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THE BACKGROUND

The market for prepared cooking sauces took off during the 90s as consumers turned from ready meals to home-cooked convenience foods. Now the sector is nearing maturity, the makers of the 'quick stand-by' pour-on, stir-in and bake sauces have had to adapt their portfolios to keep pace with evolving consumer tastes. They are trying to maintain growth by developing new lines and extending their product ranges further into exotic flavours and previously untapped ethnic cuisines, in the process appealing to younger consumers and broadening their consumer base.

Growth of the cooking sauces market has slowed in recent years as it approaches maturity and has to fight harder against other meal options for share of consumer spend.

Although it has thrived over the years as a convenient standby for a quick meal, taking its worth to £623m in 2004, between 2002 and 2003 its growth was only 2% and in the following sales period it declined 1%, according to Mintel. This is in stark contrast with previous buoyant growth that puts the overall growth for the 1999-2004 period at 22% at current prices.

Intense competition among brands and retailers has led to considerable price promotion in the sector, and 'buy one get one free' and multi-buy offers are a key factor in the decline in value of the market.

The sector can be divided in a number of ways. Wet sauces are made up of the jars, cans, cartons etc that may be either ambient or chilled, while dry sauces need to be mixed with water before using. Cook-in sauces are added to other ingredients at the beginning of cooking whereas pour-over sauces are added just before serving.

The ambient wet sauce segment is the biggest, accounting for 75% of the total market value in 2004. Within that sector Italian sauces make up almost half of sales, valued at about £224m in 2004. While pasta bake sauces are dropping off in popularity due to the time involved in cooking, pesto sauce is now worth more than £20m and is benefiting from its healthy image.

Brand focus

Dry sauces have been pushed into long-term decline (down 12% over the past five years) as ambient wet sauces have taken off. The one area of the market that is booming is the fresh chilled sector. Now worth about £75m, it grew 60% at current prices from 1999 to 2004, according to Mintel. Demand for the pour-over sauces has dipped - possibly a consequence of people eating fewer carbohydrates.

This is a highly brand-led market, with Unilever UK Foods (previously known as Unilever Bestfoods), Masterfoods and Campbell's topping the manufacturers list.

Unilever UK Foods' portfolio includes the Knorr, Coleman's, Ragu, Bertolli and Chicken Tonight brands. In line with Unilever's strategy to focus on core power brands, it has concentrated its efforts in this market on the Knorr range in preference to Coleman's. The Knorr brand has been stretched over the years to become the banner brand for Chicken Tonight, Stir it Up, Sizzle & Stir and Simply Sausages, and entered the Chinese sauce market in 2002 with the launch of Knorr Chinatown.

Simplifying ranges

Last April the company also relaunched Ragu under the Knorr brand and gave it its first advertising support for five years. Peter Lloyd, category controller at Unilever UK Foods, says this was part of Unilever's Path to Growth strategy.

'We are committed to ensuring that core brands such as Knorr engage effectively with consumers. We need to simplify the ranges we offer our customers and this is particularly true in a busy aisle, such as recipe sauces, where our research shows the number of products on display can confuse consumers,' he says. 'Shoppers tend to have a limited repertoire of brands that they will consistently buy, largely influenced by their lifestyle and the meal they are preparing. Our aim is to help unclutter the recipe sauces aisle and, in doing so, to inject new life into the brand.'

Global cuisines

Unilever differentiates its brands by marketing Bertolli as an authentic Italian sauce - manufactured in Italy. The company also has a presence in the organic sector with its Go Organic brand.

Masterfoods owns brand-leading Dolmio and Uncle Ben's, one of the mainstream brands in the ethnic food sector. Last year it invested £9m into the category and introduced the Uncle Ben's Around the World range, which includes Mediterranean, Indian, Thai and Mexican recipes.

One of the leading brands in the ethnic sector is RHM-owned Sharwoods, which produces Chinese, Indian and south-east Asian sauces. It is the brand leader in the Chinese cooking sauce sector and second-placed in the Indian sauce market behind Pataks.

Mintel predicts that the demographic trend toward one-person households could provide new opportunities for this category. Single people are often less likely to cook a meal for themselves from scratch, making them the perfect target audience for prepared sauces, especially if smaller packs are introduced.

