

Market
Market penetration occurs when a company
penetration
enters/penetrates a market with current products.
Source: http://www.encyclo.co.uk/define/Market-penetration (accessed 19
Oct. 2011).

Market
Market segmentation is about understanding the needs of
segmentation
customers and how they decide between one offer and
another.

Market
A percentage of total sales volume in a market captured by a
share
brand, product, or company.
Source: http://www.businessdictionary.com/definition/market-share.html
(accessed 19 Oct. 2011).

Marketing
A strategy that integrates an organization’s marketing goals
strategy
into a cohesive whole.
Source: http://www.businessdictionary.com/definition/marketing-strategy.
html (accessed 19 Oct. 2011).

Market
A market in which current trade and quote information is
transparency
readily available to the public.
Source: http://financial-dictionary.thefreedictionary.com/Transparent+Market
(accessed 19 Oct. 2011).
 Organic An ecological production management system that promotes
agriculture and enhances biodiversity, biological cycles, and soil biological
activity.
Source: http://www.nal.usda.gov/afsic/pubs/ofp/ofp.shtml (accessed 19
Oct. 2011).

Production
The quality levels relating to production.
standards

Specialized
Specialized markets refer to those markets which require that
markets
the cooperative products meet certain quality standards
before they can be sold.

Transaction
Mainly, costs of the preparation and execution of business
cost
transactions, costs of collecting and processing relevant
information (in order to indentify the best offer, business
opportunities and risks). Costs of drawing up agreements
and controlling their implementation.
Source: H.H. Münkner and J. Txapartegi Zendoia: Annotiertes
Genossenschaftsglossar, Annotated Co-operative Glossary, Glosario
cooperativo anotado (Geneva, International Labour Organization, 2011).

Upgrading
The concept of upgrading highlights options available to
farmers and cooperatives for obtaining better returns from
their activities.
Source: http://www.kit.nl/net/KIT_Publicaties_output/ShowFile2. aspx?
e=1687 (accessed 19 Oct. 2011).

Value chain
 A value
chain
refers
to the
entire
system
of
producti
on,
processi
ng and
marketi
ng of a
particul
ar
product
, from
inceptio
n to the
finished
product
.

xiv My.COOP
My.Coop
Managing your agricultural cooperative

Introduction
Why this training package on the management of
agricultural cooperatives?
Agriculture is a crucial democracy, for a
sector for global better distribution
development as of income and for
“farmers feed the the economic d
world”. Agriculture is evelopment of a
also the second country.”2
greatest source of Evidence shows
employment that
worldwide.1
Historically speaking,
agriculture has been
key in the
development paths of
many countries.
Within the diversity of
cooperatives
worldwide – one finds
for instance
cooperatives amongst
news agencies, schools
and green energy
suppliers – agriculture
remains
a sector where
cooperatives are a
prominent form of
enterprise. This
package is
motivated by the
conviction that
“strong and
representative
agricultural
organizations are
indispensable for the
promotion of
m a , Ethiopia, France, India, the cooperative usually have
a l Netherlands, New Zealand, as to do with governance
n well as the United States of and management issues.
y s America, also have strong Cooperatives are
e agricultural cooperatives.3 enterprises for which the
c c However, agricultural primary aim is not making
o t cooperatives face numerous profit but responding to
u o external and internal members’ needs and
n r challenges. External challenges aspirations. Cooperative
t , may be linked to markets, members own their
r regulations, infrastructure or enterprise through
i s climate change. Challenges cooperative shares, they
e u that are internal to the control their enterprise
s c
h 1 The service sector is the most important source of employment in the
world. See: http://www.ilo.org/
w public/english/dialogue/sector/sectors/agri/emp.htm (accessed 7 Oct.
i a 2011).

t s 2 About Agriterra, http://www.agriterra.org/en/text/about-agriterra (accessed 22 Sep.

h , 2011).

3 Source: Global 300, http://www.global300.coop (accessed 7 Oct. 2011).

a f
n o
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i
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o s Module 4 · Cooperative
r t Marketing
t a
a n
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t e
,
a
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i g
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u n
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 through democratic mechanisms, range of partners such as
and, finally, they are the principal cooperative development agencies,
users of the cooperative services. cooperative colleges, cooperative
This makes the cooperative a organizations, organizations of
resilient but also a complex and agricultural producers, universities
challenging and agencies of the United Nations.
business model. Cooperatives may More information on the partners
find themselves stretched between (at can be found in the list that is
times conflicting) members’ interests, included at the beginning of this
business opportunities and social document.
considerations.
The objective of this training
material is to enable (existing and
potential) managers of agricultural
What is My.COOP about? cooperatives to identify and
My.COOP stands for “Managing address major management
your agricultural cooperative”. challenges that are specific to
The My.COOP training package cooperatives in market oriented
aims agricultural development.
to strengthen the management of
As stated above, cooperatives may
agricultural cooperatives so that they
find themselves stretched between
can offer high quality, efficient and
(at times conflicting) members’
effective services to their members.
interests, business opportunities and
The package draws on the ILO social considerations. Within such
training series developed by the context cooperative managers
Materials should ensure sound decision-
and Techniques for Cooperative making on service provision for
Management Training Programme services that are common to many
between 1978 and the early 1990s. agricultural cooperatives, including
Today, My.COOP is a broad supply of farm inputs and marketing.
partnership initiative initiated by the These issues are reflected in the
ILO Cooperative Facility for Africa structure of the My.COOP training
and ILO’s Cooperative Branch. It is package:
the result of a collaborative effort
involving a wide
1
Basics of Agricultural Coope

2 Cooperative Service Provision

3 Supply of Farm Inputs

2 4 Cooperative Marketing
My.COOP
For whom is My.COOP?
My.COOP has been designed for and individuals that train
existing and potential managers of agricultural cooperatives. These
agricultural cooperatives as well as can include:
for members involved in managerial
● leaders and managers of
tasks of the cooperative. The
cooperative structures, such
material presumes that these
as unions, federations and
women and men already possess
confederations;
some practical experience as active
members in ● cooperative trainers working
agricultural cooperatives. The material in cooperative colleges,
is not developed for people who are non- governmental
starting an agricultural cooperative organizations (NGOs) and
for the first time. other (including private)
training providers;
In addition, the My.COOP package
can be a helpful tool for ● cooperative officers and
organizations extension staff of
government departments
and agencies.

What’s in the package?

T
h
e

t
r
a
i
n
i
n
g

p
a
c
k
a
g
e
c d
o u
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i s
s ,
t
s a
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o
f s
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o o
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e n

t i
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 3
2
Cooperative
Service Provision

Marketing
Cooperati
Module 4
Basics of Agricultural Supply of
Cooperatives
TRAINERS’ MANUAL
Farm Inputs 3

ve
·
Cooperative
Marketing
4 1
 Each module consists of several and concepts as well as self-
learning topics. A learning topic assignments that help the self-
consists of brief content learner to apply the contents to his
descriptions that are or her own cooperative or situation.
complemented with real Modules and topics can be used
life cases from various parts of independently from each other, in
the world that present solution any given order, in line with the
solving approaches to common training needs.
challenges in the management of
agricultural cooperatives.
Besides, each topic My.COOP
offers explanatory boxes on online
definitions also
My.COOP is related
more than a services
training and tools
package. online,
My.COOP is such as a
also a website distance
(www.agricultu learning
re-my.coop) platform
where you can for training
find not only of trainers
the package and a
but mobile
learning
kit.

4
My.COOP
 About Module 4:
Cooperative Marketing4

the marketing of produce.

Compared to customers for their
products, farmers are small-scale and
have corresponding low negotiating
and bargaining power. At the same
time, the transaction costs for
collection and marketing of
agricultural products for the individual
This module is about cooperative
farmers are very high. To address
marketing. The members of
these challenges, cooperatives can
agricultural cooperatives are farmers
support farmers in marketing by
and therefore primarily concerned
collective marketing or by providing
with production. This requires a
marketing services, for example the
variety of support services. A
provision of market information or the
cooperative can play an important
establishment of contacts between
role in meeting the needs of its
farmers and potential buyers.
members by providing them with
Marketing
services that help them optimize
is everything related to selling a
their production. When farmers do
product: assessing needs, defining
not produce for their own use but
markets, certifying products,
aim to sell their produce
promotion, and so on.
on the market, they might need
additional services: for example, Marketing is based on thinking
transporting, and sometimes sorting about the business from the point
and grading and adding value of view of the customer, and
through processing. Another considering customer needs and
important satisfaction.5
group of services in which many Marketing services focus on smooth
cooperatives are engaged is related marketing of the product. For
to example, marketing services could
involve

4 This module builds partly on M. Harper: Marketing of agricultural production, Material for
management training in agricultural cooperatives, MATCOM (Geneva, International Labour Office,
1991) and J.F. Hein: Export marketing, Material for management training in agricultural cooperatives,
MATCOM (Geneva, International Labour Office, 1992).

5 A customer is often not the same as the final consumer of a product. A direct buyer is the customer that
6 My.COOP
actually receives and pays for the sold goods or services. The customer, for example a supermarket, then
sells the product to its final consumer. The consumer is the one that consumes the product.
Module 4 · Cooperative Marketing 5
transport or storage of the products or, for example, sending information
from the production area to the market (e.g. on products available,
volumes) and from the market back to the production areas (e.g. on prices
and supply levels, consumer preferences and changes in taste). If marketing
services are improved, this will contribute to better performance by the
farmers.

