Birds Eye boss Martin Glenn: 'frozen food is the future'

by James Hall - 06/07/2010

"Birds Eye chief executive Martin Glenn has his hands full bidding for Findus Italy, deciding whether to launch an IPO and educating Britain about the value of food."

Martin Glenn was at the receiving end of a particularly harsh episode of schadenfreude last week.

Back in 1993, Glenn, who is the current chief executive of fish finger maker Birds Eye, was marketing director at Walkers Crisps, the then-struggling snack maker. In a bid to turn Walkers around, Glenn recruited former England footballer Gary Lineker as the brand's face on TV. It is a relationship that has lasted more than 15 years and has seen Walkers become a £510m operation.

But Glenn's long association with an icon of English football came back to bite him last Monday. Following England's pitiful
4-1 defeat in the World Cup to Germany, Glenn arrived at his Middlesex office to a co-ordinated chorus of cheers from his German colleagues – including the company's marketing director. One of them even produced a vuvuzela and launched into a mock victory dance.

But Glenn is not dwelling on such episodes. His life is more about battered cod than the "Hand of God" these days. The businessman, who turns 50 on Thursday, is concentrating on expanding his frozen food empire into an international business.

Birds Eye Iglo Group, to give the company its full name, was bought by private equity house Permira in 2006 for £1.2bn from household products and food multinational Unilever. At the time, Birds Eye was in a mess: it was under-invested, losing money and launching a mind-boggling 70 new product lines a year, only to see one or two of them survive.

Glenn and his team cut costs, closed factories and ditched poor brands. In his words, they "stopped the rot".

Last year the company had sales of €1.15bn (£952m) and saw earnings before interest, taxation, depreciation and amortisation (Ebitda) of €209m. In the UK alone Birds Eye sold 563m individual fish fingers and 43m bags of garden peas last year. It also owns the Arctic Roll and Supermousse pudding brands, making it the supplier of choice for children's birthday parties across the nation.

Glenn is now stepping up the pace. Birds Eye is one of the bidders for Findus Italy (Unilever's sole remaining frozen food asset that it has just put up for sale), it has expanded into countries such as Russia and Turkey and just launched a significant 112-point environmental push called Forever Food.

An IPO is now being talked about at some point in the not-too-distant future.

The Forever Food initiative is particularly noteworthy. Corporate environmental initiatives are usually the preserve of publicly-quoted companies who are aware of their Corporate Social Responsibility (CSR) obligations to shareholders. But there is no need or pressure for a privately equity-owned company to make such moves. And yet Birds Eye has embarked on a sustainability plan that – on paper at least – rivals Marks & Spencer's Plan A.

Glenn – who was once linked to the chief executive's job for the London 2012 Olympics – says that Forever Food is all about providing assurance to customers.

For years frozen food has been linked to food scares and tarnished with the "unhealthy" brush. Both of these are unfair, Glenn argues.

"People don't ring up Birds Eye and say 'please make our food safe'. You just do it. Sustainability is like that," he says.

"It is a bit like safety for airlines. Companies make a sort of tacit license to operate. The banks don't have that at the moment. If you take food companies, the unspoken social contract with consumers and the government is that we provide high quality, well-priced food but we do that at a way that does not wreck the planet."

Forever Food includes agreements with organisations such as the WWF and The Prince's Countryside Fund, and pledges to reduce packaging and CO2 emissions.

"I thought we were amateurish before. We even have a director of sustainability now," says Glenn. Of course, the CSR push also provides another crucial piece of the IPO jigsaw, another tick on the "What Shareholders Would Want" checklist.

Looking back to 2006, Glenn says that Birds Eye was a perfect acquisition target because it was "under-managed" and contained assets that everyone recognises.

"The appeal was clear to me. The brands were fantastic but the business had not been well-run. It was a non-strategic part of a multinational," he says.

However, he is adamant that Birds Eye is not the cliché of a private equity-owned company. For years private equity takeovers have become synonymous with a particular way of working. The acquirer would typically buy a distressed asset on the cheap using a high level of debt, strip the company of assets and use its cashflow to pay back this debt, then sell or float the chain years later at a profit. But this is not the way with Birds Eye, says Glenn.

"It is not what people expect. The private equity stereotype is that it is all about ripping costs out, 'turning' it as quickly as you can and not worrying about [the business]. But nowadays you can't do that, because ultimately Permira will get its money by selling this business either to the public by an IPO or to a trade buyer at some point in the future. And you can't sell a shell. Markets aren't stupid," he says.

"The board meetings we have are just like the board meetings we used to have at [Walkers' owner] PepsiCo – you talk about the quality of our people, our brands, our products."

