September 17, 2009

Talk with Coop Italia CEO Vincenzo Tassinari

Vincenzo Tassinari, CEO Coop Italia (photo: Coop Italia)
Vincenzo Tassinari: "Italian retailing faces a tough selection process where only the strong will survive"
Dr. Vincenzo Tassinari (60) hardly seems to have changed since he last talked with Lebensmittel Zeitung at Coop Italia head office in Bologna in 1990. "I am a little greyer though."

Like most Italians, the CEO beamed when asked after his children, and life's knocks didn't seem to have dented his friendly manner.

Admittedly, it is easier to be happy when you can act from a position of strength.

Whereas the co-operative movement all but self-destructed in Germany with the demise of the Coop in 1989, the Italian consumer co-operative has nearly seven million members.

Despite the tough recession in Italy, Coop Italia, with annual sales last year of €12.6bn, has a leading market share (nearly 18 per cent) of the Italian grocery market.

At the end of the day, there are worse things for a retailer than to be deeply rooted in your national soil as well as in the hearts and minds of local shoppers.

This also gives the company a great advantage over foreign competitors on the Italian market when trying to overcome the prejudices and predilections of local authorities who still decide on planning permission.

Certainly, they are too much for Aldi who won't touch the country with a bargepole until its controversial padlock law "Legge 11 Giugno 1971 n. 426" has been revised.


Dr. Tassinari, how would you characterise Italian consumer behaviour in the current recession?

I would call it a little “schizophrenic”. Many Italian consumers want convenience, low prices and top-quality food. Whether rich or poor, they tend to save on non-food products such as detergents and then seem happy to spend what they have saved on high-quality food.

Presumably this makes life difficult for you as a retailer? 

Obviously, yes, and it means that we need to update our customer models. One consequence is that we can’t offer just one price line such as low prices. This is also one of the reasons why the hard discounts haven’t even achieved a 10 per cent share of the Italian food market – unlike in many other European countries.

How are you adapting to this situation?

As market leader we have to guarantee that when a consumer is looking for convenience in our stores, he or she will find convenience. We also have to make sure that the same consumer also finds low prices and/or top-quality food when he or she wants them.

I would also like to add that my idea of quality also includes the concept of  food “safety” in all its aspects.

But isn’t the combination of low prices and top-quality food a recipe for bankruptcy in retailing? 

When consumer buying power is relatively low, we are obliged to offer low prices, but not necessarily the lowest price. The art is to find the right low price at which the consumer is also provided with products which offer both convenience and quality. 

What you say is almost counter-intuitive. At first blush, one would have thought that hard discounters such as Lidl and Penny would be booming in the current recession in Italy?

Obviously, I don’t know their profitability, but I believe that they have problems with sales in Italy. They are only growing revenues and market share through organic growth. Significantly, their sales are falling on a like-for-like basis.

Why then does Coop Italia operate 250 discount stores under the “Dico” banner? After all, discount is not your core competency.

Part of Coop Italia’s mission is to respond to customer needs and not to exclude any format capable of satisfying these needs. Therefore we must also be present in this segment.

By that logic you would also have to compete with Metro Group in the Cash & Carry sector?

Coop Italia is a cooperative organization with over seven million consumer members. Cash & Carry is a wholesale activity catering to small shop keepers, restaurant owners and caterers etc. and therefore a completely different business.

Therefore, Cash & Carry is not one of our main missions because we must satisfy the needs of our consumer members.

There is a tremendous range of discount formats in Italy ranging from hard to soft. How would you characterise Dico?

Dico is neither hard, nor soft, but a medium discounter. It is not like Lidl because we stock more big name brands than they do.

There are rumours that you want to “harden up” the Dico concept. Why go hard when soft discounters such as Eurospin are so successful in Italy? 

Both forms of discount have their raison d’être, but it is true that we have decided to go harder with Dico because it is more efficient, and because we already offer consumers softer elements in our supermarkets, superettes and hypermarkets.

Your seven million members all have equal voting rights. How can you run an efficient modern business on this basis? 

The headquarters of Coop Italia in Bologna is the central marketing and buying office for all the 124 cooperatives in Italy. Nine of these represent around 95 per cent of all turnover, which greatly simplifies our structure.

