Frozen Foods - Brand Licensing

Market Report 2007

22nd Edition July 2007Edited by Samantha Kidd

ISBN 978-1-84729-164-6

Frozen Foods

Frozen Foods Foreword

© Key Note Ltd 2007

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Frozen Foods Contents


Contents

Executive Summary 1

1. Market Definition 2

REPORT COVERAGE.......................................................................................................................2MARKET SECTORS..........................................................................................................................2Meat and Meat Products..................................................................................................................2Poultry and Poultry Products ...........................................................................................................2Fish and Fish Products ......................................................................................................................2Ice Cream...........................................................................................................................................2Ready Meals (Excluding Pizza).........................................................................................................2Potato Products ................................................................................................................................2Cakes and Desserts ...........................................................................................................................3Pizza ..................................................................................................................................................3Vegetables and Fruit (Excluding Potatoes) .....................................................................................3Vegetarian Foods..............................................................................................................................3MARKET TRENDS............................................................................................................................3Poor Image of Frozen Foods ............................................................................................................3Bird Flu Outbreak Hits Sales.............................................................................................................3Company Consolidation Continues .................................................................................................4Healthier Image for Frozen Foods...................................................................................................4ECONOMIC TRENDS.......................................................................................................................4Population.........................................................................................................................................4Table 1: UK Resident Population Estimates by Sex (000), Mid-Years 2002-2006 ............................................................................................................5Gross Domestic Product....................................................................................................................5Table 2: UK Gross Domestic Product at Current and Annual Chain-Linked Prices (£m), 2002-2006 .................................................................................6Inflation.............................................................................................................................................6Table 3: UK Rate of Inflation (%), 2002-2006 ................................................................................7Unemployment .................................................................................................................................7Table 4: Actual Number of Unemployed Persons in the UK (million), 2002-2006 ........................................................................................................7Household Disposable Income.........................................................................................................7Table 5: UK Household Disposable Income Per Capita (£), 2002-2006 ..................................................................................................................................8



MARKET POSITION ........................................................................................................................8The UK...............................................................................................................................................8Table 6: UK Household Expenditure on Frozen Foods and Household Consumption Expenditure on Food and Drink at Current Prices (£m at rsp and %), 2002-2006 .........................................................................................................8Overseas ............................................................................................................................................9

2. Market Size 10

THE TOTAL MARKET....................................................................................................................10Table 7: The Total UK Frozen Foods Market by Value at Current Prices (£m at rsp), 2002-2006 ......................................................................................10Figure 1: The Total UK Frozen Foods Market by Value at Current Prices (£m at rsp), 2002-2006 ......................................................................................11BY MARKET SECTOR....................................................................................................................11Table 8: The Total UK Frozen Foods Market by Sector by Value at Current Prices (£m at rsp and %), 2006 ...................................................................................12Figure 2: The Total UK Frozen Foods Market by Sector by Value at Current Prices (%), 2006 ...........................................................................................................13Meat and Meat Products................................................................................................................13Table 9: The UK Frozen Meat and Meat Products Sector by Valueat Current Prices (£m at rsp and %), 2002-2006 ..........................................................................14Poultry and Poultry Products .........................................................................................................14Table 10: The UK Frozen Poultry and Poultry Products Sector by Value at Current Prices (£m at rsp and %), 2002-2006 ...........................................................14Fish and Fish Products ....................................................................................................................15Table 11: The UK Frozen Fish and Fish Products Sector by Valueat Current Prices (£m at rsp and %), 2002-2006 ..........................................................................15Ice Cream.........................................................................................................................................15Table 12: The UK Ice Cream Sector by Value at Current Prices(£m at rsp and %), 2002-2006 .......................................................................................................16Ready Meals (Excluding Pizza).......................................................................................................16Table 13: The UK Frozen Ready Meals (Excluding Pizza) Sectorby Value at Current Prices (£m at rsp and %), 2002-2006 ...........................................................16Potato Products ..............................................................................................................................17Table 14: The UK Frozen Potato Products Sector by Value at Current Prices (£m at rsp and %), 2002-2006 ..........................................................................17Cakes and Desserts .........................................................................................................................17Table 15: The UK Frozen Cakes and Desserts Sector by Value at Current Prices (£m at rsp and %), 2002-2006 ..........................................................................18Pizza ................................................................................................................................................18Table 16: The UK Frozen Pizza Sector by Value at Current Prices(£m at rsp and %), 2002-2006 .......................................................................................................18Vegetables and Fruit (Excluding Potatoes) ...................................................................................19Table 17: The UK Frozen Vegetables and Fruit (excluding potatoes)Sector by Value at Current Prices (£m at rsp and %), 2002-2006 ...............................................19



Vegetarian Foods............................................................................................................................19Table 18: The UK Frozen Vegetarian Foods Sector by Value at Current Prices (£m at rsp), 2002-2006 ......................................................................................20OVERSEAS TRADE ........................................................................................................................20Meats...............................................................................................................................................20Table 19: UK Imports and Exports of Meat by Type by Value (£m), 2006 ..................................21Poultry .............................................................................................................................................21Table 20: UK Imports and Exports of Poultry by Value (£m), 2005 ............................................21Frozen Fish ......................................................................................................................................21Table 21: UK Imports and Exports of Frozen Fish by Value (£m), 2005 ......................................22

3. Industry Background 23

RECENT HISTORY..........................................................................................................................23NUMBER OF COMPANIES ...........................................................................................................23Table 22: Number of VAT-Based Enterprises Engaged in the Processingand Preserving of Fish and Fish Products, and Potato Products, and inthe Manufacture of Ice Cream by Turnover Sizeband (£000), 2006 ...........................................24EMPLOYMENT ..............................................................................................................................24Table 23: Number of VAT-Based Enterprises Engaged in the Processingand Preserving of Fish and Fish Products, and Potato Products, andin the Manufacture of Ice Cream by Employment Sizeband, 2006 ............................................25REGIONAL VARIATIONS IN THE MARKETPLACE ....................................................................26Table 24: Distribution of Local Units Engaged in the Processingand Preserving of Fish and Fish Products, and Potato Products, and in the Manufacture of Ice Cream by Government Office Region (number of local units), 2006 ...........................................................................................26DISTRIBUTION...............................................................................................................................27Table 25: Distribution of UK VAT-Based Enterprises Engagedin the Storage of Frozen and Refrigerated Goods, 2002-2006 ...................................................28Table 26: Distribution of Local Units Engaged in the Storage of Frozen and Refrigerated Goods by Government Office Region (number and %), 2006 ..........................................................................................28Table 27: Distribution in the Frozen Foods Market by Type of Outlet by Value (%), 2006 ........................................................................................................30HOW ROBUST IS THE MARKET?................................................................................................30Table 28: Number of VAT-Based Enterprises Engaged in the Processingand Preserving of Fish and Fish Products, and Potato Products, andin the Manufacture of Ice Cream by Age of Business, 2006 .......................................................31LEGISLATION .................................................................................................................................31Food Safety Act 1990......................................................................................................................31Quick-Frozen Foodstuffs (England) Regulations 2007 .................................................................32Other Legislation ............................................................................................................................32



KEY TRADE ASSOCIATIONS........................................................................................................32The British Frozen Food Federation ..............................................................................................32Food and Drink Federation............................................................................................................32The Ice Cream Alliance ...................................................................................................................33Other Associations..........................................................................................................................33

4. Competitor Analysis 34

THE MARKETPLACE .....................................................................................................................34MARKET LEADERS........................................................................................................................34Baugur Group (The Big Food Group Ltd)......................................................................................34Bernard Matthews Ltd ...................................................................................................................35Birds Eye Ltd....................................................................................................................................35Christian Salvesen Foods Ltd..........................................................................................................36Findus Ltd........................................................................................................................................37HJ Heinz Company Ltd ...................................................................................................................37Mars UK Ltd ....................................................................................................................................38McCain Foods (GB) Ltd ...................................................................................................................39Northern Foods PLC........................................................................................................................40RHM Frozen Foods Ltd ...................................................................................................................41Richmond Foods PLC ......................................................................................................................42Uniq PLC..........................................................................................................................................42William Jackson & Son Ltd .............................................................................................................43Young’s Bluecrest Seafood Ltd ......................................................................................................44Other Companies............................................................................................................................45OUTSIDE SUPPLIERS.....................................................................................................................45MARKETING ACTIVITY ................................................................................................................46Main Media Advertising Expenditure ...........................................................................................46Table 29: Main Media Advertising Expenditure on Frozen Foods (£000),Years Ending December 2002-2006 ..............................................................................................46Ice Cream and Lollies......................................................................................................................46Table 30: Main Media Advertising Expenditure on Ice Cream and Lollies (£000), Year Ending December 2006 .........................................................................47Frozen Vegetables ..........................................................................................................................47Table 31: Main Media Advertising Expenditure on Frozen Vegetables(£000), Year Ending December 2006 ............................................................................................48Frozen Ready Meals........................................................................................................................48Table 32: Main Media Advertising Expenditure on Frozen Ready Meals(£000), Year Ending December 2006 ............................................................................................49Fresh and Frozen Meat...................................................................................................................49Table 33: Main Media Advertising Expenditure on Fresh and Frozen Meat (£000), Year Ending December 2006 ..............................................................50Frozen Pizza ....................................................................................................................................50Table 34: Main Media Advertising Expenditure on Frozen Pizza (£000),Year Ending December 2006 ........................................................................................................51Fresh and Frozen Fish .....................................................................................................................51



Table 35: Main Media Advertising Expenditure on Fresh and Frozen Fish(£000), Year Ending December 2006 ............................................................................................52Fresh and Frozen Poultry ...............................................................................................................52Table 36: Main Media Advertising Expenditure on Fresh and Frozen Poultry (£000), Year Ending December 2006 ...........................................................52Exhibitions.......................................................................................................................................53Food and Drink Expo......................................................................................................................53InterCool .........................................................................................................................................53International Food and Drinks Exhibition.....................................................................................53

5. Strengths, Weaknesses, Opportunities and Threats 54

STRENGTHS....................................................................................................................................54WEAKNESSES ................................................................................................................................54OPPORTUNITIES............................................................................................................................55THREATS.........................................................................................................................................55

6. Buying Behaviour 56

CONSUMER PENETRATION ........................................................................................................56Table 37: Consumption of Selected Frozen Food Products in the Last 12 Months (% of adults), 2006 ...................................................................................56Table 38: Consumption of Selected Frozen Food Products in the Last 12 Monthsby Sex, Age, Social Grade, Region and Children in Household (% of adults), 2006 .................57HOUSEHOLD EXPENDITURE ON FROZEN FOODS ..................................................................59Table 39: Household Expenditure on Frozen Meat in the Last Month by Sex, Age, Social Grade and Region (% of adults), 2006 .....................................................................60Table 40: Household Expenditure on Frozen Meat in theLast Month by Sex, Age, Social Grade and Region (% of adults), 2006 ........................................................................................................................61Frozen Poultry.................................................................................................................................63Table 41: Household Expenditure on Frozen Poultry in the Last Week by Sex,Age, Social Grade and Region (% of adults), 2006 .....................................................................63

7. Current Issues 65

POLITICS .........................................................................................................................................65Competition Commission’s Inquiry into the UK Grocery Industry...............................................65Food Labelling ................................................................................................................................65GDA or Traffic Light System...........................................................................................................65HEALTH ..........................................................................................................................................66Tighter Rules on Food Advertisements Sought ............................................................................66Poor Perception of Frozen Foods Continues.................................................................................66Birds Eye Reduces Salt Content......................................................................................................67RETAILER DEVELOPMENTS.........................................................................................................67NEW PRODUCT DEVELOPMENT................................................................................................67



CORPORATE ACTIVITY ................................................................................................................68LEGISLATION .................................................................................................................................68Quick-Frozen Foodstuffs (England) Regulations 2007 .................................................................68ENVIRONMENT.............................................................................................................................69Retailers Aim to Become Carbon-Neutral .....................................................................................69

8. The Global Market 70

EUROPE ..........................................................................................................................................70THE US............................................................................................................................................70Table 42: Sales of Frozen Foods in the US by Selected Items ($000 and %), 2006 ....................71JAPAN.............................................................................................................................................71Table 43: Number of Factories Producing Frozen Foods in Japan, 2002-2006 ..........................72Table 44: Production of Frozen Foods in Japan by Volumeand Value (000 tonnes and ¥100m), 2002-2006 ..........................................................................72Table 45: Production of Frozen Foods in Japan by Main Products (000 tonnes and %), 2006 .............................................................................................................73Table 46: Production of Frozen Foods in Japan by Market by Volume (000 tonnes and %), 2002-2006 .................................................................................73Table 47: Production and Imports of Frozen Foods in Japan by Volume (000 tonnes and %), 2002-2006 .................................................................................74Table 48: Per Capita Consumption of Frozen Foods in Japan(kilograms per year), 2002-2006 ...................................................................................................75

9. Forecasts 76

THE ECONOMY.............................................................................................................................76Gross Domestic Product..................................................................................................................76Table 49: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 2007-2011 .......................................................................................................76Population.......................................................................................................................................76Table 50: Forecast UK Resident Population by Sex (000), Mid-Years 2007-2011 ..........................................................................................................77Inflation...........................................................................................................................................77Table 51: Forecast UK Rate of Inflation (%), 2007-2011 .............................................................77Unemployment ...............................................................................................................................78Table 52: Forecast Actual Number of Unemployed Persons in the UK (million), 2007-2011 ......................................................................................................78FORECASTS 2007 TO 2011 ..........................................................................................................78Table 53: The Forecast Total UK Frozen Foods Market by Sector by Valueat Current Prices (£m at rsp), 2007-2011 ......................................................................................79Figure 3: The Forecast Total UK Frozen Foods Market by Sector by Valueat Current Prices (£m at rsp), 2007-2011 ......................................................................................80MARKET GROWTH.......................................................................................................................80Figure 4: Market Growth in the UK Frozen Foods Market by Sector by Valueat Current Prices (£m at rsp), 2002-2011 ......................................................................................81



FUTURE TRENDS ...........................................................................................................................81Change of Image ............................................................................................................................81Sector Consolidation to Continue .................................................................................................82Concerns Over Sodium in Frozen Foods........................................................................................82

10. Company Profiles 83

Birds Eye Ltd....................................................................................................................................84Christian Salvesen PLC ....................................................................................................................86HJ Heinz Company Ltd ...................................................................................................................88Mars UK Ltd ....................................................................................................................................90McCain Foods (GB) Ltd ...................................................................................................................92

11. Consumer Confidence 94

METHODOLOGY...........................................................................................................................94KEY FINDINGS THIS QUARTER...................................................................................................94THE WILLINGNESS TO BORROW ...............................................................................................95Confidence Improves......................................................................................................................95Table A: The Average Amount Consumers Are Willing to Borrow in Orderto Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), February 2006-2007 .......................................................................................95Willingness to Borrow Slips Slightly ..............................................................................................97Table B: The Number of Adults Willing to Borrow in Order to PurchaseExpensive Items (000 and %), February 2006-2007 .....................................................................97SPENDING FROM SAVINGS.........................................................................................................98Slight Increase in Spending from Savings .....................................................................................98Table C: The Average Amount Consumers Are Willing to Spend from Savingsin Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), February 2006-2007 ..............................................................................99Saving Grows in Relative Importance..........................................................................................100Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), February 2006-2007 ...................................................100

12. Further Sources 102

Associations...................................................................................................................................102Government Sources ....................................................................................................................102General Sources ............................................................................................................................103Other Sources................................................................................................................................103Bisnode Sources ............................................................................................................................103



Understanding TGI Data 107

Number, Profile, Penetration.......................................................................................................107Social Grade ..................................................................................................................................108Standard Region ...........................................................................................................................108

Key Note Research 109

The Key Note Range of Reports 110

© Key Note Ltd 2007 1

Frozen Foods Executive Summary

Executive Summary

Retail sales of frozen foods amounted to £5.38bn in 2006, a fall of 0.5% on 2005. Between 2002 and 2006, the market increased by 2.6%.

The frozen foods market, as defined by this Key Note Market Report, is divided into the following ten sectors: meat and meat products; poultry and poultry products; fish and fish products; ice cream; ready meals (excluding pizza); potato products; cakes and desserts; pizza; vegetables and fruit (excluding potatoes); and vegetarian foods. The largest sector of the frozen foods market is meat and meat products, whereas the fastest-growing category since 2002 is fish and fish products. Another sector demonstrating higher market growth is ice cream.

Frozen foods continue to have a ‘cheap and cheerful’ image and this, combined with the deep discounting and buy-one-get-one-free promotions, which are undertaken by retailers on a regular basis, undermines the image of the market. Some of the leading retailers and producers of frozen foods are now attempting to change this perspective by introducing and promoting higher-quality ranges of frozen foods, by undertaking new presentation initiatives and by reviewing their pricing structures.

The UK food industry in general remains vulnerable to food scares. Bernard Matthews, for example, experienced a serious slump in sales, following the H5N1 bird flu outbreak at its turkey farm in Suffolk, with sales of its branded fresh and frozen turkeys estimated to have halved in the weeks following the outbreak in February 2007. It is the second time that British-reared poultry has been affected. In April 2006, more than 30,000 were slaughtered after chickens tested positive for the H7N3 strain at a farm in Norfolk.

Frozen food is a mature market and, because of this, only relatively modest levels of growth are expected up to 2011. The sector could benefit, however, from efforts by manufacturers to improve the health image of their products by removing additives and reducing the fat, sugar and salt content. The new initiatives being planned by both the retailers and producers of frozen foods could also improve the profile of frozen foods and help to attract more shoppers to the freezer cabinets.


Frozen Foods Market Definition

1. Market Definition

REPORT COVERAGE

This Key Note Market Report covers the retail market for frozen foods, including both primary products, such as carcass meat and fish, and further-processed and packaged products. The report only considers retail sales to consumers, and catering sales (through restaurants, etc.) are excluded from the analysis.

MARKET SECTORS

The frozen foods market, as defined by this report, comprises the following sectors:

Meat and Meat Products

The frozen meat and meat products sector includes primary meat cuts and joints, and processed meat products, such as mince, burgers and sausages.

Poultry and Poultry Products

This sector includes whole birds and joints, together with processed poultry products, such as coated steaks.

Fish and Fish Products

Frozen fish and fish products include unprocessed whole fish and fish fillets, which are often frozen at sea. The sector also includes shellfish, smoked fish and processed fish of other kinds, such as breaded and battered products.

Ice Cream

The ice cream sector in this report concentrates on the take-home market rather than on impulse sales and catering bulk-buys, and includes tubs and packs, multipacks and desserts based on ice cream.

Ready Meals (Excluding Pizza)

Included in this sector are ready-to-eat (RTE) meals. These may incorporate products from more than one other subsector in the frozen foods market.

Potato Products

The potato products sector includes frozen chips and other frozen potato products.



Cakes and Desserts

The cakes and desserts sector includes frozen cakes and gateaux, sweet pastry products, cheesecakes, RTE desserts, mousses and yogurts.

Pizza

Included in this sector are frozen pizzas for conventional ovens, as well as those for heating in microwave ovens.

Vegetables and Fruit (Excluding Potatoes)

Frozen vegetables include green vegetables and prepared mixes. More recent product introductions, such as stir-fry mixes, are also covered. Frozen fruit is a minor category in this sector.

Vegetarian Foods

Included here are vegetable-based products, as well as those using meat substitutes, such as Quorn. This sector overlaps with that of ready meals.

MARKET TRENDS

Poor Image of Frozen Foods

Due in part to heavy discounting and the many buy-one-get-one-free promotions in the sector, frozen foods in general have somewhat of a downmarket image in the eyes of some consumers. The low quality of some frozen foods, including some own-brand vegetable lines, helps to reinforce this perception. Both the producers and retailers of frozen foods are hoping to change this view by presenting frozen foods in a more favourable light. To achieve this, however, there will need to be an improvement in quality and higher levels of pricing.

Bird Flu Outbreak Hits Sales

Bernard Matthews is reported to have experienced a ‘disastrous’ slump in sales, following the bird flu outbreak at its turkey farm in Suffolk; supermarket sales of branded fresh and frozen turkeys were estimated to have halved in the weeks following the outbreak in February 2007. In addition to falling sales, Bernard Matthews’ reputation appears to have been badly shaken by the outbreak. It is the second time that British-reared poultry has been affected. In April 2006, more than 30,000 were slaughtered after chickens near Dereham, Norfolk, tested positive for the H7N3 strain.



Company Consolidation Continues

Consolidation and restructuring continues to be a feature of the UK frozen foods markets. This practice was evident during 2006 and culminated in the sale by Unilever of its frozen foods businesses, which included the Birds Eye brand. The frozen foods market is also increasingly cost-driven and, to remain competitive, companies require large-scale, highly efficient production facilities. Because of this, the operators are consolidating their production facilities into larger and more efficient sites, and closing less efficient plants.

Healthier Image for Frozen Foods

Some of the leading frozen food companies are improving the health image of their products. Birds Eye, for example, has reduced the salt content of its range of ready meals and has already met the Food Standards Agency’s (FSA’s) salt content targets for 2010. The company has also taken steps to ensure its meals contain less than 10% fat and has eliminated trans-fats from its ready meals. Health groups have welcomed the move as a step in the right direction, suggesting that the brand has set an example that should be emulated by the rest of the food industry.

