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The story
History
Beginnings (1844–1938)
The Co-operative Group has developed over the years from the merger of co-operative wholesale societies and many independent retail societies. The Group's roots are traced back to foundation of the movement in the UK and that of its oldest subscribing member society, the Rochdale Society of Equitable Pioneers, established in 1844. The Rochdale Society of Equitable Pioneers was based on the Rochdale Principles – which notably introduced the idea of distributing a share of profits according to purchases through a scheme which became known as the dividend or "Divi".
Although the Co-operative Group incorporates the original Rochdale Society, the business's core for much of its history were its wholesale operations. This began in 1863 when the North of England Co-operative Wholesale Industrial and Provident Society Limited was launched in Manchester by 300 individual co-operatives in Yorkshire and Lancashire. By 1872, it was known as the 'Co-operative Wholesale Society' (CWS) and it was wholly owned by the co-operatives which traded with it. The CWS grew rapidly and supplied produce to co-operative stores across England, though many co-ops only sourced around a third of their produce through the CWS. It was this continued and fierce competition with other non-co-operative wholesalers which led to the CWS becoming highly innovative. By 1890 the CWS had established significant branches in Leeds, Blackburn, Bristol, Nottingham and Huddersfield alongside a number of factories which produced biscuits (Manchester), boots (Leicester), soap (Durham) and textiles (Batley). In an attempt to drive down the significant cost of transportation for produce the CWS even began its own shipping line which initially sailed from Goole docks to parts of continental Europe. One of the CWS' steamships, the Pioneer, was the first commercial vessel to use the Manchester Ship Canal, a canal which the CWS part financed. This rapid expansion continued so that by the outbreak of World War I the CWS had major offices in the United States, Denmark, Canada and Australia and a tea plantation in India.
There was a great deal of consideration on the role of the CWS in the British co-operative movement around the turn of the twentieth century. Many, fiercely local, societies saw the CWS as a valuable supplier but did not want to exclusively purchase produce from them owing to perceptions of high cost (mostly transport costs) and unreliable quality – some things the CWS were at pains to resolve. In contrast to this, the CWS had its aim to be the centrepoint for the whole co-operative movement in the UK and lobbied hard for loyalty from co-ops. To this end, they started to assist the local retail societies in more ways than simply as a wholesaler. The CWS Bank, the precursor to The Co-operative Bank, financed loans for societies to use for expansion through purchasing new buildings, land or new equipment. After the acquisition of the Co-operative Insurance Society in 1913, the CWS also provided insurance services to members and the CWS also began providing legal services – all businesses which influence the formation of the Co-operative Group today. It was hoped that these financial ties, as well as the CWS corporate dividend, would increase loyalty to the CWS.
World War II and post-war decline (1939–1989)
During the Second World War, rationing led to an effective pause in any major changes to the co-operative movement in the UK with the CWS becoming highly involved in sourcing overseas goods for UK consumers and manufacturing wartime goods.
During this time, the CWS began planning for the future, as even then they could see the potential disruption to the retail market that the new multiple grocers could have. What was less obvious at the time would be the impact of National Savings and national taxation on the movement, as Britain shifted from a country of friendly, building and co-operative societies, to one with a National Health Service, National House building programs and National Post Office Bank NS&I GPO. In 1944, the CWS published a report entitled Policy and Programme for Post War Development which focused on methods for revitalising the co-op movement after the war had ended. The report suggested merging the CWS with the Scottish Co-operative Wholesale Society (SCWS); reducing the number of co-operative societies through merger; moving into the manufacturing and production of white goods and the expansion of the Co-operative Bank.
This report received much criticism from the fiercely local co-operative societies and the proposals of the report were only partly and slowly implemented. The end of war allowed some attempt to modernise the co-operative stores around this time, while the slow demobilisation of the wartime boost of full employment and high wages partly waned consumer spending power. After the London Co-operative Society opened its first self-service shop in 1942, the co-operative movement led the way on the development of self-service stores to the point where, by the 1950s, 90% of self-service shops in the UK were run by co-operatives. Despite this the subscribed share capital (risk capital) available to societies to innovate and take risks dwindled causing market share and relative quality of the service societies could offer their members to dwindle. Consequently, this impacted the movement by reducing the number of society members willing to enter membership and then actively trade with their co-operatives, leading to further real terms falls in withdraw-able member share capital levels, and in the level or return generated co-operative investment in the form of lower interest and dividends. A corollary of falling market share was continued ownership of freehold land, property and infrastructure, such as warehouses, dairies and farmland (the Co-operative Farms) built up by societies with accumulated surpluses from the 50 years of growth before the war.
