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MP15058

MAPS TRENDS IN FOOD SHOPPING 1998

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Executive Summary

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EXECUTIVE SUMMARY

CHANGES IN DEMAND

The number of households continues to increase dramatically, particularly those with only one person, and the pattern of daily life is consequently changing. Home baking in particular is in decline, partly because of lack of skills and of time, but also because of a change in eating habits with fewer people having afternoon tea as a regular meal.

More working women and less widespread learning of traditional skills are contributory factors in the demise of the family meal. It has even been reported that many modern children need lessons in using cutlery having been brought up on a diet of fast finger-food. Having said that, it may not be so widespread but the art of home cooking is not dead. The proliferation of cookery books and TV programmes is evidence that, apart from any necessity, it is a recreational pastime for some, and one in which many men will share as cooking and shopping are no longer considered to be a woman’s prerogative.

Most households own refrigerators, many own deep-freezes and sales of microwaves have increased at a faster rate than most other consumer durables with 74 percent of households owning one by 1996 compared to just 55 percent in 1992.

One of the most significant characteristics is the divide between households which can be described as short of time but not of money and, conversely, those which are money-poor and time-rich. The former group includes a growing number of people who value their time highly and will pay to save it. This may mean eating out at restaurants and buying from takeaways and the quality, value and choice of such food has changed almost beyond recognition over the last decade.

This improvement is reflected in the retail market. The UK consumer has become more discerning. In buying for home preparation, convenience and speed are major considerations, but no longer at the expense of quality. A whole new sector of produce has developed in response, pioneered by upmarket delicatessens and food halls and, of course, Marks & Spencer, and there is no longer any social shame in serving other than homemade dishes.

Recent Market Assessment research indicates that, in the 12 months to August 1997, 85 percent of consumers had purchased a ready-meal compared to just 62 percent in 1993. Frozen and chilled meals, particularly pasta-based, were the most popular with dry ambient meals the least.

More foreign travel and more sophisticated palates have fuelled the demand for ethnic foods while an increased awareness of the importance to health of a balanced diet, along with animal welfare and environmental concern, has been responsible for the growth in the vegetarian and organic sectors. This is being reflected in the provision of ready-meals and the inclusion of organic ingredients, in particular, will allow premium pricing.

Indubitably the teabag and the sliced loaf were the forerunners in an industry which now routinely provides washed, peeled and chopped vegetables, fruit and salads with accompanying sachets of dressings and sauces; freshly-squeezed fruit juices; fresh stocks, stuffed and marinated meats, gravies and soups and complete meals.

It is perhaps difficult to foresee how food preparation could be made any easier (some might say lazier) now that such items as rindless bacon, boned and diced meat, filleted fish, chopped tomatoes with herbs, easy-to-peel satsumas, seedless grapes, spreadable butter and cook-in sauces are so readily available.

This emphasis on convenience is also evident in packaging. Plastic resealable bottles rather than cartons, reclosable cheese packs, squeezable sauce bottles and ring-pull cans, eggs packed in fours and half-sized loaves are all aimed at fitting in with busy lifestyles and making the final user’s life as easy as possible.

However, the assumption that the shopper wants prepacked vegetables and fruit of uniform size seems to have been misguided as many more are now just as likely to be attracted by tomatoes on the vine and carrots with their leaves still on. Flavour returns as a priority and UK growers are being urged to respond to increased demand for organic vegetables.

Fruit and vegetables are attractive to display, and are almost inevitably shelved near a store’s entrance, so the tendency to prepack has not done the sector justice any more than modern mass production has improved flavours.

CURRENT AND ANTICIPATED VALUES

Total UK consumer expenditure on food during 1997 was £53.2bn and constituted 10.3 percent of total consumer expenditure. In 1992, comparable figures were £45.2bn and 11.8 percent with the subsequent drop in percentage largely attributable to the fact that retail prices of food did not rise as much as other items.

With the move away from mass farming and production towards, for example, organic produce, it is likely that consumer expenditure on food will remain at around 10 percent of total consumer expenditure and is estimated to be £60.3bn by the year 2000.

Own-label products now account for 40 percent of grocery expenditure. This was confined in its early days to low-cost copies of staple supplies like tinned vegetables. There then followed an upsurge in the demand for own-label products, some of which blatantly copied established brand names and packaging thus encouraging the consumer to make direct comparisons, but the rise is leveling out as the consumer stays loyal to brands.

