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The Big Food Group Plc Business Information, Profile, and History

iceland company stores foods

Second Avenue
Deeside Industrial Park
Deeside CH5 2NW
United Kingdom

Company Perspectives:

Our strategic objectives are to rebuild and increase shareholder value by: growing sales and improving margins by leveraging the unique strengths of the Group; developing an organisation, processes and people that enable the Group to be both efficient and innovative; building a reputation with our key suppliers as the most constructive and innovative channel to market; integrating and improving Group systems to provide accurate and timely management information and to create a strong platform for e-business development; and creating a capital structure capable of supporting planned growth whether organically or by acquisition.

History of The Big Food Group Plc

Based in north Wales, The Big Food Group plc (BFG) is one of the United Kingdom's leading food distributors. BFG sells its wares on a wholesale and retail basis and offers Internet shopping. More than 3.4 million consumers shop at BFG's 754 Iceland stores, while 100,000 independent retailers and 370,000 caterers are supplied by BFG's Booker Cash & Carry and Woodward wholesalers. Wholesale accounts for 68 percent of BFG's business. Retail makes up 30 percent, with food service contributing the remaining 2 percent. BFG was known as Iceland Group before 2002.

From Roadside to High Street in the 1970s

Malcolm Walker and Peter Hinchcliffe were in their twenties when they began selling strawberries from the North Wales roadside. Frustrated with their jobs as management trainees with retailer Woolworths, they had begun looking toward starting their own business. Buying up the stock of strawberries from another roadside vendor, the pair set up a stall on the road near Llangollen, selling to passing tourists. While modestly successful, Walker and Hinchcliffe did not see their long-term future in roadside sales. Instead, the pair turned to retail, paying £60 for one month's rent of a storefront in Oswestry, North Wales. Walker and Hinchcliffe filled their small shop with freezers and stock bought on credit and opened for business in November 1970.

Soon to become known as Iceland, the shop offered customers loose frozen foods, rather than packaged foods. The store's foods were displayed on freezer trays, and customers could take as much or as little as they wanted. The shop soon built up a steady clientele, attracted by the store's low prices. Walker's and Hinchcliffe's employers, however, were less impressed with their moonlighting activity and fired them both. The two had no choice but to decide to expand their store concept, creating the new retail food niche of loose frozen food.

From its first shop, Iceland began to expand to new locations, keeping to the North Wales region. After acquiring a second shop and a 20,000-square-foot cold storage facility in Rhyl in 1973, Walker and Hinchcliffe put the Iceland concept into high gear. By 1975, the pair operated a chain of 18 stores and had come a long way toward developing the Iceland look: clean, bright shops featuring a blue and white motif.

The next step in Iceland's evolution was the move away from loose foods to prepackaged frozen foods. As Iceland continued to make acquisitions of other frozen foods shops, struggling in the recession of the mid-1970s, the company also prepared the launch of the first "mature" Iceland shop, opened in Arndale Centre, in Manchester, England, in 1977. This was the first Iceland store to abandon loose foods in favor of prepackaged food items. By 1978, the company had begun to expand into a national food store chain, with 28 stores under the Iceland name. As its stores were also growing in size, ranging from 2,000 to 3,000 square feet, Iceland opened a 300,000-square-foot cold store facility in Deeside, Flintshire, in North Wales, where it also moved its headquarters.

Iceland was gaining a reputation among consumers as a low-priced alternative to the major supermarket chains. The company's low prices contributed to a somewhat down-market image, which dogged the company into the 1990s. Nevertheless, Iceland continued its rapid growth, boosting its number of stores to 42 by the beginning of the 1980s, while also introducing selected chilled and grocery items for the first time. In 1981, Walker and Hinchcliffe began preparing the next phase of expansion by selling a 16 percent share of the company to the British Rail Pension Fund, giving Iceland a £1.6 million war chest for further growth. The following year, Iceland rolled out its own brand label, the Iceland line of prepackaged frozen foods, which became the basis of the company's success in the 1980s. The large majority of frozen food items sold in the Iceland stores soon featured its own brand. In order to meet the rising demand for the highly successful Iceland brand, the company opened a new one million-square-foot cold store facility at its Deeside location.

Growth in the 1980s

In 1983, the company made its first major acquisition when it bought up the failing 18-store chain of St. Catherine frozen food centers. Iceland was able to turn around the St. Catherine stores and integrate them under the Iceland signage within months. At the same time, Iceland began converting its stores to a new image, abandoning the somewhat chilly blue-and-white color scheme for a warmer red-grey-beige combination. Iceland began looking for more shops to rent and other acquisitions.

Going public in 1984 provided the funding for stepped-up expansion. The company's listing was oversubscribed some 116 times, giving the company the momentum to develop into a nationwide chain. The increase in capital allowed Iceland to continue to expand its stores and also develop its own label lines of chilled foods and grocery items. At the same time, Iceland found it easier to acquire leases for its stores, as landlords were more comfortable renting to a public company. Two years after its initial public offering, Iceland was able to complete its national expansion, moving into southern England with the acquisition of Orchard Frozen Foods. That acquisition had pitted Iceland against larger rival Bejam Group.