Content of this module

This module on cooperative marketing discusses a number of challenges for
managers of cooperatives. There are two different groups that have to be
satisfied: the members as suppliers and the end buyers of the produce.
This module helps the reader to understand the challenges related to
marketing services, including collective marketing, and to identify adequate
responses.
The module is split up into three sub-sections with the following topics:
Topic 1: Marketing
Services Topic 2: Strategic
Marketing Topic 3:
Certification

Learning objectives
After studying this module, you will be able to:
 explain how a cooperative can get to know its customers;
 identify ways in which a cooperative and its members can improve their
marketing performance;
 distinguish different methods of “upgrading”;
 target markets more efficiently;
 explain the 5 Ps of a marketing mix;
 explain the importance of knowing the (changing) context in which customers are
embedded;
 propose how a cooperative can adequately respond to changes in this context;
 propose relevant certification schemes and explain the pros and cons.
TOPIC 1

Marketing
Services
 Introduction to the topic
Marketing
In the other training modules, we have seen that
Marketing is everything
cooperatives are involved in a number of services, related to selling a
including input supply services, financial services and product: assessing
value added services. All these services support farmers needs, defining markets,
in their activities. In this module we focus on one storing, promotion, and
so on. Marketing is based
specific set of services: marketing services, including on thinking about the
collective marketing. business from the point
of view of the customer,
Originally, the term “marketing” referred to going to and considering customer
the marketplace to buy or sell goods. The producer needs and satisfaction.
would sell his or her goods directly to the consumer.
Today, the producer and consumer do not usually
meet face-to-face.
Farmers do not deliver
products directly to consumers, but they still
The cooperative’s need to get their goods to the consumer in some
customer way. Farmers sell products to a trader or
The cooperative’s customer processor.
is the individual or Cooperatives can assist in this, by providing
organization that actually
marketing services, and linking farmers to
pays for and takes delivery
of the goods from the these customers.
cooperative. This can be,
Marketing services encompass a range of
but is often not, the final
consumer, whose satisfaction activities. Examples of marketing services are:
is the objective of all other informing the market about products available,
customers. The needs of your and the other way round, informing members
customer, however, depend
on the demands of his or her
about customer preferences, price information
customers, etc. services and branding. We also consider
collective marketing to be a service that a
cooperative can provide to its members.

Collective marketing
Cooperatives can either support their members’ individual marketing by
providing them with marketing services, or they can buy their members’
produce and market it themselves. The latter is called collective marketing
and is a feature of many cooperatives.
Collective marketing therefore refers to “selling together”. In collective
marketing, the cooperative buys the members’ produce and becomes the
owner of the produce (i.e. a chain operator). The premise of collective

Topic 1 · Marketing Services 9

 marketing
is that selling together brings more benefits for smallholders than selling

1 My.COOP
Price instability in rural Africa
Prices fluctuate widely between areas,
within a season, and between seasons. individually. Individually, these farmers
This is related to the dominance produce low volumes of products and
of rain-fed agriculture, frequent often fetch low prices. By jointly selling
harvest failures, limited storage
farm products, farmers can negotiate
facilities, and the limited integration
of markets due to poor roads. During better prices and services. Collective
“normal” years, producers’ prices for marketing can empower farmers in
staple food crops can be expected to markets.
double or increase even more, from
immediately after the harvest to the Collective marketing also helps to meet
“lean season” before the next harvest. market requirements, especially for
Source: Royal Tropical Institute, Amsterdam, and accessing markets outside the local area
International Institute of Rural Reconstruction,
Nairobi: Trading up: Building cooperation
(e.g. urban markets or export markets)
between farmers and traders in Africa or for delivery to a processing industry.
(Amsterdam, KIT Publishers, 2008).
These markets often demand higher
volumes, which requires bulking.
A cooperative can take various
collective marketing measures. As a
first step, a
cooperative can help farmers to bulk their produce. Bulking can be done
in different ways, using different methods (e.g. temporary collecting
hubs, local storage, etc.). Another step in collective marketing that a
cooperative can take is to add value to the produce it now owns. For
example, if it is a maize cooperative it can add value to the maize by
drying and packaging it. As a
result of this service, the cooperative can negotiate a higher price. But
providing extra services also involves a cost. Whether or not adding value is
worth
the investment depends on the costs and benefits, and also on the market
requirements.
Collective marketing of agricultural produce has some particularities. One is
that collective marketing implies that there are two different groups that
have to be satisfied: the suppliers/producers and the buyers of the produce.
The suppliers are often the members of the cooperative. Consequently, as a
cooperative, you are restricted in the selection of markets and types of
products. A cooperative has less freedom: because the cooperative is set up
by its members, it is expected to buy what the members supply and pay a
fair price for the produce. This situation can affect the cooperative’s ability
to compete with, for example, traders, who have more freedom to choose
the farmers and supply markets they source from. This poses a number of
challenges to managers of cooperatives involved in marketing, especially in a
market where uniform product quality is required.
How can a cooperative align the activities of the different farmers to
ensure the delivery of required quantities of uniform products at a
specific time?
Sanctioning is an option, but not always appreciated. There are also more
positive incentives that can stimulate farmers to meet production
standards, for example, paying premium prices for high-quality products.
The case of Rukaka Dairy Cooperative in Uganda illustrates this.

Case 1.1: Improving quality by means of incentives

Diversity can give strength to a group, but it can also be a problem.
Cooperatives can benefit from having very diverse members because they can
contribute different ideas, experiences and points of view. But this diversity can
be a challenge when the aim is to produce and sell a product of uniform
quality. One approach to dealing with variations in quality is to adopt a
punishing attitude: farmers who do not comply with certain standards are
excluded from the cooperative. The problem with this approach is that, while it
might benefit the cooperative as an organization, it does nothing to improve
the livelihood of the individual farmer. The solution implemented by the Rukaka
Dairy Cooperative in Uganda takes a more positive approach. Instead of
punishing members who fail to comply with certain standards, the cooperative
plans to reward those who do. This will create an incentive for farmers to
improve production – and will provide them with better incomes.
The problem of mixed quality is common among dairy farmers in the
Mbarara district of Uganda. Currently, all producers are paid the same price,
regardless of the quality of the milk they deliver.
 This means that farmers who invest in better breeding and handling
technologies are not rewarded, so there is very little incentive to improve
quality. If better milk was better paid, farmers who improved their quality
standards could increase their income. The Rukaka Dairy Cooperative in Uganda
has set out to solve this problem by paying a premium price for quality milk,
with the aim that producers upgrade their production standards, acquire a more
business-oriented attitude towards diary farming, and ultimately increase their
incomes. Paying a premium price is a long process that requires many changes.
Firstly, the cooperative has invested in
a new cooling infrastructure that allows its members to improve handling of this
perishable product. Secondly, farmers have been given the necessary support to
achieve better breeding techniques and improved pastures. Lastly, the
cooperative has invested in milk-testing technology that will allow it to grade the
milk accurately and test its quality.
The cooperative has made important advances, but the process is ongoing. The
infrastructure has been improved, and production has already increased.
Farmers have many of the tools they need to provide better quality milk – but
one crucial part is missing. Currently, the only buyer of milk pays soley based
on volume, not on quality. The Rukaka Dairy Cooperative is now involved in
building its own factory and processing plant, a move that will allow it to
become an important buyer. Once the plant is finished, the cooperative will
create demand for quality milk, and establish a premium price that will
encourage members to produce it.
Source: based on an interview with Leuben T. Baseeta, advisor to the Rukaka
Cooperative, and on an evaluation report prepared by an ILO consultant.

Self-assignment 1.1
Paying a premium for quality products is not always feasible. What could be
other incentives for the Rukaka Dairy cooperative to improve the quality and
uniformity of its produce?
Now, think about your cooperative. What does it do to stimulate supply that
meets market standards?

Collective marketing also poses some other challenges. Some of them

have to do with finance. Marketing cooperatives are more capital-
intensive than other cooperatives due to the fact that the harvesting (i.e.
the moment that
cooperatives buy their members’ products) and sales seasons (i.e. the moment
 they sell the
products to
customers) are not
always exactly the
same. If farmers are
not paid
immediately they
might decide to sell
their produce to
middlemen. Many
cooperatives face
the problem of side-
selling. If a
marketing
cooperative does
not apply a 100 per cent delivery duty to its members, the cooperative
will most likely face difficulties. This could even lead to losses and
eventually to bankruptcy.
Costs pose another risk. Weighing, checking quality, paying farmers all
involves administrative work and requires investments (e.g. buying
weighing scales). A cooperative manager should reflect carefully on
whether investing in collective marketing outweighs the price benefits
received. Price instability is another challenge, especially when there is a
price difference between the moment of delivery and the moment of
payment.
A cooperative sells products coming mainly from its members. But where
can a cooperative best sell these products? The answers to this question
can vary from the local market in the village, to a nearby town where
agricultural products are being sold on the market, or to a futures market,
where future contracts for delivery of commodities are traded on an
auction. Before starting marketing, a cooperative needs
to take the decision on where to market and what members.
strategy will be used. For such decisions, Market information includes
information about the market is highly relevant. information on marketing
channels, buyers, quality
standards and so on.

