Will a single, merged national identity for the co-ops solve the movement's troubles? James Durston reports
It has been in existence since 1844, runs more stores than any other retailer in the UK and owns one of the bestselling own label brands in Europe (99 Tea). Yet the co-operative movement still fails to capture the imagination of huge swatches of the public, who see the grocery stores as old-fashioned and expensive.
The food retail businesses of many societies, dogged by supply problems, have been in decline for 25 years and the rise of the multiple supermarkets has forced the co-ops to merge or acquire in search of growth rather than expand organically.
The number of co-operative societies in the UK has fallen from more than 1,000 at the end of the 19th century to 40 through merger activity.
As the preliminary results of the national rebranding trial led by the Co-operative Group suggest that it is proving palatable to the societies, the question is: could there eventually be just one, unified co-op?
Peter Marks, CEO at United Co-operatives, is keen to inject some debate into the issue. At Co-operatives UK's consumer co-op conference two weeks ago, he advocated the notion of a "national society".
Other societies also see the merits in such a move. Fergie Cowan,CEO at Wooldale
Co-operative, says: "I love to think a single society is possible. I doubt I will see it in my lifetime. There are bound to be difficulties in getting 40 different boards to agree on something. But I definitely support the idea."
The top ten co-ops in food have a combined food turnover of close to £6bn and there are about 3,500 co-op food shops, so combining their forces would make them a serious competitor in convenience.
It make sense from an operational perspective, too.
All the societies already trade through one source - the CRTG buying group. Trading prospects would be helped dramatically if that were combined with a single management structure for the stores. There would be huge cost savings as a result of replacing 40 separate management structures with just one, and one of the main problems that has hampered the co-ops, namely the inconsistency of its branding, would be solved. Most consumers already think 'The Co-op' is a single entity, so a poor shopping experience in one store can reflect on the whole group.
Teather & Greenwood analyst David Stoddart says: "The co-ops have made moves to improve their sourcing problems, but the movement still has a multiple management structure that imposes costs the multiples don't have. As long as they operate as separate societies, that will remain."
The rebranding of the movement is a nod to the notion that multiple management systems can create problems, but it has been a long time coming for some. Andrew Thorton, founder of SRCG, the specialist convenience consultancy, says: "The convenience market today is really competitive, much more so than when the Co-operative Group bought Alldays in 2002. You really have to stand for something, so it's important they identify what they want to be famous for and drive this to the consumer."
The new look, which was conceived after the Co-operative Commission's report in 2001 warned that the co-ops must modernise or die, has been trialled on 20 food stores and a range of other business arms (food, banking, funeral, pharmacy and travel).
The clover leaf insignia and separate fascias for stores such as Welcome and Late Shop have been replaced with a single logo - The Co-operative.
The different businesses have been colour-coded, with food store fascias designed in bright green because of its association with freshness, health and cleanliness, and stores will be refitted inside, too. The project also aims to improve customer service and will underline the movement's ethical trading ethos. The results of consumer feedback are being analysed now and Zoe Morgan, marketing director at the Co-operative Group, says so far they look promising in terms of getting consumers to realise that some societies have several business arms.
However, a national rebranding requires national buy-in, and here a stumbling block emerges. Cowan says that several co-ops are not convinced. "Some societies, including ours, are just not happy because there's this problem of losing your local identity. We would like to retain some vestige of our own society."
Cowan also says the financial commitment required will deter some smaller co-ops.
"We just couldn't afford to totally refit our stores," he says - particularly considering he has already spent £500,000 on refits in the past year.
Morgan says these points will all be addressed in May once the report on the latest research is published. In truth, the plight of Wooldale Co-operative with just three stores is hardly likely to upset the apple cart, but if the detractor happens to be United Co-operatives, the second-biggest society in the UK with more than 500 outlets, the consequences could be greater. The society publicly announced that it would not be in favour of ditching its "distinct identity" when the rebranding was announced. Perhaps it's in light of this that Morgan says some local elements could be retained, and the timing of the brand roll-out is down to individual societies. "The absolute purist interpretation, in which we all have to be exactly the same, is not our business model and never has been. Some local flavour is perfectly comfortable within the model, as long as we adhere to a common set of brand standards across all 5,000 outlets and that the customer sees us as one business."
