RETAILING U.K. Cooperatives on the Move Mergers, marketing and membership BY DAVID THOMPSON PHOTOGRAPH BY GAIL GRAHAM he face of Britain’s consumer coopera- The CWS and CRS should have merged tives has changed dramatically over the while they were both strong, but, as we all past decade. A once shrinking sector is In explaining what a cooperative know, boards will be boards. Thankfully, with on the move. A generation of co-op CRS on its deathbed, its board chose to merge leaders born around World War II “was” and “is,” the British co-op into CWS. Two large retail systems were com- T(1939–45) turned over stewardship of a neg- bined, excess store capacity reduced, and lected movement to a generation that would movement finally found its voice in staffing realigned. The combined volume and live in a new century. Co-ops had to deliver or reduction of costs and duplicate retail locations die. Some died—the rest are delivering. At the its values: democracy, giving back to was the smartest cooperative move in half a core of the massive change among the deliver- century. After the merger, the CWS changed its ers were mergers, marketing, and membership. community, and business ethics. name to the Co-operative Group to reflect its becoming Britain’s largest national consumer Mergers: 3,300 stores cooperative. The British retail market is a functioning oli- Society) finally merged with the CRS (Co-oper- Following the merger, the Co-operative gopoly, and cooperative mergers have occurred ative Retail Services). This merger had been Group pursued its strategy of being a major not a moment too soon. The top four British discussed for decades, but talk was cheap. The player in what is called in Britain the “topping food retailers operate mainly hypermarkets and two organizations at one point had in fact up” market. As the hypermarket segment put supermarkets with 75.2 percent of the total become bitter competitors. I have two cousins supermarkets out of business, neighborhood market share in their 3,326 food stores. The who live in Rochdale about a mile apart. One stores were needed to fill the retail vacuum in cooperatives have 3,301 neighborhood food cousin shopped at her neighborhood co-op many communities. In 2002 the Co-operative stores but also 1,236 other retail stores (phar- owned by the CWS and one shopped at her Group purchased the Alldays Chain of 600 macies, car dealerships, news agents, and neighborhood co-op owned by the CRS. stores and in 2003 added 76 Balfour stores. In funeral parlors). Although smaller in volume However, they sold differently labeled co-op a sign of cooperation among cooperatives, the and market share there are still more co-op products, had different co-op logos, charged Co-operative Group then sold 75 of the Alldays stores in more communities than any other different prices, and required a different mem- stores that were not in its trading area to a retailer in Britain. bership. My cousins always wanted to know number of the regional cooperative societies. In 2002 the CWS (Co-operative Wholesale why the two shops were different co-ops. In 2002 another merger occurred between 20 COOPERATIVE GROCER ■ NOVEMBER-DECEMBER 2006 the suburbs while the stodgy local co-op shops were on the dilapidated High Street. So many co-ops were going out of business that the word “co-op” became synonymous with failure. Even the fabled Rochdale Co-op took down the “Co-op” sign and renamed its food stores “KRAZYKUTS.” However, belief in cooperatives did not die. By the 1990s cooperatives began to show signs of life. So how could they thrive? Part of the effort had to be creating a sense that coopera- tives had a future; part dispelling the myth that cooperatives were a thing of the past; and part marketing cooperatives to a new generation for whom “community” was no longer a place but a feeling. The impetus was for change. Here are a sample of innovations which brought UK co- operatives back to life. As CEO of the Co-operative Bank, Terry Thomas, should possibly be credited with jumpstarting a return to cooperative values. two large northern co-ops. United Co-operatives, the Ipswich and Norwich with Colchester and The Co-operative Bank could not compete with now based in Rochdale, Lancashire, merged with East Essex societies. the big banks in advertising dollars. However, the Yorkshire Co-operative Society. United In November 2006 the Midlands Co-opera- it could compete on ethical lending and who it Co-operatives is now the second largest British tive Society and the Ilkeston Co-operative would not lend to and why. The feisty princi- retail cooperative. (As this story goes to press Society will merge. The merger