Chasing the big cheese
Meat processing company Vion has had a difficult 18 months. The loss of 180 jobs followed a fire in the cooked ham section at its Haverhill plant, which itself came after a profits fall of 57% in May. And although some of it can be put down to bad luck, there's a definite pattern emerging too. Vion managing director sliced cooked meats Andy Hills says that shedding his workforce is happening "against a backdrop of an increasingly competitive marketplace" in which "a restructuring of operations, and a programme of investment is being implemented".
Vion in fact is not alone in feeling the results of a difficult cooked meats market. Across the sector volumes are down by 1.7% (Kantar, 21 February) with value creeping up by 0.4%. Five years previously, cooked meats had increased by almost a quarter on 2000 levels, driving sales up to £1.7bn (Mintel), and leading most of the growth in the meat industry and gaining plaudits for it. Now the picture is somewhat different.
However, according to Richard Cullen of the Agriculture & Horticulture Development Board (AHDB), things are not quite as bad as they look. "Volumes have hit because of pack sizes instead of filling packs with 10 slices of ham, supermarket buyers have been using eight slices instead. Although the pack sizes have reduced, it is unlikely that consumers will have noticed, and will not be buying any more packs as a result," he says. "If you look at volumes in isolation, it does show a negative picture of the market, when in reality ham is doing well; reduced pack sizes are hampering performance."
Ham takes up 55% of the cooked meats sector, a significant portion, and the fact that eating occasions for ham have gone up by 1.6% suggests the market is in better health than those previous figures imply. On the other hand, people are increasingly using ham on meal occasions: taking packed lunches to work, and staying in rather than going out to restaurants in the evening in a bid to save money. According to Mintel (Sandwiches and Other Lunchtime Foods UK), 71% of consumers are now eating a sandwich at lunch. Cooked meats, in other words, should be booming, whereas the purchase frequency is actually down by 0.3% (Kantar, 21 Feb).
The fact that they are not flying off the shelves is partly because of the cost of raw materials, according to Jack Roberts, marketing director of Forza AW, a major supplier of own-label meat products to Asda. "Price inflation has stopped growth in the meat category. After 10 years of growth, that's why we've ground to a halt." Higher grain prices have also affected what farmers charge for their animals, which has meant that processors have had to increase what they charge retail buyers.
Yet other meats have been hit by similar raw material price hikes and have not dropped to the same extent. Pork sales by volume in the UK rose by 10% and poultry rose by 2% (Bpex Market Update) in 2009. Only lamb showed a significant fall, as an industry with specific problems, outlined in this issue's 'Under Scrutiny' feature.
The success of ham shows how any increase in cooked meat sales tends to cannibalise sales within the sector, rather than attracting consumers from outside. The popularity of recession-style ham has taken sales from the once-strong continental meats market: coming at the expense of Parma ham, salami and prosciutto, previously bought by AB consumers. According to one industry figure, who would not be named: "A few years ago Little Johnny would have ham for his tea, and the husband would take it for his sandwiches. Now little Johnny has the cheaper stuff and hubby 'Taste the Difference'. There has been a definite trading-down, with the performance of products at the top end dampened."
Tesco's two new products Light Choices Wafer Thin Honey Cured Roast Ham with 30% less fat than standard and No Added Water Wafer Thin Honey Roast Ham show that healthy eating has been part of the response to the recession, as well as value packs. Salt and fat limits imposed by the Food Standards Agency have affected the sector, while meat scares have filtered down. It is an ongoing battle to persuade the consumer that cooked, sliced meat is a healthy option. In early March, Kerry Ingredients & Flavours, the experimental arm of Kerry Foods, took a slightly different tack, showing a low-fat pâté concept to delegates at CFIA Rennes, the early stage of a possible major launch "driven by our understanding that our customers increasingly need to work this way, for them to meet the needs of their markets and customers", according to Karl Burkitt, strategic marketing director for Kerry Ingredients & Flavours EMEA. "This is a huge change in the way we work, but it is all about delivering customer-focused innovation."
Yet managing fat and salt in cooked meat is a tough ask for scientists. Ham, Parma ham and salami exist precisely because of the salt and fat that once preserved them, and so stripping them out means not only taking away something of the original character of the meat, but also adding other ingredients as preservatives, adding to potential health concerns.
More tangible reasons exist for an end to the recent growth, however, than 'is it/isn't it healthy?' Returning to that Mintel report of 2005, which celebrated the success of the cooked meats market, we find a line that runs: "The cooked meats market has experienced growing sales, due to the success of branding strategies among the major players. The development of trusted premium brands, as well as effective product segmentation for healthy eating, organics and other aspects, has boosted spending levels." Well, what is noticeable about the past 18 months is precisely the lack of major spending on brands.
Tulip launched a discount Honey Roast ham brand last year, a sensible response to the current recession, but most investment from the company came in above-the-line marketing activity to push its Danepak bacon rasher brand, costing £290,000. And Tulip is not alone: for all companies in the cooked market, new product development on the deli counter fell in the premium sector, as it did in low-/no-fat areas and also in cooked meat products offering ease of use (Mintel).
