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The adaptability of consumer co-operatives to changes in retailing in Canada Riley, John Norman 1962

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THE ADAPTABILITY OF CONSUMER CO-OPERATIVES TO CHANGES IN RETAILING IN CANADA by JOHN NORMAN RILEY B.Comm., St. Francis Xavier University, 1958 A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF BUSINESS ADMINISTRATION in the Faculty of Commerce and Business Administration We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA June, 1962 In presenting this thesis in p a r t i a l fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make i t freely- available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the Head of my Department or by his representatives. It i s understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of Commerce and Business Administration (Marketing Division) The University of British Columbia, Vancouver 8, Canada. Date July 18, 1962 i i ABSTRACT Many c h a n g e s h a v e o c c u r r e d i n r e t a i l i n g p r a c t i c e s i n Canada i n r e c e n t y e a r s . T h e s e c h a n g e s h a v e b e e n c a u s e d , i n p a r t , b y s o c i o - e c o n o m i c a n d d e m o g r a p h i c s h i f t s i n Canada's p o p u l a t i o n . The movement o f p o p u l a t i o n t o u r b a n a r e a s , i n c r e a s e d d i s p o s a b l e i n c o m e s a n d t h e m o b i l i t y o f t h e consumer have c a u s e d t h e r e t a i l e r s t o r e s p o n d t o t h e changes w i t h a number o f i n n o v a t i o n s . Among t h e i n n o v a t i o n s a r e t h e d e v e l o p m e n t o f t h e s u p e r m a r k e t , t h e shop p i n g c e n t r e a n d t h e d i s c o u n t h o u s e . P a r t i c u l a r a t t e n t i o n i s f o c u s s e d i n t h e t h e s i s on t h e p r o g r e s s a n d a d a p t a b i l i t y o f consumer c o - o p e r a t i v e s t o t h e changes t a k i n g p l a c e i n r e t a i l i n g i n Canada. A s e c o n d a r e a s t u d i e d i s t h a t o f e f f i c i e n c i e s p o s s i b l e t h r o u g h t h e i n t e g r a t i o n b y c o - o p e r a t i v e s o f t h e f u n c t i o n s o f r e t a i l i n g , w h o l e s a l i n g a n d m a n u f a c t u r i n g . The r e s p o n s e o f consumer c o - o p e r a t i v e s t o change i s a s s e s s e d f i r s t , i n t e r m s o f t h e l o n g - e s t a b l i s h e d c o - o p e r a t i v e s i n G r e a t B r i t a i n , Sweden a n d t h e U n i t e d S t a t e s and, s e c o n d l y , w i t h r e s p e c t t o t h e o p e r a t i o n o f consumer c o - o p e r a t i v e s i n C a n a d a . B r i t i s h a n d S w e d i s h consumer c o - o p e r a t i v e s c a r r y o u t s u b s t a n t i a l p o r t i o n s o f t h e r e t a i l t r a d e o f G r e a t B r i t a i n a n d Sweden w h i l e t h e A m e r i c a n consumer c o - o p e r a t i v e s a r e a m i n o r f a c t o r o f t h e r e t a i l t r a d e o f t h e U n i t e d S t a t e s . The B r i t i s h c o - o p e r a t i v e s r e c o g n i z e d t h e n e e d t o a s s e s s t h e i r o p e r a t i o n s a n d a p p o i n t e d a c o m m i s s i o n o f i n q u i r y . i i i The Swedish co-operatives have recently been re-organized, parti cularly with respect to the operation of department stores. A detailed analysis of consumer co-operatives in Canada indicates that the main source of sales has been in farm supplies and consumer goods in rural areas. Progress is being made, particularly in Western Canada, in the development of consumer co-operatives in urban areas. Two co-operative wholesale societies are discussed from the point of view of the integration of co-operative enterprises. It would appear that there i s a possibility that the British Columbia Co-operative Wholesale Society and Federated Co-opera tives Limited could achieve a higher degree of integration than now exists. A study of the Sherwood Co-operative Association in Saskat chewan indicates that this co-operative has radically altered both i t s f a c i l i t i e s and the product lines offered over a thirty- year period. An analysis of a sample of member-purchasers showed that the co-operative relies on a small minority of members for the bulk of i t s sales volume. A further sample was developed in order to analyze the residential location of the membership. The latter sample indicated that although the membership of the co-operative in the period up to 1944 was essentially rural, in more recent years there has been an increased participation by people in metropolitan Regina. A mail survey of Brit i s h Columbia co-operatives resulted iv in a response from nineteen co-operatives, of which nine were vendors of food products. The nine consumer co-operatives in food products expended over one million dollars for improvement and construction of f a c i l i t i e s in the previous five years. Projects totalling over $750,000 are planned for 1962. Three general conclusions were reached in the study. 1. Consumer co-operatives are making progress and adapting to changes in retailing in Canada. 2. Benefits of integrated operations through co-operative wholesale societies are possible but in some instances are not fu l l y realized by the consumer co-operative associations. 3. Consumer co-operative development in the large metro politan areas is necessary for any substantial growth in consumer co-operative sales in the future. V TABLE OF CONTENTS Chapter Page I. INTRODUCTION AND DEFINITIONS 1 I . Introduction 1 Problems to be discussed 1 Research Design and Method 5 Plan of Presentation 6 II. Definitions 8 In tr oduc t ion 8 Co-operative associations 10 "Private" versus "Co-operative" 10 General Terminology 11 Specific Co-operative Terminology 14 II. RETAIL MERCHANDISING CHANGES 18 Socio-Economic and Demographic Changes 18 Urbanization 18 Income Levels 20 Age Levels 20 Influx of Married Women in Industry 21 Transfer Payments 22 Mobility 23 Summary 25 Distributive Outlet Changes . 26 Chain Stores 27 v i Chapter Page Supermarkets 32 Shopping Centres 34 Discount House 38 Resale price maintenance 39 Department stores 40 Locations 41 Types 41 Reaction 43 Summary 44 III. INTEGRATION 47 Introduction 47 Types of Integration 47 Development 49 Co-operative and Voluntary Chains 51 Integration by Consumer Co-operatives 53 Types of integration 54 Summary 57 IV. CO-OPERATIVE RESPONSE TO CHANGE 58 I. Introduction 58 Rochdale Principles 58 Areas Surveyed 58 II. Background and Origins of Co-operatives 59 III. B r i t i s h Consumer Co-operatives 61 v i i Chapter Page Progress and Growth 61 Formation of the Co-operative Union 62 Co-operative production 63 Current standing. . . . .64 Co-operative proportion of total r e t a i l trade . . 65 Changing Patterns of Retailing in Great Britain . . 67 Decline of the independently-owned stores . . . . 67 Supermarkets . . . . 67 Changes in Co-operative Enterprises 69 The Co-operative Independent Commission 69 Major recommendations of the Commission 70 Implementation of the Commission recommendations. 71 Assessment of the effects of the Commission Report 74 Changes in r e t a i l co-operatives 75 Self-services 76 "Hire Purchase" schemes 76 Differential pricing 76 National membership scheme 77 Resale price maintenance 78 Conclusions relative to co-operative response to change in Great Britain 78 Summary 79 v i i i Chapter Page IV. Consumer Co-operatives in Sweden 81 Development of Societies 81 Current Standing 82 Response to Changed Needs and Buying Habits . . . . 85 Department stores 85 District warehouses 86 Self-service 86 The future program 87 Summary 87 V. Consumer Co-operation in the United States of America 88 Comparison with British and Swedish Co-operatives . 88 Farm Supply Co-operatives 89 Oi l co-operatives 90 Urban Consumer Co-operatives 91 Recent development of urban consumer co-operatives 92 Efficient operations 94 Expansion . . . 9 5 Surveys conducted 96 Conclusions 98 Summary 99 VI. Chapter Summary 100 ix Chapter Page V. CONSUMER CO-OPERATION IN CANADA 102 I. Introduction 102 Rural Base 103 II. Diversity and Scope 105 III. Inter-relationships with Other Co-operatives. . . .111 Credit Unions I l l Central Credit Unions 112 Marketing Agencies 113 Co-operative Unions 113 National Bodies 113 Insurance 113 National Co-operative Credit Society 114 Co-operative Union of Canada 115 Educational Programs 115 IV. Sales and Distribution Patterns 116 Provincial Patterns 118 Membership Distribution 127 V. Expansion Plans 132 VI. Summary 134 VI. CO-OPERATIVE WHOLESALE ACTIVITY 136 I. Introduction 136 Selected Co-operative Wholesale Societies 137 Two Distinguishing Characteristics 137 X Chapter Page II. Co-operative Wholesale Operations 139 Sales Increases 139 Grocery sales 140 Services Provided 141 Adequate selection 141 Pricing policy 142 Private label 142 Purpose 142 Revision carried out 143 Petroleum products 143 Specialized services 144 Management agreements 145 Retail Services Division 147 Audit services 147 Managers' conferences 148 Joint sales events 148 Federated Co-operatives Limited 149 Retail Store Manager Participation 150 III. Participation of Consumer Co-operative Associations 151 Ownership 151 Democratic Control 153 Purchases 154 Federated Co-operatives 156 x i Chapter Page IV. Changes since World War xII 158 Brit i s h Columbia Co-operative Wholesale Society . .158 Services 159 Grocery Division 160 Main problem .161 Federated Co-operatives Limited 161 Amalgamation and growth 161 Saskatchewan amalgamations 161 Manitoba merger 162 Additional product lines 163 Services Increased 164 Financial assistance 164 Distribution patterns 165 V. Proposed New Ventures 168 Merger with Br i t i s h Columbia 168 Drug Department 169 Services 169 Meats 170 VI. Value to Consumer Associations 170 Financial Benefits 170 Promotional Activities 171 "Co-op" Label Program 172 Financial 173 x i i Chapter Page Administrative Assistance 173 Staff Training 173 Conclusions 174 VII. Summary 175 VII. CONSUMER CO-OPERATIVE ASSOCIATIONS 177 I. Introduction 177 Urban Consumer Co-operatives 177 Development of Large Consumer Co-operatives . . . .178 II. Sherwood Co-operative Association 179 Regina Area Growth 179 Location and Services of the Co-operative 180 Changes in Services 182 Consumer Consultant Services 183 Changes in Membership 183 III. Analysis of Member Purchases in 1961, Sherwood Co-operative Association 184 Introduction 184 Two Samples Selected 186 Sample selection 187 Listings obtained 187 Purposes of the Analysis 188 Purchaser Sample 188 Proportion of total sales 188 x i i i Chapter Page Range of Purchases by Departments . . 191 Food department purchases 193 Length of Time as Member 194 Conclusions 195 Member Sample 196 Conclusions 198 IV. A Survey of Consumer Co-operatives in British Columbia 198 Introduction 198 Survey of Consumer Co-operatives 199 Transportation and Petroleum Products Co-operatives 200 Farm Supply Co-operatives 200 Expansion programs 202 Promotional acti v i t i e s 202 Consumer Co-operatives Operating Food Departments .203 Food sales 203 Improvements completed 207 Future improvements planned 208 Advertising and promotional acti v i t i e s 208 Leased or contracted departments 209 Comments by managers 209 Conclusions 210 X I V Chapter Page VIII. CONCLUSIONS AND RECOMMENDATIONS 212 I. Co-operative Response to a Changing Environment. .212 II. Conclusions 217 Effect of Rochdale Principles on Co-operative Development 217 Measurement of Progress 219 Sales progress 220 Membership growth 222 Fa c i l i t i e s improvement 224 Conclusions 224 Adaptability of Consumer Co-operatives to Change .225 Fa c i l i t i e s 226 Promotional ac t i v i t i e s 226 Educational programs 227 Services 228 Product lines 229 Amalgamations 229 Research 229 Efficiencies of Integration 230 Vertical integration . .230 Horizontal integration 232 Conclusions 233 Summary of Conclusions 234 XV Chapter Page III. Recommendations 235 Statistics 235 Development of Urban Consumer Co-operatives. . . .235 Co-operative Realty Company 236 Integrative Procedures 237 Member Participation 237 Future Research 238 BIBLIOGRAPHY 239 APPENDIX A 245 APPENDIX B 248 LIST OF TABLES Table Page I. Business Statistics of the Co-operative Retail and Wholesale Societies in Great Britain for the Years 1959 and 1960 64 II. Retail Establishments in Great Britain by Form of Organization, Number and Turnover - 1957 66 III. Change in Pattern of Retail Trading in Great Britain - 1950 and 1957 68 IV. Comparative Statistics for Swedish Consumer Co-operatives and the Wholesale Society, 1959-1960 . 84 V. Number, Membership and Sales Volume: Consumer Co-operatives and Co-operative Wholesale Societies in the United States - 1959 92 VI. Estimated Sales and Membership, Selected Group of Consumer Co-operative Associations in the United States - 1960 94 VII. Net Margins before Taxes; Supermarkets in the United States Compared with a Group of Consumer Co-operatives with Sales Volumes in Excess of $.1 Million 95 VIII. Growth of Marketing and Purchasing Co-operatives Reported in Canada 104 x v i i Table Page IX. Merchandise and Supplies Sold Through Co-operative Organizations in Canada, Reported for Crop Years Ended July 31, 1959 and 1960 108 X. Co-operative Services in Operation in the Provinces of Manitoba, Saskatchewan, Alberta and the North western Portion of the Province of Ontario by Operational Districts of Federated Co-operatives Limited 110 XI. Total Retail Trade and Co-operative Purchasing Business in Canada, 1949-1960 116 XII. Canada and Co-operative Food Sales, 1949-1960 . . . .117 XIII. Retail Sales by Provinces Compared with Co-operative Retail Sales, 1958 to 1960 119 XIV. Rates of Increase - Retail Sales in Canada by Regions - Total Retail and Co-operative Retail Sales 120 XV. Value of Supplies and Merchandise Sold through Co-operatives in Canada by Provinces, for the Crop Year Ended July 31, 1960 122 XVI. Percentage Distribution of Population Compared to Percentage Distribution of Co-operative Retail Sales of Food Products by Provinces 124 X V l l l Table Page XVII. Number of Associations and Membership of Co-operative Marketing and Purchasing Associations, by Provinces, for the Crop Year Ended July 31, 1960 126 XVIII. Retail Sales, Membership and Population Figures for a Group of Selected Consumer Associations 129 XIX. Consumer Co-operative Expansion Projects Completed in 1961 and Planned for 1962 - Provinces of Manitoba, Saskatchewan and Alberta 131 XX. Co-operative Wholesale Grocery Sales 140 XXI. Retail Consumer Co-operative Sales Related to Co-operative Wholesale Society Sales (Food Products) 156 XXII. Patronage Refunds Distributed to Member Associations as a Percentage of Purchases from Federated Co-operatives, Fiscal Years 1960 and 1961 171 XXIII. Member Patronage Numbers by Year of Allocation and Total of Accounts Issued - 1931-1961 - Sherwood Co-operative Association 186 XXIV. Sample Group Purchases Compared with Total of Membership Purchases during 1961 189 XXV. Purchases of Sample No. 1 by Departments - Number of Individuals and Total Purchases 191 xix Table Page XXVI. Purchases by Departments and Purchase Ranges - Purchaser Sample 192 XXVII. Total Purchases - 124 Purchasers of over $500 in Food Department Compared with Total Sales of Purchaser Sample 194 XXVIII. Length of Membership in the Association - 124 Purchasers of More than $500 in Food Department. .195 XXIX. Residence Distribution - Member Sample, 1961 . . . .196 XXX. Residence Distribution and Purchaser Ranges of the Member Sample, 1961 197 XXXI. A Summary of Respondents to a Survey Questionnaire of Consumer Co-operatives 199 XXXII. Services and Sales Volume of Four Farm Supply Co-operatives in British Columbia 202 XXXIII. Membership, Total Sales and Food Sales of 9 British Columbia Consumer Co-operatives 205 XXXIV. Product Groups Sold, Services and Food Sales Areas - 9 British Columbia Consumer Co-operatives 206 XXXV. Total Food Sales (9 Consumer Co-operatives) - Member Food Sales (4 Consumer Co-operatives) . . .207 XXXVI. Improvements to F a c i l i t i e s and Approximate Cost 1956-1961 by 9 Brit i s h Columbia Consumer Co-operatives 208 XX Table Page XXXVII. Advertising and Promotional Activity Usage by 9 Bri t i s h Columbia Consumer Co-operatives 209 Diagram 1. Operational Districts - Federated Co-operatives Limited 167 CHAPTER I INTRODUCTION AND DEFINITIONS I. INTRODUCTION Problems to be discussed During the past century very significant changes which have been termed revolutionary have taken place in the economic l i f e of the world. These changes have revolutionized the production of goods. The distributive trades have changed as well, but at a slower pace. However, in the past thirty years changes have taken place in the distributive sector at an ever-accelerating rate. It might even be claimed that a "Distribution Revolution" i s underway that w i l l be as signi ficant economically as the previous "Industrial Revolution". At the same time as these "revolutions" have taken place, a phenomenon known as consumer co-operation was organized and has flourished in a number of countries. Several important differences between consumer co-operation and private profit enterprise must be recognized, as the movement claims to embody elements of both commercial and social significance. Co-operation i s an economic system with a social content. Its idealism penetrates both i t s economic and i t s social elements. The economic ideals affect the business enterprise, i t s methods and operations. The social ideals have a direct bear ing on the association of persons comprising the 2 society, particularly as they affect the membership and personnel relations. The capability of consumer co-operatives has been amply demonstrated by the scope and coverage of consumer co-operative activity in Britain, Sweden and, to a lesser degree, in the United States and Canada. The major concern of this study is to examine a number of changes that have taken place in the period since World War II in the distribution of consumer goods, as this i s the period in which many innovations were inaugurated. As the co-operatives operate within the framework of the prevailing economic system, the problems brought about by change in the distributive system are of concern to co operative leaders. Changes in farming methods and operations are of interest to co-operative leaders due to the dominant position of farm supply co-operatives in both Canada and the United States. The performance that was outstanding yesterday and adequate to-day w i l l be found wanting in building strong co-operative programmes in the decades ahead. The challenge of change calls for co-operative leadership that can meet new needs with the same resoluteness that the co operative pioneers did a few generations ago. These needs can serve as the basis for building 1 Paul Hubert Casselman, The Co-operative Movement and  Some of i t s Problems (New York: Philosophical Library, 1952), p. 1. -3 stronger, more member-oriented and more effective business co-operatives in the future.2 On account of the democratic structure of co-operatives, whereby the member-consumer elects the Board of Directors, who are responsible for the day-to-day policy formulation and the hiring of employees, and where the autonomous structure of individual associations i s related to the integrative processes of wholesaling and processing on a federated basis, the importance of the f l e x i b i l i t y of these organizations to change i s of great interest to i t s adherents. Changes in distribution patterns and methods have taken place and the a b i l i t y of co-operatives to meet changes in a highly competitive f i e l d of endeavour bears a direct relationship to their place in the economic l i f e of the country at present and in the future. Consequently, the major hypotheses advanced are: 1. consumer co-operatives have progressed and adapted to changes in social and economic conditions, and 2. consumer co-operatives have acquired the efficiencies of integration. In examining the response of co-operatives to changes in r e t a i l distribution and the need for integration, the test 2 M. A. Abrahams en, "United States Go-operatives and the Challenge of Change", Year Book of Agricultural Co-operation  1961 (Oxford: Basil Blackwell, 1961), p. 180. 4 of business success of co-operatives cannot be the sole criterion of co-operative excellence. As the social significance i s an inherent factor in co-operative determination of success and a rallying point for i t s support by many social thinkers, the problems presented by changes in distribution are not exactly similar to those faced by an individual businessman or by a privately owned corporation. If , however, co-operation has nothing more to offer than an appeal for more trade and better business; i f i t i s to be judged purely by i t s commercial per formance, i t betrays i t s own past and condemns i t s e l f to be judged only by efficiency tests. To say this i s not to suggest that commercial efficiency and the achievement of a growing economic and social power through increased business are not v i t a l to the pur poses of Co-operation. Co-operative business i s the material expression of a social f a i t h . I f , however, the faith dies, co-operative business loses i t s social significance.* The emphasis in this study w i l l be placed on commercial e f f i  ciency, f u l l y recognizing that the f u l l significance of the co-operative movement l i e s beyond commercial success but this requires measurement of a different nature than i s applied herein. 3 Jack Bailey, The Bri t i s h Co-operative Movement (London: Hutchinson's University Library, 1955), p. 170. 5 Research Design and Method Writings on co-operatives, supplemented by s t a t i s t i c a l data, form the core of the research on the act i v i t i e s of the consumer co-operative movements in such areas as the United Kingdom, Sweden and the United States. Of particular value i s the Co-operative Independent Commission Report issued in the United Kingdom in 1958.* While the Canadian co-operative movement w i l l be described, particular attention is focused on the consumer co-operatives in Western Canada, that i s , in the provinces of B r i t i s h Columbia, Manitoba, Saskatchewan and Alberta. A survey of consumer co-operative associations in B r i t i s h Columbia was conducted through a mailed questionnaire with a view to determining the changes that had occurred in the associations and plans for further development in the near future. The questionnaire included an opportunity for the managers of the associations to indicate what, to them, were the most significant changes and probable future changes. Two samples were taken of the membership of a large consumer co-operative association in Saskatchewan. One sample consisted of two thousand and thirty purchasers in the associa tion, giving a total of a l l purchases in the association for 4 Co-operative Independent Commission Report (Manchester: Co-operative Union Limited, 1958). 6 the year 1961 as well as purchases in each of twelve departments. The second sample drawn consisted of the membership numbers and names and addresses of two hundred and thirty members of the same co-operative."* Supplementing the primary data received in this manner were the annual reports of two co-operative wholesale societies as well as the annual report of the consumer association. A number of meetings of associations were attended and inter views were conducted with research directors, management staff and public relations personnel of consumer associations, co-operative wholesale societies and government bodies. Plan of Presentation Any assessment of the adaptability of consumer co-operatives to changes in retailing requires an examination of the d i s t r i  butive system of this country, with attention paid to integra tive procedures. Changes in the merchandising f i e l d are 5 Cross-tabulation of purchases was carried out to determine i f there was any correlation between purchases in various departments. The sample of addresses was drawn separately as the larger sample contained only membership account numbers. The sample of addresses enabled a locational pattern of the membership to be drawn up. Membership account numbers were given to the members in consecutive order with no re-issuance i f the original member withdrew. A l i s t of dates of entry and account numbers permitted an estimate of the number of years a member had retained his membership in the association. 7 largely caused by socio-economic and demographic influences, consequently this area i s explored. Attempts to increase productivity in distribution have brought about changes with particular emphasis on integration between the various levels of distribution. Co-operative response w i l l be examined in several levels.., In attempting to assess possible changes and responses of Canadian consumer co-operatives, attention must be paid to areas where co-operatives are more established both in point of time and in significance in the distributive sector. For this reason considerable attention i s paid to the co-operative movements in the United Kingdom and Sweden. Due to similarity to Canadian conditions in terms of social, geographic, and proportionate share of the market, reference w i l l be made to the consumer co-operative experience in the United States. Aggregate reports of consumer co-operative activity f a i l to give a definition of the changes taking place. Consequently a more detailed study of two of the several co-operative wholesale societies in Canada i s undertaken. A survey of consumer co-operative response to change must undertake to measure the effects, plans and progress of individual co-opera tive r e t a i l outlets and for this purpose a survey of a group of consumer co-operative associations in Bri t i s h Columbia is presented along with an aggregate summary of consumer co-operative activity in Canada. 8 The development of co-operative wholesale societies in Canada has reached a high degree of integration in the provinces of Manitoba, Saskatchewan, and Alberta. To assess the impact of such a comprehensive program presents some practical d i f f i c u l t i e s and consequently a contrast is drawn between the co-operative wholesale society operating in the Prairie region and the wholesale society serving British Columbia consumer co-operatives. The acti v i t i e s of one particular co-operative association are examined in detail with particular emphasis on the buying patterns of a large section of the membership. The f i n a l chapter presents the conclusions along with a series of recommendations relative to the co-operative response to change and poses a number of suggestions for consideration in the future. II. DEFINITIONS Introduction Marketing, which i s the performance of business acti v i t i e s that direct the flow of goods and services from producer to consumer or users,^ has a wide scope and encompasses a number of acti v i t i e s that are d i f f i c u l t to distinguish. Attempting 6 "Report of the Definitions Committee", American Marketing Association, Journal of Marketing (October 1948, Vol. XIII, No. 2), p. 209. 9 to draw d i s t i n c t i o n s between r e t a i l outlets and service esta blishments i s a case i n point. Many r e t a i l merchants maintain service f a c i l i t i e s while what might be termed service e s t a b l i s h  ments are r e t a i l outlets for a number of products. This dichotomy i s very evident i n the e l e c t r i c a l appliance f i e l d and most p a r t i c u l a r l y i n t e l e v i s i o n and radio shops. Separating the two functions of r e t a i l sales of items and service repairs on the same items, exclusive of guarantee re p a i r s , can become d i f f i c u l t . In order to handle i n a more organized fashion the large mass of data on r e t a i l sales and d i s t r i b u t i v e channels only one segment w i l l be examined i n d e t a i l . Emphasis here w i l l be placed on the sale of food and a l l i e d products that are normally sold i n food stores. Nevertheless reference w i l l be required to other product groups due to b l u r r i n g between the various l i n e s of goods but mainly because many stores have become suppliers of multiple l i n e s of goods. A number of common commercial terms i n use are defined and s p e c i f i c co-operative terminology i s outlined i n order to c l a r i f y some d i s t i n c t i o n s that exist between two segments of the economy, private p r o f i t enterprise and private co operative enterprise. 10 Co-operative associations A short, concise definition of a co-operative association i s offered by H. E. Erdman and J. M. Tinley which stresses the need for capital and participation in business a c t i v i t i e s . * A co-operative association i s a voluntary organization of persons with a common interest, formed and operated along democratic lines for the purpose of supplying services at cost to i t s members, who contribute both capital and business.7 The specific points raised in this definition become clearer upon examination of the background and principles which form the basis of co-operative activity. The definition above refers to co-operative associations in general. Various types of co-operative associations are defined subsequently. "Private" versus "co-operative" A basic and arbitrary definition i s made in this study in the use of the term "private" as distinct from "co-operative" ownership of resources. This distinction is made solely for convenience as there i s l i t t l e doubt that co-operatives constitute a portion of the privately owned productive and distributive f a c i l i t i e s in the nation. The private ownership of property i s an inherent quality of the cooperative movement. In cooperation, the people organize themselves not into a state but into a free society in which they are free to be 7 H. E. Erdman and J. M. Tinley, The Principles of Co-operation  and Their Relation to Success or Failure (Division of Agricul tural Sciences, university of California Bulletin 758, 1957), p. 4. 11 members or not. Each member puts into the society- something of his own. He is given a certificate of ownership which indicates the value of the property he has put in . This property, with that of a l l the other members, is united to carry on the functions of the society. It never even becomes communistic property. It is a union of private properties, put into a pool for a mutual purpose of more advantageous adminis trat ion.8 With this distinction clearly in mind purely as a semantic difference the terms "privately owned" or "private" w i l l be used to distinguish corporate or individual private profit enterprise from the private co-operatively owned organization. General Terminology A number of recurring terms throughout the study requires precise definition. Reference w i l l be made to the distributive sector in the United Kingdom where terms used differ somewhat from those in use in North America. Specific co-operative terminology i s outlined in the last portion of this chapter. Retailer: A merchant or business establishment that sells mainly to the ultimate consumer. Wholesaler: A merchant middleman who sells to retailers and other merchants and/or to industrial, institutional, and commercial users but who does not s e l l in significant amounts to ultimate consumers. Independent Store: A r e t a i l store which i s controlled by i t s own individual ownership or management rather than from without, except insofar as i t s management i s limited by voluntary group arrangements. 8 James Peter Warbasse, Co-operative Democracy (New York: Harper and Bros., Fourth Edition, 1942), p. 110. 12 Chain Store: A group of r e t a i l stores of essentially the same type, centrally owned and with some degree of centralized control of operation. Branch Store: A subsidiary r e t a i l business owned and operated by an established store and smaller than, or carrying a much less extensive line of merchandise than, the Parent Store. Retailer Co-operative: A group of independent retailers organized to buy co-operatively either through a jo i n t l y owned warehouse or through a buying club. Voluntary Group: A group of retailers each of whom owns and operates his own store and i s associated with a wholesaler to carry on joint merchandising acti v i t i e s and who are characterized by some degree of group identity and uniformity of operation. Such joint a c t i v i t i e s have been largely of two kinds: co-operative advertising and group control of store operation.9 19. Shopping Center: A group of r e t a i l establishments of various types under separate ownership and manage ment occupying a center that i s planned, developed, and operated as a unit. Such centers have exten sive common parking f a c i l i t i e s and are related in location, size, and type of stores to the sur rounding area, generally a suburban area. 20. Discount House: A r e t a i l establishment whose key policy is to s e l l nationally advertised consumer goods consistently at substantial discounts from customary or l i s t prices; also handles private and other brands. Generally gives limited service and enjoys a high turnover at a low dollar markup per unit of sale. 25. Supermarket: A departmentized (sic) r e t a i l self-service food store having at least four basic food depart ments - grocery, meat, produce, and dairy - as well as other departments, and having an annual sales volume of at least $375,000. This figure i s an arbitrary one generally accepted in the trade. 9'Report of the Definitions Committee" American Marketing Association, Journal of Marketing (October 1948, Vol. XIII, No. 2), pp. 205-217. 13 41. Goods, Hard: Chiefly refers to household furniture and equipment, metal housewares, etc. 42. Goods, Dry: Chiefly refers to household textiles and clothing. Dry Goods: Both B r i t i s h and Swedish custom i s to refer to "dry goods" for a l l commodities such as textiles, household goods and furniture. 55. Automatic Merchandising: Selling consumer goods or services through coin-operated vending machines. 58. Self-selection: The customer selects and removes merchandise from open displays and then engages a salesperson. 59. Self-service: The customer completes a self-selection transaction at a checkout counter, rather than through a salesperson. 79. Loss Leaders: Items which a dealer sells at very low prices, sometimes below cost, in order to increase store t r a f f i c . The dealer hopes the people who come to buy the low-priced items w i l l buy enough other goods to make up for the loss he suffers on the leaders.10 Multiples: Synonymous with "Chain". 1 1 Vertical Integration: That type of organization that comes into existence when two or more successive stages of production and/or distribution of a product are combined under the same control. 1^ 10 Business and Defense Services Administration, Selected  United States Marketing Terms and Definitions: United States Department of Commerce, Washington: Government Printing Office, 1950. Numbers preceding paragraphs indicate the location in the publication. 11 Nicholas A. H. Stacey and Aubrey Wilson, The Changing  Pattern of Distribution (London: Business Publications Limited, 1958), p. 142. 12 Robert H. Cole et a l . , Vertical Integration in Marketing. (Urbana, I l l i n o i s : University of I l l i n o i s , 1952), p. 99. 14 S p e c i f i c Co-operative Terminology Over a considerable hi s t o r y extending back to 1844 a number of sp e c i a l terms and relationships have become common usage i n the co-operative movement. Some of these may have a s i m i l a r i t y to others used i n common terminology but wide differences are apparent upon examination. The most common reference i n co-operative writings i s to the so-called Rochdale P r i n c i p l e s . The Rochdale Equitable Pioneers Society was organized i n 1844 and the rules and p o l i  c ies of t h i s society led to the formulation of a set of p r i n c i  ples and practices that are common to co-operative s o c i e t i e s throughout the world. These p r i n c i p l e s were not unique as some of them had been used by other mutual assistance groups at e a r l i e r dates. The contribution of the Rochdale Pioneers was i n the combination of p r i n c i p l e s and also t h e i r success i n putting them into p r a c t i c e . A s p e c i a l committee set up to define those p r i n c i p l e s submitted to the Paris Congress of 1937 a recommenda t i o n that observance of the following four p r i n c i p l e s (because they determined the Co-operative character of an organization) should decide whether an organi zation could be admitted to membership i n the A l l i a n c e - open membership; democratic control; d i s  t r i b u t i o n of the surplus to the members i n proportion to t h e i r transactions; and l i m i t e d i n t e r e s t on c a p i t a l . In the Committee's opinion, the remaining three Rochdale p r i n c i p l e s - p o l i t i c a l and r e l i g i o u s neutra l i t y , cash trading, and promotion of education - while undoubtedly part of the o r i g i n a l Rochdale system - should not be a condition for membership of 15 the International Co-operative Alliance. The Rochdale Principles or, more particularly, the four that are designated by the International Co-operative Alliance, an international grouping of national co-operative bodies, embody two particular principles that have caused much discus sion. The principle of rebate of surplus based on patronage and the limited interest on capital are radical departures from the normal capital acquisitive relationship with regard to surpluses or profits gained by an enterprise. Patronage Refund: that portion of the original price paid to the member as a rebate from surpluses created by the association. Also referred to as "patronage rebate" and in the United Kingdom as "patronage dividend" ( d i v i ) . Producer Co-operative: also referred to as marketing co operatives which assemble, grade, process or s e l l various commodities, usually farm and fi s h , for their members. Surpluses are returned to members on the volume and grade of produce marketed. In other areas, particularly Great Britain, pro ducer co-operatives refer to ownership of produc tive resources by the workers on a co-operative basis• Consumer Co-operatives: A consumers' co-operative is usually incorporated for the main purpose of buying goods for sale at r e t a i l to i t s members and patrons.^ Service Co-operatives: co-operatives engaged in providing services to members in such fields as savings 13 Thorsten Odhe, Co-operation in World Economy (London: International Co-operative Alliance, 1955), p. 8. Also see Sec. II: Membership Art i c l e 8, E l i g i b i l i t y . Rules and standing orders of the International Co-operative Alliance. 14 W. B. Francis, Canadian Co-operative Law (Toronto: The Carswell Company Limited, 1959), p. 11. 16 and loans (credit unions), insurance, transport, electric power, housing. Single co-operative associations, of course, frequently combine the functions of two or more of the types i n  cluded in the above analysis. Associations formed for the sale of farm produce frequently go into the purchase of farm supplies and even into the operation of a con sumers' co-operative store.15 Share Capital: does not carry the same connotation as in corporate finance. It represents, in most cases, a nominal amount with larger sums of membership equity carried in Loan Capital, revolving capital or other evidences of ownership. Board of Directors: elected by the members, each member having only one vote, proxy voting i s not permitted. The directors of the association, elected at the general meeting, are given wide powers of direction and supervision over management. Nonetheless, their decision as to the distribution of the annual surplus of the association i s subject to the terms of the statutes and by-laws and where these leave some discretion, the actions of the directors are subject to the approval of the general meeting. 1" Two important distinctions between private corporations and co-operatives i s the limitation of voting to one vote per member regardless of share holdings, and no proxy voting. The second i s that the distribution of surplus i s determined by the members rather than the directors in contrast to corporations, where distribution of dividends i s determined by the directors. 15 Canada. Royal Commission on Co-operatives. Report, (Ottawa: Queen's Printer, 1945). p. 76. 16 Ibid., p. 24. Education: d i f f i c u l t y arises i n attempting to define "educa t i o n " as set f o r t h by co-operative w r i t e r s . I t i s not synonymous with "promotion" or "adver t i s i n g " , though i t contains both elements to a great degree. Funds expended may include mem bership information, s t a f f t r a i n i n g , advertising, and, more p a r t i c u l a r l y , material on co-operative p r i n c i p l e s and p r a c t i c e s . 18 CHAPTER II RETAIL MERCHANDISING CHANGES Socio-Economic and Demographic Changes A study of r e t a i l merchandising changes can only have relevance when socio-economic and demographic changes are also considered. Alterations in urbanization, l i v i n g habits, income levels, and mobility have had an impact on retailing. The growth of mass media in the form of newspapers, magazines, radio and more recently, television have influenced the sale of goods. These influences coupled with improved means of transportation have completely revised the concepts of those engaged in the distributive trades. Increased efficiencies in production have also placed the burden of disposal of products on the distributive sector. Urbanization Rapid advances in agriculture have made farming a sector of the economy with high productivity. The increased use of automated machinery, new procedures and improved seed strains make i t possible to raise more farm products with less workers. During the period 1946-1960, 511,000 workers were withdrawn from farm employment1 yet farm production, particularly in 1 S t a t i s t i c a l Summary Supplement 1960 (Ottawa: Bank of Canada), p. 132. 19 grains, increased. The l a t e s t Dominion Bureau of S t a t i s t i c s figures, taken from the 1961 Census of Population, show that 28 predominantly r u r a l census d i v i s i o n s i n six provinces showed population decreases, while many others made only s l i g h t gains. In contrast eight census d i v i s i o n s embracing the urban areas of Montreal Island, Toronto, Vancouver, Winnipeg, Calgary, Ottawa and Quebec accounted for h a l f of the 2,157,456 popula- 2 t i o n increase i n Canada between 1956 and 1961. This increased urbanization i s not evenly spread within the metropolitan areas. The increase i n the size of the suburbs has resulted i n a s h i f t from the downtown areas as prime busi ness s i t e s to more l o c a l i z e d shopping areas i n the periphery of the older urban core. Between 1951 and 1956 population i n f i f  teen metropolitan areas increased by 19.3% but the c i t y areas 3 proper increased only 9% while the fringe areas grew by 41.7%. The o v e r a l l s h i f t i n population has obviously resulted i n 4 changes i n the location and types of r e t a i l establishments. 