23
1 Introduction Due to lifestyle changing as people stay at home alone or women start working, people have to save their time and their money. As stated by Brown (2010), consumers are eating more at home and eating out less. In other words, they get going to consume and use products which is convenient for them such as frozen foods or ready meals more because buying prepared meals to cook at home is cheaper than going out to the restaurant and easier than cooking by themselves. This brings an increase in sales of convenience foods nowadays. Moreover, another point is peoples’ attitude about prepared meals are changed since the manufacturers noticed that quality of ready meals have been improved more than the past. A meal can be home cooked, by the consumer or others, but it can also be produced outside the homre. For instance, hotels, restaurants and cafes, institutional kitchens or takeaway and retail outlets according to Ahlgren(2004). There was a minimal growth of ready meals market value in the amount of 3.1%, rising from £2.70bn in 2008 to £2.79bn in 2009, representing CAGR of 3.8% in the period 2005-2009. (see appendix I) This report begin with the structure of ready meal industry in the UK, focuses on the players in this industry market. In order to know general information and understand clearly about prepared foods industry, this report displays the analysis by using PESTEL for macro environment and follows by Porter’s

Ready Meal

Embed Size (px)

Citation preview

Page 1: Ready Meal

1

Introduction

Due to lifestyle changing as people stay at home alone or women start

working, people have to save their time and their money. As stated by

Brown (2010), consumers are eating more at home and eating out less. In

other words, they get going to consume and use products which is conve-

nient for them such as frozen foods or ready meals more because buying

prepared meals to cook at home is cheaper than going out to the restau-

rant and easier than cooking by themselves. This brings an increase in

sales of convenience foods nowadays. Moreover, another point is peoples’

attitude about prepared meals are changed since the manufacturers no-

ticed that quality of ready meals have been improved more than the past.

A meal can be home cooked, by the consumer or others, but it can also

be produced outside the homre. For instance, hotels, restaurants and

cafes, institutional kitchens or takeaway and retail outlets according to

Ahlgren(2004).

There was a minimal growth of ready meals market value in the

amount of 3.1%, rising from £2.70bn in 2008 to £2.79bn in 2009, repre-

senting CAGR of 3.8% in the period 2005-2009. (see appendix I)

This report begin with the structure of ready meal industry in the UK, focuses on the

players in this industry market. In order to know general information and understand clearly

about prepared foods industry, this report displays the analysis by using PESTEL for macro

environment and follows by Porter’s five forces model which analyse micro environment, in-

cluding the prospect development.

The Structure Of Ready Meal Industry

Page 2: Ready Meal

2

Considering and understanding some major firms who are the leading

players in the ready meal market is greatly necessary. According to ready

meal industry profile (Datamonitor 2009), Northern Foods plc is the leader

of ready meal market share in the UK, follow by Premier Foods plc and

Kerry Group plc.

United Kingdom ready meals market share: % share, by value, 2009(e)

Northern Foods provides ready meal products to several food retailers

such as Marks & Spencer, Sainsbury’s, Tesco, and Asda. There was a raise

of turnover from £975.2m in 2009 to £977m one year later but a profit be-

fore taxation decreased to £7.4m, compared with £12.1m in 2009 (see ap-

pendix ll). Additionally, the powerful production of the products such as sal-

ads and sandwiches cause an increase in revenues segment. The next

manufacturer is Premier Foods who supplies the products which are manu-

facturers-branded and own-label products. The company’s revenues in

2009 dropped to £1.52bn from £1.6bn in a previous year. In contrast, a

pre-tax profit in 2009 saw a further sharp rise to £100m, which was 5

times higher than the figure in 2008. The reason for this is in early 2009,

the company extended the range of side dishes of Indian ready meals in

microwavable packages(see appendix lll). The other company is Kerry

Foods who owned by an Irish firm and selling retailer-branded and private-

label ready meals to markets in the UK and Ireland made a turnover of

£477m and £524m in 2008 and 2009, but the pre-tax profit fall to £14m in

2009 from £16m a year before (see appendix llll).

