Co-operative Group (CWS) Ltd. History

Company Perspectives:

Our purpose: to be a successful co-operative business. Our aims: to put co-operative values into everyday practice; to strive for the highest professional standards; to work for the long-term success of the co-operative sector; to act openly and responsibly.

Key Dates:

1844:

The Rochdale Equitable Pioneers' Society is founded, launching a worldwide cooperative retail movement.

1863:

North of England Co-operative Society is created to provide wholesale purchasing operations for a group of 300 cooperative societies in Lancashire and Yorkshire.

1872:

North of England Co-operative Society changes its name to Co-operative Wholesale Society (CWS) and begins manufacturing and banking operations.

1934:

Formation of Co-operative Retail Services (CRS) to serve as "ambulance" to struggling cooperative societies.

1948:

London cooperative store becomes first to open an American-style supermarket.

1973:

Co-operative Wholesale Society takes over Scottish Co-operative Wholesale Society, which brings CWS into the retail sector for the first time.

1994:

CWS sells off its manufacturing arm.

1997:

CWS fights off hostile takeover attempt, then conducts strategic review.

1998:

CWS launches Travelcare travel services subsidiary and acquires Broadoak Farming.

2000:

CWS and CRW announce their agreement to merge, creating the world's largest retail cooperative group.

2001:

CWS changes its name to Co-operative Group (CWS) to reflect its status as a diversified retailer.

2002:

CWS creates new financial services unit, grouping together its banking and insurance subsidiaries.

Company History:

Co-operative Group (CWS) Ltd. is the world's largest retail cooperative, with sales of more than £5.5 billion and a network that embraces activities including food retailing, department stores, banking and insurance, automotive sales, and building services. Despite stiff competition, CWS remains one of the United Kingdom's largest food retailers, with 1,000 shops ranging from small-scale convenience stores to full-range supermarket, as well as some 39 "superstore" department stores. Co-operative Bank remains one of the country's top full-service banks and also operates the smile.co online bank, the first of its kind in the United Kingdom. Another strong area for CWS is its CIS insurance wing. In 2002, CWS created a new entity, Co-operative Financial Services, combining the Co-operative Bank with CIS in order to create greater cross-selling potential between the two groups. CWS also operates the United Kingdom's largest chain of funeral homes, providing burial services to more than 80,000 people per year through a network of 580 funeral homes. Farmcare is the company's farming subsidiary, which is the United Kingdom's largest commercial farmer, working more than 85,000 acres of farmland through 34 agricultural businesses. CWS's Priority Motor Group sells more than 12,000 new and used cars each year, including BMW, Ford, Rover, Mazda, and Alfa Romeo models through a network of 27 dealerships; the subsidiary also operates service centers and filling stations. Synchro is CWS's building services arm, formed in 2001 to group its activities in design and project management, facilities management, equipment services, and energy management and procurement services. ACC Milk operates as CWS's milk processing and distribution arm, with five creameries and a milk distribution facilities across much of the United Kingdom. ACC also operates two manufacturing dairies to provide a line of food ingredients products. CWS represents the spearhead for the more than 150-year-old co-operative movement in the United Kingdom; created from the merger of Co-operative Wholesale Society with Co-operative Retail Services in 2000, the company adopted its present name in 2001.

Founding the Co-operative Movement in the mid-19th Century

The forerunner to CWS, Co-operative Wholesale Society, as its name implied, was not originally set up as a retailer but instead provided wholesale provisions buying and other services to the growing number of cooperative societies being founded in the middle of the nineteenth century in the United Kingdom. The cooperative movement was born in 1844 in the town of Rochdale, Lancashire, when a group of 28 workers from a local weaving manufacturer joined together to form the Rochdale Equitable Pioneers' Society.

The aim of the new group was to provide a different type of retail outlet to the United Kingdom's hard-pressed Industrial Revolution-era workers. British shoppers had long been subjected to often unscrupulous business practices--such as adulterated food stuffs and short-changing on weights--of the country's retailers, many of which were operated as retail outlets by manufacturers for their own products. Meanwhile, much of the nation's working class struggled with poverty, barring them from the country's traditional shops, which catered to the wealthier classes. The Rochdale Pioneers instead founded a business based on honesty and respect for their customers. At the same time, customers were given a financial stake in the company, as members of the cooperative, as well as given a vote in its operation, through a one-person, one-vote organization that granted women equal voting status with men. Profits were then returned to customers in the form of semi-annual dividends. For many people, these "divis" became their only means of savings, providing additional cash for such purchases as clothing and gifts.

The Rochdale shop opened in 1844 on Toad Lane, selling basic foodstuffs at first but later expanding its assortment. The Rochdale experiment caught on quickly and soon spread throughout the United Kingdom and then throughout much of the world. By the middle of the nineteenth century, food cooperatives had become an established retail force in the United Kingdom; cooperatives tended, however, to operate on a local basis. Their small size left them vulnerable to their retail competitors. Many of these were operated by manufacturers and wholesalers, and the cooperative movement found itself the subject of various attempts at sabotage and other dishonest business practices.

