Channel Islands (CI) Co-op is putting a proposition to members which would allow the board to determine whether to pay no dividend or reduce dividend rates at the annual meeting in May.
The move has prompted anger from the society’s membership, with the BBC reporting members queuing to withdraw funds. In response, the society said all savings, and dividends accumulated before 2023, were safe.
The divi, recommended by the board and agreed by members at the AGM, is based on the trading performance of the business over the previous financial year. Members earn an estimated dividend reward every time they make a qualifying purchase in a CI outlet by registering their share number at the checkout.
Announcing the proposal, CI cited “continuous pressure“ on the food retail sector since Brexit and Covid-19, “with significant ongoing strain on global supply chains, raw ingredient prices, energy costs and rising inflation“.
It added: “Despite these factors, CI Coop has absorbed much of the impact of relentless cost inflation and resisted increasing prices on many everyday items to protect its members during a period where many are struggling to manage household budgets.”
A post on the co-op’s Facebook page stressed the point that “all bonuses have been cancelled; this decision affects everyone in the business. Additionally, directors did not receive a pay rise.”
Members on Facebook responded furiously to the move, with several saying they find the co-op’s stores too expensive and that without a divi they would take their custom elsewhere. For example, Jem Plowright wrote: “Only reason we shop at the co-op is for the divi… We know what prices on what we need are cheaper elsewhere but we have stuck to them for the divi. If we don’t get payout we will shop elsewhere for our big weekly shops!”
Cindy Collenette posted: “You could have at least paid everyone’s divi this year (getting it in May) and stopped it going forwards with notice! Some people rely on that for help!!”
But Liz Walton wrote: “I will continue to support them. Not getting the full divi is a disappointment but if profits are not good that’s just a fact of life. Share dividends are never guaranteed. Hopefully they will be able to turn things around soon.”
In the co-op’s press release, CEO Mark Cox said: “We are acutely aware of the financial stress our customers are experiencing in the current economic climate and we are investing in prices to mitigate the impact as much as we can. Our business has not been immune, however to the consequences of these global issues and in particular rising costs.
“The members’ dividend is a reward scheme that is directly dependent on our financial performance, and that has been affected by extremely challenging market conditions over the past few years. The board will put forward a proposal for the 2023 dividend at our annual members meeting and it will be for our members to vote whether they approve it.”
Cox said the society is striving for efficiencies and savings wherever it can from operations and continues to invest in the customer experience through a store refurbishment programme and the introduction of new technology while maintaining its commitment to support local producers and community organisations.
“This decision affects everyone in the business,” the co-op added in its release. “Given the economic uncertainties, the decision was made to prioritise the financial stability and sustainability of our co-op to safeguard jobs and maintain ongoing operations.
“The members’ dividend is a reward scheme that is directly dependent on our financial performance, and that has been affected by the extremely challenging market conditions of the past few years. National and global events have significantly impacted our trading and operational capability. Rising inflation, Brexit, the pandemic, conflict in Ukraine and the Middle East, and the consequent impact on supply chains and operating costs have led to a reduction in profits for the business.”
As to the question of whether the divi will go back up, the society said: “We are looking at several options for the future. As well as investing in our product and prices, we will continue to make a positive impact through innovation, using technology to make our business more efficient and sustainable, which is good for you, good for our island and good for our communities. Our priority is to return to better financial performance, which will enable us to reward our loyal customers appropriately.”
With the backlash from members continuing, Carl Walker, chairman of Jersey’s Consumer Council, told the BBC: “I’ve been speaking to Coop customers this morning, who are queuing up with their share books in their hands withdrawing their money which they’ve saved up in there over the years because they are angry at the decision that the Coop surprised everyone with. They’re angry that the announcement hasn’t come sooner or that the announcement isn’t warning them that maybe next year’s dividend would be withheld.”
In response to members withdrawing funds, Cox told the BBC: “I absolutely recognise that this is really hard. No decision has been made at the moment. We wanted to be as honest and transparent as we could to members.”
He asked members to “hold on” as the financial accounts are worked through, adding that members’ money in their savings account was safe, and that baby vouchers would still be available.
This story was updated on 8 February to reference the BBC report on members withdrawing funds. Channel Islands Co-op has been approached for further comment on this report.