snack foods 2010 keynote

Market Report Plus 2010

20th Edition January 2010Edited by Sophie Worth

ISBN 978-1-84729-564-4

Snack Foods

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Snack Foods Foreword

Key Note Ltd 2010

Contents

Executive Summary 1

1. Market Definition 3REPORT COVERAGE....................................................................................................................3MARKET SECTORS.......................................................................................................................3MARKET TRENDS.........................................................................................................................3Health Issues....................................................................................................................................3Flavours............................................................................................................................................4Do us a Flavour.............................................................................................................................5ECONOMIC TRENDS....................................................................................................................5Population.......................................................................................................................................5Table 1.1: UK Resident Population Estimates by Sex (000), Mid-Years 2004-2008...........5Gross Domestic Product................................................................................................................5Table 1.2: UK Gross Domestic Product at Current and Annual Chain-Linked Prices(m), 2004-2008..............................................................................................................................6Inflation...........................................................................................................................................6Table 1.3: UK Rate of Inflation (%), 2004-2008.......................................................................7Unemployment...............................................................................................................................7Table 1.4: Actual Number of Unemployed Persons in the UK (million), 2004-2008.........7Household Disposable Income....................................................................................................8Table 1.5: UK Household Disposable Income Per Capita (), 2004-2008............................8MARKET POSITION......................................................................................................................8The UK..............................................................................................................................................8Table 1.6: Consumer Expenditure on Food and Non-Alcoholic Drink (m),2004-2008........................................................................................................................................9Europe..............................................................................................................................................9

2. Market Size 11THE TOTAL MARKET................................................................................................................11Manufacturers Sales ..................................................................................................................11Table 2.1: UK Manufacturers Sales of Prepared or Preserved Potatoes IncludingCrisps (000), 2004-2007.............................................................................................................11

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Table 2.2: Net Supply of Prepared or Preserved Potatoes Including Crisps in the UK(000), 2004-2007.........................................................................................................................12Retailers Sales .............................................................................................................................12Table 2.3: The Total UK Snack Foods Market by Sector by Value at Current Prices(m at rsp), 2005-2009.................................................................................................................12Figure 2.1: The Total UK Snack Foods Market by Sector by Value at Current Prices(m at rsp), 2005-2009.................................................................................................................13BY MARKET SECTOR.................................................................................................................13Figure 2.2: The Total UK Snack Foods Market by Sector by Value at Current Prices(%), 2009........................................................................................................................................14Potato Crisps.................................................................................................................................14Table 2.4: The UK Potato Crisps Sector by Valueat Current Prices (m at rsp and %), 2005-2009....................................................................15Figure 2.3: The UK Potato Crisps Sector by Valueat Current Prices (m at rsp), 2005-2009.................................................................................15Other Savoury Snacks..................................................................................................................16Table 2.5: The UK Other Savoury Snacks Sector by Valueat Current Prices (m at rsp and %), 2005-2009....................................................................16Figure 2.4: The UK Other Savoury Snacks Sectorby Value at Current Prices (m at rsp), 2005-2009................................................................17Snack Nuts.....................................................................................................................................17Table 2.6: The UK Snack Nuts Sector by Valueat Current Prices (m at rsp and %), 2005-2009....................................................................18Figure 2.5: The UK Snack Nuts Sector by Valueat Current Prices (m at rsp), 2005-2009.................................................................................18OVERSEAS TRADE......................................................................................................................19General Overview........................................................................................................................19Table 2.7: UK Manufacturers Imports and Exports of Preparedor Preserved Potatoes Including Crisps (000), 2004-2007..................................................19Imports...........................................................................................................................................19Table 2.8: UK Manufacturers Imports of Prepared or Preserved Potatoes IncludingCrisps (000), 2004-2007.............................................................................................................20Exports............................................................................................................................................20Table 2.9: UK Manufacturers Exports of Prepared or Preserved Potatoes IncludingCrisps (000), 2004-2007.............................................................................................................20Leatherhead Food International Ltd Export Figures............................................................21

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3. Industry Background 23RECENT HISTORY.......................................................................................................................23NUMBER OF COMPANIES.......................................................................................................23Table 3.1: Number of UK VAT- and/or PAYE-Based Enterprises Engagedin the Processing and Preserving of Potatoes by Turnover Sizeband(000, number and %), 2009.....................................................................................................23EMPLOYMENT............................................................................................................................24Table 3.2: Number of UK VAT- and/or PAYE-Based Enterprises Engagedin the Processing and Preserving of Potatoes by Employment Sizeband(number and %), 2009................................................................................................................24REGIONAL VARIATIONS IN THE MARKETPLACE.............................................................25DISTRIBUTION.............................................................................................................................26HOW ROBUST IS THE MARKET?...........................................................................................26LEGISLATION...............................................................................................................................26KEY TRADE ASSOCIATIONS....................................................................................................27European Snacks Association.....................................................................................................27Snack Food Association...............................................................................................................27Snack, Nut and Crisp Manufacturers Association..................................................................27ADVISORY AND INFORMATION SERVICES .......................................................................27The Food Commission (UK) Ltd.................................................................................................27Food and Drink Federation........................................................................................................27Food Standards Agency..............................................................................................................28

