Co-ops must make a profit to properly serve members
“Some people seem to think that it is not appropriate for the co-op to make a profit, or that it should survive on minimal margins. That is not correct,” he said.
Mr Tyrrell said co-operative members will only have confidence in the business when they see that it is well run and profitable, and capable of making the necessary investments for their future needs.
“I am making these comments because I see suggestions from some quarters which appear to imply that co-operatives should operate on a break even basis,” he said, stressing that the priority and function for the co-op is to provide services to its members.
Mr Tyrrell, who was launching a history of North Cork Co-operative Creameries by Joe Guerin, said co-ops are often misunderstood by financial analysts, Government and local authority officials and others in the business community.
“The co-operative business model deserves more credit than it often gets, for what it does for the local community and for its members.
“The focus for the co-operative is on giving benefit to the local area through its business activities, product manufacturing, store trade, use of local services and focus on providing services which are needed locally.
“That is why it deserves the support of the local community in its wildest sense and the support of its members,” he said.
Mr Tyrrell said that as co-operatives face new proposals to phase out milk quotas, they will meet the prospect of increased milk supplies from members and some producers will want to increase faster than others. There is also the prospect of new entrants to dairying, and some of these could be large scale.
“This will pose a challenge for the co-operative in terms of what products should be made, which will be profitable, and the investment which will have to be made in processing extra milk.”
Mr Tyrrell said the current indications are that quotas will be increased by 2% from April 1, 2008, and there is a realistic prospect of further increases of one or two per cent each year up to 2015, when quotas are to be completely phased-out, lifting the restriction on milk output.
“In fact, the only restrictions may be on who will handle the milk and who will have the markets. In future, the key for producers will be to be part of a business, which is preparing for the future, making investments to take their milk and convert it into products efficiently and be in a position to pay a price, which gives a profitable return to the producers,” he said.
Mr Tyrrell confirmed that ICOS is working with co-operative boards and management to address this new situation.
It is encouraging co-ops to prepare appropriate shareholding and membership policies for the future conditions.
“In ICOS, we are also conscious of the role of the co-op in to provide services to its members for their current and future needs.
“These needs can be milk processing, marketing or the supply of goods and services. In order to make and support these investments, the co-op needs to be profitable,” he said.
