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KN15240 KEY NOTE HEALTH FOODS OCTOBER 2000

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Editor: Lynsey Barker

ISBN: 1-84168-122-9

This report covers: health foods, functional foods, organic foods, vitamins, minerals, supplements, VMS, alternative remedies, sports nutrition, probiotic foods, functional drinks, cholesterol lowering products, multivitamins, fish oils, single vitamins, herbal remedies, aromatherapy products, homeopathic remedies

Companies covered include: The Boots Company, Roche Holding, Nutricia, Holland & Barrett Retail, Seven Seas, W Jordan (Cereals), Peter Black Healthcare, Health & Diet Group, A Nelson & Co, Haldane Foods, GR Lane Health Products, Cambr, Cauldron Foods, Aromatherapy Products, Planet organic, Fresh & Wild, Greenways Natural Food Stores

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EXECUTIVE SUMMARY

The specialist health foods sector has always contained a wide and diverse product range. Over the years, the boundaries between health foods and mainstream foods have become increasingly blurred. The 2000 Key Note report on health foods concentrates on four important, and relatively well-defined, market sectors: functional foods, organic foods, vitamins, minerals and supplements (VMS), and alternative remedies. Each of these categories has a presence within the mainstream manufacturing and retail sectors, as well as the specialist sector.

The total value of sales within the four selected sectors was estimated by Key Note at £1.67bn in 2000, an increase on the 1999 figure. Functional foods represent the largest sector, with organic foods being the most dynamic sector in terms of growth. Internationalisation has been a key feature within a number of health food sectors over the past decade. European and US companies have entered the UK market both in their own right and through acquisitions of UK businesses. This started within the VMS and alternative remedies sectors, and has continued more recently with a number of acquisitions within the organic sector. In addition, a growing number of mainstream food manufacturers are entering the organic foods market, notably Heinz Europe Ltd, Mars UK Ltd and RHM Ltd.

The introduction of functional foods has brought large pharmaceutical companies into the health foods market, including Novartis Ltd with Aviva, and Johnson & Johnson Ltd with Benecol. Distribution within the health foods sector has been characterised, in recent years, by the increasing encroachment of multiple retailers onto territory which has previously been mainly the province of the specialist. Most major supermarkets are now offering a wide range of organic products.

In 2000, J Sainsbury PLC opened its first ’well-being’ store within a store, carrying a range of products similar to those traditionally found in specialist health food shops. Within the specialist sector, a number of high-profile specialist ‘organic supermarkets’ have been established, with ambitious expansion plans; these include Planet Organic Ltd, Fresh & Wild Ltd and Greenways Natural Food Stores. Regulatory issues, particularly those emanating from Europe, continue to cause some uncertainty within the VMS and alternative remedies sectors. A draft European directive on supplements has now been agreed. Furthermore, the Medicines Control Agency (MCA) has been asked by the Government to come up with a discussion document on ‘traditional medicinal products’, including herbal remedies, which might form the basis of a European directive on these products.

Key Note estimates that the total market for the four selected product sectors will stand at £3.19bn by 2005. Sales of organic foods will overtake those of functional foods by 2001.

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TABLE OF CONTENTS

Executive Summary


1. Market Definition


INTRODUCTION
MARKET SECTORS
Functional Foods
Organic Foods
Vitamins, Minerals and Supplements
Alternative Remedies
MARKET POSITION
Table 1: The UK Market for Health Foods as a percentage of the Total UK Household Food Market by Value (£m at rsp), 1999-2000
(£m at rsp), 1999-2000
MARKET TRENDS
Consumers and Health
Changing Eating Habits
Food Intolerance
Food Safety Issues
Regulatory Issues
Supplier Activity
Retailer Activity


2. Market Size


THE TOTAL MARKET
(£m at rsp and percent), 1999-2000
BY MARKET SECTOR
Functional Foods
and 2000
Organic Foods
1999 and 2000
Vitamins, Minerals and Supplements
Table 6: The UK Market for Vitamins, Minerals and Supplements by Product Type by Value (£m at rsp), 1999 and 2000
Alternative Remedies
Product Type by Value (£m at rsp), 1999 and 2000
A GLOBAL PERSPECTIVE
Functional Foods
Organic Foods
(million and £m), 1998-1999
Vitamins, Minerals, Supplements and Alternative Remedies


