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Yesterday's followers are today's leaders in Britain's market-driven FF industry.

Frozen food retailers, caterers and distributors are calling the shots, as power continues to shift away from manufacturers who pioneered the business.

It is easy to fall into the trap of analyzing Britain's frozen food industry as if the trends there were still being established by the manufacturers. Not so. For some years now the direction has been set by the retailers, and in more recent times by the specialists who supply the catering and foodservice industries.

During a recent survey of the UK retail sector, this reporter found the "traditional" supermarket positions had been, if anything, accentuated and that some former positions were developing so fast that a new order could be seen in the making. Sainsbury's, Marks and Spencer, Tesco, Asda, and Safeway still make the running in food retailing, but former frozen food center specialist Iceland, after months of speculation about its plans for chilled foods, has come out into the open with a move into the Littlewoods variety store chain. Chairman Malcolm Walker described it as reinforcing Iceland's "recent transformation from freezer center to high street food retailer."

"Frozen food has become more about convenience food than bulk buying," Walker said recently. Shares in Iceland Frozen Foods jumped 21p to 668p as the company announced a |pounds~27.5m placing to fund the move into Littlewoods and forecast a 19% rise in annual profits to at least |pounds~55m.

Littlewoods is one of those store chains that rarely captures the headlines and sits somewhat uneasily between Woolworths and Marks and Spencer -- not quite sure about trading philosophy but maintaining a middle-of-the-road merchandising approach that Iceland's management team can be expected to turn around. There are 127 branches selling a variety of chilled and frozen foods as well as clothing and other commodities. It is probably unfair to describe them, as some newspapers have, as a "poor man's Marks and Spencer."

Nearly all of the 48 food halls will be in prime town or city center locations, with an average size of over 4,100 square feet, similar to existing Iceland stores. They will, according to Iceland, carry the current Iceland own label and branded food range, with a particular emphasis on frozen convenience food and chilled and fresh products, to reflect their location and the accent of Littlewoods' existing food trade on "daily purchase" items.

Littlewoods will provide Iceland with cleared floor space, in which the latter will install its own fittings and refrigeration equipment. Its first four units were expected to open by mid-March, with a further six coming on stream by the end of April. The balance will be converted by the end of October.

For an initial period of five years, no premium will be payable to Littlewoods for entry into its stores. The total cost of developing the 48 Iceland food halls will be about |pounds~20m. Additionally, 60 new stores are slated for opening in 1993, compared with a previous target of 50 in the current year and 45 in 1992.

Icelands' directors estimate that the company' sales for the 53 weeks ended January 2, 1993, were not less than |pounds~1,037 million (|pounds~889 million in 1991), with profits before tax hitting |pounds~55 million. An "estimated sales growth" of not less than 17% for the year includes growth in "like for like" food sales of 10%. Food inflation was less than two percent for the year.

Littlewoods' press statement is understandably shorter than Iceland's and plays up the company's existing strengths. It advises that where a conversion is not practicable selling space will be devoted to a much wider selection of their clothing ranges. Their restaurant business (now operating in over 100 outlets) will be expanded, and they will continue to run wine shops and cigarette kiosks. The takeaway food offer, which is said to be showing excellent growth, will be extended to the vast majority of their 127 stores.

Those with long memories of the frozen food business will recall that the two entrepreneurs who started Iceland, Malcolm Walker and Peter Himchcliffe, came together in the first place as trainee salesmen within Woolworths and may never have lost their ambition in the retail market. Whether they will be satisfied to run "shops within shops" or allow their imaginations to run riot throughout these stores remains to be seen. Retailing in Great Britain is unlikely to ever be quite the same again!

Chairman Walker said the increase in sales of 10% was mainly due to more customers walking through the doors. Individual transactions were roughly the same at about |pounds~7.50. Chilled foods provided the group's greatest growth in 1992, increasing by about 25% on the year.

In the more conventional part of the retail market, life seems to have continued much as before. Sainsbury's is everywhere with a policy based on private label. But it is followed closely by Tesco, whose labeling is brighter. Both owe much to the product development initiatives set up by Marks and Spencer, whose food halls innovatively mix chilled and frozen in a way that suggests the same management is responsible for both.

In Ashstead, not far from the Epsom racecourse, QFFI found in one M&S branch a well developed Indian range with chilled Chicken Tikki Masala at |pounds~3.25 alongside Chicken Korma, Lamb Pasada (all 10 oz. packs at |pounds~2.99) and Chicken Curry with Rice (12 oz. at |pounds~2.49). In the frozen food cabinet it was Fisherman's Pie at |pounds~2.29, Haddock Mornay and Plaice Mornay at |pounds~2.99. Stuffed Pasta and other lines were also seen, suggesting well stocked minds leading to well stocked cabinets. Private label ice cream is everywhere, so is pizza -- but pizza with toppings not seen in North America, Italy or Europe.

It was in Tesco where this reporter found something that has previously been remarked about in this column...ethnic cuisines added to a basic commodity...and in the frozen food cabinets. On this occasion, it was either one of Tesco's product development managers, or one of the pizza company's or somebody from the Indian Food company who had devised a chicken tikki masala topping to go on a deep crispy pizza base that makes something entirely new out of a combination of different cuisines. The possibilities are endless. More than almost any other food, the pizza lends itself to this kind of treatment and it looks as if the English supermarket has got there first.

Chinese, Italian, French and Indian cuisines are increasingly taking on traditional English fare (fish and chips, steak and kidney pie!). And the really good cooking is to be found in Ruthland, Oxford and the Welsh border counties where foreign (for the most part) chefs have developed adventurous recipes in country houses where one pays |pounds~20 for one course!! Suppliers on the whole have shied away from this market, preferring to mix it with the retailers who play much the same brand games.

