José M. Alvarez
In recent years, growing demand for ready-made foods of all kinds (chilled, ambient and frozen) for home consumption, on the back of new trends in buying, cooking and eating, and large industrial companies' focus on technology and marketing have enabled this market (and, therefore, sector revenues) to grow, envied by other food segments, which were quicker to feel the effects of adjustments in private consumer spending caused by the socioeconomic crisis in Spain.
At any event, this sector is now feeling the pain, despite reaching the standstill much later than other products, since its target consumers (those with greater purchasing power) have taken longer to modify their spending habits than others. The VAT hike also affected this segment. As a result, chilled foods (the sector leader) have slipped in the 12 months to last March, by around 7% in volume and 4% in value, according to consulting company IRI España.
According to sources, ambient/canned foods have also trended towards stagnation or a slight decline. As for frozen foods, consumption has improved by barely 1%, according to 2012 data from the Ministry of Agriculture, Food and the Environment (MAGRAMA) and IRI.
The crisis is noticeable, but to a lesser degree
This is the case just when the government has started to talk of a "light at the end of the tunnel". It's possible that, as a result, this stagnation might be short-lived if the general situation improves and the sector is able to get back on track to weather these tough times.
The sector has had some very good years, with notable growth. According to consulting company DBK, the prepared food sector continued to expand in 2012, by 2.4% to 2.375 billion euros.
According to this analysis, sales of frozen and chilled prepared foods both increased by close to 3%, with the market for frozen foods amounting to 915 million euros and with growth in home consumption of meat- and pasta-based dishes.
The market value of chilled prepared foods amounted to 890 million euros, with growth in demand for tortillas and products with meat, pasta and rice, among others.
Other products, ambient/canned foods, had a total value of 570 million euros, i.e. 0.9% more than in 2011, with good performance by canned meats.
Among the three categories, frozen foods has a market share of 38.5%, chilled foods 37.5%, and other foods (mainly dehydrated and sterilized products) had the remaining 24%, according to DBK.
IRI is optimistic about short-term market performance, anticipating additional growth for the end of this year despite weak household spending on food and the hospitality segment as well as significant price pressure.
It expects a 1% increase at the end of 2013, to around 2.4 billion euros, which could rise to close to 3% in 2014 in a less adverse economic context.
One big "family"
Among chilled foods at self-service establishments, pizzas rank first, with 41.7% of the market share in volume and 49.4% in value in 2012. They are followed by gazpacho (23.4% and 10.2%), prepared dishes (11.6% and 16.5%), tortillas (8.5% and 5.4%), salads (5.2% and 4.7%) and roast foods (2.4% and 4.0%), according to IRI data collected by Alimarket.
Within prepared dishes, pasta and rice products were the most popular (38.2%), followed by meat, fish and roast foods (17.4% each), nuggets/battered products (16.9%), and vegetable- and legume-based dishes (6.2%).
Among frozen items, prepared foods take first place in volume (41.2%) and value (35.9%), followed by pizza (23.3% and 34.9%, respectively), croquettes (10.6% and 7.1%), pizza bases (8.5% and 4.3%), meat pies (8.4% and 9.7%), mini-meat pies and egg rolls (5.8% and 5%) and savory pies (2% and 3%).
Within the prepared frozen food segment, the leaders are rice-based dishes (36.6% of total volume in 2012, according to IRI), followed by sautéed foods (20%), lasagna (12.4%), cannelloni (10.9%), and vegetable-based dishes (10.1%). Fish and seafood dishes, meat- and pasta-based items, and Mexican and other foreign foods lag very far behind.
As for ambient dishes, legumes are the market leader (41.5%), followed at a considerable distance by meat/poultry/fish (27.4%), rice (13.2%), salads (11.7%), vegetables (3.9%) and pasta (2.3%).
Here too, generic brands play and win
According to Mercasa, store brands play a very important role in this sector and tend to steal away market share, year after year. For example, store brand chilled pizza accounted for 56.6% of all sales, while the first brand name offer had 31.3%, the second offer 6.1%, and the third barely 1.4%. Among chilled foods, store brands hold 59.5% of the market in volume and 53.8% in value, while the leading brand name accounts for 18% and 24.2%, respectively.
As for frozen dishes, IRI data reveals that store brands had a 69.9% market share in volume of prepared foods in 2012/13, and 51.5% of pizzas; savory pies had more moderate penetration, with 22.8%.
The trend in almost all dry foods is reversed in the case of ambient products, of which store brands "only" had 37.4% of the market share in 2012, even losing 0.1 points to brand names.
Business structure in the sector
The number of sector companies remained stable at around 375, as the discontinuation of some—due to the notable increase in competition and the credit crunch—was offset by the entry of new names from related sectors.
Good growth projections have attracted many companies from related sectors in recent years, mainly specializing in meat, frozen and canned products.
In general, they are large companies, as high capital expenditure is needed to launch a competitive offer. There are some specialist companies, along with large operators whose business lines include these types of items as part of a more extensive product catalogue. Penetration by foreign companies is also very high, as some sector leaders are subsidiaries of large food multinationals.
There is a reduced number of operators, among them foreign multinationals and some of the leading meat and frozen food companies (among others) from Spain.
In 2012, the top five companies had a total market share of 37.6%, and the top ten had 47.8%.
Employment has declined in recent years, to 8,250 workers in 2012, due to adjustments implemented at the companies to address falling profitability.