The Co-operative Independent Commission (1958) was tasked with investigating the decline in the co-op movement and for making recommendations for revitalising the movement in the future. Its recommendations had two main thrusts: that a strong response to the emerging multiple-store supermarket chains (including the appointment of professional managers) was needed and that the Co-op needed to come to terms with the rise in consumerism and to move away from its association with the "working poor" rather than a more prosperous working class.
The CWS responded with operation facelift in 1968 which introduced the first national co-operative branding, the 'Co-op' cloverleaf.
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Though Operation Facelift led to some improvements, the movement (including the CWS) remained largely unreformed with its grocery market share continuing a downward trend. Again, it was suggested that societies merge to form regional societies to improve their competitiveness through enhanced economies of scale. Many local co-op societies strongly resisted such mergers but, as their financial situation declined, many were forced to merge to create regional societies or were absorbed into either the CRS or the SCWS to avoid failing. Consolidation within the movement was considerable, and in 1973 serious financial mismanagement of the SCWS Bank led to the SCWS and the CWS merging to form a single UK-wide wholesale society.
The merger did highlight the potential of The Co-operative Bank as it was building a sizeable base of customers (notably local authorities, mutuals and local groups alongside co-operative societies) and this became an increasingly significant proportion of the CWS's annual profits. The growth in the bank largely related to its aggressive expansion into the personal banking market and with the pioneering of free banking (1972) in the UK, nine years before any of its larger rivals.
The co-operative movement's marketshare and profitability continued to decline during the 1970s and 1980s, in part, due to a number of reasons.
Firstly, the process of deindustrialization, that had characterised the period led to serious economic difficulties in many of the movements heartlands (notably the northern industrial towns), which disproportionally impacted on the societies through a decrease in consumer spending despite the British economy seeing a rise in overall consumer disposable income. This was largely due to the strong increase in wealth and social inequality in the UK at this time. The co-operative movement was not well placed to tap into this increase in middle class spending due to the geographic spread of its stores and The Co-op's historic association as the shop for the "working poor".
Secondly, redevelopment projects in many cities between the 1950s and 1970s often moved people from rows of terraced housing (which featured co-op stores dotted throughout) to newer purpose-built estates, with around 18,000 co-op stores closing as they had become redundant.
Thirdly, the time was a period of notable inflation and a strong pound, which had led to a wave of cheap imported goods – this devastated much of the UK's manufacturing industries (including the CWS). By the 1980s, it became clear that the trend in the retail sector was towards large (often out of town) supermarkets and hypermarkets with hundreds of them appearing across the UK.
The co-operative movement did build some superstores, having 74 by 1986, but often their development and competitiveness was hindered by the lack of a national distribution network and price competitiveness. In an attempt to improve the collective buying power of the movement the CWS acted to reposition itself from a wholesaler (from which societies can choose to buy) to a 'buying group' (where the CWS buys on behalf of), in order that CWS could increase the proportion of produce sold through co-operative stores that was sourced by itself. Though this did work to increase loyalty, it was not until the 2000s with the development of the Co-operative Retail Trading Group that the CWS became the de facto wholesaler for co-operative stores.
During the 1980s, the CWS began to merge with a number of failing co-operative societies, having returned to direct retailing after its merger with the SCWS the decade before. These mergers with consumers' co-operatives led to the co-op having both corporate (co-op societies) and individual members, hence making it both a primary and secondary co-operative. The CWS's expansion into direct retailing (especially after the mergers of the 2000s) led to the CWS becoming a highly visible business in the UK. The legacy of this was that many people perceive the British co-operative movement to be one business, The Co-operative Group, or co-op for short.
Modernisation and takeover attempts (1990–1999)
By the start of the 1990s, the co-operative movement's share of the UK grocery market had declined to the point where the entire business model was in question. This was at a time when many building societies were demutualising as many of the public preferred the short-term financial gain of the windfall payment over the perceived lack of benefits from the mutual model. For a time it seemed as though the mutual or co-op model was almost dead.
The Co-op's reputation was not helped in this respect by the factions within the movement, notably the strong rivalry between the CRS and the CWS, acting in a manner which exacerbated the belief held by many members of the public that, rather than working for the interests of all members, co-ops were largely acting in the self-interests of a dominant 'clique' of members within each society.
