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THE BACKGROUND

Even Jamie Oliver, the man who helped remove Turkey Twizzlers from school dinner menus, will be hard pressed to halt the rise of chilled ready meals. The Department of Health recently started talks with the celebrity chef and Sainsbury's about mounting a joint campaign to persuade families to cook and eat meals together. It's a tough challenge. Ready meals have become a way of life for many UK consumers. So ubiquitous is their use that for a significant number of people they are no longer seen as an occasional stop-gap, but as a regular way of feeding the household.

Where once ready meals were all about convenience, now they are essential for those unwilling or unable to cook from scratch, as well as an option for shoppers seeking a specific dish. This has resulted in two-thirds of British consumers buying chilled ready meals, according to TGI.

The nation's changing cooking habits have ensured impressive sector growth. Sales rose 33% between 2001 and 2004 to reach £1.4bn, according to Mintel. While still growing, the rate of increase has slowed over the past two years, rising by about 6%, and sales are expected to reach £1.45bn by the end of this year.

One of the few lifestyle trends working against the sector is high-profile campaigns promoting healthier eating. Ready meals are generally lambasted by health experts on the grounds of their processed nature and high salt, fat and sugar content. ±±¾©Èü³µpk10ers are encouraging people to cook from scratch with fresh, less processed ingredients, and this focus is likely to have a negative impact on this sector. It may also account for the recent easing off in growth rates.

However, it has also meant that reduced-fat and lower-calorie ready meals, more often than not packaged as 'better for you' ranges, have been developed and are experiencing rising sales, along with meals containing more vegetables.

The sector is also showing signs of maturing, most recently in more aggressive pricing and discounting. Indeed, for some more established dishes it is becoming a commodity market. While the BOGOF offers might deliver short-term gain, they will undermine the sector's value over time.

Multiples' dominance

This sector is heavily controlled by the big retailers - branded chilled ready meals are a rarity - and virtually all promotional activity takes place in-store.

Tesco leads the pack with a number of sub-brands in this sector. Alongside Finest and Value, its 500-product Healthy Living range includes more than 50 chilled ready meals. Last November it introduced its 'Kitchen cupboard' guarantee - that all ingredients in its ready meals could be found on sale in its stores - to reassure customers of their quality.

Sainsbury's has a similar array of sub-brands, including about 20 meals under its premium Taste the Difference label. In February 2006 it ditched its Blue Parrot Cafe children's food range to introduce Sainsbury's Kids, with cartoon-free packaging, showing a responsible attitude toward advertising to kids.

Marks & Spencer pioneered own-brand chilled ready meals and still holds a strong reputation for quality meals, despite it being primarily a non-food retailer. Last year it started to remove hydrogenated fats from its meal ingredients, having previously ceased the use of artificial flavours and colours.

While the domination of the grocery multiples in this sector is clear, there are a few branded ranges. Bigham's, which started in 1996, sells premium chilled ready meals including Kitchen Classics, the Summer Sizzlers BBQ range and vegetarian Herbivores meals through Waitrose. Duchy Originals has entered the market, offering organic options, while the Premier Foods-owned Quorn and Cauldron Foods meat-free brands have also expanded into ready meals.

Within the sector, some categories, including international dishes and more upmarket options, have performed particularly well. Traditional British meals take the biggest share, although this sub-sector has also seen the development of premium and healthier options, and several retailers have introduced 'gastropub' ranges of higher-quality, contemporary meals. The rest of the market is dominated by international cuisines, Indian meals taking the biggest share.

Premium products have seen considerable development, the multiples investing in these lines as they can charge higher prices. They are also placing more emphasis on ingredients' provenance.

While premium chilled ready meals have taken off, value lines have suffered. Consumers tend not to think highly of their taste and health attributes, and those on limited budgets are more likely to buy frozen ready meals than chilled.

Ready meals tend to target single- or two-person households unless they are specifically geared to children. Where products aimed at larger households have emerged, it has been mostly in the bagged Indian and Chinese meals created to compete with the takeaway sector.

