Geraldton Fishermen’s Co-op

Australia’s largest fishing co-operative, formed by a small group of Western Australian rock lobster fishermen.

Interview by Mutuo and BCCM, CEMI Discussion Paper series
Photography by Geraldton Fishermen’s Co-operative

Geraldton Fishermen’s Co-operative fast facts (July 2020)

  • Established: 1950 in Western Australia
  • Turnover: $400 million
  • Member businesses: 300

Established in 1950, Geraldton Fishermen’s Co-operative (GFC) was formed by a small group of Western Australian rock lobster fishermen who sought to take control of their own future. Over the past 70 years, GFC has grown to become the largest rock lobster exporter in the world and one of Australia’s largest and most successful co‑operatives.

GFC is good for its members: it is 100 per cent owned by fishermen and license holders supplying the Co‑operative and is operated for the benefit of members. GFC members have a direct stake in the financial success of the company and a deep pride in the famous Brolos brand, motivating them to catch and produce the best rock lobster product possible.

The Co-op’s core purpose is to create the maximum value to fishermen. It ensures high quality regional employment that is secure and facilitates self-determination.

With an annual turnover in excess of AU$400m, GFC is a major exporter for the WA economy supporting more than 500 fishermen, employees, and their families along a thousand kilometres of WA’s coastline.

Co-operative Conversations

Watch Co-operative Conversations, Episode 3 Part 2: Roundtable. During this roundtable we examine how some of Australia’s leading agricultural co-ops work to maximise produce and the food manufacturing supply chain. Journalist Pete Lewis and our farmer panel, including Matt Rutter, Chief Executive Officer of Geraldton Fishermen’s Co-operative Ltd, discuss and explore how maximising their produce into marketable products can transform producers from price takers to price makers.

"Yeah, very proud. We're obviously one of the primary industries in Geraldton, but we're across all of the coastal towns, up and down 1,000 kilometres of coastline, which to be honest wouldn't exist, some of those smaller towns, if there wasn't the rock lobster industry generating the local economy because there's simply no other business that goes on there, but it underpins then the tourism in those towns. It also gives a sense of identity. I agree with what's been said earlier around the sense of identity linking in with this really important community resource. So like I say, it's fundamental to those regional towns. Simply in our case, probably 50% of them would simply not exist." - Matt Rutter, Chief Executive Officer of Geraldton Fishermen’s Co-operative Ltd

One of the things a co-operative can do is unite a community or collective of producers to work together to overcome adversity. We speak with some different horticultural co-operatives, including Basil Lenzo, Chairman of Geraldton Fishermen’s Co-operative Ltd, about the challenges that brought them together in the first place and how they have used co-operation to mutual benefit. How can co-ops help producers access shared services and value add through new business ventures and access new markets? Watch Co-operative Conversations, Episode 4 Part 2: Roundtable.

“I think everyone should be in a cooperative if they’re in a small business. I mean, there are reasons why it works so well, and the collective wisdom and the collective grouping of individual businesses makes so much sense if it’s economy for scale or if it’s for the benefit of the community or for social aspects as well. Most definitely. ” - Basil Lenzo, Chairman, Geraldton Fishermen’s Co operative

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Geraldton Fishermen’s Coop case study, CEMI Discussion Paper series

Rock lobster exporters

The extended version of this case study is presented in Australia’s Leading Co-operative and Mutual Enterprises in 2016, which is part of the CEMI Discussion Paper series.

Overview

The Australian fishing industry encompasses a range of commercial fishing activities engaged in the capture of wild ocean fish and other seafood. In 2016 the industry was estimated to have around 5,150 businesses with a combined annual turnover of around $1.5 billion.

The industry is highly exposed to international competition and has been facing rising competition from cheaper imports as well as the growth of farmed fish from the aquaculture industry. However, strong demand, particularly from Asia, has helped the industry grow by an annual rate of 2.3% over the past five years.

One of the most important products produced by the Australian fishing industry is rock lobster, which comprised 40% of the total value of the national fish catch in 2015/16. The global price for rock lobster has increased in the past five years due to rising demand. Compared to the other major fish catch segments, rock lobster has remained highly profitable.

Sustainably harvesting the “diamonds of the sea”

The Geraldton Fishermen’s Co-operative (GFC), headquartered in Geraldton WA, is one of the largest fishing operators in Australia, with annual sales of around $366.6 million in 2016. The company employs over 200 people. It is focused on the export of Western Rock Lobster and produces frozen, raw, cooked and live rock lobsters, primarily for exports to China, Japan, Taiwan and the United States.

The co-operative was established in 1950 by a group of local fishermen with the purpose of marketing rock lobsters internationally. It has a board of 8 directors, including 6 elected members and 2 appointed independents, and distributes dividends to members based on patronage.

Around 65% of all fish and seafood caught in Australian waters is exported. China has become a major market for rock lobster and this has significantly assisted GFC to secure a strong position in the live lobster export trade. Over the past five years GFC has seen its annual turnover increase by an average of 28%.

GFC is investing $20 million into a new facility in Welshpool in Perth, opened an office in China, and recently built live lobster distribution centres in Guangzhou. It will open two more in Shanghai and Beijing.

The co-operative plays a critical role in maintaining the sustainability of the Western Rock lobster fishery. Commercial rock lobster fishing in WA has been undertaken since the 1940s but improvements in fishing technologies that were introduced in the 1990s and early 2000s enabled fishermen to catch lobster with greater ease and efficiency. This began a decline in the stocks of baby lobsters, raising concerns over the future sustainability of the industry amongst many fishermen.

