Pie's the limit?

Related tags Meat products Fast food Sausage

With volume growth of just 0.5% and value growth of 1.5% a year, the meat products market is pretty sluggish, says RTS Resource

The Euro 57bn European meat products market is a very important one for the region's food manufacturing and ingredients industries.

With a market volume of 8.4Mt, it is larger than the EU15 markets for biscuits and cakes, cheese, and soups and sauces.

In value terms, it even exceeds expenditure on all fresh fruit. However, despite (or because of) its size, the performance of this market over the past five years has been relatively poor with a total volume growth averaging 0.5% per year and an equivalent value growth of around 1.5%.

Meanwhile, between 2002 and 2007, per person consumption grew by only 0.2% a year. However, annual per person consumption is 21.5kg, or 59g/day.

The largest volume segment is that of fresh type sausages at 3.6Mt. This is followed by bacon and ham. In value, these segments again dominate with sales of Euro 23bn and Euro 15bn respectively.

In terms of volume growth rates, delicatessen meats and prepared poultry have seen the best annual average performances. This is also reflected in value growth rates, although deli meats have experienced the most added values.

Other meat products have performed poorly with canned meats experiencing declines. Despite poor volume growth (0.2% a year) sausages did manage to post a much better value performance. This was mainly due to increases in quality, especially meats (organic and provenance). Meanwhile, the rapid growth in burger consumption, fuelled by the rise in fast food outlets in the 1980s and 1990s, appears to have come to an end.

By country, the largest consumers of meat products, in terms of kilos per person, are the Finns, followed by the Austrians, the Germans and then the Spanish. In terms of total market value at consumer prices, Germany is the largest market (Euro 12bn), followed by Italy (Euro 11bn), the UK (Euro 10bn) and Spain (Euro 9bn).

Between 2002 and 2007, by far the highest volume growth rate was seen in Spain. Denmark, Finland and Ireland also performed above the average while most other countries grew in volume by an annual average of 0% to 0.5%. Consumption in Greece declined slightly.

These performances have to be seen in the light of the EU average food consumption. Unfortunately for the industry, and despite increasing levels of immigration, the EU population has been growing very slowly at just over 0.3% per year.

As population tends to be a primary driver of volume food consumption, the food market (excluding beverage) has been growing at a similar rate, although values have been growing by almost 1.4% per year. Therefore, on this basis, the performance of meat products has been above average. Nevertheless, growth of just 0.5% per year in volume will be considered by many to have been 'difficult'.

As for brands, the European market for meat products is highly diverse, encompassing the large branded players (Nestlé, Unilever, Heinz, Tulip, Fleury Michon, Campofrio, Kerry) to small butchers and artisans.

But retailer own brands are increasingly active. As they tend to be less expensive than the branded equivalent, this has tended to suppress value growth.

The way meat products are produced and retailed varies considerably. In Germany, regional manufacturers dominate while in Italy, small artisan producers have a significant share.

Meanwhile, in the UK, both major brands and retailer own brands hold the major share with butchers in long-term decline.

Meat products and health

As with many other sectors of the food industry, the subject of health has begun to make a serious impact on meat products. This has resulted in the development of variants such as low fat, healthy balance and organic and it would appear that these influences will continue as consumers seek to eat more healthily.

Sausages and comminuted meats

Products such as sausages, burgers and other comminuted meats represent a fairly static but stable segment of the market. Sausages and burgers appeal strongly to children and pre-packaging and character merchandising, are increasingly used to stimulate interest.

Many such products are identified in the consumer's mind as 'economy' items, although manufacturers have been adding both quality and value in order to carve out premium sub-sectors. Flavour and origin are often associated with this drive for quality through the use of exotic combinations of flavours and/or ingredients.

Meanwhile, burger sales have been increasing in some countries following the development of quick service restaurants (QSRs), such as McDonalds, Quick and Burger King although menu offerings are now showing greater flexibility in deference to local tastes, leading to a halt in the growth of the traditional hamburger.

The main trends are:

  • new flavour combinations
  • new flavours to stimulate interest
  • organic alternatives
  • grill/barbecue meats
  • low fat alternatives
  • organic meats/certified meats
  • pre-cooked products for snacking
  • more imported products
  • greater demand for higher quality.

Prepared meats

Bacon, ham and canned meats continue to consist of popular consumer staples, although prices will remain under pressure. While brands and major retailers will encourage the development of added value variants, prices in general will need to remain competitive, with the lowest cost producers gaining volume share.

Some of the products included here are produced and sold locally, to local recipes and traditions, while others (Parma and Serano hams) are distributed internationally or produced by major national and trans-national manufacturers.

Overall consumption of cured meats is showing only a small rate of growth and, in some countries, declines have been recorded.

Added value poultry products have been one main area of growth and, as above, much of this has followed the development of quickserve restaurants.

Other prepared meats, alternative snacks and food-on-the-move

This sub-sector of the market has become one of the most interesting in recent years and is forecast to continue to develop. Having recognised the consumer trend for 'food-on-the-move', many sectors of the food industry have actively been developing new products, or adapting existing ones, in order to satisfy the same market needs.

The best examples are ham and crackers, beef jerky and the long-life salami stick. Unlike bagged snacks, these purport to offer the consumer real and natural food in a variety of flavours to satisfy the demand for fast food, nutrition and convenience.

In a market where companies are looking to identify and exploit new growth opportunities, snacking will continue to provide many opportunities for growth and adding value.

Demand for alternatives to conventional snacks and the general move towards lifestyles necessitating snacking and eating on-the-move, have driven sales in the dynamic international, snacks market.

Hot-eating snacks have also emerged as a growth market on an international scale. These include toaster pastries, frankfurters or burgers-in-buns, to eat in the home or from vending locations.

The future for meat products

Our analysis indicates that the core market for meat products is strong but slow-changing. This is also a highly competitive market and one where careful pricing can make a significant difference to market share.

Most development activity, therefore, takes place on the fringes. These factors are likely to continue to shape the market over the next five years. Volume growth will continue at a slightly higher rate (due mainly to increased levels of immigration) while value growth will continue at an average of 1.5% per year.

The fastest growing segments are forecast to be deli meats and prepared poultry. Sales of traditional fresh sausages are expected to decline slightly, although values will hold up better due to improvements in quality and organic alternatives.

Spain and Portugal are predicted to show the best rates of growth, while consumption in Ireland, The Netherlands, Greece and the UK will register slight declines. Declines will be mainly as a result of competition from other products.

This situation indicates that the market will continue to be highly competitive and pricing will continue to be a key issue. However, there are still opportunities for development.

The key is to be able to identify the hidden opportunities. With some exceptions, the European market for meat products is localised and panders largely to national, and even regional, tastes.

However, consumers are increasingly interested in new products and there are now even more opportunities to introduce local specialities into other, wider markets.

The key trends for the future are:

  • quality improvements
  • organic and provenanced meats
  • healthy alternatives
  • products for snacking/eating on the move
  • easy meal solutions
  • flavour
  • ethnic/exotic/imported specialities.

The international meat products market appears to be polarising with the essential commodities (sausages, ham, bacon) on the one hand and high value specialities on the other.

Mixed in with this are developments in health and quality and, therefore, precise product positioning will be crucial for successful new product development.

For further information, contact Jamie Rice at RTS Resource on +44 (0)1902 422282. wnzvr.evpr@egf-erfbhepr.pbzhttp://www.rts-resource.com​ For more RTS Resource reports, log on to http://www.foodmarketreports.com

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