Co-ops UK Retail conference

Earlier in the month I attended a conference organised by Co-ops UK (our industry trade association) focusing on the challenges and opportunities faced by co-operative retailers.  Its an annual event, but it was my first time there.  I was particularly impressed by a presentation from James Walton, chief economist at IGD (the Institute for Grocery Distribution) surveying past and future trends in retailing and the economy as a whole. And the whole proceedings were ably presided over by Ed Mayo, Secretary General of Co-ops UK.

This picture shows me chatting with Nick Matthews, chair of Co-ops UK and director of Heart of England Co-operative Society, between two of the sessions.

Shared brand and services

It was a great chance for me to get to chat at greater length with leaders from some of the independent co-operative societies.  Many of these are closely linked to the Co-op Group, many of them use our brand and have votes within our democratic structures. We have a federal wholesaling system, meaning that many products are brought centrally using our collective purchasing power to get better prices.  But they are also proudly distinct, with their own histories and a clear focus on their own regional constituencies.

The existence of these independents is sometimes a cause of confusion to Group members and customers.  They see the Co-op brand over the shops and on own brand products inside, but find they cannot swipe their membership cards. If you understand the history behind this you can understand it, but in the modern era with so much more focus on clear brand identity you would probably not want to invent such structures!

The Co-op Membership offer

So I was especially interested to gauge the thoughts of the independents about adopting the Group’s 5+1 membership offer.  It would be so much simpler if members could receive 5% on Co-op branded products and get 1% donated to local community projects, regardless of where they bought those products.

But you can understand why some of the independents are feeling reticent about adopting the same scheme. In a business where margins are often wafer thin, giving away 6% of margin can feel a big risk, especially if you still want to be able to give away dividends or support good causes in other ways too in accordance with the wishes of your own members.

To be able to afford it you need to be able to see a number of factors coming to fruition.  You need existing members to switch their purchases from branded products to own brand products, as we need to give away less margin to suppliers on the latter ranges.  Secondly, you need your members to start increasing their basket size and frequency of visits in response to the offer – so they are buying more from you than before. And thirdly you need to attract new members – not just converting existing shoppers to membership (though that is a good thing in itself), but attracting in brand new customers to increase volumes.

There are already promising signs on all these fronts for the Group, with growing proportions of own brand sales and half a million new customers signed up as members.  But you can understand why an independent may for the moment want to wait and watch before plunging in.

Fairtrade Fortnight – Co-op’s cocoa initiative

In the last week it has been great to catch up at various events with Mike Gidney, Chief Executive of the Fairtrade Foundation who for many years used to work with me at Traidcraft where he used to be Director of Policy while I was chief exec.

Mike Gidney               Fairtrade mark

Update on Fairtrade

Mike was able to share the good news that the value of Fairtrade sales in the UK rose slightly in 2016 despite the challenges posed by changes in the EU sugar regime which have severely hit Fairtrade sugar sales.  Given food price deflation, the underlying volume growth (which matters most to producers) was about 8%.

At one event a producer from Divine Chocolate (or rather from Koapa Kokoo the co-operative which owns and supplies Divine), impressed Co-op Group staff with her simple explanation of how selling cocoa on Fairtrade terms had allowed her community to achieve clean water, build a school and provide decent toilets for themselves.

Co-op’s cocoa initiative

But for me the stand-out event of the fortnight has been Co-op Group’s announcement that from May 2017 all the cocoa in any of our own brand products (not just the chocolate bars) will in future be sourced on Fairtrade terms. We are the first business in the world to make a commitment like this, and it means our purchases of Fairtrade cocoa will go up an impressive five-fold, with an extra £500,000 per annum in Fairtrade premiums flowing through to our producer suppliers on top of the value of the coca sales themselves.  Co-op is challenging other businesses to follow suit, as this is how we can really achieve scale of impact.

Chocolate report

It is a source of justifiable pride that Co-op is still leading the way in Fairtrade – perhaps particularly after the disappointing announcement that the Fairtrade logo will shortly disappear from Cadbury’s Dairy Milk (shame on them!).  I am pleased to have been able to play a small part by providing Board-level encouragement for our commitment to Fairtrade, but the credit must go to our Fairtrade sourcing manager Brad Hill whose commitment and focus over many years has been absolutely exemplary.

 

Council and Senate

I am getting a little bit behind with my blogging, but ten days ago we had a dinner for Board and executive team members with members from the Senate of the National Members Council, to mark Richard Pennycook’s departure as chief executive.   This was a good occasion, not only because of the excellent food and wine (exclusively Co-op own brand products of course!), and a memorable farewell address from Richard, but also because of the chance to build informal relationships between Board and Senate members.

Co-op democracy

The ten members of Senate are elected from the 100 members of the National Members Council (many shown in the image below), and as well as leading the work of the Council they are a forum to which the Board can refer for guidance on how Council might react to particular courses of action being considered.  To carry out this latter role effectively requires the building of trust between individual directors and Senate members, so that we can speak openly with each other and yet know that confidentiality will be respected.

Co-op logo Council

Role of MNDs

In my role as Member Nominated Director I am fortunate to have had more opportunities than many of my colleagues on the Board to get to know our Senate members and the wider Council.  This is both through attending Council meetings and because I am a member the rather strangely named Stakeholder Working Group (which acts as a point of liaison between Board and the Council President and Vice-Presidents), and last year I also served on working parties relating to the election process for MNDs and the development of the “Co-op Compass” as a way of measuring our performance against key objectives.

Holding the Board to account

The Co-op’s governance give the Council a vital role as representatives of the interests and priorities of our members, holding the Board and individual directors to account, providing inputs on possible future direction and acting in many ways as the “conscience” of the Society – making sure that we strive to hold true to co-operative Values and Principles and high ethical standards.  At times dialogue can feel uncomfortable – when Council challenges a decision or proposal from the Board.  That discomfort is essential and can be creative if we are to ensure that the Board really does steer a course that is in line with what our member owners would like. It can and does have a very positive influence for the good.  But there is always a risk that it can descend into confrontation and misunderstanding if mutual trust is replaced by suspicion or an assumption that either the Board is wanting to undermine our Values or that the Council is just wanting to create obstructions.

The way to make sure that Council-Board relationships add value to the Co-op is twofold:  firstly – clear, open and early communication; secondly – strong personal relationships.  We can always do better at both, and as an MND and member of the Stakeholder Working Group I believe I have a particular responsibility to help make sure we continue to invest in making dialogue and mutual understanding as effective as possible.  Social interaction such as the dinner are a really important way of creating human relationships that will then make more business-focused discussions increasingly productive.