Birds Eye Foods Ltd.

Birds Eye Foods Ltd., a high quality producer of frozen foods, attributed for almost three-fourths of the U.K. frozen food sales by 1964. Its success was owing to its vertically integrated operations which ensured high quality of food since it controlled the food production from the initial procurement stage (through contracts with farmers and fishermen), which satisfied its high demand for raw materials and maximized its production capacity. This raised barriers for new entrants in the industry as Birds Eye had control over the whole supply chain process. It had a robust system of distribution which enabled it to reach 93,000 outlets, increasing its sales significantly during the 1950s. It used its parent company's subsidy, SPD (Speedy Prompt Delivery) for this which proved to be a competitive advantage since this ensured efficient delivery to its consumers. Ross & Findus, Birds Eye's main competitors, did not have the capacity to aggressively market themselves nor the power to initiate price changes. Birds Eye's ability to influence pricing behavior and not face a threat from its competitors of being underpriced placed it in an advantageous position in the market.

During Birds Eye's success as a market leader, the U.K. frozen food industry significantly evolved from its basic, and to a certain extent, fragmented structure. Barriers to entry lowered due to technological advancements which provided infrastructure for food processing, storage and freezing. This brought about the emergence of specialist firms which also managed distribution and offered services in different areas of the retailing of frozen food. Eventually, Birds Eye was losing its market share to retail private labels that entered the market with the aid of specialist firms. This is evident from the increasing market share of private labels from the late 1960s onwards (appendix 2). Competitors were not as vertically integrated as they were earlier on and instead specialized on a certain component of the supply chain. With infrastructure in place for frozen food storage and display in retail stores, frozen food was readily available in many outlets. The ease in access to frozen food and influx of new entrants to the market led to a drop in prices due to increased competition. With heightened competition and power of supermarket chains increasing, there was more competition to face in terms of freezer space as now manufacturers were also up against retailers who started supplying their own brand food. Changes in food retailing such as the switch from counter service to self-service and establishment of giant supermarket chains also impacted the frozen food industry as it opened up opportunities to offer new types of products. However, after the peak in the mid 1970s, Birds Eye's performance began to dwindle.

Birds Eye faced a higher operating cost than its competitors due to controlling the entire supply chain process. Cost savings from a larger scale of production tended to be small. Technological advancements made it easier for competitors to enter the market as capital requirements were not as high as before. As competition increased, Birds Eye's costs increased, margins earned dropped and market share decreased. In order to try attaining an increasing market share, it slashed its prices in 1974; however, this further decreased the company's profitability (appendix 3). Birds