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.

Co-op: back to the future

Spent yesterday visiting the wonderful Beamish open air museum here in the North-East. As always one of the highlights was going round the village high street from the early 1900s: a high street dominated by the Co-op’s grocery and haberdashery stores.

I loved the nostalgia of looking along shelves to see some brands that are still going strong (Colman’s mustard, Rowntree chocolate …), and other products that have long since disappeared.  Lots of Co-operative Wholesale Society own brand products too, of course, many of them manufactured and packaged in our own factories and proudly labelled with their origins.  Early examples of the importance of knowing a product’s provenance.

And there were the posters urging customers to “Join Us” as members – something we are still encouraging people to do today.
   Over half a million customers have signed up to become members since the New Year – so we are well on our way to the target of one million new members this year.  But we need to do more than sign people up.  We need to reconnect with the local community too, in the same way that the store at Beamish was once the heart of the community in Annfield Plain.

So I am delighted with the £9 million we have given to 4,000 good causes around the UK and that we have announced in the last week.  This is the first fruit of our 1% donations on all own brand products bought by members since the relaunch of our Membership offer in September. As the scheme builds we hope to be giving £20 million a year in this way: that’s serious money.  I hope the pioneers and the many colleagues who worked for Co-op down through the last 170 years would be proud of what we are still able to do in the spirit of the service they gave their local communities.

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.

Lending a Hand

I spent yesterday stacking shelves and helping customers at my local store – Framwellgate Moor.  Thanks to Vicky and Kate for making me welcome and showing me the ropes – and it was also good to see Lloyd and Michael the Regional and Area managers passing through on a tour of the shops during the morning!  Framwellgate Moor store only opened in the summer, but it is already achieving and indeed exceeding its sales targets thanks to the friendly and hard-working staff team, and this is also reflected in an excellent customer satisfaction score, well above the national average.

lloyd-michael-vicky-kate-at-fwellgate

pgc-stacking-shelves-at-fwellgate

For me it was great to see things from a shop floor angle, and gain much greater familiarity with the range of products that we stock and with the customer experience.  Lots of colleagues from the support centre at the Co-op are encouraged to spend a day helping out under our “Lend A Hand” scheme, as an important gesture of support at this busiest period of the year, but it also keeps us all rooted in the realities of our business by experiencing the “frontline”.

Morale is high at Framwellgate, but it is good that in the last week or so our latest “Talkback” survey of our 70,000 colleagues across the Group has shown a strongly improving trend in colleague “engagement” right across the country.   In a way this improvement is not surprising given the Back to Being Co-op training most colleagues have been through this year that has helped re-instil pride in our history what we stand for, the excitement of our rebranding and relaunch of Co-op membership, and the sense of satisfaction that comes from a renewed confidence in the outstanding quality and value of our own brand products.  Combined with the positive sales momentum we have experienced throughout the year, I was expecting to see the figures on an upward trajectory.  But nonetheless the improvement is important further evidence that “the Co-op is back” and going places.  If we are going to succeed there is no doubt this can only be built through the enthusiasm, skill and dedication of our colleagues as they meet the needs of our members and customers and serve their local communities.

kate-at-framwellgate

A great note on which to finish before Christmas!