Perception is a tricky thing. It’s probably fair to say that fresh produce doesn’t rank highly when asked to think about retailer Iceland. But a quiet revolution is being played out in the aisles of the supermarket chain. Produce Business UK speaks to category manager Neil Gibson to hear how he and his team are driving sales, growth and what opportunities there are for suppliers
Produce Business UK: How is Iceland becoming a major player in the fresh produce sector and what does fresh produce look like in Iceland?
Neil Gibson: At the moment we’re achieving 5% sales participation in our main estate stores and we’re getting maybe 9% in our warehouse stores – of which there are 14. These stores have a larger footprint. The aspiration is to get all stores up to 9-10% in line with market. So that in effect is a doubling of sales over the next three-to-four years. If stores’ sales increase, then we’ll be looking for more sales again out of fresh produce.
PBUK: How are you driving this impressive growth?
NG: A few ways. We’re taking costs out of the supply chain. As we take costs out we’re either investing that into quality or investing in better equipment in store, for example more refrigerated space. Or we’re investing it in better packaging and stronger promotions to encourage customers to buy into the category.
PBUK: Is the name Iceland a hindrance?
NG: Although the name indicates a frozen-food store – and in fairness frozen is our point of difference – a third of our sales are frozen, a third are grocery and a third are fresh. The produce category sits in the fresh area. We clearly over index on frozen food, but we are very keen as a business to grow the full basket of shop.
PBUK: So that’s your main aim, to grow sales?
NG: To grow sales on a profitable basis by driving quality and ensuring that we’re offering our customers good value in the marketplace. There are clearly challenges in terms of fresh produce. We have to try and get produce into the mindset of our existing customers. And we also have to inform customers that don’t shop with us, that we do provide fresh fruit and vegetables.
PBUK: What about those that already buy fresh produce at Iceland?
NG: We have customers who are already loyally buying produce at Iceland – and here we’ve managed to expand their consumption, in particular in soft fruit. We’ve seen over 100% growth of soft fruit as a category for the last 18 months. And we’re still growing at 40-50% on the back of 100%. I guess that’s through loyal customers buying more of the products they like.
PBUK: Are you extending the offer all the time?
NG: Very much so. Where we think it’s going to add more absolute sales and also credibility from a customer’s shopping point of view we’ll add range. So for example we have added three lines of prepared fruit this year – prepared mango, melon and grape, and pineapple.
What we’ve found is that the prepared lines are outselling the wholehead in some cases by four or fivefold, so it suggests that we are part of that convenience shop – the convenience shopper is popping in to buy something at lunchtime and that is where the prepared fruit lines have been a great success. And that category has gone from a standstill to being worth £130,000 a week of retail over a six-week period, so we’re pretty pleased with that growth from standstill.
PBUK: Anything else?
NG: Elsewhere we’re looking at introducing a larger range of prepared vegetables – we’ve got a trial running at the moment with Mash Direct on a couple of lines and we’re also looking into prepared stir-fry veg and the more legume-style products. So we’re expanding from the core elements of produce.
PBUK: Are you devoting more shelf space?
NG: We are in certain stores, yes. At the larger footprint stores – the warehouse stores – we’ve got typically 50% more space for produce. That 50% space is generating double the sales so it seems to be well worth the investment. We’re doing trials in some stores where we’re moving the produce to be first-in-flow so we can really catch customers that walk in the door and get them thinking about produce. So that’s a trial we’re undertaking in store format. I’m continually fighting internally to get more space for produce.
PBUK: What about deals?
NG: We’ve run a seven-day deal on bananas at the front of store – a five pack of bananas for 50p. That’s very much about getting customers to see that we sell bananas and then going and having a look at our produce categories and recognising that we do stock a range of produce. We’ve also had some blueberry activity going on at front of store. We’ve managed to increase our sales there too.
PBUK: What messages are you sending out regarding fresh produce?
NG: One principle that we’ve followed for the last 18 months is we’ll tend to offer bigger packs that give better value. Although the Iceland shopper in some respects will be on foot, we do offer the home delivery service and we find that when customers go into our stores their purchases do tend to be quite bulky. So my main selling potato line is a 3.5kg line and if I’m selling a blueberry [pack] I’ll probably sell a 300g rather than a 150g. So as long as we offer really good value I find that it works from a sales point of view. We probably get customers who come to us once every two weeks and are maybe bulk purchasing but they’re quite happy to spend a bit more on a bigger pack.
PBUK: What’s the feedback like from the stores?
