The Iceland Story
Though sometimes confused with a small country of Viking origins on the fringes of the Arctic Circle, the real Iceland is a unique, fast-growing British food retailing business with over 700 stores throughout the UK. This is its story.
Early Days
1970 Iceland sprang to life when Malcolm Walker and another bored, young retailer decided to open a shop in an attempt to make their fortunes. They raised initial capital of just £60 to pay one month’s rent and opened the very first Iceland in Oswestry, Shropshire in November 1970. In those days, before domestic fridges and freezers became commonplace, Iceland specialised in selling loose frozen food.
1975 The business really took off when Woolworths fired the founders from their day jobs in February 1971, and they were able to devote themselves to developing the Iceland concept full-time. By 1975 there were 15 Iceland stores in North Wales and the North West, supported by a cold store in Rhyl.
1979 Iceland progressively evolved away from loose frozen food, opening its first purpose-built freezer centre at Stretford, Manchester, in 1978, and developing its own branded products. In 1979 the company opened a brand new cold store and head office at Deeside, Flintshire, where it has been based ever since, and by 1980 it had grown to 37 stores.
Going Public
1984 Expanding through new store openings and the acquisition of smaller chains, Iceland had 81 stores by 1984, when it became a public company through one of the most successful flotations ever seen on the London Stock Exchange. The initial public offering of just £8 million worth of shares brought in applications with cheques totalling over £900 million, making it an amazing 113 times oversubscribed.
1989 Iceland had been steadily acquiring smaller freezer centre chains but late in 1988 it went for The Big One, making a fiercely contested bid for its much larger, southern-based rival Bejam. Victory was secured by the narrowest of margins and Iceland took control in January 1989, creating a truly national chain with 465 stores.
Leading The World
1996 By 1995 Iceland had 752 stores and had clocked up an impressive 25 years of consistent profit growth. It now began to feel the effects of more intense competition as superstores were permitted to open on Sundays for the first time, and progressively extended their weekday opening hours. Under the leadership of founder Malcolm Walker, the company staged a successful fight-back based on a massive programme of innovation. This included the introduction of a still unique free, national home delivery service, and the development of a wide range of new products.
1998 Among Iceland’s many world firsts in the late 1990s were the development of a complete own label range free of GM ingredients, under the ‘Food You Can Trust’ banner, and the launch of a nationwide home shopping service. The company also developed a partnership with the Cancer Research Campaign to promote the health benefits of eating more frozen vegetables.
2000 In 2000 Iceland made a recommended offer for Booker, the UK’s largest cash-and-carry operator, with the aim of exploiting buying and other synergies between the two businesses. Booker’s top manager Stuart Rose was appointed chief executive of the enlarged group, while Iceland’s Malcolm Walker was scheduled to become non-executive chairman. But shortly after the deal was completed, Stuart Rose left to head the Arcadia fashion chain, where he made a fortune before moving on to Marks & Spencer.
The Dark Ages
2001 Into this management vacuum stepped new chief executive Bill Grimsey, who had built his City reputation at the Wickes DIY chain following the departure of its previous management team as the result of a financial scandal. Within weeks of joining Iceland, he and his new finance director Bill Hoskins – also from Wickes – claimed to have identified massive problems. These plunged the business into a £120 million loss after an amazing £145 million of exceptional items – an extraordinary reversal of fortunes for a group operating in inherently stable industries, which had recorded a profit of £32 million in the first six months of that financial year. Malcolm Walker and many of the senior managers who had built the Iceland business were forced to leave the company.
2003 Renamed The Big Food Group in February 2002, the combined Iceland-Booker business struggled under its new management, despite the launch of a grandiose recovery plan. (Click here to read the saga of 'The one, two, three, four, five year recovery plan.) For Iceland, the declared ambition was ‘to dominate high street food retailing through a renewed focus on core customers and frozen food’. The reality was a steady decline in customer numbers and sales, while costs – including senior management rewards – escalated. Profits never recovered to historic levels and were supported only by the release of provisions made in 2001. (Click here to see how the release of provisions found to be 'not needed' boosted profits in 2002-2004.) The company therefore faced growing difficulties as these neared exhaustion towards the end of 2004.
A New Beginning
2005 In February 2005 The Big Food Group’s shareholders accepted a recommended offer from a consortium of investors that made it a private company once more. Shareholders received only a fraction of the value the business had enjoyed on the stock market at its peak. The group was subsequently split into its main component parts and Iceland placed under the management of Malcolm Walker and other senior executives who had been ejected in 2001.