Macro Environment Analysis

Page 3: Ready Meal

3

According to Kew and Stredwick (2008), The macro environment is

more complex than the micro environment and the internal environment

because it is an uncontrolled factors. The company should list the environ-

mental factors which can have an impact on the company in the first step.

Recession, inflation, unemployment, and policy changing of government

are all instance of macro changes. We can classify by using analysis tool

‘PESTEL’

PESTEL

Political and Legal Factors

Government and other polities’ events always effect on the firms and

industries directly (Sloman and Sutcliffe 2004 p6). All businesses will be

conducted by the authority via using regulations, a role of legislation, stan-

dards, and a mass of laws. For example, Keynote (2010) reports that the

Food Safety Act 1990 is one of the major legislation overspreading the

food industry in the UK in two main areas-Food standards and Food hy-

giene and Food Labelling Regulation 1996 which are governed for labelling

the specific food products, applying in the UK.

Moreover, there are several trade associations who play the role in

food industry such as Chilled Foods Association who advertise and look af-

ter the interest of the frozen food industry and British Frozen Food Federa-

tion who develops common standard of quality in chilled prepare food

products. However, one of the key organisation that control the quality

and safety of food in UK is “Food Standards Agency”.

Economic Factor

GDP Quarterly Growth (%)

Page 4: Ready Meal

4

Source: Office

for Na- tional

Statis- tics

Ac- cord-

ing to Keynote (2010), the booming economic of the UK started in 1992

and met an end sixteen years later. In the second quarter of 2008, the UK

entered to the recession and plummeted in the next quarter, and contin-

ued the fall to the third quarter of 2009. Consequently, the economy met

the recession for six months which was the longest period of recession

that the UK have met. However, in the last period of 2009, the UK econ-

omy started to recovered from the recession to the same level before as

the Officer for National Statistics said that due to an increase in produc-

tions and services, GDP has a growth of 0.1 %, compared with a fall of 0.2

% in the previous quarter.

Furthermore, in the figure above, the office for National Statistics

(2010) reports there was a slight growth in Gross Domestic Product (GDP)

by 0.8 % in the third period of 2010 and it rose by 2.8 %, compared with

the same quarter in the previous year. Thus, the trends of the UK economy

is going up slightly.

Inflation

Page 5: Ready Meal

5

Source: Office for

National Statistics

Re- fer to

Kew & Stredwick (2008 p109-110), inflation is an increase in the level of

retail and consumer prices. If the inflation in the UK get higher at a fast

rate, it will be a devaluation of the UK currency. As a result, during 2009,

the recession has helped the inflation fell rapidly. However, the inflation

rocketed at the end of the year. As The Office for National Statistics has in-

dicated, there was a sharp increase in the Consumer Price Index (CPI), ris-

ing from 1.9% to 2.9% between November and December in 2009.

The factors that influence on the change in CPI inflation in upward

trend came from food, drinks, clothing, household equipment while fuels

and air transport are the largest downward pressures. These factors have

an affect on the RPI as well. As the latest figure from National Statistics

shows the CPI annual inflation and RPI annual inflation were 3.3% and

4.7% , respectively.

Unemployment

Page 6: Ready Meal

6

Source: Office for National Statistics

A study by Keynote (2009a) indicates due to the booming of the UK

economy since 1992, there was a low level of unemployment rate during

2004 to 2007, but the number of people out of work went up significantly

to 7.9% or approximately 2.5 million in September 2009 because of the re-

cession that the UK met in summer of 2008.

Next, there was a slow growth in unemployment rate compared with

previous quarters, indicating that the economy may be beginning a very

gradual recovery.

