Department of Agriculture and Water Resources, April 2016
These case studies share examples of existing farmer collaboration
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- Citrus Direct was the first Australian company to negotiate a Collective Bargaining Agreement under 2007 ACCC rules. They formed a collective to negotiate directly with two major supermarket chains.
- The two-man group draws on a small network of flexible and reliable growers. The business relies on relationships, communication and trust, rather than contracts.
- The collective model has transformed their business and their view of themselves as a business.
- Members are better informed by talking directly to the customer and product is sold before it leaves the farm, providing transparency in pricing.
- A supporting tailored computer program was critical to the group’s growth and success.
- For further information visit agriculture.gov.au/cooperatives
Citrus Direct was the first Australian company to successfully negotiate a Collective Bargaining Agreement under recently introduced Australian Competition and Consumer Commission (ACCC) authorisation in 2007. The authorisation offered producers a way to collectively negotiate directly with customers without infringing legislation that prohibited collusion between competitors.
Sandy McLay is now Citrus Direct’s co-principal. Back in 2007, as an independent grower, he was quick to recognise collective bargaining’s potential for gaining a fairer deal. ‘Our farming expenses were going up each year and our returns were going down. We were looking at making savings, so we attacked the middle man in the supply chain,’ he says. ‘It had also become apparent that supermarkets were a bit dissatisfied with the supply chain. They wanted better quality product.’
Sandy enlisted two like-minded growers to form a Collective Bargaining Group (CBG), and received authorisations to negotiate directly with two major supermarket chains, one of which Citrus Direct still supplies today. ‘The CBG model gave us independence as well as letting us collectively market directly to the customer.’
The CBG model has been transformative. ‘The collective bargaining agreement has made us recognise that we are operating a business, and not just a farm.’
Citrus Direct CBG now has two members, Sandy and co-principal Chris Bryant. To supply the required volumes and consistent quality of mandarins, lemons and limes, it draws upon a network of about six other citrus growers who are flexible and reliable.
The CBG model gave us independence as well as letting us collectively market directly to the customer. It has made us recognise that we are operating a business, and not just a farm.
We are better informed, because we are talking directly to the customer, and we’re getting a better deal than before the collective bargaining agreement.
The business has no contracts—it relies on strong relationships, communication and trust. In season, it operates under very high pressure. Running on an eight-day cycle, it negotiates volumes and preferred prices among its growers, offers buyers the growers’ agreed prices and volumes, organises the orders and delivers its loaded trucks to the customer’s distribution centres throughout Australia. Sandy is both a grower and Citrus Direct’s logistics manager, handling marketing, transport and quality monitoring. If a supplier can’t fill an order, he quickly sources alternative suppliers to ensure continuous supply. This tightly scheduled operation is backed by a tailored computer programme that Sandy cites as a critical success factor.
Citrus Direct’s annual turnover grows every year, he says, and the CBG model has no drawbacks, just benefits. ‘We are better informed, because we are talking directly to the customer and know what he wants. We can set a price and accept or reject it. And we’re getting a better deal than before the collective bargaining agreement.’
The product is sold before it has left the farm—another significant advantage. ‘Previously we’d send it down to market and wait up to six weeks to find out how much it sold for and you never really knew how much you got because there was no transparency.’
He advises other suppliers considering a CBG model to be customer-focused: analyse their customers’ needs and work with them to help ‘drive the category’ to yield sales. ‘These days, corporates are very happy to be dealing with progressive farming businesses.’
These case studies were compiled by RIRDC to share examples of existing farmer collaboration.