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cooperative began business, our trade discounts have increased over 2,094 percent.
Without obtaining the same tax relief that the cooperative has, its competitors cannot keep up the pace. The alternative is to tax the cooperative in the same way that its competitors are taxed. Its competitors are in the peculiar, and not easily understood, position of financing the cooperative in its greedy assimilation of their own businesses.
In the fall of 1955, the cooperative, notwithstanding announced intentions on the part of the milk producers to seek a higher price for their product, and notwithstanding that the costs in all other phases in the processing and distribution of milk had advanced steadily, lowered the price of milk through store outlets. In addition thereto, the cooperative set up a sliding scale discount. The photostat attached hereto is a copy of letter sent by the cooperative to all grocers in the area under discussion. It went not only to the cooperative's customers, but to all wholesale outlets in the area. The intention is clear. It was a bid for exclusive business, and failing that, it was a sure-fire method of reducing the net profit of any dairies delivering to the dealer outlet. We do not believe that the cooperative would have undertaken such a measure as this had it been paying taxes on its net profit.
The alternatives : Last fall, at a meeting of the Flint Farmers' Club, the issue of cooperatives versus taxpaying businesses was debated. At the conclusion of the debate, Gar Wagner, assistant manager of the McDonald Cooperative Dairy Co., was assailed for the everexpanding and aggressive tactics of the cooperative in pursuing new business. To this he replied:
1. The cooperative can funnel its profits back to its patron milk producers by paying more per hundredweight to them for their milk and, in such event, it will take all of the milk producers in the area away from its competitors.
2. The cooperative can pass its surplus on to the ultimate consumer by lowering the price of milk. In such an event, it will take all of its competitors' customers.
3. The cooperative can use its surplus to build new buildings, expand facilities, and obtain new business, which it is doing. Utilizing surpluses in this method is the lesser of the evils, as far as its competitors are concerned, said Mr. Wagner.
Mr. Wagner was then asked what the future of American business was to be in the event that concerns like his were to continue to operate. His reply was: “I guess you will have to go co-op.”
Trend toward monopoly: The favorable position in which the Government has placed the cooperatives in competition with proprietary taxpaying businesses induces monopolies, as will be easily seen by the example of the McDonald Cooperative Dairy Co. The situation is difficult to square with reason, when we consider that the Government is dependent, in part, upon income taxation from taxpaying businesses to underwrite the expense of our governmental activities.
If you do not give us the right to compete equally with the co-ops, then my company and thousands of the other small businesses in competition with co-ops will be forced to sell out, go co-op, or go out of business. We need your help to stay alive.
Thank you, sirs.
The CHAIRMAN. Without objection you may include the material appended to your statement in the record, if that is your desire. Mr. BOBIER. Thank you, sir.
(The material referred to follows:) CERTIFICATE OF INDEBTEDNESS OF McDonald COOPERATIVE DAIRY Co., FLINT, MICH.
This is to certify that for value received, McDonald Cooperative Diry Co., registered office, Flint, Mich., a cooperative corporation organized and existing under and by virtue of the laws of the State of Michigan, is indebted and promises to pay to the above-named payee the principal sum above stated, at the registered office of said corporation, in the consecutive numerical order of issue of the outstanding certificates of indebtedness of the corporation, at such time and in such manner as shall be determined by the board of directors.
This certificate is issued on account of moneys loaned to said corporation through deductions or retains made or withheld by the corporation from the value of agricultural products purchased by the corporation of, or from the sales proceeds derived therefrom and due to, or from patronage dividends issued to, the creditor whose name appears herein.
This certificate and all other certificates of indebtedness issued by the corporation are subject to all other debts of said corporation so that in event of liquidation or dissolution, voluntary or compulsory, all debts of said corporation, other than such as are represented by certificates of indebtedness, shall be preferred and have priority of payment and are to be paid in full before any distri. bution of the assets of said corporation shall be applied toward retirement of the debt represented by certificates of indebtedness.
The claims of holders of certificates of indebtedness on account thereof shall have priority over all claims of capital stock so that in case of liquidation or dissolution ; voluntary or compulsory, the claims of all holders of certificates of indebtedness on account thereof shall have priority of payment and shall be paid in full before any distribution of the assets of said corporation shall be made upon the capital stock of the corporation.
Certificates of indebtedness of the corporation shall be entitled to only such rates of interest as the board of directors may fix from time to time: Provided, however, interest paid upon certificates of indebtedness shall in no event exceed a rate of 4 percent per annum upon the principal amount for which certificates are issued : Provided further, interest upon outstanding certificates of indebtedness at a rate of 4 percent per annum shall be paid before any earnings of the corporation shall be distributed upon a patronage basis. Interest upon certifi. cates of indebtedness shall not be cumulative if unpaid, but when interest is paid upon any certificate of indebtedness, and interest shall be paid ratably upon all certificates of indebtedness except those duly called for payment and not surrendered in accordance with the call therefor, certificates of indebtedness called for payment shall not be entitled to interest after the day held forth in the call for payment of such certificates.