Market information
A cooperative needs market information for
collective marketing, but it can also collect and
disseminate market information as a service to its
Market information
Market information is the generation,
processing and dissemination of all facts
regarding the marketing
of different commodities.
What market information do cooperatives and their
members need?
Some examples of information that is important for marketing are:
● actual price of agricultural and livestock commodities;
● insights into price trends;
● competitors and their marketing strategies;
● requirements of consumers;
● required arrival timings of commodities;
● quality specifications by various buyers;
● grades and standards;
● packaging specifications preferred by buyers;
● terms and conditions of different commodity traders;
● transport costs;
● market fee/levy/charges, taxes, among other things;
● international standards for commodities;
● world market price trends.
Access to market information is not always possible and is often unequal.
For example, large buyers of agricultural products often have better access to
market information than smallholders. Unequal access to market information
or shortages of reliable market information could be one of the reasons for
farmers’ low bargaining power and ultimately, the low prices they derive from
marketing agricultural commodities.
Providing market information is a valuable service that a cooperative can
offer to its members. Cooperatives first of all need to gather market
information.
Then, the information needs to be disseminated to members.

How to access information?

Information is
Generating and disseminating reliable market not free
information can be a costly exercise. Moreover, Generating and
poor infrastructure, such as computer networks disseminating market
and telecommunication equipment, internet information requires
skill and time. It
connections can be worthwhile
and electricity supply, is often problematic. Also, to recruit and train
less transparent market operators can make it market information
promoters.
difficult for a cooperative to provide adequate
services.
 My.COOP

14
In Module 1 we described the cooperative pyramid. It might be easier to
get access to information at union level than at primary cooperative level.
Unions operate on a larger scale and are often closer to national
government bodies, partners and information networks. A union could
support the availability of market information to its cooperatives by, for
example, keeping track of market trends and publishing the information on
a website.
If market information is not available, it may be necessary to perform
market research. A cooperative can carry out market research for its own
sale strategies; it can also perform market research as a service to its
members that sell individually. The results of research should direct the
cooperative or the producer to trade what their customers need and want.
It is important to note that access to information does not always
improve the bargaining position of farmers, especially in more remote
areas with poor coverage by traders.6

Market research
Market research is used to identify and analyse
the requirements and needs of the different Market research
markets. Separating the many customers into Market research involves the
specific groups is referred to as market process of systematically
segmentation. Market segmentation is about gathering data related to
cooperative marketing, and
understanding the needs of
the recording, interpreting
customers and how they decide between one offer and reporting of the
and another. findings to the cooperative
management in order to
Often, a cooperative will not do market research make informed decisions.
itself, but will hire a firm or consultant to get the Market research is also about
required information. Before hiring a consultant to understanding competition
and the success of the current
do any type of market research, the cooperative marketing strategy in place.
should define what markets it wants to research
and what it wants to achieve from the market
research. This will differ from cooperative to
cooperative. A recently established
cooperative may want to identify potential products or markets. Others may
want to understand how their cooperative relates to competitors in the
market. And others might be more concerned with understanding their
members’ potential in terms of delivering to a selected preferred marketing
channel.
Other criteria include, for example, the availability of financial resources for
conducting market research.

Topic 1 · Marketing Services 1

 6 H. Kindness and A. Gordon: Agricultural marketing in developing countries: The role of NGOs and
CBOs, Policy Series No. 13 (Chatham, UK, Natural Resources Institute, 2001).

1 My.COOP
A decisive factor in choosing a method to
gather your market information is the location
of the markets that are of interest to your
cooperative and its members. If you sell on
the domestic market, getting data on
consumer needs is both important and
feasible. This is different if the produce is
exported. In this case, it makes more sense to
question direct buyers of the products, instead
of the consumers, who are far away from your
market.
After identifying the objective and the
location of the market, the process of
gathering data can
start. Market research should take place
regularly. Customers’ needs change over time
and the economic context is continuously
evolving.
If a cooperative has access to the desired
information, the next step is to disseminate
this information to members.

How to disseminate market information?

There are many different strategies that a cooperative can use to
disseminate market information. A cooperative could use different kinds of
media, such
as radio, newspapers, internet or cooperative billboards. Mobile phones are
increasingly used to access and distribute information. The following case,
from Kenya, gives an example of how mobile phones are used to send
market information in real time. This contributed to market transparency
and enabled Kenyan fishermen to make better deals.

Case 1.2: Creating market transparency using technology in

Lake Victoria
Small-scale producers around the world face many common challenges, from
unpredictable natural cycles to limited availability of technical resources and
credit. Very often, producers lack something less tangible, but equally
important: information. Information is a crucial resource for participating in
the market, either as a buyer or a seller. The more you know about prices, or
how much is being produced and purchased, the better you can negotiate and
get a fair deal. Unfortunately, producers often lack this kind of information,
and end up in a position of disadvantage relative to their buyers.
Kenyan fishermen, who work in Lake Victoria, are no exception. Even though
the fishermen benefit from being organized into cooperatives, fishing landing
sites and markets are separated by long distances, so fishermen have very
limited information about the market conditions. How much fish was caught in a
given day? What prices were paid on the opposite shore? Having this
information would be very valuable in order to negotiate a good price, but it is
hard to come by.
This is the problem that the Kenya Marine and Fisheries Research Institute,
working together with fishing cooperatives, set out to address. The Lake
Victoria region is reasonably well covered by mobile networks, and mobile
phones are widely available in the area. Why not use these technologies to the
fishermen’s benefit?
The concept is fairly simple: fishermen use their mobile phones to send
information in real time about catch volumes and prices being paid at
about 150 different landing sites and fish markets around the lake. This
information is then gathered and processed at a data centre, from where it
is then made
publicly accessible via mobile phones, the internet, printed media and radio.
The information received by fishermen around the lake is not only about the
prices paid, but also about the number of buyers and storage trucks, as well
as key weather data that can affect fishing conditions. This information is a
powerful asset for fishermen’s cooperatives. In the first place, middlemen
find it much harder to fix false prices. Secondly, fishermen are able to avoid
landing sites that are over-supplied, and save on transportation costs. If
knowledge is power, then the information system established in Lake Victoria
is certainly empowering.
Source: ILO/COOPAFRICA: Enhancing fish market information (EFMI): Use of modern
communication technology to improve Lake Victoria fishing cooperatives income (2009),
http://www.ilo.org/public/ english/employment/ent/coop/africa/download/kmfri.pdf (accessed
19 Oct. 2011).
In the case of fishermen in Lake Victoria, it turned out to be strategic for
fishing cooperatives to work together with the Kenya Marine and
Fisheries Research Institute. It also illustrates that it can be a good option
to build upon the cooperative structure for dissemination of information.
For example, a contractual agreement between a cooperative union and a
mobile phone services provider to transmit market information to primary
cooperatives and individual farmers can be considered.

Self-assignment 1.3
What is the role of your cooperative in generating and providing market
information to your members? Try to list the benefits and the costs of this
activity. What are the constraints?
TOPIC 2

Strategic
Marketing
Introduction to the topic
In planning for marketing, the organization basically has to decide what it is
going to sell, to which target market and with what marketing mix.7
Markets differ in their needs and requirements. They are different in terms
of geographic location, economic class, social-cultural aspects, etc.
Differences between domestic and international markets can be large.
These differences lie almost entirely in the differences in national
contexts.8 Other examples of very different markets are specialized
markets, such as fair trade and organic markets. Accessing these markets
requires meeting standards and obtaining a certificate (Topic 3 elaborates
on certification).
If you have sufficient information on the different markets you can decide
what market a cooperative can best target. But sometimes a cooperative has
little choice. Their farmers’ products, for example, only comply with the
requirements of the local market. In other cases, a cooperative can target
various markets.
Everything depends on the products the members are able to supply. A
cooperative can play a role in “upgrading” the products, helping them to
meet specific market requirements and access new markets.

Upgrading
Targeting markets through upgrading The concept
of “upgrading”
Cooperatives involved in collective marketing have two main
highlights
clients: their members, who supply the produce and their options
business partners, to whom they sell. When members and/or the available to
cooperative are able to improve their performance, buyers might farmers and
cooperatives
be more willing to buy the improved product, pay a higher price, for obtaining
or to buy more. better returns
from their
There are different ways for cooperatives and their members to activities.
improve their performance, and to enter into more favourable
contracts. For example, the cooperative can support farmers to
move into more sophisticated product lines (niche markets),
which is also known as “product upgrading”.9
Product upgrading means improvement of the product marketed. Farmers can

7 Food and Agriculture Organization of the United Nations: Introduction to Global Marketing (Rome,
FAO, 1997), http://www.fao.org/docrep/W5973E/w5973e02.htm (accessed 19 Oct. 2011).

8 ibid.

9 It can be helpful to distinguish different upgrading strategies: product upgrading, process upgrading,

Topic 2 · Strategic Marketing 2

 functional upgrading, inter-sectoral upgrading and social upgrading: L. Dell et al.: Making retail supply
chains sustainable: Upgrading opportunities for developing countries (2009).

