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Marketing Strategy of Alabama Farmers Cooperative, Inc.

Marketing Strategy of Alabama Farmers Cooperative, Inc.

Discuss Marketing Strategy of Alabama Farmers Cooperative, Inc. within the Marketing Management forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; Alabama Farmers Cooperative, Inc. Statistics: Cooperative Incorporated: 1936 as Tennessee Valley Fertilizer Cooperative Employees: 2,000 Sales: $324.12 million (2003) NAIC: ...

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Anjali Khurana
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Marketing Strategy of Alabama Farmers Cooperative, Inc. - December 9th, 2010

Alabama Farmers Cooperative, Inc.


Statistics:
Cooperative
Incorporated: 1936 as Tennessee Valley Fertilizer Cooperative
Employees: 2,000
Sales: $324.12 million (2003)
NAIC: 115110 Support Activities for Crop Production


Company Perspectives:
An unselfish dedication to the mutual objectives of growth and success for its member farmers is the hallmark of Alabama Farmers Cooperative, Inc.


Key Dates:
1936: Co-op is formed as Tennessee Valley Fertilizer Cooperative.
1957: Grain marketing service is added.
1961: Company changes name to Alabama Farmers Cooperative.
1969: Anderson's Peanuts is acquired.
1975: Bonnie Plant Farms is acquired.
1997: Currie Gin is acquired.


Company History:

Based in Decatur, Alabama, Alabama Farmers Cooperative, Inc. (AFC) is a federated cooperative, made up of 52 local, farmer-owned cooperatives, serving Alabama and the Florida panhandle. AFC is one of the largest farmer-owned agribusinesses in the Southeast. It operates some 80 stores, which are each governed by a local cooperative. All members share in the profits of the stores and other ventures, as well as benefit from AFC research and systemwide marketing efforts. Local co-op stores, which sell to the general public as well as farmers, offer a full range of agricultural supplies and services. The feed department not only offers horse, cattle, hog, and poultry feed, but also fish feed, sheep and goat feed, rabbit feed, deer and wild animal feed, and dog and cat food. Co-op stores supply a wide variety of medications, vitamins, and supplements. In addition, AFC offers many products that cater to non-farming customers: home and garden accessories, such as gifts and home decorating, outdoor furniture, and lawn and garden ornaments; landscape supplies, including greenhouse and nursery supplies; bird and wildlife feeders and accessories; pond and water gardening products, including pond fertilizer; fertilizers, repellants, and plant foods; pet supplies; sporting goods; and even toys. Other store product lines include farm equipment, lawn and garden equipment, fencing supplies, tool boxes and fuel tanks; and tires. AFC operates a gin division, peanut division, and plant division. The gin division, Currie Gin, operates two cotton gins in Alabama, one of which is among the largest in the state. Peanuts are handled through Opp, Alabama-based Anderson's Peanuts, a leading marketer of seeds and peanuts, which it also sells internationally. The plant division is comprised of Bonnie Plant Farms, a Union Springs, Alabama, business that is one of the nation's largest sellers of annual flowers and vegetable plants. In addition, AFC and partner Southfresh Farms own SouthFresh Aquaculture, providing feed, fingerlings, and two processing plants to Alabama and Mississippi catfish farmers. More recently, AFC and the Midwestern Land O'Lakes cooperative have joined forces to create Agriliance-AFC, LLC, an effort to increase buying power in the purchase of seed, crop protectants, and crop nutrients. To keep members informed, AFC produces a monthly publication, Cooperative Farming News. AFC is governed by a board of directors comprised of working farmers and is a member of the National Council of Farmers.

