Michael Herson, MD of market consultancy the Strategy Works, examines how food suppliers have prepared for the smoking ban
While licensees may hold mixed views about the impact on wet sales of the introduction of the smoking ban in England, many believe it will affect food sales positively. Pubs will need to re-evaluate menu options to attract a more family-oriented customer base and create food-revenue streams. Marketed correctly, this represents an opportunity, rather than a threat, to pub groups - so how prepared are suppliers from the frozen food industry to meet this challenge?
As leading UK branded and own-label
frozen-food companies, major distributors and customers face one of the most significant external market forces to impact the food-
service market in years, key issues affecting the notoriously under-researched frozen-food industry bear investigation in relation to foodservice.
Market structure
Leading UK frozen-food branded manufacturers have virtually abandoned the [direct sales] field to major wholesale groups, such as Brakes and 3663, who virtually dominate the route to market.
Horizons market analyst Peter Backman, an observer of the foodservice frozen-food market for more than 20 years, estimates it to be worth £1.25bn at distributor selling-prices. Peter says food manufacturers "lost the plot" in the 1980s, when they reduced sales forces significantly and handed responsibility for customer interface to wholesalers.
Both 3663, with £1.45bn turnover, and Brakes with a turnover of £1.3bn (excluding France), have significant sales resources. Brakes has more than 400 field sales people interfacing with end-customers, plus regionally-located
telesales teams throughout the UK, while 3663 has 1,000 field and telesales personnel operating out of 42 depots.
No branded manufacturer or own-label supplier within frozen foodservice has a direct sales force of more than 10 staff, and most have less than five.
McCain, with a strong frozen-food heritage, has 50% of its total company turnover within foodservice.
But other leading retail brands have a minor foodservice presence in relation to their retail turnover.
Young's Seafood, a significant retail brand with £500m turnover as a group, has only recorded £25m (5%) of total turnover within foodservice.
Bernard Matthews' foodservice turnover is similar to that of Young's Seafood: £25m to £30m out of total UK turnover of just less than £340m - less than 10%.
Ease of preparation
McCain associate director of food services marketing Adrian Greaves recognises that pubs will require food that is simple to prepare as those entering the sector will not be able to employ skilled chefs.
Young's Seafood foodservice director Peter Milstead says demand for part-prepared food will increase. "There has been a move back to natural pieces of fish, which chefs can work with," he says.
Healthy eating
As healthy eating becomes a key foodservice driver, Loxton Foods managing director Paul Durbin sees the trend as irreversible. "Healthy eating will continue to drive forward - it's a total change in the way we look at food," he says.
Des Bell, marketing director at 3663, reports that its Positive Steps campaign, launched in September 2005, aimed to raise industry awareness of healthier-eating opportunities.
The company has sourced its own Smart Choice range to meet market demand for healthier eating. Brakes now has more than 70 products within its Heathier Choices range.
Bernard Matthews marketing director Matt Pullen says: "Our products have had all artificial colours and flavours removed."
Millifoods managing director Stephen Drew reports a number of customers requesting healthy children's menus with no added salt, while Durbin emphasises the importance of food miles - the distance food has to travel before it reaches the plate.
Brakes PR manager Simon Henrick says his company has been working with Bourne Leisure to develop healthier children's meals and sales have increased. "We developed and worked on mini-meals for Bourne Leisure, which helped food sales increase by 20% in each of the last two years," he says.
Food provenance
Two key features of Strategy Works research are traceability and sustainability, and Greaves confirms this trend. "We have relaunched our chip products as 'Best of British'," he says. "All our chips will be made from British-grown seed potatoes, planted in British fields by British farmers and manufactured in British factories. Provenance is vital - we're the only potato manufacturer within the UK to own a seed-
development business."
Young's Seafood has a similar initiative from boat to plate, and sustainability of fish stocks is central to its strategy. Milsted reports that Young's no longer sources cod from the North Sea. The company has just launched Basa, a new fish species and member of the catfish
family, which is similar in texture to cod and haddock. As a farmed fish, stocks can be managed and it is totally sustainable.
Meanwhile 3663 supplies Whites, a brand exclusive to the company and one that delivers on the promise "We've started, so you can finish" through a range of part-prepared products with provenance.
More local sourcing
At Marston's Pub Company, which has an estate of 1,700 pubs, catering and development manager Ben Bartlett confirms the trend towards more local sourcing, particularly for gastropubs. "There is greater opportunity to source local produce - and this is what the customer is demanding," he says.
Bell of 3663 confirms this trend. "We are
rolling out our UK local-sourcing initiative: 50% of the country is already covered and the remainder will have access to locally-sourced products by the end of 2007," he says.
But Bartlett says manufacturers could do even more on traceability. "As a company we champion traceability, but have to push manufacturers and producers to supply information," he says. The Food Standards Authority (FSA) should do more to encourage traceability."
Emerging trends
3663 has placed a strong focus on preparing for the ban. Bell reports: "We have developed menus and food offerings to introduce food to a pub for the first time or enhance an existing menu for those improving their offering as a result of the smoking ban."
McCain's Greaves believes the trend towards family dining will accelerate. "Our research identifies that smokers don't tend to be big diners - pubs will have to substitute that clientele," he maintains. "Family dining is a positive solution because it's fairly easy and profitable."
Pullen says many pubs will become more family-friendly and Bernard Matthews intends to target its Fine Dining range at this sector to capitalise on opportunities.
Bartlett would have liked to see a faster pace of development leading up to the introduction of the ban in England.
He says: "The industry is slow in adapting to changing trends. There will be a big impact on trade, such as a shift towards female customers and families. The industry should plan more al-fresco dining opportunities. The smoking ban should be seen as a great opportunity to develop the offer."
Jury's Doyle Hotel Group food buyer Andrea Wehrley believes that it is well placed to forecast the demand in England, having already experienced the introduction of the smoking ban in Ireland.
Wehrley says: "When smoking was banned in Ireland two years ago, it increased the numbers of customers coming into pubs. We're buying in more food to cope with potential demand."
Ahead of the game
Clearly, some are better prepared than others for the introduction of the smoking ban, but what looks certain is that the traditional pie-and-pint pub offering will quickly be displaced by healthier menu options appealing