If you haven’t yet picked up on the BBC’s series on Iceland Foods I suggest you have a look at it.
Iceland is an amazing entrepreneurial success story. The company was founded in Oswestry on the Welsh border in 1970 by Malcolm Walker. Malcolm is a colourful old fashioned entrepreneur: failure at school, streetwise, unsophisticated, but smooth talking and super-smart. In the 1970s Iceland opened a further 15 stores across North Wales and by 1984 the company had expanded to 81 stores and was floated on the London stock exchange. In 1989 it launched a successful takeover bid for its main rival, Bejam, which at that time was three times larger than Iceland. By 2004 it had 760 outlets across the UK.
In the 1990s the company pursued a series of strategic blind alleys during the course of which Malcolm was forced to step down, then in 2009 he came back to lead the company as it refocused on its core business and in 2011 he bought back control of the company he’d founded 41 years earlier in a £1.55bn buy out.
The company’s strategy is very interesting:-
- The fact that all products are frozen means that Iceland can use pure ingredients and avoid many of the weird and wonderful additives favoured by others in the food industry.
- The production process for convenience foods is much more efficient because the products are frozen. The big supermarkets which offer “fresh” convenience products have to manage daily demand very carefully in order to avoid waste and therefore have relatively short production runs. This is expensive. Iceland, on the other hand, can have long production runs with very little waste. This creates huge efficiencies which means products can be offered at very competitive prices.
- Malcolm claims that its frozen fish is fresher than the fish sold as fresh in the big Supermarkets: ‘Fish is frozen on the docks as soon as it is caught. Why would you then defrost it just to try to convince shoppers that it is more fresh? It isn’t – as soon as you defrost it, it’s going off.’
- Iceland is very innovative in coming up with new products. Many convenience foods that we see daily on supermarket shelves, such as party food and canapés, started off in Iceland frozen food cabinets and were then copied by the big chains.
- Iceland prides itself on excellent customer service. The employees are highly motivated and absolutely love working there. In fact, some of them even go home and bore their families with stories about how wonderful it is to work at Iceland. This despite the fact that wages are no higher than the other retailers in the sector.
Iceland is growing steadily under Malcolm’s leadership, but with all this going for it why isn’t it more successful?
Iceland’s share of the UK retail food market is 2%. You wouldn’t expect the company to be in a position to compete with the likes of Tesco (at 30.5%) or Asda (at 16.9%), but it’s interesting to note that it has been overtaken by recent upstarts Aldi (3.6%) and Lidl (3.0%). Part of this must be down to the fact that frozen food is very much out of fashion. But I would argue that much of the problem lies with the company’s brand. Iceland’s strategy has a lot going for it… organic, low waste and amazing value coupled with excellent customer service. But the brand fails to get all these messages across. It just screams one thing which is “Cheap!” And we all know that cheap is not good.
To what extent are you communicating inconsistent messages through your brand? And what could you change to get your brand values across more effectively?