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Twin Town High (vol. 8) |
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All About Eve: the changing face of the co-op
Wednesday 15 October @ 15:08:01 |
 by Jane Franklin
Standing in sunny North Country Co-operative Grocery on the West Bank, choosing between the organic tomatoes and the less-healthy but no less organic locally produced tiramisu, it’s easy to feel that all’s right with the co-op world.
 What could be nicer and more old-fashioned than small businesses dedicated to local produce, member discounts, and an environmentally sound approach to consumption?
But these co-ops have always been embedded in a web of law, money, and social struggle. Today, as chain stores and organic agribusiness home in on a fast-growing market, co-ops have to change to survive. But can they change fast enough? And can they change without mirroring the union-busting, mass-marketing, globalized corporations that are their chief competitors? Your locally-grown, peacenik co-operative faces a limited access to capital and distribution right when Wal-Mart, Coca-Cola, and General Mills are gunning for organics superiority. But co-operatives are tough. They’ve stood up to the Industrial Revolution, red scares, and transnational corporations, and there’s a lot of fight left.
At its simplest, a co-op is a network of consumers or producers who buy or sell together to increase their bargaining power. A co-op may produce hydro-power, soybeans, or pesticide-free spinach, or it may act as a buying club to help its members purchase those things in bulk at lower prices. In general, a co-op has a governing board chosen from among its members, either by vote or by another system. If a co-op has surplus money at the end of the year, that money is returned to members based on their investment in the co-op. Under law, co-ops receive tax breaks but are limited in how much they can return on their members’ investment.
Organic foods were popularized by cooperative grocery stores, which are now struggling to compete in the big-money organic food business.
This simple structure has a surprisingly radical implication—a co-op does not exist primarily to make money. Christopher DeAngelis, a member at North Country, explains it this way: “Co-ops exist to provide a service: advertising, power at decent prices, healthy goods…that’s a pretty radical notion. Economically, a properly functioning co-op does not have what you would call profit.” DeAngelis goes on to explain that even money redistributed at the end of the year is not money made by selling goods above cost. You can think of it, he says, as a refund on what members overpaid for their purchases during the year. Unlike almost all American enterprises, co-ops are aimed at sufficiency rather than endless growth.
Co-operatives are as old as modernity, dating back to Industrial Revolution England with its accompanying low wages, urbanization, and massive displacements of population. A co-op is intended to help small producers and individual consumers organize to compete with corporations, and they’ve always been sites of struggle. First, a co-op was a place with a better deal than the company store. Next, it was a response to pesticide-using, labor exploiting agribusiness. And now it’s a response to labor-exploiting, standards-diluting, free trade organics.
Still, in the United States, the co-op model has always been hotly debated: Is a co-op mainly a business, like Land O’Lakes and Cenex, or is it the scene of economic transformation? Co-ops have been favorites with radical organizers like Cesar Chavez and the left-wing Finnish immigrants of Minnesota’s past, but local co-ops also produce ordinary products like commercial pig feed and margarine.
In the sixties and seventies, the co-op model attracted radicals and hippies. These “second wave” co-ops often started out as buying clubs and later became storefronts, emphasizing natural foods, community agriculture and organics. Many served as community centers for radical organizing. These co-ops were explicitly political, hotly debating labor practices and political theory.
 But in the eighties, says Stephen Schwen of Full Circle Growers’ Co-operative, something happened. “We struggled through the seventies to get people to recognize organic food, and by the eighties it had worked. People were looking for organic.” Organic food had become profitable. Suddenly chain stores, investors, and big corporations wanted a piece of the action, and since then things have never been the same.
Small co-ops now stand in the shadow of chains like Wild Oats and Whole Foods, heavily capitalized and profitable companies that buy in huge quantity and offer merchandise at a discount without requiring membership. These companies can afford to build a new store, complete with tinkling New Age music, a juice bar, and twenty different kinds of organic shampoo—and build it in an affluent neighborhood or a suburb, without relying on the politicized urban clientele that often supports independent co-ops. Chains take business from independent stores, and their economies of scale tend to mean that the Minneapolis Whole Foods shopper gets what the Boston Whole Foods shopper gets.
According to Wedge Member Services Director Elizabeth Archer, “Lots of goods are going to leave the marketplace” when chain stores dominate the industry, because they don’t have the incentive to buy small quantities from local producers. Because chain stores aim to attract a mass clientele, you are more likely to find the organic equivalent of Cheetos on their shelves, which Steven Schwen describes as “fancy little packaged goods from exotic places.” Heavily processed goods produced a thousand miles away and trucked in are little better than non-organics, he implies. The pollution generated from shipping alone undercuts the environmental value of the product.
“There’s no such thing as organic gasoline,” notes one North Country shopper.
Mass-produced organic foods can now be found on the shelves of heavily capitalized supermarket chains.
