KN15224

KEY NOTE FROZEN FOODS PLUS : October 2004

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This report covers: frozen food, meat, and, meat products, poultry, poultry products, ice cream, fish, fish products, ready meals, potato, products, cakes and desserts, pizza, vegetables, fruit, healthy eating,

Companies and Brand Names covered include: Bernard Matthews, The Big Food Group, Christian Salvesen Foods, Findus, General Mills, HJ Heinz, Mars, UK, McCain Foods, Northern Foods, RHM Frozen Foods, Richmond Foods, Unilever Ice Cream, & Frozen Foods, Uniq, William Jackson, Young's Bluecrest Seafood Holdings, Intercool, Food and Drink Expo,

TABLE OF CONTENTS

Executive Summary 1

1. Market Definition 9

REPORT COVERAGE 9

MARKET SECTORS 9

Meat and Meat Products 9

Poultry and Poultry Products 9

Ice Cream 9

Fish and Fish Products 9

Ready Meals (Excluding Pizza) 9

Potato Products 10

Cakes and Desserts 10

Pizza 10

Vegetables and Fruit (excluding potatoes) 10

Vegetarian Foods 10

MARKET TRENDS 10

Ownership of Freezers and Microwaves 10

Healthy Eating 11

Changing Eating and Shopping Habits 11

ECONOMIC TRENDS 12

Gross Domestic Product 12

Table 1: UK Gross Domestic Product

at Current Prices (£m), 1999-2003 12

Household Disposable Income 13

Table 2: Household Disposable Income Per Capita

(£ and %), 1999-2003 13

Inflation 13

Table 3: UK Rate of Inflation (%), 1999-2003 13

Unemployment 14

Table 4: Actual Number of Unemployed

Persons (million), 1999-2003 14

Population 14

Table 5: UK Resident Population Estimates by Sex

(000), Mid-Years 1999-2003 15

MARKET POSITION 15

The UK 15

Table 6: Household Expenditure on Frozen Food

by Value at Current Prices (£m at rsp and %), 1999-2003 16

Overseas 16

2. Market Size 17

THE TOTAL MARKET 17

Table 7: The Total UK Frozen Food Market by Value

at Current Prices (£m at rsp), 1999-2003 17

by MARKET SECTOR 18

Table 8: The Total UK Frozen Food Market by Sector

by Value at Current Prices (£m at rsp and %), 2003 18

Meat and Meat Products 18

Table 9: The UK Frozen Meat and Meat Products Sector

by Value at Current Prices (£m at rsp and %), 1999-2003 19

Poultry and Poultry Products 19

Table 10: The UK Frozen Poultry and Poultry Products Sector

by Value at Current Prices (£m at rsp and %), 1999-2003 20

Ice Cream 20

Table 11: The UK Ice Cream Sector by Value at Current Prices (£m at rsp and %), 1999-2003 21

Fish and Fish Products 21

Table 12: The UK Frozen Fish and Fish Products Sector by Value

at Current Prices (£m at rsp and %), 1999-2003 22

Ready Meal (Excluding Pizza) 22

Table 13: The UK Frozen Ready Meals Sector by Value

at Current Prices (£m at rsp and %), 1999-2003 23

Potato Products 23

Table 14: The UK Frozen Potato Products Sector by Value

at Current Prices (£m at rsp and %), 1999-2003 24

Cakes and Desserts 24

Table 15: The UK Frozen Cakes and Desserts Sector by Value

at Current Prices (£m at rsp and %), 1999-2003 25

Pizza 25

Table 16: The UK Frozen Pizza Sector by Value at Current Prices

(£m at rsp and %), 1999-2003 26

Vegetables and Fruit (excluding potatoes) 26

Table 17: The Frozen Vegetables and Fruit Sector† by Value

at Current Prices (£m at rsp and %), 1999-2003 27

Vegetarian Foods 27

Table 18: The Frozen Vegetarian Foods Sector by Value

at Current Prices (£m at rsp and %), 1999-2003 28

OVERSEAS TRADE 28

Imports and Exports 28

Table 19: UK Imports and Exports of Meat (Bovine Animals)

by Value (£000), 2002 29

Table 20: UK Imports and Exports of Meat (Sheep)

by Value (£000), 2002 29

Table 21: UK Imports and Exports of Meat (Swine)

by Value (£000), 2002 30

Table 22: UK Imports and Exports of Poultry

by Value (£000), 2002 30

Table 23: UK Imports and Exports of Frozen Fish

by Value (£000), 2002 30

3. Industry Background 32

RECENT HISTORY 32

INDUSTRY SYNOPSIS 32

Table 24: Average Financial Results of the Leading Companies Involved in the Manufacture of Food (£000, £ and %) 33

