CO-OP DEVELOPMENT ACTION
Innovative tools for rural co-ops
ne way in which professional
cooperative business
development centers
contribute to the nation’s
rural economy is by creating
or adapting business management
tools that enable co-ops to improve
their “multiple bottom lines” of success.
Through the coast-to-coast network
of cooperative development centers
known as CooperationWorks!, word of
these tools travels. Tales of how they
worked (or didn’t) are shared. Best
practices surface, leadership is supported.
Valuable lessons from experience are
amplified.
Kentucky: managementmeasuring
tool delivers
One tool that has met with great
success locally and is attracting attention
from a wider field is an innovative
management-audit program created by
the Kentucky Center for Agriculture
and Rural Development(KCARD).
The audit begins with a week-long, onsite
investigation. Interviews are conducted
with employees, managers,
directors and others. Legal and financial
documents are also reviewed.
KCARD staff then prepare and present
a comprehensive report (including a
business plan) that identifies the company’s
strengths and weaknesses. “It’s a
very intense process,” KCARD’s Larry
Snell says. “It takes about two weeks of
the staff’s time. We can only do one
every month or six weeks, with all the
other work we have.”
Marshall County Co-op in Benton
signed up for the Center’s Business
Management and Opportunity
Analysis (BMOA) audit this year. Tim
Farrell, the equine, cattle and poultry
supply co-op’s general manager, praises
the program.
“The most important thing was getting
an outside viewpoint,” Farrell says.
He recounts the moment of realization
— based on audit interviews — when
everyone saw that the board and staff
were mistaken in believing that their
member-customers thought the co-op’s
prices were too high.
In fact, information compiled for the
audit showed the co-op’s prices were
lower than mass merchandisers’ in a
number of key areas. When some co-op
members mentioned they were considering
a name change, KCARD staff
showed them the community interviews,
which showed how much name
recognition the co-op had — which
came as a pleasant surprise. KCARD
staff told them, “Don’t give up something
other businesses spend thousands
of dollars trying to establish.”
The audit also helped the co-op with
customer differentiation, product display
and other issues critical to its success.
“As a result of the experience, they
[KCARD staff] presented us with some
very specific objectives to accomplish,”
Farrell recounts. “Some of the information
we already knew, but some we didn’t.
We developed a strategy. Today, our
margins are higher than they have ever
been, and our customer satisfaction is
higher too.”
Dakotas: leveraging
development dollars
At the Dakota Enterprise Center
in Mandan, N. D., another innovative
approach is being taken in the search
for resources to help new cooperatives
get started and to strengthen co-ops
whose members have limited resources.
When the Center’s Pat Downs and
Bill Patrie first heard of the New
Markets Tax Credit Program, they were
intrigued. So the Center, which is cosponsored
by the N.D. Rural Electric
and Rural Telephone Cooperatives,
hosted some meetings. They also invited
their colleagues from South Dakota
to attend.
The tax credit program was
explained, which permits taxpayers to
receive a credit against federal income
taxes for making qualified equity investments
in designated Community
Development Entities (CDEs).
To qualify as a CDE, an organization
must have as its primary mission “serving,
or providing investment capital for
low-income communities or lowincome
persons.” Many rural cooperatives
around the country fit the criteria,
but until recently most of the applicants
have come from the urban centers.
The meetings the Center held generated
some interest, so the Center
asked the North Dakota Rural
Development Finance Corporations
(RDFC) to kick in $2,500, and asked
South Dakota to match it. Both agreed.
Pat Downs specifically notes the
contributions of two people in this
effort. One was former Center Director
Bill Patrie, the original organizer and
current president of the RDFC as well
as the outgoing president of
CooperationWorks.
In the fall of 2005, Dakotas America
LLC (www.dakotasamerica.com) incorporated,
and hired a manager to help
them apply for a tax credit allocation.
“Working with him raised the level of
my game,” Downs says. The manager’s
understanding of the regulatory environment
and the federal tax credit
investment program made a big difference.
Last June, the group received a $50
million tax credit allocation. The plan is
to create a fund that will invest the tax
credits in cooperative development
micro-projects in the Dakotas (or elsewhere)
— places that “aren’t even on
the map,” Downs says.
The fund will be built by proceeds
from winning the tax-credit allocation,
and beneficiaries will include co-ops,
corporations, local banks and other
players, large and small, that support
investment in remote rural areas and
the people struggling to build stronger
rural businesses and communities.
“As far as I know,” Downs adds,
“there is no history of this type of collaboration.
It’s fairly unique in the tax
arena.”
Turkey co-op takes off!
Dakota Provisions proudly states on its website that the
co-op runs: “the ultimate state-of-the-art processing plant
in the nation.” The South Dakota Value-Added Agriculture
Development Center has worked with Dakota Provisions
since its early days, offering an array of technical assistance
and educational services. “This project shows how
producers entering the value-added chain not only improve
their own bottom line, but enhance the economy of a
region,” Cheri Rath, Center executive director,
says.
The original co-op was formed in 2003
by 43 Hutterite colonies of family farmers
in the Dakotas, Iowa and Minnesota. They
soon came to the conclusion that in order
to keep going, they would need to own
and operate their own processing facility.
In 2004, they attracted a manager with
31 years experience in the poultry business
to lead the co-op in the process of
building the 150,000-square-foot, $45-million facility on 114
acres a few miles outside of Huron, S.D.
Early in 2006, Dakota Provisions began manufacturing and
producing pre-sliced, ready-to-eat meats, poultry and protein
products. The plant employs more than 400 associates
and has plans to increase that to 1,000 within five years.
The facility can harvest, de-bone and cook as many as
eight million live turkeys a year. Eventually, it will
carry a complete line of fully cooked pork, beef
and chicken products as well, all geared
toward “the food service, co-manufacturing
and niche market segments.”
Dakota Provisions also engages in
research and development, and works in
quality assurance labs and kitchens to continually
test, develop and monitor products.
Visitors to the co-op’s website, www.dakotaprovisions.
com, can take a virtual tour of
the facility.