Farmers Cooperatives Grow Out of 19th-Century Conditions

As long as farming was done for subsistence there was no great need for cooperatives, but with the rise of commercial farming the need for farmers to band together for their mutual benefit began to mount. During the 1800s the railroads, as well as grain elevators, spread across the United States, making commercial farming more viable but also putting farmers in the difficult position of dealing with a local monopoly that was interested in charging the highest possible price. The Granger movement, which started in 1866, attracted a number of farmers who wanted to band together to combat the exorbitant rates charged by the railroads and grain elevators. Farmers formed cooperatives to pool their buying power for needed supplies and to cut out the middleman when selling their products, as a way to negotiate the best price. It was not until 1922, when the United States Congress passed the Copper-Volstead Act, that farmers and ranchers were able to legally form cooperative associations for their mutual benefit.

In 1936 representatives of several local county cooperatives met in Decatur, Alabama, and agreed to pool their money in order to receive a price break on a large order of nitrogen fertilizer. To achieve this purpose they formed a new cooperative, the Tennessee Valley Fertilizer Cooperative, AFC's predecessor. In 1937 Edmond P. Garrett, Sr., was named general manager and chief executive officer of the co-op, a position he would hold for the next 31 years. Garrett, born in 1898, was college educated, a graduate of Alabama Polytechnic Institute in Auburn, Alabama.

Over the years, Tennessee Valley Fertilizer gradually added to its purpose. By World War II it was making food for cattle and hogs, and in the final years of the decade beginning to clean and process seeds. During the 1950s the co-op expanded its fertilizer facilities, eventually possessing storage facilities for both liquid and dry fertilizer. In addition, the co-op expanded well beyond fertilizer, feed, and seeds, and during the 1950s used its buying power to offer member farmers tires, lubricants, and farm tools. In 1957, a grain marketing service was added to sell the grain produced by north Alabama farmers. Eventually the co-op would own ten granaries.

Adoption of AFC Name: 1961

In 1961 Tennessee Valley Fertilizer acquired the Farmers Marketing and Exchange Stores and changed its name to Alabama Farmers Cooperative. In addition to serving the needs of member farmers, these co-op stores were also open to the general public, to gardeners and homeowners, thereby further increasing AFC's buying power. The network of co-op stores, operating under a variety of names, would eventually number 80. The 1960s also marked the end of Edmond Garrett's term as AFC's general manager. He retired in 1968 and died ten years later at the age of 70.

In 1969 AFC completed another major acquisition, adding Anderson's Peanuts. The man behind the Anderson name was Robert B. Anderson, who became interested in peanuts while working one summer in a Greenwood, Florida, peanut shelling operation. In 1933 Anderson left his family's farm and along with a man named Bryant Pender started the Anderson-Pender Peanut Company, a small buying and shelling operation. Two years later Anderson bought a shelling plant in Andalusia, Alabama. He and Pender split in 1938, and now Anderson took in his brothers, Edward and Alban, as partners. Together they formed another buying and shelling operation, the Hartford Peanut Company. Anderson continued to grow his peanut holdings in the 1940s. He launched a harvest season buying office in Jay, Florida, in 1945, gaining a good supply of high-quality seed stock. In that same year, he also established the Luverne Peanut Company. Anderson's connection to the company's present-day location of Opp, Alabama, came in 1955 when he bought a local shelling plant, which he renamed the Opp Peanut Company and brought in his son, James B. Anderson, to manage it. The Anderson family now owned four shelling operations and a network of buying locations in Alabama and Florida. After the family sold its peanut business to AFC in 1969, the Andersons remained very much involved. James headed the division until he retired in 1982. John W. Anderson succeeded him and ran the peanut division until 1989, at which point he took over as president and CEO of AFC. In the 35 years of AFC ownership, Anderson's Peanuts significantly upgraded its facilities, replacing two outdated shelling facilities with a state-of-the-art plant in Goshen, Alabama, in 1977. Then, in 1986, AFC added a 12-million-pound cold storage facility to the Goshen grounds. In addition, AFC added more buying locations and warehouses.

