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MP15053

MAPS TRENDS IN FOOD SHOPPING : JUNE 2003

Overview

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This report covers: trends in food shopping, ownership of cars, working women, health issues, eating out, obesity, allergies, childrens' food, snacks, dairy free, organic food, functional food, healthy eating, ethnic food, eating habits, availability of produce, location of home and store, composition of households, ownership of electric appliances, grocery multiples, convenience stores, warehouse clubs, mail order, online shopping, television shopping, markets, farm shops, campaign news, Jamie Oliver, advertising to children, food suitable for diabetics, use of, credit cards, loyalty cards,diet nutrition, honest food campaign, freedom food, fair trade, accusations of profiteering, opening hours, quality assurance, The British Farm Standard, brand loyalty,

Companies covered include: ASDA, Big Food Group, Co-operative Group, Marks and Spencer, Safeway, Sainsbury's Supermarkets, Somerfield, Tesco, Waitrose, Wm Morrison,

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Table of Contents
Executive Summary
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TABLE OF CONTENTS

Executive Summary 7

1. Introduction 9

Background 9

DEFINITION 9

2. Strategic Overview 10

FACTORS INFLUENCING FOOD SHOPPING HABITS 10

Economic Position 10

Availability of Produce 10

Location of Home and Store 10

LIFESTYLES 11

Eating Habits 11

Composition of Households 11

Ownership of Domestic Appliances 12

Table 1: Household Access to Domestic Appliances by Sex ( percent of adults†), 2002 12

Figure 1: Household Access to Domestic Appliances by Sex ( percent of adults†), 2002 12

Ownership of Cars 13

Working Women 13

Time Poor, Money Rich 13

Incidence of Eating Out 13

Health Issues 13

Obesity 13

Allergies 14

Children's Food 14

GROWTH MARKETS 14

Snacks 14

Dairy Free 14

Organic Food 15

Functional Food 15

Healthy Eating 16

Table 2: Consumer Attitudes Towards Healthy Eating ( percent of respondents), 2002 16

Ethnic Food 17

MARKET DYNAMICS AND SEGMENTATION 17

Household Expenditure on Food for Home Consumption 17

Table 3: Total Consumer Expenditure on Food at Current Prices (£m), 1998-2002 18

Table 4: UK Household Consumer Spending on Restaurants, Cafés, etc. at Current Prices (£m and percent), 1998-2002 19

Figure 2: percentage of Total Consumer Expenditure on Food, 1998-2002 19

DISTRIBUTION 20

Grocery Multiples 20

Convenience Stores 20

The High Street 20

Warehouse Clubs 21

HOMESHOPPING 21

Mail Order 21

Online Shopping 21

Television Shopping 22

Markets and Farm Shops 22

Expenditure by Place of Purchase 23

Table 5: Place of Purchase of Selected Foods ( percent of total expenditure), 2001 23

COMPETITIVE STRUCTURE 24

ADVERTISING 25

Main Media Advertising Expenditure 25

Table 6: Main Media Advertising Expenditure by Principal Supermarket and Grocery Chains (£000), Year to December 2002 25

Campaign News 26

Jamie Oliver 26

Voluntary Ban by the Co-op 26

Complaints to the Advertising Standards Authority 26

Advertising to Children 27

Promotions Aimed at Children 27

Challenging Claims 28

Food Suitable for Diabetics 28

5 a Day 28

THE CONSUMER 29

Expenditure 29

By Decile Group 29

Table 7: Average Weekly Household Expenditure on Food and Non-Alcoholic Drinks by Gross Income Decile Group (£ and percent), 2001-2002 29

By Age 29

Table 8: Average Weekly Household Expenditure on Food and Non-Alcoholic Drinks by Age (£), 2001-2002 30

By Day of the Week 30

Table 9: Expenditure on Groceries by Day of the Week ( percent of weekly expenditure), 2001 30

Figure 3: Expenditure on Groceries by Day of the Week ( percent of weekly expenditure), 2001 31

Use of Credit Cards 31

Analysis of Shoppers by Retailer 31

Frequency of Regular Major Grocery Shopping 32

Table 10: Frequency of Regular Major Grocery Shopping ( percent of adults†), 2001-2002 32

Loyalty Cards 32

Legislation 32

Market Forecasts 33

Table 11: Forecast Consumer Expenditure on Food at Current Prices (£m and percent), 2003-2006 34

3. Consumer Purchasing Behaviour 35

Expenditure By Category 35

Table 12: Consumer Expenditure on Food by Sector by Value at Current Prices (£m), 1998-2002 35

HOUSEHOLD PENETRATION OF SELECTED FOODS 36

Table 13: Household Penetration of Selected Foods ( percent of respondents), 2002 36

