Co-op Group holds AGM in Manchester

CEO Shirine Khoury-Haq set out the Group’s challenges and priorities for the year ahead

Co-op Group members met in Manchester and online on 20 May for the retailer’s annual general meeting where they voted on 12 motions – and heard about the organisation’s renewed emphasis on the importance of membership and co-operation among co-operatives.

Welcoming members to the AGM, outgoing chair Allan Leighton said the Group has a stronger balance sheet of any of its competitors. Responding to a member’s question about the sale of the Group’s petrol forecourt business last year, he added: “The net effect of that [sale] was taking our net debt down to £300m. The most important thing any organisation has to do at this period of time in this climate is to have a strong balance sheet.”

In her speech, CEO Shirine Khoury-Haq said 2022 had been “incredibly tough at times” the society was in a stronger position than at the beginning of the year, thanks to “our determination to address the challenges that we faced head-on … building an even stronger Co-op for all generations of co-operators, present and future”.

Key challenges included £100m extra costs in the form of rising energy and colleague payroll costs and economic uncertainty.

“We had to refocus on what mattered the most and what would drive our Co-op forward,” said Khoury-Haq.

As such, she added, a key priority over the past 12 months was improving the society’s financial and operational position.

“We reduced our net debt by £587m, a 64% reduction in year,” said Khoury-Haq. “We increased our cash flow. We became a cash-generative organisation, and one that does not need to borrow to fund investments. And we created realistic business forecasts, not aspirational forecasts, to justify the investment. And we delivered on those forecasts for the first time in years. 

“We maintained our underlying profits, we mitigated significant, externally influenced operating cost increases by delivering over £100m of in year cost savings and we are now, as a result of all of this, a far more resilient, and financially stronger Co-op.”

She added: “I’m so proud that at the heart of all of this lies the simple truth that our Co-op is a very different kind of business, one that exists for the benefit of our members, not for shareholders,” and highlighted that the organisation’s active membership had also grown over the year, with 45% of new members under 35 years of age.

Describing the society’s plans for 2023, Khoury-Haq said the Co-op would, among others, “stick closely to our financial plan”, “invest but in a prudent and capital conscious way” and strive to add one million new active members over the next five years.

A co-operative past and future

She also talked about the importance of the organisation’s heritage.

“Our heritage shows what the power of like minded individuals working co-operatively towards common goals can achieve,” she said.

“Times have changed. And our challenge is how do we continue our journey to continue to create a modern Co-op that is placed in these ever-changing times – and how do we use our difference as a co-operative not only for the good of the society, but also for our competitive advantage?

“Because of co-operatives and mutuals’ capital shares, we don’t have the access to capital scale or investment levels to respond to or compete with some of these challenges. That puts us at a potential competitive disadvantage. But one thing we do have that the rest of our competitors don’t is the power of co-operation.”

Khoury-Haq said she had been inspired by the success stories of SOK Group in Finland and Coop Norway: “What these organisations have in common is that the co-operative movement has come together to be very clear about their core and non-core activities. While the independent societies have their own members and they serve them independently, they have consolidated buying, distribution, IT, marketing and membership platforms, and they have benefited from significant economies of scale. This means that each co-operative can focus on serving their members and engaging with their communities [while] being formidable co-operative collaborative competitive forces.”

She challenged the other retail societies to “work together to create a co-operative ecosystem that will challenge our competitors, while promoting co-operative values, and doing good businesses.”

Financial reports

Mike Hazell, interim chief financial officer, said the Co-op was pleased with its financial performance in 2022, with Group revenue at £11.5bn and an underlying profit of £100m.

“We targeted £101m of cost savings and we delivered on that target,” he said.

“I’m very confident that the performance we put in this year means we come out of 2022 in a much stronger financial position than we entered it, and set ourselves up well for 2023,” he added.

Stevie Spring, chair of the Co-op’s Remuneration Committee, highlighted some of the measures taken by the society to support colleagues, such as increasing the colleague member discount for Co-op branded products from 20% to 30%, an offer extended to the end of 2023. Other actions included putting £225 onto each colleague’s membership card, aligning pay rates to the Real Living Wage, moving the hourly rate for customer team members by 10.1% from £9.90 to £10.90 per hour and investing £90m in colleague pay in 2023.

The Co-op’s pay ratio stands at 35/1 from 48/1 six years ago, said Spring, adding that the current pay policy was approved at last year’s AGM.

The importance of members and communities

The AGM also heard from Denise Scott-McDonald, the president of the National Members’ Council, who highlighted the importance of members, as owners of the society.

“I fully support the board’s ambitions to welcome one million new members over the next five years. We are stronger together but, to be more successful, we have to build our movement, and our business for the future and attract more people to our council members,” she said.

Kenyatte Nelson, chief membership and customer officer, introduced the organisation’s new member strategy.

“It cannot be just about loyalty, it’s about enabling engagement in the Co-op and supporting communities,” he said, adding that member acquisition stood at 20,000 new members per week.

“Our job is to make membership irresistible and indispensable,” he said.

Next on, Paul Gerrard, campaigns, public affairs and board secretariat director, described some of the key campaigns led by the Co-op over the past year, including its work on tackling modern slavery with Bright Future, now an independent co-operative with 11 businesses on 20 charities. Another area of work has been campaigning to secure new protections for shop floor workers, working with other co-operative retail societies and the Co-operative Party.