The new team returned to find a company in crisis. Sales were running at minus 10% on the previous year, having declined every year since 2001. Over the same four years overheads had escalated on a massive scale, with head office employee numbers growing from 800 to 1,400 and a further £16 million being spent on the services of external consultants. The product range had expanded chaotically and prices were well out of line with the market. Morale was at an all-time low and the company was in such a precarious financial state that suppliers could not even obtain credit insurance.
2006 Sales began to rise steadily every week during the new team’s first year 
back in charge, as customers returned to the stores. By the end of the financial year to March 2006 like-for-like sales were running 20% up year-on-year, making Iceland the UK’s fastest-growing food retailer. An independent customer satisfaction survey, conducted around the same time, also identified Iceland as the country’s fastest improving retailer. Instead of the massive loss anticipated at the time of the takeover in February 2005 the business achieved a satisfactory operating profit, while the cash position was transformed to give Iceland a healthy balance sheet. This permitted the launch of a major investment programme to improve neglected stores, and to turn the previous management’s unsuccessful convenience store formats back into traditional Iceland freezer centres.
The key to this success was a strategy of making the business simpler, and refocusing on its traditional strengths. Through this, Iceland rapidly became recognised once more as the UK’s natural destination store for innovative, value-for-money frozen food. The introduction of round sum pricing made it easy for customers to budget, while the unique home delivery service provided a vital helping hand to busy mums.
By Christmas 2006 like-for-like sales were growing at 15% for the second year in a row and Iceland was proud to take on sponsorship of ITV’s flagship show, ‘I’m A Celebrity … Get Me Out Of Here!’
From Success to Success
2007 The results for the financial year to March 2007 demonstrated that Iceland had been restored to robust financial health, generating cash and recording an operating profit of almost £100 million. Continued strong sales growth throughout the year was driven by innovation across the whole range of frozen food under the Iceland brand, while costs remained under tight control.
The 2007 staff survey and mystery shopper programme highlighted the massive recovery in morale since the dark days of 2004/5, with managers now feeling valued and the whole team demonstrating a real passion to make things even better. In recognition of their achievements, Iceland took all 682 of its store managers to Disneyland, Paris for two days in October for a fun-filled and inspirational annual conference.
2008 As Iceland’s strong sales and profit growth continued into 2008, the scale of the economic challenges facing British shoppers became ever more apparent. Iceland responded by reinforcing its long-standing reputation for great value and constant innovation with a range of product launches. As well as providing truly outstanding value for money, the company continued to win recognition for the quality of its innovations, with Iceland Chinese Takeaway Duck in Plum Sauce winning a Gold Award for best new poultry product of the year from the British Frozen Food Federation, while the Indian Takeaway Tandoori Chicken Masala won the Frozen Food Savoury Award in The Grocer Own Label Excellence Awards. There were awards, too, for Iceland’s successful store managers at their annual conference in Liverpool: the Iceland Oscars, a black tie extravaganza featuring the Manchester Camerata Orchestra, opera, pyrotechnics and a live performance by Girls Aloud.
2009 The year began with the announcement that Iceland had agreed to buy 51 stores from the receivers of Woolworths, massively accelerating the current year’s planned store opening programme. Iceland will now open 70 new stores this year throughout the UK, from Fraserburgh in the north of Scotland to Exmouth in Devon, creating some 3,500 new jobs. The company also plans to open a further 20-30 new stores in 2010. This is Iceland’s fastest rate of expansion since it bought Bejam 20 years ago.
In March Iceland was recognised in the annual Sunday Times 100 Best Companies to Work For survey as one of the 20 best big companies to work for in the UK.
In June the company announced record sales and profits for its financial year to 27 March 2009. Like-for-like sales were up 16%, making this Iceland’s fourth consecutive year of double-digit like-for-like growth and taking total sales over £2 billion for the first time. Operating profit increased by 41% to £135.7 million and net profit before tax by a massive 84% to £113.7 million.
Click here to read the full press release on the 2009 results.
Click here to see Iceland's like-for-like sales performance since 2001.
Click here to see Iceland's operating profit since 1981.
From rock bottom four years ago, morale has soared to give Iceland some of the best ratings in the country for employees feeling cared for and motivated, proud to work for the company and excited about where it is going. Small wonder when, in fulfilment of a pledge made at the 2008 managers’ conference to reward another good Christmas performance, almost 800 of the company's store, regional and area managers spent five days at Walt Disney World in Florida for their annual conference in September. See more on A Great Place to Work.
How on earth will Iceland follow that in 2010? Just watch this space.
