Leeds University Union shop

Great visit with Head of Franchise Martin Rogers to see the new Co-op franchise store at Leeds University Union.  Only open for less than three months, it has already seen sales increase by 150% – a response to the excellent range and smart appearance of the shop and a recognition of shared values between the student body and the Co-op.  Run by the Student Union with a mix of permanent and student staff, it benefits from a dynamic team led by Karen the Union’s Retail Director. With wide aisles and the greatest number of self scan terminals in our estate, the shop looks really attractive, and the footfall while I was there was impressive.

Before visiting I had thought of university franchise stores mainly in terms of their being an excellent way of recruiting young people to become members of the Co-op and to get them to understand the Co-op values difference.  

However, what struck me forcibly on my visit is that these stores will also give us an opportunity to listen more clearly to the up-and-coming generation of shoppers, helping us to attune our ranges and sourcing approach to their needs.  For example, the greater proportionate demand for vegan and vegetarian food can allow us to try new ways of presenting that offer; and their demands on issues like removing plastic bottles will challenge us to move faster in an environmentally sustainable direction.  We already have a free water refilling service in this store, but have also introduced today a new range of water bottles made from recycled cardboard and plant-based plastics – Just Water.  

I was also pleased to see that rather than the Costa coffee point that we have in many stores, the Student Union had insisted on a Fairtrade coffee point! A further benefit of this store is understanding better the needs of the Chinese ethnic community, as students from the Far East form a significant proportion of the Leeds student body.

All in all this felt like the start of a dynamic two-way partnership in Leeds. Co-op has much to offer them in terms of an appropriate range and professional experience, and already they are seeing greater footfall in their building as a result, whilst we in turn have much to learn from their focus on a youth clientele.  Roll on many more franchise outlets in other universities!

April’s National Members’ Council

Spent Saturday at the Co-op Council meeting: where the main focus of discussion was the publication of our year-end results, which were published last week. You can see the full report at https://assets.ctfassets.net/5ywmq66472jr/4Xi9Pw36VOEkmE2yqZhCQT/4d716091dec9e6e8832a357c718ca47b/Co-op_Annual_Report_2018.pdf

Overall our underlying profit result was flat year on year.  But with strong growth in food sales and an increased Profit Before Tax line the reception in the financial press has been very positive.  Food’s performance was outstanding with like for like sales up 4.4% – well ahead of the market – and the addition of NISA taking the Co-op’s total turnover to over £10 billion for the first time since we disposed of the Co-operative Bank. Funeralcare results were a little disappointing, with a drop in market share and profitability impacted by our introduction of lower-cost funeral options.  However, we still have a very strong platform and many opportunities in that sector and I am confident that we will see that part of our business turn around.  

It was very pleasing that the press gave plenty of coverage to other aspects of our performance too, recognising in particular the work we are doing to address crime levels in local communities, the investment by our pension trustees in social housing and the expansion of our network of academies.  This year we published the Co-op Way report at the same time as our financial results – which is something I have pushed for over the last couple of years.  There’s lots more interesting and encouraging news to draw out from that report, which I will cover in a future blog post.

The Council session also spent a lot of time looking at our work on leadership and colleague culture as well as reviewing remuneration policies which are covered in huge detail in the Annual Report.

During the Directors Q&A sessions we were challenged on a number of areas, including:

  • Progress on our IT transformation programme in the Food division (slipping behind schedule which will increase cost and delay service improvements – but we need to take the time required to get it right).
  • Reactions to the Grocery Code Adjudicator’s report and whether we were confident that our house was being put in order now: as previously declared, we had got things wrong but were working hard to make sure we treated suppliers well.
  • Colleague security: a continuing area of concern, in which we continued to invest time and money. 
  • Whether it was easier to report to shareholders or to members: we find Council questioning ranges far wider than that of financially-focused shareholders, and appreciate the fact that members take a longer term and broader perspective 

Altogether a very positive day, and I very much hope that it does not prove to be my last Council meeting, as the next one will not be until after our AGM in May when I hope to be re-elected!

Global Impact Award

Excellent news last week that the Co-op won The Hermes Global Impact Award at the Retail Week Awards.

