18 Jan 2008


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Category focus: Breakfast

The market report on the cereals sector, published by Weetabix last November, highlights the fact that 80% of all sales go through multiple grocers.

But you shouldn't worry about that unduly. It is a £1.6bn market and 20% of that is worth having and the market is in growth.

According to Andrew Pyne, corporate affairs manager at Nestlé's Cereal Partners, this is impressive growth considering the maturity of the market and the high household penetration that already exists.

“Manufacturers within the cereal category continue to reformulate existing brands, reducing fat, salt and sugar levels. For example, last year we reduced the salt level in the Shreddies brand by 16%.

Additionally, many companies are setting health and nutrition criteria in development of new products to ensure new brands have good health credentials.

Important message

“As well as the many important health messages, such as wholegrain for health, the industry is communicating the benefits of breakfast in general, working towards being part of the solution in tackling obesity and improving children's performance at school,” Pyne adds.

“In terms of health, the focus is shifting towards more natural ingredients which are naturally good for you'. The biggest talking point last year was oats, with benefits including high in fibre, Vitamin B, and iron, as well as the benefits of using the whole grain, which can help to maintain a healthy heart and help lower cholesterol,” he adds.

Oats

Ken Wood chief executive officerat Weetabix, says oats have led
the NPD plans of most of the major manufacturers. This sector represents approximately 6% of the total cereal market and is the fastest-growing segment of the market. The health benefits of oats have long been associated with the more traditional porridge category. Now with formats such as biscuit and flake, consumers can choose a cold oat cereal that is both quick and easy to eat as well as having all the benefits of oats.

Despite all the healthy eating messaging too many children are skipping this vitally important meal, and Wood says the cereal industry is playing its part to ensure that these messages get through and that people get the right start to their day. Weetabix in particular, with the emphasis on combining fresh fruit and other innovative u toppings, is ensuring the message gets through and is making healthy eating as easy as possible.

Wood believes the overall market will continue to grow but, increasingly, consumers will be making better informed choices.

Phenomenal growth

“The oats market has been experiencing phenomenal growth over the last few years due to the health benefits associated with the product and we have been at the heart of this growth,” says Alan Cullom, retail sales director for Mornflake. Consumers are increasingly turning towards oats. Household penetration is now at 64% and purchase frequency is up by 4%.

“Oats have become a key sector within the breakfast cereal market and it is essential that retailers include oats as part of their offering especially during the winter months when porridge oat sales peak,” adds Cullom.

New product development, as ever, is critical to the sector's long term growth and Mornflake has been busy. The oat crisp market is currently valued at £35.1m however, due to lack of innovation, Cullum says the market has remained relatively static for the past year. In a bid to revitalise the sector and attract new consumers Cullom's team has introduced a range of three different products under its Oat Classics brand.

“The oat crisp market was ripe for the introduction of some new and innovative products that would attract consumer attention,” says Cullom.

No added salt

The range features three recipes, all are light, crispy and blended with real fruit juices along with real fruit pieces ¬ and there is no added salt.

The three variants are: Granny Smith Apple, Macadamia Nut & Cranberry and English Rose. They are all available in 500g boxes and retail at £2.39.

Quaker marketing director, Carol Garbutt adds: “Traditional cooked breakfasts are declining, but hot cereals continue to gain in popularity and breakfast is still the key meal occasion for cereals.

“Quaker research shows that when it comes to choosing what to eat for breakfast consumers opt for something that fulfils functional needs ¬ convenient, energy-giving and hunger-busting. Women in particular want health, while men u are more likely to opt for convenience,” she says. She adds that the research also found that while 72% of consumers state that breakfast is an important, healthy way to start the day, they are not necessarily prepared to sacrifice taste with 85% saying breakfast should taste very good or delicious, 71% saying it should be nutritious, but just 52% stating it should not be fattening.

“Consumers think of breakfast on an emotional level with 72% saying they have to Œfancy' eating a particular breakfast.

