Much has been made by the biotech brigade of the recent difficulties experienced by the UK food chain Iceland and which have been pinned on to their move to organic. It seems, however, that the biotech brigade's jubilance may be premature as a fuller, and very different, picture starts to emerge as to what really went wrong.
According to this authoritative food industry analysis, released today, by Catherine Sleep, the Managing editor of justfood.com:
"With the right support and promotional spend, it is hard to see how Iceland's organics drive could have failed. Independent research shows a huge demand for organics at reasonable prices, and this is just what Iceland was offering. While Iceland was trying to broaden its organic offering to non-vegetable categories, some 95% of the group's organic range was in frozen vegetables, and if it could be bought for the same price as conventional frozen vegetables, what could go wrong?"
Indeed, according to Sleep, nothing did go wrong -- except that some in senior management failed to back the move to organic, which then allowed it to become a convenient scapegoat for Iceland's poor performance. A source within Iceland, who was closely involved with the organics policy, tells Sleep that to blame Iceland's poor six month results on the organics project is "absolute unadulterated rubbish" .
The article goes on to consider the impact on small farmers of Iceland's having scapegoated a policy it never allowed to succeed.
EXCLUSIVE: Iceland "launched organics to fail"
Doomed from the Outset: Did Iceland Trust its Organic Campaign?
31 Jan 2001
Author: Catherine Sleep
Last week UK frozen food retailer Iceland reported an appalling set of financial results.
In the six months to 29 December sales had fallen by 1.5%, with a dramatic 5.5% drop in the last four weeks of this period. Incoming CEO Bill Grimsby pinned the blame on Iceland's over-ambitious organics strategy, but should we believe him?
Yesterday follow-up enquiries cast doubt on Grimsby's comments. Is the organics explanation just a little too neat? If overall sales were down, it would be handy for the new management to pin the blame on an isolated policy introduced under their predecessors, which they are now reversing. Assuming for the moment that the policy is to blame, was it fundamentally flawed or just poorly implemented?
Our source, who was closely involved with Iceland's organics policy, has revealed a lack of commitment among senior figures from the outset. How dedicated to organics were senior management figures? Russell Ford, the managing directo who left the group following Grimsby's appointment, was the driving force behind the organics strategy, while Chairman Malcolm Walker involved himself in the initial announcement but has since distanced himself from the project. Facing investigation into the sale of most of his shares in Iceland just a few weeks before the poor results were announced, Walker has other things on his mind right now, but the revolving boardroom door suggests a lack of commitment to senior employees - and the strategies they implement.
Shortly before the launch, our source reveals that Iceland abandoned a massive TV advertising campaign intended to explain to shoppers why Iceland adopted its organic policy. At the same time CEO Stuart Rose (who has now left the group) is alleged to have gathered regional store managers and told them to be careful how they supported the new range, as the group had decided not to run with it. Education is paramount, as Iceland well knew - the group had pumped vast sums of money into its "Food you can trust" campaign, explaining why GM food was being banned from its shelves.
With the right support and promotional spend, it is hard to see how Iceland's organics drive could have failed. Independent research shows a huge demand for organics at reasonable prices, and this is just what Iceland was offering. While Iceland was trying to broaden its organic offering to non-vegetable categories, some 95% of the group's organic range was in frozen vegetables, and if it could be bought for the same price as conventional frozen vegetables, what could go wrong? The new management indicated that it could not, after all, keep prices down, but right up to Christmas, our source claims that organic vegetables prices were exactly the same as conventional vegetables.
More to the point, the impact of the organics strategy on sales can only be counted since the launch of the organic vegetable range - not until 15 October last year. Our source reveals the net effect on gross sales between that date and the end of the reporting period was no more than £900 000 - far less damaging than the company has indicated.
Under normal circumstances it would be too soon to tell whether the policy will pay off - but it suggests that the project was never given the long-term support it needed. Blaming poor six month results on the organics project is "absolute unadulterated rubbish," our source claims.
And what of the impact on small farmers? Iceland is described as behaving like a visionary; never before had a major retailer signed legally binding three-year contracts with organic producers - contracts that are now being renegotiated. In Germany a factory is being constructed with grants from the government - money that will now not be forthcoming as the facility has no choice but to switch to conventional food. Small organic farmers who had put their faith in Iceland and adapted their business plans accordingly have been left in the lurch.
By Catherine Sleep, Managing Editor, just-food.com