Edible Oils How significant is the rise of the health-conscious connoisseur? August 2009

Issues in the market How price rises affect demand for edible oils Will the increased incidence of cooking at home spare the solid oils market? Can specialty oils move beyond their niche status? Is the healthy eating trend still driving sales of olive oil?

Summary A constant flow of sales A sustained healthy eating agenda Retail value sales of edible oils have grown by 30% between 2007 and 2009 to reach £323 million. With inflation taken into account, real-term value growth stands at 17% Liquid oils dominate value sales, accounting for 96% of the market in 2009 Value sales of vegetable oil are expected to surpass those of olive oil in 2009 as price rises have led consumers to trade down to cheaper varieties of oils A sustained healthy eating agenda Consumers are paying greater attention to the food they eat, and the effect it has on their health As consumers look to maintain a healthy diet, they are cutting down on foods deemed unhealthy Consumers are increasingly looking to emulate the Mediterranean style of diet that includes olive oil as a key feature in many of the dishes Penetration dips During the last four years, penetration of oils used for cooking and in salads has hovered at just over nine in ten main shoppers Heavy volume usage skews towards under-45s, ABs and those at the family lifestage

Internal Market Environment Consumers are increasingly looking to adopt the Mediterranean style of diet that has olive oil as a key feature There has been renewed interest in home cooking and consumers are looking to create some of the complex dishes at home Commodity price rises have pushed up the price of edible oils, and this has benefited standard vegetable oil over olive and speciality oils Consumers are looking to cut down on less healthy foods, especially those deemed high in saturated fats

Broader Market Environment Consumer expenditure has dropped in 2009 as consumers cut back on discretionary spend The AB socio-economic class are the fastest-growing socio-economic group and are the highest-volume consumers of oils The significant consumption of processed food may mean that children are not getting all the nutrients they need from their food In 2003, just over a fifth of men and just under a quarter of women were classed as obese

Strengths and Weaknesses Penetration – olive oil has a penetration of just over 50% of households Home cooking – consumers cooking more meals from scratch at home ensure that the use of edible oils will continue to increase Growth opportunities – health concerns and growth in consumption of salads as people strive to meet the recommended five a day Brand awareness – long-established heritage brands like Filippo Berio have a high level of brand awareness and customer loyalty ‘Foodies’ – growing attention to food and recipes should drive experimentation of different oil Formats – oil sprays enable consumers to control and minimise the amount of oil they use on their food and in cooking Brand loyalty – a fifth of consumers claim to stick to the same brand Unhealthy image – applicable mainly to solid oils, these will face continued decline as consumers move towards healthier liquid oils Price instability – edible oil prices are vulnerable to price fluctuations in global commodity prices Innovation – the category has received minimal innovation in the last few years Marketing support – many of the oil brands receive very limited above-the-line advertising support Declining volumes –Over a third of consumers (36%) are trying to use as little oil as possible Own-label growth – over half of consumers usually buy own-label edible oil products as opposed to just over a quarter who usually buy a branded oil Poor aisle layouts – in-store layouts of edible oils may be limiting the category’s potential as the fixture may be confusing, restricting product trial

Who’s innovating? Top product claims for edible oil launches – UK, January 2006-June 2009 Source: Mintel GNPD Organic and premium products have helped to drive new product innovation, bringing naturalness and healthy eating credentials to the edible oil category Tesco in its Finest range launched a Cretan Extra Virgin Olive Oil in 2009 that is organic-certified, and produced from a protected designation of origin Jamie Oliver’s peppery Italian Extra Virgin Olive oil launched in 2007 retails at £5.99 for 250ml

UK retail value sales of edible oils, 2004-14 Market size UK retail value sales of edible oils, 2004-14 Source: Mintel Value sales of edible oils increased by a little over 30% between 2007 and 2009 to reach an estimated £323 million in 2009 Global demand for vegetable oil has increased as the rapid growth of biofuels is diverting increased amounts of vegetable oils into alternative energy production Significant value sales growth in this market has come from price increases in vegetable and sunflower oil

Segment Performance UK retail value sales of edible oils, by type, 2007-09 Source: Mintel Following several years of market leadership for olive oil, in 2009 value sales of seed oil are expected to surpass those of olive oil as price rises have led consumers to trade down to cheaper standard oils Longer term, olive oil still remains popular as consumers take advantage of its diversity, using it for cooking, on salads and in marinades There is a need to continually inform consumers about the many uses of specialty oils in order to further raise their profile

