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StrategicAnalysisoftheBirdsEyeandtheUKFrozenFoodsIndustry:

Strategic Analysis of the Birds Eye and

the UK Frozen Foods Industry:
In 1950s Birds Eye had established its integrated system of production and distribution and its
strategy was more or less marketing oriented. Company focused to increase sales by introducing new
product, promoting consumer awareness of the convenience and value for money of frozen food,
and developing consumer recognition of the quality associated with the Birds Eye brand. 40% of the
revenue used to be generating by five biggest-selling products - peas, beans, chips, fish fingers, and
beef burgers. In 1995 it used television as a biggest mean strategically to market its products hence to
increase sales. It gave a cutting edge over others to get customers to Birds Eye. Birds Eye pioneered
frozen foods with a product quality higher than people were used to in processed food and with a
personality that combined efficiency, hygiene, confidence and completeness. Birds Eye used the
strategy to attract more customers by adding more values beyond the physical and functional ones
that contributed to a clear and likeable personality for the brand.
Competitive advantage of Birds Eye:
Birds Eye's efforts gave it a competitive advantage and market dominance in the frozen food industry
in UK. In early 1950s and 1960s, Birds Eye accounted for over 60% of UK frozen food sales on a
tonnage basis. On the other hand brand market share of the company was over 70% by value and
around two-third by tonnage for most of the period, the share of the frozen food sale was 75% and
some 40,000 retail outlets were served exclusively by Birds Eye.
Birds Eye pioneered the development of market of frozen food. It managed to maintain brand
leadership and superior profitability over other competitors such as Findus and Ross. Neither of
these competitors was prepared to undercut Birds Eye. The pattern of price behavior in the industry
was affected by leadership of Birds Eye. Birds Eye's retail dominance was assisted by a system of
discounts that encouraged larger retailers to give Birds Eye the major part of their frozen foods
business. The size of the discount from its published trade prices depended on the annual turnover
of the retailer, the cabinet space, and the frequency and the size of the deliveries.
In the 1970s and 1980s there was decline in the market share and profitability of Birds Eye due to
increase in the competition in the market.
Main reason of being vertical integrated producers for frozen food:
Underdeveloped infrastructure:
Birds Eye was established in UK in 1938, which was the initiative of a British Businessman, Robert
Ducas, financially and technically supported from General foods Corp and Chivers and Sons Ltd.
Initially company faced the problems while building market leadership. These problems arose mainly
because of the concentration of processing into a short time space, the unreliability of the machinery,

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the lack of the skilled labor etc. though processing costs were fixed, yet machinery was asking for
more capital investment as it has to be imported from USA. The locations of the frozen food were
dependent on the availability of the raw material.
Quality of the food: Once company had planned facilities the next step was secure supplies of high
quality raw material. It was using grower's machines instead of manual labor.
Securing Raw Material: Birds Eye entered into broiler chicken industry in 1958 and within few years it
had built a capacity to produce 6.5 million birds a year at about 20 farms. It acquired the majority
stake in fishing company to secure a regular supply of cod. It also developed a number of innovations
in food processing and freezing techniques and developments in quality management, as well as
improvement in the production of its raw material.
Distribution was bit big problem for Birds Eye as compared to production problem. It cost at between
15-25% of the total cost of the frozen food. Birds Eye's investment in cold storage and refrigerated
distribution was primarily through its sister company SPD.
Another problem for the company was retail distribution of the frozen food. As soon as infrastructure
development took place, demand for frozen increased tremendously. Before frozen food were
considered as luxury which became a need on later stage, which lead to an increase in the number of
retail shops in 1950s and 1960s.
Preventing new competition: owning the entire value chain meant that, entering into this market
would become significantly difficult for new entrants due to high capital need, hence it provided a
advantage to Birds Eye to prevent competition
Industry Structure: The two main competitors of Birds Eye during 1950s and 1960s, Ross and Findus
were also following the vertical integration strategy and the industry structure and the maturity
around this time forced the business to vertically integrate as they had no other choice.
Birds Eye's Different arrangements for peas, fish & meat: For fish and meat Birds Eye did backward
integration by building capacity and acquiring controlling stake in the suppliers. For peas however
they worked closely with farmers providing them with both capital and expertise with the growth of
high quality product. Birds Eye had tight control over both models in supply china. The differences
between the two models could be because of in the vegetable market Birds Eye was able to secure of
raw material with longer-term contracts with farmers, whereas with the fish suppliers, there process
was more difficult. This process did not let Birds Eye have enough control so they fixed the process by
vertical integration.
Emergence of specialize intermediaries:
The several changes occurred in the industry in late 1960s and 1970s lead to emergence of
specialized intermediaries. Following are few of the reason for this:
Industry Maturity/ Technological breakthroughs:As the industry matured the rate of technological
breakthroughs increased which led to decrease in the amount of capital to enter the business making
the barriers to entry low. The emergence of smaller firms opened up opportunities to offer
specialized services to manage the various functions in frozen food retail.

