Iceland - Ongoing strength in the market

14 March 2017

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Iceland continue to go very well in the market, with Kantar showing further favourable growth for the chain last week. The retailer (not country) were a bit of a laggard for a period of time as they went down a price route with reduced frozen Pizza's at 90p alongside ranging novelty items, like the Donner Kebab Pizza for example...

However Kerry Katona, Peter Andre and co can only take you so far, and whilst Iceland had a loyal band of customers, they were unlikely to grow their core base further given their positioning in the market and focus on frozen foods. Plus their stores are typically located in hard pressed areas that are ultra price sensitive.

Therefore they needed to diversify the offer somewhat, frozen foods isn't 'sexy' and it's a hard sell. Iceland were arguably far more susceptible to discounters than anyone else, given the obvious overlap in offer and location too.

Increasingly, German discounters were expanding their frozen ranges and using seasonality incredibly well. Limiting their range counts by swapping out of Roast Potatoes and in to Potato Wedges for the Summer and back again in September.

Their low prices and footfall in to the core shop eroded the Iceland sales line, despite Iceland having a deeper range of frozen, customers were buying in to Fresh at the discounters where they could easily get their essentials for the freezer too.

Iceland had extended their offer in ambient too, but it was limited to added value packs (3l bottles of Coke etc) alongside a core range of products. Heavily promotional and not overly compelling, some nice trade up lines alongside a small range of core chilled but that was it.

Versus German discounters, it wasn't anywhere near enough.

Whilst this email reviews the new model store in Clapham, London, the reality is that it's not just about new store formats for Iceland, their growth is coming from food warehouses which combine their frozen offer alongside more chilled and larger pack sizes and world foods.

A sharper Wines fixture is also a key part of the offer; whilst these larger stores sited on retail parks are going well, there is a pressing need to modernise the core estate also.

Existing core high street stores that have been refitted (without this new look) have had chilled refrigeration added which isn't cheap, but enhances their appeal with the expanded range.

So to the new look, it's incredibly impressive really and aligns Iceland perfectly as being the 'British discounter' that Sainsbury's and Netto hoped their joint venture would be. It works in that they capitalise on their core business model around Frozen, expand fresh foods and Produce and push on with flagging their award winning products as well.

The new look store in Clapham (alongside a 2nd store in Chester that has just reopened) is classic in that it's a high street store which is typical for Iceland. So how do they align their core offer of Frozen foods with the modern day customer whilst playing to strengths of value but also provenance as they compete in a greater way against the German discounters?

Well, the High street stores in London are a different breed entirely, even in the outlying areas. Their primary mission has to be centred around convenience in the first instance, so the addition of a Coffee machine is notable, as are the cues for online deliveries.

Slots available for that day alongside tomorrow too, very flexible and enables a customer in for a few bits potentially converting their shop to a fuller one with delivery.

There's even a meal deal with a free bottle of Water!

More of the convenience thinking here, given that it's London but also that the stores have to adjust their missions to accomodate customers that are time pressed.

Rather than dropping lots of fresh foods in (there are plenty!) Iceland move their frozen Pizza and ready meals range in to the first aisle as 'meal solutions'.

Very sharp trading and works well for the time pressed consumer and allows Frozen to be as convenient as Fresh.

Big deals in the doorway preserve an element of value despite sharper surroundings, with a wider Produce range also noted.

A key fulcrum in the fightback against German discount of course.

There's a wider Fresh range too; Cheese is a big winner for German discount as their prices are so low, it was an area where main market retailers had gone too high.

Similarly Meat represents a major push for Iceland; again it's an area for Aldi and Lidl who have attained huge growth by sourcing British meat and bringing the prices down.

A more compelling range of ambient is also within the store, strong assortments of Cereals, Tea and Coffee alongside other ambient ranges, Water for example given that its central London.

Again, it's about providing more of a 'full' shop, with an expanded fresh range, low prices, the safe frozen range and a wider range of ambient. Added to that free delivery on the day of shop if applicable and it becomes very compelling.

The sharper look and feel for the centre of the store is most impressive, the Frozen range still takes up the main '%' of range and space, but there is a nicer tilt on the graphics, signage and messaging around the store.

Cues around 'quick and easy' alongside 'less waste' as there's a real push on the benefits of Frozen. The fact that Frozen is as good as Fresh and mean shopping is more cost effective for a family is noteworthy.

The work around their backlit signage atop the freezers is great to flag the various sub divisions within the category.

Quality is an ongoing battle for all retailers, again, discounters changed the landscape with their high quality, low price ethos. Iceland join the party with their comparisons against leading brands and pointers around quality of their range.

The Chicken Nuggets feature McDonald's colours on the signage (indeed there was signage pre Christmas that compared Iceland Nuggets vs. McDonald's) alongside highlighting less than 5% fat Mince, which is a key line for Slimming World customers.

Chef approved meals too..

Plus there's Greggs!

Another market for the Iceland push back vs. discount is their premium Wines fixture. Wooden crates for the premium Wine selection is a major push vs. Lidl, and also Aldi who are adding premium fixtures in to their ranges too.

So there we have it; a great format store from Iceland within the capital, the important aspect is the improvement within range and offer. Becoming more of a smaller supermarket / British discounter than just a retailer of frozen foods alongside a few impulse items.

Their advancements in signage are excellent and give more of a halo to the core frozen range. There's no reason to see why food to go and the coffee machines couldn't be be added to most of the existing estate given their wider popularity.

Yes, it's a new store and it's nice to look at. But their success is down to them doing a far better job day to day than any new concept site.

More on this next time out but it's good to see them progressing their offer in a very competitive market.

From the Grocery Insight newsletter archive, first sent to subscribers on 14 March 2017. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.