The Co-operative Group has insisted it is well placed to maintain what it sees as a “leading” position in the UK convenience sector, even as competition steps up and the country’s supermarket groups look to expand their convenience network.
The Co-op today (21 March) booked a drop in profits at its food business as investments in pricing, supply chain and store improvements hit the bottom line. However, the group registered growing net sales and a like-for-like performance that saw revenues return to growth in the fourth-quarter.
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Speaking during a media call this morning, CEO Peter Marks indicated the sales pick-up in the back half of the year gave the Co-op cause for optimism in 2013.
Marks attributed the higher sales to investments the group has made in logistics and supply chain that have resulted in improved availability, as well reduced prices.
“We’ve improved our availability and that is a result of the extensive work we have done in our supply chain, we have been investing in that over the last couple of years. [We have] also reduced our prices: we listened to customers, we talked to them, we knew we had to improve that.”
Marks acknowledged these initiatives – coupled with other investments in developing a new store format that will be rolled out over the next 12 months – had a negative impact on margins, which are down year-on-year. However, he insisted the Co-op’s ownership format allows the group some leeway to “invest for the long-term”.
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By GlobalData“We are focused on the long-term and we want to build momentum in sales, and that is what we are doing,” he said.
Marks recognised there has been a step-up in competition in the convenience sector: “You see this with all our competitors. Everybody is focusing on convenience stores. We are clearly the leader, that underlines our strategy that we said some time ago, to be the convenience retailer of choice.”
According to Marks, while the Co-op is positioned to reap the benefits of the fast-growth witnessed in UK convenience sales, it is also prepared to fend off the growing competition in the sector.
“We are the UK’s largest convenience retailer. We have a site in pretty much every postcode in the UK. We are well placed to handle the competition. Our customers tell us that when you compare our convenience stores to anybody – and I mean anybody else’s – we are the market leader. When you get back to LFL sales growth, which we have done in the final quarter of the year, I think that says everything. We are very confident about our future in food.”
One way the company is looking to build customer loyalty is by improving its own label offering. The firm has invested significantly in developing its own label products in recent years and Marks said private label sales had performed “very well”. He also revealed that the group is stepping up its activity in this area once again.
“We have plans to significantly improve the portion of own label products that (a) we make available to customers and (b) we sell through. We are very pleased with the performance of our own label products,” he commented.
In order to drive growth, the company is also looking to expand its store base. According to Marks, the retailer has now “cleared the debt” that it stacked up to fund a swathe of acquisitions, including the purchase of Somerfield and deals to expand the banking side of the business. The group’s strengthened balance sheet leaves it “well placed” to “make the most of opportunities” that arise to expand its core business.
Looking specifically at the possibility the group could be planning to snap up stores from failed high street retailers including Jessops and HMV, Marks said there was “nothing to announce”. However, he added: “Our strategy is to build our store portfolio and that is what we will be doing.”
