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Recession Proofingyour NPD
Research Presentation
Recession Proofingyour NPDFood and Drink Innovation NetworkJune 2008
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Programme
1.The UK food and drink market
2.Market pressures
3.Consumer vulnerability
4.Product vulnerability
5.The vulnerability map
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Who Are We?■ RTS Resource
■ International food industry
■ Measure, analyse and forecast the market for food, ingredients and packaging
■ Help companies grow and develop business
■ RTS = Research To Strategy
■ Established over 20 years
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Section 1
The UK marketfor food & drink
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Consumer TrendsKEY DRIVERS
POPULATION ■ AFFLUENCE•Lifestyles
•Food choices: convenience, wellness, eating out, etc...
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
UK: Population Growth1995 to 2010, millions of people
Source: Eurostat, Government projections.
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
UK: Population by Age Group1995 to 2010, number of people (000 people)
Source: Eurostat, Government projections.
Population SUMMARY
■ Population drives (volume) food consumption
■ Low birth rates
■ Increasing longevity
■ Immigration
■ Smaller households
■ Total growth +0.4% per year
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
UK: The Market for Food and Drink
VOLUME CONSUMPTION, 2002 - 2007
m tonnes/bn litres 2002 2007p Growth
Food 43.8 44.4 0.2%
Drink 20.1 22.4 2.2%
Total 63.9 66.7 0.9%
Source: RTS Resource from trade statistics and estimates.Notes: p = provisional based on latest available data. Includes retail
and foodservice. Volumes as purchased. Numbers rounded. Growth = calculated annual growth rate.
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
UK: The Market for Food and Drink
CONSUMER VALUES, 2002 - 2007
£bn 2002 2007p Growth
Food £81.8 £99.5 4.0%
Drink £38.9 £47.3 4.0%
Total £120.7 £146.7 4.0%
Source: RTS Resource from trade statistics and estimates.Notes: p = provisional based on latest available data. Includes retail and
foodservice. Values at consumer level. Numbers rounded. Growth = calculated annual growth rate.
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Volume versus Value GrowthBY SELECTED SECTOR, 2002 - 2007
-01%
00%
01%
02%
03%
04%
05%
06%
07%
08%
Fre
sh f
oo
ds
Fis
h
Da
iry
Sn
ack
s
So
ft d
rin
ks
CA
GR
volume value
Source: RTS database.
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Market Fuelled by Affluence
■ Proportion of disposable income spent on food declining (>30% in 1960, 15% today).
■ Affluence has brought demands over and above basic nutrition:
- Convenience
- Safety
- Environmental
- Ethical
- Health and well-being
■ = adding value
■ For 50 years we have been spending a lower proportion of disposable income on food.
■ ⬆ Incomes up■ Food prices down ⬇
■ This situation is now likely to change...
■ ...IS CHANGING!
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Section 2
Market Pressures
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Internal Pressures
■ Within this relatively static volume market, rising values have given us the ability to continue to develop.
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Internal Pressures■ This, in turn, has enabled the sales of:
- Organics
- Fairtrade
- Free-range
- Wellness
- Snacking
- Ready Meals
- Convenience
- Indulgence
- etc., etc.
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Trends v OtherVOLUME MODEL
.000%
25.000%
50.000%
75.000%
100.000%
2002 2003 2004 2005 2006 2007
EthicalHealthy balanceWellnessOn-the-goConvenienceOther
Pressure build-up here hasdissipated into value-
added
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Internal Pressures■ Internal market pressures now
being felt come under the main headings of:
- low market volume growth
- increasing costs
- drives to cut costs
- efforts to reduce spending (by many)
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Market Vulnerability
Low volume growth
Reducing value growth
Consumer cost cutting
Retailer price controls
Rising prices
Soft drinks slowing
Increasing elderly
Immigration
Clean labels
External Pressures
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External Pressures■ Increasing energy costs
■ Rising inflation
■ Downturn in the housing market
■ Low income growth
■ Growing unemployment
■ Higher interest rates
■ Slowing economic growth
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
External Pressures EFFECTS
■ Families cutting down on eating out, going to the theatre, buying clothes and updating household appliances and furniture.
■ Lowest income groups are feeling the pressure most because a greater proportion of their cash goes on food.
■ Some households are switching from the four big supermarket chains to discount stores such as Aldi and Lidl.
■ However, upmarket chains such as Waitrose and Marks & Spencer are continuing to enjoy robust sales. (At the moment!).
