Iceland Manufacturing holds promise as store sales slow

By Rod Addy contact

- Last updated on GMT

Related tags: Ready meals, Food

Iceland Foods director hails manufacturing plans
Iceland Foods has big plans for its processing arm and exports that will put reports of falling annual profits and weak sales growth into perspective, according to one director.

The discount frozen food chain bought manufacturer Loxton Foods in June last year and, having renamed it Iceland Manufacturing, aimed to develop it to strengthen the business, buying director Nigel Broadhurst told FoodManufacture.co.uk.

Making its own ready meals was enabling Iceland to cut costs, said Broadhurst. “It has already proven to have substantial benefits, which give a relative edge in terms of value, adding quality and taste.”

The company planned to draw on a number of “leading edge”​ processes, such as sous vide, at the Loxton Foods site, which is based at Gorton, Manchester, he added.

Chilled and frozen dishes

Various chilled and frozen dishes, ranging in price from £1 to £4 are being made at the factory. They include Pub Grub meals such as Braised Steak; a Taste of the Orient line including Chicken Teriyaki and a range of Chicken Shack chicken-based products.

Broadhurst denied that Iceland wanted involvement in all parts of the supply chain. “Are we going to become a permanently vertically integrated company across all bases? No.”

However, where appropriate, it would invest in initiatives to improve efficiencies, he said.

Iceland had already seen benefits from having a foot in food processing, said Broadhurst. They included “understanding the cost of manufacture and the cost of raw materials in the business”.

Annual results

Reporting its annual results, the company said it had launched 400 new own-label frozen products in the past year. It also announced plans to roll out trials of online sales, having seen strong performance there.

It revealed group adjusted pre-tax profit down 1.7% from £230.2M to £226.3M on turnover up just 1% from £2.61bn to £2.64bn in the 57 weeks to March 29, 2013.

That compares with previous year figures, showing pre-tax profit growth of 18.5% and sales growth of 9.4%.

The group did dispose of 54 Cooltrader stores to Heron Foods on September 29, 2012, although it also stated it had opened a net number of 33 Iceland stores in the past year.

Horsemeat

Some press reports linked the considerable slowdown to Malcolm Walker’s management buyout of the business in March 2012. However, Broadhurst said controversy surrounding findings of unlabelled horsemeat​ in some frozen beef burgers had affected figures.

Iceland was dragged into the wider horsemeat furore affecting other manufacturers and retailers when Food Safety Authority Ireland tests of some of its burgers returned positive results for horse DNA.

When samples underwent further scrutiny, they were exonerated, but negative publicity had had an impact, said Broadhurst. “There was, no question, a hit on sales of some beef-based products.”

This had been despite being “very fast on our feet”​ to roll out non-beef alternatives such as lamb burgers.

Trailing the market

British Frozen Food Federation director general Brian Young said according to the latest data he had seen on total quarterly UK frozen food sales, Iceland Foods’ sales growth was trailing the market.

“The last numbers I got showed value growth of 4%. That suggests Iceland has slowed down a bit.”

Like Broadhurst, he partly blamed horsemeat. “Ready meals may have been disproportionately affected by criminal activity in the industry.”

However, he believed sales of frozen and chilled meat-based ready meals and burgers would bounce back. And he said the situation created a great opportunity for vegetable-based meals.

Exports

Iceland reported strong growth in exports and declared plans to further develop overseas sales.

“We have spent a lot of time creating markets for frozen food and we are hoping to bring it into usage more and more,”​ said Broadhurst.

“In the Middle East and South African markets we are bringing 40 years of development in one go. We have had substantial impact in South Africa in terms of the first couple of products that have gone in.”

Iceland also announced plans to open 40 stores in the coming year, creating 2,000 new jobs.

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