3. Industry Background


RECENT HISTORY
INDUSTRY CONCENTRATION
DISTRIBUTION
Retail
Wholesale
Brewhurst Health Food Supplies Ltd
The Health Store Ltd
Nature's Store Ltd
Direct Selling
TRADE ASSOCIATIONS
Health Food Manufacturers' Association
National Association of Health Stores


4. Competitor Analysis


THE MARKETPLACE
THEIR BRANDS
Table 9: Selected Leading UK Health Food Companies by Turnover and Pre-Tax Profit (£m), 1997/1998/1999/2000
The Boots Company PLC
Roche Holding (UK) Ltd
Nutricia Ltd
Holland & Barrett Retail Ltd
Seven Seas Ltd
W Jordan (Cereals) Ltd
Peter Black Healthcare Ltd
Health & Diet Group Ltd
A Nelson & Co. Ltd
Haldane Foods Ltd
GR Lane Health Products Ltd
Cambr Ltd
Cauldron Foods Ltd
Aromatherapy Products Ltd
Planet Organic Ltd
Fresh & Wild Ltd
Greenways Natural Food Stores
ADVERTISING AND PROMOTION
Main Media Advertising Expenditure
Ending June 1998-2000
Vitamin Preparations
Ending June 1999 and 2000
Slimming Aids and Foods
Table 12: Main Media Advertising Expenditure on Slimming Aids and Foods (£000), Years Ending June 1999 and 2000
Organic Foods
Ended June 2000
Recent Advertising Campaigns
Other Recent Marketing Activity
Advertising Standards


5. Strengths, Weaknesses, Opportunities and Threats


STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS


6. Buying Behaviour


CONSUMER PENETRATION
and Other Supplements
( percent of adults), 1996-2000
By Sex
By Age
By Social Grade
By Region
( percent of adults), 1999 and 2000
By Sex and Age Group
2000
By Frequency of Use
these products), 1998-2000
By Type of Product
1999 and 2000
Slimming Foods
Table 19: Penetration of Usage of Slimming Foods ( percent of adults), 1997-2000
By Sex
By Age
By Social Grade
By Region
Region ( percent of adults), 1998-2000
By Frequency of Use
Table 21: Frequency of Usage of Slimming Foods ( percent of adults who ever use these products), 1999 and 2000


7. Outside Suppliers to the Industry


ORGANIC FARMING
and April 1999
Table 23: Number of Registered Organic Producers, 1997-1999
FOOD SUPPLY


8. Current Issues


ISSUES
Food Supplements
Herbal Medicines
St Johns Wort
Nandrolone
FUNCTIONAL FOODS
ORGANIC FOODS
CORPORATE ACTIVITY
Horizon Organic Dairy
The Organic Herb Trading Company
Ultrapharm Ltd
Kallo Group Ltd
AND LAUNCHES
Food Products
Supplements and Remedies


9. Forecasts


FORECASTS 2001 TO 2005
Table 24: The Forecast Total UK Market for Selected Health Foods by Sector by Value, 2001-2005 (£m at rsp)
2001-2005
MAINSTREAM SUPPLIERS VERSUS SPECIALIST SUPPLIERS
MAINSTREAM RETAILERS VERSUS SPECIALIST RETAILERS
FUNCTIONAL FOODS
ORGANIC SUPPLY
HERBAL MEDICINES
ONLINE RETAILING


10. Company Profiles


A Nelson & Co. Ltd
The Boots Company PLC
Cauldron Foods Ltd
GR Lane Health Products Ltd
Haldane Foods Ltd
Health & Diet Group Ltd
Holland & Barrett Retail Ltd
Nutricia Ltd
Peter Black Healthcare Ltd
Seven Seas Ltd


11. Further Sources


Associations
Periodicals
Directories
General Sources
Bonnier Information Sources
Government Publications
Other Sources

Understanding TGI Data

Number, Profile, Penetration
Social Grade
Standard Region

Key Note Research

Text © 2000 Key Note

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Last updated by Jacob van Eldik 19th November 2000