| KN52052 |
| KEY NOTE FOOD INDUSTRY : August 2002 |
|
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This report covers: food, meat, meat products, fish, fish products, fruit, vegetables, dairy products, eggs, oils, fats, bread, cakes, biscuits, cereals, sugar, ready meals, pizzas, rice, pasta, fresh, frozen, prepared food, consumption, cooked breakfast, non-cooked breakfast, hot lunch, prepared lunch, snacks, fresh fruit, take-away food, ready meals, organic food, health foods, vegetarian food, evening meal on one's own, evening meal with others, beef, lamb, veal, mutton, pork, bacon, ham, poultry, sausages, meat pies, pasties, salmon, cod, haddock, mackerel, trout, kippers, prawns, plaice, shellfish, coley, fish fingers, pilchards, tomatoes, onions, garlic, cabbage, brassica, lettuce, carrots, turnips, root vegetables, cucumbers, gherkins, mushrooms, oranges, mandarins, lemons, grapefruit, citrus fruit, bananas, apples, grapes, melons, pears, apricots, avacado, mango, guava, stone fruit, jam, marmalade, tinned vegetables, potatoes, milk, butter, cheese, yoghurt, fromage frais, cream, soup
Companies covered include: Tate & Lyle, Nestlé Holdings, RHM Group, Northern Foods, Unilever, The Alber Fisher Group, Kraft Foods, Geest, Masterfoods, Tesco, Safeway, Sainsbury's, ASDA, Premier Holdings, Birds Eye Wall's, Glanbia Fresh meats, Grampian Country Food Group, Kerry Group, Bernard Matthews, Moy Park, Northern Foods, Perkins Foods Holdings, Sun Valley Foods, Tulip International, Uniq, Findus, John West Foods, Young's Bluecrest Seafood, Capespan International Holdings,Chiquita Brands International, Del Monte Fresh Produce, Dole Food Company, Fisher Foods, Fyffes, Geest, Greenvale, G's Marketing, Hazlewood Foods, MBM Produce, Poupart, Redbridge Holdings, Processed Fruit & Vegetables, HJ Heinz, McCain Foods, Arla Foods, Dairy Crest, Express Dairies, Glanbia, The Kerrygold Company, Bread & Bakery Products, ABF Grain Products, British Bakeries, Burton's Biscuits, Fletchers Bakeries, Harvestime, Hibernia Foods, William Jackson Bakery, The Jacob's Bakery, Rathbones Bakeries, United Biscuits, Warburtons, Cereal Partners UK, Kellogg Company, Quaker Oats, Weetabix,
Key Note estimates that the UK access control market was worth £227m at end-user prices, in 2002, an increase of 4.1 percent on 2001. This represented an improvement on the low level of growth achieved in 2001, when some manufacturers reported declining sales.
TABLE OF CONTENTS
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EXECUTIVE SUMMARY
| INTRODUCTION |
| This report reviews key trends and developments in the UK retail food market between 1997 and 2001, and provides forecasts for the period to 2006. The core segments covered are: |
| meat and meat products |
| fish and fish products |
| fruit and vegetables |
| dairy products, eggs, oils and fats |
| bread, cakes, biscuits and cereals |
| miscellaneous foods, including sugar, meal enhancers (sauces and pickles), ready meals, pizza, soup, rice and pasta. |
| Both fresh and processed products are included, but confectionery, ice cream, alcoholic drinks, and hot and cold beverages (including fruit juices, tea and coffee) are excluded. |
| MARKET SIZE |
| Consumer expenditure on the foods and food products covered by this Review totalled £46.37bn in 2001 — an increase of 3.5 percent on the previous year. Growth was stronger in 2001 than in recent years, owing to a combination of more stable prices, improved performances in certain sectors (such as bread, cakes, biscuits and cereals, and dairy products, eggs, oils and fats) and some switching to higher-priced products. Most of the core sectors of the UK food market maintained some growth throughout the period from 1997 to 2001. |
| Virtually all sectors of the UK food industry experienced problems of overcapacity and limited investment in 2001/2002. The processing sectors have become more concentrated, while the supplier sectors, such as fishing and agriculture, have seen livestock numbers and fish stocks dwindle, along with the number of operators. Between 1997 and 2002, the number of UK food-manufacturing enterprises registered for VAT fell by 11.9 percent. As far as food production is concerned, there has been a switch from commodity products to further-processed and value-added lines. |
| The UK is a net importer of food, and the trade deficit in the food industry reached £10.65bn in 2001. |
| KEY NOTE CONSUMER RESEARCH |
| In June 2002, Key Note commissioned BMRB International to carry out original research into the eating habits of UK consumers. The survey questioned 1,012 adults over the age of 16, and provided mixed results as far as healthy eating habits are concerned. |