Bejam, two-and-a-half times larger than Iceland and in increasing competition as the two chain's operations began to overlap, became Walker and Hinchcliffe's next target. Joining the takeover wars that marked the mid-1980s, Iceland, which had seen its initial acquisition offers rebuffed, turned hostile and launched a takeover battle that lasted some three months. In the end, Iceland won, barely, gaining 50.09 percent of Bejam's shares in 1988. Integrating Bejam's stores, which doubled the Iceland chain to some 275 stores, proved as difficult as acquiring the larger company, especially due to management conflicts. Bejam's operations were moved to Iceland's headquarters, and Bejam storefronts were converted to the Iceland signage. By the start of the 1990s, the integration had largely been achieved. In addition to expanding Iceland's chain of stores, the Bejam purchase also brought the company into home appliance sales for the first time.

Going Green in the 1990s

The faltering economy, with consumers battered by a recession and soaring jobless rates, slowed Iceland's growth at the start of the 1990s. In 1993, however, the company returned to its expansion program, winning an agreement to take over the food halls of the Littlewoods department store chain. The first of the "Iceland at Littlewoods" stores was rolled out in 1993. At the same time, Iceland moved into the Irish market, opening its first stores in Northern Ireland. That year, Iceland attempted a European expansion, buying up the Au Gel chain of frozen foods retail shops in France. That purchase proved untimely, and the company was forced to shut down the Au Gel subsidiary within a year. Efforts to export the Iceland brand's frozen food products were more successful, and the company built a £30 million depot in Swindon to support its domestic business and growing export sales. In 1994, cofounder Hinchcliffe retired to a non-executive position with the company, and Walker took over as chairman and CEO.

After the collapse of the Au Gel subsidiary, Iceland refocused on its core U.K. market. During the mid-1990s, the company stepped up its store opening program, adding some 50 new stores--now with an average store size of more than 4,000 square feet--per year. Nevertheless, Iceland's per-store sales growth--and share price--were affected by the sluggish economy and increasing competition from the major, full-line supermarkets. Iceland turned to expanded services to make the difference. In 1996, the company added home telephone sales and home delivery; while only a small part of the company's sales, these new services nonetheless were quickly profitable.

While the company rebuilt its retail sales momentum, it also began to diversify, purchasing Woodward Frozen Foods, the third largest foodservice provider to the U.K. catering and restaurant markets. Iceland quickly expanded its foodservice division, adding Cold Move, in 1997. In that year, the company renamed its Woodward operations as Wood Foodservice. Within two years, Iceland had built up its food service division to some £50 million in sales per year; Walker made no secret of his plans to extend Woodward's share of the U.K. foodservice market, especially a targeted doubling of Woodward's sales by the end of 2000.

As Iceland faced ever-growing competition from the giant supermarket chains--which were rapidly introducing their own frozen food selections--Iceland sought new ways not only to differentiate itself from its competitors but also to improve its image among consumers. In 1998, catching the spirit of growing public resistance to genetically modified foods (GM foods), Iceland announced its intention to remove all GM food products from its Iceland-branded foods. The move proved highly successful with British consumers, who were becoming more and more fearful of the possible harmful effects of the so-called "Frankenstein foods." The company further boosted its newfound "green" image by introducing its own line of environmentally friendly refrigerators and freezers, replacing Freon and other harmful cooling agents with hydrocarbon based systems. The new appliance line was named "Kyoto" after the 1997 environmental summit in Kyoto, Japan. Later that year, Iceland teamed up with U.K. retailer J. Sainsbury to offer home appliances through Sainsbury's DIY (do-it-yourself) superstore subsidiary, Homebase House & Garden Centre.

After boosting its foodservice division in 1999 with the acquisitions of Rossfish and Deep Freeze supplies, which strengthened Iceland's foodservice component in southwestern and northeastern England and brought the company into Scotland, Iceland beefed up its service component, becoming one of the first U.K. grocers to offer free Internet shopping services. On the physical front, Iceland also rolled out a new store concept, Iceland Extra, which offered an extended range of fresh and grocery items, as well as convenience products such as tobacco and newspapers. By mid-1999, the Iceland Extra format began showing its promise--the first eight Extra stores, operating in the London area, had increased their sales by some 40 percent. Iceland began making plans to roll out an additional 20 Extra stores nationwide and saw the potential to convert perhaps 70 more stores of the entire chain's more than 700 Iceland stores to the expanded format.

