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Ready meals recorded weaker growth than packaged food at global level, increasing by a 0.8% CAGR in the 2010-2015 period, compared to 2.3% for total packaged food in constant terms, as the category remains strongly biased towards developed markets, with North America and Western Europe together accounting for an estimated 66% of world sales in 2015. In addition to low growth, the world’s largest branded ready meals manufacturers increasingly have to contend with highly competitive and innovative private label products in key markets.
Although the share of private label in packaged food has risen in most of the world’s major regions between 2010 and 2015, paradoxically, it has seen a decline at world level. With the majority of private label sales generated in the low-growth Western European markets, private label sales did not sufficiently rise in the rest of the world to sustain growth globally.
However, ready meals bucked the trend by being the only one of packaged food’s 16 major product categories to see a rise in the share of private label between 2010 and 2015 at global level, increasing from 24% to 25%. This is largely due to strong innovations in private label in developed markets, with the UK and Japan showing typical examples of strategies giving private label an edge over brands.
Source: Euromonitor International
The two largest global markets for private label ready meals, the UK and Japan, both showed share growth in the 2010-2015 period. However, with private label shares in ready meals standing at 69% and 27%, respectively, in 2015, this highlights the sharp differences in the level of maturity of private label between the two markets, as well as also showing the level of concentration in grocery retailing. A more fragmented grocery retailing environment in Japan compared to the UK, and most other European markets, contributes to the dominance of unbranded generic products and therefore to the lower share of private label.
The fourth largest market, Germany, in contrast with its peers, saw stagnation in the share of private label between 2010 and 2015. This partly reflects the maturity and high penetration of private label groceries and the limited growth potential, but is also the result of the decline in Aldi’s share. The largest private label player in ready meals by some distance, Aldi’s position was hit as total sales of the chain stagnated in its domestic market.
Source: Euromonitor International
The sophistication of private label ready meals in the UK is reflected by the rising share of grocery retailers with a premium positioning, notably Marks & Spencer and Waitrose, the latter successfully exploring the super-premium niche with the Heston range endorsed by the celebrity chef Heston Blumenthal. The co-branded Slimming World frozen ready meals range successfully launched by the supermarket chain Iceland in 2015 innovated by strengthening its health credentials thanks to the collaboration with the membership-based weight-loss company.
Among Japanese private label ranges, the top three ready meals operators in Japan are the three largest convenience store operators, Seven & I (7-Eleven), FamilyMart and Lawson. Healthier chilled bento box ready meals helped these operators widen their core target to appeal to older consumers, notably with recipes containing ingredients from regional cuisines or sourced locally. Elderly consumers are particularly targeted by premium ranges such as Aeon’s Topvalu Select and Seven & I’s Seven Gold.
Price remains essential for private label ready meals, for example with the greater range of microwaveable ready meals available in the UK, strongly contributing to growth, notably within frozen pizza. Hence, private label ranges –including frozen pizza offered below £1 by Aldi and Iceland – were also strong contributors to growth at the low end of the price spectrum. A polarisation of the private label offer in ready meals is also apparent in Japan, with retailers increasingly focusing on both premium and economy ranges, according to demographic profiles, with economy ranges often targeting young adults and premium ranges aimed at older consumers.
Compared to other packaged food categories in the UK, private label is strongly competitive in ready meals in all price segments, from economy to super premium, leaving little room for brands to differentiate themselves. While branded manufacturers in other markets and categories mostly operate in more favourable competitive environments, they also face difficulties in maintaining share due to the assault from private label, particularly when occupying the mid-market price segment.
Amid a growing polarisation in packaged food, which goes beyond ready meals, branded product manufacturers may emulate private label innovation trends seen in Japan and the UK, notably in terms of provenance and healthier recipes, in order to avoid being too reliant on a mid-market positioning.