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13th January 2014

Hamish Renton, Managing Director

Dairy Foodservice – the forgotten sector?

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Introduction‘Foodservice’ is:

One watch out - regular, reliable and actionable data is harder to come by.

Grocery Retail - £170bnFoodservice - £79.7bn

Out of home Wholesale

Delivered wholesale The cost sector

Sources: Catering Insight, IGD

Similar concepts of pricing and branding as in retail dairy, but applied to a different market.

A large, complex, dynamic and competitive market.

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Foodservice market overview

Chains are growing, with independents

declining

Consumers who eat out are the ones who go

shopping

Overcapacity Eating out

is the new normal

Multiple routes to market

means a complex value chain

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Dairy Food Service Market

UK Foodservice Market£79.7bn

Dairy£6bn

(7.5%)

38.1% Milks

29.3% Cheeses

14.7% Yoghurts

14.6% Butter & Spreads

3.3% Cream

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Dairy Food Service Market

Category Share of category (%) Foodservice category (£000s)

UHT Milk 2.3 135mFresh milk 29.7 1.774bnOther milk 4.1 248mFlavoured milk 2.0 121mCheddar 15.9 956mSoft cheese 1.8 110mOther cheese 11.6 694mYoghurt drinks 3.3 196mYoghurts 11.4 681mButter 7.0 422mSpreads 7.6 456mChilled cream 3.3 199mTotal 100% 6bn

UK Dairy Foodservice Structure2500 groups constitute 40% of the market with 200,000 independents making up the other 60%

Profit sector

Restaurants

Cost Sector

Quick Service Restaurants

Pubs Healthcare, Education, Services

Staff CateringLeisureHotels

Hotel

High Street

Fine Dining

Local

In-store

Food Courts, Malls, Shopping Centers

Coffee shops

Tea rooms

Bakers

Cafeterias

Site basedFood primary function

BurgerChickenPizzaEthnicFish & ChipsBakersSandwich ShopsIce CreamHome Delivery

RetailFood Secondary Function

Garden CentersSandwiches & SnacksForecourtsSupermarketsConvenience StoreNewsagent

Mobile Operators

Pubs

Restaurants

Outdoor EatingBar food

Clubs

Night clubsSocial clubsPrivate member clubs

Full ServiceGuest HouseB&B

Sports

Sports CentresHealth ClubsSports ClubsStadiaSpecialty eg. Racecource

Tourist Attractions

Stately Homes etcMuseumsGalleries

Theme ParksZoos, Safari ParksCinemas, TheatresCasinos, Bingo HallsHoliday CampsTravelOutside Caterers

ContractSelf ManagedFacilities Management

Local AuthoritiesSchools, Colleges, UniversitiesHospitalsNursing HomesSocial ServicesPolicePrisonsArmed Services

FOODSERVICE

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Opportunity channels for dairy

Restaurants QSR Pubs

Hotels Leisure Department Stores

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Typical Dairy Co

Delivered Wholesaler

Cash & Carry

Contract Distributor

Others including

Retail

DirectSupply

1) Dairy Co must choose a route to market 2) Must work with end user to pull demand

Channel choices

Foodservice Operator

(end user)

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Series10

5

10

15

20

25

30

35

40

Cost Sector

Profit Sector

Volu

me

cons

umed

Dairy consumption patternsCost sector

consumption concentrated in the early afternoon

Profit sector consumption

primarily mid- evening

6am – 9am

9am – 10am

10am – 11am

11am - Noon

Noon – 1pm

1pm – 2pm

2pm – 3pm

3pm – 4pm

4pm – 5pm

5pm – 6pm

6pm – 7pm

7pm – 8pm

8pm – 9pm

9pm – 10pm

10pm – 11pm

11pm - Midnigh

t

Midnight –

6am

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18.9%Restaurants

22.5%QSR

13%Pubs

15.7%Hotels

6.7%Leisure

9% Staff Catering

5.8% Health

6.7% Education

1.8% Services

UK Food Service PurchasesSource: Published data, March 2012, Total food service food & drink sales: £13,056m

• Restaurants, QSR and pubs make up over 50% of the market from a dairy perspective.

Food and drink purchases

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Keys to Success

Increasing presence internationally or penetrating into a new market

Sales planning

Wholesale, Delivered Wholesale, Regional Wholesale and Direct supply to selected major chains (QSR, Hotels & Restaurants)

Upweight trade marketing

Establish credibility as a broad based dairy player by working the channels

Insight and category analysis

Establish trade and end user credibility using channel specific research

Branding and packaging

Create a strong brand identity in a complex and competitive market

Export services

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Foodservice Exports

Trade ad

20 kg deli block

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2014 Predictions

Pressure and cost continue to increase

Growth of the lacto free sector

Health concerns grow - popularity of lighter cheeses

Chains will continue to grow with independents declining

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Summary

Dairy companies muststart small and grow.

The value of the UK Hospitality and Foodservice market is

expected to reach £90bn by 2018.

A complex and challenging market.

Lots of opportunities for dairy, particularly in cream,

flavoured cream and butter.

TNS predict that by 2035 the distinction between

foodservice and grocery retail will be meaningless.

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Address: Rockwood House, Parkhill Road, Torquay, Devon, TQ1 2DUPhone: 01803 203387E-mail: info@hamishrenton.com

Twitter: @hamishrenton

Linkedin: Hamish Renton

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