# Why are there not more competitive nonprofits?

For example, when I go to the grocery, and peruse the various goods for sale on the shelves, there is at least a 99.9% chance that any given product is produced for-profit. Even "Newman's Own", which gives all of it's profits to charity, is classified as being for-profit.

Why are there no non-profit brands of, e.g. breakfast cereal, whose goal is to simply provide consumers with a healthy and affordable morning meal, but not to make a profit?

There is a Hungarian economist by the name János Kornai, who has renowned work on eastern block socialist systems. He has devised a system theory on coordination mechanisms which guide the way people work together and allocate resources. Based on this theory you can explain different economic and political systems as well. The four coordination mechanisms are:

1. market (for-profit business - capitalism)
2. bureaucratic (the state - socialism)
3. ethical (non-profit, charity organizations, the church etc.)
4. aggressive (organized crime etc.)

From these four, the ethical is the mechanism which guides charity and non-profit organizations, which is actually the weakest in terms of efficiency. The guiding objectives are grounded on moral and altruistic behavior, but as humans are collectively more selfish in reality, this does not work too well. There is a crowding-out process, by which market coordination takes over in that certain field. Which is in your case the FMCG industry. Even if there are some moral initiatives to simply provide consumers with a healthy and affordable morning meal, but not to make a profit, slowly the enthusiasm erodes and people start to behave more selfish, and exploit the the brand and image to make money. Look at part III. section 1. of the article titled, Neither bureaucracy, nor market? for a good explanation.

The answer to that is kind of tricky. I haven't found any literature directly discussing the relation between non-profit structures and market share, but here are a few ideas.

Usually for-profit companies try to maximize (surprise!) their profit-function in the long-run, even though they might focus on other stuff like market share or prestige in the short- or even medium-term. That is because shareholders in for-profit companies (for the sake of argument, let's define 'shareholders' more broadly than in the conventional sense) try to maximize their own consumption as well, meaning they will try to raise they're budgets to elevate their possible consumption, subsequently increasing their utility.

Non-profits on the other hand focus on some other thing to maximize. For the most part, their goals are idealistically driven, for example minimizing global CO2 output, or maximizing survivability rates of marine life. It wouldn't make sense for a nutrition company to focus on maximizing market sharewhich would lead to a noticably increased presence on the shelves, without returning to a profit-maximization routine in the long-run.

Keep in mind that in economics, monetary value is (beside other functions like driving down transaction costs) just a way to approximate a certain good's real value. Cost-minimzation, which is typically done within a profit-maximization routine, could be seen as a constant re-evaluation of the value of goods used for producing something else.

• "It wouldn't make sense for a nutrition company to focus on maximizing market share which would lead to a noticably increased presence on the shelves, without returning to a profit-maximization routine in the long-run." Is this the case? As you yourself have pointed out, firms may "focus on other stuff like market share or prestige in the short- or even medium-term". Therefore, a nutrition-focused nonprofit can focus on market share and prestige while still maintaining a long-term nutrition focus. Indeed, they must, since if they have no market share, they cannot accomplish their goal.
– Him
Jul 3 '19 at 8:26

The production of goods and services requires equity capital and possibly some debt capital. Equity capital investors usually require dividends or the prospect of dividends. Dividends arise from profits.

There is a limited amount of equity capital available from the type of investors that do not require dividends or the prospect of dividends. That limit creates a limit on the formation of non-profit production.

You can search the internet to read about non-profit organizations. Ask yourself what that type of organization might do if they had some undeployed financial capital. It is likely you will think "breakfast cereal" is an improbable answer.