The Management of Consumer Co-Operatives in Korea

Identity, Participation and Sustainability

Seungkwon Jang

• Publisher: Routledge
• Year: 2019
• Print ISBN:
  9781138489943
• eBook ISBN:
  9781351036443
• Topic: Business
• Subtopic: Business General
• Index: Business

This book explores and analyzes cooperative management and provides insight into how Korea's consumer cooperatives have evolved and been managed. It focuses on Korea's consumer cooperative management practices and examines their growth and performance. This book is an invaluable resource for those interested to learn more about the successes and failures of consumer cooperatives.

1
Introduction

Korea’s consumer cooperatives

Seungkwon Jang

Past and present of Korea’s major consumer cooperatives

Consumer cooperatives in Korea have progressed slowly but steadily over the last three decades. Hansalim consumer cooperatives¹ celebrated their 30th anniversary in 2016, and Happycoop consumer cooperatives² were established in 1989. Dure consumer cooperatives³ and iCOOP consumer cooperatives⁴ turned 20 years old in 2017. As they have grown, consumer cooperatives have become more influential and important in Korean society in general.

It is estimated that the number of members of the four major cooperative federations is around 1.195 million households in 2018 (see Table 1.1). The number of members in 2018 accounted for 5% of that of total households in Korea, 19.56 million. Roughly 10,000 workers are employed by these four consumer cooperative federations, and 10,000 or more agricultural producers as farmer members are in business partnerships. Sales of the four major consumer cooperatives are 1,140 billion Korean won, which is equal to 1 billion US dollars (see Table 1.2). One of the main businesses of consumer cooperatives in Korea is to supply their members with organic foods, livestock, seafood, and other goods.

In this introductory chapter, a brief history and current status of Korean consumer cooperatives are illustrated. The four major consumer cooperatives in Korea have their own unique histories, philosophies, founding leaders, and members. Noticeably, the major consumer cooperatives have been developed along with their own roots of a social movement, as shown in Figure 1.1 (Jeong et al., 2011). Furthermore, the challenges of cooperatives, specifically business-related themes such as governance, finance, performance, organization, marketing, and supply chain, are discussed in terms of business and social movement.

1. Hansalim

In 1986, a humble grain store called ‘Hansalim Nongsan’ was opened in Seoul, where the former president and farmers sell organic rice, grains, sesame oil, and eggs (Kim, 2017). They dreamed of the world in which urban and rural

Table 1.1 The number of members in Korea’s consumer cooperatives

Table 1.2 Turnover of Korea's consumer cooperatives (year, million US$)

Figure 1.1 Development of Korea’s consumer cooperatives.

Source: Jeong et al. (2011, p. 18, revised).

Note: Circles = coop federations, boxes = primary consumer coop, boxes with dotted lines = movements and federations, arrows = influence.

communities overcome the existing market system and live together through direct trade of eco-friendly agricultural products (Hansalim Federation, 2015). For local producers to lead the Hansalim Movement (literal meaning is ‘save all living things’), Hansalim Producers’ Association was established in 1988 (Hansalim website). During a similar period, consumers in urban areas also organized a cooperative, ‘Hansalim community consumer’s cooperative’ (Hansalim, 2018). Through this organization, consumer members have regularly visited the producing area and built trust with producers (Hansalim website). Hansalim spread their view by announcing the Hansalim Manifesto in 1989 and inspired several social movements. Also, they contributed to organic agriculture in Korean society as taking the lead on establishing the Korean Federation of Sustainable Agriculture Organizations (Hansalim website).

In 2002, Hansalim Seoul reconstructed its organization by separating local groups, registering a corporation, establishing ‘Moshim and Salim Research Institute’, and organizing Hansalim Business Association around the metropolitan area (Hansalim website; Hansalim Federation, 2015). Along with the consumer movement, they started to consider a new organic certification system other than the current system. At the same time, they have raised funds for agriculture and established the solar power stations for preserving the environment (Hansalim Federation, 2015).

In 2011, Hansalim Producer Meeting, which was established in 2003, changed its name to Hansalim Federation, and it represents all the businesses and activities of Hansalim since then (Hansalim Federation, 2015; Hansalim website). Furthermore, a new distribution center has been built in 2012 where there are food-processing factories and facilities for recycling bottles (Hansalim website). Starting from a small rice shop run by only a few farmers, Hansalim consists of about 114 farmers communities and more than 661,000 households as members, and has 221 local stores nationwide in 2018 (Hansalim, 2018).

2. Happycoop

Happycoop consumer cooperatives (hereafter Happycoop,⁵ Hangbok Jungsim Saenghyup) was established in 1989 with the aim to enhance gender equality and women’s rights in the practice of a consumer cooperative movement organized by Women’s Link (Huh, 2008). Leading Korean feminist movement Women’s Link expected that the cooperation of housewives (women) would contribute not only to environmental-friendly foods but also widely to gender, education, local, and consumption issues (Kim et al., 2012: 321). In the early 1990s, despite the increasing interest in food safety issues, Happycoop showed little development (Park, 2007). The slow progress led them to set up their own vision and business plan as a consumer cooperative, hence separating them as an independent organization from Women’s Link.