4. Competitor Analysis 29THE MARKETPLACE..................................................................................................................29MARKET LEADERS.....................................................................................................................29Intersnack Ltd...............................................................................................................................29Seabrook Crisps Ltd.....................................................................................................................30Tayto (NI) Ltd................................................................................................................................30United Biscuits Topco Ltd...........................................................................................................31Walkers Snack Foods Ltd............................................................................................................32OUTSIDE SUPPLIERS..................................................................................................................32Raw Materials...............................................................................................................................32Snack Processing Equipment.....................................................................................................34Packaging......................................................................................................................................34MARKETING ACTIVITY.............................................................................................................35Main Media Advertising Expenditure......................................................................................35Table 4.1: Main Media Advertising Expenditure on Savoury Snacks (000), YearsEnding September 2008 and 2009............................................................................................35


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Table 4.2: Main Media Advertising Expenditure on Potato Crisps and Snacks(000), Year Ending September 2009......................................................................................36Table 4.3: Main Media Advertising Expenditure on Crispbreads and Crackers(000), Year Ending September 2009......................................................................................37Recent Promotions.......................................................................................................................38Other Marketing Activities........................................................................................................39Exhibitions ....................................................................................................................................39

5. Brand Strategy 41RESEARCH FINDINGS................................................................................................................41Table 5.1: Popularity of Selected Snack Food Brands(% of respondents), 2008 and 2009.........................................................................................41By Sex..............................................................................................................................................42Table 5.2: Popularity of Selected Snack Food Brandsby Sex (% of respondents), 2009 .............................................................................................43By Age............................................................................................................................................44Table 5.3: Popularity of Selected Snack Food Brandsby Age (% of respondents), 2009 ............................................................................................44By Social Grade.............................................................................................................................45Table 5.4 Popularity of Selected Snack Food Brandsby Social Grade (% of respondents), 2009..............................................................................46By Region ......................................................................................................................................47Table 5.5: Popularity of Selected Snack Food Brandsby Region (% of respondents), 2009........................................................................................48Table 5.6: Popularity of Selected Snack Food Brandsby Remaining Regions (% of respondents), 2009.................................................................49COMPANIES BRANDS..............................................................................................................50Intersnack......................................................................................................................................50Largo Food Exports .....................................................................................................................50Tayto (NI) ......................................................................................................................................50Tyrrells Potato Chips ...................................................................................................................50United Biscuits..............................................................................................................................51Walkers Snack Foods ..................................................................................................................51TOP BRANDS...............................................................................................................................51The Guild of Fine Food Great Taste Awards...........................................................................51Table 5.7: Winners of The Guild of Fine Food Great Taste Awards, 2009........................52

6. Strengths, Weaknesses, Opportunities and Threats 53STRENGTHS..................................................................................................................................53WEAKNESSES..............................................................................................................................53OPPORTUNITIES.........................................................................................................................54


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THREATS.......................................................................................................................................54

7. Buying Behaviour 55HOUSEHOLD EXPENDITURE ON FOOD AND DRINK......................................................55CONSUMER PENETRATION ...................................................................................................55Potato Crisps, Tortilla and Corn Snacks...................................................................................55Table 7.1: Penetration of Potato Crisps, Tortilla and Corn Snacks in the Past12 Months by Frequency (% of adults), 2009.........................................................................55Nuts and Dried Fruit....................................................................................................................56Table 7.2: Penetration of Nuts and Dried Fruit in the Past12 Months by Frequency (% of adults), 2009.........................................................................56Other Savoury Snacks..................................................................................................................57Table 7.3: Penetration of Other Savoury Snacks in the Past12 Months by Frequency (% of adults), 2009 ........................................................................57

8. Current Issues 59CLOSURES, MERGERS AND ACQUISITIONS ......................................................................59MBMG............................................................................................................................................59Tyrrells Potato Chips....................................................................................................................59BOARD AND SENIOR MANAGEMENT CHANGES............................................................59PepsiCo UK and Ireland..............................................................................................................59NEW PRODUCT DEVELOPMENT ..........................................................................................59McCoys..........................................................................................................................................59Penn State.....................................................................................................................................60Pringles...........................................................................................................................................60Tyrrells............................................................................................................................................60Walkers..........................................................................................................................................60

9. The Global Market 61EUROPE.........................................................................................................................................61THE US...........................................................................................................................................61ASIA PACIFIC ..............................................................................................................................62SELECTED GLOBAL COMPETITORS .....................................................................................62Calbee Foods ................................................................................................................................62Intersnack Knabber-Gebck ......................................................................................................62ITC ..................................................................................................................................................63J&J Snack Foods ...........................................................................................................................63Largo Food Exports .....................................................................................................................63Liberation Foods .........................................................................................................................64


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Lorenz Snack-World....................................................................................................................64PepsiCo...........................................................................................................................................64Procter & Gamble ........................................................................................................................64Snack Foods ..................................................................................................................................65Snyders of Hanover....................................................................................................................65