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Supermarket Chains:Development in the food retailing led to the emergence of super market
chains this development led to shift in the balance of power from producers to retailers. Retailers
found it profitable to introduce their own brands in the market. This led to an increase of market
shares of retailers own brands from 0 to 29% in 1982, these retailers whose core business was not
frozen food needed someone to manage distribution and production facilities this paved the way for
the emergence of specialized intermediaries.
Catering Segment:Percent consumption of catering companies increased from 16% in 1967 to 30%
in 1973. Birds Eye did not cater to this niche market whose requirements were different from the
consumer market in the sense that they need larger packaging sizes at a lower cost. These factors led
to the emergence of competitors like Menu master Ltd to cater to this segment. The new entrants
required help with the distribution and production, which again stimulated the emergence of
specialized intermediaries like Flying Goose, which specialized in this segment.
Specialization:As the industry and the cost structures decreased, it made sense for the new
entrants to specialize in one product business to reduce costs and complexity in business
Hence it can be analyzed that there was a great expansion in the frozen food industry in UK. It gave a
huge competition to Birds Eye and there was great challenge to get over it. The rapid growth of eating
away from the home and rapid shift of the catering industry from fresh and canned foods to frozen
foods provided a particularly attractive opportunity to new competitors in the market, which were
more price conscious rather brand name recognition and sophisticated product packaging.
Birds Eye response to decline in sales and strategic reappraisal:
The retirement of chairman of Birds Eye put pressure on the company and there was decline in the
market share. Beyond this condition Birds Eye was able to maintain its market dominance in small
retail packs to independent grocer and to a lesser extent, supermarkets. The representation of Birds
Eye was really poor in some area such as in home freezer centers, where its share was around 8% in
1974 and in 1973 it was 10%. There was continuous decline in its market share as a whole though
whole market was expanding.
In this response, particularly in response to the rise in bulk buying by consumers with home freezers,
and to the competition of recent entrants in this sector, Birds Eye introduces Bulk Packs to the retail
market in 1972 and followed with this establishment in 1974 of a new business called Country Fair
Foods, to supply the home freezer centers and other purchases willing to accept a minimum drop
size. Country food and Birds Eye same production facilities but different distribution facilities,
because of the different requirements of the freezer centers. Birds Eye was primarily looking forward
to maintain its sale growth, primarily by extending product range through new product introduction.
The company introduced new product line in 1970s in addition to vegetables, fish fingers and beef
burgers, and it was ready to eat meals, desserts, and ethnic dishes.
The increase in the product range cause major difficulties in the areas of marketing strategy and to
allocate budget to different segments for Birds Eye. No doubt there was a great need to promote the
products and hence had to have a strong marketing strategy. Birds Eye tried to do this at best extent
of its strategies. For this purposes, Birds Eye's marketing advertisements were targeted and
segmented-focused.

