Crisps and Snacks - UK - May 2005

SUMMARY

Sales of crisps and snacks increased by 10.1% between 2000 and 2003 to peak at £2,386 million. A decline of 3.5% in 2004, however, took retail sales to £2,303 million. The key factor currently impacting on the crisps and savoury snacks market is public concern regarding rising levels of obesity and the need for many to follow a healthier more balanced diet.

The crisps sector accounts for just over 56% of total crisps and savoury snack sales. Within the crisps sector, sales of added value/premium crisps saw their share of sales increase from 20% in 2000 to 26% in 2004. Within the savoury snacks sector, stacking chips have struggled to maintain their value, while the share of sales accounted for by child-oriented products has declined.

TABLE OF CONTENTS

Introduction and Abbreviations

Definition

Consumer research

ACORN

Advertising data

Abbreviations

Executive Summary

Obesity issue having a stinging impact

Niche sectors are seeing growth

Market segmentation

Walkers Snack Foods Ltd dominates

Advertising critical to target children

Multiple grocers stranglehold tightening

Penetration levels remain high

A market at a crossroads?

Market Drivers

Shrinking number of 15-24-year-olds providing a challenging market

• Figure 1: UK population breakdown, by age, 2000 and 2005

Slimming and dieting issue

• Figure 2: Adults who have felt overweight in the last year, by gender, 2004
• Figure 3: Adults who are trying to slim, by gender, 2000-04

Potential consumption occasions are declining

• Figure 4: Methods consumers would use to lose weight, January 2005

Crisps declining popularity amongst adults as a snack

• Figure 5: Foods eaten between meals in the preceding month, 2000-04

Premiumisation is a factor too

• Figure 6: Agreement with selected lifestyle statements, 2000-04

A sharp rise in childhood obesity

• Figure 7: Agreement with statements about eating, 11-14s, 2001-04

Government White Paper on health - November 2004

Increase in disposable income for kids

• Figure 8: Average weekly income of children aged 7-14, by gender and age, 2001-04
• Figure 9: Average monthly income of children aged 15-16, by gender and age, 2001-04

Children痴 weekly spend increasing with hyper-parenting

• Figure 10: Average weekly spend, 11-14-year-olds, 2004

NPD

Market Size and Trends

Did 2003 mark a turning point?

• Figure 11: UK retail volume and value sales of crisps and snacks, 2000-05
• Figure 12: UK retail value and volume sales of crisps and snacks, by sector, 2000-04

Market Segmentation

Crisps

• Figure 13: UK retail volume and value sales of crisps, 2000-05

Launch of Sensations helped to establish a premium segment

• Figure 14: UK retail value sales of crisps, by type, 2000-04

Sales of low-fat crisps have failed to see significant take-off

• Figure 15: UK retail sales of lower-fat potato snacks*, 2000-05

Trend in packaging towards larger bags

Crisps by flavour

• Figure 16: UK retail value sales of standard/regular crisps, by flavour, 2002 and 2004

Snacks

Snack sector has spearheaded market decline

• Figure 17: UK retail volume and value sales of snacks, 2000-05

Stacking sector increasingly focused on dipping occasions

• Figure 18: UK retail sales of stacking chips, 2000-05

Child-specific vs general

• Figure 19: UK retail sales of savoury snacks in the UK, by type, 2000-04

The Supply Structure

Overall market share

• Figure 20: Manufacturer shares in the UK crisps and snacks market, by value, 2002 and 2004

Crisps

• Figure 21: Company shares in the UK crisps market, by value, 2002 and 2004

Snacks

• Figure 22: Manufacturer shares in the UK snacks market, by value, 2002 and 2004

Companies and brands

Walkers

KP

Golden Wonder/Snack Factory

Procter & Gamble

Kettle Foods

Red Mill Snack Foods

Intersnack

Quaker Oats

Seabrook

Burts

Jonathan Crisp

Tayto Ltd

Tyrells

Other companies and brands

Own-label

New Product Development

Introduction

Health-inspired developments

Low-carb

Low-fat

Low-calorie

Low-salt

Low-cholesterol

Higher protein

Flavour trends

Cuisine-led

Premiumisation and greater variety

Organic

Packaging

Targeting men and the adult consumer

Seasonal/limited editions

The future

New Product Briefs

December 2004

November

October

September

August

July

June

May

April

March

February

January

Advertising and Promotion

Rising media spend

• Figure 23: Main monitored media advertising expenditure on crisps and snacks, 2000-04

Declining market size could see advertisers rein in their spend

• Figure 24: Main monitored media advertising expenditure on crisps and snacks, 2000-04

Walkers accounts for almost half of the total spend

• Figure 25: Main monitored media advertising expenditure on crisps and snacks, by manufacturer and retailers, 2002-04

Walkers

Procter & Gamble

KP

Golden Wonder

Why is advertising so important?