Future plans

“2008 is set to be another massive year for Quaker,” says Garbutt. “We are planning some high profile initiatives and NPD to drive average weight of purchase across the range. This in turn will be backed by an even bigger level of support than we put behind our brands last year.

We believe innovation is key to continuing to drive category sales and we have plenty in the pipeline for the coming 12 months.” She says there will also be significant focus on driving penetration and trial of the Quaker ready-to-eat Oat Granola and Oat Muesli ranges. Garbutt says the communications will play up the health credentials of both cereals to bring new consumers to Quaker and to capitalise on the growing demand for healthy products.

New product news

Alara, the UK's biggest manufacturer of organic muesli, has launched its first range of premium oat products.
The OT range is made from organic products such as Omega 3-rich linseeds, strawberries and Lucama fruit and there are three variants ¬ Chocolate, Vanilla and Strawberry. The 500g bags retail at £2.45.
www.alara.co.uk
(020 7387 9303

Carman's Fine Foods, the Australian manufacturer of muesli products, has launched a range of products in the UK. It can now offer 500g packs of its Original Muesli, which retail at around £2.98 as well as its Classic and original Muesli Bars ¬ six-packs retail at £2.25.
8www.carmansfinefoods.com.au

Kellogg's is making its Special K 2008 Slimmer Jeans Challenge bigger than ever this year. The simple and effective initiative helps Œshape-watchers slip back into their favourites jeans' after over-indulging over Christmas.
(0870 240 2393

Cereal facts

Ken Wood, chief executive officer at the Weetabix Food Company, says: “the challenge that all manufacturers face is how to create the appropriate conditions for continued business growth, whether that relates to existing brands or successful new innovations that drive category growth.

“We also recognise how important the sustainability issue is today. I believe that there is an onus on all of us to play a part in promoting sustainability and helping to maintain both a healthy nation and planet for future generations.” The Breakfast Cereal & Cereal Bar Market Report 2007, published by Weetabix, highlighted 10 key points about the market that indicate the direction the sector is taking:

Market growth is at 8% and makes the breakfast cereals market the fastest growing category within the total grocery market lThe market is growing in terms of volume and value growth ¬ not usually the case in such a mature market. This is driven by three factors:

A healthy loaf

Consumer purchasing trends in the UK as a whole have shifted recently towards healthier products as shoppers become increasingly more health focused.
Warburtons Healthy Inside loaf, for example, contains inulin, a pre biotic ingredient which, helps your body produce its own friendly bacteria helping to improve your digestion. As part of the Healthy Inside range, Warburtons launched the 400g Healthy Inside Oats loaf. Given that oats contain the naturally occurring ingredient beta glucan, a soluble fibre which can help reduce blood cholesterol as part of a diet low in saturated fat, it has proven to be an ideal choice for the health-conscious shopper.

The case for bake-off

“According to research shoppers miss breakfast on average 13 times a month, meaning convenience stores are ideally placed to meet this need,” says Clare Hallam, marketing manager at Cuisine de France.

“By offering even a small selection of classic breakfast products you can dramatically increase your sales and shoppers incremental spend.” Cuisine de France offers a wide range of hot breakfast snacks under its Cuisine to Go and Pierre's brands. A core breakfast range should include the best-selling Bacon & Cheese or Breakfast Puff Pastry Turnovers, a Sausage Roll and a selection of hot breakfast sandwiches.

Cuisine de France's hot breakfast components include bacon, sausage, omelette and hash browns, which can be combined with products from its range of bread carriers allowing you to turn the simplest of breakfast sandwiches into something really tasty for your customers adds Hallam.

Now available as part of its Cuisine to Go concept is ŒHeat and Eat' ¬ a sandwich concept designed to deliver a fast and tasty food to go solution.

The pre-filled sandwiches are ready to eat from chilled in as little as 90 seconds.

breakfast occasion

The great British breakfast is an established tradition and research carried out by Heinz shows that the in-home breakfast market is now worth £6 billion. There are 16 billion in-home breakfast occasions per year in the UK and the light breakfast, such as cereal or beans on toast, is growing particularly strongly, up 9% from 2003 as consumers look for quick, convenient and healthier breakfast options.

