How Iceland had to adapt and develop in light of the pandemic
This past year has been challenging for companies and workers alike. We chatted to Richard Kirk, the Managing director of Iceland UK, an award-winning food retail provider worldwide, to understand how a large commercial company has had to adapt and develop in light of the pandemic.
Iceland is one of Britain’s fastest-growing and most innovative retailers, recognised as one of the best companies to work for in the UK, after celebrating 50 years of great service! Not only that, Iceland is committed to becoming the first major retailer globally to eliminate plastic packaging from all of its own-brand products by the end of 2023!
Q: Can you start by providing a brief description of what Iceland does, and how you as the managing director handle the day to day operations of an international company?
Yes. If I look at Iceland, I mean, Iceland is one of those I've been with on and off for a long, long time. I was initially the store's director and then Managing Director of this business way back in the 80s and 90s. Initially, the business started off as a frozen food business, only selling frozen food. But obviously over the years, we've changed and evolved and became more of a so-called convenience store but more of a discount store but still really focusing on frozen food. Over the last couple of years, the business has changed dramatically, with a big swing, because in two different areas. If we look at our business as of today, which is I suppose where we should be looking, we have three parts to our business, we still have the old core, Iceland, and the core Iceland is our high street business. That's how we started, selling food in the high street. And as the high street sort of grew with more and more stores into the high street, and then started to move some of the stores online. Around about five or six years ago, we launched our food warehouse, which was a much larger concept, again, selling a much wider range of food, while still very much focusing on frozen food, some larger packs will also just have more range right across the breadth of the product ranges. And that's developed into a by around 20% of our business. On top of that, if we look back 18 months, online owned less than 10% of our business. And now it's over 20% of our business. So certainly I could see that change in mix where the high street, which was 100% is now 60. We've got 20 odd percent in the food warehouse, and 20% online, that changed so much in what we do and how we operate. But in the last few weeks, again, we're starting to see some change again. Because as the high street opens up, as people go back to normal, as people get vaccinated and become more confident, we're seeing people drift back to the high street, that people with high street tend to be older people who've been scared to go out using public transport that I mean, if you think who was on the high street during that week, people are at work or the work at work. So you've only got really generally over that on a Saturday, Sunday, older people and your mom’s with kids aren't working. So you know, that's starting to change. But we're also seeing online where people again, move away, perhaps they're only using online just because they're scared to go out. So those dynamics are changing the market and have done so over the years. And as we're seeing that change continue now.
Q: What was Iceland’s first reaction to the pandemic and what impact did it have on the company?
Well, to be honest with the sales, we're a food business. So we saw our sales go up, particularly online. As I've said, we saw the high street fall away, we saw our cost dramatically increase. Because of additional people we have to take on with all the COVID restrictions. The COVID restrictions we had to put in the work, we had to put it in to protect our colleagues which cost millions, many, many millions last year. So a big, big change. And we're all still sort of scratching our heads and saying to ourselves, will those people come back to the high street? I mean, at the moment we've sort of opened up this week, but we're not seeing any big leap in sales. And if we look around and we read what's happening, and I yesterday, I read a big BBC article on a consultancy called springboard and springboard and do all this information on customer flow, and who's out and who's back in the high street and so on. And as of yesterday, they were saying that high streets saw a 35% down since last year, retail parks are back to flat with last year. But actually week on week, sales transactions are slightly down. People just don't seem to have gone out. Whether it's the weather when it's freezing cold, we'll have to wait and see for another few weeks and see what happens. I guess people are still nervous.
I mean, first of June, who knows? I mean, a lot of our business in town, is what I've said. But also there's lots of shops that have closed with loads of offices, you know, hundreds of accountants, solicitors, small offices, you know, building societies, banks, where hardly anybody has gone back to work, and all those are high street shoppers, I guess one day they'll come back. But my view is perhaps they won't be back until October.
Q: How well were you and your team prepared to handle the crisis? Did your business plan need to change in its response?
Well yes, we had a mix of massive changes, as I said because the channel mix was the most demanding, but we also saw what we sell, changed. I mean, a lot of things that used to sell, I’ll give you a good example, things like bread, and milk was a good example, which are almost daily purchases, those sales dropped away. But in other areas we saw the sales power away in a different way. Slimming World is a big part of our business, you know, we sell a whole range of Slimming World, all the Slimming World groups slow down. So we saw the sales of our Slimming World profits drop off. So you know, lots of change going on. But overall, I would say it was beneficial for us.