Bernard Matthews has spent about £500,000 every 12 months for the past three years, but new category management controller Daniel McGuigan is promising a "significant investment step-change" beginning in May. He puts the 19% drop in cooked turkey sales (Kantar, 24 Jan) down to retailer cooked meat fixtures, "which are very ham dominated". McGuigan insists: "We're looking to address the placing of turkey on the edge of the fixtures, along with the fact that other proteins have more profile on-shelf."
However, it is not just the amount spent on brands, nor their positioning, that appears to be counting against cooked meats. More of an issue is their scarcity. Own-label now forms 83% of the market (Mintel) and Anthony Wilson, marketing manager of Mattessons, finds the market very own-label dominated. "In cooked meats we're one of the noisiest players. You have to talk to people, you cannot just rely on pretty packaging."
Which is why they are spending big. Wilson refuses to say how much, but insists the resources for Mattessons are increasing yearly and considering the investment in the brand in 2007 was £5m, it must be significant sums. Kerry Foods, Mattessons owner, has attempted to break through the blanket coverage of own-label. But its money has been targeted in a slightly different way. The 'Fridge Raiders' brand, a series of bite-sized flavoured meat pieces in crisp-sized packets is where the focus lies.
Launched in 2005, Fridge Raiders' worth has risen steeply, up to £20m. They're aimed not at housewives or older couples of cooked meats yore, but younger males, who tend to want not to cook or even think about assembling a sandwich a meat snack is, in that case, ideal. A new TV campaign is about to launch, and associated marketing is on the way.
"From a category perspective we're trying to establish meat snacking as something that people do. Everyone likes to grab a slice of ham and pepperoni, so Fridge Raiders certainly has a place in that branded market," says Wilson.
This points a way to the future in which brands take share from the snacking market, rather than from each other. "Sometimes crisps or chocolate just aren't enough," says Wilson. "And only meat will do". That's the gist of their advertising, and signals a way out of the lunch/light evening meal occasion.
Fridge Raiders in fact are just part of a new approach that places flavour ahead of meat type. Mattessons re-launched its entire range in February on a colour-coded basis, a different colour for each flavour. So rather than putting turkey, ham, beef and chicken in large letters, shoppers are more likely to notice the fact that it's blue for 'Southern Fried', orange for 'Tikka', or yellow for 'Roast'.
"The more we do, the more we encourage people to give more space on shelf for what we are doing," says Wilson, describing this admirable self-perpetuating approach. Wilson wants to "add interest and vibrancy" to the 30-foot of space available for cooked meat on supermarket shelves.
But to reinvent the packet does not get to the heart of the question of interest around cooked meat products. Surveys show cooked meat remains a low-interest purchase, and people tend to stick to the same kind of product within the sector (Mintel) they like a deli counter in a supermarket, but few use them. This means that consumers need to be given the idea that different products matter whether through competitions, skills academies or high-end retailers. "We need to create the excitement that exists around cheese," says Roberts.
Cheese is a good example, with shops such as Marylebone's La Fromagerie as the name suggests existing to sell the milk-based product. The British Cheese Awards, celebrity cheesemakers like former Blur bass player Alex James and books about cheese-and-drink-matching all combine to add a buzz around the dairy sector. And this translates into customers trying out different options, often from the UK.
The cooked meat industry needs all of these, even cooked meat shops experts in selling ham, salami and a range of pâtés. The Spanish capital Madrid, for example, is full of dark, wood-panelled shops where legs of ham hang from the ceiling and people drop in for a glass or two with a few pieces of meat, or take home some attractively wrapped samples. The challenge by no means an impossible one is to recreate something similar in the UK.
Because the picture is not as bad as current figures suggest: growth in the next four years is predicted to be steady, at 5% by volume and 8% by value, not including price rises. It is a more positive outlook than for either bacon or sausages. But this assumes cheese does not make any more inroads. As Roberts says: "In the battle of the sandwich market, cheese is winning out."
And cooked meat companies need to up their game to stop them grabbing any more share.
Turkey category focus
Norfolk turkey company Bernard Matthews has amassed four personnel in its category department, including former Mars executive, Daniel McGuigan, as its new category management controller in order to develop "a strong approach" to the cooked turkey market, according to McGuigan. "The key growth in the cooked meat market is in sandwich meats and the lunch occasion," adds McGuigan. "Consumers are using cooked meats as a substitute for buying sandwiches, and that trend is continuing. Fridge Raiders has driven the snacking element, so we're very keen to drive the turkey consumption message, which fulfils both these opportunities."
Bernard Matthews is the major part of a turkey category that has stumbled a little in recent months, but McGuigan insists that a new marketing spend, "that is really focused on the provenance of Bernard Matthews products, and the healthy attributes of turkey" will set this right. Newly set to launch is a 100g, £1 turkey slice pack with World Cup branding, and aimed at "a younger demographic it has great affordability and novelty value," says McGuigan. And new turkey breast packs with 1% saturated fat have also been brought out in Morrisons. "We want to get them in the right areas in store, and distribute them across the retail market," adds McGuigan.
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