MD Mike Coupe tells Elaine Watson how Iceland’s programme of refits is a vital part of a master plan to drive profits
This time last year some quarters of the City were writing off Britain’s biggest frozen food retailer as a hopeless case. A new promotional strategy driven by Iceland’s new MD and former Asda man Mike Coupe had spectacularly backfired, sales were in freefall and shares plummeted to an all-time low.
Iceland, said one City sceptic in a devastating note on the Big Food Group published in December, was stuck between a rock and a hard place, tied to a promotional stategy that was failing to deliver any profit, and struggling to present a consistent offer to the consumer.
Nine months later, however, and Coupe could be having the last laugh. TNS data suggests Iceland will be back into positive sales growth in the second quarter. New format stores are generating double digit growth and sales from the rest of the estate, which nosedived after his abortive attempt to switch to a less deal-led strategy, have stabilised.
“I can’t comment on current trading,” says Coupe. “But I can say there is now a degree of stability in the base business supplemented by a group of stores doing reasonable year-on-year growth.”
Contrary to some “analyst bluster”, adds the former Asda trading director who took the helm at Iceland in late 2001, sales growth from refurbished stores is not being driven at the expense of profits. If the company was unhappy with the returns from refits it wouldn’t be shelling out £200,000 a time on them, he says bluntly. “We just wouldn’t be doing it. It’s that simple.”
In fact, sales growth at stores converted to one of the new formats (see box) has been so encouraging that refits will double from 100 to 200 in the next financial year. Take out holidays and that equates to roughly six refurbishments a week, observes Coupe. “The pace will be absolutely ferocious.”
From a pricing and promotional point of view, the new format stores herald a change in emphasis rather than a switch to EDLP as has sometimes been reported, Coupe emphasises. “Iceland is a deal-led organisation, and that’s got to be central to our overall proposition.”
But by increasing the range and encouraging shopping of the whole store rather than just the deals in the first aisle, the new formats are less deal dependent. “As we convert more stores, the deal participation will reduce.”
The notion that Iceland is still struggling to define itself in the marketplace, as some analysts have suggested, leaves Coupe bemused. “We know exactly who our customers are and why they shop with us. The Iceland customer is mid- to downmarket, usually a mum with a hungry family to feed on a tight budget. That’s our core customer constituency.”
The refit programme helps Iceland sweat more out of its assets - prime locations on busy high streets - by tailoring ranges to local demographics and competition. The sales increases at refurbished stores have largely been driven by higher footfall, rather than increased basket spend, says Coupe. “Sales have gone up because more people are shopping with us.”
Aside from smartening up its stores and continuing to offer market leading deals, a central part of the strategy will be a renewed emphasis on product quality and innovation, which will feature more prominently in Iceland’s marketing from now on. “External communications will still be deal-focused, but we will also start talking far more about product quality,” he explains.
The Yummy Awards, which compare Iceland own label products with equivalents from other leading supermarkets in blind taste tests, are a good example. “This drives home the message that we are offering fantastic quality as well as prices,” says Coupe. “It’s easy to forget that Iceland is the second largest player in frozen food in the UK [after Tesco], which gives us immense bargaining power. We can be truly market leading in deals and through innovation.”
Likewise, pooling volumes with Booker, Big Food Group’s wholesale arm, has given Iceland much better terms on ambient staples like soft drinks. And Iceland is starting to use Booker’s expertise and buying power on beers, wines and spirits.
Although refurbishing the estate has been the top priority, the last 18 months have also seen a colossal amount of work from a systems perspective to make Iceland a far slicker operation, says Coupe.
Central to this has been the roll-out of a new sales-based ordering system and the development of collaboratively managed inventory initiatives with suppliers (The Grocer, August 30, p12). These vastly improve communications with suppliers and reduce inventory through greater visibility of stock.
Hand-held terminals are used on the shopfloor to improve stock control, he adds. “It’s incredible to think that, less than two years ago, we were relying on hand counts and manual data entry to manage stock, and all of our shelf edge labels were printed centrally and distributed to stores. Now we can run off duplicates instore.” Store managers are also being given access to more financial information and incentivised to up their game through a new performance-related bonus scheme.
“Again, 18 months ago, managers literally had no idea of what their net profits were. Now they are far more commercially aware.”
Given that Iceland is still “only 10% to 15% down the road [to a fully refurbished estate], there is absolutely no room for complacency,” he adds, “but we have achieved a hell of a lot in the last year”.
