In a rare interview, guest editor Martin Glenn speaks frankly to Alex Beckett about the challenges facing the frozen food industry

Q: How has life at Birds Eye changed since Unilever sold it to Permira three years ago?
A: We bought a business that was really unloved. Unilever didn't get frozen. It saw it as commoditised and had low expectations. In the preceding five years, sales and profits had been declining, so there was a culture of resignation. Our immediate job was to restore people's belief in the business. We are now more competitive, determined and goal-oriented.

Q: Frozen food volumes are flat, although value is up 4.6% to £5bn [Kantar Worldpanel]. Why has the frozen industry failed to capitalise on the recession?
A: Fish, veg and poultry are our core categories - 70% of our business. Poultry is in double-digit growth, fish is in growth, but veg less so. The benefits of recession still apply, but I am leery about trying to equate frozen with distress purchasing. It's simplistic people have no money, so they trade down. That's the problem with frozen. Fresh broccoli costs twice as much as frozen. It's the same standard, so why is it half price? Because the category has been badly managed over 25 years.

Q: But why are volumes flat?
A: With commodity price inflation last year, we took the grammage out and there has been price management going on. People aren't eating more. There is a massive opportunity to get people eating more frozen food. We have also reduced our total number of SKUs by 15%, which explains some of the declines.

Q: Is better marketing needed?
A: It is working. We have to have a margin structure that allows us to continually advertise. McCain has done a good job in making the category worth paying more for. Retailers want to support us. Waitrose announced it was re-merchandising its frozen own-label range in December.

Q: What was wrong with the marketing in the past?
A: Fundamentally, the truths of the benefits of frozen haven't been told to a generation. When Birds Eye was launched in the UK in the 1940s, it had an education programme with ads about fish fingers containing 100% fish. Now only one in two Britons believes that. Shame on us.

Q: Why has there been so little innovation in frozen?
A: Frozen food has historically suffered from cheap innovation and was categorised by lots of small launches and minor differentiated products. 

Q: I bet you wish you came up with microwaveable fish fingers first, though?
A: Tell me, when have you seen them advertised? Let facts speak for themselves. The reason they haven't is because they're a horrible product. We looked into it because the concept was attractive, but the delivery wasn't.

Q: What about Birds Eye's other areas? Desserts, ready meals and your struggling pies business.
A: We've got a great business in waffles, burgers, ready meals and pies. We've had a good, hard look at these areas but are not going to chase unprofitable sales. We have a brilliant new pie supplier and pies will see nice growth. With ready meals we have a new sponsorship deal on mainstream TV. I'm not giving up on those areas, but they are not run as classic brands.

Q: Why have you decided to stop pea production in Lowestoft?
A: Without sounding callous, it's not a big deal. It was triggered by us losing a long-standing but low-margin contract in Italy, worth 20% of what we grow. We had to act quickly, but we are not deserting UK peas.

Q: One in five featured space promotions are Birds Eye. This can't deliver long-term sustainable value growth, can it?
A: Promos are definitely part of the marketing mix. They are really important in frozen, as visibility is a key challenge. People don't shop frozen impulsively. I'm happy with promotions as long as they have the right margin structure. Simply Bake to Perfection doesn't have big margins, but sufficient to support the brand.

Q: Were you happy to see the end of Asda's £1 deals last year?
A: We reacted by getting Bake to Perfection ready. Asda's done a fabulous job of developing frozen. The £1 deals were a phase and won't define how the category is ultimately seen.

Q: So your investors are happier?
A: They're bankers, they're never happy! Some 120 banks have lent us money we presented to them last week and said that over the past three years we had gained a stronger platform. Our gearing when we bought the business was 6.6 times profit. Now it's 4.4 times and our debt trades very healthily. But we have competition.

Q: Like Findus?
A: Findus has spent nothing on investment. We outspend them 10 to one. Our share of voice in fish is humongous.

Q: But sales of Birds Eye cod fillet fish fingers fell 26.8% to £30m last year and those of Young's cod fillets rose 12.7% to £22.7m. How do you explain that?
A: Well, it would have been nice if Young's had done any marketing. It has gone into fish fingers and downtraded it significantly. It's an incremental business to it - it has no franchise to damage. I don't see Young's doing anything beneficial to the category. It's pointless dropping prices to unsustainable levels.

Q: So you don't set much store in Findus UK's pledge to become the nation's no 1 frozen food brand in five years?
: Talk is cheap. I'm never complacent about competition, but I'll worry more when I see it on TV. Actually I'd like that, as it would grow the category faster.

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