Social Factor

Page 7: Ready Meal

7

According to Keynote (2009a), Over the past 50 years, The growth of

number of working women and single-person resident has reflected to the

Demand for easy-to-prepare food products. Moreover, freezers and mi-

crowaves are ubiquitous at the present so this led the cooking is easier

and faster. In addition, since the home-entertainment market invested

heavily on home-entertainment channel and equipment such as high-defi-

nition television and game consoles, people in the UK prefer staying at

home to going out somewhere with their family and friends. what is more,

as the consumers’ disposable incomes and number of hiring people fall,

meaning that they should save their money more. In doing so, the conve-

nience food products is becoming more popular than the past and the

word ‘staying in is the new going out’ is occurred.

The awareness on nutrition in convenience products is one of the key

factor that influences on customer decision. Hence, the makers try to per-

suade customer that their brands contain healthy aspects by using prod-

uct labelling schemes showing how the product is on the label of pack-

ages. For example, the organic food sign or low fat sign on the products.

Technological Factors

Refer to Kew & Stredwick (2008), there are various new technologies

have an impact on humankind such as information technology, communi-

cation technology, transportation technology and the Internet. These tech-

nologies are changed and developed constantly to be an invention and in-

novation. Nowadays, it is an absolutely acceptable fact that the Internet

has a great affect on everybody even though on the retailers. This leads to

many large retailers offering e-shopping to the customers. So that the

number of e-customer has risen quickly. As the report of Keynote(2010)

shows there was a dramatic increase by 20% in online sales of Tesco in

2009. In the UK, the internet access home rate has grown every years, the

number of Internet access increase from 69% in 2006 to 90% three years

later. However, there are some parts of rural area where are far away from

a telephone line and cannot access to the Internet.(Keynote 2010)

Page 8: Ready Meal

8

Environmental Factors

Due to changing of climate, the issue of Global warming is becoming a

more and more controversial topic in the media nowadays. This leads to

modification of manufacturing and delivery process. The company have to

concern and care about their processes which can damage the environ-

ment and based on altruism. However, Benett & Welch (2010) argue that

overuse and misuse devalue the meaning of green. The companies should

understand their aims of their green businesses clearly and know the posi-

tion they will be in next five or ten years. The clear example for this is

Marks & Spencer company. They claims that on 15 January 2007, Marks &

Spencer launched the green project called Plan A, they pledged to change

100 things in 5 years and now they have made progress on over 80 things.

There are some obvious highlights such as over 20% of the business has

now moved to renewable electricity, electric truck runs on zero emissions,

fully recyclable packaging. (Mark & Spencer 2010)

Micro Environment Analysis

As stated by Kew and Stredwick (2008), in fact there are more com-

plexity and difficulty in the reality of industrial world so the company

should choose the right analysis tools which match to this complex situa-

tion. In this stage, Michael Porter’s Five Forces Model is suitable for

analysing the near environment. As stated by Datamonitor (2010)

Page 9: Ready Meal

9

Threat of new entrants

This threat depends on the level of the barriers of each industry which

the new company entrance to. In this stage, establishing new ready meal

factory and promotion to the market require high capital investment ex-

penditures. A result for this it would be too risk for small business to suc-

ceed in the global market level. What is more, persuading the retailer to

place new ready meal brand on the shelf in their stores is quite hard be-

cause there is a limit space for the products from numerous brands and

the shops would not like to lose the sales of existing brand product which

familiar to customers. For this reason, the accessing to the market by this

distribution channel is a barrier for the new entrants. Overall, the threat

for the new firms to entry is evaluated as strong.

Bargaining Power of Buyers

In this process the buyers means many retailer such as supermarkets

and hypermarkets which are the main distribution channels for ready

meals product in the UK and the market value of this channel is approxi-

mately 80%. Because of this, these retailers buy a large volume of prod-

ucts and have a power to make a bargain to the factory owners. Overall, it

could be suggest that power of purchasers is strong.