Then there’s the question of labor relations. Whole Foods, which counts among its “core values” such things as “community citizenship” and “integrity in all business dealings” has spent the last several years trying to crush a unionization campaign. When employees have asked for job security, fair grievance processes, and the right to bargain collectively, Whole Foods CEO and founder John Mackey has urged his employees to “expand into love and not into hate.” He notes that “unions don’t want employees to be happy” while lauding Whole Foods’ “empowering work environments that stimulate the collective energy and intelligence of all our Team Members.”
Similarly, the emerging sector of organic agribusiness uses its warm, fuzzy image to get around some serious questions. Small, formerly independent labels like Cascadian Farms and Seeds of Change have been bought up by corporations with sinister histories. Cascadian Farms is indirectly owned by General Mills, whose primary stockholders include weapons producers like Dow Chemical and DuPont, labor-unfriendly brands like Nike and Disney, and oil companies Chevron and ExxonMobil. As ownership becomes more convoluted, it’s hard to tell whether you’re eating an organic burrito or supporting the bombing of Baghdad. Organic now means serious money, and serious money means Coca-Cola buying cuddly Odwalla Juice while labor activists at the Columbian Coca-Cola plants disappear and turn up murdered.
As if sending your organic dollar to stockholders in the Swoosh weren’t bad enough, corporate ownership of organic labels may dilute the meaning of “organic” and it certainly is not good for local economies. For example, Fresh Samantha, an organic juice producer that merged with Odwalla, has already decreased the amount of fruit in its juice and increased the water, with an eye to longer shelf life and lower production costs. Stephen Schwen also describes organic agribusiness as only technically organic—that is, the food is pesticide-free, but it may be harvested by exploited migrant workers, carelessly packed in the field so that it arrives bruised, or made from organic eggs and dairy produced by factory-farmed chickens and cows fed all day on heavily processed “organic” feed. Because big organics are heavily capitalized, they can afford slick advertising and wide distribution, often driving small, local producers out of the market.
Just as with non-organic food, the variety of products available can decline simply because the smaller labels don’t have the economies of scale or the distribution networks. And the profits that a big label makes don’t stay in town — they go straight to company H.Q. “Small is better,” says Schwen, “because it keeps your neighborhood alive and it keeps your people connected.”
Mega-shopping @ Lunds
While big business has access to big capital through bank loans and stock issues, co-ops and small growers often struggle to raise the money that they need to expand or even to stay solvent. How and why to expand, as well as how and why to raise money, seem to be the biggest challenges facing co-ops now. Nowhere is this more evident than in the recent, controversial sale of distribution co-op Blooming Prairie and in the passage of the Minnesota Co-operative Associations Act.
Although its recent sale to small corporate owner United Natural Foods Incorporated (UNFI) has inspired regret and nostalgia, Blooming Prairie was always an ambiguous role model. This co-operative distributor worked like any service-providing co-op: Member businesses were able to get distribution services less expensively because they bought jointly; surplus money was returned to members at the end of the year. Its sale was voted on by the membership, and member co-ops received back all of their equity as well as a substantial bonus, a much-needed infusion of capital for many members.
Organized as a nonprofit in Iowa in the 1980s, Blooming Prairie grew through acquisitions during the eighties and reincorporated as a Minnesota co-operative in 1996. Through the mid-nineties, Blooming Prairie grew, distributing to regional supermarket chains and becoming the main supplier to Whole Foods in the Midwest. In 1999, it reincorporated under Ohio law in order to move from a one member/ one vote system to a system of weighted voting that gave more voice to larger purchasers. The co-op distributor for small co-ops like North Country grew and became profitable by serving their competition.
Meanwhile, former employee Justin Hersh notes that “I couldn’t really see the difference between the work environment at Blooming Prairie and any other standard openly hierarchical work environment. We still got yelled at, we were assumed to be dumb as rocks by management, and there was always an individual in charge no matter what their title … Capitalists will be capitalists, as soon as they get the chance to..[I’m not surprised] about their acquisition…it seems like the same kind of consolidation that’s going on in media.”
Still, to Sidney Pobihushchy, a co-op activist who has written extensively about the co-operative model, warehousing, and distribution, the purchase of Blooming Prairie by a for-profit distributor is a loss because “it force[s] owner co-operatives into dependency on a business which is driven by values and goals which are completely inconsistent with co-operative values and goals. An investor-owned and profit-driven business primarily acts in the service of capital, not people.”
Lots of products = Lots of profit for Lunds
To Elizabeth Archer, the sale of Blooming Prairie was the end of a long story of competition and consolidation, “the result of a failure of imagination on the part of the national co-operative community.” Corporate inroads into distribution coupled, with the undercapitalization of co-operatives, ate into the system over the last decade. “In the early nineties, it was clear that we had to unify to avoid losing our network. By last year, Blooming Prairie was the last healthy regional co-op distributor left standing … they fell one by one instead of uniting into a coast to coast, border to border co-operative distributor.”