10. Forecasts 67INTRODUCTION..........................................................................................................................67The Economy.................................................................................................................................67Population.....................................................................................................................................67Table 10.1: Forecast UK Resident Population by Sex (000), Mid-Years 2009-2013.........67Gross Domestic Product..............................................................................................................68Table 10.2: Forecast UK Growth in Gross Domestic Productin Real Terms (%), 2009-2013....................................................................................................68Inflation.........................................................................................................................................68Table 10.3: Forecast UK Rate of Inflation (%), 2009-2013...................................................69Unemployment.............................................................................................................................69Table 10.4: Forecast Actual Number of Unemployed Personsin the UK (million), 2009-2013...................................................................................................69FORECASTS 2010 TO 2014......................................................................................................70Table 10.5: The Forecast UK Snack Foods Market by Sectorby Value at Current Prices (m at rsp), 2010-2014................................................................70Figure 10.1: The Forecast UK Snack Foods Market by Sectorby Value at Current Prices (m at rsp), 2010-2014................................................................71MARKET GROWTH....................................................................................................................71Figure 10.2: Growth in the UK Snack Foods Marketby Value at Current Prices (m at rsp), 2005-2014 ..............................................................72FUTURE TRENDS.........................................................................................................................72Industry Consolidation................................................................................................................72Overseas Markets.........................................................................................................................73Health Issues..................................................................................................................................73

11. Company Profiles 75INTERSNACK LTD.......................................................................................................................76SEABROOK CRISPS LTD............................................................................................................78TAYTO (NI) LTD..........................................................................................................................80UNITED BISCUITS TOPCO LTD................................................................................................82WALKERS SNACK FOODS LTD...............................................................................................84


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12. Company Financials 87

13. Further Sources 89Associations.................................................................................................................................89General Sources.........................................................................................................................90Government Sources ...............................................................................................................91Other Sources.............................................................................................................................92Key Note Sources ......................................................................................................................92

Understanding TGI Data 95Number, Profile, Penetration................................................................................................95Social Grade.................................................................................................................................96Standard Region........................................................................................................................96

Key Note Research 97

The Key Note Range of Reports 99


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Our taste buds are changing anddeveloping as new flavours and foodsbecome readily available in the UKand Ireland. Everyone has theirfavourite flavours, but lately peopleare becoming keen to experimentand try new foods.

Heston Blumenthal, celebrity chef and chief judgein Walkers Do us a Flavour competition(www.fmb.org.uk)

Innovative flavour additions are keyfor snacks as our extensive research hasshown that approximately 30% of allcategory growth in the latest 52 weekshas come from new flavours beingadded to existing brands.

Paul Lettice, Trade Communications Officerof Procter & Gamble (www.talkingretail.com,2nd February 2009)

When Jamie Oliver said that becausethere are a few fat children nobodyshould be eating crisps, it crucifiedour business. Schools were bannedfrom stocking crisps and our turnoverplummeted from 15m to 12malmost overnight.

Ken Brook-Chrispin, Chairman and Chief Executiveof Seabrook Crisps (www.ft.com, 5 May 2009)

Snack Foods

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Executive SummaryThis Key Note Market Report Plus examines the UK snack foods market,which comprises potato crisps, other savoury snacks (including tortilla chips,baked snack biscuits and rice- and corn-based snacks) and snack nuts.It excludes sweet snack items, such as chocolate, which are covered inKey Notes Confectionery Market Report Plus and the Sweet & Salty SnacksMarket Assessment. Key Note estimates that, in terms of retail sales, the totalvalue of the market increased by 12% between 2005 and 2009 to reach2.39bn. An especially strong growth of 8.4% was seen between 2008 and 2009as manufacturers passed on steep rises in commodity costs for items suchas potatoes, sunflower oil and nuts.Manufacturers of snack foods continued to respond to health issuesin 2008/2009, reducing salt and fat content in their foods through theintroduction of light and low-fat variants. Emphasis has been placed onthe use of more natural ingredients, as well as on baked, rather than fried,goods. Seabrook Crisps has admitted that when celebrity chef Jamie Oliveradvised people against eating crisps because of their fat and salt content,it decimated its sales almost overnight. However, despite most snack foodsbeing relatively low in nutritional value, consumption of them on a regularbasis is very high. A Target Group Index (TGI) survey carried out by BMRBInternational Ltd found that 84.1% of respondents had consumed potatocrisps, tortilla or corn snacks in the 12 months ending March 2009, indicatingthat consumers look upon such foods as indulgent treats.As well as being indulgent, savoury snack foods such as crisps are also anaffordable treat. Even at the premium end of the market, products are cheapin comparison to other food treats, such as premium chocolate. In fact, thecurrent recession has helped demand for upmarket products, as there has beenan increase in consumers staying in rather than going out and replacingluxuries such as eating out in restaurants with eating snack foods at home.This has also led to retailers giving more shelf space to snack foods, particularlylarge sharing packs.The hike in commodity costs in 2008/2009 led to hefty price rises in the industry,and there have been corporate casualties as a result. For example, NaturalCrisps Ltd was close to administration when it was bought by Tayto Crisps ofNorthern Ireland in a distress deal completed in a week over Christmas 2008.The deal was Taytos fourth acquisition in 3 years, following its purchases ofGolden Wonder in 2006, Real Crisps in 2007 and Red Mill Snack Foods in 2008.Germanys Intersnack purchased a 15% stake in Largo Foods (the owner of theTayto brand in the Republic of Ireland), and is thought to be consideringmaking more acquisitions in the UK market. Further consolidation in anindustry currently dominated by Walkers Snack Foods seems likely in thefuture, especially as the recession continues and companies struggle to survive.Key Note forecasts that the retail sales value of the UK snacks market willincrease by 3.6% to 2.48bn in 2010, and will grow by an overall 5.3% between2010 and 2014 to finish at 2.61bn.

