Grocery Co-ops: Dead or Ready to Future-Shock You?

Bob St. Peter has a provocative piece over at Grassroots Economic Organizing (a piece that was originally printed in Saving Seeds, Summer/Fall 2008) about the failure of food co-ops to truly transform, or provide an alternative to the nation’s food system. While I don’t agree with everything in the article, it’s worth a close read, especially if you’re a manager at a natural foods co-op or belong to one as a member.

From the article:

Walk through any retail food co-op in the country and if you know what to look for you’ll find shelves and coolers full of food from companies owned by General Mills, Kraft, Coke, Cargill, the colonial empire of Dole, and other top players in the global food industry. These transnational food corporations disguise their own organic brands with clever marketing or just simply buy up existing natural or organic food companies to add to their stables.

In two sentences, St. Peter neatly exposes what has happened to the natural foods industry since 2002, with the rise of Big Organics, and I totally share his dismay. Indeed, it’s why we fight here at FFF. It’s difficult — one hand, I’ve made the argument myself that Big Food is actually playing organics’ game, now, by contributing more dollars to farms that grow without harsh synthetic pesticides and fertilizers. Me, I think that’s basically good, and I also think that food manufacturers can play a positive role in creating markets for sustainable farmers, e.g., employing the 100% organic label, which still adheres to strict standards (and why you rarely see it on packaged foods).

But on the other hand, however, the trade off is that corporations now own these brands, and it’s not a different economic model or a true alternative for shoppers anymore. And that sucks. St. Peter furthers his argument by showing that even the wholesale companies distributing our beloved natural foods brands are no better than Big Food manufacturers like Kraft and Coke.

Two big-time wholesalers – United Natural Foods, Inc. and Tree of Life – now account for 80% of distribution nationwide. [We assumes St. Peter means "distribution of organic and natural foods." ~E.D.] Tree of Life itself is owned by an even larger European outfit called Koninklijke Wessanen, a Dutch conglomerate that is one of the largest food companies in Europe. UNFI gained their market dominance through acquisitions and in 2002 gobbled up the last two regional distributors, Blooming Prairie and our very own Northeast Cooperatives.

This exposes the heart of the problem for natural foods co-ops in particular. These wholesalers, UNFI and Tree of Life, provide natural foods stores — from the smallest co-op to Whole Foods Market — with the vast majority of their packaged grocery and frozen food items, which are owned by the conglomerates mentioned in the previous paragraph. More, UNFI is obviously playing shell games within in shell games about where their organic food comes from, as Fair Food Fight discovered in our Case of the Mysterious Chinese Sticker.

In short, the nation’s natural foods’ distribution system not only resembles the corporate mainstream system, it is the corporate mainstream system. And co-ops are supporting that with the natural foods’ shoppers’ hard-earned money — and, perhaps, even, their sacrificed ideals. As St. Peter puts it:

Sadly, the once vibrant organic and natural foods movement has been taken over by the very businesses and business models that the founders of food co-ops a generation ago set out to replace. Not helping matters is the food co-op’s own desire to survive at any cost and the widespread belief that continual growth is necessary and even beneficial for small businesses. Add to the mix a conservativeness that comes from doing something a certain way for a long time and we end up with…well, go see for yourself.

Now the question is, are food co-ops right to be called out on their mission to provide an alternative to this model? Are they really just surviving at the cost of their souls? Are co-ops just Whole Foods lite?

I think I agree with the spirit of St. Peter’s argument, but not the substance. He goes to outline 9 points of advice for co-ops to regain their hearts and souls based on his “ten years of experience in and around food co-ops,” and many are points with which I agree.

However, it’s ridiculous to sggest that grocery co-ops need to become food producers. Some are buying farms and partnering with local farmers in more intricate ways, and that’s great. But few are in a position to diversify and, more to the point, shoppers need stores. Not everyone is ready to radicalize their food experience to the point of buying solely from CSAs and farmstands. And it’s not a retail store’s responsibility to make sure they do.

But I do agree that shoppers and farmers need to get closer together in the supply chain, and that can happen in some more creative ways than St. Peter is suggesting. In order to remain relevent in the growing sustainable foods market, co-ops do need to become more of what they are by doing more of what they do best: local, fresh, seasonal, and direct marketing food with even  non-local food producers and vendors who share their cooperative ideals. That means, in a nutshell, to quote St. Peter:

Stop trying to compete with Whole Foods.

