WAC On Birds Eye and UK frozen Food Industry

JUNAID BAIG
10108135

Birds Eye and the UK Frozen Food Industry

Issues:
1. Birds Eye was losing market share in an industry where once they were
dominated.
2. New entrants were coming in the market that was specialized in one
segment of freezing food industry.
3. Increased rate of new product launches combined with new marketing
approach led to considerable difficulties in designing an advertising policy
within the limits of advertising budget.
4. The Capital cost of Birds Eye was very high.
5. Distribution Cost of Birds Eye was very high.
6. Unreliability of Machinery and lack of Skilled Labor.
Analysis of Issues:
In 1997 Birds Eye was losing market share in an industry they once
dominated. Over previous decades they had established themselves as the
leading player in the UK frozen food industry. In 1977 the company reported
a net loss of 679,000 British Pounds.
From 1947 to 1980, 87,000 new entrants came in the market of UK frozen
food industry, they got 68% share of the total market in 1982 from just 20%
market share in 1966. Mostly they were specialized in one type of product
due to which their Overhead cost was very low as compared to Birds Eyes.
During the 1950s and 1960s Birds Eye had built and developed the frozen
food market in the UK. Using technology developed by Clarence Birdseye,
Birds Eye implemented quick freeze technology in 1938 to introduce a
fresher, higher quality product to the UK consumer. After the company was
bought by Unilever in 1942, the development of the frozen food industry was
underway. The industry faced many challenges in the 1940s. Frozen foods
were uncommon and little infrastructure was in place to facilitate the
sourcing, production, and distribution of frozen food. In addition, few retailers

WAC On Birds Eye and UK frozen Food Industry

JUNAID BAIG
10108135

had freezers in their stores to stock and sell frozen products. These
challenges were addressed through Birds Eyes involvement in the entire
supply chain. Vertical integration provided the means for the company to
become very successful in the UK.
Birds Eye first became involved in the sourcing and production of the raw
materials. Since successful freezing requires that the food be harvested and
frozen in a short period of time, Birds Eye invested in production facilities
located close to the farms and ports where the food was harvested. This
allowed the company to manufacture a high quality product. To further assist
in quality, Birds Eye also partnered with farmers to assure the highest quality
was grown and harvested. Through the establishment of SPD, the company
became involved in the storage and distribution of frozen food. This
investment overcame the limited capacity of the distribution system of the
1950s. In addition, Birds Eye was also influential in getting frozen freezers to
retailers. Due to which the capital cost of Birds eye was very high as
compared to their competitors.
With significant investment in the infrastructure of the industry, Birds Eye
was very successful in the 1950s and 1960s. By the 1970s the landscape had
changed and new entrants to the market were impacting the profitability and
dominance of Birds Eye.
Birds Eye was continuously increasing their product range due to which they
were facing the difficulty of designing the advertisement policy within their
advertisement budget.
The Distribution Costs of Birds Eye were estimated at between 15% and 25%
of the total cost for frozen foods.
Options:
1. They can spin off their supplier and distribution business.
2. They can sell to the Private Label Market.
3. They can Leverage their Brand.
4. They can reduce their Product Line to handle the difficulties of
Advertisement.

WAC On Birds Eye and UK frozen Food Industry

JUNAID BAIG
10108135

Evaluation:
1. By Spinning off the Supplier and distribution business they can reduce
their overhead cost which was very high. Due to small size they can also
quickly respond to the market changes.
2. Private label Market is growing at a rapid rate. Their shares increased
from 6% in 1970 to 28% in 1982. So By selling to the Private label market
they can increase their market share by 28% even though the profit
margin is low in this sector but still its profitable for Bird eye to gain as
much market share as possible.
3. By using their brand recognition to expand into other products and by
license their Brand names to others they can earn some extra revenue.
4. By decreasing the no of products in product line they can easily manage
their advertising budget for less number of products.
Decision Criteria:
I took market share and brand loyalty as a decision criteria.
Decision:
As a chairman of Birds Eye Foods Ltd I will spin off our supplier and
distribution business and will sell our products to the Private label market.
Recommendations:
1. They should reduce their Product line to handle the difficulties of
designing the advertising policy.
2. They should spin off their distribution and Supplier business to decrease
their cost of capital.
3. They should expand their brand into other products or license their brand
to other manufacturers to increase their revenue and market share and
decrease the business risk.
4. Birds Eye should consider selling to private labels as their share in the
market place has been increasing at a rapid rate.

WAC On Birds Eye and UK frozen Food Industry

JUNAID BAIG
10108135

Exhibit 1
Birds Eye

Brand Share of the UK retail market for frozen foods

1966
62

Own label

1970
60

1974
45

1978
29

1982
20

14

21

28

Findus

13

13

11

Others

20

13

21

35

40

Ross

Exhibit 2

Forecasted Birds Eye Shares after Selling to Private Label

Market
Birds Eye

1986
55

1990
62

1994
69

1998
76

2002
83