The battle raging between the grocers on price and innovation has made tough decisions necessary - but it has also brought opportunities.
There’s a war going on in Britain’s supermarkets. The shock troops of the German discount invaders are wreaking havoc, overturning long-established perceptions of what customers want and how to serve them.
Add in the switch to online ordering, the trend away from hypermarkets and big weekly shops, plus the focus of the largest of the big four on its own self-inflicted problems, and you have the recipe for a perfect storm that makes Michael Fish’s famous hurricane look like a gentle breeze.
Everyone loves to read about disasters, so the car crash that is UK food retailing today makes great copy. But spare a thought for the human cost. Many thousands of jobs are at risk and most of us will ultimately feel the pain in our pensions as share values plummet.
In order to protect the livelihoods of my 25,000-plus colleagues, I’ve had to take drastic action. Cutting milk to 89p for four pints has won me no friends in the farming community, though it was entirely funded from our own margin. But it’s helped to renew Iceland’s point of difference on the high street.
We’ve also cut prices on other lines, rolled out online shopping across the country and developed a completely new type of store called Food Warehouse that offers a wider range of speciality lines and bulk packs that represent really outstanding value.
At Iceland we pride ourselves on being innovative, but achieving exclusivity is more of a challenge. We invented frozen party food in the UK but everyone quickly copied us. You can guarantee that our best-selling lines last Christmas will be in several other stores this year. It’s a constant challenge to keep one step ahead.
The good news is that this works both ways and we can quickly learn from and copy our competitors. Iceland itself wasn’t an original idea when I started it in 1970. I pinched it from someone else.
We are learning from the discounters how to do things more cheaply and efficiently, and can pass those savings on to our customers. The tricky bit is doing that without chucking out the distinctive ethos and culture that make Iceland Iceland, rather than Aldi or Lidl.
The best bit of business advice I have ever received is simply “never give up”. So we are not daunted or discouraged by the waves buffeting our business.
We also benefit from being privately owned, and not beholden to shareholders who are relentlessly focused on short-term performance and therefore demand quick fixes.
I have one further important advantage in being Britain’s longest-serving food retail chief executive: I’ve seen it all before.
The analysts read the last rites for Iceland as a quoted company when we had our first profit dip way back in 1996. They told us we were finished. Worse than that, they said we should never have existed in the first place.
We proved them wrong by reinventing ourselves and rebuilding a unique position in the market. Free home delivery – which any accountant will tell you is economic madness – was critical to setting us apart and has never been replicated elsewhere.
The business had been brought to the brink of collapse again before I came back to run it in 2005. Once again, we turned it around successfully.
Yes, war is hell. But at least it’s not dull and, so long as we continue to believe that we can win once more, I know we will.
- Malcolm Walker, chief executive, Iceland