WHAT WENT WRONG AT AGWAY
Bruce L. Anderson and Brian M. Henehan1
On October 1, 2002 Agway filed for Chapter 11 bankruptcy. Many people are asking
what went wrong. This is a hasty attempt by the authors to analyze the situation. We hope that
this short article will provide valuable lessons for other cooperatives and organizations.
First, a little history. Agway was formed in 1964, the result of a merger between GLF
(Grange League Federation) and Eastern States Farmers’ Exchange. A year later the
Pennsylvania Farm Bureau Cooperative merged into Agway. The result was a very large
agricultural supply and marketing cooperative that covered 13 states, spanning from Maryland to
Maine to Eastern Ohio.
We have divided our discussion into historic and recent issues.
Provide Members A Secure Market
Cooperatives are often formed to provide members a secure source of inputs and markets
for their products. However, sometimes this motive can go to extremes.
GLF (i.e. Agway), together with other New York agricultural organizations, provided the
leadership in establishing a radio network, Rural Radio Network, in 1946 to serve the radio
needs of farmers and rural residents. It was sold in 1959 when it had an accumulated deficit of
$970,000 and total debt to GLF (i.e. Agway) of $1.36 million.
In 1946 GLF also bought approximately a 40 percent share of Mohawk Airlines, the
forerunner of USAirways, in the name of providing air transportation to Upstate New York. In
this case, they fortunately saw their investment more than double before it was sold.
Another example was Agway's attempt to provide services to members was its operation,
together with Southern States Cooperative, of Texas City Refining. The purpose was to provide
members a secure source of petroleum products. This proved extremely advantageous and
profitable during the oil shortages of the early 1970's. However, the petroleum market
eventually changed and Texas City proved a