Co-op Group to sell farms business and consider offloading pharmacy chain
Britain’s biggest mutually owned company is facing its worst ever loss, according to a BBC report
The Co-operative Group has announced plans to sell its farms business and is considering a sale of its pharmacy chain as it faces a reported loss of more than £2bn.
Britain’s biggest mutually owned company, which is preparing for its worst ever loss according to a BBC report on Wednesday morning, considers the farming business – the biggest in the UK – to be peripheral to its main activities and in need of investment. The network of 750 small pharmacy stores, which employs 6,500 staff, sits apart from the group’s grocery operation and the group thinks it also requires investment to compete with rivals such as Alliance Boots.
In a statement, the Co-op said: “As part of the wider strategic review of all of its businesses, the Co-operative Group has decided that its farms are non-core and has started a process that is expected to lead to a sale of the business. In addition, it is exploring options for the future of the pharmacy business. This could include the sale in whole or part of the business.”
The chief executive, Euan Sutherland, who joined nine months ago, is reviewing the Co-op’s entire business, which spans groceries, banking, funeral parlours and legal services. A £1.5bn hole in the bank’s capital requirements saw the group cede control of 70% of the bank to bondholders, led by US hedge funds. The wider group had £1.2bn of debt at the end of its first half in July and is expecting further losses at its bank.
The sale of both businesses will be an emotive subject for the most committed of the Co-op’s eight million members, who view the 15 farms as a historic part of the company and the pharmaceutical arm as one of its most visible operations.
Peter Hunt, the former general secretary of the Co-op political party, said: “It’s pretty shocking news. I think members will be dismayed to lose the pharmaceutical business in particular because it is so well known and has such a wide presence on the high street. The connection with the farms business is probably a bit more sentimental.”
The Co-op started buying farms in the late 19th century to ensure a supply of food for its grocery stores. In defending the sale, the Co-op will stress that 70% of production is cereals sold to other companies and that only 2%, mainly potatoes, goes to the group’s stores.
Phil Hudson, the head of food and farming at the National Farmers Union, said it would be difficult for the Co-op to claim it supports British agriculture if it sells the farms, which employ 200 people.
“It’s disappointing that the Co-op has decided it needs to do this. Although it is looking at selling the farms as a going concern that could be an opportunity for farmers that want additional land or to get into farming, there’s the potential for the loss of land to farming and agriculture.”
Activists are concerned about the way decisions are being made at a group that has been proud of its democratic credentials since it was founded by the Rochdale Society of Equitable Pioneers in 1844.
Jim Lee, a Co-operative member and activist for 25 years, said: “The farms are part of history and the attitude that we had. If you couldn’t get proper food supplies because there was an arrangement within the merchant classes then you started your own farms. In that sense it’s no longer relevant but it shows how we used to deal with things but now we bow out very quickly.
“They are taking huge, huge decisions that change the shape of the co-operative movement without referring them beyond the board and that is worrying.”
Sutherland will give an update on his plans on 26 March when the Co-op announces its annual results. After a £559m loss in the first half, he told the Guardian last week that the annual numbers would be “ugly”.
The BBC reported that the group was heading for a £2bn annual loss and that between 4,000 and 5,000 jobs would be cut in the next three years. The Co-op declined to comment beyond its statement.
The loss is likely to have been caused by more problems at the Co-op Bank, which suffered a £779m loss in the first half mainly because of writedowns on loans from its merger with Britannia Building Society in early 2009. The group may also take further writedowns on the value of Somerfield, which it bought in 2008.
Sean FarrellSarah Butler
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