Iceland discovers that there's profit in purity

Malcolm Walker could have been forgiven a wry smile when Marks & Spencer declared its conversion to organic foods. It was 18 months ago that Walker, founder, chairman and chief executive of Iceland, set the organic ball rolling by banning genetically modified ingredients from the shelves of his supermakets. The few who took any notice greeted his stand with derision. Who would have thought that a down-market chain like Iceland would be so keen to court the environmental lobby?

Nowadays, the public attitude to GM food has changed out of all recognition and the M&S conversion seems at best belated.

"Our suppliers thought we were mad when we started, but it has paid remarkable dividends in terms of publicity and increased sales," says Walker. "With everyone else resisting, it became much easier for us to get supplies."

In spite of the success of his decision, Walker does allow himself a moment of bitterness when it comes to the Damascene conversions of his rivals.

"I do get annoyed when other people like Sainsbury's say it was their idea," he says. "When I wrote to them about it 18 months ago, they didn't even reply. We remain the only company to have come out against GM foods because it's the right thing to do."

Although Iceland could hardly be accused of jumping on a bandwagon that at the time did not exist, there is no doubting the commercial logic of the move. Since hitting a low of 76p in 1997, its shares have soared to close on Friday within 8p of their all-time high of 2961/2p. Interim figures to be announced on Tuesday will be accompanied by a confirmation of Iceland's commitment to organic products.

There are those who would argue that Walker's stance has been motivated more by greed than principle. Iceland's success has helped Walker build a personal fortune of the order of pounds 25m, most of it generated since GM foods were ditched.

Unfortunately for the cynics, Walker's environmental credentials are too consistent to be dismissed as opportunism. Indeed, there must be times when Iceland's more mercenary shareholders tire of hearing about yet another of its good turns. This, after all, is the company that puts pictures of missing children on its milk bottles. That Greenpeace has chosen to endorse the eco-friendly technology that Iceland demands for its freezers is a source of particular pride to Walker, who is himself a member of the pressure group.

But Iceland's organic conscience is consistent with a company that has decided - as an easy prey in the retailing jungle - differentiation is the key to survival. Iceland has also led the way in home-delivery shopping. Despite its appeal to the environmental concerns of the urban elite, it has steadfastly refused to follow the retailing world's move upmarket.

The result is a chain "which you couldn't invent if it did not exist," says Walker. More important, he believes, it protects Iceland from predators at a time of rapid consolidation in the sector. Last week's announcement that French groups Carrefour and Promodes were getting together was the first significant reaction to WalMart's takeover of Asda. The latter deal had apparently forced supermarket chains the world over to seek safety in numbers, although not according to Walker.

"I think being small is now an advantage," he maintains. "The last thing you want to be is a full-scale supermarket. There is not much chance of us being a bid target. We are quite a different animal, so if anyone wanted us, there wouldn't be a lot of sense doing it without keeping our management."

But then again, Walker has always been a contrarian. When he and a friend bought a couple of freezers in 1970 and Iceland was born, he was still working as an assistant manager with Woolworths, although not for long after it discovered his moonlighting. Not many people would have jeopardised such a job armed only with an "O" level in woodwork.

No surprise, then, that Walker has turned Iceland into the kind of exotic creature that even the most mighty beasts in the retailing jungle would hesitate to attack.