In 1999, Iceland found a new bandwagon from which to trumpet its health-conscious message. In October of that year, the company made headlines by promising to remove all artificial colors from its branded foods, as well as reducing where possible preservatives and other additives. With more and more studies linking food colorings and other additives to a series of health problems and disorders such as hyperactivity, Iceland's "clean food" image continued to impress the British consumer. Iceland had also impressed other retailers. In January 2000, Iceland announced its agreement with Storehouse to create a special line of Iceland products, particularly chilled and fresh food products, for the Storehouse BHS department store chain. The move by BHS to add food products was made to enable that chain to compete head-to-head with rival Marks & Spencer. After a successful prototype run in BHS's Birmingham store, the Iceland-Storehouse agreement called for a rollout of Iceland products in another ten BHS stores, with a possible extension to an additional 90 stores by the end of 2001.

Growth and Competition after 2000

The acquisition mode continued in May 2000 as Iceland bought Booker plc for £373.5 million ($552 million) in stock. Booker's distribution capabilities and storage space were seen as complementary to Iceland's expanding e-commerce trade.

Company co-founder Malcolm Walker stepped down from the chairman's spot in March 2001. An ill-timed foray into organic foods under Walker was blamed for devastating sales results that hammered Iceland's share price. (Walker was investigated, but cleared, of insider trading for selling £13.5 million in BFG stock just before a profit warning was issued.)

Bill Grimsey was named chief executive in January 2001 and tasked with turning the company around. Mergers among giants in the grocery business, such as the takeover of Safeway by Wm. Morrison Supermarkets plc, were making the market even more competitive and, as Grimsey wrote in an editorial in Grocer, were threatening thousands of locally owned convenience stores with closure.

In 2001, Iceland combined the finance departments of its three main businesses--Iceland, Woodward Foodservice, and Booker. Retail Week reported BFG based the merged finance department at its north Wales headquarters but kept Booker's SAP Financials IT system.

In February 2002, Iceland was renamed The Big Food Group, plc. While the Booker Cash & Carry business had been divesting its foreign subsidiaries, BFG aimed to capitalize on the strength of the Iceland brand of frozen food by increasing overseas distribution. Booker's Chef's Larder brand was also popular among expatriate Brits, noted Grocer.

Though 2001 had been something of an bad year for BFG, in the 2001-02 fiscal year the company saw pre-tax profits (before one-off costs) rise from £40.1 million to £42.9 million. The new management team was able to report other positive developments in spite of an extremely competitive environment. A needed £300 million credit line had been obtained. BFG was also raising £250 million in cash in May 2002 by entering into sell and leaseback arrangements on its headquarters and some Iceland stores, reported Liverpool's Daily Post.

BFG's Iceland chain relied excessively on promotions to retain customer loyalty during grocery sector price wars. However, it was able to wean itself from the most generous of these margin-eroding incentives.

BFG profits and sales were up in the fiscal year ended March 28, 2004. The group posted a pre-tax profit of £50.1 million, up 35 percent, on turnover of £5.15 billion ($9.49 billion). When these figures were released, BFG had converted 142 of its 754 Iceland stores to a new convenience format and planned to refit another 150 in the coming year. In trials, the new design was found to increase sales at renovated stores by 17 percent.

BFG considered acquiring the Londis food distributor in 2004 but lost interest. The company was attracting takeover interest itself. Iceland's Baugur Group hf built up a 22.11 percent shareholding and made a takeover bid in September 2004 that valued BFG at £378 million. At the time, BFG had a debt of £245 million; neither the Iceland nor the Woodward businesses were making a profit.

Sales were declining at the retail grocery chain despite the continuing renovation program. To increase Booker's marginal profits, BFG was focusing on streamlining the wholesaler's distribution system.

Principal Subsidiaries: Bejam Group plc; BF Ltd.; Booker plc; Booker Cash and Carry Ltd.; Burgundy Ltd.; Iceland Foods plc; Iceland Foods (Ireland) Ltd.; Iceland Foodstores Ltd.; Trans European Insurance Ltd.; Woodward Foodservice Ltd..

Principal Operating Units: Iceland; Booker Cash & Carry; Woodward Foodservice; Expert Logistics.

Principal Competitors: ALDI Group; ASDA Group plc; Brake Brothers; Dixons Group plc; Tesco plc; J Sainsbury plc; Wm. Morrison Supermarkets plc.

Chronology

  • Key Dates:
  • 1970: Malcolm Walker and Peter Hinchcliffe open the first loose frozen foods store.
  • 1973: The company opens a second retail store and purchases 20,000-square-foot cold storage facility.
  • 1975: Fifteen Iceland stores are in operation.
  • 1978: The company opens 300,000-square-foot cold store in Deeside, in North Wales.
  • 1981: The company sells a 16 percent share to British Rail Pension Fund for £1.6 million.
  • 1982: Iceland brand frozen foods line rolls out.
  • 1984: The company completes an initial public offering on the London Stock Exchange.
  • 1988: A hostile takeover of Bejam Group is effected.
  • 1993: A roll out of "Iceland at Littlewoods" takes place.
  • 2000: Iceland acquires Booker plc.
  • 2002: Iceland is renamed The Big Food Group plc.
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