MARK935 Marketing Strategy Case Analysis
CASE STUDY: Iceland Foods takes heat for bold environmental message
The unveiling of Christmas television advertisements is an annual ritual in the UK’s hugely competitive retail market. Yet the commercial judged to be the most effective in 2018 never made it on to the nation’s TV screens.
Advertising agency Kantar Millward Brown con-ducts consumer research into the effectiveness of festive campaigns. It says the expensive effort by department store John Lewis featuring singer Elton John and a schmaltzy Sainsbury’s supermarket advert about a school play both had less resonance than Iceland Foods’ low-budget animated feature about an orangutan made homeless by deforestation.
Richard Walker, managing director of the frozen food chain, says the ‘Rang-Tan’ advert was originally made for Greenpeace, the environmental lobby group of which he is a member. ‘They showed us a rough cut of this campaign video they had: it brought a tear to my eyes. We thought it would be great if we could use it as our Christmas advert,’ he says.
Clearcast, the organisation controlled by broadcasters that approves adverts, had other ideas. It refused to clear the advert because it had previously appeared on the Greenpeace website and the group had some of the legal characteristics of a political organisation. Instead, the advert was released online – with a generous dose of ‘the ad they tried to ban’ publicity – and promptly went viral. It was viewed more than 70m times worldwide, while a petition launched in the UK urging Clearcast to reconsider received more than 1m signatures.
Walker is adamant Iceland did not plan for this turn of events as a cost-effective way to upstage bigger rivals. ‘We thought debadging it would be enough to get it past Clearcast. I genuinely did not think it would be banned.’ He says the company had booked more than £600,000 of television advertising slots to air the commercial.
The advert refers to the clearing of forests in Indonesia and Malaysia to make way for palm oil plantations. According to Greenpeace, an area equivalent to 146 football pitches is cleared every day in Indonesia alone. ‘Rainforests cover only 2 per cent of the planet’s surface but account for half its bio-diversity. They are the crown jewels,’ says Walker, who in April 2018 pledged to remove palm oil from all Iceland’s own-label products by last December to persuade the industry to stop clearing forests.
Iceland’s choice of campaign theme might seem an odd one for a company that, since its foundation in 1970, has targeted customers at the value end of the shopping spectrum. It lacks the scale of other supermarkets – its annual revenue of £3bn is a fraction of the £51bn (excluding fuel) that UK market leader Tesco achieves, or the SFr91.4bn ($90.6bn) posted by food multinational Nestlé.
Iceland’s palm oil consumption for own-label products, about 500 tonnes a year, was inconsequential in a global con-text; consumer goods giant Unilever gets through 1.5m tonnes annually, and total world yearly production is 72m tonnes.
Walker acknowledges the move was at least partly a personal one. ‘Were [customers] screaming down the aisles saying, “If only there was no palm oil”? No, but I am so proud that now some customers, some of whom only have £20 a week or so to spend on food, are talking about palm oil – where it comes from, the pros and cons,’ he says.
Environmentalists such as Jonathan Porritt say UK retailers generally have a good record on palm oil – the World Wide Fund for Nature rates most of them highly on progress towards ensuring that record is sustainable, mostly via participation in industry standards body.
But Iceland was the first to propose removing palm oil from its products altogether – a controversial move in many respects. It was derided by Porritt (who is an adviser to Sime Darby, a producer of sustainable palm oil) as ‘an almost entirely meaningless gesture’. Other critics say switching to alternatives would have a catastrophic impact on the smallholders who cultivate palm oil.
Walker acknowledges such matters are rarely clear cut. Palm oil is a widely used ingredient because it is one of the cheapest vegetable fats and is much higher yielding than many alternatives. Sunflower or rapeseed, for instance, require far more land to produce the same volume. He says his objection is specifically to deforestation, and that ‘it would be great’ if improved sustainability meant he could remove the ‘No Palm Oil’ branding proliferating across Iceland’s ranges.
The palm oil ban is not the first occasion Iceland has made a bold move in the name of the environment. Two decades before, it was the first UK super-market to ban genetically modified (GM) ingredients. Previous initiatives have included recycling freezers containing ozone-depleting chemicals and removing artificial colourings and preservatives from foods.