The cooperatives constitute the supervisory board of Coop Italia which acts as the movement’s operating company.

How do you view Rewe Group’s investment in the supermarket operator La Standa?

I know Standa very well because around ten years ago we participated in the bidding process when Mr. Berlusconi wanted to sell the business. At the time it was literally bust. Many of its outlets were old, obsolete and not valid for the consumer.

Therefore, Rewe had to invest a considerable amount of money in renovating and reforming the whole business.

How do you rate Standa as a competitor today?

I think that they are more in a medium or average position today. Obviously, however, after having been chopped, changed, and dismembered, Standa is not what it used to be. 

Do you think that Standa will be successful in the medium to long-term?

I think that this is a question you can ask of virtually all players. We are all facing a crisis in consumer consumption which is generally declining. This is hitting everyone’s sales. Therefore, I believe that the next few months and years will witness an awkward selection process, where only the strong will survive.

Where then do you see a strategy for survival on the Italian market?

With only 160 m² (1,722 ft²) of modern retail space for every 1,000 citizens, Italy is considerably under-stored compared with other advanced European economies.

The real chance for modern retailers lies in Italy’s southern “mezzogiorno“ region where there are only half as many modern stores as in the north.

And how is Rewe positioned to take advantage of this opportunity?

Standa is principally concentrated in the north, but Rewe is obviously a strong group. Their success will depend on either buying the right competitors or expanding successfully in the south. However, if they remain as small as they are, they will have a problem in the future.

Bernado Caprotti, the owner of superstore operator Esselunga, has said that he would favour Rewe Group as a potential buyer. Do you think he intends to sell his company?

It is always difficult to guess this type of question, especially as we have had differences of opinion with Dr. Caprotti in the past, and I certainly don’t want to continue these.

That said, I think that Esselunga is an excellent operation, and I couldn’t imagine Dr. Caprotti wanting to sell as long as the business continues to run successfully. What will happen in terms of succession is purely a matter for the family to decide.

Surely the expression “differences of opinion” is putting it somewhat mildly? In his book “Falce e carrello” Caprotti accuses Coop Italia of conspiring with leftist regional authorities to hinder the expansion of Esselunga.

I think this is a polemical view of the current competitive situation in Italian retailing. We are not Dr. Caprotti’s real problem. He sees himself as a victim of processes which, in my opinion, affect all Italian retailers. 


In Italy the extremely restrictive planning law no. 426, passed in 1971, was reformed only fairly recently in 1998. Law no. 426 greatly hindered the development of modern retailing in our country.

It didn’t just hit relatively small retailers such as Esselunga; it has also hit big store operators such as Coop Italia particularly hard. It has taken us a good 40 years to modernise our store base from around 6,000 small stores in the 1960s to around 1,300 today.

Do you believe that the law was reformed in 1998 in order to hinder foreign expansion in Italy?

No, I don’t believe that it had anything to do with hidden protectionism. In fact, the Italian authorities have been very liberal in allowing foreign retailers to gain a market share of more than 30 per cent, which is much higher than elsewhere in Europe.

However, you still wish to reform current planning laws?

The “new” law has delegated many decisions to local authorities, which makes it impossible to apply one norm throughout Italy’s 22 regions. The main problem, therefore, is not the law itself, but how it is applied.

Too often, local authorities have a vested interest in keeping small shopkeepers in business. We need one national governance to avoid the current chaos. 

But there are some who don’t see big retail stores as a blessing; they genuinely see them as a threat.

What these people too often don’t realise is that modern retailing can greatly alleviate household budgets and thus increase consumer spending power, while also decreasing price inflation.

Regrettably, the whole debate has become a political-cultural matter in certain regions, but, significantly, these tend to be economically more backward ones. 

Could the strategic cooperation between Auchan and Crai in Italy tempt you to seek an international partner?

Our whole ethos is geared towards cooperation and therefore we do not reject any form of alliance per se. However, Coop Italia and Despar Italia have already joined to form the marketing and buying group Centrale Italiana. Our combined sales represent 24 per cent of the whole Italian market.

And in Europe?

Within the non-food sector, Coop Italia actively participates in Intercoop Ltd for the non-food sector, the association of European cooperatives based in Copenhagen with around 25 million consumer members. We also cooperate with other European cooperatives via a centralised buying office in Hong Kong.

