Marketing and Marketing Alliances: The Basics

June 2003
Shelley Humphries - Glades County Extension, 4-H Coordinator/Livestock/Horticulture Agent

There are many new marketing structures in the cattle industry today. Marketing Alliances are among the up coming avenues for cattle producers to market their products. Because this is a new concept, many producers are unsure as to what the alliance actually is and how it works. This article is going to introduce you to marketing and marketing alliances and give you some information on what alliances have to offer.

To better understand the concept of the marketing alliance we must first look marketing and understand exactly what it is. Well what is it? Marketing encompasses all activities of getting products and services to the end user. It is the sum of business activities involved in the flow of goods and services from the point of production until the goods are in the hands of the ultimate consumer.

The whole idea behind marketing is being able to provide a desired product to the consumer in the desired form and at the right time and place.

Now that we have a better understanding of what marketing actually is, let's take a look at marketing alliances. The goals of the alliance are to create value for producers that participate while still producing desirable consumer products, and to generate a greater value and a higher return for its participants.

There are three distinct categories of marketing alliances for producers to participate in, cooperatives, brand licensing, and specialty product marketing, but this article will focus on cooperatives first.

What are cooperatives? A cooperative is a business organization that is owned by farmers and/or ranchers to collectively sell their products. The cooperatives allow producers to accomplish collectively what they could not on their own. Cooperatives also give small producers greater power in the marketplace.

Although cooperatives ultimately provide positive end results they can also have some drawbacks. Producers must buy stock or shares in the cooperative to participate. The shares come with certain rights and also obligations for the producer. If the producer is unable to meet the obligations, they may be penalized

There are two different types of cooperatives in the marketplace, centralized and federated. The centralized cooperative membership is made up of individual producers with control being in the hands of the members. Centralized cooperatives usually serve a local area, and are usually limited to the first few steps of the marketing process.

Federated cooperatives' members are local cooperatives which in turn have members who are local farmers. These cooperatives are quite larger and serve a greater geographical location. The control rests with the local cooperatives that make up the federation.

Besides cooperatives, brand licensing organizations and specialty product programs fall under the alliance category. Brand licensing programs are often breed based and require cattle to meet certain standards. They enter the market as a value added product that sends a standard of quality along with the name. An example of this type of alliance is Certified Angus Beef.

Specialty programs are similar to brand licensing, along with the value added concept specialty program find niches in the market and market solely to that niche. Again this type of alliance has certain restrictions for producers and standards that the cattle must meet.

It is important for producers to find the alliance that matches their operation the best. There are many factors that producers can look at, the genetics of the herd, breeding practices, etc. Producers should also investigate the limitations and restrictions of individual cooperatives and be comfortable with those before entering into an agreement, as well as the standards and restrictions of the specialty and brand licensing programs. As a producer if you are interested in participating in a marketing alliance, contact your local extension agent so that you can find others in your area interested in the same avenues.

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