Acquisition of Bonnie Plant Farm: 1975

AFC's next major acquisition came in 1975 when the co-op acquired Union Springs, Alabama-based Bonnie Plant Farm. The business was started in 1918 by Livingston and Bonnie Paulk in Bullock County, Alabama. The couple started out with a small truck farm in Boynton, Florida, but were ruined by a freeze that killed all of the area's vegetables and fruits. They moved back to his hometown of Union Springs, Alabama, in June 1917, living on his uncle's farm, and started some small-scale planting of cotton, corn, and peanuts, as well as hogs, but were only able to scrape by. To make ends meet during the winter months, they decided to raise cabbage plants in their garden to sell to area merchants. The following winter they planted a much larger crop and began to advertise the plants in the local newspaper, which drew out-of-town orders. As the business grew, so did the accounting and paperwork. Now in need of letterhead, Livingston went to a printer to have some made. When asked the name of the business, he decided on the spot to name it after his wife, calling it the Bonnie Plant Farm.

The Bonnie Plant Farm began to advertise in farm newspapers throughout the south, which led to a much greater cabbage crop and the addition of onions, strawberries, and potato plants. After seven years of growing the plant business on their uncle's farm, the Paulks were able to buy their own 200-acre farm. To keep up with competition they began to deliver their plants, a move that not only retained old customers but brought in new ones. In 1936 they built a greenhouse where they could plant seed in boxes, transfer the small plants to pots, and later transplant to the fields. In this way the Paulks were able to get their produce to the market early and receive a better price. Next, they built a packinghouse with one room sealed off to serve as a seed room.

By 1940 the Paulks had established a steady business in their winter crops, but it provided little more than a good living. In the postwar years, however, that would begin to change as the Bonnie Plant Farm evolved into a true business. Bonnie reached the $1 million mark in annual sales in 1967. At this stage the farm mostly offered field-grown vegetable plants, but within a few years, in answer to customer demand, Bonnie began to focus on greenhouse potted plants. As a result, the farm began to build more greenhouses. After AFC bought Bonnie in 1975, Paulk family members, like the Andersons, stayed on to run the business. With AFC's support, Bonnie began to expand rapidly, adding trucks and building new greenhouses to serve an ever-growing market. By 1983 Bonnie marketed to 13 states and annual sales reached $9 million. Expansion was fueled even further by the rising popularity of garden centers by mass market retailers. Bonnie built up its sales staff, constructed more greenhouses, and as a result was well positioned to enjoy great success in the 1990s. In 2000 Bonnie would take in more than $42 million in revenues. As was the case with the Anderson family, one of the Paulks would eventually rise to the top at AFC. In 1996, Tommy Paulk, grandson of Bonnie's founders, became AFC's CEO, the fourth in the co-op's history.

AFC also enjoyed a period of strong expansion in the 1990s. In 1993 it formed a financing subsidiary to serve the seasonal and long-term needs of local cooperative members. A year later, AFC formed Dixieland Express, a transportation division with some 200 tractor trailers that served the eastern United States. (This business would be sold off in 2001.) McCullough, Alabama-based Currie Gin was acquired in 1997. The business was founded by the Currie family in Atmore, Alabama, in 1913 and moved to McCullough in 1950. AFC created SouthFresh Aquaculture, LLC, in 1999, a joint venture with Indianolia, Mississippi-based Southfresh Farms, and became involved in supplying the needs of Alabama and Mississippi catfish farmers.

AFC continued to launch new initiatives in the new century. It established the Co-op Calf Marketing Program to provide added value and better markets for cattle breeders through state-of-the-art preconditioning. In 2000 SouthFresh opened the first fish processing plant in Alabama's history, providing the state's catfish farmers with another marketing option. In 2003 AFC and regional cooperative Land O'Lakes formed a partnership, Agriliance-AFC, LLC, to pool their buying power to help members achieve better prices in the purchase of seed, crop protectants, and crop nutrients. By now, AFC was generating over $300 million in annual revenues. In 2003 the co-op recorded a net margin of $7.5 million before taxes.

Principal Divisions: Anderson's Peanuts; Bonnie Plant Farms; Currie Gin.

Principal Competitors: Farmland Industries, Inc.; Gold Kist Inc.; Southern States Cooperative, Incorporated.
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