Recession Proofing your NPD. Research Presentation Recession Proofing your NPD Food and Drink...

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

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

Section 1

The UK marketfor food & drink

Consumer TrendsKEY DRIVERS

POPULATION ￭ AFFLUENCE•Lifestyles

•Food choices: convenience, wellness, eating out, etc...

UK: Population Growth1995 to 2010, millions of people

Source: Eurostat, Government projections.

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

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.

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.

Volume versus Value GrowthBY SELECTED SECTOR, 2002 - 2007

volume value

Source: RTS database.

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!

Section 2

Market Pressures

Internal Pressures

￭ Within this relatively static volume market, rising values have given us the ability to continue to develop.

Internal Pressures￭ This, in turn, has enabled the sales of:

- Organics

- Fairtrade

- Free-range

- Wellness

- Snacking

- Ready Meals

- Convenience

- Indulgence

- etc., etc.

Trends v OtherVOLUME MODEL

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-

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)

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

External Pressures￭ Increasing energy costs

￭ Rising inflation

￭ Downturn in the housing market

￭ Low income growth

￭ Growing unemployment

￭ Higher interest rates

￭ Slowing economic growth

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

External Pressures EFFECTS

￭ Cutting down on travel

￭ Focus on wastage

- Using up food

- ‘Careful’ purchasing

External Pressures

Food & Drink Food & Drink Spend £Spend £

Low income growthIncreasing

energy costs

Downturn in the

housing market

Rising inflation

Higher interest ratesGrowing

unemployment

= 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

Section 3

Consumer Vulnerability

￭ Volumes

￭ Values

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.

...as Value COMES UNDER PRESSURE

￭ Values (expenditure), on the other hand, will come under pressure.

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

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...

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

Seriously Affected

￭ Senior Citizens

￭ Producers

￭ Hard-pressed Families

￭ Have-nots

Affected

￭ Settled Suburbans

￭ Nest Builders

￭ Urban Adventures

￭ Country Life

Relatively Unaffected

￭ Affluent Achievers

￭ Thriving Greys

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

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.

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

The Vulnerability Map

￭ The RTS vulnerability map has been designed to start the thought processes accordingly....

Section 5

Vulnerability Map

SausagesBacon& ham

Frozenmeals

Chilled meals

Sandwiches

Sweetbiscuits

Cerealbars

Breadspreads

Cheese

Freshsoup

Cookingsauces

RiceFairtrade

Organic

Crisps

Volume

Declining Volume/Declining Value

Increasing Volume/Increasing Value

Restaurants

SausagesBacon& ham

Frozenmeals

Chilled meals

Sweetbiscuits

Cereal bars

Breadspreads

Cheese

Freshsoup

Cookingsauces

RiceFairtrade

Organic

Crisps

Volume

Declining Volume/Declining Value

Increasing Volume/Increasing Value

Market Reports Custom Research

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Recession Proofingyour NPD

Recession Proofing your NPD. Research Presentation Recession Proofing your NPD Food and Drink...

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