Catering Gets Professional

There was a time when every food company felt it necessary to be good at everything. Food manufacturers had to be represented in every sector; brewers had to supply beer not only to pubs but to clubs, restaurants and holiday camps. Today is the age of the specialist and a company like Brake Bros. can make a handsome profit selling frozen foods to the catering and foodservice industries alone.

Although food styles remain, at best, unadventurous in Britain, it is a lot easier than it used to be to find a reasonable restaurant and more and more units are managed by group operators who apply professional management and financial controls. Moreover, a world cuisine is now available through the various catering outlets in the UK.

According to Brake Bros., one of the most significant food distributors in the UK at the present time, many of the largest selling products are not traditionally English and would not have been seen at all on menus 30 to 40 years ago.

Headquartered at Ashford, Kent, Brake Bros. works from a price list that contains nearly 4,000 items, including pasadas, pizzas and pastas, two pages of shellfish (prawns, scampi, lobster, crab, mussels, cockles and scallops).

The company believes that it has correctly identified a trend away from the desire for bespoke products that require the caterer to take responsibility for stock as well as "due diligence." In a paper this reporter was given by CEO Frank Brake, it is pointed out that European legislation emphasizes the responsibility caterers must take for every product. This involves them in product specification, nutritional features, food safety, labeling and packaging. To carry out their "due diligence" satisfactorily requires regular, professional factory inspections not only of all suppliers, but also their own product development teams, if they require bespoke products. This makes it attractive to rely on major first class suppliers who carry out all these responsibilities on the caterers' behalf.

The quality of food distribution, they say, has improved considerably over the years, particularly as regards the cold chain and hygiene standards. This had come as much from the caterers' own commitment to purchasing only safe, healthy food as to legislation.

Brake Bros. is inordinately proud of the standards it has achieved. "We have continually developed our infrastructure with significant investment in modern distribution centers, the highest quality refrigerated vehicle fleet, and EC-standard production factories."

The price list referred to previously is not one for the gourmet chef alone. It is firmly based in reality and provides an excellent guide to the current state of British food taste. A preponderance of prepared and specialty dishes sits well with what used to be called commodities -- peas, beans, french fries (chips) corn on the cob. And if the whole thing looks like an invitation to a country home bean feast, then so much the better.

Brake Bros. has a reputation for basic common sense that has given it a unique position in the British frozen food industry. In the company's interim report for the six months ending last June 30, 1992, sales of |pounds~126.4m were reported. Pre-tax profits of |pounds~7.1 million were realized, along with earnings per share of 10.3p. "Against the continuing background of recession, I consider this to be satisfactory," noted Chairman Bill Brake. "Further organic growth is being achieved and benefits from recently acquired frozen food businesses will begin to emerge as integration plans take effect." One of these was the purchase last year of the Cogeshalles group, an independent supplier of frozen foods to caterers in the Paris area.

Input from Perkins

Compared with the noise food manufacturers used to make in the 1960s and 70s, their silence now is almost uncanny. The "public relations" machines have ground to a halt in recession, leaving a lot of space for the newer, smaller concerns...companies like Perkins Foods PLC. CEO Howard Phillips master-minded a policy of acquisition "in order to get critical mass," a policy that enabled Perkins to hit a sales volume of |pounds~260m in 1991, yielding profit before tax of |pounds~24.3m. His demeanor when this reporter met him in Peterborough in January indicated that the situation had improved. In fact, turnover for the six months ended last June 30 had risen to |pounds~176,336, and a doubling of that figure by the year-end would have got them beyond |pounds~350,000.

This magazine put a series of questions to the CEO, which were answered as follows.

QFFI: Does the way forward lie with private label or with processed markets like chilled, fresh or frozen?

Phillips: Looking forward, my personal view is that there is a lot of scope for both the chilled and frozen market, although I think that the growth in the frozen market will be behind prepared convenience dishes rather than the old commodity lines. Perkins Foods is servicing many of the major supermarket groups with both chilled and frozen prepared products and therefore any expansion of these outlets is a good opportunity for us. We supply both private label and our own brands, and therefore can take a flexible approach. The new trends in pizza formulation which you have seen are exciting and, in fact, we are progressing very well with Pizza Bolognaise in France. As before, we very much specialize in own label manufacture...down to prepared pasta dishes, prepared potato dishes, that sort of thing.

QFFI: It is clear that you believe in internationalism, but is that because of market opportunity or product development ideas?

Phillips: Certainly internationalism produces a wide expanse of market opportunity as you are selling into a number of different markets compared to, maybe, just one if you are, for example, simply UK based. Many products are currently sold across European markets, for example, ice cream, fish fingers, peas, pizzas, lasagne, and beefburgers. I think it goes without saying that product development will continue to give increased international opportunity as to some extent there are common tastes. There is no doubt that each country takes on board, from time to time, new sorts of tastes and flavors that are often brought about by foreign travel. For example, in the UK you could point to a huge growth of Indian curry products which has developed over many years. In Germany, you have a very strong influence from Greek and from Chinese eating. In each of the countries of Europe there tends to be a move away from the really traditional dishes towards some rather more exciting eating patterns.
COPYRIGHT 1993 E.W. Williams Publications, Inc.
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Article Details
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Title Annotation:News from Europe; frozen foods
Author:Kemp, Graham
Publication:Quick Frozen Foods International
Article Type:Industry Overview
Date:Apr 1, 1993
Previous Article:Innovative new products proliferate at food and drink exhibition in London.
Next Article:Frozen vegetable trade is stable as Europe goes free for 1993.

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