The Co-operative Bank has shown that it can be done. Tesco demonstrates that supermarkets can do it. But whether the 500-strong Co-operative Retail Society grocery chain can carry it off is by no means assured.
“It” is nothing less than staging the complete relaunch of a flagging brand, turning round consumer perceptions and giving a real point of difference to rivals.
To this end, CRS has fired J Walter Thompson Manchester from its 7m advertising account and hired Duckworth Finn Grubb Waters (MW April 3). Shifting the ad account is the first tangible move made by CRS food business chief executive David Robey since he was installed in the position six weeks ago. This fits with the old adage that if you can’t make a difference, hire a new ad agency.
The former Safeway business unit director for specialist businesses replaced Jim Gray, although Harry Moore, chief executive of the whole CRS, remains in ultimate control. Robey bypassed the usual route of drawing up a shortlist and running pitches, preferring to take recommendations from his old advertising croney Geoff Howard-Spink, director of strategic planning at Tesco’s agency Lowe Howard-Spink. Robey refused to answer any of Marketing Week’s questions or make any comment other than confirming the appointment of DFGW, and CRS refused to put up a spokesman, so it is hard to say what motivated his move.
However, Gary Duckworth, chairman of Duckworth Finn, says the agency was recommended for its previous work on Daewoo Cars, plus its retail experience on brands such as Pizza Hut. This at least gives some idea of the direction in which the CRS is moving.
But speculation about a possible 500m bid for the non-food parts of the Co-operative Wholesale Society and CRS has drawn attention to the group and could put more pressure on Robey to turn things round quickly.
The bid, from Andrew Regan who bought the Co-op’s food manufacturing business for 110m in 1994, has been rejected by the Co-op and the inviolability of its co-operative status seems assured if the Labour Party is elected on May 1. But the move has raised interest in the workings of the group, although Regan’s bid does not include Robey’s division.
The problems of CRS, a rag-tag portfolio of 500 stores under three different facias – Leo’s, Pioneer and Stop & Shop – are profound and difficult. Its market share in the grocery trade has fallen from nearly nine per cent in the late Eighties, to less than six per cent today.
The stores are now being rebranded under two names – the larger stores as Co-operative Pioneer and the convenience stores as Co-operative Local. This move was under way before Robey’s arrival. The variation in store sizes and poor location of some stores means different stores offer different ranges, opening hours and standards of service.
Many of the stores are used as “secondary” shopping destinations, where shoppers go to top up their weekly shop. Sales per square foot, a crucial measure in comparing supermarkets, are lamentable at CRS – only 5 compared with an industry average of 17.
Robey has said he wants to improve this low figure to 10 per square foot. Profit before tax for the whole of CRS fell to 16m in 1995, compared with 21m in 1994, while food sales rose to over 1bn, from just under this figure 12 months earlier.
Many CRS customers are older and less affluent than those of Sainsbury’s and Tesco, so another Robey objective is to make the stores appeal to a broader, more representative, group of consumers.
The problems at CRS have been accentuated by the technical advances made by the other multiples in stock replenishment, electronic point of sale, loyalty and customer service. It is not so much what CRS has been doing wrong, but what the competition has been doing right.
Yet CRS, and the Co-operative movement in general, have some important saving graces. Duckworth says: “The Co-op is one of the best known brands in the UK. It has got latent heritage and there are a lot of things people think are good about the brand – but it has become tarnished in recent years.”
In fact, CRS faces some of the same problems which confronted the Co-op Bank seven years ago when it hired agency Butterfield Day DeVito Hockney for its relaunch. Building on its brand heritage of social responsibility has helped it to recruit a new generation of consumers attracted by its ethical positioning. Its financial results, released last week, show the Co-op Bank increased pre-tax profits by 24 per cent to 45m last year.
But perhaps the most appropriate parallel for what the CRS is trying to do is a similar task carried out by Tesco in the Eighties. The chain also had a downmarket image and its name was synonymous with a “pile it high, sell it cheap” philosophy.
Robey joined Tesco in 1986, and later became director of marketing, in the midst of the chain’s attempts to redefine itself. Its aim was to become more like Marks & Spencer and Sainsbury’s – a task it has ably achieved as it is now top grocer in terms of market share.
CRS needs more efficient organisation, and Robey is implementing a new management structure and redefining lines of responsibility and reporting. There is also work to do on product ranges, which are seen as too diffuse. Ranges are decided locally rather than nationally.
While this means local tastes can be targeted accurately, it can lead to confusion in relations with suppliers and in the negotiation of discounts. Part of the new attitude to merchandise and the supply chain at CRS is the introduction of the own-label Co-operative brand.
Previously the Co-op brand was sourced by sister Co-op CWS – but since Regan took over this arrangement has been dropped and new suppliers found. The strength of the new own-label will go a long way to defining the level of quality of the relaunched CRS.
Robey, and Duckworth Finn, have a tough task ahead. By the time Robey drags CRS up to the level of the competition, they will already have moved on. But the experience of Tesco and the Co-op Bank shows that it can be done.