The seeds to making an alliance function and grow is to learn from others' mistakes. For example, Ernie Davis, agricultural economist at Texas A&M University, says to be successful you need:
* Commitment from producers
* Trusted leadership
* Financial strength to stay in the market for at least two years, and
* Enough volume to be able to capitalize on more than a single product.
"The attraction of alliances is getting a premium for your cattle," says Davis. "So, make sure you get your genetics where you have higher quality, premium cattle."
The Power Of Supply - "Supply is far more powerful than capitalization in alliances," says Jim Strain, who in the mid-80s joined Mel Potter and others to form the now defunct Better Beef Marketing (BBM). "If you can get your arms around enough supply, you can start doing things."
Strain says BBM's roadmap was fashioned after the successful cranberry cooperative started by Mel Potter's father. Their cooperative, like many today, included producing beef product from conception to consumer. Part of the plan was to align with a packer.
"We weren't interested in bricks and mortar," Strain says. "There was plenty of processing capacity around when we were doing this. Since we could get custom processing for about $18 a head at the time, we just wanted to strategically align ourselves with somebody."
After spending a year trying to persuade cattlemen to do business differently, BBM and Strain, who runs a yearling operation in southwest South Dakota, gave up.
"We were under the assumption that when we got the thing fully conceptualized and put together, we'd go back to the producers we'd originally contacted to join up," Strain recalls. "But, they didn't. So, we were left high and dry."
Strain is convinced the industry needs to become vertically integrated, but has advice to those leading the pack.
1. Identify and analyze what's wrong with your current marketing situation, then devise a plan with solutions.
2. Hire corporate-style professionals and give one guy the clout.
3. Keep cowboys out of management. "The only thing cattlemen should do is be on a board of directors," Strain advises. "No one can get the slightest advantage or it starts to come apart because of resentment."