ECONOMIC TRENDS

Population

The UK population is growing steadily and, between 2002 and 2006, it increased by 2% to 60.5 million. Population growth on its own is unlikely to have a significant impact on the frozen foods market, although demographic factors, such as the rise in single-person households, could have an impact. Single-person households are also more likely to buy items such as frozen convenience foods and RTE meals, while larger households — and particularly those with children — may place more importance on other types of products such as fish fingers and pizza.



Gross Domestic Product

In general, the UK economy has performed well since 2002, with gross domestic product (GDP) in annual chain-linked terms, rising by 11% to 2006. This relatively strong economic background has encouraged consumers to remain optimistic and therefore aided spending. Much of this increased spending has, however, been on high value-added goods in the food industry. Frozen foods, which are relatively inexpensive, appear to have suffered as a consequence.

Higher economic growth often translates into consumers eating out more frequently or purchasing more takeaway meals, a trend that negatively affects sales of frozen foods. Hence, consumers may buy greater quantities of frozen food during periods of economic downturn.

Table 1: UK Resident Population Estimates by Sex (000), Mid-Years 2002-2006

2002 2003 2004 2005 †2006

Female 30,359 30,446 30,563 30,730 30,864

Male 28,963 29,108 29,271 29,479 29,668

Total 59,322 59,554 59,834 60,209 ‡60,533

% change year-on-year - 0.4 0.5 0.6 0.5

† — taken from Projections Database

‡ — does not sum due to rounding by source

Source: Monthly Digest of Statistics, May 2007, National Statistics website/Projections Database (2004-based projections), Government Actuary’s Department © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)



Inflation

The UK retail price index (RPI) increased to a 5-year high of 3.2% in 2006 and has doubled since 2002. Despite this increase, the retail prices of many frozen foods have failed to keep pace with retail price rises in general, due to intense competition in the grocery retailing sector and the downward pressure on prices this has created. This trend has, in turn, affected the sales and profitability of many of the frozen foods suppliers, and forced some to withdraw from the market.

Table 2: UK Gross Domestic Product at Current and Annual Chain-Linked Prices (£m), 2002-2006

2002 2003 2004 2005 2006

Current prices 1,048,767 1,110,296 1,176,527 1,225,978 1,289,989

% change

year-on-year - 5.9 6.0 4.2 5.2

Annual chain-linked

GDP 1,081,469 1,110,296 1,146,523 1,168,674 1,200,960

% change

year-on-year - 2.7 3.3 1.9 2.8

GDP — gross domestic product

Source: Economic & Labour Market Review, May 2007, National Statistics website © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)



Unemployment

The number of people unemployed in the UK increased to a 4-year high of 940,000 in 2006, although it was still slightly below the level witnessed in 2002. Despite the rise, buying food is a necessity for households and it is unlikely to have any significant impact on frozen food sales.

Household Disposable Income

Household disposable income increased by 3.1% to stand at £13,781 in 2006 and is expected to show a similar level of increase in 2007. This trend has increased the ability of consumers to buy more expensive food items, and is likely to have diverted some expenditure away from frozen food purchases.

Table 3: UK Rate of Inflation (%), 2002-2006

2002 2003 2004 2005 2006

Inflation (%) 1.6 2.9 3.0 2.8 3.2

Percentage point

change year-on-year - 1.3 0.1 -0.2 0.4

Note: inflation is at retail price index (RPI).

Source: Monthly Digest of Statistics, May 2007, National Statistics website © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

Table 4: Actual Number of Unemployed Persons in the UK (million), 2002-2006

2002 2003 2004 2005 2006

Actual number of

claimants (million) 0.95 0.93 0.85 0.86 0.94

% change year-on-year - -2.1 -8.6 1.2 9.3

Source: Monthly Digest of Statistics, May 2007, National Statistics website © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)



MARKET POSITION

The UK

Retail sales of frozen foods account for a steadily decreasing percentage of total household expenditure on food and drink. In 2006, the share slipped to a 5-year low of 7.6%, down from 8% in 2005, and 8.6% in 2002. Household consumption expenditure on food and drink is itself accounting for a declining proportion of total final household consumption expenditure, having fallen from 9.2% in 2002 to 8.9% in 2006. As a consequence, frozen food sales as a percentage of total household consumption expenditure have fallen even further and were down to 0.7% in 2006, compared with 0.8% in 2002.

Table 5: UK Household Disposable Income Per Capita (£), 2002-2006

2002 2003 2004 2005 2006

Household disposable

income (£) 11,952 12,433 12,796 13,364 13,781


Source: Economic & Labour Market Review, May 2007, National Statistics website © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

Table 6: UK Household Expenditure on Frozen Foods and Household Consumption Expenditure on Food and Drink

at Current Prices (£m at rsp and %), 2002-2006

2002 2003 2004 2005 2006

Household expenditure

on frozen foodse 5,243 5,322 5,341 5,405 5,379

Household consumption

expenditure on food

and drink 61,310 63,174 65,521 67,539 70,809

Table continues...



Overseas

The UK, Germany and France are the three largest frozen foods markets in the EU, accounting for more than half of total consumption within the region. The UK is the largest overall market, accounting for more than 20% of sales by volume.

The frozen foods market in the US is estimated to have been worth around $28.1bn (approximately £10bn) in 2006. This would make it, in value terms, almost twice as large as the UK.

...table continued

2002 2003 2004 2005 2006

% of total food and drink

expenditure taken by

frozen foods 8.6 8.4 8.2 8.0 7.6

Total household final

consumption expenditure 664,562 697,160 732,531 760,032 793,322

% of total household final

consumption expenditure

taken by frozen foods 0.8 0.8 0.7 0.7 0.7

rsp — retail selling prices

e — Key Note estimates

Source: Monthly Digest of Statistics April 2007, National Statistics © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)/Projections Database Government Actuary’s Department/Key Note

Table 6: UK Household Expenditure on Frozen Foods and Household Consumption Expenditure on Food and Drink

at Current Prices (£m at rsp and %), 2002-2006


Frozen Foods Market Size

2. Market Size

THE TOTAL MARKET

The value of the retail market for frozen foods is estimated by Key Note to have fallen by 0.5% in 2006 to £5.38bn. The fall is partly due to the ongoing price demands on suppliers from major multiples. The use of frozen foods as a major promotional tool with frequent discounts and buy-one-get-one-free offers is a strategy often employed by the leading retailers, although it has been a major contributing factor to the negative or low growth rates experienced by the industry since 2002.

Despite the fact that the value of the sector overall is down on 2005, growth rates vary quite widely from category to category. For example, some experienced fairly large increases in sales in 2006, while others demonstrated some quite large falls.

Table 7: The Total UK Frozen Foods Market by Value at Current Prices (£m at rsp), 2002-2006

2002 2003 2004 2005 2006

Value (£m) 5,243 5,322 5,341 5,405 5,379

% change year-on-year - 1.5 0.4 1.2 -0.5


Source: Key Note



BY MARKET SECTOR

In 2006, frozen meat and meat products accounted for the largest share of the frozen foods market, followed by poultry and poultry products, and fish and fish products.

Tables 8 to 18 provide a breakdown of sales in the various sectors of the market. Some of these sectors overlap with others. Items such as pastry products, for example, are included across a number of sectors, including meat and poultry products, and desserts.

Figure 1: The Total UK Frozen Foods Market by Value at Current Prices (£m at rsp), 2002-2006


Source: Key Note

5,150

5,200

5,250

5,300

5,350

5,400

5,450

2002 2003 2004 2005 2006



Table 8: The Total UK Frozen Foods Market by Sector by Value at Current Prices (£m at rsp and %), 2006

Value (£m) % of Total

Meat and meat products 1,062 19.7

Poultry and poultry products 740 13.8

Fish and fish products 703 13.1

Ice cream 687 12.8

Ready meals (not pizza) 531 9.9

Potato products 420 7.8

Cakes and desserts 404 7.5

Pizza 331 6.2

Vegetables and fruit (excluding potatoes) 321 6.0

Vegetarian foods 180 3.3

Total 5,379 †100.0


† — does not sum due to rounding

Source: Key Note



Meat and Meat Products

Sales of meat and meat products fell by 4% in 2006 to £1.06bn. This sector, which includes items such as burgers and sausages, has been badly affected by the trend towards healthier eating, including the Jamie Oliver campaign against low-quality food products. To counter the poor image, suppliers of frozen meats and meat products are now offering better, higher-value products in an effort to rekindle public confidence. Birds Eye is the dominant brand in the market, although there are also numerous own-label products.

Figure 2: The Total UK Frozen Foods Market by Sector by Value at Current Prices (%), 2006

Source: Key Note

Meat and meat products

Poultry and poultryproductsFish and fish products

Ice cream

Ready meals (not pizza)

Potato products

Cakes and desserts

Pizza

Vegetables and fruit(excluding potatoes)Vegetarian foods



Poultry and Poultry Products

Sales of frozen poultry and poultry products were valued at £740m in 2006, a 4.4% reduction on 2005. Coming under this heading are two of the largest segments of the market — whole chickens and turkeys, along with chicken breasts, legs and quarters. Since 2002, sales of these products have benefited from the more positive, healthier image that poultry has compared with red meat. However, this positive image has now been affected by the health scares surrounding poultry, and sales of frozen poultry have suffered.

Table 9: The UK Frozen Meat and Meat Products Sector by Value at Current Prices (£m at rsp and %), 2002-2006

2002 2003 2004 2005 2006

Value (£m) 1,060 1,074 1,090 1,106 1,062


Sector share of

total market (%) 20.2 20.2 20.4 20.5 19.7


Source: Key Note

Table 10: The UK Frozen Poultry and Poultry Products Sector by Value at Current Prices (£m at rsp and %), 2002-2006

2002 2003 2004 2005 2006

Value (£m) 736 745 759 774 740


Sector share of

total market (%) 14.0 14.0 14.2 14.3 13.8


Source: Key Note



Fish and Fish Products

In 2006, the value of the frozen fish sector increased by 4% to £703m. A number of high-quality brands, including Young’s Bluecrest, operate in this sector and these are supported by some strong own-label products from UK and overseas producers. Fish and fish products tend to have a healthier image than other categories of frozen foods and the sector also benefits from the higher prices that fish products are able to command at the retail level.

Ice Cream

The weather has a strong influence on ice cream sales and hot summers often lead to sharp rises in demand for ice cream. This trend was evident again in 2006 (which was the hottest year on record in the UK) and sales advanced by 4.9% to £687m, according to Key Note.

Growth in the take-home ice cream sector is also being driven by other factors, including the popularity of premium products, new product innovations, the development of own-label sales, the continued extension of confectionery brands into the premium ice cream format and sales of lower-fat products. Branded products, such as Häagen-Dazs, Ben & Jerry’s and Wall’s, are estimated to account for over 50% of the market by value.

Ice cream sales often generate higher margins than some other types of frozen foods and this is likely to have been one of the reasons that Unilever maintained its ownership of its Wall’s ice cream brand when it disposed of its Birds Eye frozen foods brand.

Table 11: The UK Frozen Fish and Fish Products Sector by Value at Current Prices (£m at rsp and %), 2002-2006

2002 2003 2004 2005 2006

Value (£m) 635 648 661 676 703


Sector share of

total market (%) 12.1 12.2 12.4 12.5 13.1


Source: Key Note



Ready Meals (Excluding Pizza)

The market for frozen ready meals is estimated to have fallen by 6% in 2006 to £531m. The sector has been affected by an oversupply of cheap, and sometimes inferior-quality, products, and by the policy of the multiples to offer their own-label ready meals at low prices. During 2006, several leading brands are also reported to have suffered from poor sales.

To improve the perception of frozen ready meals, companies such as Birds Eye have removed additives, including colourings, flavourings and preservatives, from their products. They have also reduced salt levels and the saturated fat content of the oil used to prepare these products.

Table 12: The UK Ice Cream Sector by Value at Current Prices (£m at rsp and %), 2002-2006

2002 2003 2004 2005 2006

Value (£m) 635 679 645 655 687

% change year-on-year - 6.9 -5.0 1.6 4.9

Sector share of

total market (%) 12.1 12.8 12.1 12.1 12.8


Source: Key Note

Table 13: The UK Frozen Ready Meals (excluding pizza) Sector by Value at Current Prices (£m at rsp and %), 2002-2006

2002 2003 2004 2005 2006

Value (£m) 555 556 561 565 531


Sector share of

total market (%) 10.6 10.4 10.5 10.5 9.9


Source: Key Note



Potato Products

The market for frozen potatoes increased by 1.2% in 2006 to £420m. The expansion of the sector is being negatively affected by the high fat content in some products such as roast potatoes, potato wedges and frozen chips, items that go against the current trend for healthier eating and consumer obesity concerns. To counter the poor image, leading producers such as McCain are marketing potato products, which contain only a relatively small amount of fat (around 5%).

Cakes and Desserts

Frozen cakes and desserts were one of the growth sectors in 2006, with a 4.9% increase in sales to £404m. The sector has, in the past, been negatively affected by low prices and a poor image among consumers. More recently, several smaller and weaker suppliers, including some who gave in to constant price demands from the retailers, have left the market and this has provided a boost to the other suppliers. Product quality is now improving and multiples are pursuing more sensible pricing policies. This has in turn helped to boost the value of the sector.

Table 14: The UK Frozen Potato Products Sector by Value at Current Prices (£m at rsp and %), 2002-2006

2002 2003 2004 2005 2006

Value (£m) 415 420 418 415 420

% change year-on-year - 1.2 -0.5 -0.7 1.2

Sector share of

total market (%) 7.9 7.9 7.8 7.7 7.8


Source: Key Note



Pizza

The value of the frozen pizza sector remained unchanged in 2006, at £331m. Main media advertising expenditure on pizzas has fallen steadily since 2002 (see Marketing Activity section in Chapter 4 — Competitor Analysis) and this may have finally affected sales growth. However, the quality of frozen pizzas is still considered high for both branded and own-label products and very often, the overall quality and benefits of the frozen take precedence over the chilled equivalent.

Table 15: The UK Frozen Cakes and Desserts Sector by Value at Current Prices (£m at rsp and %), 2002-2006

2002 2003 2004 2005 2006

Value (£m) 413 397 390 385 404

% change year-on-year - -3.9 -1.8 -1.3 4.9

Sector share of

total market (%) 7.9 7.5 7.3 7.1 7.5


Source: Key Note

Table 16: The UK Frozen Pizza Sector by Value at Current Prices (£m at rsp and %), 2002-2006

2002 2003 2004 2005 2006

Value (£m) 316 320 326 331 331

% change year-on-year - 1.3 1.9 1.5 -

Sector share of

total market (%) 6.0 6.0 6.1 6.1 6.2


Source: Key Note



Vegetables and Fruit (Excluding Potatoes)

The market for frozen vegetables and fruit remained static in 2006, with a value of £321m. The sector is generally characterised by own-brand domination (which has received criticism for sometimes being low-quality), high levels of discounting and a perception that frozen vegetables are less nutritious than the fresh alternative persists, all of which contribute to the downward pressure on prices. Despite this, some new branded innovations, such as the Steamfresh ranges, have proved to be popular.

Vegetarian Foods

The vegetarian frozen food sector is roughly split between vegetarian-based products and meat alternative products such as Quorn. As with other sectors of the frozen foods market, sales in this sector are being undermined by non-frozen alternatives and growth in 2006 was limited to just 1.7%. The threat from alternatives such as chilled foods is expected to grow as the range of products expands.

Table 17: The UK Frozen Vegetables and Fruit (Excluding Potatoes) Sector by Value at Current Prices

(£m at rsp and %), 2002-2006

2002 2003 2004 2005 2006

Value (£m) 312 315 318 321 321

% change year-on-year - 1.0 1.0 0.9 -

Sector share of

total market (%) 6.0 5.9 6.0 5.9 6.0


Source: Key Note



OVERSEAS TRADE

As the majority of vegetables used by UK frozen food manufacturers are grown and processed in the UK, meat and fish are the main import and export items for the frozen food industry. In 2006, the UK had a trade surplus in frozen fish, but large trade deficits in both meats and poultry.

Meats

Three of the main types of meats imported into the UK are bovine animals, swine and sheep. The largest trade is in swine (fresh, chilled and frozen), which attracted imports of £687.1m in 2006 of which £671m or 97.7% came from EU countries, particularly Denmark, which accounted for £310m of the overall total. Imports of sheep (fresh, chilled and frozen) amounted to £282.4m of which £246.4m came from Asia-Oceania producers, particularly New Zealand (£213.5m) and Australia (£32.3m). Imports of bovine animals amounted to £124.3m in 2006 of which £56.1m came from the Republic of Ireland and £10.9m came from Germany.

The UK’s main export markets for meat include France, which accounted for £155.4m of sheep exports in 2006, and the Republic of Ireland and Germany, which accounted for £31.3m and £27.4m of UK swine exports, respectively.

Table 18: The UK Frozen Vegetarian Foods Sector by Value at Current Prices (£m at rsp), 2002-2006

2002 2003 2004 2005 2006

Value (£m) 166 168 173 177 180


Sector share of

total market (%) 3.2 3.2 3.2 3.3 3.3


Source: Key Note



Poultry

Imports of poultry into the UK were worth £702.9m in 2006, with exports valued at £160.4m. The Netherlands was the leading overseas source of poultry imports into the UK, at £324.8m in 2006, followed by France at £87.3m. The two leading export markets for UK poultry in 2006 were the Republic of Ireland, with £53.2m and France with £22.7m.

Frozen Fish

The UK recorded a surplus in the frozen fish trade in 2006 of £18.8m. The largest source of imports was Russia, which accounted for £20.9m of the £106.9m total. A further £26.8m of fish imports came from Asia and £19.4m came from the EU. The main export markets included Russia, at £38.5m.

Table 19: UK Imports and Exports of Meat by Type by Value (£m), 2006

Imports Exports Balance

Bovine animals frozen 124.3 12.0 -112.3

Swine (fresh, chilled or frozen) 687.1 99.8 -587.3

Sheep (fresh, chilled or frozen) 282.4 232.8 -49.6

Total 1,093.8 344.6 -749.2

Source: Overseas Trade Statistics, HM Revenue & Customs © Crown copyright

Table 20: UK Imports and Exports of Poultry† by Value (£m), 2006


Value (£m) 702.9 160.4 -542.5

† — includes ducks, geese, turkeys, chickens and guinea fowl, fresh, chilled or frozen




Table 21: UK Imports and Exports of Frozen Fish† by Value (£m), 2006


Frozen fish 106.9 125.7 18.8

† — excludes fish fillets and other fish meat whether or not minced, fresh, chilled or frozen



Frozen Foods Industry Background

3. Industry Background

RECENT HISTORY

The UK frozen food sector is currently facing a number of challenges. Pressures in the marketplace from the increased buying power of the grocery multiples and the larger wholesale distributors are making life difficult for frozen food producers and importers, and generally leading to low prices at the checkout. In addition, the image of frozen foods still remains fairly poor in the eyes of consumers due to the high levels of discounting and the perceived low quality of some products. The decision of some of the leading suppliers to dispose of their frozen foods businesses and exit the market has further added to the general impression that the sector is a generally unprofitable area of food manufacturing and retailing.

NUMBER OF COMPANIES

The frozen food industry is wide-ranging and diverse, and encompasses companies engaged in a number of activities. However, the supply side of the market is dominated by around a dozen or so operators, including Birds Eye, Young’s, McCain and Bernard Matthews, which provide significant volumes of branded frozen foods. These leading manufacturers in turn sell most of their products to around ten leading retailers and, together, these suppliers and retailers represent almost the entire infrastructure of the branded retail frozen foods market in the UK.

The structure of the own-label marketplace for retail frozen foods differs a little. The British Frozen Food Federation (BFFF) has around 50 to 60 medium-sized manufacturers that produce retailers’ own-label products. In some instances, some of these producers might make only a couple of lines for one or more retailers, with the balance of their production often going into the foodservice market. The BFFF also has around 50 importer companies, bringing in mainly own-label products from overseas producers.

In 2006, there were 575 UK VAT-based enterprises engaged in just three of these sectors — the processing and preserving of fish and fish products; the processing and preserving of potato products; and the manufacture of ice cream. Ice cream manufacturers tend to be smaller than some of the other companies in the sector, with just 15.4% of enterprises recording turnovers of £1m or more in 2006. By comparison, 47% of the fish and fish products processors and preservers and 50% of the potato processors and preservers had turnovers of more than £1m in 2006.



EMPLOYMENT

The number of people involved in the frozen foods manufacturing industry is estimated to be in excess of 50,000. According to National Statistics’ Annual Business Inquiry, companies involved in the processing and preserving of fish and fish products employed around 18,000 people in 2005, the number employed in the potato processing and preserving sector amounted to around 12,000, and a further 3,000 were employed by the ice cream manufacturers.

One of the leading employers in the chicken processing sector is Bernard Matthews which had a workforce of 7,082 in 2005. Young’s Bluecrest Seafood Ltd is among the leading employers in the fish processing industry with a workforce of 3,095 in 2005 and Richmond Foods, a leading ice cream maker, employed 881 people in the same year.