This time last year some quarters of the City were writing off Britain’s biggest frozen food retailer as a hopeless case. A new promotional strategy driven by Iceland’s new MD and former Asda man Mike Coupe had spectacularly backfired, sales were in freefall and shares plummeted to an all-time low.
Iceland, said one City sceptic in a devastating note on the Big Food Group published in December, was stuck between a rock and a hard place, tied to a promotional stategy that was failing to deliver any profit, and struggling to present a consistent offer to the consumer.
Nine months later, however, and Coupe could be having the last laugh. TNS data suggests Iceland will be back into positive sales growth in the second quarter. New format stores are generating double digit growth and sales from the rest of the estate, which nosedived after his abortive attempt to switch to a less deal-led strategy, have stabilised.
“I can’t comment on current trading,” says Coupe. “But I can say there is now a degree of stability in the base business supplemented by a group of stores doing reasonable year-on-year growth.”
Contrary to some “analyst bluster”, adds the former Asda trading director who took the helm at Iceland in late 2001, sales growth from refurbished stores is not being driven at the expense of profits. If the company was unhappy with the returns from refits it wouldn’t be shelling out £200,000 a time on them, he says bluntly. “We just wouldn’t be doing it. It’s that simple.”
In fact, sales growth at stores converted to one of the new formats (see box) has been so encouraging that refits will double from 100 to 200 in the next financial year. Take out holidays and that equates to roughly six refurbishments a week, observes Coupe. “The pace will be absolutely ferocious.”
From a pricing and promotional point of view, the new format stores herald a change in emphasis rather than a switch to EDLP as has sometimes been reported, Coupe emphasises. “Iceland is a deal-led organisation, and that’s got to be central to our overall proposition.”
But by increasing the range and encouraging shopping of the whole store rather than just the deals in the first aisle, the new formats are less deal dependent. “As we convert more stores, the deal participation will reduce.”
The notion that Iceland is still struggling to define itself in the marketplace, as some analysts have suggested, leaves Coupe bemused. “We know exactly who our customers are and why they shop with us. The Iceland customer is mid- to downmarket, usually a mum with a hungry family to feed on a tight budget. That’s our core customer constituency.”
The refit programme helps Iceland sweat more out of its assets - prime locations on busy high streets - by tailoring ranges to local demographics and competition. The sales increases at refurbished stores have largely been driven by higher footfall, rather than increased basket spend, says Coupe. “Sales have gone up because more people are shopping with us.”
Aside from smartening up its stores and continuing to offer market leading deals, a central part of the strategy will be a renewed emphasis on product quality and innovation, which will feature more prominently in Iceland’s marketing from now on. “External communications will still be deal-focused, but we will also start talking far more about product quality,” he explains.
The Yummy Awards, which compare Iceland own label products with equivalents from other leading supermarkets in blind taste tests, are a good example. “This drives home the message that we are offering fantastic quality as well as prices,” says Coupe. “It’s easy to forget that Iceland is the second largest player in frozen food in the UK [after Tesco], which gives us immense bargaining power. We can be truly market leading in deals and through innovation.”
Likewise, pooling volumes with Booker, Big Food Group’s wholesale arm, has given Iceland much better terms on ambient staples like soft drinks. And Iceland is starting to use Booker’s expertise and buying power on beers, wines and spirits.
Although refurbishing the estate has been the top priority, the last 18 months have also seen a colossal amount of work from a systems perspective to make Iceland a far slicker operation, says Coupe.
Central to this has been the roll-out of a new sales-based ordering system and the development of collaboratively managed inventory initiatives with suppliers (The Grocer, August 30, p12). These vastly improve communications with suppliers and reduce inventory through greater visibility of stock.
Hand-held terminals are used on the shopfloor to improve stock control, he adds. “It’s incredible to think that, less than two years ago, we were relying on hand counts and manual data entry to manage stock, and all of our shelf edge labels were printed centrally and distributed to stores. Now we can run off duplicates instore.” Store managers are also being given access to more financial information and incentivised to up their game through a new performance-related bonus scheme.
“Again, 18 months ago, managers literally had no idea of what their net profits were. Now they are far more commercially aware.”
Given that Iceland is still “only 10% to 15% down the road [to a fully refurbished estate], there is absolutely no room for complacency,” he adds, “but we have achieved a hell of a lot in the last year”.
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