Counting the dough

There's no denying it, we are living in grim times. While the UK is now officially in recession and soaring numbers of people are joining the increasingly long lines of the unemployed, household incomes are coming under mounting pressure. Financial doom is the topic of conversation around the water cooler, and there is no escaping media hype about plummeting house prices, failing banks and the ticking of the taxation time bomb. All of these threats are forcing British shoppers to cling on to their hard-earned cash.

This is the backdrop for manufacturers, and new product launches are starting to reflect this struggle. In some cases, bakers and retailers are using price as their number one tool to capture market share. According to Tesco, research carried out on 20,000 customers found that price was now their number one priority.

United Biscuits has taken the bull by the horns and launched a value range to complement its core products.

It has developed Crawford's Teatime biscuits with packaging that stresses the price: 'only 59p'. The offering has 32 value-for-money wrap packs that include Bourbons, Custard Creams, Jam Rings, Nice and Pink Wafers.

"The Crawford's range also includes six assortment packs under the Family Circle and Teatime brands, both of which are performing very well and are in the top five most popular biscuit assortments in the UK," according to United Biscuits, which cites Nielsen data from the end of last year.

So it would seem that affordable, value bakery products appear to be emerging as winners in the recession. Consumers also appear to have returned to low-cost convenience food in the UK.

Chief executive Ken McMeikan at bakery giant Greggs certainly seems to think so, saying that the chain is in a good position to offer value to customers who are continuing to feel the impact of the economic downturn: "I believe that the quality and prices of our products give us a competitive advantage."

A spokeswoman at Greggs says that the chain has "not launched a branded discounted range, as such", but is adding cheaper, value products to its range. Offerings include a £1.25 egg mayonnaise roll, and a £1.25 cheese roll. She says that these, among other recently launched competitively priced products, are to be trialled over a six-month period. After this Greggs will reassess the range.

In its latest trading update the bakery giant bucked the downward trend with strong sales - up 5.3% on last year in the four weeks to January 3. This compares with Marks & Spencer (M&S), at the other end of the premium/value scale, which saw its like-for-like food sales drop 5.2% in the 13 weeks to December 27, 2008, against the same period in 2007.

The tale of two manufacturers

"By taking a closer look at suppliers of M&S, interesting insight can be gained into the market," according to Andrew Saunders, food analyst at Panmure Gordon. The performance of Northern Foods and Uniq, which supply sandwiches and other bakery food-to-go products to the retailer, offers a "telling tale of two manufacturers" both of which have responded to the credit crisis in polar opposite ways, he claims.

Uniq "failed to respond to the new trends" propelled by the recession, and UK sales tumbled 9.6% in the final quarter of 2008. On the other hand, Northern Foods innovated and launched a value range instead of continuing to rely heavily on M&S's custom, he adds. This saw the £1 sandwich in Tesco and an increase of own-label bakery products into discounters such as Aldi and Lidl.

Cake maker Finsbury Food Group has found that consumers are also responding to promotional activity. "As we see retailers increasing levels of promotional activity and price discounting in many food categories," Saunders adds, "it is not surprising that Finsbury has also been supporting the sales growth in cakes with its largest customers through an increased level of deeper-discount promotions."

Earlier this year its cakes that normally retail at £1.59 were being sold for £1 on promotion. Finsbury confirms that throughout 2009 it will continue to "invest heavily in promotional activity to support our customers"

Tesco has also run promotions on over 3,000 everyday products, which include offers such as three for £3 on Hovis bread. "Our research shows just how keenly customers are feeling the need to watch their budgets," says Tesco's commercial and marketing director, Richard Brasher.

** Move to supermarket own-label **

Among these trends - value, discount and promotion - supermarket own-label foods are also growing in popularity. Data provided to Food Manufacture from TNS Worldpanel shows that in the wrapped bread market, supermarket own-label sales grew 21.6% in 2008, compared with 16.1% growth in branded wrapped bread. For biscuits, own-label was up 9.4% year-on-year, compared with 7.6% in the branded market.

"This is not just a case of consumer pull, but also retailer push," says Ed Garner, director of research, TNS Worldpanel. "Supermarkets, in particular, seem to have jumped ahead of consumer behaviour, and are influencing the way shoppers are buying their goods. The recession is a good marketing opportunity for them."

Garner says that Sainsbury's Switch and Save campaign is a good example. The supermarket's Basics range saw its sales shoot up 40% year-on-year. He also says that Tesco is using its website to push its recently launched discounter range. "If you type in bread or bakery, for example, its cheaper Wheatfield range or value range pops up," says Garner.

Tesco's latest range of discounted products is essentially own-label products that do not carry the Tesco brand. They are intended to complement the supermarket's existing ranges, with a price positioning varying between the supermarket's Value and Finest ranges. For example, for an 800g white loaf, the new discounted Wheatfield Bakery costs £1.00, Tesco Value 40p, a standard Tesco loaf 72p and the Finest £1.17.

As well as the Wheatfield label, other products in the discounted bakery range include Marvellous Muffins at 99p for a pack of four, Oatland Biscuit Co's plain chocolate digestives (57p) and chocolate chip wafer bars (89p), as well as Creamfields toffee cheesecake and Cafe Continental croissants (88p). All prices were taken from Tesco.com on January 28, 2009.

As the reality of the recession hits, UK consumers are making dramatic changes in their food shopping. In the last 12 months alone, 41% of shoppers have switched to cheaper brands and three in 10 (34%) have cut down on the premium ranges, such as Tesco Finest and Sainsbury's Taste the difference, according to market data provided by Mintel.

The research company also found that two-thirds (66%) of British people now look for promotions and deals more often than they did a year ago.

"During the recent years of unprecedented prosperity in Britain, we saw a very noticeable shift towards premium, upmarket food, with shoppers buying more luxurious ready meals and exotic produce. But in the space of just a few months, this trend has already started to be reversed," says Richard Perks, director of retail research at Mintel.

"It is clear that shoppers are now really feeling the pinch and beginning to trade down when out buying food." FM