Q: What were the most challenging obstacles Iceland had to overcome and what solutions have you been able to apply?
Adapting our source to covid, I mean, initially, there were people who were really scared. I mean, if you think about all we had to do wearing a mask, and so on, and now people are used to shopping in a supermarket, I guess you go in now I'd ever think. I mean, I've been out in shops all the way through it. But in between how what I see it now, when I think back to sort of 15 months, or whatever it was last March, there was nobody out at all, there was the odd person scurry around with their mask on and they were panic buying paper, soup, and you name it and our average basket sort of at that particular time doubled. And people were just so scared, they thought they'd have to batten down the hatches for a month.
They were going to be buttoned down for a month, but it’s been what, actually a year and a half now. But it's amazing how people get used to it.
I mean our strength is our colleagues, our installer colleagues. To be fair, we've been on the front line and worked through all this all along. I mean, of course, they've been careful. Of course, they've been wearing masks. But you know what, they really, really have been on that front line, not nurses, you're not in contact with people with COVID, but you are in contact with 1000s of people in the general public. And I think they've done an amazing job.
Q: Would you say that there are any challenges right now?
Yeah, there always is. I mean, because the business changes and people start perhaps drifting back to the big supermarkets. I think the biggest challenge is the high street. You know, lots of shops have closed down, you have to do something to attract people back into the high street, cut the business rates for another few years, develop markets in town centers, get some you know, they've got to do something pretty major. I walked around in my local town on Saturday in Chester and it was just raining, Devil Looms are closed now. You know, it was an anchor store in the town, I walk around the precinct and I would say 50% empty shops. It's a shame. More and more of the shops are becoming restaurants, malls and centers become more about hospitality than just shopping.
Q: How has coronavirus affected hiring and demand in your industry?
Well, we've had a lot of temporary people on, lots of drivers on through our home delivery, 1000s. A lot of colleagues in the stores came in part time where lots of people were furloughed. Some came in just on a temporary basis to work for us and have now gone back to what they did before. So, you know, over the years I'm trying to think back to last year we had several 1000’s of people off with either symptoms of Corona or they were in contact so they were self isolating, you know? And so to try and take up that slack in our stores where you've got maybe 10 members of staff, it just wasn't easy.
Q: After months of lockdown and social distancing, consumers have been forced to shop differently, reprioritising what is essential and swapping the checkout line for online shopping more than ever before.
b: What change are you able to see when it comes to online shopping and shopping in stores? Can you see if the consumer behaviour has changed since the start of the pandemic in Iceland?
I’m not quite certain what you mean. How has it changed? I mean the changes for an online shopper against our core shoppers, they spend a lot more, the basket is a lot bigger as you'd guess. I mean, the one thing in Iceland, we don't charge for delivery once we get past a certain basket. And that, of course, drives a much larger basket. But this is a mix of products that we're selling is pretty similar, maybe a little bit more of a while luxury products have been sold online. Because again, you're attracting a slightly more affluent customer, I guess. A lot of brands have people shifting back to brands, where people somehow just feel safe with the brands, you know, whether it's Bird's Eye, the brands that mom knows, she just thinks, you know what, I'm going to stick to that brand because I know it's a favorite and the quality is right.
Q: The single most important action companies have taken in its response to the pandemic is focusing on employees' wellbeing.
b: How has Iceland chosen to provide support to its employees wellbeing during lockdown?
Well, as I said, I think we've done everything we possibly can to protect those employees. We're in the office here, people have been working remotely, we obviously try to make the offices as safe as possible. We still don’t have everybody back here. And I guess we never will. In the stores, it's a little more difficult. Of course, we've introduced all the shields at the checkouts, social distancing. But you know, when you go in the back area, and my colleagues in the back area, they are often quite often close together, but we insisted they wear the masks, and you can only do as much as you can. It has been quite difficult in this pandemic, you know, because there's all the social distancing, you can't make or do something you can’t do. We've actually been put into offices and looked into retail, colleagues have been working together in quite close proximity for the last year or so. I do personally feel that we are maybe getting a little bit wrapped up in it and wonder if we are just getting a little bit too cautious as a nation.
Don't get me wrong. I'm not being blasted. Well, you know, in the workplace, I can sit next to somebody, I can have a meeting in here with 6 people and I sit next to them. But actually, at nighttime, I couldn't have a drink with them.
