Because of inherent constraints, few farmer cooperatives use branding to pursue differentiation and competitiveness in the agri‐food industry. Considering the complete lack of applied research on the brand–performance relationship for farmer cooperatives, it is unknown if branding is even profitable. This paper addresses the gap in our understanding with a novel panel study of 707 US marketing cooperatives for the 2005–2011 period. Informed by lagged observations of trademark and service mark data, the empirical analysis indicates a positive relationship of brand equity to the financial performance of marketing cooperatives. Specifically, 1% increases in the total stock of trademarks and service marks have a positive impact of $130,441 and $141,921, respectively, on the net sales of the mean marketing cooperative. The corresponding impact on net income is estimated at $3,815 and $17,286, respectively. Following the estimation of further specifications, there is also indication most of the impact is facilitated by older trademarks (>3 years) in the stock, which implies a delayed impact of brand equity on financial performance. Overall, the reported evidence serves as motivation to directors and managers of marketing cooperatives to pursue opportunities to build brand equity. To do so, however, may first require a solution to the equity constraint which appears at the foundation of most farmer cooperatives.
Cooperatives in the agricultural sector have been successful (Cooperatives Europe, 2016; United States Department of Agriculture, 2017). However, farmer cooperatives face many challenges in the internal as well as the external environment which impact survival and longevity (Grashuis, 2018). In addition to widespread consolidation across the agri‐food industry (Saitone & Sexton, 2017), one prominent challenge is the ongoing segmentation of consumer preferences (Grunert, 2005). The ability to respond to different wants and needs by means of product or process differentiation requires a strong market orientation. As user‐owned and user‐controlled business organizations, farmer cooperatives do not often possess a market orientation (Beverland, 2007; Challita, Aurier, & Sentis, 2018; Grashuis, 2017; Grashuis & Magnier, 2018; Hardesty, 2005; Kontogeorgos, 2012). Instead, the strategic orientation of most farmer cooperatives is toward the objectives and preferences of its users, which is problematic as cooperative performance is more likely to be impacted by strategic characteristics as opposed to ownership or governance characteristics (Benos, Kalogeras, Verhees, Sergaki, & Pennings, 2016; Kyriakopoulos, Meulenberg, & Nilsson, 2004; Sisay, Verhees, & van Trijp, 2017). The latent construct of market orientation is often indicated by brand equity, a marketing term to describe the value of an intangible or market‐based asset which is not evident on the balance sheet (e.g., Christodoulides & De Chernatony, 2010). In general, brand equity is observed to relate positively to long‐term business performance (e.g., Belo, Lin, & Vitorino, 2014; Chang, Wang, & Arnett, 2018). However, it is uncertain if the brand–performance relationship is also existent in farmer cooperatives. Addressing the uncertainty about potential ex post outcomes may alleviate ex ante reservations to make investments in brand equity (Grashuis, 2017; Hardesty, 2005). Thus, instead of asking if farmer cooperatives invest in brand equity (e.g., Grashuis & Magnier, 2018), perhaps the question ought to be if farmer cooperatives should invest in brand equity? Consequently, this paper addresses the following research question: What is the economic impact of brand equity on the financial performance of marketing cooperatives?