Cooperatives in the balance between retail and member interests: the challenges of the German cooperative sector

Abstract

Wine cooperatives have a long tradition and still account for roughly a third of the German wine market. Based on cooperative values and seven cooperative principles, the legally manifested business goal of cooperatives is to patronize their members' business activities. As the members are grape growers, member-orientation leads to a business policy of production-orientation which stands in strong contrast to the customer orientation which is associated with saturated competitive markets. The aim of this article is to analyse this area of conflict. Based on the results of this analysis, we intend to shed some light on the relation between the wines produced by cooperatives and their origin as a means of marketing.

Keywords:

• German wine cooperatives
• member orientation
• customer orientation
• branding

Notes

1. Within the specialized retail stores is a tendency that successful retailers have a couple of outlets. The largest specialized retailer ‘Jaques’ Wein-Depot’ manages over 280 franchise outlets (Jaques’ Wein-Depot, 2013).

2. Traditionally, viticulture in Germany was one of several different forms of agriculture on most farms, and the farms as well as the vineyards were very small. As a result of structural change in the agricultural sector, the farms increased their acreage and production as they specialized. The necessity for high intensity of labour hours on one hand and the simple equipment needed for small growers on the other hand have made viticulture economically attractive for full-time as well as part-time farmers (Schweickert, 2007).

3. Even though the beginnings of the co-operative grouping on German soil can be traced back to the German tribes (von Gierke, 1954), Raiffeisen cooperatives which are addressed in this paper ‘only’ date back to the year 1869 (Aschhoff & Henningsen, 1986).

4. In this context, Karl Marx published an article on the affliction of small wine growers in Mosel valley during the 1830s and its economic consequence (Marx, 1841).

5. Using this form of qualitative content analysis, a large amount of text can be prepared for interpretation. Mayring (2008) suggests three basic forms of interpretation: aggregation, explication, and structuring. Within this process, a fundamental role is played by the composition of categories. We used a deductive way of categorization by deducing from the cooperative theory a manual of relevant topics.

6. As this survey is nearly 10 years old, we encouraged several masters' and bachelor's theses to address the topic in the last 3 years. The results show that the main conclusions of our survey are still valid.

7. From the 147 German wine co-operatives with their own vinification (‘wet’ wine co-ops), we analysed more than 40% (60 cooperatives answered our questionnaire). The composition of the analysed ‘wet’ wine co-ops is representative so that all main German wine-growing regions are fully represented. In our survey 71.7% of the ‘wet’ wine co-ops pay the viticulturist according to their ‘yield per hectare'. Through this payment-measure they encourage wine-growers not to exaggerate the potential of the vines, resulting in better wine quality. As shown in Figure 1, this measure was 2.22 on a scale from 1 to 5. Because the value of the measure ‘Average Oechsle’ with 1.82 is lower than the one for ‘yield per hectare', ‘wet’ wine co-ops (80%) apply the measure ‘Average Oechsle’ more often. Analysing the average degree Oechsle for every variety they pay, a surcharge for those viticulturists who delivered grapes above the average degree. Conversely, viticulturists who deliver below-average grapes are paid less. The least used procedure was the system of rating the grapes before they are pressed using a grape scan. Forty-five percent of the ‘wet’ wine co-ops did not apply this procedure of negative-selection in which grapes that do not match the minimum quality level are taken out. The concept of offering a loose production contract to produce higher quality is used by 73.3% of the co-ops. Strict production contracts are being used by 78.3% of the ‘wet’ wine co-ops. The value 1.97 on the scale confirms the important role of this approach.