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Co-operative Advantage of Doing Business: Case of JCCU

Co-operative Advantage of Doing Business: Case of JCCU. Akira Kurimoto Consumer Co-operative Institute of Japan. Plan of Presentation. Background of Japanese Food System and Consumer Co-op’s Key Business Performance Factors Contributing to the Successful Business Models of Home Delivery

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Co-operative Advantage of Doing Business: Case of JCCU

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  1. Co-operative Advantage of Doing Business: Case of JCCU Akira Kurimoto Consumer Co-operative Institute of Japan

  2. Plan of Presentation • Background of Japanese Food System and Consumer Co-op’s Key Business Performance • Factors Contributing to the Successful Business Models of Home Delivery • Priorities in Future Planning of Co-operative Business

  3. Key Business Performance • Characteristics of Japanese Food System • Production phase • Dominant small farm (on average 1 ha) • Declining production capacity (aging farmers, abandoned farms, exit from agriculture) • Trade liberalization and deregulation • Food processors relying on imported material • Low self sufficiency (80% to 39% since 1960)

  4. Key Business Performance • Characteristics of Japanese Food System • Distribution phase • Complicated distribution channels with numerous small wholesalers and retailers • Supermarkets’ growing market share • Shift in public commercial policy from protectionism to liberalization/ deregulation • Growth of fast food chains and takeout delicatessen business • Carrefour or Wal-Mart withdraws?

  5. Key Business Performance • Consumer co-op’s expansion during 1970 and 1990 • Membership 2.9 m.→14.1 m. (x4.9) • Turnover \183 b. →\2,777 b. (x15.2) • Share capital \10 b. →\240 b. (x24) • Stagnant growth since the 1990s • Growing membership →24.2 m. (172%) • Business slow-down →\3,369 b.(121%) • Creating major co-ops in each province • Integration through consortiums

  6. Growing Co-operative Membership (in million)

  7. Evolution of Turnover of Consumer Co-ops and JCCU (in JPY billion)

  8. Key Business Performance • Consumer Co-ops involves 24 million members or a third of households. • They are controlling 5.5% of food retail market. • Hyogo (12.5%), Hokkaido (11.1%) • They are the third largest retail group after Aeon group and Seven & I group. • But they are fragmented in ca. 600 co-ops showing mixed performance.

  9. Key Business Performance • Mixed Performance • Stagnant store operations due to regulation and competition • Joint Buying as a driving force of co-operative expansion • Innovation of Individual Home Delivery supplementing/replacing Joint Buying • Evolution of turnover and surplus

  10. Evolution of retail co-op turnover by categories

  11. Operating surplus of non-store operations offsetting deficits of store operations

  12. Co-ops are dominating subscribed food home delivery business in 2004

  13. Factors Contributing to the Successful Business Models of Home Delivery • What is Joint Buying? • A unique system of consumers’ collective buying of food and daily necessities • Consumerism and ecologist campaigns gained strength in the 1960s. • Housewives joined in buying clubs to obtain ‘pure milk’ at an affordable price. • Spontaneous buying clubs had grown to consumer co-ops in the 1970s.

  14. Factors Contributing to the Successful Business Models of Home Delivery • Organizational Factors • Han neighborhood groups for ordering and receiving products • Co-op employees for delivery • Out-sourcing of delivery • Consortium’s role for product development and marketing

  15. Han members collaborate in unloading and sorting orders.

  16. Factors Contributing to the Successful Business Models of Home Delivery • Commercial Factors • Co-op brand for safety and reliability by reducing additives, informative labeling and simpler packaging • Sanchoku (Direct transaction between producers and consumers) as an alternative to conventional production, distribution and consumption • Catalogue explaining how products are grown, processed and sourced • Own laboratories for securing quality

  17. Co-op brand representing safety and reliability

  18. Consumers meet producers to learn each other for Sanchoku.

  19. Factors Contributing to the Successful Business Models of Home Delivery • Technological Factors • OCR(optical character reader) order sheets • Payment from bank accounts • Semi-automatic products sorting • Cold chain for frozen/chilled foods • Use of Internet for ordering and communication

  20. Members fill in OCR order sheets.

  21. Factors Contributing to the Successful Business Models of Home Delivery • Financial Factors • Low investment (It can be started with PC and delivery trucks without store facilities) • No need for expertise for store operations which cost a lot • Minimum inventories (pre-order system, high stock turnover)

  22. Priorities in Future Planning of Co-operative Business • Securing Food Safety • Building Brand Equity • Creating Values for Money • Improving Member-Employee Communication • Practicing Socially Responsible Retailing in triple bottom lines

  23. Conclusion • Co-operative must combine its advantage and business innovation. • Co-operative must identify its advantage as member-owned and controlled business. • In view of a life cycle, co-operatives need to continue innovation.

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