8 MIN READ
Dec 6, 2019
Photo by Tom Werner/Getty Images
“Who owns your grocery store?”
It’s the question emblazoned on the back of a van that has ferried me across 34 states to visit 128 consumer-owned grocery stores (food co-ops) and another 20 in development.
I spent 13 years investigating every facet of the food supply. It led me to the conclusion that the grocery store is, hands down, the most influential force shaping food, the planet, and our health. So I wrote a book about it, bought a tour van, and took the book on the road. The message I’m sharing is that it’s time to pay a lot more attention to who owns the grocery stores we shop at and what those answers mean to the future of food and the future of our communities.
We have invested considerable energy over the past decade into deepening our understanding of how and where food is grown and who grows it. Organic food has exploded into a $50 billion industry in the United States. Farm-to-table restaurants are plentiful. Farmers markets are thriving and community supported agriculture models are enabling new generations of farmers to usher in a new food paradigm. But there remains a cavernous gap in the effort—where we buy our groceries. If 10% of our weekly food budget is at a farmers market, what about the other 90%? It’s almost certainly being invested in a grocery store. So what are we investing in?
If it’s The Fresh Market, you’re investing in Apollo Global Management—a firm that includes the former Blackwater in its portfolio. If it’s Trader Joe’s, you’re investing in Aldi Nord—a German multinational grocer. If it’s Whole Foods, you’re investing in Amazon and lining the pockets of the wealthiest person on the planet. And what of the smaller chains? The trajectory of grocery consolidation suggests you’re investing in what will likely become an acquisition by one of a handful of hungry grocery giants.
Look at Canada and the U.K., where market concentration in grocery retail is remarkably high. In Canada, two companies alone receive over half of Canadians’ grocery dollars. Combined with the next three largest grocers, those five companies command 80% of the market. The numbers are similar in the U.K.
What happens when a market becomes this concentrated? Take Loblaw Co. Ltd., the largest of Canada’s grocers commanding 30% of the market. December 14, 2017: Loblaw admits to the Canadian public that they’ve been cheating their customers for 14 years – alleging they had colluded with four of their most notable competitors to fix the price of bread. It’s understood Canadians were spending $1 more per loaf of bread than general rates of food inflation would have predicted. Back in 2007, over in the highly concentrated U.K. grocery market, Asda and Sainsbury’s admitted to fixing the price of dairy between 2002 and 2003. The scheme was said to have cost consumers the equivalent today of $438 million.
If 10% of our weekly food budget is at a farmers market, what about the other 90%? It’s almost certainly being invested in a grocery store. So what are we investing in?
As a Canadian, I’m particularly interested in what will come of the investigation into bread price fixing, but despite the ongoing investigation it appears we have already moved on. On April 9, 2019, Canada’s Environment and Climate Change Minister announced Loblaw would receive a $12 million subsidy to upgrade refrigeration units at 370 of their stores. Company admits to cheating Canadians. Canadians gift them $12 million. Incredible.
Are Canadians outraged? Are they switching grocery stores? Absolutely not. Loblaw is doing just fine. Granted, there aren’t a whole lot of alternatives. Four other grocery giants are alleged to have participated in the scheme. In many areas of the country, those five grocers are the only options available.
Similar levels of market concentration are also emerging across the United States. After Walmart’s explosion into grocery in the late 1990s and early 2000s, waves of grocery mergers and acquisitions followed, leaving only a handful of grocery giants operating in any one geographic area. As I traveled through the eastern states this past spring, it became clear how few people are aware of the companies behind the banners. The once regional chains are no longer so regional. Hannaford, Food Lion, Giant, Stop & Shop, all are now subsidiaries of Ahold Delhaize (Netherlands.) Fred Meyer, Harris Teeter, Ralphs—now Kroger banners. Safeway, Shaw’s, Star Market and Vons—all now part of Albertsons.
With the exception of some areas of the country where fierce grocery store battles are playing out, we eaters are generally at the mercy of one of a few giants. In rural communities and many urban neighborhoods, there might be just one single option available—textbook monopolies.
“Well, that’s capitalism for ya,” some will say. No doubt. But this is different. This is about food. Grocery stores are not, in any way, just some other “business.” These buildings operating in our neighborhoods bear tremendous social and economic responsibilities.
Take human health. The connection between food and health is now well understood. Studies show that the common cold, diabetes, and heart disease can be prevented, curtailed, or managed through the foods we eat. Food is medicine. So what responsibilities have we placed upon these grocers that are proportional to the vital health services they’re providing? What have we done to ensure all people, regardless of income, race or geography, are provided access to healthy, wholesome, and risk-free food at the grocery stores in their neighborhoods? Not much. We’ve left the health implications of our grocery stores entirely in the hands of market forces.
A grocer’s economic role is also deserving of scrutiny. Ten years ago, it was nearly impossible for local/regional food producers to get their products on the shelves of a major national chain operating nearby. Whereas some progress has been made in this regard, there remain many producers who continue to come up against substantial barriers when trying to access the shelves of their local/regional grocers. These barriers effectively throttle local economic development and diminish the wider social benefits that extend from the presence and growth of a diversity of local businesses.
For the past 100 years, grocers have also been shaping the entirety of the food system. With only a handful of grocers dominating any one region or nation, they have effectively acted as bottlenecks within the system—gatekeepers to the foods that will and won’t make it to market. It’s the grocers who are determining the how, where, and who of food production both locally and globally. Grocers are determining the future of food.
