General Manager's Annual Report (2018)

Actions
Loading...
May 10, 2018
General Manager's Annual Report (2018)

MANAGER’S REPORT

Board and Management continue to work together to implement the Corporate Performance Management (CPM) program. The program utilizes a “Balanced Scorecard” to measure the success of the Co-op rather than focussing solely on the financial results. Management develops the goals and strategies to achieve the Co-op’s vision and mission as set out by the board of directors. The balanced scorecard approach measures the success achieved in each of the Co-op’s five pillars of corporate performance; Market, Operations, Financial, Sustainability, and People. My report will include a brief description of each pillar, the goals and strategies we have identified under each pillar, along with the results we have achieved over the past year.

Market

The “Market” pillar pertains to the co-op’s members and includes areas such as sales, products offered and services provided. Our goal under this pillar is:

“To grow retail sales in key business lines, through targeted promotions and enhanced customer experiences.”

In order to remain relevant and viable, a business must continually increase its revenue to offset the effects of inflation on expenses and generate an acceptable profit. We have set our target to increase sales by 5% each year. Because of Pembina Co-op’s trading area, we have a higher dependence on marketing producer products (crop inputs, bulk fuels, equipment) compared to consumer products (building products, food, pump gas). Agriculture is the dominant industry within our trading area and our results will reflect the strength of the local farm businesses. Our sales will increase if farmers are able to realize a larger profit by increasing crop inputs to achieve higher yields. On the other side of the coin, our consumer products depend more heavily on population growth to drive sales growth. Many of our stores are located in rural communities that are achieving minimal, if any population growth. For these products, we need to focus on marketing beyond our present trading area to increase our sales to sustain our businesses. When the competition becomes another Pembina Co-op store, or a neighbouring retail co-op, we need to remain open to all options available, including consolidation, to remain relevant.

Some of the strategies that management has identified to meet our market goal along with the results achieved over the past year include:

  • Develop the Direct-To-Farm bulk fertilizer market through the new Co-op fertilizer terminal in Brandon. The terminal opened last spring and we are exploring opportunities to utilize the facility to service farms that are able to store their fertilizer requirements on the farm.

  • Develop infrastructure to capitalize on the expansion of soybean acres in southern Manitoba. The completion of the seed treating plant at Notre Dame will increase our capacity to store and treat soybeans to capture sales in this expanding segment of the market.

  • Develop relationships with building contractors to expand lumber sales. Building Centre managers are working with contractors to build closer relationships.

  • Expand the selection of seasonal hardware items in our building centres and hardware stores. Hardware managers have been increasing the selection of outdoor furniture and power equipment to add excitement to our stores.

  • Explore potential to sell bulk lubricants. FCL has revamped its lubricant programs and we are determining the best way to capture this business.

Sales for the past year were $133.63 million, an increase of 5.2% over 2016 sales.

Operations

The “Operations” pillar focuses on the co-op’s income statement and pertains to efficiencies in expense control, utilization of technology, safety and regulation compliance. Our goals under this pillar are:

“Improve retail performance through enhancing retail strategic direction and alignment, by adapting corporate performance management processes.”

“Increase inventory return on investment, through effective and aligned purchasing and sales fulfilment.”

In order to survive, a business must continually become more efficient in its operations. While Pembina Co-op is a large co-op with over $130 million in sales, it is comprised of 21 individual cost centres operating in 15 communities. We do not enjoy the same economies of scale achieved by retails in larger centres that are able to achieve similar sales volumes with half the stores. In the core of our trading area, we struggle as our retail outlets compete for the same customers. In some of our markets, there simply are not enough people to support the number of stores in the area. Last year, we made the decision to close the Manitou food store when it became evident that the store would never generate a profit. Under the Co-op model where our owners are our customers, we struggle with difficult decisions such as closing departments or entire stores.

For future success, we must decide if we are providing better service to our members by having more sites with a basic selection of products, or by offering greater product selection through fewer locations. In certain areas, we have found that we are no longer even able to operate a basic service to the community. In the coming year, we plan to review the food operations at the St. Leon Building Centre as the remaining refrigeration equipment is near the end of its life.

