Cooperatives Across Clusters: Lessons from the Cranberry Industry

Clusters are geographically concentrated areas of activity around a certain industry. The central question for modern cluster theory from the perspective of industry dynamics is why firms co-locate in the same space. The classic example is Silicon Valley, where multiple IT companies compete side by side, amidst some of the highest costs in the world. The truth is that we have only partial answers. Some suggest that clusters are, in good part, the result of historical accidents, such as the origins of the tire cluster in Akron. It’s no secret that Bill Gates moved Microsoft to Bellevue because he grew up in Seattle. Others say that industries are set up close to transportation hubs or large markets, most often linked to Krugman’s on clustering, such as the Valley’s proximity to San Francisco.

Meanwhile, some suggest that having flexible labour pools, specialised training institutes and universities, and a set of anchor firms with startups and subcontracts, helps to explain the “stickiness” of industries in certain locations. Still others suggest, and many places are betting, that policy can make a difference, for example by improving infrastructure, setting up R&D facilities, training local personnel, and providing startup funds, among other things. The truth is, there is no consensus around why clusters arise and what gives them staying power.

One of the most obvious explanations is to look at natural conditions and use them to explain location. According to this thinking, steel mills are close to Pittsburgh because of where the coal is. The same is generally assumed in agriculture. We grow food where the conditions are optimal, which leads to lower cost and better quality food. But what if some of the other factors, such as proximity to large markets or infrastructure, or availability of agricultural extension agents, also figure in? By adding in consideration of supply chains, cluster theory points to ways that agriculture can potentially reduce the negative effects of commodity cycles, which reflect a boom-bust rollercoaster of prices for farmers, and have only been partially addressed through protectionist and subsidy policies.

We chose to focus on cranberries because they are grown in seven different clusters, concentrated growing regions within North America. Even in the states and provinces where they are grown, they tend to be concentrated. They are particularly interesting because most production is organised under one cooperative, Ocean Spray. We conducted statistical, historical, GIS, and sectoral/business analysis over 3 years, supplemented by in-person stakeholder interviews in every cluster as well as with Ocean Spray and other key supply chain companies.

Even with all its idiosyncrasies, we find that the cranberry industry offers important lessons for the potential reorganisation of some types of agricultural production. The concentration of production despite wider growing conditions refutes the dictum that agriculture takes place wherever crops grow best. Growing conditions are a precondition, but only the starting point for understanding agricultural organisation. Studying the growing regions of cranberries demonstrates cluster theory’s utility in understanding where and how agrarian production occurs. Proximity to markets, processing facilities, infrastructure, knowledge, and path dependency (historical experience) all play roles, alongside governance issues. In that regard, the largest cooperative organisation has not only provided collective industry goods and leadership but also helped family farmers capture some of the downstream value-added and smoothed out some of the commodity cycle through developing new demand. While it is impossible to think of the cranberry industry organisation as either stagnant or easily replicated, there are many lessons that could have tangible payoffs for farmers of a wide variety of crops as part of a longer-term research agenda. This, in turn, raises the question about whether a cooperative arrangement could be replicated in other agricultural sub-sectors, in order to insulate farmers from commodity cycles as well as to provide club goods in regional clusters and to coordinate those clusters. In one chapter of the book (Cooperatives Across Clusters: Lessons from the Cranberry Industry), we examine parallel cases, Land O’Lakes in dairying, Welch’s in grapes and jelly, and Sunkist in oranges. They demonstrate further the theoretical and practical utility of examining how to promote cooperation across clusters.

More About the Book and Its Application

Cooperatives Across Clusters: Lessons from the Cranberry Industry (Oregon State U. Press, 2024) is a new book on cluster theory by Andy Hira (Simon Fraser University), Paul Gottlieb (Rutgers U.), Neil Reid (U of Toledo), Stephan Goetz (Penn State U.), and Elizabeth Dobis (USDA). It is part of a larger project to explore whether cluster theory (explaining the geographical agglomeration of productive activities in an industry) can be applied to commodity-based agriculture. It has previously been applied to concentrated industries such as IT in Silicon Valley and speciality agriculture, such as quality winemaking.

More about Anil’s new project can be found at: https://www.sfu.ca/politics/CERG.html

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