Bob Dylan takes the Co-op forward

When American singer-songwriter Bob Dylan was coming to prominence in the early Sixties, the co-operative sector was already on the wane from its heyday of the Fifties when it accounted for about 30% of the grocery market.

By the Nineties the Co-op’s share of the grocery market had declined considerably and many came to doubt the viability of the co-operative business model that had existed for more than a century. In a world driven by big business and cheap finance, the Co-op seemed outdated, staid and too safe to succeed.

Yet, the relaunched Co-operative Group is set to embark on its biggest advertising drive yet, underlining its ethics and values to the soundtrack of Dylan’s Blowin’ in the Wind, an anthem that came to represent the change generation.

Speaking exclusively to Marketing Week, group marketing director Patrick Allen outlines how he believes that co-operative values are making a comeback, particularly with consumers who have seen a meltdown of the financial services sector and its repercussions on the high street and beyond. “The planets are aligning with our stance, which is great,” he says. “But even if they weren’t, we would be out there saying that action on climate change is important, that doing the right thing in international development is important. It might not always be fashionable, but it is the right thing to do.”

The Co-operative Group has formed gradually over 164 years from the merger of individual societies to a nationwide operation. The restructure and rebrand of the group under the Co-operative brand umbrella began in earnest following the merger of two of the largest societies in July 2007, when Allen was brought in as group marketing director. The group now has 85% of the co-operative retail business in the UK and substantial shares in certain wider markets, including travel, finance, funerals and pharmacies.

Since then it has audaciously launched a £1.56bn takeover of supermarket chain Somerfield, making it the fifth-largest retailer of food, with more than 3,000 stores. Following the deal it embarked on a three-year, £1.5bn refurbishment and rebrand programme of its entire portfolio. It has also relaunched its Dividend loyalty programme, which offers cash back to its 3 million members as well as discounts on services, backed by a drive to cross-sell its businesses.

The group announced in November last year that, despite the economic downturn, half-year profits had risen by 35.6% to £292.6m for the six months to June 2008. Across retail, its like-for-like performance over the Christmas period rose by 6%, easily outgunning the likes of Tesco, Sainsbury’s and Marks & Spencer.

The £10m brand campaign of next month will highlight what is different about the Co-operative under its strapline “Good for Everyone”. The campaign makes no reference to the individual group businesses but instead focuses on its ethical and environmental credentials, such as its commitment to climate change, renewable energy, poverty alleviation in the UK and abroad and fair trade.

Overall, the group will spend £70m on paid-for advertising this year, heralding its new look, up substantially on the £30m spent in 2008 and the £50m pledged for 2009 last summer (MW July 23, 2008). It is hoping that the drive, which is expected to launch with a two-and-a-half-minute TV ad taking over an entire break on ITV, will convince people to re-evaluate the Co-operative.

Allen says: “What we’re trying to do is put a spotlight on the Co-operative Group and the co-operative model, which is probably as relevant today as it has always been. In many cases it is a better business model. We are the fifth largest food business with £86bn sales, but that accounts for only about 50% of the business. We are the third largest UK pharmacy business, the largest funeral directors in Europe and one of the largest independent travel agencies in the UK.

“That stands us in good stead. Our banks are outperforming the high street and that has been through sensible banking policies such as no subprime lending,” he continues. “It was madness to do that, which is what everyone is now recognising. We were seen as a low-risk, staid, old bank, but one that it now appears was actually good at banking policy. It made sense and has proved to be a success.”

Indeed, in order to give it scale and compete more effectively against the beleaguered banks,  the Co-op last week announced a merger with Britannia Building Society. With an estimated 9 million customers and adding about 250 branches to its 100-strong network, it would have the ammunition to seriously rile those rivals. “The Co-operative brand has always been a challenger brand, that has stuck a pole in the ground and said this is what we’re about and what we stand for. It has never been frightened to do that,” Allen says.

Moreover, as rivals across all its business sectors are re-evaluating their commitment to social and ethical issues in favour of cost-cutting and restructuring, the Co-operative says it is best placed to carry on doing what it has always done and campaigned for change. Allen says that because the model was built with change in mind it has evolved to incorporate environmentally and ethically better practices: not for it a costly change in infrastructure at a time when businesses need to trim costs.

“We are true to our values and our principles and any marketing activity has to be aligned. That runs through everything in the Co-operative and if we move away from that we are pandering to fashion or the latest thinking from our competitors,” he says.

The big difference, though, is the change to a single brand under which its diverse set of businesses can trade and campaign. It must convert customer trust and respect into better results. “We are a big business. We are a successful business. We are not a plc and for that reason we have often been ignored,” adds Allen.

The new-look, more-aggressive Co-operative Group must hope to replicate Dylan’s enduring success and resurgent popularity.