The operation goals have been measured by the co-op’s local savings. In 2017, our local savings were $2.67 million and represent 2.0% of total sales. This was up from $2.27 million (1.8% of sales) that we achieved last year. The stronger savings can be attributed to market gains on our fertilizer inventory returning to more traditional levels. Higher expenses reflected increased depreciation and start-up costs on the Souris Building Centre and the costs incurred from the Manitou food store closure. In the upcoming year, our budget is projecting local savings of $2.57 million ($1.8% of sales). Depreciation will continue to impact our savings with the completion of the Manitou fertilizer shed and the Notre Dame seed facility.

Some of the strategies that management has identified to achieve our operations goals include:

  • Utilize the corporate performance management model to continually review operations and benchmark results with more profitable departments to identify improvement opportunities.

  • To replace the point of sale system in the agro departments with Tronia; a system designed specifically for agro retailers. To train our managers to utilize the system to manage our customer information better and improve inventory turnover through making better inventory buying decisions.

  • Expanding store inventory reviews to identify product that is no longer moving and making plans to move this product and replace with new stock.

Financial

The “Financial” pillar focuses on the strength of the Co-op’s balance sheet and pertains to its ability to meet its future financial commitments. A Co-op only has two sources of capital to finance its growth initiatives; credit from commercial lending institutions and the savings it achieves on operations. Our goal under this pillar is:

“Reduce reliance on member’s equity to finance Co-op’s assets.”

While Pembina Co-op has short term financing in place to meet seasonal capital demands for inventory and accounts receivable, financing for capital projects has been made through the savings generated each year. Each year, a portion of the savings are allocated to reserves and to the members in the form of shares. The reserves and shares recorded on our balance sheet does not represent cash in a bank account, it represents the value of our co-op, including the facilities, equipment, inventory, accounts receivable and the cash in the bank. Over the past five years, we have been slowly transitioning from relying on member equity to using reserves to finance our capital projects.

Our financial goal is to increase the reserves by 1% of total assets each year. Some of the strategies that management has identified to achieve our financial goals include:

  • To improve our understanding of future capital requirements by expanding our financial forecast model to a five-year time horizon.

  • Focus on cash repayments rather than patronage allocations to drive member loyalty.

During the past three years, Pembina Co-op has allocated $13.49 million to its members and has made $13.07 million in cash repayments. During that period, share capital has remained relatively stable at $31.38 million while the reserves have increased by $6.79 million to $30.79 million. By increasing the reserves, we have been able to aggressively reinvest in our facilities without the need to take out any loans.

Sustainability

The “Sustainability” pillar deals with sustaining community and environment; essentially determining if Pembina Co-op is a good corporate citizen. Because of its ownership structure whereby the business is actually owned by the members it serves, community is ingrained in the co-op’s culture. Under the co-op model, community support goes beyond providing financial support for community groups and infrastructure. It provides opportunities for people to develop leadership skills through being a director or an employee of the co-op, encouraging employee’s to be active in their community, and keeping its profits close to home. During the past year, Pembina Co-op has donated over $72,000 towards community events and projects, paid over $406,000 in property taxes and returned $3.99 million cash to its members.

The second part of sustainability is the Co-op’s footprint on the environment. This includes using our resources efficiently, recycling our waste whenever possible and taking care not to pollute the water or soil. We must play particular attention to our petroleum, fertilizer and chemical operations to ensure all precautions are followed to limit spill potential. Care is taken during the construction process to follow all guidelines for energy efficiency, spill containment and employee safety. Operating procedures are developed, implemented and audited to manage the sites on a continual basis.

Our goal under this pillar is:

“Strengthen support to local community initiatives/charities, through initiating strategies that guide financial giving and volunteerism.”

Some of the strategies to achieve this goal include:

  • To develop a program to encourage, measure and recognize employee volunteer commitments.

  • Review the co-op’s donation policy to become more proactive in its community support through a managed program.

A Community Support Policy that focuses on these strategies was developed and approved by the Co-op board in January. Under the new policy, the Co-op will be more proactive in its support of local initiatives. While the process for handling donation requests will be more formalized than in the past, it will enable us to track and manage our support more effectively. Information on the policy is available at any of our outlets, or on our web page at pembinacoop.ca.

People

The “People” pillar pertains to the employees of the co-op, and includes the area of culture, engagement, recruitment, retention, competencies, learning and development, succession and diversity. Of all the pillars, the people pillar has the greatest influence on the long term success of any business. Our goals under this pillar are:

“Strengthen employee competencies through programs and training opportunities in the area of leadership, management and technology.”

