Deli Meat, Bacon and Sausages Convenient and versatile, but do consumers make the most of them ? June 2009

Issues in the market Rising food costs are helping to position bacon and sausages as a good value protein source Heavy discounting is holding back value sales growth Own-label dominance in an established market Reduced imports of pig meat into the UK provide more opportunities for UK producers Sausages and bacon move beyond a breakfast staple

Summary Volume sales stall Volume sales of deli meats, sausages and bacon increased by 1% in 2008 before falling an estimated 3% in 2009. Value sales have grown by 5.2% between 2007 and 2009 to reach £3.9 billion Volume sales are set to grow by 2% from 2009 -14, indicating that value growth will increasingly need to come from premiumisation Category sales Suppliers have used price promotions to stimulate extra volume sales of bacon, and manufacturers have sought to add value to the sausage market by widening the premium offer ‘No additives/preservatives’ was a key product claim in the market between 2006 and 2008. Consumers are looking for natural products, and pay more attention to ingredients Consumer Habits As the bulk of sales go through grocery multiples (79%), consumers have a preference for pre-packed cooked meats and sausages compared to the loose or sliced to order option Cooked meats are most likely eaten as part of lunch, while bacon and sausages prove quite popular when eaten as part of a traditional ‘English’ meal

Internal Market Environment Warmer weather forecast for summer 2009 should benefit sausage sales, especially for the barbecue occasion Changing breakfast habits have relegated bacon and sausages to a weekend treat The increased focus on animal welfare ties in with the increased prominence given to the origin of food sold Meat imports have fallen in the UK as the industry recovers from foot and mouth, blue tongue and other diseases

Broader Market Environment The FSA has issued further recommendations for the reduction of fat and salt in certain foods The farming sector has been exposed to recent fluctuations in global commodity feed prices The over-64s who are forecast to grow by just under 13% over the next five years, are key targets for cooked meats as they are most likely eaten at home for lunch. A World Cancer Research Fund report published in 2008 reported that those eating two rashers of bacon and two sausages a day had a 63% higher risk of bowel cancer

Strengths and Weaknesses Deli meats bacon and sausages are versatile and have multiple uses Premium ranges have benefited from consumer concerns about food provenance and the ingredients in their food Cooked meats remain a lunchtime favourite, especially for retired consumers Sausages are a good value protein source, increasingly eaten as part of a main evening meal Appeal amongst all socio-demographic groups A warm summer offers promising opportunities for sausages and deli meats Wide range of products available at different price points Dominated by own-labels, limiting shelf space for brands Constant discounting and promotions can affect consumer’s judgement about product quality Food inflation affecting cost of pig meat World Cancer Research findings claim that processed meat increases the risk of bowel cancer If the swine flu pandemic does not abate, there are fears that consumers may adopt a cautionary approach to pork Bacon and sausages suffer from an unhealthy image due to their salt and fat content respectively Volume sales have stagnated as consumers spend less time (if any) at the breakfast table

Who’s innovating? NPD in processed meats, % by positioning, 2006-08 As consumers increasingly pay greater attention to the food that they eat, they are increasingly looking for additive and preservative-free foods Food manufacturers have been put under increasing pressure to reformulate their food products This is especially the case for deli meats which have been criticised for being too salty Processed meats are dominated by own-label launches, although brands are starting to increase their share of NPD activity Grocery retailers are adding value to the sausages market with launches of premium own- label ranges Source: Mintel GNPD NPD in processed meats, % own-label vs. branded , 2006-08 Source: Mintel GNPD

Market size UK retail volume and value sales of deli meats, bacon and sausages, 2004-14 Source: Mintel Retail value sales of deli meats, sausages and bacon have grown by an estimated 5% in the two years to 2009. However with the effects of inflation removed, the market fell 6% Rising production costs, as well as consumers try to eat a healthy diet have stemmed growth in this market Volume sales are set to stagnate, growing by just two percent from 2009-14, indicating that value growth for this market will increasingly need to come from premiumisation

Segment Performance UK retail value sales of bacon, sausage and delicatessen meats, at constant prices, 2004-14 UK retail volume sales of bacon, sausage and delicatessen meats, 2004-14 Source: Mintel Source: Mintel The bacon market has suffered price deflation as retailers run multiple sales promotions Sausages have moved away from being just a breakfast favourite Delicatessen meats will continue to be the fastest growing segment, increasing by 20% at current prices from 2009-14

