Meat-free food December 2010

Issues in the market Three in five UK adults now eat meat-free food, according to Mintel’s consumer research. However, only 6% of adults identify themselves as vegetarians, this share remaining broadly stagnant in recent years. Demand from ‘omnivores’ who eat both meat and meat-free foods, has been a key factor supporting underlying growth. Mintel estimates that the meat-free market posted growth of 18% over 2005-10 period, to £553 million. Going forward, the market looks set to benefit from the projected growth in the number of ABs and 25-34-year-olds, both keen users of meat-free foods. Against this background, Mintel expects the market to grow to a total of £673 million in 2015, with the best and worst case forecasts taking the value to £735 million (best case) and £611 million (worst case) in 2015. Key themes How has the meat-free food market and its different segments performed in the recession? What are the key drivers and dampeners to eating meat-free food? How do the attitudes to meat-free food differ between demographic groups? © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Omnivores support meat-free market Uptake by meat-eaters drives demand The number of vegetarians has fluctuated at around 6% of adults since the turn of the millennium. Meanwhile, around 13% of adults tend to avoid meat, these two groups making up the core market for meat-free foods. However, uptake of meat-free foods by people who also eat meat, some 58% of adults, has become an important factor fuelling demand. Health concerns trump the environment Various bodies have promoted lower meat consumption as a way to pursue environmental sustainability in recent years. However, health concerns appear to play a greater role in encouraging consumers to cut back on meat, according to consumer research. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Growth of ABs and 25-34-year-olds bodes well for the market Real consumer spending growth is expected to return into positive territory in 2011. However, the recovery remains fragile and consumers are expected to continue to seek out good value for money. The projected growth in the number of 25- 34-year-olds, key users of meat-free foods, over 2010-15 is good news for the market. The rising number of over-55s, the least likely to eat meat-free food, looks set to dampen growth. The expected growth in the number of ABs bodes well for the market. They are the group most likely to eat meat-free food and to want to cut back on meat, fish and poultry. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Strengths & Weaknesses Half of adults would consider meat- free foods, if deemed exciting or tasty in their own right, signalling strong mainstream potential. Meat-free foods could appeal to the 13% of adults who would like to cut back on meat, fish and poultry. One in five adults who eat meat-free foods choose them to save money, the market standing to benefit if consumers remain cautious. Better availability would encourage three in ten adults to eat vegetarian or meat-free products more. The expected growth in the number of top users of meat-free foods, ABs and 25-34-year-olds bodes well for the market. One in three consumers have tried meat-free foods or meat substitutes and been put off by the experience. Nearly two in five adults have never thought of buying meat-free foods or meat substitutes. With few brands able and willing to invest in advertising, ad spend on the market remains low, limiting its mainstream visibility. Half of consumers are put off by meat substitutes by the taste or artificial image of them. The projected rapid in the number of over-55s poses a challenge for the market, this group being the most likely to never eat meat-free foods. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

High protein claims and new ingredients spice up NPD Branded operators accounted for two in three new launches in 2010, thanks largely to activity by Premier Foods. The absence of additives and preservatives and environmentally-friendly packaging rank among top claims in meat-free, in line with trends in the broader food market Meanwhile, the high-protein claim has gained ground rapidly in recent years. New products stand to offer greater variety and convenience than traditional sources of protein. Individual launches show innovation in new ingredients (such as oat and lentil, tempeh and quinoa) and new food segments, adding variety to the market. Some of the leading brands also appear to be adopting transparent packaging, potentially lowering barriers to trial. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Own-label leads the meat-free market Manufacturers’ shares in meat-free foods, 2009 Own-label captures over half of the spending on meat-free food. In addition to vegetarian ranges, own- label enjoys a strong presence across main-stream categories that feature meat-free variants, such as ready meals. Premier Foods continues to hold an unassailable lead in the meat-free market through Quorn, now enjoying sales in the region of £120 million. Its other brand, Cauldron, contributes on a much smaller scale. The rest of the market remains fragmented, most players commanding shares in the market of less than 5% each. Some of the smaller brands, like Linda McCartney owned by Hain Celestial, have reported rapid growth in recent years. *Irish Food Processors acquired the Dalepak arm from Northern Foods in August 2010. Source: Mintel © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Ready meals regain ground from ingredients Value sales of meat-free foods, by type, 2010 The growth in scratch-cooking in the recession put pressure on added value products like ready meals, boosting demand for ingredients. This trend reversed in 2010, helped by improving consumer sentiment and new launches from leading brands. The snack segment has enjoyed robust growth in recent years, benefiting from new launches by leading brands. Burgers and sausages are among the longest-established products in the market, and are slowly losing share to products with lower penetration. The chilled segment captures around 70% of meat-free food sales, in line with the wider consumer preference for chilled over frozen. The frozen category gained popularity in the recession thanks to its strong value image and a no waste proposition, chilled regaining ground rapidly in 2010. Source: Symphony IRI/Mintel © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Meat-free foods forecast to reach £673 million in 2015 UK retail value sales of meat free food, 2005-15 Source: Mintel The fan chart illustrates the probability of various outcomes for the market value of meat- free foods over the next five years, from the best to worst case forecasts. The best and worst case forecasts take the value of meat-free foods from an expected £553 million in 2010 to £735 billion (best case) and £611 million (worst case) in 2015. Based on the projected rapid growth in key user groups, such as ABs and 25-34-year- olds, Mintel expects the market to grow to a total of £673 million in 2015. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

