Two topics tend to crop up most frequently in speculation about the future of the fresh produce industry: the demise of one of the big four, and the rise of the discounters.
Often overlooked are more marginal, though no less significant, changes, such as Iceland’s ambition and plans for its produce category and the potential impact on the supply chain.
Since taking over as category manager around 18 months ago, Neil Gibson has been a man on a mission and has revamped everything from store layouts, ranges, produce specifications and sourcing strategy. “We have a one per cent market share on produce, which at times can get up to four per cent on soft fruit,” he says. “The aspiration is to double sales over the next few years. We are currently growing at 10 per cent and we are working on plans to improve this to 20 per cent. It is within our scope to do that.”
With a strong retail background in Sainsbury’s, Morrisons and Budgens, Gibson is ambitious and focused – he attended Fruit Logistica this year along with the rest of the Iceland buying team, and sees value in produce trends and NPD as well as improving Iceland’s core range.
Since taking on the role, Gibson has made several changes that are aimed at bringing Iceland into line with the other major produce retailers. New fixtures and pallets on the produce aisles have now been placed in 40 per cent of stores, something that isn’t innovative in itself, says Gibson, but is a sign that the business is moving towards the layout of its bigger produce competitors. Produce has also been moved to the front of some stores as the traditional lure to shoppers, and packaging has been revamped with a Farmers’ Market branding that is noticeably without the Iceland logo, designed to reinforce messages of quality and provenance. Iceland shoppers remain very value-minded, and Gibson has responded to this in the produce category through upscaling pack sizes – for instance introducing a new four-pack of larger onions, instead of three.
Other lines are used to create a ‘halo’ effect through overindexing on quality and price, such as Pink Lady apples, which recently saw specifications raised on colour and Brix while the price has been held at £1.79 for four.
“Sizing of both packs and produce has been another area of focus,” says Gibson. “The new 2kg packs of apples and bumper packs of nine bananas have been popular with shoppers who use Iceland’s home delivery service. Orange sales have grown by 20 per cent in the last year driven by larger fruit sizes – again due to customer perception of value.
“Iceland has 70 produce SKUs, with a core range of about 40. We are continually trialling new lines. Soft fruit is one of the bigger growth areas – it more than doubled last year.”
Sitting between the discounters and the top-four retailers on price, Gibson says Iceland achieves its lower pricing through a combination of margins and direct sourcing. “Since taking over I have introduced seven new direct-to-grower relationships. It gets us closer to the product, there is no buffer and it’s good for us to have close relationships,” he says. “It’s not all direct – it’s a combination of both. Typically the more complicated lines do not lend themselves so well to direct sourcing. For example, grapes are multi-country, and are managed for us by Griffin & Brand.”
Prepared vegetables is Gibson’s next target – he has doubled refrigeration space in refitted stores and has a full relaunch of the prepared range planned for September. “We are looking for more suppliers, particularly on prepared veg and we’re talking to a lot of people about this to find out where this category is going next. The prepared area is a big opportunity,” he explains.
Iceland currently has seven prepared veg lines, including three from QV’s Veg Lovers range, two from Willow Bank and one from Freshtime. On fruit it is working with Northern Irish supplier Simply Fruit, which supplies Tesco’s prepared fruit lines. “We will hopefully be tapping into some new trends such as courgetti, cauli rice and boodles. And we are planning to focus on prepared salads this summer. A new prepared fruit line, pineapple, is now out-selling the wholehead version five to one,” he says.
Where in some places Gibson is nudging Iceland closer to the norm in grocery retail, in other areas he is happy to hold a niche. A new incentive programme saw stores rewarded with £100 for their social funds if they succeeded in boosting blueberry sales, which they did by decorating stores, moving displays to prominent positions and selling them on checkouts. It was so successful that the resulting sales spike was higher than a 100 per cent extra free promotion, says Gibson, who is planning similar programmes for this year. “That came from engagement with regional store managers. We’ve also started to do store manager visits to key suppliers, so we’ve been to Fyffes and Florette to see the whole process, and this helps to increase their awareness of the categories.”
The most recent initiative is a tie-up with diet brand Slimming World in a cross-aisle promotion that sells a prepared frozen meal with a side of prepared vegetables. Iceland significantly overtrades in frozen, and it is this footfall that means the retailer has so much potential in fresh, according to Gibson, and also underlines the value in more cross-category promotions in the future.
Iceland’s reputation as a frozen retailer is both a blessing and a curse, as Gibson notes that one of his biggest challenges is to change customer perception of its fresh offering. But with such a huge overindex in this category, the untapped reserve of Iceland’s traditional customer base could work wonders if Gibson can persuade shoppers to fill their baskets in other aisles, something he is clearly aware of, adding: “Frozen is our point of difference.”
Flexibility in the marketplace
Iceland is able to respond very quickly to gluts or shortages in the supply chain, according to category manager Neil Gibson. “We can respond to something in the market on Tuesday that can be in stores by Saturday,” he says, adding that due to its relative size Iceland can “respond quickly and allocate product flexibly”.
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