Source: Verdict Research
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
External Pressures EFFECTS
■ Cutting down on travel
■ Focus on wastage
- Using up food
- ‘Careful’ purchasing
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
External Pressures
Food & Drink Food & Drink Spend £Spend £
Low income growthIncreasing
energy costs
Downturn in the
housing market
Rising inflation
Higher interest ratesGrowing
unemployment
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
= a market UNDER PRESSURE!
Low volume growth
Reducing value growth
Consumer cost cutting
Retailer price controls
Rising prices
Soft drinks slowing
Increasing elderly
Immigration
Clean labels
Low income growthIncreasing
energy costs
Downturn in the
housing market
Rising inflation
Higher interest ratesGrowing
unemployment
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Section 3
Consumer Vulnerability
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Consumer Vulnerability
■ Volumes
■ Values
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VolumeWILL CONTINUE TO GROW...
■ Total volumes should continue to grow roughly in line with predicted population growth @ 0.4% per year.
■ The key issue will be how that total volume will be derived.
■ We will eat the same amounts, (more or less) but differently.
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...as Value COMES UNDER PRESSURE
■ Values (expenditure), on the other hand, will come under pressure.
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Changing Habits■ Raw potatoes instead of chips
■ Bulk rice rather than Basmati or microwave
■ Bread and fillings instead of prepared sandwiches
■ Organics or Fairtrade may be sacrificed
■ Chicken breasts and sauce instead of a ready meal
■ Eat out less often
■ Raw potatoes instead of chips
■ Bulk rice rather than Basmati or microwave
■ Bread and fillings instead of prepared sandwiches
■ Organics or Fairtrade may be sacrificed
■ Chicken breasts and sauce instead of a ready meal
■ Eat out less often
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Changing Habits■ Volume of food consumption is
maintained
■ There is no apparent sacrifice in food quality
■ But, consumer expenditure will come under pressure as habits change
■ These trends will not be evenly spread...
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Vulnerability by Consumer Type
■ A - Affluent Achievers
■ B - Thriving Greys
■ C - Settled Suburbans
■ D - Nest Builders
■ E - Urban Ventures
NRS Super Profiles Classifications courtesy of National Readership Survey
F - Country Life
G - Senior Citizens
H - Producers
I - Hard-pressed Families
J - Have-nots
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Seriously Affected
■ Senior Citizens
■ Producers
■ Hard-pressed Families
■ Have-nots
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Affected
■ Settled Suburbans
■ Nest Builders
■ Urban Adventures
■ Country Life
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Relatively Unaffected
■ Affluent Achievers
■ Thriving Greys
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Section 4
Product Vulnerability
■ Fairtrade
■ Organics
■ Ready meals
■ Sandwiches (RTE)
VULNERABLE
PRODUCTS
■ Eggs
■ Sausages
■ Burgers
■ Meat cuts
■ Cooking sauces
WINNERS
■ Pizzas
■ Canned fish
■ Pies/pasties
■ Biscuits
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Product Vulnerability
■ Unlike previous recessions, we think it would be wrong this time to all make a mad dash to cut costs (supermarket price war).
■ The average British diet has plenty of “padding” and will be relatively easy this time to save money without sacrificing quality.
■ Therefore, the thoughtful consumer is much more likely to choose alternative products, rather than just cheaper versions.
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
NPD Considerations
1. Don’t just reduce quality
2. Assess where your product sits
3. Rate product vulnerability
4. Re-evaluate NPD - To meet lower value growth and
changing consumer needs
5. Focus NPD on taking market share from competitors
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
The Vulnerability Map
■ The RTS vulnerability map has been designed to start the thought processes accordingly....
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Section 5
Vulnerability Map
SausagesBacon& ham
Frozenmeals
Chilled meals
Pizza
Sandwiches
Sweetbiscuits
Cerealbars
Breadspreads
Cheese
Freshsoup
Cookingsauces
RiceFairtrade
Organic
Crisps
Volume
Valu
e
Declining Volume/Declining Value
Increasing Volume/Increasing Value
(C) Copyright RTS Resource 2008
Restaurants
SausagesBacon& ham
Frozenmeals
Chilled meals
Pizza
Sweetbiscuits
Cereal bars
Breadspreads
Cheese
Freshsoup
Cookingsauces
RiceFairtrade
Organic
Crisps
Volume
Valu
e
Declining Volume/Declining Value
Declining Volume/Declining Value
Increasing Volume/Increasing Value
(C) Copyright RTS Resource 2008
Recession Proofing your NPD www.rts-resource.com Tel +44 (0)1902 422282 |
Market Reports Custom Research
or visit our new website @ www.rts-
resource.com
✓ Market analysis✓ Forecasts✓ Ingredient usage✓ Flavour trends✓ Competitor analysis
Recession Proofingyour NPD