Sector Insight: Meat-free foods and meat substitutes - Dabblers spur meat-free sales

Brands are looking beyond their core veggie audience to court health-conscious omnivores.

THE BACKGROUND

The number of UK consumers describing themselves as vegetarian is falling, but an increasing proportion of the population is becoming less reliant on meat as a staple food. Factors such as food safety scares, healthy eating trends and, to a lesser extent, concerns over farmed animal welfare and the environment have inspired more people to include meat-free products into their diets. Sales of meat-free food products increased by 5.5% a year between 2001 and 2006 to reach a value of £690m and are likely to see a further 11% growth over the next five years.

Meat-free products are defined as those aimed specifically at meat avoiders and those who wish to reduce the amount of meat in their diet as well as committed vegetarians. All vegetarian ready meals are included, as are meat substitutes including Quorn, tofu and soya mince, either as ingredients for home cooking or as part of a prepared product.

There are about 3.5m vegetarians and 250,000 vegans in the UK - about 6% of the total population. Their numbers rose by more than 50% in the 90s but growth has since stopped, with the total figure declining from 2001-03 and again between 2005 and 2006.

The fortunes of the market are closely linked to health scares surrounding meat products. Food scares result in a temporary reduction in meat consumption rather than a mass shift to vegetarianism, according to research by the Food Standards Agency, so as consumers' fears about BSE and foot-and-mouth disease receded, annual growth slipped.

What is more likely to have a longer-term positive impact on the sector is the trend toward healthy eating. Many consumers have looked to reduce their consumption of red meat, for example, or have turned to vegetarian food in search of lower-fat meal options.

Higher socio-economic groups are more likely to be meat-avoiders, according to TGI surveys. About 7% of ABs and C1s claim to be vegetarian compared with less than 4% of Ds and 5% of Es.

Battling misperceptions

Brands in this category have long struggled to overcome a perception among omnivores that their products are bland and heavily processed. They might tick the 'healthier' box but not necessarily the 'natural' one for consumers.

In line with other food categories, consumers are increasingly favouring chilled meat-free products over frozen alternatives. However, they also favour foods that can be used as an element to add interest to meals they are preparing themselves, rather than complete ready meals. The latter are often seen as unhealthy or at best uninspiring by consumers of this sector.

The meat-substitute sub-sector accounts for just less than a quarter of the total meat-free market but it has been steadily growing in recent years and now consists of a broad range of products including sausages, burgers, pies, pates and meat-style slices.

There have been considerable changes among the key manufacturers in the past couple of years with extensive mergers and acquisitions.

Premier Foods, the leading player, has been at the forefront of the strategy to market the products as healthy rather than purely vegetarian. In 2005 it acquired both Marlow Foods and Cauldron Foods. The £172m purchase of Marlow brought Quorn into its brand portfolio. Quorn dominates the meat-substitute market with more than two-thirds of sales. It is seen as one of Premier Foods' key growth brands.

Premier is one of the sector's key advertisers and last year appointed Publicis to its £6m Quorn ad account. Previous ads for the brand using the line 'It might just surprise you' focused on the health benefits of the range, aiming to extend its appeal to consumers beyond the core vegetarian market. But this month saw the debut work by Publicis featuring a headstrong teenager who is initially unimpressed that her whole family is eating her Quorn. The new strapline is 'Quorn. Help yourself'.

The company paid £27m for Cauldron, one of the first manufacturers of tofu products in the UK. It is the most widely available tofu brand, with distribution in specialist stores including Holland & Barrett, but its original 'block' tofu, Organic Beech Smoked Tofu and ready-to-eat Marinated Tofu Pieces are also available in major supermarkets.

Many of Cauldron's products, including burgers, bakes, sausages and pates, use ingredients such as ginger, paprika, mustard and sun-dried tomatoes to introduce stronger flavours and shed the bland image still often associated with meat substitutes.

The brand recently extended its range from its core chilled and organic lines with the addition of frozen products including Lincolnshire Veggie Sausages and Mediterranean Vegetable Bistro Bakes.

Linda McCartney founded the meat-free brand that bears her name in 1991. Last June Heinz sold the brand to US firm Hain Celestial in a divestment of its frozen-food interests. The purchase fits with Hain's strategy of expanding its natural and organic-foods business and should ensure that its founding ideals are maintained.