2 The Province (Vancouver), March 24, 1962, p. 9. 3 Canada 1961. Dominion Bureau of S t a t i s t i c s (Ottawa: Queen's P r i n t e r ) , p. 38. 4 Canada. Royal Commission on Price Spreads of Food Products. Report. V o l . 2 (Ottawa: Queen's P r i n t e r , 1959), p. 42. The c i t y proper showed a s l i g h t increase i n population between 1941 and 1951., but population declined i n subsequent years to about the same number as i n 1941. The population of the inner suburbs rose at a rapid rate between 1941 and 1951; the rate of increase de c l i n e d a f t e r 1951, however. The most spectacular change took place i n the outer suburbs which saw t h e i r population r i s e from 57,000 i n 1941 to 196,000 i n 1951, to 413,000 i n 1956. 20 Income le v e l s Despite substantial increases i n prices over the post war period, income le v e l s have more than o f f s e t p r i c e increases and l e f t more discretionary income i n the hands of the consumer. The proportion of food expenditures i n staple goods tends to be i n e l a s t i c and satiable and has resulted i n a trend towards increased expenditures on services. Average hourly earnings i n manufacturing i n Canada increased from $0.71 i n 1947 to $1.78 i n 1960 with a reduction i n the average hours per week worked from 42.7 to 40.4. ' Rising disposable income l e v e l s are indicated by the t o t a l r e t a i l trade which grew from $8,532 b i l l i o n i n 1949 to $16,414 b i l l i o n i n I960. 5 Age l e v e l s D i s t r i b u t i o n of age groups has changed s u b s t a n t i a l l y over the past decade. Low infant mortality and a high b i r t h r a t e have added a m i l l i o n children to the age group under 15 years between 1951-56 and r a i s e d the proportion of t h i s group from 30.3 per cent of the population to 32.4 per cent during the five-year i n t e r v a l . The income-producing group from 15 to 64 years of age was 2 per cent lower and would have been considerably lower i f the i n f l u x of immigrants had not been so strong between 1951 and 1956. 6 5 S t a t i s t i c a l Summary Supplement 1960. op. c i t . , p. 137. 6 Canada, Bureau of S t a t i s t i c s , Canada Year Book 1961 (Ottawa: Queen's P r i n t e r , 1961), p. 160. This change in age groupings has significance for mer chandisers in terms of lines of goods, av a i l a b i l i t y of outlets and promotional approaches. Influx of married women in industry The large increases in number of married women gainfully employed is of particular significance to the retailer. In many cases women are attempting to carry out two functions, that of wage-earner and also housekeeper. This trend has had some effect on shopping habits in terms of desirable hours for purchases and also in the degree of pre-preparation of food by the processor and reta i l e r . Not a l l women in the labor force are working due to necessity but in many cases to augment the income of the husband. The rise in importance of the service industries has presented a labor market for many low skill e d groups of workers. The general desire to improve l i v i n g standards, as reflected in the growing number of women at work, has coincided with a great increase in the kind of jobs that attract women.... It is in the service indus- ^ tries that the great majority of women are employed. Two important effects arise out of the large number of gainfully employed females. One centers around the structural changes in merchandising methods that rise from changes in 7 "Are There Too Many Women in the Labor Force?" Canadian  Business, 34 (June 1961), p. 45. 22 shopping habits due to employment and the second arises from the release of more consumption dollars. I f , as i s stated above, much of the wages of employed females (married) i s tied in with a general desire to improve li v i n g standards then i t would be a f a i r l y safe assumption that these earnings are reentering the economy rather rapidly. A second monetary effect i s that while unemployment has been very heavy in male jobs, female unemployment has not been as severe and in many cases i s probably adding considerably to consumption spending even when the major wage earner i s not employed. Transfer payments The retailer must consider another important change in the economic climate in Canada that has direct bearing on his a b i l i t y to move goods out of his establishment. Transfer payments to the public in the form of Old Age Assistance, Family Allowance, various governmental assistance projects, have built a great deal of cushioning into the economy. The existence of Unemployment Insurance as well as private pension plans has done much to mitigate the d i f f i c u l t i e s of the recessions of 1958 and 1960 and provide a base for consump tion expenditures of a minimal nature. Personal expenditures on consumer goods and services over the twelve-year period 1949-1960 increased from $10,923 million to $23,409 million i n a relatively consistent manner over the period. In terms 23 of constant 1949 dollars the increase was from $10,923 million to $17,774 m i l l i o n . 8 Non-durable and service goods show a consistent pattern of increased expenditures while durable goods tend to fluctuate with economic conditions, due in part, no doubt, to the i n f l u  ence of automobile sales. Transfer payments during the same twelve-year period rose from $971 million in 1949 to $3,156 million in 1960, equivalent to 16% of totals received for wages, salaries and q supplementary labor income. Mobility Since World War II Canadian citizens have been on the move. Urbanization, as has been demonstrated earlier in this chapter, has contributed to large movements from the farm to the ci t y . Within metropolitan areas there has been wide dispersal to the environs of the city proper. The opening of new resources has caused the Canadian to move to new job opportunities. This a b i l i t y to move about is more striking in terms of the number of registered motor vehicles and the paved roads available for movement. Since 1947 the number of motor vehicles registered 8 S t a t i s t i c a l Summary 1960. O P . c i t . . pp. 124-125. 9 Ibid.. pp. 126-127. 24 has risen from 1,836,959 to 5,017,686 in 1959. 1 0 Canadian governmental expenditures on roads and highways i s continually r i s i n g in an attempt to satisfy the lure of the automobile and i t s a b i l i t y to move people further and further from their places of work to their residences. Urban mileage of roadways 11 was 37,614 miles in 1959, of which 19,245 miles were paved. Roads of a l l types in Canada total 420,000 miles with 42,000 miles of paved roads and an additional 200,000 miles of gravel surface.^ The mobility of the Canadian and, perhaps to a greater extent, the American, has had several important effects upon merchandising in North America. One i s the need to accommodate a large number of automobiles in close proximity to the selling point. Not only is parking a problem but reasonable access to shopping areas must be provided in terms of speed and convenience. Secondly, the need to concentrate in downtown areas, readily accessible to rapid transit, i s no longer too important. The construction of stores with large parking areas, drawing from much wider regions, is a phenomenon very prevalent today. 10 Canada Year Book 1961. op_. c i t . . p. 803. 11 Ibid.. p. 803. 12.Ibid., p. 799. 25 Summary Basic socio-economic and demographic changes have had a strong bearing on the retailer and the distributive trades in general. Increased urbanization is drawing more people to the larger centres of population, further accentuating the problem of d i s t r i  bution to decreasing numbers of persons in rural surroundings. Even within the metropolitan areas the shift has not been to the ci t i e s proper but to the surrounding suburbia. Increased incomes with increased leisure is changing the pattern of spending. The introduction of married women to the labour force in ever-increasing numbers is providing markets for semi-processed articles that were not considered of interest to the lower- and middle-income groups. The large sums of transfer payments added to income earned by women in the service industries has tended to mitigate some of the more severe effects of unem ployment. Increased mobility on the part of Canadians both in national terms and on the local level has introduced new factors into the distribution of goods and services to Canadians. The next part of this chapter w i l l attempt to assess some of the basic distributive changes that have been made in answer to the challenge of the important changes being made in the Canadian consumer, his likes, dislikes, and apparent needs. It might be noted that changes in patterns of consumption and consumer expenditures are not confined to 26 North America. The Br i t i s h consumer has also gone through a series of relatively rapid changes, particularly after the lapse of rationing and shortages brought about during World War II and afterwards. The move from a conserving to a consuming economy is a trend of considerable importance for Br i t i s h industry and the Brit i s h consumer. This i s a development which w i l l affect not only the home trade but also the export trade.13 Distributive Outlet Changes The response of retailers and other elements in the distributive sector to basic changes in population, income shifts and settlement patterns has been accelerating at a rapid rate. The similarity of conditions in Canada to those of the United States i s quite evident. Changes inaugurated in the United States tend to be accepted shortly afterward in Canada. This acceptance or adaptation can be attributed to the presence of many American firms in Canada and by the close approximation in conditions. Consequently some observa tions on American r e t a i l conditions w i l l be used as well as those that are particularly Canadian. From the earliest Colonial days to the present this country's merchants have been on the move to keep pace with the shifting centers of popu lation, new types of goods, and ever-improving 13 Nicholas Stacey and Aubrey Wilson, The Changing Pattern  of Distribution (London: Business Publications Limited, 1958), p. 117. 27 methods of merchandising. Despite the relative "maturity" of retailing among American industries, i t shows no signs of "settling down" but on the contrary has under way bold programs for change and expansion looking far into the future. 1^ Since the mid-30's the rise of the chain store, supermarket, shopping centre and discount house has caused significant adjustments in the r e t a i l f i e l d . Rising costs of doing business have resulted in attempts to lower costs through the introduction of cost-reducing factors such as larger stores, more self- selection and self-service. The drive to expand sales and become more efficient has had some serious effects for the independent r e t a i l merchants. Chain Stores The chain store or multiple, as i t i s termed in the United Kingdom, has been on the r e t a i l scene for a considerable number of years. The 1951 Census of Distribution defines a r e t a i l chain as an organization operating four or more r e t a i l stores in similar or related kinds of business under the same ownership. The origin of the chain-store system i s commonly dated from 1858, in which year the f i r s t unit of what was to become the Great Atlantic & Pacific Tea Company was established. Many other chains 14 "Merchants on the Move", November 1954 Monthly Letter of the National City Bank of New York, reprinted in Changing  Patterns in Retailing. J . W. Wingate and A. Corbin (eds.) (Homewood, 111.: Richard D. Irwin, Inc., 1956), p. 2. 28 were established before 1900 and had shown a f a i r rate of growth by that time." F. W. Woolworth had a number of stores operating under his control by the turn of the century. Not only did his system involve the concept of the chain store but also the idea of selling a large variety of goods at one fixed price. By 1919 16 his company was operating more than a thousand stores. The presence of chain stores in a wide variety of products is evident throughout Canada. The variety chains are dominated by F. W. Woolworth Co. Ltd., S. S. Kresge Co. Ltd., Metropolitan Stores Ltd. and Zeller's Ltd. Numerous shoe stores are run by the Agnew-Surpass group. Men's clothing under the Tip Top label i s available from a chain of stores operated by the parent company, Tip Top Tailors Ltd. Singer Sewing Machine Co. determined early in i t s history to r e t a i l through a chain of stores in various populated centers. The major department store organizations, unlike many of their American counterparts, operate chains of stores across Canada. Order offices of The T. Eaton Co. Canada Ltd. and Simpson-Sears Ltd. are a variation of the mail order business but also handled in a 15 Edward Bower, "Marketing", Encyclopedia Brittanica (15th ed.), XIV, 918. 16 "F. W. Woolworth", Encyclopedia Brittanica (15th ed.), XXXIII, 736. 29 chain fashion. Voluntary chains of independent r e t a i l e r s have also been organized but i n most cases the independent members do not f i t the q u a l i f i c a t i o n l i s t e d for a chain under the 1951 Census of D i s t r i b u t i o n . Undoubtedly, however, chain store operations have been applied i n t h e i r greatest concentration to the r e t a i l grocery trade. The e f f i c i e n c i e s possible i n food d i s t r i b u t i o n are most important i n a f i e l d where margins tend to be lower than i n the durable goods industry. The high degree of handling of numerous low-price products presented p o s s i b i l i t i e s of improvements through chain store operations that were not as possible i n other l i n e s . R e t a i l chain stores of a l l types increased t h e i r number of outlets from 7,846 i n 1951 to 9,491 i n 1959 or 21 per cent, while sales grew from $1,775,744,000 to $3,280,263,000 or 85 per c e n t . 1 7 Based on t o t a l r e t a i l sales i n 1959 of $16,283 m i l l i o n t h i s would be 20.1 per cent of a l l r e t a i l sales i n Canada. Corporate chains i n food products increased t h e i r proportion of sales from 32 per cent i n 1951 to 44 per cent i n 1958. 1 8 17 Canada Year Book 1961. op. c i t . , p. 888. 18 Canada. Royal Commission on Price Spreads of Food Products. Report. V o l . 2 (Ottawa: Queen's P r i n t e r , 1959), p. 35. 30 Centralized management, large scale purchasing and the use of area-wide promotion and advertising gives the chain store an advantage in the market place. The f l e x i b i l i t y of the corporate chain organization to changing patterns in population, income levels and shifts in demand is not quite as high as some independent operators. Numerous studies and projections are made in anticipation of changes resulting in the growth of outlets and proper location. In the year 1949 a large Canadian grocery chain closed 29 units and opened 13. The owners of these stores are aware that their customers are always on the move, and what was a hundred per cent location twenty years ago i s not nearly as good today, while what is farmland at present can become a flourishing shopping centre in ten years.^ The financial a b i l i t y of the large chain in terms of capitalization of new outlets and willingness to accept tempo rary losses in anticipation of future gains i s of distinct advantage. Innovation of cost reducing methods i s possible where large volumes of goods are being handled. However, the question of increased efficiencies related to large scale operations had been challenged in several quarters. The costs of distribution have not decreased in any appreciable fashion, at least in terms of prices to the consumer. A study 19 Harold Shaffer, How to Be a Successful Retailer in Canada (Toronto: McGraw-Hill Co. of Canada Ltd., 1961), p. 228. 31 conducted by a Royal Commission as late as 1958 concluded that the optimum size of operations had long been reached, at least in food sales. We do not have any evidence on which to conclude that the large Canadian food chains have increased the efficiency of their operations as a result of their expansion over recent years. In our opinion, i t i s unlikely that the large chain organizations need to operate at their present size in order to obtain the f u l l advan tages of economies of scale. 0 The Twentieth Century Foundation, in a study conducted in 1939, concluded that costs of distribution were excessive, in particular those related to advertising and duplication 21 of services and promotion. * The efficiencies of chain store operations have been challenged by independents once the independents have arrived at an optimum size. While the chains have coordination in the use made of assets and outlets, the American experience was that chains tended to move more slowly in changes while independents moved into areas like 22 supermarkets more quickly than chains. Shaffer claims the strength of the chains l i e s in their a b i l i t y to plan and 20 Canada. Royal Commission on Price Spreads of Food Products. op_. c i t . . Vol. 2, p. 59. 21 Does Distribution Cost Too Much? (New York: The Twentieth Century Fund, 1939). 22 John Wingate and Arnold Corbin, Changing Patterns in  Retailing (Homewood, 111.: Richard D. Irwin, Inc., 1956), p. 71 32 control their resources and locations; their staff are highly developed merchandisers and exhibit a constant drive for more efficiency* However, the very size of chains creates i n f l e x i b i l i t y , relations with customers are not as personal as those with the independent owner, and most of their locations are 100 per cent locations requiring the optimum use of f a c i  n g 23 l i t i e s . The development of chain operations has resulted in the extension of purchases by chains in bulk or the use of their own wholesale outlets and ultimately to processing of materials. These attempts w i l l be explored in more detail in the following chapter. The majority of chains, both corporate and voluntary, are operators of supermarkets. Supermarkets Supermarkets were introduced to the North American r e t a i l trade during the depression ' 30's and vi r t u a l l y revolutionized the r e t a i l food distribution picture. The supermarket i s characterized by a large store, complete self-service and low prices. Originally stores were simple, with no services provided except adequate parking. It has reduced the expenses of r e t a i l food distribution about one-third; i t has greatly increased the size of the average amount purchased at one time by customers; i t has magnified the importance of preselling the 23 Shaffer, op_. c i t . . pp. 377-378. customer on s p e c i f i c brands; i t has greatly increased the amount of impulse buying as d i s t i n c t from planned shopping-list buying; and i t has l e d to the develop ment of mammoth supermarkets that have l a r g e l y replaced the neighborhood g r o c e r y . ^ The c h a r a c t e r i s t i c s of the supermarket i n s i z e , depart- 25 raentalization and s e l f - s e r v i c e were i n i t i a l l y applied to food stores but elements of supermarket operations have been applied to more diverse product groups such as v a r i e t y stores, hardware stores and drug stores. The advantages of supermarket operations have not only accrued to the food chain stores but also to the independent merchant. Some business writers assert that the supermarket p r i n c i p l e has enabled the large independent store to compete with the chains due to large 26 volumes handled by single stores. Independents, by i n t e  grating into voluntary chains, can place themselves i n a more competitive p o s i t i o n r e l a t i v e to the food chains with t h e i r integrated operations. The supermarket food store represents an adaptation both i n methods used and i n the physical environ ment of the store i t s e l f to changed conditions i n the Canadian consumer demand fo r food. But the food supermarket adaptation has been only a part of 24 John Wingate, op_. c i t . . p. 72. 25 See Chapter 1, p. 12. 26 Wingate, op_. c i t . , p. 79. 34 a general re-designing process in the whole f i e l d of r e t a i l marketing. The changing conditions of consumer demand, and the changes they bring about in the r e t a i l marketing structure, comprise a series of interrelated developments, varied in their effects upon the different types of r e t a i l and service establishments and organizations.27 The point of supermarket saturation is a matter of concern to the trade as the a b i l i t y of the stores to capture trade runs into the relatively constant proportion of disposable income spent on food and a l l i e d products. The search for sales and higher margins has resulted in food stores entering into soft goods, housewares, magazines and drugs. This has led to a phenomenon known as "scrambled merchan dising" with retailers of other products entering into food 28 sales. One-stop shopping has bean a common idea as a number of department stores have operated food floors for a number of years. While the supermarket principle has been applied to stores in central locations in city centres i t has reached i t s ultimate usage in the development known as a shopping centre. Shopping Centres Shopping centres would have been an impossibility during the early portions of the century. While the prototypes of 27 Canada. Royal Commission on Price Spreads of Food Products. op. c i t . . Vol. 2, p. 40. 28 John Wingate, op_. c i t . , p. 74. 35 the shopping centre appeared shortly before World War I I , the advent of the universal use of automobiles, growth of suburbs, adequate connecting roads and downtown congestion were required to bring the shopping centre into f u l l operation. The important socio-economic and demographic changes out l i n e d i n the f i r s t portion of t h i s chapter have contributed to the success of the shopping centre. One of these changes was the movement of the upper income groups to the periphery of metropolitan areas; another, the distance to the downtown area and attendant parking problems required a location nearer to the markets, also, the aggressive promotion of r e a l estate developers who desired shopping f a c i l i t i e s close to housing developments. However, one factor i n the acceptance of the shopping centre was the provision of adequate parking space. The desire of the customer to be able to drive up to the store and drive away with h i s or her purchases i s an accepted fact i n modern l i v i n g . By providing large parking areas with convenience of entrance and egress as well as modern shops, the shopping centre was able to c a p i t a l i z e on the use of the family automobile. While the majority of shopping centres are located i n more outlying areas a number are located i n built-up sections of the c i t i e s . Two examples would be the Oakridge Shopping Centre i n Vancouver and the Dartmouth Shopping Centre i n Dartmouth, which c a p i t a l i z e s on i t s location at the entrance 36 to the Angus L. MacDonald Bridge to Halifax. Easy access and adequate parking are of paramount importance to a l l stores nowadays, but most important to the shopping centre. By definition the shopping centre consists of a number 29 of shops of various types. Basic to any shopping centre is a supermarket food store, either chain or independent. A number of large department stores have attempted to retain and expand sales by installation of f a c i l i t i e s in shopping centres. The T. Eaton Company Canada Ltd., Simpsons-Sears Ltd. and Woodward Stores Ltd. are examples in the Vancouver area of this trend, while in Montreal, the Henry Morgan Co. Ltd. has opened several branches in suburban shopping centres. The growth of shopping centres i s liable to bring about several problems. The proliferation of centres is proceeding rapidly and may reach a saturation point in the not-too-distant future. Recent surveys show that approximately 1,000 planned shopping centres w i l l open in North America in 1961. By the end of this year, there w i l l be 5,500 shopping centres in the United States and Canada.30 Al l i e d with the growing number of primary shopping centres, which term could be applied to centres with anywhere from five 29 See Chapter I, p. 12. 30 E. R. Loftus, "Trends in Shopping Centres", Western  Business and Industry, XXXV (June 1961), p. 22. 37 or more stores, is the development of what are termed regional shopping centres. Regional shopping centres would be those with complete product outlets including department stores and highly competitive with the primary r e t a i l trading area of a metropolitan community. The expansion of shopping centres presents a new dimension in retailing, with a number of problems. While catering to an expanding population and a sprawling suburbia the retention of customer loyalty or patronage presents d i f f i c u l t i e s . The mobility of the customer does not require his using a conveniently located centre; he can and often does move on to another centre down the road simply and conveniently. The i n i t i a l opening of a centre w i l l attract widespread interest but the centre must attract customers in sufficient volume to cover costs and must draw them in many cases from the "downtown" stores or other shopping centres. Pressure on profits i s f e l t in the promotional costs required to attract customers and cost of high rentals. Building costs have risen and are reflected in rentals to the merchants. A second major factor i s the response of the merchants in downtown locations. Not w i l l i n g to lose trade to the shopping centres, the downtown merchants have begun to retaliate. In many areas the response has taken the tack of construction of parking arcades, price differentials, more self-selection and self-service. Probably the most interesting development 38 has been the construction of "Shopping Malls" i n the downtown areas. Blocks of streets are closed to vehicular t r a f f i c , with the streets being turned into pedestrian arcades and made a t t r a c t i v e with flowers, benches and fountains. The f i r s t such r e h a b i l i t a t i o n i n Canada was the Sparks Street Mall i n Ottawa, and the idea i s spreading to other areas. Downtown plazas or malls are i n operation i n such areas as London, 31 Ontario and Rochester, N.Y. The deterioration of the p o s i t i o n of downtown merchants i s of great concern to c i v i c a u t h o r i t i e s , who view with alarm tax losses due to movement of r e t a i l tradesmen to locations outside the c i t y l i m i t s . Discount Houses The emergence of the discount house i s a change that has aroused great inte r e s t i n the past few years. The develop ment of a new idea i n the United States, to be l a t e r transferred to Canada, i s a f a m i l i a r pattern i n r e t a i l i n g and i t i s once again evident i n the case of the discount house. The entry of discount houses into the Canadian market, however, faced two important differences r e l a t i v e to the r e t a i l s i t u a t i o n i n the United States. The f i r s t difference was the lack of resale p r i c e maintenance or F a i r Trade prices i n Canada, which were prevalent i n the United States. The second difference 31 Time. LXXIX, No. 16 ( A p r i l 20, 1962), p. 52. 39 was that the sale of durables was substantially in the hands of department store chains. Department store operations are some what different in Canada to those in the United States due to the dominant position of department store chains in Canadian retailing. Resale price maintenance The Combines Investigation Act in Canada expressly forbids 32 resale price maintenance. This is contrary to the position in the United States, where Fair Trade laws are enacted in a number of states. The attack on Fair Trade was a logical step for the discount store which saw the margins of the traditional merchants protected by Fair Trade prices. The discounter relies on lower markups and less services to the customer including a great degree of self-selection and self-service. Discounters gambled by basing their operations on low markups and on the value of pre-sold merchan dise. They stocked only well-advertised and branded goods, so that the customers knew every discount but the onus of merchandise satisfaction was placed directly on the manufacturer.33 The pressure of the discount store has weakened the Fair Trade position of manufacturers of consumer goods in the United States, particularly since the discounters have become a 32 Canada. Combines Investigation Act. R.S.C. 1952 C.314; as amended, 1953-54 C.51; 1960 C.45; S.34. 33 Shaffer, op_. c i t . . p. 108. 40 strong factor in the distributive trade in that country. Department stores A major difference between Canada and the United States i s in the department store area. Canadian department store sales have been dominated by two large organizations which have operated a series of chain stores for a number of years. The T. Eaton Co. Canada Ltd. operates sixty-two main and 34 branch stores in a l l ten provinces. Robert Simpson Limited and Simpsons-Sears Ltd., while separate entities, between them cover 11 metropolitan areas in Canada. Two large regional groups, Hudson's Bay Company Limited and Henry Morgan & Co. Ltd., 35 have joined forces and there are several other large regional stores, such as Woodward Stores Ltd. in Vancouver and Dupuis Freres Limited in Montreal. In effect, a handful of companies dominate the department store trade in Canada in contrast to a relatively large number of independent department stores in the United States. While W. T. Grant Co., J. C. Penney Co., Sears-Roebuck & Co. and Montgomery-Ward & Co. operate chains of department stores, there are numerous independents such as R. H. Macy and Company and Gimbel Bros, in New York, William 34 Mary-Etta Macpherson, "The Eatons: Shopkeepers for a Nation", Chatelaine. Vol. 35, No. 6 (June 1962), p. 28. 35 Financial Post. December 17, 1960, p. 10. 41 Filene & Sons and Jordon-Marsh Co. In Boston, Marshall Field & Co. in Chicago and Neiman-Marcus Co. in Dallas. The T. Eaton Co. Canada Ltd. and Simpsons-Sears Ltd. also operate mail order houses which tend to support the operations of the department stores. Locations The number of market areas in Canada in which discount operations could be supported on a large scale i s limited to considerably fewer locations than in the United States. Types Two types of discount operations are functioning in the United States and their counterparts may be found in Canada. One method i s the "Closed Door" store in which "membership" cards are purchased at a cost of $2.00 or $3.00. Currently 36 one such type of discounter i s operating in Vancouver. The second method is by "Open Door" or public selling which is characterized by a group of discount stores which i s currently 37 operating in Ontario. The challenge of the discount store to traditional methods 36 Hamilton Harvey and Son Limited requires payment of a $2.00 membership fee in order to be able to enter their store and purchase goods. 37 The Towers Marts of Canada stores in suburban Toronto are open to the public without any membership requirement. 42 of re t a i l i n g i s not limited to hard goods or any specified group of products. While the major emphasis was placed on appliances, discount operations have been extended to drugs, sporting goods, automotive supplies and food. The Towers organization, which i s a prominent promoter of discount stores, describes a typical Towers store in the following manner. Area: 100,000 square feet. "The most economic operating size." Cost: Land and buildings - $1,000,000 exclusive of a food outlet. Parking: Space for a minimum of 1,000 cars. Projected Volume: $7-8 million. Promotion: About 3 per cent of gross sales. Outlets: About 14 concessionaries with central check-out, food outlet, automotive centre and gasoline outlet.38 According to Fulton, discounters have set a volume target 39 for 1963 of $600 million a year. The growth of discount stores has had two important effects on traditional methods of merchandising. The f i r s t was an impact on margins. With high-volume, minimum service and low wage cost per sale, discount stores are able to operate on margins substantially below those offered by "traditional" merchants. The second effect was the wider use of large 38 David Fulton, "Revolution in Retail Merchandising", Saturday Night. Vol. 77, No. 1 (January 6, 1962), p. 17. 39 Ibid., p. 16 43 numbers of leased departments or concessions within the store. New chain store organizations of leased departments are in operation.^ Reaction The response of traditional merchandisers has ranged from outright disparagement to development of discount subsi diaries. Margins in department stores have ranged in the vi c i n i t y of 35 to 40 per cent in contrast to 19 to 24 per cent 41 in discount stores. Once discount stores became sufficiently competitive, "legitimate" stores were forced to review their mark-up policies and decide whether to base them on facts or tradition.*"*' The r i s e of the discount house was a reaction to the administered price or Fair Trade policies common in the United States. American retailers used pressure on manufacturers to i n s i s t on Fair Trade prices but the ultimate volume and scope of discounters has made the situation on Fair Trade untenable. While "suggested r e t a i l prices" may be indicated by manufacturers in Canada, resale price maintenance is forbidden 40 E. B. Weiss, "The Coming Era of Giant Leased-Department Chains", pamphlet issued by Doyle, Dane, Bemback, Inc. 41 Wingate, op_. c i t . , p. 112. 42 Shaffer, op_. c i t . . p. 108. 44 by the Combines Investigation Act. Canadian retailers have used private label goods as one way to maintain patronage, through product differentiation and lower prices compared to nationally advertised brands, to meet discount store prices. The ultimate in response has been a gradual move by older established companies in the United States into the discount f i e l d . Food chains such as Grand Union Co. and The Kroger Company and variety chains like F. W. Woolworth and S. S. Kresge are involved in discount stores. The latest move into discount stores in the United States includes W. T. Grant Co., Walgreen Drug Co. and the Great Atlantic and Pacific 43 Tea Co. Summary The rapid changes that have taken place during the post war period came about due to two major factors. The f i r s t factor was related to the socio-economic and demographic changes that brought numerous changes in l i v i n g standards, discretionary spending, and attendant changes related to consumer demand. The second was the changeover from a period of shortages brought about the Second World War to a period of surplus production and more d i f f i c u l t y in creating the demand 43 Time. LXXIX, No. 13 (March 30, 1962) 45 for the consumption of the surplus production. Associated with a more resistant buyer were ris i n g costs of merchandising that required cost saving innovations in distribution. Some of the socio-economic and demographic changes were concerned with urbanization, particularly in the suburbs on the outskirts of the main metropolitan centres, ri s i n g income levels, influx of married women into industry, wage floors or income floors created by transfer payments, and increased mobility of the Canadian consumer. Distribution changes in response to the new socio-economic and demographic conditions gave rise to the importance of chain stores and the development of the supermarkets. Shopping centres have been devised to answer the need for adequate r e t a i l outlets in suburban areas with a main attraction being their generous parking areas. In effect these are controlled shopping areas somewhat similar to the shopping d i s t r i c t s common in city neighborhoods but organized in a more formal and s c i e n t i f i c manner. The newest phenomenon in the r e t a i l f i e l d i s the discount house, offering goods at discounts on the traditional suggested r e t a i l l i s t prices. While the f u l l impact of discount houses is not yet assessable in Canada, the r e t a i l picture i s changing, particu l a r l y with respect to prices. The trend in many stores i s toward one-stop shopping through an extension of product lines either within a supermarket, department store, or shopping centre. Other trends are apparent in the United States that could conceivably make their appearance in Canada. Some are Sunday opening of stores, more evening openings, and upgrading of discount houses so that the distinction w i l l be rather narrow between discount stores and traditional merchants who have lowered their margins. The possible use of computers and electronic ordering i s another trend that is becoming common. Generally these innovations depend on large volume turnover and i t i s conceivable that they may add to the cost of distribution without any appreciable increased benefit to the consumer. 47 CHAPTER III INTEGRATION Introduction The traditional division of business enterprise into manufacturing or production, wholesaling and retailing, with each sector carried out by separate corporations,has altered a great deal during this century. A trend towards integration of the three sectors i s becoming more apparent each year. Types of Integration Integration of functions may be characterized as v e r t i c a l 1 or horizontal. The ve r t i c a l method may be further classified as "forward" or "backward". "Forward" vertical integration i s the combination of the stages of distribution or production under one control which extends the acquiring firm's operations nearer to the ultimate consumer. "Backward" vertical integra- 2 tion extends control nearer raw material sources. A re t a i l e r in food products may develop a wholesale subsidiary which in turn would operate a food processing 1 See Chapter I, p. 13. 2 Robert H. Cole et a l . , Vertical Integration in Marketing (Urbana, 111.: University of I l l i n o i s , 1952), p. 104. 48 plant and may even complete the process by owning farms or orchards• Horizontal integration i s the extension of the firm into a series of related processes within the same level of activity. The operations of two or more r e t a i l outlets might be carried out by a single company. The chain store 3 i s an example of horizontal integration. One example of horizontal integration in the transportation industry i s the Canadian Pacific Railway Company, which has subsidiaries in a l l types of transportation. Firms may integrate operations both v e r t i c a l l y and horizontally. Integration i s carried out in order to effect economies and increase the competitive position of the firm. The original impetus towards integration can be traced to the efficiencies that were evident in the development of mass production during the Industrial Revolution. Production of goods was "integrated" into the factories instead of being carried out in various small shops. The development of the wholesale business was an integrative procedure. The wholesaler assembled a number of diverse products for distribution to retai l e r s . Consequently the production and distribution of goods became a three-fold 3 David Hamilton, The Consumer in Our Economy (Boston: Houghton M i f f l i n Company, 1962), p. 46. 49 process: manufacturing, wholesaling and retailing. The shortening of the lines of distribution which results from integration i s of concern to those interested in developing economies in distribution. Development The advent of the chain store organization was the main stimulant to ver t i c a l integration. Until then the single r e t a i l establishment was unable to influence to any extent 4 the acti v i t i e s of the wholesalers and manufacturers. However, chain stores began to develop their own warehouses and wholesale divisions or subsidiaries. Thus they could circumvent the wholesalers and were ultimately able to deal directly with the manufacturers, due to large-volume purchases. The best-known example of complete integration in the food f i e l d is found in the Great Atlantic and Pacific Tea Company, which owns a large chain of r e t a i l outlets, wholesale depots, processing plants and has interests in farms, orchards and plantations.^ I n i t i a l l y the company started as a r e t a i l institution and integrated backwards. The operations of the Singer Sewing Machine Company are an example of forward integra tion in that the producing company operates a series of r e t a i l 4 Nicholas A. H. Stacey and Aubrey Wilson, The Changing Pattern of Distribution (London: Business Publications Limited, 1958), p.113. 5 Moody's Industrial Manual (New York: Moody's Investors' Service, 1960), p. 2532. outlets i n many areas of the world. The development of integrated operations gives competitive advantages to the integrated over the non-integrated organizations. A number of devices, exclusive of d i r e c t or subsidiary ownership, may be exercised which r e s u l t i n v e r t i c a l integra t i o n . Independent stores or outlets may be t i e d into contrac t u a l obligations with suppliers i n a manner that r e s u l t s i n a high degree of integration. Automobile dealer franchises, service s t a t i o n licenses and many other such arrangements may confer the benefits of v e r t i c a l integration, to both the manufacturer and the r e t a i l e r . Three factors enable the manufacturers to set terms and require close conformity to uniform practices: 1. the r e l a t i v e l y weak bargaining p o s i t i o n of the r e t a i l e r s with respect to the manufacturer; 2. many manufacturers may finance r e t a i l o utlets; and 3. the importance of the advertising and brand i d e n t i f i  cation of the product.^ The p o s i t i o n of the independent wholesaler i n the d i s t r i  butive system i s threatened from two points. Two forces challenging the existence of the indepen dent wholesaler have gathered momentum during the 6 Moody's I n d u s t r i a l Manual, op. c i t . , p. 1118. 7.Nicholas Stacey, op., c i t . , p. 106. 51 past quarter century. One of these forces has been the desire of manufacturers for greater control over the distribution of their products. The other has been the desire on the part of large r e t a i l organizations for greater economy in the procurement of merchandise.