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Iceland looks at ending group sales of tobacco

February 2001

The frozen food retailer Iceland is to review sales of tobacco through its cash-and-carry business Booker, with which it merged last summer.

The study of tobacco sales will be one of the major issues to be addressed by former Greenpeace executive director Lord Peter Melchett, who takes up a new post as Iceland's adviser on social and environmental issues this month.

Iceland merged with Booker in June last year and as a result 25 per cent of the enlarged group's sales now come from the wholesale of tobacco to corner shops. Although less than one per cent of the group's profits come from those sales, they generate valuable 'customer traffic' and Iceland believes that ending tobacco-selling could encourage customers to go elsewhere for other supplies.

Nevertheless, the group has already sold Booker's own label cigarette brand and has halved the number of brands it sells.

Iceland said: 'We are committed to supporting the indendent retailers who rely on Booker, but we do understand that there is an ethical issue here and we are looking at ways of addressing it.'

Lord Melchett has already discussed the issue at board level with Iceland and said he is anxious to find 'an agreed route forward to solve this difficult problem'.

Talks were also held between former Iceland chairman Malcolm Walker and the London-based fund manager Jupiter, which holds shares in the group and has asked the company to stop selling tobacco products.

Emma Howard Boyd, head of Jupiter's Environmental Research Unit, said Jupiter's two socially responsible investment funds – the Ecology Fund and the Environmental Opportunities Fund – should technically have disinvested from Iceland after the merger because they should not hold shares in companies involved with tobacco.

But she said Iceland's track record on social and environmental issues persuaded Jupiter to continue investment while Iceland considers the issue. 'We could have sold our shares on the announcement of the deal and washed our hands of the whole affair, but we thought it was important to talk directly with senior management, particularly as we have had a long and fruitful relationship with Iceland,' she said.

Howard Boyd said the 'fundamental review' being carried out by Iceland, plus the arrival of Lord Melchett and the reduction in the number of cigarette brands sold, demonstrated that Iceland was taking the issue seriously.

However, Howard Boyd stressed the Booker merger had left Jupiter with 'a huge dilemma' and warned: 'If at any point we believe Iceland is not making satisfactory progress towards achieving its goal of reducing its exposure to tobacco wholesaling, we will review our position'.

Around four per cent of total investment in Jupiter's Environmental Opportunities and Ecology funds is held in Iceland shares, making it one of the top ten investments for both funds.

Iceland confirmed at the end of January that it would be proceeding with its tobacco review. The company had poor sales in December and Walker resigned at the end of last month.

 




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