Grocery

Grocery Category Snapshot

The Grocery sector comprises a wide range of products including jams, preserves, sauces, condiments, spices, oils, cereals and baking ingredients and mixes. The sector performed well in 2015 growing by 5% despite the challenges of volatile ingredient and input costs, a strong presence of imported products combined with increased operating expenses.

The sector relies heavily on the domestic market, accounting for approximately 65% of outputs with exports to the UK, Europe, USA, Asia and UAE.

Exports in 2015 were primarily to the key UK and European markets with emerging and new markets such as Middle East, USA and Asia presenting opportunities for the sector.

Manufacturers need to differentiate their brands and develop a strong penetration on the domestic market to ensure that they stand out and resonate with the consumer as a basis for exporting.

Market Overview

The home baking category is worth €119m and has declined in value by 2.2% over the past year. Falling shopper numbers buying less volume has driven the decline of the home baking market. Culinary Nuts, fruits and peel is the highest value segment within home baking, although flour is the highest volume sector.

New research undertaken by Bord Bia in the RoI has identified home baking as a tradition that is closely tied to the Irish consumer’s sense of wholesomeness and quality food deriving from the home and the definition of home baking has not changed over time.

Category trends can be summarised as follows:
  • Private label is capturing a greater share of the market increasing to 37% while branded products account for 63% of category value sales.
  • Sales of traditional spreads such as jam and marmalade are declining while chocolate spreads, honey and nut butters are growing in popularity due to a mixture of their versatility, convenience and health credentials.
  • The rise in demand for nut butters which has increased by 46.7% can be attributed to the health and wellbeing attributes in addition to innovation in the category with new variants featuring on trend additions like coconut, sunflower, pumpkin and chia seeds.
  • Honey is a versatile product and manufacturers are using this to promote its diversity as a natural breakfast accompaniment for use with porridge, yogurt and pancakes and as a natural sweetener and an alternative ingredient to refined sugar in home baking. The development of flavoured honeys and smaller, convenient, squeezy and novelty packaging formats has also added to the increase in overall volume sales.
  • Variety and innovation are key drivers in addition to an increased consumer focus on health and wellbeing which is evident in the trend for free from/gluten free/low fat/low sugar/low allergen products. There are new entrants to the market using innovative, experimental ingredients and combinations including wild and organic products such as nettle and heather.
In the UK the value of the market is £464m and has increased by 5.7% from 2013, and by 34% from 2008 to 2013. Price has been a constant growth driver and shoppers are also buying the category more often.

The star performers are peanut butter and chocolate spread which are growing ahead of the market. Honey accounts for 25% of the market and is also performing well growing by 5.07% in the 12 months to May 2015. Sales of jam and marmalade are showing slight signs of decline of -1.9% and -0.2% respectively.

Innovative new packaging formats including pouches and cups aim to drive usage as a snack /dessert and appeal to younger consumers and can also help extend beyond traditional meal occasions e.g. breakfast for sweet spreads, lunch for savoury spreads and promote ‘on the go’ consumption.

The RoI market for Sauces, Oils and Condiments is worth €68m declining by 1.1% in the year to May 2015. 98% of Irish shoppers buy from the category each year but they are shopping less and purchasing lower volumes per trip. Brown Sauce and Pourable Dressings are in decline but relishes and mayonnaise are seeing growth of 10.4% and 0.1% respectively. Private label share is growing strongly and represents 19% of the value and 30% of the volume sales in the market. Growth is being driven mainly by the discounters.

In the UK the market is valued at £810m and is growing at 0.4%. The market is attracting new shoppers and shoppers are buying more often. Sauces are the only area in growth while pickles, chutneys and relishes are declining by 3.1%. The sauce market is heavily branded with brands accounting for 82% of sales.

Many smaller brands are successfully entering the category offering interesting products and brand personality. Less traditional products and hot spicy sauces that appeal to younger shoppers and free from products are also driving growth. Speciality vinegars are growing ahead of the market at 13.5%.

Challenges

The key challenge for manufacturers is to drive growth by maintaining interest in the category and encouraging more usage occasions.

The increasing presence of private label products also poses a challenge for brands and is currently growing for total ambient grocery at 14% yoy in Ireland.