The cooked breakfast is alive and well and Heinz's research shows that its popularity as a weekend occasion is increasing with 19% of weekend breakfasts featuring a cooked breakfast, up 1.6% since 2003. The cooked breakfast is viewed as an enjoyable occasion that people take their time over, in contrast to weekday occasions when the pressures of work or getting the children ready for school mean only 6% of breakfasts feature a cooked breakfast, a figure which has decreased by 8.5% since 2003.

“The face of the cooked breakfast is changing and no longer has to consist of a ŒFull English' says Nathan Ansell, senior brand manager, Heinz Beanz.

“With the growth of the light breakfast, the cooked breakfast has changed and within the Œlight breakfast' market, cooked breakfasts have grown by 20% since 2003. Consumers are opting for smaller components for their cooked breakfast such as a bacon sandwich or eggs on toast. Baked beans on toast, a prime example of a Œlight' breakfast, has increased from 467 million occasions in 2005 to 484 million occasions in 2006,” he adds.

Natural leaders

With a sales value of almost £7.6bn and as the largest food category, Dairy Crest's 2007 report ŒDairy for life' apprises dairy as; “clearly a super category”.

However, in the latter half of 2007 soaring milk prices and supply issues sent pricing across the sector spiralling. “Up until the end of last summer prices had been flat for at least two years,” says Nick Slater, senior controller ¬ chilled foods at Nisa-Today's. “Since August prices on dairy products have gone through the roof. We have seen increases of up to 25%.” With prices widely anticipated to keep on rising well into 2008, retailers must look to the latest consumer trends to ensure they are stocking products that consumers consider worthy of their price tags.

Naturally healthy

Dairy is well-placed to capitalise on the healthy eating trends that are pushing spending across the entire food and drink sector.

“Consumers intrinsically see dairy as healthy, providing important nutritional benefits,” says Dairy Crest. However, Œhealthy' is no longer the one-dimensional low fat/low calorie concept that it used to be. whilst consumers continue to look to trim their waistlines with lower fat milk products (three quarters of milk sales are semi-skimmed, and skimmed is catching up, says Robert Neal, trading controller at Spar), it's no longer diet-led that is driving demand for Œhealthy'.

Balanced diet

“People are adopting a more holistic, more natural approach and we are seeing consumers switching from diet specific products to foods that positively help them achieve a healthy, balanced diet,” says Chris McDonough, marketing and R&D director at Müller. The new Müllerlight marketing campaign, just launched this January, echoes McDonough's comments, creating a Œhealthy' message rather than positioning it as a diet product.

However, there is still space for indulgence, and consumers are still buying into the cream category. “There has been a definite move towards crème fraiche and soured cream which offer consumers such versatility,” says Slater at Nisa-Today's. “Even mascarpone is becoming a popular cream substitute, through PR from celebrity chefs. Not enough independents stock these products at the moment.” Elsewhere in dairy, the rapid rise of functional products is now beginning to slow.

“Functional spreads such as Flora Proactive have withered somewhat,” says Neal at Spar. “The higher pricing and a reduction in promotional activity have been deterring shoppers.” Even functional yogurts, recent stars of the chiller cabinet, have been suffering. Neal again: “The huge growth in functional yogurts in 2006 has slowed as too many brands have come in and fragmented the category.

Retailers should focus in on known sellers, otherwise they risk confusing consumers with too much choice.” In the butter, spreads and margarine (BSM) category, it's butter which has profited from u this move to Œnatural'. “This year, I think we'll continue to see more people going Œback to butter' as consumers opt for purer, more natural foods,” says Alison Palmer, brand marketing controller for Kerrygold.
However, consumers are still demanding convenience and this has led to a surge in spreadable butter sales, which is the largest sector in BSM, valued at £244m. This has real benefits for retailers, says Neal at Spar: “The margin on these products may be slightly lower, but the the category is not being compromised by BOGOF activity.”

