Yahoo Finance Interview: Steve Murrells of Labour-backing Co-op Group on re-earning the right to work with government
Not many big business leaders will have watched last night’s election coverage hoping to see Jeremy Corbyn triumph. Co-op boss Steve Murrells might’ve been one of the few.
Britain’s biggest mutual is a Labour donor through its affiliated left-wing party, the Co-operative Party, which sees its candidates stand as Labour & Co-operative.
What’s more, this month marks the 175th anniversary of the formation of the Rochdale Pioneers. The early consumer co-operative was among the first to pay a dividend and formed the basis of Britain’s co-operative movement. Peering at grainy images of the forefathers, you can easily imagine arch-socialist Corbyn assembled among their ranks.
Not that the retail chief openly endorsed Jezza. In fact, he plays down the link between his food-to-funerals business and the red side of Westminster. “We’re a donor because our members want us to be a donor and that’s right and proper,” he says, adding that the £625,000 donated last year has fallen significantly over the past decade.
He adds that he doesn’t agree with Labour’s academy school policies and the Co-op worked closely with Tory peer Lord McColl on his anti-slavery bill. “We are completely agnostic. We’ll deal with any party.”
There’s plenty Murrells hopes to discuss with the new government: from the apprenticeship levy and business rates to homelessness, sustainability and knife crime. It’s this image as a conscientious, ethical business which Murrells believes sets Co-op apart — and almost destroyed it.
To recap: the £10 billion Co-op Group found itself in the emergency ward in 2013 after the disastrous takeover of Britannia building society and the discovery of a £1.5 billion black hole almost toppled the bank. The lender’s chairman, Paul Flowers, was involved in a sex and drugs scandal which earned him the nickname the Crystal Methodist.
Under Murrells’ predecessor Richard Pennycook, the group was stabilised, several divisions sold off and the bank hived off, now in the hands of US hedge funds. Murrells, boss of the 2600-stores food arm since 2012, took charge in 2017 and has presided over steady growth.
He’s simplified the rest of the business down to funerals, legal services and insurance. Profits rose 27% to £93 million last year, although there are few signs the prized dividend for its 4.6 million members will be restored soon.
“I think we’re becoming relevant again as we were relevant in the past. We are exactly in the rhythm of what people need and our social fabric around this is under quite a lot of pressure,” he says as we meet in London.
Murrells, dressed in a dark blue jumper and grey trousers, has shed what he calls the flowing “Samson” locks he once sported for a more under-stated look.
He’s down from Manchester to kick-start an initiative on tackling knife crime. His store staff faced a staggering 650 physical attacks last year. “That can’t continue… one of the things about the recovery is that we are now giving permission to have a voice again on these important themes.”
Murrells knows plenty about life on the shop floor. He began his career as a kid pushing trolleys at Sainsbury’s in Stanway, near Colchester. His mentors as he climbed the ranks are a who’s who of grocery’s big beasts: 10 years under John Sainsbury at the orange grocer, 15 years with Sir Terry Leahy as Tesco became Britain’s biggest retailer, and the past five under Asda’s saviour Allan Leighton, now chair of the Co-op.
A foray into manufacturing, running pork producer Tulip, was followed in 2012 by the “fight or flight” of the Co-op food job as the group struggled. Five years later he was promoted to the top job just as his wife Nicola, who was battling bowel cancer, was given weeks to live. She pushed him to take the job, and died as he began it. “I suppose you could see it as a slight bitter irony as I was getting the top job that the home life was a bit tough but I’m forever grateful to the Co-op,” says the father of three.
Murrells, who took home £1.9 million last year, lives in Premier League footballers’ territory in Prestbury, Cheshire and adds: “Unfortunately everyone judges your needs by the salaries of footballers’ cheques. Nothing’s cheap.”
He’s even brought a Co-op store to the village, although struggles when I quiz him on the price of its goods (he doesn’t know the price of eggs or milk, but is spot on with a £4 chicken and king prawn paella ready meal). Further afield, he’s looking to expand the Co-op empire. He reckons there are “1500 to 2000 places that can take a Co-op”, with 40 to 50 opening within the M25 each year.
He admits food sales have been a “little lacklustre” of late, adding: “Our food business’s outperformance of everybody else is very strong, but we have seen it drop off against our run rate in recent weeks. I think that’s a reflection of where the whole country is, so we would be expecting a good Christmas.”
Industry data this week showed Co-op outperforming all the big four supermarkets this quarter.
One obvious area for sales growth is online groceries, where the Co-op is still on the start line. This year, it began trialling selling food online, including in London, only to areas close to stores, using robots, electric bikes and taxis. Whether that can work at scale remains to be seen.
Why has it taken so long to launch? “I couldn’t see any prize in running a model that wasn’t sustainable.” And what does he make of M&S and Ocado’s £750 million online food venture next year? “It’s a lot of money for a model that doesn’t make any money,” he zings.
There’s also no sign of a let-up in the funerals price war Co-op has been fighting, while Murrells adds the group is dipping its toe back into health.
Its High Street pharmacies arm was sold for £620 million in 2014 but now the group has a cheaper digital option fulfilling repeat NHS prescriptions and it could even offer online consultations.
It might be the sensible option for a business just about out of the sick bay.
