Peter Marks, the chief executive of UK retailer The Co-operative Group, had reason to smile when he addressed the country’s grocery members on Tuesday (13 October).
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At the IGD’s annual convention, Marks, the amateur drummer at the head of the UK’s fifth-biggest grocer, took the opportunity to tell his audience that his company, in the wake of its recent takeover of Somerfield, was finding the right rhythm.
A quick look at the latest numbers to emerge from the Co-op’s HQ in Manchester does suggest that Marks and the rest of his business is in tune.
A day earlier, the company booked underlying group pre-tax profits of GBP228.8m (US$374.1m) – up 17% on the year. Revenues climbed 27.1% to GBP6.4bn, while like-for-like food sales rose 7.3% during the six months to 25 July.
Marks hailed what he called the Co-op’s “exceptional” performance, while Tim Hurrell, the MD of the retailer’s food stores, told just-food the business had been “constantly ahead” of the IGD.
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By GlobalDataHurrell echoed recent comments from the likes of Sainsbury’s CEO Justin King about falling food prices denting like-for-like sales growth but the Co-op executive was upbeat about his company’s prospects.
Hurrell insisted, for instance, that the Co-op could withstand competition in two of its key heartlands – convenience and ethical trading. “Sainsbury’s has done extremely well in balancing the premium nature of their brand with their value proposition but then again so have we,” Hurrell said.
Value has been a battleground for UK retailers but, despite the downturn, values remain important to local consumers. Categories like Fairtrade have remained buoyant and, although the IGD said this week that it expects post-recession shoppers to be “more careful”, ethics will be a growing element to consumer choice.
In recent days, the UK has seen a series of announcements from its largest grocers on issues like the environment (Tesco), sustainable sourcing (Sainsbury’s) and so-called “democratic consumerism” (Asda).
The latter attracted some playful public criticism from Marks, who used his appearance at the IGD lectern to take a swipe at Asda’s move to open up its business to its shoppers.
With a glint in his eye, Marks suggested that Asda had taken its lead from the Co-op’s forebears, the Rochdale Pioneers, who are seen as the founders of the modern co-operative movement.
Marks more seriously argued that business could only “regain and retain the trust of our customers” by responding to their “growing ethical concerns”. A glance at the Co-op’s press output in recent months underlines that message and the company’s ambition to be seen as being at the forefront of issues like waste reduction, the Fairtrade movement and buying local food.
However, for all the noise the Co-op makes in the trade media, the business will have to continue to shout about its brand, its value and its values as it looks not just to turn the UK’s Big Four into a Big Five but also to head off growing competition in the country’s fast-growing convenience channel.
The Co-op launched its first branded TV ad in February – a two-and-a-half-minute spot using the Bob Dylan track “Blowin’ in the Wind” – and similar moves will be necessary as the likes of Sainsbury’s encroaches more and more into that convenience heartland.
Even Morrisons, renowned for its big box stores, is making a great amount of noise about its decision to open smaller stores. Marc Bolland, Morrisons’ CEO, used his turn at the IGD to showcase his company’s move into convenience retailing. And, although Bolland insisted the smaller Morrisons stores were not “convenience shops”, he was keen to emphasise that the company was practising “convenience shopping”.
A set of robust numbers put a smile on Marks’ face this week but the ever-competitive UK grocery sector will no doubt cause some furrowed brows at the Co-op in the weeks and months ahead.