Amen. Because UNFI is basically Whole Foods’ warehouse, co-ops will never again regain those brands and products as their “very own.” Indeed, WFM now moves those corporate organic products faster than co-ops ever will. It’s lost ground, and fighting to maintain it is the wrong strategy.

In fact, the entire “center store” in my opinion, is lost. That’s where the packaged food lives in most grocery stores, and when people say that General Mills, Kraft, and Coke now “own organics,” what they are talking about is food located on shelves in the center of your natural foods store. Cereals, snacks, pastas, soups, bottled juices, rice milks, ice creams, frozen veggies — this part of the store is now in the wrestling ring of Big Organics.

The outer ring of a store, meanwhile, where shoppers typically find perishable foods (produce, cheese, meat, floral, dairy, eggs, etc), is where co-ops can find purchase against the food goliaths, because it’s product that Big Food largely needs to avoid when it comes to local organic food. Too much spoilage and loss involved for industrial food manufacturers to maximize profits, especially with premium product like organic foods.

Neither of the “supernatural” giants, as we call the natural foods super chains Trader Joe’s and Whole Foods, does local organic very well. They support the idea, market the idea, and trumpet that they carry it in order to draw the coveted mover-and-shaker core shopper, but they simply can’t be small and mobile enough to carry this product consistently. Like Big Organic food manufacturers, there’s simply too much loss in perishables, and, more to the point, many small organic growers can’t supply supernaturals with the volume they require. Their small volume would vanish by the noon rush, if it does sell at all.

Indie co-op grocery stores, on the other hand, are made for local partnerships, and they do it well. Here in the Twin Cities, some local growers have been selling to local co-ops for decades (plural), long before Whole Foods ever left Texas.

Where St. Peter makes his strongest argument, though, is in point #2. Here he cuts to the bone, offering advice to co-ops about pricing on local foods.

2. Recognize how retail food co-ops hurt the local foods movement. One way this happens is through the markups that raise the price of food coming from small-scale local farms, which is already likely to be priced higher than food produced on a much larger scale and distributed by wholesalers who exert their buyer power to push prices down even further.

It’s the painful reality of an ethical retailer, and kind of a cheap shot, but there it is. You have to mark-up foods in order to pay staff, give them benefits, and do all the things that shoppers expect ethical grocery stores to do, and yet you want to pay local farmers a price that will keep them in business. But it can’t be so high that shoppers freak and go, “Why do I bother shopping at co-ops? Y’all milk me for money like I’m a dang cow! Aren’t co-ops supposed to be cheap?” And yet the price can’t be so low that farmers can’t pay their workers well. And so on.

What to do?

The fact is that a $1 to $10 million per year store will never have the volume to offer lower prices in exchange for volume. They just don’t do enough business. Many co-ops do calculate a lower mark-up for local growers’ food prices, seeking to make that money up elsewhere, but I don’t know how wide this practice is. (Maybe co-op friends could chime in and let me know in the comments?)

St. Peter says co-ops should promote CSAs and farmers markets, which they certainly do. But there are other ways to develop a local food system than support a competitive business model. For example, steal a page from Fair Trade and make low interest loans or even grants available to local farming partners. Many co-ops give money to local non-profits, but maybe it’s time to create grants for their growers instead.

And maybe it’s time for the National Co-op Grocers Association, the co-op’s “trade” group, to take this on, too. By pooling money at the national level, co-ops might be in a better position to help small farms nationwide.

Speaking of the National Co-op Grocers Association, St. Peter reserves some special heat for them. To wit:

Stay away from the National Cooperative Grocers Association (NCGA)…The only way to co-opt the relocalization of our food systems is by allowing ourselves to take direction from those who have no stake in our communities, or do not know the local culture and how that can help or hinder the development of local food economies. In the case of NCGA, they use the collective buying power of more than 100 retail co-ops nationwide to buy processed, packaged food in larger quantities, often from the transnational food conglomerates that have come to dominate the natural and organic foods industry. Pooling buying power is a useful and important strategy, but when it is used to cheapen food from Nestle, ConAgra, or the Altria Group (read: Philip Morris) then it does more harm than good. Keep local local.

“The ironing is delicious,” to quote Bart Simpson. NCGA is a national group by definition, and by definition, a national group can’t authentically push local. NCGA does go through admirable contortions in their marketing material to get around this problem, by trying to put muscle behind small co-ops and their drive to tell a local story. Their instincts are correct but the fact remains: Only locals can tell local stories and describe the special relationship between co-op, farmer, and member. 

