Has the Co-op put its reputation at risk?

After a set of impressive annual results, you could be forgiven for thinking the Co-op would be basking in the glow of some positive media coverage.

Yet, the reality is it has found itself facing some damaging headlines that have raised questions about its ethics and values.

And there have even been accusations of hypocrisy.

The Co-operative Group has been in the firing line since announcing that, while it would repay £15.5m in furlough support claimed through the Coronavirus Job Retention Scheme, it would keep £66m of business rates relief it received during the pandemic.

That decision to keep hold of taxpayer’s money has been made despite its profits booming over the past year and it appearing to be a pandemic winner.

Pre-tax profits at the group rose to £127m from £24m and sales grew by 5.5 per cent to £11.5 billion. As a result, the executive team has been awarded bonuses – a decision that has added to the brand’s PR headache.

Here is a taste of what the media has made about the announcement:

Co-op pays bonuses to bosses after profits soar 500% but keeps £66m of taxpayer's Covid-relief cash thisismoney

Co-op to keep £66m in rates relief despite 400% rise in profits Guardian

Co-op under attack for keeping business rates relief Telegraph

Co-op Group risks hit to reputation by retaining part of state COVID funds Sky News

 

As well as these headlines, The Telegraph story included a quote from an anonymous ‘supermarket executive’ who accused the Co-op of "nuclear-powered hypocrisy".

Steve Murrells, the Co-op chief executive, defended the decision by saying costs had risen with the need for additional staff and PPE equipment and increased sickness and absences.

He added that: “The pandemic turned our plans upside down and, while our revenues went up marginally, our costs rose dis-proportionately.

“We welcomed money from the Government on the basis that it was not a loan and we would not need to pay it back – and we took business decisions accordingly.”

 

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So, why is this such a damaging story for the Co-op and is it a crisis media management incident? After all, the business rates relief was not a loan and it is up to the group to decide what to do with the support. 

Well, the majority of other major supermarkets have already opted to hand back business rates relief, including Sainsbury’s, Lidl, Asda, Morrisons and Tesco, who became the first to take this approach in December, and scored a great PR win. Other retailers like B&M and Pets at Home have also paid the money back.

While some other stores, notably Waitrose (facing an annual loss of more than £500m) and Iceland, have resisted calls to return the money to the public purse, these are in the minority.

What makes this a bigger problem for the Co-op – and potentially a crisis – is that the group puts huge emphasis on its values, principles and ethical reputation, and goes to great lengths to try to show it is ‘different’ from its rivals. 

The messages on its website talk about principles being “more valuable than profits”. Its ‘why we are different’ section adds: “The more successful we are, the more we can give back to you and your local community.”

Despite its campaigning alongside Marcus Rashford and the money it has given to good causes over the past year, customers may now be asking themselves a few questions.

Does this decision feel right?  Do its ethical messages ring hollow? Does the group value these values as much as it says?

And ultimately, some will be asking whether it truly offers "a different, fairer and better way of doing business", or is it ultimately all about profits and bosses’ bonuses?

The Co-op faces a wait to whether these sorts of questions and doubts will see shoppers part with their cash elsewhere.  Will this decision impact its business, or will it be a short-term hit to its reputation?

Either way, it may be hard for it to reclaim the moral high ground any time soon.

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Media First are media and communications training specialists with more than 35 years of experience. We have a team of trainers, each with decades of experience working as journalists, presenters, communications coaches and media trainers. 

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