2 My.COOP
improve their product in various ways. For example, they may plant a
new variety that has more desirable characteristics; or they may invest
more time in post-harvesting (e.g. drying and fermentation), which
increases the quality
and the price of the product. The cooperative can support farmers in doing
this. It can also support farmers in accessing alternative certified markets.
Certified products receive higher prices.
A cooperative can also support farmers in improving the way products are
being produced; this is known as “process upgrading”.
Process upgrading means producing the same product more efficiently, for
example by using new technologies or management methods. For example,
farmers may grow more by applying fertilizer; they may reduce pest attacks
and save costs through integrated pest management rather than spraying.
Process upgrading can also take place at the level of the cooperative. The
cooperative may husk maize more quickly using a machine rather than by
hand; or it may invest in building new grain bins to improve storage.
Process upgrading can also refer
to better working conditions and
lessen health and safety risks.
This is also known as “social
upgrading”. What can
agricultural cooperatives do to
achieve this? Cooperatives can
take action at the cooperative
site (for instance around
warehouses, sorting
and grading areas) and at their
members’ farms. They can raise
awareness of dangers (for
instance, through posters and
signs) and train members on
handling machinery, equipment
and agro- chemicals. They can
also develop user instructions and
distribute protective clothing and
equipment in order to reduce
risks. Modelling good practice at
the cooperative site may inspire
replication at members’ farms.
The box below refers to a practical
tool that cooperatives can easily
use for this purpose.
 Box 2.1: Action list on health, safety and working conditions in agriculture

To assess health, safety and working conditions, cooperatives can use the action list
developed by the ILO. It provides examples of practical and low-cost actions for
improvement, and is illustrated with drawings and pictures. The checklist can be adapted
easily to the context of the cooperative for six working areas:
Material storage and handling;

Work station design and work tools;

Machine safety;

Work environment and control of hazardous agents;

Welfare facilities (such as toilets, drinking water or a shaded and furnished place to rest and eat);
Work organization.

Example of improving the work station design: arranging and sorting potato seeds usually
requires a continuous standing posture. Place a stool near to the work area and occasionally
lean on the stool to rest during work.

Source: ILO: Work improvement in neighbourhood development: Training programme on

safety, health and working conditions in agriculture (Bangkok, 2002).

If better member performance leads to access to new markets, this does

not automatically result in more returns for a cooperative and does not
always satisfy all members. It can be the case that for some members it is
more difficult to obtain higher returns than for others. The cooperative
should consider whether unequal opportunities exist and think carefully
about the advantages and disadvantages of the desired strategy. Relevant
questions may be: is there a market for better quality? Is the price
difference worthwhile?
Are members excluded from accessing a premium market (which is in need
of additional services)?
Instead of focusing on the performance of its members, a cooperative can
also focus on improving its own performance by looking for ways to add
more value to the products it buys from its members. For example, a
cooperative could start processing the products (e.g. instead of selling
bulked paddy rice, sell bulked white rice) or invest in packaging. This is also
known as “functional upgrading”.
Functional upgrading means taking on new activities or changing the
mix of activities a cooperative undertakes in order to add value to the
produce
marketed. Processing and branding are examples of functional
upgrading for a cooperative. These kinds of activities are often not
feasible for individual farmers. For farmers, collective marketing is an
example of functional
upgrading: a cooperative enables farmers to perform a function higher up in
the value chain, namely marketing instead of production alone.
If a cooperative embarks on activities higher up in the chain, the chain
becomes shorter and the cooperative starts receiving a higher margin.
Although tempting, it is not always the best way forward. For example,
getting rid of middlemen that distribute the produce implies getting rid of
the people who are specialized in this task. Is the cooperative ready to
replace this specialist? It might be more rewarding to start working better
with traders instead of removing them.10 So, in case a cooperative considers
taking up such new tasks, questions could be: does the cooperative already
have the skills to become involved in these new activities? Does this new
activity require any investments or additional costs?

Diversification
Instead of focusing on “doing better” it can also be strategic for a
cooperative to explore how higher returns can be obtained by doing
different things. It may, for example, be strategic to diversify products and
services. For example, farmers may start growing a new crop, keeping a
new species of livestock, or beginning a new enterprise such as dairying or
agrotourism. For farmers, diversification can be an important strategy for
dealing with risks. If farmers transfer their skills and experience from their
existing enterprises to a new activity in another value chain this is referred
to as “chain upgrading” or “inter-chain upgrading”. A cooperative can use
the same strategy. The case of Central Lanera Uruguaya (CLU, Uruguayan
Wool Central) gives an example of a cooperative that responded to changes
in demand for (lambs)wool by converting slowly to

10 Royal Tropical Institute, Amsterdam, and International Institute of Rural Reconstruction, Nairobi:
Trading up: Building cooperation between farmers and traders in Africa (Amsterdam, KIT Publishers,
2008).
(lamb) meat production. Because the cooperative continued to build upon
core activities in its market reorientation, it was able to face challenges and
still exists now.

Case 2.1: Confronting the challenge of innovation

It is often noted that once a cooperative becomes successful, it becomes
irrelevant. This may be something of an exaggeration, but it is certainly true
that when cooperatives are able to fix some of the market problems that
they were set up to solve, it is much harder for them to continue to justify
their presence to their members. This is what happened to CLU, a very
successful lambswool commercialization cooperative in Uruguay. The
solution: keep being good at
its core business, and offer a new service that adapts to the market’s changing
conditions.
When CLU came into being over 40 years ago, the market for wool was not
transparent, and wool producers were not receiving a fair deal. The
cooperative was set up using a very simple idea: it would pay a fixed price
(which it called “average price”) for every type of wool, regardless of the
volume purchased.
Furthermore, it would announce its price early in the harvesting season,
even before other buyers had determined theirs. The average price set by
the
cooperative became a sort of baseline price, effectively forcing competitors to
at least match CLU’s price. After four decades of consistently offering an
average price, CLU had created a more transparent market, benefiting even
those producers who did not sell to the cooperative.
With the market becoming more transparent, CLU’s role was seen as less
necessary. The cooperative decided to stick to its time-tested system of paying
an average price, but it also decided to take a step in a new direction. Realizing
that the world demand for wool was declining due to the use of synthetic
fibres, the cooperative began to promote conversion to meat production. The
conversion was slow and difficult, but the cooperative used its credibility and
financial robustness to aid its members in the process. Today, meat is a far
more important business for Uruguayan lamb ranchers than wool, and CLU has
been playing a leading role in driving new technologies by offering the same
system of average prices that helped it build its success with wool.
Source: based on an interview with Gastón Rico, founder of Central Lanera
Uruguaya, an Agriterra partner, and with Christian Gouet, an Agriterra consultant.
 Self-assignment 2.1
How could your cooperative contribute to better performance from its
members? What are the possible constraints or requirements?
How could your cooperative improve its own performance and add value to the
products it buys? What are the costs and benefits of “upgrading”?

Marketing mix
Marketing is about building lasting relationships that satisfy the needs of
the supplier and the buyer. The key elements of marketing are “customer
value”, “competitive advantage” and “focus”. This means that organizations
involved in marketing have to study the market, develop products or
services that satisfy customer needs and wants, develop the “correct”
marketing mix (product, place, promotion, price and people) and satisfy its
own objectives as well as giving customer satisfaction on a continuing basis.
Although farmers want to receive the best price for their products,
customers want to buy products at the lowest possible price. But they also
want good quality products and may be willing to pay more for higher
quality products. Customers also want the products to be available when
they need them.
A cooperative’s strategy must take these needs, also referred to as QQF
(Quantity, Quality and Frequency), into consideration:
● Quantity refers to the volume of the agricultural produce taken to the
marketplace for the intended target market. The right quantity is
necessary for both the seller and the buyer.
● Quality is the perceived benefit/value of the produce. From the
perspective of the buyer, quality is linked to meeting changing tastes
and preferences of consumers. From the cooperative’s perspective, it is
the cost of producing the agricultural produce plus the desired surplus.
● Frequency refers to the number of times/the period when the
cooperative’s produce is expected to reach the intended customers and
consumers. Frequency affects transport costs and storage needs.
The 5 Ps
An agricultural cooperative could enhance its marketing in different ways
by influencing the following elements: product, price, promotion,
packaging and place. These elements can be referred to as “the 5 Ps”
and are known as the “marketing mix”.

1. Product
This refers to the commodity that a cooperative produces and has to
present to the market for the intended customers. The product should be
the right one
for the customers based on their needs and wants. To meet the demands of
the customers, a cooperative could:
● enhance the quality of the products to
meet customers’ quality standards;
● ensure that the right quantities
are available at the time they are
requested by customers;
● enhance packaging and
labelling, ensuring the right
packaging size, materials and
information.
● Cooperatives can enhance the
quality of products in order to
meet market demands. This is
very much related to Quality in
the QQF.

2. Price
From the seller’s perspective, this is the value of the product which
incorporates the cost of producing the product plus the desired surplus. From
the customer’s point of view, this is the amount of money which the customer
will have to part with in order to obtain the product from the cooperative.
Cooperatives need to set a competitive price that provides surplus. The right
price determines the marketing of the product.

3. Promotion
This is considered to be the activities which the cooperative can use to
create awareness about the existence and quality of the product amongst
the intended consumers. This may include advertising, sales promotion,
personal selling, public relations, and direct marketing. For example, in its
promotion
and marketing, a cooperative can shift from product awareness to low
price awareness, to attract the next layer of price-sensitive consumers.
This is especially important if the cooperative is targeting price-sensitive
consumers.

4. Place
It is important that a product
is available and accessible at
the right place and the right
time. Good distribution
ensures that the cooperative
product
is available and accessible
to consumers. Cooperatives
should place emphasis on
the convenience of
accessibility of their produce
to the intended consumers.
A channel of distribution is a
mechanism through which
goods and services are
moved from the cooperative
to the customers. Adequate
distribution systems enhance
the marketing of the
product.

