Birds Eye and the U.K.

Frozen Food Industry

Group 1
M028-15
M034-15
M048-15
M051-15
F002-15

KUDI SHRINIDHI HANMANTRAO

NIRAJ JHUNJHUNWALLA
SASWATA BANERJEE
SHRUTI VINYAS RAJESHKUMAR
ABHISEK SUR

Case Overview Key Issues

Decline began in 1970

Market dominance
existed mostly in small
retail and independent
grocers

Share in catering
center was only 10
percent in 1973

Major difficulty :
Widened product
range and increased
range of market
segments

Share in home freezer

center was only 8
percent in 1974

Why did Birds Eye develop a

vertically integrated Company?

Raw material
suppliers,
distributors and
retail stores
relatively
unsophisticated
and
underdeveloped
Products had to
be frozen at the
right moment
within hours to
justify the
premium charged
for high quality
product

Prevent new
competition by
owning the
entire value
chain, thus
inhibiting new
entrants due to
high capital
needs
Industry
maturity led to
low profit
margins and
fostered vertical
integration to
improve profit
margins

How two different models allowed Birds Eye

to have a tight control over it supply chain?
The reason for the difference can be
explained by the fact that in the
vegetable market Birds Eye was able to
secure the supply of raw materials with
longer-term contracts with the farmers

With the fish supplies, there process

was more ad-hoc where the supplies
were either bought from dock side
auctions are imported from
Scandinavia. This process did not let
Birds Eye have enough control so they
fixed the process by vertical integration

Emergence of Specialized Intermediaries

Industry
Maturity/
Technological
breakthroughs

Supermarket
Chains

Catering
Segment

Specialization

What Competitive Advantage did

Birds Eye build over integrated
producers?

Value Chain Analysis

Value Chain of Birds Eye Primary Activities

Cold storage and insulated vehicles for transport Maintain freshness
of produce greater appeal of the product
Heavy investment in SPD & Franchised exclusive whole sellers
Greater reach of Birds Eye SKUs in the retail segment across
geography
NPD : fish fingers and beef burgers
Consumer Awareness and recognition of quality of frozen foods:
Television commercials, only industrial advertiser
Seller incentives- quantity discounts aimed to incentivize larger
stores incentivize bulk buying reduction in transaction cost
for Birds Eye
Developed new food processing and freezing activities(improved
processes)
Improved utilisation of man power and equipment despite
seasonality in raw materials increased efficiency reduction in
variable cost of production

Value Chain of Birds Eye Secondary

Activities
(a) Annual contracts with farmers and investing in farming
equipment procurement of high quality produce
(b) Fish: Similarly only white variety of fish was chosen & long
term contract with suppliers reduce price volatility lowering
transaction costs
(c) Improvement in vegetable variety, cultivation technique and
harvesting equipment improved quality and quantity of produce

Why did the frozen food industry

de-integrate?

 Rapid growth in demand for frozen food by the catering trade

16 % in 1967 to 30 % in 1974 (Exhibit 1b)
Lower fixed overhead costs (advertising & packaging) neutralized advantages of brands
Modest turnover coupled with better scope to enter the industry
Broadening of the distribution networks
Advent of specialists
Cold storage companies like Christian Salvesen, Union Cold Storage and Frigoscandia
Roles of independent suppliers, distributors, transporters, marketers expanded
Integrated services provided by such distributors and suppliers
Growth of self-service stores and private labels in frozen food
Self-service stores grew from 15k stores to 40k stores between 1967 1980 (Exhibit 5)
Supermarkets increased to 7k stores in 1980 from 2k stores in 1967 (Exhibit 5)
Market share of private labels increased from 6% in 1970 to 28% in 1982 (Exhibit 2)

 Increased penetration of frozen food in households

Growth in freezer centers
Sold home freezers along with bulk packs of frozen food
Development of cash & carry outlets
Greengrocers aided with small range of frozen food
Change in industry structure
Slowing growth rate of frozen food market
Market development and knowledge diffusion led to the entry of many new players
Smaller suppliers were more flexible, specialized & efficient when compared to larger
firms
Larger firms have hierarchical levels resulting in higher production, bureaucratic &
strategic costs
Technology
Blast freezer and home freezer
Technology became accessible and affordable

What could Birds Eye have done to

stop
de-integration of
industry?

 Seasonal demand
The frozen food industry is subjected to seasonal demand prefer fresh produce in
seasons
The produce is subjective to climatic conditions
This affects the demand, pricing and marketing strategies for these frozen food
Easy to imitate business
Ross and Findus imitated their business and strategies based on that of Birds Eye
This is risky and companies should go for joint ventures rather than vertical integration
Demand growth rate slowed down during the late 1960s early 1970s
Stable technology - availability of low cost and small scale freezers
The market saw the advent of specialist offering reliable solutions at better price points
Small players were quick to respond to market demand
From the above factors we conclude that the industry de-integration could not have been
stopped by Birds Eye

What should Birds Eye do now?

 De-integrate:
Play the marketing arm for their brand
Use merchants to grow, process, store, and possibly distribute their products
Focus on brands and products:
At present Birds Eye have 40 skus in vegetables, 36 skus in fish, & 58 skus in meats
Top 5 skus give them 40% of the revenue
It is suggested they identify their top earning products and focus on building around
them with new products
Focused factories:
Birds Eye should have their factories focused in manufacturing particular products
This will reduce overhead and idle costs
Consolidate distribution:
They should consider to consolidate their distribution network to have a better reach at
both the household and catering sectors, either by owning the network or contracting it
Product differentiation:
They should try and differentiate their product offering launching of RTM products like
pizza

Thank
You