It’s 5:30am on a cold Saturday and Paddy’s Markets Flemington, a fruit and vegetable market in western Sydney, is already buzzing.
Trolleys weave through shoppers bargaining with cash in hand and traders shouting their prices.
Josh Blythe and his son Chris have arrived with a mammoth task.
“We are here to feed 12 families for the next week with a bunch of fruit and veggies,” the co-founder of Killarney Heights Fruit Co-op tells The Business.
Mr Blythe’s cooperative is a voluntary bulking buying community group.
Each family devotes three to four hours of their time once every three months to do the shopping.
The budget is $20 a family for a box of fresh produce that lasts for a week.
“We generally get higher volume, lower costs and better quality than some of the major supermarkets,” Mr Blythe said.
They take the food home and divide it up before it’s collected by the rest of the families.
The goal is to save money on groceries.
“If we had to do that in the [major] supermarkets, it would probably be about $60 a week,” Mr Blythe said.
“We’re probably saving two-thirds on our weekly grocery bill just for the fruit and veggies.”
More co-ops formed as cost-of-living bites
Vendor Frankie Schipirra, whose family has been in the fruit and vegetable business for decades, said he’s seen an influx of small informal co-ops at Paddy’s Markets due to cost-of-living pressures over the last six to 12 months.
“A lot more families getting together, and neighbours getting together to buy a box of this and a box of that and share it,” he said.
“You come down to Paddy’s and you cut out the middleman, you can get stuff that comes direct from the wholesaler or the grower at a reasonable price.”
While Mr Blythe’s co-operative is informal, some have set up as profit-sharing enterprises or non-profit organisations offering membership to the public.
“When we think of companies, we often think of shareholder companies,” Melina Morrison, CEO of the Business Council of Co-operatives and Mutuals said.
“When we think of cooperatives, we need to think of a different type of owner, the owner is the user of the business.”
Ms Morrison said these cooperative structures allowed people to pool their purchasing power in the face of cost-of-living pressures.
“It makes absolute sense to cooperate when you’re trying to solve a need that you all share and that’s what co-ops are formed to do.”
Ms Morrison adds that the purpose of a co-op is to deliver benefits back to members, rather than profit maximisation and returns to investors.
In Australia, cooperatives exist across a broad range of industries including banking, insurance, agriculture, motoring and retail.
According to the Business Council of Co-operatives and Mutuals, 8 in 10 Australians are members of at least one co-operatively owned business.
Cooperatives, including member-owned super funds, account for about 8.3 per cent of GDP.
How is a co-op supermarket different from Woolworths and Coles?
In the Barossa Valley in South Australia, 90 per cent of the local population shops at Barossa Co-op, in an area where Coles and Woolworths are absent.
The cooperative is Australia’s largest and longest-standing retail co-operative.
It was established in 1944 as a general store and has since grown into a major co-op that runs a supermarket and services for 23,000 members.
CEO Cathy Main said the way they handle their profits differentiates the co-op from major supermarkets because their profits were returned to the community through sponsorships and price discounts.
“It feeds into the cooperative ethos of working together, cooperation, collaboration, to be a self-reliant community in controlling its economic and lifestyle future,” she said.
“Last year, we provided just under $500,000 worth of discounts in Barossa Fresh supermarket alone, with fuel discounts included.”
Ms Main said members enjoy cheaper prices but also retain a say in how the co-op is run through voting rights.
Australia’s supermarket sector is highly concentrated, with Woolworths and Coles controlling two-thirds of the market.
A recent report by the former chair of the Australian Competition and Consumer Commission (ACCC) found a lack of competition is allowing for exploitative practices, which is hurting Australian households and grocery suppliers and might be adding to inflation
Less than 1 per cent of the sector are co-operative supermarkets.
However, in countries like Switzerland (70 per cent), Germany (46.5 per cent) and France (35.8 per cent), co-op supermarkets account for a big chunk of the market.
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More competition, lower prices
After a number of inquiries, the federal government is imposing a mandatory code of conduct on supermarkets.
They will face fines of up to $10 million if they mistreat suppliers.
While Ms Main said her co-op supermarket doesn’t fall under the code because it didn’t meet the annual revenue threshold of $5 billion, they take their relationships with suppliers seriously.
“Operating ethically and having open transparent relationships with suppliers is fundamental to our existence,” she said.
Some economists don’t think implementing a code is the best approach, instead, they’d like to see more competition in the market.
“It’s very difficult for an outside observer, including a bureaucratic observer, to completely accurately work out how much it costs Coles or Woolworths, for example, to put a particular product on the shelf,” Gigi Foster, from the School of Economics at UNSW said.
“The bureaucratic approach generally, which is always going to involve either monitoring or something like a mandatory code of conduct where you just say, here’s a regulation you must obey.
“I just don’t think that that’s the right way to go, the right way to go is competition, generate another source for customers, generate some other choice that they have.”
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Professor Foster says although co-ops can exert some price pressure, they won’t be able to seriously challenge Coles or Woolworths given the market share, convenience and range of products the major supermarkets have.
The competition watchdog is currently investigating the major supermarkets and will release its interim report next month.
Ms Morrison is calling on the government to support cooperatives as a business model.
“Competition law doesn’t recognise the specific advantages of cooperatives enough,” she said.
“We need legislation that is shaped in their interests and incentivises people to not only shop with a co-op, but to form new cooperatives.
“The best recipe for addressing a cost-of-living crisis and inflation is to have genuine market competition and consumer choice.”