Co-op struggles continue with Somerfield takeover

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The Independent Online

The Co-operative Group's food division is suffering a trading crisis in the Somerfield stores that it acquired nearly three years ago in a £1.6bn deal.

Documents seen by The Independent also reveal the Co-operative's food business is battling soaring complaints in its stores, including overcharging customers due to misleading information.

The damning revelations about the UK's fifth-biggest grocer come after it unveiled up to 280 redundancies last week. These are largely at its head office in Manchester, with none in stores.

The former Somerfield stores posted a 3.38 per cent fall in like-for-like food sales over the eight weeks to 25 February, compared with a rise of 0.13 per cent at the Co-operative's own grocery shops, according to a memo. Total sales at the Co-op's food business, excluding fuel, are already £15.55m below budget, just eight weeks into its new financial year that started in early January.

The mutual business has converted all of the 650-plus Somerfield shops to its Co-operative branding but continues to use data on both in internal documents. The figures will further reinforce the view that its troubles in integrating Somerfield into the group are far from over, with sources citing the Co-op's failure to get the right ranges into the acquired stores.

Following reports emerging in April 2010 about Somerfield trading woes, the ongoing problems will intensify the pressure on Peter Marks, the chief executive of the group, which acquired the Britannia building society in 2009.

The group, which has more than 4,800 retail trading outlets across pharmacy, banking and funeral care, was also given preferred-bidder status in December to acquire 632 branches of Lloyds Banking Group.

Data on customer complaints also makes for grim reading at the Co-op's 3,000-store food business. The number of complaints rose to 447 in the sixth week of its financial year, up from the 333 recorded in week three. The documents say that "staff attitude complaints continue to be in the 100s" each week, with swearing, overcharging and food safety concerns also cited. The grocer has 20 million weekly transactions.

The latest memo refers to "general rudeness of staff – no eye contact, no please or thank you, talking to colleagues, not asking for membership cards, queues and overcharging". The Co-op declined to comment. A source said that complaints are rising as the Co-operative is going through so much change.

Up to 280 food job will be cut across functions, including central operations, IT and finance, as well as field-based loss prevention teams. In a memo, the Co-op said that no staff will receive less than 2 weeks' pay, in addition to payment for their notice period.