M&S Surpasses Food & Drink Market Share Of Co-op

M&S has become the seventh-biggest retailer of food and drink products in the UK after overtaking Co-op.

According to unpublished Worldpanel data seen by trade publication The Grocer, M&S’s food and drink market share was 5.1% over the 52 weeks to 13 July, compared with Co-op’s 4.7%. In the previous 52-week period, Co-op had a higher share of 4.9% compared to M&S’s 4.7%.

The report noted that M&S’s food and drink sales have grown by 11.5% year-on-year, while Co-op’s were unchanged.

The Grocer’s report noted that the food and drink market share data, which is distributed privately to retailers, includes sales of fresh, chilled and ambient groceries but not alcohol, household, toiletries or healthcare. It is different to the grocery market share data published monthly by Worldpanel – formerly Kantar – which relates to all expenditure through store tills (excl. petrol and in-store concessions).

The monthly published data also do not include market share figures for M&S, as it falls outside the research group’s definition of a grocer due to its clothing & home business.

Despite a recent cyberattack impacting its operations, M&S has also increased its lead over Waitrose in food and drink sales. The report stated that Waitrose’s share was 4.5% in the 52 weeks to 13 July, meaning M&S’s lead has grown from 0.3 percentage points to 0.6 percentage points over the last year.

Co-op told The Grocer that it regards Worldpanel’s take-home methodology as an incomplete gauge of its performance, arguing it ignores a large chunk of its sales as a convenience retailer.

A Co-op spokesperson is quoted as saying: “We are proud to be the leading UK convenience retailer, not a supermarket, with a market share 12.7%, as reported by Circana, who measure all convenience categories, whilst Kantar [Worldpanel] excludes circa 30% of our sales, including many food and drink categories such as food to go, confectionery and soft drinks.

“We continue to grow ahead of the convenience market and also hold nearly 25% of the UK quick commerce market.”

A Worldpanel spokesperson commented: “We do not publish retailer market share data for select categories. Our grocery market share release provides a full view of grocers’ performance, including all expenditure through store tills except petrol and in-store concessions.”

Earlier this month, the same food and drink data put Lidl ahead of Morrisons for the first time.

NamNews Implications:

• As always, market share ranking, however cut… 
• …will have an impact that is psychological and will differ by audience.
• i.e. uplifting for M&S….
• …troubling for Co-op.
• Meanwhile, food & drinks markets are in a state of flux...
• ...wherever you stand.

Myners’ striking at core Co-op issues...

Euan Sutherland argued that democracy and values might be vital, but without radical change the whole future of the Co-op business was at risk.

By implication, Lord Myners’ resignation endorses that view.

In practice, the Co-op will not go bust, but may break down into separate societies, each operating and buying without the benefits of scale, and as a consequence becoming less attractive to suppliers in terms of being a counter to the power of the major multiples…

The BBC quotes the Midcounties submission to Lord Myners' re-organisational recommendations: "Among the independent consumer co-operative societies, it is demonstrably the case that it is the most democratic that are the most successful in commercial terms, not the reverse."

No one is claiming that democracy in business does not work, it just takes longer…

And, as even the most consultative CEO’s know - and their teams accept - in crisis conditions a degree of temporary autocracy is essential…

If the Co-op really wants to perform commercially, it means being able to deliver an acceptable ROCE – not the currently depressed 5-10% level currently being delivered by the UK major multiples, but more akin to Walmart’s 19% - a combination of 5% Net profit and a stockturn of 10+ times/annum.

As anyone with commercial experience knows, producing an acceptable surplus of sales over costs – i.e. a source of funds for investment in the business and sharing with members – means aiming at 10% net profit and achieving 5%...

Suppliers are prepared to invest in suitably qualified trade partners a combination of retail margin (25+%), free trade credit of 45+ days, trade investment of up to 20% of retail purchases, and even suffer up to 7% deductions off invoice for failure on their part to meet professional retailer agreements...

All the supplier require in return is fair-share treatment, retail professionalism and 100% compliance, a standard even the major multiples find onerous…

If the Co-op wants a place at the table with the major multiples, and to be treated as a serious ‘invest’ player by key suppliers, it needs to perform commercially, and deliver standards of compliance comparable with other retail players…

A focus on the bottom line can help drive the business in the short term, and managing a gradual improvement in ROCE will provide a longer time-frame, each demonstrating to suppliers that the Co-op qualifies for longer term investment, and means it..

Unfortunately, a £2bn loss is not the best place to start…

Co-operating with the Co-op - the challenge for suppliers

Given several years of producing results like a ‘normal’ retail multiple in terms of net margin, stockturn and ROCE, and suppliers having responded by upgrading their Co-op NAMs to pro-active business managers of the account, and factoring increasing market share into trade strategies aimed at long term collaboration, yesterday’s developments on top of a catastrophic loss of Co-op banking credibility, means that the clock has been set back twenty years…minimum.

The co-operative model works well in other countries, all based on the Rochdale pioneers approach. However, the UK Co-op is a business with deep problems, a long history of under-performance, an outdated board structure and far too much debt. This latest crisis may have convinced those in charge that Sutherland’s resignation should be "a catalyst for the real and necessary change which the group must go through"…

The problem for suppliers in these unprecedented times is that they cannot afford to wait for the evolution of a new Co-op model that reflects the competitive, consumer-savvy, ROI and fast pace of retailing today.

Also, suppliers cannot hope to change to Co-op, and instead have to revert to short-term transactional management, dumbing down the supplier-retailer relationship, minimising service level, reducing exposure, and deploying talent elsewhere.

If the Co-op survives this challenge, muddles through and begins to show signs of improvement, then suppliers will begin to cautiously re-invest, using performance-based reward, and insisting on 100% compliance…

That is the price the Co-op must pay for 2014’s mis-steps….

Co-op profitability has a cost

For many years the Co-op was run as a ‘breakeven’ organisation in strict application of its shared-profits culture.

As anyone in mainstream business will appreciate, in order to result in breakeven, it is wiser to aim at say 5% net profit, and the result will probably be 0% or perhaps even 0.5% profit.

Reality of 'breaking even'

Aiming for breakeven in business can be a way of ensuring a loss-making year…

This breakeven approach and its consequential loss-making caused the failure of individual societies, resulting in them being absorbed into healthier parts of the movement. However, the Co-op still remained a confusing and inefficient trade partner for leading–edge suppliers, resulting in minimal levels of support, with most discretionary funds going to major customers that ran their businesses in a more traditional manner.

The penny drops…

Several years ago the Co-op apparently began to embrace the idea of making a profit, and even began to refer to ROCE and other KPIs in their annual reports.

All very encouraging for suppliers as the Co-op began to produce acceptable returns, encouraging increased investment of trade funding as a way of producing a viable alternative to the Big Four.

Testing the change in philosophy

The real test of this change in philosophy required the global financial crisis (a challenge to capitalism everywhere) to cause the Co-op to embrace the other side of the coin, cost-cutting and redundancies.

Latest reports indicate that the Co-op Group is preparing to further slash its food division’s workforce, as it seeks to cut costs amid tough trading at its grocery operation The job cuts in the food property team are part of its Unity Programme. This is the Co-op’s project to deliver a more co-ordinated strategy and efficiencies across over 4,800 retail trading outlets, including pharmacy, banking and funeral care.

The need for persistence

Despite the social cost, the Co-op needs to continue with this strategy, not only to maintain its profitability, but to demonstrate to its trading partners its determination to justify a level of partnership that compares with that currently given to the Big Four.

Above all, realistic suppliers need to support and cooperate with the Co-op, in this, the completion of their transition to ‘mainstream’ retailing…