Tuesday, October 10, 2006


Today was the second day of my Master's class and we talked for the first art about entrepreneurship and our business plans. For the last four hours of class however we were joined by Antonio Cancelos, Founder of the Eroski (click to see a previous post on Eroski) retail chain and former director of the MCC. He was truly a dynamic and energetic speaker. Cancelos was the head of a local coop grocery store in the town of Eibar (about a half hour away from Mondragón) in the mid sixties he saw the need to join together with other coops in the region to form a larger entity. By 1970 this organization had become Eroski.
As I explained in my previous post on Eroski at a certain point in the 1980´s Eroski underwent a rapid expansion in all of Spain. This was done to head off the arrival of its competitors, such as the French retail chains and perhaps even companies like Wal-Mart. In order to expand they developed Hipermercados (like Supercenters that include food and all kinds of other retail items) and a network of hundreds of smaller stores as well as an alliance with a regional cooperative chain in Valencia called Consum. In order to finance this bold expansion of what had once been two relatively small and regional chains into a national chain capable of competing head-to-head with multinationals, Eroski had to get creative. Aside from forming a partnership with Consum (which fronted only 5% of what Eroski did) they reached out to several investors, limiting themselves to quasi-governmental agencies or non- profits and also the Italian Cooperative chain Coop Italia. With this capital they formed various holding companies and for each individual store the holding group provided 51% of the capital and local partners like ONCE (National Spanish Organization of the Blind) provided the rest of the capital. In this way they were able to multiple their capital to fund the expansion. After a number of years as their new businesses became profitable they were able to fund everything on their own. It also should be noted that they did not recieve money from Caja Laboral.

In the mid-90s Cancelos became the director of MCC, he summarized his six years there in this way: ¨when I arrived there were 28,000 workers in MCC and when I left there were 70,000.¨ He also noted that only about 38,000 of those workers were employee-owners (now days the figure is somewhat higher) and that the rest (that is, non-worker owners) worked abroad or largely at Eroski. He rhetorically raised the question that if the coops were creating non-cooperative jobs at such a large rate would they soon no longer be coops? His answer was that expanding non-coop employment allowed for the creation of more worker owners, made coops more competitive and that during his time as the head of MCC the created on average 2,000 co-operators per year more then during any other period. In addition non-owner workers in MCC companies tend to be treated and paid better then workers in other firms in the same industry.

Meeting Cancelos was even more exciting then meeting Jose María Ormaetxea. He truly embodied the image of an entrepreneur dedicated to cooperativism but open to non-traditional means of growing cooperative firms.

6 comments:

Hancock said...

I think the substance is more important than the form. Mondragon is a major force, contending with transnational capital in the market with a High Road strategy. They're clearly deeply committed to a values-based business model, to participation and increasing the number of worker-owners.

They recognize the challenge in expanding membership and are addressin it.

But, again, I think the most important thing is they're part of a development vision that runs counter to and competes with neoliberalism.

We need this more than we need the right percentage of employee-owners versus employees or some other mechanical formula.

Dan Bianchi said...

I agree. I think what is important is that many large worker owned companies are competing internationaly against traditional capitalist firms and are doing so on the High Road. There commitment to the High Road is not fleeting or shallow. Squabling over numbers of employees owners is not very important. However, it is a significant debate here because it gets to the heart of serious quesions that confront the coops. Namely, what is our role outside the basque region, in other parts of Spain or internationally. In many sectors there is real fear about globalization and a sort of pessism that exists, as expressed by Ormaetxea. Which, given the history of MCC and its incredible ability to face adversity is unfitting. And of course the debate in MCC is not should we treat our workers in Poland well or not, but is how do we remain competitive on the HIgh Road and How might we go about starting cops here?

Anonymous said...

I wonder if Matt or Dan could provide some examples to support Matt's assertion that Eroski is
"part of a development vision that runs counter to and competes with neoliberalism."

Anonymous said...

I wonder if Matt or Dan could provide some examples to support Matt's assertion that Eroski is
"part of a development vision that runs counter to and competes with neoliberalism."

Hancock said...

Perhaps neo-liberalism wasn't the right term, since that implies a larger political-economic movement.

But insomuch as Walmart represents the Low Road of capital -- which is that part of the business community that has pushed the neo-liberal agenda -- I think EROSKI and the Italian consumer co-op COOP do represent a counter to the Low Road in the retail sector.

Basically, by Low Road I mean the Wal-Mart business model: it's about short-term profit by whatever means necessary.

Certainly, some of Wal-Mart's profit is due to their smart use of resources, technology, logistics, etc. But any good they do is cancelled out by their relentless drive to push costs - labor, taxes, vendors - down as low as possible. So not only do they pay little and drive other retailers out but they also put enormous pressure on manufacturers to take the Low Road as well.

I don't know enough about EROSKI, but I can speak from the Italian point of view.

COOP is the largest retailer in Italy. It's owned by its consumers.

COOP focuses on high quality, low environmental impact, fair return to vendors and affordable prices to the consumer.

CO-OP is aggressively introducing organic and environmentally sustainable products through a new, private label they've developed. And they work with their vendors to create value that is shared with the COOP, the consumer and the vendor so the vendor can make a fair return as well.

They've developed ties globally with Fair Trade producers, and have made these products accessible to the average pocket-book by taking advantage of the same supply-chain technology that Wal-Mart uses, but in a way that creates value for all the stakeholders.

COOP is also committed to maintaining long-term relationships with Italian food producers, especially the Italian farmer co-ops.

And they've created a cooperative purchasing arm that serves COOP, as well as a number of other, smaller Italian chains. Allowing for economies of scale.

Finally, when Wal-Mart indicated that they were considering moving in to the Italian market by buying up an existing chain, the cooperative movement recognized the danger that Wal-Mart posed and they went in and made a counter-offer which scared Wal-Mart away.

Dan Bianchi said...

My response is posted here:
http://danbianchi.blogspot.com/2006/10/this-is-response-to-comments-made-to.html#links