Iceland - Value signposting
19 February 2018
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A brief email on Iceland today, as this service turns its focus on retailers who are finding things tougher in the market, or adopting strategical changes to consoliate their position.
Iceland continue to perform well in the wider market and in fairness, their performance has been impressive given the marketplace is dominated by discount growth.
With Aldi and Lidl performing well, Iceland were in the crossfire pre their efforts on Fresh and expanding their offering in premium.
The 2008 / 2010 recession saw a number of customers switch back in to Iceland as their offer of a frozen food centric range and simple value comms enabled customers to save money.
In many ways, they were Asda of old 'lite'. Gimmick based foods like the Doner Kebab Pizza helped generate PR bit didn't help the quality perception. So for Iceland to then talk about quality was difficult.
Aldi and Lidl clearly felt Iceland pose a threat, given they both have looked at their frozen offer and there has been a degree of churn in this range from both German retailers also.
In recent times, Iceland have had a real push on Luxury inspired by the discounters with some real success found here. Lower margin products in the core range, with the higher margins on the premium drive profits through the business.
They have won a number of awards too which really helps drive perceptions northwards. Their Mince Pies have won a Good Housekeeping award for two consecutive years, and their Toilet Roll was also a 2017 winner.
All of this adds to an improvement in the perception of quality and they can then ride the wave of 'discount' especially as they have been stronger in Fresh and merrily banging the drum on British too.
However with Brexit and their core customer base, in core store locations. Have no doubt that Iceland face right in to the perfect storm of frozen benefit payments, little or no wage growth and rising prices across the board.
There is a real need to strike a balance......
Great value everyday is their chosen strapline and they are really pushing this across the store. It's not always the case that a change in marketing messaging means a retailer is struggling.
They could be reading the market, listening to customers and also being acutely aware that they have been pushing a premium message for some time in Ambient, Fresh and Frozen too.
Therefore a rebase to this yellow/red messaging soothes the core customer, signposts value clearly at the £1 price point and enables customers who are not as budget conscious to find the premium / sharper ranges as they see fit.
Two areas of strength for Iceland, their work on driving sales for events. Chinese New Year and also a big deal on Pancake day (buy a pan for £5 and all ingredients are free).
Also British, bigger packs always work well if the price is right too.
A KVI (known value item) focus is important (Sugar, Milk, Cornflakes, Bread etc). but there can be a risk that a retailer focuses on these items but poorer value exists elsewhere in the store.
Thus not only harming the value perception of the chain but also increasing cannibalisation as customers buy the cheaper KVI items and then disappear elsewhere for their shopping.
This isn't occurring at Iceland however, their value remains solid throughout the store. But they are competitive (and cannot afford not to be) and make a big deal of highlighting their value on these key lines in store.
Another growth area for Iceland has been their ambient range, which has grown respectably.
In their core stores, it occupies the tops of the freezer units and can be difficult to shop, and fill in some cases. There is often the side of an aisle on the last aisle of the store that features traditional shelving with Household, Pet and Beers, Wines and Spirits too.
Iceland come in to contact with B&M and Home Bargains anyway across ambient and therefore have to be competitive in key categories like Household where both variety discount retailers are often leading the market on price.
Iceland opt for leading brands, some tertiary brands (not main household names) and then their own label in some cases, like Toilet Tissue which has won Good Housekeeping and becomes a really effective 'anchor' to get the customers in the door.
The core strength of Iceland is Frozen and in particular, Kids and general Ready Meals aren't forgotten in the core shop. Price cuts are strongly advertised for customers to see on the shelf edge.
There is conflict with the £1 signage versus the 90p backboard but the cross out prices tell customers that prices have come down.
A final tactic from Iceland is the '7 day deal' to bring customers in to the store, effective for their estate given the shared sites many stores occupy.
It allows them to benefit from secondary footfall in the main. If you consider the core Iceland location, often they'll share small retail parks with competitors like B&M, Poundworld alongside some Asda Supermarkets (ex Netto) too.
Therefore 7 day deals - where an item is sold at a low price means footfall can be driven to the store. This alongside strong prices / permanent deals on Sugar, Milk and Bread and a wider feeling of lower prices in the core Frozen areas all help....
Iceland look a decent proposition for customers in the months ahead.
Let's not forget their newer 'premium' format which works well in areas like London, where there is a need to change perceptions on Iceland and crucially, drive some margin in these stores.
The Food Warehouse format also continues to go well for them. The larger format, Cash & Carry style store is attractively laid out with a full Frozen offer alongside an increasing number of ambient larger pack, better value lines that can attract bulk buying discounts.
Whilst their Removing plastic campaign is to be applauded. Bang on trend and also a great piece of PR, it is perhaps easier for them than it is for other, larger retailers given their relatively low assortment of products.
It does raise questions about both Aldi and Lidl though, who are never shy about a PR campaign or five... Surprising to see no 'backing' for the Iceland campaign, or a pledge to join their mission and even reduce the number of years it will take them to do it.....
Credit Iceland with the PR. A great piece of work and it might even drive some trade in to the shops. where the value is clearly evident.
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From the Grocery Insight newsletter archive, first sent to subscribers on 19 February 2018. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.