Building Co-operation, published last year to mark 150 years
of the Co-operative Wholesale Society, was the first business history of the
Co-operative Group, written by John Wilson, Tony Webster and Rachel
Vorberg-Rugh. It very nearly turned into its obituary. When it was published
the Co-operative Group was on an up, confident enough to be building a superb
new state of the art headquarters at Angel
Square in
Manchester.
That seems like a lifetime ago. We are facing the biggest crisis in the movement since 1997 when the Lancia Trust attempted to take-over and demutualise the CWS backed by such City luminaries as Hambros, Schroders and Nomura.
We fought back learning lessons that sparked a revival based on two things a common brand and a degree of consolidation. The branding was effective, meaning that travel,
pharmacy, funeralcare, food, insurance and banking where all clearly part of the same business. The idea was to encourage cross selling and reduce marketing costs.
Consolidation has however been less successful. If any one individual is associated with this drive it was the former CEO Peter Marks who even argued for a single national co-operative society. His climb to the top was thanks to a series of society mergers rising from CEO of Yorkshire Society via a merger with United North West, to CEO of the Group when United in turn merged with CWS.
Despite some people having misgivings in the way elected members had been persuaded to support these mergers with large pay-offs grudgingly most commentators felt that the Co-op was at least back on the map.
Mergers had bought some efficiency savings, in food and to some extent in banking, the feeling was the Group was still too small to compete effectively with its rivals.
The book has a section on Marks and the ‘Renaissance’ in retrospect the word is quite rightly hedged. Len Wardle became chair in 2007 and Marks CEO in 2008. The authors argue that Wardle offered Marks ‘constructive criticism’. It is hard now to see anything constructive about this partnership. Having gathered as many of the existing retail societies into their net as possible the next step, given that organic
growth was too slow, meant that acquisitions where on the agenda.
His predecessor Martin Beaumont had looked at the acquisition of the Somerfield Group (also an aggregation of other businesses including Kwik Save) and ruled it out as too difficult to absorb. Marks and Wardle had no such fears and in March 2009 paid £1.57 billion to make the purchase.
Euan Sutherland informed us recently that the Group are to announce losses of over £2billion. As well as the costs of saving the Co-operative Bank, following its merger with Britannia, part of the losses will be a reduction in the value of the stores and the good-will obtained from the Somerfield deal.
The step too far that finally bought the Group to its knees was the attempted acquisition of branches from Lloyds.
These deals have left the Group carrying far too much debt. There was a danger the Group would no longer be owned by its members but by the banks. Clearly reducing the debt is a key challenge.
Academic’s point out that co-op failures can be attributed to three key factors, “badly thought out business strategies, paying too much for acquisitions, and boards being out of their depth.”
They don’t point to over weaning CEO’. But they are a challenge in any business and Marks did not care much for the Board or the members.
Manchester.
That seems like a lifetime ago. We are facing the biggest crisis in the movement since 1997 when the Lancia Trust attempted to take-over and demutualise the CWS backed by such City luminaries as Hambros, Schroders and Nomura.
We fought back learning lessons that sparked a revival based on two things a common brand and a degree of consolidation. The branding was effective, meaning that travel,
pharmacy, funeralcare, food, insurance and banking where all clearly part of the same business. The idea was to encourage cross selling and reduce marketing costs.
Consolidation has however been less successful. If any one individual is associated with this drive it was the former CEO Peter Marks who even argued for a single national co-operative society. His climb to the top was thanks to a series of society mergers rising from CEO of Yorkshire Society via a merger with United North West, to CEO of the Group when United in turn merged with CWS.
Despite some people having misgivings in the way elected members had been persuaded to support these mergers with large pay-offs grudgingly most commentators felt that the Co-op was at least back on the map.
Mergers had bought some efficiency savings, in food and to some extent in banking, the feeling was the Group was still too small to compete effectively with its rivals.
The book has a section on Marks and the ‘Renaissance’ in retrospect the word is quite rightly hedged. Len Wardle became chair in 2007 and Marks CEO in 2008. The authors argue that Wardle offered Marks ‘constructive criticism’. It is hard now to see anything constructive about this partnership. Having gathered as many of the existing retail societies into their net as possible the next step, given that organic
growth was too slow, meant that acquisitions where on the agenda.
His predecessor Martin Beaumont had looked at the acquisition of the Somerfield Group (also an aggregation of other businesses including Kwik Save) and ruled it out as too difficult to absorb. Marks and Wardle had no such fears and in March 2009 paid £1.57 billion to make the purchase.
Euan Sutherland informed us recently that the Group are to announce losses of over £2billion. As well as the costs of saving the Co-operative Bank, following its merger with Britannia, part of the losses will be a reduction in the value of the stores and the good-will obtained from the Somerfield deal.
The step too far that finally bought the Group to its knees was the attempted acquisition of branches from Lloyds.
These deals have left the Group carrying far too much debt. There was a danger the Group would no longer be owned by its members but by the banks. Clearly reducing the debt is a key challenge.
Academic’s point out that co-op failures can be attributed to three key factors, “badly thought out business strategies, paying too much for acquisitions, and boards being out of their depth.”
They don’t point to over weaning CEO’. But they are a challenge in any business and Marks did not care much for the Board or the members.
Indeed Sir Graham Melmoth an earlier CEO of CWS has publicly stated had, “Peter Marks would not know a co-operative principle if it crept up and hit him in the face.”
The biggest issue however the Group today is the relationship with its members. A revitalisation of the membership offer is vital. If membership is just a loyalty scheme for many the loss of the dividend has stretched that loyalty to breaking point.
Clearly cultural difference has emerged between Euan Sutherland
and the Board. And not wanting to repeat past mistakes he has gone. He had begun a renewal programme to turn the
business around and according to the co-operative principal of self-reliance,
we will, successfully continue to navigate the clear commercial plans it has in
place.
The Co-operative Group does have to be as good as any other
commercial business in its operations, Euan is right on that point.
It is not true however that Co-operatives are ungovernable.
What they are is democratically accountable. And I can name a few other
businesses that would benefit from that sort of control.
Across the worldwide there are 1,465 co-operative businesses
with a turnover of more than $100 million a year. Large, complex businesses,
their accountability to their members is a strength, not a weakness,they are
living proof that large-scale co-operatives can work.
The road ahead is tough but the Co-operative Group can, and
will, turn its fortunes around.
What the other 6,000 co-operative businesses in Britain
must think of these goings on one can only guess at.
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