Championing Fairtrade products, contributing to local community, launching the Bright Future programme to help victims of Modern Slavery, recycling and the Future of Food strategy were all called out as examples of what puts Co-op ahead of most other businesses.

One of the judges said: “If it was about a single initiative or a campaign there were good entries, but in terms of multiple initiatives over time and the aggregate impact they have, the Co-op just stands out on its own. “The grocer shines a light on important issues like slavery and water – not always the ones that are popular. There’s a pure intent. Tackling modern slavery by offering a path back into employment is a great approach.”

Another judge commented: “The Co-op consistently delivers. It’s cultural across its business – the grocer doesn’t just talk about it, it lives and breathes it.  The Co-op has a strong, genuine sense of duty and community. It is properly entwined with every part of the organisation and it deserves to be properly recognised for that. The Co-op is staying true to its purpose of ‘championing a better way of doing business’, which makes it the worthy winner of this award.”

Reading these plaudits is most encouraging, and having just spent this morning reviewing the 2018 Co-op Way sustainability report at the Risk and Audit Committee, I know we have plenty more positive news to report on the sustainability front.  I was particularly pleased that the Committee met once again with our assurance providers, DNV, and that we considered their report at the same time as our draft financial accounts for the last year.  This to me symbolises the way that we give equal weight to our ethical and financial performance, recognising that the two can and should reinforce each other in a virtuous circle of creating a stronger Co-op the more we can be seen to be contributing to stronger communities and a more sustainable world.

Co-ops UK Retail Conference

It was good to spend Friday and Saturday at the annual Co-ops UK conference for members who are retailers, a great chance to share notes and build relationships. A good turnout of Co-op Council colleagues (some also wearing other hats) plus Gareth Thomas, Helen Grantham and myself from the Group Board and executive.

As usual one of the highlights was the presentation from James Walton, chief economist at the IGD (Institute of Grocery Distribution), with a masterly overview of trends in the marketplace and consumer attitudes.

Take home thoughts from his presentation included: * the impact of Brexit likely to be negative in short to medium term at least, with 40% of our food imported from the EU. * Consumer confidence is consequently at a record low ebb. * Although there is projected growth in grey sales over the next five years, most of this will be form inflation and a little bit to reflect population growth. * Convenience, discounting and online sectors would continue to grow whilst larger supermarkets woful continue to shrink. * Future shoppers will be much more conscious of both health and ethical issues – and even if they still excuse themselves when they consume less-ethical products they will not excuse big companies for ethical lapses. * Growth in plant-based diets seems likely to continue.

There were also useful sessions on trends in the funerals market (including a presentation from Alison Close of the Co-op) and a discussion of initiatives on food waste, tacking anti-social behaviour and making food provenance more transparent in local supply chains.

Final Fairtrade Fortnight update

Coffee with Mike Gidney – CEO of the Fairtrade Foundation (pictured above) – was an excellent chance to catch up with an old colleague and to mull over possible future initiatives for Fairtrade. We met in Esquires cafe in Durham – which as you can see was appropriately merchandised to support the fortnight.

We were particularly interested to discuss how to make careers in ethical food more accessible to students – recognising that for many the first steps in a career path would be in larger company where they could learn skills, but that retaining a focus on ethics in their early careers could then sometimes be challenging. We generated ideas around co-ordination of internship placements by the Foundation, creating positive peer support groups and tying more ethical inputs into initiatives such as Grocery Girls being promoted by the Food CEO of the Co-op, Jo Whitfield.

We also spent time reflecting on the Grocery Code Adjudicator, whose establishment Mike and I both campaigned for when at Traidcraft, and the irony that she was currently investigating the Co-op’s buying practices when Co-op was probably amongst the most ethical of all retailers. Although we await the outcome of those investigations, we both agreed that the focus all retailers were now having to put on handling supplier relationships better was a major step forward. The improvements in god practice across the major retailers in the last two years have really been very marked. However, the scope of the Code was limited to UK suppliers at the moment, so did not really provide direct help to Fair-trade and other overseas producer groups – perhaps that’s a next stage to campaign for.