NUMBER OF COMPANIES 33

Table 25: Number of UK VAT-Based Enterprises

Engaged in the Fish Freezing Industry by

Turnover Sizeband (£000), 2003 34

Table 26: Number of UK VAT-Based Enterprises

in the UK Ice Cream Manufacturing Industry

by Turnover Sizeband (£000), 2003 35

EMPLOYMENT 35

Table 27: Number of UK VAT-Based Local Units Involved

in UK Fish Processing by Employment Sizeband

(number of employees, 2003 36

Table 28: Number of UK VAT-Based Enterprises Involved

in the UK Ice Cream Manufacturing Industry

by Employment Sizeband (number of employees), 2003 37

REGIONAL VARIATIONS IN THE MARKETPLACE 37

DISTRIBUTION 38

Table 29: Share of Expenditure on the Frozen Food Market

by Type of Outlet (%), 2003 38

HOW ROBUST IS THE MARKET? 38

LEGISLATION 39

KEY TRADE ASSOCIATIONS 40

The British Frozen Food Federation 40

The United Kingdom Association of Frozen Food Producers 40

The Ice Cream Alliance 40

Other Associations 40

4. Competitor Analysis 41

THE MARKETPLACE 41

market leaders 41

Bernard Matthews Ltd 41

Company Structure 41

Current and Future Developments 42

Financial Results 42

The Big Food Group PLC 42

Company Structure 42

Current and Future Developments 42

Financial Results 43

Christian Salvesen Foods Ltd 43

Company Structure 43

Current and Future Developments 43

Financial Results 43

Findus 44

Company Structure 44

Current and Future Developments 44

Financial Results 44

General Mills UK Ltd 44

Company Structure 44

Current and Future Developments 44

Financial Results 45

HJ Heinz Company Ltd 45

Company Structure 45

Current and Future Developments 45

Financial Results 45

Mars UK Ltd 45

Company Structure 45

Current and Future Developments 46

Financial Results 46

McCain Foods (GB) Ltd 46

Company Structure 46

Current and Future Developments 46

Financial Results 46

Northern Foods PLC 47

Company Structure 47

Current and Future Developments 47

Financial Results 47

RHM Frozen Foods LTD 47

Company Structure 47

Current and Future Developments 47

Financial Results 48

Richmond Foods PLC 48

Company Structure 48

Current and Future Developments 48

Financial Results 48

Unilever Ice Cream & Frozen Food Ltd 48

Company Structure 48

Current and Future Developments 49

Financial Results 49

Uniq PLC 49

Company Structure 49

Current and Future Developments 49

Financial Results 49

William Jackson & Son Ltd 50

Company Structure 50

Current and Future Developments 50

Financial Results 50

Young's Bluecrest Seafood Holdings Ltd 50

Company Structure 50

Current and Future Developments 50

Financial Results 51

Other Companies 51

OUTSIDE SUPPLIERS 51

MARKETING ACTIVITY 52

Table 30: Main Media Advertising Expenditure on Frozen Food

(£000), Years Ending 2001-2003 53

Ice Cream and Lollies 53

Table 31: Main Media Advertising Expenditure

on Leading Brands of Ice Cream and Lollies (£000),

Year Ending June 2004 54

Frozen Ready Meals 54

Table 32: Main Media Advertising Expenditure

on Leading Brands of Frozen Ready Meals (£000),

Year Ending June 2003 55

Frozen Pizza 55

Table 33: Main Media Advertising Expenditure

on Leading Brands of Frozen Pizza (£000),

Year Ending June 2004 56

Frozen Vegetables 56

Table 34: Main Media Advertising Expenditure

on Leading Brands of Frozen Vegetables (£000),

Year Ending June 2004 57

Fresh and Frozen Poultry 57

Table 35: Main Media Advertising Expenditure

on Leading Brands of Fresh and Frozen Poultry (£000),

Year Ending December 2003 57

Fresh and Frozen Fish 58

Table 36: Main Media Advertising Expenditure

on Leading Brands of Fresh and Frozen Fish (£000),

Year Ending June 2004 58

Fresh and Frozen Meat 58

Table 37: Main Media Advertising Expenditure

on Leading Brands of Fresh and Frozen Meat (£000),

Year Ending June 2004 59

EXHIBITIONS 59

Frozen Food at The International Food Expo 59

InterCool 59

Food and Drink Expo 59

5. Brand Strategy 60

INTRODUCTION 60

ICE CREAM BRANDS 60

Table 38: Brands of Ice Cream Purchased on a Regular Basis

by Sex (% of adults), September 2004 61

Table: Brands of Ice Cream Purchased on a Regular Basis

by Age (% of adults), September 2004 62

Table 40: Brands of Ice Cream Purchased on a Regular Basis

by Social Grade (% of adults), September 2004 63

Table 41: Brands of Ice Cream Purchased on a Regular Basis

in the Southern Regions and Wales (% of adults),

September 2004 64

Table 42: Brands of Ice Cream Purchased on a Regular Basis

in the Midlands and Northern Regions (% of adults),

September 2004 65

Companies Brands 66

6. Strengths, Weaknesses, Opportunities and Threats 67

FROZEN FOOD OTHER THAN ICE CREAM AND DESSERTS 67

Strengths 67

Weaknesses 67

Opportunities 68

Threats 68

ICE CREAM AND DESSERTS 69

Strengths 69

Weaknesses 69

Opportunities 69

Threats 70

7. Buying Behaviour 71

FROZEN MEAT 71

Table 43: Percentage of People Buying Frozen Meat

in the Past 12 Months by Sex, Age, Social Grade and Region (% of adults), March 2004 71

