The first co-operative was based on a set of rules, known as the Rochdale Principles. Membership of the group was open to anyone who could pay the membership dues, and each member had a say in the running of the company. Members would also receive a share of the profits in proportion to the amount of trade they did with the co-operative, as well as a small interest payment on the capital they had invested. The business was run on a cash-only basis, did not discriminate on political or religious grounds and helped promote education to the largely illiterate working classes that it served.
The Rochdale Principles served as a template for other co-op businesses throughout the UK and the movement continued to grow in popularity, including on the continent, where the first co-ops were created in the latter years of the 19th century. The original Rochdale business was a consumer co-operative but the movement quickly spawned a number of variations, including the retailer co-operative, which saw individual retailers pool their resources to increase their buying power and share communal profits, and workers’ co-operatives, where employees took a share of the profits. All these types of co-operative still exist today, such as consumer co-op the Co-op Group, retailer co-op Londis, and workers’ co-op Waitrose.

Elsewhere in Europe
The British co-operative movement, in its various formats, was also exported to other countries, mainly in Europe. Migros and Co-op Suisse in Switzerland are both consumer co-operatives, as is the Co-op Norden group in Denmark, Norway and Sweden, Co-op Italia in Italy and Consum in Spain. In France, the best-known chains are retailer co-operatives Intermarché, Leclerc and Système U, while Rewe and Edeka in Germany are also retailer co-ops. Eroski in Spain is a workers’ co-operative. These continental European co-ops have also developed their own principles, according to their own national characteristics. The French versions, for example, have a far less active ‘social’ agenda and now tend to operate primarily as buying groups, while Swiss co-operatives often go even further than the UK in terms of social and environmental investment. Dutch co-operatives, meanwhile, had close ties with socialist politics or with Roman Catholic communities. Although widespread in Europe, co-ops are rare elsewhere in the world – they do exist in limited numbers in the US, however.

Not concerned by competition
So while the co-operative movement is over 160 years old, it is still a force to be reckoned with – indeed, co-ops in Scandinavia, Germany, France and Switzerland are among the market leaders in their countries. But what of its future? Will the co-operative movement be able to survive the seemingly inexorable rise of publicly owned companies such as Tesco or Carrefour?
“We are not concerned by the competition,” says Martin Henderson, spokesman for the Co-op Group, the largest co-op in the UK. “Over the last few years we have refocused our business: we want to be the leading community-based retailer for secondary shopping – not the main weekly shop.” Of the group’s 1,700 stores, most (1,200-1,300) are convenience stores, with the remainder consisting of small supermarkets. “We are not going head-to-head with the major multiples and their huge out-of-town stores,” says Henderson. “Our stores serve local communities, and offer a range of products and services tailored to those communities.”
Henderson believes the Co-op Group has reached sufficient “critical mass” to take on the likes of Tesco and Sainsbury’s in the convenience market
Patrick Mitchell-Fox, senior business analyst at the IGD in the UK, agrees that the Co-op Group’s business model has what it takes to be a success well into the 21st century. “The co-operative movement in the UK – and the Co-op Group in particular – has several strengths,” he says. “The convenience market is growing significantly –total sales of £24.9 billion in 2006 were up four per cent on the previous year. Although convenience stores account for just 20 per cent of the total UK grocery market, they are growing faster than the sector as a whole, which improved by just 3.4 per cent in 2005. IGD predicts that in 2011 the convenience market will be worth an estimated £33.9 billion. So the decision to focus exclusively on the convenience sector is likely to pay off for Co-op Group and the other co-operatives.”

Distinct values and principles
But they have other strengths as well. For example, the way co-operatives are structured makes it extremely difficult for them to be bought up by rivals. And Henderson believes the unique heritage and ownership structure of co-operatives gives them another advantage. “We have a set of values and principles that mark us out from the majority of the competition, and there is a high level of trust in our business. We have more than two million members, and they help direct the business: all our board members are also members of the co-operative.”
But this does not mean that the co-operative is unable to take rapid business decisions. “Decision-making works in a similar way to a publicly held company,” says Mitchell-Fox. “So while shoppers are shareholders of a co-operative, they do not have any greater power than shareholders of a public limited company. The board of directors is responsible for the running of the business and is answerable to the shareholders.”
The Co-op Group’s values are clear from a look at the range of products on display in its stores. In particular, the company has been at the forefront of the Fairtrade movement in the UK, switching all its own-label coffee and chocolate ranges to Fairtrade products. Mitchell-Fox sees this as the natural extension of one of the co-operative movement’s founding principles.

