October National Council Meeting 2106
|Sunny Angel Square|
Welcome to the report of the Co-ops National Council meeting held on a sunny Saturday in late September As usual, when the sun was shining and everyone was having a great time enjoying the late September summer, I along with my one hundred fellow council members and colleagues from the Co-op were encased in the basement Auditorium of 1 Angel Square..
Although the Council started work at 9.30 in the morning, there was an informal session with Steve Murrells the CEO Co-op food, on the day before. This session updated the Council the progress of our food business and how our renewal programme “True North” was performing.Members may remember a few months ago that the Group sold many of our food stores to McColl’s as part of this strategy. Council members had raised some concerns over this sale and Steve and his colleague from estates came to update us and respond to our concerns.
Steve explained that the sale of the stores to McColl’s were stores that did not fit into “core” category. The stores in question were mainly in the CTN market segment (Confectionery, Tobacco and newspapers). These operate on low margins and consequently their contribution to the food business is quite low. In deciding when to invest in a store, it is important that the unit makes sufficient contribution to make a sufficient return on capital to justify a full refit every seven years. Many of these stores do not pass this hurdle and consequently drain capital away from other stores. A second consideration is that our food offer going forward is based upon a good quality fresh offer, and many of these stores had little opportunity to grow fresh sales.
Council members raised concerns that many of the stores sold were located in striving areas of our communities and it was important that the Co-op did not abandon areas just because of the demographics in those areas. Steve assured us that this was not the case, and that we had many great stores in striving areas and if an opportunity comes along to buy or develop a store that can provide the right offer he would do so.
As part of the True North Strategy, a decision was made for the Co-op to become the leading convenience retailer and, where appropriate, to exit from our large stores. Over time the strategy has evolved and the retail market has evolved. The growth of Aldi and Lidl had disrupted the big four expansion plans, and we have seen the market for large store acquisitions slow down. In response to this Steve developed a large store division in food to manage these stores. He reported that the large stores division was performing well and has started to see some positive turn arounds. He believed that being in convenience was the right place for the co-op to be in, but large stores still had a place in the Co-op.
Finally, Steve outlined the future store pipeline for acquisitions. We have published our intention to acquire 100 stores per year. Steve assured us that he had an active pipeline across the whole of the nations and regions of the UK. This was welcomed by the Council as much of our expansion in recent years has been within the M25 circle.
I found the briefing on Funeralcare fascinating. We are the largest funeral operator in the UK with a turnover of £400m and a market share of 16.5%. We have over 4000 colleagues providing high levels of customer satisfaction over 99%. Over the years we have been the number one provider in providing funerals at need, but we have been behind the market for selling funeral plans. Funerals backed by Funeral Benefit options and Funeral bonds now account for over 25% of the funerals we undertake. So it is important that we improve our performance in this area to protect our market share going forward.
We challenged how the funeral business participated in the member relaunch. Did the 5% and 1% apply in those “private named” co-op funeral homes. The answer was yes it did and that it was the funeral business intention to activity re-brand those private names to the Co-op brand going forward where the “goodwill” of the private name had been exhausted.
Matt Howells gave a brief history of Co-operative Legal Services(CLS) and described the state of the business. CLS reported a £9m loss in 2013 and in 2015 posted a £1m profit. A turnaround of £10m in two years. The market for legal solutions is fragmented with many small firms and a few large firms. CLS operate in the Personal Injury, Probate, Wills, Family Law and Legal expense markets. Most of work is referred from other businesses, Co-op Insurance, Funeralcare and the Co-op Bank. Matt felt that Personal Injury was not a good fit with our values and we should think whether we should be in this market in the future. Matt outlined his view that if CLS were to be successful it needs to refocus on providing products to members. The acquisition of Collective Legal Solutions was a good step in this direction as it has a great track record in providing legal services to and in the community.
Richard Pennycook our CEO and Executive lead for Membership, outlined the progress on the relaunch of the membership proposition. The new blue cards have been issued to our members and I recently saw a press release that said that over £1m had been returned back to members under the 5%. This was in just under two weeks. My shopping habits have changed as now I always look for a co-op own brand first. One of my challenges going forward is where is Co-op own brand Vegetarian protein? We only sell Quorn products not a Co-op alternative.
Next up was Alyson Chadwick, who outlined the Community Framework, and how we will be interacting with our members and communities in the future. Our vision is for the 5 and 1 to give back over £100m by 2108. As part of the community 1%, 1500 local communities were identified. These communities could form the backbone of our local member’s forums, where our members organise themselves to promote the Co-operative philosophy. The Board has agreed to fund local member pioneers to run these groups and for a small budget to organise activities. The plan is for 1500 local member pioneers to be in place by 2020. This is a great step forward in building a commonwealth of active co-operators in our regions and nations. The issue of how the 1500 local communities were identified was raised. It is important that these forums not only reflect the trading units on the ground but also where the members live and where active members live. As such it was agreed to review how Council inputs into the composition of these local structures to ensure a good fit between the members, communities and our businesses.
Finally, the Council received a report from the Co-op Way committee. The Co-op way committee is forum for creating policy positions for the Co-op. The membership is drawn from Colleagues, the Board and the Council. Its role is to develop policy statements for approval, to review progress, monitor targets and benchmarks and to report on performance. We aim to be world class in reporting against our policies from 2016 onwards.
I was pleased that our first policy to be approved was the position statement on Business ethics and behaviour. This features a commitment to Ethical trade and Human Rights. The guiding principles are based upon the Ethical Trade Initiative, International Labour Organisation standards, the UN declaration on Human Rights and the Modern Slavery Act. We shall work to ensure all these principles are incorporated into the not only our own brand products but also other branded products.
Finally, we approved minutes and notes of various committees that met since we last held a meeting. I emerged out of the Auditorium into the last rays of sun as it dipped below the CIS Tower, Oh well, The next meeting is in November when no doubt it will be raining.