Winners and losers in chilled food boom

Eurofood, Feb 3, 2000

Between 1994 and 1998, the UK chilled convenience food sector doubled by size to almost 2.9bn [pounds sterling] (??4.6bn), and is forecast to exceed 4bn [pounds sterling] by 2002. The development is informed by two of the food sector's primary consumer trends -- time and gratification. Consumers are increasingly reluctant to spend time preparing food, and are willing to pay a premium to buy part-prepared dishes. However, they also look for tasty, high quality food, and many feel they are more likely to find this in the chill cabinet than in the frozen section. Food safety concerns are also perceived to be less of an issue for chilled products than for ambient or frozen goods. A new report by Retail Intelligence suggests that ready meals will be the main drivers of growth, with sales expected to soar by 70% in the 1998-2000 period.

The report claims that the multiple grocers -- spearheaded of course by Tesco and Sainsbury -- have been well placed to benefit from this sea change. Their growth in these areas has been given a tangible boost by their moves to establish a town centre presence, such as the Sainsbury Central format. Tesco now has 36 Metro and over a dozen Express forecourt stores.

M&S IN TROUBLE?

Perennial high street favourite Marks & Spencer, on the other hand, has lost some ground to the supermarkets, with food sales up by just 15% between 1995 and 1999. While it remains the leader in the chilled convenience food sector, its lead is shortening all the time, and it risks being overtaken by the leading multiples. Marks & Spencer traditionally benefited heavily from impulse purchases made by customers drawn by the core clothing section, but with that section undergoing a slump, such `passing trade' is on the wane.

While Marks & Spencer remains a heavyweight in the market, and is indeed the leader in the huge ready meals sector (44%), as well as dressed and snack salads (29%), sandwiches (27%) and quiches (23%), Retail Intelligence analyst Nick Wall is sceptical that the group can reverse the steady erosion of what was historically a dominant position.

NEW CHAIRMAN - NEW IDEAS?

Can new chairman Luc Vandevelde prove otherwise? It is perhaps fortuitous that the new man at M&S comes from a food retail background rather than clothing, and as such is likely to bring new ideas for stimulating innovation and sales in the food sector.

1998 sales of chilled convenience foods by retailer (%)

Marks & Spencer    23.3
Sainsbury          21.0
Tesco              20.4
ASDA                8.5
Safeway             7.2
Waitrose            3.8
Others             15.6

Total             100.0

Source: Retail Intelligence

Forecast sales of chilled convenience foods (m [pounds sterling])

                       1999    2002

Ready meals             780   1 130
Pizzas(1)               178     205
Pies, pasties           462     515
Quiches                 120     145
Sandwiches(2)           485     665
Dressed salads(3)       268     322
Dips(4)                  85     109
Soup                     76     110
Pasta                    92     131
Sauces                   63      93
Cheese snacks            82     142
Dairy desserts          284     331
Non-dairy desserts      229     295

Total                 3 204   4 193

Source: Retail Intelligence Notes: (1) Includes pre-packed sales only (2) Refers to sales though multiples only (3) Includes pre-packed and deli counter sales (4) Includes savoury and Greek dips

"Chilled Convenience Food in the UK" Price 675 [pounds sterling]. Contact: Nicholas Wall, Retail Intelligence. Phone: 44 171 8143712. Fax: 44 171 6969004. E-mail: nwall@cior.com