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UK's Iceland to bring organic food to mass market

Date: 15-Jun-00
Country: UK
Author: Mian Ridge

Iceland, the first supermarket chain to ban genetically modified food from its stores, said it had secured nearly 40 percent of the world's organic produce and set up long-term contracts with suppliers.

"This is the biggest move in the organic industry so far," said Chairman Malcolm Walker in a statement. "It is our aim to stop organics being a niche market and make it accessible to all income groups."

Iceland will start by switching its own-label frozen vegetables to organic produce before converting a whole range of conventional foods.

Instead of hiking prices to secure profits it will reduce margins on organic food to the tune of eight million pounds.

"This means the company will be able to sell organics at the same price as ordinary supermarket own-label food, while ensuring customers and farmers get the best deal," it said.

Kate Calvert, an analyst at HSBC bank said the move was part of Iceland's brand repositioning strategy. The supermarket is seeking to distance itself from its image as a purely frozen food retailer, in which will be helped along by its merger with grocery wholesaler Booker Plc announced last month.

The deal with Booker is seen as a merger of complimetary businesses, which will remain separate but reap some synergies. Booker is strong in room-temperature foods.

ORGANIC DEMAND OUTSTRIPPING SUPPLY

Calvert said the success of Iceland's move into organic food depended upon its handling of the supply-demand issue.

Iceland says the market for organic food is predicted to grow by 40 percent per year for the next five years. With only three percent of British land currently organic, demand for organic food would quickly grow to outstrip supply.

In order to overcome short-term difficulties this would create, Iceland said it would source 80 percent of its frozen vegetables from overseas, but it would also invest one million pounds in the British National Trust's farming programme to increase organic acreage in the UK.

"This is a big marketing push for Iceland," said Calvery. "There is potential for growth here, but in any case Iceland's competitors will follow it into the mass market for organic food very fast."

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