Table 22: Number of VAT-Based Enterprises Engaged in the Processing and Preserving of Fish and Fish Products,

and Potato Products, and in the Manufacture of Ice Cream by Turnover Sizeband (£000), 2006

Pro

cessin

g a

nd

Pre

serv

ing

of Fish

an

d Fish

Pro

du

cts

Pro

cessin

g a

nd

Pre

serv

ing

of

Po

tato

Pro

du

cts

Man

ufa

cture

of Ice

Cre

am

Turnover Sizeband (£000)

1-49 25 0 10

50-99 20 5 35

100-249 50 5 55

250-499 40 5 40

500-999 40 5 35

1,000-4,999 95 10 25

5,000+ 60 15 5

Total 330 50 195

Note: totals may not sum due to rounding to nearest five enterprises by source.

Source: UK Business: Activity, Size and Location 2006, National Statistics © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)



The majority of companies working in both the fish preserving and processing, and ice cream manufacturing sectors tend to have relatively small workforces. In 2006, half of UK VAT-based enterprises engaged in the processing and preserving of fish and fish products employed fewer than ten people, as did three-quarters (76.9%) of enterprises engaged in the manufacture of ice cream. Enterprises engaged in the processing and preserving of potato products tend to be somewhat larger on average, with over a fifth (22.2%) having in excess of 250 employees. McCain Foods, the leading frozen chip producer, employed around 1,790 in 2005.

Table 23: Number of VAT-Based Enterprises Engaged in the Processing and Preserving of Fish and Fish Products, and Potato Products, and in the Manufacture of Ice Cream by

Employment Sizeband, 2006

Pro

cessin

g a

nd

Pre

serv

ing

of Fish

an

d Fish

Pro

du

cts

Pro

cessin

g a

nd

Pre

serv

ing

of

Po

tato

Pro

du

cts

Man

ufa

cture

of Ice

Cre

am

Number of Employees

0-4 115 10 95

5-9 50 10 55

10-19 45 5 25

20-49 55 5 15

50-99 30 5 0

100-249 25 5 0

250+ 10 10 0

Total 330 45 195

Note: totals may not sum due to rounding to nearest five enterprises by source.




REGIONAL VARIATIONS IN THE MARKETPLACE

The principle UK regions for the processing and preserving of potato products are Yorkshire and Humberside, the East and West Midlands, and the East. McCain Foods has five manufacturing sites across the country, including Scarborough, Whittlesey and Wombourne. PAS Ltd, a subsidiary of McCain, also has processing facilities at Grantham and Hull.

The principle UK region for the preserving and processing of fish and fish products is Scotland, which accounted for almost half (45%) of all UK companies involved in this activity in 2006. The other main locations are Yorkshire and Humberside, the South West and Northern Ireland. Young’s Bluecrest Seafood, which is based in Grimsby, also has sites in Scotland, Pewsey in the South West and Kilkeel in Northern Ireland.

The ice cream industry is more fragmented. Although the large grocery multiples are often supplied by leading national and international brands, there are also many small localised ice cream manufacturers that supply premium products. Richmond Foods has a number of manufacturing plants across the UK, including ones in Devon, Cornwall, North Yorkshire and Wigan.

Of the other major frozen food sectors, much of the vegetable freezing industry is focused around the main growing areas in East Anglia, and many of the major meat-freezing plants are also based in the East Anglia region.

Table 24: Distribution of Local Units Engaged in the Processing and Preserving of Fish and Fish Products, and Potato Products,

and in the Manufacture of Ice Cream by Government Office Region (number of local units), 2006

Pro

cessin

g a

nd

Pre

serv

ing

of Fish

an

d Fish

Pro

du

cts

Pro

cessin

g a

nd

Pre

serv

ing

of

Po

tato

Pro

du

cts

Man

ufa

cture

of Ice

Cre

am

Region

North East 10 5 10

North West 20 0 30

Yorkshire and Humberside 65 10 20

East Midlands 5 10 15

West Midlands 5 10 15

Table continues...



DISTRIBUTION

Between 2002 and 2006, there was a steady decline in the number of VAT-based enterprises engaged in the storage of frozen and refrigerated goods. Consolidation in the industry is likely to have accounted for some of the fall.

...table continued

Pro

cessin

g a

nd

Pre

serv

ing

of Fish

an

d Fish

Pro

du

cts

Pro

cessin

g a

nd

Pre

serv

ing

of

Po

tato

Pro

du

cts

Man

ufa

cture

of Ice

Cre

am

Region

East 15 10 10

London 15 5 20

South East 10 5 10

South West 40 5 30

Wales 5 0 15

Scotland 180 5 35

Northern Ireland 30 10 15

Total 400 †65 225

† — does not sum due to rounding to nearest five local units by source


Table 24: Distribution of Local Units Engaged in the Processing and Preserving of Fish and Fish Products, and Potato Products,

and in the Manufacture of Ice Cream by Government Office Region (number of local units), 2006



In terms of local units, 5,120 were engaged in the storage of frozen and refrigerated goods in 2006. The largest percentages were in the major population areas of the South East, the East, the North West and Greater London.

Table 25: Distribution of UK VAT-Based Enterprises Engaged in the Storage of Frozen and Refrigerated Goods, 2002-2006

2002 2003 2004 2005 2006

Number of enterprises 3,200 3,100 2,940 2,865 2,845

Source: Business Monitor PA1003 — Size Analysis of UK Businesses (2002-2003), UK Business: Activity, Size and Location (2004-2006), National Statistics © Crown copyright material is reproduced with the permission of the Controller of HMSO (and the Queen’s Printer for Scotland)

Table 26: Distribution of Local Units Engaged in the Storage of Frozen and Refrigerated Goods by Government

Office Region (number and %), 2006

Number of Local Units % of Total

Region

North East 145 2.8

North West 565 11.0

Yorkshire and Humberside 465 9.1

East Midlands 490 9.6

West Midlands 485 9.5

East 605 11.8

London 560 10.9

Table continues...



In terms of retail distribution, the grocery multiples are estimated to account for around 88% of frozen food sales by value. The leading grocers have the floor space available for the freezer cabinets needed for frozen foods and this gives them a very strong position in the market.

The smaller retail outlets, including convenience stores, are unable to provide the choice of products that consumers have come to expect and, as such, they are estimated to account for little more than 5% of frozen food sales.

The other two main retail outlets for frozen food sales are freezer centres and butchers/fishmongers/other, which together account for around 7% of the market.

...table continued

Number of Local Units % of Total

Region

South East 780 15.2

South West 385 7.5

Wales 200 3.9

Scotland 350 6.8

Northern Ireland 85 1.7

Total 5,120 100.0

Note: totals may not sum due to rounding to nearest five local units by source.


Table 26: Distribution of Local Units Engaged in the Storage of Frozen and Refrigerated Goods by Government

Office Region (number and %), 2006



HOW ROBUST IS THE MARKET?

Many frozen foods can, in general, be viewed as being basic commodity low-cost items and because of this, the sector is fairly robust to economic downturns. The sector is, however, vulnerable to various health scares such as the outbreak of Avian Flu at a Bernard Matthews Farm in February 2007, which can have a serious impact on sales.

Consumer concerns relating to matters such as healthy eating can also impact negatively on sales, particularly with products that have high fat, sugar or salt content. The frozen food sector also remains vulnerable to changing consumer preferences in favour of fresh and chilled foods.

To counter the poor-quality image that some frozen foods have, the major manufacturers have introduced premium and innovative products in an attempt to bolster sales. Many of the major retailers prefer to concentrate on chilled produce, however, which often generates higher margins.

Despite these drawbacks, the majority of companies engaged in the processing and preserving of fish and fish products, potato products and the manufacture of ice cream have been in business for 10 years or more and, to this extent, the sector could be viewed as being fairly robust.

Table 27: Distribution in the Frozen Foods Market by Type of Outlet by Value (%), 2006

Grocery multiples 88

Convenience stores 5

Freezer centres 4

Butchers/fishmongers/other 3

Total 100

Source: Key Note



LEGISLATION

As part of the food and retail industry, suppliers of frozen foods are subject to a wide range of legislation in a number of areas. Of particular importance is the Food Safety Act 1990.

Food Safety Act 1990

The Food Safety Act is one of the most important pieces of legislation affecting the food industry.

The Act provides the framework for all food legislation in the UK and affects everyone who works in the production, processing, storage, distribution and sale of food. The Act aims to ensure that all food produced for sale is safe to eat, reaches quality expectations and is not misleadingly presented. It also provides legal powers and penalties.

In order to take account of EU Food Hygiene and Official Feed and Food Controls Regulations, the Food Safety Act 1990 has been revised and updated, and an associated piece of legislation, The Food Hygiene (England) Regulations 2006, came into force in England on 11th January 2006.

Table 28: Number of VAT-Based Enterprises Engaged in the Processing and Preserving of Fish and Fish Products,

and Potato Products, and in the Manufacture of Ice Cream by Age of Business, 2006

Pro

cessin

g a

nd

Pre

serv

ing

of Fish

an

d Fish

Pro

du

cts

Pro

cessin

g a

nd

Pre

serv

ing

of

Po

tato

Pro

du

cts

Man

ufa

cture

of Ice

Cre

am

Age of Business

Less than 2 years 25 5 15

2-3 years 35 5 15

4-9 years 50 10 35

10 years or more 220 30 130

Total 330 50 195




Quick-Frozen Foodstuffs (England) Regulations 2007

The industry is also affected by the Quick-Frozen Foodstuffs Regulations, which implement EU standards on temperature-monitoring equipment for quick-frozen foods. The Regulations require the application of a uniform standard for temperature-monitoring equipment and aim to ensure that it complies with technical requirements and a common approval system across the EU. The new rules have applied to all new equipment from 1st January 2006, although existing equipment may be used until 31st December 2009.

Other Legislation

The frozen food sector is also affected by a raft of other food-related legislation, including food labelling legislation and genetically modified (GM) labelling legislation.

KEY TRADE ASSOCIATIONS

The British Frozen Food Federation

The BFFF is the main association representing the UK frozen food industry. Its declared aim is to promote and protect the interests of the members through the provision of information, the development of unity and the co-ordination of collective strengths. The BFFF has a broadly based membership of both large and small businesses covering producers, importers, brokers, wholesalers, retailers and associate services to the industry.

Food and Drink Federation

The Food and Drink Federation (FDF) represents the UK food and drink manufacturing industry. The FDF communicates the industry’s values and concerns to a range of audiences in the UK and abroad, including Government, regulators, consumers and the media. It works in partnership with other main players in the food chain to help ensure that food is safe and that consumers can have confidence in it. In 2005, the FDF took over the UK Association of Frozen Food Producers and turned it into a new FDF group. This group focuses on issues such as cold chain efficiency, the positioning and perception of frozen foods, and technical and regulatory issues. The FDF group’s producer members include Birds Eye, Mars UK, McCain Foods, Richmond Foods and Young’s Bluecrest.



The Ice Cream Alliance

The Ice Cream Alliance (ICA) provides a forum for suppliers, retailers, caterers and manufacturers of ice cream products. The Alliance currently has a membership of over 750, divided into 9 geographically based divisions, each with their own annually elected Committee. The ICA publishes Ice Cream, the industry monthly magazine, as well as organising the annual trade conference, together with exhibitions, competitions and regional social events. The organisation also has long-established links with all Government bodies, particularly the Department for Environment, Food and Rural Affairs (Defra) and the Department of Health (DoH).

Other Associations

Outside the UK, the National Frozen & Refrigerated Foods Association (NFRA) has been serving the frozen food industry of the US since 1945 and the Féderation des Associations de Fabricants des Produits Alimentaires Surgelés (FAFPAS) covers EU countries.


Frozen Foods Competitor Analysis

4. Competitor Analysis

THE MARKETPLACE

The UK frozen foods market continues to go through a period of consolidation. Some of the long-established manufacturers, including Unilever, have sold their frozen foods businesses and exited the market, and many of the new owners are now private-equity firms. The industry is also facing, and responding to, other pressures such as consumer demands for healthier products, the impact of health scares on sales and brand reputations, and new regulatory requirements that govern the advertisements and promotion of some food items, particularly those that are aimed at children.

MARKET LEADERS

Baugur Group (The Big Food Group Ltd)

Company Structure

The Big Food Group PLC emerged in June 2000 following the Iceland Group’s acquisition of Booker PLC, the UK’s largest cash and carry operator. One of the main subsidiaries within the merged group was the Iceland frozen food retail chain.

In February 2005, The Big Food Group accepted an offer for the business from a consortium led by Baugur — an investment group based in Iceland. The business was subsequently split into its main component parts and Iceland was placed under the management of one of its founders, Malcolm Walker, and other senior executives. These executives now aim to restore Iceland’s core strengths in frozen foods. The company currently has 667 stores throughout the UK and Republic of Ireland.

Current and Future Developments

The Iceland frozen food chain has been restructuring its activities. It has cut loss-making stores and raised cash by selling sites to Marks and Spencer for its Simply Food chain. Iceland aims to open ten stores a year and a further ten of Cool Trader, its sister chain.

Financial Results

In the year ending 31st December 2005, Baugur UK Ltd reported a turnover of £3.48bn, with a pre-tax profit of £318,000. Turnover figures are not available for 2004, but the company made a pre-tax profit of £36,000.



At the time this report was published (July 2007), there were no turnover or pre-tax profit figures available for The Big Food Group Ltd on the ICC Juniper database.

Bernard Matthews Ltd

Company Structure

Norwich-based Bernard Matthews is a food processing company with over 50 farms throughout Norfolk, Suffolk and Lincolnshire. The company produces and markets turkey and other meat products, including oven-ready turkeys, frozen turkeys and other poultry products. In addition to its activities in the UK, Bernard Matthews also operates in a number of overseas markets including Germany and Hungary (under the SaGa Foods label). Bernard Matthews farms around 8 million turkeys every year in the UK.


A Bernard Matthews farm in Holton was at the centre of a major outbreak of the H5N1 bird flu virus. The outbreak, which is likely to have been caused by poultry meat imported from Hungary, resulted in the company having to slaughter around 160,000 turkeys. Sales of Bernard Matthews products fell sharply as a consequence of the outbreak and the brand suffered a collapse in confidence. Bernard Matthews has now introduced new biosecurity measures, including a ban on imports from any country where bird flu is confirmed.

Financial Results

In the year ending 1st January 2006, Bernard Matthews Ltd reported a turnover of £479.9m and a pre-tax profit of £24.4m. In the 53 weeks ending 2nd January 2005, the company had a turnover of £458.7m and a pre-tax profit of £38.5m.

Birds Eye Ltd

Company Structure

In November 2006, Unilever completed the sale of its European frozen food business to Permira, the private-equity firm for €1.73bn (£1.15bn). Unilever’s ice cream business, which includes the Wall’s brand, was not part of the sale. On completion of the deal, the acquired business was renamed Birds Eye Ltd.

Unilever’s frozen foods operations in the UK, Austria, Belgium, France, Germany, the Republic of Ireland, the Netherlands and Portugal changed hands in the deal. The businesses sold employ around 3,500 people across Europe, including 1,250 staff who work in the UK in Suffolk and East Yorkshire.

Permira saw off competition to buy the business from rivals including CapVest, which owns the Findus frozen food brand. Other rival bidders included Blackstone Capital Partners, Kerry Group and JPMorgan Partners.




Permira has announced plans to close its frozen food factory in Hull, which produces fish fingers, fish cakes and frozen peas, and transfer production to other company plants. The company has blamed excess capacity in its supply chain for the decision to close the factory and switch production to Bremerhaven in Germany and Lowestoft in Suffolk. The factory is set to close in September 2007.

Financial Results

In the year ending 31st December 2005, Birds Eye Ltd’s turnover was £627m, with a pre-tax profit of £54.7m. In the previous year, the company had a turnover of £659.2m and a pre-tax profit of £42.5m.

Christian Salvesen Foods Ltd

Company Structure

Christian Salvesen Foods Ltd is a subsidiary of Christian Salvesen PLC, a major European logistics business with 13,000 staff, 200 sites and operations in Belgium, France, the Netherlands, the Republic of Ireland, Portugal, Spain and the UK. The company is organised into two broad divisions; Food and Consumer; and Transport. Within the Food and Consumer division there are four operating units — Food and Consumer Mainland Europe; Food and Consumer United Kingdom; Support Services; and Christian Salvesen Foods. Within the Transport division there are three operating units — Christian Salvesen Darfeuille (France), Christian Salvesen Gerposa (Spain and Portugal) and Transport Services UK.

Christian Salvesen Foods Ltd is one of the UK’s leading processors of frozen green vegetables. The company produces around 50 frozen vegetable products under its own brand name Ross, and others for supermarket own brands. The frozen foods produced include vegetables, chips, pizzas, ready meals, fish products, Oriental-style products, burgers and desserts. The company also offers food processing, packing and freezing services at sites in Grantham, Humberside and Lowestoft.


Christian Salvesen’s temperature-controlled business unit has introduced two innovative and double-deck trailers for its dedicated Marks and Spencer frozen food distribution contract. At just under five metres in height, the trailers are the highest ever to be built to carry temperature-controlled food. Each vehicle carries significantly more cages of Marks and Spencer frozen foods, compared with a conventional trailer. This means that fewer deliveries have to take place in order to deliver the same amount of goods. It also means that CO2 emissions are reduced as fewer journeys are required.



Financial Results

In the year ending 31st March 2006, Christian Salvesen PLC reported a turnover of £820.7m, up from £805.5m in 2005, and a pre-tax profit of £15.6m, up from £13.2m in 2005.

In its interim results for the 6 months ending 30th September 2006, Christian Salvesen PLC’s turnover was £432.6m, up from £402.4m in the corresponding period in 2005, and pre-tax profit was £30.6m, up from £8.1m in the previous year.

Findus Ltd

Company Structure

Findus Ltd, which is currently in private ownership, produces and retails a range of frozen foods, including Crispy Pancakes, French Bread Pizza, Pasta Presto, curries and vegetable mixes. Findus AB, which covers the Findus business outside of the UK (excluding Italy and Switzerland) was bought by CapVest in January 2006. The Findus brand in the UK, which was not part of the CapVest deal, is based in Newcastle-upon-Tyne and employs around 380 workers.


Findus food products have been improving the health aspects of its foods by reducing the amount of sugar and salt and removing ‘E’ numbers. For example, the company has launched, in collaboration with celebrity chef Jean Christophe Novelli, a new range of foods, which is completely free of artificial colours, additives or preservatives. Findus is also launching a pure and toxin-free form of Omega-3 supplement as part of its drive towards healthy eating.

Financial Results

In the year ending 31st December 2006, Findus Ltd recorded a turnover of £27.6m, down from £28.1m in 2005. The company made a pre-tax loss of £2.6m in 2006, compared with a pre-tax loss of £5.8m in 2005.

HJ Heinz Company Ltd

Company Structure

HJ Heinz Company Ltd is a major US packaged food company with a long-term presence in the UK. Its leading brands include Heinz Baked Beans, Heinz Baby Food, Heinz Salad Cream, Heinz Soup, Heinz Spaghetti and Heinz Tomato Ketchup. Its ready meals frozen food brands include Weight Watchers and it is also licensed to make Harry Ramsden (frozen fish and chips) and Aunt Bessie’s under licence to Tryton Foods.



In June 2006, Heinz sold its Linda McCartney brand of frozen vegetarian foods to the US-based Hain Celestial Group. Heinz had planned to sell the rest of its frozen food businesses, including the Weight Watchers brand, although these plans were shelved after the company failed to obtain a suitable price for the sale.

Heinz has announced plans to reduce its global workforce by 8% by mid-2008, with 2,700 employees set to lose their jobs, including around 600 at the group’s European plants. The restructuring will involve the closure of around 15 of its production plants.


In March 2007, HJ Heinz announced that it expects the real ‘turning point’ for its European business to come in 2008 as investment behind new innovations begins to drive faster growth. Heinz has completed a restructuring of its European operations, selling off non-core units and buying businesses to reinforce its leadership in ketchups and sauces. The UK business, the second-largest after the US, also turned the corner in 2006. Baked beans and ketchup hit all-time record market shares and soups were doing well.

Financial Results

In the year ending 27th April 2005, HJ Heinz Company Ltd achieved a turnover of £571.4m and a pre-tax profit of £92.1m. In the previous year ending 30th April 2004, the company reported a turnover of £562.4m and a pre-tax profit of £113.5m.

Mars UK Ltd

Company Structure

Mars Inc is a worldwide manufacturer of confectionery. The company’s headquarters are in Virginia, US, and it is entirely owned by the Mars family, making it one of the largest privately owned US corporations. The US Division, known as Masterfoods USA, is based in New Jersey. The European Division, known as Masterfoods Europe, has its headquarters in Brussels, and Veghel, the Netherlands.

Mars Ltd is the name of the British branch of Mars, and is based in Slough. Most of Mars confectionery products for Europe are produced in Slough, Veghel and Viersen (Germany). Some of the Mars brands manufactured in the UK include Galaxy Milk Chocolate, Maltesers and Tunes. Mars’ presence in the frozen foods business is mostly through the extension of its confectionery brands into ice cream and lollies.

Mars spearheaded the confectionery brand extension policy into ice cream and, in the process, established a precedent that has been followed by other companies such as Nestlé and Cadbury Schweppes. The company’s ice cream brands include Mars, Galaxy, Snickers, Bounty and Twix.




