Co-op (UK)

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The Co-op - it returned to its old name in 2016 after several years as The Co-operative Group - is the UK's biggest mutual retail association, offering a broad range of services including travel, legal services and even funeral services. However, its biggest business is grocery retail. With the takeover of rival Somerfield in 2008, it became the UK's fifth largest supermarket group by revenues, with around 6% of UK grocery shopping, according to Kantar Worldpanel, and around 2,775 small and medium-format stores across the country. It has come under intense pressure in 2017 from its closest rival in size, the discounter Aldi, which finally pushed it back into 6th place during 2016. All businesses now operate under the Co-op name. The group also lends its name to a sizeable community banking business. In 2013, Co-operative Bank signed a deal to acquire 630 branches and 5m customers from Lloyds. However, completion was delayed repeatedly by funding problems and the deal eventually collapsed. Shortly afterwards, the bank's credit rating was slashed as a result of a gaping capital shortfall prompted by bad debts, mostly inherited through the acquisition of building society Britannia. To refinance the bank and avoid collapse, the Co-op was obliged to transfer majority control of that business to its bondholders. Further sordid revelations followed concerning the off-duty activities of former bank chairman Paul Flowers. The disastrous performance of the banking division, as well as a sharp downturn in trading at its grocery business, resulted in a massive £2.5bn loss in 2013. In 2014, the group sold its pharmacy and farming divisions to reduce debt. Morrisons executive Richard Pennycook, who joined the group that year, was widely credited with saving it from total collapse. He stepped down in 2017, to be succeeded as group CEO as grocery chief Steve Murrells. Revenues for 2016 were £9.5bn, including £7.1bn from food retail. Insurance is the next biggest at £439m, followed by Funeralcare (£307m). However the group suffered another large loss as a result of a write-off of its remaining 20% stake in Co-op Bank. The Co-op has around 4m active members. Adbrands does not currently profile this company but subscribers may access account assignments and contact information. The searchable account assignments database is available to full subscribers to premium services. Click here to access Adbrands account assignments (subscribers only); or see here for information on how to subscribe.

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Capsule checked 9th April 2016

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 12th October 2017: UK food retailer The Co-op has offered to acquire convenience store competitor Nisa for around £143m, or almost £250m including debt. Both chains are owned by their members, but Nisa's board has given its full recommendation to the offer. The chain's 1,400 independent owner-operators will vote on whether to accept the deal next month. Approval would increase Co-op's footprint by around 3,200 outlets. Nisa had previously received an approach from Sainsbury's but this was withdrawn after competition regulators expressed concerns over such a tie-up.

Adbrands Weekly Update 16th Feb 2017: The UK's struggling Co-operative Bank, now only 20% owned by the main Co-op retail group, put itself up for sale in a last-ditch attempt to prevent an enforced liquidation. The bank is close to breaching capital reserves requirements set by the Bank of England as a result of prolonged low interest rates which have slashed its profitability. The bank was recapitalised by institutional shareholders in 2013, but they now face steep losses on their investments.

Adbrands Weekly Update 9th February 2017: After months of neck-and-neck rivalry, Aldi has overtaken The Co-op for the first time to become the UK's 5th largest food retailer. Kantar Worldpanel figures for the 12 weeks to 29th January estimated Aldi's share of till roll at 6.2%, compared to 6.0% for Co-op. It was perhaps unfortunate timing that, later the same day that Kantar's figures were published, Richard Pennycook resigned as CEO of Co-op Group. His departure was not connected to the market share figures, and he will in fact be succeeded by Co-op retail chief Steve Murrells. COO Pippa Wicks moves up to deputy CEO. Pennycook is widely credited with having rescued The Co-op from near-collapse in 2013, as a result of the financial crisis at its banking division.

Adbrands Weekly Update 24th Mar 2016: Latest figures from Kantar Worldpanel for market share among UK supermarkets put Aldi at a new high, close to overtaking Co-operative Food Stores as the local #5. Aldi's share for the 12 weeks to the end of Feb hit 5.8%, compared to 6.0% for the Co-op. Sainsbury's retained the #2 position for the fourth consecutive period, ahead of Asda.

Adbrands Weekly Update 3rd Dec 2015: Ads of the Week: "Ice". Leo Burnett London joins in the seasonal fun with what may be their swansong for Co-Op Food Stores - the account is under review. This excellent but low-key ad fully embraces the chain's down-home community roots. Once again, UK oldies are on the receiving end of some Yuletide munificence. It's a commendable concept, executed without sentimentality (and that's a big relief at this otherwise heartstring-twanging time of year).

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