1988

Preparing for the future: co-operatives turned into limited companies

In the face of international competition and major investments, the co-operatives’ resources are insufficient. In order to go forward, they need money from investors and an entirely new model of operation. Despite fierce objections, the Itikka and Lihakunta co-operatives convert their slaughterhouses into limited companies that are listed on the stock exchange. 

New challenges, new model: listed company

In the late 1980s, Finnish agriculture, meat production and co-operatively owned slaughterhouses are going through the greatest transformation in their history.  Competition is opening up in Europe and the so-called controlled economy, related to trade with the Soviet Union in particular, begins to crumble.

The problem in agriculture is substantial overproduction. In order for co-operative slaughterhouses to succeed internationally, they must be converted into larger, more productive and more efficient production plants. This requires a great deal of money.

Competition between slaughterhouses also changes in the domestic market. The co-operatives’ central organisation, Tuottajain Lihakeskuskunta (TLK), is put on a collision course with Northern Finnish co-operatives, in particular, when it develops its own, competing industrial operations. The conflict leads to the closing down of TLK.

The co-operative slaughterhouses in Seinäjoki (Itikka) and Kuopio (Lihakunta) begin to simultaneously prepare for transitioning to an era of deregulation and intensifying competition. The co-operatives’ leaders are thinking along the same lines: co-operative slaughterhouses must be incorporated into limited companies. This will secure sufficient financing and enable more flexible development of the operations.

At Lihakunta, the idea is advocated by managing director Paavo Jauhiainen, and Itikka’s architects of change are newly-elected managing director Seppo Paatelainen and chairman Reino Penttilä, the supreme decision-maker of both the co-operative and the co-operative slaughterhouse. The incorporation projects are strongly objected by leading co-operative players, and public debate is fierce.

Paatelainen and Penttilä’s proposal for incorporation is unanimously approved by all of Itikka’s decision-making bodies. The co-operative’s slaughterhouses and commercial operations are transferred to the new company, Itikka Lihabotnia Oy. The co-operative continues to be responsible for animal procurement and trading.

The company is listed on the Helsinki Stock Exchange in the same year. It is the first listed company converted from a co-operative to a limited company, the first meat company to go public and the first listed company in the province. Nevertheless, Itikka Co-operative continues to have the highest decision-making power in the company.

Lihakunta’s incorporation takes place slightly later but in the same manner. A company called Lihapolar Oy is founded to be in charge of production and sales and listed on the stock exchange. The co-operative is the majority shareholder in this company as well.

The incorporation of Itikka’s and Lihakunta’s co-operative slaughterhouses sets in motion the reorganisation of the entire meat sector. As a result, Finland’s leading meat company is created and slaughterhouses owned by meat producers also begin to compete in the market. 

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Ostrobothnian meat enters the stock exchange. The share issue was a great success, as was Lihakunta’s issue a little later.

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