Masterfoods has pledged to stop advertising its core confectionery and snack brands to youngsters below the age of 12 by the end of 2007. It is the first time a major food maker has set such a high global age threshold for such products. The measure reflects mounting concerns about the links between advertising and childhood obesity. The move by Masterfoods, one of the world’s top 30 advertisers, is the biggest shift in marketing policy by a large food group since European officials threatened companies with regulation 2 years ago. It could drive other companies to adopt similar practices.

Financial Results

In the year ending 31st December 2005, Mars UK Ltd reported a turnover of £1.49bn, with a pre-tax profit of £171m. In the previous year ending 1st January 2005, the company’s turnover was £1.56bn, with a pre-tax profit of £194.2m.

McCain Foods (GB) Ltd

Company Structure

McCain Foods (GB) Ltd, a privately owned company established in 1957 by the McCain brothers in New Brunswick, Canada, is the world’s largest producer of french fries and other oven-ready frozen foods. McCain Foods has 20,000 employees and 55 production facilities in 12 countries spanning six continents. While frozen potato products remain the foundation of McCain’s success, McCain products also include green vegetables, desserts, pizzas, juices and beverages, oven meals, entrées and appetisers.

McCain opened its first UK factory in Scarborough in 1968 and currently operates six UK factories with a combined workforce of 2,500. PAS Ltd, a subsidiary of McCain, has processing facilities at Grantham and Hull, and a seed potato business in Montrose, Scotland. McCain works with a network of 300 dedicated potato growers and sources over 600,000 tonnes of British-grown potatoes each year.


McCain Foods is one of the manufacturers that has adopted the Food Standard Agency’s (FSA’s) official campaign promoting ‘traffic light’ labelling, a voluntary system that has also won the backing of grocers such as J Sainsbury, Waitrose, ASDA and Marks and Spencer. Other manufacturers and retailers have adopted an alternative labelling system, which is based on guideline daily amounts (GDAs) of salt, sugar and fat. The colour-code system recommended by the FSA proved too much for many food manufacturers and retailers who have baulked at slapping red ‘stop sign’ logos on the front of their products.



Financial Results

In the year ending 30th June 2006, McCain Foods (GB) Ltd reported a turnover of £291.2m, with a pre-tax profit of £20m. In the previous year, the company’s turnover was £302.6m, with a pre-tax profit of £35.2m.

Northern Foods PLC

Company Structure

Northern Foods PLC is based in Leeds and has 19 operating sites across the UK and the Republic of Ireland, specialising in chilled, bakery and frozen food production. The business is focused around five key categories — pizza, biscuits, ready meals, sandwiches and salads, and Christmas puddings — all of which have strong leading brands or high-growth own-label positions. The company has a workforce of around 11,500.

Northern Foods produces a wide range of own-label products for UK and the Republic of Ireland retailers, and a range of well-known brands including Fox’s, Goodfella’s, Holland’s Pies, Grassington’s Food Co, Dalepak, Donegal Catch and Green Isle frozen foods. The Northern Foods brand and own-label split is approximately 50:50 and sales to its top five customers — ASDA, Marks and Spencer, Morrisons, J Sainsbury and Tesco — represent 77% of total revenue.

Northern Foods has been streamlining its businesses. In July 2006, it disposed of NFT, its chilled distribution business, to a management buyout (MBO) for £51.2m and, in January 2007, it completed the sale of its speciality bread, chilled pastry, cakes and flour milling businesses to Vision Capital Ltd for £160m. These disposals accounted for around 40% of Northern Foods’ sales in the year ending April 2006, and were undertaken to allow the company to focus around its five core categories.


The Northern Foods-owned Goodfella’s has relaunched its Deeply Delicious deep pan pizza range to include a lighter, healthier pizza base, new toppings and a revamped packaging design. In response to growing consumer demand, the company has also removed hydrogenated fats from its Goodfella’s pizza bases and the Deeply Delicious new pizza dough. According to Northern Foods, the Goodfella’s brand hit sales of over £100m for the first time in 2006 and is currently worth £104.2m. With growth of 21% year-on-year, Goodfella’s is reported to have a 32% value share of the frozen pizza market, making it a clear market leader.

Financial Results

In the year ending 1st April 2006, Northern Foods PLC had a turnover of £1.44bn, up from £1.42bn in 2005. The company reported a pre-tax loss of £16.1m in 2006, compared with a pre-tax profit of £19.2m in 2005.

Northern Foods PLC interim results for the 26 weeks ending 30th September 2006, showed sales of £683.2m and a pre-tax profit of £26.7m.



In a trading update to 31st March 2007, Northern Foods reported that underlying continuing revenue in the frozen division grew by 2.4% in the fourth quarter of its 2006/2007 financial year and by 2.6% in the year to date. Pizza and fish have performed well, while frozen pastry and meat grills have continued to disappoint, reflecting the impact of this year’s mild weather and a slowdown in foodservice volumes.

RHM Frozen Foods Ltd

Company Structure

RHM Frozen Foods Ltd is the UK’s leading frozen pie manufacturer, and a major player in the frozen ready meals and frozen desserts markets. The company is part of the RHM Group, and has a number of brands including McDougalls Pies, Sharwood’s Frozen Ready Meals, Bisto Ready Meals, and Cadbury Frozen Desserts. RHM Frozen also has an extensive retailer-branded business across all three categories (pastry, ready meals and desserts).


In a bid to build on its leading position in the savoury pie market, RHM Frozen Foods has relaunched its McDougalls Upper Crust premium family and individual pie range. The company is looking to differentiate itself from its competitors by reformulating the existing range with a new look, ‘just-like-homemade’ ingredients, new premium packaging, and the addition of an Indulgent range. All the pies are free from trans- and hydrogenated fats, artificial colourings and flavourings, while the pie size has also been increased to 710 grams (g) from 680g. The new products were launched in September 2006.

In March 2007, the RHM Group was acquired by Premier Foods PLC for £1.2bn. The takeover made Premier the UK’s largest food manufacturer.

Financial Results

In the year ending 29th April 2006, RHM Frozen Foods Ltd reported a turnover of £63.7m, compared with £61.2m in 2005. The company made a pre-tax profit of £5.3m in 2006, up from £2m in 2005.



Richmond Foods PLC

Company Structure

Richmond Foods is best known as an ice cream manufacturer and the leading take-home ice cream maker in the UK. The company holds the licence to make a number of branded ice cream products, including a range of Nestlé ices acquired from the Swiss company in 2001. The purchase of the Nestlé UK Ice Cream business added major Nestlé brands to the company’s product portfolio including the Fab, Smarties and Rowntree’s Fruit Pastil-Lolly.

In March 2006, Richmond ceased production at its smallest production site, located at Bude in North Cornwall. The manufacture of the products made at Bude was transferred to the three remaining Richmond sites.

In May 2006, Richmond Foods was acquired by a subsidiary of Oaktree, a US private-equity firm that has ice cream operations in northern Europe. Following the acquisition, Richmond Foods merged with Roncadin in Germany, one of Europe’s leading ice cream makers and another Oaktree subsidiary.


In January 2007, Richmond Ice Cream created the new post of Sales and Marketing Director as part of its strategy to develop its portfolio of Nestlé brands and Skinny Cow, the leading brand in the UK healthy ice cream sector. The company also aims to expand its presence in the own-label market.

Financial Results

Richmond Foods PLC recorded a turnover of £140.7m and a pre-tax profit of £14.4m in the 53 weeks ending 2nd October 2005. This compares with a turnover of £143.6m and a pre-tax profit of £11m in the year ending 26th September 2004.

Uniq PLC

Company Structure

Uniq is a European chilled and frozen food producer. It makes predominantly fresh chilled desserts, salads, sandwiches, fish, dips, dressings and ready meals. It is a major supplier to leading supermarket groups in Europe on a branded and customer own-label basis. The company employs around 7,600 people.

Uniq’s leading chilled and frozen products are sold to retail and foodservice customers in the UK and continental Europe. It manufactures in the UK, France, Germany, Poland, the Netherlands and Spain. Products are also sold in Austria, Belgium, the Czech Republic, the Republic of Ireland, Italy, Luxembourg, Portugal and Sweden. The company’s main interest in frozen foods is in the supply of fish-based meals, including the frozen Marie branded business in France.




Uniq has been restructuring its operations in northern Europe. During 2006, it sold its French spreads and Belgian salads businesses for £288m, implemented other restructuring plans in France and is now relaunching its Marie frozen foods brand.

Financial Results

In the year ending 31st December 2006, Uniq PLC reported a turnover of £541.2m, with a pre-tax loss of £58.5m. In the previous year, the company’s turnover was £706.8m, with a pre-tax loss of £45.3m.

William Jackson & Son Ltd

Company Structure

William Jackson & Son Ltd is a food production business with five main subsidiary operations: the frozen foods manufacturer Tryton Foods, which supplies the Aunt Bessie’s range of frozen foods; Jackson’s Bakery, which supplies bread products; Kwoks Foods, which manufactures chilled Chinese and Oriental foods; Hazeldene Foods, which supplies salads and salad products; and Parripak Foods, which supplies freshly prepared vegetables.

Tryton Foods produces a range of Aunt Bessie’s frozen foods products, including Yorkshire puddings, roast potatoes, chicken pies, stuffing balls, apple pie and golden syrup. The company is the market leader in frozen Yorkshire puddings, which are produced at the rate of over 2 million a day at in-house manufacturing operations in Hull. A number of the brand’s products are also manufactured under licence arrangements.

The Aunt Bessie’s brand is reported to be the fastest-growing brand within UK frozen foods, with retail sales value of over £130m.


Tryton Foods has installed a bespoke weighing and packing solution to enable it to automate the packing process of its Aunt Bessie’s Yorkshire puddings range. The effectiveness of the system has enabled Tryton Foods to change the packaging of its Yorkshire puddings from flow-wrapped trays to bags. The weighing equipment includes software that uses the average individual weight of each Yorkshire pudding to calculate and ‘count’ by weight the required number into bags of 12, 15 and 25 puddings.

Financial Results

William Jackson & Son Ltd recorded a turnover of £95.5m and a pre-tax loss of £3.6m in the year ending 29th April 2006. This compares with a turnover of £128.1m and a pre-tax profit of £72.3m in the year ending 30th April 2005.



Young’s Bluecrest Seafood Ltd

Company Structure

Young’s Bluecrest Seafood Ltd is a producer and distributor of frozen, fresh and chilled seafood, supplying approximately 40% of all the fish eaten in the UK. Young’s has its headquarters in Grimsby and employs approximately 4,500 people at 16 sites, located mainly around Humberside and in Scotland.

Most of the group’s sales are of its Young’s brand of frozen and chilled fish, shrimp and shellfish. Other brands include Ross (retail frozen market); Bluecrest (chilled and frozen retail and foodservice markets); King Frost and Marr (for the foodservice market); Scotpak (chilled seafood products for retail); and Macrae in Scotland. The Young’s Bluecrest Foodservice subsidiary focuses on the restaurant and catering industry, while Polarfrost Seafoods specialises in fish frozen at sea.

The company was formed through the merger of Young’s and Bluecrest in 1999. It is privately owned by holding company Foodvest (part of CapVest), which is a major player in the European seafood industry and also owner of Findus AB, based in Malmo, Sweden.


In January 2007, Young’s Seafood announced a reorganisation of its chilled manufacturing facilities in Humberside. The company is planning to move production, currently based at Gillett Street in Hull to Grimsby, where Young’s is headquartered. The Gillett Street site would close. The change is designed to facilitate future expansion of Young’s business in chilled seafood, which, according to the company, has witnessed sales growth of at least 25% since 2004.

The company has also established a major new seafood processing factory, which supplies food to supermarket chain Waitrose. The Young’s Seafood subsidiary, Macrae Edinburgh, is to take on extra staff at its brand new £10m plant in Starlaw Park, which is to create more than 100 product ranges, including smoked salmon, fish pâtés, speciality canapés and shellfish.

Financial Results

In the year ending 1st October 2005, Young’s Bluecrest Seafood Ltd reported a turnover of £348.3m, with a pre-tax profit of £3m. In the previous 40 weeks ending 2nd October 2004, the company had a turnover of £274.1m and a pre-tax profit of £211,000.



Other Companies

Other companies involved in the frozen foods market include:

• Anchor Seafoods Ltd, which is part of The Seafood Company Ltd. Based in West Sussex, the company supplies a wide range of frozen and chilled ready-prepared shellfish dishes and ingredients under its own brands and for retailer private labels. In the 27 weeks ending 31st December 2005, the company had a turnover of £17.4m and a pre-tax profit of £1.4m. For the previous 12 months ending 25th June 2005, The Seafood Company Ltd had a turnover of £31.5m and a pre-tax profit of £2.8m. The Seafood Company Ltd was acquired by the Canadian-based Fishery Products International (FPI), in September 2005.

• Brake Bros Ltd supplies chilled, fresh and frozen food to the catering industry in the UK and France. In the year ending 31st December 2005, Brake Bros Ltd had a turnover of £1.63bn and a pre-tax loss of £4.6m. Brakes’ owners, the private-equity firm Clayton Dubilier & Rice, has put the company up for sale with an estimated price tag of £1.2bn.

• Delice de France PLC is a specialist distributor of part and fully baked frozen bakery products. In the year ending 31st July 2006, the company had a turnover of £120m and a pre-tax profit of £2.3m.

• Grampian Country Food Group supplies fresh and frozen chicken, pork, beef and lamb products for the retail, wholesale and foodservice sectors. In the year ending 31st May 2005, the company recorded a turnover of £1.85bn and a pre-tax profit of £1.3m.

OUTSIDE SUPPLIERS

The main outside suppliers to frozen food companies include: suppliers of raw materials, foodstuffs and ingredients; packaging companies; refrigerated storage and distribution companies; and suppliers of freezer cabinets and other equipment.

One of the leading transport refrigeration companies is Carrier Transicold, a US-owned company with worldwide operations. Carrier Transicold Europe specialises in transport refrigeration across Europe, Russia, the Middle East and Africa. One of the leading suppliers of refrigerating equipment is FMC Food Technologies, a US-based company, while among the leading temperature-controlled storage and distribution companies is Norpak Food Services Ltd, part of the ACC Distribution group. One of the leading UK-owned transport refrigeration companies is Exel Logistics, an Exel PLC company and a global leader in supply-chain management and packaging. Christian Salvesen also specialises in managing outsourced supply-chain operations for manufacturers and retailers in the industrial, consumer and food sectors.



MARKETING ACTIVITY

Main Media Advertising Expenditure

Main media advertising expenditure on frozen foods slipped back by 1% in 2006 to £58.1m. The largest category of expenditure in 2006 was ice cream and lollies, with £17.1m or 29.4% of the total. Expenditure on four other categories of frozen foods, namely frozen vegetables, ready-to-eat (RTE) meals, fresh and frozen meat, and frozen pizza, were all lower in 2006 compared with 2005, although there was a large increase in advertising on fresh and frozen fish, and a further rise in advertising expenditure on fresh and frozen poultry.

Ice Cream and Lollies

Wall’s continues to dominate main media advertising expenditure in the ice cream and lollies sector, accounting for 71.3% of the overall total in the year ending December 2006. The individual Wall’s brands with the highest level of main media advertising expenditure were Magnum ice cream, with £5.2m and Carte D’Or ice cream with £2.7m. The Häagen-Dazs brand attracted the highest level of expenditure for a non-Wall’s brand in 2006, at £1.7m. Wall’s ice cream is owned by Unilever and Häagen-Dazs is owned by General Mills. Two of the other heavily promoted brands are Ben & Jerry’s, which is also a Unilever brand, and Skinny Cow, which is owned by Richmond Foods.

Table 29: Main Media Advertising Expenditure on Frozen Foods (£000), Years Ending December 2002-2006

2002 2003 2004 2005 2006

Ice cream and lollies 14,929 17,833 11,351 16,798 17,078

Frozen vegetables 8,995 5,569 9,212 12,472 11,243

Frozen ready meals 11,630 11,756 11,875 11,502 10,682

Fresh and frozen meat 3,267 2,518 3,757 10,645 8,358

Frozen pizza 10,893 8,347 7,705 5,794 4,625

Fresh and frozen fish 5,742 2,662 2,229 325 3,709

Fresh and frozen poultry 2,910 4,791 776 1,159 2,413

Total 58,366 53,476 46,905 58,695 58,108

% change year-on-year - -8.4 -12.3 25.1 -1.0

Source: Nielsen Media Research



Frozen Vegetables

The frozen vegetables category is dominated by McCain, which spent £9.3m on main media advertising in 2006, including £7.8m on its oven chips and home fries oven chips products. The two other highest-spending brands were Birds Eye and Aunt Bessie’s, with expenditure of £1m and £741,000, respectively.

Table 30: Main Media Advertising Expenditure on Ice Cream and Lollies (£000), Year Ending December 2006

Wall’s

Magnum ice cream 5,209

Carte D’Or ice cream 2,675

Cornetto 2,338

Ice cream range 634

Carte D’Or greek yoghurt 534

Carte D’Or crème brulée 264

Carte D’Or lavazza 180

Kids promise kids products 133

Magnum classic 107

Ice lolly range 103

Total Wall’s 12,177

Häagen-Dazs 1,655

Ben & Jerry’s — ice cream range 1,546

Skinny Cow — low-fat ice cream 1,352

Other 348

Total 17,078


Table 31: Main Media Advertising Expenditure on Frozen Vegetables (£000), Year Ending December 2006

McCain

Oven chips 5,742

Home fries oven chips 2,027

Frozen potato product range 614



Frozen Ready Meals

Birds Eye is by far the leading main media advertiser on frozen ready meals. In the year ending December 2006, the company accounted for 90.3% of the £10.7m spent in this category of frozen foods, with the only other brand promoted to any extent being the Rustlers microwave food range. Rustlers is owned by Kepak, a leading Irish meat business.

Wedges 304

Chips 237

Home roasts 228

Fries to go 184

Total McCain 9,336

Birds Eye

Steamfresh vegetables 485

Soya beans 355

Frozen vegetable range 185

Total Birds Eye 1,025

Aunt Bessie’s

Crispy roast potatoes 528

Homestyle chips 213

Total Aunt Bessie’s 741

Other 141

Total 11,243


Table 31: Main Media Advertising Expenditure on Frozen Vegetables (£000), Year Ending December 2006



In January 2007, Weight Watchers launched a new television advertising campaign as part of its overall investment of £5m to drive growth of the brand and the frozen category. The adverts focused on the message that the Weight Watchers brand offers low-fat options without compromising on taste. The campaign ran throughout the key diet season, which typically covers the first 2 months of the year. Products from the Weight Watchers range of indulgent desserts and frozen ready meals were featured.

Fresh and Frozen Meat

Main media advertising expenditure on fresh and frozen meat fell back in 2006, although it still recorded its second-highest total since 2002. Advertising levels have been boosted since 2002 by increased spending by the Meat and Livestock Commission (MLC), and by the Quality Standard for beef, lean beef and pork. The promotion of meat in the wake of the various food scares that the industry has encountered since 2001 accounts for some of the higher spending.

Table 32: Main Media Advertising Expenditure on Frozen Ready Meals (£000), Year Ending December 2006

Birds Eye

Product range 8,624

Healthy options 203

Mediterraneo range 76

Roast dinner 91

Simply chicken 249

Birds Eye — Simply Salmon 406


Rustlers — microwave food range 820

Other 213

Total 10,682




Frozen Pizza

Main media advertising expenditure on frozen pizza has fallen steadily since 2002 and, in 2006, it was at a 5-year low of £4.6m. The main brands supported in 2006 were Goodfella’s, a Northern Foods brand, with £1.7m; the US-owned Schwan brand, with £1.3m; and the German-owned Dr Oetker, which spent £1.6m on its Ristorante and Bistro pizza ranges.

Table 33: Main Media Advertising Expenditure on Fresh and Frozen Meat (£000), Year Ending December 2006

Meat and Livestock Commission

Beef and lamb 1,642

Beef 656

Mince 957

Total meat and livestock commission 3,255

Quality Standard

Beef, English beef 630

Beef and lamb 213

Lamb 372

Pork 184

Total quality standard 1,399

Quality meat Scotland — meat range 1,056

New Zealand meat — lamb 833

Welsh lamb and beef promotions — beef 647

British meat — pork 131

Meat promotion Wales — Welsh lamb 114

Mr Brains — faggots 110

Birds Eye — beefburgers 83

Other 731

Total 8,359




Fresh and Frozen Fish

Main media advertising on fresh and frozen fish fell back between 2002 and 2005, although in 2006, it moved up again rising to a 4-year high of £3.7m. Much of the increase in 2006 is due to increased spending by Young’s Bluecrest, which invested a total of £2.3m or 61.1% of the total. Young’s Bluecrest and Birds Eye, which spent £1.1m on its fish range, together accounted for 91.2% of the total.

Table 34: Main Media Advertising Expenditure on Frozen Pizza (£000), Year Ending December 2006

Goodfella’s

Solos range 1,539

La Bottega Pizza 87

Deep Pan Pizza 76

Total Goodfella’s 1,702

Chicago Town Deep Pan & Ovenrise 1,301

Dr Oetker

Dr Oetker — Ristorante Pizza 1,132

Dr Oetker — Bistro Pizza 446

Total Dr Oetker 1,578

Other 44

Total 4,625




Fresh and Frozen Poultry

Mattessons and Bernard Matthews were the heaviest spenders in the fresh and frozen poultry category in 2006, with Mattessons supporting its Chicken Bites promotions with a £1.4m spend and Bernard Matthews spending £923,000. The two companies together accounted for 96.2% of all main media advertising on these items.

