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

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