Sector opportunities

Overall, Mintel thinks that the cooking sauces market is oversupplied with brands chasing the same number, or even decreasing numbers, of buyers.

The excessive use of discounting in the past two years has been to the detriment of long-term brand building.

However, there is the chance to add value back into the sector with premium and authentic products as well as extending into smaller pack sizes. The fresh chilled sector is the one area that has bucked the trend, and Marks & Spencer in particular has extended its own-label offerings in this area.

NPD will be crucial to maintaining cooking sauces' place as a convenience food, with microwaveable sauces and pastas an important area of innovation.

It will also be seen in the introduction of newer regions' cuisine such as South African and Vietnamese.

Mintel estimates that the market will grow by 21% to reach a value of £755m by 2009. When inflation is taken into account, this is a rise of 12%.

WET/AMBIENT COOKING SAUCE BY MANUFACTURERS' SHARE (excluding pasta)

Brand 2004* 2002 02-04

pounds m % pounds m % % chng

1 Campbell's Foods (Homepride) 60 25 55 24 9.1

2 Unilever Bestfoods (Knorr) 57 24 54 23 5.6

3 Sharwood's 29 12 24 10 20.8

4 Masterfoods (Uncle Ben's) 24 10 25 11 -4.0

5 Patak's 14 6 14 6 0.0

6 Other brands 14 6 17 7 -17.6

7 Own label 40 17 42 18 -4.8

Total 238 100 231 100 3.0

Source: Mintel *estimated

WET ITALIAN (PASTA) SAUCE SECTOR BY MANUFACTURERS' SHARE

Brand 2004* 2002 02-04

pounds m % pounds m % % chng

1 Masterfoods (Dolmio) 92 40 94 41 -2.1

2 Unilever Bestfoods

(Ragu, Bertolli) 39 17 40 17 -2.5

3 Premier Foods (Loyd Grossman) 23 10 16 7 43.8

4 Campbell's (Homepride) 16 7 14 6 14.3

5 Sacla 18 8 17 7 5.9

6 Other brands 7 3 9 4 -22.2

7 Own label 34 15 40 17 -15.0

Total 229 100 230 100 -0.4

Source: Mintel *estimated

ADSPEND ON COOKING SAUCES BY TOP SPENDERS

Brand £000 % Total

1 Masterfoods (Dolmio range) 6051 32.3

2 Campbell's (Homepride range) 3071 16.4

3 RHM/Centura (Sharwoods range) 2450 13.1

4 Masterfoods (Uncle Ben's range) 2284 12.2

5 Unilever Bestfoods (Bertolli pasta sauce) 915 4.9

6 Others 3958 21.1

Total 18,729 100.0

Source: Nielsen Media Research

ANALYST COMMENT

Neil Hendry, Lead analyst, Datamonitor

In recent years, growth in the UK cooking sauces market has been driven by pasta and ethnic lines, with consumers willing to try new and exotic sauces, particularly at the premium end of the market.

However, there is evidence that this trend is coming to an end as the market is evolving significantly. Recent sales in the bedrock pasta sector have been relatively lacklustre. The pour-over and dry brands are losing share, while the premium chilled sector is on the up.

Recent years have provided more reasons for manufacturers' concern than simply the changing dynamics of the market. Sales growth has been hampered by intense competition, stagnating manufacturer margins and resulting in flat sales lines.

The market continues to be fuelled by the growing expendable incomes of increasingly time-pressured consumers who want to eat high-quality tasting food with minimal effort in preparation.

However, such habits do not guarantee a rosy future for the market. Preference within the 'convenience' consumer group is being challenged by cross-sector alternatives such as ready meals and takeaways.

Manufacturers are striving to maintain moderate growth by creating new products, innovative packaging, flavour extensions and increased offerings in the reduced-calorie and fat sectors.

As volume sales of cooking sauces reach inevitable saturation, one fact bodes well for manufacturers - the uptake of cooking sauces is most evident among younger consumers. Companies must now retain them as they mature, and thus leverage sales by organically broadening the market's consumer base.