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In response to growing power of large supermarkets chains, Birds Eye redirected its marketing
efforts. In 1970 the focus of marketing strategy was shifted from consumer marketing to trade
marketing, with particular emphasis on developing relationship with major supermarket chains,
including joint promotion efforts.
In order to achieve lower cost Birds Eye and Walla Ltd were merged under the name of Birds Eye Wall
by Unilever. In 1982, the combines refrigerated distribution company, Unicold-walls, was transferred
to Birds Eye Walls with the intention of speeding the reorganization of distribution and improving
coordination. The goal was a streamlines national network of seven regional distribution centers in
operation.
Though Birds Eye put huge efforts to adjust new market circumstances, but its market shares and
financial performance continued to deteriorate throughout the 1970s. Birds Eye maintained its
marketing budget by cutting prices on some major selling products, which resulted in increased sales
volume, whereas there was decrease in profit margin.
The appointment of new Chairman in 1979 resulted in Birds Eye reappraising its strategy in UK frozen
food market and considering a new phase of internal restructuring. In particular there was a
widespread realization that the vertically integrated approach to the sourcing, processing,
distribution, and marketing of frozen foods through which Birds Eye had developed the UK market
for frozen foods may be a weakness rather that a strength of Birds Eye
Frozen food industry in 1980s:
In 1980s there was a great demand for frozen food. It was become a need over a luxury. There was a
huge competition in market to Birds Eye. There were many small retailers offering frozen food to the
customers.
Arguments for and against of vertical integration approach:
Vertical integration means that a company is producing own inputs and disposing of its own outputs.
Although vertically integrated producer did enjoy some competitive advantages relative to the
specialized suppliers, but over time their structure led to some disadvantages in other areas, which
negated their advantages. On the whole the disadvantages exceeded the advantages.
Their advantages are
Barriers to entry:A vertically integrated producer enjoyed control over the entire supply chain
leading to faster reaction to increased demand. By vertically integrating backward to gain control over
the source of critical inputs or vertically integrated forwards to gain control over distribution
channels, a company can build barriers to entry as well.
Quality of products: Since a vertically integrated producer has much better control over the quality at
several points in the supply chain, they can ensure a better quality finished product.
Capturing the profit margins across the value chain:Vertically integrated producers were able to
capture both the upstream and downstream profits.
Facilitate investment in specialised assets:
Improved scheduling:
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It is sometime argued that vertical integrated approach give rise to strategic advantages due to easier
planning, coordination and scheduling of adjutants processes made possible in vertically integrated
companies, which are beneficial in just-in-time inventory. It also enables a company to response in
better way to sudden changes in demand.
Disadvantages:
Cost disadvantages:The specialized suppliers enjoyed lower overhead costs as they were
specialized in single product, which did not involve any changeover costs. On the other side vertically
integrated suppliers had multiple product lines, which led to inefficiencies.
Exit Barriers:The significant infrastructure capital investments by vertically integrated producers
when the market was not mature prevented them exiting less profitable businesses.
Technological Changes:
When technology is changing fast, vertical integration poses the hazard of tying a company to an
obsolescent technology.
Demand Uncertainty:
Vertical integration can be risky in unstable or unpredictable demand conditions, when demand is
stable, higher degrees of vertical integration may be managed with relative ease.
Key recommendations to Executive of Birds Eye:
If we go back in 1979, the following could be the few recommendations for the executive of Birds eye
to improve sale and market share in frozen food industry, as there was a huge competition in the
market at that time.
Divest/Spin off supplier and distribution businesses:Birds Eye should consider selling or spinning
off its procurement and distribution businesses. This could had helped Birds Eye in the decrease
overheads and achieve parity in cost structure with the rest of the competition. The smaller size
would also contribute to making it more agile and respond quickly to changes in its business.
Leverage Brand:Birds can use the brand recognition to expand into other products or license
their brand name for other products to generate some revenue
Selling to private labels:Birds Eye should consider selling to private labels as their share in the
market place has been increasing at a rapid rate from 6% in 1970 to 21% in 1978. Though the margin
will be lower in this business it will help recapture market share.
Reduce product lines:Over a period of time product proliferation occurred at Birds Eye in order to
compete in several different market segments. This led to difficulties with marketing as promoting
such widely different products was proving to be difficult. Birds Eye should consider concentrating on
the most profitable product lines use it s brand image as leverage and promote higher margin
products while doing away with the unprofitable product lines.
Birds Eye's value chain analysis:
The analysis above is showing the value creation in Birds Eye, by analysing the inputs strategies of the
company, production and distribution process marketing and sales strategies and services and in last
outputs.
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Birds Eye's interpretation over industry life cycle:

It has been observed that over the period of time, most industries pass through stages, which can be
referred as growth, maturity and decline. These stages have different implications for the form of
competition.
Industry life cycle is being an important tool to determine and analyzing the effects of the industry
evolution on competitive forces. Industry environment can be divided into five types: a) an embryonic
(introduction) industry environment; b) a growth industry environment; c) a shake-out environment;
d) a mature market industry environment; e) a declining industry environment. These stages can be
shown as below in graphical format.
C:\Users\Rupam\Desktop\picture_product_life_cycle.gif
This graph shows all the four environments in the industry. In the embryonic or introduction phase
the company just starts developing its basis. In the growth phase the market share and customer
base starts increase and company actually start recovering its costs. In the maturity face the company
reaches its break-even point and starts making profits. It is a kind of saturation point. In the decline
phase due to different reasons, such as increase in the competitions, the market share and
profitability of the company starts declining and hence company starts bearing losses.
The same thing happened in the case of Birds Eye as well. When Birds eye came into the industry, as
it pioneered the frozen food industry, it used vertical integration approach. It had lot of profit and
competitive advantage over its competitors. It had high profitability and market share as compared to
its competitors. But later in late 1970s and 1980s there was increase in competition, which lead in
decrease in market share and profitability of the Birds Eye.
No doubt at this point Birds Eye did reappraise its strategy and tried to recover. But the increase was
not as high as before.

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