What’s up with the cheap Italian chocolate?

Perhaps many of you read my last post and wondered why the heck chocolate is so much cheaper in Italian co-ops. I’m not qualified to give a full analysis and I haven’t even done any serious research into it (but I will, believe me, I will). Nevertheless, here is my off-the-cuff theory: Those chocolate bars are inexpensive because they are part of an unbroken (or nearly so) cooperative chain of production, distribution, and retail called Co-op Italia (http://www.e-coop.it – unfortunately all in Italian, but if anyone parla italiano and wants to help with some research, please let me know).

Rather than passing through many hands, each of which must take its own profit, the Italian arrangement appears to be a case study in the glories of cooperative federation. That is, many co-ops band together to form second-level cooperatives that are democratically controlled by representatives from each primary cooperative (i.e. the Trentino federation). Then, those secondary cooperatives form even larger ones with other secondary cooperatives (in this case, concentrated in the region around Bologna). The end result is that you have a system that is capable of competing with anyone on size, using cooperative means.

That is, they have a democratic and not-for-profit system that is able to purchase products on a massive scale, but it is also able to produce them. In some cases, they may actually manufacture the product themselves at a Co-op Italia processing facility. In other cases this may be a co-packing agreement where Co-op Italia buys a large chunk of some other company’s product (maybe even a co-op) and slaps their own label on it. Incidentally, this is how Trader Joe’s operates.

Now, regarding fair trade (which is where we diverge from the Trader Joe business model): I’m not an expert on this, but as I understand it, there are a number of things that have to happen for Fair Trade certification. Obviously, from the name, there has to be a fair price. There is therefore at least an encouragement of production cooperatives. This only makes sense, because it is that much harder to get the producers a fair price if there is also some for-profit company in the middle, skimming off it’s bit for the stockholders. Co-op Italia appears to be seeking out specific producer cooperatives to serve as suppliers to them, kind of like Wal-Mart but less evil. Every product has a statement that “Co-op products are made without discrimination or exploitation of workers.”

Because they are in the early stages of this, the Solidal product line is a bit random. (shirts, roses, soccer balls) But what they have done, appears to be working rather nicely. I’m very curious to do price comparisons for the other items, but I can tell you that the Nutella rip-off was also competitively priced.

So what is different in the US? Why can’t we get good chocolate for a buck?

I see the weakest link being the lack of in-house production. Another, more complicated problem is that the cooperative system in the US is very fragmented. The natural foods industry is dominated by a single company, United Natural Foods, Inc. This was, ironically, formed from the remains of many smaller regional warehouses, and many of these were originally co-ops, set up by the food co-ops. Almost every food co-op in the US orders most of its groceries from UNFI.

Meanwhile, there are a number of regional wholesale cooperatives, whose members are independent grocery stores, and some small chains. These distribution cooperatives don’t necessarily look or smell very “co-opy” to a lot of people, and indeed, it isn’t obvious that they are co-ops from their public face (for example, check out http://www.uwgrocers.com/) However, they have played a key role in helping independents hold on against the really big chains like Safeway and Albertsons). They have also created their own co-op brand, Western Family/Shur Fine (www.westernfamily.com)

Meanwhile, there are a lot of producer co-ops, like Ocean Spray, Land-O-Lakes, and Sunkist. These are generally not found in retail food co-ops because they don’t tend to have well-developed natural or organic lines, and becuase there is a lot of ignorance about what they are. Yes, they are big business, but they are big cooperative business. They have their flaws, but at least they are a step in the right direction and allow indpendent farmers to survive by getting better prices and a higher share of the retail cost.

It’s a very confusing mess, and I barely get it myself sometimes. I think I need to draw some sort of diagram of what a food system looks like, and map out where the chain is broken. Because that’s the key thing here: We have all the ingredients for what the Italians are doing, but it is just in several fiercely independent pieces. Maybe it would be easier to build from scratch.

On that note, there is important work being done to build these sorts of cooperative links to the US. Equal Exchange (www.equalexchange.coop) is a worker-owned importer that got started with coffee but has moved into chocolate and also a new concept of domestic Fair Trade. They seek to create an unbroken cooperative chain from producer to distributor to retailer. Alas, their bars, at the food co-op in Sacramento, cost about 4x the Italian stuff (which is admittedly milk chocolate so maybe cheaper to produce. Perhaps this would be better with economies of scale, since I think I remember hearing some crazy number like 1/6 of the groceries sold in Italy are produced cooperatively (don’t quote me on that). Maybe it is 6% but that is still huge.

Another neat project with is the Working World, where you can buy stuff like shoes and pet clothes and balloons made by worker cooperatives in Argentina. Most interesting (I think) is that they have a price breakdown for each item, telling you how much of your purchase price goes to the producer, to them (a worker co-op of Yankees, based in Maine), to a microcredit fund, and to taxes. They also have some inspiring stories on their web site: http://theworkingworld.org/ Please check it out.

To get a look at what a more integrated co-op system looks like (in English) check out our neighbors to the north. There are two major distribution federations, Federated (http://www.fcl.ca) and Co-op Atlantic (http://www.coopatlantic.ca/). These are not quite as developed as Co-op Italia, but they are the same general idea. Last year I got to visit a store in Saskatchewan that is part of Federated, and the manager boasted that he could compete with Wal-Mart on the price point. His store also had houses for sale. Seriously. Real live manufactured houses, sitting on trailers in the parking lot, for about $75-80K. Members can buy a house at the co-op. Just hitch up and drive it away.  When I saw that, I was overwhelmed and had to sit on the steps staring at the prairie sky for a few minutes.

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