News Analysis: Co-op faces delicate balancing act

As the Co-operative Group prepares to reintroduce its 160-year-old profit-sharing programme, Richard Cann investigates the image of the formerly working-class movement and the communications challenges it faces.

The Co-operative Group dominated food retailing in the 1960s before the emergence of supermarket giants such as Sainsbury, Asda and Tesco, but its recent media profile lags well behind that of its rivals as it struggles to adjust to a changing consumer world.

As a group it recorded profits of more than £320m last year, while operating a diverse range of consumer-facing businesses, but its marketing has leant markedly towards promoting its ethical stance and CSR programmes.

Co-op head of PR Martin Henderson explains that making a stand for its customers is a unique selling point. 'We have a credibility advantage that other organisations don't when it comes to CSR, so we should use it,' he says. 'CSR has become part of the vocabulary of most UK businesses relatively recently, but it has been engraved in the way the Co-op's different businesses have conducted themselves since 1844.'

Consumer champion

In consequence, campaigns are 'very much customer-focused, designed to champion consumer issues', according to Henderson.

The Co-op has its genesis as a protector of the consumer rights of poorer people, he goes on. However, its approach to CSR in recent times has become broader, to incorporate a stance against genetically modified food and misleading labelling.

This year, the Co-op created an independent advisory panel headed by City University's Institute of Health Sciences' Professor Tim Lang to set higher standards of ethical trading.

The shift into broader ethical territory has bought success in its financial businesses, with The Co-operative Bank recording ten successive years of record profits after it was re-positioned as an ethical trader in 1992.

However the approach has not been as successful in food retail. Former Tesco head of corporate communications Andrew Coker points out that 'back in the 1960s, the Co-op was the biggest supermarket chain in the UK. It had all the attributes that any of today's big retailers would wish to espouse.'

Coker believes Tesco took off when it introduced its Clubcard loyalty scheme in 1995, which allowed it to stake out the Co-op's traditional territory of consumer champion.

'A loyalty programme only builds customer loyalty when the retailer uses the information it gathers to tailor its business to meet customer demands,' says Coker, adding that PR cannot build a reputation if the business loses touch with delivering what its customers want.

The Co-op's original loyalty scheme, the 'Divi', was launched in 1844 and paid out a share of profits twice yearly to customers based on the number of goods they bought.

'In the Divi, the Co-op had the loyalty programme of all loyalty programmes,' says Coker. 'It's a tragedy it didn't use it properly when it had it.'

There have been improvements in its business, but Coker says these need to be properly publicised. 'There are so many things that it does right, one would like to see more about these things in the media,' he says.

'Perhaps it needs to be more imaginative and find ways to demonstrate the things it does for customers and around ethics.'

Coker also points out that, since the Co-op operates a number of regionally based societies, 'it's very difficult for it to put together one coherent customer offer or communication'.

Mark Tomblin, director of planning at Publicis, which has Asda as a client, believes the Co-op needed an aggressive CSR agenda because growing prosperity since the Second World War has made its origins as the working class champion less relevant.

However, Tomblin says the Co-op faces a difficult balance between taking advantage of its inherent strengths in ethical trading and maintaining its traditional support.

He points to Iceland's initiative in 2000 to make all its own-label products organic, which proved unsuccessful because its working class customer base did not want the added expense.

'I think the Co-op is going to run out of road before people realise what it produces is valuable,' says Tomblin.

Middle-class indulgence

'The problem with CSR is that it is in the really early stages of uptake.

For some people it is a massive motivation, but it tends to be expensive.

Unfortunately a lot of CSR is seen as a middle-class indulgence.'

Henderson does not accept this, pointing out that 'it does not cost extra to label products honestly. Price isn't the overriding factor. We're here to present quality and value for money.'

He adds that a current review of its brand structure will necessarily clarify what services the Co-op has available for consumers, given the diverse industries in which it operates.

'Inevitably there will be consumers who do not understand everything we do,' says Henderson. 'Everyone will have heard of the Co-op, but their perceptions will be coloured by the side of the business they have the most knowledge and experience of.'

Henderson says the important thing is that each of its businesses are 'linked by the same values and principles' and speak in the 'same tone of voice'. How consumers respond remains to be seen.


Retail: Operates more than 1,600 food stores, such as Welcome and Alldays, and operates 39 department stores

CIS: Insurer has 5.4 million customers and administers more than £20bn

Co-operative Bank: Profits stood at £130.1m in 2003

Smile: Online banking service with more than 500,000 account holders Funeralcare: UK's largest funeral director with more than 500 branches

Travelcare: Largest independent travel agent in the UK with 390 branches

Priory Motors: Top 30 motor group with 26 dealerships

ACC Milk: Operates two creameries and six dairies

Farmcare: UK's largest farmer, managing more than 35,000 hectares

CG Property: Owns £190m in investment property and manages more than 3,000 trading properties

Syncro: Building services supplier employing 500 staff.

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