The restructure, announced last Thursday, will result in 600 jobs going from the organisation’s head office, which employs 3,300 people. About 400 of these staff have marketing roles, taking in product development, customer services and design. A spokesman admits that marketing will be affected by the restructure, but refuses to give any details.
The move follows a disappointing financial performance from the Co-op, which in 2004 experienced a fall in sales to £7.8bn – from £8.1bn the previous year – and a drop in profits to £243.7m, from £327.3m.
Some of the group’s problems stem from the acquisitions of food retail chains such as Alldays and Balfour, which formed a part of the organisation’s efforts to defend its share of the convenience market in the face of increased competition from supermarkets such as Tesco and Sainsbury’s.
Verdict Research senior analyst Gavin Rothwell says: “There have been issues with the supply chain, which has been stretched by the expanded estate.”
The restructure will not include Co-operative Financial Services – the biggest profit contributor to the group – but will affect the food retail, pharmacy and travel businesses.
Group chief executive Martin Beaumont says: “This is not just about cutting costs. Over the years, we have evolved into a conglomerate of individual businesses, often with their own support structures and overheads, but failed to exploit the combined strengths of the group. At head office, this autonomy has sometimes resulted in the duplication of management effort, leading to inefficiency, higher costs and missed opportunities.”
The group had no central marketing function until last year, when it appointed ZoÃÂ« Morgan as director of marketing (MW July 29, 2004). She has begun identifying marketing opportunities in the group’s businesses and is working with the individual marketing teams. Sources suggest that the restructure could result in a more centralised marketing operation, with the marketing teams in each business possibly being disbanded.
Morgan is also overseeing an initiative to rebrand the co-operative movement as a whole, with the aim of establishing consistency across the different businesses and individual regional co-operatives, including the Co-operative Group. It is likely that new branding will be implemented in the autumn.
Separately, the group is looking at a membership or dividend scheme that will reward customers. It already operates such a scheme in its food retail stores, but it is not known whether the scheme will be taken up by the movement as a whole.
In many ways, the Co-op has been ahead of the game. Its original “divi” scheme was a forerunner of the Tesco Clubcard and Sainsbury’s Nectar customer loyalty schemes. And it introduced a traffic-light food-labelling system long before healthy eating became an issue that supermarkets could no longer afford to ignore. It has also supported the Fair Trade movement by selling ethically sourced produce, and spotted the potential in convenience food retail before larger rivals. Its financial services business has adopted a much-lauded ethical stance.
But the Co-operative Group and the wider co-operative movement have not yet been able to shed their fusty image and recapture the glory days when they dominated grocery retail. This restructure is a first step in that direction.