Figure 4: Household Penetration of Top 5 Foods ( percent of respondents), 2002 37

NATIONAL DIET AND NUTRITION SURVEY 37

ETHICAL PURCHASING 38

Ethical Purchasing Index and Ethical Trading Initiative 38

Fairtrade 38

Honest Food Campaign 39

Freedom Food 39

Place of Purchase 39

Usually Bought From a Supermarket 39

Table 14: Respondents Usually Buying from a Supermarket ( percent), 2002 40

Figure 5: Respondents Usually Buying from a Supermarket ( percent), 2002 40

Usually Bought Elsewhere 40

Table 15: Respondents Usually Buying from Elsewhere ( percent), 2002 41

4. Supplier Issues 42

CONVENIENCE FORMATS 42

ACCUSATIONS OF PROFITEERING 42

OPENING HOURS 43

Quality Assurance 43

The British Farm Standard 43

Brand Loyalty 44

ADVERTISING BUDGETS 44

5. An International Perspective 45

Europe 45

The US 45

ASIA 46

6. PEST Analysis 47

POLITICAL FACTORS 47

ECONOMIC FACTORS 47

SOCIAL FACTORS 48

TECHNOLOGICAL FACTORS 48

7. Consumer Dynamics 50

Introduction 50

Table 16: Factors Influencing Decision Where to Do Weekly Grocery Shopping ( percent of respondents), 2003 50

Consumer Preferences in Food Shopping 51

Wide Range of Choice 51

Low Prices 51

Table 17: Wide Range of Choice and Low Prices ( percent of respondents), 2003 52

Proximity or Location of Retailer 54

Availability of Car Parking and/or Petrol Facilities 54

Table 18: Proximity or Location of Retailer and Availability of Car Parking and/or Petrol Facilities ( percent of respondents), 2003 55

Availability of Cash Machines 57

Promotions and Loyalty Schemes 57

Table 19: Availability of Cash Machines and Promotions and Loyalty Schemes ( percent of respondents), 2003 58

Availability of Recycling Facilities 60

Large and Varied Selection of Organic Goods 60

Table 20: Availability of Recycling Facilities and Large and Varied Selection of Organic Goods, 2003 61

Assistance with Packing 63

On a Public Transport Route 63

Table 21: Assistance with Packing and On a Public Transport Route ( percent of respondents), 2003 64

Other Considerations 66

8. Company Profiles 67

ASDA Group Ltd 67

Corporate Strategy 67

Profitability 67

Table 22: Financial Results for ASDA Group Ltd (£m), Years Ending 7th January 2000, 6th January 2001 and 31st December 2001 67

Big Food Group PLC 68

Corporate Strategy 68

Profitability 68

Table 23: Financial Results for Big Food Group PLC (£m), Years Ending 1st January 2000, 31st March 2001 and 31st March 2002 69

Co-operative Group (CWS) Ltd 69

Corporate Strategy 69

Profitability 70

Table 24: Financial Results for Co-operative Group (CWS) Ltd's Food Retailing Division (£m), Years Ending 31st December 2000, 2001 and 2002 70

Marks and Spencer PLC 70

Corporate Strategy 70

Profitability 70

Table 25: Financial Results for Marks and Spencer PLC (£m), Years Ending 31st March 2000, 31st March 2001 and 30th March 2002 71

Safeway PLC 71

Corporate Strategy 71

Profitability 71

Table 26: Financial Results for Safeway PLC (£m), Years Ending 1st April 2000, 30th March 2001 and 31st March 2002 72

Sainsbury's Supermarkets Ltd 72

Corporate Strategy 72

Profitability 73

Table 27: Financial Results for Sainsbury's Supermarkets Ltd (£m), Years Ending 1st April 2000, 30th March 2001 and 31st March 2002 73

Somerfield PLC 73

Corporate Strategy 73

Profitability 74

Table 28: Financial Results for Somerfield PLC (£m), Years Ending 29th April 2000, 28th April 2001 and 27th April 2002 74

TEsco PLC 75

Corporate Strategy 75

Profitability 75

Table 29: Financial Results for Tesco PLC (£m), Years Ending 26th February 2001, 24th February 2001 and 23rd February 2002 75

Waitrose Ltd 76

Corporate Strategy 76

Profitability 76

Table 30: Financial Results for Waitrose Ltd (£m), Years Ending 29th January 2000, 27th January 2001 and 26th January 2002 76

Wm Morrison Supermarkets PLC 77

Corporate Strategy 77

Profitability 77

Table 31: Financial Results for Wm Morrison Supermarkets PLC (£m), Years Ending 31st January 2000, 4th February 2001 and 3rd February 2002 77

