The announcement that WCRS has resigned Iceland’s account throws doubt
on the retailer’s future marketing, writes Patrick Barrett
Iceland is in danger of finding itself out in the cold on the modern UK
high street. Squeezed between the discounting forces of some retailers
and superpowers such as Sainsbury’s and Tesco, it is struggling to find
its own positioning.
Its worries came to a head last week with the decision by WCRS to quit
the pounds 7m Iceland account.
The two companies issued a statement saying they had agreed to sever
their two-year relationship due to a disagreement over the future
direction of Iceland’s advertising. Iceland has returned its account to
Manchester-based Tom Reddy Advertising.
But despite a supposedly amicable separation, a silence has descended
over the true reasons for the break-up. According to one source, Iceland
is reluctant to move its ads on from the pile ’em high sell ’em cheap
philosophy which its chairman and chief executive, Malcolm Walker, has
advocated since the chain was launched.
‘WCRS has been trying hard for a long time to get Iceland to be more
mature about the advertising process. It came to the point where they
couldn’t reasonably advise them what to do,’ says the source.
The debate between Iceland and WCRS is thought to have been further
strained by internal divisions within the retailer over its future
But the company’s decision to stick to its cheap and cheerful campaigns
is based as much on its difficult position in the grocery retail market
as its reluctance to try more sophisticated advertising.
During the 1980s Iceland appeared to have found a niche selling frozen
foods and became the darling of the City, expanding rapidly to its
current 757 stores.
The chain traded well among D and E shoppers and its copyline ‘Mum’s
gone to Iceland’ was one of the best remembered in the grocery sector.
In recent years, however, the chain has been put under pressure by
powerful supermarkets and the expanding, down-market, discount operators
such as Lidl and Aldi. The retailer’s selling proposition as a provider
of frozen foods has also been eroded as most grocery chains have
introduced their own frozen food sections.
The ‘Mum’s gone to Iceland’ copyline was dropped last year in a bid to
up the brand’s appeal among younger,C1 and C2 shoppers.
But after reporting the first fall in pre-tax profits in its 25-year
history - down 11% from pounds 33.6m last year - at its interim results
in September, many observers are beginning to see a high street chain
which sells only frozen goods as redundant.
Michael Dennis, retail analyst for NatWest Securities, says Iceland is
suffering because the casual shoppers it relied upon were wooed by
supermarket loyalty cards. He adds that the chain will be forced to buy
back its customers with advertising featuring its ‘Price Check’
‘Iceland is appealing to deal-driven customers, which is not what you
want to do because you are giving your gross margin away. It seems they
are going on the offensive, but potentially it could be disastrous. The
key to their survival is attracting customers without cutting prices,’