| A large majority of UK adults claim to eat fresh fruit during a typical day, but a majority also eat savoury snacks. The popularity of organic foods and vegetarian foods has not increased significantly since a similar survey carried out in 2001, yet more people are eating cooked breakfasts and hot lunches. Convenience continues to be an important factor, with the popularity of ready meals and take-away foods growing. |
| The prepared lunch is very popular, and although there has been a long-term decline in traditional meal occasions, the overwhelming majority of adults still eat an evening meal with others during a typical day. |
| INDUSTRY STRUCTURE |
| The key features of the UK food industry in 2001/2002 were further merger-and-acquisition activity and a continuation of the refocusing of businesses on higher-margin sectors such as convenience foods and further-processed products. |
| Corporate activity in 2001 was led by the merger of Bestfoods UK and Unilever's Van den Bergh Foods. Other significant deals included the sale of Uniq's Malton Foods pig-meat business to Grampian Country Food Group in autumn 2001, the sale of the Ski and Munch Bunch dairy-products brands to Nestlé by Northern Foods in spring 2002, and the purchase of Golden Vale PLC by Kerry Foods PLC in 2001. The most notable business failure was the collapse of The Albert Fisher Group. |
| Although food retailing continues to be dominated by the big four supermarket chains, the long-term decline in sales through specialist food outlets was halted in 2001. Greengrocers, in particular, showed healthy sales growth during the year. The convenience-store sector has performed well in recent months, and most of the large supermarket chains have introduced convenience-store outlets. These outlets are mostly targeted at the busy shopper looking to purchase a few items after work or as top-ups between major shopping trips. Online grocery shopping is growing, but it still takes a very small share of total sales. |
| MEAT AND MEAT PRODUCTS |
| Consumer expenditure on meat and meat products fell by 1.4 percent at current prices in 2001, to £12.15bn. At constant prices, the market suffered a 5.3 percent decline in sales. The two core sectors of the market experienced differing fortunes during the year: carcass-meat sales declined after an improved market performance in 2000, while sales of other meat and meat products continued their year-on-year growth. |
| Health concerns and increased demand for further-processed meats to suit different meal occasions have been the main factors behind reduced sales of carcass meat. Meat-based ready meals has been one of the strongest growth areas. Household penetration of both fresh and frozen meat is already very high (over 92 percent of female housewives in each case), so these markets are mature ones with limited opportunities for growth. |
| UK agricultural livestock numbers are in long-term decline, and the situation worsened in 2001 following the outbreak of foot-and-mouth disease. The restructuring of the meat-processing industry continued in 2001, and many of the remaining businesses are becoming larger, vertically integrated operations. |
| FISH AND FISH PRODUCTS |
| Consumer expenditure on fish and fish products totalled £2.26bn at current prices in 2001 — an increase of 4.8 percent on the previous year. There was also real growth in the market, with sales increasing by 4.2 percent at constant prices. Volume consumption of fish showed little change between 1997 and 2000, but increased by 3.3 percent in 2001. Premium products such as ready meals, canned fish, and fish-based snacks have been the main growth areas. |
| The market can be divided into three core sectors: fresh and chilled fish, frozen fish and canned fish. Salmon has overtaken traditional favourites such as haddock and cod as the most popular type of fresh and chilled fish, while fish fingers have lost their long-established position as the most popular frozen-fish category. (Fish-based meals now take the largest share of sales in the frozen-fish sector.) Canned fish is the smallest and most mature sector of the market, but new product developments boosted sales in 2001. |
| At a global level, there are concerns that demand for fish is outstripping supply. In the UK, stocks of white fish, in particular, are poor, and the UK's fishing sector has gone through a period of decommissioning and capacity aggregation to reduce the size of its fleet. |
| FRUIT AND VEGETABLES |
| The fruit and vegetables sector has overtaken meat and meat products as the largest sector of the UK food market, with sales of £12.52bn in 2001. Sales increased by 3.7 percent at current prices in 2001, although there was a 3.8 percent fall in sales in real terms. |
| Processed fruit and vegetables accounted for 40.2 percent of sales in this market in 2001, but the largest sector was fresh produce, accounting for 59.8 percent of sales. The fresh-produce sector is led by sales of fresh vegetables. |
