Amid all the eye-catching changes of branding unveiled at the recent Co-op Group AGM, changes were also made to that most intrinsic of co-operative elements: membership.
The Group’s annual report prepared the ground for the membership changes, declaring it to be “the biggest thing to happen to our Co-op for 25 years”.
The headline news was that members will receive a 5% reward for any purchases they make of Co-op own brand products and services. In addition to that, a further 1% will be given directly to benefit local, community causes. Finally, there are plans to bring back the dividend, once the Co-op is back in profit.
The five and one percent are not a replacement for the divi. Far from it
Some have questioned whether this five and one percent would swallow up any personal divi. However chief executive Richard Pennycook told the AGM this is not the case: “It’s important to say that the five and one percent are not a replacement for the divi. Far from it.
“The divi remains a fundamental point of difference for any Co-op. Combining our divi with the new reward of ‘five and one’ is the biggest innovation in our Co-op membership for decades. It puts membership back at the heart of the Co-op and the Co-op back at the heart of communities throughout Britain.”
But when is this return to the divi likely to happen?
The Group’s annual report states that “The Co-op is on a three-stage journey to recovery, with Rescue, Rebuild and Renew phases.” Having completed “Rescue” in 2014, the three-year ‘Rebuild’ phase began at the end of 2014. The plan was to move on to ‘Renew’, and the return of the dividend, by the end of 2017.
However, that doesn’t necessarily mean the a is due in time for Christmas next year. The report showed promising signs, but with a long way to go. Underlying profit at the Group is up from £73m in 2014 to £81m in 2015. Net debt is down £51m as well, although it still stands at £692m. That number is a considerable improvement on the year before, though, when debt was at £1.4bn.
Given the increased level of investment and capital expenditure, we do not expect to declare dividends until 2018 at the earliest when we enter our Renewal phase
A spokesman for the Co-op Group explained: “The level of profit we make needs to be sufficient to allow the investment needed in the business to occur before we return to paying a dividend.
“The £1.3bn being invested in our business over the three year Rebuild period will significantly improve the products and services we can offer to our customers and members. Given the increased level of investment and capital expenditure, we do not expect to declare dividends until 2018 at the earliest when we enter our Renewal phase.
“We shared with members at our AGM the plans we have in place for driving the growth of the business for the long-term, to the sustainable benefit of our members and their communities,” said the spokesman, citing the member rewards of five and one percent.
Before the dividend, then, it’s membership and sense of community where the Group will look to drive growth.
The 5% return on own brand products and services will be rolled out from September – having been ‘test-driven’ by Co-op staff and the National Members’ Council. The money will be paid into a membership account, allowing members to spend what they save in any Co-op business.
The 1% to communities kicks off with staff members from each region (1,500 Co-op regions have been identified) selecting three local charities for members to support. After six months, Co-op members will be able to put forward suggestions for charities and causes from their communities which they believe deserve the support.
The aim is to recruit a million new members, with half of the trade to be done with members – at the moment, in Food, that number stands at 20%. As Mr Pennycook said: “Then we can really call ourselves a Co-op”.
For perhaps the first time in the Group’s long history, there is a genuine drive for individual members.
The Co-operative Wholesale Society (CWS) began life in 1863 as a federal group – members were other co-operative societies, not individuals.
The Scottish CWS was founded five years later and began to set up retail branches which attracted individual members. The CWS, on the other hand, did not. Instead, it set up what became the Co-operative Retail Services (CRS).
The CWS and Scottish CWS merged in 1973. Gillian Lonergan, head of heritage resources at the National Co-operative Archive, explains: “That was the first time that the CWS even had individuals as members. They’d only ever had corporate members before that. And all of those individual members were in Scotland.”
The CWS grew and began to absorb other societies until, by the late 1990s, it had become the largest retailer in the co-op movement. It merged with the CRS and in 2001 changed its name to the Co-operative Group. “It was recognition that it had changed – it was no longer just a wholesaler for the movement, and hadn’t been for a long time,” says Gillian.
This sprawling growth meant the Group found itself with huge membership through absorbing independent societies which had themselves sought members.
The enormous task of working out a proportion of everyone’s sales within the co-op and dividing up the transaction slips into members became completely unviable. Or, as Gillian puts it, “They were spending more on that than they were distributing”.
Divi stamps, which appeared in the late 1960s at the independent societies around at the time, were originally introduced to make this process simple. But, says Gillian, “shops were giving out the stamps to everyone who shopped there, whether they were members or not.”
Members would get a bit more, but with not much money being distributed anyway, the benefits of membership seemed pretty slight.
Lots of societies went in for a community dividend instead – supporting community activities rather than giving each member a relatively small amount. This was the case until the 2000s, when the swipe card meant a ‘real dividend’ could once again be paid, as the technology was easily available to calculate everyone’s individual amount.
This complex history has provided an enormous challenge of identity. A challenge not helped by situations such as that with the Co-operative Bank – now 80% in the hand of private investors, but retaining ‘the Co-operative’ name.
Alongside the new logo and branding of ‘The Co-op’, the Group is aiming to promote – and educate – about its sense of community and co-operation through a series of Being Co-op events for staff.
The 90 minute events are being run over the summer.
Nick Crofts, president of the National Members’ Council, explained: “It’s part of the ‘Being Co-op’ colleague re-immersion programme.”
It’s a big investment in our colleagues that will help everyone to live our values in the workplace
“All 70,000 colleagues will be going through a high-intensity, very participative ‘immersion’ session, in small groups across the country over the months ahead.
“It’s a big investment in our colleagues that will help everyone to live our values in the workplace, understand the co-operative difference and enhance the emotional connection colleagues have with our society.”
The Group’s membership changes rely on widespread growth with a distinct sense of community.
The society, which traces its roots back to the Rochdale Pioneers, now has 3.6 million members. A drive for membership will see this number increase. The problem of tying together the myriad of organisations and individuals is not a new challenge for the Group, but it has never been greater.