will create the ples and the free publicity made the Co-opera- United’s CEO Mr. Marks shared with me that the third largest consumer co-operative in the U.K., tive Bank the UK leader in social investing. Sheffield Co-operative Society has proposed to with a turnover of $1.9 billion. Terry Thomas gave the cooperatives a winning merge with United Co-operatives. The merger, if playbook on how to sell co-op values to con- approved, will bring United Co-operatives to Marketing: reclaiming values sumers. over $3.8 billion in turnover.) In post-war Britain almost a third of the fami- A corporate stripper unintentionally did The next merger, in September 2005, cre- lies had a co-op number which we gave when British co-ops a great favor. Andrew Regan ated Midcounties Co-operative Society, with we shopped at the co-op. In early December gave two senior staff of CWS large bribes to get about $1.07 billion in turnover. The merger of when the “divi” (dividend) was paid, families him the entire CWS membership list. Regan’s the Oxford, Swindon & Gloucester Co-operative excitedly stood in long lines to collect the cash. intent was to offer the CWS members $2.28 Society (OS&G) and the West Midlands Co- Every year our family’s Christmas started at the billion to buy all their one-pound shares and operative Society (WMCS) created the fourth- Co-op. take over the CWS. Then he would asset strip largest cooperative society. However, a war-tired Britain was ready to the CWS to realize a likely value of over $10 Another merger, in October 2005, created spend. People could buy everything on credit; billion. In fighting off Regan and his money the East of England Co-operative Society, with there was a housing boom, foreign holidays, backers the CWS was fortunate to have a turnover of $760 million. The fifth largest co- and TV. Retail patterns shifted overnight. The Graham Melmoth as CEO. Melmoth became an operative society was created by the merger of new flashy national supermarket chains were in articulate and resolute defender of the NOVEMBER-DECEMBER 2006 ■ COOPERATIVE GROCER 21 CWS and cooperative values. groups ranging from $950 up to $57,000. Peter The fight to beat back the takeover was Marks told me, “United presents itself to the front page news for months. Suddenly, the Because of their values, public as ‘Your Community Retailer,’ and the entire co-op movement had to answer, “Why Co-operative Foundation is a key part of that should people not sell their one-pound shares cooperatives are the leaders in Fair position.” and make a handsome return, why shouldn’t Midcounties Cooperative Society operates a the co-op be sold off?” In explaining what a Trade, organics, buying locally, and patronage refund system and encourages its cooperative “was” and “is,” the British co-op members to donate their patronage to its movement finally found its voice in its values. giving back to their communities. Community Dividend program (similar to how It was democracy, giving back to community, Hanover Food Co-op funds its Co-op and business ethics. The CWS was a permanent Community Foundation). Nonprofit groups resource not to be dismantled for the “make it then apply for funding from the co-op. quick” city sharks. Cooperators were given the received. Our co-op milkman came daily to the Midcounties places great emphasis on directing opportunity to explain themselves and they did front door, our co-op coalman weekly to the some of those funds into development of local it superbly. One greedy financier had finally put back door. We went to the co-op shops (the cooperatives. fire back into the co-op’s torch. grocer, butcher, greengrocer) every day and fre- I asked Peter Couchman, “In what way does Twenty-nine co-ops joined together in the quently to the co-op department store. Co-op your community dividend further Midcounties’ Co-operative Retail Trading Group (CRTG). The families like ours who re-invested their “divi” objectives?” He answered, “Of all the brand first year in which all the British food co-ops to gain interest gave the co-ops a substantial messages, community is the one that the cus- bought together (2002) was 158 years after equity boost. When my mother died in 1982 tomer both understands more and values more. opening Toad Lane. Today, CRTG has a she had $418 in her Blackpool Co-operative Community dividend is designed to show the turnover of $10.07 billion. As Chairman of Society share account. Co-op meeting local needs, listening to local CRTG in 2005, Mr. Marks, CEO of United Co- Today the focus is back on the meaning of concerns, and returning our profits to the com- operatives, said, “CRTG was possibly the best membership.