Rather than seeking higher quantities of rock lobster, it was the view of many in the industry that ‘value’ of catch was more important than ‘volume’. Perhaps surprisingly, the catch taken by commercial rock lobster fishermen in WA is usually less than the quota set by the state fisheries authority. For example, in 2015 the WA Department of Fisheries offered a quota in excess of 8,000 tonnes, but the fishermen voluntarily restricted this to 6,000 tonnes. Their philosophy was that rock lobsters are highly valuable and in demand. In essence the rock lobsters are the “diamonds of the sea” and over supply is only going to negatively impact price as well as fishing efficiency and sustainability:

So the role we’ve played in that is certainly as their advocate, but also in driving a cultural change away from high risk/high-volume, towards low risk/high value. And the export market certainly responds to scarcity, not to abundance… it has certainly built our confidence so we know we have got a firm foundation, which is underpinning these investments we are making both here and in China. So it is a great success story and the key to it is, it was totally driven by fishermen, not the other way around.

Wayne Hosking, CEO GFC

Although not all commercial rock lobster fishermen agreed with this “value over volume” strategy, it was a decision taken at the board level as being in the best interests of the majority of members. This required the board and the management to engage with members to help educate them towards the longer term view.

Making the “member value proposition”

Like any small business, fishermen have to invest in their own enterprise and take on the risk and cost of remaining in the industry. To remain competitive commercial fishermen must pay for their fishing licenses and keep their boats and equipment up to date with the most advanced technologies. Profit margins are typically thin across the Australian fishing industry with fuel, bait and fishing gear being major operating expenses.

For GFC the ability to retain the loyalty of their members is contingent on the co-operative being able to offer its members value, in particular financial benefits.

“Remember in one sense we are a successful company, in another we are a house of cards, as none of our members have to be here tomorrow; they can leave whenever they like and so, in terms of long term supply, we talk about sustainability in the fishery, but in terms of actual supply of fish, we have no guarantee of anything tomorrow, next month, next season so we exist purely on the basis that fishermen believe they are going to get paid more by being here," Wayne Hosking.

The co-operative has around 63% of the lobster catch each season and aims to grow that share of market by offering a compelling value proposition to members and future members. Part of that strategy is its ability to offer competitive pricing and the distribution of profits via a loyalty bonus based on volume of supply if they support the co-op throughout the season. It also includes investing in the marketing and supply chain in order to grow future revenue.

The co-operative has developed a sophisticated logistics management system that sees live rock lobsters taken from sea and transported long distances by road and air from Perth to China. This involves the use of specialised holding tanks, protective packaging, a fleet of refrigerated trucks that keep the lobsters healthy and under less stress during the long road trip from Geraldton to Perth, and then a well-managed cool chain from Australia to overseas distribution centres. The development of its own supply chain in China will also help the co-operative to move further into the marketing channel and sell direct to the consumer via e-commerce, delivering live lobster to their door from local distribution centres. Chinese consumers lack information about the origin and quality of the food they are purchasing, so this will potentially help GFC develop a strong reputation.
“So what we are doing is we are integrating into the value chains so we still have all the same requirements back here, but we are cutting out the middle man you might say and we are building our own path to the consumer. At the moment most of our product still goes through to a handful of big seafood importers and they have the tanks, they have the distribution and so forth whereas we are now building our own capabilities.” Wayne Hosking, CEO GFC

This expansion into China is a major opportunity for GFC and helps the co-operative to add considerable value to its brand, the product it sells, and therefore the longer term returns to its members. It is a strategy that few of the smaller seafood exporters in Australia could undertake, so it will potentially make a stronger member value proposition (MVP) and help to differentiate the co-operative from these competitors. The challenge for the co-operative was to get members to look long term, what is often viewed as a “horizon problem”.

“Fishermen have their daily price and then their annual loyalty bonus payment. And then, as we said before, there is the longer-term horizon, looking at the company’s strategic direction into the future, and we need to bring our members along with this. The non-fishing investor has different drivers to fishermen, and those are the value of their asset over time and the return on that investment, usually expressed as an annual lease payment. But they don’t necessarily relate these to the co-op’s performance and how that influences capital value and lease returns, but clearly our sales and marketing performance has a huge impact on these. How we develop the China market and how much we return to the fishermen in terms of beach price directly affects the value of the asset and the return on investment. You can see that over the last five years as beach prices and so forth have tripled and obviously, the capital value has increased and so forth not surprisingly. But some investors can be distracted by short term offers from our competitors, you know, someone wants to pay them more to secure the lease pot, so it is much harder to make the link between the co-op’s performance and the benefits to a pure investor but they are there", said Wayne Hosking.

The signing of a Free Trade Agreement between Australia and China is viewed as a major benefit to GFC. The co-operative was actively involved in these free trade negotiations because more than 90% of its export trade has been going to China in recent years. Over the next five years the Chinese tariff barriers will be lowered and this augurs well for the co-operative’s export activity.

GFC recently arranged an intensive tour of the China seafood market, taking 40 members and industry investors to 5 cities in 8 days so that they could better understand GFC’s strategic plans and ambitions in the world’s largest and fastest growing seafood market. This kind of stakeholder engagement is an important part GFC’s overall strategy.

These are your lobsters, your market, your clients, your offices, your facilities, your staff , your strategy, your future and your co-operative.
Wayne Hosking, CEO, GFC

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