But was the sale inevitable? According to the online edition of the Cooperative Grocer, Blooming Prairie was strong and profitable at the time of the sale, and characterizes the decision to sell as a move by the board to protect members’ investment. Cooperative Grocer describes the sale as preemptive, with a probable decline in Blooming Prairie’s value ahead.
If Blooming Prairie may not be able to compete with for-profit distributors, is there any better solution than becoming one of them? How can co-ops stay co-ops in a hyper-competitive marketplace?
A new piece of legislation called the Minnesota Cooperative Associations Act attempts to address this question, with equally uncertain results. The law allows co-operatives to reincorporate and accept investment from outside investors.
Margaret Lund, director of the Northcountry Cooperative Development Fund [separate from the North Country Co-operative Grocery], which provides loans and training to Midwestern Co-ops, views the act as “a fairly fundamental philosophical change.” According to Lund, the low returns on co-op investment make it hard for co-ops to raise enough capital to compete with publicly traded corporations; therefore, the law addresses a real and important problem. Lund is concerned, though, that investor-friendly co-ops introduce “a new class of member where all they do is deliver money….it opens the door to have people involved in the co-op whose interests are different from the co-op.” While Lund adds that “it may be perfectly fine,” she does sketch out a scenario where producers and buyers are at odds with investors over the purpose of the co-op. Investors want a financial return, dollar value. Producer or consumer members may want a return in a long-term, less quantifiable form: jobs in their town, sustainable production, a stable way of life to pass on to their children.
In certain circumstances, Lund says, investor-members would even be able to work with a small minority of producer/buyer members to force a sale for short term profit. Christopher DeAngelis makes a different but related critique: “It doesn’t matter how [non-investors]vote…the money is the real vote.”
Water - the universal solvent - @ North Country
Faced with increasing pressure to become corporate to compete with corporations, co-ops negotiate and triage, with no perfect choice in sight. Almost everyone interviewed for this article stressed the need for co-ops to link up, form alliances, and grow in response to corporate depredations. Schwen, Archer, and DeAngelis also allude to the vibrant global co-op movement, with its international networks of trade and education.
Christopher DeAngelis’s vision of the future of co-ops is rife with danger and possibility and the dramatic need to change and grow: “Organics is not going to exist the way it does now…the whole industry is going to be gone. What comes after consolidation [of small producers] is outsourcing. Quality will go to hell. Combine that with genetically altered food….[organic production and the co-op movement] will be subverted in this economy, unless we change this economy.”
DeAngelis adds that “the organic food industry is more profitable than commerical food. [Big corporations] are going to be able to move in. They are going to continue buying the organic industry…that’s why we are working on fair trade.”
To DeAngelis, the best hope for this change lies in fair trade alliances, community organizing, and co-op networks that consciously try to challenge global economic norms. Fair trade production emphasizes worker rights and fair pricing as well as environmental soundness. A fair trade buyer might make alliances with specific growers, often but not always in the developing world, and agree to purchase their output at a non-exploitative price rather than at the market rates pushed lower and lower by global capital. North Country is active in the fair trade movement and stocks fairly-traded products, as do many local co-ops.
Margaret Lund talks hopefully of Organic Valley, the alliance of family farmers which runs the CROPP label. “They do $125 million in sales, which is huge in little co-op land, but they are totally and utterly committed to family farms. What they do as a co-op is make it viable to be a small organic dairy farmer.”
The organization Stephen Schwen works through, Full Circle Growers’ Co-operative, is also an alliance of independent small producers, ranging from family farmers to former hippies to Amish growers. Schwen describes how this alliance of farmers produces as much on their land as conventional farmers would, but more healthily and with more varieties.
North Country itself is taking action on the local level. After a massive fundraising campaign and extensive work with the North Country Development Fund, the co-op succeeded in buying its building on the West Bank.
Christopher DeAngelis describes the excitement of North Country’s members: “Every time we tell people about this, they get happy.” Instead of paying rent, they are paying off the building, and that building itself can be used to leverage capital.
In an area with rising property values, North Country will be able to hold onto its location, keeping a valuable progressive business on the West Bank.
Ownership opens up a wide range of possibilities for the co-op, guaranteeing that it can support local growers and fair trade into the future.
Picking up a couple of tomatoes and a tiramisu, I have a vision of the brave co-ops of the world, tiny and individual, linked by plans and goals into a net that spans the globe. Here a building is purchased, there an Amish farmer plows a field. In Columbia, farmers negotiate with gringo buyers to sell coffee at sustainable prices, while a co-operative bank in Basque Spain lends money to expand a local market.
All around the world, co-ops are still standing, standing for fair trade and sustainability, standing against Nike and Monsanto and Exxon. Whose planet? Our planet.
 
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