As there is no regulatory oversight of grocery store behaviors and practices in these three key areas of influence, where can we eaters find modest assurance that grocers have our interests at heart? And how might a grocer’s commitment to our community be sustained for generations to come? I believe it comes down to who owns your grocery store. It should come as no surprise that the most locally owned grocer is most likely to be the most accountable and responsive to the community it serves. After all, the owner(s) and senior management are often residents of the town/city/neighborhood in which the store is located. As long as our neighborhood grocer is privately owned, any assurances of long-term commitment are precarious. No question there are many independent grocers out there who are in it for the long haul and dedicating themselves to their customers, but it’s risky for any of us to place the future of our neighborhood grocer entirely in the hands of a single individual or family. Just as closures of chain stores are commonplace, so too are closures of independent locally owned grocers, particularly in today’s hyper-challenging climate of grocery retail. Acquisitions are also a risk to the future of the grocery stores in our neighborhoods. In both cases, community consultations are not required despite the enormous repercussions a closure or acquisition may have on food access, health, community and economy. If it’s merely a change in ownership, the unique characteristics that may have set a store or chain apart often erode into the culture of the acquiring chain. The accountability and commitment to the community often goes with it.
What defines a consumer food co-op? Rather than any one individual or company owning the grocery store, consumer food co-ops spread ownership out to however many people want to become a shareholder.
In August 2019, Musser’s Markets, with three locations in Lancaster County, Pennsylvania, was acquired by Giant (a subsidiary of the Dutch multinational Ahold Delhaize.) This followed Giant’s single store acquisition in May of Ferguson & Hassler in Quarryville and prior to that, Darrenkamp’s in Willow Valley in September 2018.
In January 2019, the Long Island-based King Kullen (c. 1930) with 32 locations and its independent subsidiary Wild by Nature with five locations were acquired by Stop & Shop (also a subsidiary of Ahold Delhaize.)
In 2015, Chicago’s Mariano’s, with 44 locations, was acquired by Kroger. The culture change at Mariano’s is not going unnoticed. An August 2019 article in Crain’s Chicago Business magazine reads, “Is Kroger ruining Mariano’s?”
So where can eaters find greater assurance in the future of their grocery stores? My research and experience within the food system leads me to only one model. That is the consumer cooperative—food co-ops—full-service grocery stores collectively owned by their customers.
There have been zero instances of a food co-op in America being acquired by a chain grocer. Why not? It would first require a vote by the co-op’s thousands of shareholders who would be asked to decide on whether or not to sell the store. It’s true that there are examples of food co-ops closing, but any decision to change the ownership of a cooperatively owned grocery store is a democratic one, made by the people who would be most affected by the decision: eaters and workers—us! Community consultations on the future of neighborhood grocery stores are built directly into the cooperative model of ownership.
What defines a consumer food co-op? Rather than any one individual or company owning the grocery store, consumer food co-ops spread ownership out to however many people want to become a shareholder. There are no limits to who can become a shareholder nor how many shareholders can co-own the store. Better yet, no one shareholder has any more voting power than another. Each share in the co-op is equal to one vote and each shareholder is limited to one voting share. Once a year, shareholders in a food co-op will vote for their board of directors to govern the co-op. Co-ops democratize the economy.
We’ve generally placed any business or service that a community deems ‘essential’ into an entirely different category of oversight, scrutiny and expectations. Public transit, public libraries, community centers, drinking water, roads and first responders are generally stewarded by public agencies and institutions. They’re simply far too important to leave entirely in the hands of the private sector. Is food deserving of the same attention? Co-ops, particularly consumer co-ops, are effectively public institutions. They build accountability to the community directly into the ownership model. They allow the public to steward the food system from the primary point of convergence between eaters and the system—at the grocery store.
While a food co-op may in practice be a for-profit business, by virtue of their ownership model, they operate far more along the lines of a nonprofit businesses. Every dollar of profit generated at a co-op is channeled into one of two directions—back into improving the business or returned to shareholders in the form of dividends proportional to the level of purchases a shareholder made over the previous year. As a shareholder of a food co-op, I’ve received checks as low as $10 to as high as $50 at the end of the year. These dividends are essentially the grocer saying to its customers, “sorry, we charged you too much this year, here’s how much we overcharged you.”
The recirculating effect of a food dollar spent at a food co-op doesn’t end with the distribution of profits. At a cooperatively owned grocer, the head office is not only in the community served by the co-op, it’s almost always located directly inside the store itself. With the head office located inside the store, the co-op grocery store becomes home to more jobs, including more full-time positions. Marketing managers, human resources, finance, outreach, any positions that would otherwise be located at a distant head office are instead located within the community. Over 180 people are employed at my food co-op, almost 100 of them full time. The largest chain grocer operating in my city claims 150 employees. Then there are the third-party services a cooperatively owned grocer will utilize. This translates into more of our grocery dollars circulating into local businesses that in turn re-circulate those dollars locally.
Today, 230 co-ops operate over 300 locations in the United States. Another 100 are in various stages of development. The food co-op movement is expanding and evolving. Of the 144 new food co-ops that have opened in the past 11 years, 72% of them have weathered the challenging grocery retail climate and have remained open. Nationwide, interest in food co-ops is spreading beyond consumers of organic and local foods. All types of communities, including those in designated food deserts, are turning to this model of grocery store ownership to secure a more promising future for their communities.
|Jon Steinman is the author of “Grocery Story: The Promise of Food Co-ops in the Age of Grocery Giants” (New Society Publishers, 2019).