Home » Coop and the puzzle of price increases. Alliance 3.0 goes ahead with the rearrangement

Coop and the puzzle of price increases. Alliance 3.0 goes ahead with the rearrangement

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Coop and the puzzle of price increases.  Alliance 3.0 goes ahead with the rearrangement

At Coop the accounts do not add up

On the one hand there are inflamed bills and galloping inflation, on the other the business which should grind profits and which instead will not be positive before 2024. For Alleanza 3.0, the management of supermarkets is a real puzzle whose easiest solution is in the price hikes for products on the shelves. Also because 2022 was a difficult year in which the largest Coop in the country decided to absorb a large part of the price increases without passing them on to customers. A fact that cost dearly as evidenced by a loss of 132 million. An inevitable red even in spite of the fact that the company has been busy reorganizing its activities and cutting costs. Complete with the sale of assets no longer considered strategic such as, for example Robintur travel agencies sold at Gattinoni srlpartner at True Italian Experience. And that is the company headed by the communicator and childhood friend of Maurizio Landini, Gianni Prandi, until december supplier of Ita airways.

A 2022 to forget

In the balance sheet of Alleanza 3.0, born in 2016 from the marriage between Coop Adriatica, Coop consumers Nordest, and Coop Estense, all the difficulties that the company faced last year emerge. The scenario is soon outlined: the company has faced rising financial charges with the rise in interest rates, has recorded an increase in bank debts and a drop in liquidity, as well as a decline in shareholder loans. So 2022 of Alliance 3.0 closed in loss of 132 million with a negative consolidated net financial position of almost 2.9 million (down by 302 million) on over 4 billion in revenues from sales and with a gross operating margin of 4 million, a clear decrease compared to 68 million in 2021.

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An “altruistic” but costly strategy

“Faced with the inflationary pressures on production, the Cooperative has deliberately decided to absorb the significant increases recorded by the industry until June, not transferring them to sales prices” reads the accounting document. “In July, when the situation was already unsustainable, we launched an important maneuver to protect savings through a basket of 600 products – chosen by the shareholders – at reduced prices” he continues.

“This operation was accompanied by other initiatives to protect shareholders of great value (…). At the end of the year, the investment in these extraordinary activities is calculated at 45 million euros” estimates the budget in the 2022 management report. Repeating it in the future, however, means taking into account other expenses that weigh on the budget. And since inflation shows no sign of slowing down, the only alternative route that is envisaged for the Alleanza 3.0 supermarkets in the medium term is an upward adjustment of prices.

Braking all activities

Also because already in 2022 all the different areas recorded a slowdown: from the financial sector (deteriorating by 9 million) to the real estate sector (-12 million in 2022) up to the management of subsidiaries (43 million profit against 56 million in the year Before). This latter fact is linked to the “22 million worsening of the results of Igd siiq, both to the extraordinary items for 2021 (42 million of the second dividend UG2021) that cannot be repeated in 2022, partly offset by the sale of Robitur with a view to stop loss (in 2021 at a loss) and to the best results from ALG and other minor investees for a total of 6 million)” as stated in the Alleanza 3.0 accounting document.

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The report also describes management’s concerns for 2023. “In 2022, 18% of families declared that they had faced permanent food shortages (about 9 million) and one in four Italians fears real poverty for 2023 (not having money for food, transport, clothes, school). And it is above all the unexpected that jeopardizes this fragile harmony: 66% of the sample would not know how to deal with a sudden and non-deferrable expense of 850 euros” we read. For this reason, according to Alleanza 3.0 it would be “in this context, a major fiscal intervention is desirable to support the real income of households and recover purchasing power” reads the management report.

Alliance 3.0 excludes price increases at the supermarket counter

“The hypothesis that Coop Alleanza 3.0 is planning an increase in the prices of its products is groundless. On the contrary, a generalized decrease in prices is already underway which we expect will continue throughout 2023. This is possible because, as announced in the strategic plan, the Cooperative has allocated between 20 and 25 million a year from 2022 to support the purchasing power of members and consumers” let official sources of Alleanza 3.0 know.

“In 2023 alone, for example, 22 million will be invested to keep prices under control and thus reduce the impact of shelf inflation. Furthermore, until the end of 2023 Coop Alleanza 3.0 will continue to offer its members a basket of 500/600 products at protected prices and has introduced a line of branded products in the entry-level price range that allows everyone access to extremely affordable quality goods. In all, therefore, the Business Plan envisages an investment of no less than 130 million over 5 years in terms of supporting the purchasing power of shareholders and customers” specify the same sources.

Meanwhile, to prepare for the future, Alliance 3.0 has entered the heart of a reorganization process

First the situation demanded the downward revision of the strategic plan targets which was revised in the first quarter of this year. Meanwhile, Alleanza 3.0 has moved forward in the “corporate simplification process launched in 2021” as stated in the accounting document. In this context, in June last year, for example, the Cooperative “faced with the continuing difficulties in the tourism sector, finalized the sale of 100% of Robintur to the Gattinoni group with a cash-out of approximately 5 million euro (…) and a positive economic effect of around 2 million (thanks also to the Covid contributions pertaining to the period prior to the sale, retroceded by the purchaser to Coop Alleanza 3.0)”.

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Finally, the liquidation of the subsidiary Viaggia con noi srl was also completed (with a loss of 39 thousand euros), thus marking the farewell of the coops to the tourism segment thanks to Robintur which owns the Bt Expert, Conero Viaggi and Turismo srl brands, as well as Cherry For Fun. Many small pieces in an attempt to keep the accounts in order while prices and rates continue to rise, promising nothing good. Thus, 2023 will also close with a loss.

“Finally, on the subject of the budget, it is too early to make predictions. However, barring further energy shocks – which heavily conditioned the 2022 results – and thanks to the investment decisions on personnel training, modernization of the sales network and products and thanks to the focus on the Cooperative’s core activities, we are counting on being able to return to profit in 2024″ they conclude from the largest Country Co-op.

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