^ Food chain stores particularly are extensively integrated and have made substantial progress in r e t a i l sales in Canada. A l l types of chain stores in Canada in 1960 had $3,441 million of sales compared with $12,971 million r e t a i l sales of indepen dent stores, but in that same year the food chain stores had $1,582 million of sales compared with $1,847 million of sales 9 by independent food stores. Co-operative and Voluntary Chains Independent wholesale societies and retailers have not passively accepted the competition resulting from integration methods adopted by the chain stores. They have recognized the advantages which the chain stores gain by lower prices, improved merchandising techniques, promotional materials, improved layouts. The independent operators have turned to two different methods of integration in seeking to attain similar benefits. These are the co-operative chain and the voluntary chain. 8 Richard M. H i l l , Improving the Competitive Position of  the Independent Wholesaler. Bureau of Business Management Bulletin No. 812 (Urbana, 111.: University of I l l i n o i s , July 1958), p. 9. 9 B. Hamilton (ed.), 1961 Survey of Markets and Business  Year Book (Toronto: Maclean-Hunter Publishing Company Limited, 1961), p. 213. 52 It would appear that a co-operative chain (which i s composed of a retailer-owned wholesale house and independent r e t a i l stores) is closely following a ver t i c a l l y integrated plan of organization, in i t s operation of the wholesaling function and in i t s performance of other merchandising acti v i t i e s on a joint basis. On the other hand, a voluntary chain (which i s composed of an independent wholesaler and independent r e t a i l stores associated with the whole saler for buying, advertising, and other merchandis ing activities) appears to be operating under what would be termed a "quasi-integrated" arrangement. " The voluntary and co-operative chains are also able to develop branded goods that give product differentiation that is closely comparable to the chain store brands though they are not as effective as nationally advertised brands. The importance of the voluntary chains in maintaining the position of the independent merchant can be judged by the fact that voluntary chains control 20 per cent of r e t a i l food sales in Canada. 1 1 The same entrepreneur may use combinations of the chain store method and the voluntary chain to gain the advantages of integration. One large wholesaler in Western Canada controls a number of r e t a i l outlets directly and also functions as a 12 voluntary chain operator with a group of independent retai l e r s . 10 Cole, op_. c i t . . p. 68. 11 Canada. Royal Commission on Price Spreads of Food Products, op. c i t . , p. 37. The Report indicates that Red and White Stores comprises 7 wholesales and 995 stores; Independent Grocers A l l i  ance - 9 wholesales and 656 stores. The Lucky Dollar chain serves 482 stores. An estimated 4,200 stores were members of voluntary chains in 1951. 12 Ibid.. pp. 67-68. 53 Integration by Consumer Go-operatives Br i t i s h consumer co-operatives were pioneers of many types of integration. The f i r s t consumer co-operative was organized in Rochdale in 1844 and by 1863 the f i r s t co-operative wholesale society was organized by the consumer associations. The wholesale society went into the processing f i e l d shortly afterwards in 1873. In their relationship with their supply sources, the Co-operative societies have enjoyed the advantage of at least a limited form of vertical integration for a far longer period than any other form of r e t a i l enterprise.^ A similar development took place in Sweden and in v i r t u a l l y a l l areas where consumer co-operatives have been organized. 1^ The reasons for development of integration by co-operative enterprises arose from three major considerations based on the consumer-oriented philosophy of these co-operatives, that i s 1. desire to extend the co-operative economy into more processes to the ultimate benefit of the consumer-member; 2. the extension into wholesaling and processing as a logical method of guaranteeing quality; and 3. to offset what they regarded as an antagonistic attitude on the part of private suppliers. 13 Stacey, op_. c i t . . p. 51. 14 A more complete outline of co-operative integrative proce dures in Sweden, Great Britain and the United States i s contained in Chapter IV. 54 Types of Integration The methods of integration open to co-operatives have appeared to be limited only by the ingenuity possessed by co-operative leaders within the limits of co-operative princi ples and practical economics. The balancing of these two limitations i s illustrated by the need to maintain control by member-consumers and at the same time to develop economic units of operation. 1 5 Some deviations from pure co-operative principle in this respect arose in Alberta when the Alberta Co-operative Wholesale Association Limited assumed control of twenty-one stores originally organized by the United Farmers of Alberta. This was necessary from an economic point of view but overrode the principle of consumer control temporarily. Sixteen of these stores have been re-organized as consumer-member- owned stores, thus tending to re-establish the balance between philosophy and economics.^ The integration of co-operatives in Canada is substantially similar to integration as represented by a co-operative chain. The co-operative wholesale societies generally are owned by 15 Co-operative Independent Commission Report (Manchester: Co-operative Union Limited, 1958), p. 17. 16 1961 Annual Report. Federated Co-operatives Limited, Saskatoon, p. 7. 17 Interview, Henry Cooperstock, Research Director, Federated Co-operatives Limited, Saskatoon, Sask., May 14, 1962. r e t a i l associations. In some cases, however, producer groups or even i n d i v i d u a l producers are members. In the case of Eastern Co-operative Services Limited, Sydney, Nova Scotia, several consumer-owned r e t a i l stores have been amalgamated into the corporate e n t i t y of the wholesale society, thus con sumers i n that instance are j o i n t owners of the wholesale 18 society with consumer associations. I n t e r p r o v i n c i a l Co-operatives Limited and Canadian Co operative Implements Limited are owned by wholesale co-operative s o c i e t i e s i n several provinces. Thus, integration by co operatives i n Canada i s extended backward to processing and manufacturing. The pattern of integration among co-operatives i s much clearer i n Western Canada than i n Eastern Canada as the pro ducer co-operatives are separately owned and operated by producer-members. In Eastern Canada there i s a blending of the producer and consumer in t e r e s t s i n one organization. The choices facing consumer co-operates i n Canada interested i n integration f a l l into the following categories: 1. amalgamations between consumer associations; 2. use of the services and products of the wholesale society on a voluntary basis; 18 Peoples Co-operative Society Limited, Antigonish, Nova Scotia, was merged with Eastern Co-operative Services, Sydney, Nova Scotia, i n 1960 according to a l e t t e r dated March 12, 1962, signed F. Scammell, Inspector of Co-operatives, Nova Scotia Department of Agriculture and Marketing. 3. management agreements; 4. service functions performed by the wholesale society for consumer associations on a contract basis; 5. ownership of r e t a i l outlets by wholesale s o c i e t i e s with individuals as members of the wholesale society; and 6. j o i n t ownership of common f a c i l i t i e s by the consumer associations and the wholesale society. Consumer co-operatives are faced with increasing competi ti o n from the chain stores and the voluntary groups. Closer integration of co-operative d i s t r i b u t i o n must be developed i f co-operatives are to continue to expand. Because of the co operative p r i n c i p l e s , e f f e c t i v e methods of integration available to private enterprise must be adapted by co-operative leaders before implementation. Economic e f f i c i e n c i e s , however, must be maintained by co-operatives to keep the co-operatives i n a competitive p o s i t i o n . The co-operative sector of the economy i s changing. This i s occurring by reason of: 1. amalgamations; 2. wholesale s o c i e t i e s o f f e r i n g more services; and 3. urbanization of the membership. 19 Management agreements are discussed i n more d e t a i l i n Chapter VI. Summary The production and d i s t r i b u t i o n of consumer goods i s changing from the three functions of manufacturing or proces sing, wholesaling, and r e t a i l i n g to a more integrated system. Integration may be horizontal or v e r t i c a l . V e r t i c a l integra t i o n may be c l a s s i f i e d as either "forward" or"backward", according to whether the firm i s attempting to reach forward to the ultimate consumer or backward to the processing of raw materials. Chain stores have l e d i n integrating t h e i r operations. Independent merchants have used the co-operative chain to maintain t h e i r competitive p o s i t i o n . Voluntary chains operated by wholesalers are the response of the independent wholesalers to the need for v e r t i c a l integration. Consumer co-operatives have used v e r t i c a l integration i n t h e i r development. For a number of years they were leaders i n the f i e l d i n Great B r i t a i n and i n Sweden. The co-operative wholesale s o c i e t i e s are su b s t a n t i a l l y s i m i l a r to a co-operative chain but may have some c h a r a c t e r i s t i c s of a voluntary chain. The co-operatives are moving toward more integration but i n so doing are conscious of the need to maintain the co-operative p r i n c i p l e of democratic cont r o l . 58 CHAPTER IV CO-OPERATIVE RESPONSE TO CHANGE I. INTRODUCTION Rochdale P r i n c i p l e s The co-operative movement subscribes to a set of p r i n c i p l e s and practices commonly c a l l e d the Rochdale P r i n c i p l e s . At l e a s t four of these p r i n c i p l e s must be practised by a co operative society i n order to q u a l i f y as a member of the International Co-operative A l l i a n c e . These p r i n c i p l e s are: open membership, democratic control, d i s t r i b u t i o n of the surplus to members in proportion to t h e i r transactions, and i l i m i t e d i n t e r e s t on c a p i t a l . The remaining three Rochdale p r i n c i p l e s - p o l i t i c a l and r e l i g i o u s n e u t r a l i t y , cash trading, and promotion of education - are not a condition for membership i n the Interna t i o n a l Co-operative A l l i a n c e . Areas Surveyed The development of co-operatives i n Great B r i t a i n and Sweden may provide an i n d i c a t i o n of the a d a p t a b i l i t y of consumer 1 Thorsten Odhe, Co-operation i n World Economy (London: International Co-operative A l l i a n c e , 1955), p. 8. 59 co-operatives to changes i n r e t a i l i n g methods. Co-operative trade i s a s i g n i f i c a n t factor i n the economies of these coun t r i e s . As American economic his t o r y and population dispersion have a number of s i m i l a r i t i e s to Canadian conditions, a summary of the consumer co-operative experience i n the United States i s included i n t h i s chapter. The growth and development of consumer co-operatives i n Great B r i t a i n , Sweden and the United States w i l l be treated i n separate sections. I I . BACKGROUND AND ORIGINS OF CO-OPERATIVES The organization of the Rochdale Equitable Pioneers Society i n 1844 took place during a period of t r a n s i t i o n i n the economic l i f e of the country. The establishment of the society had been preceded by a series of s o c i a l experiments by such s o c i a l reformers as Hobert Owen. The source of co-operation i n the England of the 1840 1s lay i n the hardships of early i n d u s t r i a l i  zation, wage d e f i c i e n c i e s and a poor system of distr i b u t i o n . 2 The organizers of the Rochdale Society did not originate each of the Rochdale p r i n c i p l e s . The p r i n c i p l e s were adapted from a v a r i e t y of mutual associations i n d i f f e r e n t parts of B r i t a i n . The stimulant for organization of co-operatives came 2 Paul Greer, Co-operatives - The B r i t i s h Achievement (New York: Harper and Brothers, 1955), p. 4. 60 from the great emancipatory movements of the Nineteenth Century. The Rochdale Society organizers inaugurated a number of r a d i c a l changes that centered around the protection of the consumer. The Pioneers aimed to do, and they did, the following unusual things: "Supplying the purest provisions they could get; giving f u l l weight and measure." They asked for no c r e d i t nor gave any, and thus discouraged debt among working people.^ The development of business practices based on f a i r weights and unadulterated goods was a departure from the not uncommon practices i n the r e t a i l trade of the period. The f i r s t known Swedish consumer co-operative was organized i n 1850 and i t s membership consisted of farmers and a g r i c u l t u r a l workers. This enterprise c a r r i e d on business for a number of years but had no influence on subsequent co-operative develop ment. 5 Consumer co-operatives did not function e f f e c t i v e l y u n t i l the formation of a co-operative wholesale society i n 1899. Co-operative a c t i v i t y i n the United States had i t s ori g i n s i n combinations of workmen or farmers. Florence Parker claims that there were two co-operatives i n operation as early as 1829 though i t i s generally believed that d i s t r i b u t i v e co-operation 4 James Peter Warbasse, Cooperative Democracy (New York: Harper and Brothers, Fourth E d i t i o n , 1936), p. 28. 5 John Lundberg, In Our Hands (Stockholm: Kooperativa Forbundets Bokforlag, 1957), p. 1. started i n 1845. The development of co-operatives i n the United States centered i n the protective associations that were organized to r e l i e v e the workingman of some of the problems attendant upon i n d u s t r i a l i z a t i o n . A series of serious depressions, p a r t i c u l a r l y i n 1846-1849, gave a stimulant to the organizati< of co-operative buying groups. I I I . BRITISH CONSUMER CO-OPERATIVES Progress and Growth The f i r s t co-operative shop was opened i n Toad Lane, Rochdale on December 21, 1844 with a c a p i t a l of 28 Pounds of which 14 Pounds was invested i n a stock of oatmeal, f l o u r , butter and sugar. 7 The success of the Rochdale co-operative society encou raged workers i n other towns i n Great B r i t a i n to organize stores i n t h e i r communities. The Co-operative wholesale Society was organized i n 1863 and opened i t s f i r s t f a c t o r i e s i n 1873-74 for the manufacture of b i s c u i t s and boots. Co operative associations i n Scotland were also organized and progressed to the point that they organized the Scottish 6 Florence E. Parker, The F i r s t 125 Years (Chicago: The Cooperative League of the U. S. A., 1956), p. 3. 7 Warbasse, op_. c i t . . p. 27. Co-operative Wholesale Society i n 1868. B r i t i s h consumer co-operatives grew r a p i d l y i n numbers and membership and increased the co-operative share of t o t a l r e t a i l trade. By 1900 co-operative r e t a i l trade represented 3.1 per cent q of the t o t a l expenditures on goods and services. Membership t o t a l l e d 1,793,000 i n 1,438 s o c i e t i e s by 1901. 1 0 The growth of the consumer co-operative share of r e t a i l trade i n Great B r i t a i n increased from 6.0 per cent i n 1904 to 11.5 per cent i n 1956. 1 1 Formation of the Co-operative Union A congress of co-operative s o c i e t i e s was held i n London i n 1869. The deliberations of the delegates l e d to the forma t i o n of the Co-operative Union. The Co-operative Union i s a federation of co-operative s o c i e t i e s of a l l types. The Co-operative Union operates departments concerned with 8 Nicholas Stacey and Aubrey Wilson, The Changing Patterns of D i s t r i b u t i o n (London: Business Publications Limited, 1958), p. 80. 9 Co-operative Independent Commission Report (Manchester: Co-operative Union Ltd., 1958), Table 1, p. 2. 10 "Co-operative S t a t i s t i c s " , Co-operative Congress, Report (Manchester: Co-operative Union Ltd., 1961), p. 5. 11 Co-operative Independent Commission, Report, op. c i t . . Table 2, p. 3. 63 co-operative education, propaganda, research, and advisory s e r v i c e s . 1 ^ P o l i t i c a l n e u t r a l i t y had been maintained by the co-opera t i v e movement u n t i l 1919. At that time The Co-operative Party was organized and a number of candidates were elected to Parliament.I 3 The Co-operative Party has never had a large representation i n Parliament. The membership of B r i t i s h co-operatives consists, i n the main, of workers who have supported The Labor Party rather than The Co-operative Party. Co-operative production A steady succession of new productive f a c i l i t i e s was added by the co-operative wholesale s o c i e t i e s to supply consumer co-operative members. There i s a great degree of "quasi" v e r t i c a l integration. The thousands of co-operative r e t a i l stores throughout Great B r i t a i n have provided an outlet for the production of the co-operative f a c t o r i e s . The Co-operative Wholesale Society owns tea estates i n India and Ceylon, operates a large bank and j o i n t l y owns an insurance company with the S c o t t i s h Co-operative Wholesale Society. The Co-operative Wholesale Society i s among the largest printers i n the country. 1 12 Warbasse, op_. c i t . , p. 30. 13 Ibi d . , p. 133. 14 A l l About the C.W.S. (Manchester: Co-operative Wholesale Society, 1961), p. 4. 64 Current standing Table I outlines the most recent s t a t i s t i c s concerning membership, sales and surpluses of the consumer co-operative s o c i e t i e s and co-operative wholesale s o c i e t i e s for 1959 and 1960. TABLE I BUSINESS STATISTICS OF THE CO-OPERATIVE RETAIL AND WHOLESALE SOCIETIES IN GREAT BRITAIN FOR THE YEARS 1959 AND 1960 1959 1960 R e t a i l Societies Number Members Employees Sales Share Ca p i t a l Reserves and Other Funds Loan Capital Wages ^ Net Surplus Co-operative Wholesale Society Sales Production S c o t t i s h Co-operative Wholesale Society Sales Production D Decrease + 53 weeks 889 859 12,791,567 12,956,839 288,262 284,278 - Pounds S t e r l i n g - 1,021,830,814 1,032,749,334 252,401,596 254,101,348 37,188,344 39,685,343 128,121,652 60,149,908 467,867,807 146,060,269 87,798,572 23,540,467 39,268,512 40,015,702 130,631,282 59,539,058 475,565,896, 144,754,949H 87,386,748 23,987,004 Increase 30D 165,272 3,984D 10,918,520 1,699,752 2,080,168 330,359 2,509,630 610,850D 7,698,089 1,305,320D 411,824D 446,537 * Excluding Share Interest Source: "Co-operative S t a t i s t i c s I960", Co-operative Congress Report (Manchester: Co-operative Union Limited, 1961), p. 4. 65 Table I shows that i n 1960 t h i r t y less B r i t i s h co-operative r e t a i l s o c i e t i e s than i n 1959 handled an increase i n sales of 11 m i l l i o n Pounds S t e r l i n g . During 1960 the number of co operative employees decreased by 3,984 while the wages paid to employees increased by 2,509,630 Pounds S t e r l i n g during the same period. The net surplus of 59,539,058 Pounds S t e r l i n g for 1960 represents a decrease of 610,850 Pounds S t e r l i n g over 1.959. The Co-operative Wholesale Society increased sales during the year but t h i s could be accounted for.by a 53-week period i n the 1960 returns. The average weekly sales of the Co operative Wholesale Society were s l i g h t l y greater i n 1959 than i n 1960. The decrease i n production of the wholesale society was less than one per cent over the period. The S c o t t i s h Co-operative Wholesale Society had a decrease i n sales of 411,824 Pounds S t e r l i n g while i t s production increased 446,537 Pounds S t e r l i n g during the year 1960. Co-operative proportion of t o t a l r e t a i l trade The B r i t i s h consumer co-operatives conduct a s i g n i f i c a n t portion of the r e t a i l trade i n Great B r i t a i n . Presentation of aggregate figures of co-operative sales does not indicate the r e l a t i o n s h i p to other r e t a i l establishments i n the country. Table II outlines the number of establishments and the turnover of r e t a i l stores i n Great B r i t a i n for the year 1957. 66 Co-operative s o c i e t i e s with 5 per cent of the establishments reported sales of 905 m i l l i o n Pounds S t e r l i n g , or 12 per cent of a l l r e t a i l trade. Chain organizations with 10 or more stores operate 10 per cent of the stores and sales amounted to 1,909 m i l l i o n Pounds S t e r l i n g or 24 per cent of r e t a i l sales. Unin corporated firms or companies with less than 10 stores operate 84 per cent of the stores and account for 63 per cent of sales. TABLE I I RETAIL ESTABLISHMENTS IN GREAT BRITAIN BY FORM OF ORGANIZATION, NUMBER AND TURNOVER - 1957 Establishments Turnover No. % of % of 000 f s Total £Millions Total TOTAL RETAIL TRADE 574 100 7,798 100 Unincorporated Firms 433 75 3,342 43 with 1-9 shops 432 75 3,333 43 with 10 or more 1 - 9 - Companies 109 19 3,489 45 with 1-9 shops 50 9 1,589 20 with 10 or more 59 10 1,900 24 Co-operative Societies 29 5 905 12 Nationalized Bodies 3 1 62 1 (Gas & E l e c t r i c i t y Showrooms) Source: Board of Trade, Census of D i s t r i b u t i o n 1957, Reported i n Investors Chronicle (London, England), July 14, 1961. Changing Patterns of R e t a i l i n g i n Great B r i t a i n 67 Decline of the independently-owned stores The r e t a i l trade i n Great B r i t a i n , as elsewhere, i s changing i n terms of the amount of trade c a r r i e d out by inde pendent r e t a i l e r s . The change i s i l l u s t r a t e d by Table I I I , on the following page. Independent merchants or "Other Shops" show a decline i n proportion of sales i n each of the f i v e categories of goods represented. The multiple shops have increased t h e i r proportion of r e t a i l trade i n a l l product groups except confectionary and tobacco. R e t a i l consumer co-operatives showed a decrease i n t h e i r share of clothing and footwear sales and minor gains i n the other categories of products. Supermarkets The development of supermarkets i n Great B r i t a i n was not a gradual process. Supermarkets were i n s t a l l e d i n B r i t i s h towns i n imitation of the processes used i n the United S t a t e s . 1 5 The rate of increase of sales i n co-operatively owned businesses and the number of changes i n r e t a i l i n g practices were a cause of concern to co-operative leaders. The r e s u l t was the formation of a commission of inquiry into the co-operative 15 Stacey, op_. c i t . , p. 186. TABLE I I I CHANGE IN PATTERN OF RETAIL TRADING IN GREAT BRITAIN - 1950 AND 1957 Total R e t a i l Sales of Goods 1950 1957 Food & Drink 1950 1957 Con fee t ionary & Tobacco 1950 1957 Sales by A l l Retailers I M i l l i o n s 5,004 7,664 2,016 3,281 608 867 R e t a i l Co-ops 11.8 12.2 18.3 18.7 10.2 11.1 Percentages of Tot a l Sales Made by Department Stores 5.2 4.8 0.5 0.5 Mail Order Houses 0.9 1.7 Other Multiples" 1 21.4 23.9 19.9 22.4 0.4 0.5 12.6 11.8 Other Shops 60.7 57.4 61.2 58.3 76.7 76.6 Clothing & Footwear 1950 1,068 1957 1,435 Household Goods 1950 717 1957 1,145 Other Goods 1950 596 1957 935 6.9 5.6 6.2 7.0 6.8 7.1 13.0 13.2 11.7 10.6 4.0 4.1 2.2 4.3 1.7 3.8 1.6 2.3 27.8 34.8 22.8 23.4 22.3 24.2 50.0 42.1 57.6 55.2 65.3 62.3 (continued) 69 TABLE I I I (Continued) * Including multiple department store organizations as w e l l as "independent" department stores, but excluding stores operated by co-operative s o c i e t i e s . + R e t a i l organizations (other than co-operative s o c i e t i e s ) having 10 or more branches; excludes department store organizations. Source: Board of Trade, Censuses of D i s t r i b u t i o n 1950-57. Quoted by Investors Chronicle. Braken House, London: July 14, 1961. * * * movement and i t s r e l a t i o n s h i p to the changing r e t a i l s i t u a t i o n i n Great B r i t a i n . Changes i n Co-operative Enterprises The Co-operative Independent Commission The Co-operative Congress of the Co-operative Union authorized the se t t i n g up of a commission of inquiry into a l l phases of B r i t i s h co-operative enterprise i n 1955. The Preamble to the resolution authorizing the Co-operative Independent Commission (hereinafter ref e r r e d to as the Commission) states i n part: That t h i s Congress notes the changing pattern i n r e t a i l d i s t r i b u t i o n i n Great B r i t a i n with the continued growth of large scale r e t a i l i n g under national control....16 16 "Terms of Reference and Membership", Co-operative Indepen  dent Commission Report (Manchester: Co-operative Union Ltd., 1958), p. v i i . 70 The Commission was to be responsible for "surveying the whole f i e l d of co-operative production and marketing, both wholesale and r e t a i l . " ^ Major recommendations of the Commission The report of the Commission was released in 1958. It contained a series of recommendations of which the following four were of major significance to the movement: 1. the Boards of Directors of the co-operative wholesale societies would serve as "part-time" officers rather than in their present "full-time" positions in the management of 18 the societies; 2. authorization of a national economic and trading survey designed to lead to definite proposals for the amalga- 19 mation of consumer societies; 3. establishment of a Retail Development Society owned joi n t l y by the Co-operative Union and the co-operative whole- 20 sale societies; and 4. the opening of a series of national r e t a i l specialty 21 chain stores. 17 "Terms of Reference and Membership", Co-operative Indepen  dent Commission, Report, op. c i t . . p. v i i . 18 Ibid.. p. 250. 19 Ibid.. p. 242. 20 Ibid.. p. 252. 21 Ibid.. p. 253. The Commission believed that the co-operative movement should operate a chain of stores specializing in footwear, clothing and other product groups rather than having separate departments within the presently operating societies. 71 The Commission made a series of other recommendations with reference to dividend p o l i c i e s , c a p i t a l i z a t i o n , management t r a i n i n g , and production p o l i c i e s for the wholesale s o c i e t i e s . However, the four proposals of the Commission already outlined proved to be the most important i n terms of the future d i r e c t i o n of the co-operative movement i n Great B r i t a i n . The recommendations of the Commission were presented to a sp e c i a l meeting of the Co-operative Union held i n November 1958. Debate of the recommendations by co-operative r e t a i l , wholesale and production delegates was of an extended duration with many delegates challenging the proposals contained i n the report. The report and recommendations of the Commission were adopted with minor amendments. Study committees were appointed by the Congress delegates with instructions to study the recom mendations of the Commission and prepare d e t a i l e d plans for implementation of the recommendations. Implementation of the Commission recommendations The Commission was authorized by the Co-operative Union delegates to study the co-operative movement and to bring forward proposals. However, the implementation of any proposals was subject to r a t i f i c a t i o n by an i n d i v i d u a l society which might be affected by the proposals. The i n d i v i d u a l s o c i e t i e s have the r i g h t to veto any plan that involves the surrender of autonomy to a cen t r a l i z e d body. 72 The f i r s t recommendation regarding the Boards of Directors of the wholesale s o c i e t i e s , namely, the proposal for an a l t e r a  t i o n i n the functions of the Boards of Directors of the two co operative wholesale s o c i e t i e s was defeated at the annual meetings of the wholesale s o c i e t i e s . The change i n the status of the Directors required amendments to the constit u t i o n of the 22 s o c i e t i e s . The second recommendation,' regarding amalgamations, was implemented by the appointment of a survey committee. The survey committee of the Co-operative Union on amalgamations presented a report to the Central Executive of the Co-operative Union on September 21, 1960. The National Amalgamation Survey Report was approved by the Central Executive as a basis for discussion and action by consumer co-operative o f f i c i a l s i n Great B r i t a i n . The report recommended that the number of con sumer so c i e t i e s i n Great B r i t a i n be reduced to 307 s o c i e t i e s 23 through amalgamations. Discussion of the report i s currently underway i n the various Sections or d i s t r i c t s of the Co-operative 24 Union i n Great B r i t a i n . 22 A New Look at the Co-op. (Manchester: Co-operative Union Ltd . , 1960), p. 6. This pamphlet i s a t r a n s c r i p t of a radio broadcast discussion over the B r i t i s h Broadcasting Corporation, Home Service, on Thursday, June 9, 1960. 23 National Amalgamation Survey (Manchester: Co-operative Union Ltd., 1960), p. 8. 24 Co-operative Congress, Report (Manchester: Co-operative Union Ltd., 1961), p. 48. 73 The third and fourth recommendations of the Commission, concerning the development of a Retail Development Society and the commencement of a series of r e t a i l specialty shops, caused a serious division of opinion among co-operative leaders. One group advocated the development of the Retail Development Society through joint action of the r e t a i l societies, operating through the Co-operative Union, and the co-operative wholesale societies. A second faction proposed that the Retail Develop ment Society be controlled by the co-operative wholesale societies and those r e t a i l co-operative societies interested in the project. A study committee was appointed by delegates to the Co-operative Congress in 1958 to draft proposals for a r e t a i l development society. The report of the study committee was presented to the Co-operative Congress in 1960. A minority report was also f i l e d . The majority report of the study committee recommended that the research and advisory functions for a r e t a i l development program be implemented by expansion of the existing staff and departments of the Co-operative Union. The majority report further proposed that the commercial development of the r e t a i l specialty chain stores would be joi n t l y sponsored by the Co-operative Wholesale Societies and interested r e t a i l societies. The minority members or, 25 as one newspaper termed them, "the ginger group", agreed 25 The Economist. January 31, 1959, p. 439. 74 i n p r i n c i p l e to the proposal that the Co-operative Union should carry out the research and advisory functions but maintained that these functions should be ca r r i e d out by an "autonomous" department within the Co-operative Union which would be advised, i n part, by r e t a i l s o c i e t i e s . The minority report claimed that the proposals of the majority v i o l a t e d the recommendations of the Commission that had been approved by the Co-operative Congress i n 1958. 2 6 The majority report of the survey committee was adopted. Newspaper comment claimed that i t was a retrogressive step as i t further entrenched the "establishment" or more conserva- 27 t i v e elements i n the co-operative movement. Assessment of the eff e c t s of the Commission Report Assessment of the r e s u l t s brought about by the Commission Report i s d i f f i c u l t . The d i f f i c u l t y l i e s not i n the complexity of the recommendations of the Commission, but i n the accurate measurement of the reactions of the thousands of co-operative o f f i c i a l s who are responsible to the members of t h e i r co operative organizations. A wide difference of opinion i s e v i  dent from the debates recorded i n the minutes of the Co-operative Congresses. Undoubtedly the Commission Report caused 26 Co-operative Congress Report. 1960, op. c i t . , p. 97. 27 New Statesman, V o l . 59, June 11, 1960, p. 843. 75 dispute with i t s objective approach to the problems facing the co-operative movement. As one observer has stated: The result of this survey has been an exhaustive and lucid and (in some respects) iconoclastic report that has not feared to lay hands upon many of the movement's most sacred cows.2° Certainly i t is too soon to draw any firm conclusions with respect to the benefits arising from the Report. The study of amalgamations which arose from the Commission Report was the f i r s t such complete assessment of the co-operative movement. The question of a chain of r e t a i l specialty shops is currently under study with implementation to be undertaken shortly. The r e t a i l advisory services of the Co-operative Union have been expanded. The close attention of co-operative leaders and the press to the report of the Commission and the debate on i t s recom mendations tended to obscure a number of changes that were already taking place in the British co-operatives. Changes in Retail Co-operatives The Commission pointed out in the introduction to i t s report that the co-operative movement had many remarkable 29 achievements to i t s credit. A number of changes in co-operative 28 Stacey, op_. c i t . , p. 205. 29 Co-operative Independent Commission Report, op. c i t . , p. 1. methods have taken place since World War II although following l i s t is not exhaustive. Self-service Not content with past successes, i t has, since the war, pioneered the introduction of self- service in Great Britain; and to-day nearly 60% of a l l self-service shops are Co-operative. It is now leading the r e t a i l trade in the deve lopment of supermarkets; and, in one of i t s traditional fields, i t is building, notably in the New Towns, some of the most impressive department stores in the country.30 "Hire Purchase" schemes Installment credit or "hire purchase", as i t is termed in Great Britain, has been introduced in a number of societies. The originators of the Rochdale Principles included cash trading as a principle or practice but co-operatives have come to recognize the need for a source of consumer credit. During 1959 "645 societies conducted hire purchase trade and the trade of 560 of these societies was 22.85 million." Differential pricing The competitive situation in r e t a i l trade in Great Britain has caused a number of consumer societies to open shops with 76 the 30 Co-operative Independent Commission Report, op. c i t . , p. 1. 31 Co-operative Congress Report, 1961, p. 46. 77 spe c i a l prices made possible through elimination of delivery services and c r e d i t . A v a r i a t i o n on posted prices i s to declare an "Instant Dividend". The Co-operative News reported the opening of a co-operative supermarket on the outskirts of London where a two-shilling patronage rebate i s paid at the 32 time of purchase on each Pound S t e r l i n g of purchases. The dividend was calculated on the assumed savings made possible by the use of a "cash and carry" p o l i c y . Some so c i e t i e s have developed "No Dividend" stores where the prospect of a patronage dividend i s not held out to the members as i n the ordinary operations of the society. National membership scheme In 1949 a national membership scheme was introduced. Co-operative members of any co-operative were allocated patronage rebates on purchases i n any society. The patronage rebate earned i n the society i n which the member made purchases i s forwarded to the co-operative society of which he i s a member. The patronage rebate i s then credited to the member's account. The purpose of the scheme was to enable f u l l c r e d i t for co-operative purchases made i n co-operative s o c i e t i e s outside 32 Co-operative News (Manchester), February 17, 1962. "Instant Dividends" enable the society with a number of branches to maintain a standard price throughout t h e i r chain of stores, yet allowing a p r i c e reduction for l i m i t e d service stores. the normal trading area of the member's co-operative. The scheme is rapidly gaining favor for " i n 1960 the national 33 membership trade was £9.9 million." Resale price maintenance The co-operatives have taken a consistent stand of opposi tion to resale price maintenance. Several legal actions have been taken against co-operatives due to patronage rebates as manufacturers claim this is a violation of resale price maintenance. Conclusions Relative to Co-operative Response to Change in  Great Britain Any conclusion that the Br i t i s h co-operative movement is amenable to change must be qualified. The wholesale socie ties are federations of consumer co-operative societies and are not as closely integrated as are private integrated whole salers. The consumer co-operative organizations are free to deal with any supplier, co-operative or otherwise. Generalizations regarding the British co-operatives are d i f f i c u l t due to the wide variety of consumer societies, in terms of volume of sales, product lines sold, and quality of management. The productive f a c i l i t i e s of the wholesale societies and the purchasing power of the co-operative member- 33 Co-operative Congress Report, 1961, p. 6. ship are not uniquely situated i n terms of the competition for the consumer d o l l a r as i n the past, when the co-operatives operated an integrated system and private merchants were non-integrated. The integrated operations of the private multiple or chain stores are a challenge to the movement. The solutions developed by co-operatives to meet the new challenges w i l l determine the success of the movement for a generation. Summary The d i s t r i b u t i v e sector of the B r i t i s h economy i s under going r a p i d changes with the expansion of multiple or chain stores absorbing a larger portion of the sales volume of the country. The co-operative movement controls a large proportion (12.2 per cent) of the r e t a i l trade i n Great B r i t a i n . Co-operative s o c i e t i e s developed a higher degree of integration than t h e i r competitors for a considerable number of years. The increase i n the sales volume of co-operatives has been reduced i n comparison to the period p r i o r to the 34 World War I I . The movement appointed a commission of inquiry i n 1955 to investigate the p o s i t i o n of the co-operatives i n the economy. 34 From 1909 up to the nineteen t h i r t i e s , the movement's share was one-tenth higher i n each succeeding five-year period, however, since 1947 the increases were zero and one-twentieth. 80 The major recommendations of the Commission were: 1. changes in the administrative structure of the whole sale societies; 2. a survey of societies be conducted to determine which societies should be amalgamated into more economic units; 3. the organization of a r e t a i l development society; and 4. the development of a chain of specialty goods shops. The proposals for the amalgamation survey were carried out by the Co-operative Union. However, the Commission's recommendation for administrative changes in the co-operative wholesale societies was defeated at the annual meetings of the wholesale organizations. The recommendations for the organization of a r e t a i l development society and development of a chain of r e t a i l specialty goods shops caused a great deal of debate at meetings of the Co-operative Congress. Progress in regard to the proposed r e t a i l development society and the chain of r e t a i l specialty stores i s being made but under a different procedure than originally recommended by the Commission. The consumer co-operatives have responded to the competi tive situation in Great Britain by the erection of supermarkets, use of hire purchase agreements, differential pricing, and a national membership scheme. IV. CONSUMER CO-OPERATIVES IN SWEDEN 81 Development of Societies The e f f o r t s of Swedish co-operators i n the l a t t e r period of the Nineteenth Century were l i m i t e d to a few stores i n a number of areas. These struggling s o c i e t i e s f i n a l l y united, i n 1899 to form the Kooperativa Forbundet (The Cooperative Union), known f a m i l i a r l y the length and breadth of the land as K. F. I t combined the functions of both the Cooperative Wholesale Society and the Co operative Union i n England, and i t s formation was the beginning of a rapid development of the co operative movement. Consumer soc i e t i e s were organized r a p i d l y a f t e r 1900. The growth i n the early years of t h i s century was gradual and i t was not u n t i l 1913 that the membership of co-operatives reached one hundred thousand f a m i l i e s . By 1925 Swedish co- operators could claim that 20 per cent of the population were 36 members of co-operative enterprises. A series of mergers of smaller s o c i e t i e s into larger units took place i n 1916. The Stockholm Society (Konsum) represented the amalgamation of a number of so c i e t i e s i n the the Stockholm area. The Stockholm Society operated 800 food stores, 30 restaurants, 50 specia l t y shops serving 170,000 35 Marquis Childs, Sweden. The Middle Way (Harmondsworth, Middlesex: Penguin Books Limited, 1948), p. 2. 36 I b i d . . p. 6. 82 members in 1957. A number of food processing factories are 37 operated by the Stockholm Society. The Swedish co-operatives have been credited by a number of writers with possessing a strong influence on the price levels in Sweden and particularly with the a b i l i t y to curb 38 cartels and monopolies in many consumer products. Three particular instances of elimination of monopolistic control in the margarine, flour milling and rubber footwear industries 39 are commonly cited. The growth of co-operatives in Sweden i s sometimes a t t r i  buted to their willingness to enter into competition with the cartels in any sector of the economy in which the co-operatives believe substantial savings to the consumer are possible. Current Standing The Swedish co-operative societies have continued to increase in sales volume u n t i l the present. The co-operative wholesale society, Kooperativa Forbundet, owns forty manufacturing 37 Konsum-Stockholm (Stockholm: Konsumtionsforeningen, 1957), p. 6. 38 Paul Greer;, Co-operatives: The Brit i s h Achievement (New York: Harper & Brothers, 1955). John Lundberg, In Our Own Hands (Stockholm: Kooperativa Forbundet Bokforlag, 1957). 39 Childs, op., c i t . , p. 25. 83 establishments and participates with the central co-operative organizations of the Scandinavian countries and Finland in a common import organization known as the Nordisk Andelsforbund (the Scandinavian Co-operative wholesale Society). In 1955 a parallel organization, Nordisk Andels-Eksport (Scandinavian Co-operative Export Society) was created for joint export of products.