Exciting times for the Co-op - it even flourishes in hard times

 Source: MEN

 As targets go, getting a third of the population to join your movement seems fairly ambitious.

But that’s the goal set by the Co-operative Group, which hopes to have 20 million people signed-up to its dividend scheme by 2020.

At the start of this year, the figure stood at six million members.

Although it’s early days, things are heading in the right direction, with the Manchester-based mutual revealing to Business Week it has already signed-up a nearly 250,000 extra people since it launched a major recruitment drive in February.

Tripling the Co-op’s membership is just one of a series of tough targets set by chief executive Peter Marks, including its most radical ethical plan to date, which is made up of 47 separate aims.

They range from rendering the group’s operations carbon neutral by 2012 to the launch of a £20m fund to help co-operatives around the world get off the ground.

And the Co-op has embarked on one of its most challenging projects to date, as it aims to transform a 20-acre section of Manchester into a new retail, office and residential quarter, where its own new headquarters will be housed.

The group hopes the £800m NOMA scheme, which will even involve a dual-carriageway being re-routed, will ‘open up’ a new destination to the public for the first time.

But, as any of the organisation’s senior management team will tell you, pulling off ambitious challenges is part of the Co-op’s culture.

It started-out in 1844 when a group of 28 Rochdale workers, tired of seeing their families friends and neighbours exploited, decided to set up their own, new type of business, which distributed a share of profits to members through a ‘divi’.

Today, the group has more than 15 separate divisions, from food to funerals and banking to pharmacies, with underlying profits of £545.7m, on a combined annual turnover of £13.7bn, which outstrips any other organisation in the region.

Employing 114,000 staff, it operates more than 5,000 retail outlets, distributes 53bn prescriptions a year, has 800 funeral homes and 360 travel agencies.

All that makes it the world’s largest co-operative to be owned by its own customers.

The Co-op’s unique structure makes it one of the few businesses to have flourished in the credit crunch and come out fighting.

And, amid national Co-operatives Fortnight, it seems more and more of us are following suit, with latest figures revealing membership of mutuals has shot-up by 18 per cent since 2008.

“What we think we are very good at is long-term thinking and planning,” says the Co-op’s head of social goals Paul Monaghan.

“That is because we don’t have the same pressure to deliver short-term results to shareholders.

“Even in the recession, we have been growing and we have grown in an ethical way.

“What we are finding is more people are turning to the old Co-op as they know it but also that other people are considering the co-operative model as a way to do business. They can see that the two largest football clubs in the world – Real Madrid and Barcelona – are fan-owned and that is just one example.”

While the rest of the business world has suffered the effects of the recession, the downturn has proved to be a catalyst for an economic renaissance at the Co-op.

Two key events gave the business a major boost, the first of which was its merger with United Co-operatives in 2007, which delivered an extra £70m of profit to the Co-op in the first year and gave it capital for further investment in retail stores.

Following that was the 2008 acquisition of the Somerfield chain, which was integrated into the Co-op’s food retail division, adding 3,000 grocery stores.

Twelve months later, the Britannia building society was merged into the Co-operative’s finance arm.

Not content with doubling sales, profits and membership numbers against a tough economic backdrop, the group was eager to maintain ‘clear blue water’ between itself and its competitors when it comes to its ethical credentials.

“It got to the stage when we thought we had to reinvigorate our approach to ethics,” says Monaghan.

“We felt a lot of our competitors had stepped up their games and we needed to respond and, in the context of doubling our sales and membership, we felt we were in good enough economic shape to take the next step.”

That led to the formation of the Co-op’s Ethical Operating plan, which set out 47 targets, all of which will be reviewed and re-assessed each year.

The plan was launched in February and Monaghan is pleased to report it is already having an impact. Quarterly research carried out on behalf of the group’s banking and retail arms recently showed it has widened the gap between itself and its nearest rival in terms of the public perception of its ethical policies.

A key strand of the Co-op’s ethical plan is to spread the word to others. Specific actions include investing £11m between now and 2013 to support the growth of co-operatives throughout the country. FC United of Manchester, owned and run by fans, has already received support.

Next year, it will spend £1m to help celebrate the United Nations’ Year of Co-operatives, while a £20m international Co-operative Development Fund is being set-up.

Included in the ethical plan is the NOMA development, which will deliver 4m sq ft of mixed-use space and the group aims for it to be the biggest sustainable construction development in Europe.

Just one illustration of this is the fact the fuel used to generate all the site’s energy will come from rape seed oil grown on the Co-op’s farms.

Staying true to its ethical roots has seen the Co-op adopt a ‘tortoise and hare’ strategy to overtake its competitors, who lost the trust of their customers during the downturn, explains Richard Wilcox, of the Co-operative Bank’s social banking unit.

The team, which provides finance to charities, social housing companies, credit unions and those engaged in renewable energy projects, has more than doubled in size since 2007, now employing 40.

One of its key pledges is a commitment to lend £1bn to renewable energy projects by 2013. One recent example was a scheme in New Mills, Derbyshire, where £60,000 was provided to a co-operative wanting to operate its own hydro-electricity system, which is used to power the local Co-op store.

“We’re in the market for more than just financial return,” says Mr Wilcox.

“But we also recognise that this is a market that will grow and grow, so that is why we spent more time than perhaps other people would understanding how the scheme worked, so it can be rolled-out in other places.

“We can take that longer-term view because we are not driven by institutional shareholders, who want half-yearly returns.

“And we are able to work with these organisations because we genuinely understand what they are all about because we are a mutual ourselves.

“We are not necessarily doing anything different than we have done in the past but there has been a definite flight of trust towards us.

“We have definitely seen that halo effect across the whole of the banking division, not just in terms of lending to charities and the third sector.

“People are recognising that we have a model that they want because they no longer trust the failed busted flushes of the other banks.”

*What's in store at the £800m NOMA development....

1. The City Building will become the luxurious Hotel Indigo, which will include a Marco Pierre White restaurant and is set to open in autumn 2012.

2. Two buildings on the corner of Corporation Street and Balloon Street to be converted into 106,000 sq ft of grade A office accommodation. Completion by second half of 2013.

3. The Co-op's existing space in New Century House to be refurbished and brought to market when all staff have moved out, starting September 2012.

4. CIS Tower still to be occupied by the banking division, though parts may eventually be brought to market. The Co-op has the capacity to fund the revamp itself if necessary.

5. The Co-op's new HQ will house 4,000 of its staff and will be complete in September 2012.

6. Major new car park planned. Access to be gained from the inner ring-road, which is set to be re-routed.

7. Plot next to Angel Meadows has been identified as one of main areas for residential development.

8. Land opposite the CIS Tower, on the site of the former Arkwright's Mill earmarked for mixed-use development, comprising retail, residential and office space. Talks are underway with potential developers.

9. Space north of the CIS Tower is likely to be turned into office space, with a call centre one of the options being considered.