Resilient co-ops better placed to weather economic storm - study shows

05 June 2020

Co-op businesses are better placed to weather the post lockdown economic storm, according to a study published today, 5th June.

The annual Co-op Economy report reveals that co-ops have almost double the chance of surviving the first five years when compared to other start-up businesses. Compiled by sector body Co-operatives UK, the report shows that 76 per cent of co-ops (up from 72 per cent in 2019), are still operating after the difficult first five years of existence. Just 42 per cent of all new companies make it beyond five years.

Co-ops are organisations owned and controlled by their members. Their collective decision making and more rounded approach, as opposed to just fixating on maximising profits, give them a distinct advantage as the UK economy recovers from the Coronavirus pandemic.

The UK's 7,063 co-ops operate across all sectors, from community-owned pubs to multi-billion pound high street retailers and professional services providers, from the nation's biggest farmer owned agriculture businesses to supporter-owned football clubs. They have a combined turnover of £38.2bn (up £350m from 2019) and 14 million people are members of a co-op - the equivalent to more than a fifth of the UK's population.

The largest co-op is the Co-operative Group with a turnover of £10.9bn followed by the John Lewis Partnership (turnover £10.2bn) and the farmer-owned Arla Foods (£2.6bn).

Steve Murrells, CEO of the Co-op Group, said: “Co-op’s already play an important role in the social and economic fabric of our country, and the Co-op Economy report illustrates that they are well placed to face into the difficult economic conditions that lie ahead in the post lockdown world.

“Co-ops are in existence to create value for their members and their communities and are not just about maximising profits for shareholders. All businesses now face unprecedented challenges, but the fact that many co-ops have community-based ownership means more people are invested in their long-term success.”

Throughout the coronavirus crisis, the Co-op has continually demonstrated its community support with a series of initiatives including establishing a Members’ Coronavirus Fund to support foodbanks, address funeral poverty and help local causes, by creating temporary jobs for more than 7,000 people out of work and through launching Co-operate, an online community centre.

Steve Murrells added: “Our response to the emergency in the last few months was built upon our Co-op values and principles and ongoing commitment to our members across the UK. When this crisis broke, we weren’t starting from scratch, we were already ‘on the ground’ with good relationships and existing resources in place.

“We didn’t need to invent a local Community Fund, appoint hundreds of Member Pioneers to support communities, or develop a Community Wellbeing Index to provide unique local insight. Those assets were already in place because our purpose extends beyond maximizing commercial profits.”

Nick Matthews, Chair of Co-operatives UK, said: "There's an appetite for a different economy to emerge from this crisis, with many people talking about the need to ‘build back better’. If we are to rebuild a fairer economy, provide decent livelihoods and support communities we need more co-ops, mutuals and social enterprises, not less. And there’s compelling evidence to show that new co-ops are built to last.” __Case studies __ 1) Creative Coop

After eight years toiling away in London for design agencies Ben Philp was, to put it bluntly, “fed up”. Multi-tiered chains of command, a lack of ethics and long hours for limited reward had all taken their toll.

“It was pretty soul-destroying stuff,” said Ben. “Sometimes you might have to change a logo simply because the CEO’s wife didn’t like it. I really didn’t like the hierarchy of agencies. Project managers often didn’t care. It was about maximising profit – what the project manager wanted, not the best solution for the client. I was fed up with that way of work.”

Ben struck out on his own before a chance encounter led to some joint-working with Creative Coop and an invitation to join the Colchester-based design studio followed. It proved mutually beneficial. Ben said: “We know we’re building something for ourselves and not one wealthy owner or shareholders. Generally, I find people in co-ops more driven – and as a member of the co-op you’re involved in the decision-making.”

Established in 2003, Creative Coop are a design studio that specialises in branding, design and web development. Ben is one of a small team of four – though the co-op utilises a network of associates and freelancers. The design studio’s ethical standpoint is clear in its client base of social enterprises, community organisations, charities and public sector bodies.

Working with organisations like Save the Children and a range of co-ops has proven far more rewarding. Ben said: “In the past, having to create campaigns for organisations you knew were involved in things like the destruction of rainforests was pretty soul destroying. “Here we’re proud of what our clients are trying to achieve. And when what they want isn’t necessarily the best solution for them we’ll turn work down. For example we won’t just go and create an app if it’s not going to be the best suited to the clients needs – even if initially that’s what they believe they need and would be more profitable for us.”