Snack Foods Executive Summary

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Executive Summary Snack Foods

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1. Market DefinitionREPORT COVERAGE

Snacks can be defined as food consumed at times other than breakfast, lunchand dinner, or as a selection of small items eaten to replace traditional meals.However, for the purpose of this Key Note Market Report Plus, such items areconfined to bagged savoury snacks, and the report excludes sweet items, suchas sweet biscuits, sugar and chocolate. These items are covered in Key NotesConfectionery Market Report Plus and Sweet & Salty Snacks MarketAssessment.In addition to retail outlets, sales of savoury snacks are made throughfoodservice outlets, such as coffee shops, public houses (pubs) and canteens.These outlets are not included in this report, but would add considerably tothe total value of the market.

MARKET SECTORSWithin this report, the snack foods market is divided into three principlesectors, as follows: potato crisps other savoury snacks, including tortilla chips, baked snack biscuits and

rice- and corn-based snacks snack nuts.

MARKET TRENDSHealth Issues

Healthier formulations continue to be a major concern within the food market,particularly for savoury snacks marketed to children. The relatively high fat,salt and sugar content of processed foods, together with the sedentary lifestyleof many consumers, has led to an increasing proportion of overweight andobese people in the Western world. Data from the Department of HealthsHealth Survey for England (HSE) shows that, in 2007, 60.8% of adults (aged16 or over) in England were overweight and, of these, 24% were obese.This represented a slight fall in the proportion of overweight adults (61.6% in2006); however, the data also showed that obesity had increased in children.In 2007, 28.6% of children (aged between 2 and 10) in England wereoverweight and, of these, 15.4% were obese.

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In contrast, a survey conducted by the Stroke Association in September 2009found that, perhaps surprisingly, consumers under the age of 18 were moreconscientious than other age groups when it came to checking the salt contentof foods before purchasing (21% compared with the national average of lessthan 10%), but that a high salt content did not deter them from buyingproducts.The Department for Business, Innovation and Skills (BIS) Foresight TacklingObesities: Future Choices project the findings of which were published inOctober 2007 predicts that, if no action is taken, 60% of men, 50% of womenand 25% of children will be obese by 2050. With the threat of possible legalaction ever present in todays litigious society, food manufacturers haveresponded by offering reduced-fat and -salt alternatives in most categories,including potato crisps and other bagged savoury snacks. However,reformulation of products has closed the gap between healthy and regularcrisps, as manufacturers reduce the calorie count by introducing differentcooking oils and recipe changes. According to Nielsen, in the year ending April2009, there was a 2.3% drop in the sales value of Walkers Baked (the healthyoption) as sales of its core brand rose after it began using healthier cookingoil. Other measures to make savoury products more healthy include theremoval of monosodium glutamate and artificial flavourings (see Flavourssection below) and colourings.In July 2008, a joint initiative between the UK Government, foodmanufacturers and advertising agencies was announced to tackle obesityby encouraging the public to eat healthily and take more physical exercise.The 75m Change4Life campaign was 4 years in the making and has thesupport of an industry consortium, including Tesco, PepsiCo and Kraft. In July2008, a coalition of companies including BSkyB, ITV, Tesco, Coca-Cola,Cadbury and AOL pledged the equivalent of more than 200m in advertisingspace and services to support the initiative in the run-up to the 2012 OlympicGames (London 2012).

FlavoursAs palates have become more adventurous, novel new flavours have beenintroduced to snack foods, often based on ethnic tastes and spicy flavours.There is even a campaign on the social networking website Facebook to bringback the hedgehog-flavoured crisps that were introduced as a joke but enjoyedsurprising success in the 1980s. Flavoured with pork fat, thehedgehog-flavoured crisps inevitably led to a charge brought by the Office ofFair Trading (OFT) for false advertising. In another instance, the EuropeanCommission attempted to ban Prawn Cocktail- and Smokey Bacon-flavouredsnacks on the grounds that they contained artificial sweeteners or otherharmful additives.However, according to a survey undertaken by Kettle Chips in 2009, nearly halfof the UK adults surveyed voted the classic Cheese & Onion as their favouritecrisp flavour. Other findings were that 49% of males preferred Cheese & Onionover any crisp flavour and, while the flavour was most popular in East Angliaand London, it was less so in the South West, where just 33% named it as theirfavourite.

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Do us a FlavourIn 2008, Walkers Snack Foods ran a competition on its website entitledDo us a Flavour, inviting the public to suggest a new flavour for its crisps.The company then manufactured the six finalist flavours Cajun Squirrel;Crispy Duck and Hoisin; Builders Breakfast; Onion Bhaji; Fish and Chips; andChilli and Chocolate for the public to vote on. In May 2009, the BuildersBreakfast flavour (which was said to be flavoured with egg, bacon, sausageand beans) was announced as the winner.

ECONOMIC TRENDSPopulation

In 2008, the population of the UK was estimated at 61.4 million an increaseof 0.7% compared with the previous year and 2.6% higher than the 2004 levelof 59.8 million. Any rise in population is of benefit to demand for consumergoods as it increases the customer base. However, the fact that the UK hasan ageing population will dampen the demand for childrens snack products.The population increase will largely be as a result of immigration, and this maystrengthen demand for snacks influenced by cuisines from around the world.

