- guardian.co.uk, Tuesday January 23 2001 03.16 GMT
During December the retailer's sales fell by 5.5%, which it blamed on a failure to sell as much organic food as it had expected.
While the company was selling its organic products at lower prices than rivals, they still cost more than Iceland shoppers were prepared to pay. At the same time, Iceland had compounded the problem by abandoning its "buy-one-get-one free" promotions which had been popular with its cost-conscious customers.
However, the inability of Iceland to tempt customers to buy organic exclusively was not interpreted as a sign that the scramble for organic produce was over. The market as a whole is predicted to grow each year by as much as 40%.
Bill Grimsey, Iceland's new chief executive and the man responsible for turning around the DIY retailer Wickes, said that organic food would remain in Iceland's chill cabinets but non-organic products would be re-introduced. Of the policy by the previous management to sell only organic produce, Mr Grimsey said: "It was clearly a very bold but premature thing to do".
When the strategy was announced in June, it was regarded as a public relations coup. Even though Iceland was late to embrace organic produce, it was the first retailer to throw out non-organic items altogether. It claimed to have bought 40% of the potential world supply of organic vegetables, but promised to take £8m off its profit margins to keep prices down for consumers. However, while that strategy has clearly backfired on Iceland, and caused a sharp fall in Iceland's share price yesterday, its rivals and retail experts did not write off the organic market.
Sainsbury's organic sales are growing every year. It has 1,000 organic products on offer, generating £3m a week. Waitrose also claims £2m of organic sales a week.
"Iceland mainly concentrates on frozen foods and it is the perishable items that are more likely to attract consumer interest," said an analyst from Verdict Research, the retail consultancy. Overall, Iceland admitted its sales had fallen 1.5% in the half year to the end of December.
Booker, the cash and carry group with which Iceland is merging, reported flat sales over the period but a 1% rise over the Christmas period.
