PotatoNext asks members for funding

PotatoNext was founded in 2023 by combining the table potato divisions of Nedato, Agrico, and Agrico subsidiary Leo de Kock. It has now completed two harvests. Final figures are still pending, but according to CEO Harry van der Linden, that won't be long. Final audits are underway. PotatoNext reports a net annual turnover of €80 million on its website. To reduce its initial debt and maintain sufficient solvency, it is asking members to participate in (partially) free member financing.

Mandatory member financing
The financing program includes three different schemes, which growers approved during the general meeting on July 2nd. This involves mandatory member financing, withholding 3,7% of the gross turnover achieved per grower (for the 2024 harvest year). Members contribute this amount for three, five, or seven years. After this period, they choose one of the three periods for the mandatory portion.

In addition, there are two voluntary financing schemes with which the cooperative hopes to raise another €1,5 million. The voluntary member financing scheme has the same terms and conditions as the mandatory member financing scheme, except that the interest rate surcharge is 0,25% higher. Interest rates are paid based on Euribor and the European capital market index (IRS). Finally, there is a current account financing scheme, with which the cooperative hopes to generate working capital in the short term. This has a term of one year.

Nothing crazy
According to Van der Linden, it's not unusual for a cooperative to consult its members to meet its financing needs. "We follow the rules established by the NCR (National Cooperative Council, ed.). Agrico, for example, also uses member financing, as do many other cooperatives. Because of its structure, PotatoNext started with initial debt. Our two sorting and packing locations in Purmerend and Oud-Beijerland are rented. That's not an ideal starting point for applying for financing."

PotatoNext says it has deliberately chosen not to seek an external financial partner for the required capital. "In principle, a cooperative isn't supposed to make a profit; the money should go to the members in the form of a good pool price," adds cooperative chairman Gertjan van Dueren den Hollander. "If you want to grow the capital, you can do so through profit retention. However, this is dead capital. The cooperative prefers to pay interest to its members rather than to a bank."

Capital intensive
What doesn't simplify the financial picture is the company's unusual liquidity situation. The large fluctuations have even surprised the CEO. "We pay an advance when the members deliver the potatoes. In July, we pay the final settlement for last year's harvest. As a cooperative, we also advance the seed potatoes. The cooperative has sufficient liquidity. When the final settlement, including the seed potatoes, has to be paid in July, PotatoNext (as an organization still under construction) relies heavily on its financing. However, we are a capital-intensive company, given that the two factories require significant investments."

Growers vote for
During the vote at the last meeting, three-quarters of those present approved the proposed member financing. Approximately two hundred growers are affiliated, collectively cultivating 3.200 hectares of table potatoes in the Netherlands, from Zeeuws-Vlaanderen to Eemshaven. The pooled prices were also presented at the meeting. Despite the difficult potato market in the second half of the year, PotatoNext managed to achieve positive prices. "The growers were not dissatisfied," says Van der Linden.

An added burden and expense is the nearly 10% of potatoes for which there was no market, both among domestic growers and imported early potatoes. According to Van Dueren den Hollander and Van der Linden, this was unavoidable. "Nobody in the sector saw this situation coming. Moreover, it's crucial for us to never have to turn down a sale," explains Van Dueren den Hollander. "A year ago, there was a major shortage at the end, and potatoes were expensive. You don't want to be caught off guard by that. Unfortunately, things turned out very differently this year."

Specialism
The cooperative actually has a larger acreage than is needed for its sales volume. "This is necessary to always have the right quality," says the chairman. "Growing table potatoes is a specialty. We now know on which soil and with which grower each variety performs best. There are currently forty different varieties. We have the expertise to grow the best possible product and to sell that quality to the right destination. That could be the Netherlands, but also elsewhere in Europe, Africa, or the Caribbean."

The directors are positive about Dutch and European sales. "The figures show that the table potato market is stabilizing," says Van Dueren den Hollander. "I think we can still achieve a lot with promotion. The Netherlands is a true chip country, especially when you're dining out. But potatoes are so versatile. There are so many possible dishes. You don't see them on menus nearly enough." In the Netherlands, Albert Heijn is by far the largest customer. PotatoNext has multi-year agreements for delivery. They are very pleased with the collaboration. "Albert Heijn is a unique retailer that values ​​long-term relationships," says Van der Linden. "The company looks at the entire supply chain, especially the farmer. That position needs to be sound."

Own factory
Securing sufficient funding won't just alleviate the financial situation in the short term. The dream is to have our own factory. "We currently have two rental locations, and that's not ideal," admits the CEO. "We want to work more efficiently, keep potato flows separate, and store our own product, to name just a few. Building a new factory isn't easy, and finding a location is already a challenge. That's a long-term goal."

The proposed financing rounds run until the end of this month. By then, the cooperative hopes to have raised sufficient funds from its members. It's still early days, but the initial signs are cautiously optimistic. "We have to do it together; that's how we can make a profit," concludes Van Dueren Den Hollander. "We bear the risks together." He doesn't consider himself a true cooperative man, "but table potato cultivation is so specialized and complex, with all the certifications, that I think this is the best way to organize it."