View
839
Download
0
Category
Preview:
Citation preview
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
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
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 (%)
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
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
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
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)
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)
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
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.
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,
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
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]
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
15
Appendix
I. The value of ready meals market in the UK between 2005 and 2009
16
Source: Datamonitor
II. Key Financial and Employees of Northern Foods.
Source: Fame
III. Key Financial and Employees of Premier Foods.
17
Source: Fame
IV. Key Financial and Employees of Kerry Foods.
Source: Fame
Recommended