NG: We’ve got store managers, area managers and then regional managers. And equally we’ve got a field team of quality experts. We use different techniques to communicate as a team what they’re seeing in stores. We have a conference call three times a week. We’ve got a number of people that input into that across retail. And we have a WhatsApp group to send messages on a daily basis as the issues crop up. I can get a really quick feed in terms of any quality issues within the stores. I spend a lot of time in stores myself – watching customers and observing how they interact with the products.
PBUK: Are you getting good feedback from customers?
NG: I’d like to do more customer panels – we don’t do a huge amount of that currently but it’s something I’d be willing to do as we get a bit bigger. I think they’re invaluable techniques in talking to customers on a wider scale. I’ve used them in previous businesses and they can give you quite an insight into what is important for customers.
PBUK: What about embracing technology? What innovative methods are you employing?
NG: One technique I’ve seen abroad is that customers can pay more for something that has a longer shelf life than a product that has a shorter life. There might be some technology in the future that we’d be interested in looking at that rewards customers that want effectively to pay more for something that you can have maximum life on. We’d be offering a moving scale between five days’ and one day’s life.
PBUK: How does sourcing work?
NG: We use three different models. One model is direct to grower where we have a relationship with the actual grower who in all these cases would get the product to the retailer in a packed state. They grow the product, pack it and then send it into our depots. We have these direct relationships in the UK, but we also have them abroad. When we have them abroad, in some cases we will pull the product from say South Africa, it comes into the UK and goes straight into our depot and we hold it as stock in our depot. And we pull stock from there. That’s again a very direct relationship in that we’re taking responsibility for the short-term storage of the product and maximising the efficiencies of full truckloads into the depot from source.
And then we have companies that will operate more in terms of, well, they’re growers but they work with other growers. So they’re grower-packers and they also represent other growers and that could be where a UK grower wishes to import to keep their facility working all year round. They become an importer during the imported season and a UK grower-packer during the UK season.
The final model is a more traditional model where we have companies that don’t grow anything but effectively import product and operate on a commission basis and we buy stuff from them.
So we do have a mixture of styles and models and I think its good to be involved in all of them because they give you different levels of exposure to the marketplace and it also gives you different levels of knowledge coming through in terms of how things can work.
PBUK: So there’s not a one-size-fits-all approach?
NG: Certain categories at certain times of year we may programme all-year-round on 12-month contracts. Other categories we may decide to trade an element of it and take advantage of market opportunities.
We are introducing a spot promotional opportunity from August 5, where we are effectively opening up the whole market to offer us deals on a weekly basis. If one particular supplier came to us and said they had an opportunity on pineapples and could we hold a truck of pineapples, we’d take the whole lot, allocate it out to stores and do it on a special deal. That’s coming in August as a new initiative and that will be open to more than our current supplier base.
But in these cases we’ll always go back to our current supplier and give them an opportunity to match the deal. Equally we understand the implications for any on-going business. We wish to avoid promotions that could disrupt growers’ programmes.
PBUK: What are you looking for in your suppliers?
NG: “It’s really by category. If you take something like top fruit we prefer to have the relationships with the growers because it’s relatively straightforward in terms of the markets you’re dealing with – we have a UK direct source, we’ve got two French direct sources and we’ve got a South African direct source. So that model works well.
Grapes, because it’s multi-country you basically follow the sun around the world, moving countries relatively often. Therefore it makes more sense to have that category managed by an expert. We use Griffin & Brand for grapes. And then elsewhere it’s some and some. So in citrus for example we use Rio Tinto direct for half of it and then we use Fesa for the other half of it. And then we blend the two together. There are different models for different categories.
PBUK: Are you looking for new suppliers?
NG: At the moment Jon (Hooper, senior buyer) and I have only been with the business for just over a year so we’re still at a position where we’d encourage conversations with new suppliers as we look to restructure our supplier base for the future.
I guess one of the things that has been significant in terms of overall business priority has been the drive towards improving quality. We’re definitely more interested now than we’ve ever been in things like varieties, flavour profile, shelf life, those kinds of aspects… I guess that’s in-line with the market generally. Although we trade more in the discount part of the market we do have quality aspirations at the higher end.
PBUK: What does the future hold then for Iceland and fresh produce?
NG: The long-term goal is getting sales up to 9-10%. This year we’ve been growing at 11%. We had a great year last year so I’ll be pleased to carry on a double-digit growth over the summer. And when we get into the winter months I think we’ve got some real opportunities to get that up to 15-20% growth, which is where I need to be to really achieve my goals over the next three years. I think we’re well placed. There are lots of challenges out there at the moment. It’s not been easy – a slow start to the soft fruit season, the English crop seemed a bit behind on strawberries, so does the stonefruit from Spain, so we’ve had challenges from a supplier point of view. The retail market is as competitive as ever so if we can achieve those levels of growth this year I’ll be delighted.