Blog: Dean BestUnder-fire UK retailer Co-op sees chairman quit

Dean Best | 19 November 2013

The Co-operative Group, the UK's fifth-largest grocer, has had its issues in food retail in recent times but those challenges are nothing compared to the headlines its banking business has attracted. And, today, after weekend allegations linking drug dealing to the former chair of the Co-op Bank, the group's chairman handed in his resignation.

Len Wardle is to step down as chairman of The Co-operative Group "with immediate effect". The announcement, made this morning, came 48 hours after lurid newspaper allegations Paul Flowers, the ex-chair of the Co-op's banking arm, had been filmed buying crack cocaine, days after he had been grilled by UK legislators on the near-collapse of that side of the Co-op's business.

In a statement, Wardle said he had led the board that had appointed Flowers and added: "It is right I step down now, ahead of my planned retirement in May next year."

Wardle said the allegations about the behaviour of Flowers - a Methodist minister - have "raised a number of serious questions for both the bank and the group".

Ursula Lidbetter, The Co-op's deputy chair and chief executive of the Lincolnshire Co-operative Society, will take over from Wardle.

"These are very difficult times for The Co-operative Group and the wider movement, but I believe that we can and will come through this period stronger than ever by facing up to our challenges," Lidbetter said.

The Co-op's reputation as a mutual organisation had been dented after the collapse of its high-profile bid to buy over 630 bank branches from Lloyds. The company pulled the offer for the branches in April, citing the economy and regulation on the financial sector. In June, The Co-op announced plans to list part of its banking arm in a bid to plug a GBP1.5bn hole in its finances.

Flowers became chairman of The Co-op Bank in 2010 but stepped down from the role in May as the division's financial problems became clear.

His appearance in front the House of Commons Treasury Select Committee was derided by industry watchers as he struggled with what appeared to be basic facts. However, the claims in The Mail on Sunday raised eyebrows - and raised more questions about corporate governance at The Co-operative Group.

The Co-op is battling pressures from major grocery rivals Tesco, Asda, Sainsbury's and Morrisons in the UK's growing convenience sector, although like its larger competitors, it is also likely feeling the pinch from discounters Aldi and Lidl. The latest Kantar Worldpanel data, out today, showed The Co-op saw its share of the UK grocery market fall again, dipping from 6.5% to 6.3% in the 12 weeks to 10 November.

The Co-op's food arm is looking to improve its performance through a conversion of its stores to a new "fresh format", through product innovation and, down the line, a move online.

It will be a challenge, however, in a market that is as competitive as ever, with its larger retailers all investing in those areas, and with the discounters winning over more shoppers every quarter.

And while The Co-op's food arm and its boss Steve Murrells works on those plans, higher up, the organisation is battling to restore its reputation.

Sectors: Retail

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