Table 1.1: UK Resident Population Estimates by Sex(000), Mid-Years 2004-2008

2004 2005 2006 2007 2008

Female 30,568 30,741 30,893 31,059 31,232Male 29,278 29,497 29,694 29,916 30,151

Total 59,846 60,238 60,587 60,975 61,383% change year-on-year - 0.7 0.6 0.6 0.7

Source: Monthly Digest of Statistics, November 2009, National Statistics website Crown copyright material is reproduced with the permission of the Controllerof HMSO (and the Queens Printer for Scotland)

Gross Domestic ProductGross domestic product (GDP) rose by 3.5% at current prices in 2008, comparedwith 5.5% in 2007. Figures published by National Statistics in late November2009 showed that GDP contracted by 0.3% in the third quarter of 2009, revisedfrom a previous estimate of a fall of 0.4%. In the third quarter of 2009, GDPwas 5.1% lower than in the corresponding period of 2008, reflecting the stateof the economy as the recession dragged on.


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Table 1.2: UK Gross Domestic Product at Currentand Annual Chain-Linked Prices (m), 2004-2008

2004 2005 2006 2007 2008

Current prices 1,202,956 1,254,058 1,325,795 1,398,882 1,448,054% changeyear-on-year - 4.2 5.7 5.5 3.5

Annualchain-linkedGDP 1,227,387 1,254,058 1,289,833 1,322,842 1,330,118% changeyear-on-year - 2.2 2.9 2.6 0.6

GDP gross domestic product

Source: Economic & Labour Market Review, November 2009, National Statisticswebsite Crown copyright material is reproduced with the permissionof the Controller of HMSO (and the Queens Printer for Scotland)

InflationAs is evident in Table 1.3, inflation fell slightly in 2008, having increased theprevious 2 years. Figures published in November 2009 showed that ConsumerPrice Index (CPI) annual inflation the Governments target measure was 1.5% in October, up from 1.1% in September 2009. As an internationallycomparable measure of inflation, the CPI shows that the UK inflation ratein September 2009, at 1.1%, was above the provisional figure for the EU as awhole (0.3%). Retail Price Index (RPI) inflation, which includes housing costs,fell by 0.8% in the year ending October 2009, compared with a fall of 1.4%in September.


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Table 1.3: UK Rate of Inflation (%), 2004-2008

2004 2005 2006 2007 2008

Inflation (%) 3.0 2.8 3.2 4.3 4.0Percentage pointchange year-on-year - -0.2 0.4 1.1 -0.3

Note: inflation is at retail price index (RPI).


UnemploymentThe latest annual figures released by National Statistics in November 2009show that the unemployment rate rose to 910,000 in 2008 a 5.8% increasecompared with 2008. This worsened considerably in 2009 as a direct result ofthe recession, and the latest quarterly figures from National Statistics revealthat the number of people out of work increased by 21,000 to 2.49 millionbetween August and October (not tabulated). However, this was the smallestincrease seen since the March-to-May period in 2008, indicating that the worstis over and employers are beginning to hire again.Unemployment is always a lagging factor in a recession, as many businessescease trading during the economic difficulties, and employers tend to remaincautious for some time after the economy has recovered. However, withsavoury snacks being a relatively cheap purchase, unemployment figuresare not likely to have as much impact as in other consumer goods sectors.

Table 1.4: Actual Number of Unemployed Personsin the UK (million), 2004-2008

2004 2005 2006 2007 2008Actual number ofclaimants (million) 0.85 0.86 0.95 0.86 0.91% change year-on-year - 1.2 10.5 -9.5 5.8



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Household Disposable IncomeBank interest rates are at an all-time low and, in a further attempt to kick-startconsumer spending, the standard rate of VAT was reduced to 15% on1st December 2008. However, it will revert to 17.5% on 1st January 2010in a move that could curtail any growth in consumer spending on high-priceditems, but will not be expected to make any difference to demand forlow-ticket snacks.The latest Retail Sales Monitor from the British Retail Consortium (BRC) showsthat UK retail sales values for October 2009 rose by 3.8% on a like-for-like basisfrom October 2008, when sales had fallen 2.2%. However, food sales growthslowed further, largely reflecting lower food price inflation. Nevertheless, anyindication of a return in consumer confidence will be encouraging for the snackfood industry, where Christmas sales of premium indulgent snacks are soimportant.According to the latest figures from National Statistics, UK householddisposable income increased by 4.1% to 14,921 in 2008 (compared with 2007),and rose by an overall 14.1% over the 5-year review period.

Table 1.5: UK Household Disposable IncomePer Capita (), 2004-2008

2004 2005 2006 2007 2008Household disposableincome () 13,078 13,572 13,952 14,331 14,921% change year-on-year - 3.8 2.8 2.7 4.1

Source: Economic & Labour Market Review, November 2009, National Statisticswebsite Crown copyright material is reproduced with the permissionof the Controller of HMSO (and the Queens Printer for Scotland)

MARKET POSITIONThe UK

Consumer expenditure on food and non-alcoholic drink rose by 8.8% in 2008,compared with the previous year a much sharper increase than has beenrecorded in recent years. Expenditure on savoury snacks as considered in thisreport is estimated to have amounted to 2.8% of total expenditure on foodand non-alcoholic drink in 2008 (not tabulated).


