Iceland announces home delivery plans

FROZEN food chain Iceland yesterday unveiled plans to roll out an online grocery service nationwide and create 2,000 in-store jobs as it looks to combat “intense” competition from supermarket rivals.

File photo of an Iceland store on Edinburgh's Easter Road. Picture: TSPL

The announcement came as the firm revealed fierce trading conditions and the impact of the horse meat scandal held back growth in the last financial year.

Iceland, which currently has 790 stores across the UK, posted a 1.1 per cent rise in annual like-for-like sales in a marked slowdown on the 6 per cent hike seen the previous year.

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Underlying earnings edged up 0.6 per cent to £226.3 million in the year to 29 March.

It confirmed plans to roll out the online delivery service within the next year following trials announced last month across 25 stores.

The move will see it return to online grocery sales, having been the first UK retailer to pioneer the concept as long ago as 1999 before pulling out amid trading woes eight years ago.

Iceland is stepping up its fight back against major rivals as it comes up against stiff competition from supermarket chains launching money-off coupons and promotional campaigns.

It saw sales fall in the first six months after losing out to the big players and as bosses were distracted by a £1.5 billion management buyout last year.

Founder and chief executive Malcolm Walker regained control of Iceland from liquidators of failed Icelandic banks Landsbanki and Glitnir in a deal backed by a consortium of investors.

Sales picked up in the second half, but Iceland admitted demand for frozen beef products was impacted by the horse meat crisis.

The Food Safety Authority of Ireland (FSAI) said it found small traces of horse DNA in some Iceland quarter-pounders, which were withdrawn as a result, 
although the group’s own tests found no contamination in its own brand products.

The firm launched money-off coupons earlier this year to fend off supermarket competition and also attracted record numbers of customers to its loyalty card.

Walker said: “The major multiples’ short-term promotional activity, through coupons, has continued to dominate the UK market place.

“Despite this intense competition, Iceland performed strongly by remaining committed to a round sum pricing policy which delivers great value everyday on all our own label products, supported by unbeatable deals on brands.”

Iceland, which employs almost 25,000 staff, opened 33 stores on a net basis in the year and plans to launch a further 40 over the following 12 months. It said the extra stores would create another 2,000 jobs.

The UK’s online food market is currently growing at around 16 per cent, and is set to almost double in value over the next five years to £11bn.

Last month Morrisons said it would be able to start its internet delivery business by the end of the year under an agreement with Ocado.

The tie-up will see the chain use Ocado’s distribution centre in Warwickshire for deliveries through a Morrisons-branded fleet.