Table 35: Main Media Advertising Expenditure on Fresh and Frozen Fish (£000), Year Ending December 2006

Young’s Bluecrest — seafood range 2,266

Birds Eye

Cod fish fingers 878

Frozen steamfresh fish 160

Fish 78


Other 327

Total 3,709


Table 36: Main Media Advertising Expenditure on Fresh and Frozen Poultry (£000), Year Ending December 2006

Mattessons — Chicken Bites 1,398

Bernard Matthews — Golden Drummers 635

Bernard Matthews — Turkeys 288

Other 92

Total 2,413




Exhibitions

Food and Drink Expo

Food and Drink Expo is the UK’s largest food-led show. The event attracts a variety of people, including buyers and specifiers from a wide range of retail, foodservice, manufacturing and wholesale sectors. Food and Drink Expo is a biennial show and will next be held from 6th to 9th April 2008 at the National Exhibition Centre (NEC) in Birmingham. The event will be part of the Food & Drink World event and will encompass The Convenience Retailing Show, Foodex Meatex, The International Forecourt & Fuel Equipment Show and the Baking Industry Exhibition.

InterCool

Intercool is an international trade fair for frozen foods, ice cream and refrigeration technology, and is held every 2 years. The next InterCool trade fair will take place from 28th September to 1st October 2008 in Dusseldorf, Germany.

International Food and Drinks Exhibition

The biennial International Food and Drinks Exhibition draws the largest gathering of the international food and drink community in the UK. The exhibition typically attracts more than 26,000 food and drink industry professionals, including around 3,000 international visitors from almost 100 countries. The 2009 exhibition will be held between 15th and 18th March at the ExCel centre in London.


Frozen Foods Strengths, Weaknesses, Opportunities and Threats

5. Strengths, Weaknesses, Opportunities and Threats

STRENGTHS

• Frozen foods are an established part of the UK diet and a substantial proportion of the population purchases frozen food items most weeks.

• Frozen foods are as healthy, if not healthier, than many equivalent fresh products. Some sectors of the market, such as frozen fish, have a particularly positive image.

• The UK frozen foods market is among the largest in Europe in terms of overall sales and per capita consumption.

• Ownership levels of fridges, freezers and microwaves in the UK are high and this helps to underpin the strength of the market.

• The branded section of the frozen foods market is strong and is being continually developed by the producers.

• Annual levels of advertising expenditure on frozen foods are considerable and this helps to provide ongoing marketing and promotion within the industry.

• Freezing food is the best and most natural way to preserve both the active life and quality of food products.

WEAKNESSES

• Adverse weather conditions can affect production of the frozen food raw materials and can in turn lead to higher prices.

• Food scares can have a major impact on sales of some frozen foods. The outbreak of H5N1 bird flu on the Suffolk farm of Bernard Matthews, for example, caused a fall in demand for frozen poultry.

• As with other sectors of the UK manufacturing industry, frozen food production plants are vulnerable to the decision by the plants’ owners to shift production to lower-cost facilities abroad.

• Low levels of profitability in the frozen foods market have caused some long-established operators, such as Unilever, to exit the sector.

• Due to discounting and special promotional offers, such as buy-one-get-one-free deals, frozen foods often have a relatively poor image compared with chilled food alternatives.

• Expenditure on frozen foods as a percentage of expenditure on food and drink overall in the UK shows a steady, ongoing fall.


Frozen Foods Strengths, Weaknesses, Opportunities and Threats

OPPORTUNITIES

• The lower end of the chilled ready meals sector continues to be commoditised by the major multiples. This makes frozen foods meals more competitive against them.

• New, innovative frozen food products, which prove to be successful, such as the Birds Eye Steamfresh vegetable range, can generate substantial rewards for manufacturers.

• Some producers, such as Birds Eye Foods Inc, have decided to concentrate their resources on their branded businesses, increase their focus on new products and marketing, and exit their non-branded frozen foods businesses. Birds Eye considers that its branded businesses have considerable growth potential, while their non-branded business generates low margins.

• The frozen foods market in the UK is going through a period of reconstruction and consolidation and, when completed, the industry could emerge better equipped to meet the challenges of the current retail environment.

• The decision of supermarkets such as Somerfield to relaunch their own-label frozen foods range suggests that they see opportunities for growth in the market.

• The introduction of more premium products, increased innovation, better availability instore and reduced discounting could all help to transform the image of frozen foods in the retail environment.

THREATS

• Sodium or salt in food is increasingly gaining ground as a health concern. Some frozen ready meals such as pizza contain relatively high levels of salt and consumer attitudes towards the consumption of these foods could affect sales.

• The frozen foods market is increasingly cost-driven and the success and survival of manufacturing plants is increasingly through the consolidation of production facilities into larger, more efficient sites. Companies that are unable to follow this practice may struggle to survive.

• Diminishing fish supplies could put pressure on the price and supply of some white-fish products.

• Consumers may continue to move away from frozen foods towards more fresh and chilled foods and, if this trend persists, the frozen food sector is unlikely to enjoy any periods of sustained growth.

• The decision of the Office of Communications (Ofcom) to ban advertisements for foods high in fat, sugar and salt during or around television programmes made for children could affect demand for certain frozen foods such as ice cream and desserts.


Frozen Foods Buying Behaviour

6. Buying Behaviour

CONSUMER PENETRATION

According to BMRB International Ltd’s Target Group Index (TGI) survey, sweet products, including ice cream and frozen cakes, are among the most popular frozen food items eaten by households. In 2006, ice cream in tubs and blocks appeared to be particularly well liked, having been eaten by 79.1% of households in the 12 months preceding the survey. Household penetration rates of items such as frozen peas and vegetables, and frozen chips are lower at a little under 50% of adults, while fish fingers and other frozen fish products were consumed by 27.7% and 37.6% of adults, respectively. Lower penetration rates appear to exist for products such as frozen pizza and frozen ready meals.

The consumption by women of frozen foods appears to be higher than men in all product categories. The difference is particularly marked for items such as frozen peas and vegetables, and frozen chips, but less so for ice cream and frozen cakes.

Penetration rates by age also differ quite widely depending on the product. The consumption patterns of adults aged between 15 and 19 years, for example, are heavily skewed towards items such as ice cream and frozen cakes, while they are correspondingly low for foods such as frozen ready meals and fish fingers, which are more likely to be eaten by older members of the household. The penetration rate for items such as frozen peas and vegetables tends to increase with age, whereas for products such as pizza and frozen ready meals, penetration peaks in the 35 to 44 year-old category.

Table 37: Consumption of Selected Frozen Food Products in the Last 12 Months (% of adults), 2006

Ice cream in tubs and blocks 79.1

Ice cream bars and sticks 59.8

Frozen cakes 50.1

Frozen peas and vegetables (excluding potatoes) 49.0

Frozen chips and potato products 46.0

Ready to eat desserts (chilled or frozen) 45.9

Other frozen fish products (excluding fish fingers) 37.6

Fish fingers 27.7

Frozen pizza 26.9

Frozen ready meals 24.5

Source: Target Group Index (TGI) © BMRB International Ltd, 2006



The lower price of many frozen foods probably contributes to the consumption patterns of these products by social grade. Apart from ice cream and frozen cakes, penetration rates for the other five categories of frozen foods given in Table 38, peak within the E grouping.

Regional differences in penetration rates for frozen foods appear not to be particularly noticeable. The presence of children in a household does seem to have an effect, however, with penetration rates for all categories of frozen foods being higher in households with children compared with households without children.

Table 38: Consumption of Selected Frozen Food Products in the Last 12 Months by Sex, Age, Social Grade, Region and

Children in Household (% of adults), 2006

Ice C

ream

in Tu

bs a

nd

Blo

cks

Froze

n C

akes

Froze

n P

eas a

nd

Veg

eta

ble

s (e

xclu

din

g p

ota

toes)

Froze

n C

hip

s an

d P

ota

to P

rod

ucts

Fish Fin

gers

Froze

n R

ead

y M

eals

Pizza

All adults 79.1 50.1 49.0 46.0 27.7 24.5 26.9

Sex

Men 77.6 44.7 28.1 26.9 15.7 14.3 14.8

Women 80.5 55.2 68.6 64.0 39.0 34.2 38.3

Age

15-19 84.1 57.9 13.1 15.8 10.8 8.5 13.9

20-24 81.8 56.2 29.3 32.9 23.2 20.3 27.3

25-34 79.8 48.7 48.2 49.4 35.3 26.0 34.6

35-44 77.2 52.2 53.3 53.4 38.0 28.5 36.7

45-54 78.1 51.2 55.1 50.7 29.2 26.5 31.7

55-64 78.2 47.7 54.5 46.3 23.6 24.2 22.7

65+ 78.5 44.4 58.9 49.6 22.3 26.6 15.9

Table continues...



...table continued

Ice C

ream

in Tu

bs a

nd

Blo

cks

Froze

n C

ak

es

Froze

n P

eas a

nd

Veg

eta

ble

s (e

xclu

din

g p

ota

toes)

Froze

n C

hip

s an

d P

ota

to P

rod

ucts

Fish Fin

gers

Froze

n R

ead

y M

eals

Pizza

Social Grade

A 81.7 40.1 53.2 45.1 24.6 18.2 24.1

B 81.0 44.6 51.3 43.3 23.2 18.5 23.6

C1 78.7 50.2 48.5 45.3 26.5 24.1 27.7

C2 78.5 54.0 45.4 45.3 29.2 25.6 28.1

D 79.2 54.4 45.7 46.0 30.4 27.9 26.4

E 75.2 50.6 58.2 57.9 36.4 36.1 32.9

Region

Scotland 81.3 50.4 42.5 46.9 21.1 22.5 26.3

North West 76.0 50.1 48.9 48.3 27.7 27.1 28.5

North 75.8 53.9 41.6 44.6 31.0 28.4 27.4

Yorkshire and

Humberside 76.7 49.9 45.1 42.8 28.2 23.4 24.8

East Midlands 79.8 52.2 49.2 47.7 28.6 24.3 26.6

East Anglia 80.5 53.8 50.2 44.9 29.8 24.0 27.0

South East 80.0 48.2 51.2 46.3 26.8 23.6 27.1

Greater London 79.9 44.0 52.1 45.3 28.3 22.8 25.3

South West 80.2 49.4 51.9 45.8 26.9 22.6 26.0

Wales 77.9 53.4 50.6 44.9 31.2 28.2 28.7

West Midlands 80.2 55.7 49.8 46.5 30.0 27.1 29.3

Table continues...





HOUSEHOLD EXPENDITURE ON FROZEN FOODS

Frozen Meat

Frozen meat is another of the more popular items bought by shoppers, although little more than a quarter of the population purchase it on a monthly basis. According to BMRB International Ltd’s TGI survey, 54.6% of adults overall purchase frozen meat, with 26.9% having purchased it in the month preceding the survey.

Of the 26.9% of adults who purchased frozen meat in the previous month, 20.9% (or more than three-quarters of the total), spent less than £21 a month on the product. Expenditure at the lowest monthly level of up to £5 a month tends to increase with age, while the major spenders at the highest level of expenditure (£76 or more a month) are those age between 35 and 44 years. By social grade, the heaviest users include the Es, whereas by region, the highest proportion of heavy spenders is in London.

...table continued

Ice C

ream

in Tu

bs a

nd

Blo

cks

Froze

n C

ak

es

Froze

n P

eas a

nd

Veg

eta

ble

s (e

xclu

din

g p

ota

toes)

Froze

n C

hip

s an

d P

ota

to P

rod

ucts

Fish Fin

gers

Froze

n R

ead

y M

eals

Pizza

Children in Household

1-4 years 83.0 54.7 54.1 56.0 49.0 29.0 38.7

5-9 years 81.8 57.2 52.0 55.6 47.2 31.6 39.6

10-15 years 81.5 61.0 45.5 46.8 33.2 26.8 36.0

No children in

household 77.5 46.3 48.9 43.6 21.8 23.0 22.0






Table 39: Household Expenditure on Frozen Meat in the Last Month by Sex, Age, Social Grade

and Region (% of adults), 2006

£7

6 o

r Mo

re

£51-£

75

£36-£

50

£26-£

35

£21-£

25

All adults 0.6 0.5 1.2 1.5 2.2

Sex

Men 0.4 0.3 0.7 1.0 1.3

Women 0.7 0.7 1.7 2.0 3.0

Age

15-19 0.1 0.6 0.3 0.8 0.2

20-24 0.5 0.6 1.0 1.9 2.1

25-34 0.6 0.6 1.3 1.7 2.8

35-44 1.2 0.5 1.7 2.2 2.8

45-54 0.4 0.4 2.1 2.1 3.0

55-64 0.6 0.6 1.3 1.0 2.1

65+ 0.2 0.4 0.5 0.8 1.2

Social Grade

A 0.0 0.9 0.7 1.2 2.9

B 0.6 0.3 0.8 1.0 1.7

C1 0.6 0.4 1.3 1.5 1.6

C2 0.4 0.5 1.3 1.7 2.3

D 0.5 0.7 1.2 1.8 2.9

E 1.2 0.7 1.8 2.1 3.1

Region

Scotland 0.6 0.5 0.8 1.0 2.1

North West 0.3 0.4 1.3 1.6 1.8

North 0.3 0.2 0.8 2.0 1.6

Table continues...



...table continued

£76 o

r Mo

re

£51

-£75

£36

-£50

£26

-£35

£21

-£25

Region (cont’d)

Yorkshire and Humberside 0.2 0.4 0.8 1.3 1.8

East Midlands 0.3 0.6 1.3 1.2 2.1

East Anglia 0.2 0.3 1.3 1.4 1.3

South East 0.6 0.5 1.4 1.7 2.4

Greater London 2.0 1.1 1.9 1.3 2.6

South West 0.3 0.2 1.3 1.6 1.5

Wales 0.2 0.5 0.8 2.0 3.9

West Midlands 0.2 0.7 1.0 1.6 2.3


Table 40: Household Expenditure on Frozen Meat in the Last Month by Sex, Age, Social Grade and Region

(% of adults), 2006

£16-£

20

£11-£

15

£6-£

10

Up

to £

5

No

thin

g S

pen

t

All adults 3.5 4.1 6.7 6.6 27.7

Sex

Men 2.6 2.7 4.3 4.1 16.5

Women 4.3 5.4 9.0 8.9 38.2

Table continues...

Table 39: Household Expenditure on Frozen Meat in the Last Month by Sex, Age, Social Grade

and Region (% of adults), 2006



...table continued

£16-£

20

£11-£

15

£6-£

10

Up

to £

5

No

thin

g S

pe

nt

Age

15-19 1.6 2.8 3.0 3.2 5.6

20-24 4.7 3.9 6.4 5.2 11.6

25-34 4.1 4.1 8.0 7.0 27.5

35-44 3.9 5.1 7.0 6.2 28.8

45-54 3.5 4.9 6.7 6.4 29.9

55-64 4.1 3.8 6.7 6.6 32.5

65+ 2.3 3.2 7.0 8.6 36.8

Social Grade

A 3.6 3.2 4.1 2.9 40.0

B 2.3 2.5 5.1 5.7 34.3

C1 3.5 3.7 6.7 6.6 28.1

C2 3.9 5.0 6.9 6.6 22.9

D 4.0 4.9 7.8 6.8 21.2

E 4.2 6.0 9.4 9.9 27.6

Region

Scotland 2.6 3.5 4.6 6.2 30.1

North West 4.2 4.2 6.6 8.3 27.8

North 3.7 3.2 4.9 8.9 26.2

Yorkshire and Humberside 2.3 2.7 6.2 6.4 28.5

East Midlands 3.9 3.9 7.7 8.6 24.5

East Anglia 3.1 4.2 6.1 5.5 28.8

South East 3.2 4.1 7.2 5.5 28.1

Greater London 4.1 4.6 6.8 5.4 30.1

South West 2.4 5.2 7.5 6.3 27.4

Wales 4.7 5.4 7.4 7.2 24.1

West Midlands 4.2 4.0 7.3 6.5 25.2


Table 40: Household Expenditure on Frozen Meat in the Last Month by Sex, Age, Social Grade and Region

(% of adults), 2006



Frozen Poultry

Frozen poultry is another relatively popular household purchase, with a penetration level of 39.9% (not shown), although only around 15.4% of households appear to purchase such products on a weekly basis. The largest proportion of households (5.2%) spent between £3 and £4.99 in the previous week on frozen poultry, suggesting that few bulk purchases of chicken and other poultry products are made. Those aged between 25 and 44 years were the most likely to have spent £7 or more on frozen poultry in the last week, and those aged 65 and over were the least likely to have done so. Penetration rates by region are quite marked at the highest level of expenditure, with 3.3% of households in Greater London spending £7 or more a week on frozen poultry, compared with 0.5% in Yorkshire and Humberside.

Table 41: Household Expenditure on Frozen Poultry in the Last Week by Sex, Age, Social Grade and Region (% of adults), 2006

£7

or M

ore

£5-£

6.9

9

£3-£

4.9

9

£2-£

2.9

9

Un

der £

2.0

0

No

thin

g S

pen

t

All adults 1.5 2.2 5.2 4.5 2.0 24.5

Sex

Men 1.0 1.4 3.1 3.0 1.5 15.7

Women 2.0 3.0 7.2 6.0 2.5 32.7

Age

15-19 0.9 0.9 2.8 2.0 0.4 9.4

20-24 1.5 1.5 7.1 3.8 1.9 17.9

25-34 2.5 2.7 5.4 4.5 2.4 31.8

35-44 2.3 3.0 5.9 4.6 1.6 30.5

45-54 1.4 2.9 6.0 5.2 2.2 25.8

55-64 1.1 2.0 4.6 4.9 1.7 24.6

65+ 0.6 1.5 4.5 5.1 2.9 20.5

Social Grade

A 0.4 2.3 6.0 3.7 2.1 29.8

B 1.5 1.5 3.5 3.4 1.3 29.5

C1 1.5 2.3 5.3 4.2 2.0 25.8

C2 1.5 2.7 5.7 4.6 2.0 21.8

D 1.9 2.2 5.7 5.2 2.5 18.6

E 1.3 2.8 7.0 8.0 2.8 22.5

Table continues...



...table continued

£7 o

r Mo

re

£5-£

6.9

9

£3-£

4.9

9

£2-£

2.9

9

Un

der £

2.0

0

No

thin

g S

pen

t

Region

Scotland 1.1 1.7 5.6 3.6 1.8 23.9

North West 1.3 1.6 5.3 4.9 2.2 25.2

North 0.7 2.3 5.2 4.8 2.7 22.8

Yorkshire and Humberside 0.5 1.1 3.7 5.1 2.1 23.7

East Midlands 1.8 2.0 5.2 5.8 2.3 24.3

East Anglia 0.8 3.1 3.9 3.7 1.3 26.3

South East 1.5 2.4 5.6 4.3 2.1 24.5

Greater London 3.3 2.6 5.3 3.4 1.5 29.1

South West 1.0 2.3 5.3 5.0 1.5 24.7

Wales 2.8 4.1 6.3 5.0 3.4 19.3

West Midlands 0.8 2.2 5.2 5.2 1.8 21.4


Table 41: Household Expenditure on Frozen Poultry in the Last Week by Sex, Age, Social Grade and Region (% of adults), 2006


Frozen Foods Current Issues

7. Current Issues

POLITICS

Competition Commission’s Inquiry into the UK Grocery Industry

The latest Competition Commission’s inquiry into the UK grocery industry, which was published in January 2007, has turned its attention to retailer competition in local areas and will examine whether prices and quality are higher in some areas than others and what might be causing this. The Commission will also assess whether retailers such as Tesco, or any other supermarket, are able to get into such a strong position, either nationally or locally, that no other retailer can compete effectively. On supply-chain issues, the Commission said there was no clear evidence that supermarket buying power was reducing supplier innovation.

The Competition Commission is currently seeking the views of the British Frozen Food Federation (BFFF) on its grocery inquiry.

Food Labelling

GDA or Traffic Light System

A debate is being conducted in the UK between those manufacturers and retailers that support the use of guideline daily amount (GDA) front-of-pack labelling and those that are behind the ‘traffic light’ system, which is favoured by the UK’s Food Standards Agency (FSA). GDAs are basic guides to how much energy and key nutrients the average healthy person needs in order to maintain a balanced diet. The traffic light food-labelling system indicates the amount of sugar, salt and fat in products, with green on the label meaning eat plenty, amber meaning eat in moderation and red meaning eat sparingly. Manufacturers and retailers such as Unilever and Tesco favour the GDA, while others favour the traffic light approach. The EU is currently developing proposals for revising general food and nutrition labelling legislation.

Among the frozen food manufacturers to have adopted the FSA’s official campaign promoting traffic light labelling is McCain Foods.



HEALTH

Tighter Rules on Food Advertisements Sought

Teaching, health and consumer groups have written to the Government urging it to tighten up the rules on food adverts that target children. The National Union of Teachers (NUT) and the British Heart Foundation (BHF) are among ten groups highlighting ‘inconsistencies’ with the rules governing television adverts. The new code for non-broadcast adverts, including those appearing on websites, was unveiled in April 2007 by the Committee of Advertising Practice (CAP). Its measures — to come into force on 1st July 2007 — do not include ‘rules to restrict the volume or frequency of food advertising to children’ and failed to ‘differentiate between healthy and unhealthy foods’, according to the ten groups. The organisations also feel there are major ‘omissions and inconsistencies’ between rules for print and Internet adverts, compared with those for broadcast adverts, which are developed separately by industry regulator, the Office of Communications (Ofcom).

