As he prepares to retire, Martin Beaumont is proud of the strides he has made in improving Co-operative Group's bottom line. But, finds Joanne Birtwistle, he wouldn't want to be up there with Tesco
Profit is good, says Martin Beaumont, chief executive of the Co-operative Group.As well he might.
His latest half-year results show a 32 per cent rise in pre-tax profits to £3157.4m, with revenues topping £34bn.
But it isn't everything.
He insists he needs to follow a different business model to his rivals Tesco, Asda and Sainsbury. "What we don't have to be is the most profitable in each of our business sectors," explains Beaumont. "In fact, to be the most profitable would probably mean we would be in conflict with some of our values.
We have to get to a point where we are around the medium, I would argue, against like-for-like competition in the different markets we are in.
We have to deliver a return on our capital that is at least an equivalent to a market cost of capital - which we are progressively moving towards - then you have a sustainable business on a financial basis," says Beaumont.
Yes, profit is the lifeblood of the organisation because, as Beaumont says, "you have to generate sufficient profit to have the cash for investment in your business, and for developing new services and to have a share to give to members".
But profit forms only part of the triple bottom line.
It also acts as an enabler for those environmental and social considerations.
The Co-op doesn't want to be up there with Tesco, he says, because it would have to compromise some of its other goals and values.
It is the ethical alternative. "We've developed a balance score card to measure our progress towards being the best cooperative model in the world," says Beaumont.
There are eight measures in all.
Profit is one aspect, as is market growth, customer satisfaction, membership growth, membership participation through sales levels, corporate reputation, employee engagement and commitment.
But despite these protestations the elephant in the cooperative family living room is the issue of when, or if, the major societies should merge.
A year ago Peter Marks, Beaumont's counterpart at United Co-operatives, was coy about the issue, saying predictions were more than his job was worth but conceding the inevitability of such a move.
Insider got the hint, used the headline On your Marks for a merger and the issue exploded.
Mutterings followed about Marks parking his tanks on Beaumont's lawn; we were told we'd missed the point. The well-spoken Beaumont is no less direct than Bradfordian Marks, who started his career stacking shelves at what is now a United store. "I've got the classic co-op background," jokes Beaumont whose chosen social pastime - he is apparently a keen Scottish dancer and enjoys getting together with friends to practice for the annual charity ball he helped form at Chester Town Hall - is surely a giveaway to his upbringing.
Beaumont is a public school boy and talks with a charming accent.
He went to Cambridge University, before accountancy training, a partner role at what is now KPMG and other jobs, including a three-year stint at a children's publishers. He then became finance director at United Co-operatives, rising to be chief executive.
In 2002 he settled into his role at the Co-operative Group, succeeding the mammoth that is Graham Melmoth, and freeing up the role at United for Marks.
The differences between this country's two cooperative heavyweights are apparent but the divide has grown with the well-publicised rift over the possible merger of the big two, and some dispute over branding, with contention revolving around the matter of when, rather than if, the two groups will merge. Insider's provocative headline of a year ago seems to have emboldened Rochdale-based Marks to come out and publicly admit he thinks a get together should happen sooner rather than later.
A few weeks after this interview, Beaumont announced his retirement for October 2007.
Could this be a chance for Marks to step up into the role? The board chooses a successor in November 2006.
Of course, it was only fair to ask the merger question of Beaumont too. "I'd be very happy to merge with United one of these days," comes the cool response. "As the number of societies has been coming down, many of us feel that ultimately there will be one society.
It's a question of timescale, but each society is master of its own destiny." Beaumont does not want this matter to dominate our interview, insisting that this is not at the forefront of his, nor other cooperative board members', minds. He has plenty to focus on in the group before having to rely on joining forces as a means to improve market position. "Our priority is not to get too distracted by that and continue with the transformation of the business," he says.
But Beaumont closes the topic with a reminder that Co-operative Group is still top dog. "We are already the national player.
We are 70 per cent of the movement's assets, over 60 per cent of its retail outlets," he says. "The smaller societies have to decide to join its bigger brother, not the other way around.
If any society approaches us, we would be happy to talk to them and see if we can meet there needs in terms of joining us." Best of breed, indeed.
The Co-operative Group is the largest cooperative in the country with 69,000 employees and 3,000 high street outlets.
Food remains the biggest business with 1,700 stores across the country.
But although the group has improved its position considerably there is still a sense that it's punching below its weight. "We've had a huge amount of legacy issues," responds Beaumont. "The scale of the transformation we've been through over the last three or four years is unprecedented.
In an organisation of that size it does take time to put your foundations in place - which we've now done." So what is the Co-operative Group doing to make sure it punches high enough to impinge on Tesco and the like? The group has been on this path to become a more profitable, more effective cooperative model since Beaumont became chief executive.
Step one was to sort out the business portfolio and determine which businesses should be exited. Step two, which ran parallel, was strengthening the core businesses, which Beaumont says were all at different stages. "We had the huge task of remodelling and rebuilding CIS, which was behind where other insurers were," says Beaumont. "The expansion of food retail and making sure we had a strong presence in convenience was really important. We were over-represented in the large stores where we weren't competitive but under-represented in convenience, so acquiring Alldays in 2002 was very necessary.
We had to do that before we could rebuild the food offer and get it into good shape." The latest part of that journey is strengthening buying scale for the group and the other societies.
The Co-operative Retail Trading Group, which enables bulk buying among the UK's cooperatives, has formed the alliance with Spar, which itself has 2,742 stores and retail sales of £32.5bn.
And the group has just embarked on the final stage of its three-step plan - looking at new business opportunities.
First off the blocks was Co-operative Legal Services, which opened for business in August 2006 and will focus on consumer legal services, such as conveyancing, wills, probate and accident management services.
And Beaumont thinks legal services will feed into many of the group's existing businesses.
But does the Co-op's brand sit comfortably with accident management services, more readily known as - Beaumont finishes my sentence for me - "ambulance chasing"? "That is exactly why it needs a brand like us," he says. "The market research tells us that the market does not do a good job for the everyday legal needs of most people.
You need a reputable service provider that will help and support people." Beaumont wants the group to move into markets that have traditionally struggled with their reputation; where its brand values will shine as a community-minded retailer with a social conscience, what Beaumont calls "the cooperative difference".
The group also unveiled its new unified identity branding across all its businesses in August 2006. "Collectively we are a very big business.
That is why the brand is so important and we have put so much effort into developing the new identity," says Beaumont.
With the new look also came a new profit-share loyalty scheme for members, reminiscent of the old "divi'.
The aim is to put membership back at the heart of the brand and a share of profits back at the heart of membership.
In many ways Tesco's creep into all areas of life looks for all the world like the very model cooperative approach. A brand you can trust to deliver.
Beaumont's hope is this combination of branding and the loyalty scheme will help build share for the Co-op. "The businesses need to benefit from each other.
At the moment 85 per cent of our customers only trade with one business, so there is a huge opportunity," he says.
Also in: November 2006
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