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Keynote Market Report : Meat and Meat Products : January 2005

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This report covers: meat and meat products, vegetarianism, organic, free-range, products, carcass meat, poultry, bacon, and, ham, livestock production, beef farming, sheep farming, poultry farming, red meat, chicken,

EXECUTIVE SUMMARY

Meat is an essential part of the UK diet, accounting for 24.2% of household expenditure on food in 2003, according to National Statistics. Meat's share of total spending on food rose sharply in 2003, reflecting the increase in the prices of some meats but also an apparent recovery in consumer confidence in meat as memories of the BSE (bovine spongiform encephalopathy) crisis fade. Other key trends affecting meat consumption include increasing demand for convenience foods, such as ready-to-cook meat products and ready meals, and growing concern about the sources of foods, which has helped to fuel demand for organic and free-range produce.

The total volume of meat available for domestic use in the UK declined in 2000 and 2001, but subsequent years saw a recovery from the effects of the foot-and-mouth and BSE crises. Key Note believes that volume sales of beef rose by around 3% in 2003, and by around 4% in 2004, boosted by the popularity of the Atkins Diet and by sales of cuts for the barbecue. Volume sales of lamb, which were hit hard by the foot-and-mouth outbreak, continued to decline in 2003 but were showing signs of growth by the end of 2004. Chicken and turkey sales also recovered as prices became more competitive. Pork continued to suffer from limited supply and rising prices, largely as a result of increases in feed costs.

Specialist butchers still account for around 15% of meat sales by value, but their share of the market is declining. Over the past few decades, the supermarkets have gradually established a stranglehold on the food market in the UK. More than 90% of the population now use supermarkets as their main or sole place of shopping. As a result, the major multiples have huge bargaining power, which they have used to squeeze the prices they pay food producers and other suppliers. However, the UK's farmers are fighting back against the power of the supermarkets by creating new, added-value products and by selling their produce through unorthodox channels, such as farmers' markets. These markets are spreading rapidly and were forecast to record sales of around £25m in December 2004.

Key Note expects the market for meat and meat products to show relatively strong levels of growth between 2005 and 2009. The value of the market is forecast to rise at a faster pace than inflation, owing to increasing sales of added-value and premium products, such as chilled meat in sauces and meat that has been raised organically or on a free-range basis. Sales of red meat should continue to recover, and sales of poultry will also rise, boosted by convenience and health concerns.

TABLE OF CONTENTS

Executive Summary

1. Market Definition

REPORT COVERAGE

MARKET SECTORS

MARKET TRENDS

Changing Lifestyles

Food Safety and Vegetarianism

Confidence in Red Meat Returns

Added-Value Products Driving Sales

Organic and Free-Range Products

ECONOMIC TRENDS

Gross Domestic Product

Table 1: UK Gross Domestic Product at Current Prices (£m), 1999-2003

Inflation

Table 2: UK Rate of Inflation (%), 1999-2003

Table 3: Inflation Rates for Meat and All Food (index January 1987=100 and %), 2004

Household Disposable Income

Table 4: Household Disposable Income per Capita (£), 1999-2003

Unemployment

Table 5: Actual Number of Unemployed Persons in the UK (million), 1999-2003

Population

Table 6: UK Resident Population Estimates by Sex (000), Mid-Years 1999-2003

MARKET POSITION

The UK

Table 7: Total Household Expenditure on Food and Household Expenditure on Meat and Meat Products (£m and %), 1999-2003

Overseas

Table 8: Per Capita Consumption of Beef in Selected Countries by Volume (kilograms), 1995 and 2003

Table 9: Per Capita Consumption of Poultry in Selected Countries by Volume (kilograms), 1999-2003

2. Market Size

THE TOTAL MARKET

By Volume

Table 10: Total Meat Available for Domestic Use in the UK (000 tonnes), 1999-2003

By Value

Table 11: UK Consumer Expenditure on Meat and Meat Products at Current Prices (£m at rsp), 2000-2004

BY MARKET SECTOR

Carcass Meat

Table 12: UK Consumer Expenditure on Carcass Meat at Current Prices (£m at rsp), 2000-2004

Poultry

Table 13: UK Consumer Expenditure on Poultry by Type of Bird at Current Prices (£m at rsp), 2000-2004

Bacon and Ham

Table 14: UK Consumer Expenditure on Bacon and Ham at Current Prices (£m at rsp), 2000-2004

Other Meat and Meat Products

Table 15: UK Consumer Expenditure on Other Meat and Meat Products at Current Prices (£m at rsp), 2000-2004

OVERSEAS TRADE

Table 16: UK Balance of Trade in Meat by Volume (000 tonnes), 1999-2003

3. Industry Background

RECENT HISTORY

Livestock Production

Table 17: Livestock Production in the UK by Value (£m), 1992/1994, 2002 and 2003

Livestock Numbers

Table 18: Livestock Numbers in the UK by Type of Animal (000 head), 1992/1994, 2002 and 2003

Market Conditions

Beef Farming

Sheep Farming

Pig Farming

Poultry Farming

INDUSTRY SYNOPSIS

Table 19: Key Financial Ratios for UK Producers of Meat and Poultry Meat Products† (£000, % and £), 2003/2004

NUMBER OF COMPANIES

Table 20: Number of UK VAT-Based Enterprises Engaged in the Production, Processing and Preserving of Meat and Meat Products by Turnover (£000, number and %), 2004

EMPLOYMENT

Table 21: Number of Employee Jobs in Agriculture and Food Manufacturing (000), June 1999-2004

Table 22: Number of UK VAT-Based Local Units Engaged in the Production, Processing and Preserving of Meat and Meat Products by Employment (number and %), 2004

REGIONAL VARIATIONS IN THE MARKETPLACE

DISTRIBUTION

Table 23: UK Sales of Meat by Retailer by Value (%), 2003

HOW ROBUST IS THE MARKET?

LEGISLATION

Table 24: Examples of Recent Legislation and Regulations Affecting the Meat and Meat Products Industry, 2004

KEY TRADE ASSOCIATIONS

British Chicken Association

British Meat Processors Association

British Poultry Council

Meat and Livestock Commission

Red Meat Industry Forum

4. Competitor Analysis

THE MARKETPLACE

Table 25: Selected Leading Companies in the UK Meat-Processing Market by Turnover and Pre-Tax Profit (£m), 2002/2003/2004

MARKET LEADERS

Anglo Beef Processors Ltd

Company Structure