Former director at Iceland Foods Ltd
- Frozen grocery consumer demand-side trends amid pocket squeeze and outlook in a recessionary environment, highlighting strength of frozen category
- Input cost inflation, including food price, energy and labour, plus price pass-through ability
- Iceland’s competitive positioning against players such as Asda, Aldi and Tesco (LON: TSCO) and market share growth opportunities
- Market share movements and medium-term growth opportunities
Could you highlight 2-3 key trends that are shaping the UK grocery retail market?
How has the frozen food category performed throughout 2022, considering the trends we’ve discussed?
How does frozen food perform in a downturn or recessionary environment, if we head into one?
How is the cost inflation environment impacting Iceland Foods and the wider grocery market?
How has inflation impacted consumer habits around average basket size and shopping frequency? Given how inflation and a recessionary downturn period plays into frozen food, could that mean market share gains for Iceland in an environment such as this because it trades so well in frozen?
Can you outline the key cost buckets for Iceland? Obviously, we spoke about energy being a very significant one. Could you segment it in terms of percentages?
How significant a cost saving would be experienced from the UK government’s recent announcement around the six-month commitment to controlling energy prices on the commercial side?
Iceland reported that volumes were impacted by labour shortages in its most recent report for the period ending 17 June 2022. Are we still seeing labour shortages? How does that impact the company?
If we compare Iceland’s cost price inflation to other retailers, due to it being heavily exposed towards the energy and cost rise, is it probably seeing or will it ultimately see more inflation come through than other retailers?
What level of input cost inflation do you expect to ultimately come through before it starts normalising?
What would be the opportunities to cut costs?
How are contracts between manufacturers and Iceland negotiated during the time you’re describing? Are there price pass-through clauses for certain commodities?
How do you see promotional spend evolving for Iceland? How important is the company’s Bonus Card loyalty scheme, when we’re seeing Tesco Clubcard having real success in that area?
We’ve talked about Iceland being very exposed to the frozen category and there’s been some work to expand the fresh category and have a more rounded offering. Is that an effort that the company needs to double down on?
If Iceland has about 1,000 stores, is there room for rationalisation in its store estate – given the comparison with Aldi you gave – to perhaps improve its liquidity situation, considering the debt we’ve talked about?
How do the two traditional high street stores – Iceland stores and The Food Warehouse – differ in terms of margin profiles?
Where do you place Iceland’s current price positioning relative to those of its competitors?
Do you expect the big four retailers and discounters such as Aldi and Lidl to make invest in the frozen category, given how it trades in a downturn? Or do the relatively high energy costs of running such an expansion deter further investment?
We’ve touched on the debt and Iceland’s relatively unpleasant position. What can the company do to improve liquidity and cash flow?
Do you think there’s anything else worth noting on Iceland that we haven’t touched on?
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