Mark Cox, CEO of Channel Islands Co-op, has issued a statement to members after the proposal to cut or suspend the divi sparked a backlash, with some members closing their accounts.
The storm broke earlier this week when the society said it would put 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 society warned: “The food retail sector has experienced continuous pressure since Brexit and Covid-19, with significant ongoing strain on global supply chains, raw ingredient prices, energy costs and rising inflation. Despite these factors, the CI Coop has absorbed much of the impact of relentless cost inflation and resisted increasing prices on many everyday items.”
And it told members: “Estimated dividend is calculated throughout the financial year – however, may only be paid when CI Coop achieves net profits from all its activities.”
Angry members took to the co-op’s Facebook page threatening to take their business elsewhere, and yesterday the BBC reported that members were queuing to withdraw funds.
The row prompted Cox to post a message on the society’s website. He thanked members for their response, adding: “I strongly emphasise that no final decision has been made regarding dividends at this juncture.
“The recent announcement aimed to be transparent about the challenges we are facing, namely that maintaining a 4% dividend is currently unfeasible for this year. The board will thoroughly review the year-end accounts and propose a plan regarding dividends, which will be communicated directly to you. Any proposed action will be subject to a vote at the Annual Members Meeting (AMM) scheduled for May.”
He added: “The potential adjustment or suspension of dividends, while undoubtedly challenging, is crucial for ensuring the long-term sustainability of our society within the islands. While our heritage is significant, so too is our ability to adapt and thrive in changing times.”
With regard to members leaving the society, Cox warned: “While I fully respect the decision of some members to close their accounts entirely, I urge customers to be fully aware of what this choice will mean. If the decision is made to pay a reduced dividend in May, members who have closed their accounts will lose the opportunity to receive that dividend payment. Unfortunately, it’s not possible to reopen a closed member account.”
And he tried to reassure members considering withdrawing their funds, telling them: “Please be assured that any decision on dividend does not impact the security of the funds held within your share account, which will continue to earn interest as usual. The interest payments for the last year will be disbursed in the coming weeks.”
Cox also addressed complaints made by members over other expenditure by the co-op, alongside claims that its products were too expensive.
“Regarding concerns about our expenditures, including those on uniforms, pharmacies, technology, and branding, I encourage discussion on these matters at the upcoming AMM in May when our financial information will be published,” he wrote. “However, it is important to stress that these investments are made with the long-term interests of our society in mind, aiming to enhance both customer and colleague experiences. They have been carefully factored into our accounts and have not impacted our short-term profitability.”
He added: “Our recent decrease in profitability is attributed to various factors, including the need to invest in price reductions to offset cost increases for our members. We acknowledge concerns about high prices and are actively working to address them. Our recent price drop campaign underscores this commitment, with £2m invested in price reductions last year alone, reflecting our dedication to delivering more immediate benefits based on your feedback.”
And he told members: “As a co-operative owned by you, our members, we deeply appreciate your loyalty. We understand that this decision may come at a challenging time, but we believe honesty and transparency are paramount in our communication with you.
“Your continued support is invaluable as we navigate these challenges together. Through collaboration, we can work towards restoring profitability and ensuring the continued sharing of profits with you in the future.”
Noting that members have made queries about the annual meeting process, Cox attached a link to member rules, “outlining the relevant sections (9 and 16)”.