Does the future profit of food lie in the two extremes of premiumisation and low pricing? - UK

Published by: Mintel International Group Ltd.

Published: Aug. 1, 2007 - 133 Pages

Table of Contents

Issues in the Market

Market in Brief

Economy

Impact of the major grocers

The influence of the health trend

Consumers are buying more premium

So, what next

The Economy

Figure 1: PDI and consumer expenditure, 2001-06

Growing number of AB consumers

Figure 2: Changes in socio-economic status, by gender, 2001-06

Future economic prospects

Figure 3: Trends in PDI and consumer expenditure, 2001-11

Greater affluence…for some

Figure 4: Trends in the adult population by socio-economic group, 2001-11

Multiple Retailers

Major grocers dominate the sector

Figure 5: Sales by food retailers, 2001-06

Structure of the grocery market

Figure 6: Trends in market share by retailer type, 2001-06

Growth of private label

Figure 7: Retailer brand coverage

Own label premium is the first step…

Figure 8: Importance of own label ranges to shoppers, May 2006

What does the future hold for the major grocers

Figure 9: Food retailers’ sales, 2001-11

Farmers markets vs the grocers

Future for own label

Premium brands

COD - cheapest on display

Figure 10: Tesco Value lines, 1993-2006

Figure 11: UK retail sales of cheapest on display own-label food and drink, 2001-06

Figure 12: Number of cheapest on display own-label lines by retailer, July 2006

Breakdown of OL foods

Figure 13: UK retail sales of the own-label food and drink ranges, 2001-06

Performance by category

Chilled foods

Figure 14: Estimated own label penetration by selected chilled packaged foods by value, 2002-06

Figure 15: Structure of selected chilled packaged foods markets, 2006

Figure 16: Sales value growth in selected markets, 2005 v 2006

Ambient foods

Figure 17: Estimated own label penetration by selected ambient packaged grocery markets, by value, 2002-06

Figure 18: Structure of selected ambient packaged foods markets, 2006

Bread sales driven by premiumisation

Biscuits

Soups and cooking sauces

Frozen foods

Figure 19: Estimated own label penetration by selected frozen foods markets, by value, 2002-06

Figure 20: Structure of selected frozen foods markets, 2006

The exception to the trend

Figure 21: Premium/economy sales of ice cream

Renaissance in frozen foods?

Others are jumping on the bandwagon

New Product Development

High profile for premium products

Figure 22: Number of new products by positioning claims, 2001-06

Rate of progress slowing

Figure 23: Number of new products with premium and indulgent claims, 2001-06

Economy products

Figure 24: Number of economy new products, 2001-06

Restricted focus for new premium products

Figure 25: Number of new products with premium and indulgent claims by category, 2001-06

Figure 26: New product claims by category, 2006

Latest regulatory investigation

Below cost selling

Price flexing

Future pricing developments

Pricing strategies

EDLP (everyday low pricing)

Below cost selling

Flexible pricing strategy

Healthy Eating

Figure 27: Agreement with lifestyle statements about diet and health, 2002-06

More sophisticated approach to healthy eating

Greater affluence

Salt reduction

Food labelling

Changing attitudes towards food types

Biscuits

Figure 28: Percentage change in sales figures, 2005-06

Functional Foods

Figure 29: UK retail value sales of 'healthy' yogurt, by type, 2002-06

Functional foods for breakfast

Figure 30: Examples of other leading brands, functional ingredients and basic health claims, 2006

Discrepancies in pricing

Figure 31: Typical price differentials on functional foods v standard brands and own label

Environmental/Ethical

Organic growth

Figure 32: UK retail sales of organic food, by type and value, 2002-06

Figure 33: Agreement with the statement “It’s worth paying more for organic food”, 2001-05

The future

Food miles

Farmers markets on the up

Grocers jump on the bandwagon

Supply is difficult, but it can be done

Fairtrade

Figure 34: UK value sales of Fairtrade certified products*, 2002-06

Figure 35: Agreement with the statement ‘I buy Fairtrade products when available’, 2003-07

Grocers are leading the way to a Fairtrade future

But manufacturers are not far behind

What does the future hold?