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Table 1.6: Consumer Expenditure on Foodand Non-Alcoholic Drink (m), 2004-2008

2004 2005 2006 2007 2008

Expenditure (m) 65,156 67,138 69,510 72,313 78,680% change year-on-year - 3.0 3.5 4.0 8.8

Source: Consumer Trends, Quarter 2 2009, National Statistics Crown copyrightmaterial is reproduced with the permission of the Controller of HMSO (and theQueens Printer for Scotland)

The latest figures available for the first half of 2009 show that expenditure onfood and non-alcoholic drink continued to rise and was 4.8% higher in the first6 months of 2009 than in the comparable period in 2008.

EuropeOverall, the EU savoury snacks market is estimated by Key Note to haveincreased by 4% to 11.3bn in 2008. The latest detailed figures from theEuropean Snacks Association (ESA) related to 2007, when potato chips (crisps)accounted for more than a third (34.3%) of the total value of savoury snacksand nuts.The snack nuts sector has seen significant growth in some Western EU markets,but declines in the Eastern EU have reduced the sectors overall growth. In 2005(the latest figures available), the UK accounted for around 21% of the totalvalue of the EU savoury snacks market, with Germany representing 13%; Spain10% to 11%; France and Italy 8% to 9% each; Scandinavia (excluding Norway)6%; and Belgium and the Republic of Ireland 3% each. The market leader insavoury snacks across Western Europe is PepsiCo, which owns the Frito-Lay andWalkers brands.


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2. Market SizeTHE TOTAL MARKETManufacturers Sales

Unlike other sectors of UK manufacturing, manufacturers sales of preparedor preserved potatoes, including crisps have risen in value over recent years.According to National Statistics Products of the European Community(PRODCOM) publication, sales increased by an overall 8.5% from 827.2mto 897.7m between 2004 and 2007 (the latest years for which figures areavailable).

Table 2.1: UK Manufacturers Sales of Prepared or PreservedPotatoes Including Crisps (000), 2004-2007

2004 2005 2006 2007

Value (000) 827,192 841,446 892,378 897,689% change year on year - 1.7 6.1 0.6

Source: PRODCOM, PRA15310, National Statistics Crown copyright materialis reproduced with the permission of the Controller of HMSO (and the QueensPrinter for Scotland)

PRODCOM also provides import and export statistics for prepared or preservedpotatoes, including crisps. By adding the total value of UK imports to the valueof domestic manufacturers sales and deducting the total value of UK exports,figures are arrived at showing the value of the UKs net supply of theseproducts, as shown in Table 2.2.

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Table 2.2: Net Supply of Prepared or Preserved PotatoesIncluding Crisps in the UK (000), 2004-2007

2004 2005 2006 2007

Value (000) 837,303 844,635 891,159 888,235% change year-on-year - 0.9 5.5 -0.3


Retailers SalesKey Note estimates that UK retail sales of snack foods were worth 2.39bn in2009 an increase of 8.4% compared with the previous year (as a result ofmanufacturers passing on steep rises in commodity costs) and a rise of 12% onthe 2005 total of 2.13bn. The strongest growth was seen in the potato crispssector, the value of which increased by 14.6% between 2005 and 2009.

Table 2.3: The Total UK Snack Foods Market by Sectorby Value at Current Prices (m at rsp), 2005-2009

2005 2006 2007 2008 2009

Potato crisps 938.0 942.0 944.0 980.0 1,075.0Other savoury snacks 1,005.0 1,010.0 1,015.0 1,022.0 1,110.0Snack nuts 190.5 192.0 194.5 203.0 205.0

Total 2,133.5 2,144.0 2,153.5 2,205.0 2,390.0% change year-on-year - 0.5 0.4 2.4 8.4

rsp retail selling prices

Source: Key Note

Market Size Snack Foods


In recent years, the better-for-you healthier sector has driven growth, butthe gap between regular products and healthier products has narrowed asmanufacturers have begun to reformulate their standard products(i.e. through the use of lighter cooking oils). Manufacturers concentrationon premium sharing snacks has also contributed towards growth, as staying inhas become the new going out as a result of the recession. However, therecession has also driven many consumers to the value end of the market, sodemand has remained fairly buoyant across the board.

Figure 2.1: The Total UK Snack Foods Market by Sectorby Value at Current Prices (m at rsp), 2005-2009

Potato crisps

Other savoury snacks

Snack nuts

2005 2006 2007 2008 20090

250

500

750

1,000

1,250

1,500

1,750

2,000

2,250

2,500


Source: Key Note

BY MARKET SECTORFigure 2.2 illustrates the market share held by each sector of the snack foodsmarket in 2009. Other savoury snacks represented the largest proportionof the market (46.4%), mainly because this category incorporates variousdifferent types of products, such as tortilla chips, baked snack biscuits,and rice- and corn-based snacks. Potato crisps was the second-largest sectorof the market, with 45% in 2009, followed by the nuts category with 8.6%.



Figure 2.2: The Total UK Snack Foods Marketby Sector by Value at Current Prices (%), 2009

Snack nuts 8.6%

Other savoury snacks 46.4%

Potato crisps 45.0%

Source: Key Note

Potato CrispsIn 2007, Europes potato prices more than doubled after the previous yearshot summer saw production slumping by up to 15% in key producing countriessuch as Germany, the Netherlands and Great Britain. On the whole, crispmanufacturers in the UK absorbed the additional costs. The wet summer of2008 pushed prices of potatoes up again, and this was coupled with a steeprise in the price of sunflower oil. Manufacturers absorbed some of theincreases, but had no alternative but to increase retail prices, resulting in asharp rise in shelf prices in 2008 and 2009. Less was seen of discount offers suchas buy one, get one free (BOGOF), which had been a characteristic of themarket before.Traditional potato crisps remain the single largest product category of thesnack foods market as defined in this report, accounting for a 45% share in2009. Key Note estimates that the retail sales value of potato crisps increasedby 9.7% to 1.08bn in 2009, and grew by 14.6% over the 5-year review period.