5. People
“People” refers both to the
customer and to staff. For
customers, it is important
to
know: what kind of customers are they? Who are they? What are their
needs? Can they be broken down into groups with common characteristics,
needs, etc.? What are the customer strategies?
People refers also to people working within a cooperative. You could call
this “internal marketing”, which can be defined as “the task of successfully
hiring, training, and motivating able employees who want to serve the
customers well”.11
By using the 5 Ps in an appropriate manner, a cooperative can achieve its
marketing objectives. For example, it could aim for market modification. In
this

11 People, de vijfde P in de marketingmix, http://zakelijk-financieel.todio.nl/marketing-advisering/people-de-

vijfde-p-in-de-marketingmix-2237.html (accessed 19 Oct. 2011).
case the cooperative will try to increase the number of customers
purchasing the product by identifying new users or converting non-users
into users and entering new market segments. By studying its customers,
it can decide to modify the marketing mix: other marketing programmes
should be reviewed according to customers’ interests. For example, such
measures could include effective pricing, effective distribution and
effective promotion. If the price has been considered by the consumers to
be high, the cooperative may consider shifting the price downward in
order to attract the many price-sensitive consumers.

Self-assignment 2.2
List the activities for each of the Ps for your cooperative. What could be a
good marketing mix for your cooperative?

Satisfying member needs

When choosing a marketing strategy, the short-term satisfaction of
members and the long-term viability of the enterprise can be a dilemma. In
this case, the manager has to balance the different interests and sometimes
make tough choices. A case from the Philippines shows how a new
management team dealt with the dilemma of satisfying customers or
members, and how concentrating on customers and creating profit helped
the cooperative to become sustainable.
Case 2.2: Satisfying customers or members?
The Cooperative Training Centre (CTC, now known as NCMF) is a rice
commercialization cooperative in Manila that was able to turn around its
finances through good management, and some tough choices. The CTC does
not buy directly from farmers, but instead from other smaller producer
cooperatives. Prior to 2001, the CTC was buying rice from many different
suppliers, paying little attention to quality and offering good prices. This led to
a situation in which the buyers were unhappy with the product, and the
cooperative was running very high losses. Things started to change in 2001,
when a new management team was brought in by the board.
The new managers realized that, to make the cooperative sustainable,
they had to satisfy their customers before they could satisfy their
members. Both the quality of the rice and the choice of customers had to
improve. In the competitive rice market of Manila, customers demand very
specific quality
standards and volumes. In a move that was unpopular among the rice
providers, the CTC started by raising the quality standards of its purchases.
This was unpopular because many of the traditional providers could not meet
the stricter standards, but it started to raise the profile of the CTC as a seller
of quality rice. To make up for the loss of suppliers, the CTC started to
purchase from private (non-cooperative) suppliers that did meet the
standards, allowing it to increase its sales volume and begin to turn around
profits. While at the beginning they were unhappy, some producer
cooperatives started to make improvements
and eventually were able to become suppliers of the CTC and benefit from its
favourable prices.
A second thing that the new management realized was that the cooperative
was struggling because it was competing for clients with some of the largest
rice distributors. It needed to find new markets. Instead of selling to
supermarkets, as it had traditionally done, the management identified a
market opportunity:
it decided to sell directly to institutional buyers such as schools and hospitals,
which were not being catered to by the large distributors. The cooperative
bought a truck, and started a very successful sales and delivery system.
Without the competition of large distributors, the CTC was able to find a
favourable commercialization channel that helped it to become profitable again.
Source: based on an interview with Raul Montemayor, member of NCMF, and on
information provided by Christian Gouet, an Agriterra consultant.
 Self-assignment 2.3
Explain some of the marketing strategies you think the cooperative should use
to retain the product at the growth stage.

Strategic marketing
Marketing requires knowing everything about the customer, but even more
important is knowledge of the customer in context, which includes the
competition, government policy and regulations, and the broader economic,
social and political macro forces that shape the evolution of markets. When
marketing also takes into account these contextual factors, we talk about
“strategic marketing”. In strategic marketing, generating benefits for different
stakeholders is crucial.12
So, if a cooperative is involved in providing marketing services it has to
know its main customers and the context of which the customer is part. In
module 1, we already discussed the changing context of the agricultural
market. In this module we also refer to the value chain in which
cooperatives and other chain operators and supporters are embedded. Let
us first take a closer look at the value chain, and see how it helps us in
strategic marketing.

How does the value chain help us in strategic marketing?

A value chain refers to the entire system of production, processing and
marketing of a particular product, from inception to the finished product.
In module 1, we discussed the fact that a value chain consists of a series
of chain operators, linked together by flows of products, finance,
information and services. Chain operators only own the product at one
particular stage of the chain. For example, a farmer owns maize from
planting seed to selling the maize to his/her cooperative, which then
becomes the owner. The cooperative

12 Food and Agriculture Organization of the United Nations: Introduction to Global Marketing (Rome,
FAO, 1997), http://www.fao.org/docrep/W5973E/w5973e02.htm (accessed 19 Oct. 2011).
bulks its members’ maize and packages the produce, before it sells it to
the miller, who is the new owner, etc. At each stage of the chain the value
of the product goes up. The activities needed to increase the value of the
product result in a certain cost. As long as the value increase is larger
than the cost involved in obtaining the higher value, a positive margin
results for the chain operator. The flow of products, money, services and
information between farmers, cooperatives and other value chain
operators varies for each product.
In addition to direct chain operators, such as farmers, cooperatives,
traders, wholesalers, retailers and consumers, there are often other
organizations involved, supporting the smooth operation of the value chain.
These chain supporters may provide financial and non-financial services to
the individual farmers or to the cooperative. Such services include technical
assistance, support in business management, certification support, financial
management, and organizational strengthening. In the example of the rice
chain in Rwanda (see Module 1), a credit provider helped the cooperative to
increase its working capital. If an agricultural cooperative is only involved in
providing inputs to
its members, we do not consider it a chain operator (as the chain starts
with production on the farm), but we do consider it a chain supporter (as
the availability of proper inputs can significantly influence the quantity and
quality of on-farm production).
Chain operators and chain supporters operate within a context that includes
the larger social, political and economic environment. This external
environment affects not only farming activities, but also has an impact on
the whole value chain. Currency exchange rates, government policies, rules
and regulations
as well as infrastructures (water and energy supply, roads, information
and communication technology) may all have an impact on the efficiency
of value chain transactions. Trends in the international environment may
also affect the choices and decisions of value chain operators. For
example, international
advocacy organizations may influence market demand by encouraging consumers
to buy products that are produced in a socially- and environmentally-friendly
way. At national level, tax regimes might make it difficult for formal
organizations to compete with private traders. At local level, traditional
relations within a community might favour certain groups in accessing
services and decision- making processes. It is obvious that developments in
the wider context provide both risks and opportunities for chain operators,
including cooperatives and their members. The embedding of the value chain
in a wider social, political and economic context is shown in Figure 2.1.
 Figure 2.1: A value chain and its wider context

€/$ %

Farmer Trader Processor Wholesaler Retailer Consumer

CHAIN ACTORS

CHAIN SUPPORTERS

CHAIN CONTEXT

Source: Royal Tropical Institute, Amsterdam, and International Institute of Rural

Reconstruction, Nairobi: Value chain finance: Beyond microfinance for rural
entrepreneurs (Amsterdam, KIT Publishers, 2010).

Self-assignment 2.4
Map the value chain in which your cooperative and your customers are
involved. Indicate the flow of products, money, services and information. Who
are the chain operators and who are the chain supporters? What particular
developments in
the wider context affect the chain and thereby influence the performance of
your cooperative?

A recent development in agricultural value chains is that buyers increasingly

try to establish direct links with farmer organizations. There are various
motivations to do this. For example, sourcing directly from organized
farmers reduces transaction costs. Another reason is that it improves
traceability; increasingly, companies have to be able to show where their
products come from and
products are easier to trace when the provider is a cooperative. Moreover,
being organized helps farmers to access training and finance, which
supports farmers in improving production quality and volumes. This is
beneficial, not only for the farmers involved but also for the customers
(providing them with better quality and higher volumes of a product) and
can help the whole chain to run smoothly.
For cooperatives, it is also important to establish a long-term relationship
with buyers, as this can reduce uncertainty created by the market. This is
often
a challenge, but the next case, from a buyer’s perspective, illustrates
how building trust through credibility can overcome the difficulties in
establishing long-term relationships with buyers.

Case 2.3: Buying coffee from cooperatives: a buyer’s

perspective
What are buyers looking for? How do they decide which cooperatives to buy
from and which to avoid? The answers to these questions provide important
insights about a very common challenge faced by agricultural cooperatives
around the world: establishing a long-term relationship with a customer.
Durable relations between suppliers and buyers tend to work well for both
sides: buyers get a dependable stream of raw material, and producers remove
a great deal of uncertainty from the market. This can be a particularly tricky
issue because the
members of the cooperative might be interested in obtaining quick returns, and
the benefits of a long-standing link with a customer may take some time to
become apparent.
 Van Weely Koffie is a coffee importer in the Netherlands that buys from
cooperative producers in Africa and Latin America. The company likes to
maintain a wide
base of suppliers so that it can offer a variety of coffees to its clients, and that
means that it deals with all sorts of cooperatives, from huge enterprises to
small local organizations. Some cooperatives are better structured than
others; some are wealthier, some are poorer. But what Van Weely Koffie is
mainly looking for is reliability. As a buyer, the main concern is that the seller
does not become a risk. The key to a sustainable business partnership, then,
is to establish trust.
This is easier said than done. One of the most common problems encountered
by this coffee buyer is that suppliers will make promises they cannot keep. This
is not due to bad faith. What happens is that producer cooperatives will often
commit
to unrealistic volumes, qualities or prices that later they cannot uphold.
Credibility is built when suppliers are able to demonstrate, year after year, that
they can deliver on their commitments, however modest these may be. This
implies that the cooperative has a very clear understanding of its own
possibilities and limitations. Another challenge commonly encountered by Van
Weely Koffie is the lack of strategic management in cooperatives. Too often,
the management will change buyers, or sell simultaneously to (too?) many
buyers seeking the best price. While this may turn a quick profit, it can result in
price fluctuations and instability. On the other hand, cooperatives that have a
longer-term vision and concentrate on establishing trusting relationships with
fewer but more stable buyers can benefit from better overall prices, and much
more predictable outcomes.
Source: based on an interview with Frank Kraaijkamp of coffee importer Van Weely B.V.
(Netherlands).

