Chief executive Peter Marks claimed that following the acquisition of Somerfield, a fifth big grocery player will be created and its reputation for responsible retailing will be a key strength.
Marks told Retail Week: “You only have to look at what has happened in the banking sector to see that consumers have lost confidence in big corporations. They are weary of corporate greed and there has never been a more appropriate time for ethics to come to the fore.”
In its first half, Co-op refurbished 350 shops, introduced lines and expanded its range of own-label goods. Marks said: “We have done a lot of work on stores and products and our ethical stance will be the icing on the cake. What’s happened in financial services shows that it is perfect timing for the renaissance of the Co-op.”
On Wednesday, the retailer reported interim profit before payments to and on behalf of members – the equivalent of pre-tax profits – up 60.5 per cent to£197.6 million. Growth was driven by Co-op’s food division, which recorded sales up 43.5 per cent to£2.4 billion and like-for-likes up 5 per cent.
Marks said: “Food has performed extremely well for us and our like-for-likes are ahead of the market average, which shows that customers already like what we do, so the Somerfield deal will mean we can do that on a much bigger scale.”
He said spend on price promotions had increased significantly and would continue with the Great Deal Locally campaign that it is running at the moment.
Marks expects the Office of Fair Trading to report on the Somerfield acquisition in the next few weeks. According to TNS Worldpanel, Somerfield has 3.8 per cent of the grocery market at present and Co-operative Group has 4.3 per cent. The deal would edge Co-op closer to Morrisons – the smallest of the big four grocers – at 11 per cent.
Allegra Strategies project director Steve Gotham said the retailer is well placed to play to its ethical strengths, although “that stance will play second fiddle to price-led issues in the current climate”.
He added: “The Co-op will have to sell off some Somerfield stores, so is likely to end up with around 7 per cent market share, and that figure has to be in the double digits to create a really credible fifth player.”