Select a region
Worsening financial performance will see the Channel Islands Coop consider stopping or reducing dividend rates paid out to its thousands of members across the islands later this year in an "unprecedented" move that was met with backlash this evening.
The dividend rate is proposed each year by the retailer and voted on by members at an annual meeting held in May when the firm’s accounts are published.
However, in an email to Members and a statement published on its website and shared on social media, the Group said that this year a proposition will be put forward that could see the end or reduction of rewards.
The level of dividend is determined by the financial performance of the business in the previous year. It allows customers with share numbers at the checkout to earn a financial reward every time they make a qualifying purchase.
Profit is returned to Coop members based on the rate and the number of purchases they have made.
But it said there has been “continuous pressure” on global supply chains and prices since Brexit and the pandemic.
Accounts for the company for 2022 showed that profits continued on a downward trend and it was reporting “very challenging trading conditions”.
Pictured: CEO Mark Cox.
Mark Cox, CEO at the CI Coop said the business “has not been immune” to rising costs due to global events and has worked to invest in prices where it can to mitigate “the financial stress our customers are experiencing in the current economic climate”.
He said the reward scheme is “directly dependent on our financial performance, and that has been affected by extremely challenging market conditions over the past few years”.
Mr Cox added that the firm has resisted passing product price increases onto consumers as far as possible to help manage the cost-of-living crisis and is looking for efficiencies and savings “wherever it can”.
The move was met with strong criticism on social media this evening, with the Facebook post receiving nearly 300 comments in around just three hours and more than 100 shares.
"An absolute disgrace – I like so many others rely on my divi, which is why I pay the prices that have already rapidly risen on so many items... I feel this will end badly for the coop as I certainly won't be spending my money in the coop if we loose our dividend," one commenter said.
Another widely echoed sentiment came from another who said the "only reason we shop at the coop is for the Divi".
"We know what prices on what we need are cheaper elsewhere but we have stuck to them for the Divi," the commenter continued.
"If we don't get payout we will shop elsewhere for our big weekly shops!"
The Coop paid out £5.5m of dividend to around 130,000 members in 2023.
Revenue has increased in recent years, but costs have bitten into profit margins.
The dividend system has changed in recent years at the Coop, with ‘double divi days’, the 1% loyalty bonus, and stamps scrapped in favour of 10% discounts on selected weekends and the usual 4% reward on transactions.
The email sent by Mark Cox to Co-op Members this evening...
Dear Member,
I wanted to reach out to you regarding some challenging decisions we're currently grappling with due to the ongoing difficult trading conditions we're facing. As you may be aware, the food retail sector has encountered significant hurdles over the past five years, stemming from various national and global events such as inflation, Brexit, the pandemic, and conflicts worldwide. Our Coop and the beautiful Islands we call home have not been immune to these pressures.
Despite these factors, the CI Coop has absorbed much of the impact of relentless cost inflation and resisted increasing prices on many everyday items to protect its Members during a period where many are struggling to manage household budgets. I take pride in how we've responded, remaining steadfast in our commitment to support our members, colleagues, and communities.
Regardless of our concerted efforts, our end-of-year financial report will reflect a notable reduction in our net surplus. Faced with this decline, the Society must make some tough decisions that will impact our members. This may involve either reducing dividend payments or suspending them entirely for the 2023 financial year.
I believe it's essential to provide you with this context ahead of our Annual Members' Meeting in May. While it's standard practice for businesses to review their dividend annually, I acknowledge that any adjustment to the dividend is unprecedented for our Coop. I understand that such news may be disappointing and raise concerns, however it's crucial that our Board makes decisions based on what is best for the business and all stakeholders' interests.
A proposition aligned with our member rules, allowing the Board to determine whether to pay no dividend or reduce dividend rates, will be presented at our annual members meeting in May for your vote.
It's important to emphasise that despite this news, the Channel Islands Co-operative Society remains in a strong financial position. Our strategy remains focused on investing in people, infrastructure, technology, and the communities we serve to uphold our position as the leading food retailer in the Channel Islands.
Your membership and loyalty to your Coop are integral to our success. It's crucial that you understand the challenges we're striving to overcome to safeguard the principles upon which we were founded over a century ago. It is your support of your Coop that enables us to be successful and continue to do what we do.
Looking ahead, our strategy includes offering exclusive member pricing and promotions across popular brands, ensuring you receive better value every time you shop in one of our stores. I will be providing more details about these plans in a subsequent communication.
I hope you understand that our Board, Leadership Team and members must make difficult decisions, particularly in challenging conditions like the present. We do not shy away from these decisions and remain transparent and honest about our business.
I sincerely thank you for your continued support and loyalty.
We've put together some FAQs that should help answer any queries, but if you have any further questions about this decision, please don't hesitate to reach out to our Membership Team, who will be more than happy to assist you.
Yours sincerely,
Mark Cox
Chief Executive Officer
The Channel Islands Co-operative Society Limited
Comments
Comments on this story express the views of the commentator only, not Bailiwick Publishing. We are unable to guarantee the accuracy of any of those comments.