Co-op supermarket hit by Paul Flowers 'drug' scandal, food boss admits

Paul Flowers former chairman of Co-op arrested over allegations of drug use (Nigel Roddis/Getty Images)

Co-op has admitted the scandal surrounding former chairman Paul Flowers over his alleged drug-taking has hit its supermarket business.

"For 50 years, the Co-op group has been suffering from coronary heart disease and last year it had a heart attack,” said Steve Murrells, head of food at Co-op. “During the banking issue the brand position in food remained but image and trust did drop in the dark days of the reverend [Paul Flowers]. However, it has since picked up faster than, say, Tesco recovered after horsemeat."

The revelation comes as Murrells said he wants Co-op Food to become the dominate force in convenience stores with plans to double the 2000 stores to 4,000 within five years.

Murrells said the company is only planning to open 150 stores a year and will not reach the target, but hopes to find “innovative ways” to reach that target.

He also admitted that the food business had lost its way. Since he joined 18 months ago he has replaced 60 per cent of the management team with former executives from rivals Tesco and Sainsbury’s.

A milk war had also been opened up as Co-op followed Tesco’s lead this week by dropping the price of milk from today.

However, Murrells said he will only be dropping the price of one and two pints, rather than four pints like Tesco, saying: “We think this will appeal to customers who shop at convenience stores. We thought dropping four pints will lead to more waste as most people don’t need that much.”

The biggest task for the company is making it relevant again, he added.

“We want a Co-op on every corner of every town. We are moving out of big box stores and focus more on smaller stores,” he said. “We know we haven’t been investing in the business, our stores were, frankly, awful.

“It was also clear to me that our ranges were too confused. Far too often I’d walk in and see 20 varieties of tinned tuna, which is not what you want when space it as a premium.”

He added that with Morrisons, Tesco and Sainsbury’s expanding faster than ever into convenience stores, the best sites are leading to bidding wars. However, revamps of current stores are going well, with double digit growth in those that have had an overhaul.