Table 2.4: The UK Potato Crisps Sector by Valueat Current Prices (m at rsp and %), 2005-2009

2005 2006 2007 2008 2009

Value (m) 938 942 944 980 1,075% change year-on-year - 0.4 0.2 3.8 9.7

% share of total market 45.0 43.9 43.8 44.4 45.0


Source: Key Note

Cheese and Onion-flavoured crisps are said to be the nations favourite flavour,having overtaken Ready Salted, and sales of the former are valued at morethan 250m. However, Salt and Vinegar-flavoured crisps have declined inpopularity in recent years. Manufacturers are concentrating on relaunchingand/or promoting retro brands, since it is cheaper than launching a newproduct, and benefits from the fact that brands such as Hula Hoops andMonster Munch will already have a fan base as many consumers will rememberthem nostalgically from their own childhoods.

Figure 2.3: The UK Potato Crisps Sector by Valueat Current Prices (m at rsp), 2005-2009

2005 2006 2007 2008 2009900

925

950

975

1,000

1,025

1,050

1,075

1,100


Source: Key Note



Other Savoury SnacksOther savoury snacks are those that are not wholly or exclusively made frompotatoes, potato flour or potato starch, but can be, for example, dough-,wheat-, starch- or rice flour-based. Products include traditional extruded andpelleted snacks (such as Procter & Gambles Pringles range, which are madefrom reconstituted potato), tortilla products (i.e. Walkers Doritos), bakedsnacks (such as Mini Cheddars and Twiglets) and rice- and corn-based snacks(i.e. Quakers Snack-a-Jacks).Like potato crisps, other savoury snacks suffered a decline in sales values earlierin the decade in the backlash against unhealthy products, but sales have sincerecovered due to manufacturers new product development (NPD) of healthieroptions, as well as the trend towards sharing packs of premium snacks.Key Note estimates that the combined retail sales value of the productsincluded in the other savoury snacks sector accounted for 46.4% of the totalmarket in 2009, and that retail sales of other savoury snacks increased by 10.4%between 2005 and 2009 to reach a value of 1.11bn.

Table 2.5: The UK Other Savoury Snacks Sector by Valueat Current Prices (m at rsp and %), 2005-2009

2005 2006 2007 2008 2009

Value (m) 1,005 1,010 1,015 1,022 1,110% change year-on-year - 0.5 0.5 0.7 8.6



Source: Key Note



Figure 2.4: The UK Other Savoury Snacks Sectorby Value at Current Prices (m at rsp), 2005-2009

2005 2006 2007 2008 2009980

990

1,000

1,010

1,020

1,030

1,040

1,050

1,060

1,070

1,080

1,090

1,100

1,110

1,120

1,130


Source: Key Note

Snack NutsNuts are perceived as a healthier alternative to other savoury snacks, and thecategory has grown in value and volume in the past, at the expense of otherproducts in the market. However, the sector is susceptible to supply disruptions,as crops can be in short supply due to factors outside of manufacturers control,such as frost damage to crops and farmers price hikes. UK buyers of peanutshave also been hit by the low value of sterling as peanuts which haveescalated in price anyway are sold in US dollars. Peanuts now account foran estimated, and declining, 40% share of the snack nuts sector by value.Own-label products are significant in the sector, and their value now accountsfor more than two-thirds of the total. However, sales of all nuts are highlyseasonal, and around 30% of the sectors retail sales value for any year isearned in the final quarter in the run-up to Christmas.Key Note estimates that retail sales of snack nuts increased by an overall7.6% between 2005 and 2009, to reach a value of 205m. However, sales areestimated to have increased by just 1% between 2008 and 2009, when thesectors market share dropped to a 5-year low of 8.6%



Table 2.6: The UK Snack Nuts Sector by Valueat Current Prices (m at rsp and %), 2005-2009

2005 2006 2007 2008 2009

Value (m) 190.5 192.0 194.5 203.0 205.0% change year-on-year - 0.8 1.3 4.4 1.0



Source: Key Note

A recent lack of innovation and NPD in the snack nuts sector has caused it tostagnate a little, and manufacturers are seeking to re-energise the categorywith introductions of sweet nut lines (such as peanut clusters), which falloutside the scope of this report. Moreover, some brands of nuts are largely orexclusively sold through foodservice outlets such as public houses (pubs),hotels, coffee shops, cafs and canteens sales from which would significantlyincrease the overall value of the sector.

Figure 2.5: The UK Snack Nuts Sector by Valueat Current Prices (m at rsp), 2005-2009

2005 2006 2007 2008 2009185.0

187.5

190.0

192.5

195.0

197.5

200.0

202.5

205.0

207.5

210.0


Source: Key Note



OVERSEAS TRADEGeneral Overview

The value of UK imports of prepared or preserved potatoes, including crisps,decreased between 2004 and 2007, while that of exports showed year-on-yearincreases. This resulted in the trade deficit seen in 2004 and 2005 changing toa surplus in 2006 and 2007, and one which increased by 8.2m between 2006and 2007.