^ Table IV sets forth the increases in various acti v i t i e s of the Swedish co-operatives between the years 1959 and 1960. Consumer society membership figures increased by 26,000 and sales increased by 219 million Swedish Crowns. Kooperativa Forbundet and i t s subsidiary production units increased sales by 262 million Swedish Crowns during the year 1960. 40 Lundberg, op_. c i t . . p. 24. TABLE IV COMPARATIVE STATISTICS FOR SWEDISH CONSUMER CO-OPERATIVES AND THE WHOLESALE SOCIETY, 1959-1960 1959 i960 Increase Consumer Co-operative  Societies Number of Societies Number of Shops Number of Members Sales Share Capital Total Shares & Reserves The Swedish Co-operative  Union & Wholesale Society Sales to societies Sales to other buyers in Sweden Export Sales Total Sales Total Capital, Reserves 6s Surplus * Not available 638 * 2,647 * 1,151,000 1,177,000 26,000 - million Swedish Crowns+ - 3,146 3,365 219 189 192 3 482 500.8 18.8 1,153 619 231 2,003 398 1,355 670 230 2,255 410 205 51 ID 252 12 D Decrease + Exchange rate, approximately 5.15 Swedish Crowns equals $1.00. Source: "Some Facts and Figures", Kooperativa Forbundet (K.F.) Stockholm: Kooperativa Forbundet 1961. Co-operative leaders in Sweden estimate that the consumer co-operative societies carry on 14 per cent of a l l r e t a i l trade and 26 per cent of national food products s a l e s . ^ Promotional and educational activity is carried out by 41 Thorsten Odhe, "Swedish Cooperation in a World of Changing Structures", Review of International Co-operation. DII July- August 1959, p. 200. 85 the co-operative s o c i e t i e s with support from the wholesale society. The weekly p e r i o d i c a l V i ("We") has a c i r c u l a t i o n of approximately 550,000 copies. Journals of i n t e r e s t to p a r t i c u l a r segments of the membership such as study clubs, employees and homemakers are published. The wholesale society owns a publishing house and has f i n a n c i a l i n t e r e s t s i n two others. The co-operative movement's publishing a c t i v i t y s p e c i a l i z e s i n the production of economic and s o c i a l l i t e r a t u r e , books for children and adolescents, teaching material, and l i t e r a t u r e used i n adult education. This publishing a c t i  v i t y i s extensive. Of one of the children's books more than one hundred thousand copies have been sold i n one year. Response to Changed Needs and Buying Habits The changed needs and buying habits of the Swedish con sumers are s i m i l a r to those a f f e c t i n g the Canadian consumer. The consumer co-operatives faced the need to develop a dry goods program by entering into department store operations. One-fifth of the sales of consumer co-operatives i s i n t h i s 43 product group. Department stores The co-operative movement, through Kooperativa Forbundet, 42 Lundberg, op_. c i t . , p. 17. 43 I b i d . . p. 6. 86 purchased a large general department store i n Stockholm i n 1934. The store was acquired by the Stockholm Society i n 1945 from the Kooperativa Forbundet. The Swedish General Departmental Stores Association, organized i n 1956, has esta blished 25 general departmental stores at st r a t e g i c points i n Sweden. The department store organization i s j o i n t l y owned by the wholesale society and the r e t a i l co-operative stores. A further association of s p e c i a l shops currently operated independently by the co-operative s o c i e t i e s i s under considera t i o n . * * The s p e c i a l shops s e l l footwear, t e x t i l e s , appliances, and b i c y c l e s . D i s t r i c t warehouses A series of d i s t r i c t warehouses has been established and the expansion of the warehouses to include such services as co-operative education, bookkeeping and accounting. S e l f - s e r v i c e Co-operatives were the innovators of s e l f - s e r v i c e i n the food trade and operate 60 per cent of a l l s e l f - s e r v i c e 45 shops i n Sweden. 44 Odhe, op_. c i t . . p. 199 45 Ib i d . , p. 201. 87 The Future Program The Swedish co-operators are aware that the changes i n the economic and s o c i a l l i f e of the country require a constant appraisal of co-operative methods i n t h e i r country. Structural changes i n the Swedish as w e l l as i n the national economies of other countries are c e t t a i n to continue. In order to safeguard democracy - the keystone of the Movement every where - Cooperative Movements must be prepared to carry out necessary adjustments i n t h e i r administrative and parliamentary structure to meet changing conditions. Summary The Swedish co-operatives are s i m i l a r to the co-operative s o c i e t i e s i n Great B r i t a i n and follow the Rochdale P r i n c i p l e s i n operating t h e i r s o c i e t i e s . The Swedish co-operatives d i d not make any substantial gains u n t i l a f t e r the organization of a co-operative wholesale society (Kooperativa Forbundet) i n 1899. Co-operatives i n Sweden are credited with an aggressive and successful attack upon ca r t e l s and monopolies i n products such as margarine, f l o u r and rubber footwear. Consumer co-operative associations account for 14 per cent of a l l r e t a i l sales i n Sweden and 26 per cent of food products sales. The volume of sales for 1960 i n consumer associations was 3,365 m i l l i o n Swedish Crowns. The wholesale society and 46 Odhe, op_. c i t . . p. 203. 88 i t s f o r t y production a f f i l i a t e s registered sales of 2,255 m i l l i o n Swedish Crowns i n 1960. Swedish co-operative leaders have recognized the need to adapt to changes i n the economy of t h e i r country and the changes i n consumer tastes. Department store chains, sp e c i a l t y shop associations, new d i s t r i c t warehouses and s e l f - s e r v i c e are r e l a t i v e l y recent innovations i n the Swedish co-operative movement. V. CONSUMER CO-OPERATION IN THE UNITED STATES OF AMERICA Comparison with B r i t i s h and Swedish Co-operatives Consumer co-operatives, except i n a few instances, have not succeeded i n urban areas of the United States. The con sumer co-operative movement i n the United States i s b a s i c a l l y d i f f e r e n t from the movements i n Great B r i t a i n . The differences are not r e l a t e d to co-operative p r i n c i p l e s as American co operatives adhere to the Rochdale P r i n c i p l e s . However, the differences are i n terms of the s i g n i f i c a n c e of co-operative r e t a i l trade to t o t a l r e t a i l trade, the r e l i a n c e upon the farm supply co-operatives rather than consumer co-operatives i n urban areas, and i n the number of wholesale s o c i e t i e s that serve the consumer s o c i e t i e s . A further difference was the lack of a central organization s i m i l a r to The Co-operative Union of Great B r i t a i n or Kooperativa Forbundet i n Sweden, capable of u n i t i n g the scattered consumer co-operatives i n a national 89 body. While cooperation was making i t s remarkable progress i n Europe during the past century, i t advanced slowly i n t h i s country. The chief reason for t h i s slow progress i s that u n t i l 1916 there was no national source of information such as existed i n each European country. The people started s o c i e t i e s that were not r e a l l y cooperative i n method; and they attempted to run them without guidance.^6a The Co-operative League of the United States was organized i n 1916, with headquarters i n New York. Later, i n 1941, i t 47 moved i t s executive o f f i c e s to Chicago. Farm Supply Co-operatives The American movement found i t s greatest support i n the farming areas of the country. This i n t e r e s t was p a r t i c u l a r l y evident a f t e r the depression of 1920-21 when a number of farm supply co-operatives were set up i n the midwestern area of the United States. Farm supply co-operatives t y p i c a l l y deal i n feed, seed, f e r t i l i z e r , petroleum f u e l s , farm machinery and hardware. A number have expanded into food products and clothing. Confinement of t h i s study to the consumer co-operatives tends to overlook the growth of many other types of co-operatives that did not face the d i f f i c u l t i e s of the consumer co-operative stores. Credit unions, r u r a l e l e c t r i f i c a t i o n co-operatives, 46a Warbasse, op. c i t . . p. 57. 47 I b i d . . p. 61. 90 insurance, and marketing of farm products made substantial gains during this period. The decade of, roughly, the 1930's was a period unparalleled as regards coordination of cooperative a c t i v i t i e s . Not only was a national wholesale (sic) organized, but an unprecedented number of both regional and d i s t r i c t wholesales (sic) was started, as well as federations to provide specific services or manufacture certain products.^ World War II presented d i f f i c u l t i e s for many co-operatives, as many had been established immediately prior to the war. Rationing in some instances restricted sales and they were unable to carry the overhead expense. This was particularly true of petroleum co-operatives. O i l co-operatives Due to the need for petroleum products for use in farm equipment, the attention of co-operators turned to this basic commodity as early as 1921. The i n i t i a l efforts were charac terized by group buying of o i l and gasoline and the construction of bulk storage plants. The process of integration of f a c i l i t i e s to the o i l well continued. By 1939 the f i r s t co-operative o i l well in the United States pumped o i l to co-operative refineries. It is estimated that the co-operatives supply 18 per cent to 22 per cent of the petroleum products used on farms 4 9 in the United States. 7 48 Parker, op_. ext., p. 153. 49 Jerry Voorhis, American Cooperatives (New York: Harper & Bros., 1961), p. 104. During 1951. the bulk of the manufactures produced by co operatives were i n two categories: petroleum products, crude and refine d (60.6 per cent), and feed, seed and f e r t i l i z e r (27.2 per c e n t ) . 5 0 Urban Consumer Co-operatives The development of urban consumer co-operatives has always proven d i f f i c u l t i n the United States. A series of i l l - t i m e d and often mismanaged co-operatives have resulted i n losses. However, the growth of urban consumer co-operatives since 1951 i s encouraging to supporters of co-operatives. However, the development i s widely dispersed. Table V c l e a r l y i l l u s  trates the r u r a l bias i n American consumer co-operatives. Table V shows that urban co-operatives account f o r less than 8 per cent of the t o t a l sales by consumer co-operatives. The large number of co-operative wholesale organizations i s i n s t r i k i n g contrast to the integrated wholesale programs i n Great B r i t a i n and Sweden. 50 Parker, op_. c i t . , p. 182 92 TABLE V NUMBER, MEMBERSHIP AND SALES VOLUME: CONSUMER CO-OPERATIVES AND CO-OPERATIVE WHOLESALE SOCIETIES IN THE UNITED STATES - 1959 Sales Volume Number Membership ($ m i l l i o n ) Consumer Societies Farm Supply Rural Consumer Co-operatives 3,300 3,400,000 2,200 Consumer Stores, Fuel Co-operatives 1,050 750,000 180 Co-operative Wholesale Societies 34 + 1,374.7 more than $5 m i l l i o n i n sales 22 + 1,336.3 l e s s than $5 m i l l i o n i n sales 12 + . 38.4 + Membership not a v a i l a b l e . Source: Cooperatives 1959-60. P h i l i p J . Dodge (ed.) (Chicago: Cooperative League of the U. S. A., 1960). Recent development of urban consumer co-operatives The area of great change i n the United States consumer co-operative movement i s i n the development of supermarket co-operatives i n large urban areas. Consumer co-operatives i n a number of urban areas have been successful. The story of the Greenbelt, Md., cooperative, now the leading nonfarm consumers' cooperative i n the en t i r e United States, i s that of continuous expansion and a u c c e s s . 5 1 51 Parker, op_. c i t . , p. 141. 93 Voorhis claims that the consumer co-operative food-store and shopping center idea w i l l spread. A basic requirement in the proper development of consumer co-operatives is efficient, capable and imaginative personnel. The Consumer Cooperative Managers' Association was organized in 1959 to assist in the development of more efficient managers through conferences and courses. 5^ In the Hyde Park area of Chicago, the co-operative built the city's largest food store in a shopping center serving 53 the United States' f i r s t major "redevelopment" project. The Proceedings of the Consumer Cooperative Managers Conference in 1961 record the sales and membership of a number of co-operatives that have been set forth in Table VI. Identi fication has been limited to alphabetical symbols. With the exception of M. S. Society, a l l the associations have memberships ranging in excess of a thousand members. The geographic locations of the co-operatives are dispersed throughout the United States with a majority of the associa tions located on either the East Coast or the West Coast of the United States. 52 Voorhis, op_. ext., p. 161. 53 Philip J. Dodge (ed.), Cooperatives 1959-60 (Chicago: Cooperative League of the U. S. A., 1960), p. 30. 94 TABLE VI ESTIMATED SALES AND MEMBERSHIP, SELECTED GROUP OF CONSUMER CO-OPERATIVE ASSOCIATIONS IN THE UNITED STATES - 1960 Estimated Sales Association ($ thousand) Membership H. P. 4,550 6,000 N. Y. 5,980 5,500 N. A. 2,500 6,000 F. C. 776 1,000 V. I. 1,600 3,000 S. M. 1,200 2,000 B. C. 10,040 18,000 P. A. 6,000 6,500 F. B. 4,500 6,100 G. S. 1,768 1,500 M. S. 1,200 600 G. B. 24,000 22,000 Source: "Progress Reports", Proceedings. Consumer cooperative Managers Conference, 1961. E f f i c i e n t operations A survey of the progress of co-operative supermarkets by the Economic B u l l e t i n of the Cooperative League of the U. S. A. i n Jul y 1960 indicated 33 consumer co-operatives i n excess of $1,000,000 i n annual sales volume. Table VII compares the net margins of the co-operatives to a l l super markets i n the United States. 95 TABLE VII NET MARGINS BEFORE TAXES; SUPERMARKETS IN THE UNITED STATES COMPARED WITH A GROUP OF CONSUMER CO-OPERATIVES WITH SALES VOLUMES IN EXCESS OF $1 MILLION 20 Coops with A l l Supermarkets A l l 33 Coops Supermarkets i n United States (Net savings as (Net p r o f i t as Year per cent of sales) per cent of 1953 2.19 2.15 - 1954 1.98 1.98 2.46 1955 2.17 2.16 2.56 1956 2.28 2.27 2.13 1957 2.32 2.45 2.26 1958 2.25 2.32 2.20 1959 2.33 2.39 2.30 Sources: A l l Supermarkets: from Supermarket News, May 9, 1960, compiled by Curt Kornblau, Research Director, Supermarket I n s t i t u t e . Co-operatives: reports from t h i r t y - t h r e e co-operatives. Quoted i n American Cooperatives by Jerry Voorhis, New York: Harper and Brothers, 1961, p. 165. The net margins of the selected consumer co-operative supermarkets have been greater than the nation a l average for a l l supermarkets since 1956. The structure of the consumer co-operatives i n urban areas i s comparable to large indepen dently owned stores rather than chain store supermarkets. Expansion The expansion of urban co-operatives i n the highly compe t i t i v e food products industry presents several problems. The f i r s t i s the need for large c a p i t a l investment on the part of the members i n order to set up an establishment capable 96 of handling a large s e l e c t i o n of grocery l i n e s and provide adequate f a c i l i t i e s . The second i s the need for competent s t a f f to operate the stores once they are established. A t h i r d d i f f i c u l t y , not found i n Swedish or B r i t i s h co-operatives, i s the lack of concentration of co-operatives i n one area which would allow economic development of a wholesale society. Expansion into urban areas by farm supply co-operatives i s a probable development as farm membership i s reduced. Housing co-operative developments which include large neighborhoods i n urban areas may provide opportunities for urban consumer co-operative stores. A number of consumer co operatives have been organized i n co-operative housing develop- 54 ments and have proved successful. Surveys conducted An exploratory study of consumer motivations with regard to co-operatives was c a r r i e d out by Ernest Dichter i n 1956. His report to the Cooperative League of the U. S. A. contained four key findings: 1. The best way to solve the cooperative idea i s to do i t competitively; 2. Things change - the whole concept of dynamics i s involved; 54 Voorhis, op_. c i t . , p. 167. 97 3. The consuming public has grown up; and 55 4. You are s e l l i n g the wrong merchandise. The proposals put forward by Dichter were that the co operatives should accept r e a l i t y , r e v i t a l i z e the philosophy of co-operatives and develop a personality or "image". A motivational research project was ca r r i e d out at Green- belt Co-operatives i n 1960. Among the recommendations contained i n the report were "de-emphasize i n s t i t u t i o n a l advertising 56 and step up advisory services to home-makers." Co-operative publications i n the United States were c r i  t i c a l l y reviewed by four experts i n the f i e l d s of public r e l a  t i o n s , motivational research, sociology and advertising. Some of the c r i t i c i s m s of co-operative publications were: 1. Cooperatives f a i l to adapt t h e i r appeals to c u l t u r a l changes or to the way people think i n the present day " a f f l u e n t society". 2. No clear concept of cooperatives i s projected. 3. Educational materials do not help to make i t c l e a r . 4. Use of " s p e c i a l co-op language". 5. Do not appeal to people as "educated middle class people". 55 Ernest Dichter, A P i l o t Research Study (Croton-on-Hudson, N.Y.: I n s t i t u t e for Motivational Research Inc.). An explora tory study of consumer motivations conducted for the Cooperative League of the United States of America(1956?) . 56 Samuel F. Ashelman, "The Dichter Report", Proceedings. Eleventh Annual Consumer Cooperative Managers Conference, Monterey, C a l i f o r n i a , June 5-10, 1961. 98 6. Need to appeal frankly to modern family's love of "good r i c h life".57 The research projects outlined would indicate that co operative leaders are aware of the need for adaptation to the changing patterns of d i s t r i b u t i o n i n the United States. Conclusions The consumer co-operative movement i n the United States i s divided into two sections based on occupational needs. One group, commonly termed "farm supply co-operatives", have developed a series of successful co-operatives, while the "urban" consumer co-operatives have made l i m i t e d progress. The t r a n s i t i o n from purely "farm supply" to "urban" may be hastened by the decrease i n the number of farmers i n the United States. The development of the co-operative movement in the United States has been i n h i b i t e d by a series of f a i l u r e s due, i n part, to inadequate management and lack of adequate c a p i t a l i z a t i o n . Any future progress of consumer co-operatives w i l l be based upon demonstrated capacity to provide members and patrons with modern stores and competitive p r i c e s . 57 Calvin Kytle, "The C h a r a c t e r i s t i c s of Cooperatives and How to Dramatize Them E f f e c t i v e l y " , Proceedings, Eleventh Annual Consumer Cooperative Managers Conference, op_. c i t . , p.5. 99 Summary The consumer co-operative movement i n the United States has not developed to any extent i n the urban areas. The farm supply co-operatives provide the majority of co-operative sales i n the United States. American co-operatives have generally lacked the unifying force of a national body such as large co-operative wholesale s o c i e t i e s as are i n operation i n Great B r i t a i n arid Sweden. The unique co-operative development i n American co-opera tives i s the petroleum co-operative. The need for large quan t i t i e s of petroleum products on the farms stimulated the development of petroleum d i s t r i b u t i o n co-operatives. Integra t i o n of the co-operatives resulted i n the construction of r e f i n e r i e s and development of o i l wells. Thirty-four regional wholesale s o c i e t i e s and one national purchasing and manufacturing society service the 4,350 farm supply and urban consumer co-operatives i n the United States. The development of urban consumer co-operatives requires the erection of larger premises and more managerial s k i l l than previously displayed. The net margins of the 33 largest consumer co-operatives compare favorably with the net margins of super markets i n the country. Co-operative o f f i c i a l s have i n i t i a t e d a number of surveys, including surveys using motivation research methods, i n order to determine the best methods for the promotion of the services 100 of the associations. VI. CHAPTER SUMMARY While co-operatives in Great Britain, Sweden and the United States follow, in the main, common principles and practices based on the Rochdale Principles, there are a number of operational differences. The Br i t i s h co-operatives were the initiators of many progressive programs in the co-operative movement and were the f i r s t to develop wholesale societies and manufacturing f a c i l i t i e s to serve co-operatives. The progress in Great Britain was rapid u n t i l very recent times. The Swedish co operatives were organized much later and did not begin to make progress u n t i l the organization of a co-operative wholesale society. In both Great Britain and Sweden the main support for co-operatives has come from urban areas. The American co-operative movement has had a series of organizational drives which were sponsored by farm or labor groups but the co-operative associations, in the main, did not carry on business for any appreciable time. A central co ordinating influence such as i s exercised by the large wholesale societies and co-operative unions of Sweden and Great Britain was lacking. However, the American co-operators have developed associations not directly connected with consumer purchases. E l e c t r i c a l co-operatives, credit unions, health care co-operatives, 101 co-operative insurance societies and co-operative housing claim millions of members in the United States. In each of the three countries the changes that are taking place in the production and distribution of consumer goods have required an examination of the position of the co-operatives. The response of the co-operatives to change is d i f f i c u l t to assess. The Brit i s h co-operatives carried out a major assess ment under the Co-operative Independent Commission. The recom mendations of the Commission caused a number of major altera tions in the co-operative sector. The Swedish co-operatives have also made substantial changes in their methods, particu l a r l y with reference to department store operations. The American co-operatives are less united in their approach though there i s some indication that the farm supply co-operatives are expanding their operations. Urban consumer co-operatives have become well established in several areas.of the United States. The development of successful consumer associations w i l l require larger investments of capital, more skil l e d manage ment and better informed Boards of Directors than in previous times. The Cooperative League of the United States of America is providing leadership to many co-operative enterprises, including the consumer co-operatives. 102 CHAPTER V CONSUMER CO-OPERATION IN CANADA I. INTRODUCTION The i n i t i a t i o n of consumer co-operation in Canada had it s origins in individuals who brought the principles of Rochdale to this country and began the organization of co operative stores as early as 1861. The f i r s t consumer co operative in Canada was started in Stellarton, Nova Scotia, by a group of miners. It is among the miners of Nova Scotia and Cape Breton Island that we find the f i r s t efforts at co-operative stores in Canada, some of the most disheartening failures, and some of the most signal successes.! The majority of the early efforts at consumer co-operation had disappeared by the end of World War I. An exception to this i s the British-Canadian Co-operative Society at Sydney Mines, Nova Scotia, that has continued to prosper since i t s organization in 1906. In 1960 the association reported sales of $3,558,000.2 1 H. Michel, "The Co-operative Store in Canada", Bulletin of  the Departments of History and P o l i t i c a l and Economic Science (Kingston, Ontario: Queens University, January 1916), No. 18, p.9. 2 F. E. Scammell, Co-operative Associations in Nova Scotia  I960 (Halifax, Nova Scotia: Department of Agriculture and Marketing, 1961), p. 5. 103 Rural Base With a few exceptions, such as the British-Canadian Co-operative Society, consumer co-operatives have been essen t i a l l y r u r a l organizations. A f a m i l i a r pattern of development has been the addition of consumer services to e x i s t i n g marketing co-operatives. The organizational e f f o r t of farmers and fishermen i n i t i a l l y was l a r g e l y concentrated i n obtaining adequate compensation for grains, dairy products and f i s h through co-operative means. Consequently the pattern of growth i n Canada has been a progression from marketing of commodities, to purchase of vocational supplies and ultimately to consumer goods such as groceries, hardware and soft goods. The growth of consumer associations i n Western Canada has followed t h i s pattern to a large extent. In the p r a i r i e grain-growing area of the Province of Saskatchewan, producer - or, more accurately, farmers' marketing - co-operation preceded, i n volume, the eventual growth of large-scale con sumer co-operation. Thus the development of organized co-operation i n Saskatchewan, as i n the p r a i r i e areas of the adjoining provinces of Mani toba and Albetta, was i n reverse order of sequence i n comparison to unfoldment of the move ment i n the United Kingdom and continental Europe where urban centers were i n the forefront.-* The economic recession of the early 1920's proved a d i f f i c u l t period for consumer associations and a number f a i l e d . 3 Jim F. C. Wright, P r a i r i e Progress (Saskatoon: Modern Press, 1956), p. 10. However, the depression period gave impetus to the consumer movement i n many areas of Canada. The work of the Extension Department of St. Francis Xavier University at Antigonish, Nova Scotia, stimulated the growth of a number of associations i n the Maritime Provinces. The support of the Wheat Pools i n the P r a i r i e Provinces resulted i n the formation of a number of associations i n that region. Table VIII indicates the progress made from 1932 to the outbreak of World War I I . Of p a r t i c u l a r s i g n i f i c a n c e i s the increase i n sales of the purchasing (consumer) co-operatives which increased t h e i r sales 91.7 per cent i n the seven-year period i n contrast to a 34.2 per cent increase i n marketing of primary a g r i c u l t u r a l products. TABLE VIII GROWTH OF MARKETING AND PURCHASING CO-OPERATIVES REPORTED IN CANADA, YEARS 1932-1939 Crop Total Business Year Associations Marketing Purchasing including Ending Reporting ($ thousand) Other Revenue 1932 795 134,611 10,665 145,303 1936 781 144,962 12,788 158,165 1937 1024 157,031 16,363 173,927 1938 1217 134,493 20,091 155,080 1939 1331 180,747 20,441 201,659 Source: V. A. Heighton, Co-operation i n Canada (Canada: Department of Agr i c u l t u r e , 1960). 105 The period of wartime shortages and rationing i n h i b i t e d any large-scale growth on the part of consumer associations though substantial gains were recorded during the six-year period 1939-1945. Sales of purchasing co-operatives i n 1939 were $20,441,000 and increased to $81,360,000 i n 1945. By 1960 sales volume had grown to $362,911.,000 i n 1,586 asso- 4 c i a t i o n s . I I . DIVERSITY AND SCOPE Co-operative a c t i v i t y throughout Canada exhibits an a b i l i t y to serve many d i v e r s i f i e d groups of people. While not a large element i n the t o t a l r e t a i l trade the spread of co-operatives of a l l types covers every province and i n many f i e l d s of marketing, r e t a i l i n g and service. A most recent and i n t e r e s t i n g example of the extension of co-operatives i n Canada i s the work being done i n Canada's Northland among Eskimos. Notable among the aspects of the new Eskimo l i f e are the projects i n which the Eskimo's i n i t i a  t i v e and s p e c i a l a b i l i t i e s have been encouraged. Eskimo co-operatives i n northern Quebec and at Cape Dorset on B a f f i n Island are making use of natural resources and the unique a r t i s t i c a b i l i t y of the people. A r c t i c char, a f i s h that graces 4 V. A. Heighton, Co-operation i n Canada 1960 (Canada: Department of A g r i c u l t u r e ) , p. 7. 106 the tables of Canada's best restaurants, i s caught and shipped by these co-operatives.5 Canadian co-operatives, while adhering to the Rochdale P r i n c i p l e s , have developed along a somewhat d i f f e r e n t pattern to the co-operative movements i n the United Kingdom or Sweden. The main emphasis i n the European co-operatives has been i n r e t a i l trade while Canadian and American co-operatives have found t h e i r strength i n the marketing of a g r i c u l t u r a l and f i s h products. The other main difference i s that the development of service co-operatives such as banking has been c l o s e l y a l l i e d with the consumer movement i n Great B r i t a i n and appears to be monolithic i n structure, whereas i n Canada there has been a growth i n types of co-operatives that have been more sp e c i a l i z e d i n t h e i r appeal. The number of members i n a l l co-operatives, the volume of a l l co-operative a c t i v i t y , and the services ava i l a b l e through co-operative channels i n Canada would compare favourably with the United Kingdom i f advantageous factors such as the density and the homogeneity of the population are considered. A consumer co-operative i s organized to service the needs of i t s members, consequently the products handled vary widely from association to association. Reference here w i l l be made 5 Canada 1961. Dominion Bureau of S t a t i s t i c s (Ottawa: Queen's P r i n t e r , 1961), p. 49. only to associations o f f e r i n g commodities for r e t a i l sale but l a t e r i n the chapter a short summary of the a v a i l a b i l i t y of services, d i s t i n c t from commodities, from co-operative i n s t i t u  tions w i l l be made. A few consumer associations are one-commodity associations i n contrast to large organizations capable of serving v i r t u a l l y a l l the consumer needs of a member. Table IX indicates the major groupings of products handled by co-operatives i n Canada. I t might be noted that feed, f e r t i l i z e r , spray materials, machinery and equipment form 35.5 per cent of the sales of consumer associations i n 1960, in d i c a t i n g a strong r u r a l bias 6 i n purchases from these associations. Food products, clothing and home furnishings account for 31.1 per cent of consumer co operative sales. Similar figures f o r 1955 show 37.3 per cent i n feed, f e r t i l i z e r and farm machinery and equipment, while food, clothing, and home furnishings represented 30.98 per cent. 6 These categories cannot be considered as consumer goods, but as i n d u s t r i a l or farm supplies. 7 V. A. Heighton, Co-operation i n Canada 1955 (Canada: Department of Agriculture), p. 7. 108 TABLE IX MERCHANDISE AND SUPPLIES SOLD THROUGH CO-OPERATIVE ORGANIZATIONS IN CANADA, REPORTED FOR CROP YEARS ENDED JULY 31, 1959 1959 AND 1960 1960 No. of No. of Associa Value r A s s o c i a  Value Supplies t i o n s * ($000) tions ($000) Food Products .818 94,463 834 100,831 Clothing & Home • Furnishings 533 11,596 578 12,229 Hardware 719 21,516 703 25,342 Petroleum Products & Auto Accessories 654 57,915 680 63,447 Feed, F e r t i l i z e r & Spray Material 1,040 109,636 970 116,340 Machinery & Equipment 234 10,763 312 12,684 Coal, Wood & Building Material 573 20,032 567 23,402 Miscellaneous 594 7,913 565 8,635 Total 1,568 333,834 1,586 362,910 * Duplication exists i n t h i s column as some associations handle many of the supplies l i s t e d . r Revised. Source: V. A. Heighton, Co-operation i n Canada 1960 (Ottawa: Canada Department of Agriculture, 1961). Consumer co-operatives range i n s i z e from large multi purpose organizations such as the Surrey Co-operative i n 8 8 a B r i t i s h Columbia, the Saskatoon Co-operative and the Sherwood 8 Surrey Co-operative Association Ltd., 1961 Annual Report (Cloverdale, B r i t i s h Columbia: 1962). 8a Saskatoon Co-operative Association Limited, 1961 Annual  Report (Saskatoon, Saskatchewan: 1962). 109 9 Co-operative i n Regina , a l l of which registered sales over $5,000,000, to small co-operated stores such as at Fox Harbor i n Nova Scotia with sales of $32,000.^ The range of a r t i c l e s a v a i l a b l e from a consumer co-operative varies and often r e f l e c t s the s p e c i a l i z e d needs of the p a r t i c u l a r area i n which the co-operative i s located. With the exception of the metropolitan areas of Edmonton, Calgary, Regina, Saskatoon and Winnipeg, and the non-metropolitan Sydney-Glace Bay area, the main sources of co-operative sales are i n smaller communities. The degree of market coverage by co-operatives i n various areas i n the P r a i r i e Provinces i s more p r e c i s e l y outlined i n Table X, which indicates the va r i e t y of products handled, the number of consumer associations reporting departments for the various operational d i s t r i c t s of the co-operative wholesale society, Federated Co-operatives Limited. 9 Sherwood Co-operative Association, 1961 Annual Report (Regina, Saskatchewan: 1962). 10 Scammell, op_. c i t . , p. 11. TABLE X CO-OPERATIVE SERVICES IN OPERATION IN THE PROVINCES OF MANITOBA, SASKATCHEWAN, ALBERTA AND THE NORTHWESTERN PORTION OF THE PROVINCE OF ONTARIO BY OPERATIONAL DISTRICTS OF FEDERATED CO-OPERATIVES LIMITED F.C.L. Petroleum Service Principal Oper. Gas Trading Dist. Service Pump Food Service Centre No. Bulk Station Service Lumber Coal Feed Fe r t i l i z e r Hardware Grocery Meats Dry Goods Province Winnipeg 01 7,IP 3 13 4,IP 5 25, IP 17 18, 8P 22,2P 9 13, 3P Manitoba Ft. William 02 19, IP 5 18 8,2P 17 30 27 25, 8P 15,3P 7,9P 10, 7P Manitoba & W. Ontario Brandon 03 24 8 12 18 13 28 28 26, 2P 11,3P 6 9, 3P Manitoba Yorkton 04 26 13 11 13 12 33 32 12,13P 15 7 9, IP Manitoba Virden 05 21 6,IP 9 16 10 23 19 19, 3P 12,2P 2,9P 5, 3P Manitoba Weyburn 06 28 10, IP 16 16 22 30 12 22, 7P 12 11, IP Saskatchewan Regina 07 22 7 15 9 18 22 18 13,10P 16 5 4,10P Saskatchewan Wynyard 08 32 12, IP 17 11, IP 21 32 24 23, 7P 28 3 14,IIP Saskatchewan Moose Jaw 09 33 5 28 13 18 29 5 26 12 5 11 Saskatchewan Swift Current 010 36, IP 15, IP 21 18,4P 22 40 22 27,15P 18,2P 5 12, 5P Saskatchewan Kindersley 011 18 7 12 10 20 25 23 21, 2P 18 4 12, 2P Saskatchewan North Battleford 012 22 2 12 10 5 24 23 22 21 4 20 Saskatchewan Saskatoon 013 22,3P 6,2P 16 16 19 34 21 20,13P 18 2 13, 3P Saskatchewan Pr. Albert 014 21, IP 4 14 7,IP 23 26 21 14, 8P 24 4 11, 9P Saskatchewan Humbolt 015 23 6 20 7 27 31 30 21, 9P 18 - 18, IP Saskatchewan Calgary 016 9 3 3 4,3P - 22 17, IP 17, 8P 13,7P 8 7, 8P Alberta Wainwright 017 10, IP 2 5 3P - 20,2P 19 7,17P 23 8 9,12P Alberta Edmonton 018 7 3 4 1,4P - 20,2P 16,2P 10,IIP 25 4 9,16P Alberta Peace River 019 5 1 3 1 1 17 12 15, 4P 20 2 15, 4P Alberta Totals 385,9P 119,6P 249 182,19P 253 511,5P 386,3P 358,145P 341,19P 85,18P 212,99P P denotes part i a l service only. Source: Federated Co-operatives Limited, 1961 Annual Report. Principle Trading Centre added to identify location of the various operational d i s t r i c t s . Operational D i s t r i c t 02 includes a portion of Northern Ontario. Operational D i s t r i c t 04 includes portions of Saskatchewan and Manitoba. I I I . INTER-RELATIONSHIPS WITH OTHER CO-OPERATIVES Contrary to the experience of early co-operatives i n Canada, a large number of co-operative a c t i v i t i e s are now well established on the Canadian scene. With varying degrees of effectiveness, a large degree of co-ordination of e f f o r t i s seen between the consumer co-operatives and other types of co-operatives. Of d i r e c t concern to consumer co-operatives i s the develop ment of wholesale s o c i e t i e s . In each case the co-operative wholesale organizations are owned by the consumer co-operatives, through consumer associations or j o i n t l y with marketing co o p e r a t i v e s . ^ As an example of the in t e r - r e l a t i o n s h i p s that e x i s t between co-operatives, I n t e r p r o v i n c i a l Co-operatives Limited, a national body owned by the wholesale s o c i e t i e s , and Canadian Co-operative Implements Limited, a manufacturing plant for farm machinery, are also owned i n part by the consumer associations. Credit unions The most common co-operative organization i n Canada i s the c r e d i t union, or caisse populaire as i t i s known to French- speaking Canadians. Two and one-half m i l l i o n Canadians are 11 The a c t i v i t i e s of two co-operative wholesale s o c i e t i e s are treated i n d e t a i l i n Chapter VI. 112 members of 4,529 cr e d i t unions which have assets over $1,287,641,000.^ In many areas of Canada the c r e d i t union i s located i n the consumer store or immediately adjacent thereto. The a b i l i t y of the c r e d i t unions to act as financers of members' c r e d i t needs r e l i e v e s many associations of the problem of the extension of c r e d i t . The close collaboration of c r e d i t union and consumer co-operative i s most evident where cr e d i t unions are organized on a community basis. A large number of c r e d i t unions are organized i n i n d u s t r i a l groups and are not connected with other than c r e d i t union organizations. Central Credit Unions The growth of central c r e d i t unions i n the past f i f t e e n years, whereby surplus funds of c r e d i t unions and co-operatives are pooled i n p r o v i n c i a l bodies which may have a v a r i e t y of terms such as leagues, centrals, co-operative c r e d i t s o c i e t i e s , has been of great value to consumer co-operatives. The accumulation of substantial amounts i n centrals has enabled the centrals to finance many projects for consumer associations and t h e i r co-operative wholesale s o c i e t i e s . 12 Credit Union Yearbook 1961 (Madison, Wisconsin: Credit Union National Association, 1961), p. 27. 113 Marketing Agencies While much of the marketing of commodities in Western Canada is handled by such large organizations as the Wheat Pools, close collaboration and assistance has been forthcoming to consumer associations. In fact, much of the in i t i a t i o n for consumer associations came from various producer groups in the early days and in some areas the division between the producer organizations and the consumer association i s d i f f i c u l t to distinguish. Co-operative Unions The organization of co-operative unions in various provinces as educational and co-ordinating agencies had had the effect of drawing together the different co-operative groups in the provinces. The provincial organizations have met with limited success in some areas but in others have been a strong influence in developing a co-ordinated pattern of education and promotion by a l l co-operatives in the provinces. National Bodies Insurance The development of two co-operative insurance companies in Canada under co-operative auspices has enabled consumer co-operatives to collaborate in making f i r e , auto and casualty insurance and various l i f e insurance programs available. 114 The value derived from participation in these insurance com panies, Co-operative Fire and Casualty Company and Co-operative Li f e Insurance Company, both with headquarters in Regina, has many advantages. Consumer associations are able to purchase f i r e insurance on their buildings, automobile insurance and surety bonds from a co-operative organization. The co-operative insurance company in many instances operates an office in close proximity to the co-operative store i f not within the store premises i t s e l f . Pension programs, l i f e insurance for employees, and other fringe benefits may be purchased from the l i f e insurance company by the association. Financial assistance is also available inasmuch as the co-operative insurance companies can and have made investments in co-operative enter prises, including consumer stores, in various parts of the country. National Co-operative Credit Society A relatively recent addition to the financial organizations on the co-operative level has been the development of a national co-operative credit society, of which provincial credit societies and national co-operative organizations are members. Additional financial resources are made available to the co-operative movement through this national association. 