Iceland's sales shine as bidders circle

By This Is Money
Updated: 11:07 EDT, 24 May 2011

Frozen food chain Iceland heaped pressure on potential bidders today by emerging as one of the winners from the industry's latest sales figures.

Bigger fish: Morrisons is mulling a £1.5bn for Iceland

Revenues increased 5.7% in the 12 weeks to May 16, beating the grocery market's 4.8% rise as a whole according to figures released by Kantar Worldpanel.

Morrisons, the UK's fourth largest supermarket, is understood to be mulling a £1.5bn for the chain but the strong performance could mean potential bidders having to pay more.

Discount supermarkets Aldi and Lidl saw sales grow a whopping 15.4% and 16.1% respectively as cash-strapped shoppers continued to tighten their belts in the face of soaring inflation, tax hikes and spending cuts.

German chain Aldi now has a record 3.4% of food and drink sales. Iceland counts for 1.9%.

The grocery market, which had seen sales growth of just 2.6% in the 12 weeks to March 20, was boosted by recent hot weather, the royal wedding and Easter, said Kantar. Sales were up 7.8% in the four weeks to May 15.

Edward Garner, communications director at Kantar, said: 'A rising tide lifts all boats and the top retailers performed well this month buoyed by the lifted market growth rate.'

Waitrose was among the top performers, with sales up 8.8%, increasing its market share to 4.3% from 4.1%. Supermarket leader Tesco increased its market share to 30.7% from 30.6%, while Morrisons' share grew to 11.9% from 11.8%. Asda lost ground, however, after its its market share dropped to 16.6% from 16.8%, as its sales grew by less than the rest of the market.

Iceland, which has 750 stores in the UK, has been put up for sale by officials winding up Landsbanki, the failed Icelandic bank that took control of the chain in 2008. The sale process, however, will not start until September.

A successful bid for Iceland would see Morrisons nearly triple the number of its stores and bring its market share closer to Asda and Sainsbury's, Britain's second and third largest supermarkets behind Tesco.

Morrisons could face competition from other supermarkets and from the management team at Iceland, who could also table a bid, according to reports.

Iceland's sales have performed well since the recession as frozen food has gained in popularity because it stores for longer and is seen as offering better value for money.