Poundland’s acquisition of frozen food specialist Fultons Foods last week came as no surprise to the retail industry, considering it has been launching everything from new price points to booze and new in-store frozen food sections over the past year.
The discount retailer said it has been working with Fultons Foods for 12 months on the development of a chilled and frozen food range. The partnership will see Poundland offer frozen and chilled food in over 70 stores, and expand to a further 40 stores by December. The retailer has already committed to investing £25 million in the next two years into the market segment.
Long-term, Poundland aims to expand its chilled and frozen offer into a further 150 stores in the 2021-2022 financial year, and as many as 500 stores in the next two years.
It marks the latest initiative from its business transformation team, led by Mat Ankers as transformation director, which formed in January last year.
The following August, it introduced new price points, including 50p, 75p, £3, £4 and £10, in addition to existing £1, £2 and £5. The first frozen and chilled shop-in-shop concepts was introduced in Ashbourne, also in last year, and Poundland has been selling around 400 frozen and chilled food lines ever since.
Fultons Foods has been supplying the frozen food range since the beginning of Poundland’s transformation programme. The business has 80 north of England stores, ranging from 2000 sq ft to 6000 sq ft, but this deal is not about the estate.
“We have much to bring each other – Fultons have the expertise in chilled and frozen and we have a bigger stage for them to play on in bringing that expertise to more customers,” a Poundland spokesperson told Retail Gazette.
“What’s more the chilled and frozen offer is a fundamental part of our transformation programme as we offer more of what customers want to buy in Poundland.”
With Iceland being one of the biggest players in the frozen food market – reporting a surge in frozen food during lockdown – Poundland’s new acquisition could see it bring in new competition for the frozen food grocer, particularly as more regions across the UK go into tier 3 lockdowns and customers consider stockpiling again.
“Frozen food has seen growth this year due to families ensuring they have enough stocks of food in case of a lockdown or self isolation and frozen food retailers have seen increased sales,” said Catherine Shuttleworth, chief executive of retail marketing agency Savvy.
“Iceland as the biggest player in the market has driven positive growth through both its Iceland fascia and its expanding Food Warehouse brand.
“Its focus on line has paid off during the pandemic as it is serving a broader range of customers than ever before.”
She added that Poundland’s deal with Fultons Foods allows it to increase its footprint in already established retail locations and naturally extend its range into frozen foods and make more of their growing grocery offer.
“Fultons Foods is a very well established value driven brand that is highly regarded by shoppers as consistently good value,” Shuttleworth told Retail Gazette.
“It’s a good deal for Poundland as it kick starts growth in an existing operation with infrastructure in place and with the added announcement of a new distribution centre allows greater reach of the frozen offer at scale across their estate.”
“Frozen food has seen growth this year as families ensure they have enough stock”
A Poundland spokesperson said the retailer would grow its distribution network using Fultons Foods’ Barnsley distribution centre as a national hub and Poundland’s distribution centre in Harlow, Essex. They added that the aim to expand its frozen and chilled food ranges was necessary because it “offers customers more choice and amazing value under one roof”.
“Chilled and frozen food ‘shop-in-shops’ are a key part of our transformation programme alongside our Pep&Co clothing and home offer,” the spokesperson said.
“Over time it will make Poundland a one-stop shop for our customers.”
Retail expert Nelson Blackley argued that it seems likely the senior Fultons Foods team will now steer Poundland’s chilled and frozen foods development, given that all 800-plus Fulton Foods staff are scheduled to join the Poundland team this month.
“Whilst the acquisition of Fultons Foods will may not make it possible for shoppers to complete a total weekly grocery shop at Poundland, there is no doubt that it will help increase frequency of visit and so help Poundland appeal to a broader shopper base,” he told Retail Gazette.
“This is very much in line with the way other leading variety discounters such as Home Bargains and B&M, which have evolved through enhancing and extending their grocery offers.”
Nelson argued that Poundland, along with all discount retailers, have faced the challenges of having relatively low basket value. Although Poundland presently serves around seven million customers a week, on average they each spend only around £5 per visit.
“This new frozen and chilled range appeals to a wide base of shoppers and so helps extend Poundland’s reach as well as growing average basket size and value,” Blackley said.
“This move also represent a move into very relevant product categories for existing Poundland customers and reflects consumers less frequent visits to shops since the start of the pandemic and to get more of their requirements in one retail outlet if they can.”
Nevertheless, Poundland’s acquisition of Fultons Foods comes as Kantar reports that frozen food has emerged as the real winner in the grocery sector during the past six months.
“The new frozen and chilled range appeals to a wide base of shoppers”
According to data from Kantar, in the 12 weeks after national lockdown was imposed at the end of March, sales of frozen foods increased by over 19 per cent in value and 17.5 per cent in volume, which outperformed total grocery sales by some margin.
Poundland has made no secret of its desire to extend operations into food, capitalising on shoppers’ increasing desire to do more grocery shops with discounters.
Furthermore, B&M’s acquisition of Heron Foods demonstrates the way that shoppers see the discount sector as a trusted provider of groceries. It also shows that shoppers are prepared to visit a number of fascias to complete their weekly food shop, meaning there is real competition to grab the biggest share of spend.
To protect market share and to drive the all necessary footfall, Poundland may need to depend on a compelling fresh and frozen food offering. Nonetheless, the Fultons Foods acquisition provides Poundland with significant additional capability in terms of infrastructure – including a specialist warehouse and distribution network, trucks, and the expertise that allows it to manage chilled, frozen, or multi-temperature products.