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Chilled Foods Market Report Plus 2009
Key Note Publications Ltd, July 2009
The chilled foods market grew at a healthy pace over the review period (2004 to 2008), with value sales increasing by 20.9%. Growth was well above the rate of inflation each year and a number of factors helped to drive this, including mounting demand for convenience foods and growing interest in health, which has helped to boost sales of functional products that claim a particular health benefit. In addition, a benign economic background from 2004 to 2007 helped to support sales of added-value products, while price rises in 2007 and 2008 also helped to lift value sales. Cheese comprises the largest sector of the market, accounting for 23.2% of sales in 2008, followed by yogurts, yogurt drinks and chilled desserts, and ready meals.
The chilled prepared foods market is one of the most dynamic areas of the food market. 15 years ago, the market was dominated by highly commoditised dairy products such as milk and cheese; however, over the intervening period, suppliers and retailers have placed increasing emphasis on developing the chilled cabinet. This is now one of the largest areas in many supermarkets, which is packed with high-value, convenience products that tend to have a healthy image and, therefore, appeal to increasingly time-pressured and health-conscious consumers.
Suppliers have been keen to enhance the healthy image of the market by developing functional products such as yogurts and yogurt drinks that claim particular health benefits (e.g. improving digestion or reducing bloating). Meanwhile, the convenience factor has led to an explosion in demand for chilled ready meals and pizzas. These have been perceived as healthier, more flavoursome and more exciting than competing products in the frozen cabinet. However, in 2008 the recession affected sales in both the ready meals and pizza sectors, with price-conscious consumers either deciding to save money by cooking from scratch at home or buying competitively priced products in the freezer cabinet.
Large multinational companies dominate certain sectors of the chilled foods market; the giant US food company Kraft is a major player in the cheese sector, while Nestlé has significant interest in the yogurt, yogurt drinks and chilled dessert sector. Nevertheless, the market is also home to many medium-sized companies such as Arla Foods, which has a strong presence in milk and yellow fats, as well as small niche players supplying companies that manufacture local cheeses or that have a major presence in certain sectors. Therefore, Kingdom Cheese and Dairy Company may not be a household name, but it is the UK's second-largest producer of cottage cheese after Uniq.
The authors forecast that the value growth of the chilled foods market will slow sharply in 2009 and 2010. This will largely reflect falling dairy prices around the globe, as increased supply meets weakening demand. The recession will also encourage UK consumers to trade down to lower-cost products. Even though the recession may be over by the end of 2009, unemployment will keep rising in 2010 and this will continue to hamper any recovery in consumer spending. Growth will gradually pick up in the following years, as the UK and global economy recovers and demand for dairy products around the world revives.
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