“Ensure consistent operations and client service performance through enhanced workplace management and succession strategies that minimize job vacancies.”

The first goal focuses on developing our employees to assume greater responsibility by providing the resources and opportunity for training to improve their skills. The second goal takes the process one step further by providing the career opportunities for our staff to utilize the skills by taking on the management positions as vacancies occur. We want to be ready for when vacancies occur whenever possible rather than reacting and simply filling positions.

Our strategy to achieve our goals is to implement the Talent Management program that has been developed by FCL. The program consists of five modules; Performance Management, Talent Development & Competencies, Employee Engagement, Talent Acquisition & Onboarding, and Succession Planning & Leadership Development. We plan to adopt one module each year.

In 2017, we implemented the performance management module. This was a major change for everyone in the company as we adopted new appraisal formats and performance was reviewed on a quarterly basis rather than annually. As we learn and gain confidence in the new processes, we will also modify and refine the program to make it more effective to develop our people to take on greater responsibility. I believe it will take us 2-3 years to see the full benefits of the new performance management system.

The talent development & competencies module was introduced in 2017 and will be implemented in 2018. This is a structured program to assist employees in developing their competencies to be more successful in their present roles, or to enable them to take on greater responsibility. Competencies are observable behaviours; they can be measured and learned. Learning competencies and practicing them at work allows people to be able to perform in new or enhanced ways; do new things, behave differently, display a changed attitude or deliver enhanced results. The competencies required for team members, team leaders and organizational leaders have been identified so employees can understand where they need to develop in order to manage their career. Our people are encouraged to take ownership of their personal development and the competency model provides the framework to assist them in understanding the areas they need to work on. While classroom study plays a role in developing a competency, the focus is on gaining experience by taking on new tasks outside of a person’s comfort zone and improving their ability to handle these new challenges.

We will continue to recruit employees into entry level positions who can be trained and developed to assume greater responsibility as they develop their career. Employees who have completed formal training programs over the past year include:

  • Ken Henderson (Administration) completed the Retail Manager Group Training program.

  • Brodie Gobin (St Claude Building Centre) completed the HABS Manager Group Training program.

  • Francois Gie (Cypress River Agro) and Brad Parsonage (Baldur Agro) completed the Agro Manager Group Training program.

  • Zachary Mayo (Mariapolis Agro) and Colin Grenier completed the Agronomist in Training program.

The Group Manager training programs are held at FCL Home Office in Saskatoon and focuses on business planning, finance, human resources and marketing.

In 2018 we will be introducing the employee engagement module. Our first step will be to complete an employee engagement survey to determine the baes-line for our Co-op. We will be completing the training for this module with plans to start implementing it in 2019.

 

Pembina Co-op would like to recognize the following employees who have reached service milestones during the past twelve months:

5 Years Service

  • Jacy de Koning Souris Building Centre
  • Chris Hagyard Oakbank Building Centre
  • Gilles Vuignier St Claude Building Centre
  • Mitchell Bohrn Minto Agro
  • Alanna Bellow-Macdonald Swan Lake Agro
  • Vance Desantis Administration

10 Years Service

  • Grant Lusignan Notre Dame Agro
  • Brad Earle Oakbank Building Centre
  • Edward De Smet Swan Lake Agro

15 Years Service

  • Grant McLean Manitou Hardware
  • Bruce Sholdice Cypress River Agro

20 Years Service

  • Susan Pryor Crystal City Food
  • Curtis Lehouillier Administration
  • Carole Tremorin St Claude Building Centre
  • Lewis Hacault Mariapolis Agro
  • Melissa Levreault Pilot Mound Building Centre
  • Barry Nordal Cypress River Agro
  • Reg Almey Swan Lake Agro

30 Years Service

  • Conrad Durand Notre Dame Agro
  • Lorraine Cousin Swan Lake Agro

40 Years Service

  • Marcel Lesage Administration

I would also like to recognize the following employees who have retired since our last annual meeting:

  • Roland Rondeau, our Hardware Supervisor at Oakbank Building Centre with 33 years of service.

  • Bev Nickles, our Agronomist at Mariapolis Agro with 17 years of service

 

On behalf of the entire staff, I would like to thank you for your continued support and we look forward to serving you in the coming year. Thank you

 

 

Dale Pouteau, General Manager