So it sounds as if, even at this relatively early stage, The Co-operative Group is having to water down what was initially billed as a concentrated, unifying brand.
Nevertheless, everyone seems to accept that doing nothing is not an option. Cowan admits: "We need to do something. Tesco and Sainsbury and others have common brands across the country and they market them aggressively. The co-ops can't do that to the same extent."
This, of course, is why there have been some high-profile mergers between societies, and such mergers indicate that economies of scale are taken seriously by the movement. Last year Midcounties Co-operative and East of England Co-operative were both created through mergers and United Co-operatives, itself the result of a merger between United Norwest and Yorkshire societies in 2002, was in the running for Somerfield before pulling out. Plymouth & South West Co-op has just confirmed its merger with Brixham Co-op, and Peter Marks and Martin Beaumont, CEO at the Co-operative Group, have both underlined the need for societies to grow through acquisition strategies.
Although the Co--operative Group was a bit gung-ho with its acquisition of 714 Alldays and Balfour stores in 2002 and 2003, which led to crashing profits, 600 job cuts and a consequent sale of 100 of those stores, Martin Henderson, head of PR at the Co-operative Group, says: "You can be sure that there will be further mergers."
The concept of a single, merged UK co-operative society therefore remains a tantalising possibility. Perhaps at this stage it's a rather fanciful notion, especially with all the work to be done still with the national branding. But what an impact it would have on the convenience market if the co-ops suddenly clubbed together.
Top retail co-ops
The major societies Society Food retail turnover latest figure 2003 The Co-operative Group £3.3bn £3.1bn United Co-operatives £806m £840m The Midcounties Co-op £358m n/a Midlands Co-op £349m £340m East of England Co-operative Society £266m n/a Anglia Regional Co-operative Society £195m £131.4m Scottish Midland Co-operative Society (Scotmid) £195m £216m Southern Co-operatives £134m £116.6m Lincolnshire Co-operative n/a n/a Plymouth & South West Co-operative £101m n/a Source: Annual reports, individual societies and Co-operatives UK
It has been in existence since 1844, runs more stores than any other retailer in the UK and owns one of the bestselling own label brands in Europe (99 Tea). Yet the co-operative movement still fails to capture the imagination of huge swatches of the public, who see the grocery stores as old-fashioned and expensive.
The food retail businesses of many societies, dogged by supply problems, have been in decline for 25 years and the rise of the multiple supermarkets has forced the co-ops to merge or acquire in search of growth rather than expand organically.
The number of co-operative societies in the UK has fallen from more than 1,000 at the end of the 19th century to 40 through merger activity.
As the preliminary results of the national rebranding trial led by the Co-operative Group suggest that it is proving palatable to the societies, the question is: could there eventually be just one, unified co-op?
Peter Marks, CEO at United Co-operatives, is keen to inject some debate into the issue. At Co-operatives UK's consumer co-op conference two weeks ago, he advocated the notion of a "national society".
Other societies also see the merits in such a move. Fergie Cowan,CEO at Wooldale
Co-operative, says: "I love to think a single society is possible. I doubt I will see it in my lifetime. There are bound to be difficulties in getting 40 different boards to agree on something. But I definitely support the idea."
The top ten co-ops in food have a combined food turnover of close to £6bn and there are about 3,500 co-op food shops, so combining their forces would make them a serious competitor in convenience.
It make sense from an operational perspective, too.
All the societies already trade through one source - the CRTG buying group. Trading prospects would be helped dramatically if that were combined with a single management structure for the stores. There would be huge cost savings as a result of replacing 40 separate management structures with just one, and one of the main problems that has hampered the co-ops, namely the inconsistency of its branding, would be solved. Most consumers already think 'The Co-op' is a single entity, so a poor shopping experience in one store can reflect on the whole group.