Advertisements for foods high in fat, sugar and salt have been banned by Ofcom during or around television programmes made for children, or programmes that would particularly appeal to 7 to 9 year-olds, since the start of June. Restrictions are due to be extended to children aged up to 15 in 2008, along with an outright ban on promoting junk food on dedicated children’s channels. The CAP said there was no need for similar restrictions on adverts in non-broadcast media.

The Mars Inc subsidiary Masterfoods, intends to stop advertising its core confectionery and snack brands to youngsters below the age of 12 by the end of 2007.

Poor Perception of Frozen Foods Continues

In January 2007, Birds Eye published the results of a survey aimed at countering common consumer perceptions that frozen food is full of artificial additives. The survey compared the levels of additives and preservatives consumed by those who eat chilled ready meals, frozen ready meals and home-cooked meals, and found that there is a significant misunderstanding of where additives are found and that consumers still think frozen food is full of preservatives. The frozen food industry argues to the contrary that freezing is the most natural way to preserve food.

Birds Eye had earlier announced in 2004 that it was removing additives from all its products in the UK in a multi-million pound overhaul. The company has since dropped over 100 artificial ingredients, including modified starches and thickeners.

The company’s strategy of removing additives is designed to appeal to specific consumer concerns about artificial additives. Recent studies have linked some additives to childhood tantrums, and E numbers are increasingly being linked to issues such as obesity and heart disease. However, there remains a degree of debate over the issue.



The consumer research was published by Birds Eye and conducted by ICM in November 2006. Over 1,000 UK adults were questioned about their attitudes towards additives.

Birds Eye Reduces Salt Content

According to the FSA, 85% of men and 69% of women in the UK eat more than the recommended daily amount of salt. To address this problem, the FSA has been working with the food industry to encourage reductions in the levels of salt in foods.

Within the frozen food sector, Birds Eye has stated that its range of ready meals has already met the FSA’s salt content targets for 2010 (which is to achieve the 6 grams (g) target for average population intakes by consumers). Birds Eye has also taken steps to ensure its meals contain less than 10% fat and it eliminated trans-fats from its ready meals. Among the other frozen food producers, Heinz has reduced salt levels across its product range by between 11% and 18%. Some of the frozen food products that often contain high salt levels are pizzas and ready meals.

RETAILER DEVELOPMENTS

Somerfield has announced a major relaunch of its own-label frozen foods products by updating recipes, making them healthier and by redesigning the packaging. The relaunch will be backed with in-store tasting, national press advertisements, extensive coverage in its own magazine, in-store point of sale (PoS) material and other promotions. Somerfield’s own-label range includes ice cream, frozen confectionery, fish and ready meals. It is the biggest relaunch ever in frozen food for Somerfield and it aims to bring customers back to buying frozen products without compromising quality.

NEW PRODUCT DEVELOPMENT

Scientists at the US government’s Agricultural Research Service (ARS) have developed new invisible edible coatings made from fish gelatin that could be used to prevent moisture damage in frozen foods. In tests, the alternative coatings, which do not smell or taste of seafood, are protected against unwanted moisture and oxygen to a greater extent than films made from other materials. The gelatins could be used to reduce water loss in refrigerated and frozen foods. Covering a gel-capsule-type medication with a thin coating of fish gelatin would also slow down natural oxidation.



CORPORATE ACTIVITY

Leading foodservice wholesaler and distributor Brakes has been put up for sale by its owners, private-equity firm Clayton, Dubilier & Rice, for an estimated £1.2bn. Originating as a frozen food distributor, Brakes has evolved into a multi-division business, with significant interests across all temperature categories of supply into foodservice operators. Brakes operates 82 depots across the UK and a smaller division in France. Clayton, Dubilier & Rice has owned the business since 2002.

In November 2006, Unilever’s European frozen food business was acquired by Permira, the private-equity firm business for €1.73bn (£1.15bn). Unilever Ice Cream & Frozen Food Ltd was renamed Birds Eye Ltd on completion of the deal.

In July 2006, Northern Foods disposed of NFT, its chilled distribution business and, in January 2007, it completed the sale of its speciality bread, chilled pastry, cakes and flour milling businesses. The company has been streamlining its businesses to focus on its core areas of operation.

In March 2007, Premier Foods PLC acquired the RHM Group for £1.2bn. RHM Frozen Foods Ltd is a subsidiary of the RHM Group.

Uniq PLC has restructured its operations in Northern Europe. It has sold its French spreads and Belgian salads businesses, introduced other restructuring plans in France and is relaunching its Marie frozen foods brand.

LEGISLATION

Quick-Frozen Foodstuffs (England) Regulations 2007

The Quick-Frozen Foodstuffs Regulations implement EU standards on temperature-monitoring equipment for quick-frozen foods. The Regulations provide for the enforcement, in England, of Commission Regulation 37/2005/EC on the monitoring of temperatures in the means of transport, warehousing and storage of Quick-Frozen Foodstuffs (QFF) intended for human consumption. They also consolidate the national legislation to make it easier for all stakeholders to reference.

The Regulations require the application of a uniform standard for temperature-monitoring equipment and will ensure temperature-monitoring equipment complies with harmonised technical requirements and a common approval system across the EU. By establishing these requirements, the Regulations are concerned with maintaining food quality.

The new rules have applied to all new equipment from 1st January 2006, although existing equipment may be used until 31st December 2009.



The key new requirements of the Regulations are:

• All new temperature-monitoring equipment/instruments used in the transport, warehousing and storage of QFF must comply with three European Committee for Standardisation (CEN) standards from 1st January 2006.

• Existing equipment complying with previous legislation can continue to be used only until 31st December 2009. Therefore, existing equipment that does not conform to the CEN standards will need to be replaced before this date with equipment that complies with the CEN standards from 1st January 2010.

• The new temperature-monitoring requirements now apply to transport of QFF by rail from 1st January 2006.

• Food operators must also keep all relevant documents permitting verification that equipment/instruments conform to the relevant CEN standard.

None of the QFF regulations and directives apply if the food is not being described as ‘quick-frozen’. The main exceptions are:

• retail display cabinets

• transport in the course of local distribution (although they do apply to rail transport)

• cold-store facilities with a capacity of less than 10 metres cubed used for storing stock in shops.

ENVIRONMENT

Retailers Aim to Become Carbon-Neutral

The UK’s food supply chain is becoming increasingly ‘green’. Marks and Spencer, for example, is spending £200m to become carbon-neutral by 2012 and Tesco is committing £500m to label the carbon footprint of its products and cut carbon dioxide emissions from its stores.

The implications of this for the nation’s food and drink manufacturers are considerable. The Marks and Spencer strategy will affect all of its suppliers, including manufacturers, which operate from around 2,000 factories. The procurement strategy of Northern Foods, one of Marks and Spencer’s suppliers, is already taking on an increasingly ethical dimension.

The trend will also affect companies involved in the transportation of frozen foods. The introduction by Christian Salvesen of two innovative double-deck trailers for its Marks and Spencer frozen food distribution contract is not only a major development for Christian Salvesen, but for the industry in general as they offer cost-saving solutions, as well as lower carbon dioxide emissions.


Frozen Foods The Global Market

8. The Global Market

EUROPE

Key Note estimates that the frozen foods market in Europe was worth between £35bn and £45bn in 2006, with the higher figure including ice cream sales. In volume terms, the European market sells around 12 million tonnes of products a year, excluding ice cream and frozen chicken. Growth rates in 2006 are estimated to have been fairly modest, at little more than 1%.

The largest European markets for frozen foods in volume terms are the UK, Germany and France, which together account for half of the total. In terms of per capita consumption, the leading European countries include Sweden, the Republic of Ireland, the UK and Denmark. In many Eastern European countries, such as Bulgaria and Romania, the market remains substantially underdeveloped.

Frozen potatoes and frozen vegetables head the market in volume terms while fish, other seafood and convenience meats are the most valuable. The convenience of frozen food, and its generally low prices, are helping to aid sales. Working against growth across the Continent are health scares such as the outbreak of Avian Flu in the UK, which negatively affected frozen poultry sales.

THE US

According to the US-based Information Resources Inc, the US frozen foods market was worth around $28.1bn in the 52 weeks ending 31st December 2006, a 1.8% increase over 2005. In volume terms, the market fell by 0.7% to 10.6 billion units.

Demand for frozen food in the US was fairly buoyant in the earlier part of the decade, with sales in 2001 increasing by 6.1% to $26.6bn. The strength of the market at that time was partly due to a large rise in the number of new products introduced to meet demand for low-carbohydrate foods. Since 2001, however, the annual growth in the value of the sector slowed year-on-year. A slight turnaround got under way in 2005, as sales moved ahead by 1% and that recovery continued into 2006, with the 1.8% advance. Unit sales, by comparison, have continued to struggle since hitting their peak at 11.1 billion in 2001, and they have dropped off each successive year to the current level of 10.6 billion.

Dinners and entrées are the largest sector of the US frozen foods market. In 2006, sales of these items increased by 3.6% to $5.86bn, while sales of ice cream, the second-largest segment, fell by 0.7% to $4.21bn and sales of pizza, the third-largest sector, rose by 0.4% to $2.54bn. Three key protein categories had good years. Processed poultry was up by 4.4% to $1.2bn. Individual quick frozen (IQF) poultry increased by 1.6% to $1.11bn, and meat was up by 1.3% to $1.11bn.



New product introductions, such as slow-churned ice cream and natural and organic pizzas, dinners and entrées, are bringing renewed attention to those categories. In addition, consumers more than ever are looking to frozen fruits and vegetables as part of the overall ‘better for you’ effort in eating and nutrition. In 2006, US shoppers spent $1.8bn on frozen fruits and vegetables.

JAPAN

According to the Japan Frozen Food Association, there has been a steady fall in the numbers of factories in Japan that produce frozen foods. In 2006, the total dropped by a further 4.7% to 778 and there were 13.3% fewer than in 2002.

Table 42: Sales of Frozen Foods in the US by Selected Items ($000 and %), 2006

Value ($000) % of Total

Dinners/entrées 5,863.3 20.8

Ice cream/sherbet 4,206.2 15.0

Pizza 2,543.9 9.0

Novelties 2,385.3 8.5

Seafood 1,697.7 6.0

Plain vegetables 1,529.3 5.4

Breakfast food 1,236.4 4.4

Process poultry 1,201.2 4.3

Meat 1,114.7 4.0

IQF poultry 1,110.0 3.9

Other 5,239.0 18.6

Total 28,127 †100.0

IQF — individually quick frozen

† — does not sum due to rounding

Source: Information Resources Inc



Despite this fall in factory numbers, production of frozen foods in volume terms increased slowly, but steadily, between 2002 and 2006 and, in 2006, it was 4% higher than in 2002, at 1.5 million tonnes. However, the value of the market has fallen slowly and, in 2006, it reached a 5-year low of ¥6,656bn, 5.6% down on 2002.

The major items of frozen foods produced in Japan include croquettes, noodles and pilaf fried rice, which together accounted for over a quarter (27.6%) of total production in 2006. The ten leading items accounted for over half of all frozen food output.

Table 43: Number of Factories Producing Frozen Foods in Japan, 2002-2006

2002 2003 2004 2005 2006

Number of factories 897 840 819 816 778

% change year-on-year - -6.4 -2.5 -0.4 -4.7

Source: Japan Frozen Food Association

Table 44: Production of Frozen Foods in Japan by Volumeand Value (000 tonnes and ¥100m), 2002-2006

% Change2002-

2002 2003 2004 2005 2006 2006Volume

(000 tonnes) 1,485.3 1,496.7 1,526.6 1,539.0 1,545.2 4.0

Value (¥100m) 7,050 6,795 6,730 6,692 6,656 -5.6




The main growth area for the frozen food manufacturers has been the home, or domestic, market which is accounting for an increasing share of Japanese production. Between 2002 and 2006, production destined for the home market increased by 24.6%, compared with a 5.2% fall in production for business. More women are returning to work in Japan and this has led to an increase in demand for convenience and frozen foods, particularly frozen vegetables.

Table 45: Production of Frozen Foods in Japan by Main Products (000 tonnes and %), 2006

000 Tonnes % of Total

Croquette 158.3 10.2

Noodles 154.4 10.0

Pilaf fried rice 114.2 7.4

Katsu 83.0 5.4

Hanbagu 64.5 4.2

Candies 59.8 3.9

Giyouza 40.5 2.6

Shiyuumai 37.0 2.4

Egg product 33.1 2.1

Meat balls 31.8 2.1

Other 768.6 49.7

Total 1,545.2 100.0


Table 46: Production of Frozen Foods in Japan by Market by Volume (000 tonnes and %), 2002-2006

2002 2003 2004 2005 2006

Production (000 tonnes)

Business 1,026.3 1,002.5 999.5 988.9 973.2

Home 459.0 494.2 527.1 550.1 572.0

Total production 1,485.3 1,496.7 1,526.6 1,539.0 1,545.2

Table continues...



Imports of frozen vegetables and other frozen foods into Japan increased from a combined 910,500 tonnes in 2002 to 1.15 million tonnes in 2006, a 26.4% increase. A large proportion of the vegetables come from China, with imports of products such as frozen spinach being popular.

...table continued

2002 2003 2004 2005 2006

Business production as a

% of total production 69.1 67.0 65.5 64.3 63.0

Home production as a

% of total production 30.9 33.0 34.5 35.7 37.0

Total 100.0 100.0 100.0 100.0 100.0


Table 47: Production and Imports of Frozen Foods in Japan by Volume (000 tonnes and %), 2002-2006

2002 2003 2004 2005 2006

Production of frozen food

in Japan (000 tonnes) 1,485.3 1,496.7 1,526.6 1,539.0 1,545.2

Frozen vegetable

imports (000 tonnes) 717.2 679.8 761.3 786.5 831.9

Other frozen food

imports (000 tonnes) 193.3 222.8 259.5 291.1 315.4

Total consumption 2,395.8 2,399.3 2,547.4 2,616.6 2,692.5

Production of frozen food

in Japan as share of

consumption (%) 62.0 62.4 59.9 58.8 57.4


Table 46: Production of Frozen Foods in Japan by Market by Volume (000 tonnes and %), 2002-2006



Per capita consumption of frozen foods in Japan has increased strongly since 2003 and, in 2006, it reached 21.1 kilograms (kg), 12.2% higher than in 2002.

Table 48: Per Capita Consumption of Frozen Foods in Japan (kilograms per year), 2002-2006

2002 2003 2004 2005 2006

Per capita consumption

(kilograms per year) 18.8 18.8 20.0 20.5 21.1



Frozen Foods Forecasts

9. Forecasts

THE ECONOMY

Gross Domestic Product

Gross domestic product (GDP) in the UK is forecast to increase by 2.6% in 2007 and then rise by yearly rates of between 2.4% and 2.6% up to 2011. Although this economic expansion will probably help generate additional spending on premium-priced frozen foods products, it is likely to be of less benefit to expenditure on frozen foods in general.

Population

The UK resident population is forecast to rise by 1 million people, or around 0.4% per year, between 2007 and 2011 to reach 61.9 million. Within these overall population rises, a number of demographic trends are likely to have a more significant impact on frozen food sales. Firstly, the number of children in the population is set to fall, which could have a negative impact on the industry, given that families with young children are among the main consumers of frozen food. By contrast, the number of older people in the population will rise, and as consumption of some types of frozen food tends to increase with age, this could have a beneficial effect on sales.

Table 49: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 2007-2011

2007 2008 2009 2010 2011

Gross domestic product growth (%) 2.6 2.4 2.5 2.6 2.6

Percentage point change

year-on-year - -0.2 0.1 0.1 0.0

Source: Forecasts for the UK Economy, May 2007, Treasury Independent Average © Crown copyright



Inflation

The rate of UK inflation is forecast to fall to 3.1% in 2007 (from 3.2% in 2006) and then decrease to 2.6% in 2008, thereafter gradually increasing to 2011. These forecast annual rates should help to minimise future production cost pressures for the frozen food manufacturers. However, the discounting policy and special price promotions offered by the retailers on frozen foods, if maintained, are likely to result in below-inflation-rate price increases for many of the frozen food categories.

Table 50: Forecast UK Resident Population by Sex (000), Mid-Years 2007-2011

2007 2008 2009 2010 2011

Female 30,987 31,101 31,216 31,333 31,454

Male 29,833 29,984 30,135 30,286 30,438

Total †60,821 61,085 61,351 61,619 61,892

% change year-on-year 0.5 0.4 0.4 0.4 0.4

† — does not sum due to rounding by source

Source: Projections Database (2004-based projections), Government Actuary’s Department © Crown copyright

Table 51: Forecast UK Rate of Inflation (%), 2007-2011

2007 2008 2009 2010 2011

Inflation (%) 3.1 2.6 2.7 2.7 2.9

Percentage point change

year-on-year -0.1 -0.5 0.1 0.0 0.2

Note: inflation is at retail price index (RPI).




Unemployment

The UK is forecast to register a slight decrease in the number of persons unemployed between 2007 and 2011, from 920,000 to 890,000. Falling unemployment, combined with the high numbers of people in work in the UK, generally means that most consumers will have more income to spend and, as such, demand for many low-cost items, such as frozen foods, might suffer a little.

FORECASTS 2007 TO 2011

Frozen food is a mature market and, because of this, only relatively modest levels of growth are expected up to 2011. The persistent discounting and special buy-one-get-one-free price promotions of many frozen food lines continue to affect the image and value of the market, and the competition from chilled and fresh products, in preference to frozen foods, is ever present.

During 2007, the market could, however, benefit from a number of new initiatives from both the retailers and producers of frozen foods. Tesco and Sainsbury’s, for example, are planning new frozen food ranges under their Finest (Tesco) and Taste the Difference (Sainsbury’s) brands, and new frozen food initiatives from Waitrose, Morrisons and ASDA should help to attract more shoppers to the freezer cabinets.

New product launches are also planned from businesses such as Findus, Young’s and Tryton, and a resurgence of the Birds Eye brand, under its new ownership, should provide a boost to the industry. The continuing resurgence of Iceland under its new management should similarly be beneficial for sales.

Key Note forecasts that, in 2007, the total UK frozen foods market will increase by 0.7% to £5.42bn at retail selling prices (rsp). Thereafter, and up to 2011, the positive changes that are being introduced by both producers and retailers of frozen foods could have an increasingly beneficial effect and the annual percentage increase in the value of the sector may show a steady rise. By 2011, the total UK frozen foods market is forecast to be worth £5.79bn, a 6.9% increase on 2007.

Table 52: Forecast Actual Number of Unemployed Persons in the UK (million), 2007-2011

2007 2008 2009 2010 2011

Actual number of claimants (million) 0.92 0.93 0.93 0.91 0.89

% change year-on-year -2.1 1.1 0.0 -2.2 -2.2




Ice cream and fish and fish products are expected to be among the fastest-growing sectors up to 2011. Sales of ice creams should continue to benefit from warmer summers in the UK, while the health advantages of eating fish should continue to boost sales in that segment. Higher-quality frozen cakes and desserts should, in turn, enhance the image of those items, while new innovations in the vegetable and fruit market could help sales move ahead in that sector.

Sales of meat and meat products are forecast to slowly recover by 2011, although sales of frozen poultry could continue to suffer from health scares. The ready meals market could also demonstrate some growth over the forecast period as the trend towards the production of more healthy ready meals gathers pace and sales of frozen pizza should also show a steady, if slow, annual rise. Sales of potato products should similarly show some increase by 2011 if the trend towards more healthy products in this sector continues.

Table 53: The Forecast Total UK Frozen Foods Market by Sector by Value at Current Prices (£m at rsp), 2007-2011

2007 2008 2009 2010 2011

Meat and meat products 1,030 1,030 1,040 1,050 1,070

Fish and fish products 735 755 775 800 825

Ice cream 720 740 760 785 810

Poultry and poultry

products 720 710 710 720 730

Potato products 430 440 450 460 465

Cakes and desserts 420 435 445 450 460

Ready meals (not pizza) 520 510 520 530 540

Vegetables and fruit

(excluding potatoes) 325 330 335 340 345

Pizza 332 335 338 341 344

Vegetarian foods 183 186 189 192 197

Total 5,415 5,471 5,562 5,668 5,786

% change year-on-year 0.7 1.0 1.7 1.9 2.1


Source: Key Note



MARKET GROWTH

Between 2002 and 2011, the UK frozen foods market is forecast to increase by 10.4% to reach £5.79bn.

Figure 3: The Forecast Total UK Frozen Foods Market by Sector by Value at Current Prices (£m at rsp), 2007-2011


Source: Key Note

0

1,000

2,000

3,000

4,000

5,000

6,000

2007 2008 2009 2010 2011

Vegetarian foods

Pizza

Vegetables and fruit(excluding potatoes)

Ready meals (not pizza)

Potato products

Cakes and desserts

Poultry and poultry products

Ice cream

Fish and fish products



FUTURE TRENDS

Change of Image

One of the major challenges facing the frozen food sector involves moving the retail side of the industry away from the ‘cheap and cheerful’ image that it currently holds. The deep discounting and many buy-one-get-one-free promotions that characterise frozen foods undermine the image of the market in the eye of the consumer, reinforcing the perception of frozen foods as being somewhat low-quality, downmarket goods. The pressure is now on for both retailers and producers to present frozen foods in a more favourable and upmarket light. An improvement in quality and a higher level of pricing will be needed, however, if this objective is to be achieved.

