Co-op sales boosted by ethical stance

Related tags Business ethics

An emphasis on convenience and ethical business practices has paid
off for the UK's Co-op group, with both sales and profits
increasing substantially in 2002. The company has also invested in
increasing its store portfolio - a programme which it said is
likely to continue this year.

At a period when trust in big business - especially in the food industry - is at an all-time low, companies which successfully promote themselves as ethical businesses are sure to do well.

This at least is what happened to the UK Co-op​ food retail group last year, which successfully increased its sales and profits after a number of measures designed to highlight the ethical business practices adopted by the group.

Martin Beaumont, chief executive of the farms to finance, funerals to food group - the world's largest consumer co-operative - said the values and principles espoused by his businesses and underpinned by a major investment programme in store refits and acquisitions had paid dividends during 2002.

"In a year when levels of trust in business people and companies have taken some very hard knocks, we have been able to capitalise on the inherent trust and reassurance offered by a revitalised co-operative business,"​ said Beaumont.

In the year ended 11 January 2003, group income, at £7.8 billion (€11.3bn), was up £2.4 billion on the previous year. Consolidated operating profit before exceptional items was up from £165.8 million to £231.4 million.

The group's food retailing business is focused on convenience stores and market town supermarkets. It continued to outperform the national grocery market, with like-for-like sales up 6 per cent in convenience stores.

Total food sales rose 9 per cent to £2.6 billion and profits jumped 52 per cent to £69.5 million. This was helped by store refits and acquisitions, margin improvements resulting from scale growth, and a strong marketing campaign communicating the group's convenience offer and its ethical values.

Last year the group refitted 262 stores, bringing the total refits in the last three years to 835. And, in October, it acquired Alldays for £133 million to become the UK's market leader in convenience retailing with over 1,700 outlets. This followed a number of smaller acquisitions of regional chains like the West Yorkshire-based GT Smith.

"Alldays gave us critical mass in a sector where we perform strongly. We do not intend that to be our last major acquisition in food retailing, though we are prepared to wait for the right opportunity to come along,"​ said Beaumont, although he gave no indication of which other chains could be targeted. Competition in this sector is hotting up, with both Sainsbury and Tesco placing greater emphasis on their convenience store formats, and the Co-op is clearly keen to ensure that it has a strong position in such an important sector.

The retail team, led by chief operating officer, Malcolm Hepworth, is currently piloting the Co-op's successful Welcome store format in 10 Alldays stores where sales have leapt 30 per cent and plans are in hand to begin the roll out to the remaining 600 stores later this year, Beaumont added

The group has also strengthened its position as the UK's leading retailer of ethically traded products. In November it became the first to convert its entire own brand range of block chocolate to Fairtrade - a move that doubled the size of the UK market.

On the food production side, the Co-op's Associated Co-operative Creameries (ACC) and its farming operation, Farmcare, were once again hit by the problems besetting their industries. ACC made a loss of £0.2 million after £0.7 million of rationalisation costs, while Farmcare managed to reduce its losses by £0.9 million to £2.0 million.

Beaumont concluded: "Looking across our major businesses, it is clear that food retailing, pharmacies, banking and property are performing very well, and that we are making definite progress elsewhere, even where the external context is very unforgiving.

"But we have to work harder to exploit co-operation within the group. And we continually need to demonstrate that our co-operative difference is something that enthuses staff and members alike, as well as providing outstanding service to customers and achieving great results."

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