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| CHILLED & FROZEN FOODS |
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| Executive Summary |
| Chilled Foods
The UK chilled foods market was worth an estimated £6bn in 1999, and has achieved a 13% growth since 1995. The major sectors in the market are cheese, yoghurts and chilled desserts, delicatessen meats, yellow fats, chilled ready meals, chilled pizzas, savoury pastry products, dressed and snack salads, cream and accompaniments and other chilled prepared foods. Growth has been driven by a number of factors.
The food market as a whole continued to show rising sales during the recession of the late 1980s and early 1990s. However, the rise in personal disposable income from the mid-1990s onwards, manifested itself in the food market through greater demand for more convenient and better quality foods. Cooking skills are being eroded as fewer people have the time or knowledge to cook dishes from scratch. Conversely, consumer interest in all kinds of food is stronger than ever due to a rise in international travel, a thriving restaurant trade in international cuisines and strong media interest in cookery.
Some sectors have been in a strong position to benefit from the interest in different foods. Ready meals, pizzas and accompaniments, as well as other foods, have been well received, capitalising on consumer desire for better quality, authentic foods which can be swiftly and conveniently cooked in the home. The trend towards snacking and eating ‘on the go’ has also contributed to rising sales of convenient products, including savoury pastries as well as snack salads and single portions of other products.
The more mature sectors of the chilled foods market have seen lower levels of growth. Cheese and yellow fats, as well as delicatessen meats, have experienced stagnating or declining volumes, with value sales driven by added-value products. Competition on more standard products remains intensive. Other eating trends have also shaped developments in the market. The interest in healthy eating has been developed through a number of low-fat and lighter versions of established brands, such as Flora Light and Anchor Half Fat.
The other route taken has been through the development of specific brands such as WeightWatchers from Heinz and St. Ivel Shape. The latest entrants to the field have been retailer own brands such as Sainsbury’s ‘be good to yourself‘ and Marks & Spencer’s ‘count on us’. Retailer own-label products are prominent in all sectors of the chilled foods market.
However, manufacturer brands remain significant in sectors, such as cheese, yellow fats, yoghurts and chilled desserts in particular. The market is likely to continue to grow in the short to medium term, driven by the continued demand for more convenient foods. Sectors likely to show particular growth include ready meals, pizzas and accompaniments, with factors such as the launch of more organic ranges and premium products both adding value to the market. Key Note forecasts that the market will increase by 16.2% over the estimated 1999 value, reaching £6.98bn in 2004.
Frozen Foods Plus
Frozen-food purchases are an important part of most households' weekly grocery shopping trip, and the retail market for frozen foods was valued at an estimated £5.09bn in 2000. Sales growth in 2000 was only 1.9%, with price discounts, buy-one-get-one-free (bogof) promotions, limited new product development, and competition from chilled foods impacting on sales value. However, over the last 5 years, sales growth in the frozen food sector has still outperformed growth in the food market as a whole: between 1996 and 2000, retail food sales increased by only 4.8% at current prices, while frozen food sales grew by 15%.
This report considers nine frozen-food sectors. The largest of these is meat and meat products, accounting for a fifth of all retail sales. The sector performed better than the frozen-food market as a whole in 2000, as did another large sector, poultry and poultry products. The strongest-growing sectors in 2000 in value terms were ready meals, pizzas, and meat-free products, while weak growth was experienced by frozen vegetables. There were sales declines, in value terms, for frozen cakes and desserts, and for frozen potato products. Sales growth in the ice cream sector was close to the market average.
Despite strong competition from the chilled foods sector, the frozen foods sector has maintained steady growth in recent years through the introduction of more convenience products, the development of more premium products in many sectors, and more attention to packaging and design. In 2000, 91% of British households had freezers: a high penetration by European standards. A series of purchases, mergers and restructuring in 1999 and 2000 temporarily placed some limits on new product developments, but towards the end of 2000 and in 2001, new product development activity has been strong.
In the strong growth areas, new product development has been a key feature. In frozen pizzas, for example, new rising pizzas and microwaveable pizzas have increased their popularity, while many consumers have moved to better-quality products in the ready meals sector. Volume sales of potato products increased in 2000, but value sales were weakened by price discounts. Soft ice cream in tubs and many more flavour options have been introduced into the ice cream sector, along with crossover brands from other sectors, notably confectionery.
The next few years should see healthy growth in the retail frozen-food sector as new product developments and new options (such as more organic varieties and quality microwaveable products) increase in importance.
Ice Creams and Frozen Desserts
Ice cream and frozen desserts represent one of the largest packaged grocery sectors. Total retail sales have grown by 16% since 1994, reaching an estimated £1.49bn in 1999.
Ice cream sales have suffered over the past few years owing to poor summer weather, particularly in 1998. However, manufacturers have attempted to deseasonalise the market with the introduction of winter-themed products, and have encouraged year-round sales. Increasing segmentation of the market has occurred, with different products being offered, catering for consumers' specific needs, which have also helped raised consumption levels.
Sales of frozen desserts have benefited from the growing trend towards convenience products, with consumers moving to more luxurious, indulgent desserts, and away from the fruity varieties.
The UK ice cream market is extremely concentrated, and is dominated by three major food companies -- Birds Eye Wall's, Mars UK Ltd, and Nestlé Ice Cream. All three companies have a wide portfolio of brands, and are prominent in their respective market sectors. The dominant player is Birds Eye Wall's, having over 70% of the wrapped impulse sales, and around 25% of take-home sales by value in 1999. Own-label products dominate the frozen desserts sector, while Sara Lee UK Holdings PLC is the largest branded manufacturer, having over 22% of value sales.
The past year has seen a tremendous increase in new product innovation, as well as record promotional and marketing support by the major ice cream manufacturers, in an attempt to revive lost volumes and increase market share. While impulse sales continued to be affected by the weather, the
take-home sector was boosted by the rising sales of adult premium products, especially in multipacks and tubs. In frozen desserts, convenience and indulgence remain the two key factors influencing new product developments, while the healthy desserts sector also remained buoyant.
A significant development in the ice cream market was the recent ban on freezer exclusivity deals, as practised by Birds Eye Wall's, in the impulse sector. Consequently, this will result in increased choice and competition in the market, thus benefiting both consumers and retailers alike.
The future holds many exciting challenges for ice cream and frozen desserts manufacturers. Strong demand for premium-quality convenience foods will ensure further growth in the medium term. Key Note forecasts that by 2004, total sales will reach £1.65bn.
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