Self-assignment 2.5
Identify for your cooperative the different types of customers of your
produce. What do you know about their needs? What kind of relationship do
you have with your customers?

Sometimes partnerships can help to establish direct links between

cooperatives and buyers. Below, we present a case on the Upland
Marketing Foundation and Pecuaria Development Cooperative in the
Philippines. This case illustrates how a partnership between a cooperative
and a foundation created links between a cooperative and modern retailers.
 Case 2.4: Creating links to modern retailers in the Philippines
Supermarkets have expanded rapidly throughout the world. Today it is
common to find modern retailers not only in industrialized countries, but in
cities and towns across Asia, Africa and Latin America. This rise of
supermarkets brings potential opportunities for farmers – and also many
obstacles. On the one hand, supermarkets offer a significant channel through
which to reach potential customers, many of whom are relatively wealthy and
willing to pay good prices.
On the other hand, selling to supermarkets is not easy. Modern retailers have
strict quality standards and delivery demands which are hard to meet,
especially for smallholder farmers. In addition, supermarkets do not pay their
providers immediately, delaying their payments for weeks and even months.
The Upland Marketing Foundation was established to help farmer cooperatives
and other community-based organizations in the Philippines overcome the
obstacles that prevent them from reaching the potentially lucrative possibilities
offered by supermarkets. The Foundation is an intermediary that helps connect
farmers to modern retailers through marketing, branding and financial services.
One of the foundation’s most successful customers is Pecuaria Development
Cooperative, a rice growers’ cooperative from the southern part of Luzon
Island. Pecuaria was already a well-established and strong cooperative, but it
knew that it had to find new business opportunities if it was to remain relevant
and profitable. About ten years ago, the members of Pecuaria realized that
organic rice might well be the opportunity they were looking for. At the time,
there was very little production
of organic rice, so the cooperative decided to tap into a niche that nobody else
was exploiting. Supermarkets in Metropolitan Manila appeared to be the ideal
outlets for reaching potential customers. But how to become a supplier for
modern retailers?
This is when the partnership with the Upland Marketing Foundation took off. The
cooperative had the production system in place, and the foundation provided
the support and financing needed to meet the requirements of the new buyers.
Over the years, Upland Marketing helped Pecuaria to develop better and more
attractive packaging, and it began to sell the rice under the Foundation’s
brand. The cooperative has also received advice on how to develop new
products that can target different types of consumers. In short, the partnership
has allowed Pecuaria to create attractive products and to effectively put them
on the market. In addition to providing marketing support, Upland Marketing
Foundation helps cooperatives like Pecuaria to deal with the problem of
delayed payment by supermarkets.
Producers establish a clear commitment in terms of volumes to be supplied,
and the foundation makes frequent and regular payments to the cooperative.
Source: based on an interview with Mr Fonollera, office manager of the UMF.

Direct links between cooperatives and large buyers do not guarantee

favourable outcomes for a cooperative and its members. For example, the
conditions under which a cooperative sells to a buyer can be unfavourable
(e.g. delay in payment) or risky (e.g. high price fluctuations). Another risk is
the creation
of a relationship of dependency. In this case an option is to move away
from the buyer by diversifying markets and possibly also diversifying
products.
Alternatively, the cooperative could move towards the buyer, by engaging in
activities further up in the value chain (e.g. processing).13

Who decides what to sell, how much, to whom and at

what price?
Ideally, in a cooperative, the members, together with the management,
decide what they sell, how much they sell, to whom and at what price. The
management may control payment terms, definition of grades and
standards, targeting of consumers, innovation management, and so on.
But in reality it is often not only the cooperative that decides. There are often
others, both within the chain as well as outside it, who influence the decision-
making process within a cooperative. It is, for example, no exception that
prices are set outside a cooperative’s direct sphere of influence. It is also
common that services that are needed to improve performance are absent
(e.g. finance).
Often, buyers of products demand specific quality or volumes of products.
Increasingly, buyers are also interested in the way products are produced,
for example, without the use of agrochemicals or under fair trade
conditions (see topic 3). Generally, this requires stronger coordination from
the cooperative and can be quite a challenge.
Changes in the cooperatives environment are also beyond the direct control
of the cooperative. These changes might affect the outcome of the
strategies in place.

How to respond to a changing environment?

Markets are constantly changing, especially with regard to commodities
and staple crop demand and supply fluctuations, which influence
marketing
strategies. Likewise, the requirements and needs of today’s consumers
change fast. The wider environment also changes; one only has to think of
innovations, price changes in energy or construction of new roads. A
cooperative should anticipate changes in the environment.

Changes in policy environment

In some cases, lobbying might help to influence developments, for example
13 Royal Tropical Institute, Amsterdam, and International Institute of Rural Reconstruction, Nairobi: Value
chain finance: Beyond microfinance for rural entrepreneurs (Amsterdam, KIT Publishers, 2010).
in the policy environment. It can also be the other way around with interest
groups, for example, lobbying government and buyers of agricultural
products for closer attention to labour rights, which can create constraints
or
opportunities for cooperatives. There can also be changing laws and
regulations that discriminate or favour cooperatives. In order to avoid
decisions being made to the detriment of cooperatives and without a proper
consultation, maintaining relations with the government is considered to be
part of cooperative marketing.

Changes in prices
In the case of changes in prices, other steps help cooperatives to cope
with or take advantage of this. For example, in the case of a decline in
agricultural commodity prices the cooperative could invest in storing their
products in a warehouse until market prices have stabilized.

Changes in technology
Technological advances can bring new opportunities for cooperatives to
market products and disseminate information, for example by using mobile
phone services or the internet. Examples exist of multi-stakeholder
platforms that own a website on which cooperatives can post when and
how much they have to sell and buyers what they are looking for.

Changes in consumer demand

Consumers are not only increasingly interested in social issues but also in
environmental issues. Some consumers do also reject products that are
produced under conditions that violate human rights or labour standards,
for example, child labour.
Concern for the environment can be seen as providing a marketing
advantage. Cooperatives should consider their impact on the environment
and how their practices might be used in a marketing programme.
Producing organic products opens up access to alternative marketing
channels.
TOPIC 3

Certification
 Introduction to the topic
Increasingly, standards are put in place to guarantee Specialized Markets
food safety, product quality and reliability of
Specialized markets refer
sourcing. Some of these standards are voluntary, to those markets which
such as fair trade, organic production, responsible require cooperatives’
trade and sustainable trade. These standards all products to meet certain
quality standards before
have their they can be sold. These
own certification schemes. There are also company can either be production
standards (such as the C.A.F.E. practices of standards (e.g. moisture
Starbucks) or sector-wide standards, like the level) or production
process standards (e.g.
Common Code for the Coffee Community (4C). labour conditions).
Private standards are becoming increasingly
important for international trade, and are used as
strategies to differentiate products and firms.14
Certification is a popular way of organizing market requirements. In theory,
certification is not an obligation, but in practice it can be if you want to
remain in the market. GlobalGap certification, for example, is to some
extent compulsory for suppliers of supermarkets in Europe. Although
certification is
currently mainly attached to export products, it is clear that certification is
likely to become an increasingly important prerequisite for the local market as
well.
Maybe, if your cooperative sells to a local supermarket, there might already
be quality or packaging requirements in place.
There is also a tendency for certification to become increasingly important for
agricultural cooperatives. Cooperatives therefore need to prepare themselves for
certified markets.
But how do you know when to invest in certification, and what type? The
different certification schemes all have their advantages and disadvantages.
There are also different costs and benefits involved in getting certified.
What are the direct costs involved, for example, in compliance? What are
the indirect costs of monitoring, for example? What will certification
contribute in terms of added value? This topic will elaborate on certification
and its dynamics.

42 My.COOP
14 R. Ruben and S. Verkaart: “Comparing fair and responsible coffee standards in East Africa”, in A.H.J.
Helmsing and S. Vellema (eds.): Value chains, social inclusion and economic development: Contrasting
theories and realities (Abingdon, UK, Routledge, 2011) pp. 61–81.