He insists this is not a contrived approach. It is merely the way that a big business should be run.

"It is not deliberate. It is purely enlightened self-interest. I don't think Permira is trying to prove a point by doing this, they just know that they will maximize their chances of good returns if Birds Eye is seen to be what we want it to be – a premium packaged goods company with great growth prospects. A business that has been cost-optimised that can't do anything is not going to be of any interest to anyone," Glenn explains.

Since the Permira buyout, Birds Eye has seen one of its most important roles as educating UK consumers in the perceived benefits of frozen food.

Glenn's assessment is blunt: "In the UK, people are less food aware [than in other European countries]. I think 'less educated' would be the case. Contrast this with German or Italian understanding. In those countries they understand that food is frozen at the point of perfection. The Germans never waste food – but in Britain we throw away hundreds of pounds worth of food a year. Some of those issues were less understood in UK than overseas markets."

Frozen food is also seen as archaic in the UK. In the evolution of food preservation and storage techniques, frozen food is wedged between the tin can and the modern refrigerator. In consumers' minds it is stuck in the 1970s, forever associated with Black Forest gâteau and Abigail's Party.

"Just before we bought the business we did some research and people described frozen food as 'dead food in a box'. We had to try to find a way to get people to think differently about the category," says Glenn.

Birds Eye has tried to alter perceptions. For example, it recently launched a premium range of frozen fish called Bake To Perfection, which consists of prime fillets of fish in an easy-to-cook baking bag. It is now a £25m brand.

However, there appears to be a downside to all this innovation. Some of what Glenn says about people's attitude to food is remarkable, and "frozen food solutions" – as the industry likes to call ready meals – can only serve to perpetuate consumer laziness.

He says that Birds Eye's own research shows there are three barriers to consuming fish. "People don't like to touch it, they don't like the smell of it and they don't often really know what to do with it," he says.

"Ten per cent of the population know how to cook a fish. That is the real fact," he says.

So what about the economy? Does Captain Birds Eye see any icebergs ahead from his well-placed crow's nest?

Glenn says that there has been a recovery in the UK recently and argues that things were never quite as bad as people feared.

"The fear of recession is far greater than the reality. Unemployment didn't shoot through the roof," he says.

However, he warns that things will continue to be tough: "I think that disposable income is going to continue to get squeezed as inflation and tax takes rise. We are going to see five years where consumer spending growth isn't going to do much, which means that for people selling into the UK it is going to continue to be very competitive. That is not a disaster but we are not anticipating a boom any time soon. There is going to be continued focus on price promotion.

"I am pretty optimistic about the fundamentals of the UK economy but it is going to be a low growth economy, and the businesses that grow are going to do so at the expense of market share."

One thing that will definitely happen is that food prices will rise, Glenn says. A mixture of globalisation and commodity price increases will ensure this.

"The long-term outlook for commodity prices is inflationary and the factors that are driving this price inflation are fundamental. There are hundreds of millions of Chinese and Indians who are getting richer and whose diets are changing. They are starting to eat more protein. That is having a knock-on effect in agriculture: if they eat more chicken or beef, that changes agricultural patterns. There's this shift in supply and demand."

This move could help Birds Eye.

"The great thing about freezing is that you can go into the best place in the world when things are in season, buy at the cheapest point in the season, freeze it and you are in good shape. Freezing has a natural advantage in a market where things are tightening."

But in general we will have to pay more for our fish fingers?

"Yes, definitely," he says, although he adds that Britons have never spent less on food than they do today as a proportion of their total income.

So, Birds Eye is well on the way to being transformed under Permira. An IPO is clearly in the offing but when pressed Glenn refuses to give a date.

"It doesn't help to put a timescale on it. We are not in a rush for investors to get their investment back. An IPO is a definite possibility but there is no timetable."

However, he is clear about one thing. "The business should be independent again one day. It is a wonderful stock market candidate."


What's in a name?

Ever wondered why the Birds Eye name does not contain an apostrophe? Surely, according to correct grammar, it should be "Bird's Eye"?

Apparently not. The company is not named after a bird's optical organ but rather Clarence Birdseye, an American inventor. From 1912 Birdseye spent three years in Labrador, Canada, observing Inuit hunting habits. He was impressed at how they preserved their fish, and he went on to develop an entirely new process for commercially viable quick-freezing.

He launched his own company. In 1929, Birdseye sold his General Seafood Corporation and its patents for $22m to Goldman Sachs and the Postum Company. The company eventually became General Foods Corporation but the Birdseye name became a famous offshoot.

More Details: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/7869883/Birds-Eye-boss-Martin-Glenn-frozen-food-is-the-future.html