115 Co-operative Union of Canada Co-operatives throughout English-speaking Canada are united in membership in the Co-operative Union of Canada, which i s a federation of provincial co-operative unions and acts as a co-ordinative influence and as spokesman for the organized movement. Through a f f i l i a t i o n with the Co-operative Union of Canada, Canadian co-operatives participate in the work of the International Co-operative Alliance. Annual meet ings of the Co-operative Union of Canada are termed "Co-opera tive Congresses" and provide a forum for discussion of problems of concern to the entire co-operative movement. The Co-operative Union of Canada publishes a quarterly called The Co-operative  Digest and a newsletter, Co-op Commentary, which provides current information on items of interest to co-operatives. National Committees on research, consumer co-operation, co operative marketing, accounting, provide opportunities for development of uniform practices in the country. French-speaking co-operators maintain a parallel organiza tion called Le Conseil Canadien de l a Cooperation, which colla borates with the Co-operative Union of Canada on matters of mutual interest. Educational Programs Consumer co-operative associations participate with other co-operative organizations in educational programs of a general 116 co-operative nature. The programs include short courses, specialized training and community courses. Two examples of co-operative education are the programs of the Western Co-operative College at Saskatoon and the programs of the Extension Department of St. Francis Xavier at Antigonish. Of great significance to the maintenance of relationships with other co-operatives i s a community of interest that does not cease with the particular co-operative interest of the managers or Board of Director members. A recent confer ence on the development of a program for summer schools for high school students was attended by staff members of the Wheat Pool, the Co-operative Credit Society, the Co-operative Wholesale Society, the consumer co-operatives, the producer co-operatives, the credit union league and the co-operative union. Where close collaboration between various types of co operatives i s maintained, a l l segments appear to make progress together. In areas where this close collaboration i s not maintained, various segments appear to grow at unequal rates. IV. SALES AND DISTRIBUTION PATTERNS The impact of consumer co-operatives on r e t a i l trade varies considerably throughout the country. In the overall picture for Canada, the proportion of co-operative r e t a i l sales to total 117 r e t a i l sales has been r e l a t i v e l y constant. Table XI indicates that the co-operative portion of r e t a i l sales has varie d from a low of 1.7 per cent i n 1955 to a high of 2.2 per cent i n 1960. TABLE XI TOTAL RETAIL TRADE AND CO-OPERATIVE PURCHASING BUSINESS IN CANADA, 1949-1960 Total Per Cent of Total Co-operative Co-operative R e t a i l Trade Purchasing Business to Year i n Canada Business Total Trade - thousand d o l l a r s - - per cent - 1960 16,413,465* 362,911 2.2 1959 16,283,558 332,943 2.0 1958 15,444,341 296,492 1.9 1957 14,826,441 283,730 1.9 1956 14,297,558 258,751 1.8 1955 13,111,896 228,446 1.7 1954 12,065,758 234,583 1.9 1953 12,125,802 245,629 2.0 1952 11,532,076 234,848 2.0 1951 10,693,097 209,985 2.0 1950 9,617,197 206,082 2.1 1949 8,531,998 191,804 2.2 * estimated. Sources: Dominion Bureau of S t a t i s t i c s for Total R e t a i l Trade. V. A. Heighton, Co-operation i n Canada (Ottawa: Canada Department of A g r i c u l t u r e ) . The food sales picture i s more e r r a t i c . Co-operatives handled 3.4 per cent of food sales i n 1950 and dropped to a low of 2.5 per cent i n 1955 but have maintained a steady growth to 2.9 per cent i n 1960. The highest share of food sales was recorded i n 1950 when co-operative sales were 3.4 per cent of 118 t o t a l food sales. Table XII indicates the Canada food sales, co-operative food sales and the percentage of co-operative to t o t a l food sales for the years 1949 to 1960. TABLE XII CANADA AND CO-OPERATIVE FOOD SALES, 1949-1960 Co-operative Per Cent of Canada Co-operatives Canada Sales Year - thousand d o l l a r s - - per cent - 1960 3,430,632e 100,831 2.9 1959 3,256,083 94,463 2.9 1958 3,093,593 81,924 2.6 1957 2,872,755 74,967 2.6 1956 2,620,964 68,173 2.6 1955 2,429,581 61,463 2.5 1954 2,279,402 63,859 2.8 1953 2,132,560 63,877 3.0 1952 2,040,788 51,579 2.5 1951 1,906,608 54,425 2.9 1950 1,614,639 54,853 3.4 1949 1,474,402 48,906 3.3 * Sales of Grocery and Combination Stores as reported i n R e t a i l Trade i n Canada. Dominion Bureau of S t a t i s t i c s , Ottawa, Canada. Does not include food sold by other r e t a i l e r s . e Estimated. Sources: Dominion Bureau of S t a t i s t i c s , Ottawa, Canada. Co-operative s t a t i s t i c s provided by V. A. Heighton, Economist, Canada Department of Agriculture, Ottawa. P r o v i n c i a l Patterns While co-operative sales f o r Canada account for 2.2 per cent of national r e t a i l sales, the proportions of co-operative to t o t a l r e t a i l sales vary i n each province, to a considerable 119 degree. Ontario co-operative sales are considerably below the national average while Saskatchewan consumer co-operatives have been able to increase their percentage to three times the national average. Table XIII gives the proportions of various regions in Canada. While gasoline sales have been included in general figures there is only one area in which any large amounts of gasoline and petroleum products are handled by co-operatives. In some other areas, dealerships have been arranged with private o i l companies; i t is d i f f i c u l t to extract these figures, therefore, they have been included. Table XIV on page 121 indicates that consumer co-operatives have gained sales in a l l provinces relative to total r e t a i l sales during 1959 and 1960. While this should be a source of encouragement to co-operators in Canada, i t should not be a source of complacency. The low ratios in Ontario and Brit i s h Columbia point up the problem facing co-operatives in any attempt to increase co-operative sales in Canada. Ontario and British Columbia accounted for 38.4 per cent and 10.1 per cent respectively of total r e t a i l sales in Canada in 1960, and these areas are l i k e l y to maintain these proportions and possibly increase them i f present trends continue. 120 TABLE XIII RETAIL SALES BY PROVINCES COMPARED WITH CO-OPERATIVE RETAIL SALES, 1958 TO 1960 Total Co-operative R e t a i l Sales Sales Ratio ($ m i l l i o n ) ($ thousand) (per cer A t l a n t i c 1958 1,290.1 30,201 2.34 Provinces 1959 1,361.6 32,098 2.36 1960 1,429.6 34,736 2.43 Quebec 1958 3,646,7 67,534 1.85 1959 3,877.6 80,124 2.06 1960 3,944.3 89,760 2.27 Ontario 1958 5,934.4 58,866 .99 1959 6,218.4 64,950 1.04 1960 6,312.7 67,031 1.06 Manitoba 1958 753.6 18,796 2.49 1959 812.9 22,690 2.79 1960 842.5 26,349 3.13 Saskatchewan 1958 913.5 64,676 7.08 1959 950.9 69,844 7.34 1960 938 74,291 7.93 Alberta 1958 1,274.8 26,301 2.06 1959 1,355.1 28,982 2.13 1960 1,366.4 30,526 2.22 B r i t i s h Columbia 1958 1,631.2 22,223 1.36 1959 1,707.1 24,721 1.45 1960 1,668.3 29,446 1.76 Canada 1958 15,444.3 296,743 1.7 1959 16,283.6 333,834 2.0 1960 16,413.5 362,910 2.2 Sources: Canada. Dominion Bureau of S t a t i s t i c s . R e t a i l Trade. Vol . XXXII, No. 12, December, 1961. V. A. Heighton, Co-operation i n Canada. (Canada: Department of Agriculture, 1958-1959-1960). 121 TABLE XIV RATES OF INCREASE - RETAIL SALES IN CANADA BY REGIONS - TOTAL RETAIL AND CO-OPERATIVE RETAIL SALES % Increase over Previous Year Total Co-op Region R e t a i l Sales R e t a i l Sales A t l a n t i c Provinces 1959 5.54 6.28 1960 5.00 8.21 Quebec 1959 6.16 18.6 1960 1.72 12.0 Ontario 1959 4.7 10.3 1960 1.5 4.74 Manitoba 1959 7.86 20.7 1960 3.6 16.1 Saskatchewan 1959 4.09 8.0 1960 -1.3 6.3 Alberta 1959 6.29 10.1 1960 .81 5.3 B r i t i s h Columbia 1959 4.66 11.2 1960 -1.6 19.1 Sources: Canada. Dominion Bureau of S t a t i s t i c s . R e t a i l Trade. Vol . XXXII, No. 12, December, 1961. V. A. Heighton, Co-operation i n Canada (Canada: Department of Agr i c u l t u r e , 1958-1959-1960). The steady increases i n the P r a i r i e Provinces cannot be a t t r i b u t e d s o l e l y to favorable governmental at t i t u d e s . The presence of a s i g n i f i c a n t petroleum co-operative adds strength to the consumer movement, p a r t i c u l a r l y i n Saskatchewan. Of greater s i g n i f i c a n c e for the future i s the changeover from a purely r u r a l base to one embracing a considerable number of 122 urban dwellers. A second trend of importance is the widening of the scope of merchandise offered. Large consumer associations located in Edmonton, Calgary, Regina, Saskatoon and Winnipeg have broadened not only their membership base but have extended into more consumer lines. The trend towards modernization, extension into more consumer lines, and more urban members w i l l result in significant changes. Of paramount importance to growth i s the transition from small, isolated community consumer co-operatives to larger units with modern supermarkets, service stations and integrated programs through the co-operative 13 wholesale societies. A complete assessment of the importance of co-operative retailing in each community presents a d i f f i c u l t task beyond the scope of this inquiry. Aggregate figures as presented in Table XI (page 117) do not indicate the magnitude of the various commodities sold through consumer co-operatives in Canada. Table XV outlines a breakdown of sales by province and by main product groupings for purchasing co-operatives in Canada. The results of a survey of consumer co-operative associations in British Columbia are presented in Chapter VII to indicate the sales volumes of consumer associations in communities of various sizes. Also included is a summary of changes that have 13 The role of co-operative wholesale societies i s discussed in detail in the following chapter. TABLE XV VALUE OF SUPPLIES AND MERCHANDISE SOLD THROUGH CO-OPERATIVES IN CANADA BY PROVINCES, FOR THE CROP YEAR ENDED JULY 31, 1960 Clothing Petroleum Feed, Coal, & Home Products F e r t i l i z e r Mach. Wood 6t Food Furnish & Auto & Spray and Building Province Products ings Hardware Access. Materials Equip. Materials Misc. Total - thousand do l l a r s - B. C. 11,374 2,199 2,698 2,028 10,552 77 275 244 29,446 Alberta 10,406 1,766 2,276 11,253 1,924 478 2,280 143 30,526 Sask. 22,006 3,371 8,081 27,829 1,864 714 8,396 2,030 74,291 Manitoba 7,454 712 2,409 8,766 2,035 427 3,832 714 26,349 Ontario 10,570 361 4,029 9,723 35,349 1,425 3,196 2,378 67,031 Quebec 20,944 1,831 4,156 2,296 51,146 4,937 3,061 1,388 89,760 N. B. 3,410 354 675 807 3,236 44 426 113 9,066 N. S. 8,191 737 758 586 5,675 52 288 290 16,577 P. E. I. 2,766 41 261 134 749 - 11 58 4,019 Newfld. 3,710 825 - 25 332 12 150 20 5,074 Interprov. - 32 - 3,477 4,517 1,488 1,257 10,771 To t a l 1960 100,831 12,229 25,343 63,447 116,339 12,683 23,403 8,635 363,910 1959 r 94,463 11,596 21,516 57,915 109,636 10,763 20,032 7,913 333,834 * Mainly smallwares, e l e c t r i c a l equipment and supplies, r Revised. Source: Co-operation i n Canada 1960. Canada Department of Ag r i c u l t u r e . ro CO 124 taken place in the surveyed co-operatives and an indication of the plans for improvements in the immediate future. Table XV clearly points out the heavy reliance in consumer or purchasing co-operatives on the farm supply commodities. This is quite comparable to the experience in the United States. Feed, f e r t i l i z e r and spray materials provide the majority of sales with food products second in importance. The importance of the petroleum co-operatives can be judged by the fact that Saskatchewan sales of petroleum products accounted for 43.8 per cent of a l l co-operative sales in this line in Canada. The petroleum program of Consumer Co operative Refineries Ltd. i s a prime example of the control of a commodity by the consumer from the service station pump to the o i l well including a l l the intermediary processing and wholesaling f a c i l i t i e s . The heavy concentration of co-operative sales in Western Canada can be observed by comparing the distribution of popula tion in the various provinces with the pattern of sales for a staple group of commodities such as food. This type of analysis would tend to cancel out the overall sales weight of occupational needs such as feed, f e r t i l i z e r and spray materials or petroleum products such as in the co-operatives in Saskatchewan. Table XVI relates percentage distribution of population to percentage distribution of food products sales in consumer co-operatives in the provinces of Canada. Saskatchewan consumer co-operative members purchased 20.7 per cent of Canadian co-operative food sales. The percentage of sales i s four times the popula t i o n concentration i n that province. The weakness of co operative sales i n Central Canada i s c l e a r l y indicated. Food purchases i n consumer co-operatives i n the four western provinces are i n excess of population concentration as are the purchases of the consumer co-operative members i n the three provinces of Prince Edward Island, Nova Scotia and Newfoundland. TABLE XVI PERCENTAGE DISTRIBUTION OF POPULATION COMPARED TO PERCENTAGE DISTRIBUTION OF CO-OPERATIVE RETAIL SALES OF FOOD PRODUCTS BY PROVINCES B r i t i s h Columbia Alberta Saskatchewan Manitoba Ontario Quebec New Brunswick Nova Scotia Prince Edward Island Newfoundland Population Co-operative Sales 8.70 11.2 6.98 10.3 5.48 21.8 5.29 7.4 33.61 10.5 28.78 20.7 3.45 3.3 4.32 8.1 0.62 2.6 2.58 3.6 + Calculated from sales figures, Co-operation i n Canada 1960 Canada Department of Agr i c u l t u r e . * Source: Canada Year Book 1958 (Ottawa: Queen's P r i n t e r s , 1959). The r e l a t i v e l y good showing i n B r i t i s h Columbia and the A t l a n t i c Provinces can be explained by the presence of large 126 consumer co-operatives in the smaller concentrations of popula tion in these provinces. An analysis of nine Br i t i s h Columbia consumer co-operatives is presented in Chapter VII. Charlotte- town Consumers' Co-operative i s one of the largest food stores in that ci t y . Over one-tenth of the population is concentrated in the capital city of Prince Edward Island. Another large consumer co-operative serves Summerside, the only other major concentration of population in that province. Precise sales figures for these co-operatives are not available but personal observation would indicate that a majority of consumer co operative sales in Prince Edward Island i s concentrated in these two co-operatives. The development in Nova Scotia consumer co-operatives i s similar to Prince Edward Island. The British-Canadian Co-operative Society Limited and Sydney Co-operative Society Limited, situated in industrial Cape Breton, the second largest population centre in the province, account for 50 per cent of 14 a l l co-operative sales in Nova Scotia. A large co-operative in Corner Brook in Newfoundland pro vides service in one of the highest income level towns in that province. 14 Scammell, op_. c i t . , p. 10. 127 Membership D i s t r i b u t i o n Separate consumer co-operative membership s t a t i s t i c s are not a v a i l a b l e from Dominion government reports. Aggregate figures are reported for both co-operative marketing and co-operative purchasing associations. According to t h i s report, j o i n t membership i n marketing and purchasing associations was 1,316,484 fo r the crop year ending July 31, 1960. TABLE XVII NUMBER OF ASSOCIATIONS AND MEMBERSHIP OF CO-OPERATIVE MARKETING AND PURCHASING ASSOCIATIONS, BY PROVINCES, FOR THE CROP YEAR ENDED JULY 31, 1960 Associations Shareholders Province Total or Members B r i t i s h Columbia 110 54,855 Alberta 169 222,795 Saskatchewan 449 472,633 Manitoba 107 137,847 Ontario 280 160,157 Quebec 601 94,567 New Brunswick 55 14,029 Nova Scotia 90 29,885 Prince Edward Island 21 6,194 Newfoundland 48 7,257. In t e r p r o v i n c i a l 6 116,265 Tota l 1960 1,936 1,316,484 1959 1,982 1,290,462 * Associations and i n d i v i d u a l s . Source: Co-operation i n Canada 1960. Canada Department of Agr i c u l t u r e , Ottawa. Table XVII shows that more than 50 per cent of co-operative members are resident i n Alberta and Saskatchewan. The number of co-operatives i n the Province of Quebec exceeds those i n a l l other provinces. However, the number of individuals i n associa tions i s exceeded by the membership i n four provinces, Ontario, Manitoba, Saskatchewan, and Alberta. In terms of d e f i n i t i o n of membership the figures i n Table XVII would be considered very inadequate. A d i f f i c u l t y a r i ses from the amount of duplication i n membership. While the figures give the t o t a l membership i t i s conceivable that an i n d i v i d u a l may be a member of several associations. Assem b l i n g s t a t i s t i c s i s further complicated i n that some associa tions perform multiple services i n both marketing and supplying consumer goods. Comprehensive s t a t i s t i c s on consumer co-operatives as d i s t i n c t from marketing co-operatives are a v a i l a b l e from Saskatchewan. 1 5 Membership i n consumer co-operatives was 211,246 at the end of the 1960 f i s c a l year. This represented an increase of 11,671 over the previous year. The number of s o c i e t i e s was 348, which was sixteen less than the previous year. Six of the associations amalgamated with other associa t i o n s , eight were dissolved by the members, and two were struck o f f the Register a f t e r being inactive for a number of years. A summary of a number of associations i n B r i t i s h Columbia i s 15 Co-operative Association Services 1960. Department of Co-operation and Co-operative Development, Saskatchewan (Regina Queen's P r i n t e r , 1961), p. 19. 129 reported separately in this study. A significant point made by the report on Saskatchewan consumer co-operatives showed that 24.7 per cent of the total membership was inactive. This figure compares closely to the figures quoted in Chapter VII on the membership participation in an individual association in that province. The location and size of a selected group of consumer co-operatives in Saskatchewan i s outlined in Table XVIII. A l l major population centres in Saskatchewan are served by consumer associations. According to the 1956 Census nine communities were listed with populations in excess of five thousand. A l l these have large consumer co-operatives. The selection of the associations l i s t e d was on the basis of r e t a i l sales in excess of one million dollars. Even with the proposition stated above concerning inactive members, the figures are indicative of several trends. The complete figures for Saskatchewan indicate that of the 348 consumer associations, 3.4 per cent of the associations have 40.6 per cent of a l l members and transact 34.6 per cent of a l l r e t a i l sales. It must also be remembered that in the majority of cases membership in the association consists of a family membership rather than numerous members in one family or earning unit. 130 TABLE XVIII RETAIL SALES, MEMBERSHIP AND POPULATION FIGURES FOR A GROUP OF SELECTED CONSUMER ASSOCIATIONS 1956 R e t a i l Sales Membership Population Sherwood (Regina) 5,234,571 23,850 89,755 Saskatoon 5,028,587 16,066 72,858 Pioneer (Swift Current) 3,627,742 8,722 10,612 Moose Jaw 3,004,555 8,774 29,603 Lloydminster 1,890,650 4,000 5,077 Weyburn 1,775,623 4,153 7,684 Yorkton 1,600,357 4,511 8,256 Kindersley 1,493,637 2,588 2,572 Prince Albert 1,458,850 4,177 20,366 North B a t t l e f o r d 1*188,007 3,005 8,924 Melfort 1,025,350 3,726 3,322 Assiniboia 1,017,645 2,133 2,027 28,345,074 85,705 Total Saskatchewan 83,211,863 211,246 Sources: Co-operative Association Services 1960. Department of Co-operation and Co-operative Development, Government of Saskatchewan, 1961. Canada Year Book 1961 (Ottawa: Queen's P r i n t e r s , 1962). There i s a trend toward amalgamation of smaller units to the larger associations. Two smaller associations i n the Swift Current area were amalgamated into the Pioneer Co-operative Association (Swift Current). A small group at Theodore was amalgamated into the Yorkton Co-operative Association. Three small associations were amalgamated into larger units with sales i n the $200,000 to $300,000 sales volume brackets. A locker plant was amalgamated with a consumer association with sales 131 i n excess of $400,000. 1 6 The r o l e of food products, service stations and department store items i s becoming more important r e l a t i v e to farm supplies and feed. Saskatoon Co-operative Association Ltd. reported 54.8 per cent of i t s 1961 sales i n f o o d , ^ Sherwood Co-operative Association Limited at Regina showed 55.5 per cent of i t s sales 18 were i n foods and the department store. Further expansion planned by Saskatoon Co-operative Association Ltd. w i l l tend to increase the proportions spent on consumer goods i n these categories. An analysis of operating r e s u l t s of Saskatchewan consumer associations conducted by the Department of Co-operation and Co-operative Development of the Saskatchewan government showed that the number of associations with sales i n excess of $400,000 had r i s e n from 2 per cent i n 1949 to 11 per cent i n 1960. Consumer co-operatives i n the sales range of $50,000 or under had 19 dropped from 71 per cent i n 1949 to 19 per cent i n 1960. 16 Co-operative Association Services 1960. op. c i t . . p. 7. 17 Saskatoon Co-operative Association Ltd., Annual Report 1961. 18 Sherwood Co-operative Association Limited, Annual Report  1961. 19 Analysis of F i n a n c i a l Statements. Saskatchewan Purchasing Co-operatives, F i s c a l Year 1960, Research and S t a t i s t i c a l Services Department of Co-operation and Co-operative Develop ment, Regina. V. EXPANSION PLANS 132 Details of consumer expansion programs are available for associations a f f i l i a t e d with Federated Co-operatives Limited. Table XIX l i s t s projects completed and forecast. Retail co operatives in Manitoba, Saskatchewan and Alberta spent over $4,800,000 on 192 different projects in 1961 and 110 possible new projects involving expenditures of nearly $9,500,000 are predicted for 1962. TABLE XIX CONSUMER CO-OPERATIVE EXPANSION PROJECTS COMPLETED IN 1961 AND PLANNED FOR 1962 - PROVINCES OF MANITOBA, SASKATCHEWAN, AND ALBERTA Completed Planned in 1961 for 1962 Stores 26 34 Lumber Sheds 22 17 Service Stations 9 16 Petroleum 15 18 Renovations 62 25 Miscellaneous, including fixtures 58 192 110 Source: Federated Co-operatives Limited, 1961 Annual Report. The expansion plans of a group of Bri t i s h Columbia consumer co-operatives are outlined in Chapter VII. The consumer movement in Canada, particularly in Western Canada, shows v i t a l i t y and strength and this can be attributed 133 to several factors: there i s awareness of the need for expan sion of present f a c i l i t i e s to service more consumer needs and the need for the amalgamation of smaller units into more e f f i  cient economic units. A large, co-operative wholesale unit serving a l l three prairie provinces permits a high degree of integration and consequent benefits. Development of additional consumer associations is not l i k e l y to be significant in the future, though the number of members may continue to climb. Several studies made within the co-operatives point out several very important factors to be recognized i f orderly progress i s to be made. One i s the need for more adequate research on problems before major decisions are made. The Saskatoon Co-operative Association conducted an intensive survey of their membership before planning expansion and discovered that peripheral development of outlying supermarkets was not indicated for some time ahead. Consequently the decision was made to expand their present location in the 20 center of the cit y . 20 Interview, M. Benson, Public Relations Director, Saskatoon Co-operative Association Ltd., May 14, 1962. VI. SUMMARY 134 Canadian consumer co-operative associations have a strong r u r a l base with sales of commodities of a vocational type constituting as much as 60 per cent of sales. This i s the opposite to the development of the large consumer co-operative developments i n the United Kingdom and Sweden but quite s i m i l a r to the pattern i n the United States. Co-operative growth and development i s unevenly spread across Canada with high concentrations of consumer co-operatives i n the P r a i r i e Provinces. Co-operative stores have wide d i v e r s i t y i n s i z e , l ocation and products handled. They may be small organizations i n r u r a l locations or large m u l t i - m i l l i o n - d o l l a r complete shopping centres i n a large population centre. The consumer co-operatives form a segment of a large and rather complex grouping of co-operative endeavour which tends to c l u s t e r around the s p e c i f i c i n t e r e s t of the Canadian co-operator. A m u l t i p l i c i t y of co-operative marketing groups, savings and loan associations (cr e d i t unions) and various service co-operatives such as insurance, health, housing, present a mosaic of co-operation that lacks the more precise integration of the B r i t i s h movement. Despite f i f t y or more years of active p a r t i c i p a t i o n i n the economic l i f e of the country, consumer co-operatives s t i l l are a minor par t i c i p a n t i n the d i s t r i b u t i v e sector of the 135 economy with a national average of 2.2 per cent of r e t a i l sales, unevenly d i s t r i b u t e d i n the country. The province of Saskatchewan co-operatives handle 7.83 per cent of r e t a i l sales while Ontario co-operatives are at 1.06 per cent of sales. Lack of accurate data of membership i n consumer co-operatives precludes any close analysis of the p a r t i c i p a t i o n of the co-operatives i n r e t a i l trade by area. This i s not true of the s i t u a t i o n i n Saskatchewan where comprehensive reports are issued. The Dominion Department of Agriculture s t a t i s t i c s lump marketing and consumer membership together while separating the purchasing and marketing fi g u r e s . With the exceptions of the metropolitan areas of Regina, Saskatoon, Calgary, Edmonton and Winnipeg, consumer co-operatives are not functioning i n the major population centres of Toronto, Montreal, Ottawa, Vancouver, St. John, Hamilton, Quebec and Windsor. With the great trend towards urbanization i n these centres co-operative leaders must look towards the ways and means of stimulating co-operative i n t e r e s t i n these areas. Smaller population centres, however, have excellent consumer stores, most notably the Cape Breton i n d u s t r i a l area, Prince Rupert, Saskatoon, Swift Current, Moose Jaw, Prince Albert, and numerous other areas. This i s p a r t i c u l a r l y evident i n Saskatchewan where the major centers have growing associations which have changed from purely r u r a l to a more urban membership. 136 CHAPTER VI CO-OPERATIVE WHOLESALE ACTIVITY I. INTRODUCTION The consumer co-operative movement i n Canada i s served by s i x large p r o v i n c i a l wholesale s o c i e t i e s as w e l l as a number of smaller regional wholesale s o c i e t i e s . Approximately sixteen hundred co-operative r e t a i l outlets i n a l l ten provinces are member-owners. These 1,700 r e t a i l stores i n turn own six whole sales; Co-op Fede'ree de Quebec (1961 volume $116 m i l l i o n ) ; Federated Co-operatives (Saskatoon: $81.7 m i l l i o n ) ; United Co-ops of Ontario ($75 m i l l i o n ) ; Maritime Co-op Services ($17.5 m i l l i o n ) ; Federation des Magasins Co-operative ($10.5 m i l l i o n ) ; and B. C. Co-op Wholesale Society ($5 m i l l i o n ) . Voting practices vary, but i n general voting power i s r e l a t e d to volume of purchases from the wholesale and influence of management i s s t r ong. 1 An assessment of a l l co-operative wholesale a c t i v i t i e s i n Canada i s too large a topic for t h i s paper. Consequently, det a i l e d references w i l l be made to only two of the co-operative wholesale s o c i e t i e s . 1 "How Co-op Organization Operates Across Canada", F i n a n c i a l  Post, Vol. LVI, No. 8, February 24, 1962, p. 23. The figures quoted by F i n a n c i a l Post are not i n agreement with figures issued by the Canada Department of Agriculture i n Co-operation  i n Canada 1960. 137 Selected Co-operative Wholesale Societies The a c t i v i t i e s of Federated Co-operatives Limited, and B r i t i s h Columbia Co-operative Wholesale Society w i l l receive attention. The f i r s t mentioned i s the largest i n Canada, while the second has the smallest volume and fewest number of member associations. A further reason for such a choice i s that Saskatchewan, which provides the bulk of Federated Co-operative's sales, has the highest r a t i o of co-operative r e t a i l sales to private r e t a i l firms while B r i t i s h Columbia consumer co-operative sales are below the national average. S i m i l a r i t y of operating pra c t i c e s , services offered, and inter-wholesale integration through I n t e r p r o v i n c i a l Co-operatives Limited would make many of the following observations of u t i l i t y with respect to other co-operative wholesale s o c i e t i e s i n Canada. Two Distinguishing C h a r a c t e r i s t i c s Two c h a r a c t e r i s t i c s of co-operative wholesale s o c i e t i e s d i s t i n g u i s h them from private wholesalers. 1. In many cases the o r i g i n a l impetus for wholesaling came from the need for regional marketing of primary a g r i c u l  t u r a l products; the d i s t r i b u t i o n of groceries, hardware and vocational goods followed. Maritime Co-operative Services 2 originated as a marketing association early i n 1927. United 2 W. H. McEwen, "The Cover Picture - M.C.S.", Ottawa: Canadian Co-operative Digest, V o l . 5, No. 1, Spring, 1962,, p. 4. 138 Co-operatives of Ontario was i n i t i a l l y organized to market 3 l i v e s t o c k on a co-operative basis. Eastern Co-operative Services at Antigonish received i t s main support from dairy and creamery operations f o r a number of years. Cooperative Federee de Quebec i s another large operation with a s i g n i f i c a n t volume i n a g r i c u l t u r a l marketing. In 1960 co-operative whole sale s o c i e t i e s across Canada marketed i n excess of $116 m i l l i o n of farm production.^ S i g n i f i c a n t differences e x i s t i n the functions and operations of the organizations. A l l of them supply merchandise including food supplies to t h e i r l o c a l co-operative members. But, whereas those i n Western Canada do not engage i n the marketing of farm products, those i n the Eastern Provinces from Ontario to the Maritimes also act as central marketing agencies for farm products such as li v e s t o c k and dairy products.-* 2. I n i t i a l c a p i t a l i n every case was nominal. The Saskatchewan Co-operative Wholesale Society (forerunner to Federated Co-operatives Limited) began operations i n 1929 with twenty-nine hundred d o l l a r s i n c a p i t a l . The B r i t i s h 3 Malcolm McNair et ajL., Problems i n Marketing (New York: McGraw-Hill Book Co., 1957), p. 305. 4 V. A. Heighton, Co-operation i n Canada 1960 (Ottawa: Economics D i v i s i o n , Canada Department of Agriculture, September 1961), p. 9. The bulk of farm production marketing i n co-opera t i v e channels i s made through s p e c i a l i z e d agencies such as Wheat Pools. S l i g h t l y more than 33 per cent of the t o t a l value of a l l a g r i c u l t u r a l products marketed i n Canada i n 1960 were handled by co-operatives for a t o t a l of $972 million...p.3. 5 Royal Commission on P r i c e Spreads of Food Products, Report (Ottawa: Queen's P r i n t e r , 1960), V o l . I l l , p. 29. 6 B. Johnsrude, "The Wholesale i n Consumer Co-operation", Ottawa: Canadian Co-operative Digest, A p r i l 1960, p. 52. 139 Columbia Co-operative Wholesale Society was set up with less 7 than $10,000 i n cash i n 1940. Despite these i n i t i a l l y low investments membership equity has continued to increase and represents i n the main, patronage refunds that have been a l l o - g cated to so c i e t i e s and retained. I I . CO-OPERATIVE WHOLESALE OPERATIONS Sales Increases The amalgamation on November 1, 1961 of the Alberta Co operative Wholesale Association Limited with Federated Co operatives Limited, under the l a t t e r name, provides integrated wholesale operations for the three P r a i r i e Provinces of Manitoba, Saskatchewan and Alberta. Sales of the two wholesale s o c i e t i e s were reported separately to October 31, 1961. Federated Co operative's sales were $71,941,000 and the Alberta Co-operative Wholesale Society recorded $11,428,000 i n sales to members. To t a l sales f o r the three provinces reached $81,757,000 for a q gain over 1960 of 7 per cent. The B r i t i s h Columbia Co-operative 7 1961 Annual Report. B r i t i s h Columbia Co-operative Wholesale Society (Burnaby, B. C , 1962), p. 9. 8 Heighton, p_p_. c i t . , p. 15. Members' equity represented 44 per cent of the t o t a l assets of $6 m i l l i o n reported by co-operative wholesale s o c i e t i e s i n Canada i n 1960. 9 1961 Annual Report, Federated Co-operatives Limited, Saskatoon, p. 11. 140 Wholesale Society increased sales from $4,560,197 i n 1960 to $5,260,928 i n 1961, a gain of 15.3 per c e n t . 1 0 Grocery sales The progress of the co-operative wholesale s o c i e t i e s i s indicated i n Table XX. Substantial increases are evident i n t h i s f i e l d with very s i g n i f i c a n t increases i n Alberta and B r i t i s h Columbia while the consumer co-operatives i n Saskatchewan and Manitoba increased t h e i r grocery purchases from t h e i r co-operative wholesale society at a less rapid rate. TABLE XX CO-OPERATIVE WHOLESALE GROCERY SALES 1960 1961 Per Cent - Dollars - Increase Federated Co-operatives Limited* 14,868,000 16,623,000 11.8 Alberta Co-operative Wholesale Society 3,423,000 4,656,000 36.0 B r i t i s h Columbia Co-operative Wholesale Society 1,768,600 2,243,000 27.0 Totals 20,059,600 23,522,000 17.2 * Before amalgamation with Alberta Co-operative Wholesale Association. Sources: 1961 Annual Reports of the Federated Co-operatives Limited and the B r i t i s h Columbia Co-operative Wholesale Society Ltd. 10 1961 Annual Report. B r i t i s h Columbia Co-operative Wholesale Society, p. 11. 141 Services Provided Substantial gains in volume both at the r e t a i l and whole sale level has required the provision of additional services from the wholesalers. The merger between Alberta Co-operative Wholesale Association and Federated Co-operatives Limited w i l l result in the extension of services not previously supplied by the Alberta Co-operative Wholesale Association. Certain uniform practices are observed by Br i t i s h Columbia Co-operative Wholesale Society Ltd. and Federated Co-operatives Limited in order to standardize operating procedures with a view to possible amalga mation in the future. However, this process is also more imme diately advantageous by the use of common f a c i l i t i e s and promo tional materials. Adequate selection Of primary concern to any consumer co-operative society is the a b i l i t y of the wholesale society to provide goods of stan dard qualities, in adequate quantities, and at competitive prices. The Br i t i s h Columbia Co-operative Wholesale Society provides 3,000 to 3,500 product lines in the grocery trade. With few exceptions this range covers the requirements of the consumer co-operative associations. These lines include stan dard brand products and the "Co-op" private label line. 142 P r i c i n g p o l i c y Federated Co-operatives Limited and B r i t i s h Columbia Co operative Wholesale Society Ltd. operate on the service fee or "cost plus" system of p r i c i n g . Wholesale prices are quoted on a base p r i c e to which i s added a margin that i s determined by the volume of goods purchased by the consumer co-operative a s s o c i a t i o n . 1 1 Private l a b e l The use of private brands or labels i n order to create product d i f f e r e n t i a t i o n i s a common device i n the r e t a i l trade. Corporate chains, voluntary chains, department stores and large manufacturers have become involved i n the production of goods with a p a r t i c u l a r brand i d e n t i f i c a t i o n . The co operatives, through t h e i r wholesale s o c i e t i e s and Int e r p r o v i n c i a l Co-operatives Ltd., have developed a private l a b e l program. a. Purpose In order to co-ordinate and amass volume around s p e c i f i c products so that economic production of goods can be accelerated, co-operators i n Canada have a "Co-op Label Program". The Co-op l a b e l i s a private brand, owned by the co-operatives and registered i n the Patents Department of the Federal Government. In order to control q u a l i t y of products packed under the l a b e l and to e l i m i  nate abuses, the Co-op brand name has been 11 B. Johnsrude, General Manager, B r i t i s h Columbia Co-operative Wholesale Society Ltd., interview, May 1, 1962. 143 assigned to I n t e r p r o v i n c i a l Co-operatives Limited, i n whose name i t i s registered.12 b. Revision c a r r i e d out A r e v i s i o n of the l a b e l program was c a r r i e d out i n 1961 i n that the previous method of grading goods according to red, green and blue l a b e l s , i n d i c a t i n g standard, fancy, and choice grades, was abandoned. Currently two names are used, "Co-op" and "Harmonie". The Harmonie l a b e l generally denotes a more economical grade. Items under the l a b e l are either processed by I n t e r p r o v i n c i a l Co-operatives Ltd. or produced under contract. I n t e r p r o v i n c i a l Co-operatives L t d . operates a plant i n Burnaby, B. C , where tea, coffee, peanut butter and dry f r u i t s are processed. Quality i s monitored by a research laboratory operated by I n t e r p r o v i n c i a l Co-operatives Ltd. i n Winnipeg. c. Petroleum products No discussion of "Co-op" l a b e l products would be complete without reference to the "Co-op" petroleum products which are produced i n a completely integrated operation through Consumer Co-operatives Refineries Limited, a subsidiary of Federated Co-operatives Limited. While a d e t a i l e d analysis i s not fea s i b l e , the production of petroleum products i s an important factor i n the co-operative economy. In 1961 4,587,000 barrels 12 B. Johnsrude, "The Wholesale i n Consumer Co-operation", Canadian Co-operative Digest, A p r i l 1960, p. 55. 144 of crude o i l were processed and 136,485,000 gallons of refined fuels were sold along with 1,509,000 gallons of l u b r i c a t i n g 13 o i l s and 1,694,000 i n grease. Specialized services Despite the humble origins of the wholesale s o c i e t i e s the need and usefulness of such organizations i s becoming more evident as times change. The operation of scattered, i s o l a t e d consumer associations requires the co-operative wholesale s o c i e t i e s to provide assistance i n many f i e l d s . While i n the i n i t i a l stages the functions of a co-operative wholesale were thought to be merely to supply member co-operatives with t h e i r requirements on a wholesale basis, the actual operation of the wholesale has extended far beyond t h i s primary r o l e . The wholesale organi zations have become co-ordinating bodies for consumer co-operative a c t i v i t i e s , and they have accepted the r e s p o n s i b i l i t y of giving assistance to the general development of the consumer move ment, including leadership and assistance i n the f i e l d of consumer education.14 Progress i n the provision of s p e c i a l i z e d services has been made i n a number of f i e l d s . The major f i e l d s have been i n management assistance, accounting procedures, conferences, and promotional a c t i v i t y . The amount of d i r e c t f i n a n c i a l assistance possible through the wholesale s o c i e t i e s has been l i m i t e d by 13 1961 Annual Report, Federated Co-operatives Limited, op. c i t . , pp. 39-42. 14 Johnsrude, op_. c i t . , p. 52. 145 t h e i r resources. a. Management agreements A procedure c a l l e d "Management Agreement" i s often employed whereby the co-operative wholesale society undertakes to a s s i s t the consumer co-operative association i n the management of the association. Management agreements as used i n B r i t i s h Columbia 1 5 provide that the d i r e c t i o n of the business or businesses of the association i s undertaken by the society on a mutually agreed fee. The services to be supplied by the society are s t i p u l a t e d as: accounting, purchasing of inventories, employment of personnel, administration of salary and wage schedules, r e p a i r s . The association, through i t s Board of Directors, establishes c r e d i t p o l i c y , holds regular meetings, c a r r i e s out public r e l a  tions functions, provides finances, controls c a p i t a l expenditures. When a management agreement has been signed between the society and a member association a further agreement i s completed. A "Resident Manager Agreement" i s signed between an association that has completed a management agreement with the society and the manager of the association. The manager operates under the 15 This section i s condensed from documents e n t i t l e d "Manage ment Agreement" and "Resident Manager Agreement" made availa b l e to the author by the B r i t i s h Columbia Co-operative Wholesale Limited. The term "society" r e f e r s to the wholesale society and the term "association" to the consumer co-operative organi zation i n t h i s p a r t i c u l a r context. 146 authority of the wholesale society and i n turn the society agrees to provide supervision, review s a l a r i e s and make a v a i l  able transfers to other suitable co-operative po s i t i o n s . The resident manager becomes an employee of the society and his remuneration i s set by the society's general manager and the cost i s borne by the association. Twenty co-operative associations i n B r i t i s h Columbia are currently operating under management agreements. In the main, these are smaller units which f e e l the need for more profes sional judgment of t h e i r operations than i s possible through l o c a l determination. The use of centralized accounting pro vided by the society i s mandatory where management agreements have been concluded with a s s o c i a t i o n s . 1 ^ Similar management agreements have been concluded between Federated Co-operatives Limited and a number of associations i n the area served by that society. In contrast to the s i t u a  t i o n i n B. C*, the 90 to 100 management agreements currently i n force through Federated Co-operatives Limited are with larger units i n the area. The involvement i n c a p i t a l loans by the wholesale society i n substantial amounts required management agreements as a prerequisite to the granting of the l o a n s . ^ 16 Interview, B. Johnsrude, op_. c i t . 17 Interview, Henry Cooperstock, Director of Research, Federated Co-operatives Limited, May 14, 1962. 147 While these agreements may appear to be similar to voluntary chain agreements, no provision i s made for any stipulated amount of purchases from the co-operative wholesale societies or participation in promotional activity. The main purpose is to provide adequate supervision, management personnel and continuity of employment for suitable personnel. b. Retail Services Division Responsibility for the administration of management con tracts in the British Columbia Co-operative Wholesale Society Ltd. rests with the Retail Services Division. Assistance and advice in the f i e l d of retailing is handled by this division. c. Audit services Centralized accounting for twenty associations i s carried out by the Br i t i s h Columbia Co-operative Wholesale Society Ltd. A recent innovation is the use of an outside service bureau whereby data are placed on special cards to be processed by computers, giving financial and operating statements monthly. A number of the wholesale society's functions are also handled in this manner. Audits of associations are carried out by the audit d i v i  sion, including travel audits whereby the audit is conducted on the association's premises. The division employs qualified personnel including a chartered accountant and registered public accountant. 