And then on Friday I was at the AGM of Shared Interest – an organisation that lends to fair trade producers who cannot access commercial finance, and on whose Board I have served for four years. It had been an encouraging year for Shared Interest, and it was inspiring to hear of the impact that well-judged lending could have in equipping small groups for expansion that could extend fair trade benefits to hundreds more workers. But chatting to other supporters – many also keen members of the Co-op – it was also clear that they remain disappointed by the degree to which our stores can get behind Fairtrade Fortnight. There are practical and logistical barriers to be overcome, but I think they are right that we need to try harder in future years.

More Fairtrade Fortnight activities

Just back from giving a talk at Cullercoats Methodist Church on Saturday. We had an audience of about fifty church members and Co-op members/supporters, and the event was organised by Co-op Council member Mark Ormston. Those attending included Sir Alan Campbell, the local MP and Deputy Chief Whip of the Labour Party, and Dan Crowe – Vice-President of the Co-op’s National Members’ Council.

Mark Ormston, myself and Sir Alan

I gave a very brief overview of the development of the Fair Trade movement and then talked about some of the key product categories sold by Co-op: wine, sugar and chocolate/cocoa. I was able to give some colour to my illustrations be describing from my own experience at Traidcraft how producers of these types of product often choose to use Fairtrade benefits. We discussed in particular education, access to clean and safe water and creating opportunities for women.

I then talked about the challenges in Fairtrade at the moment, with reference to the decisions of Cadbury’s, Nestle and Sainsbury’s to drop the Fairtrade Mark from some of their key product lines. We also discussed the commercial problems that Traidcraft has recently faced.

My message was to take heart from the fact that new commitments to Fairtrade were still being made: Waitrose has just announced that it has taken all its chocolate confectionery Fairtrade (something Co-op has done for many years fo course!). And Fairtrade has still had a huge impact on these big organisations, and that big corporates now had to take sustainability very much more seriously. Nestle, Cadbury’s and Sainsbury’s all still were pursuing ethical sourcing schemes, and often applying them now across their whole supply chains rather than just on Fairtrade lines. Whilst these schemes were less impactful in depth, they brought benefits to many millions more producers.

But I then emphasised that we need to keep Fairtrade thriving so that the pressure to run these schemes continued and that everyone had a part to play. As consumers our individual buying choices mattered and send important signals to companies – we should never underestimate how much our own purchases matter: so keep buying Fairtrade (and see my call for taking up the Co-op Fairtrade Pledge on my blog below!).

We can also all join in campaigns and petitions – such as Fairtrade Foundation’s current campaign for a living wage for all cocoa farmers in Ivory Coast. I could show form my own experience how just a few thousand campaign postcards could be enough to get a meeting with a minister of European Commissioner to press for change.

And finally I encouraged people to carry on buying from the fair trade pioneers such as Traidcraft, Divine, Cafedirect and Liberation Foods (as well as buying Co-op Fairtrade products, since Co-op convenience stores could only stock a limited range of their goods). The pioneers are needed to keep standards high, to enthuse and mobilise supporters at grassroots level and to push forward innovation in Fairtrade.

Interestingly this was the first talk on Fairtrade that I had given with a Co-op rather than an exclusively Traidcraft emphasis. What struck me forcefully was just what a difference Co-op and Traidcraft working in partnership together has made – the first Cafedirect products on supermarket shelves, the first fair-trade wine, pioneering of new categories such as charcoal and rubber gloves, sourcing fair trade coffins from Bangladesh. And Co-op has also partnered with Divine since 2000 when it took all its own brand chocolate Fairtrade boring with Divine’s Kuala Kokoo co-operative. Partnerships like this are a great expression of Co-operation in practice – and they really work!

Also in the last week I gave a talk to students at St Chad’s College on Fairtrade matters and ran my own Traidcraft stall at our local church. And we are still only half way through Fairtrade Fortnight!

Fairtrade Fortnight pledge

Take the Co-op Fairtrade Pledge and help some of the world’s poorest farmers

Fairtrade Fortnight is underway (25 Feb – 10 March) and I’m asking our Co-op members and customers to make a commitment to Fairtrade that will help some of the poorest farmers in the world get a fairer chance in life. 