The increased combined buying power of the major supermarkets is enabling them to dictate their requirements, to farmers and other suppliers, as to size, presentation and labelling of produce and goods. The increased costs of this are being borne, to a large extent, by the suppliers who have little choice but to comply.

It should be remembered that this report is only concerned with food shopping so that some figures relating to, for example, company turnovers will be of limited significance including, as they do, expenditure on alcohol and non-food items which are sold to an ever-increasing extent in the multiples.

CHANGES IN SUPPLY

In recent National Opinion Poll (NOP Solutions) research commissioned by Market Assessment, the three important factors cited most frequently when deciding where to do a major grocery shop were low prices, wide choice and location of the store. It is doubtful whether these priorities have changed much over the years but the way in which the industry serves them certainly has.

According to the magazine Marketing Week, at the end of the 1980s supermarket retailers were making operating profits of more than 8 percent, among the highest in the world. This accelerated growth and the pursuit of ever-higher margins could not be sustained in the leaner recessionary years of the early 1990s. Competition intensified, particularly from European discount stores including Netto and Lidl which opened in the UK and who, by their philosophies of limited lines supported by limited marketing, soon captured a 6 percent share of the UK food market. They were forecast to have increased this share to 13 percent by 1996 and UK supermarkets were forced to retaliate by the introduction of their own ‘basic’ lines and so stave off the threat.

The extent and degree of the price wars during which, for example, a tin of baked beans cost as little as 3 pence, is unlikely to be readily repeated although a vigilant eye is kept on competitors’ prices since many operators offer a lowest-price guarantee. As well as refunding differences in price, quality is assured with some offering refunds as well as replacements. Tesco sums the philosophy up with its slogan ‘no quibble.’

The supermarkets are looking to other initiatives, apart from price, to differentiate themselves from their rivals, to improve customer service and provide a one-stop shop. They can be described as having become ‘customer friendly’ with an emphasis on providing such services as self-scanning, helping with packing, designated parking for the disabled and those with young children, customer toilets and rooms for nursing mothers, pharmacies and dry-cleaners and catering facilities.

It took little time to establish the widespread practice of Sunday trading and the supermarkets have further disadvantaged convenience stores, whose long hours were one of their main attractions, as well as independents who would not or could not extend their hours. Twenty-four hour trading is inevitably creeping into more chains and is reported to be proving popular with people from all walks of life.

Credit cards have only recently been widely accepted for food. Now, some supermarkets offer banking and insurance services and most offer a cash-back facility and some form of loyalty scheme. This last also makes available the necessary data to directly target customers with relevant promotions so maximising sales potential.

A 1997 survey from the National Consumer Council (NCC) found that their efforts at improvement have been successful with 36 percent of supermarkets being assessed as ‘very good’ whereas five years before only 28 percent were described thus.

Tesco and Sainsbury’s regularly vie for grocery market leadership with the former the current victor. Safeway and Asda are the next largest with Somerfield, Waitrose and the Co-operative Group other significant contenders.

Marks & Spencer is the present leader in premium ready-meals. It maintains that it is not in competition with the supermarkets, describing itself as ‘selling the gin, not the tonic.’

In addition to improved product presentation, efforts are being made to make the shopping environment less bland, to inject a fun element and make the exercise seem less of a chore. With an increase in the availability of home shopping, consumers need to be encouraged in-store. Magazines, recipes, cookery demonstrations and free tastings are frequently used to put an entertainment slant on promotions.

Brightening up store layout, the publication ‘In-Store Marketing’ mentions Tesco’s Sheffield store which has models of penguins standing on a bridge over the frozen foods sector and wooden Friesian cows in the dairy produce, while Sir Terence Conran’s Bluebird Food Market aims to revitalise the food sector in much the same way as his shops have done for kitchenware.

THE FUTURE

The grocery sector is a mature market, fiercely competitive, where one company’s growth is largely at the expense of another. It is likely that some grocery multiples will continue to expand to the detriment of some of their counterparts and independents, and to further experiment with smaller convenience formats. Further consolidation will be seen.

Differentiation is the key with efforts likely to concentrate on home shopping, loyalty schemes and, quite feasibly in the future, the selling of a complete range of utility services.

Tentative trials have already been undertaken to include polling booths and health centres within the supermarket format.

The Confederation of British Industry’s (CBI) Distributive Trades Survey points to strong sterling causing retailers to increase the proportion of grocery produce from overseas suppliers, which is now at the highest level this decade and set to continue to rise.

Text © 1998 MAPS

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Last updated by Duncan Nottage 5th March 1999