AGM hears of ‘solid progress’ for Co-op Group’s rebuild

Delegates at the Co-0p Group AGM were given a progress report on its rebuild process, with chief executive Richard Pennycook reporting “solid progress” on all fronts and chair Allan...

Delegates at the Co-0p Group AGM were given a progress report on its rebuild process, with chief executive Richard Pennycook reporting “solid progress” on all fronts and chair Allan Leighton telling how, in the past 12 months, the Co-op has been the most shopped food business in Britain.

Mr Pennycook – who, a year before, had warned the rebuild would take three years and not be a “quick fix” – told delegates in Manchester how “every penny generated is going back to membership”.

Richard Pennycook at the Co-op Group AGM 2016
Richard Pennycook at the Co-op Group AGM 2016

In convenience and Funerals the Co-op is a market leader, he said, and its legal services business is also back in profit.

The Group’s insurance business would have also made progress if it hadn’t been for Storm Jonas affecting Cumbria, he added.

“Other insurers weren’t so quick to recognise the scale of the storm and the impact,” said Mr Pennycook.

Full coverage: The Co-op Group AGM 2016

He explained how colleagues kept stores open and local customers helped clear up stores that had been damaged by the storm. The Co-op also opened pop-up shops where they could not re-open shops to help communities get access to the products they needed.

“These colleagues show how much they care about being the Co-op,” said Mr Pennycook, adding that the Co-op had also increased pay for its 40,000 colleagues.

The Group has invested £400m in its businesses during 2015 and intends to invest another £900m during 2016-2017.

“Unashamedly we are investing to fix our business,” he said.

The Group invested £125m in 2015 to put fresh produce within customers’ reach, which, in return, led to a double-digit growth in volume of fresh produce sold.

Mr Pennycook confirmed the Group would continue to dispose of stores in locations that are not working for the business and use the proceeds to reinvest.

The investment strategy was also applied to funeral care, with the Co-op opening 25 new funeral homes, including one in Rochdale, the birthplace of the modern-day co-operative movement. The Group has focused on replacing vehicles and refurbishment as well as looking at ways to maintain quality at an affordable price.

Co-op Funeralcare reduces prices by 7%

In terms of legal services, the Co-op has launched a new website to make it easier for customers to navigate.

It has also invested in the insurance business, signing a 10-year contract with IBM to provide a new platform to transform its offer. The £55m partnership was announced in June 2015 and will see IBM provide technology services for all insurance business functionality.

Delegates arriving at the Co-op Group AGM
Delegates arriving at the Co-op Group AGM

Reducing the level of debt remains a key concern, said Mr Pennycook. In 2013 the Co-operative Group made a £2.3bn loss following the discovery of a £1.5bn black hole at the Co-operative Bank, which at that time was 100% owned by the Group. The bank was rescued by US hedge funds, but the Group maintains a 20% stake in the business. The Co-op has managed to reduce debt from £1.4bn in 2013 to £808m in 2014, £743m in 2015 and £692m in 2016.

But he also stressed that being a co-op “is about a lot more” – chiming with comments by Mr Leighton that a “powerful co-operative movement” had never been needed more in Britain.

Mr Pennycook said the society wanted to return to campaigning and fundraising on a national scale. As part of its rebuild strategy, the Group has focused on working with local suppliers, particularly co-operatives. It has also recruited 1,500 apprentices and joined the Campaign for Real Ale (CAMRA).

On education, the Group will continue to support its eight academy schools in the north of England. The schools, sponsored by the Group, are based in multicultural areas and faced significant challenges when they were taken over by the Co-op.

The rebuild is on track, on plan and on budget

Another priority for the Co-op Group was “to go back to ethical leadership, ensure they maintain the highest ethical standards”, said Mr Pennycook.

He said the Co-op had set up a policy committee to look at issues such as human rights, health and safety, colleague well-being and business ethics and behaviour.

“The rebuild is on track, on plan and on budget,” he said.

The Co-op Group has rebranded back to The Co-op. Here’s the new look:

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Delegates also heard from Lois McClure, chair of the Co-operative Young Members’ Board (CYMB), and Nick Crofts, president of the Group’s Council.

Ms McClure encouraged delegates to “go out there and inspire young people” to get involved in the Co-op.

Set up two years ago, the CYMB has created a six-point manifesto that defines what the Co-operative means for the new generation.

On products and services, it is looking at how the NUS discount card can encourage young people to get involved in the Co-op. Student with an NUS card currently get a 10% discount at the Co-op’s food stores, helping 100,000 students save £6m.

Nick Crofts said the council’s key priority was to strengthen the relationship with the board and executive.

“There are occasional differences of view between the council and the board and that is right for a member-owned business,” he said.

The council has developed a framework to assess the success of the business through four lenses. “The compass adds a new dimension to how we work together for success. This direct and meaningful member oversight is a unique feature of our business model,” said Mr Crofts, adding that communicating the council’s work remained a weakness.

“The best days for our co-op lie in the future and not in the past,” he said.

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