In 2000, they held an inaugural meeting to announce their legal corporate entity, based on the Consumer Cooperatives Act (Park, 2007; Huh, 2008). The following year, Happycoop initiated a joint logistic center and engaged discussion among primary cooperatives to increase member participation and achieve business sustainability (Park, 2007). As part of its active movement, they engage in principal associative activities, including a monthly forum, Asian Sisterhood International Meeting, and exchange meeting of women consumers and producers (Happycoop website). To ensure their business sustainability, in 2006, Happycoop adopted the slogan Hangbok Jungsim (Center of Happiness) and became actively engaged in social issues such as the decline of agriculture, the emergence of aging society, and women labor in a local community. In the same year, Happycoop launched three independent primary cooperatives in the Seoul metropolitan area, where each local branch manages its own retail stores (Park, 2007). Individual primary cooperatives are governed autonomously by their own board of directors and secretariat.

Then, in 2011, according to the revised Consumer Cooperatives Act, Happycoop established the Korean Federation of Women Link Cooperative (hereafter KFWL), which allows them to organize and support the primary cooperatives. Afterward, KFLS has to change the fundamental identity of women’s cooperatives merging the various cooperatives and expanding the business field. Celebrating the 20th anniversary in 2013, KFWL has changed its name to Happycoop (Kim, 2012). Currently, Happycoop is developing its vision for women, local community, welfare system, alternative economy, and environmental-friendly agricultural products.⁶

3. Dure

Dure Consumer Cooperatives’ Union (hereafter Dure) as a formal organization was derived from the Korean Consumer Cooperative Federation (KCCF), whose main aim was direct trading of agricultural products to guarantee small and poor farmers and fishermen stable income, to suggest a turning point of consumer cooperatives in Korea (Jeong, 2011; Kim, 2017; Dure Consumer Cooperatives’ Union, 2017). Also, it has been found due to the financial difficulties that two-thirds of consumer cooperatives in KCCF had faced during the economic crisis in 1997 (Kim, 2017). In the same year, seven main local cooperatives in Seoul metropolitan areas established the Capital Metropolitan Business Consortium to enhance the business-wise capabilities of the organizations, with financial support from Japan’s consumer cooperatives such as Green Co-op, Pal system Consumer Co-operative Union, Co-op Kobe, Life Club, and so on (Dure Consumer Cooperatives’ Union, 2017). They emphasized the importance of forming a sustainable and efficient distribution system for both producers and consumers, and developed a computerization program of one order per week to adjust the balance between supply and demand.

In 1999, they changed its name into the Capital Metropolitan Cooperative Association to transcend the business boundary and include all the activities and solidarity of member cooperatives (Dure Consumer Cooperatives’ Union, 2017). In the meantime, the financial support from Green Co-op in Japan during the establishment of the Consortium initiated an official fund for mutual benefit between Korea and Japan in 2000 to sustain their relationship (Dure Consumer Cooperatives’ Union, 2017).

Farmers who supplied agricultural products to the Consortium in the early 1990s were from various areas and not formally grouped as an organization. Since 2003, however, the Association started to recognize the needs of a formal organization for producers. This has led to the establishment of the Dure Producers Association consisting of 70 to 80 farmers (Dure Consumer Cooperatives’ Union, 2017). As the organization grew, Dure again expanded its local boundary by changing its name to the Dure Consumer Cooperative Union in 2005. At 20 years old, Dure practiced cooperation with other social economy organizations, notably, creating People’s Fair Trade Cooperative (PTCoop) with other consumer cooperatives for Fair Trade business that they have been doing since 2004 (PTCoop website). Dure now has a mission to enrich people’s lives and recover local communities through organic farming and cooperation (Dure website).

4. iCOOP

The history of iCOOP consumer cooperatives (hereafter, iCOOP) traces back to 1997 when small- and medium-sized local cooperatives founded a consumer cooperatives federation (Jeong, 2011; Kim, 2017).⁷ Their primary concern was to overcome the financial difficulty in direct trade of environmental-friendly agricultural products (Kim, 2017; Yeom, 2018). To reduce the high logistics costs, they integrated the logistics of each primary cooperative and implemented a membership due system (Yeom, 2018). In the early 2000s, there had been several incidents of organic food adulteration. These were happened by greedy producers, as cheap non-organic foodstuffs were mixed with high-priced authentic organic foods (Jang et al., 2004). A series of incidents made consumer cooperatives in Korea, including iCOOP, unreliable and untrustworthy as organic food providers for Korean consumers (Jang et al., 2011).

From the experience, iCOOP has set out their plans for food safety system: control, product, and production. Firstly, they have established the iCOOP certification center to ensure qualified eco-friendly agricultural products for members. In addition, they launched the retail store brand ‘Natural Dream’ to expand membership, ultimately to achieve economies of scale in production. Most importantly, in late 2007, they concluded an agreement to establish an eco-friendly organic food cluster in Goesan for a sustainable production and consumption base (iCOOP Union, 2018). Accordingly, iCOOP strengthened its relationships with producers by creating the Price Stabilization Fund and the Production Stabilization Fund. In response to executing new policies, iCOOP announced their identity as that of ethical consumerism and confirmed their name as iCOOP Saenghyup⁸ (iCOOP Consumer Cooperatives). The identity implies the impact of ethical consumption on its members, the general public, and planet earth.

Besides, in 2010, based on the revised Consumer Cooperati...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Contents
• List of figures
• List of tables
• List of contributors
• 1 Introduction: Korea’s consumer cooperatives
• 2 Cooperative governance practice
• 3 Gender perspectives for consumer cooperatives
• 4 Price stability and asymmetric price transmission for agricultural products
• 5 Financing consumer cooperatives
• 6 Consumer cooperative brand identity
• 7 Member participation and productivity changes
• 8 Consumer cooperatives and supply chain management
• 9 Conclusion: the future of Korea’s consumer cooperatives
• Index