| Demand for fresh potatoes continues to decline as diets become more varied and consumers look for carbohydrates in other foods, such as rice and pasta. Sales of fresh green vegetables, however, continue to grow year-on-year, led by sales of prepacked convenience products. Fresh-fruit sales have increased over the last few years as consumers have increasingly turned to fruit for snacks or light meals. Fresh fruit is the ultimate convenience food. |
| Growth in the processed sector has come mainly from new product developments and the extension of existing lines, including snack varieties of processed fruits, combinations of fruit with other foods, and microwaveable processed vegetable products. |
| DAIRY PRODUCTS, EGGS, OILS AND FATS |
| Retail sales of dairy products, eggs, oils and fats increased by 2.5 percent in 2001, to £8.89bn. Sales increases of between 2.3 percent and 2.9 percent at current prices were achieved each year between 1998 and 2001, but the market witnessed a slight decline in sales in real terms in the latter year, after 3 years of growth. |
| The largest sector of the market is liquid milk. After 3 years of limited growth, or sales declines, value sales of liquid milk increased by 1.8 percent in 2001, boosted by demand for new varieties, such as low-fat, vitamin enriched and organic milk. Sales of cheese, the second-largest sector of the market, increased by 3 percent at current prices in 2001, helped by a wider choice of quality cheeses and some price increases. Value sales of yoghurts and chilled desserts increased by 3.6 percent, with new product developments and new packaging formats continuing to be features of the sector, while the retail market for yellow fats (including butter, margarine and spreads) grew by only 1.2 percent, with strong competition — particularly in the spreads market — weakening prices. Sales of cream and eggs saw little growth in 2001. |
| Fresh milk, cheese and eggs are among the most mature sectors of the UK food market, and household penetration of these products is extremely high. Doorstep deliveries of milk continue to fall as supermarkets take an increasing share of sales. |
| BREAD, CAKES, BISCUITS AND CEREALS |
| Consumer expenditure on bread, cakes, biscuits and cereals totalled £8.96bn in 2001 — a healthy 10.9 percent increase in sales at current prices. Real growth in the market was also impressive: 9.8 percent at constant prices. Even commodity markets such as bread witnessed growth in 2001, with price discounting by the leading supermarkets less evident, and new ranges of speciality breads, organic breads and healthier varieties helping sales. |
| The biscuits market benefited from strong growth in the children's and healthier-eating categories, plus more bite-size and snacking varieties. Increased use of cakes for snacking and in lunchboxes encouraged new products aimed at this market, while relaunches of core brands and new product developments such as snack-sizes, single portions and cereal bars all helped to increase consumer interest in the breakfast-cereals sector. |
| MISCELLANEOUS FOODS |
| The miscellaneous foods chapter of this Review covers a range of products, such as sugar, meal enhancers, ready meals, pizza, soup, rice and pasta, and includes some of the fastest-growing food sectors in recent years. Sales of ready meals, for example, increased by 3.9 percent in 2001, helped by the convenience factor and improved product quality. The markets for meal enhancers, soup and rice also generated sales growth of over 3 percent in 2001. New varieties and improved packaging have helped to reinvigorate the traditional soup market, while rice continues to benefit from the interest in new cuisines and a move away from traditional meals. |
| The one sector of the miscellaneous foods market failing to generate growth is sugar, which is suffering from a long-term decline in sales and per capita consumption. The sugar market was valued at £193m in 2001, unchanged from the figure for 2000. |
| THE FUTURE |
| The value of the retail market for food is forecast to increase slowly over the period to 2006. Any economic downturn is unlikely to have a major impact on sales: expenditure on staple food items suffers less than spending on discretionary items during a period of economic slowdown. However, growth is likely to be stronger in 2002 and 2003 than in the remaining years of the forecast period. |
| The socio-demographic factors driving growth in the market will include the UK's ageing population distribution, an increase in the number of single-person households, and growth in the number of working women. Consequently, convenience foods, snack foods and single servings will be growth areas. Of the core food sectors, bread, biscuits, cakes and cereals, and fish and fish products, are likely to show the strongest growth. |
Text © 2002 Key Note
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Last updated by Amanda Porteous February 2004
