‘Food prices will never drop back down again’
Iceland boss Richard Walker tells Gordon Rayner inflation is seeing middle-class shoppers turn to budget supermarket brands
For a country in the depths of a cost-of-living crisis, the past week’s headlines have been unremittingly grim. Inflation hitting a 40-year high. Warnings of “apocalyptic” price rises from the Bank of England Governor. And a helpful heads-up from Rishi Sunak that the next few months “will be tough”.
Richard Walker, managing director of the supermarket chain Iceland, says financial pressures are driving some shoppers to take drastic action to stay within budget. “Some customers are getting to the till and asking the cashier to tell them when it gets to £40, so they empty the trolley on to the conveyor belt and when it gets to £40, they stop.”
Iceland has become the first retailer to offer a senior citizens’ discount. Over-60s will get 10 per cent knocked off their grocery bill, though only if they shop on a Tuesday. Others simply can’t afford to pay, so the chain is piloting a micro-loan scheme through a not-for-profit lender, offering customers up to £75 for up to eight weeks, at a maximum total interest of £2.75.
Even then, Walker says Iceland is losing customers to food banks, and for those who hope the rising cost of food is just a blip, he offers little comfort. “I don’t think we’re ever going to see a dropping back now,” he says. “Food prices have been too low for too long and there has been a readjustment.
“If I look back to the Iceland ads in the 1990s we were selling a 500g lasagne for a quid. And we still are. So there hasn’t really been food inflation in the market for decades and the UK consumers get a very good deal, but there have been systemic changes because of Covid, because of Ukraine, because of everything else. For example, bread was 89p a loaf, now we’re at £1.15, as things settle down maybe we’ll go back to £1 but I don’t think we’ll ever be back to sub-£1.”
He backs predictions that inflation will peak at 9 or 10 per cent, “probably in September, October. I think food inflation is already there and in some commodities, higher.” Official rate predictions can offer a skewed picture that does not reflect reality for those on the breadline, he adds. “I think it was Jack Monroe, the food poverty campaigner, who pointed out the official food inflation figures include things like champagne and legs of lamb.” Behind the scnees, those struggling to make ends meet are finding some basics are rising at an even higher rate.
Research by the consumer group Which?, published this weekend, showed prices of groceries such as dried pasta and cooking oil were rising faster than inflation – while fruit such as tomatoes and oranges were rising slower, or actually decreasing in price. Which? advised shoppers to buy more fruit and vegetables to beat inflation, but there are increasing signs the rising cost of food is leading middleclass shoppers to change where they shop, and try budget brands for the first time. The cash-and-carry chain Costco is gaining attention, with the presenter Kirstie Allsopp recently revealing she is a card-carrying member and recommending it for vodka, cheese and bath towels.
Walker has helped Iceland to move on from its 1990s “Mum’s gone to Iceland” image, stocking frozen avocados and lobster tails in an unapologetic ploy to reel in a new demographic. The middle classes have also been instrumental in the success of its new upmarket offshoot, Food Warehouse, based largely in retail parks. “We started with no stores six years ago and now we’ve got about 160,” he says.
Walker says that “a lot of people who have previously shopped at the likes of Sainsbury’s” are turning up, with its sea bass fillets and Indian Ocean crab popular among shoppers looking to save money by bulk buying.
“It’s a broader church of customer. [Because they are in retail parks] people have to own a car to go there.”
He believes Iceland has been the victim of “generations of snobbery and
misinformation about what frozen food is”, pointing out that in France “people boast and brag about shopping at [frozen food store] Picard. People don’t realise that if you buy frozen you save money, the quality is locked in and you can halve your food waste”.
Specialising in frozen food has also proved useful in coping with supply chain issues resulting from the panic buying of the pandemic and now the Ukraine conflict. Like other retailers, Iceland has had to limit sales of sunflower oil, but Walker says he doesn’t believe rationing of any other products will become necessary. “I’m not seeing any [other] crisis of actual supply.”
He has been critical of the Government for failing to come up with a coherent cost-of-living strategy, and believes long-term changes in costs to business, rather than expensive handouts to individuals, are the way forward.
“We’re not some endless sponge that can continue to absorb this,” he warns. “The Government has done a lot but they need to do more. I’ve said to Boris and Rishi that some sort of tapering or cap for business energy costs would really help and in turn help consumers.”
In addition, Walker would like a long-overdue reform of business rates, with online retailers paying their fair share, to help high streets survive and keep costs down at the tills.
He is already on first-name terms with the Prime Minister and the Chancellor as a member of Mr Johnson’s newly created business council. Does he have political ambitions himself?
“There’s nothing imminent,” he says, “but it certainly does interest me.
I go on Question Time, I do all that stuff and it’s fine to be a commentator but it would be nice to be a player as well.”
His environmental activism would likely appeal to younger and nontraditional Tory voters.
Having been a member of Greenpeace since 2006, in recent years he has led a drive to rid the country’s food stores of plastic packaging (with more than a quarter of Iceland’s plastic replaced with paper-based alternatives so far) and to remove palm oil from every product he sells.
The biggest blot on his record is his use of the company helicopter to zip around the country – hardly an environmentally friendly choice – but Walker says it was necessary to fly to as many stores as he could during the pandemic to support his staff and insists he rarely uses it now.
Like his father Sir Malcolm Walker, who founded Iceland in 1970, he has used the company as a laboratory of ideas. Along with the Food Warehouse offshoot, he has launched a new chain of convenience stores, Swift (which has just opened four stores in London following a successful pilot in Newcastle). For a retail heir who is, inevitably, desperate to prove he can be a success in his own right, Food Warehouse, which was his “baby”, is the hit that has enabled him to step out of his father’s shadow. Sir Malcolm, 76, remains executive chairman of the business, and was never going to hand it over to anyone who had not proved capable of taking it on, regardless of whether he had fathered them.
Walker, who studied geography at Durham University, built up a property business in Poland, where his family name counted for nothing, before he made the switch to Iceland in 2012, at the age of 31. Instead of being ushered into a comfy seat in the boardroom, he spent his first year working as a shelf stacker and till operator.
“It was a real eye-opener,” he says. “I had to deal with shoplifters, drunks, drug addicts, all sorts, but most of all I learned about the sense of community in our stores. On average, our customers live only three miles from the store, so they are being served by their friends and families and neighbours, and that’s our secret weapon really.”
Before then, his only experience of working for Iceland was a holiday job in the customer complaints department. “People would literally send a cut of meat through secondclass post and say it was mouldy. Five days later when it turned up, it definitely was!”
He has now sent one of his two daughters to work in the same department. After his year on the tills, Walker was given a promotion to store manager, and has worked his way up the business, ness, having convinced his father he e is a safe pair of hands. Does Sir Malcolm olm give advice?
“Yes,” ” he says, adopting a Yorkshire re accent. “Don’t f--it up!”
Though gh still committed to improving ng his company’s environmental mental credentials, he says now w more than ever food retailers s must find ways to help hard- rd-up customers feed their families milies – such as Iceland’s s new microloan scheme. heme. “We’re racking our brains trying to o come up with as many different t ideas as we can.” ”
‘Politics interests me. I go on Question Time to comment, but it would be nice to be a player as well’