UK retail value sales of olive oil, by brand, 2007-09 Market Share UK retail value sales of standard oils, by brand, 2007-09 Standard oil sales are dominated by own-labels, with the main brands being Crisp ‘n Dry and Flora from Unilever Despite rising production costs, olive oil manufacturers have not significantly increased their prices Thanks to its Mediterranean origins, leading brand Filippo Berio (Societa per Azione Lucchese Oli e Vini), from Italy, has an established presence in the UK olive oil market Branded manufacturers have very actively used price promotions to drive sales and prevent loss of share to the growing range of own-label products Source: Mintel UK retail value sales of olive oil, by brand, 2007-09 Source: Mintel

Brand Communications and Promotion Main monitored media advertising expenditure on edible oils, 2005-09* Source: Nielsen Media Research/Mintel Edible oils have received minimal above-the-line support in recent years The dominant medium used for advertising oils was press, including food and lifestyle titles and supermarket customer magazines RH Amar has been the leading advertiser in support of the Filippo Berio brand To counter the threat of own-label eroding their share, branded manufacturers need to inform consumers of their brands’ USPs

The Consumer – Usage of Edible Oils ‏Frequency of using oils for cooking and in salads, 2004-08 Base: main shopper/all users of oils for cooking and salads aged 15+ Overall penetration of oils used for cooking and in salads has remained at around nine in ten households However, frequency of use is increasing and more of these users are using cooking oils at least once a day As consumers pay greater attention to the food they eat, they may look to cut down their oil consumption for health reasons “Over the last 18 months, I have stopped deep fat frying any foods. I will use alternative methods eg oven, shallow fry, George Foreman grill etc.” - 45-54-year-old ABC1 male “I have started to use as little oil as possible for health reasons.” - 35-44-year-old C2DE male Source: Toluna/Mintel

The Consumer - Types of Oils Used and Attitudes Consumers were asked “Which, if any, of these cooking oils/salad oils have you bought to use at home in the last 12 months?” Cooking oils/salad oils bought to use at home in the last 12 months, March 2009 Base: 1,000 internet users aged 16+ The health attributes claimed for the typical Mediterranean diet have made olive oil a popular choice, especially amongst more affluent consumers living in London and the South East Vegetable and sunflower oils share a relatively less affluent C2 consumer base who interchange between both oil types depending on price Stir-frying is the most popular use for oil, with eight in ten people cooking stir-fries Own-label oils are the choice of over half of consumers while three in ten choose the cheapest product “I only use extra virgin olive oil low-fat spray, I use it for all types of frying, which mainly consists of stir-fries.” - 35-44-year-old ABC1 female Source: Toluna/Mintel

The Consumer – Broadening consumer’s repertoires ‏ Repertoire of cooking oils/salad oils bought to use at home in the last 12 months, March 2009 Base: 1,000 adults aged 16+ The key demographics of those buying just one type of oil are: aged 45-54 DE and relatively low household income live in the North and Scotland live alone shop mainly in Morrisons. By contrast, the key demographics of those buying five or more types of oil are: aged 35-44 AB and high household income live in London two-person household read broadsheet newspapers and shop A quarter of consumers are adventurous enough to be using four or more types of oil, offering suppliers the challenge of broadening consumers’ repertoires of oil Source: Toluna/Mintel

The Consumer – Multipurpose oil uses ‏ Consumers were then asked: “For which of the following purposes do you use cooking oils/salad oils?” Base: 958 internet users aged 16+ who use edible oils Source: Toluna/Mintel Olive oil is first choice for use in marinades, salad dressings and for dips (probably mixed with balsamic vinegar and other herbs and spices) These dishes typify the classic Mediterranean diet Edible oils are used for cooking stir-fries by about four fifths of consumers as it is a quick meal solution that requires minimal cooking skills

The Consumer – Target Groups for Edible Oils ‏ Consumer target groups for edible oils, March 2009 Base: 958 internet users aged 16+ who use edible oils Own-label Value Seekers (34% of sample) The key characteristic of these consumers is that they buy the cheapest oil on sale, taking advantage of special offers and happily buying own-label. Own-label Oil Reducers (23% of sample) These consumers are health-conscious and use as little oil as possible in their cooking. They are also keen on supermarket own-label products Healthy Oils (13% of sample) These consumers are brand-conscious and also try to use as little oil as possible in their cooking for health reasons. Unlike the other consumer groups, they also pay attention to the sourcing of their oil Branded Loyalists (30% of sample) These consumers are loyal to brands and usually stick to the same brand once they find one they like Source: Toluna/Mintel

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