We would like to extend this cooperation to the food sector. If we were to succeed in extending this to include all the cooperatives in Europe, we would reach about €70bn in turnover, which would represent a very considerable force.

Why do you think that most European retail alliances haven’t been able to achieve very major buying synergies to date?

Obviously, each individual member must defend market share on its home market first. Also most European suppliers are still primarily focussed on their national markets and are therefore organised on a country-specific basis. 

So it’s the suppliers’ fault?

We retailers must also realise that we have to offer Procter & Gamble, Coca-Cola etc. a reason for doing supra-national deals. Instead of just pressuring them for better terms & conditions, we must offer them added-value on pan-European agreements. Collaboration can only succeed if there is a win-win for both parties. 

Do you believe that your cooperative model has the capacity to refinance itself adequately when compared with publicly quoted retail multiples?

Under current legislation no cooperative is allowed access to financial markets, which obviously imposes certain limitations. That said, our successful expansion and modernisation since the 60s has been largely financed by loans from our members.

Will these also suffice to sustain medium-term growth?

Currently, members have loaned around €12bn ($17.2bn; £10.6bn). We intend to invest around €2bn ($2.9bn; £1.8bn) in the next three years in order to open 66 new outlets. So, clearly, funding is sufficient for current purposes unless we were obliged to make extraordinary investments on a very large scale.

A number of Italian retailers have petitioned the European Commission to scrap the 30 per cent tax break on co-operative profits. Is this justified?

The Italian government already reduced any tax benefits we receive to a minimum in 2003. I believe that the complaint filed by our competitors is totally unjustified when you look at our corporate structure.

Your critics claim that they know your corporate structures and that current regulation distorts competition to your favour?

As a coop we are obliged to act on mutual principles whereby profits are not distributed among members for the purposes of self-enrichment. Instead profits are reinvested in development.

Members would also not even profit if we sold the company because it would become the property of the Italian state. This is a specific characteristic of our co-operative society model.

There are some who claim that Coop Italia is a political organisation infiltrated by the Left?

These are pure polemics. You only need to look at the dates. We were created in 1854; the Italian communist party wasn’t founded until 1921. Also, if you look at our membership structure, you will find a whole range of consumer cooperatives, including Catholic ones.

In fact, we are really proud of our autonomy and our independence of any political party. We are open to anyone over 18 who wants to join, regardless of sex, race or creed.

Coop Italia exited Croatia in February this year. Would you say that the Croatian experience proves that cooperatives don’t export well?

I think it shows that when cooperatives move abroad, they are often no better than private companies. The real strength of any cooperative derives from its firm roots in a country’s citizenship and consumer base.

Therefore, I think we should cooperate with other national cooperatives so that each one can thrive on its own national territory. We are clearly not an export product.

Carrefour has already sold four hypermarkets to Coop Italia and wishes to sell further stores. Is this a prelude to them exiting in Italy altogether?

Obviously, Carrefour hasn’t been doing well in the south; otherwise it wouldn’t want to exit from the region. It can now concentrate on those regions where it makes more profit.

That said, I don’t think it’s good news at all that the largest retailer in Europe and the second-largest one in the world has given up, because we believe that the south also deserves to benefit from modern retailing.

As a former owner of Standa, Silvio Berlusconi also used to be involved in retailing. Have you seen any reflection of this in the retail legislation his government has passed?

As a businessman, President Berlusconi was always primarily involved in the construction industry and later on in the mass media. As regards retailing, I think his government has assumed a fairly neutral position.

He has been a force neither for the good, nor for the bad. In fact, he has done virtually nothing in terms of retail-specific legislation.

What would you like him to do?

I would like him to promote more modern retailing structures in the south of Italy. I would also like him to liberalise pharmaceuticals, the sale of petrol (gas), the telecommunications industry etc. as it is in other countries.

After all, consumer spending power is in a situation of crisis and modern distribution could play a very useful role in developing competition.

Will Coop Italia be able to cope without the legislative reform you desire?

In our 155-year history we have overcome countless major crises; I am therefore more than confident that we shall master the current one successfully.

Related article in German: Interview by Mike Dawson in Lebensmittel Zeitung, no. 36, 03.09.2009

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