Together these crises meant that the 1990s would become a crucial decade if the Co-op was to survive. In order to raise capital to invest in its food stores (and also the increasingly successful Co-operative Bank), the CWS sold many of its factories to Andrew Regan in 1994 for £111 million in what initially appeared to be a highly beneficial arrangement for the CWS.
However, later it appeared that those involved in this deal did so without the CWS Board's permission and had been also handing confidential CWS files to Regan. Notably, one Sunday newspaper printed the CWS' annual report before it had been officially released. This would later pose a huge threat to the CWS when in 1997 Regan posed a highly ambitious £1.2bn hostile takeover attempt of the CWS. This shocked many in the movement and consolidated support for the CWS as the 'linchpin' of the movement in a way that many had previously opposed.
The CWS, under the leadership of Graham Melmoth, was able to defend itself from this takeover bid, largely by informing Regan's creditors that his hostile takeover was based upon dubiously sourced data and bad business practices. The deal also failed because Regan had greatly misunderstood the CWS' complicated ownership structure, assuming that by paying off the 500,000 'active members' he could gain control of the CWS.
Though this strategy worked for the carpetbaggers working to demutualise UK building societies at the time, it failed to recognise that the ownership actually lay with millions of ordinary members and that many of these 'active members' were staunch co-operators and who would be unlikely to back the bid.
After investigations by a private detective and a subsequent criminal court case, Regan's bid was rejected and two senior CWS executives were dismissed and imprisoned for fraud. An arrest warrant was issued for Andrew Regan in 1999 however he had already emigrated to Monaco.
The shock that Regan's bid sent through the co-operative movement has been attributed with sowing the seeds for the reduced hostilities between the CWS and CRS factions which eventually ended with the CRS becoming a member of the CRTG before fully merging with the CWS in 1999. The merger took two years to complete and the launch of the newly combined business, named The Co-operative Group, was timed with the release of the 2001 Co-operative Commission report, chaired by John Monks, which proposed a strategy of modernisation.
The report focused on improving store design and building a consistent branding whilst also driving for efficiency savings to make the food business more competitive – the similarity in conclusions between the 1919, 1958 and 2001 reports highlights the distinct lack of progress within the movement during this time. The 2001 report also highlighted the need to market what it called 'The Co-operative Advantage'; a favourite idea of Graham Melmoth, which suggested that commercial success would provide the funding for the social goals of the movement which (when the public saw a tangible benefit to their own lives) would provide a competitive advantage to the Co-op which would further its commercial success – a virtuous cycle. Unlike Gaitskell Commission's 1958 report the recommendations of the report, notably the major update to "The Co-operative brand" and the re-launch of the membership dividend scheme, were largely adopted by the co-operative movement including The Co-operative Group. These changes to the business are largely credited with the successes in profitability and the achievement in social goals which improved in the years after the Co-operative Commission report.
As a part of the CWS-CRS merger, new governance arrangements were designed with the 'independent societies' becoming part owners of the new Group and their representatives were elected to the group's national board. The largest change, however, was the much stronger representation for the individual members of the retailing operation with a string of regional boards and area committees designed to facilitate a clear democracy and representation on a local and national level. The composite nature of the Co-op as both a primary and a secondary co-operative led to the business having both individual members and corporate members (independent co-operative societies) which had to be included in any democratic structure. This led to a governance arrangement which was complicated and not understood by many individual members and which led to relatively few members becoming democratically engaged with the business. During 2007 the then chief executive Martin Beaumont was critical of the lack of commercial expertise on the board, foreshadowing the conclusions drawn from later Myners review into the near failure of the business during 2013 which was (in part) due to an unfit governance arrangement. In 2014 the governance arrangements were completely redesigned to reflect the recommendations of the Myners review – for more information see the governance section.
Establishing the "Co-operative difference"
Though the modernisation of the business was most noticeable after the 1997 takeover attempt, this is not to say that modernisation of the CWS had not been under way for some time. Since 1993 the CRTG had been working to switch the role of the CWS from "selling to" to "buying for" co-operative societies as a way of maximising the economies of scale to become more competitive to the major supermarkets. Since the 1960s the Co-op had been following retail trends after they had occurred, always having to catch up, in a way that it led the changes before the Second World War. Many leaders within the movement began to appreciate that this approach to retailing was not working, for example, expanding into hypermarkets after Tesco and Sainsbury's had already developed a dominant position, but without the resources to compete on price. After the 1997 strategic review the business suggested that it close the majority of its hypermarkets and department stores and instead focus on its core chain of convenience stores.