New occasions and omnivores have supported growth The meat-free market posted estimated growth of 18% over the period 2005-10, to £553 million. The number of vegetarians has broadly stagnated in recent years, uptake by omnivores and new product development supporting growth. Broader consumer trends have contributed to driving the interest in meat-free food, with health concerns typically ranking high, as discussed later. New product development has supported growth by expanding the category to cater for new occasions, to fuel higher spending among users. The market has benefited from the pressure on consumer incomes, one in five people who eat meat-free food reporting to do so to save money. Like the broader food market, the meat-free segment has been affected by food inflation, fuelling value growth in 2009, partly offset by switching down. Premier Foods' ongoing investment in advertising to support Quorn and the Meat-free Mondays campaign among others have also played a role in building visibility for the category as a whole. Against the strong comparisons in 2009, growth slowed noticeably in 2010. © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Three in five adults eat meat-free Consumption of vegetarian/meat-free food, by type, July 2010  Base: 1,000 internet users aged 16+ Three in five adults eat meat-free foods, signalling a broad appeal outside the 6% of adults who classify themselves as vegetarians. However, only one in three adults eats meat-free food at least once a fortnight, suggesting demand remains biased towards core users. Women, under-35s, students and ABC1s come across as the most likely to eat meat-free food. 25-34-year-olds, students and ABs are the most likely ‘heavy users’. Sausages, burgers and ‘meat’ balls top the list, helped by their image as quick and easy meal solutions. Mince has benefited from high-profile campaigns promoting Quorn mince as a healthy alternative to beef mince. Source: Toluna/Mintel © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Interest in variety and health fuel demand for meat-free Reasons for eating vegetarian/meat-free foods, July 2010 Base: 606 internet users aged 16+ who eat meat-free food The importance of variety and taste as reasons for choosing meat-free underlines the need for these foods to deliver on the culinary front. Dishes drawing inspiration from ethnic, traditionally meat-free cuisines could be well positioned to tap into this interest. Delivering on overall ‘healthiness’ could benefit these foods, given the high ranking of health benefit and wanting a lighter meal as reasons for eating meat-free. Ethical and environmental considerations only drive the meat- free choice of a minority of consumers, despite high media visibility. Source: Toluna/Mintel © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Meat-free must deliver on taste to leverage interest Attitudes towards eating meat vs. meat-free food, July 2010 Base: 1,000 internet users aged 16+ The data suggest considerable openness to meat-free foods, as half of adults choose these on a whim. It also underlines the importance for meat-free foods of delivering on culinary grounds to take advantage of the openness. Media coverage promoting cutting back on meat has impacted only a minority of adults. However, meat-free foods look well-positioned to cater for the one in eight who would like to do so. Meat enjoys a strong image as nutritious and enjoyable, particularly among the over-55s and Ds. Source: Toluna/Mintel © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Greater variety could drive demand Attitudes towards meat substitutes and vegetarian food, July 2010 Base: 1,000 internet users aged 16+ Supply has potential to drive demand in meat-free, as 29% say that greater variety would encourage them to eat meat-free foods more. Heavy users are the most likely to see greater variety as driving uptake. A large minority see vegetarian foods at grocery stores as often bland, or unhealthy. These findings indicate that meat-free foods are underperforming in areas identified above as key to usage. Being artificial or processed is the top issue putting people off meat substitutes, their taste standing close behind. These views are held both by non- users and many who eat meat-free food. Source: Toluna/Mintel © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

One in five are positive about meat-free Target groups, July 2010 Base: 1,000 internet users aged 16+ A positive attitude towards meat-free and vegetarian food differentiates the Veg-lovers. These one in five adults thus make up the core audience for new products and varieties in the market. One in four adults come across as adventurous and focused on the taste of food. Dishes that deliver exciting, new culinary experiences could help meat-free foods appeal to them. The Traditionalists come across as a challenging target, given negative attitudes towards meat substitutes. They are the most likely to have been put off by previous experiences and to choose traditional recipes. One in three consumers stand out as Meat- lovers, suspicious of vegetarian food and seeing little need to cut back on meat. The bias towards lower-income households is likely to make this an unprofitable group to target. Source: Toluna/Mintel © 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Kiti Soininen Your contact Senior Food Analyst mintel.com fax: +44 20 7606 5932 email: ksoininen@mintel.com mintel.com