Brand Partnerships - Sustainable Food Systems: Marketing and Finance

This page outlines how business relationships among farmers, urban and rural landowners and investors can be organized and managed for sustainability. With brand partnerships, farmers, gardeners and their cooperatives will own controlling interests in “sustainable food companies”. These new companies will be organized as partnerships, but will be legally and financially separate from the associated organic or transitioning farm. The idea is to spread financial risks while maintaining a direct link between the brand and the land.

As such, the organic farmer will serve as the managing partner for the brand. As the managing partner, the farmer will be well compensated because her/his skill and hard work are central to the success of each new enterprise. Although the brand partnerships will not own land, their food brands will be directly linked to specific farms and farmers. This structure will help focus the attention of all the partners on marketing and finance methods that directly support sustainable practices at the farm and community levels. As discussed below, if the brand is successful, the farmer and the minority partners will make money by advancing sustainable agriculture, not by cutting corners.

The minority partners (investors and landowners) will most likely be members of organizations with strong business, social and environmental interests, including:

• Churches, schools, colleges and universities
• Food companies, including retailers, manufacturers and distributors
• Land owner groups
• Green mutual funds
• Economic development agencies

A single partnership could own one or several sustainable food brands. My goal is to organize new farms and brand partnerships in close geographic proximity so that labor, equipment and land can be used to the best advantage. This spreads financial and operating risks while reducing unit production costs.

Partnership Structure and Operation

Returns to investors and land owners will be paid once the managing partner reaches production and income goals contained in partnership agreements, and related business plans. These contracts will also detail the duties of each partner.
Briefly, producer responsibilities will include production and coordination of shared operations with near-by partnerships. The investors will provide the capital and/or operating funds in return for a share of the partnership profits. Landowners will share in the partnership profits and negotiate separate lease and ownership agreements with the managing partners. These agreements will cover lease/purchase terms along with payment of taxes, insurance and maintenance.

Each partnership will have ready access to experienced agricultural, environmental and dietary consultants. Marketing, banking, insurance and legal services will also be provided. Processing and distribution services will be contracted to established firms as long as prices are reasonable. Otherwise, they will be owned directly by a brand partnership, or by a partnership consortium. The partners will conduct scheduled contract reviews and discuss business plans for each brand and product, including retail supply contracts. Further, the partnership agreements will contain provisions for an orderly dissolution in the event that consensus cannot be reached on key issues.

Multiple Partnerships

Even though neighboring partnerships might compete at the retail level, they can reduce unit costs by cooperating on production, processing and distribution.

Once several partnerships are in place, the members will be encouraged to join informal “partnership councils” to discuss operations, finances, legal issues and markets. The frequency of these meetings and the agendas will be determined by an informal committee that includes managing partners, investors and landowners. In time, these councils may become legal entities with public relations and lobbying duties of their own.

Product-Specific Accounting

As with any business, accurate cost accounting is essential. A simple, standard accounting and reporting system will be used by each partnership to track and manage its internal capital and operating costs for each product that it sells. The accounting system will be designed so that the managing partner controls the accounting process and reports only to her/his investors and landowners.

The other critical stakeholders (truckers, processors, distributors and retailers) for each product will receive an annual “letter of good standing” from the partnership’s local accountant. These letters will provide assurances about the financial health of the responsible partnership, without going to the time and expense of an annual audit and report. These assurances are very important because if a major partnership fails to deliver its product, then marketing and distribution costs will go up for the remaining products and partnerships. In other words, each partnership will maintain a closed set of books and provide an annual statement of solvency to key stakeholders.

Massena Fees

Once successful partnerships are in place, Massena Farms will begin to receive small management and marketing fees from each group in return for negotiating and managing supply contracts and arranging financing, etc. These fees will be pegged to services rendered and/or to sales. We will not accept fees and commissions from contractors, service providers or vendors.

End 02-21-11