Dividend system
Henderson believes that listening to the membership means more than simply putting certain types of food on the shelves, however. The British co-operative movement was the first to reward customer loyalty, long before the major multiples got in on the act in the 1990s. But the ‘dividend’ system – whereby co-op members received a payment at the end of the year in exchange for collecting stamps and valued according to how much they had spent, went further than the modern loyalty card system in that it allowed members to directly benefit from the co-op’s performance – the more they spent, the more money the co-op made and the more it paid back in dividends to its members. This dividend system was dropped by the co-operative movement in the late 1990s in favour of a loyalty card scheme available to all shoppers – not just members – but has just made a comeback.
“We have reintroduced the dividend system this year, under the name ‘co-operative membership’,” says Henderson. “The new dividend system has a far larger number of opportunities for members to earn money, however: payments will depend on the amount of business our members do with the whole of the Co-op Group, not just the food retail arm.”

Close to local communities
But are the continental co-operatives likely to see the same success? Jonathan Gunz, senior international business analyst at the IGD, believes that many of the same factors will influence the Swiss, Scandinavian and French co-operatives. “Switzerland’s co-operatives are very comparable to the UK in format, but they are much more influential in terms of the market as a whole, not least because they are the dominant format in Switzerland, accounting for upwards of 50 per cent of the grocery market. Migros alone has around 32 per cent of the Swiss market. It and rival Co-op Suisse both have a very strong social responsibility, running language classes for employees and investing in environmental projects,” Gunz says. Karl Weisskopf, spokesman for Co-op Suisse, says that this social responsibility is a result of being close to customers. “We know exactly what they want. This is why we haven’t responded to the arrival of hard discounters in Switzerland by going down that same route – our shoppers do not want that.”
Trust and confidence is also a key part of the co-operative business in Scandinavia. “If the company is seen as having a conscience, this breeds trust among consumers,” says Inger Holmström of Co-op Norden, which groups together the Swedish, Danish and Norwegian co-operatives. “There is also a growing awareness among consumers of the importance of quality – and that this cannot necessarily be achieved at the lowest possible price,” she says, reacting to the rise of discounters in the Nordic market as well. But this is not to say that the co-operatives have ignored the price pressures. “In Sweden in particular we have had to lower our prices. Now we have a good price profile there, but customers haven’t realised how good our prices are. We have to get more involved in spreading the word about our quality/price ratio.”
Price is an important issue for the co-operatives in France as well, says IGD’s Gunz. “The pressure to sell at the lowest price is particularly intense in France, dictated by the economic environment there. This is why we are starting to see buying alliances such as Co-opernic, formed recently by Leclerc, Rewe, Italian co-op Conad, Co-op Suisse and Belgium’s Colruyt. These buying groups allow co-ops to buy more efficiently – and cheaply – and pass on the savings to their customers. This is why Colruyt is a member, even though it is not a co-operative – the pressure on prices is very strong in Belgium, so it too needs to make savings where it can.” But this kind of alliance is not for every co-operative, Gunz says. “Co-ops on the continent are more akin to symbol groups in the UK, and do not involve direct consumer ownership. Co-opernic’s members are retailer co-ops, and so are run along different lines to those in the UK .”
For Holmström, “being the biggest is not always the answer to success. But if you can find mutual benefits of joining forces – and deliver them to your customers – then it is good to be together. The Co-op Norden experience shows that while we share quite a lot of similarities, there are also some major differences. It has been important for us to sort out where we need to co-operate and where we do not. We need to remember that the strength of our business lies in being close to the local communities we serve – which inevitably give us a national focus.”