Cooperating for Change

Throughout Europe, consumer cooperatives play an important role in national economies, providing a surprisingly substantial alternative to the dominance of multinational corporations. In Sweden, consumer cooperatives sales account for 19 percent of the Gross National Product. In England, co-ops account for over 15 percent of all food sales.

Consumer cooperatives, businesses owned by their customers, provide a variety of goods and services, ranging from food to automobile insurance. Communities of consumers who pool their resources to control their own needs, European co-ops display the ability to by pass the economic power of giant corporations. Backers say a cooperative economy provides increased competition and greater consumer participation in economic policymaking. Co-ops have emerged as a force in the political arena, with close links to the Social Democratic Labour Party in Sweden, and a political party of their own in Switzerland.

But as some European cooperatives have grown large, problems have developed. Gary DeLoss, a member of a Ralph Nader task force studying European coops, concluded, "None of the European cooperatives studied by the authors could be characterized as vibrant participatory democracies. While some have maintained membership involvement and control more successfully than others, few can claim membership interest beyond a few activities." Although an intangible element, the authors regard the idealism and commitment underlying cooperative activity as a crucial component for a coop's success. "The European experience demonstrates," DeLoss writes, "that if cooperatives discard their idealism, they lose their reason for existence, their distinctiveness-and money."

But the authors find that co-ops can make a significant contribution to local needs-under means controlled by local consumers. Although limited in the United States, co-ops are both longstanding and widespread throughout Europe with a tradition that is instructive to both the world's largest market and the developing countries in the Third World.

What follows are three excerpts from Making Change? Learning from Europe's Consumer Cooperatives, a soon-to-be published Nader study.

Switzerland:

Switzerland's most successful cooperative, Migros, opened in 1925 as a private retail operation and did not assume the cooperative legal structure until 1941, long after it had adopted the style that characterizes its operations. Migros was the creation of Gottleib Duttweiler, a highly innovative native of Zurich.

At the age of 37, after a disappointing business career, Duttweiler returned to Switzerland from a year's stay in Brazil and made a discovery that sparked his future success: "I was shocked to see, on my return home, that the retailer, merely by passing the coffee over the counter, received as much as the planter did for growing the product. At the same time, the free movement of the world's raw materials and consumer goods were impeded by the bottleneck of distribution."

On his return to Zurich, Duttweiler decided to become a retail merchant. He began his enterprise in August 1925 with five trucks converted into shops-on-wheels. Duttweiler christened his new business "Migros," an abbreviation of "demi-gros" - French for "half wholesale." The name was fitting. Migros initially sold items at a retail mark-up of eight percent, as opposed to the typical mark-up of 25 percent. Over the years, the margin has increased, but the "half wholesale" philosophy continues as the mainstay of Migros' success.

The Migros retailing style burst in upon a world of small shops and producers organized into cartels. The Swiss food establishment fought back in a bitter struggle that lasted nearly two decades. Manufacturers and producers boycotted Migros; laws were enacted to restrict its growth.

In 1941 Duttweiler converted Migros into a cooperative by giving shares to 100,000 families who were regular customers. The change in legal structure enabled Migros to avoid the impact of various laws and tax levies directed against it. It was also a remarkable act of generosity,

The initial shares in Migros were valued at 30 Swiss francs. Since 1950, shares have ,been worth 10 Swiss francs (about $4) and are often given away as part of a promotion campaign-for example, the opening of a new store.

When it abandoned its private retail structure, Migros became the Federation of Migros Cooperatives with each regional operation becoming a cooperative unit. Today Migros is Switzerland's largest retailer with a 25 percent share of the food market and 12 percent share of the retail market. As of 1975, it operated 446 retail stores, 119 stores-on-wheels serving rural Switzerland, and 71 specialty stores (do-it-yourself, flowers, automotive service stations). Migros also produces many of its own goods from canned produce to soap. Total retail sales amount to over $2 billion annually, and consolidated sales of the cooperative and its various affiliated businesses total over $2.6 billion.

Sweden:

The most striking aspect of the cooperative movement in Sweden is its prominent role in the national economy: Swedish consumer cooperative sales account for 19 percent of private consumption and 10 percent of the Gross National Product. Three out of five Swedes are cooperative members. The cooperative movement has considerable market shares in the five major areas of consumer spending: food and non-food merchandise (19 percent); oil, autos and related goods and services (20 percent); travel services and hotels (20 percent); insurance (Y/ to 53 percent, varying with the type of insurance); and housing (21 percent).

The first known cooperative in Sweden was a purchasing society organized by farmers in 1850. In 1864 the Freedom of Commerce Decree ended various restrictive government controls on commerce, and within 10 years more than 300 cooperative societies were formed, primarily to provide the basic necessities to workers through so-called workers associations.

