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United Kingdom Food & Drink Report Q1 2008
Business Monitor International, Feb 2008, Pages: 77
The United Kingdom Food Drink Report provides independent forecasts and competitive intelligence on the United Kingdoms food and drink industry.
The UK’s per capita spending on food and drink continues to rise as a move towards convenient and healthy products drives consumers towards higher-margin products. This, coupled with a general trend towards premium, higher-quality products, is forecast to push per capita spending up by 30% over the next five years. This increase is good news for both manufacturers and retailers as the higher margins will aid sales and profit growth in both sectors.
The move towards premium products is highly pronounced in the beer and spirits sector and this has prompted UK based brewer SABMiller to acquire Dutch brewer Grolsch. This acquisition boosts its range of premium beers and allows the company to offer a premium brand with a strong heritage that is already very well known in the UK. Beer sales by value are forecast to increase only slightly over the next five years as volume sales are fairly flat in the mature UK market. Therefore to improve, or even just maintain, profits brewers will need to increase their margins by selling more of these premium products.
In another brewing development Carlsberg and Heineken launched a hostile joint bid for UK firm Scottish & Newcastle (S&N), with the high-growth Russian venture Baltic Beverages Holding, currently jointly held by S&N and Carlsberg, the motivation behind the move. This move highlights the importance that UK and Western European brewers place on emerging markets as sales in many Western Europe markets, including the UK, have been flat for several years and premiumisation cannot be relied upon to improve profits indefinitely.
The UK’s mass grocery retailers (MGR) breathed a sigh of relief as the UK’s Competition Commission announced its findings from its investigation into the MGR sector. The results were good news for most MGRs as the commission found that any lack of competition was due to a scarcity of supermarkets in particular areas giving certain retailers virtual monopolies over certain towns or districts. The report also highlights that the land-banks that retailers have built up are maybe being used to stifle competition.
Therefore the one retailer who may not be totally satisfied with these findings is Tesco who, with the largest amount of undeveloped plots, may be forced to sell-off a considerable portion of its land-bank which may open it up to increased competition.
This announcement and the continued good results being posted by the big MGR operators, thanks to the move towards higher margin products and greater footfall, means that the author is forecasting total MGR sales to increase by 34% over the next five years. The author is forecasting particularly strong growth in the convenience store sector, in which both Tesco and J. Sainsbury are expanding aggressively, as more customers are tempted to shop at convenience stores by the greater quality and range that these large retailers are able to offer.
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