Figure 4: Market Growth in the UK Frozen Foods Market by Sector by Value at Current Prices (£m at rsp), 2002-2011


Source: Key Note

4,900

5,000

5,100

5,200

5,300

5,400

5,500

5,600

5,700

5,800

5,900

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011



Sector Consolidation to Continue

The frozen food sector has experienced a considerable amount of consolidation activity in 2006, with the private-equity group EQT selling the Findus brand to CapVest, Heinz selling the Linda McCartney business to Hain Celestial and Unilever disposing off its Birds Eye frozen food businesses to Permira. This trend has continued into 2007, with the purchase of the RHM Group by Premier Foods PLC. Further consolidation along these lines is anticipated as some companies decide to sell their frozen foods businesses, while others choose to extend their presence in the market.

Concerns Over Sodium in Frozen Foods

Sodium could become the new battleground in the quest to make diets healthier. For example, McCain Foods, which has been part of the battle to remove artery-clogging trans-fats from foods, now expects sodium to increasingly gain ground as a health concern. Sodium is linked to high blood pressure and some research suggests that people who cut down on sodium consumption could reduce their overall risk of heart disease. Many food products ranging from snack foods to frozen dinners carry high levels of sodium and, in the UK, the excess consumption of sodium and its dangers are being more widely recognised.


Frozen Foods Company Profiles

10. Company Profiles

INTRODUCTION

The following section contains financial profiles of some of the principal companies identified as operating within the market sector discussed in this report. The financial results of some of the important names within the sector may not be reported if:

• their principal activities are so varied that their results are not considered applicable to the survey

• they are no longer trading as separate companies

• their financial data are very out of date.

DEFINITIONS

A company which has a ‘Y’ consolidated value has filed consolidated accounts for the relevant year.

† — denotes that the growth rate calculation is invalid, because the figures either move from positive to negative or from negative to positive.

Turnover (Sales)

This includes all income derived from the principal activities of the firm, net of VAT. It encompasses UK sales, exports and overseas and intercompany sales.

Pre-Tax Profit

The net trading profit figure after deduction of all operating expenses, including depreciation and finance charges but before deduction of tax, dividends, subventions or group relief, and other appropriations. Where applicable, it will include the share of profits and losses of associated companies. Items described by the company as exceptional are included; extraordinary items are excluded.

Profit Margin

Pre-tax profit expressed as a percentage of sales.

Average Remuneration

Total employee remuneration divided by the number of employees.

Sales per Employee

Sales divided by the number of employees.

FURTHER INFORMATION

For more detailed financial information telephone ICC Customer Services on: 020-7426 8555



BIRDS EYE LTD

Registered Office Station AvenueWalton on ThamesSurrey, KT12 1NTTelephone: 01932-263 000

Company Registration Number 00343496Date of Incorporation 18/08/38Holding Company Unilever UK & CN Holdings LtdUltimate Holding Company Unilever PLC

Previous Name(s) and Date(s) of Change

Unilever Ice Cream & Frozen Food Ltd (03/11/06)Birds Eye Wall's Ltd (14/04/03)Birds Eye Foods Ltd (31/12/81)Birds Eye Foods Ltd (31/12/80)

Principal Activities

The manufacture and sale of quick-frozen foods and ice cream products.

SIC Codes

15899, Manufacture of other food products not elsewhere classified.15520, Manufacture of ice cream.15330, Processing and preserving of fruit and vegetables not elsewhere classified.

Structure

Birds Eye Ltd (formally Unilever Ice Cream & Frozen Food Ltd) was acquired by the private-equity firm Permira from Unilever in 2006. The company has frozen food operations in the UK, Austria, Belgium, France, Germany, the Republic of Ireland, the Netherlands and Portugal. Unilever’s ice cream business, which includes the Wall’s brand, was not part of the sale.

Brand Information

The company’s main brands include Birds Eye, Findus and Iglo.

Recent Developments

Birds Eye has announced that its factory in Hull is to close in September 2007 and production will be moved to Germany.



FINANCIAL PROFILE

Year End 31/12/05 31/12/04 31/12/03 31/12/02Weeks 52 52 52 52Consolidated N N N N

Sales

Sales (£000) 626,989 659,223 684,373 676,706% change year-on-year -4.89 -3.67 1.13 -Exports (£000) 57,663 54,769 58,380 65,206Exports/Sales (%) 9.20 8.31 8.53 9.64

Profits

Pre-Tax Profits (£000) 54,734 42,514 85,864 42,566% change year-on-year 28.74 -50.49 101.72 -Profit Margin (%) 8.73 6.45 12.55 6.29Operating Profit (£000) 59,357 46,799 89,408 45,826

Employees

Number of Employees 1,995 2,802 2,977 3,881Average Employee Remuneration (£) 31,697 23,546 27,771 21,123Sales per Employee (£) 314,280 235,269 229,887 174,364Profit per Employee (£) 27,436 15,173 28,842 10,968Capital Employed per Employee (£) 72,913 48,480 58,329 42,775

Balance Sheet/Ratios

Capital Employed (£000) 145,462 135,841 173,646 166,011Return on Capital (%) 37.63 31.3 49.45 25.64Net Worth (£000) 33,137 13,615 19,697 45,351Current Ratio (%) 1.48 1.29 1.53 1.43Liquidity Ratio (%) 0.48 0.39 0.53 0.50



CHRISTIAN SALVESEN PLC

Registered Office 16 Charlotte SquareEdinburgh, EH2 4DFTelephone: 01604-662 600Fax: 01604-662 605

Company Registration Number SC007173Date of Incorporation 24/06/1909Holding Company None Ultimate Holding Company None


None


A group engaged in the management of outsourced logistics for manufacturing and retail customers in the industrial, consumer and food sectors.

SIC Codes

60249, Freight transport by road not elsewhere classified.63120, Storage and warehousing.

Structure

Christian Salvesen Foods Ltd is part of Christian Salvesen PLC, a major European logistics business employing around 13,000 staff and operating in eight countries. The food division is one of Europe’s largest food-processing companies and the largest processor of frozen green vegetables in the UK, handling a wide variety of vegetables grown in the surrounding fens.

Brand Information

Christian Salvesen produces 49 frozen vegetable products under its own brand Ross, which is the fifth-largest frozen foods brand in the UK. In addition, the company supplies supermarket own brands. The frozen foods produced cover a range of categories, including: vegetables and chips, pizzas, ready meals, fish products, Oriental-style products, burgers and desserts.

Recent Developments

Christian Salvesen PLC has stated that the profit improvement of its Food & Consumer sector for the 6 months ending 30th September 2006 was driven by a good performance in the UK. The food processing business, Salvesen Foods, increased sales, but faced a difficult vegetable harvest in summer 2006.



FINANCIAL PROFILE

Year End 31/03/06 31/03/05 31/03/004 31/03/03Weeks 52 52 52 52Consolidated Y Y Y Y

Sales

Sales (£000) 820,700 805,500 795,200 829,600% change year-on-year 1.89 1.30 -4.15 -Exports (£000) - - - -Exports/Sales (%) - - - -

Profits

Pre-Tax Profits (£000) 15,600 13,200 4,500 -5,500% change year-on-year 18.18 193.33 † -Profit Margin (%) 1.90 1.64 0.57 -0.66Operating Profit (£000) 20,900 18,100 16,900 5,700

Employees

Number of Employees 13,245 13,109 13,302 14,649Average Employee Remuneration (£) 19,592 18,880 18,704 17,947Sales per Employee (£) 61,963 61,446 59,780 56,632Profit per Employee (£) 1,178 1,007 338 -375Capital Employed per Employee (£) 21,616 11,786 21,636 22,118


Capital Employed (£000) 286,300 154,500 287,800 324,000Return on Capital (%) 5.45 8.54 1.56 -1.70Net Worth (£000) -23,100 -14,300 -12,300 -27,800Current Ratio (%) 1.20 0.68 1.17 1.05Liquidity Ratio (%) 1.11 0.62 1.03 0.93



HJ HEINZ COMPANY LTD

Registered Office South BuildingHayes ParkHayesMiddlesex, UB4 8ALTelephone: 01942-214 057

Company Registration Number 00147624Date of Incorporation 01/06/1917Holding Company Heinz Europe LtdUltimate Holding Company Heinz Co (US)


HJ Heinz Company Ltd (23/02/01)


The development, marketing, manufacture, sale and distribution of processed food products.

SIC Codes

15330, Processing and preserving of fruit and vegetables not elsewhere classified.15891, Manufacture of soups.15870, Manufacture of condiments.

Structure

HJ Heinz Company Ltd is a major US-owned packaged-food group, which has had a presence in the UK for more than 100 years. The company has four manufacturing sites in the UK.

Brand Information

Heinz’s leading brands include Heinz Baked Beans, Heinz Baby Food, Heinz Salad Cream, Heinz Soup, Heinz Spaghetti and Heinz Tomato Ketchup. Its ready meals brands include Weight Watchers, and the company is licensed to make Harry Ramsden (frozen fish and chips), and Aunt Bessie’s products under licence to Tryton Foods.

Recent Developments

In January 2007, Weight Watchers launched a new television advertising campaign as part of its overall investment of £5m to drive growth of the brand and the frozen category.



FINANCIAL PROFILE

Year End 27/04/05 30/04/04 30/04/03 27/04/02Weeks 52 52 53 52Consolidated N N Y Y

Sales

Sales (£000) 571,422 562,391 789,116 813,461% change year-on-year 1.61 -28.73 -2.99 -Exports (£000) - - - -Exports/Sales (%) - - - -

Profits

Pre-Tax Profits (£000) 92,088 113,508 101,965 124,130% change year-on-year -18.87 11.32 -17.86 -Profit Margin (%) 16.12 20.18 12.92 15.26Operating Profit (£000) 111,925 116,809 125,591 137,774

Employees






MARS UK LTD

Registered Office 3D Dundee Road SloughBerkshire, SL1 4LGTelephone: 01753-550 055

Company Registration Number 00636458Date of Incorporation 03/09/1959Holding Company Food Manufacturers (GB Company) LtdUltimate Holding Company Mars Inc


Seira Ltd (18/10/82)


The manufacture and sale of food and food-related products.

SIC Code

15841, Manufacture of cocoa and chocolate confectionery.

Structure

Mars has its headquarters in Virginia, in the US, and is entirely owned by the Mars family. It is one of the largest privately owned US corporations. The US division, known as Masterfoods USA, is based in New Jersey. The European division, called Masterfoods Europe, has headquarters in Brussels and in the Netherlands. Mars UK Ltd is based in Slough.

Brand Information

The company’s ice cream brands include Mars, Galaxy, Snickers, Bounty and Twix.

Recent Developments

Masterfoods has pledged to stop advertising its core confectionery and snack brands to youngsters below the age of 12 by the end of 2007. It is the first time a major food maker has set such a high global age threshold for such products.



FINANCIAL PROFILE


Sales

Sales (£000) 1,493,879 1,556,680 1,545,283 1,545,624% change year-on-year -4.03 0.74 -0.02 -Exports (£000) - - - -Exports/Sales (%) - - - -

Profits

Pre-Tax Profits (£000) 170,972 194,243 146,113 158,302% change year-on-year -11.98 32.94 -7.70 -Profit Margin (%) 11.44 12.48 9.46 10.24Operating Profit (£000) 115,256 148,585 139,785 151,021

Employees



Capital Employed (£000) 126,276 106,469 405,256 488,017Return on Capital (%) 135.4 179 36.05 32.44Net Worth (£000) 55,601 -142,001 338,022 438,575Current Ratio (%) 0.40 0.42 0.71 0.95Liquidity Ratio (%) 0.25 0.28 0.46 0.67



MCCAIN FOODS (GB) LTD

Registered Office Havers HillEastfieldScarboroughNorth Yorkshire, YO11 3BSTelephone: 01723-584 141

Company Registration Number 00733218Date of Incorporation 22/08/62Holding Company McCain Holdings BVUltimate Holding Company McCain Foods Group Inc (Canada)


McCain International Ltd (31/12/80)


The manufacture, purchase and sale of frozen foods and dry goods.

SIC Codes

15820, Manufacture of rusks and biscuits; manufacture of preserved pastry goods and cakes.15310, Processing and preserving of potatoes.51390, Non-specialised wholesale of food, beverages and tobacco.

Structure

McCain Foods (GB) Ltd is part of the privately owned Canadian company, McCain Foods Group, the world’s largest producer of French fries and other oven-ready frozen foods. McCain currently operates six UK factories and also has a network of around 400 potato growers in the UK.

Brand Information

McCain markets a range of frozen foods under its name, including chips, potato specialities, pizzas, ‘anytime foods’ and its Micro range.

Recent Developments

McCain Foods has adopted the Food Standard Agency’s (FSA’s) official campaign promoting ‘traffic light’ labelling. The system has won the backing of a number of national grocers including J Sainsbury, Waitrose, ASDA and Marks and Spencer.



FINANCIAL PROFILE


Sales

Sales (£000) 291,229 302,601 311,809 309,291% change year-on-year -3.76 -2.95 0.81 -Exports (£000) 21,543 15,634 17,171 15,075Exports/Sales (%) 7.40 5.17 5.51 4.87

Profits

Pre-Tax Profits (£000) 19,981 35,199 44,028 39,607% change year-on-year -43.23 -20.05 11.16 -Profit Margin (%) 6.86 11.63 14.12 12.81Operating Profit (£000) 23,910 38,615 41,711 35,225

Employees





Frozen Foods Consumer Confidence

11. Consumer Confidence

METHODOLOGY

In order to assess the degree of confidence consumers have, Key Note has commissioned BMRB Access to regularly question around 1,000 adults aged 15 and over in Great Britain about their willingness to spend. Consumer confidence surveys are conducted on a quarterly basis in February, May, August and November. The latest survey was undertaken in February 2007 among 1,002 adults aged 15 and over. Respondents were asked the following two questions:

“Assume you want or need to buy one or more expensive items, like a holiday, car, home improvement or an electronic item (like a widescreen television or home computer). What is the maximum amount of your own savings you would feel confident spending on all of these items at this moment in time?”

“Assume you want or need to buy one or more expensive items, like a holiday, car, home improvement or an electronic item (like a widescreen television or home computer). What is the maximum amount of money you would feel confident borrowing in order to buy these items at this moment in time?”

Respondents were given bands of possible spending levels, ranging from less than £250 to more than £10,000.

Analysing the results enables Key Note to calculate a monetary value of the maximum amount of borrowing consumers feel confident committing to expensive items at a particular instant in time. Tracking changes to this over time allows Key Note to assess changes in confidence alongside an assessment of the proportion of adults willing to borrow. In addition, rather than borrowing, consumers have the option to spend from their past savings, so an assessment of the willingness to use savings to finance expensive items provides a guide to consumers’ willingness to spend and the extent to which they want to spend cautiously (from savings) or spend with more risk (via borrowing).

KEY FINDINGS THIS QUARTER

Consumer confidence has improved this quarter (February 2007), compared with the previous quarter (November 2006) and with the same quarter in 2005. In this quarter’s survey, borrowing and savings data suggest that consumers are more optimistic about spending by going into debt and/or drawing from their savings. In general, the statistical indicators are supporting a pessimistic viewpoint, suggesting that consumers’ overall financial health has deteriorated slightly.



THE WILLINGNESS TO BORROW

Confidence Improves

The end of 2006 and the beginning of 2007 saw a slight improvement in consumer confidence, despite rising interest rates. There was a small improvement in confidence between November 2006 and February 2007, based on the willingness of consumers to buy expensive items by borrowing money. The rise in confidence is impressive given the increase in interest rates in November 2006 and January 2007, and comments from the Bank of England that rates might increase further.

The aggregate amount consumers were willing to spend by borrowing in February 2007 was £53.5bn, compared with £52bn in November 2006 and £52.1bn in February 2006.

Excluding the ‘don’t knows’, the typical adult in Great Britain was willing to borrow £1,084 to finance a major purchase in February 2007, compared with £1,064 in the same period of 2006.

The amount consumers were willing to borrow improved this quarter (February 2007) on a constant price and seasonally adjusted basis. There was a particularly large rise in confidence once price inflation and seasonal factors were taken into account: between November 2006 and February 2007, the average amount consumers were willing to borrow to finance major purchases rose by 10.2% on a seasonally adjusted and constant price basis. However, between February 2006 and February 2007, the amount consumers were willing to borrow in seasonally adjusted and constant price terms declined by 1.4%. This is the fifth successive quarter that borrowing has declined on an annual basis.

Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices

(£ and £bn), February 2006-2007

02/06 05/06 08/06 11/06 02/07

Average amount willing

to borrow at current

prices (£)† 1,064 1,034 1,065 1,061 1,084

% change year-on-year - -2.8 3.0 -0.4 2.2

Aggregate amount willing

to borrow at current

prices (£bn)† 52.1 50.7 52.2 52.0 53.5

Table continues...



In terms of the amount consumers are willing to borrow, the consumer groups willing to borrow the most money are:

• men

• adults from London, the South East and the North

• those aged between 25 and 44 years

• adults in the AB and C2 social grades

• those in full-time employment

• those who own their home with a mortgage

• adults who are widowed or married

• those with young children, aged between 0 and 9 years.

...table continued

02/06 05/06 08/06 11/06 02/07


to borrow at constant

November 2004

prices (£)‡ 1,088 1,005 1,012 974 1,073


† — non-seasonally adjusted

‡ — seasonally adjusted

Source: Key Note/IRN Research

Want more detail? Order further customised analysis through IRN Research on [email protected]. See Further Sources for more on this service.

Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices

(£ and £bn), February 2006-2007



Willingness to Borrow Slips Slightly

February 2007 saw a slight rise in the proportion of adults unwilling to borrow any money to purchase expensive items.

It is generally the case that the willingness to borrow is more common among:

• adults aged between 16 and 54 years

• those in the C2 social grade

• adults living in London, the North, the South East, East Anglia, Wales and Scotland

• adults who are widowed or single

• those with children

• those living in rented accommodation and homeowners with a mortgage

• adults who are in employment.

While these adults are often working, many are not very affluent, and borrowing is likely to be a key method of financing many of life’s basic items.

Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), February 2006-2007

02/06 05/06 08/06 11/06 02/07

Adults aged 15+ 49,004 49,004 49,004 49,004 49,379

Adults willing to borrow 24,698 24,747 22,542 27,344 25,628

Adults unwilling to borrow 24,306 24,257 26,462 21,660 23,751

% of adults unwilling to borrow 49.6 49.5 54.0 44.2 48.1

Net number of adults willing

to borrow 392 490 -3,920 5,684 1,877





Between November 2006 and February 2007, most adults reduced their willingness to borrow, but some groups scaled back on their desire to borrow much more strongly than the sample as a whole. Those who strongly increased their willingness to borrow over the past 3 months are adults who:

• are female

• live in Wales, the East Midlands, Yorkshire and Humberside, the North West, East Anglia and the South East

• are in the DE and C1 social grades

• are aged 55 and over, or are aged between 25 and 34 years

• live in property rented from the council

• are not working

• are separated

• have children aged between 5 and 9 years.

SPENDING FROM SAVINGS

Slight Increase in Spending from Savings

February 2007 saw a slight increase in the willingness of consumers to spend from their past savings, compared with November 2006. In February 2007, the average adult in Great Britain was willing to spend a maximum of £1,677 from his or her own savings on expensive items, compared with £1,665 in November 2006. The increase in willingness to spend past savings was more marked between February 2006 and February 2007.

Compared with the previous survey conducted in November 2006, February 2007 saw a sharp increase in the amount consumers were willing to spend from their savings in constant and seasonally adjusted terms. Between November 2006 and February 2007, spending from savings grew by 8% in seasonally adjusted constant price terms. On an annual basis, spending from savings rose by 13.5% between February 2006 and February 2007 in current, non-seasonally adjusted terms, and by 9.3% after price and seasonal adjustments were made.



Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items

at Current and Constant November 2004 Prices (£ and £bn), February 2006-2007

02/06 05/06 08/06 11/06 02/07


to spend from savings

at current prices (£)† 1,477 1,268 1,609 1,665 1,677

% change year-on-year - -14.2 26.9 3.5 0.7

Aggregate amount willing


at current prices (£bn)† 72.4 62.1 78.8 81.6 82.8



at constant November

2004 prices (£)‡ 1,510 1,232 1,530 1,529 1,651


† — non-seasonally adjusted

‡ — seasonally adjusted





Saving Grows in Relative Importance

As was the case in the previous quarter (November 2006), in this quarter (February 2007), consumers favoured buying expensive items from past savings rather than going into further debt.

In February 2007, of the total amount consumers were confident spending, 60.7% came from savings, which is a slightly lower percentage than seen in the previous quarter, but a higher percentage than seen in the same period of 2006.