In 1899 the diverse local consumer cooperative societies established a central organization, the Cooperative Union, or KF (Kooperativa Forbundet), to provide information and advice to local societies, which had 'often failed due to poor business management. In 1904 KF expanded its services to include limited wholesale activities on behalf of local societies.

Between 1921 and World War II, KF expanded its operation into several areas of production where producers' cartels controlled the market. KF attacked cartels in margarine (lowering the price of margarine from 2.70 Swedish krones to 1.90 krones), galoshes (lowering the ?rice from 8.50 krones to 6.50 krones) and light bulbs (lowering the price per bulb from 1.35 krones to .85 krones).

KF continues this tradition today, entering industries where prices are inflated due to inadequate competition. KF officials point to the 1964 purchase of a tampon factory and the subsequent decrease in price of tampons as an illustration.

In addition to consumer goods, KF is also a leading provider of insurance. In 1908 KF began the first Swedish cooperative insurance society, Folksam General, to provide fire insurance for the low value chattels of the urban working class -a market that had been ignored by existing insurance companies. KF and the Swedish Confederation of Trade Unions created a mutual life insurance company, Folksam Life, in 1914. In 1949, a third Folksam division, Folksam International, was established to handle the reinsurance business of the first.

Expansion of the Folksam Group began following World War II. Growing rapidly in the 1950's and 1960's, Folksam became one of the largest insurance companies in Sweden. While ranking third in total premium income (with 17 percent of the national total), Folksam is the top supplier of auto insurance, homeowners insurance, and collective sickness and accident insurance. KF proclaims proudly that more than half the Swedish population maintains a Folksam policy.

Folksam is far from the ordinary insurance company. It has established "claims settlement councils," with majority consumer representation to review cases of policyholders who are not satisfied with Folksam's resolution of their claims. Folksam also has an ombudsperson, answerable only to the general membership, who reviews and, evaluates complaints about claim treatment.

Folksam has been equally innovative in seeking ways to prevent losses. It annually gives grants for research projects that promote environmental, medical and automotive safety. Its researchers have published numerous investigative reports on auto safety and even work at developing equipment and repair methods to cut down the high price of auto repairs.

Denmark:

A bubbly soft drink that resembles tonic water, but tastes like cola, symbolizes the vitality of Danish consumer cooperatives. The drink, aptly termed "Cola without Color," is one of the newest and most publicized products to be marketed by the Danish cooperative, Faellesforeningen for Denmarks Brigsgoreninger (FDB).

At a 1975 press conference to introduce the drink, blind-folded journalists participating in a taste test were unable to distinguish Coca Cola from Cola without Color. Headlines trumpeted the results.

The stories were not so concerned that a new drink would join the dozens already available on store shelves. More important was that the co-op developed a cola drink without artificial, some potentially harmful, food dyes. Coca Cola representatives had insisted to the Danish health officials that the cooperative's achievement was not possible. (Cola without Color has proven popular, too, accounting for eight percent of all Danish cola sales in just two years.)

From the start, Danish cooperators were impressive, efficient, and open. They were concerned with survival, as were all co-op members, and were proud of their business pragmatism. Yet, they also expressed genuine concern with issues of food purity, consumer protection, and economic justice.

In Denmark 1400 consumer cooperative societies serve close to 900,000 members (1978), which testifies to the importance of the cooperative in the economy.

FDB was established in 1896, 30 years after the founding of the first retail society. Initially, FDB was set up solely to provide societies with wholesale purchasing power. But as was the case in other countries, the wholesaler quickly expanded into production. Today FDB plants grind flour, roast coffee, bottle wine, roll cigars, bake biscuits, grow seeds, can fruit, craft furniture, and produce a variety of other goods and services as well.

FDB is both the wholesaler for Danish retail cooperatives and, with 300 of its own retail stores, the nation's largest retailer. Small cooperative societies typify the Danish pattern. A study completed in the late 1960's found that the average Danish farmer belonged to eleven separate cooperative societies. The same farmer might belong to a cooperative dairy, an egg marketing cooperative, a farm machinery supply cooperative, a cooperative bacon factory, and of course to his local retail cooperative. A more recent study confirmed this finding, although it noted a gradual consolidation of producer cooperatives into larger economic units.

Whatever the -number of cooperative societies, the pervasive influence of the consumer cooperative on Danish fife is not about to diminish. The one mil. lion members of retail co-ops represent one-fifth of the Danish population; or about one-half of the total number o1 households.

The co-op's influence is manifested in many ways. Its share of the retail market-13.2 percent of all items and approximately 22 percent of foodstuffs in 1976 enables co-ops to exert a considerable influence on many Danish communities and businesses. Samvirke, the co-op magazine, is the largest monthly publication in the country.