Teather & Greenwood analyst David Stoddart says: "The co-ops have made moves to improve their sourcing problems, but the movement still has a multiple management structure that imposes costs the multiples don't have. As long as they operate as separate societies, that will remain."
The rebranding of the movement is a nod to the notion that multiple management systems can create problems, but it has been a long time coming for some. Andrew Thorton, founder of SRCG, the specialist convenience consultancy, says: "The convenience market today is really competitive, much more so than when the Co-operative Group bought Alldays in 2002. You really have to stand for something, so it's important they identify what they want to be famous for and drive this to the consumer."
The new look, which was conceived after the Co-operative Commission's report in 2001 warned that the co-ops must modernise or die, has been trialled on 20 food stores and a range of other business arms (food, banking, funeral, pharmacy and travel).
The clover leaf insignia and separate fascias for stores such as Welcome and Late Shop have been replaced with a single logo - The Co-operative.
The different businesses have been colour-coded, with food store fascias designed in bright green because of its association with freshness, health and cleanliness, and stores will be refitted inside, too. The project also aims to improve customer service and will underline the movement's ethical trading ethos. The results of consumer feedback are being analysed now and Zoe Morgan, marketing director at the Co-operative Group, says so far they look promising in terms of getting consumers to realise that some societies have several business arms.
However, a national rebranding requires national buy-in, and here a stumbling block emerges. Cowan says that several co-ops are not convinced. "Some societies, including ours, are just not happy because there's this problem of losing your local identity. We would like to retain some vestige of our own society."
Cowan also says the financial commitment required will deter some smaller co-ops.
"We just couldn't afford to totally refit our stores," he says - particularly considering he has already spent £500,000 on refits in the past year.
Morgan says these points will all be addressed in May once the report on the latest research is published. In truth, the plight of Wooldale Co-operative with just three stores is hardly likely to upset the apple cart, but if the detractor happens to be United Co-operatives, the second-biggest society in the UK with more than 500 outlets, the consequences could be greater. The society publicly announced that it would not be in favour of ditching its "distinct identity" when the rebranding was announced. Perhaps it's in light of this that Morgan says some local elements could be retained, and the timing of the brand roll-out is down to individual societies. "The absolute purist interpretation, in which we all have to be exactly the same, is not our business model and never has been. Some local flavour is perfectly comfortable within the model, as long as we adhere to a common set of brand standards across all 5,000 outlets and that the customer sees us as one business."
So it sounds as if, even at this relatively early stage, The Co-operative Group is having to water down what was initially billed as a concentrated, unifying brand.
Nevertheless, everyone seems to accept that doing nothing is not an option. Cowan admits: "We need to do something. Tesco and Sainsbury and others have common brands across the country and they market them aggressively. The co-ops can't do that to the same extent."
This, of course, is why there have been some high-profile mergers between societies, and such mergers indicate that economies of scale are taken seriously by the movement. Last year Midcounties Co-operative and East of England Co-operative were both created through mergers and United Co-operatives, itself the result of a merger between United Norwest and Yorkshire societies in 2002, was in the running for Somerfield before pulling out. Plymouth & South West Co-op has just confirmed its merger with Brixham Co-op, and Peter Marks and Martin Beaumont, CEO at the Co-operative Group, have both underlined the need for societies to grow through acquisition strategies.
Although the Co--operative Group was a bit gung-ho with its acquisition of 714 Alldays and Balfour stores in 2002 and 2003, which led to crashing profits, 600 job cuts and a consequent sale of 100 of those stores, Martin Henderson, head of PR at the Co-operative Group, says: "You can be sure that there will be further mergers."
The concept of a single, merged UK co-operative society therefore remains a tantalising possibility. Perhaps at this stage it's a rather fanciful notion, especially with all the work to be done still with the national branding. But what an impact it would have on the convenience market if the co-ops suddenly clubbed together.
Top retail co-ops
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