Those who are willing to commit only small sums from their savings (e.g. less than £500) to buy expensive items are most likely to be found in the social groups that tend to live off fixed incomes, e.g. adults who:

• are female

• are aged between 16 and 24, or between 35 and 44

• are in the DE social grade

• live in the West Midlands, Wales, Scotland and the North

Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), February 2006-2007

02/06 05/06 08/06 11/06 02/07

From savings (£) 1,477 1,268 1,609 1,665 1,677

By borrowing (£) 1,064 1,034 1,065 1,061 1,084

Total 2,541 2,302 2,674 2,726 2,761

of which:

from savings (%) 58.1 55.1 60.2 61.1 60.7

by borrowing (%) 41.9 44.9 39.8 38.9 39.3

Total 100.0 100.0 100.0 100.0 100.0





• are widowed or single

• live in rented accommodation

• have children

• are retired or working part time.

The groups who are willing and able to commit the heaviest amounts to spending by running down past savings are more likely to be relatively affluent and in full-time employment, or not working, although they are also found in relatively high numbers among adults aged 55 and over.

The adults who are more likely to use their savings rather than going into debt to finance big-ticket purchases tend to be older (aged 55 and over) and affluent adults (in the ABC1 social grades), and those who own their homes outright.

Frozen Foods Further Sources


12. Further Sources

Associations

British Frozen Food Federation3rd FloorSpringfield HouseSpringfield Business ParkSpringfield RoadGranthamLincolnshire, NG31 7BGTelephone: 01476-515 300Fax: 01476-515 309http://www.bfff.co.uk

Food and Drink Federation6 Catherine StreetLondon, WC2B 5JJTelephone: 020-7836 2460Fax: 020-7836 0580http://www.fdf.org.uk

Ice Cream Alliance3 Melbourne CourtPride ParkDerby, DE24 8LZTelephone: 01332-203 333Fax: 01332-203 420http://www.ice-cream.org

Government Sources

Government Actuary’s DepartmentFinlaison House15-17 Furnival StreetLondon, EC4A 1ABTelephone: 020-7211 2601Fax: 020-7211 2630E-mail: [email protected]://www.gad.gov.uk• Projections Database

National Statistics1 Drummond GateLondon, SW1V 2QQ Telephone: 020-7533 5888Fax: 01633-812 599http://www.statistics.gov.uk • Economic & Labour Market Review• Forecasts for the UK Economy• Monthly Digest• UK Business: Activity, Size and

Location

Overseas Trade Statistics5th Floor CentralAlexander House21 Victoria AvenueSouthend on Sea Essex, SS99 1AATelephone: 01702-367 485E-mail: [email protected]://www.uktradeinfo.com



General Sources

Nielsen Media Research1st Floor Atrium CourtBracknellBerkshire, RG12 1BZTelephone: 01344-469 100Fax: 01344-469 102E-mail: nmrcommunication@ nielsen.co.ukhttp://www.nielsenmedia.co.uk

Target Group IndexHadley House79-81 Uxbridge RoadEaling, W5 5SUTelephone: 020-8566 5000Fax: 020-8579 9809E-mail: [email protected]://www.bmrb.co.uk

Other Sources

Information Resources IncEagle houseBracknellBerkshire, RG12 1HSTelephone: 01344-746 000Fax: 01344-746 001http://iriuk.infores.com

Japan Frozen Food Associationhttp://www.reishokukyo.or.jp

Bisnode Sources

ICC CreditTelephone: 020-8481 8800Fax: 020-8941 6014E-mail: [email protected]://www.icc-credit.co.uk

ICC Credit delivers services geared towards maximising the effectiveness of your credit management process. These range from reporting through decision and investigation services to integration and data management services.

ICC Information LtdTelephone: 020-8481 8800Fax: 020-8941 6014msn: [email protected]: [email protected]

ICC can provide information via:

• Juniper (WindowsTM online service), updated daily

• Plum (Internet), updated daily

• Blueberry (CD-ROM — Credit Index, Company Index and Broker 50), updated monthly

• Damson (Bulk Data Supply via EDD, EDI, ISDN, magnetic tape and DAT)

Databases available via Juniper, Plum, Blueberry and Damson include:

• directory information on all live and dissolved companies

• analysed financial information of every trading British company

• database of all 4.9 million directorships

• images of the latest directors’ reports and accounts

• full text annual reports and accounts of UK quoted PLCs

• stockbroker research• shareholders’ information.



Key Note LtdTelephone: 020-8481 8750Fax: 020-8783 0049E-mail: [email protected]://www.keynote.co.uk

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Focusing on the bigger picture, Key Note Market Reviews are designed to inform you of developments and opportunities across entire industry sectors.

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Prospect Swetenhams offers list broking, list management, owned data and data processing services, publishing more than 300 business reports.


Frozen Foods Understanding TGI Data

Understanding TGI Data

TGI Tables, produced by BMRB International Ltd, are generally based on one of the following groups:

• Households — a private household consists of either one person living alone or a group of people, usually, but not always, members of one family, who live together and whose food and other household expenses are managed as one unit.

• Adults — any person aged 15 or over.

• Housewives — a member of a private household who is solely or mainly responsible for the household duties.

Number, Profile, Penetration

Tables used in Key Note reports may give figures for the Number, Profile, and/or Penetration. These terms are explained in the following Table.

TGI data used in Key Note reports are broken down by age, social grade and standard region.

.0

.0

Table Heading

Population Number (000) Profile (%) Penetration (%)

All housewives 20,371 13,535 100.0 66.4

Age

15-24

25-34

Social Grade

AB

C1

Region

Greater

London

Source:Target Group Index, © BMRB International, 1995

1,045 7.7 0.03

2,697 19.9 12.1

61.5

71.9

2,557 10.4 55.2

The total number of adults, housewives, households, etc.

Across

The % of 15-24 year-olds, etc. who are users.

This is the projected number of people in each subgroup who use the product.

Down

The % of each subgroup who are users. Eachsubgroup should total 100% vertically.


Frozen Foods Understanding TGI Data

Social Grade

This is normally based on the occupation of the Head of the Household, or if the Head of the Household is retired, their former occupation. If this information is not available social grade is based on environmental factors such as type of dwelling, amenities in the home, presence of domestic help etc.

Social grade is assessed by the interviewer when collecting the information and is, therefore, based on information given personally and verbally by the respondent. Social grade is checked by BMRB’s coding and editing office.

The following table broadly defines the six social grades used. The relationship between social grade and net income of the Head of the Household is a complex one and readers should note that income is not determinant of social grade.

Standard Region

This is as defined by the Registrar-General.

Social Grade Social Status Head of Household’s OccupationA Upper middle class Higher managerial, administrative or professionalB Middle class Intermediate managerial, administrative or

professionalC1 Lower middle class Supervisory or clerical and junior managerial,

administrative or professionalC2 Skilled working

classSkilled manual workers

D Working class Semi and unskilled workersE Those at lowest

levels of subsistence (no other earner)

State pensioners or widows

Frozen Foods Key Note Research


Key Note Research

Key Note is a leading supplier of market information, publishing an extensive range of consumer, industrial, business-to-business and services titles. With over 25 years’ experience, Key Note represents clear, concise, quality market information.

For all reports, Key Note undertakes various types of research:

Online searching is carried out by product code or free search method, and covers the period from the last edition of the report to the current day.

The internal ICC Juniper database is used to select company information relevant to the particular report. The financial information extracted may then be backed up by further online searching on particular companies.

Trade sources, such as trade associations, trade journals and specific company contacts, are invaluable to the Key Note research process.

Secondary data are provided by BMRB International (TGI) and Nielsen Media Research for consumer/demographic information and advertising expenditure respectively. In addition, various official publications published by National Statistics, etc. are used for essential background data and market trends.

Interviews are undertaken by Key Note for various reports, either face-to-face or by telephone. This provides qualitative data (‘industry comment’) to enhance the statistics in reports; questionnaires may also be used.

Field research is commissioned for various consumer reports and market reviews, and is carried out by NEMS Market Research.

Key Note estimates are derived from statistical analysis and trade research carried out by experienced research analysts. Up-to-date figures are inserted where possible, although there will be some instances where: a realistic estimate cannot be made (e.g. the number of disabled people in the UK); or external sources request that we do not update their figures.

Key Note Editorial Manager, 2007

Frozen Foods The Key Note Range of Reports


The Key Note Range of ReportsKey Note publishes over 180 titles each year, across both the Key Note and MarketAssessment product ranges. The total range covers consumer, lifestyle, financialservices and industrial sectors.

Title Edition Published

Market Reports and Reports Plus

A

Access Control 9 2007

Accountancy 10 2006

Aerospace 12 2003

Agrochemicals & Fertilisers 3 2002

Air Freight 2 2005

Airlines 18 2007

Airports 11 2007

Animal Feedstuffs 11 2001

Arts & Media Sponsorship 1 2005

Automatic Vending 21 2007

Automotive Services 5 2007

Autoparts 18 2007

B

Baths & Sanitaryware 12 2005

Bearings 2 2007

Betting & Gaming 19 2006

Biscuits & Cakes 14 2007

Book Publishing 18 2006

Bookselling 14 2007

Bread & Bakery Products 22 2007

Breakfast Cereals 13 2007

Breweries & the Beer Market 25 2006

Bricks & Tiles 14 2006

Bridalwear 2 2005

Builders’ Merchants 15 2006

Building Contracting 9 2006

Building Materials 12 2006

Bus & Coach Operators 8 2006

Business Press 13 2007

C

Cable & Satellite TV 10 2004

Camping & Caravanning 13 2002

Canned Foods 15 2006

Carpets & Floorcoverings 15 2002

Catering Equipment 10 2007

Chemical Industry 11 2006

Childrenswear 6 2006

Chilled Foods 13 2005

China & Earthenware 24 2007

Cigarettes & Tobacco 20 2006

Cinemas & Theatres 9 2001

Closed-Circuit Television 9 2007

Clothing Manufacturing 13 2006

Clothing Retailing 5 2004

Commercial Radio 8 2004

Commercial Vehicles 13 2006

Computer Hardware 6 2005

Computer Services 7 2004

Computer Software 6 2005

Confectionery 25 2007

Consumer Internet Usage 4 2000

Consumer Magazines 14 2007

Contraception 2 2002

Contract Catering & Foodservice Management 19 2006

Contract Cleaning 19 2006

Cooking Sauces & Food Seasonings 2 2006

Corporate Giftware 2 2007

Corporate Hospitality 5 2006

Cosmetics & Fragrances 20 2007

Cosmetic Surgery 5 2007

Courier & Express Services 14 2005

D

Dark Spirits & Liqueurs 3 2004

Debt Management (Commercial & Consumer) 3 2006

Defence Equipment 10 2006

Design Consultancies 3 2000

Digital Broadcasting 2 2007

Digital TV 2 2003

Direct Marketing 17 2006

Discount Retailing 6 2007

Disposable Paper Products 11 2005

Domestic Heating 13 2007

Dry Cleaning & Laundry Services 5 2005




E

Electrical Contracting 8 2006

Electrical Wholesale 4 2006

Electricity Industry 5 2006

Electronic Component Distribution 12 2002

Electronic Component Manufacturing 11 2002

Electronic Games 4 2003

Equipment for the Disabled 4 2006

Equipment Leasing 12 2003

Estate Agents 15 2005

Ethnic Foods 12 2005

Exhibitions & Conferences 9 2007

F

Factoring & Invoice Discounting 2 2003

Fast Food & Home Delivery Outlets 22 2006

The Film Industry 4 2002

Finance Houses 11 2000

Fire Protection Equipment 8 2006

Fish & Fish Products 12 2004

Fitted Kitchens 10 2002

Football Clubs & Finance 3 2005

Footwear 15 2007

Franchising 10 2006

Free-To-Air TV 8 2004

Freight Forwarding 15 2006

Frozen Foods 22 2007

Fruit Juices & Health Drinks 11 2007

Fruit & Vegetables 20 2007

Further & Higher Education 5 2005

G

Garden Equipment 12 2006

Gas Industry 4 2006

Giftware 15 2006

Glassware 13 2005

Greetings Cards 22 2006


H

Hand Luggage & Leather Goods 13 2007

Health Clubs & Leisure Centres 7 2006

Health Foods 22 2003

Heating, Ventilating & Air Conditioning 9 2002

Home Furnishings 17 2007

Home Shopping 11 2005

Horticultural Retailing 16 2007

Hotels 21 2006

Housebuilding 17 2006

Household Appliances (Brown Goods) 10 2004

Household Appliances(White Goods) 15 2004

Household Detergents & Cleaners 15 2007

Household Furniture 17 2004

I

Ice Creams & Frozen Desserts 12 2007

Industrial Fasteners 8 2001

Industrial Pumps 5 2000

Industrial Valves 8 2001

Insurance Companies 11 2006

Internet Usage in Business 8 2005

IT Security 8 2007

IT Training 11 2007

J

Jewellery & Watches 22 2006

K

Kitchenware 6 2007

L

Laboratory Equipment 8 2006

Lighting Equipment 14 2002

Lingerie 7 2007

M

Management Consultants 10 2003

Market Forecasts 1 2005

Meat & Meat Products 18 2006

Medical Equipment 15 2003

Metal Recycling 4 2004

Milk & Dairy Products 21 2007

Mobile Phones 6 2005

Mobile Telecommunications 2 2007




N

Natural Products 2 2007

New Media Marketing 3 2002

Newspapers 16 2006

Non-Metal Recycling 1 2005

O

Office Furniture 20 2006

Offshore Oil & Gas Industry 4 2006

Ophthalmic Goods & Services 15 2006

OTC Pharmaceuticals 12 2005

Own Brands 11 2006

P

Packaging (Glass) 12 2003

Packaging (Metals & Aerosols) 12 2003

Packaging (Paper & Board) 13 2002

Packaging (Plastics) 14 2003

Paper & Board Manufacturing 14 2002

Personal Banking 11 2000

Photocopiers & Fax Machines 14 2005

Plant Hire 12 2001

Plastics Processing 10 2003

Poultry 2 2005

Power Tools 5 2007

Premium Lagers, Beers & Ciders 6 2004

Printing 12 2007

Private Healthcare 18 2007

Protective Clothing & Equipment 6 2006

Public Houses 23 2007

R

Rail Travel 6 2005

Ready Meals 9 2006

Recruitment Agencies (Permanent) 7 2007

Recruitment Agencies (Temporary & Contract) 7 2007

Renewable Energy 2 2006

Restaurants 21 2006

Retail Chemists & Drugstores 14 2006

Road Haulage 20 2006


S

Sauces & Spreads 10 2007

Shopfitting 13 2006

Short Break Holidays 4 2001

Slimming Market 8 2000

Small Domestic Electrical Appliances 10 2005

Snack Foods 18 2007

Soft Drinks (Carbonated & Concentrated) 16 2006

The Soup Market 1 2005

Sports Clothing & Footwear 11 2007

Sports Equipment 14 2007

Sports Sponsorship 5 2006

Stationery (Personal & Office) 23 2007

T

Take Home Trade 16 2006

Telecommunications 20 2005

Timber & Joinery 18 2006

Toiletries 20 2007

Tourist Attractions 5 2001

Toys & Games 21 2007

Training 15 2006

Travel Agents & Overseas Tour Operators 19 2006

Tyre Industry 3 2006

V

Vehicle Security 8 2007

Videoconferencing 4 2007

Video & DVD Retail & Hire 8 2005

W

Wallcoverings & Ceramic Tiles 17 2006

Waste Management 8 2005

Water Industry 4 2007

Windows & Doors 18 2006

Wine 17 2006

White Spirits 1 2005

Market ReviewsCatering Market 19 2007

Clothing & Footwear Industry 11 2006




UK Computer Market 11 2004

Construction Industry 10 2006

Contracted-Out Services 3 2007

Defence Industry 7 2003

Distribution Industry 9 2007

DIY & Home Improvements Industry 10 2005

Drinks Market 17 2006

The Energy Industry 6 2005

Film Market 1 2006

The Food Industry 17 2006

Healthcare Market 10 2005

Insurance Industry 9 2007

The Legal Services Market 1 2005

Leisure & Recreation Market 15 2005

Leisure in the Home 1 2007

Leisure Outside the Home 1 2007

Mechanical Handling 1 2001

Motor Industry 11 2006

Music Industry 1 2006

Office Equipment Industry 8 2006

Packaging (Food & Drink) Industry 1 2003

Passenger Travel in the UK 5 2007

Pharmaceutical Industry 5 2005

Process Plant Industry 1 2000

The Publishing Industry 11 2006

Railway Industry 2 2006

Security Industry 11 2006

Sports Market 11 2007

Travel & Tourism Market 13 2006

Market Assessment ReportsA

The ABC1 Consumer 2006

Activity Holidays 2006

Advertising Agencies 2007

All-Inclusive Holidays 2000

Alternative Healthcare 2005

Audio-Visual Retailing 2000

B

Baby Foods 2006

Baby Products 2005

Baths and Showers 2000

Beds, Bedrooms and Upholstered Furniture 2000

Betting and Gaming 2002

Book Retailing on the Internet 2007

Bottled Water 2003


Bridalwear 2002

Business Postal Services in the UK 2002

The Business Travel Market 2006

C

Cable and Satellite Services 2002

Charity Funding 2005

Childcare 2006

Children’s Publishing 2005

Clothing Retailers 2000

Coffee and Sandwich Shops 2005

Commercial Dynamics in Financial Services 2005

Commercial Insurance for Small Businesses 2002

Condiments and Sauces 2006

Consumer Credit and Debt 2006

Contact Centres 2007

Contraception 2002

Cooking & Eating 2007

Cross-Border Shopping 2000

The Cruise Market 2005

Customer Loyalty in Financial Services 2000

Customer Magazines & Contract Publishing 2007

Customer Relationship Management 2006

Customer Services inFinancial Organisations 2007

The C2DE Consumer 2006

D

Diet Foods 2007

The DINKY Market 2004

Direct Insurance 2007

Direct Mortgages 2006

Domestic Lighting andElectrical Products 2000

Domestic Telecommunications 2006

E

E-Commerce: The Internet Grocery Market 2006

E-Commerce: The Internet Leisure & Entertainment Market 2006

Electronic Banking 2000

EMU — The Impact on the UK Financial Services Industry 2003

E-Recruitment 2006

E-Shopping 2002

Estate Agents and Services 2006

Ethnic Foods 2002

European Electricity Industry 2007




The European Gas Industry 2005

European Long-Term Insurance 2006

The European Oil and Gas Industry 2005

The European Renewable Energy Industry 2005

European Short Breaks 2001

European Telecommunications 2002

European Tourist Attractions 2007

The European Water Industry 2005

Extended Financial Families 2005

F

Financial Services Marketing to ABs 2006

Financial Services Marketing to ABC1s 2000

Financial Services Marketing to C1C2DEs 2006

Financial Services Marketing to Over 60s 2004

Financial Services Marketing to the Retired and Elderly 2007

Financial Services Marketing toStart-Up Businesses and theSelf-Employed 2003

Financial Services Organisations on the Internet 2005

The Fish Industry 2001

Forecourt Retailing 2006

Functional Foods 2007

Funding in Higher Education 2002

G

General Insurance 2006

Generation Y 2007

Global Waste Management 2007

Green and Ethical Consumer 2005

Grey Consumer 2006

H

Healthy Eating 2006

Holiday Purchasing Patterns 2006

Home Entertainment 2002

Hot Beverages 2007

I

In-Car Entertainment 2000

Independent Financial Advisers 2003

Individual Savings Accounts 2005

Insurance Prospects 2002

Internet Advertising 2007

Internet Service Providers 2005

Issues and Challenges in the UK Life Assurance Market 2002

Issues in Higher Education Funding 2006

IT Recruitment 2007


L

Lifestyle Magazines 2005

Low-Fat & Reduced-Sugar Foods 2006

The Luggage Market 2000

M

Marketing to Children 4-11 2003

Marketing in the Digital Age 2006

Medical & Health Insurance 2007

Men and Women’s Buying Habits 2005

Men’s Toiletries & Fragrances 2006

Millennium Youth 2002

Motor Finance 2005

N

The Newspaper Industry 2005

Non-Food Sales in Supermarkets 2006

Nutraceuticals 2005

O

Off-Trade Spirits 2004

Opticians & Optical Goods 2006

Organic Baby & Toddler Care 2007

Organic Food 2006

OTC Pharmaceuticals 2000

Over-40s Consumer 2005

P

Pay TV 2004

Pension Extenders 2002

Pensions 2006

Personal Banking 2003

Personal Lines Insurance 2007

Personal Loans 2006

The Pet Market 2005

Plastic Cards in Europe 2005

Plus-Size Fashion 2005

Private Sector Opportunities in Education 2001

Public Relations Industry 2006

Public Transport 2001

R

The Railway Industry 2004

Ready Meals 2001

Recycling and the Environment 2000

Retail Credit 2000

Retail Development 2001





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Savings & Investments 2007

Saving Trends in the Eurozone 2002

Singles Market 2007

Shopping Centres 2006

Short Breaks 2004

The Slimming Market 2002

Small Businesses & Banks 2002

Small Office Home Office Consumer 2001

Small Office Home Office Products 2001

The Soup Market 2001

Sponsorship 2000

Supermarket Own Labels 2007

Supermarket Services 2003

Sweet & Salty Snacks 2006


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Trends in Food Shopping 2006

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Vegetarian Foods 2006

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Frozen Foods - Brand Licensing

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