Are they doing a deal or are they doing a deal? Iceland customers don't seem to think so and have turned their backs on the chain and its new EDLP strategy. Following last week's dismal trading statement, Iceland's been forced to restore its bogof offers to persuade shoppers that it still does bargains best. Chief executive Bill Grimsey conceded that an 8.3% drop in like-for-like sales in the first three weeks of July was the result of a "too aggressive move to a value driven proposition". Poor old Iceland shoppers. It doesn't seem that long ago that hordes of them were sent running in bewilderment from the stores after Malcolm Walker tried to force his organic principles upon them. Shareholders are also none too pleased after shares in the group took a 59% dive to a rocky 38.25p last week ­ their lowest level for more than a decade. Iceland is expected to make an operating loss of about £8m for the first half of 2002 compared with a profit of £8m in the same period last year. It doesn't look that good for the chain which has been struggling to hang onto its customers for a while now and has seen a gradual decline in share of trade: market share (by value) for the 12 weeks ending June 15 was 2.4% compared with 2.7% in the same period a year ago. Alongside baffled shoppers and angry shareholders, the firm has also incurred the wrath of 1,000 staff who are threatening legal action over the decision to close its final-salary pension scheme. And earlier this year it axed half of its instore concessions at Bhs outlets while a second experiment to take the Iceland brand into selected T&S stores wasn't extended beyond a handful of stores. Woolworths also ended a supply deal with Booker for its Big W general merchandise stores. Changing its name from the Iceland Group to The Big Food Group was generally accepted (with a little sniggering), but came as it posted trading figures which most City analysts described as dismal. Meanwhile, plans to refurbish and develop different formats for specific geographic areas are going slowly ­ only seven have been done. And now this miscalculation over pricing is another blow and appears to have come from the office of Iceland md Mike Coupe who is used to the aggressive EDLP ethos of Asda. Evidently Iceland shoppers are a different breed to Asda's. But does Iceland know who it's trying to attract into its shops? These are typically in town centres without much parking, which can make carrying home huge packs of frozen Yorkshire puddings difficult. Whoever they are, they like bogofs which are believed to account for 50% of Iceland's sales. Grimsey gets tetchy at the suggestion that Iceland might not know what its customers want. "We've always understood our customers ­ they want value­ now they'll get deals and that's the end of it." He admits they are attracted by a high level of promotional activity but says that as stores are reformatted the offer will evolve into a "permanent value proposition supported by the necessary ranges and services". He adds: "In the current stores they get good deals, but in the new format stores they'll go for range of products and services." Grimsey gets equally annoyed when asked about the EDLP policy. "EDLP is an overstatement ­ it suggests you don't have a promotional element and we all know that people like Tesco and Asda do." He's clear about the chain's direction and insists it's still on track. "We've a wonderful portfolio ­ I've always said the changes would take two to three years. We've got to correct this and move on." Analysts seem to agree that it does need to move towards an EDLP offer to become more profitable, but think it might only happen as the new store formats are rolled out. However new stores cost money and that's something the group doesn't have much of. James Collins at ABN Amro says all this has demonstrated how fragile Iceland's consumer demand is. "Their consumers are fickle and don't seem to have a reason or need to shop there." Grimsey thinks the City overreacted and insists the firm, with an annual turnover of £5bn, can get back on track, despite the fact that the market is only valuing the company at £131m. It's true that the BFG's other firms, Booker and foodservice firm Woodward, are doing pretty well. And let's not forget that Grimsey resuscitated the ailing Wickes DIY chain and is a no-nonsense guy who gives the impression of mucking in; happily posing with frozen turkeys on the checkout. He's also a keen marathon runner ­ but this race could be a lot tougher than he thought. n {{FEATURES }}

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