The Structure of Seikatsu

Seikatsu started but did not stop at the milk industry. In the 1960s, the concern for food safety ranged much wider than milk. Consumers expected some knowledge about how other types of food were produced as well. Concerned Japanese consumers, including Seikatsu and its members, first worked to pressure the government to put safety labels on the food in the marketplace, but it did not come true. The realization that consumers might have to rely on themselves gave rise to the idea of connecting directly to producers, which moved Seikatsu forward. Today the structure of Seikatsu is well-suited for efficient handling of a wide variety of food products. ?The arrangement of each coop can be broken down into two sides; the producers’ side and the members’ side.

The members provide the capital, the market and the labor to ensure the smooth operation of the Coop. All activities of Seikatsu are financed by the input of the members. Unlike US or Canadian consumer coops that usually have to borrow from banks or credit unions, Seikatsu is completely self-sufficient in terms of finance. No loan is involved. This is made possible by the fact that middle and upper class women constituted the main body of the membership. At the annual meeting of each coop, the members would vote for a voluntary membership fee for the coming year. Typically, more than 90% of the members would choose to pay. The contribution varies according to region. In Toyko it reaches 25,000 yen per month, but the average contribution was close to 1,000 yen. Data in August 2007 shows that the total contribution reached 27,600 million yen (240 dollars), which implies that approximately 93,000 yen is invested in each member. The turnover was 79,200 million yen (687 million dollars). With a large working capital, Seikatsu financed its own 17 million dollar building, necessary capital equipments such as stores and trucks, as well as the operating expenses, such as the wages of the full-time employees.

Although the full size of Seikatsu was huge, as each member cooperative of Seikatsu was managed fairly independently, the decision making process was highly decentralized. The Union holds annual general meetings and manages the common property of the member coops, such as the milk factory, and negotiated for prices between the member and the producers. Each coop pays an operating fee to the union. A financial statement was produced each year. But most of the transactions are at the level of local coops. Each local coop had an independent budget and account. Purchases and deliveries were managed at the level of individual local coops.

The transactions at the local coop level are based on a prepayment order system. By the 1980s, the basic unit for ordering and deliver within a coop was “han” groups. Each han consists of eight to ten housewives living close to each other. They collectively ordered the food they needed in the following one or two weeks and sent the numbers to the coop to be compiled and analyzed. Producers would send the products to the warehouse of the local coop according to the size of the order weekly or fortnightly. Trucks would deliver food from the warehouses directly to the han, and member women come to the han to pick up their purchases. The local coop keeps track of people’s order, so it understands the members’ needs and preferences. The total demand is usually stable and predictable through the years.

Seikatsu was created in the years when women were rarely employed in Japan. The nature of the han arrangement required high labor input from the members. After the 1980s, more women started working, making them less active participants in the daily operations of the coop. To adapt to changing needs of the members, Seikatsu has diversified its options. Apart from the han organization, members are also served through direct house-to-house deliveries and the depot system (stores). In 2007, around 120,000 members were involved in hans, 140,000 in house to house delivery and 40,000 in depots. They are also making use of the internet. Orders are placed online, so that women do not have to go personally for group meetings of the hans.

The local coops serve the consumer market by connecting closely with the members, while the Union works more closely with producers. Seikatsu has more than 130 legally-linked suppliers. For each product the Union sits with the producers to negotiate prices and the approximate quantities every year before orders are placed. The Union also collects feedbacks from both sides and holds annual general meetings to bring members and producers together. In this way, consumers can inform producers whether they would like less or more or a certain type of vegetable this year beforehand, and thereby, reduce waste. In order to ensure stable supply and to protect producers, Seikatsu requires that producers sell less than a third of their products to Seikatsu to ensure a diverse market.

Seikatsu grew from the concern for food safety. The Union is the main body in charge of quality control. It sets the standard for procurements and monitors the production process. Seikatsu has ten principles on safety, health and the environment:

(1)Pursuit of safety for consumer materials
(2)Raising self-sufficiency in food
(3)Reduction of harmful substances
(4)Sustainable use of natural resources
(5)Reduction of waste and promotion of reuse
(6)Reduction of energy use
(7)Reduction of risk
(8)Information disclosure
(9)Independent control and auditing
(10) Mass participation

Prohibited items include: aerial spraying of agricultural chemicals, GMOs, use of agricultural chemicals for unclear reasons, residual agricultural chemicals (e.g. herbicides) exceeding one-tenth of the national standards in edible materials.
The Union has an Independent Control Committee/Auditing Committee that oversees the quality and methods of production. It publishes an annual independent audits of producers. By directly representing the consumers in auditing the production of food, Seikatsu is a credible authority that provides a valuable signaling service to its members.

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