Client choice and honest appraisal of their needs has proven its worth, even with the impact of COVID-19. Ben said: “In other sectors I have heard a number or organisations have gone bust, or not paid the design agency. That’s not been the case for us, but we have lost work. In the first week of isolation maybe 70 or 80 per cent of our work we had booked in was wiped out.

“Some of that work won’t come back. But our model of business has made us really resilient. There’s a shared responsibility and one individual isn’t taking all the funds out. Money goes back into the co-op regardless.”

The co-op model is also resilient in other ways. Ben said: “As an owner you are willing to go that extra mile, but you also get out what you put in. It’s different for traditional companies. I have seen a fair few design agencies go under when someone key leaves, due to buy outs, including some of the most successful design agencies.”

Expanding Creative Coop’s membership is something Ben is keen to explore when something approaching normality returns. He added: “For me personally it’ll be nice to give something back – not only by helping clients make a positive social difference but also to give others in our industry the chance to appreciate the benefits working in a model like ours, with a great range of clients that really care.”

2) Open Food Network

Locavore is one of 636 ‘shopfront’ members of the platform co-operative Open Food Network (OFN). It was already a growing business – even before COVID-19 struck. The social enterprise, in Glasgow’s Southside, connects people with locally and ethically sourced produce via its shop, wholesale operation and vegetable box scheme. And it has been a genuine lifeline to some of its customers during the pandemic.

“Demand exploded for the veg boxes,” said Locavore’s Dorothea Warlich. “People really appreciate that we are reliable, that they can rely on us in an emergency. They’re grateful we have been able to keep going, keep delivering their veg boxes, keep the shop open and well stocked.”

Short supply chains and direct relationships with producers have proved key to coping with increased demand, including delivery to some of the community’s most vulnerable people. Locavore gained around 400 new customers by mid-April with online sales increasing five-fold in just three weeks during the same month.

Dorothea said: “It has really helped having the local connections. We are all about the short supply chains. I really hope this encourages a wider range of people willing to support the food producers in their local communities.”

Locavore’s ethos is not unique. Like other OFN members, it is based on a sustainable local food system which benefits the local economy, the environment and local communities. More than 1,300 food producers are member owners of the software platform – and the UK’s arm of the platform co-operative is booming. In the four months from mid-January to mid-May the weekly turnover of OFN shops increased by more than 1200% to almost £60,000 per week.

Nick Weir is Communications Manager for OFN. He said: “We want a fairer system for farmers and to make food affordable. We can give farmers a fair price and shoppers affordable, quality produce. COVID-19 has brought into sharp focus the need for local control of food systems. We’ve seen a real coming together of communities around these systems which I think will have a lasting effect.”

All OFN members are eligible to stand for election to the co-op’s board and can influence how the software develops – even at a global level. Nick said: “In other countries it’s the same story. Brazil, India, Italy, Ireland… they all want shorter food supply chains.”

Locally rooted and ethically sound retailers are not a new invention. Co-op retailers, including The Co-op Group, the independent retail societies and worker-owned wholefood businesses all champion those ideals. Nick believes the expanding OFN membership can operate alongside to help create a more sustainable future.

“When we are talking about massive neo-liberal enterprises, the biggest supermarket chains and discounters, they’re legally bound to maximise shareholder profit,” he added. “Co-operatives, with their membership structure and values and principles immediately takes away that all-encompassing profit incentive.”

About the Co-op:

The Co-op is one of the world’s largest consumer co-operatives with interests across food, funerals, insurance, legal services and health. It has a clear purpose of championing a better way of doing business for you and your communities. Owned by millions of UK consumers, the Co-op operates 2,600 food stores, over 1,000 funeral homes and it provides products to over 5,100 other stores, including those run by independent co-operative societies and through its wholesale business, Nisa Retail Limited. It has more than 63,000 colleagues and an annual revenue of over £10 billion.

Co-operatives UK is the network for Britain’s thousands of co-operatives. Together we work to promote, develop and unite member-owned businesses across the economy. From high street retailers to community owned pubs, fan owned football clubs to farmer controlled businesses, co-operatives are everywhere and together they are worth £37 billion to the British economy.www.uk.coop