• Figure 26: Agreement with statement " I like to buy things seen in adverts on TV" 7-10 and 11-14s, 2001-04

Attitudes towards television advertising not so positive amongst adults

• Figure 27: Agreement with lifestyle statements on advertising, 2001-04

Below the line

Multibuy promotions dominate

• Figure 28: Share of promotions in the savoury/salty snacks market, by type, January-December 2004 (multiple grocers only)
• Figure 29: Instant win promotions, January-December 2004

Impulse sales in the independents are critical

Distribution

• Figure 30: UK retail sales of crisps and snacks in the UK, by type of outlet, 2002 and 2004
• Figure 31: UK retail sales of crisps and snacks in the UK, by type of outlet and product, 2004

The Consumer - Consumption Trends

Potato crisps and potato snacks, and other savoury snacks

Consumers cutting down on potato crisps and potato snacks

• Figure 32: Weight of consumption of potato crisps and potato snacks, 2002-04

Other savoury snacks are spearheading market decline

• Figure 33: Weight of consumption of other savoury snacks, 2002-04

Detailed demographics - potato crisps and potato snacks

All users

35-44-year-olds are the greatest users, then usage declines with age

Retired, older consumers eschew potato crisps and snacks

Presence of children is a strong discriminator

Widespread usage throughout GB

Heavy users

Men are the heaviest users and heavy usage declines with age

• Figure 34: Heavy usage of potato crisps and potato snacks, by age, 2004

Presence of children drives heavy usage

North/South divide

Family and pre-/no family lifestages are the heaviest users

Medium users

Men are most likely to eat crisps two or three times a week

AB consumers least likely to be medium users

The presence of children is not as great an influence

Low propensity for medium users in London but high in the provinces

Light users

Women are most likely to be weight-conscious

Better-off socio-economic groups are light users

Childless households are most likely to be light consumers

Smaller households most likely to be light users

Londoners are light users

ABC1 third age and ABC1 retired are most likely to be light users

Detailed demographics - other savoury snacks

All users

Women are more likely than men to consume other savoury snacks

Other savoury snacks are a mass-market product

Three quarters of those living in families eat other savoury snacks

• Figure 35: Consumption of other savoury snacks, by presence children in household, 2004

Other savoury snacks users are found in the provinces

Heavy users

Children are the most important factor

Medium users

22% are medium users

Household size is again a major factor

Light users

Women are most likely to be light users

ABs are the lightest users

Concentration in one-person households in South East/East Anglia

Retireds show a low propensity to be light users...

because they are most likely to be non-users

Product types

• Figure 36: Crisps and savoury snacks purchased in the last three months, January-February 2005

The power of brands

No clear trend towards healthier products

17% of consumers purchased a multipack

Low-fat crisps have a strong feminine appeal

Pan-fried/hand-cooked crisps appeal to AB consumers

Biscuit-based snacks popular with younger adults

Children are a key driver of corn-based snacks

DVDs and videos drive popcorn sales

Families drive multipack usage

The Consumer - Usage: Detailed Demographics

Weight of usage

Crisps and potato snacks

• Figure 37: Penetration of potato crisps and potato snacks, by gender, age, socio-economic group, presence of children, marital status, working status, household size, region, lifestage and Mintel痴 Special Groups, 2004

Other savoury snacks

• Figure 38: Penetration of other savoury snacks, by gender, age, socio-economic group, presence of children, marital status, working status, household size, region, lifestage and Mintel痴 Special Groups, 2004

Product type

• Figure 39: Crisps and savoury snacks purchased in the last three months, by gender, age and socio-economic group, January-February 2005
• Figure 40: Crisps and savoury snacks purchased in the last three months, by presence of children in household, lifestage and Mintel痴 Special Groups, January-February 2005
• Figure 41: Crisps and savoury snacks purchased in the last three months, by working status and household size, January-February 2005
• Figure 42: Crisps and savoury snacks purchased in the last three months, by region and ACORN category, January-February 2005
• Figure 43: Crisps and savoury snacks purchased in the last three months, by media usage, commercial TV viewing and supermarket usage, January-February 2005

The Future

The future heralds a change of zeitgeist

Decline in children aged 0-14 will offer manufacturers a challenge

• Figure 62: Forecast population of children, 2005-10

Opportunities must reposition crisps and snacks on a healthy platform

Manufacturers will increasingly turn to the adult market

Greater opportunities for segmentation

Limited editions will remain important

Legislative issues remain unclear

Forecast

Market set to see torpid growth

• Figure 63: Forecast of the crisps and snacks market, by value, 2005-10
• Figure 64: Indexed growth rates of the crisps and snacks market in the UK, AT 2005 prices, 2005-10

Added-value propositions will aid crisp sales

Bad news for the market

Strategies for the market

Volume sales will lead decline

• Figure 65: Forecast of the crisps and snacks market, by volume, 2005-10

Healthier varieties are key

• Figure 66: Forecast of the crisps and snacks market, in percentage terms, 2005-10

Factors used in the forecast