Lanica plans pounds 10m wholesale cuts for Co-op

Andrew Regan would slash annual bill and strip out layers of management
Andrew Regan would cut the Co-operative Wholesale Society's central costs by pounds 10m, introduce bumper incentive schemes for employees and prune middle management if his approach to the Co-op movement proves successful.

The details are the first to emerge of the 31-year-old's strategy if his Lanica Trust vehicle wins control of parts of the CWS's non-food interests.

Though Lanica would not comment yesterday, it is understood that it has estimated the CWS's central office costs in Manchester to be around pounds 16m per year, including heavy costs for the executive committee and support staff. Some two-thirds of the costs would be stripped out.

The Co-op employs 2,500 staff in the main Manchester offices of the CWS, Co-operative Insurance Society, the Co-op Bank and the Co-operative Union.

Lower-level jobs at the CWS would not be severely affected by Mr Regan's plans. Incentive schemes would be introduced to motivate the rank and file. These would be similar to schemes introduced at his previous vehicle Hobson, which bought the Co-op's food manufacturing businesses.

The details come ahead of the CWS annual results, due to be published on Monday. As well as confirming a poor year for the business it is expected that they will reveal details of the retirement package of the previous chief executive, David Skinner. There is speculation that it could involve a payment of two years' salary plus continued use of his company Jaguar.

Though Mr Regan has missed the deadline for resolutions for the CWS annual meeting next month, it is possible that a supportive Co-operative member could propose a special meeting to discuss the issue. It is thought that Lanica Trust would prefer its proposals to be discussed in a single-issue meeting rather than have its motion compete with a host of others at an agm. Lanica Trust also felt that using the annual meeting would have appeared hostile.

Though there have been suggestions that Mr Regan has the support of some of the regional societies, one chief executive of a small Co-op said yesterday: "We would strongly support the line taken by Graham Melmoth [the CWS chief executive] and oppose the approach that has been made. As mutuals without a fluctuating share price to distract us and through generations of accounting policies the movement has built up considerable internal reserves. But that wealth is not there to be plundered. We are the custodians of it. We are charged with cultivating it and handing it on to the next generation."

However, the chief executive added that he accepted the movement's fragmentation was a problem and that he would strongly support a merger of the CWS and Co-operative Retailer Services, the other main Co-op division.

Mr Melmoth made similar comments to a group of Co-op managers in Solihull last Friday. He is quoted in the latest issue of Co-operative News as saying it is "time to heal our split personality". Though he repeated his tough stance on the Lanica approach he said the movement should make its assets work harder. He hinted at a moving together of the CWS and CRS though he did not use the term "merger".

He said that if the two camps were to move closer they would form a stronger commercial proposition. Mr Melmoth said: "It is possible that the interesting diversion of Lanica over the last few weeks ... will help to concentrate minds."