Brand Communications x Main monitored media advertising expenditure on deli meats, bacon and sausages 2006-08 x Source: Nielsen Media Research/Mintel Own-label leadership of this category has limited advertising expenditure to a few key brands Kerry Foods dominates advertising expenditure (contributing 37% in 2008) promoting such products as Richmond and Wall’s sausages Below the line marketing activity is also used as an essential promotional tool to drive sales

Channels to market UK retail value sales of delicatessen meats, bacon and sausages, by outlet type, 2006 and 2008 * includes convenience stores, forecourts, farmers’ markets, e-tailing etc Source: Mintel As consumers look to do all their weekly shopping under the same roof, butchers and other specialist retail outlets have seen their share of sales decline “I tend to think that the quality of meat products from a butcher is of higher quality, and I like to think that they would be fresher as well, although it does tend to depend on the butcher.”. 25-34 year-old ABC1 male “I will usually buy sausages and bacon from the supermarket, mainly because it’s cheaper and also because there is not a local butcher in my area.” 25-34 year-old C2DE female

The Consumer – What is eaten at home ‏Types of cooked meats eaten/served at home, March 2009 Base: 871 adults who eat/serve cooked meats Consumers tend to stick to pre-packed cooked meats despite the deli counters offering a wider selection Time pressures when doing the grocery shopping may also mean that consumers are less willing to queue up for cooked meats, preferring to choose from the pre-packed selection Key consumers of pre-packed sliced meats are: Aged 25-44 Socioeconomic group:C1 Children in household aged 5-9 years 4+ people in household Source: Toluna/Mintel

The Consumer - Repertoire analysis ‏ Repertoire of cooked meats, bacon/gammon and sausages eaten/served at home March 2009 Base: 871 adults who eat/serve cooked meats, bacon/gammon and sausages Consumers have a wider choice of cooked meats to choose from, leading to larger repertoires At the lowest level, those eating just one type of cooked meat are most likely to opt for pre-packed ham or pre-packaged poultry meat The choice is more restricted in bacon, thus bacon rashers are the key choice for most consumers Source: Toluna/Mintel

The Consumer – Consumption Motivations ‏ When cooked meats/bacon and gammon/sausages are eaten/served at home, March 2009 Base: 1,000 adults aged 16+ Lunchtime is the most popular occasion for eating cooked meats, most likely in sandwiches “I usually eat deli meats at lunch time, usually in a sandwich or with crackers.” - 45-54 year-old ABC1 female The versatility of sausages and bacon make them a popular ingredient in cooking Sausages are one of the most popular barbecue foods as they are quick and easy to cook, and also a relatively inexpensive option Source: Toluna/Mintel

Consumer Attitudes – Cooked meats ‏ Attitudes towards pre-packed cooked meats and pre-cooked meats available at the deli counter, March 2009 Base: 1,000 adults aged 16+ Consumers perceive products bought from the deli counter to be of better quality than the pre-packed alternatives “You can certainly taste the freshness of meat brought from the deli counter, although it might cost a little bit more.” - 25-34 year-old ABC1 male “Deli counters are usually better, but they have fewer offers so I try the aisle first.” - 35-44 year-old ABC1 male Deli counters offer consumers the option to buy only the amount they need, hence reducing on waste Source: Toluna/Mintel

Consumer Attitudes – Bacon and sausages ‏ Attitudes towards bacon and sausages, March 2009 Base: 1,000 adults aged 16+ The sausages and bacon bought from butchers is felt to be of better quality; however it is seen as a more expensive choice “I tend to find that the butcher bought sausages have a better taste and quality, but store bought ones are a good alternative when looking for that cheaper option.” - 35-44 year-old ABC1 male “I doubt if there is a lot of difference between sausages and bacon bought at a butchers or the supermarket. I guess it does depend on the particular butcher.” - 35-44 year-old C2DE male Just over one in ten consumers have cut down their spend on premium products in order to save money Premium foods have been one of the fastest growth sectors in recent yearx Source: Toluna/Mintel

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