All you have to do is take the ‘Co-op Fairtrade Pledge’ by swapping a regular product you buy for a Fairtrade alternative. 

It could be a chocolate bar, a bottle of wine, a jar of coffee or packet of biscuits. It’s a simple switch, but if all Co-op members and customers did this it would make a huge difference to people’s lives giving them greater financial security and the chance to improve education and healthcare for their communities.

Famous for Fairtrade

At the Co-op we’ve been famous for Fairtrade for decades. That’s because we believe it’s the ‘gold standard’ for an ethical trading relationship which addresses poverty and exploitation and gives the farmers themselves control and choice over how they use the money they earn.

The Fairtrade mark means farmers are guaranteed a fair price for their goods and are cushioned against dramatic changes in world markets – like the crash in cocoa prices that took place in 2016. In West Africa, where 60% of cocoa beans are grown, that price crash means families are struggling to survive. 

I’m pleased to say that all the cocoa we use in our Co-op chocolate and as an ingredient in any Co-op product is 100% Fairtrade. That means our cocoa farmers have been able to maintain their livelihoods. 

And our commitment goes well beyond cocoa.    

While other retailers are stepping back from Fairtrade and introducing alternative ethical schemes that cause shoppers confusion, at the Co-op we’re staying true to the values the Fairtrade mark stands for. 

Women leaders

But we always want to do more. So over the last year we’ve increased our commitment to women cocoa farmers in West Africa. We’re funding the Fairtrade Africa’s Womens’ leadership school projects, which are working with women in Côte d’Ivoire to empower them as future leaders. 

The projects train them in business skills such as decision making, resource management and leadership. We’re also working with Kuapa Kokoo, a cocoa growing co-op in Ghana, to give their women workers access to training.

Take the pledge

By taking the Co-op Fairtrade Pledge you’ll be playing your part to make trade fairer for some of the most disadvantaged communities in the world. And you’ll discover how fantastic Fairtrade products taste. If you’re planning any Fairtrade events where you live Tweet @coopuk so we can spread the word. 

January 2019 Council meeting

Saturday saw the first National Members’ Council meeting of 2019, and as part of my Member Nominated Director role I was of course delighted to be there.

The two main items on the agenda were an update from the senior management team on progress within our Food Business, and a Q&A session around the proposed sale of our insurance underwriting business.

2018 was an amazing year for Coop Food. Sales performance outpaced the market by a considerable stretch, we acquired NISA, opened a hundred new stores and invested in colleagues and testing out a whole range of new initiatives. Questions from Council focused on plans for developing our vegetarian/vegan/organic offerings, and underlined the importance of not using every new efficiency to strip hours out of stores but to enable more time for serving members and customers.

As one might expect there was appropriate challenge offered to the decision to sell underwriting activities to Markerstudy (see picture above and also my previous blog). Mark Summerfield, MD of Coop Insurance, was present to lead Council members through the rationale and provide reassurances – and it was great to hear explicit recognition from Council and Board members of the integrity and expertise he has brought to the negotiations. By the end of the session my impression is that Council members, a number of whom had initially been sceptical about the decision, came round to recognise that it was the right strategic move on the part of the Board.

There were also sessions when we as individual directors were held to account by questioning from small groups of Council members. In my own Q&A session there was discussion of our logistics operations, our investment in improved IT systems, the management of Group debt and the background to our Sustainability Bond offer in the autumn, and the role of MNDS compared with that of independent non-executive directors. Various points were made around our Festival offering in 2018 particularly in relation to displays about the Co-op’s wider purposes and membership, the use of membership cards and a desire to see us consider offering free water at future events.

All in all it was a good and useful day, with questions focusing on important issues and on longer-term opportunities, and answers being full, open and honest: as one would hope! It was also an occasion when we could note that Council Secretary Gill Gardner was moving on to another role within the Group.

Gill has been an amazing colleague, helping the Council to become ever more effective, and she will be a very hard act to follow: though I am told we have number of excellent candidates putting themselves forward and an excellent interim Council Secretary in Andrew Seddon.

