Letter to the Editor: Cold-Hearted Costco

Editor’s note: This was submitted as a Letter to the Editor to Patch. An abridged version appears in the Oct. 23, 2013 edition of The Gazette and can be found on the paper's website.

As the holidays approach, food drives and other hunger-relief efforts seem to be everywhere.....except your local Costco. Although this retailer is the current darling of the "socially responsible" financial set and has been praised by President Obama and patronized by Vice President Biden, a closer look at Costco's record in helping the hungry shows it to be more Scrooge than saint.

In an e-mail, Arthur D. Jackson, Jr., Costco's Vice President of General Administration, said "...we are not likely to have a 'food drive' at any of our locations. There are just too many worthy causes that would love to have that access, we would never be able to accommodate them all. Once we allow one we'd be hard pressed to deny it to others."  However, this glib rationale actually raises more questions than it answers: Is Costco saying that because there are so many worthy groups that want Costco's help doing good in this way, Costco says "No" to all of them? Why is it that Costco's competitors don't have any problem allowing access by some and denying it to others?  Lastly, what's to stop Costco from holding its own food drives, independent of those pesky do-gooder groups? Many others do just that; the Boy Scouts in Montgomery County are holding a food drive in early November during which they will pick up donated food from the doorsteps of generous residents and transport it to hunger-relief groups. All Costco would need is a collection space and a few signs asking its customers to buy and donate an extra package of the canned or boxed food products Costco prides itself on selling so cheaply.

Ever wonder what happens to all the food in stores that isn't purchased before its sell-by date? Most large retailers, including BJ's Wholesale and Sam's Club, Costco's direct competitors, have extensive and robust programs for collecting and donating those products to food banks and soup kitchens.  But not Costco. It composts that food and sells it for use as fertilizer and livestock feed. Just how much food does Costco dispose of in this way? According to figures in Costco's own 2009 Sustainability Report, each Costco location produces an average of 3.7 tons of food waste each week. The number of Costco locations in the U.S. is 448 and growing. That means each year Costco composts or throws away more than 172 million pounds of food, about seven pounds for each of its more than 25 million U.S. members.

So why doesn't Costco donate this food to some of the "many worthy causes" mentioned by Mr. Jackson? After all, the same economies of scale in selling only large-sized packages of food that help make Costco so profitable would also apply to food donations. The answer, unfortunately, appears to be profit. Donating food would require Costco to pay employees to sort the food, and somebody would have to bear the cost of transporting it to hunger-relief agencies. It's apparently more profitable for Costco to sell the food for pig slop than give it to hungry people. Keep in mind that Costco refused to accept food stamps until 2009, when increasing bad press forced it to do so.  The reasons Costco gave for its refusal: It would cost too much to change the software to accept food stamps, and poor people don't shop at Costco anyway because they can't afford membership. Costco sometimes claims it doesn't donate food because of liability concerns, but that excuse ignores the 1996 federal law that eliminates liability arising from good-faith donations of food. Liability concerns don't stop Costco's competitors from donating unsold food to the hungry.

And then there's money. Starting in 2006, Costco advised the premier local food bank in Montgomery County that Costco would no longer provide any support to the charity because its financial hunger-relief efforts would be through another group. The one hunger-relief organization Costco has chosen to support is Feeding America, a Chicago-based national charity whose CEO is paid more than $400,000 per year. In the same e-mail mentioned before, Mr. Jackson said "....please know that Costco has been very active in the 'hunger space' for a number of years. We are acutely aware of this need in many parts of our country....We have partnered with Feeding America in an effort to reach as many communities as possible to help feed the hungry. We called upon their expertise in vetting and support distribution. Interestingly, our financial support of Feeding America continues to grow year over year to not only assist with the growing need but to also allow them to assist even more communities."

Like many of Costco's statements about its efforts, that sounds impressive until you look at the facts and figures. If all of Costco's hunger-relief "eggs" are dollars in Feeding America's "basket", just how much of its $1.7 billion in annual net income does Costco give them?  Costco refuses to say. And Feeding America's lawyer maintains the charity is precluded from disclosing the figure because Internal Revenue Service regulations make the names and addresses of contributors confidential.

Oddly, those concerns about confidentiality don't prevent Costco from boasting about its financial support of the organization, nor do they inhibit Feeding America from listing Costco Wholesale on its website as a "Supporting Partner", the lowest level of giving for which Feeding America grants any public recognition. Since the minimum to be a "Supporting Partner" is $100,000 a year and companies that give an average of $400,000 a year for five years are classed as "Mission Partners", Costco's financial support of Feeding America is between $100,000 and $400,000 per year, not enough to pay the CEO's salary. On a percentage basis, that's the same as an individual with a net income of $100,000 contributing between $6 and $24 per year to the hungry.

The list of "Mission Partners" on Feeding America's website includes retailers like Big Lots, CVS, Macy's, Publix, Safeway, Walgreens and Winn-Dixie.   Food Lion, Kroger, Sam's Club, Target and Wal-Mart each give an average of at least $2 million a year. And most of those companies don't limit their hunger-relief efforts to contributing to Feeding America, as Costco seems to. 

Costco derives most of its profits from the annual membership fee it charges. And Costco is not reticent about taking from the communities where it operates, such as the $4 million subsidy Montgomery County taxpayers gave to help bring a new Costco to Wheaton. When Costco solicits you for a membership, ask why Costco doesn't do more for hungry people.

Timothy F. Reynolds
Silver Spring