The Co-op Group held its AGM on Saturday with an online event looking back on its campaigning work over the past 12 months.
In his opening address, chief executive Steve Murrells highlighted the Group’s leading role in the campaign for greater protection for store workers from violent crime.
And he repeated pledges the retailer has made to improve diversity and equity in its business and to make its operations more environmentally sustainable.
But there were also some critical questions from members, over issues such as the executive pay gap and the retailer’s partnership with Deliveroo.
Last year saw the Group grow its revenues, with a pre-tax profit of £127m, up from £24m the previous year. But it also drew harsh press comment for its decision to hold on to more than £66m in business rates relief, given by the government to support organisations through the pandemic.
Some of this criticism had focused on bonus payments to the Group’s executives, an issue addressed by Stevie Spring, chair of the co-op’s remuneration committee.
She told members that a balanced scorecard for judging the bonuses was still right despite the challenges of pandemic.
“It was clear to all participants that everything on the 2020 scorecard would be assessed,” she said. And although the pandemic had distorted the retailer’s performance, in weighing up the bonus question, all government support was stripped out of the financial results.
“We couldn’t be blind to the sweet spot of our position in the pandemic,” she said, adding that the executive bonuses had been lowered to within “a smidgen” of the target, and reduced to around 60% or 70%, with some getting more in the shape of payments deferred from previous years.
Elsewhere, executives had taken on extra roles resulting in “a smaller and lower cost top team than in recent years”, she added.
Delegates were told of a number of measures to support frontline colleagues, including the ’12 Days of Togetherness’ Christmas campaign which saw workers given £50 on their membership card and an exclusive discount day of 50% off all Co-op branded goods.
Mr Murrells said 33,000 colleagues have had their pay aligned to the living wage; but there were questions from delegates regarding the pay differential between the lowest and highest paid Group employee.
Ms Spring said: “We are working hard on this. Equality to me is about increasing frontline pay … this has been increased while executive salaries have been held.”
She said there is also a bonus differential to take into account but argued that the Group is “a very complex and very large business with a turnover of over £10bn – we need the best of the best talent to run it”.
All of the Group’s top team are earning substantially less than they would at a rival with a corporate business model, she added.
In terms of frontline pay, Ms Spring said colleagues always indicate their preference for increased hourly pay over the potential of a bonus. “I’d like to do both, it’s on the radar,” she said, but warned that the Group has to balance pay decisions against other investments such as product pricing.
Asked about the gender pay gap, Ms Spring said the median pay gap had fallen from 9.2% to 6.3%; but she warned there is also a gender role gap to consider.
“Most colleagues are on a fixed hourly rate so men and women are paid the same but we have fewer female than male executives,” she said, adding that there are programmes in place to remedy this by developing and mentoring female talent.
Other questions tackled ethical issues around Group policies, with one member asking why it had selected controversial tech platform Deliveroo – one of the onlne giants regularly criticised by the platform co-op movement, which recently saw its stock valuation lowered after City investors took against its treatment of drivers.
Chris Conway, the Group’s e-commerce director, said that with the rapid switch to online grocery shopping, the Group had needed to find a way to deliver, and that Deliveroo had offered the necessary scale.
He added that the Group was working with local partners and with Deliveroo to address any concerns about riders’ pay and conditions, and added that Deliveroo offered low-emission deliveries.
Members also raised questions about the sourcing of meat and fish, in terms of animal welfare and sustainability.
The Group sells trawled fish but members were told it has a process which takes into account the latest innovations and data on the impact of fishing methods.
In terms of animal welfare, Mr Murrells said the Group has always worked to achieve high standards across its UK meat ranges but in its standard chicken range it falls short.
“We’re going to trial a slower-growing bird breed and see what the customer reaction is,” he added, warning that people may have to pay slightly more to reflect the higher welfare standard.
Other sustainability questions took in the issue of fossil fuels; asked about the provision of electrical vehicle charging points, property director Stuart Hookins said the Group is looking into the possibility of rolling them out into its estate.
Members also suggested putting warnings on petrol pumps at Group stations warning about the environmental risk. But Mr Murrells said: “I’m not convinced this would see any change in behaviour. Instead we should have more detailing carbon labelling of all products, just as we pioneered on nutritional labelling 15 to 20 years ago. That’s more likely to bring behavioural change.”
Asked about plastics, Mr Murrells referred to the Group’s recent ten point environmental commitments, adding that by summer all own-brand products will be in sustainable packaging.
In response to a question calling for the Group to help tackle obesity by committing to targets for a higher proportion of healthier food sales, he said: “I don’t think targets is the right thing yet”, but the Group would “play our part in this space” by increasing the amount of healthy food on sale, improving promotion and communications in store and online, and working with the government for better regulation.
The Group’s recent decision to sell its Co-op Health business – given a high profile launch in 2019 – was also queried by member. “Nobody likes to sell a business,” said Mr Murrells. “These are critical decisions that the board spends a lot of time on.”
Covid-19 and the lockdown had accelerated five years’s worth of change to the business landscape in just 12 months, he said, “and turned our planning upside down”. Looking at the return on investment that the health business – a digital pharmacy service – would need to offer, “we concluded that the right thing was to exit”.
“We shouldn’t see the exit is a failure,” added Mr Murrells. “It’s a venture. If you can’t scale it in the way you need to, then get out fast.”
He said the Group is still exploring other ventures, such as Co-op Power, adding that “some will flower, and some won’t”.
In terms of its food store strategy, Mr Murrells said the Group is “perfectly in the right place” for the growth in convenience shopping but it needs to adapt to meet the growth in the home delivery market.
“We have to review our food estate with that in mind. Where we do conclude a number of stores may have to close we have levers that we never had before in wholesale and licensing – we can maybe reinvent those stores through a franchising offer rather than closure.”
The Funeralcare estate is also being looked at. Chief financial officer Shirine Khoury-Haq said the Group is looking at locations, and the need to revamp the product and pricing proposition, as well as incoming regulation. Issues have been raised with the condition of some Funeralcare sites and she said these were being addressed.
Asked why member rewards aren’t rolled out to Nisa stores through its partnership with the Group, Mr Murrells said: “Nisa stores are owned by our partners who stand on the profit they make, so we can’t roll out the member reward card there. It would coming off the owner’s profit.”
And on the question of Group stores opening near those operated by independent retail societies, Mr Murrells said it would go against market regulations to collaborate with other co-ops on store location.
Closing the AGM, Mr Murrells reiterated the Group’s new campaigning theme, co-operating for a fairer world. “Our aim is to help the nation and our own co-op to build back better and build back different,” he said, adding that the pandemic had sparked a “surge in community solidarity and a sense that we have a duty towards each other”.
He highlighted campaigns such as the Group’s leading role in calls for more protection from crime for store workers. Colleagues are asked to uphold the law on age-related sales, he argued, so should have same protection as emergency workers who uphold the law.
Mr Murrells praised the work of the Group’s charity, Co-op Foundation, with the #Iwill campaign to “give young people chance to influence the future”.
He said the Group would continue to work with its charity partners on mental health issues; wanted to be the UK’s biggest support of Fairtrade; and would continue to drive sustainability through treeplanting schemes and developing its Gro range of vegan food.
“But we need to grow the business, be agile, and adapt”, he added, saying the focus would be on hyperlocal and innovation.
All motions put to members were carried, including motion 9 on funding for the Co-op Press and Co-op College, which had not been supported by the Group board.
Kate Allum was elected as member nominated director over Sandra Campopiano and Wendy Barnes.