This certificate and all other certificates of indebtedness of the corporation are, except in the event of liquidation or dissolution, retirable in whole or in part in the consecutive numerical order of issue in the sole direction of the board of directors upon payment of the principal amount of the certificates so called for retirement and payment. In the event of liquidation or dissolution, all outstanding certificates of indebtedness shall share ratably in assets until the principal amount thereof has been fully paid.
This certificate is transferable only on the books of the corporation upon surrender of the certificate properly endorsed and when any indebtedness owed to the corporation by the owner hereof has been fully paid. Upon transfer of ownership of title to the claim represented hereby and surrender of this certificate for transfer and reissue, this certificate shall be canceled and the certificate issued shall bear the same numerical number as the certificate surrendered for transfer.
In witness whereof, the said corporation has caused this certificate to be signed by its duly authorized officers and its seal to be hereunto affixed.
L. R. LONG, President.
MCDONALD CO-OPERATIVE DAIRY CO.,
Flint, Mich., November 5, 1955.
IMPORTANT NEWS ABOUT MILK PRICES
DEAR CUSTOMER: In the past year and a half you have been confronted by many competitive moves in the packaging and pricing of milk. First it was glass half-gallons. We resisted this move for a long time because we felt that it took you back about 10 years when glass milk bottles were an item of considerable bother and expense to the grocerman.
Next came cut-rate milk in cartons bearing new names. This we could not go along with. In this area the name “McDonald" has always stood for the very highest in quality products and dependable service. We will do nothing to sacrifice this position.
After a great deal of thought we have arrived at the following rebate formula which we believe is equitable to everyone. We believe you will think so too, because it is a definite arrangement that is controlled entirely by the amount of your purchases from us. The following table is self-explanatory.
of rebate Purchase, Dollars per month : 1
you ears $0.01 to $351.00.-$361.01 to $551.00
4 $551.01 to $741.00.
5 $741.01 to $931.00..
6 $931.01 to $1,121.00.. $1,121.01 and over-
724 1 Not including butter and glass half-gallons.
If there are any questions, consult your driver or call our office. Thanks for your cooperation. Yours very truly,
ANNUAL REPORT, MCDONALD CO-OPERATIVE DAIRY CO., SUBMITTED AT THE ANNUAL
MEETING, March 29, 1955
Procurement and processing, 1954
63, 331, 388 Chesaning members_
28, 266, 730 St. Louis members..
33, 499, 435 Columbia ville members----
20, 594, 919 Michigan Milk Producers Association
2, 497, 505 Total milk received..
148, 189, 977 Sweet cream for butter..
Butter purchased--Products processed and sold : Fluid milk.
--quarts. 23, 544, 409 Bottled cream.
188,085 534, 895
408, 100 2, 069, 960 555, 189
--gallons.. Ice cream novelties..
--dozen.. Ice cream mix.--
-gallons. Skim condensed milk.
---do.--Nonfat dry milk.
---pounds.. 3, 226, 430 Butter
1, 550, 614
95, 732 1, 587, 355
Comparative balance sheets
Cash or readily convertible to cash_
$204, 149. 25 636, 303. 65 111, 047.96
Current accounts for materials and supplies---
196, 615. 67 332, 898. 97
7, 773. 73 189, 408. 79
Comparative statement of operations and margins, 1954 Net sales and inventory change..
$10, 604, 461. 93
655, 079. 55
Balance distributable savings-----
Costs and returns to patrons per dollar of sales
Salaries and wages.
Cents 20.08 9. 01 7.64 1. 54 3. 51 2. 64
Total cost of doing business..
Balance due patrons---
Balance distributable savings--
12 years of progress
Value of sales
Milk proc. essed (pounds)
982 1, 108 1, 182 1, 287 1, 382 2,070 2, 198 2, 252
36, 481, 221
$2, 654, 657.22
890, 470. 69
$210, 234, 49
320, 310.82 419, 050 28 582, 373. 27 758, 911. 53
977, 759.21 1, 450, 675. 43 1, 785, 877.89 2, 231, 792.95 2. 488, 066.63 3,015, 641 11 3,637, 249. 54
10 years of progress
Milk processed (pounds)
Value of sales
1943. 1944. 1945. 1946. 1947 1948 1949. 1950. 1951. 1952 1953. 1954.
742 775 814 811
982 1, 108 1,182 1, 287 1, 382 2,070
36, 481, 221 42, 186, 418 50, 551, 989 50, 416, 959 57, 428, 528 62, 613, 163 75, 111, 474 86. 657, 965 89, 889, 968 114,361, 962
$2, 554, 657, 22
2,678, 599. 64
$142, 509. 26 $747, 267. 37
99, 372.38 890, 470. 69
$210, 234, 49 320, 310.82 419, 050.28 582, 373. 27 758, 911. 53
977, 759. 21 1, 450, 675, 43 1,785, 877.89 2, 231, 792. 95 2, 488, 066. 63
655, 079. 55