In response, a group of 300 cooperatives in the Lancashire and Yorkshire regions banded together to create their own wholesaling group, the North of England Co-operative Society. Founded in 1863, the new body was able to use the combined purchasing power of its retail members to obtain fairer prices for its bulk goods purchases. The North of England Co-operative Society operated according to the same code of honesty and shared profits of its retail cooperative members. All profits were passed back to the retail cooperatives, which helped them to reduce their business costs still further. North of England soon expanded beyond its initial wholesaling base to begin manufacturing a range of goods, such as shoes and clothing, sold in the retail cooperatives.

In 1872, as the cooperative movement spread across the United Kingdom, the North of England Co-operative Society changed its name to Co-operative Wholesale Society (CWS). At that time, CWS branched out into providing financial services through the Co-operative Bank. Another diversification of the same period brought the group into the insurance industry, with the founding of its Co-operative Insurance Society subsidiary. CWS continued to expand its manufacturing operations, adding items such as soap, biscuits, and jam. The cooperative movement began operating farms, providing dairy and meat products, and also began operating plantations in India to supply its retail members with tea. The growing range of CWS's import activities led it to launch its own shipping fleet.

The cooperative movement in the United Kingdom counted more than 1,000 cooperative societies at the turn of the century. While a number of these societies consisted of a single shop in a remote rural location, other societies had grown into large-scale operations with dozens of stores operating in many towns and cities. CWS remained the central body supplying wholesale purchasing services, as well as banking and insurance products, and an increasing number of its own manufactured goods.

The cooperative movement and CWS played an increasingly prominent role in its members' lives and in British society in general. In 1893, the cooperative movement joined in the creation of the Independent Labour Party. In 1904, CWS inaugurated its first convalescent home; the society had also begun to offer funeral and burial services, becoming one of the largest providers of these services in the United Kingdom, and also added life insurance policies to its insurance arm. CWS also founded the Co-operative Permanent Building Society to provide affordable housing to cooperative movement members. CWS's growing manufacturing operations were to play a prominent role in clothing the British army during World War I, as the group converted its clothing operation to uniform production at the outbreak of hostilities. At the end of the war, the cooperative movement became a leader of social change when it began reducing work hours, increasing wages, improving working conditions, and providing paid vacations and pensions as well as paid sick leave. The "divi" had by then become a British institution, with pay-outs provided twice a year.

Merging Movements in the 1970s

The financial chaos that accompanied the Great Depression in the 1930s threatened the existence of growing numbers of retail cooperative societies. In response, the movement set up a new body in 1934, Co-operative Retail Services (CRS), which had as its purpose to operate as an "ambulance" for failing retail societies. CRS quickly grew to become a dominant force in the cooperative movement, becoming not only the largest single retail cooperative society, but also one of the United Kingdom's top five department store groups.

Until the end of World War II, the United Kingdom's food shops retained their traditional approach, where customers were served by shopkeepers and staff. In 1948, however, a store in London became the first cooperative to introduce the self-service supermarket concept that had been pioneered in the United States. Over the next two decades, more and more cooperatives followed suit. By the 1960s, however, the cooperative movement found itself under pressure from a new type of competitor, as a small number of large-scale supermarket groups began to dominate the UK retail scene.

In 1973, CWS itself became an ambulance group for the cooperative movement when it agreed to merge with failing Scottish Co-operative Wholesale Society, which controlled several hundred retail stores. Over the following decades, CWS was called on to rescue a growing number of societies, becoming in the process one of the largest retailers in the United Kingdom. Already by the middle of the 1970s, CWS held some 20 percent of the UK's retail food market.

By this time, however, CWS and the cooperative movement in general were under heavy pressure. Falling profits had forced most of the movement to abandon the "divi," which had been paid in cash since the 1960s; these dividends were replaced with redeemable stamps. Yet these too were phased out by the early 1980s. Meanwhile, the cooperative movement was finding it more difficult to attract and retain members, who fled the movements' many small and cramped stores for the larger stores being opened by such growing supermarket groups as Tesco and Sainsbury.

CWS continued to act as the cooperative movement's ambulance, rescuing a number of failing societies despite the financial pressure these acquisitions placed on the group. By the early 1990s, CWS itself was posting losses as it absorbed two recent acquisitions. At this point, the cooperative movement, which at one time had counted more than 11 million members of more than 2,000 cooperative societies, had dwindled to just 60 societies. CWS had become the single largest cooperative group. Second place position was held by Co-operative Retail Services.

Revitalized for the New Century

A merger of the two groups had long been considered an inevitability, and talks between CWS and CRS had been held since 1981. Yet the two sides had not been able to agree upon a mutually acceptable arrangement. Meanwhile, CWS found itself outclassed by the rising strength of Tesco, Sainsbury, and other growing retail rivals. In 1994, CWS sold off most of its manufacturing operations to entrepreneur Andrew Regan for £111 million. Regan shut down a number of the CWS factories, restored the remainder to profitability, then sold them again for £120 million.

