Beyond the cooked meat hype
The cooked meat market seems to have weathered last year’s tough economic climate extremely well, emerging from the darkest recesses of the downturn with renewed vigour and increased sales. However, despite an apparent stabilisation in the market, heavy promotion by the major retailers may have been behind some of the increase in sales and some in the industry fear the situation may be unsustainable.
During 2010, there was an overall rise of 7.2% in sliced cooked meat sales by value year-on-year (Kantar Worldpanel, 52 w/e 21 Feb 2011) with 5.9% more volume being shifted than in 2009. With the top four multiples still accounting for 74% of sales of cooked meat (Kantar Worldpanel, 52 w/e 23 Jan 11, AHDB Monthly Report), heavyweight promotional discounting can make a significant impact on the overall market.
Richard Cullen, research and insight executive at the Agriculture & Horticulture Development Board (AHDB) explains: “There was a deliberate ploy from the retailers to try to get people to trade up to better-quality products from value to standard, and standard to premium. But how stable that is in the long term remains to be seen.”
Chris Tune, category controller for Vion cooked meats, part of Vion Food Group, agrees: “There has been an emergence of strong growth in the top tiers of the market, with the premium sector and
no-added-water sector both doing very well. But the economy is likely to be in fragile condition again this year with the pending cuts. With consumers’ disposable incomes reduced, there will be pressure on that premium sector, so we may see the growth coming back on economy lines.”
Eighteen months ago, it was the middle of the market that was feeling the squeeze and evidence suggested consumers were trading down to value lines. Although this trend slackened over the course of 2010, some processors are finding signs it is beginning to emerge again.
Alan Davies, customer relations manager of Stephens Fresh Foods, agrees: “There’s a gap in the middle of the market. The really exclusive products are no problem — they are selling the same, but there has been a bit of a shift from the upper range to the slightly lower-cost range. So products with a little more water content have become a bit more popular again, after a decline through last year. This suggests people are trying to cut back a bit and be more frugal.”
However, the prognosis is not all doom and gloom. Innovation, which slumped during 2010 as producers concentrated on their sales, seems likely to be back on the table for 2011. Stephens Fresh Foods is only one of a number of producers looking at different ways to diversify and increase their product range. “We’re about to embark on some development work on more premium products,” says Davies. “We particularly want to do some work with flavoured hams, so we are trying to set up links with local producers, as there are a lot of local micro-breweries in the area. We’re trying to get the idea out there that ‘local is cool’.”
Tune agrees: “There is evidence that innovation will become more important – in bringing in new usage occasions and for making other products, such as centre-of-plate products. The snacking sector is also relatively buoyant and Continental meats are doing well.”
The Continental meat market is one sector which has grown in value terms by 8.8% (Kantar Worldpanel) and now accounts for 10.42% of the market. As a growth area, it is perhaps significant that Sainsbury’s is going to relaunch its Continental meats range in August, following good sales and positive feedback for its recently improved Taste the Difference range.
Snacking meat has also seen a year-on-year increase, rising by 16.5% by volume. Producers such as Mattesson’s capitalised on their highly visible Fridge Raiders adverts, introducing spicier flavours to broaden the snacks’ appeal, as well as the UK’s first dipping meat snacks, the Rippa Dippa. However, snacking meat still only accounts for about 2% of the market (Kantar Worldpanel).
Pork saw the biggest increase in sales, rising by 29%, followed by corned beef, which increased in value by 11.9%, although volume only rose by 4%. This highlights one of the major concerns many producers are facing. With the rising price of beef driven by the increased cost of feed, many processors are finding sourcing beef become more and more difficult. Davies explains: “Corned beef is a good example. We’ve seen 30-40% price rises on what should be a value product – but it’s not any longer. Anyone looking to down-grade to a lower cost of meat is going to come unstuck, as even corned beef is feeling it.”
Pressure on production costs
Of all the cooked meats, ham is the most important product and has performed well. It remains the most dominant force, cornering around 54% of the market by both spend and volume. This is largely made up of pre-packed slices. There was an increase year-on-year of 6.7%, taking expenditure to £1,639m. But the slight fall-off in the popularity of sandwiches may start to affect performance as ham is still strongly associated with lunchtime. Kantar Worldpanel research states that 63% of ham’s consumption happens at lunchtime (Pork consumption review, September 2010).
Bpex’s recent hard-hitting report on the crisis facing the UK pig industry also highlights another major area where increasing price pressures are taking a toll. While many producers have worked hard to absorb the rising costs, rather than pass them onto the consumer, it seems unlikely that they will be able to continue to do so, as the impact of transport, energy and feed costs affect both producers and their suppliers.
Tune explains this is not just confined to the pig industry: “There are lots of inflationary pressures on the cost of meat which are reflected in retail prices. Grain price increases are particularly affecting chicken processors as it is a quicker supply chain,” he says.
For now though, the poultry sector has held its position. Chicken is still the most popular cooked meat after ham and turkey, with sales increasing 12.2% in volume last year. Bernard Matthews Farms reports that brand sales are up 11.8%, with its 340g wafer-thin turkey ham packs up 428%, partly due to increased distribution and effective promotion (IRI 12 w/e 19 Feb 2011, Kantar Worldpanel Value 52 w/e 20 Feb 2011). Turkey sandwich meat is growing at 4.8% year-on-year.
Daniel Bracegirdle, cooked meat buyer at Sainsbury’s, notes this significant increase in cooked poultry sales across the market and attributes it to a different marketing approach. “Whereas previously the range was dominated by mini-fillets and very small products, there has been a movement towards larger packs that will feed a family or provide more sandwiches,” he says.
Another reason he identifies for the increase of poultry sales was consumers’ growing awareness of eating healthily. Although the media has been whipping up a storm over recent changes to the government’s guidelines for red and processed meat consumption, it seems consumers are resilient to scaremongering. Richard Cullen of the AHDB confirmed that they had not picked up any changes in consumer habits due to negative press, although he noted healthy eating had been suffering slightly as a result of the recession. “Five-a-day has been going down rather than up, but as we come out of recession, we expect to see that reverse,” he said.
Davies adds: “The more people talk about healthy eating, the more they are likely to buy from a local producer.”
Sarah Chaffey of traditional catering butchers Dorset County Farms has also noticed this shift in consumer awareness: “There are two aspects to healthy eating: people are more conscious in terms of the welfare of the pig, as well as from a dietary point-of-view. Generally, people are more aware of what they eat, they want to know what’s in it and where it comes from and I think that influences what they buy,” she said.
With the growing export market, there are opportunities to export more cooked produce abroad. Davies says: “I think there are more markets out there. In this country, we’re a little bit embarrassed about our food output – we think we’re not as good as everyone else. But we’re producing some really good foods in the UK and we should be proud to move them all over the world.”
Sandwich consumption peaked in 2009, according to Kantar Worldpanel’s research (Pork review, September 2010) but has since fallen off by nearly 3% or 164m occasions, taking it to pre-2008 levels.
As the recession bit, more people made lunches at home but this trend seemed to have slowed slightly as the economy recovered. Sandwiches remain a popular choice in childrens’ lunchboxes, with meat-based sandwiches rising by 7.9% and taking the total to an estimated £2,306m (Mintel’s Children Packed Lunches Market Intelligence Report – UK, December 2010).