Sustainable Growth and Capital Constraints: The Demutualization of Lilydale Co-operative Ltd

Lilydale Co-operative Ltd was one of Canada’s largest and most geographically diversified co-operative poultry processors. In 2005, Lilydale voted to end its 65- year existence as a cooperative and converted to an investor-owned firm (Lilydale Inc.). The motivations for Lilydale’s organizational change are examined focusing on access to capital and using the sustainable growth model as the framework. For sustainable growth, a balance is required between increased actual sales and changes in financial management measures. For much of its history, Lilydale’s actual sales growth rate exceeded its sustainable growth rate. The firm may have been making financial decisions without considering all financial commitments, including increasing requirements to distribute equity to retiring members. Long-term debt was very high during the ten years prior to the decision to restructure the cooperative. Although the time period is short, since conversion Lilydale has had more reasonable growth rates.