Experience With International Membership

1
Experience With International Membership

• Bill Davisson
• GROWMARK, Inc. CEO

2
Point of Reference

• GROWMARK is
• Regional farm supply grain marketing
  cooperative
• Based in Bloomington, Illinois
• 2.8 billion in sales (2005)
• Nearly 1 billion in assets
• Ranks among the largest agricultural cooperatives
  in North America

3
Point of Reference

• GROWMARK
• Began as Illinois Farm Supply Co. in 27
• Expanded to Iowa/Wisconsin in 60s
• Consolidated with Ill. Grain Corp. in 80 to form
  GROWMARK
• Purchased assets of UCO in 95
• (35 member cooperatives in Ontario)

4
Point of Reference

• GROWMARK
• Expanded marketing territory in 90s
• Investment in Mexican feed company in 96
• Purchase of AgWay agronomy assets in 02
• Today, business in 21 states, Ontario, and Mexico

5
Point of Reference

• GROWMARK Strategic Direction
• Maintain strong member system
• Grow expand from core products
• More involvement with value added
• Expand marketing territory
• Mergers/acquisitions supporting business
  strategies

6
Point of Reference

• GROWMARK Ventures/Investments
• Benefit to core membership
• Related to core business competencies
• ROI (15)
• Further strategic direction

7
Canadian Member Business

• Acquisition of UCO assets (1995)
• Factors in the decision
• UCO structure similar to GROWMARK
• Federated
• Loyal members
• Farmer focused
• A system approach to business
• Common agriculture
• Corn
• Soybeans
• Livestock

8
Canadian Member Business

• Factors in the decision continued
• Core businesses
• Agronomy
• Energy
• Feed
• Grain
• Consumers
• Economic opportunity/growth

9
Canadian Member Business
Where is Ontario agriculture?
10
Canadian Member Business

• Why approach as member business?

11
Canadian Member Business

• Why approach as member business?
• Ownership options
• - Canadian General Business Corp
• - Canadian Cooperative Subsidiary
• - Operate in Canada as GROWMARK
• (member basis)

12
Canadian Member Business

• Why operate on member basis?
• Largely a philosophical decision
• - UCO members wanted to buy a regional co-op
• - UCO members willing to invest in GROWMARK up
  front over time
• - UCO members desired to be equal with U.S.
  members
• (Note All but 2 of the former UCO members
  became members of GROWMARK)

13
Canadian Member Business

• Challenges Legal and tax issues
• - Revenue Canada rulings
• - Canadian Securities Commission issues
• - Anti-Trust laws in both countries
• - Bankruptcy issues (UCO)
• - Pension/benefit laws/programs
• - Doing business with Cuba

14
Canadian Member Business

• Other challenges
• - Expatriate management Customs
• - Governance (GROWMARK Board)
• - Acceptance of U.S. company in Canada
• - Acceptance of decision by U.S. members
• - How would ownership investment by members be
  equalized?

15
Canadian Member Business

• Other challenges
• - Cultural issues
• - French Canadian issues
• - Acceptance of U.S. company in Canada
• - Acceptance of decision by U.S. members
• How would ownership investment be equalized?
• - Currency issues

16
Canadian Member Business

• Process of assimilation
• - Its about the people!
• - Joint meeting of member co-op managers/ board
  presidents
• - Teaming of co-op leaders (US/Canadian) for
  facility tours
• - Employee meetings
• - We discovered our similarities were great

17
Canadian Member Business

• Process of assimilation
• - Staffing started as combination of former UCO
  and a few key, long-term U.S. employees
• - Today, the Ontario region staff is all
  Canadian

18
Canadian Member Business

• Given 20/20 hindsight,
• would we change anything?
• Not much
• - Pleased with Revenue Canada rulings
• - May have kept some things separate (patronage
  pools, etc.)

19
Canadian Member Business
No more one size fits all Tension Unity vs.
Uniqueness
20
Canadian Member Business

• Keys to success
• In this instance, having Ontario member
  cooperatives as full, equal members was
  essential
• Recognize differences, but blend the family

21
International Non-Member Business Example

• maltaCleyton
• 2nd largest animal feed company in Mexico
• Diversifying into pet food/ aquaculture
• 44 management ownership
• 44 GROWMARK ownership
• 12 private investor ownership

22
Non-Member Business
maltaCleyton

• Why make the investment?
• Supports strategic direction
• - Core business
• - Geographic expansion
• - Solid ROI
• - Growing market
• - Market for grain

23
Non-Member Business
maltaCleyton

• Why non-member investment?
• - Not a cooperative to begin with
• Different risks/challenges
• Countrys economy/government
• Security
• Language
• Culture

24
Determining the Appropriate Strategy

• Let principles guide
• Think globally
• Calculate risks
• Monitor results
• Nurture relationships
• Be aware of issues/attitudes in each country

25
Questions?