Topic 3 · Certification 41
Certification
Certification can be a way to improve farmers’ circumstances, by providing
them with additional (or at least stable) incomes and other privileges,
conditional on their compliance with certain requirements. Such
requirements are outlined in documents called standards or codes of
conduct, which are used by auditing committees to randomly check farms or
companies. The certified product, which eventually finds its way onto the
market, informs the consumer of the product’s origin by means of a labelling
system. As well as providing consumers with information on the quality of
the product, and producers with premium prices, certificates also provide
marketing opportunities for companies involved in the branding of certified
products.15
Examples of certification schemes are the Rainforest Alliance for nature
conservation, Organic for organically produced products, and Fairtrade for
social issues. These schemes deliver certified products to highly specialized
markets, for which there is relatively little demand. Recently also,
conventional markets increased their sustainably-produced goods segments;
UTZ is a well-known mainstream certifier, currently of three products
(coffee, cocoa and tea), which offers certification programmes for farmer
support to large industrial players.
Each of the four abovementioned certifiers focuses on different aspects of
sustainability and has its own unique standards and approaches to rewarding
farmers. Different labels have a lot in common; for example, for the cocoa
sector these four different labels have an 80 per cent overlap in their social
and environmental criteria.16
Certification provides opportunities mainly for formally organized farmers,
and not to such an extent for individual farmers. By forming a partnership
with a certifier, a cooperative can gain access to a more beneficial market,
in terms of price and arrangements. But access to these markets also
implies costs for a cooperative: they bear at least part of the costs
involved in, for example, internal control of the standard and meeting the
quality requirements.
Sometimes certification is presented as the way forward. This is a risky idea,
as certification does not always work. Moreover, certification is not a goal in
itself, but a means to improve a situation: for example, increasing
smallholders’ income or protecting the environment.

15 A. Laven and P. Pelders: Chocolate forever. The Dutch contribution to knowledge on sustainable cocoa
(Amsterdam, Dutch Ministry of EL&I, KIT Publishers, 2010).
16 ibid.
Whether to engage or not in certification?
What are the main differences between the different certification
schemes? Does one scheme exclude another? In practice, certified
producers can sell their products via multiple markets. Multi-certification
represents a strategy for diversifying sales to various buyers with
different quality and delivery
Fair trade
requirements.17 A cooperative can also
decide to sell all “Fair trade is about better prices,
decent working conditions, local
its products to one buyer; in this case sustainability, and fair terms of
the benefits should outweigh the risks trade for farmers and workers in
involved in depending on a single buyer. the developing world. By requiring
companies to pay sustainable prices,
Let us first look at some of the
fair trade addresses the injustices
certification schemes. We will have a of conventional trade, which
closer look at fair trade and organic traditionally discriminates against
markets (both niches), and make some the poorest, weakest producers.
Fair trade enables them to improve
comparisons between Fairtrade and the
their position and have more control
UTZ CERTIFIED scheme (mainstream). over their lives. Furthermore it
makes it possible for farmers to
invest in education, healthcare and
Fair trade a better environment.”
Source: http://www.fairtrade.org.uk/what_
Fair trade was established in the 1960s
is_fairtrade/faqs.aspx (accessed 19 Oct. 2011).
as an alternative market system. It
challenged existing trade relations
dominated by large international buyers
by offering better trading conditions and
securing the rights of marginalized
producers and workers – especially in
the South.18 Selling products
to the fair trade market offers different opportunies to cooperatives and
its members. They can sell their product at predefined and guaranteed
minimum floor prices.19 Generally there is a price premium, paid directly to
farmers and a percentage of the profit that goes into a fund for
community development projects. An important benefit of access to this
market is that it provides
a stable market relationship, as it guarantees the cooperative an outlet
at a secured price. Stability is an important asset, both for farmers and
for a

17 R. Ruben and S. Verkaart: “Comparing fair and responsible coffee standards in East Africa”, in A.H.J.
Helmsing and S. Vellema (eds.): Value chains, social inclusion and economic development: Contrasting

Topic 3 · Certification 4
 theories and realities (Abingdon, UK, Routledge, 2011) pp. 61–81.

18 P. Develtere and I. Pollet: Cooperatives and fair-trade, Background paper for the COPAC Open Forum on
Fairtrade and Cooperatives, Berlin (Leuven, Higher Institute for Labour Studies, and Geneva, Committee
for the Promotion and Advancement of Co-operatives, 2005),
http://www.copac.coop/about/2005/cooperatives-and- fair-trade-final.pdf (accessed 19 Oct. 2011).

19 R. Ruben and S. Verkaart: op. cit., pp. 61–81.

4 My.COOP
cooperative, so as to be sure of income support investments. In return for
these benefits the Fairtrade organization that assigns the Fairtrade label
requires the cooperative to meet certain criteria, both on a cooperative level
as well as at the level of their indiviual members.
There are two key requirements for producers to access fair trade markets:
● producers should be smallholders mainly dependent on family labour;
● producers should be organized in cooperatives operating along
democratic lines.

Box 3.1: fair trade criteria20

For workers:
● decent wages, good housing, health and safety standards and the
right to join trade unions;
● no child or forced labour;
● programmes for environmental sustainability.
For small farmers’ cooperatives:
● a democratic structure that allows members to participate in
the cooperative’s decision-making processes.
Moreover, the trading terms must include:
● a price that covers the cost of production;
● a social premium to improve living and working conditions;
● partial advance payment to prevent small producer organizations falling
into debt;
● contracts that allow long-term production planning.

The Fairtrade organization is a partnership in trade. Besides this, the fair

trade movement is active on the consumer side, raising awareness of the
importance of fair trade and promoting fair trade products. Sales of fair
trade products are on
the rise around the world, with the US leading. In 2010, overall sales of fair
trade products grew by 24 per cent.21 Despite this growth pattern, the relative
share of fair trade in the world market remains very small.
What could motivate a cooperative to sell to a fair trade market? The table
below lists some of the advantages and disadvantages.

20 Adapted from P. Develtere and I. Pollet: op.cit.

21 The Independent: Fairtrade market experiencing explosive growth in UK and US (9 Mar. 2011),
http://www. independent.co.uk/life-style/fairtrade-market-experiencing-explosive-growth-in-uk-and-us-
2236449.html (accessed 19 Oct. 2011).
 Table 3.1: Advantages and disadvantages for a cooperative of
selling to the fair trade market

Advantages Disadvantages
● cooperatives meet the two ● very specific and often high
basic requirements; quality standards for production
and processing;
● fair trade products fetch a
minimum price and advanced ● requires investment to meet quality
payment; standards and to cover costs
involved in paperwork, certification
● fair trade products fetch a
fees, etc.;
premium price for community
development; ● relatively small market: normally
it cannot absorb all production.
● the demand for fair trade products
is growing;
● NGOs can support cooperatives in
the start-up phase (reducing costs
and risks);
● fair trade contributes to more stable
trading relations between a
cooperative and its buyer, and
increases income stability for
farmers;
● a wide range of products can
be certified.

If you are considering becoming a fair trade producer, the Fairtrade

Labelling Organization (FLO) has websites where they elaborate on the
steps to follow and on how producers can get support from the fair trade
system.22

Comparing Fairtrade with UTZ CERTIFIED

UTZ CERTIFIED, previously known as UTZ Kapeh, is a market-based
certification programme, focusing on improved farm management, input
efficiency and traceability, while also demanding good performance on
social and environmental issues.23 There are many different stakeholders
involved, such as the food industry, government, and civil society. So far, it
offers coffee, tea and cocoa certification programmes and manages
traceability for Roundtable on Sustainable Palm Oil (RSPO)-certified palm
oil.
UTZ CERTIFIED has developed a code of conduct, an internationally-recognized set
of criteria for professional coffee and cocoa growing, which includes socially and
environmentally appropriate growing practices, and efficient farm management.
22 Fairtrade International: Becoming a fairtrade producer,
http://www.fairtrade.net/becoming_a_fairtrade_ producer.0.html; Fairtrade International: Support for
producers, http://www.fairtrade.net/support_for_ producers.0.html (both accessed 19 Oct. 2011).

23 R. Ruben and S. Verkaart: op. cit., p. 65.

Cooperatives have to meet these codes of conduct before they can be certified by a
Certification Body.24
How does UTZ differ from Fairtrade, for example? The table below outlines
the main differences.

Table 3.2: Main differences between Fairtrade and UTZ CERTIFIED

Fairtrade UTZ CERTIFIED

Only producer organizations can be certified Also open to large-scale producers.
Currently exploring options to certify local
Minimum price is fixed + FLO premium + traders
pre-finance Market price + negotiable price premium
Niche market
Slowly growing: limited number of Mainstream market
producers involved Growing fast
Wide range of products can be certified
Limited number of products can be
certified (currently only coffee, cocoa)
Source: based on R. Ruben and S. Verkaart: “Comparing fair and responsible coffee standards in
East Africa”, in A.H.J. Helmsing and S. Vellema (eds.): Value chains, social inclusion and
economic development: Contrasting theories and realities (Abingdon, UK, Routledge, 2011) p.
65.

Organic Agriculture
In many African countries and elsewhere, large areas under cultivation are
not treated with any chemicals. This indicates that there are major
opportunities for organic agriculture. But organic agriculture is not about
“doing nothing”.
Organic agriculture requires active on-farm (pest) management and post-harvest
practices, which require relatively more time and labour. Its farm practices
are based on the general principles of organic agriculture (Box 3.2). In the
case of many pests and diseases, organic agriculture requires alternative and
affordable measures and organic inputs. In order to make farmers receptive
to organic farming practices, it may be necessary to work on a change in
mindset and invest in training and awareness raising.
Organic agriculture creates opportunities, as certified organic products
receive a premium on the market. It is especially interesting for farmers
who have not been using chemicals on their farm for at least three years
(producing “organic by default”). But the high costs of certification can be
problematic, especially when volumes of production are low.
Conversion from conventional farming (with the use of chemicals) to certified
24 http://www.utzcertified.org (accessed 19 Oct 2011).
organic production entails a cost; before you can access organic
marketing channels your farm has to be chemical-free for at least
three years. During this transition process you are not allowed to
use chemicals, or to sell your product on the
organic markets. So, organic agriculture
Higher prices for
has its costs and conversion to organic organic?
production takes time. Before you obtain
In contrast to fair trade, not
certification, an internal control system all organic products qualify
assesses whether or not the product meets for higher prices than non-
the requirements. organic products. Organic
premiums vary with the crop
and may differ according
to whether you are dealing
with a processor, wholesaler,
retailer or directly with
the consumer. The size of
the premium also depends
on price fluctuations of
conventional products.

