The Citizen Consumer Dilemma, Part One: The Problems

Equal Exchange
February 21, 2017
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By Rink Dickinson, President, and Deepak Khandelwal

At Equal Exchange, we think about food every day. We think about the foods we sell, the farmers we purchase from, shipping logistics, the marketplace, and other day-to-day details. We are also deeply consumed in thinking about the broader food system: what is working, what is broken, how ownership and power are distributed, and how to develop alternative models. Ultimately, we are working to bridge the gap that exists between farmers and consumers.

In this post we will talk about high-level problems that we face as consumers, citizens and activists working within the U.S. and the global food marketplace. In a future post we will look at past successful and unsuccessful efforts to reform the market, and what we can learn from that history. All of this is the context in which we are building the Equal Exchange Action Forum, a model to address macro problems as well as direct challenges facing Equal Exchange. Let’s get to it.

Problem #1: The Food System is Predominantly a For-Profit System

The food system is a business; we know that on multiple levels. But food, housing, health and education are systems that address, at least in part, our basic human needs. This means that they should not be pure commodities and not based solely on free market principles. The predominantly commodity structure of the food system today is a big part of the problem.

On the organizational level there are too few mission-driven, not profit-maximizing organizations. A huge challenge is building the capacity to operate and navigate within the largely for-profit marketplace. It is very difficult to build capital, vision, culture and economic viability while remaining on mission. There are very few alternative trade organizations not only in the U.S., but globally as well. Without these organizations there is less capacity for risk, experimentation, and economic democracy in the North.

Problem #2: Corporate Control and Consolidation

The examples of corporate consolidation are near endless. On the U.S. farm level there is dramatic growth of very small farms and increasing concentration of large farms. Mid-sized farms may be the most important to support - and the most threatened.

In the coffee market that Equal Exchange grew up alongside there were myriad regional, mid-sized roasters in the northeast and across the country. Hundreds of micro-roasters have sprung up in the last 20 years, but the mid-sized roasters have largely been forced to sell out. In the last two years we have seen dramatic consolidation at the top. The primary driver has been JAB, a holding company based in Germany that has gobbled up Peet’s, Caribou, Stumptown, Intelligentsia, Einstein Brothers, Krispy Kreme and Keurig/Green Mountain.

On the supermarket level there has been ongoing consolidation in the last 20 years. Walmart, who spent years consolidating non-food retail, started selling food in the ‘90s. They are now the single largest seller of food in the country. Kroger—who held the number one spot in food for many years before Walmart entered the scene—continues to acquire regional supermarkets and is on a growth trajectory. Delhaize (Hannafords, Food Lion, etc.) is merging with Ahold (Stop & Shop and Giant) to create the Ahold Delhaize supergroup. Reorganization and consolidation will continue, the names and positions of these agglomerating supermarkets will change, winners will become losers, and vice versa, but the direction is clear.

The “natural” and “organic” (and “fair trade”) movements have been completely digested in this period as well. Whole Foods led the charge nationally and grew from 70+ stores in 1997 to approximately 425 stores today. Mainstream chains have taken notice, and have brought in their own organic and clean products by the hundreds. Other actors and venture capitalists have seen the market opportunity and have launched new rival natural foods chains or have helped fuel the reorganization and growth of existing regional chains. The net result is an organic foods industry that is very much part of the mainstream marketplace and not the alternative system that some would argue it was attempting to be.

The independent and cooperative food stores that, along with churches, make up Equal Exchange’s core customer base are facing direct competition from these new, fast-moving, highly capitalized stores. This competition creates a dynamic which forces these independent and co-op stores to re-examine their key values and strengths, and figure out how to compete. Hypothetically, this might mean a deeper commitment to authentic fair trade, real organics, new forms of engagement with their shoppers or members, and a new level of experimentation. Alternatively, it might lead to less commitment to those values, less commitment to the concept of consumer ownership of food, and more emphasis on cost reduction and competing purely on commercial terms. This second path might be rational in the short term, but will have devastating consequences in terms of driving real change in the food system.

Distribution networks—the warehouses and truckers that get food from manufacturers to stores—are, by definition, even more likely to be concentrated than the retail side. The food co-op movement in the ‘80s had 15 cooperative warehouses located all across the country. Supporting those warehouses were scores of co-op stores and consumer-run buying clubs. These warehouses competed with each other, and with the other funky (and less funky) natural foods distributors. By 2002, all of the co-op warehouses were gone. The other natural foods distributors had consolidated and there was essentially one natural foods distributor for the entire U.S. market: United Natural Foods (UNFI). Today, UNFI is the primary supplier to the dominant natural foods store, Whole Foods, and is also the key distributor of natural foods to most supermarkets. It is also the key distributor to the independent natural food stores and cooperatives that compete with Whole Foods.

Why is consolidation a problem? On one level the answer is less competition, higher prices, and worse service. Beyond those basic economic impacts, having a non-diverse monoculture is also negative for democracy, citizen involvement, and ultimately food justice. The for-profit food system is continuously consolidating and the largest entities are gaining more economic and political power. If supermarkets, food companies, brands and distributors are more consolidated, who or what is not consolidated? Who does the the consolidation benefit?

In the Equal Exchange supply chain, peasant farmers are organized but not consolidated. They have to work together to build any type of control over their buyers, but their control is weak even when selling to alternative trade organizations like Equal Exchange. When these farmers sell to the conventional marketplace they have virtually no control, and consolidation of companies and the marketplace is making things even worse.