The man behind many of those decisions was not Walker but his father, Sir Malcolm Walker, the company’s founder and executive chairman, who claims to have coined the phrase ‘Frankenstein foods’. ‘Our business was about walking a tightrope between what people will spend on food and the absolute quality of the product,’ Sir Malcolm wrote about GM foods in Best Served Cold, his 2013 autobiography. ‘We had to compete but we also had to be ethical. Our customers were mainly on a low income but they had a right to a choice.’
Not that he minded the publicity such moves attracted. ‘I wasn’t embarrassed to shout about them and try to turn them into a point of difference. They were certainly good for sales and our constant high profile in the media brought in new customers.’
Richard Walker is more circumspect, saying there was no clear-cut evidence of a sales boost from the ‘Rang-tan’ advert. The company also incurred significant costs by helping its suppliers remove palm oil from its ranges, at a time when it is carrying a relatively high debt load and facing challenging trading conditions. Iceland’s borrowings – more than five times its earnings – stem from a leveraged buyout of the group led by Sir Malcolm in 2012. The ratio of debt to earnings is below two at all the major UK supermarkets.
An even more complex undertaking is Iceland’s pledge to remove all plastic from its own-label ranges by 2023, another area where rivals have followed its lead. Plastic, which is cheap and
versatile, is integral to food packaging, but the BBC’s Blue Planet wildlife documentaries have raised public awareness of its environmental effects.
Walker says there have been some early wins. Wrapping bananas in a cardboard girdle rather than bagging them has saved 10m plastic bags a year, for instance. ‘We are a fifth of the way on the journey in terms of tonnage, though I’m not entirely happy. If you go into our shops now, it is still a wall of plastic,’ he says.
Walker also admits there is a degree of contradiction in a company that owns a private jet lecturing others about environmentalism. ‘There are contra-dictions in all our lives, but I don’t think the answer is to live in a cave and never fly anywhere,’ he says.
Rita Clifton, co-founder of BrandCap, a consultancy, says Iceland seemed to have overcome the ‘radical at the research questionnaire but reaction-ary at the checkout’ situation, where customers pro-fess strong views about an issue but fail to act on them if that would mean bearing additional costs. Last December, Wilmar, the world’s largest palm oil trader, said it would improve the monitoring of its suppliers, a decision Greenpeace described as ‘a breakthrough moment’. The previous month, the RSPO had said it would commit to a no-deforestation policy.
It is impossible to know to what degree the advert influenced these changes, given that environmental organisations have lobbied food manufacturers and retailers for years to clean up their act on palm oil.
Clifton says it is easy to criticise the flaws in such initiatives, but adds: ‘If they’re nudging the peanut forward in the right way, they should be encouraged as well as monitored.’
Questions
Instructions
This Assessment Task consists of TWO parts. Both parts MUST be attempted. Answer ALL questions. Your answers must be your original/independent work.
Each answer should be no more than 2 pages (1.5-spaced, Times New Roman 12-point font) in length.
Start a new page for each answer, and clearly number the part/number of each answer.
Section A: Theory Questions (40 Marks)
- Should business concern itself with non-business issues (e.g. the environment, genetically-modified foods, climate change)? If so, why? If not, why not? (10 Marks)
- How is the American Marketing Association’s 2013 conceptualisation of Marketing materially different to its previous conceptualisations, and what are the implications of the revised definition? (10 Marks)
- How can retailers practice the (co-)creation and delivery of value for customers, partners, and societyat-large? (10 Marks)
- Describe the connections between the American Marketing Association’s 2013 conceptualisation of Marketing and the concepts of: corporate social responsibility; sustainability; and ethics. (10 Marks)
Section B: Discussion Questions (60 Marks)
- How does Iceland’s stand on genetically-modified (GM) food and palm oil relate to the concept of marketing strategy? (15 Marks)
- How does Iceland express its sustainability ambitions, and what marketing strategy tools are implicated in this expression? (15 Marks)
- What may be the drivers of CSR initiatives for supermarkets such as Iceland? (15 Marks)
- How might the marketing mix for sustainability (Pomering, 2017) be used to improve Iceland’s marketing strategy? (15 Marks)