The Rise of the ‘Foodie’

Increased media coverage

Celebrity chefs

Eating out

Increased appreciation of foreign foods

Consumer - Purchasing Behaviour

Figure 36: Products purchased in different food categories

Figure 37: Propensity to buy premium foods compared to two years ago, June 2007

Figure 38: Propensity to buy economy food items in past two years, June 2007

Consumer - purchasing frequency

Figure 39: Frequency of purchase specific food types, June 2007

Figure 40: Attitudes towards buying food, June 2007

So, who thinks what?

Consumer Typologies

Consumer groups

Posh Noshers (21% of Internet users)

Who are they?

Premium foods galore….

So, what next?

Econophobes (44% of Internet users)

Who are they?

So, what next

Rangers (13% of Internet users)

Who are they?

Downmarkets (21% of Internet users)

Who are they?

Appendix

Consumer research

ACORN

Advertising data

Abbreviations

Consumer attitudes

Figure 41: Agreement with selected lifestyle statements, by demographic sub-group, 2007

Health

Figure 42: Health types

Figure 43: Health types by demographic profile

Propensity to buy premium/economy foods

Figure 44: Propensity to buy premium/economy foods

Figure 45: Propensity to buy premium/economy foods, by demographic sub-group, 2007

Consumer groups

Figure 46: Cluster groups, by demographic sub-group, 2007

Figure 47: Cluster groups by grpcers

Figure 48: Cluster groups by proportion of spend in premium/standard/economy

Figure 49: Cluster groups by propensity to buy premium/economy/standard food more or less than two years ago

Figure 50: Index of premium/economy/standard food usage

Figure 51: Type of products purchased by demographic profile - crisps and snacks

Figure 52: Type of products purchased - breakfast cereals

Figure 53: Type of products purchased by demographic profile - breakfast cereals

Figure 54: Type of products purchased - chocolate

Figure 55: Type of products purchased by demographic profile- chocolate

Figure 56: Type of products purchased - meat

Figure 57: Type of products purchased by demographic profile - meat

Figure 58: Type of products purchased - ready meals

Figure 59: Type of products purchased by demographic profile - ready meals

Figure 60: Type of products purchased - desserts

Figure 61: Type of products purchased by demographic profile - desserts

Figure 62: Type of products purchased by demographic profile - vegetables

Figure 63: Type of products purchased by demographic profile - vegetables

Figure 64: Type of products purchased - yogurts

Figure 65: Type of products purchased by demographic profile- yogurts

Figure 66: Type of products purchased - bread

Figure 67: Type of products purchased by demographic profile - bread

Figure 68: Type of products purchased - pizza

Figure 69: Type of products purchased by demographic profile - pizza

Figure 70: Type of products purchased - pasta

Figure 71: Type of products purchased by demographic profile- pasta

Figure 72: Propensity to buy premium foods compared to two years ago

Figure 73: Propensity to buy premium foods compared to two years ago by demographic profile

Figure 74: Propensity to buy economy food items compared to two years ago

Figure 75: Propensity to buy economy food items compared to two years ago by demographic profile

Figure 76: Frequency of purchase Fairtrade products

Figure 77: Frequency of purchase Fairtrade products by demographic profile

Figure 78: Frequency of purchase organic products

Figure 79: Frequency of purchase organic products by demographic profile

Figure 80: Frequency of purchase locally sourced products

Figure 81: Frequency of purchase locally sourced products by demographic profile

Figure 82: Frequency of purchase functional foods

Figure 83: Frequency of purchase functional foods by demographic profile

Figure 84: Frequency of purchase food from independent retailers (butchers, bakers, fishmongers)

Figure 85: Frequency of purchase food from independent retailers by demographic profile

Figure 86: Frequency of purchase food from supermarket meat, fish or bakery counters

Figure 87: Frequency of purchase food from supermarket meat, fish or bakery counters by demographic profile

Figure 88: Attitudes towards buying food

Figure 89: Attitudes towards buying food by demographic profile

Figure 90: Attitudes towards confidence in food safety in the UK

Figure 91: Attitudes towards confidence in food safety in the UK by demographic profile

Abstract

This report examines the hypothesis that the future profitability of the food market lies in the two extremes of premiumisation and low pricing. It answers crucial industry questions e.g. What is the likely impact of interest rate increases and utility cost hikes on consumer confidence? How will healthy eating trends continue to impact on food quality and price? What impact do trends in new product development have on pricing? Will organic foods remain a premium niche or will they become mainstream?

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