Agway is an agricultural cooperative based out of Syracuse, New York. Agway was founded in 1964, when GLF
(Grange League Federation) and Eastern States Farmers’ Exchange merged. A year later, the Pennsylvania Farm Bureau Cooperative merged into Agway, and increased the company's range to 13 states from Maine to Maryland. Agway has had a rocky history, with great gains usually followed by great losses. On October 1, 2002 Agway filed for Chapter 11 bankruptcy.
The co-op exists to decrease costs and increase benefits and profits of those in the co-operative. Agway allows only active farmers to join the co-operative by buying one share in the co-operative. Currently, Agway has over 69,000 members. The co-op has two main divisions. The Agricultural Group run the retail end of the cooperative, selling feed, seeds, fertilizer, and farm supplies either to members, or through their collection of small stores located across the Northeast. The Country Products Group gathers produce from co-op members, and distributes it to wholesalers. This division invests and researches new agricultural technology.
Agway would take money generated by their products and services, and then invest it with mixed results. Agway heavily invested, in the Cooperative Producers and Consumers Market, more commonly known as P&C grocery stores in 1941. By 1961, Agway sold its stake in the stores, as the markets were all operating at a loss. Agway also dumped money into petroleum maker Texas City Refining, in an attempt to procure a steady supply of oil for it's customers. By the time Agway sold off Texas City Refining, the company had lost over $110 million. On the other hand, Agway, also invested heavily in the fledgling Mohawk Airlines in 1946. This company would eventually evolve into US Airways, bringing a windfall for Agway.
In the 1980's, Agway reached it's peak, with sales of over $4.1 billion in 1984. The co-op was listed on the Fortune 100 list of companies, which was emphasized on much of the corporate literature at the time. However, the company's size and growth were higher priorities than efficiency and profits, and this created a pattern that would begin the decline of Agway.
In the early 1990's, it became apparent that Agway was running heavily in the red, and needed cash to stay afloat. The co-op sold off its stake in Curtice-Burns, a produce market, even though it was one of the only investments that was making money for Agway. Rather than increase the price of membership or cut back on corporate overhead, Agway turned to bank loans and Tax Paid Retained Earnings as a source of revenue. This meant that the cooperative members were no longer the primary source of equity, and the company began to turn inwards on itself. For a company that is based on helping it's members, this is the death knell.
By 2002, Agway had been running annual losses in eight out of the previous 19 years. Over the same stretch, Agway had suspended profit sharing with its members in all but two years. The yearly cooperative conference had been reduced from a grand three-day affair to a small business meeting. Beginning in March, Agway began shedding pieces of the cooperative in order to stay afloat. Four companies were quickly put on the auction block, including Telmark, a leasing company that was actually making money for Agway. However, the negotiations to sell the company disintegrated. Agway had been banking on the sale of Telmark, literally, and now was stuck holding the bag when the loans came due. The co-op also began closing their corporate-owned retail locations, allowing those running franchises to remain open.
Outside executives were brought in to streamline
the company in the beginning of the year, but both had resigned on the same day in June after fully evaluating the condition of the company. In an August report, Agway listed it's liquid assets
at $0. After filing it's complete financial report with the SEC
on September 30, Agway turned around and declared Chapter 11
bankruptcy In the Northern District Court of New York the next day.
After the Collapse
Fortunately for members of the cooperative, the bankruptcy filing did not effect Agway's distribution or collection centers. Business continued almost as usual, but in a much smaller and limited form. In an attempt to pay off banks and creditors, Agway has sold off all but the essential core of the company. Agway Energy was sold off to the Suburban Propane Partners in late 2003 for a total of $206 million. On January 21, 2004, Agway sold its animal feed division to Cargill Animal Nutrition for $10 million. As the reorganization continues, Agway will attempt to concentrate and streamline it's main business, helping farmers do their job cheaper and better.