Topic 3 · Certification 47
 Box 3.2: What is organic agriculture?25

Organic agriculture
● Environmentally, socially and economically sound and sustainable, a
holistic approach;
● Based on natural and local conditions, situation-specific.

Basic principles
● Soil, water and nature conservation;
● Reduced external inputs;
● Use of locally-available organic materials;
● Nutrient recycling – shade trees;
● Diversity, natural surroundings;
● Natural pest- and disease-management.

No Synthetic Fertilizers, Pesticides or

Herbicides Key-issues in the organic chain

● Quality;
● Traceability;
● Training;
● Marketing;
● Trust;
● Economic incentives;
● Organizational capacity.

So, why would a cooperative opt for organic agriculture? The table below
lists some of the advantages and disadvantages of selling to the organic
market.

4 My.COOP
25 Common Fund for Commodities and International Cocoa Organization: “Agro Eco”, in Agro Eco and
Tradin: Feasibility study on organic cocoa production in West Africa (Amsterdam, KIT Publishers,
2010).

Topic 3 · Certification 4
 Table 3.3: Advantages and disadvantages for a cooperative of
selling to the organic market

Advantages Disadvantages
● organic agriculture has an intrinsic ● premium is not fixed but negotiable;
environmental value and contributes
● organic agriculture can
to better health of farmers and
lower production;
their workers;
● conversion to organic production
● organic agriculture can lower your
requires innovation in the whole
costs (not using inputs);
farming system and the value
● organic agriculture fetches a chain. This requires coordination
premium on the market; this and investments;
premium
● certification process takes a long time;
should cover both costs for
meeting requirements and fees ● conversion to organic takes time
paid to certification bodies; and only pays off after several
(more than
● the demand for organically
3) years;
produced products is growing;
● the market for organic products
● NGOs can support cooperatives in
is small;
the start-up phase (reducing costs
and risks); ● requires sound coordination and
control.
● these alternative marketing channels
can create more stable trading
relationships between a
cooperative and its buyer.

Going organic as a cooperative requires

sound coordination of members, to
ensure that they share the vision and
produce according to the set organic
farming principles. Farmers will need
support to make this transition to
certified organic products. The case
below on organic tea production in
Nepal shows how clear targets and
enhanced technical support helped to
align the activities of members.
 Case 3.1: Upgrading to organic tea production: the need for a
common vision
The world of modern supply chains presents a double challenge for
agricultural cooperatives: not only must they find and secure buyers for their
products, they also have to ensure that all farmer members produce crops of
consistent quality. Whilst a lot of attention is paid to the commercialization
problem, it is also very difficult to get all the members on board with
production standards, especially
if they are being upgraded. This is precisely the challenge faced by small-
scale tea growers in the eastern Himalayan region of Nepal. Farmers
realized that the demand for organic tea is increasing, and that in the not
too distant future the majority of demand in Nepal will be for organically
produced tea. How to
make sure that more than 2000 farmers made the transition to the strict organic
standards?
The role of the Tea Sector Service Centre (TEASEC), a second-level
cooperative, was crucial in the successful conversion to organic production.
TEASEC
was established to provide a range of technical services, from production to
commercialization. It also began to provide training and support, helping to
strengthen the more than 45 member cooperatives. It was clear to many
members that conversion to organic production was strategically important, but
most farmers lacked the technical know-how to get involved in this lengthy
process. In addition, while organic crops were bought at a higher price, it was
known that conversion to organic would decrease yields, potentially affecting
farmers’ income.
TEASEC worked on two fronts to help mobilize the farmers around the
productive upgrade. Firstly, starting in 2007, it developed a clear field code of
conduct regarding transparency, quality, and environmental and social
sustainability that was shared with all farmers. Secondly, it began to provide
the technical support that allowed farmers to abide by this code. Three years
after the process began, the farmers affiliated to TEASEC’s member
cooperatives successfully migrated from conventional to organic production.
The process has not been without its difficulties. Even though the price per kilo
increased from 25 to 55 rupees, the majority of farmers experienced reductions
in yields of up to 50 per cent. Still, farmers are convinced about the long-term
gains of the conversion to organic, and
TEASEC’s continued involvement will help increase yields through improved
access to organic fertilizers.
Source: based on interviews with members of TEASEC, an Agriterra partner, and on a
written report provided by Bertken de Leede, Agriterra liaison officer.

5 My.COOP
Self-assignment 3.1
What are the different marketing channels for your product? List the differences
and requirements. Is the cooperative targeting the most optimal market for its
produce?
Key Learning Points
Collective marketing can be a service that a cooperative provides to its
members. A cooperative can also limit its role to providing collective
marketing services. One of these services is providing market information.
Before a cooperative can market its produce, it needs to know its
customers, and how to address their needs. Access to market information
helps a cooperative in strategic decision-making. More than information on
customers’ needs, it is important to understand the (changing) environment
in which customers (and the cooperative) are embedded. Knowing the
context helps cooperatives in strategic marketing.
The changes in context require constant adaptation of the cooperative’s
strategies and their members’ performance. However, these adaptations are
not always favourable for members. For example, it may be that the costs
involved are so high that they do not outweigh the benefits.
A constant challenge in collective marketing is to balance the needs of
customers and those of members.
Bibliography
List of works consulted
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Agro Eco and Tradin: Feasibility study on organic cocoa production in West Africa (Amsterdam,
KIT Publishers).

Dell, L. et al. 2009. Making retail supply chains sustainable: Upgrading opportunities for
developing countries.

Develtere, P.; Pollet, I. 2005. Cooperatives and fair-trade, Background paper for the COPAC
Open Forum on Fairtrade and Cooperatives, Berlin (Leuven, Higher Institute for Labour
Studies, and Geneva, Committee for the Promotion and Advancement of Co-operatives).
Available at http://www.copac.coop/about/2005/cooperatives-and-fair-trade-final.pdf [19 Oct. 2011].

Food and Agriculture Organization of the United Nations. 1997. Introduction to Global Marketing
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Harper, M. 1991. Trainer’s manual: Marketing of agricultural produce, Material for management
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Hein, J.F. 1992. Trainer’s manual: Export marketing, Material for management training in
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International Fund for Agricultural Development. 2010. Rural poverty report 2011 (Rome)
Available at http://www.ifad.org/rpr2011/report/e/rpr2011.pdf [19 Oct.2011].

International Labour Organization. 2002. Work improvement in neighbourhood development:

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Available at http://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/documents/publication/
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ILO/COOPAFRICA. 2009. Enhancing fish market information (EFMI): Use of modern communication
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Kindness, H.; Gordon, A. 2001. Agricultural marketing in developing countries: The role of
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Kotler, P. 1997. Marketing management: Analysis, planning, implementation and control, ninth
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Laven, A.; Pelders, P. 2010. Chocolate forever: The Dutch contribution to knowledge on
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Münkner, H.H.; Txapartegi Zendoia, J. 2011. Annotiertes genossenschaftsglossar, Annotated

co-operative glossary, Glosario cooperativo anotado (Geneva, International Labour Organization).
Available at http://www.ilo.org/public/english/support/lib/resource/subject/coop/glossaire_munker_
des.pdf [22 Sep. 2011].

Onumah, G.; Temu, F. 2008. Reducing marketing constraints and enhancing producer incomes
through warehouse receipt systems: Cases from coffee and cotton sub-sectors in Tanzania
(Tanzania and South Africa, CTA and AFD).

Module 4 · Cooperative Marketing 5

Royal Tropical Institute, Amsterdam, and International Institute of Rural Reconstruction,
Nairobi. 2008. Trading up: Building cooperation between farmers and traders in Africa
(Amsterdam, KIT Publishers).

–. 2006. Chain empowerment: Supporting African farmers to develop markets (Amsterdam,

KIT Publishers).

Ruben, R.; Verkaart, S. 2011. “Comparing fair and responsible coffee standards in East Africa”, in
A.H.J. Helmsing; S. Vellema (eds.): Value chains, social inclusion and economic development:
Contrasting theories and realities (Abingdon, UK, Routledge).

Recommended further reading

Arinze, B. 1990. “Market planning with computer models: A case study in the software
industry”, in Industrial Marketing Management, Vol. 19, No. 2, pp. 117–29.

Kibera, F.; Waruingi, B. 1998. Fundamentals of marketing: An African perspective (Nairobi,

Kenya Literature Bureau).

Perreault, W.D..; McCarthy, E. 2003. Essentials of marketing: A global-managerial approach,

ninth edition (New York, McGraw-Hill Higher Education).

Salemi, N.; Njoroge, E. 1997. Marketing simplified.

Thomas, W. 2005. Financing Fairtrade (London, Sage Publications).

Thuo, J. 2008. Principles of marketing: Skill building approach, second edition (Nairobi, Acrodile).