Radical change at an ethical operator

The Co-op's chief executive Peter Marks tells James Thompson that his way of doing business has never been so relevant

It is fair to say that Peter Marks, the chief executive of the Co-operative Group, is as well-known for his northern sense of humour and straight-talking, as he is for having created a group that, if it were listed, would easily be in the FTSE 30. Referring to the transformation of the Co-op over the past four years, he pulls no punches: "We had to change the business radically and at pace because, quite frankly, had we not we were facing extinction. When I sit down and think about how much change is going on in the business, even I take a sharp intake of breath. If I am being honest, it is probably too much in too short a period."

Having played his part in combining the Co-operative Group with United Co-operatives in 2007, Mr Marks led its acquisition of Somerfield for £1.6bn in 2009 and oversaw the merger of its bank with Britannia Building Society that year. In October, the group unveiled the merger of its high street travel agent andforeign exchange businesses with Thomas Cook, a deal which is the subject of a fast-track Competition Commission probe.

The results appear to be speaking for themselves. For the 51 weeks to 2 January 2010, the Co-op delivered total sales of £13.67bn, reflecting the fact it is now the UK's fifth biggest grocer, the third-largest retail pharmacy chain and the market leader in funeral care services and as an independent travel business. This month, it is expected to unveil record 2010 profits in excess of the previous year's £402m. Achieving this scale, however, has not dimmed Mr Marks's penchant for telling it the way it is on a broad range of topics.

Unsurprisingly – as he started his career in the Co-op's grocery business in 1967 at a time when it was as powerful as Tesco is today – he saves some of his strongest opinions for the food sector. For the past two years, the Co-op has been freneticallyconverting all the Somerfield stores to its own branding and by the end of this month it will have refurbished about 650 shops. Mr Marks admits that the conversions – and the heavy snow before Christmas – have hit its recent performance. For the 13 weeks to 1 January, the Co-op's like-for-like food sales fell by 3.2 per cent, which was behind its big rivals. He explains that as theCo-op's 3,000 stores are in local neighbourhoods, away from trunk roads, it had "real problems getting stock to stores" with the snowfall.

In typically forthright fashion, he says: "We let our customers down during that period. Our availability was poor and we are still recovering from that but we are recovering quickly. Added to that, we are still in the middle of integrating Somerfield and that has given us some pain during this year." At its peak, the Co-op was refurbishing 25 stores a week, which led to those stores being closed for a short period.

Mr Marks admits the UK consumer spending environmentremains tough, as can be seen by the more than 40 per cent of its food offered on promotion currently. He says: "Right now, I think it is the most competitive market I have ever experienced in my career."

As a result, headv ises the Bank of England not to raise interest rates because it would have a damaging impact on the economy. "In my view, it would be disastrous for interest rates to go up. If they are talking about a double-dip [recession], that will guarantee a double dip."

A longer-term concern of Mr Marks is food price inflation and how to feed a burgeoning global population, which is forecast to increase from 6.8 billion to 9 billion by 2050. "We are running out of food. How are we going to feed 9 billion people? We have got to find ways of being more efficient at producing food."

One way the Co-op is doing its bit is by paying a premium to Fairtrade farmers in developing countries. On a visit to Africa in October, he saw how the Fairtrade farmers had become more efficient by sharing machinery and resources through forming co-operatives.

"If we did not support them, they could not survive. That is one way we can alleviate poverty and help us as a world to produce more and better food," he says.

As part of a much a wider new benchmark for "ethical consumerism" unveiled last month, the Co-op vowed that wherever possible it would source any product it could a Fairtrade basis by 2013. To highlight its ethical, community and co-operative credentials, the Co-op will launch a big new advertising campaign on ITV on Monday night.

Despite the austere economic conditions, Mr Marks believes the original values and principles of the Rochdale Pioneers Society, which founded the co-operative movement in 1844, are just as relevant today. "My members tell me that this idea of social responsibility is not a tap you can turn off and on when it suits you or the economy is down," he explains. "Population growth andclimate change will not come to a temporary halt because we are inrecession."

While the current and the previous governments have reached out to the Co-operative Group to seek better ways of delivering public services, Mr Marks criticises the way the coalition has communicated its message on the Big Society.

He says: "As far as the Big Society is concerned, I kind of understand the vision – vaguely – and that is the problem. And I think the articulation of that vision has been somewhat lacking." One example of his own interpretation of the Big Society is the Co-op's "enterprise hubs", which give free advice to small businesses or groups seeking to form a co-operative.

While he is happy to wax lyrical about such issues, Mr Marks smiles and rolls his eyes, when asked about his retirement. "Iam a spring chicken [at 61]," he says: "I want to make sure I finish off all the big change projects that I need to do and when that is done I will think about myfuture plans." When that day comes, Mr Marks will leave a lasting legacy of an organisation looking ahead to a bright future instead of "extinction".

A retailer and rock star

Peter Marks joined Yorkshire Co-op as a management trainee in 1967 before climbing the ladder to become chief executive in 2002. He then became the boss of the enlarged United Co-operatives, when United Northwest and Yorkshire Co-operatives merged. After the Co-operative Group's merger with United, he took the top job.

An unfamiliar husband...

Work has been hectic recently for Mr Marks. He jokes: "My wife said to me the other day, 'I recognise the face but I cannot put a name to it'." He has two daughters and lives in Bingley, Yorkshire. He plays golf and supports Bradford City but he also plays in a blues band, The Alligators. The 61-year old says: "One of my team called us 'The Old Crocs', which was not her best career move."