The impact of brand equity on the financial performance of marketing cooperatives

Abstract 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.