Why the latest co-operative merger is ‘quite different’

Another co-operative merger is on the horizon. On 15 September, Chelmsford Star Co-op will transfer its operations to larger regional society Central Co-op, following a vote by its members earlier this month.

Chelmsford Star Co-op says the merger offers the best way to protect jobs, safeguard member investments, and provide long-term financial security. And with more scale, the enlarged society says it will also be able to deliver greater value for members, continued investment in local services, and remain competitive in the challenging retail and funeral sectors it operates in.

It is the first consolidation of retail co-op societies in eight years, the last one being Wooldale Co-op’s merger into Central England Co-op, known today as Central Co-op, in 2017.

And there are some clear differences. Most notably perhaps that the Chelmsford Star trading name will be retained locally.

That isn’t entirely unique, as “other societies may have incorporated elements of a local co-op’s name following a transfer” in the past, says Central Co-op. But it is unusual. In past mergers, a smaller society has tended to cede its identity to the larger one. Or, occasionally the names of both organisations have disappeared and they have created a new identity – such as Midcounties Co-op, formed by merging West Midlands Co-op with the Oxford, Swindon and Gloucester Co-op in 2005 (see box below).

But this time “Chelmsford Star Co-op is not being consumed into a single entity”, Central Co-op CEO Debbie Robinson explains. “It’s exciting and probably quite different from how transfers of engagement and mergers between co-ops have happened before. We feel we’ll be a stronger society with Chelmsford Star as part of it and maintaining and celebrating those local differences.”

As one of the longest-standing co-ops in the country still trading under its original identity, this aspect of the deal holds clear benefits for Chelmsford Star Co-op.

It means the society will continue to operate under its own name and keep its identity when backing community events and initiatives.

But like any other society, Chelmsford Star Co-op is owned by its members, putting community principles at the fore, and merging means trusting the larger entity to uphold them too.

“It’s up to the larger society in any merger to look after the values and legacy that the smaller society holds, and Chelmsford Star is in real safe hands with Central Co-op in that regard,” says Neil Turton, former COO of Co-operatives UK. “When you put yourself in a position of a member of the board, what you really care about is the relevance to your community.”

Member-led discussions

The proposal of the merger arose from discussions between Chelmsford Star Co-op’s board, who are elected by the wider membership, and its leadership team, with members of the society having the ultimate say.

The process ensures any major decisions affecting the society’s future are “truly member-led”. As Turton explains: “As a co-operative CEO, you must be more consensual and use influence, not power.”

Robinson will become CEO of the new enlarged society, with Chelmsford Star Co-op CEO Barry Wood moving on.

“Robinson is an effective leader in the style required for co-op societies,” adds Turton. “She uses softer skills of leadership and a more collegiate form of management. At a co-op, it’s about stewardship. These societies have existed for hundreds of years in some cases and your job is looking at the long-term interests rather than the short-term goals.”

Robinson says this is exactly what she is doing. “We’ve got lots of listening groups with the colleagues of Chelmsford Star who work through all of their ideas and choose the best way forward for the new enlarged society,” she says. “We’re also setting up a new Essex cluster within Central Co-op’s Eastern Membership & Community Council, where members can ensure their voices are heard and the Essex community’s priorities continue to shape local activity, and potentially find their way on to the board of Central Co-op.”

Also as part of the new strategy, Central Co-op and Chelmsford Star Co-op have pledged to offer better value to members upon the merger, leveraging its new scale to strengthen its negotiating position among local suppliers. “It makes sense for consolidation to happen, particularly when the geographic areas are so complementary,” says Turton.

Chelmsford Star Co-op members will in time move on to the Central Co-op membership proposition, giving them access to Central Co-op’s app and its new cashback-style rewards initiative. Chelmsford Star will also get access to capital to invest in stores, including the installation of solar panels.

“Credit to the board of Chelmsford that they saw an opportunity to improve their offer to their consumers,” says Turton.

Read more:

• Midcounties Co-op launches range of value initiatives, including Aldi Price Match

• Chelmsford Star Co-op members vote in favour of merger with Central Co-op

• How Katie Secretan is steering Nisa to its new life as Co-op Wholesale

• Co-op launches new micro food-to-go chain in UK first

That has commonly been the reason co-operatives have strategically merged in the past: to become “bigger and stronger”, Turton adds. There were around 1,400 co-operative societies in 1900, primarily made up of retailers. When Central Co-op and Chelmsford Star Co-operative complete their merger, there will be just 15 consumer retail societies.

“In almost every example of a merger, it has resulted in a stronger provision and benefits to the members,” says Co-operatives UK member services lead Emma Laycock, who has also been Chelmsford Star Co-op society secretary during the transfer process.

“Scale is important and mergers can enable the scale at support centre level to remain similar whilst growing the number of stores, products and services available to members. Mergers between societies are more attractive than co-operatives being sold off to non-co-operative businesses or losing co-operatives from a geographical area.”

Nevertheless, some co-ops are reluctant to merge, says Turton. “There’s been decades of sensible consolidation, but a lot of societies want to remain independent because they’re regionally proud and hyper-localised. Lincolnshire Co-op, for example, do a good job in being a community business and they’ll be looking to keep their identity.”

Given the historic trend for consolidation in co-ops, there are likely to be more mergers in the long term. When they do, can smaller societies now expect to keep their own name?

“For a society to keep its own name is a highly attractive thing in these circumstances,” says Turton. But, although Central Co-op has agreed to it in this case, it may not set a precedent. It might be less likely, for example, that the Manchester-based Co-op Group would do the same.

Turton says: “This all comes down to, of course, the society board, and for a smaller society looking to merge into a larger one for commercial benefits, it is one of the things they need to take into account if the situation ever comes around.”