148 d. Managers 1 conferences Annual conferences for consumer co-operative managers have been sponsored by the B r i t i s h Columbia Co-operative Wholesale Society Ltd. for the past f i v e years. In 1962, two days were devoted to reviewing merchandising methods, procedure and co ordination between the wholesale and r e t a i l operations. A seminar on ap p l i a n c e - s e l l i n g and service was held and included representatives from I n t e r p r o v i n c i a l Co-operatives Limited and the manufacturer of the appliances demonstrated. e. J o i n t sales events For several years the co-operative wholesale s o c i e t i e s i n B r i t i s h Columbia and the P r a i r i e s have co-operated with the r e t a i l associations i n two sales promotional periods a year. Spring and Autumn events have been developed with two main objectives: 1. More t r a f f i c into consumer co-operatives, and 2. I n i t i a t i o n of a promotional drive for membership on 18 the part of the Board of Directors of consumer co-operatives. Special promotional materials are made available for the eight days of the events as well as sp e c i a l purchases from suppliers that allow sale " s p e c i a l s " . These events are consistent with the co-operatives' attempt to provide goods at savings to 18 Interview, B. Johnsrude, op_. c i t . 149 members. The response on the part of associations i s gaining momentum and these events w i l l remain a pattern i n the area for the foreseeable future. Federated Co-operatives Limited Due to a larger volume and more experience than the B r i t i s h Columbia Co-operative Wholesale Society Ltd., Federated Co-operatives Limited i s able to provide more services. A l l the services l i s t e d may not, as yet, have been extended to Alberta consumer co-operatives. They w i l l be extended when experienced personnel are a v a i l a b l e . Administrative Assistance: d i r e c t supervision, accounting services, audits, surveys, provision of forms, advice on equipment. Personnel and Training Programs: s t a f f recruitment, and s e l e c t i o n , s t a f f t r a i n i n g , conferences for managers, s t a f f c l i n i c s . Construction and Related Services: design of f a c i l i t i e s , construction, paint-up service, store f i x t u r e s . Merchandising Assistance: technical assistance to con sumers, d i r e c t feed delivery, inventory advice, cata logues, p r i c i n g assistance, s p e c i a l showings. Advertising and P u b l i c i t y : The Co-operative Consumer, posters, advertising programs, newspaper mats, no v e l t i e s , l i t e r a t u r e , radio s c r i p t s , TV s l i d e s , speakers, consumer education material. F i n a n c i a l Assistance: loans or guarantees for l o c a l expansion, financing feed programs, budget plans. Grants or Subsidies: for highway signs, j o i n t advertising, to Co-operative Unions, educational assistance, research p r o j e c t s . 1 ^ 19 Abridged from Annual Report. Federated Co-operatives Ltd., p. 55-56. 150 P a r t i c u l a r attention should be directed to The Co-operative  Consumer, published by Federated Co-operatives Ltd. The 1961 c i r c u l a t i o n figure was 185,000. The publication i s issued semi-monthly to the l o c a l co-operative associations' members and features consumer education materials and co-operative news with adequate space for i n s e r t i o n of material of inte r e s t to s p e c i f i c regions. R e t a i l Store Manager P a r t i c i p a t i o n Federated Co-operatives Limited and the B r i t i s h Columbia Co-operative Wholesale Society Ltd. recognize the need for close collaboration between the s o c i e t i e s and the managers of consumer co-operative associations. Management Advisory Commit tees have been organized i n both areas served by the wholesale s o c i e t i e s . The Advisory Committee i n B r i t i s h Columbia i s orga nized i n an informal manner but Federated's procedure i s more formalized. The Committee now consists of 22 managers of r e t a i l co-ops who meet at regular i n t e r v a l s with FCL's senior management. One member i s elected by the manager of each of FCL's 19 operational d i s t r i c t s . Three others are appointed to the Committee to balance repre sentation with respect to size and type of co-operatives.20 A publication e n t i t l e d "The Co-op Manager" was introduced i n 1961. This magazine i s published by Federated Co-operatives 20 1961 Annual Report. Federated Co-operatives Ltd., op. c i t . , p. 53. 151 Limited with assistance from an E d i t o r i a l Advisory Board on which the managers of associations are represented. I I I . PARTICIPATION OF CONSUMER CO-OPERATIVE ASSOCIATIONS P a r t i c i p a t i o n of consumer co-operative associations i n the a c t i v i t i e s of co-operative wholesale s o c i e t i e s involves more than the normal commercial relationships between wholesale suppliers and t h e i r customers. Three sectors are involved: ownership, democratic control and purchases. Ownership As indicated previously, co-operative associations own 44 per cent of equity i n co-operative wholesale s o c i e t i e s across 21 Canada. Equity c a p i t a l i n B r i t i s h Columbia Co-operative Wholesale Society i s much lower at 16 per cent. This can be a t t r i b u t e d to the expansion program which has been c a r r i e d out i n the past few years. Federated Co-operatives Limited (before amalgamation with the Alberta Co-operative Wholesale Association) had 46 per cent membership equity while the Alberta Wholesale Society had 25 per cent. In terms of equity to f i x e d and term assets the three wholesale s o c i e t i e s had r a t i o s of 52 per cent, i n the B r i t i s h Columbia Wholesale Society, 21 Heighton, op_. ext., p. 15. 152 66 per cent in the Alberta Co-operative Wholesale Society and 22 85 per cent in Federated Co-operatives Limited. While the above figures show direct ownership equity on the part of member associations, indirect ownership by parallel or associated co-operatives would indicate a larger share of ownership by persons who are co-operative members. For example, the Bri t i s h Columbia Co-operative Wholesale Society has deben tures and Savings Certificates outstanding of close to $200,000 as well as lines of credit with the Br i t i s h Columbia Central 23 Credit Union Limited. Federated Co-operatives Limited 1s largest commitment is a $15,312,000 bond issue secured by hypothecation of the real property of Federated Co-operatives and Consumers' Co-operative Refineries Limited and held by 24 various co-operators in the province. At a time of need for rapid expansion in many areas the lack of equity may prove a formidable barrier to co-operatives. A low rate of savings on operations over the years 1957 to 1961 has slowed down the accumulation of member equity capital in the British Columbia Co-operative Wholesale Society, but Federated Co-operatives' savings have been substantial and by retention after allocation to associations have made expansion 22 1961 Annual Report. British Columbia Co-operative Wholesale Society, op_. c i t . . p. 10. 23 Ibid., p. 25. 24 1961 Annual Report, Federated Co-operatives Ltd., p. 25. 153 possible. The sale of Co-operative Savings Bonds has provided funds and more financing w i l l be carried out in this manner in the future. Democratic Control The emphasis in co-operative writings on the value of demo cratic control over production and distribution would imply two ideas: 1. a suitable method for the democratic control of societies and associations, and, more importantly, 2. the intelligent use of those rights by a significant number of persons. Each co-operative association which is a member of the British Columbia Co-operative Wholesale Society i s entitled to a minimum representation of one voting delegate at the annual meeting of the wholesale society. Additional voting delegates are allocated to an association based on the volume of goods purchased during the previous year. The maximum number of voting delegates from each association is five. The 1962 meeting of the British Columbia Co-operative Wholesale Society had 25 consumer societies repre sented from a total of 112 with 40 delegates in attendance. The delegates debated resolutions dealing with financing addi tional capital requirements and other items of interest to the wholesale society and the consumer associations. A number of candidates were nominated for election to the Board of Directors 154 25 of the wholesale society. Due to the widespread operations of Federated Co-operatives the electoral process is based on d i s t r i c t meetings of 16 elec toral d i s t r i c t s . Directors to Federated are nominated at each meeting as well as a quota of delegates to the Annual Meeting of Federated Co-operatives Ltd. Of the 551 trading co-operatives entitled to representation at the 16 d i s t r i c t meetings, 395 or 72 per cent were in attendance in 1961. Attendance ranged from a low of 46 per cent in one d i s t r i c t to a high of 100 per cent with the mean f a l l i n g at the same point as the arithmetic average. Eight of the directors are from Saskatchewan, four from Manitoba, and four from Alberta, according to the by-law . . 26 provisions. Purchases During 1961 thirty-seven consumer co-operative associations in B r i t i s h Columbia purchased $2,191,000 of groceries from their 27 wholesale society and a total of $4,603,061 in a l l lines. The annual report of the wholesale society estimates that 75 per cent of member needs in groceries are purchased from the society. This estimate would appear to be excessive. Food 25 The author was present at the Annual Meeting of British Columbia Co-operative Wholesale Society on March 27, 1962, and the material presented i s based on notes taken at that time. 26 1961 Annual Report, Federated Co-operatives Ltd., p. 21. 27 1961 Annual Report, Bri t i s h Columbia Co-operative Whole sale Society, p. 11. 155 products sales in 1960 by Br i t i s h Columbia co-operatives are l i s t e d at over $11 million. Admittedly f r u i t , vegetables, and meat products are not handled by the wholesale society but there i s a wide discrepancy in any case. Twelve associations (32.4 per cent) purchased $1,141,030 (78.7 per cent) of the wholesale society's sales during 1961. With one exception these represent the largest consumer co-operatives in the pro vince. A further change is anticipated as a large co-operative with over a million dollars in food sales has begun to use the services of the British Columbia Co-operative Wholesale Society during the current year. Consumer co-operative association u t i l i z a t i o n of the society can be deduced from a study of the figures published by the Canada Department of Agriculture. Food products sales of consumer co-operatives in Br i t i s h Columbia for 1960 over 2 8 1959 increased by only 1.2 per cent while during the same period grocery sales of the wholesale society in British 29 Columbia increased by 15.4 per cent. Though the periods quoted do not coincide exactly they are parallel to a large degree. Statistics for consumer co-operative sales for 1961 w i l l not be available u n t i l September 1962. The Br i t i s h Columbia 28 Co-operation in Canada 1960. op. c i t . , p. 11. 29 1961 Annual Report, British Columbia Co-operative Wholesale Society, p. 11. 156 Co-operative Wholesale Society showed a substantial increase of 27 per cent i n 1961 which would indicate that a considerable increase i n sales to associations i s capturing a larger portion of t h e i r business. Federated Co-operatives Limited The degree of consumer co-operative p a r t i c i p a t i o n i n Federated Co-operatives Limited can be observed from Table XXI. TABLE XXI RETAIL CONSUMER CO-OPERATIVE SALES RELATED TO CO-OPERATIVE WHOLESALE SOCIETY SALES (FOOD PRODUCTS) Co-operative R e t a i l Sales ($ thousand) 1958 1959 Increase 1960 Increase Manitoba 4,327 6,955 2,628 60.7% 7,454 499 7.29% Saskatchewan 19,698 21,338 1,640 8.3% 22,006 668 3.1 % Combined 24,025 28,293 4,268 17.7% 29,460 1,167 4.1% Co-operative wholesale Sales ($ thousand) Federated 10,297 13,077 2,780 27% 14,868 1,791 13.7% Sources: Annual Reports. 1960 and 1961, Federated Co-operatives. Co-operation i n Canada, Canada Department of A g r i c u l  ture, Ottawa: Reports for 1958, 1959, 1960. Manitoba and Saskatchewan consumer co-operative associations gained $4,268,000 i n food r e t a i l sales i n 1959 or 17.7 per cent while co-operative wholesale sales increased by $2,780,000 or 27 per cent. Allowing a 20 per cent margin added to wholesale prices would indicate that $3,336,000 of the increase i n 1959 157 of associations' sales were purchased through the co-operative wholesale society. As fresh f r u i t and vegetables and meats are not handled by the wholesale society a major portion of the sales increase was purchased from the wholesale society. The r e s u l t s i n 1960 are s t r i k i n g evidence of the u t i l i z a t i o n of the wholesale society by the associations. R e t a i l sales increased by $1,167,000 or 4.1 per cent while wholesale sales increased by $1,791,000 or 13.7 per cent for an imputed r e t a i l sales value of $2,149,000 which was $358,000 more than r e t a i l sales gain by the associations. An a l t e r n a t i v e method of determining the p a r t i c i p a t i o n by the associations i n the wholesale society would be by comparing the purchases of consumer co-operative associations as a proportion of r e t a i l sales. In 1959 associations purchased $13,077,000 of t h e i r r e t a i l sales requirements from the wholesale society at wholesale p r i c e s . In 1960 purchases increased to $14,868,000 out of r e t a i l sales of $29,460,000. On a percentage basis purchases by associations went from 46.2 per cent i n 1959 to 50.4 per cent i n 1960. Canadian wholesale sales for groceries and food s p e c i a l i t i e s 30 increased 8.9 per cent between 1958 and 1959, compared to 27 per cent for Federated Co-operatives operations for the same period. R e t a i l sales by provinces have been compared i n Chapter V. 30 Dominion Bureau of S t a t i s t i c s , Canada Year Book 1961 (Ottawa: Queen's P r i n t e r , 1961), p. 886. 158 The figures presented i n Table XXI r e f e r to food and grocery sales only. Federated Co-operatives Ltd. operates a number of other departments with varying proportions of sales to consumer associations. Petroleum products sold by r e t a i l co-operatives i n Saskatchewan are produced by the co operative o i l r e f i n e r y i n Regina. IV. CHANGES SINCE WORLD WAR II Just as rapid expansion was undertaken i n other areas of r e t a i l d i s t r i b u t i o n , the co-operative movement expanded and developed into new f i e l d s . The growth was most evident i n the wholesale l e v e l but i t might be remembered that t h i s growth was a r e f l e c t i o n of a strong expansionary trend on the part of consumer co-operative associations i n communities throughout the P r a i r i e s and on the West Coast. B r i t i s h Columbia Co-operative Wholesale Society The B r i t i s h Columbia Co-operative Wholesale Society Limited was incorporated i n 1939 and found i t s e l f highly r e s t r i c t e d during the period of r a t i o n i n g and lack of supplies. Sales during 1945 amounted to only $50,000. By 1961 sales had increased to $5,260,927 with 1959 r e g i s t e r i n g a m i l l i o n - d o l l a r increase i n one year.^ 1 31 1961 Annual Report, B r i t i s h Columbia Co-operative Wholesale Society, p. 35. 159 This wholesale society has attempted to prepare an o v e r a l l development plan. I t was i n i t i a t e d i n 1956 with expansion i n view and a f t e r three years the Board of Directors began to consider a period of consolidation. I t w i l l be r e c a l l e d that a d e f i n i t e co-operative development program was adopted i n 1956 which c a l l e d for a three year period of expansion of co-operative services, both i n the wholesale and r e t a i l f i e l d s . Accordingly, during 1957, 1958 and 1959 v i r t u a l l y a l l of our Wholesale's e f f o r t s and earnings were expended i n that d i r e c t i o n . 3 ^ The success of the expansion program i s evidenced by sales which increased by $262,000 i n 1957, $840,000 i n 1958 and $915,000 i n 1959. 3 3 The present emphasis i s on consolidation but not to the exclusion of further expansion. The expansion of sales that took place has not dropped o f f completely as sales increases of $400,000 and $700,000 have been recorded i n the subsequent 34 years. ^ Services A l l the services outlined i n t h i s chapter saw t h e i r inauguration during the post war period. Mention has not been made of physical changes i n the plant. The warehouses 32 1961 Annual Report, B r i t i s h Columbia Co-operative Wholesale Society, p. 3. 33 I b i d . , p. 35. 34 Loc. c i t . 160 and o f f i c e s i n Burnaby have been expanded s i x f o l d including a new warehouse addition which was formally opened i n 1962. A complete assessment was made of the society's operations by a firm of management consultants and a number of changes were made as a consequence of t h e i r recommendations. Trans portation to consumer associations has always posed d i f f i c u l t i e s for the wholesale society. Large consumer co-operative associa tions at Prince Rupert, Terrace and Prince George are r e l a  t i v e l y i s o l a t e d from the Lower Mainland. Pooled orders made i t possible to u t i l i z e pooled carlots of mixed merchandise. Reduced costs through pooled orders increased the volume of sales with the r e s u l t that 110 cailway carloads of goods were shipped i n 1961. Grocery d i v i s i o n Gradual development of the grocery d i v i s i o n has resulted i n the addition of new l i n e s each year. The greatest impetus was given t h i s year with the enlargement of warehouse f a c i l i t i e s when 400 items were added to the grocery department inventory. P a r a l l e l i n g the growth i n grocery trade has been the development of f l o u r , feed, f e r t i l i z e r , petroleum, farm equip ment, hardware and drygoods sect-ions. Petroleum products, exclusive of gasoline, were added i n 1956 to the l i s t of pro ducts sold by the wholesale and are estimated to serve 50 per cent of the needs of the member associations. A r e l a t i v e l y new 161 departure was the opening of a drygoods department i n 1959. Main problem The main problem facing the wholesale society has been the adequate financing of the expansion program. Large c a p i t a l expansion projects have been financed through borrowings rather than membership equity. This problem has been mitigated to some extent by very strong stock turns, for example, grocery stock turn was 16.19 i n 1961. 3 5 Federated Co-operatives Limited  Amalgamation and growth The co-operative movement had developed wholesale s o c i e t i e s i n each of the three P r a i r i e Provinces by 1944, which year saw the beginning of a series of amalgamations. Saskatchewan amalgamations In 1944 Consumer Co-operative Refineries Limited amalga mated with the Saskatchewan Co-operative Wholesale Society to form Saskatchewan Federated Co-operatives Limited. The increasing sales volume of both the Saskatchewan Co-operative Wholesale Society and the Consumers Co-operative Refineries were by 1944 pointing to a closer coordination of administration and d i s t r i b u  t i o n . The many l o c a l s handling petroleum products required items of hardware, while coal and wood co-operatives had expanded into bulk petroleum stations. Others were going into groceries and dry 35 1961 Annual Report, B r i t i s h Columbia Co-operative Wholesale Society, p. 8. 162 goods. With membership i n both the r e f i n e r y and the wholesale almost i d e n t i c a l , the advantages of amalga mation were apparent. Preliminary meetings of the directors of the two organizations culminated i n a j o i n t meeting of delegates at Saskatoon on June 8, 1944 and formal amalgamation became e f f e c t i v e on November 1, 1944. 3 6 Buildings were purchased i n Regina and Saskatoon for warehousing lumber and feed i n the same year. Manitoba Co-operative Wholesale acquired a warehouse and o f f i c e b u i l d i n g i n Winnipeg and added a hardware department i n 1945. In the same year the Alberta Wholesale Society opened a warehouse i n Edmonton while Saskatchewan Federated Co-opera ti v e s developed a wholesale grocery department at Saskatoon. By 1950 the Alberta Wholesale Society had added cen t r a l i z e d accounting, management services and an audit department as services to i t s members. I t also had acquired a feed plant, a branch warehouse at Calgary and d i r e c t ownership of 21 r e t a i l 37 stores from United Farmers of Alberta. The following year a larger warehouse at Edmonton was constructed. Manitoba merger Manitoba Co-operative Wholesale Society, during the period 1945-55, had added a feed manufacturing plant and opened a 36 Jim F. C. Wright, P r a i r i e Progress, Saskatoon: Modern Press, 1956, pp. 153-154. 37 By 1962 sixteen of these stores had been turned over to l o c a l groups as community-owned consumer co-operatives according to information received at Federated Co-operatives headquarters i n Saskatoon. 163 wholesale lumber department. In 1955 the merger of Saskatchewan Federated Co-operatives and Manitoba Co-operative Wholesale Society took place under the name Federated Co-operatives 38 Limited. The co-operative o i l r e f i n e r y was extended consider ably with a $7.5 m i l l i o n expansion program i n 1954. The most recent merger of Federated Co-operatives and Alberta Co-operative Wholesale Society was approved i n p r i n c i p l e at t h e i r annual meetings i n 1959 and scheduled for October 31, 1962. Plans for the merger moved ahead of t h i s schedule with the r e s u l t that the merger took place i n 1961. The constant growth i n volume i n a l l trade l i n e s resulted i n new warehouse construction i n Winnipeg, Regina and Saskatoon. The Saskatoon warehouse,opened i n 1961, covers four acres. Additional product l i n e s The l a t e s t change i n the operations of Federated i s the development of an extensive meat program whereby fresh meats are purchased i n bulk on behalf of member associations. Appliance repair shops have been set up at Saskatoon, Regina and Winnipeg, thus adding to the services a v a i l a b l e to the member through h i s consumer co-operative. At Winnipeg Branch, a new venture into the automotive supplies f i e l d i s to begin early i n 1962 as a service to Co-op service stations. Through t h i s department, automobile accessories 38 Wright, op_. c i t . , pp. 211-215 164 and standard repair parts, such as brake linings, ignition and carburetor repairs, etc. w i l l be supplied.39 The brief outline above has only attempted to sketch the broad outlines of changes that have taken place. From three wholesale societies and a co-operative o i l refinery the co-operators of the Prairies have welded together a strong organization with a significant sales volume. Services Increased The development of adequate f a c i l i t i e s has been an impor tant factor in the growth patterns for the wholesale society and the consumer co-operative stores. Just as important, however, has been the a b i l i t y of the wholesale society due to i t s volume to provide the services of many specialists and technicians. One example is the development of tabulator centers at Regina and Edmonton and a computer center at Saska toon. These centers enable more accurate, detailed data on the operations of the society. Extension of this service to community associations enables more use of such procedures on their part. Financial Assistance A significant trend towards change is evident in the financing act i v i t i e s of Federated Co-operatives Limited. 39 1961 Annual Report, Federated Co-operatives Limited, p. 52. 165 Despite substantial patronage refunds allocated to consumer co-operative associations and re-invested by the associations, a d d i t i o n a l sources of finance are required. Increased inven t o r i e s , advances to associations, and improved f a c i l i t i e s cannot be r e s t r i c t e d to the savings of the society. Conse quently a series of Co-operative Savings Bonds Series "A" has been approved for sale i n the provinces of Alberta, Saskatchewan and Manitoba. The importance of t h i s type of financing i s indicated by an increase from $9,963,000 i n 1960 to $15,312,000 i n 1961 i n Bonds Payable, and a further increase of $6,000,000 40 i s predicted for 1962. Much of t h i s new c a p i t a l w i l l be used to finance expansion projects planned by r e t a i l co-operatives 41 i n 1962. D i s t r i b u t i o n Patterns Several factors have given r i s e to p r a c t i c a l d i f f i c u l t i e s for the i n i t i a l e f f o r t s of co-operative wholesalers i n Canada. As there i s no federal act s p e c i f i c a l l y providing for the incorporation of co-operatives, with few exceptions co-operatives are incorporated i n each of the provinces of Canada. This has resulted i n the development of co-operatives and t h e i r wholesale operations within p r o v i n c i a l boundaries. 40 1961 Annual Report, Federated Co-operatives Limited, p. 25. 41 Ibi d . , p. 16. 166 While the private wholesaler has not been bound by any such p o l i t i c a l boundaries, i n the main, co-operative whole sale operations have been l i m i t e d to the various p r o v i n c i a l areas. With the amalgamation of a l l the co-operative whole sale operations i n one organization, serving consumer co operative associations from the Lakehead to the B r i t i s h Columbia border, a number of new d i s t r i b u t i o n patterns are emerging. The operations of Federated Co-operatives Limited are c a r r i e d on by four main branches at Winnipeg, Regina, Saskatoon and Edmonton with a sub-branch at Calgary. Diagram No. 1 i l l u s t r a t e s the location of branches and the operational d i s t r i c t s that are d i r e c t l y coordinated by the various branches. Each operational d i s t r i c t i s served by a resident representative while each branch o f f i c e maintains s p e c i a l i s t s i n various l i n e s of merchandise. The operational d i s t r i c t s of Federated Co-operatives Limited are not exactly s i m i l a r to the e l e c t o r a l d i s t r i c t s 42 previously discussed. I t might be noted that the Winnipeg branch o f f i c e of Federated Co-operatives i s s e r v i c i n g member associations., as far west as Yorkton i n Saskatchewan. With Alberta associa tions now members of Federated Co-operatives Limited, i t i s possible that adjustments may be undertaken i n the areas 42 See pages 153-154. Diagram No. 1 ALBERTA S A S KA TC HE U/A/V OPERATIONAL DISTRICTS - FEDERATED CO-OPERATIVES LTD. Branch Areas Head Office - Saskatoon Branches - Regina, Winnipeg, Edmonton Sub Branch - Calgary Source: Operational D i s t r i c t Map - Federated Co-operatives Ltd. 168 immediately adjacent to the Saskatchewan border. V. PROPOSED NEW VENTURES The r a p i d expansion of consumer co-operatives i n the P r a i r i e region has been r e f l e c t e d i n the provision of new f a c i l i t i e s and services of Federated Co-operatives. Attention i s currently focused on the development of services i n the Alberta region comparable to those offered i n Saskatchewan and Manitoba. Several new ventures are under consideration though only the more s i g n i f i c a n t are referred to i n t h i s chapter. Merger with B r i t i s h Columbia An eventual merger between FCL and the B r i t i s h Columbia Co-operative Wholesale Society has been proposed. The basic p r i n c i p l e of such a merger has been agreed to by the Board of Directors of both organizations as being a l o g i c a l step to be considered i n the future.^3 The proposed merger i s not l i k e l y to be effected i n the immediate future as Federated Co-operatives requires a period of adjustment due to the recent merger with the Alberta Co operative Wholesale. In the meantime, the f i s c a l periods, accounting practices and many operational procedures are uniform i n a n t i c i p a t i o n of a merger i n the future. 43 1961 Annual Report. Federated Co-operatives Limited, p. 14. 169 Drug Department The increased number of consumer co-operative associations with drug departments presents the possibility of savings being effected by co-ordination of purchases. The number of co operative drug stores currently in operation does not warrant a f u l l department in the wholesale society. Present plans c a l l for FCL to engage a qualified druggist to start a program of co-ordinating drug store lines with the eventual formation of a drug department at FCL in mind.**** Services Federated Co-operatives is rapidly changing the manner of servicing consumer co-operatives. The range and complexity of products handled make service by d i s t r i c t representatives more d i f f i c u l t . Consequently the emphasis is placed on the provision of specialists in the fields of food, dry goods, hardware, petroleum and other fields in order to assist associa tions. Western Co-operative College at Saskatoon i s supported by Federated Co-operatives and provides training in management, co-operative philosophy and other specialized topics. These courses are presented not only to r e t a i l co-operative employees 45 but also to employees of the Co-operative Wholesale Society. 44 1961 Annual Report. Federated Co-operatives Limited, p. 13. 45 Interview, Harold Chapman, Principal, Western Co-operative College, Saskatoon, May 12, 1962. 170 Meats Despite requests for a meat packing plant, i t i s u n l i k e l y that such a project w i l l be undertaken by Federated Co-operatives Limited. However, co-ordinated buying of fresh meats from packing plants has been attempted and w i l l be operative i n the four main centers at Winnipeg, Edmonton, Regina and Saskatoon. VI. VALUE TO CONSUMER ASSOCIATIONS The test of returns of f i n a n c i a l benefits to associations should be regarded as only one of the values to be derived from co-operative wholesale a c t i v i t y . F i n a n c i a l Benefits Return of surplus to member associations by the B r i t i s h Columbia Co-operative Wholesale Society i n 1961 amounted to s l i g h t l y over $7,000. Federated Co-operatives Limited 1s surplus allocated to associations i n 1961 (before amalgamation with Alberta Wholesale Association) was $3,208,000. Table XXII indicates the percentages of the cost of purchases returned as patronage refunds for various groups of products. 171 TABLE XXII PATRONAGE REFUNDS DISTRIBUTED TO MEMBER ASSOCIATIONS AS A PERCENTAGE OF PURCHASES FROM FEDERATED CO-OPERATIVES, FISCAL YEARS 1960 AND 1961 1961 1960 Petroleum Light Fuels 12.0 13.3 Petroleum Middle D i s t i l l a t e s 5.4 5.3 Petroleum Heavy Fuels 2.0 2.0 O i l and Grease 7.0 8.0 Lumber 4.0 3.4 Hardware 3.25 3.3 Coal 2.0 2.0 Dry Goods 2.0 3.0 Feed - R e t a i l Co-operatives 2.0 3.0 - Other Regionals 2.0 2.0 F e r t i l i z e r 2.0 3.0 Flour 2.0 2.0 Groceries 1.5 2.0 Source: 1961 Annual Report. Federated Co-operatives Limited. Promotional A c t i v i t i e s Co-operatives have consistently urged the elimination of promotional a c t i v i t i e s that have tended to r a i s e costs without any compensating value to the consumer. However, t h i s attitude cannot be construed as condemnatory of adver t i s i n g i n a l l i t s phases. Recognizing the important r o l e advertising plays i n modern merchandising, and that co-operatives have a need to inform members about products handled, FCL has developed a plan of a s s i s t i n g r e t a i l co-operatives i n advertising programs.^ 46 1961 Annual Report, Federated Co-operatives Limited, p. 54. 172 Provision of newspaper mats, radio and t e l e v i s i o n aids, advertising allowances for j o i n t programs i s undertaken by Federated Co-operatives. Publication of The Co-operative  Consumer i s an important promotional a c t i v i t y sponsored by Federated Co-operatives Ltd. and i t s member associations. Another important project i s the development of Public Relations Federations i n each of the e l e c t o r a l d i s t r i c t s of Federated Co-operatives. The Public Relations Federations promote ' j o i n t programs of the consumer co-operative associations, co-operative marketing organizations, and Federated Co-operatives and receive f i n a n c i a l support from each. A c t i v i t i e s i n Manitoba are co-ordinated by Federated Co-operatives Ltd. while i n Saskatchewan the work of the Public Relations Representatives i s supervised by the Co-operative Union of Saskatchewan. Alberta Public Relations Federations w i l l be organized i n 1962. Grants to Public Relations Federations from Federated Co-opera tiv e s during 1962 are expected to reach $100,000. "Co-op" Label Program The provision of a private l a b e l through the wholesale society i s of d i s t i n c t value to the r e t a i l associations. The majority of private l i n e s are i n the grocery trade but paints, ba t t e r i e s , t i r e s and a number of appliances are a v a i l a b l e . Control of such a l a b e l and the products c a r r i e d under the l a b e l allow co-operatives to provide guaranteed goods and perform an 173 important function of consumer advice. Advantages are also received from product d i f f e r e n t i a t i o n . F i n a n c i a l A number of associations have received f i n a n c i a l assistance i n order to expand operations. Over $4,000,000 was made a v a i l  able to associations i n 1961 for expansion and improvements to e x i s t i n g f a c i l i t i e s . A dditional funds are currently being raised for assistance i n expansion programs on the r e t a i l l e v e l . Administrative Assistance Accurate measurement of the value of administrative and technical assistance to associations i s d i f f i c u l t . The a v a i l  a b i l i t y of audit services, r e t a i l advisory s t a f f , tabulation centers, and a r c h i t e c t u r a l advice are of great support to managers of community associations. S t a f f Training The substantial f i n a n c i a l support given by Federated Co-operatives to the Western Co-operative College at Saskatoon has enabled the expansion of the s t a f f t r a i n i n g f a c i l i t i e s at that i n s t i t u t i o n . While i n d i v i d u a l associations, along with other groups such as the c r e d i t unions and the marketing organi zations have contributed to the work of the College, the grants from Federated Co-operatives are important to the continuance of the College. Personnel from the wholesale society are also 174 frequently used as i n s t r u c t o r s . Conclusions While no precise measurement of the value of the co operative wholesale society to consumer co-operative associa tions i s possible, the v a r i e t y of services rendered and the close collaboration between the associations i n the wholesale society would indicate a high degree of appreciation of the value of the society. The most p r a c t i c a l demonstration i s the savings of $184,000 returned to consumer co-operative associations by the B r i t i s h Columbia Co-operative Wholesale Society since i t s o r g a n i z a t i o n . 4 7 Savings returned by Federated Co-operatives Limited to i t s member associations during 1960 and 1961 t o t a l l e d $6,800,000. 4 8 I t might be pointed out that the organization of whole sale operations i n a l l consumer co-operative developments i s based on three important aspirations. 1. The extension of the power of the consumer, through d i r e c t ownership, from h i s l o c a l association, to the wholesale society and ultimately to productive f a c i l i t i e s . In t h i s manner some control i s maintained i n an e f f o r t to provide consumer goods of guaranteed qu a l i t y at the best possible p r i c e ; 47 1961 Annual Report, B r i t i s h Columbia Co-operative Wholesale Society, p. 35. 48 1961 Annual Report, Federated Co-operatives Limited, p. 26. 175 2. the need to protect the consumer associations from control or interference by private wholesalers who have shown antagonism towards consumer co-operation i n the past; and 3. integration of operations can r e s u l t i n savings and more e f f i c i e n c y i n the operation of the associations. VII. SUMMARY The extension of consumer co-operative associations into the f i e l d of wholesaling i s a l o g i c a l progression from co operation between consumers to that between associations. Total sales of co-operative wholesale s o c i e t i e s are s t i l l a minor factor i n the t o t a l wholesale trade i n Canada. However, the growth of the co-operative sector i s increasing more ra p i d l y than that of the private trade. Co-operative wholesale s o c i e t i e s did not begin to make appreciable progress i n the d i s t r i b u t i o n of groceries and food products u n t i l a f t e r World War I I . Despite a l a t e r s t a r t most progress i s being made i n Western Canada i n developing an integrated program on a l l l e v e l s . The development of an e f f e c t i v e private l a b e l program w i l l prove important to the consumer co-operatives. The series of amalgamations that took place i n Manitoba, Saskatchewan and Alberta provide an opportu n i t y for more u n i f i e d action i n the three P r a i r i e Provinces. B r i t i s h Columbia consumer co-operatives have made progress i n developing a wholesale society but due to lower volume and a 176 more d i f f i c u l t terrain have not been able to realize the maximum potential possible. A c r i t i c a l period i s presently facing the Brit i s h Columbia Co-operative Wholesale Society as i t is now geared to greater production without too great an increase in cost. Recognition must be taken of the fact that the wholesale societies in Western Canada have not been faced with the problem of large-scale marketing of farm products as in other parts of Canada. In fact the support of the large commodity groups such as the Wheat Pools has contributed to the success of the consumer movement on the Prairies. A more detailed study of the co-operative wholesale societies would no doubt reveal the complexities of these associations. The number of departments and lines carried is not duplicated by most wholesalers in Canada and places an additional burden on the senior managements of the societies. 177 CHAPTER VII CONSUMER CO-OPERATIVE ASSOCIATIONS I. INTRODUCTION The ultimate purpose of the consumer co-operative move ment is f u l f i l l e d through the development of associations operative in the r e t a i l trade and serving the consumer needs of member-owners. In contrast to the United Kingdom and Sweden the local associations in both Canada and the United States have found their greatest support in rural areas. Development of co operatives in urban areas has been negligible in Canada u n t i l recently. For a number of years the only significant non-rural consumer co-operative association in an urban area was the British-Canadian Co-operative Society in Sydney Mines, Nova Scotia. Urban Consumer Co-operatives Undoubtedly the organization of consumer co-operatives in urban areas i s a prime requirement for a substantial increase in co-operative r e t a i l sales in Canada. Cr i t i c s of co-opera tives have claimed that co-operatives are incapable of operating in the metropolitan areas due to the competition of the chain stores. No doubt a few supporters of co-operatives are dubious 178 about co-operative capabilities in such areas. Two important developments require the formation of a number of successful urban consumer co-operative r e t a i l stores in the larger population centers. The f i r s t i s the decline in the rural population and the narrowing of the base for success f u l rural co-operatives. This does not obviate the need for co-operatives to continue to serve rural members. Even in the most highly organized areas from a co-operative viewpoint the rural population i s not f u l l y u t i l i z i n g the co-operative services available. The mobility of the urban dweller i s matched by that of the farmer and more co-operatives w i l l need to locate in more central trading areas rather than in smaller communities as in the past. The second important reason for urban co-operative develop ment is that efficient progress in both retailing and wholesaling requires a large volume of sales. The possibility of increased sales in urban consumer co-operatives would strengthen the wholesale societies and the private label program. If consumer co-operatives wish to carry out their often expressed desire of influencing the production of goods and price levels the need for more urban co-operatives is imperative. Development of Large Consumer Co-operatives A growing number of co-operative associations record r e t a i l sales in excess of a million dollars a year. The greatest development of co-operatives in population centers of 179 over 50,000 inhabitants i s taking place i n the provinces of Manitoba, Saskatchewan and Alberta. Red River Co-operative Society operates two large supermarkets i n the C i t y of Winnipeg. Saskatoon Co-operative Association has exceeded f i v e m i l l i o n d o l l a r s i n annual sales and i s planning a two-million d o l l a r expansion program. Calgary Co-operative Association operates two large m u l t i - l i n e stores and has doubled i t s membership to 10,000 i n the past eighteen months. Edmonton members are serviced by a large r e t a i l o u t l e t . This progress i s matched by a number of associations i n smaller centers - twelve consumer associations i n Saskatchewan reported sales over a m i l l i o n d o l l a r s i n I960. 1 I I . SHERWOOD CO-OPERATIVE ASSOCIATION One of the larger u n i t s , Sherwood Co-operative Associa t i o n Limited i n Regina, Saskatchewan, i s the subject of a closer analysis. The choice of Sherwood Co-operative Association i s based on i t s a b i l i t y to demonstrate the v i a b i l i t y of a consumer co-operative i n meeting change. Regina Area Growth A survey of markets conducted by F i n a n c i a l Post rates the c a p i t a l c i t y of the Province of Saskatchewan with personal 1 Co-operative Associations Services 1960. Department of Co-operation and Co-operative Development, Regina: Queen's Pr i n t e r , 1961, p. 28-33. 180 incomes 28 per cent above the national average with a personal disposable income of $186 m i l l i o n . The population growth rate estimated for the c i t y was 41 per cent per decade with a popula t i o n figure of 105,700 as of March 1, 1961. 