Bargaining Power of Suppliers

There are a large number of primary suppliers which frequently include

not only agriculturists but also grazier s. Nevertheless, numerous food

manufacturers do not buy their materials from these direct suppliers,

whereas they buy from a few large companies that trade in commodities

on a worldwide scale which usually offer some pre-factory processing such

as conversion of oilseed to oil (OEM). Besides, from the ready meal manu-

facturing companies’ perspective, this organization increases supplier

Page 10: Ready Meal

10

power. In other word, suppliers have more bargaining power from this

structure. If Outstanding manufacturers want to keep their brand equity in

the ongoing term, they have to retain a quality of product. Apart from this,

they need to source raw materials which are appropriate for quality, this

lead to the suppliers who can produce required products being more pow-

erful.However, lack of a variety of commodity material debilitates supplier

power. What is more, substitutive materials are important for raw materi-

als; for example, if the price of pork increases, a manufacturer could re-

duce the volume of buying it and buy a cheaper substitute instead such as

chicken and beef. All thing considered above, it is clearly that supplier

power is evaluated as powerful. Commodities are key factor of power of

suppliers, if price of raw the materials increase there would be an effect to

M&S directly.

Threat of Substitutes

There are a variety of substitutes for ready meals such as delicatessen,

canned food, instant noodles or processed food. However, the quality of

frozen food is better. It is too complicated to evaluate the price because

the retailer will pay for these products on a different consideration. If the

performance is similar to the products with near prices, the threat will be

strong.

The intensity of rivalry among existing Firms

There are three manufacturing leaders of ready meal market in the UK

who having 23.2% of the whole market share which can show the competi-

tive level is high. In fact, it is very easy for retailers to change the products

between different manufacturers. However, brand loyalty of customer is

an obstacle for this situation. Because of the ready meals products are

identical, the competition is strengthen and it is very hard to retain exist-

ing customer.

Page 11: Ready Meal

11

Conclusion

A few year ago, the UK has faced to the recession. The result for this is

the British had to spend less money and the number of unemployed peo-

ple had increased. In the fact that the price of ready meals products is

cheaper than the meals at the restaurant, people buy these kinds of prod-

uct more. Moreover, the perception of convenience foods have been

changed more in a positive way, as the quality of the product was im-

proved and better design packaging. Additionally, there is a wide variety

of products such as Thai food, Indian food, Chinese food, Italian food or Ja-

panese food, so the consumers have a large number of alternatives for

their meals by buying from the supermarket or hypermarket.

The high demand of ready meals from 1990s caused high level of com-

petition, many producers invested their money to construct and enlarge

the factories. However, the products are undifferentiated therefore it is

quite hard to retain the customers especially price sensitive customers.

To sum up, economic cycle is not an important factor that can have an

impact on food expenditure as other sectors such as furniture, clothing,

electric tools and extravagant goods the reason for this is food expendi-

ture is a vital shopping for every households.

Mission Vision Values(Goals)

M&S outlines its core business as clothing and Food. Its financial

objectives is to deliver shareholder value in terms of increase re-

turns, but also in terms of increase sales and market share in re-

tailing. It beliefs and values are outlined as “Our customers con-

tinue to see Marks & Spencer as the place to shop for special food,

Page 12: Ready Meal

12

produced to exacting standards”. M&S also sees its workforce as

an important part of its plan and also considers modernising its

stores as a key corporate objective.

Vision: The standard against which all others are measured

Mission: Making aspirational quality accessible to all

Values: Quality, value, service, innovation and trust

Globalisation strategy

Marks and Spencer Plc is an international retailer with 718 locations across 34 coun-tries. The group sells clothing, footwear, gifts, home furnishings and foods under the St. Michael trademark in its chain of 294 stores in the United Kingdom. It is listed in the FTSE 100 index and employs over 75,000 staff. Approximately half of the group's overseas stores are franchised to local partners.

