Q&A: What lies ahead for European co-ops?

The current challenges for European retailers are offering consumer co-ops the chance to assert their co-operative difference and build new partnerships, in line with principle six – co-operation among co-operatives. Anca Voinea talks to Todor Ivanov, secretary general of Euro Coop, the sectoral organisation of the International Co-operative Alliance representing over 20 consumer co-operative organisations in Europe. He discusses the risk of deflation in Europe, innovation and the notion of a single market for consumer co-ops.

Anca Voinea: Economists talk about the risk of deflation within the EU. The UK’s grocery market has already entered deflation. We’ve seen milk prices fall in the UK. What would be the implications for consumer co-operatives across the EU?

Todor Ivanov: Co-operatives function to defend their members’ interests. In the case of consumer co-ops, the concepts of consumer and member are intertwined. The economic and financial hardships for the people in across Europe have continued for longer than anticipated.

Would deflation be bad news for consumer co-operatives? It depends on your perspective. SOK Finland and Coop Italy are already taking steps towards alleviating their consumer-members by voluntarily lowering prices on the most popular food products.

This derives from a co-operative nature and mission: by the people for the people. In the case of SOK Finland, the drop in prices will be throughout their hypermarket chain, aiming at becoming the most affordable store in Finland. In the meantime, product quality and assortment will be guaranteed, along with its further development, and keeping 80% of the products domestically manufactured.

So, if consumer co-ops are willingly dropping their prices, where their own efficiency and capacity allows it, the question of deflation applies differently, as it would apply elsewhere – such as among private retailers.

Something else to consider – consumer co-operatives base their retail strategy more often around the concept of “most affordable store”, rather than “cheapest store”. What is the difference? While most affordable entails a balance between quality and price, cheapest simply means lowest price possible regardless of the quality. Consumer co-operatives strive to offer their consumer-members the most affordable price in relation to the respective quality. Whereas the other concept is one implemented by discounters.

AV: A few years ago the first European co-operative society was registered between the Central Co-operative Union of Bulgaria and Cantine Siciliane Riunite. What has been the outcome of this initiative? Are other co-ops likely to initiate such collaborations?

TI: The outcome has been a success. A specialised store for sale of Sicilian wines was open in Sofia on the occasion of the European Co-operative Society’s registration in December 2011. The supply chain for these wines was established directly between the two participating organisations. Hence, there is no intermediary, which guarantees the best price for Sicilian quality wines on the Bulgarian market.

As far as I know from our Bulgarian member, at times CCU has had to deal with the reverse effect on consumers’ perception of the wines’ quality, since the prices are so attractive that they give rise to suspicion of the products’ genuineness! I was informed that CCU plans another delivery early 2015.

The collaboration between CCU and CSR proves the European Co-operative Society can work successfully, so I believe it is only a matter of time until other national co-operative organisations in general, and Euro Coop members specifically, will resort to this legal form for their closer mutual collaboration.

AV: Could you give examples of areas in which consumer co-operatives are leading the way in Europe? Or of areas in which co-ops have set an example that other retailer have followed?

TI: Five of Euro Coop’s members are market leaders in their countries – SOK Finland (47%), ANCC/COOP Italy (21%), Coop Denmark (37%), COOP Jednota Slovakia (20%), and Coop Estonia (20%). This proves that consumer co-operatives are doing an excellent job at providing value to their members and more successful at attracting the general public than the private retailers.

Individually, Euro Coop members are usually pioneers and/or masters of specific campaigns towards their members and general public, which are of societal and environmental importance: consumer awareness, food and water waste, eco-products, food quality, Fairtrade, etc.

The UK’s Co-operative Group was the pioneer of Fairtrade on the UK market about 10-15 years ago. Slowly afterwards, private retailers followed suit. In 2002, it became the first retailer in the UK to include calorie information on the label of its alcohol products, and in total, it sources 98% of its energy from renewable sources. This is concrete evidence of the Co-operative Group’s commitment towards its members, customers, society, and the environment.

ANCC/Coop Italy is a leader in consumer awareness linked to product labelling, food origin, and tackling waste. Actually, they are the only organisation or institution which owns and uses a specific machine, “Heracles II”, which can immediately indicate the origins of any food product and prove food authenticity. This is spectacular, and it has come to realisation simply because co-operative members desire to know where their food comes from and whether it is genuine. Coop is also the first retailer in Italy to transform all its own-brand tea line to Fairtrade and organic, and it is the first retailer in the world to launch the Environmental Product Declaration (EPD) for its own-brand beef.