Q: How have remote work worked for your company? Many companies plan to combine remote work with time in the office to get the best mix of productivity and collaboration. Are you thinking of applying a hybrid approach now when more employees are asking for it?
Yes we are but, look, you know, so it depends on the department, if you're in the IT department, and you're programming or whatever you do, and it’s not a difficult thing for that day, you can do the rest of it at home, provided you do the work, which they will. But I think if you're a trading manager or a buyer, you've got to be in here, you've got to be with talking to the technologies, you got to be talking to your boss. You know, you've got to be talking to suppliers, and all those sorts of things. It depends what the job is. If you work in a shop, you can't work from home, can you?
You know, you build the banks, and we're doing it...Fair enough, if that's what they want to do. But I always think, again, if you're in retail, it's hard. And you've got to work all the way through this. So I think we have a little bit of a responsibility to our retail colleagues to support.
Q: As economies now reopen, many companies plan to combine remote work with time in the office to get the best mix of productivity and collaboration. What are your thoughts around remote work? Are the company thinking of applying this now when more employees are asking for a hybrid approach?
Yeah, it’s been working well, but there's nothing compared to having your colleagues back in the office. You know, zoom calls like this are great. But normally there's a string of people on the bottom of the screen here, you know, or wanting to say something they can't, they can't get into the conversation. You know, you don't get that interaction that young people come in, don't understand how things work and read things work. You know, how come they have their say, they don't see how the boss motivates the team. You know, there's so much that goes on. And you know, when I'm in here, I walk around, and so does my Chairman and CEO. They walk around here, talk to people, and that's what you do. You know, you're in and out to different people's offices in the office space. And if you want to know something, a few minutes, and then the trading directors of the business work for me. So I just give him a shout, come to the office for 10 minutes. We'll get around and have a chat and that's what we're going to do. You can't do it on zoom. And it worked okay but I think again, to be honest with you. I'm not seeing people get back, which I thought they would do. Supplier meetings we've almost had in the year. I think we've only had half a dozen meetings in the office in a year. And this is people working from home. Honestly, maybe I'm a bit old fashioned. See I don't quite get it. I think to get Britain moving again, we need to get people back in the offices.
Q: This outbreak is a sharp reminder that pandemics, like other rarely occurring catastrophes, have happened in the past and will continue to happen in the future. Even if we cannot prevent viruses from emerging, we should prepare to dampen their effects on society.
b: What lessons have you learned from the crisis? And could there be a situation that we can learn from since the start of this and look to strengthen the future of our businesses and employment?
Gosh, of course, yes. I mean, if we have another pandemic, I think we've been through one to know what we need to do. I think the problem with this one is that we were all learning as we went along, and there's been lots of criticism about the government and how it's been handled, although the vaccination programs have been absolutely amazing. But you know, we look back, everybody with hindsight, would have done it differently. But my view is that at the time, I mean, I honestly thought it was a daft idea to start with. And then I thought we could only be locked down for a month. And then in no way when it came out in June today, every Monday, we'll be going back in again, you know. So I think we've learned a lot. We've learned a lot about how we operate, and I think some of the things will stay. I mean, in terms of social distancing, it will take years, but I guess if the pandemics and there isn't another resurgence or a different one, people will forget, you know, five years time, you'll have forgotten all about it. So we'll come back to normal, eventually, you know, just enjoying yourself.
Q: We’re now slowly starting to open up our society again and I want to know what Iceland’s forecast is for the future. What are the top priorities within the next few months and do you have any new projects going on that you would like to share?
Yeah, we have just opened our first convenience store, which is open and we will be opening some more, under another part of the business! We're continuing to open food warehouses, where 25 new fire food warehouses are opening in the next nine months. Our core High Street businesses will continue to invest in and refurbish and change space to really sort of satisfy the demand that's out there in more fresh production or chilled products, etc. So yeah, there's lots of things going on, lots of product development, and particularly in our frozen food area. We're developing a whole range of excellence in brands, if you go into our stores now you'll see a lot of ice creams. All these sort of journalising cola bottles and strawberry milkshakes and TGI Fridays, TGI’s with a whole range of TGI’s. We've got to Greg's, these are all exclusive to us. And that's a key part of our strategy going forward is to develop these exclusive brands that you can only buy in Iceland!
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