Furthermore, by offering special pricing on the national organic and natural brands that St. Peter mentions, NCGA actually turns co-ops into competitors against local food producers. Organic Valley is a terrific company, and I love it like my own behemoth big brother. But it competes with Minnesota’s small organic dairies when it goes on special. Is this the model that NCGA wants to employ on behalf of member stores?

The real question is how do co-op retailers — stores and NCGA as a trade group alike — bring consumers and local food producers closer together and make them truly part of each other’s communities? Because that’s what Whole Foods and Trader Joe’s cannot really do. And without creating that rich “food chain community,” it’s hard to imagine a small market having an impact on its local economy. The challenge isn’t rally lowering the standard mark-up or supporting CSAs or starting farmers markets. Here’s the magic: Despite this enduring recession, from my point of view, the grocery market is even more receptive to the local foods story and even more savvy about advertising b.s. spread by giant natural food companies. Thanks to Michael Pollan, Food Inc, the Obama garden, Oprah, and a variety of other current cultural phenomena, we are in a particularly amazing moment in the history of the natural foods industry. No longer are co-ops struggling to educate shoppers and get the message out about sustainable food, in the way they were, say, 20 years ago. In fact, co-ops are in a unique position to grab the spotlight.

How? Two suggestions: By playing no holds barred with the physical store’s appearance and by employing innovative technology or social networking stategies.

Blow Up Your Store

In my mind, the way to play to a co-op grocery store’s greatest strength is to re-outfit stores and customers expectations of what a grocery store is. Shatter it. Shrink the center store. Expand the outer ring. Bring back the butcher, the seafood cutter, and expand the cheese offerings from small cheese mongers near and across the globe (talk to Gordon Edgar of Rainbow Co-op in San Farn about this. The man is a magician). Bring in more bulk items. Expand the produce department when in season, which might mean devising mobile (or at least movable) shelving units that shift with the calendar.

By re-outfitting stores in innovative ways, rather than simply expanding or locating into new buildings, co-ops make an industry splash and a media event out of their innovation.

Embrace Future Shock

Web 2.0 is soooooo two minutes ago.

Small indie stores like grocery co-ops are in a perfect position to take advantage of highly innovative social networking tools. After all, co-ops have built-in communities for this and I don’t just mean their memberships and shoppers. I mean a co-op’s community of farmers, growers, vendors, Boards of Directors, and even other co-ops. I mean, beyond local, the small farmers who grow coffee cooperatively. The food manufacturers like Eden Foods and Amy’s who do a terrific job of maintaining their integrity. Well, how about a social network that links all these entities together? What if Fair Trade blueberry growers in Argentina could talk with co-op shoppers? What about a website that allows CSA farmers to sell shares direct to co-op members? That introduces co-op shoppers to farmers market farmers with whom they might not be familiar, but who may soon be delivering to their co-op?

Think: A network of social networks that goes beyond static print or website-tile advertising, and which embraces the uber-interconnectivity and interactivity of the next generation of Twitters, Facebooks, and Foursquares. One that people will be eager to join and ask, “How do I get a co-op started in my neighborhood so we can take part in this thing?”

I see all this is as very possible because I basically disagree with St. Peter on this point:  Co-ops truly are an alternative to the status quo, Business as Usual, corporate food supply chain. True, grocery co-ops are in a strategic jam right now, dependent as they are on natural-turned-national brands. But unlike Whole Foods or Trader Joe’s, the profits garnered from co-ops don’t fly off to HQ in Austin or Europe or points unknown. By definition of what co-ops are, profits returned back to the members in the form of refunds for customer patronage — and this is a pillar of co-op business practices. Patronage refunds stand in basic defiance of what a corporation is (as is the co-operative tenant of one member one vote). Money goes back to the community, and is re-planted in the local economy, year after year.

Mr. St. Peter may not like the food choices at his local co-op, but unlike, say, buying fair trade coffee at Wal-mart, buying co-operatively grown and distributed coffee from a co-op store does strengthen an intrinsically democratic and different food chain. That’s absolutely not possible at any other kind of store.

The only question for co-ops is this:

“Will we ride the tide of our advantage as truly different and local businesses? Or will we allow the supernaturals to swamp the boats we built?”

Because the market is only going to get tighter, amigos.