2 Regina i s the c a p i t a l of the Province of Saskatchewan and the s i t e of the headquarters for many government departments and commissions. The T. Eaton Company Canada Limited and the Robert Simpson Company Limited operate department stores i n Regina. Several grocery chain store outlets are located i n the c i t y and i t s suburbs. Location and Services of the Co-operative 3 Sherwood Co-operative Association Limited i s a multi purpose r e t a i l consumer co-operative serving members i n the C i t y of Regina and the immediate trading area. A l l of the r e t a i l operations of the co-operative are located within the c i t y with the exception of the bulk f u e l plant which i s imme di a t e l y adjacent to the co-operative o i l r e f i n e r y on the out s k i r t s of the c i t y . The products offered by the co-operative cover a complete l i n e of goods with automobiles the only major exception. 2 B. M. Hamilton (Ed.), Survey of Markets and Business Year  Book 1961. 37th E d i t i o n (Toronto: Maclean-Hunter Publishing Company Limited, 1961), p. 180. 3 S t a t i s t i c s and f i n a n c i a l figures are extracted from 1961  Annual Report of Sherwood Co-operative Association Limited as of December 31, 1961. The author toured a l l the f a c i l i t i e s and conducted interviews with various s t a f f members. 181 Two foodmarkets, two service stations, two drug stores, a complete department store including hardware and appliances, a lumber yard, locker plant, heating equipment supply house, bulk fuels plant, and farm equipment depot o f f e r complete services to over 25,000 members. The bulk of the f a c i l i t i e s are located i n a main shopping area which includes a foodmart, service s t a t i o n , a department store and the administration o f f i c e s . A number of consumer services are operated i n association with the department store. Co-operative insurance ( F i r e , Auto, L i f e and Casualty), t e l e  v i s i o n and radio r e p a i r s , c r e d i t department, lounge, auditorium, post o f f i c e and dry cleaning depot are a v a i l a b l e at the Co operative Centre. Leased departments consist of a beauty salon, barber shop and shoe repair shop. The locker plant not only rents frozen food lockers but also provides a complete butchery and packing service for members. A large parking l o t i s provided at the main center. The Sherwood Credit Union has located i t s o f f i c e s at the main center. The c r e d i t union has assets i n excess of ten m i l l i o n d o l l a r s and provides complete f i n a n c i a l services such as chequing services, safety deposit boxes and t r a v e l l e r s ' cheques. These are i n addition to the standard c r e d i t union services of savings and loans. Sherwood Co-operative Association sales i n 1961 amounted to $5,561,121 with the foodmarkets providing $2,165,959 or 39 per cent of sales. Department store sales accounted for 182 $922,642 or 16 per cent of the total sales while the service stations provided $742,840 or 13 per cent of the sales volume of the co-operative. Bulk petroleum sales of light fuels to farmers or heating fuels to householders recorded a $934,121 sales volume. Net surplus was $186,992 or 3.4 per cent of sales. Changes in Services The i n i t i a l operations of Sherwood were carried on as a bulk fuel purchasing program for farmers in the d i s t r i c t . The organization got underway in 1931 and gradually made a series of progressive steps into bulk feeds, farm supplies and u l t i  mately into groceries. The major change made was when the expansion program was completed by the addition in 1961 of a three-floor department store and a large foodmart. The majority of changes have been instituted in the past five years including such ventures as co-operative drug store operations. A s i g n i f i  cant economic advantage to members is apparent in this f i e l d as the co-operative paid a patronage rebate or refund of 20 per cent on drug prescription sales to members in 1961. Patronage refunds paid in each department are l i s t e d in Table XXIV, page 189. The concern of management and the Board of Directors is currently focused on the need to consolidate the recently completed developments and the maximum use of the f a c i l i t i e s currently available. 183 Consumer Consultant Services The services of a consumer consultant are now available to members of the Sherwood Co-operative Association. The purpose of the consumer consultant i s to provide the consumer-member with the assistance of a p r o f e s s i o n a l l y trained home economist i n the solution of consumer problems. In addition to consulta tions with members the consumer consultant w i l l a s s i s t d i v i  s i o n a l managers i n an advisory capacity. The s p e c i f i c a t i o n s of the duties of the consumer consultant are reproduced i n Appendix "B". Changes i n Membership Urbanization, which i s prevalent throughout Canada, has had i t s impact on Regina. The i n f l u x of c i v i l servants, growth of petroleum industry s t a f f and the development of a number of manufacturing industries provided Regina with a changing popu l a t i o n base. The a b i l i t y of co-operatives to act r e a l i s t i c a l l y and imaginatively to such changes i s demonstrated by the actions of the members, Board of Directors and management of the Sherwood Co-operative Association. The co-operative was organized i n 1931 by a group of farmers i n order to purchase f u e l o i l , gasoline and lubricants i n bulk from a private o i l company. The pattern of predomi nantly farmer membership was maintained u n t i l 1942. In 1942 the membership pattern i n Sherwood began to a l t e r when a 184 hardware d i v i s i o n and a service station were added. Urban families began to patronize the co-operative association and have joined the association i n st e a d i l y increasing numbers. Farm family membership has continued to grow, but at a r e l a  t i v e l y slower pace. No precise figures on r u r a l and urban membership are avai l a b l e as the co-operative does not c l a s s i f y i t s members by occupation on i t s records. I I I . ANALYSIS OF MEMBER PURCHASES IN 1961 - SHERWOOD CO-OPERATIVE ASSOCIATION Introduction The equity and purchase accounts of the members of the co-operative are recorded on International Business Machine tabulator cards and are processed by the tabulation department of Federated Co-operatives, Regina Branch O f f i c e . Every purchase of a member i s recorded i n the accounts of one of the twelve sales departments of the association. Patronage refunds, based on the surplus estimated to have been created by each department, are calculated on the t o t a l purchases of the member from each sales department and credited to the member1s share account. When the annual patronage refund to be credited to a member i s less than two d o l l a r s , the patronage refund i s credited to the share account of the member. Patronage refunds i n excess of two do l l a r s are credited to the member i n the 185 following manner: 50 per cent of the patronage refund i s paid i n cash; 50 per cent of the patronage refund i s credited to the member's share account. The account number, name and address of each member i s also maintained on a series of tabulator cards. Member account numbers have been issued consecutively since the incorporation of the association. Table XXIII records the date of entry of member account numbers from the years 1931 to 1961 i n c l u s i v e l y . Table XXIII also enables the determination of the length of time a person has been a member of the associa t i o n . 186 TABLE XXIII MEMBER PATRONAGE NUMBERS BY YEAR OF ALLOCATION AND TOTAL OF ACCOUNTS ISSUED - 1931-1961 - SHERWOOD CO-OPERATIVE ASSOCIATION Patronage No. of Patronage No. of Numbers Member Numbers Member Year From To Accts. Year From To Accts 1961* 28,231 31,185 2,954 1946 5,066 6,309 1,243 1960 26,713 28,230 1,517 1945 4,298 5,065 767 1959 25,105 26,712 1,607 1944 3,363 4,297 934 1958 23,822 25,104 1,282 1943 2,783 3,362 579 1957 22,259 23,821 1,562 1942 2,350 2,782 432 1956 20,411 22,258 1,847 1941 1,655 2,349 694 1955 18,521 20,410 1,889 1940 1,253 1,654 401 1954 16,515 18,520 2,005 1939 950 1,252 302 1953 14,244 16,514 2,270 1938 716 949 233 1952 12,357 14,243 1,886 1937 590 715 125 1951 10,959 12,356 1,397 1936 424 589 165 1950 9,625 10,958 1,333 1935 311 423 112 1949 8,261 9,624 1,363 1934 243 310 67 1948 7,329 8,258 929 1933 195 242 47 1947 6,310 7,328 1,018 1932 156 194 39 1931 1 155 155 * Patronage numbers 30,001 to 30,999 were not issued due to confusion i n presenting the numbers at check-out counters. L i s t i n g was prepared by the Accounting Department, Sherwood Co-operative Association, Regina. Two Samples Selected Two separate samples of membership l i s t s were selected. The f i r s t was a sample of member-purchasers and consists of 2,130 accounts, hereinafter r e f e r r e d to as the "Purchaser Sample". The second sample was drawn from the membership l i s t of the association and i s hereinafter r e f e r r e d to as the "Member Sample". A l l sales figures and patronage calculations are reported as at the end of the f i s c a l year, December 31, 1961. 187 Sample sel e c t i o n A random selection was made of the terminal d i g i t "6". A l l member-purchasers with terminal d i g i t "6" i n t h e i r account numbers were included i n the Purchaser Sample. The Member Sample was drawn from the member l i s t by use of the terminal d i g i t "6", but at in t e r v a l s of one hundred. L i s t i n g s obtained The use of ele c t r o n i c tabulation equipment made possible a number of c l a s s i f i c a t i o n s of approximately 10 per cent of the t o t a l purchaser-members of the association. The l i s t i n g s obtained were: 1. purchases of each member sampled by sales department and grand t o t a l of purchases; 2. separate l i s t i n g s of purchases for each of the twelve departments by department; 3. patronage refunds to purchaser members c l a s s i f i e d as to those who were e n t i t l e d to more than two do l l a r s i n patronage refunds and those members who were e n t i t l e d to less than two do l l a r s i n patronage refunds for the year 1961; and 4. the names and addresses of members of the Member Sample. 188 Purposes of the Analysis The Purchaser Sample, consisting of 2,130 accounts, allows a determination of the frequency of purchases i n various depart ments. The sample also provides a d i s t r i b u t i o n of purchases among the members sampled. The r e l a t i v e importance of the tenure of co-operative members i n the association can also be determined. The Member Sample, consisting of 230 accounts, provides an opportunity for determining an approximate pattern of the r e s i d e n t i a l locations of the members. Attempts to deve lop occupational groupings were not conclusive inasmuch as no purchase commodity could be found that c l e a r l y defined an occupational group. Purchaser Sample Proportion of t o t a l sales Table XXIV indicates that the t o t a l purchases of the Purchaser Sample amounted to $509,966, which accounted for 9.80 per cent of t o t a l member purchases of $5,205,789. Total a l l o c a t i o n of the patronage rebate to the sample group was $20,690, or 9.89 per cent of the patronage rebate credited to a l l members. The figures for the three major operating d i v i s i o n s , the food stores, the department store and the service stations, show that the Purchaser Sample acquired 9.43, 9.03 and 9.76 per cent of the sales of the respective departments. 189 TABLE XXIV SAMPLE GROUP PURCHASES COMPARED WITH TOTAL OF MEMBERSHIP PURCHASES DURING 1961 Patronage Total Sample % Refund Membership No. 1 of Department Rate Purchases Purchase Total Food 2% 2,075,348 195,923 9.43 Department Store 37, 818,421 73,944 9.03 Prescriptions 20% 42,219 3,636 8.61 Service Station 4% 618,626 59,379 9.76 Lumber 7% 505,765 56,023 11.7* Heating Equipment 5% 55,002 16,035 29.1* Coal & Wood n i l 24,329 3,011 12.3 Bulk Light Petroleum 11% 350,238 30,806 8.79 Bulk Other Petroleum 6% 572,183 52,684 10.3 Feed & F e r t i l i z e r 2% 85,554 5,891 6.88 Drug No. 2 3% 23,258 1,735 7.46 No Refund + n i l 94,838 10,894 11.49* Total Purchases 5,205,786 509,966 9.8 A l l o c a t i o n of Refund 209,101 20,690 9.89 Number of member-purchasers N.A. 2,130 * Purchases d i s t o r t e d by one large commercial purchaser. N.A. Not avail a b l e + Ca f e t e r i a , Locker Plant Rentals, and Processing, Labour, a l l departments. The higher r a t i o of the Purchaser Sample's patronage refunds to the t o t a l membership i s explained, i n part, by the higher proportion of purchases by the Purchaser Sample i n the lumber and heating equipment departments. The lumber and .heat ing equipment departments, with t h e i r higher r e l a t i v e earnings, were able to a l l o c a t e higher refunds of 7 and 5 per cent respectively. A commercial account was selected i n the sampling 190 procedure, which di s t o r t e d the sample, p a r t i c u l a r l y with regard to the lumber, heating equipment and no refund departments. No comparative figure on the t o t a l number of purchasers i s currently a v a i l a b l e . The r e l a t i v e importance of the food department i n terms of sales volume i s i l l u s t r a t e d i n Table XXV. Food sales repre sented 38.44 per cent of the sales volume purchased by the Purchaser Sample group. Over 71 per cent of the Purchaser Sample recorded purchases i n the food store during the year. The department store and the service stations accounted for 14.5 per cent and 11.64 per cent re s p e c t i v e l y of the t o t a l sales volume of the sample group; a l l other departments repre sented 35.42 per cent of purchases by the Purchaser Sample. The proportions of the sample sales conform within reason to the t o t a l o v e r a l l sales volume of the three major departments of the association, which were 38.9, 16.5 and 13.3 per cent resp e c t i v e l y . 191 TABLE XXV PURCHASES OF SAMPLE NO. 1 BY DEPARTMENTS - NUMBER OF INDIVIDUALS AND TOTAL PURCHASES Purchasers Total Purchases Department No. % Amount % Totals 2130 + 509,966 Food 1530 71.8 195,923 38.44 Department Store 1356 63.7 73,944 14.5 Prescriptions 225 10.6 3,636 .71 Service Station 958 44.9 59,379 11.64 Lumber 484 22.7 56,023 10.99* Heating Equipment 71 3.3 16,035 3.14* Coal & Wood 66 3.1 3,011 .6 Bulk Light Petroleum 205 9.6 30,806 6.05 Bulk Other Petroleum 426 20.0 52,684 10.33 Feed & F e r t i l i z e r 106 5.0 5,891 1.13 Drug No. 2 167 7.8 1,735 .34 No Refund 457 21.4 10,894 2.13* + Duplication by purchasers i n various categories. * Purchases di s t o r t e d by one large commercial purchaser. Range of Purchases by Departments Table XXVI outlines purchases by the Purchaser Sample i n various ranges i n the twelve departments. The food stores had the largest number of purchasers - 1,530, or 71.8 per cent of the Purchase Sample. Food store purchases of less than $25 were registered by 785 purchasers or 51.31 per cent. Purchases i n the department store were made by 1,356 members of the sample of which 842 or 62.10 per cent recorded purchases of less than $25. The service stations recorded sales to 958 members or 44.90 per cent of the sample group yet 544 or 56.80 per cent of these purchases were i n the $25 or less purchase range. TABLE XXVI PURCHASES BY DEPARTMENTS AND PURCHASE RANGES - PURCHASER SAMPLE $1.00 $1.01 $10.01 $25.01 $100.01 $500.01 $1000.01 or to to to to to or Total Department Less $10.00 $25.00 $100.00 $500.00 $1000.00 More Number Food Department 117 421 247 296 325 110 14 1530 Department Store 140 467 235 320 181 11 2 1356 Service Station 71 340 133 232 173 7 2 958 Prescriptions 3 127 48 43 4 - - 225 Lumber 37 154 99 109 72 10 3 484 Heating Equipment 5 35 11 4 14 1 1 71 Coal & Wood 5 22 12 21 5 1 - 66 Bulk Light Petroleum 3 67 19 40 68 6 2 205 Bulk Other Petroleum 4 46 44 130 193 5 4 426 Feed & F e r t i l i z e r - 52 16 28 10 2 - 108 Drug No. 2 54 65 16 13 4 - - 152 No Refund 27 224 121 73 11 - 1 457 VO to 193 The remaining departments showed the following proportions of members i n the $25 or less purchase range: Lumber - 60 per cent Heating Equipment - 72 per cent Coal & Wood - 60 per cent Bulk Light Petroleum - 43.4 per cent Bulk Other Petroleum - 22 per cent Drug No. 2 - 68 per cent No refund - 81 per cent. I t would appear that the patronage of the members as indicated by the Purchaser Sample, i s , for the majority of the purchaser-members, su b s t a n t i a l l y less than could be expected. The expenditures by the members i n a l l departments with the exception of petroleum fuels show that a majority of the members are purchasing less than $25 per year. Food department purchases The largest purchasers, as indicated by the sample i n the food store department, are represented by 124 purchasers who bought over $500 i n 1961. This group represents only 6 per cent of a l l the purchasers l i s t e d i n the sample yet they were responsible for 28.7 per cent of a l l sales i n the sample. The group purchased 46.5 per cent of a l l grocery items, 30*8 per cent of department store items and 20.2 per cent of service s t a t i o n items. Of the 124 largest purchasers i n food, 115 194 purchased more than $25 in the department store and 73 purchased more than $25 worth of products at the service stations. Table XXVII indicates the proportion of the total purchases by this group, TABLE XXVII TOTAL PURCHASES - 124 PURCHASERS OF OVER $500 IN FOOD DEPARTMENT COMPARED WITH TOTAL SALES OF PURCHASER SAMPLE Departments Purchased $25.00 or More Total % of 124 Purchases Purchasers 124 Purchaser to Purchaser Purchasers Sample Sample Food Department Store 115 Service Stations 73 A l l Other Departments 104 91,317 22,800 12,022 20,492 195,923 73,944 59,379 180,720* Total Purchases 146,633 509,966 * Commercial account of approximately $46,500. 46.5 30.8 20.2 11.3 28.7 In contrast to the large scale purchasers, only 37 of the 117 purchasers of less than one dollar in the food stores department purchased from other departments for a total of $4,853. Length of Time as Member Further analysis of the large purchaser group in the sample reveals that 7 of the group have been members of the association for more than twenty years and forty have been members for more than ten years. The largest membership is that consisting of those who joined the association in 1960. 195 TABLE XXVIII LENGTH OF MEMBERSHIP IN THE ASSOCIATION - 124 PURCHASERS OF MORE THAN $500 IN FOOD DEPARTMENT 1961 - 3 1960 - 15 1959 - 9 1958 - 5 1957 - 8 1956 - 7 1955 - 9 1954 - 6 1953 - 8 1952 - 11 1951 - 3 1950 - 1949 - 1948 - 1947 - 1946 - 1945 - 1944 - 1943 - 1942 - 1941 - 2 5 0 3 9 4 7 0 1 2 7 P r i o r to 1941 Conclusions I t would appear that substantial numbers of members (ranging as high as 60 per cent) have made purchases at the co-operative store but have not continued t h e i r patronage. The success of the co-operative would appear to l i e with a r e l a t i v e l y small number of members. Undoubtedly the difference between t o t a l membership of the sample group and the patronage i n each of the departments can be explained by the diverse interests of the purchasers, distance from f a c i l i t i e s , and the construction of new buildings which may have caused some reluctance of purchasers to enter the co-operative at the time of construction and a l t e r a t i o n . Only s l i g h t l y more than 32 per cent of the purchasers of food products who are members and who d i d enter the premises purchased less than $10 a year, with corresponding figures of 44.7 and 32.9 per cent for the department stores and the service 196 stations. It would appear that this segment of the co-operative membership should be the subject of research. The above analysis indicates a marginal membership of large proportions i f the sample i s indicative of the total membership of the association. No consistent pattern i s indicated by the analysis of the length of time the member has been associated with the co-opera tive. However, those members who are substantial purchasers of groceries tend to be purchasers of consequence in other departments. Member Sample The Member Sample, which contained the names and addresses of 230 members, was divided into four geographic groupings with a f i f t h group of "address unknown". Table XXIX indicates the areas of residence of the Member Sample. TABLE XXIX RESIDENCE DISTRIBUTION - MEMBER SAMPLE, 1961 Location Number Percentage Saskatchewan City of Regina Regina Trading Area Outside Regina Trading Area 157 26 25 68 11 11 Outside the Province of Saskatchewan 13 6 No address available 9 4 Total Member Sample 230 A substantial percentage of the Member Sample (68 per cent) 197 gave Regina as their mail address. A further 11 per cent are located in the Regina Trading Area which is defined as the suburbs of Regina and the surrounding area within a radius of thirty to thirty-five miles. The Member Sample was drawn from the equity-holding members of the association and includes non-purchasers as well as those who purchased and were included in the Purchaser Sample discussed in the previous pages. Table XXX indicates the distribution of the Member Sample and the purchase pattern of members of the Member Sample. TABLE XXX RESIDENCE DISTRIBUTION AND PURCHASE RANGES OF THE MEMBER SAMPLE, 1961 N i l $10. $10.01 $25.01 $100.01 $500.01 $1000.01 Pur- or to to to to & Distribution chases Less $25.00 $100.00 $500.00 $1000.00 Over Saskatchewan City of Regina 23 25 16 25 44 20 4 Regina Trading Area 5 4 - 6 4 2 5 Outside Regina Trading Area 6 6 5 5 2 1 — Outside Saskatchewan 6 2 1 3 1 - - No Address Available 4 1 1 2 1 - - Total 44 38 23 41 52 23 9 The total Member Sample had 44 members who were non-purchasers 198 or approximately 11 per cent. An additional 61 members (26 per cent) of the Member Sample purchased less than $25 during the year 1961. Conclusions It would appear that the Member Sample group in the Regina Trading area are more substantial purchasers relative to members resident in the City of Regina. In a particular case one of the Member Sample, resident outside the Regina Trading Area and Regina, was also a substantial purchaser; (over $500). In a number of instances the outside Saskatchewan members are persons transferred by employers. The number of "no address available" would appear excessive i f the Member Sample corresponds to l/100th of the total membership. This would imply 900 accounts with no addresses are currently on the records of the association. IV. A SURVEY OF CONSUMER CO-OPERATIVES IN BRITISH COLUMBIA Introduction Co-operative associations may be modified over a period of time in a number of ways. Among the changes required of the co-operatives may be the following: 1. alteration in the original business functions of the association; 2. the proportion of business carried on by the co-operative may change in relation to the total r e t a i l activity in i t s 199 trading area; 3. requirements for the construction or improvement of f a c i l i t i e s ; and 4. the amount and type of promotional work may require alteration. Survey of Consumer Co-operatives A survey of consumer co-operatives in British Columbia was undertaken in an attempt to assess changes in services offered, recent improvements to co-operative f a c i l i t i e s , proposed improve ments and the extent of the use of advertising by co-operatives. The purpose of the survey was not to treat the subject exhaustively but simply to explore the general outlines of the problem. A questionnaire was mailed to f i f t y consumer co-operative as sociations of which nineteen replies were returned. The respon dents included a variety of co-operative enterprises. The respon dents have been categorized into three groups: co-operatives with food sales, farm supply co-operatives, and transportation and petroleum co-operatives. A copy of the questionnaire is included herein as Appendix A. TABLE XXXI A SUMMARY OF RESPONDENTS TO A SURVEY QUESTIONNAIRE OF CONSUMER CO-OPERATIVES Questionnaires Mailed 50 Questionnaires Returned 19 Associations with Food Departments 9 Associations with Farm Supply Departments 4 Transportation Co-operatives 2 Petroleum Products Co-operatives 4 200 Transportation and Petroleum Products Co-operatives Two transportation co-operatives and four petroleum co operatives returned the survey questionnaire. Both transporta tion associations have maintained their original function of providing a transportation system for their members. However, one association has expanded into the operation of a garage which repairs the automobiles of members as well as acting as the service depot for the co-operative's buses. The second transportation society that returned the questionnaire operates a mail order service for i t s members for a limited range of consumer goods. The petroleum products co-operatives also s e l l items related to automobiles and tractors such as tires and batteries. One co-operative inserts a twice monthly advertisement in the local newspaper. A thirty thousand dollar expansion program is planned by one of the petroleum products co-operatives. Petroleum product sales reported by two of the co-operatives exceeded $190,000 each. Farm Supply Co-operatives The term "farm supply" i s frequently used to distinguish co-operatives which supply the occupational requirements of the farmers from the consumer co-operative associations engaged in selling goods to the ultimate consumer. Of the four respondent farm supply co-operatives one was 201 organized in each of the years 1913, 1928, 1945 and 1947. One farm supply co-operative commenced operations as a marketing co-operative. Table XXXIIindicates the services operated by the farm supply co-operatives which replied to the questionnaire. Table XXXIIindicates that changes are not too apparent in these organizations. A l l four grant credit and a l l use clerks, though two recorded partial self-service was in opera tion. A l l four associations s e l l hardware, feed and f e r t i l i z e r and in three cases petroleum products have been added. Growth in sales between 1960 and 1961 is only 3.7 per cent. 202 TABLE XXXII SERVICES AND SALES VOLUME OF FOUR FARM SUPPLY CO-OPERATIVES IN BRITISH COLUMBIA U QJ 00 cu w 1 CQ OJ N rv > ed CO r l c Q) 4J • r l r - l OJ u N q u CCj • r l r - l o r- l cd co CO OJ 4J • r l • r l OJ O • r l • H 1 > • r l c 13 03 -5 4J r l •o 13 4J 4J 4-1 u • H 13 cd cd co r i O 4J  OJ u r l r - l QJ r - l OJ w u u OJ cu r - l OJ Vi OJ OJ Cd OJ r-l OJ r l r l H < 2 o CU 04 En fa PHI CO Q CJ O OJ 13 O O A 12000 3000 X X B 7000 500 X C N.R. N.R. X X D 12000 320 X Sales Volume 1960 1961 X X X X X X X X X X X X X X X X X 1913 X 1945 X 1928 X 1947 475,656 499,222 201,727 339.323 1,455,276 1,315,928 455,210 485,052 190,593 324.421 N.R. No reply to the query. Expansion programs In responding to questions about improvements or expansion of f a c i l i t i e s i n the previous f i v e years, Association "A" had made no improvements and did not plan to make any. Associa t i o n "B" had i n s t a l l e d storage tanks worth $35,000 but did not plan any further expansion i n the next year. Association "C" had plans for a minor remodelling of the store and had opened a branch store within the previous f i v e years. Association "D" had invested $5,000 i n new equipment two years previously but had no new projects under consideration. Promotional a c t i v i t i e s Question No. 8 i n the questionnaire requested data on promotional a c t i v i t i e s including advertising, premiums, weekend 203 "specials" and seasonal sales. The replies to this question showed wide differences between the associations. Three of the four conducted some advertising, two associations weekly and one occasionally. One association used radio advertisements. None offered special premiums. Two associations offered weekend "specials" and conducted seasonal sales while the remaining two associa tions carried out neither of these a c t i v i t i e s . One association l i s t e d as other promotional a c t i v i t i e s , "horticultural shows, art shows". Admittedly there i s probably less need to use promotional methods for occupational goods than for consumer goods. Leased or contracted departments were not in operation in these associations. The f i n a l question in the survey invited the managers to indicate what significant changes in co-operatives they had noted and what changes were foreseen. None of the managers included any personal comments. Consumer Co-operatives Operating Food Departments  Food sales Nine replies were received from co-operatives that operate food departments. Two associations began operations in other trade lines, one as a feed distributor and the other as a fi s h marketing co-operative. Table XXXHIindicates the total sales volume, food sales and membership of the respondents. The nine respondents reported sales of food products of $5,124,830 in 1960 had increased to $5,612,472 in 1961 for a sales dollar increase of $487,642. Association "C" increased food sales by $218,352 between 1960 and 1961. Food sales accounted for 34 per cent of the total sales in 1960 of the respondent group and 32 per cent in 1961. Table XXIV indicates the product lines sold, services and food sales area of the respondents. Total membership purchases of foods for a l l associations are not available. However, four co-operatives reported food sales to members. Table XXV on page 207 details the total food sales of the nine co-operative associations for the years 1960 and 1961 and the food sales to members where i t was reported. The ratios of member food sales to total food sales ranged from a low of approximately 30 per cent to a high of 74 per cent during 1961. TABLE XXXTII MEMBERSHIP, TOTAL SALES AND FOOD SALES OF 9 BRITISH COLUMBIA CONSUMER CO-OPERATIVES Assoc. Population Organi- Trading Co-op zation Area Members Date (fami l i e s ) ( f a m i l i e s ) Food Sales 1961 1960 A 1940 4,000 2,000 1,750,000 1,680,000 2,800,000 B 1945 110 95 86,000 72,000 914,384 N.A. C 1921 N.A. 8,500 1,132,736 10,761,436 D 1945 8,000 1,700 887,893 823,074 1,249,492 E 1957 325 180 320,000 270,000 400,000 F 1947 1,200 125 372,368 361,224 761,578 G 1958 160 85 329,900 319,900 465,000 H 1922 1,600 843 223,575 216,048 238,038 677,000 K 1921 1,700 800 510,000 533,000 5,612,472 5,124,830 Tota l Sales 1961 1960 2,400,000 N.A. 8,839,906 1,132,582 325,000 754,454 435,000 229,745 712,000 17,352,544 14,828,687 ,A. Not available TABLE XXXIV PRODUCT GROUPS SOLD, SERVICES AND FOOD SALES AREAS - 9 BRITISH COLUMBIA CONSUMER CO-OPERATIVES Product Groups Services  Partial Self- Self- Food Assoc. Food Clothing Hardware Others Branches Service Service Clerks Delivery Credit Sales Area sq. f t . A X X X X Yes X X X Limited 8,450 B X X X X X X N.A. C X X X X Yes X X X Limited 16,880* D X X X X X X Limited 3,200 E X X X X X X Limited 3,200 F X X X X X X X 3,000 G X X X X X X 1,980 H X X X X X X N.A. K X X X X X X X 3,900 * Two stores. o o> 207 TABLE XXXV. TOTAL FOOD SALES (9 CONSUMER CO-OPERATIVES) - MEMBER FOOD SALES (4 CONSUMER CO-OPERATIVES) Total Food Sales Member Food Sales :iations 1960 1961 1960 1961 A 1,680,000 1,750,000 N.A. N.A. B 72,000 86,000 N.A. N.A. C 914,384 1,132,736 N.A. N.A. D 823,074 887,893 642,000 666,000 E 270,000 320,000 140,000 160,000 F 361,224 372,368 N.A. N.A. G 319,900 329,900 95,970 98,970 H 216,048 223,575 N.A. N.A. K 533,000 510,000 355,000 340,000 5,124,830 5,612,472 Improvements completed Eight of the nine co-operatives dealing i n food products expanded t h e i r f a c i l i t i e s during the five-year period p r i o r to the survey. Table XXXVI indicates that more than a m i l l i o n d o l l a r s was invested i n new f a c i l i t i e s and services by the consumer co-operatives surveyed. Approximately one m i l l i o n d o l l a r s was invested i n improved consumer operations with the remainder spent on improvements to a feed m i l l and mixing plant. 208 TABLE XXXVI IMPROVEMENTS TO FACILITIES AND APPROXIMATE COST 1956-1961 BY 9 BRITISH COLUMBIA CONSUMER CO-OPERATIVES Number of Approximate Cost Associations ($ thousand) Expansion of Stores New equipment Branch store construction New services Processing plant Approximate To t a l Cost 8 6 2 4 1 615 165 100 110 200 1,190 Future improvements planned Five of the nine consumer co-operative associations i n the survey are planning to make substantial improvements i n t h e i r f a c i l i t i e s . Projects programmed for the current year are estimated to cost more than $750,000. Four associations plan enlargement of store premises while the f i f t h intends to b u i l d a service station and an automatic laundry o u t l e t . Advertising and promotional a c t i v i t i e s The nine consumer co-operatives make use of advertising and promotional a c t i v i t i e s i n a more aggressive manner than the farm supply co-operatives. Table XXXVHillustrates the use made of advertising and promotional a c t i v i t i e s . 209 TABLE XXXVII ADVERTISING AND PROMOTIONAL ACTIVITY USAGE BY 9 BRITISH COLUMBIA CONSUMER CO-OPERATIVES Association Advertising Promotional Newspapers A c t i v i t i e s  Semi- Week end Seasonal Weekly monthly Radio Specials Sales Other A X X X X X B* C X X X X D X X X X E X X X F X X X G X X X H X X X K X X X X * No reply given to t h i s question + Includes newsletters, extension courses, community projects Leased or contracted departments Fuel o i l d i s t r i b u t i o n and a drug store are operated on co operative premises under lease arrangements i n one co-operative. Comments by managers Seven managers of co-operatives appended t h e i r personal opinions on changes that have taken place, and are l i a b l e to occur, i n the future. The tone of the r e p l i e s were optimistic - a comment of approval f o r the co-operative wholesale society; a b e l i e f that the r u r a l emphasis was changing; praise for the "Co-op"label program. Several commented on the need for ade quate financing and competent management. 210 Conclusions The respondents to the questionnaire consisted of nineteen associations or approximately f o r t y per cent of those co-opera t i v e associations to which the questionnaire was c i r c u l a t e d . However, the t o t a l 1960 sales volume represented by the respon dents i s approximately 56 per cent of the t o t a l sales volume of a l l purchasing (consumer) co-operatives i n B r i t i s h Columbia. Food product sales of the respondents amounted to 45 per cent of the t o t a l co-operative food product sales i n B r i t i s h Columbia. Farm supply co-operatives among the respondents have no plans for expansion i n the immediate future and with one excep tio n have not made substantial investments i n new equipment or f a c i l i t i e s i n the previous f i v e years. I t would appear that the farm supply co-operatives i n the survey were i n a s t a t i c posi t i o n . Sales volume gains were low i n each case. The consumer co-operatives with food departments which supplied data appear to be making progress. Sales of food pro ducts have increased s u b s t a n t i a l l y . However, one association has shown a decline of $23,000 i n sales. A cause for concern for co-operative leaders i n several of the co-operatives would seem to center around the low r a t i o of member purchases to t o t a l purchases. In one instance, seventy per cent of the sales were 4 V. A. Heighton, Co-operation i n Canada, p. 11. ,211 conducted with non-members in contrast to twenty-six per cent in one other co-operative that reported. Expansion of co-operative f a c i l i t i e s i s a prominent feature of the consumer associations in the survey. Eight of the nine reported expansion projects in the past five years compared with only one in four for the farm supply co-operatives. Several of the projects undertaken are not directly related to food merchan dising but to the provision of services. Evidently the use of advertisements and promotional ideas such as weekend "specials" and seasonal sales is common in the consumer co-operatives in the sample. Eight consumer co-opera tives recorded the use of such methods to encourage patronage. A f i n a l conclusion centers around the difference between the co-operative response to change that i s demonstrated by the consumer co-operatives in comparison with the farm supply co operatives. A relatively stable trade i s usually associated with farm-sponsored supply co-operatives. The degree of compe t i t i o n for farmer patronage in seeds, f e r t i l i z e r s and occupa tional needs is not as severe as i s competition for the food purchases of the urban dweller. Consequently, the managers of consumer co-operative stores have reacted aggressively to a number of challenges. This would appear to explain in part the expansion programs that have been carried out, the use of adver tisi n g , weekend "specials", and seasonal sales by the consumer co-operative stores. 212 CHAPTER VIII CONCLUSIONS AND RECOMMENDATIONS I. CO-OPERATIVE RESPONSE TO A CHANGING ENVIRONMENT Rapid changes have taken place in the distributive sector of the Canadian economy particularly during the past thirty years. These changes have occurred as a result of the altering socio economic and demographic patterns within the country. The economy's productive capacity has also caused changes in distribution. This i s due to i t s a b i l i t y to more than meet the demand for products. Consumer co-operatives have been in operation for over 100 years in various parts of the world. Canadian co-operative progress and adaptation to changes in retailing and the acquisi tion by co-operatives of the efficiencies of integration consti tute the theme of the study. The socio-economic and demographic changes that have i n f l u  enced the distribution of goods are: urbanization, rising income levels, changes in age levels, influx of married women into industry and the mobility of the Canadian consumer. The growth of chain stores and the development of supermarkets and shopping centres were among the responses of the distributive sector to changes in the consumer buying patterns. Associated with the 213 development of such devices was the need for cost-reducing inno vations. The discount house is an example of a recent develop ment in r e t a i l trade that bases i t s appeal to the consumer on reduced r e t a i l prices. The traditional division of business enterprises into manufacturing, wholesaling and retailing with each sector carried out by separate institutions has altered a great deal. A trend toward integration of the three sectors i s becoming more apparent each year. The integrative procedures of the chain stores place them in an advantageous position in relation to other retailers. Co-operative chains (a wholesale organization owned by independent retailers) or a voluntary chain (an indepen dent wholesaler and independent retailers associated for buying, advertising and other merchandising activities) were methods devised by independent operators in order to acquire the benefits of integration. Consumer co-operatives have developed integrated procedures through the organization of co-operative wholesale societies and ultimately the provision of manufacturing and processing f a c i l i t i e s . Co-operative response to changes in the distributive sector of the economy was outlined in preceding chapters for three countries, Great Britain, Sweden and the United States of America. The Rochdale Principles, by which a "genuine" co-operative may be distinguished were developed in Great Britain in 1844 and form the basis for co-operative activity in a l l countries of the world. 