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Does the future profit of food lie in the two extremes of premiumisation and low pricing? - UK - August 2007

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

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