Talking shop: Tim Hurrell, The Co-operative Group
Tim Hurrell is planning aggressive growth for the Co-operative Group
The Co-operative Group accounted for a quarter of the UK grocery retail market in the 1960s. By 2008, its share had fallen to 5%. However, the Co-op's purchase of the Somerfield chain two years ago has sparked its renaissance and Tim Hurrell, the head of the company's food retail arm, spoke with Petah Marian about the integration, Fairtrade and how the company is rising again.
The Co-operative Group completed its move to buy Somerfield in March 2009, an acquisition that made it the UK's fifth-largest retailer and led the company's management to claim the country's Big Four chains had become a Big Five.
The hard work, however, did not stop when the contracts were signed and the two sides shook hands on the deal. Since then, the Co-op's food arm - the part of a retail empire that takes in banks, holidays and funerals - has been focusing on the integration of Somerfield.
Nevertheless, Tim Hurrell, the head of the Co-op's food retail division, says the Somerfield integration has gone "very well" despite reports earlier this year that sales in its Somerfield stores had fallen. "It's not surprising really," Hurrell says. "Stores trading under the Somerfield fascia are the ones that are struggling. We've still got stores trading under Somerfield but they have no real identity because we haven't invested in them. We're selling Co-operative branded products, so from a customer's point of view, it's an incomplete offer."
However, Hurrell emphasises the temporal nature of the issue, saying that "of course that will disappear [when the fascia change is completed], so 2011 will be a lot better, because we'll have them all as Co-operative".
Speaking to just-food at the IGD's annual convention in London this week, Hurrell insists the Co-op has no plans to slow its aggressive growth and wants to open around 150 to 200 stores a year.
"We're just pulling together our three-year plan in terms of new stores and acquisitions," Hurrell says. "We've always said that, once we got the Somerfield acquisition out of the way, we'd complete the integration and pay off some of the debts, then resume quite an aggressive number."
"We are in discussions with Asda," Hurrell says, adding that the Co-op is interested in "a number of stores", although he would not be drawn any further on how many he might be considering.
Following the Somerfield acquisition, the Co-op's market share bumped up to 7.5% and Hurrell sees no reason for that upward trend to change. "I think we'll grow market share over the next five years. I think that, next year, there will be a period of stability, but we'll see it grow in years two, three, four, five and along that horizon. I think maybe not as high as 10%, but I think it will be somewhat higher than 7.5%."
Another area where Hurrell now plans to put his "foot back down on the accelerator" is in private label. He reveals plans to launch some 300 products across all of the Co-op's own-label tiers. "Our plans now that we've got integration out of the way are to be quite progressive in new product development," he says.
That said, there has still been a good deal of movement over the last couple of years with the retailer "filling in the gaps" between the Co-op's and Somerfield's private-label brands, with the Co-op's Value label being rebranded as the Co-operative Simply Value, after Somerfield's Simply Value range.
Private label is a key battleground for the UK's food retailers; Asda and Sainsbury's have, in recent weeks, revamped their own-label stable in a bid to gain traction with the country's cautious consumers.
Value, however, is not just about price. Values is also an area of fierce competition and the Co-op, a retailer almost synonymous with ethical values, has seen the likes of Sainsbury's invest in areas such as Fairtrade over the last 12 to 18 months.
Sainsbury's has claimed the mantle of the world's largest Fairtrade retailer, although Hurrell is sanguine about such pronouncements. "We've always been leaders in this area and we still are leaders," Hurrell insists. "We were a bit put out by Sainsbury's claims that it is the largest which it is. They are by scale, but we do more products. How do you define the largest? But we've always been a leader in that area and we continue to be. And it's very much part of our brand."
With no plans to slow growth, Hurrell has faith in consumer confidence improving. "I think there are signs of it recovering. We've been through the real tough time in the second half of 2009 and the early part of 2010. I think the outlook is not fantastic, but it is a it better for 2011, so I can see some confidence coming back into the market in the next 18 months."
Nevertheless, while Hurrell does not expect the UK government's planned austerity measures to make much of an impact on his business, due to the "resilience" of the channel, he is forecasting a tough Christmas. "This market is very competitive, it always has been and it will always continue to be so. So Christmas will be tough, the economic climate is still fairly gloomy, so I think we'll be really competitive."
Hurrell, a retail veteran who has been in the business since 1974, is unlikely to be phased by a tough Christmas and, looking further ahead, he is determined to continue to bring about the renaissance of this once-glorious retailer.
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