What is a Marketing Cooperative?

A marketing cooperative provides a sales outlet for the products supplied to it by members. It is a cost-effective way for smaller farmers to sell products at more advantageous prices than they could achieve alone, especially when selling to large food companies.

Marketing cooperatives may deduct retains from the proceeds that are payable to patrons. These amounts are placed in the capital accounts of the patrons. These retained funds are essentially a form of financing for the cooperative. Retains are usually paid out over a number of subsequent years, and so can be considered liabilities of the cooperative.

Characteristics of a Marketing Cooperative

The key characteristics of a marketing cooperative are as follows:

Member-owned and controlled. Members own and govern the cooperative. Decisions are made democratically, often following the "one member, one vote" principle.
Collective marketing and sales. The cooperative markets and sells members’ products under a common brand or strategy.
Economies of scale. Members pool resources to lower costs related to advertising, transportation, packaging, and distribution.
Fair pricing. The cooperative negotiates better prices for members by selling in larger volumes.
Enhanced bargaining power. A marketing cooperative reduces dependency on middlemen and provides more stable income to members.
Profit distribution based on use. Profits are distributed among members based on their level of participation in the cooperative.
Shared branding. Cooperatives often operate under a unified brand name to improve recognition and trust.
Vertical or horizontal integration. Some marketing cooperatives engage in vertical integration (e.g., processing raw products into finished goods before sale). Others may operate horizontally, where members produce similar products and collectively sell them.
Long-term stability for members. Marketing cooperatives help protect members from market fluctuations by securing stable demand and pricing for their products.
Legal formalities. Marketing cooperatives must be legally registered and follow state and federal cooperative laws.

Examples of Marketing Cooperatives

For example, a farm sells livestock and crops on an ongoing basis through a cooperative that handles the marketing and eventual sale of products to third parties. Similarly, a group of small family-owned vineyards bottles and sells their wines through a marketing cooperative that deals with large wine distributors.