Mr Pennycook was confirmed in the job days after the Co-op's members approved major changes to the way the mutual is run.
He stepped up from his post as chief financial officer to lead when Euan Sutherland abruptly quit in March.
Mr Pennycook, a former Morrisons executive, has been hired permanently to provide "a period of certainty and calm" after he "impressed us with his deep integrity and has built a rapport with our members", said Group Chair Ursula Lidbetter yesterday.
The Co-op yesterday reported income of £116 million for the first six months of 2014, compared to a loss of more than £1 billion in the same period a year ago as the group raced to repair a capital hole that stemmed from its banking arm.
The Co-op has since sold off most of its stake in the bank, and recently agreed to sell its farming, pharmacy and security businesses to raise a total of £910m.
On an operating level, profits declined from £105m to £43m while revenues dipped from £5.3bn to £5.1bn. The Co-op said its rescue efforts also led to a spike in debt levels to £1.4bn, though the recent asset sales will give a boost to its balance sheet later this year.
"As these results make clear, we have a long road ahead of us before we reach our goal of returning the Co-operative Group back to full financial health," said Mr Pennycook.
He expects to spend three years rebuilding the business and two years in a "renewal phase".
As part of the turnaround, the group is shedding its larger supermarkets to focus on smaller stores. The group expects to open 100 new stores this year and is gradually selling 200 sites.
Like-for-like sales at the smaller outlets rose four per cent on last year, which the firm said was pleasing in light of the ongoing price war between British grocers.
Sales in Co-op's Funeralcare business fell from £201m to £187m, owing to the lower death rate during a particularly mild winter.
In general insurance, which Mr Pennycook described as being "a little bit unloved" in recent years, revenues fell 23 per cent to £189m and the business swung to a loss of £7m. The Co-op scrapped plans to sell the unit in January.
Mr Pennycook said he believed that insurance "fits very well with our portfolio" and has plans to invest in new IT for the business after several years of treading water. "We took our foot off the accelerator in terms of (new business), but we have been very pleased with the renewal rates."
The Co-op is working with headhunters to identify candidates for its new board and will also set up a council of 100 Co-op members.
The overhaul began after the furore surrounding Paul Flowers, the Methodist minister and former chair of Co-op Bank who admitted in court to drug offences.
When asked whether the group had managed to claw back Mr Flowers' £31,000 payoff, Mr Pennycook said: "Unless the cheque's in the post it's not appeared yet."