Regan returned to CWS in 1996 with an offer to buy out its non-foods operations for £500 million. CWS refused the offer, and in 1997 Regan announced his intention to launch a hostile takeover of CWS worth more than £1.2 billion with the intention of breaking up the group and selling its components to the takeover's financial backers. CWS braced itself for battle--yet the takeover attempt quickly fizzled when it was revealed that Regan had induced a number of high-ranking CWS executives to steal confidential financial documents.

Embarrassed by the incident, which if nothing else had revealed the poor financial position of the UK's cooperative movement, CWS used the remainder of 1997 to conduct an extensive review of its operations in order to define a new strategy to enable it to regain its former prominence on the UK retail scene. At that time the company determined that its future lay especially with the convenience store format; the company's superstores were put up for reviews, with a number sold off to its competitors. At the same time, CWS began a program of renovating its supermarkets. Another initiative taken was the launch of a new breed of dividend, a customer loyalty card. Unlike its competitors, which linked their loyalty card purchases to name-brand products, CWS's Dividend Card instead gave points on purchases of its own-label products.

In 1998, CWS entered a new retail arena when it launched a new travel services subsidiary, Travelcare. Its CWS Farms subsidiary grew into the UK's largest commercial farmer with the acquisition of Broadoak Farming that same year. The new group was renamed Farmcare, representing 34 businesses operating more than 85,000 acres of farmland, much of which was owned by the CWS group.

Meanwhile, CWS and CRS once again began merger talks as CRS struggled with losses at the end of the 1990s. The first move toward a merger was taken in 1999 when CRS at last joined the CWS-led purchasing group, Cooperative Retail Trade Group (CRTG). In 2000, the sides at last agreed to merge their operations, and CWS took over CRS, creating a company with more than 1,100 food stores and annual sales of more than £5 billion.

Following the merger, CWS took steps to revitalize its image. In 2001, the company adopted a new name, Co-operative Group (CWS) Ltd., reflecting not only the diversity of its activities but also its intention to lead the co-operative movement as a whole into a new era. The group also began an extensive modernization program, revamping some 400 of its stores along a more modern, "market town" concept. The group also stepped up the rollout of its line of own-label products.

CWS continued to build its other operations as well. In 2001, the group bundled together its various and growing building services subsidiaries into a single entity, dubbed Synchro, which became one of the UK's leading full-service building services and facilities management companies. In April 2002, CWS turned toward its Co-operative Bank and CIS insurance subsidiaries, creating a new Co-operative Financial Services to bring the two operations under a single management in order to encourage cross-selling of both entities products among their banking and insurance customers. The company also announced plans to revive the twice-yearly dividend beginning in 2004. CWS was able to look back on more than 150 years as both the pioneer in the worldwide cooperative movement and its leading light for the new century.

Principal Subsidiaries: Co-operative Insurance Society Ltd.; CIS Mortgage Maker Ltd.; Hornby Road Investments Ltd.; CIS Unit Managers Ltd.; CIS Policyholder Services Ltd.; The Co-operative Bank plc; Unity Trust Bank plc (27%); Co-operative Bank Financial Advisers Ltd.; Northern Ireland Co-operative Society Ltd.; (Northern Ireland); Millgate Insurance Brokers Ltd.; Associated Co-operative Creameries Ltd.; Syncro Ltd.; Goliath Footwear Ltd.; Farmcare Ltd.; Herbert Robinson Ltd.; Manx Co-operative (CWS) Ltd. (Isle of Man); CRS (Properties) Ltd.; National Co-Operative Chemists Ltd. (74%); Shoefayre Ltd. (76%); Gilsland Spa Ltd. (98%).

Principal Competitors: ALDI Group; ASDA Group Ltd.; Bongrain SA; Booker Cash & Carry Ltd.; The Boots Company; Friesland Coberco Dairy Foods Holding N.V.; J Sainsbury plc; John Lewis Partnership plc; Marks and Spencer p.l.c.; Safeway plc; Somerfield plc; Tesco PLC; Koninklijke Wessanen nv.

Further Reading:

• Amerlang, Soren, "Co-op to Focus on Convenience Stores, Acquisitions," Reuters, June 7, 2000.
• Dutter, Barbie, "Co-op Returns to the Days of the 'divi'", Daily Telegraph, February 2, 1998.
• Farrelly, Paul, "Counter-attack from the Man at the Co-op," Independent on Sunday, February 16, 1997, p. 5.
• Griffin, Jon, "Modern Move for the Co-op," Evening Mail, September 7, 2000, p. 39.
• Hardcastle, Elaine, "UK's Coop Unveils Modernisation Plan," Reuters, February 8, 2001.
• Potter, Ben, "Superstores to Go in Co-op Shake-up," The Daily Telegraph, December 12, 1997, p.1.

Source: International Directory of Company Histories, Vol. 51. St. James Press, 2003.

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