EUROPEAN RetaileRS 78

France 78

Germany 78

9. The Future 79

Resurgence of Convenience formats 79

Effects of demographic changes 79

Move towards locally sourced food 79

Online Selling 80

Outcome of Safeway Sale 80

Market Growth 81

Figure 6: Forecast Consumer Expenditure on Food at Current Prices (£bn), 2003-2006 81

10. Further Sources 82

Associations 82

Publications 83

General Sources 84

Bonnier Information Sources 84

Government Sources 86

Other Sources 86

EXECUTIVE SUMMARY

The origin of modern supermarkets in the UK can be traced back to the beginnings of the Co-operative movement in the 19th century, begun by a group of independent local retailers who joined forces to sell food at affordable prices. The abolition of Resale Price Maintenance in the 1960s set the stage for supermarkets to proliferate and for consumers to benefit from the lower prices encouraged by competition and the timesaving and convenience associated with a 'one-stop' shop.

This growth was, of course, at the expense of smaller independent operators and led to the demise of many high-street shops which were unable to compete on price or extent of choice. Corner shops, which traditionally had an advantage of longer opening hours, suffered too as supermarkets extended their opening times, sometimes opening for 24 hours a day. The days of trudging round a succession of local shops just to buy the ingredients for that day's meal are all but gone, as are the personal service and community feeling associated with shopping in this way.

The principal supermarket chains in the UK are now immensely powerful, so much so that they were the subject of an inquiry by the Competition Commission. The inquiry found that cost increases fell disproportionately on producers and that supermarket buying practices operated to the detriment of suppliers. Supermarkets ostensibly provide the cheap food that UK consumers have come to expect, frequently through the use of 'loss leaders'. Selling goods for less than the price retailers pay their suppliers is illegal in France, Germany, the Republic of Ireland, and Spain, while the practice in the UK has put many UK producers under pressure.

Four chains dominate the marketplace with each one increasing sales largely at the expense of another, but this 'big four' may soon become a `big three' as Tesco, Wal-Mart/ASDA and Sainsbury's stalk an ailing Safeway. The Competition Commission is expected to report its findings of the probable effect of each of the bids by August 2003. Should the smaller Morrisons chain be successful in its bid, it will result in a fourth chain of reasonable size, but, in advance of the result of the Competition Commission's inquiry, it appears Wal-Mart/ASDA, with its deep pockets, is the most likely contender. Any acquisition may well lead to less competition and less choice, to the detriment of the UK shopper.

While the out-of-town superstores still flourish, changing lifestyles are somewhat ironically changing the way many shop. The increase in the number of single households with little need to shop in bulk, increased pressure on leisure time, families eating different foods at different times, and the increasing trend towards snacking have all contributed to a return to top-up shopping.

The grocery multiples have been quick to stake their claim on this market increasing the number of their town- and city-centre shops. Tesco has added the T&S chain to its stable, while the Co-op has just bought the Alldays convenience chain. Even ASDA, traditionally associated with huge out-of-town formats, is planning to open up to 300 small high-street stores selling just fresh produce following successful trials in Bodmin and Walthamstow.

Another major change in shopping habits is the advent of Internet shopping. Although some people will always want to select produce themselves and others may have no idea what they intend buying as they enter a shop, to its converts, online shopping is quick and convenient. Tesco.com claims it is the world's largest Internet grocery retailer with sales of £10m per week at December 2002. However, it is not just the big grocery retailers that are involved as e-commerce offers producers an invaluable route to their customers, knocking out the middleman.

Research commissioned for this report to ascertain which factors people thought influenced their choice of where to shop found that a wide choice of produce was important to more people than were low prices, in a reversal of a similar survey's findings in 1998. Certainly, the UK consumer is not short of choice and there now exist few seasonal limitations thanks to the amount of imported food. Some people, however, object on environmental grounds to the number of 'food miles' travelled by imports and on humanitarian grounds to the fact that many overseas workers are exploited in the production of food, while UK producers and suppliers are bypassed. Such shoppers are encouraged to buy locally and seasonally and the number of farmers' markets has increased dramatically.

In a snapshot of what food is being bought, 99.3 percent of respondents to a BMRB TGI survey ate bread and 93.1 percent baked beans. Pot Noodle, meanwhile, pioneer of the instant hot snack, claims double-digit volume growth year-on-year. Manufacturers have introduced countless new snack products to satiate consumers' apparent desire to snack throughout the day, and preferably while doing something else. Pot Noodle has even found its way onto the Retail Price Index shopping list, updated by the Office for National Statistics yearly, which is a list of the 650 items (not confined to food) most frequently found on the nation's shopping list. Other new appearances in 2003 include takeaway burgers and kebabs. Some would think this a sad reflection of the UK's eating habits.

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Last updated by Amanda Porteous July 2003