“We’ve not done it individually, our society. We’ve not won because we’re a co-operative. We’ve won because we’re co-operatives, we won because of the co-operative movement and we will win as co-operatives.”

His points were later reiterated by Khoury-Haq, who said the Group was working with other retail co-ops, to explore opportunities to work together to benefit all members and businesses by exploring economies of scale.

“It’s really early days and I’m sure that you can imagine that a piece of work of this nature may take some time to materialise in our businesses, but as we did in 2022, we are working quickly. The group held their first meeting earlier this month, and then held a strategy session with other retail co-op CEOs.”

One of the issues being looked at is creating a common membership platform and wallet between the co-ops for their members’ benefit.

The motions

After approving the annual report (Motion 1, carried with 32,331 representing 98.44% of the votes) and directors’ remuneration report (Motion 2, carried with 27,512, 89.53%), members voted to receive the Co-operate report (Motion 3, carried with 32,133, 98.47%) and re-elect CEO Shirine Khoury-Haqas Executive Director (Motion 4, carried with 28,951, 93.3%).

Motions 5 and 6 saw Stevie Spring and Victor Adebowale get re-elected as Independent non-executive directors (carried with 26,771, 91.94% and 25,886, 93.41% respectively).

Co-op members also reappointed EY as auditors (Motion 7, carried with 96,71%).

A joint board and council motion on political donations was also adopted (Motion 8, carried with 24,927, 81.02%), meaning that members backed political expenditure including donations and/or subscriptions to political parties, not exceeding £750,000 in total for the year commencing 1 January 2024.

Four other advisory motions passed as ordinary resolutions, meaning they only required a simple majority to be adopted.

Motion 9 from the Council was carried with 32,118, 97.57%. It asked the board “to showcase and celebrate the positive impact of our ethical and sustainable credentials for our members and customers, communities and our planet by promoting ethical and sustainable practices in our food stores through member offers, promotions, and our brand and marketing activity all year round.”

The motion called on the board to also continue to support members to take actions themselves to live sustainably by for, example, providing advice on food waste, recycling and healthy, sustainable, low-carbon food choices; and to explore how to ensure Co-op own-brand products are instantly recognised by members, customers for quality and sustainability standards.

Motion 10 from Council and supported by the Young Members’ Group asked the board to ensure that the views and needs of young people are included and built into how decisions are made across all parts of the Co-op. It also encouraged the board to work with the rest of the movement to make co-ops relevant to all young people and consider how to lobby for co-op business models to be included in the curriculum in schools, developing best practice within Co-op Academies. It was carried with 32,447 votes (98.09%).

“Motion 10 focuses on how the needs of young people are factored into decision making across our Co-op,” said Khoury-Haq.

Motion 11, also from Council, asked the board to work with the council to “develop new and innovative approaches to communicate the business’ unique member ownership and Co-op Difference and to broaden and develop opportunities to make membership meaningful”. Measures suggested by the Council include building on the Join In and Co-op Member, Education, Training and information programme and using technology to develop digital democratic participation tools. The motion was carried with 32,199 or 98.05%.

Members also voted in favour of Motion 12 from individual members, which called on the Co-op to improve the welfare standards for chickens and requested the board to consider adopting the Better Chicken Commitment in full. The motion was passed with 31,226 votes or 96.36%.

Prior to the vote Matt Hood, managing director, Co-op Food, said he and the board could not support one of the measures in the motion – a call to adopt breeds of chicken that meet the RSPCA Broiler Breed Welfare Assessment Protocol due to the current economic environment. 

“Asking our customer members to spend an extra 35% on a core staple within their food diet, I do not think is appropriate at this point in time. Now it’s not a ‘No, never,’ for me it would be a ‘No, not today’,” he said. 

He added that the Group would, however, invest in lowering stocking density and enriching sheds.

The motion was initiated by Co-operative members from The Humane League UK, an animal charity which campaigns for supermarkets to improve their chicken welfare standards.

”I am very proud that as a Co-op member I will have a say on their future treatment of chickens,” said Aaron Parr, senior campaigner at the Humane League UK, and member of the Groupp. “What makes our Co-op unique is its democratic and progressive values. These have historically extended to animal welfare. But the fact that chickens raised for meat, our most farmed animal in the UK, have been left out of Co-op’s purview is a massive oversight. Co-op policy says that we have a ‘pioneering’ approach to animal welfare. But to maintain that badge of honour, our Co-op must improve farming practices and give all chickens better lives.”

A strong future

Concluding the AGM, Khoury-Haq thanked chair Allan Leighton for his two terms in office.

“Our businesses have defined strategies that will allow them to win in their markets. I have an incredibly strong leadership team that are all pulling in the same direction to power our. And we have a strong set of strategic priorities.

“We are ready to grow, we will trade our businesses well, and cost-effectively through 2023 to create the value that we need to get back to you, to our local communities and deliver on our mission. We have huge opportunities to grow our membership, our businesses, and we will absolutely grab them,” she said.

“We will focus on getting all members the best possible value that we can continue to support you and our colleagues through the cost of living crisis because membership and co-operation is what differentiates us from other businesses. It’s what makes us special,” she added.

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