Brexit implications

Like many others I find Brexit is a constant topic of conversation at the moment. Personally I voted Remain, mainly on the grounds of international solidarity and because I saw the UK as a positive influence for good within a Europe that was (and is) facing serious challenges. As a historian by training I am very conscious of how fragile Europe has always been, and how much we all benefit from peace and stability and have a responsibility to contribute to it.

The Co-op Group chose not to campaign on the subject at the time of the referendum because we recognised that our membership was pretty evenly divided on whether to leave or stay in the EU, and the issues at stake were far wider than the difference it might make to the Co-op on which we could legitimately speak.

But what difference would Brexit make to the Co-op, particularly if it is a “hard exit”?

If, as seems likely, Brexit leads to a deflation of sterling, then the cost of all food imports will go up, and this may be amplified by the additional frictions of bringing food across borders, and possibly by the imposition of WTO tariffs. Although the Co-op sources more product proportionally from the UK than the other major retailers, a lot of what we sell is of course still imported, and competitive pressures will inevitably also force the price of UK-sourced goods up. Price competition between retailers may shield consumers a little, but the scale of price rises means that food prices are almost certainly going to rise pretty steeply.

Food retailers are more protected than some in inflationary times, because we all still need to eat. However, as consumers feel their purchasing power squeezed they will be forced to choose more basic products, and (a good thing this) will become much more conscious of only buying what they need. Competition from discounters will become even stronger in this context – although Aldi and Lidl imports a great proportion of what they sell from Europe and so may be disproportionately disadvantaged.

We will also be concerned about our colleagues from overseas. Although they will have some rights to remain here, we know they will feel less welcome in our country and some valued members of our teams may choose to leave. For those who are sending may back to their homes, their sterling earnings will be worth less because of the likely downward movement of the pound. Many of our agricultural suppliers will be even more affected by the reduced attractiveness of coming to the UK for the seasonal workers on whom they depend.

Are there any upsides? From a strictly Co-op Group perspective, I can see few benefits from leaving the European Union.

But whatever happens we have to recognise that we have become a society where a sense of division is more acute than at any time since the 1930s. Brexit has accentuated perceptions of the real unfairness of income distribution between rich and poor, between the university-educated and the less-educated, between skilled and unskilled, between the regions and the South East, between companies and the people. It is also leading to a sense of distrust in our political system and its ability to work for the common good. It has made it clear that something has gone wrong with the working of our society, and we need to change.

This will be a context not too dissimilar to the times when the co-operative movement started in the 19th century. So co-operative values and approaches will be more important than ever – and are likely to resonate more with the general public. Themes of justice, fairness and working together to build stronger community, which are all intrinsic to co-operation, will be very relevant to re-creating a cohesive society in this country.

So whether we leave or whether we remain in Europe, now is a time when we need to promote the benefits of co-operation and community values afresh – and it just may be that we will find the nation readier than ever to respond. That is a challenge and an opportunity to which I hope the Co-op will be able to respond.

Sale of insurance under-writing business

It has just been announced that Co-op has agreed to sell its insurance under-writing business to Markerstudy, subject to approval from the Regulators. It is important to make it clear that this is not the Co-op exiting from the insurance business – which will remain an important part of our offer. We are just selling the under-writing element, which creates risk and volatility of earnings. Co-op home, motor, travel and pets insurance products will continue to be available – and as well as releasing capital, this move should free us up to develop an even wider range of insurance products to offer to our customers and members. This deal secures the jobs of hundreds of our colleagues – who will continue to be at the “front end” handling customer queries and claims and maintaining the high quality of service for which Co-op insurance is renowned.

From my perspective this is the right way forward. Insurance under-writing was a discrete part of our business and was not operating at an effective scale. Being a regulated business it created a lot of complexity, and the Co-op Group was not the sort of partner that the Regulators felt comfortable with. In Markerstudy we have found a partner with a strong reputation for treating its staff and customers well, and with a higher level of technological expertise than we have historically had in place. We look forward to working closely with them on Home and Motor products for the foreseeable future (at least 13 years), will also work with Markerstudy and others on developing a wider range of insurance products that more closely match our members’ needs. Our recent award-winning travel insurance product has demonstrated how we can innovate in the sector – and we should expect to see a lot more of this in the years ahead.