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The Iceman Cometh (Again)

29 November 2013 By George Hay

Malcolm Walker has a no-nonsense recipe for retail success. While larger supermarkets have expanded upmarket, overseas, and away from food, he’s made a fortune selling cheap frozen dinners to hard-up Britons through his Iceland Foods chain. It’s all about meeting customer demand, controlling costs, and staying focused, his autobiography shows. Still, Walker’s travails down the years are a reminder how easily things can go wrong in the food business.

Walker’s title – “Best Served Cold” – threatens a dreary exercise in score-settling. There is, indeed, a bit of that. He devotes a fair few chapters to defending a controversial 2001 share sale. After 30 years at the helm, he was making way for new management. But they were keen to “kitchen-sink” the bad news following a troubled merger, and issued a walloping profit warning. A three-year investigation ensued.

Still, Walker turned it round. He was cleared, returned to Iceland in 2005 (via a buyout financed, appropriately enough, by Icelanders) and made the group successful again. Nowadays the Reykjavik raiders are gone too, but Walker remains in charge, having led a new buyout in 2012. And beyond the self-justification, and surfeit of exclamation marks sprinkled throughout the book, he offers an interesting primer on good retailing. 

Despite his estimated 215 million pound fortune, Walker apparently retains an acute sense of what cash-strapped customers want. Cheap frozen food, for starters. But as Walker says, good value isn’t always the cheapest. Removing genetically modified ingredients from most own-brand products helped Iceland carve out a niche as cheap, but respectably so. Lidl and Aldi are now taking a similar tack.

As he concedes, the central business is deceptively simple. Obviously you need to sell something people want to buy. You must also have maximum clarity and control over your costs. You have to minimise “shrinkage” – stock that gets bashed or stolen. And too much discounting, even if it boosts sales, is dangerous.

In the 1970s, Walker and his business partner, Peter Hinchcliffe, were micro-managers. They produced weekly financial statements long before near-real-time financial controls were commonplace. When he came back in 2005, Iceland’s internal controls had become so lax that one employee had enjoyed a company-funded wedding. Another had somehow bought a horse on Iceland’s account. More prosaically, Iceland carried too many ranges and had a slapdash approach to discounting.

Still, Walker hasn’t always avoided another danger: because retail can be so easy, those who are good at it quickly get bored. Early on, this manifested itself in an endless mania for diversification. Iceland ventured into commercial printing; opened a pizza restaurant in Rhyl; and tried to buy Hungarian farms after the Iron Curtain came down. Later, as Iceland grew to 760 stores nationwide, the restlessness fed into corporate finance and M&A – with equally questionable results.

The takeover of Southern rival Bejam and a merger, later unwound, with cash-and-carry outfit Booker were exciting at the time. But they prompted management struggles and loss of focus. They probably helped bring on Iceland’s early 2000s slump. Terry Leahy, Tesco’s expansionist former boss, would no doubt sympathise.

Unlike many entrepreneurs, Walker is also disarmingly candid about his own shortcomings. He admits his main motivation for Iceland’s 1984 flotation was financial insecurity. Now he thinks he would have been much richer if it had stayed private. He criticises Rothschild for under-pricing the issue.

Indeed, Walker’s bemused encounters with corporate financiers are part of the book’s charm. Banker excess has made the public suspicious of commerce. But Walker’s story is a reminder that outside the City, businesses isn’t about selling duff advice, but something customers need. He’s just best off sticking to frozen food.


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