Kari Huhtala: Essential elements
IFAD Asset Request Portlet
Kari Huhtala: Essential elements02 March 2016
Kari Huhtala, Helsinki Pellervo Society, Cooperative Director:
Good afternoon to everybody. These days many people are concerned about food and the food chain, if the food is safe and healthy or if it is too expensive or too cheap. We ourselves may even wonder is it possible to both produce the food efficiently and to market it efficiently and in a responsible way? My answer is, it is possible and my solution is cooperative.
Cooperatives, they were born in middle England, in Manchester, in the 1850s. Cooperatives are most numerous in the United States, but who knows where is the most cooperative country in the world? You may now guess. It is far in the north where distances are long and where people live sparsely. The country is Finland. Now I am going to tell the Finnish story of cooperatives from our perspectives.
I was born and raised in middle Finland on a dairy farm with some 12 cows. Every morning the milk tractor came to the farm, picking up the churns, bringing them to the dairy. And the same tractor in the afternoon came back to the farm bringing a bag of powder that had been ordered in the morning. Pretty handy and efficient is it not? My father, he was a member of this particular dairy cooperative. He was also a member in the cooperative store where he bought the utensils that he needed in farming. For example, fertilizers or even machinery. It is probably vain to mention that he was also a member into the local cooperative bank as well as in the local mutual insurance company. The bank director, when he came to our farm, helping with deeds or the contracts, the trust between my parents and the bank director, it was complete. They knew it is a cooperative, it is theirs. The bank director was almost like our family doctor. Only a long time afterwards I got to know that I was raised in the most cooperative region of the world's most cooperative country.
Finland has 5.4 million people but a staggering number of 7.4 million memberships in cooperatives and mutual. Let us look at this picture. It means that 84 per cent of the adult population has at least one membership in a cooperative. This means that on average they have 2.1 memberships in cooperatives. I myself am pretty average, I have one membership card in the cooperative store and one more in the local mutual insurance company. The farmers, in turn, they have 4.1 memberships, which is a high figure. This means also that the market share of our cooperatives is high in Finland, just take an example in dairy production 98 per cent and in meat 77 and in dairy goods 45. So cooperatives play a great role in our society.
A few words about the history of our cooperatives. This gentleman, Hannes Gebhard, brought cooperation into Finland 160 years ago. The conditions were entirely different at those times in Finland than today. Finland was struggling with its independence under Russian rule. The conditions in the rural areas were poor, 90 per cent of the population were bound into agriculture. The smallholders, the farmers, were struggling with overpriced goods and poor services and they were fighting with the monopolies. For example, a monopoly is able to benefit its rule and power by using so-called biddings and to pull down the producer price. So there is a clear shortage of both economic and social welfare in the countryside. And now the cooperation came to this situation and as early as in 1901 the first cooperative law is signed down in Finland, which has formed a robust foundation for the welfare of our cooperatives.
Let us now go ahead and ask this question. How does a cooperative benefit its members, both the farmers and the consumers? Let us begin from the farmers' side. It is the farmers who own the cooperative, it is theirs so by uniting their power together they gain more so-called negotiation power, they are more powerful towards the buyers. This is one clear benefit. Also with the help of the cooperatives the farmers can share their costs.
Cooperatives takes care of the marketing, takes care of transportation, and so on. It becomes more efficient. The cooperatives provides a lot of services as well to its members. The cooperatives play a great role and have a lot to do with the welfare of the farmers. I take the example from Finland, from a dairy by the name Valio. Valio is a great dairy cooperative, its market share is over 80 per cent in Finland and it exports one third of its products today abroad. Valio consists of 80,000 farmers today. Its turnover exceed €2 billion, they produce high quality products and they have high quality standards. Valio has a few promises to both farmers and to the consumers. First, Valio has promised to use only Finnish milk. Valio also promises to use only GMO-free feed in its production on the farms. Important to the farmers, Valio promises to buy all the milk from the member farms no matter where they are located. So the farm in the northern-most Lapland receives the same producer price and the same benefits are the farm next to the dairy plant in the south of Finland and you can imagine how much this increases the trust and the commitment among the farmers.
Let us now proceed to the consumers angle. This is pretty challenging. You know that consumers today are diverse and they require much. Also there are giant global players in the market who want to compete with the price. We are lucky in Finland that our largest retail grocery store is also a cooperative, so it has the same roots as Valio, this farmers' dairy. They promise that out of their 20,000 grocery products over 80 per cent are of Finnish origin. A major director from this group said that it is the basic right of our clients and consumers to know the origin of the food. So we can see that from both sides cooperatives play a great role in our food chain.
In conclusion, we come to the question, how are we able to increase the trust from farm to fork? First, commitment. We need commitment from both the farmers' side and from the consumers' side. Farmers commit to certain quality standards, they commit to produce high quality milk for example. On the consumers' side it is more challenging because of this diversity but in a cooperative, thanks to this kind of membership arrangements, consumers are more committed.
Second, communication. We need open, transparent communication within the chain. So, for example, the consumer knows the journey of the milk from farm to fork. And third comes the trust after these two previous steps: commitment, communication and trust. In Finland we have no Walmarts but we have cooperatives. Thank you.