The Ready Meal Capital
By Ian McGarrigle

A variety of chilled ready meals from M&S.

Ready meals provide UK consumers with a quick, healthy, inexpensive meal.

The British food shopper of 2008 is facing some tough choices. After many years of strong economic growth that saw consumers grow used to increased spending on added-value supermarket food, organic produce or ethically reared meat, the good times have suddenly come to an end.

The credit crunch and collapse in the housing market has already seen a fall in consumer spending across retailing that is described as being the worst for at least 20 years. Badly-hit households are already amending their buying habits and are turning their backs on the top of the range private label products that the supermarkets developed over the last 10 years. Suddenly, the “value” lines which Tesco and Sainsbury’s introduced during the recessions of the early 1990s, are back in fashion. The hard discounters, Aldi and Lidl are winning market share at a rate never seen before.

And yet, food shoppers still demand quality and range when it comes to cuisine and ingredients. They also want value lines to increasingly deliver healthy choices and for an increasing number of health-conscious consumers that foods bought in their supermarkets clearly label the fat, calorie and salt content on packaging.

Against these seemingly contradictory pressures, the ready meal sector within the UK suddenly finds itself fighting to maintain the dramatic growth it has seen over the last 10 years. According to the very latest research published earlier this year by retail research company Mintel, sales of ready meals, both frozen and chilled, represent 7% of all main meal occasions in the UK. Totalling a forecast market value of £2.1 billion in 2008, these statistics go some way to explaining the reputation within Europe of the UK as a country that has forgotten how to cook and is now viewed as the European capital of the ready meal.

However, despite this seemingly remorseless growth, there are underlying negative pressures developing within the ready meal sector. Firstly, the frozen ready meal – the product line, which started the UK’s obsession with prepared TV dinners when Findus launched the frozen lasagne in the 1970s – has been in decline for at least the last five years. Between 2003 and 2007 frozen ready meals declined from £684 million to £483 million according to Mintel, a decline of 29.4%. Branded lines took the brunt of this decline, registering a decline of 44% compared with a 15.9% decline experienced by the own labels.

The net result of the pressure on frozen meals is that the market overall for ready meals is at best flat. Much of this pressure has come about directly from changing consumer tastes and in particular a demand for fresh ingredients and more authentic tasting and delicate cuisine dishes such as Thai foods.

Thai Green Curry is a new addition to M&S store brand ready meal assortment.

Chilled ready meals were given a boost with the affluent late 1990s and early 2000s. Consumers demanded more sophisticated dishes reflecting their growing awareness of a wider selection of international cuisine. At the same time, retailers were developing their high-end private label ranges such Sainsbury’s Taste the Difference and Tesco’s Finest. They grew their chilled ready meal ranges at the expense of Marks and Spencer in the early 00s when M&S was struggling. It has since recovered much of its reputation with a renewed emphasis on research and development and is now a strong number two in the market with 23% market share worth £348 million compared to the number one, Tesco, which has 26% and £396 million of sales in chilled ready meals.

Much of the boost to the chilled ready meal sector has come from new cuisines proving popular: namely Thai, Mexican and Spanish to compete with the perennially popular British dishes, Indian, Chinese and Italian meals.

According to Mintel, retailers have been investing heavily to develop solutions to their customers’ demands for healthy alternatives, reduced additives and preservatives. M&S led the way from 2005 with heavily promoted new ready meal ranges that used reduced salt and saturated fats and more authentic ingredients. One of the ranges to emerge out of this new phase of development was the “Steam Cuisine” meals that are sold in a special oval plastic tub, which is completely sealed and has a steam “widget” in the top. When the dish is microwaved, the steam widget causes the tub to fill with steam, and cooks the food within it.

Close rival to M&S, Waitrose, has also entered an unprecedented growth phase with the opening of smaller stores in affluent towns where the emphasis has been on convenience ranges that are perfect for one of the fastest growing demographic groups – the single person households. All the major retailers have also been targeting the convenience sector with both smaller stores and forecourt stores.

As a consequence, since 2003, private label chilled ready meals have grown by a staggering 21.4% by value to £1.49 billion in 2007.

But if the demographics have been working in the ready meal market’s favour, a new point in the cycle has been reached that looks set to halt its growth. Even before the economic problems hit the UK, consumers were beginning to turn towards “scratch cooking” and healthier diets. With the increasing popularity of celebrity TV chefs and their emphasis on cooking meals from fresh ingredients, shoppers have begun to rediscover “cooking.” Chefs such as Jamie Oliver, who works closely with Sainsbury’s, has been helping to promote “feed your family for a fiver” recipes that are made from fresh ingredients. Increasingly, hard-pressed households have realised that it can work out cheaper to buy basic ingredients and make a fresh meal rather than buy ready meals.

Whilst household penetration of ready meals remains very high, their frequency of use has declined in favour of ready to cook products. According to TGI, nearly 70% of UK consumers use ready meals at least two or three times a month.

For retailers, the battle to keep the sector growing will demand greater R&D and a continued emphasis on healthy, fresh ingredients. It is also clear that with the economy under pressure, price and value will figure strongly. M&S, for example, has been heavily promoting 2 meals for £10 – including 2 main meals, side dish, deserts and a bottle of wine. Sainsbury’s promotes heavily the fact that all its chilled ready meals are free from saturated fats and additives.

Mintel sees some optimism ahead to 2013 with the ready meals sector growing from £2.1 billion to £2.3 billion, a rise of 12%. Taking into account food price inflation however, this translates into a decline of 3%. Food industry commentators remain optimistic though for the sector arguing that the current changes and pressures in the market merely present new opportunities. It is believed that ready meals can continue to make further moves towards the premium market; that they can co-exist and complement ready-to-cook meals and also that they can continue to develop healthier ingredients and additive-free meals.

Healthy Confusion

The controversy over food labelling looks set to become even more heated as politicians join the debate over the usefulness of nutritional information on the nation’s food.

With the growing concern over health and obesity in the UK, food manufacturers and retailers joined together to develop an easy to understand labelling that gives shoppers information on “guideline daily amounts” of key nutritional ingredients such as salt, fat, sugar, saturated fat and calories. This led to the “traffic lights” system of labelling which shows the relative levels of ingredients and red, amber or green depending on their amount per portion. Some retailers chose to adopt slightly differing representations, from Sainsbury’s “wheel of health” to Tesco’s “traffic lights.”

When the system was first adopted it led to some critics saying that it failed to give an accurate picture or was potentially misleading to consumers depending on the size of portions and the percentage a nutritional ingredient represented as part of a daily recommended diet. Despite these initial criticisms, consumers appear to have taken to the traffic light labelling system.

However, in recent weeks, some politicians have re-opened the debate arguing that the traffic light system should be scrapped and that healthy diets should be promoted. Senior figures within the Conservative Party and, if the opinion polls are to be believed, the likely Party to form the next Government, have added their support for them to be scrapped. It looks likely that the nation’s health could form part of the political battleground over the next two years.