Organic growth

Lurpak's launch into organic butter reflects a wider trend making waves through dairy. According to Lurpak “volume sales of organic BSM are growing 16% year-on-year and worth £13m.” Brands such as Yeo Valley and Rachel's Organic are now moving mainstream and Yeo Valley has heavy investment planned for 2008. Its modern, cleaner rebranding is currently being supported by £3m of press, poster and TV advertising.

Slater of Nisa-Today's says this is not a trend to be ignored. “Organic is growing fast, and as it adds a premium for retailers even smaller stores should be offering Yeo Valley and Rachel's Organic.” Ben Cull, marketing director for Yeo Valley, predicts that organic milk, which he says is seeing 26% growth year-on-year, will continue to be a strong performer. “Organic has really revitalised the milk market and from a virtually static situation it is now in growth again.” However, Neal of

Spar is more cautious about the imminent potential of organic milk: “Organic milk is still not a core product and it's important that it doesn't overface the chiller section, particularly where space is at a premium. As long as you have fresh milk 24/seven then you will be meeting consumers' demands, but you must have the right fat content in stock.”

Popular provenance

An area of continuing growth, which all experts agree retailers should be aware of, is provenance. Mintel reports that the trend for Œbuying British' has provided a “huge boost for sales of British regional cheeses”, which it says rose by 16% between 2004 and 2006.

“In the next 12 months, I think the provenance dairy products seen in the supermarket multiples will be coming into the independents,” says Neal at Spar.

Consumers' palates are also changing, and those after a richer taste are driving sales of extra mature and vintage Cheddars. Slater at Nisa-Today's believes this will also mean an increase in sales of continental cheese:

“Independents still lag behind on continental cheese and we are seeing big growth in these areas.” Whilst Neal at Spar says that it is important to keep stocking the core ranges; “Ultimately the bulk of sales will come from core products from Danone and Muller”, Slater says there is still no excuse for independents not to experiment; “Consumers are now expecting to see all the new products in independent stores too. I would recommend retailers to invest a s much as they can in refrigeration and stock new products, especially those which have been nationally launched.”

Paul Delves, managing director of Harry Tuffins stores, has three convenience stores of between 1,500 and 3,000 sq ft in Shropshire and mid-Wales.

With the most recent store to open boasting 30 metres of chillers, 18 metres of which are dedicated to dairy, Delves has some top tips to maximise sales in this category.

“It's important to keep on reinvigorating dairy with new products to keep it exciting, but we've also got to consider space because no retailer has elastic shelves,” says Delves. “At my stores, it's important to stock local produce. Customers are keen to know that local means reduced food miles and we use barkers at product level to display food miles.” However, Delves advises that pricing is still crucial:

“There is a lot of talk about local and we will continue to expand our local offering, but we've got to get the price right. The two most important things to customers are price and convenience, and customers will still turn their noses up if products are too expensive.”

“Promotions are also always very popular,” says Delves. “as much as 30% of our dairy takings are from promotions and Œ2 for' deals are particularly popular.” In his newest store Delves has sectioned off food-to-go in a separate chiller, and retails milk, one-shot yogurts and some cheese snacks such as Dairylea Dunkers and Babybel.

“Food-to-go is doing well in the new store and we'll look to devote more space to this in the other stores this year,” he says.

“Another area which will certainly continue to grow is Œconvenience' with natural sliced and grated cheese becoming increasingly popular,” says Slater: “Also, food-on-the-go is in huge growth.” Dairylea Dunkers and Philadelphia Snacks are both seeing double digit value growth and there have been range extensions by Cheesestrings (light variant), and by Primula cheese (squeezy tube format) launched in 2007.

Slater predicts there will be even more npd in 2008: “A number of manufacturers are now looking for their products to be stocked alongside sandwiches. Our recommendation is to have a separate food-on-the-go cabinet which should be front of store for easy access for lunchtime trade.”

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