References

Benett, A. & Welch, G. (2010) ‘Why green companies should go clear in-

stead: now that just about every brand out there claims to be green, it's

time to make a more meaningful set of claims’ [Online]

<http://find.galegroup.com.

ezproxy.brighton.ac.uk/itx/start.do?prodId=EAIM>[accessed 19th Novem-

ber 2010]

Brown, H (2010) Dinner will be served in a minute, Food Manufacture. Vol

85, No 2, pp61-62

Page 13: Ready Meal

13

Datamonitor (2010) ‘Ready meal in the United Kingdom’ [Online]

<http://web.ebscohost.com.ezproxy.brighton.ac.uk/ehost/detail?

hid=104&sid=03e4

f31f-fcef-484e-8ba6-5690633dc6b0%40sessionmgr112&vid=1&bdata

=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=52479567>

[accessed 20th December 2010]

Fame, (2010) ‘Premier Foods Group Limited’ [Online]

<https://fame2.bvdep.com/version-2010126/Report.serv?

seqnr=0&context=CAT560

NXK6CR1KD&_cid=612>[accessed 20th December 2010]

Fame, (2010) ‘Northern Foods PLC’ [Online]

<https://fame2.bvdep.com/version-2010126/Report.serv?

context=CAT560NXK6CR1KD&_cid=630&Seq

Nr=1&HideTab=true> [accessed 20th December 2010]

Fame, (2010) ‘Kerry Foods Limited’ [Online]

<https://fame2.bvdep.com/version-2010126/Report.serv?

context=CAT560NXK6CR1KD&_cid=666&Seq

Nr=2&HideTab=true> [accessed 20th December 2010]

Kerry Group plc, (2010) Structure [Online]

<http://www.kerrygroup.com/page.asp?pid=108> [accessed 20th Decem-

ber 2010]

Kew, J. & Stredwick, J. (2008) Business environment : Managing in a strate-

gic context. 2nd ed, London: Chartered Institute of Personnel and Develop-

ment

Key Note, (2009a) ‘Ready Meals 2009’ [Online]

<http://www.keynote.co.uk.

ezproxy.brighton.ac.uk/market-intelligence/view/product/10337/ready-

meals?highlight=read+meal&utm_source=kn.reports.search> [accessed

20th December 2010]

Page 14: Ready Meal

14

Key Note, (2009b) ‘Frozen Foods 2009’ [Online]

<http://www.keynote.co.uk.

ezproxy.brighton.ac.uk/market-intelligence/view/product/2270/frozen-

foods?highlight=ready+meal&utm_source=kn.reports.search> [accessed

20th December 2010]

Key Note, (2010) ‘Food Industry 2010’ [Online]

<http://www.keynote.co.uk.

ezproxy.brighton.ac.uk/market-intelligence/view/product/2360/food-indus-

try?highlight=ready+meal&utm_source=kn.reports.search> [accessed

20th December 2010]

Marks&Spencer, (2010) ‘Plan A’. [Online] <http://plana.marksandspencer.

com/about> [accessed 20th December 2010]

National Statistics, (2010) ‘GDP Growth’. [Online] <https://studentcentral.

brighton.ac.uk/webapps/portal/frameset.jsp?tab_tab_group_id=_2_1> [ac-

cessed 20th December 2010]

National Statistics, (2010) ‘Inflation’. [Online] < https://studentcentral.

brighton.ac.uk/webapps/portal/frameset.jsp?tab_tab_group_id=_2_1> [ac-

cessed 20th December 2010]

National Statistics, (2010) ‘Labour market’. [Online]

<https://studentcentral.

brighton.ac.uk/webapps/portal/frameset.jsp?tab_tab_group_id=_2_1> [ac-

cessed 20th December 2010]

Sloman, J. & Hinde, K. (2007) Economics for business. 4th ed, Harlow: Fi-

nancial Times Prentice Hall

Sloman, J. & Sutcliffe, M. (2004) Economics for Business. 3rd ed, Harlow:

Pearson Education Limited

Page 15: Ready Meal

15

Appendix

I. The value of ready meals market in the UK between 2005 and 2009

Page 16: Ready Meal

16

Source: Datamonitor

II. Key Financial and Employees of Northern Foods.

Source: Fame

III. Key Financial and Employees of Premier Foods.

Page 17: Ready Meal

17

Source: Fame

IV. Key Financial and Employees of Kerry Foods.

Source: Fame