Back to the Present and into the Future: Prospects for the UK Frozen Food Industry
By Brian Young, BFFF Director-General

BFFF Director-General Brian Young is optimistic about the frozen food industry, both domestically and internationally.

First of all, I would like to take this opportunity to congratulate John Saulnier and all the folks involved in producing Quick Frozen Foods International magazine on reaching their Golden Anniversary. The British Frozen Food Federation (BFFF) has been delighted to contribute to this prestigious magazine over most of those 50 years, and we look forward to offering our support into the next golden era.

I will take this opportunity to have a look at the current state of the UK frozen food industry, both in terms of the market and the key issues facing us all.

I begin with a review of the foodservice market, and I would like to thank Peter Backman of Horizons for providing the data.

The frozen food element of the foodservice market now stands at around £2.3 billion and is currently pretty flat. The economy in the UK, with rising unemployment, lower disposable income, financial uncertainty and incessant tales of woe has made the environment for foodservice operators very difficult.

However, those doing business in this sector have always been resilient, innovative and able to rise to the many challenges that the economic climate thrusts upon them. This year is no different, with some categories continuing to show modest growth whilst undoubtedly some segments have been more badly hit.

It is certainly true that corporate entertaining and the events side of the market is having a tough time with many of its sponsors, particularly financial institutions, not being able or prepared to continue with previous hospitality activity levels.

The pub sector is suffering from a record number of closures, however, the majority of those are on the wet side only. Many pubs are managing to survive, and with inventive promotional activity they are continuing to get consumers to frequent their establishments. Average take per person may be down, and indeed profit margins are being squeezed, but many operators continue to do reasonably well and suppliers to the pub trade continue to record acceptable numbers.

The contract catering and institutional side of the market in the main is continuing to fare reasonably well with prisons, care homes and hospitals relatively unaffected whilst schools have been much more affected by political factors – especially the introduction of nutritionally-based food standards.

Overall the foodservice market is flat but, as always, some pockets are doing quite well and others less well. We are just beginning to hear more positive signs in the media about the recovery of some financial institutions, number of job vacancies beginning to rise, increased activity in the housing market and, whilst all of these are very early signs at very low rates, one would hope that over the next 12-18 months the outlook for foodservice will begin to improve somewhat.

From Strength to Strength

The players in the market continue to get bigger with Brakes, 3663, Sodexho, Aramark and Compass growing ever stronger, whilst the emergence of the buying groups amongst wholesalers has also been most noticeable.

Despite the continuing consolidation within the industry there still remains a very active and vibrant independent sector.

Clearly economic recovery is fundamental to return to robust good health for the foodservice industry, but also the growing interest taken by government in this sector should not be underestimated.

In recent years we’ve seen scores on the doors, the Food Standards Agency being very active in looking at nutritional information for consumers in foodservice outlets, the healthier food mark being touted as a way forward for public sector procurement and the cabinet office’s strategic unit’s “Food Matters” report looking at food security and sustainability in general.

Increasingly the industry will be faced with further government interference and whilst the intentions are honorable, experience has taught us that much time will be wasted, much cost incurred and a very uncertain likelihood that their objectives will be met.

The last two to three years has seen a remarkable turnaround in the fortunes of the retail sector. The market has now enjoyed 12 consecutive quarters of value growth and the turnaround started a year before the credit crunch became a media frenzy.

Much of the turnaround, in the early period, can be attributed to the terrific work of retailers and their suppliers in producing premium end aspirational products.

More recently the re-emergence of Birds Eye, with its change of ownership, and Iceland being restored to health by its original management team have greatly influenced the recovery of the sector.

The frozen food market, according to the latest TNS Worldpanel data, is now worth £5.1 billion in Britain and is growing in value terms at 6.3% per annum. All nine product sectors analyzed by TNS Worldpanel are showing value growth, which is very encouraging.

During recent years Unilever sold its Birds Eye business to venture capitalists, whilst Young’s Blue Crest has been bought and sold by two venture capitalists. McCain Foods remains a family business, whilst these three brands continue to be the retail market powerhouses.

There has been further consolidation within the industry, particularly notably in the pizza market with the latest consolidation being the sale of Schwan’s European businesses to Dr. Oetker.

The retail market has enjoyed significant growth despite the UK having two of its worst summers on record in the last three years, with both the ice cream market sector badly affected and crops of potatoes and peas, in particular, for two years being severely reduced.

The BFFF has mounted a consumer promotion campaign through its thenewiceage.com website. A foodservice promotional has also been launched to spread the message on the generic benefits of frozens.

In the retail market consumers are beginning to understand better the amount of fresh product that is being thrown away and how frozen, with its minimal wastage, can help save cash-strapped households significant sums of money.

We believe consumers are beginning to understand the nutritional message better than ever before, with more and more publicity highlighting the locked in goodness of frozen foods. It is undoubtedly true that during every economic downturn frozen foods sell well because of the great value offered and, of course, some of the growth being enjoyed more laterally is partly due to the economic climate.

Similarly to the foodservice market the retail sector may well enjoy more than its fair share of political interference. We have seen with the debates over GDA’s versus traffic lights, the Food Standards Agency’s campaigns on reducing salt and saturated fat, the program pushing Five-A-Day and numerous other health-based initiatives, that activity from government will not diminish.

Traditionally, frozen food producers do well when economic situations are difficult. I believe that over the next 25-50 years food will become increasingly expensive as a proportion of disposable income.

As populations in developing nations grow and eating habits change with more protein being consumed, they will need more and more of their own food production. Inevitably the UK and a large part of Europe, as major importers of their food requirements, will have to pay ever more for their products. I cannot see how food inflation will not continue to be prevalent over the next generation.

I believe as food becomes relatively more expensive and food inflation continues to be an issue that the landscape for frozen, with its minimal waste and great value, will continue to be very positive.