Ten Conversations about Identity Preservation: Implications for Cooperatives

Motivation: While it appears the modern economy demands ever increasing amounts of differentiation, opportunities for grain producers to create and capture significant new sources of value remains elusive. Opportunities appear to loom large to help remove risk and improve quality in the grain supply chain through preservation of product identity, producers, producer groups, and cooperatives are frustrated at the low level of value available to them from IP demand. Why do premiums remain low? And, what is the role of group action in these new differentiated markets? Objectives: This research report helps to explain this apparent paradox underlying the economics of the value proposition for IP grains. Methodology: Needs assessments were conducted on procurement executives using a semi-structured instrument. Results: The study demonstrates that understanding identity preservation business opportunities requires an understanding of the buy-side proposition. Respondents described how they balance the risk mitigation and market uplift features of a supply offering with the risks of narrowing the supply base. A model of the buyer's calculus is constructed. The results show how for producers and producer groups to drive value up the chain they need to shift away from solely a new product focus. Instead attention needs to be directed towards technologies, delivery systems, and organizational models that when bundled with new products make end-users more competitive. A second insight was the limited role of group action in meeting end-user needs. Where value markets existed, internalized groups rather than "arm's length" group transactions were the norm. Plan for Discussion: The cooperative movement was grounded in group action giving individual producers power in the market. The motivation to unite was very clear. In the post-industrial agrifood system though, why do buyers want to purchase from a group? What is the role of the group, from a buy-side perspective, in the modern economy? How should effective groups be structured? Key Words: identity preservation, supply chain management, value creation, group action