Small independents

Other brands in the sector are generally produced either by smaller, specialist independent companies, including Redwood Foods, which produces vegan alternatives to meat, fish and cheese, and Goodlife, which makes frozen vegetable dishes, or subsidiaries of major manufacturers including Birds Eye, where meat-free is a small part of the business.

Haldane Foods was owned by the biggest soya processor, US group Archer Daniels Midland, until its sale to Hain last month. Its portfolio covers frozen, dry mix and dairy-free products and includes the Realeat, Granose and Direct Foods brands, which have a strong presence in health-food stores. Last year it added low-fat, high-fibre Chicken Style Pieces, which are promoted as helping reduce cholesterol, to the Realeat range.

Fifteen- to 24-year-olds are most likely to eat meat-free, so the growth in this group will be positive for brands in this sector: the number of 20- to 24-year-olds is set to rise 7% by 2011. Similarly, a shift in promotion focus from 'vegetarian' to 'better for you' should appeal to the growing over-45s segment.

Mintel predicts the market will grow by 22% to reach a value of £839m by 2011 - 11% growth in real terms. Meat substitutes will experience slightly slower growth than the rest of the market and is forecast to be worth £188m by 2011.

MEAT-FREE FOOD MANUFACTURERS BY SALES AND MARKET SHARE

2006 2002 02-06
pounds m % pounds m % % chng
1 Premier Foods 120 17 93 16 29
2 Hain Celestial* 23 3 21 4 10
3 Dalepak 15 2 13 2 15
4 Heinz 8 1 9 2 -11
5 Birds Eye 7 1 7 1 0
6 Goodlife Foods 6 1 5 1 20
7 Haldane Foods** 6 1 5 1 20
8 Tivall 4 1 3 1 33
Own-label 455 66 364 64 25
Others 46 7 50 9 -8
Total 690 100 570 100 24

Source: Mintel
*Acquired Linda McCartney brand Jun 2006
**Acquired by Hain Celestial Dec 2006


MEAT-SUBSTITUTE MANUFACTURERS BY SALES AND MARKET SHARE

2006 2002 02-06
pounds m % pounds m % % chng
1 Premier Foods 103 66 80 62 29
2 Haldane Foods* 6 4 5 4 20
3 Tivall 4 3 3 2 33
4 Hain Celestial ** 3 2 7 5 -57
Own-label 36 23 29 23 24
Others 4 3 5 4 -20
Total 156 100 129 100 21

Source: Mintel
*Acquired by Hain Celestial Dec 2006
**Acquired Linda McCartney brand Jun 2006


MEAT-FREE FOOD SALES BY DISTRIBUTOR TYPES

2006 2004 2002 02-06
pounds m pounds m pounds m % chng
1 Grocery multiples* 632 570 510 23.9
2 Health food/wholefood outlets 18 18 17 5.9
Other** 40 41 43 -7.0
Total 690 627 570 24.0

Source: Mintel
*Incl. Marks & Spencer, Co-op
**Incl. freezer centres, delicatessens, market stalls, independents

ANALYST COMMENT - IAN BELL, UK RESEARCH MANAGER, EUROMONITOR INTERNATIONAL

Vegetarianism has moved into the mainstream in recent years, but the booming UK sales of meat-free products are at odds with the stable vegetarian population, which has stood at about 5% for years.

With strict vegetarians and vegans less likely to opt for products intended to resemble meat, the growth in this segment is being generated by meat eaters who are trying to cut down their intake by substituting a vegetarian option in one or two meals a week. In many cases these consumers prefer products that resemble the meat they are intended to replace.

Premier Foods leads the UK's meat-free market with a 41% share in 2005. It has developed Quorn and Cauldron into mainstream brands through advertising, using elements of consumer education and consistent product development.

The company has been aided by a buoyant healthy eating sector, but new product development has been a key factor in appealing to a broad range of consumers. A wider chilled offer and the addition of its Quorn Deli range of meat-style slices has opened up the lunchtime sandwich market to meat-free products. The bulk of its range remains crossover. Its burgers, sausages and escalopes simulate meat products and are popular with both meat reducers and time-pressed vegetarians.

Premier Foods' acquisition of Cauldron, with its organic and chilled focus, was a smart move as the brand is more popular than Quorn with committed vegetarians.

It is surprising that, with the exception of Linda McCartney and Dalepak, Premier has not been given a tougher run for its money in this sector. Undoubtedly further growth will bring new entrants to this flourishing market.

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