214 The Bri t i s h co-operative movement controls a significant (12 per cent) portion of a l l r e t a i l trade in Great Britain. Close to 13 million persons are members of the British consumer co-operatives. The ac t i v i t i e s of the Co-operative wholesale Society, formed in 1863, include production of 144,754,949 Pounds Sterling worth of goods and sales amounting to 475,565,896 Pounds Sterling. The Bri t i s h co-operatives carried out a thorough study of their operations through a Co-operative Independent Commission which made recommendations on a number of issues. Amalgamation into larger, more economic units, changes in the role of the Board of Directors of the wholesale societies, the creation of a r e t a i l development society and the development of a chain of r e t a i l specialty shops were among the major recommendations of the Co-operative Independent Commission. The recommendations of the Commission were implemented in part. The Swedish co-operatives have progressed to the point where 14 per cent of a l l r e t a i l trade and 26 per cent of a l l food sales are handled by the consumer co-operatives in that country. Both in Great Britain and Sweden, co-operatives pioneered the use of self-service and supermarkets. The Swedish co-operatives have instituted structural changes in the operation of the co-operative department stores. The American consumer co-operatives have developed at a di f  ferent rate and in a different manner than the British or Swedish consumer co-operatives. Early efforts of consumer co-operatives 215 did not succeed for any appreciable length of time. The American consumer co-operatives are primarily farm supply co-operatives with the majority of the sales volume represented in farm occu pational needs. The urban co-operatives are currently making progress. One of the retarding factors in the United States has been a lack of a unifying national organization comparable to the large central wholesale societies as are prominent in the Br i t i s h and Swedish co-operative movements. Canadian consumer co-operatives process slightly more than 2 per cent of a l l r e t a i l sales in Canada. The development of consumer co-operatives is uneven in the various provinces of Canada. However, consumer co-operatives are in operation in every province of Canada with Saskatchewan leading in the pro portion of co-operative sales to r e t a i l sales. With few exceptions consumer co-operatives are not organized in the larger metropolitan areas. While the consumer co-operative movement in Canada is not large in terms of consumer sales there are a number of other types of co-operatives in marketing of primary products, savings and loan associations as well as insurance, health and housing services. Canadian consumer associations have organized a number of regional wholesale societies across Canada. The study concentrated on the two wholesale societies in Western Canada. Federated Co-operatives serves the consumer co-operative associations in Manitoba, Saskatchewan and Alberta. The Bri t i s h Columbia 216 Co-operative Wholesale Society operates in the Province of British Columbia. In contrast to other co-operative wholesale societies in other regions of Canada the western wholesale societies are consumer based and do not blend both marketing and wholesaling in the same organization. Federated Co-operatives reported sales of $81 million in 1961. The British Columbia group reported sales in excess of $5 million. Both wholesale societies offer a number of services to their member associations in the form of management agreements, audit services, promotional activities and a private "Co-op" label. One particular consumer association was examined in some detail. The Sherwood Co-operative Association in Regina reported sales in excess of $5 million in 1961. Two samples of the member ship were developed. One, constituting approximately 9.5 per cent of the purchaser-members, indicated that a majority of the members were purchasers of less than $25 per annum. The larger purchasers of food products ($500 per annum or over) were approxi mately 6 per cent of the sample group and were substantial pur chasers in other departments of the association as well. A pattern of the place of residence of members indicated that 79 per cent of the members were resident in Regina or within the Regina Trading Area. The two hypotheses advanced in this study are: 1. consumer co-operatives have progressed and adapted to changes in social and economic conditions, and 217 2. consumer co-operatives have acquired the efficiencies of integration. II. CONCLUSIONS Effect of Rochdale Principles on Co-operative Development The evaluation of the progress and adaptability of consumer co-operatives requires c r i t e r i a that include recognition of the social as well as the economic features of the co-operative enter prise. Privately owned enterprises need only to assess their operations in terms of p r o f i t a b i l i t y . It i s only, however, within the framework of the basic principles guiding co-operatives that the progress and adaptability of co-operatives may be measured in terms of commercial success. Consequently the role of the Rochdale Principles must be assessed in terms of the inhibition or the promotion of change within the movement i t s e l f . Investigation of the influence of the Rochdale Principles on co-operative development is beyond the scope of this study. Reference is made in generalized terms to the Rochdale Principles rather than in any detail. The particular principles of open membership, democratic control, limited interest on capital, and return of surpluses to members on the basis of patronage are considered essential to the co-operative character of an institution. Insofar as the Rochdale Principles distinguish the co-operatives from private enterprises and might have some bearing on the response to change w i l l they be reierred 218 to in these conclusions. Fundamental differences between co-operatives and privately owned enterprises underline the motives for achieving change and performing in an economically efficient manner. In proprietary business, personal or corporate control i s related to the amount of voting stock held while the earnings or surpluses belong to the stockholders in proportion to holdings. However, different classes of stock may share unequally, as when preferred stock is restricted to a stated minimum rate of return. This is in contrast to co-operative principles where the member is entitled to only one vote with proxy voting not permitted. Also the sur pluses belong to the member on the basis of patronage given to the co-operative. A further difference between corporate enter prises and co-operatives is that the individual stockholder is unlikely to be a large.purchaser of the products of the firm in which he is a shareholder. Critics may argue that co-operatives, by restriction on capital earnings, have denied the value of capital and the need to recompense capital for risk bearing. From this conclusion i t would appear that capital requirements for co-operatives w i l l always be restricted. However, there is no evidence that the non speculative character of co-operative share capital is an inhi biting factor in the accumulation of capital. Admittedly the co-operative movement could readily use additional sources of capital yet the restrictive features in terms of stated future 219 earning are commonplace i n public issues such as bonds. The d i f f i c u l t y i n c a p i t a l a c q u i s i t i o n i n co-operatives l i e s not i n the return on c a p i t a l but i n the l e v e l of investment c a p a b i l i t i e s where co-operatives o r d i n a r i l y are commonly found. The provision of c a p i t a l for new f a c i l i t i e s i s treated below i n more d e t a i l . Surpluses allocated to members as patronage refunds have been retained for varying periods within the co-operatives. A s i m i l a r procedure i s c a r r i e d out by the wholesale s o c i e t i e s with r e l a t i o n to patronage refunds a l l o c a t e d to consumer co operative associations. The accounting records required to e s t a b l i s h member purchases e l i g i b l e for patronage refunds add to the accounting expenses of the co-operative organizations. The democratic nature of co-operative organization i s i n d i  cated by the provision of one vote per member. A deviation from t h i s p r i n c i p l e i s found i n the provision of voting power i n federations based, not on c a p i t a l however, but on patronage. There i s no conclusive evidence that the co-operative p r i n  c i p l e s , commonly known as the Rochdale P r i n c i p l e s , have i n h i b i t e d the growth of consumer co-operatives. Measurement of Progress While a recognition of the p r i n c i p l e s that motivate co operative endeavour i s important, t h i s study has l i m i t e d , to a large degree, the measurement of co-operative progress and ada p t a b i l i t y to the measurable indices of sales, membership and 220 f a c i l i t i e s . Consequently, the following conclusions were based on empirical data without attempting to draw inferences based on the large body of co-operative theory related to the social impact of co-operatives. However, the inter-relationship between the Rochdale Principles and the business practices of co-opera tives requires reference to co-operative principles at various stages of these conclusions and recommendations. Therefore, the questions of progress, adaptability, as well as integrative pro cedures w i l l be examined independently. Progress w i l l be examined in terms of sales, membership and f a c i l i t i e s . Adaptability w i l l be rated in terms of f a c i l i t i e s , promotional activity, services and product lines. Integration of co-operative activity w i l l be tested not only in terms of vertical integration between consumer co-operative associations and the wholesale societies but also in terms of amalgamations within various levels of activity. Sales progress The growth of consumer co-operatives in relation to total r e t a i l trade has been significant. The gain in sales volume from 1958 to 1960 has been $76 million or approximately 22 per cent. Total r e t a i l sales for Canada increased by approximately 7 per cent for the same period. 1 The sales of consumer co-operatives 1 See Table XIII, p. 120. have increased more rapidly in a l l regions of Canada than have 2 the total r e t a i l sales during the period 1958-1960. However, the progress of consumer co-operatives has not been evenly distributed throughout Canada. The progress in the provinces of Manitoba, Saskatchewan and Alberta has been more rapid than in other areas of Canada. The proportions of co- i operative r e t a i l sales to total r e t a i l sales in these provinces range from 7.93 per cent in Saskatchewan to 2.22 per cent in Alberta. 3 The nine consumer co-operative associations in British Columbia surveyed in Chapter VII increased their total sales by over $2.5 million in one year and food sales by approximately $500,000.4 Individual consumer co-operative associations have gained in sales as has been pointed out in Saskatchewan. Consumer co operatives with sales volumes in excess of $400,000 increased from 2 per cent in 1949 to 11 per cent in 1960 of a l l consumer co-operatives in the province. 5 Sales volumes exceeding $1 million in Saskatchewan in 1960 were reported by twelve consumer 6 co-operatives. 2 See Table XIV, p. 121. 4 See Table XXXV, p. 207. 6 See Table XVIII, p. 130. 3 See Table XIII, p. 120. 5 See p. 131. 222 Membership growth Membership statistics available are very unsatisfactory. The f i r s t d i f f i c u l t y in using current statistics is that of separating the membership figures for consumer co-6peratives from those of the marketing co-operatives. Federal government reports for Canada do not report membership of consumer co operatives separately from the marketing co-operatives. The aggregate number of members of both types of co-operative has^ fluctuated between 1,200,000 and 1,316,000 for the past five years. The membership reported in statistics refers to persons who have met the minimum requirement of possession of equity holdings in the associations. No precise indices are available as to the degree of purchases in the co-operative associations. As has been pointed out in Chapter VII in the analysis of a large sample of the members of an individual association a majority of members in the sample purchased less than $25 a year from the association. 7 The sample was taken from purchasers and not from the total regi stered equity-holding membership. A smaller sample of 230 names, referred to as the Member Sample, showed that 44 had not purchased from the association, 38 purchased less than $10, while 23 pur- chased less than $25, but more than $10. The statistics for co-operative associations included in the 7 See p. 191 8 See Table XXX, p. 197. 223 survey of consumer co-operatives i n B r i t i s h Columbia do not give comparable figures i n terms of i n d i v i d u a l purchases except that some indications as to t o t a l membership patronage of t o t a l sales show wide differences. In one instance, a consumer co-operative 9 reported 70 per cent of i t s sales were to non-members. Large multi-purpose co-operatives would appear to lose con- tact with t h e i r membership. Cumulative membership figures are not t r u l y i n d i c a t i v e of the strength of the organization i n terms of membership patronage. In some regions i t i s l i k e l y that the number of members i s close to a saturation point. Membership i n Saskatchewan consumer co-operatives, as d i s t i n c t from marketing co-operatives, i s 211,246.^"° Membership i n many cases consists of family member ships, thus the population served by the co-operatives would be considerably larger. The task facing the Saskatchewan co-opera ti v e s i s not only to increase the number of members but more important to increase the p a r t i c i p a t i o n of e x i s t i n g memberships i n terms of purchases per member. Co-operatives with memberships based on e s s e n t i a l l y r u r a l groups are l i a b l e to be vulnerable due to the trend towards urbanization. S t a t i s t i c s for the Province of Quebec show only 94,000 members i n a population exceeding 4 mi l l i o n . * * 1 Any 9 See p. 202. 10 See p. 138. 11 See Table XVII, p. 137. 224 substantial progress in consumer co-operative membership in that province depends on altering the sales program to appeal to a more urbanized population. F a c i l i t i e s improvement Progress in the provision of new f a c i l i t i e s has been excel lent in terms of the groups studied herein. The sample group of nine consumer co-operatives in Bri t i s h Columbia as reported in Chapter VII have spent over one million dollars from 1956 to 1961 in the provision of new f a c i l i t i e s and services and plan 12 to invest $750,000 in the current year on new construction. The consumer co-operatives a f f i l i a t e d with Federated Co operatives in Manitoba, Saskatchewan and Alberta spent over $4,800,000 on 192 projects in 1961 and plan further expenditures of $9,500,000 during 1962. 1 3 Conclusions as to consumer co-operatives in other regions of Canada would require more data than is available at this time. Conclusions On the basis of progress in terms of sales and f a c i l i t i e s co-operatives would appear to be making progress. The ratio of co-operative r e t a i l sales to total r e t a i l sales in Canada is 12 See p. 208. 13 See Table XIX, p. 132. 225 increasing gradually. Expansion of f a c i l i t i e s shows progress particularly in Western Canada, the area of concern in this study. Membership increases in both marketing and consumer co operatives are evident from the reported increase of 26,000 in the year I960. 1 4 However, the statistics available are inadequate to draw firm conclusions on this point. Adaptability of Consumer Co-operatives to Change Any attempt to assess the adaptability of co-operatives to change must take into consideration the social and economic changes to which adaptation becomes necessary. The consumer co-operatives face conditions similar to those that are faced by the private owner of a r e t a i l establishment. However, interest in consumer co-operatives may increase in periods of adverse economic conditions. The appeal to a desire for owner ship and control may be less attractive in periods of relative prosperity. Another change of v i t a l importance to co-operatives is the trend toward urbanization. In vi r t u a l l y every area of Canada the rural member is the dominant factor in the consumer co-opera tive. The movement of the rural population to larger population centres has implications for co-operatives. The increased mobility of the farmer also poses locational problems for 14 See Table XVII, p. 137. 226 co-operatives which are located i n smaller r u r a l communities. F a c i l i t i e s One adaptive response of co-operatives to change i s to develop better, more up-to-date f a c i l i t i e s . I t might be noted that large expenditures of funds for construction and improvement of f a c i l i t i e s have been made i n Western Canada. The nine consumer co-operatives i n B r i t i s h Columbia reported i n Chapter VII are making improvements to e x i s t i n g f a c i l i t i e s i n terms of super markets and s e l f - s e r v i c e procedures. The construction of new buildings by the Sherwood Consumer Co-operative Association during 1961 was to provide for more parking space, modern supermarket operations i n food, and a department store. Promotional a c t i v i t i e s Promotional a c t i v i t i e s such as advertising, weekend specials and seasonal sales are currently being used by co-operatives. The advertising i s c a r r i e d over t e l e v i s i o n programs as well as by radio stations and newspapers. It i s s i g n i f i c a n t that large co-operative organizations such as Saskatoon Co-operative Association and Sherwood Co operative Association have hired public r e l a t i o n s o f f i c e r s . Public r e l a t i o n representatives are i n operation i n a l l the d i s t r i c t s of Federated Co-operatives. 227 Educational programs The Co-operative Consumer provides information to many thousands of members on a bimonthly basis. The consumer co-operatives have developed new ideas in terms of consumer education. Both Saskatoon Co-operative Associa tion and Sherwood Co-operative Association employ consumer con sultants, whose functions are to advise staff on consumer require ments and to assist the consumer in his selection of consumer goods. The organization of the Western Co-operative College at Saskatoon with emphasis on training in business practices as well as co-operative theory brings more educational opportunities for staff members and Board of Director members. The co operatives are showing v e r s a t i l i t y in their approach to both educational and promotional act i v i t i e s that in many cases i s limited only by lack of funds. In the area of promotion and education the application of the Rochdale Principles is of great significance to the co operative movement. As co-operatives are essentially consumer- oriented the need for promotion is not simply the exposition of goods in advertising for the sake of sales and ultimate profits. Included in advertising i s a need to measure the interest of the consumer in terms of what i s offered. In training staff members, the co-operative staff member receives not only training in the efficiencies that are common in private trade but also appreciation of the role of the member-228 patrons. Education of the Boards of Directors and member-patrons in the principles guiding co-operatives is important in terms of the objectives of the co-operative. This dichotomy of the member, as an owner as well as a customer, requires not only the use of modern methods of communication that enable the sale of a product but also requires the sale of an idea or concept. The conclusions drawn by a number of studies are that the communication of co-operative ideas and principles has been badly handled in terms of the consumer of today. The analysis made in the United States and referred to in page 97 is indicative of the concern of the co-operative leaders that the proper "image" or concept of the co-operative i s not being presented adequately. Services Consumer co-operatives are developing services such as insurance, parking f a c i l i t i e s , laundromats, in order to adapt to the changed consumer. The broadening of services is indicated by the provision of the complete services at the Sherwood Co operative Association at Regina. While not a l l co-operatives are of such size in terms of volume of sales the trend is towards co-operatives with services roughly comparable. In most cases, such as insurance, the services are provided by a different co operative organization but available within the store premises. 229 Product l i n e s The broadening of product l i n e s i n consumer co-operatives to include hardware, drugs and department store items i s quite noticeable i n co-operatives. Petroleum products constitute a sizeable portion of the consumer business of co-operatives i n the area served by Federated Co-operatives. While the o v e r a l l sales s t a t i s t i c s f or consumer co-operatives show that sales are predominantly i n farm supplies there i s a gradual change taking place toward consumer goods. Amalgamations The number of consumer co-operatives appears to be decreasing. The r e s u l t s of amalgamations are p a r t i a l l y d e t a i l e d for one year on page 138. The absorption of consumer co-operatives into more economic units which are capable of r e t a i n i n g s k i l l e d management i s a trend i n Canadian co-operatives. Many B r i t i s h co-operatives are contemplating large scale amalgamations i n the B r i t i s h I s l e s . Research The weakest l i n k i n co-operative ad a p t a b i l i t y i s the lack of research of any depth. The appointment of a research d i r e c t o r to Federated Co-operatives was undertaken i n 1960. The Co operative Union of Canada has hired a research expert within the l a s t six months. The need for research on problems related to co-operatives i s more widely recognized today than i t has been i n the past. The formation of a Co-operative Development Foundation 230 and a National Committee on Co-operative Research should provide a better understanding of the need for research. This i s not to say that co-operatives have never done any research, as t h i s has been done i n i n d i v i d u a l s i t u a t i o n s . The Saskatoon Co-operative Association undertook a research project i n r e l a t i o n to i t s planned expansion. Government research on co-operatives has been l i m i t e d to, i n the main, the accumulation of s t a t i s t i c s i n most governments. The p r o v i n c i a l government i n Saskatchewan has set up a Co operative Research Department and the Ontario Government has organized a Co-operative D i v i s i o n within the Department of Agriculture. National s t a t i s t i c s have been compiled by the Canada Department of Agriculture at Ottawa. E f f i c i e n c i e s of Integration The question of integration presents two p o s s i b i l i t i e s to the consumer co-operatives. One i s v e r t i c a l integration between the consumer associations and the co-operative wholesale socie t i e s and the other i s the amalgamation or horizontal integration of either the wholesale s o c i e t i e s or the consumer co-operative associations. V e r t i o a l integration The degree of integration with the wholesale s o c i e t i e s varies considerably among co-operative associations. The large number of co-operative service stations i n Saskatchewan are 231 closely integrated into the operations of Consumer Co-operative Refineries Ltd., the petroleum products subsidiary of Federated Co-operatives. A number, estimated at 90 to 100, of the consumer co-operatives in the Federated Co-operatives area are on manage ment contracts with the wholesale society while in British Columbia twenty co-operative stores have a similar procedure in effect with the British Columbia Co-operative Wholesale Society. 1 5 The basis of co-operative integration as practised in Western Canada cannot be characterized as vertical integration in i t s accepted definition. The result might more properly be termed a "quasi" integration. Each co-operative association, except under the obligations imposed by a management agreement, is autonomous. Purchase from the wholesale society by a consumer association is voluntary. Consequently, the wholesale societies must compete with private wholesalers for the trade of the local associations. The provision of the numerous services by the wholesale societies is not a l t r u i s t i c on their part. The consumer associations must prosper or the position of the wholesale societies could become precarious. Despite the fact that the support of the wholesale societies by consumer associations is voluntary, the wholesale societies have increased their sales volume considerably. The sales volume gain of the wholesale societies is greater than that of the individual 15 See p. 146. associations indicating that more of the consumer co-operative trade i s being handled through the co-operative wholesale 1 fi societies. Efficiencies related to promotional efforts, advertising, use of data processing and tabulator centres accrue to the consumer associations participating in the co-operative whole sale society. Horizontal integration The amalgamation of the Alberta Co-operative wholesale Association and Federated Co-operatives Ltd. in 1961 w i l l make further efficient use of f a c i l i t i e s and personnel. Common pro cedures in accounting, advertising and management practices are followed by Federated Co-operatives and the British Columbia Co-operative wholesale Society. These common procedures are not only preparatory to ultimate amalgamation but enable e f f i  ciencies to be gained currently. While the status of the Interprovincial Co-operatives Ltd. has not been analyzed herein the operations of Interprovincial Co-operatives are integrative procedures of the various co operative wholesale societies on a national level. The "Co-op" label program, which is an integrative procedure, is supervised 16 Table XXI on p. 156 indicates that consumer associations in Manitoba and Saskatchewan increased food sales by 17.7 per cent in 1959 and by 4.1 per cent in 1960. Federated Co-opera tives food sales increased by 27 per cent and by 13.7 per cent for the same years. 233 by Interprovincial Co-operatives Ltd. The processing of a number of food products is also carried out by Interprovincial Co operatives Ltd. Conclusions The consumer co-operative movement has instituted a con siderable number of integrative procedures through the use of / regional wholesale societies and a national wholesale organiza- i \ tion. In some instances, notably in petroleum products, the integrative procedures include production. The efficiencies possible through co-operative integration should result in material benefits to consumer associations. The British Columbia Co-operative Wholesale Society with a net surplus in 1961 of slightly in excess of $7,000 was unable to make any substantial patronage refund to i t s members. However, the member associations of Federated Co-operatives received a patronage rebate of $3,208,000. This amount was refunded on the basis of a 1.5 per cent return on grocery purchases to a high of 12 per cent return on petroleum light fuel purchases. 1 7 The efficiencies available through integration are not always achieved by consumer associations. The autonomous status of the associations may, and sometimes does, result in purchases from private wholesalers. Purchases by co-operative associations 17 See Table XXII, p. 171. 234 from private wholesalers can result in under-utilization of the resources of the wholesale societies. It is in this context that the principle relating to ownership and control may inhibit the efficient operations of a wholesale society in comparison with a private chain store wholesaling operation. Summaryiof Conclusions 1. Consumer co-operatives are progressing in the areas of sales volume and the provision of f a c i l i t i e s . Progress in membership growth is d i f f i c u l t to assess but in any case i s not as evident as the increases in sales volume and provision of f a c i l i t i e s . 2. Consumer co-operatives are in a process of adaptation to changing in retailing, particularly in the provision of f a c i l i t i e s , use of promotional and educational materials. A more recent adaptation is the use of research on matters of concern to co-operatives. 3. Consumer co-operatives have acquired a number of the efficiencies of integration. It i s highly possible that maximum use of integrative procedures would yield increased efficiencies. A prime consideration in this regard would be the reconciliation of the integrative procedures with the Rochdale Principle of control of the association by the consumer members. III. RECOMMENDATIONS 235 The following recommendations for further study would appear to be indicated from the material presented herein. Statistics A definitive analysis of consumer co-operatives as distinct from marketing and farm supply co-operatives i s d i f f i c u l t under the present methods of accumulation of s t a t i s t i c s . The only currently available national data are unsatisfactory for the purposes of distinguishing consumer co-operative membership from marketing co-operative membership. The accumulation and form of statistics should be revised to enable accurate measure ment of the significance of the consumer co-operatives in the r e t a i l trade of Canada. Development of Urban Consumer Co-operatives The development of consumer co-operatives in the metropolitan areas would appear to be necessary in any attempt to substantially increase co-operative r e t a i l trade. The traditional approach to organization of a consumer co-operative where the association gradually grew from a small enterprise over a number of years is totally inadequate in terms of present-day conditions. The mini mum requirement for a successful r e t a i l food products outlet of any kind, including co-operative, would appear to be several thou sand patrons and $200,000 to $300,000 of i n i t i a l capital. 236 Two factors w i l l influence the future growth of consumer co-operatives and require the organization of urban consumer co-operatives. The f i r s t is the decline in the rural population which has provided the main support for consumer co-operative associations. The second i s the need for larger sales volumes to u t i l i z e f u l l y the current capabilities of the wholesale societies. Investigation should be undertaken into the p o s s i b i l i t i e s of co-operatives, not the least being a new approach to the question of the most suitable form of consumer co-operative to be organized. The possibility of consumer co-operatives' operating in a manner similar to discount houses should not be ignored. Co-operative Realty Company The possibility of the creation of a co-operative realty organization, with adequate capital and expert staff, should be explored. The proposal i s that a co-operative be developed that would be capable of building and leasing suitable premises and f a c i l i t i e s to consumer associations. An association of this nature would be able to assist in developing consumer store locations and f a c i l i t i e s , thus relieving the local associations of the technical and financial problems involved in such projects. 237 Integrative Procedures The reconciliation of the interests of the consumer associa tions and the co-operative wholesale societies in terms of increased integration should be analyzed. Amalgamation of consumer associations into the wholesale societies does not appear to contradict the principle of democratic control yet undoubtedly the sense of pride in local ownership of a co operative store could readily be weakened. Balancing the social aspirations of a community with the need for economic efficiency is v i t a l to the continued growth of consumer co-operatives. Member Participation A f i n a l recommendation is concerned not with the commercial aspects of the consumer co-operatives but with the social signi ficance of the consumer co-operatives. Commercial efficiency as representdd by modern buildings, large accumulations of capital, and well trained management w i l l result in economic benefit to the members. However, the success of co-operative development is not expressed solely in terms of dollars but in the development of a democratically expressed extension of the consumer membership. The growth of large consumer co-operatives requires a re-examination of the procedures by which the individual member may exercise control and contribute to this understanding of his association. 238 Future Research The changes in Canadian retailing and in the socio-economic and demographic patterns examined herein seem to be a pattern of change that i s a continuing process. The relationship of consumer co-operatives to change requires research in the future as additional changes occur. 239 BIBLIOGRAPHY I. BOOKS Abrahamsen, M. A. "United States Co-operatives and the Challenge of Change", Year Book of Agricultural Co-operation 1961. Oxford: Basil Blackwell, 1961. Bailey, Jack. The Bri t i s h Co-operative Movement. London: Hutchinson's University Library, 1955. Casselman, Paul Hubert. The Co-operative Movement and Some of  Its Problems. New York: Philosophical Library, 1952. Childs, Marquis. Sweden, The Middle Way. Harmondsworth, Middlesex: Penguin Books Limited, 1948. Cole, Robert H. et a l . Vertical Integration in Marketing. Urbana, I l l i n o i s : University of I l l i n o i s Press, 1952. Francis, W. B. Canadian Co-operative Law. Toronto: The Carswell Company Limited, 1959. Greer, Paul. Co-operatives - the Bri t i s h Achievement. New York: Harper and Brothers, 1955. Hamilton, David. The Consumer in Our Economy. Boston: Houghton M i f f l i n Company, 1962. McNair, Malcolm et.al. Problems in Marketing. New York: McGraw-Hill Book Co., 1957. "Merchants on the Move", November 1954 Monthly Letter of the National City Bank of New York; reprinted in Changing  Patterns in Retailing. J. W. Wingate and A. Corbin (eds.), Homewood, I l l i n o i s : Richard D. Irwin, Inc., 1956. Parker, Florence E. The First 125 Years. Chicago: The Co operative League of the U. S. A., 1956. Shaffer, Harold. How to be a Successful Retailer in Canada. Toronto: McGraw-Hill Co. of Canada Ltd., 1961. 240 Stacey, Nicholas A. H. and Wilson, Aubrey. The Changing Pattern of Distribution. London: Business Publications Limited, 1958. Twentieth Century Fund, The. Does Distribution Cost Too Much? New York: The Twentieth Century Fund, 1939. Voorhis, Jerry. American Cooperatives. New York: Harper and Brothers, 1961. Warbasse, James Peter. Cooperative Democracy. Fourth Edition. New York: Harper and Brothers, 1942. Wingate, John and Corbin, Arnold (eds.). Changing Patterns in Retailing. Homewood, I l l i n o i s : Richard D. Irwin, Inc., 1956. Wright, Jim F. C. Prairie Progress. Saskatoon: Modern Press, 1956. II. GOVERNMENT PUBLICATIONS Bank of Canada. St a t i s t i c a l Summary Supplement 1960. Ottawa: Bank of Canada 1961. Business and Defense Services Administration. Selected United  States Marketing Terms and Definitions. United States Department of Commerce, Washington: Government Printing Office, 1950. Canada. Combines Investigations Act. R.S.C. 1952. C.314, as amended 1953-54 C.51; 1960 C.45; S.34. Canada, Dominion Bureau of Statistics. Canada 1961. Ottawa: Queen's Printer, 1961. Canada, Dominion Bureau of Statistics. Canada Year Book 1961. Ottawa: Queen's Printer, 1961. Canada, Royal Commission on Co-operatives. Report. Ottawa: Queen's Printer, 1945. Canada, Royal Commission on Price Spreads of Food Products. Report, Volume II. Ottawa: Queen's Printer, 1959. Government of Saskatchewan. Analysis of Financial Statements. Saskatchewan Purchasing Co-operatives Fiscal Year 1960, Research and Sta t i s t i c a l Services, Department of Co-opera tion and Co-operative Development, Regina. 241 Government of Saskatchewan. Co-operative Association Services 1960. Department of Co-operation and Co-operative Develop ment. Regina: Queen's Printer, 1961. Heighton, V. A. Co-operation in Canada 1955 and 1960. Canada Department of Agriculture, Ottawa: 1955. Scaramell, F. E. Co-operative Associations in Nova Scotia 1960. Halifax: Nova Scotia Department of Agriculture and Marketing, 1961. III. PAMPHLETS So-operative Union Limited. A New Look at the Co-op. Manchester: Co-operative Union Limited, 1960. Co-operative wholesale Society. A l l about the C.W.S. Manchester: Co-operative Wholesale Society, 1961. Dichter, Ernest. A Pilot Research Study. Croton-on-Hudson, New York: Institute for Motivational Research, Inc. (1955?). Dodge, Philip H. Cooperatives 1959-60. Chicago: Cooperative League of the U. S. A., 1960. Erdman, H. E. and Tinley, J. M. The Principles of Cooperation  and Their Relation to Success or Failure. Division of Agricultural Sciences, University of California Bulletin 758, 1957. H i l l , Richard M. Improving the Competitive Position of the  Independent Wholesaler. Bureau of Business Management, Bulletin No. 812. Urbana, I l l i n o i s , University of I l l i n o i s , July 1958. Konsumtionsforeningen. Konsum-S tockholm. Stockholm: Konsum- tionsforeningen, 1957. Lundberg, John. In Our Hands. Stockholm: Kooperativa Forbundets Bokforlag, 1957. Odhe, Thorsten. Co-operation in World Economy. London: Inter national Co-operative Alliance, 1955. Weiss, E. B. "The Coming Era of Grant Leased Department Chains" Doyle, Dane, Bernback, Inc. 242 IV. REPORTS AND PROCEEDINGS Ashelman, Samuel F. "The Dichter Report", Proceedings. Eleventh Annual Consumer Cooperative Managers Conference, Monterey, California, June 5-10, 1961. Briti s h Columbia Co-operative Wholesale Society. 1961 Annual  Report. Burnaby, B. C : British Columbia Co-operative Wholesale Society. Co-operative Congress. Reports. Manchester: Co-operative Union Limited, 1960, 1961. Co-operative Independent Commission Report. Manchester: Co-operative Union Limited, 1958. Co-operative Union Limited. National Amalgamation Survey. Manchester: Co-operative Union Limited, 1960. Credit Union National Association. Credit Union Yearbook 1961. Madison, Wisconsin: Credit Union National Association, 1961. Federated Co-operatives Limited. 1961 Annual Report. Saskatoon: Federated Co-operatives Limited. Kytle, Calvin. "The Characteristics of Cooperatives and How to Dramatize Them Effectively", Proceedings. Eleventh Annual Consumer Co-operative Managers Conference, Monterey, California, June 5-10, 1961. Saskatoon Co-operative Association Ltd. 1961 Annual Report. Saskatoon: Saskatoon Co-operative Association Ltd. Sherwood Co-operative Association Ltd. 1961 Annual Report. Regina: Sherwood Co-operative Association Ltd. V. JOURNALS AND PUBLICATIONS "Are There Too Many Women in the Labor Force?" Canadian  Business. 34 (June 1961). Fulton, David. "Revolution in Retail Merchandising", Saturday  Night. 77 (January 6, 1962). 243 Johnsrude, B. "The Wholesale in Consumer Co-operation", Canadian Co-operative Digest. (April I960) Loftus, E. R. "Trends in Shopping Centres", Western Business  and Industry. XXV (June 1961). McEwen, W. H. "The Cover Picture - M.C.S.", Canadian Co-operative  Digest. V (Spring 1962). MacPherson, Mary-Etta. "The Eatons: Shopkeepers for a Nation", Chatelaine. XXV (June 1962). Michel, H. "The Co-operative Store in Canada", Bulletin of the  Departments of History and P o l i t i c a l and Economic Science. Kingston, Ontario: Queen's University, 1916. Moody's Industrial Manual. New York: Moody's Investors' Service, 1960. Odhe, Thorsten. "Swedish Cooperation in a World of Changing Structures", Review of International Cooperation. DII (July-August 1959). "Report of the Definitions Committee", American Marketing Association. Journal of Marketing (October 1948). VI. ENCYCLOPEDIA ARTICLES Bower, Edward. "Marketing", Encyclopedia Britannica (15th ed.), XIV: 918. "F. W. Woolworth", Encyclopedia Britannica (15th ed.), XXXIII: 736. VII. NEWSPAPERS Co-operative News. (Manchester) February 17, 1962. The Economist. January 31, 1959. Financial Post. December 17, 1960. February 24, 1962. New Statesman. June 11, 1960. 244 The Province. (Vancouver) March 24, 1962. TIME. April 20, 1962 - March 30, 1962. VIII. INTERVIEWS AND LETTERS Benson, M., Public Relations Officer, Saskatoon Co-operative Association, Saskatoon, Saskatchewan (May 14, 1962). Chapman, Harold, Principal, Western Co-operative College, Saskatoon, Saskatchewan (May 12, 1962). Cooperstock, Henry, Research Director, Federated Co-operatives Limited, Saskatoon, Saskatchewan (May 14, 1962). Johnsrude, B., General Manager, Br i t i s h Columbia Co-operative Wholesale Society Limited, Burnaby, Br i t i s h Columbia (May 1, 1962). Scammell, F., Inspector of Co-operatives, Nova Scotia Department of Agriculture and Marketing, Halifax, Nova Scotia, letter dated March 12, 1962. APPENDIX A Mr. J. Norman Riley c/o Professor James Warren Faculty of Commerce and Business Administration University of Br i t i s h Columbia CONSUMER CO-OPERATIVE QUESTIONNAIRE Name of Co-operative Society Location of Store Branches ( i f any) What year was the Society organized? Did the Society commence operations as a r e t a i l store? Yes No If "No", what t&as the original purpose of the Society? What year did r e t a i l operations begin and what lines were handled at f i r s t : Approximate size of your trading area(number of families)_ Membership in Co-op.(number of families) Present Operations: Lines Carried: Food Sales Clothing; Hardware Other (describe) What type of store do you manage: Self-Service (Please check one) Partial Self-Service Delivery Credit Clerks Total r e t a i l sales ( a l l departments) 1960 $ 1961 $ Appendix A 5. Food Sales (groceries, meat and produce): Area devoted to food sales: Approximately Food Sales Total 1960 $ $. 1961 $ $. f t . x f t . Members 6. Have any improvements or expansion of f a c i l i t i e s been made: In the past year? In the past 2 years? In the past 5 years? If "yes", what was done? Expansion of Store New Equipment Yes_ Yes_ Yes No_ No No New Branch Store_ New Services Approx. Cost $_ Approx. Cost $_ Approx. Cost $_ Approx. Cost $_ Approx. Cost $_ (Please l i s t i f necessary) Are you planning any improvements or expansion in the next year? Yes No If "yes", what is planned and what do you estimate the cost w i l l be? Cost $ 8. Does your Co-op undertake any promotional activities? Yes No Advertising? Yes No If "yes", how often do you advertise? Weekly Twice Monthly Occasionally On radio? Do you offer special premiums (exclusive of manufacturer's deals)? Yes No Appendix A I f "Yes", what type? Do you have " s p e c i a l s " on weekends? Yes No, Do you have seasonal sales? Yes No Please l i s t any other promotional a c t i v i t i e s Do you have any leased or contracted departments? Yes No I f "Yes", which department(s) Do you wish a copy of the consolidated questionnaire report? Yes No Address to: What do you believe personally are the most s i g n i f i c a n t changes you've noticed and what changes do you foresee for the future? 248 APPENDIX B JOB SPECIFICATIONS - CONSUMER CONSULTANT SHERWOOD CO-OPERATIVE ASSOCIATION LIMITED TITLE: CONSUMER CONSULTANT DATE APPROVED: BY: POSITION INCUMBENT: DATE POSITION FILLED: SALARY RANGE: General Function The Consumer Consultant i s responsible for a consumer information and counselling function. To develop and promote for and within Sherwood Co-op a program relating to ethical practices, consumer protection and consumer information. Duties and Responsibilities 1. To serve as a consultant to the merchandise personnel in Sherwood Co-op from the standpoint of assuring the u t i l i t y and value to consumers of the products distributed by Sherwood Co-op to i t s members. 2. To arrange classes which w i l l provide information to members and customers on the best way to u t i l i z e materials, e.g. clothing, furniture, appliances, food, etc. 3. To render individual specialized service either at the department involved or in the home (decorating, painting, draperies, rugs, furniture, etc.). 4. Suggest menus for the Cafeteria when requested. 5. To prepare material for "Consumer Information Bulletins" which could be distributed through check-outs and parcel deliveries, or reprinted on back page of the Consumer. 6. To plan and deliver television or radio programs on the basis of a service feature, rather than a sales approach even i f such information may retard the sale of some specific item handled by Sherwood Co-op. 7. To plan classes that would provide the greatest good to the greatest number of our members. Appendix B 8. To provide counsel to newlyweds or young people and assist those who are planning a home. 9. The counselling service should be as broad as possible, however the services, aims and objectives of Sherwood Co-op and the Co-op movement generally should not be overlooked. 10. To provide technical advice to staff regarding products (e.g. Consumer Reports ratings, quality, etc.). 11. Department Manager's requests for help should receive priority, but should not supercede previously arranged programs. 12. To attend a l l Departmental Manager's meetings. 13. To be alert to recommend actions to the General Management of Sherwood Co-op which should be established as merchan dising policies in the interests of protection and benefit to Sherwood members. 14. To carry on such liaison work as is necessary with the Sherwood Co-op Women's Guild, Homemaker's Clubs, Consumers Association of Canada, etc. 15. To be prepared to render any other necessary service within the realm of this general function as time and conditions w i l l warrant and dictate. Relations 1. Responsible to the General-Manager. 

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