I MUST ADMIT THAT I’ve never been a member of a co-operative, mainly due to my tendency to being a bit of a rebel. So I have been following the goings-on at Londis as an interested observer rather than as a shareholder. Incidentally, the way some of the media have been reporting this story you could be forgiven for thinking that holding a share was less to do with being a member of a club and more like being the lucky winner of the Golden Ticket for Willy Wonka’s Chocolate Factory.
NOW IT HAS TO BE SAID that credit must be given that the organisation has been making profits and has made itself so attractive. It is also true that the directors who were set to walk away with over £20m were no Johnny-come-latelies as they had a fair number of years service under their belts. It is also true that Londis retailers didn’t join the group as a long-term strategic investment and the chance of a quick £10,000 fluttering through the letterbox would at first appear to be an unexpected bonus.
HAVING SAID THAT, from my point of view, the true position is very different. Firstly, should a co-operative be making big profits? On the one hand any organisation needs to retain a certain level of surplus if it is to be able to invest in the future. There is no doubt that we would be hearing very different howls of protest if the directors were calling for all the shareholders to stump up an extra £10,000 a head to keep the ship afloat. On the other hand the profits have only arisen because they represent the extra price paid for goods and services by the members. The fact that most of these members have been able to trade successfully, despite paying more for their goods, is a reflection of the directors’ success in the efficient purchasing and distribution of product, but at the end of the day that surplus belongs to the members, not the directors.
THAT THE DIRECTORS WERE ABLE to gain approval for such an obviously unfair ‘potential disposal’ package is a damning indictment of this kind of mutual organisation. Most of the members are just too busy running their own businesses to be able to examine the minutiae of everything they are asked to approve. That the directors made the distribution of the spoils so unfair is a testament to the fact that, sometimes, successful people operating in a vacuum tend to get carried away with ideas of their own invincibility. Having been well paid for their normal duties, if they had shown some restraint and opted for a payout of ‘only’ £8m they would probably have got away with it.
SO WHAT NOW FOR THE FUTURE? Certainly there can be no return to the way things were. The directors must feel resentful at being ‘robbed’ of their prize, while the members are bound to view their every move with mistrust. Which is a great shame because obviously the previous status quo had been serving all concerned very well. While there is no way of putting the genie back in the bottle, the members should remember that their livelihood depends on an efficient day-to-day operation by their ‘supplier’ and not on the size of any windfall cheque. From the forecourt trades’ view it is to be hoped that such an efficient symbol group survives. I have long believed that being part of a symbol group is the best way forward for the majority of sites with reasonable size shops and no specific prior expertise in convenience retailing. We have already been hard hit by the reduction of available suppliers for fuel. As the likes of Tesco and even Sainsbury gear themselves up for a real assault on the convenience trade, we desperately need to have a choice of which symbol group we join.
THIS MARKET LEADER THING really seems to affect companies? Just look at BP. Couldn’t deliver petrol properly over Christmas, the roll-out of the Dione system that had forecourts grinding to a halt, altering premia almost at will – it’s enough to remind you of the Tiger of a few years ago!