FROZEN POULTRY 72

Table 44: Weekly Expenditure on Frozen Poultry by Sex,

Age, Social Grade and Region (% of adults), March 2004 73

FISH FINGERS AND OTHER FROZEN FISH PRODUCTS 74

Table 45: Frequency of Purchase of Frozen Fish Fingers by Sex,

Age, Social Grade and Region (% of adults), March 2004 75

8. Current Issues 77

SUPPLIERS SEEK TO EXPLOIT HEALTHY EATING TREND 77

US Food Companies Strive To Produce `Healthier' Foods 77

Dr Oetker Makes Inroads Into The UK Pizza Sector 78

Frozen Snacks Falter 78

Hibernia Finds Buyer 79

Birds Eye's Risky Rebranding Strategy 79

Birds Eye's Grimsby Plant Under Threat? 79

Wet Summer Dampens Ice Cream Sales 79

Iceland Remains Under Pressure 80

Skinny Cow To Boost Ice Cream Sales? 80

Are Chips Really Vegetables? 81

Quorn Linked To Asthma Attacks 81

9. The Global Market 82

GLOBAL TRENDS AND MARKET SIZE 82

Table 46: The Global Frozen Food Market by Value

at Current Prices (£bn at rsp), 1999-2003 82

US Trends 82

European Trends 83

10. Forecasts 84

THE ECONOMY 84

FORECASTS 2004 TO 2008 84

Table 47: The Total UK Forecast Frozen Food Market

by Sector by Value at Current Prices (£m at rsp), 2004-2008 85

FUTURE TRENDS 85

Demographics 85

Table 48: Projected UK Population by Age (number),

2002, 2006 and 2011 86

Market Segmentation 86

Product Development 86

Competitor Forecasts 87

11. Company Profiles 88

Christian Salvesen Plc 89

The Big Food Group Plc 91

Hj heinz Company Ltd 93

Mars Uk Ltd 95

Mccain Foods (gb) Ltd 97

12. Company Financials 99

13. Further Sources 100

Associations 100

General Sources 101

Other Sources 102

Government Publications 102

Bonnier Information Sources 103

EXECUTIVE SUMMARY

Retail sales of frozen food amounted to £5.32bn in 2003 or 8.6% of total consumer spending on food and drink products in the UK, a moderate growth of 1.5% from 2002. The market is broken down into ten sectors; meat and meat products, poultry and poultry products, ice cream, fish and fish products, ready meals, potato products, cakes and desserts, pizza, vegetables and fruit and vegetarian foods.

The market first took off in the UK in the 1960s when freezer ownership became increasingly widespread. It received a further boost in the 1980s with the introduction of the microwave and considerable new product development (NPD) in sectors such as pizzas and ready meals. The development of the industry has been heavily influenced by two of the key factors affecting food markets over the past 40 years — growing demand for convenience products and concerns about health. Frozen foods were one of the first beneficiaries of demand for convenience products; with the introduction of frozen peas in the 1960s, boil-in-the bag meals in the 1970s and ready meals in the 1980s helping to drive demand.

However, over the past 5 years growth has slowed sharply and the market now appears to have reached maturity. Ownership of freezers and microwaves is now ubiquitous, while the scope for further product development appears to be limited. Furthermore, the emergence of chilled produce represents a major challenge to frozen foods. The range of chilled produce has expanded dramatically in the UK in the past 5 years and it offers considerable advantages in terms of convenience over frozen alternatives. Furthermore, consumers believe chilled products are more flavoursome, natural and healthy than frozen alternatives. Retailers and suppliers have also concentrated their marketing and NPD activity on chilled produce, which offers higher margins than the frozen sector. Chilled produce is also far more attractively presented than its frozen alternative and is normally located close to the entrance of many stores, while the sterile-looking frozen food section is often at the end of the store.

Within the frozen food market, fish, poultry and ice cream probably have the greatest growth potential. Suppliers such as Young's are exploiting the positive health image surrounding fish with some success, while poultry is also regarded by consumers as being healthy. Ice cream is obviously greatly influenced by the weather, but faces no competition from chilled produce and growing demand for premium products is also boosting the overall value of the sector. The low-fat ice cream segment also appears to offer huge potential. The potato products and cakes and desserts sectors, by contrast, appear to be in decline.

However, frozen foods continue to offer advantages in term of convenience and bulk buying, and are a long-established item on consumers' shopping lists. They also offer benefits in terms of health — they do not contain the preservatives found in chilled produce — that have yet to be fully exploited by the industry. Thus, Key Note believes the market will continue to grow, albeit at a moderate rate, with the value of the market reaching around £5.63bn in 2008

Text © 2004 Key Note

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Last updated by Amanda Porteous November 2004