As a further attempt to differentiate itself from its larger competitors The Co-operative Bank had introduced an ethical policy in 1992. The CWS decided that, though it had always aimed to trade responsibly (for example though the working conditions in its factories and plantations as well as its boycott of South African produce during the years of apartheid), by cementing its "ethical" credentials in a series of strong and clear policy commitments it could work to convince the public of the "co-operative difference".
As a part of this, the Co-op worked with The Fairtrade Foundation to help introduce the Fairtrade Mark in the UK. It was an early adopter of the RSPCA's 'Freedom Foods' animal welfare certification. It introduced the first supermarket range of 'environmentally friendly' household products and the first range of toiletries certified by Cruelty Free International as "not tested on animals".
This new adoption of an ethical strategy was only part of the CWS' changes. The Co-op made notable changes to its packaging with nutritional labelling on food (1985) and later introduced Braille. Many own brand products were also reformulated to reduce the amount of salt, sugar and fat in order to make the product range more healthy.
To implement what was a core recommendation of the 2001 Co-operatives Commission, The Co-operative Group launched a brand panel which was tasked with developing consistent national branding. For decades, marketing by co-operatives was confusing for many customers with different societies adopting different store names (notably "Co-op Welcome" and "Co-op Late Shop"), various shop fascia designs and inconsistent marketing. Also, the cloverleaf design of the Co-op logo was seen by many as too associated with the years of neglect and decline within the movement and hence The Co-operative Group aimed to launch a totally new brand.
Co-op Foundation
Co-op Foundation is the Co-op's own charity and is a working name of the Co-operative Community Investment Foundation, a charity established in 2000 and registered in England and Wales (1093028) and Scotland (SC048102).
History of co-op membership
Historically, members' sales would be recorded in ledgers in society's stores and at the end of the collection period a proportional payment would be made to the member. As the societies grew, and the number of members increased, the method of using ledgers became cumbersome. As a solution, some societies, including Co-operative Retail Services, issued stamps to members for qualifying transactions. Members collected stamps on a savings card and, when the card was complete, would use it as payment for goods or deposit into their share account.
By the late 20th century the group's predecessors and then the Co-operative Group no longer paid true dividend as it had become a drain on limited resources, although several independent societies (such as Anglia Regional) continued to do so. In the mid-1990s a loyalty card scheme, in the style of the Tesco Clubcard, was introduced which used the dividend brand. These loyalty cards were inspired by the co-operative dividend but were little more than marketing exercises and a way to gather useful customer information. Co-operative customers, not just members, could sign up and receive a swipe card to record purchases with vouchers sent out twice a year which could be exchanged for cash or goods.
In September 2006 the Co-operative Group relaunched "true" dividend whereby a proportion of the profits of the Co-operative Group is returned to members. To emphasise the change, the scheme is now called the Co-operative Membership and members earn a "share of the profits". New members are recruited by allowing them to deduct the refundable subscription for a £1 share from their first dividend. Members can collect points to increase their share of the profits by using the services provided across the whole family of businesses. In 2008, the dividend almost doubled to £38 million, equivalent to 2.63p per point (one point being earned for each £1 food purchase), reflecting an 8% increase in underlying profit.
Group membership increased sharply in the first year after the relaunch, to 2.5 million with many more young people who have an affinity with the co-operative values and principles attracted to join.
In 2007, the Oxford-based Midcounties Co-operative became an affinity partner of the group's membership scheme, allowing its members to earn dividend at Co-operative Group stores and vice versa. Since then, other independent co-operatives have joined the reciprocal membership dividend scheme, including Central England Co-operative (merged from Anglia and Midlands who joined in 2008 and 2010 respectively), Southern Co-operative (2009) and Chelmsford Star Co-operative Society (2009). Southern Co-operative withdrew from the affinity partnership scheme in 2021. This reciprocal membership agreement means members of these societies can earn membership points at more than 90% of UK co-operative outlets. Dividend payments are made at the rate of the society where the points were earned, not the society of the member, although the member's society is responsible for distributing the payment.
From Wikipedia’s article on The Co-operative Group, shared under CC BY-SA 4.0.5