Consumers are the other group that is not consolidated and, unlike our farmer partners, not even organized. As long as consumers stay unorganized their power is questionable and, similar to farmers, consolidation is only making things worse. But this group is the sleeping giant. This is the group with the most potential to make massive change in the food system. And the requirement is to get organized and think differently.

Problem #3: Companies and Their Brands: Deceptive Marketing, Deceptive Diversity

One side effect of consolidation is the increasing prominence of brand portfolio companies - large national and multinational companies who own and control multiple consumer brands. Let’s look at a few examples. Unilever: 13 major brands (with many small, side brands); Kraft (the new slimmed down version): about 15 brands; Mondelez (a result of the Kraft slimdown): about 25 brands; General Mills: 80+ brands; and Hain Celestial: 30+ brands.

These brand portfolio companies are able to leverage combined volumes, operations, staff, and build economies of larger and larger scale. On some level this structuring of brands might provide some benefit to the purely economic-minded consumer, namely in cheaper prices.

This structuring of brands also allows companies to push forward a diverse landscape of selling propositions and messages. No longer does a single brand company have to respond to the needs of a wide audience. These companies now have an entire fleet of messaging vehicles that are targeted to different types of consumers and can be deployed accordingly: upscale brands, mid-level brands, cheap brands. In the last 5-10 years, these companies have made a big push in adding organic brands and small, funky, craft brands to their list.

The result is a massive marketplace that is full of brands, messages, and choices. But the reality is a controlled and curated environment where choice is fake, and the companies behind the products are masked.

The result is a massive marketplace that is full of brands, messages, and choices. But the reality is a controlled and curated environment where choice is fake, and the companies behind the products are masked. In a natural foods store, a consumer can choose to buy juice from Knudsen or Santa Cruz Organic or After the Fall. They all have different looks, selling propositions and prices, and nowhere would you find that they are all part of the same Smuckers brand portfolio. Or in the supermarket, a shopper could find ice cream from Klondike, Good Humor, Breyers, Magnum, Talenti, Starbucks, or Ben & Jerry’s. Amazing options, but does it matter that they are all part of the Unilever portfolio? These companies know how to market to consumers, and now with many brands at their disposal are able to play the game at an even more sophisticated and deceptive level.

Problem #4: The Citizen-Consumer Dilemma

Companies target us by using a whole variety of tactics and messages: Best quality. Lowest prices. New. One angle, because these companies know that there is all kinds of support for caring for the earth, for food justice, for tolerance, is by relentlessly talking to us as citizens and marketing the social good they purport to do or their “Corporate Social Responsibility.”

One example is Ben & Jerry’s. To many of us, this brand is still about two radical ice cream-loving hippies that are committed to social justice. They refused to use dairy from cows treated with recombinant growth hormones (rhGH), they took a public stance supporting the Black Lives Matter movement, and they wrote a post-election letter to then President-Elect Trump. It is a strong brand, with a strong social mission component, and the marketers in charge know that. The problem, of course, is the 130-million dollar Ben & Jerry’s brand is a tiny part of the 57 billion dollar Unilever behemoth. Does this mean that Unilever as a whole supports these stances? Shouldn’t it mean that at least the other ice cream brands they own share these values? Or maybe it means that they have a diverse portfolio which allows them to hedge messages?

This is savvy marketing with very little risk. Corporate food brands are not asking for people to get together and tackle big questions. They are not talking about the compensation of their CEOs. Nor are they talking about how many brands they have out there marketing themselves as if they were real companies. The most insidious brand confusion is at this level. Our strongest values are turned into attributes to be marketed, and are demeaned in the process. It’s all illusion.

We need to learn about what it means to be a consumer as well as a citizen in the marketplace. This is what we at Equal Exchange are calling the citizen-consumer dilemma. We think of our consumer hat being in play when choosing products, without factoring in the issues of democracy, food justice and the earth. We each do this all the time. But when we put on our citizen-consumer hat we are actively opening up a litany of issues to grapple with, including democracy, food justice and the earth. And to do this reasonably effectively we cannot be individual actors making personal choices; we will ultimately need to be organized—just as our farmer partners are organized—so that we can drive change together.

On one level, most of us are generally unaware of the illusions of brands, companies, and false citizen messaging. But on another level, we sort of know and have adapted by becoming highly cynical. We do know many corporations or governments are capable of the highest degree of malfeasance, lying, and accountability dodging. This combination of being both unaware and cynical further saps our energy and makes it even harder to build the citizen-consumer skills we need to actually change our food system.

The corporate need to market to our citizen sides is in a race with our ability to understand and digest this marketing. Do you support small business? Then American Express is here for you. Do you support tolerance between Islam and Christianity? It turns out Amazon Prime is all about that. Do you care about individual freedom and liberation? Apple was founded on that principle.

This marketing onslaught will continue, but in part based on our real desire to support tolerance, small business, and individual freedom. We have tremendous untapped power as citizen-consumers. We need to come together, to support each other. We need to learn how supply chains work. We need to learn from our victories and failures. We need to re-engage and understand how each of these identified problems can be confronted, and what tools can help solve these related problems.

Supporting sustainability, fair trade, organic or local food movements reactively—without understanding capitalist economics, or corporate consolidation— is not an effective action. We need to understand the system we operate in and how it can be changed by reform, and how those reforms themselves get digested and weakened by a prevailing company-brand system that is, in many ways, the problem.

Stay tuned for a future post looking at some of the reforms from the past and the lessons they hold for us.