In 2010, co-operative retailer Eroski in Spain has constructed a “Zero CO2 Emission Store”, leading to 65% energy reduction compared to supermarkets of the same size. This has become a reference model in Spain, where it was the first supermarket to receive the Sustainable Construction Certificate BREEAM (Building Research Establishment Environmental Assessment Methodology) and in Europe, being the first to get an ISO 50001 certificate in energy management.

If this does not prove environmental consciousness, I don’t know what does. Eroski is also the first retailer in Spain to launch the “Locally Produced” logo, which officially recognises short-supply chains and strict co-operation with the local community. The logo was firstly launched in Catalonia by the Eroski-owned chain “Caprabo”.

Coop Denmark is first retailer in Denmark to enter an agreement with the enterprise NC Environment to transform all organic waste into biogas. The agreement means that when all Coop stores will be connected to the system there will be 10,000 tons less CO2 released in the environment. Coop also became the first retailer in Denmark that guarantees that all wooden garden furniture comes from sustainable production through FSC certification.

Coop Norway is the first to offer phosphate-free detergents on the market, and it is the owner of Europe’s most modern logistic centre. The centre is fully automatised, developed on 52,000 square meters and covers all merchant categories.

Euro Coop represents 20 national consumer co-operative organisations and, here, I’ve presented just some examples from the bigger members. However, consumer co-operatives’ track record in representing consumers’ interests, environmental protection and social commitment is long and impressive, which could be dealt with in an interview devoted just on that subject.

AV: Should consumer co-operatives have a single market or become one European consumer co-operative?

TI: I have my dreams for the future of the co-operative movement in Europe, and globally. Indeed, a pan-European co-operative commercial body of some sort is part of these dreams.

It’s only natural for national co-operative structures to make use of the vast, if not endless potential of collaborating with each other. Coming together commercially would give them bigger purchasing power, which would translate into higher volumes and, well, lower prices.

Ultimately, this would benefit the members and consumers.

However, this is just a dream for the moment, as several Euro Coop members pioneered an initiative back in 2010 to explore the possibilities of such purchasing collaboration. It became evident that our members favour the idea, but are still five to ten years away from actually coming around and implementing it.

When I started at this position, I did so with a clear idea of exploring this further with our members. I soon found out that the obstacles to such commercial unity on a pan-European level are clear – the different national culinary traditions, preferences and food cultures. It is so complicated and detailed, that it comes down to taste preferences and even product labelling and packaging standards on national level.

So, for example – ham. Some prefer it salted, others spicy or smoked; what about the package size and label design? But every big journey starts off with a small step, and in this context, it means identifying key common products which every co-op across Europe sells. These would be the international brands and basic general products and foods – soda drinks, shampoos, sweets, alcohol (although Scandinavia has a different regime), gum, certain fruits and vegetables etc.

The good news is that purchasing collaboration between national co-ops is happening on a regional basis, and examples of this are CoopTrading (Scandinavian countries) and Coop Euro (Slovakia, Czech Republic, Hungary, and Bulgaria). This proves that the idea of uniting purchasing operations makes sense; the question is one of size.

AV: Negotiations on the Transatlantic Trade and Investment Partnership have been suspended for now, but what could the TTIP deal mean for consumer co-operatives?

TI: The whole deal with TTIP is alarming, and the Commission has brought this upon itself. In my mother tongue, we have a saying “The guilty one runs without being chased”. Had the EU authorities been more transparent with the EU community about the negotiation proceedings, civil society wouldn’t have been as alarmed and suspicious, as it is now. If one is being secretive, then one has something to hide, otherwise it’s illogical.

On one hand – consumer co-operatives are alarmed due to the risk of lowering the high EU standards in terms of food security and quality (GMOs, cloning, chemicals, etc.); the risk of co-op labelled products and others in general which co-op stores sell could become less competitive due to cheaper alternatives from the US, but with lower quality and safety standards. After all, consumer co-operatives are in the difficult situation of balancing economic viability and socio-environmental responsibility. Yes, we need to be competitive against the likes of large multinational retailers, and no, we will not compromise on the standards concerning quality of food and its environmental footprint, something we fear TTIP’s “harmonizing standards” between EU and US could jeopardise.

On the other hand, there could be a possibility to have easier access to European products, and co-op products included, to the US market, which could increase turnover for our members.

But again, since most of the time the public is left out in the dark on TTIP, we can only really guess at this moment.