Shoppers under 25 years of age are most likely to buy chilled ready meals. However, the high divorce rate means a key emerging group of buyers are the over-45s. The growing demographic of men under 65 living alone are also crucial purchasers of these meals.

Opportunities for development of the chilled ready meal sector are good. These dishes are now thought of as part of a repertoire of eating rather than a replacement for home-cooked meals. The number of small households is expected to rise and it is also likely that older consumers will look to these products. But convenience is becoming less of a factor as health takes precedence for many.

Mintel predicts that the market will grow by 37% over the next five years to reach a value of £2bn in 2011. This is equivalent to real growth of 25%.

CHILLED READY MEAL SEGMENTS BY SALES AND MARKET SHARE

2005 2004 04-05
pounds m % pounds m % % chng
1 Traditional British 271.0 19.1 250.9 18.3 8.0
2 Indian 207.2 14.6 211.1 15.4 -1.9
3 Italian 195.8 13.8 189.2 13.8 3.5
4 Premium 188.7 13.3 148.1 10.8 27.5
5 Healthy 184.5 13.0 187.8 13.7 -1.8
6 Oriental 149.0 10.5 161.8 11.8 -7.9
7 Tex-Mex 103.6 7.3 100.1 7.3 3.5
8 Value 31.2 2.2 46.6 3.4 -33.0
9 Vegetarian 18.4 1.3 17.8 1.3 3.5
10 Kids 15.6 1.1 17.8 1.3 -12.4
11 Healthily balanced 12.8 0.9 8.2 0.6 55.3
Others 41.2 2.9 31.5 2.3 30.5
Total 1419 100 1371 100 3.5

Source: Mintel


CHILLED READY MEAL MANUFACTURERS BY SALES AND MARKET SHARE

2005 2001 01-05
pounds m % pounds m % % chng
1 Tesco 355 25 238 23 49.2
2 Marks & Spencer 312 22 259 25 20.5
3 Sainsbury's 255 18 196 19 30.1
4 Asda 156 11 103 10 51.5
5 Morrisons/Safeway 128 9 93 9 37.6
6 Waitrose 71 5 41 4 73.2
Other own-label 99 7 83 8 19.3
Branded 43 3 21 2 104.8
Total 1419 100 1034 100 37.2

Source: Mintel


GROCERS' PREPARED-FOOD RANGES BY MEDIA SPEND (£000)

2005 2004 2003 2002 2001

1 Marks & Spencer 17,122 7670 6529 4965 2271
2 Sainsbury's 480 2019 1391 1521 2278
3 Tesco 877 389 1044 1321 62
4 Asda 353 283 143 25 77
5 Waitrose 784 95 n/a 254 286
Total 19,616 10,456 9107 8086 4974

Source: Nielsen Media Research/Mintel

ANALYST COMMENT - IAN BELL SENIOR RESEARCH ANALYST, UK AND IRELAND, EUROMONITOR

The British love of the ready meal is well documented, with the highest rate of consumption in Europe - 22kg per person in 2005. This is double the consumption of France and almost three times that of Germany. We have, it appears, become ready meal-dependent.

It is true that long working hours and an increasing number of single-person households have led more of us to depend on the convenience and speed of ready meals, but the idea that we have all suddenly forgotten how to cook seems a little farcical. The success of Marks & Spencer's Cook! kit range, which requires the consumer to participate in the preparation of their meal, is perhaps an indication that some consumers are willing to get at least one pan dirty at dinner time.

The bottom line for most ready-meal consumers is that cooking is fine, but they can't be bothered with the preparation or cleaning up, as modern life provides so many other preferable distractions. For many, the weekend is a different story - a chance to get some use out of that expensively assembled kitchen.

The trouble with ready meals is that they are apparently bad for our health, which would appear to have far less to do with the consumer than the manufacturers or retailers that have been supplying them. The tide seems to be turning, however, with Waitrose reformulating its ready-meal range by reducing salt and removing hydrogenated vegetable oil as an ingredient and Asda starting its 'Fresh change' initiative, which includes a focus on its chilled and healthier ready meal range.

All we need now is a consistent, comprehensible labelling system that allows consumers to make more informed choices so we can go back to worrying about fast food again.