Table 2.7: UK Manufacturers Imports and Exports of Preparedor Preserved Potatoes Including Crisps (000), 2004-2007

Imports Exports Balance of Trade

2004 50,815 40,704 -10,1112005 48,512 45,323 -3,1892006 49,921 51,140 1,2192007 49,197 58,651 9,454


ImportsImports from countries outside of the EU are fairly insignificant in value, andaccounted for just 0.9% of the total in 2007. Between 2004 and 2007, the UKsimports of prepared or preserved potatoes were greater than its exports to EUmarkets.



Table 2.8: UK Manufacturers Imports of Prepared or PreservedPotatoes Including Crisps (000), 2004-2007

Intra-EU Imports Extra-EU Imports Total

2004 49,861 954 50,8152005 47,843 669 48,5122006 49,558 363 49,9212007 48,774 423 49,197


ExportsAlthough most export trade is with EU countries, non-EU markets arebecoming increasingly important to UK manufacturers of prepared orpreserved potatoes. For example, the value of such exports rose by 66.5%between 2004 and 2007, while the value of exports to EU countries increasedby 37.3% over the same period.

Table 2.9: UK Manufacturers Exports of Prepared or PreservedPotatoes Including Crisps (000), 2004-2007

Intra-EU Exports Extra-EU Exports Total

2004 31,274 9,430 40,7042005 33,234 12,089 45,3232006 37,453 13,687 51,1402007 42,950 15,701 58,651




Leatherhead Food International Ltd Export FiguresAccording to research carried out for the Food and Drink Federation (FDF)by Leatherhead Food International Ltd in June 2009, UK exports of crisps a more limited category than the prepared or preserved potatoes, includingcrisps classification seen in the National Statistics figures previously increased in value by 26.4% to 47.5m between 2007 and 2008, continuingseveral years of high growth. The largest market was the Republic of Ireland,exports to which were worth 25.8m in 2008, representing an increase of23.9% compared with 2007. However, it was the export markets of Italy andGermany that recorded the highest growth rates between 2007 and 2008, at84.4% and 41.5%, respectively. More recent figures published by LeatherheadFood Research (the trading name of Leatherhead Food International)in October 2009 showed that UK exports of crisps had risen in value by 13.7%to 27.3m in the first 6 months of 2009, compared with the same period in2008. The Republic of Ireland remained the largest market to which exportsof crisps rose in value by 35.5%, compared with the first half of 2008 whileexports to Denmark showed a growth rate of 200.7% over the same period.



3. Industry BackgroundRECENT HISTORY

Potato crisps were invented in 1853 by an exasperated American-Indian hotelchef in Saratoga Springs, New York, who responded to repeated complaintsfrom a customer that his chips were too thick by cutting the potatoes waferthin. The guest was said to be very enthusiastic about the crisp, paper-thinpotatoes, and they soon became a staple of American menus. The first Britishpotato crisps were manufactured by a Mr Carter in 1913, but were first massproduced when Frank Smith of Cricklewood formed the Smiths Potato CrispsCompany Ltd in 1920 the company that would eventually become part ofWalkers Snack Foods.Potato crisps are manufactured from thinly sliced fresh potatoes (oroccasionally other vegetables) that are lightly fried in oil or oven-baked andthen sprinkled with flavourings. Different types of oils and flavourings havebeen introduced over the years, and many products have been reformulatedto make them healthier. The 1970s saw the introduction of extruded productswhereby, for example, ground corn is squeezed through a small shapedopening, expanding as it heats up into soft, light pieces that are then bakedin an oven to make them crisp.

NUMBER OF COMPANIESAccording to National Statistics UK Business: Activity, Size and Locationpublication, there were 60 UK VAT- and/or pay-as-you-earn (PAYE)-basedenterprises engaged in the processing and preserving of potatoes in 2009.Of these, 41.7% had a turnover in excess of 1m, and a quarter reporteda revenue of more than 5m an unusually high proportion.

Table 3.1: Number of UK VAT- and/or PAYE-Based EnterprisesEngaged in the Processing and Preserving of Potatoes

by Turnover Sizeband (000, number and %), 2009

Number of Enterprises % of TotalTurnover Sizeband (000)0-49 10 16.750-99 5 8.3100-249 10 16.7250-499 5 8.3

Table continues...

Snack Foods Industry Background



by Turnover Sizeband (000, number and %), 2009...table continued

Number of Enterprises % of TotalTurnover Sizeband (000)500-999 5 8.31,000-4,999 10 16.75,000+ 15 25.0

Total 60 100.0

Source: UK Business: Activity, Size and Location 2009, National Statistics Crown copyright material is reproduced with the permission of theController of HMSO (and the Queens Printer for Scotland)

EMPLOYMENTOf the 60 UK VAT- and/or PAYE-based enterprises engaged in the processingand preserving of potatoes in 2009, exactly half employed fewer than tenpeople. At the other end of the scale, a third of the enterprises were largecompanies with 100 or more employees.


by Employment Sizeband (number and %), 2009

Number of Enterprises % of TotalNumber of Employees0-4 25 41.75-9 5 8.310-19 5 8.320-49 5 8.350-99 0 0.0

Table continues...

Industry Background Snack Foods



by Employment Sizeband (number and %), 2009...table continued

Number of Enterprises % of TotalNumber of Employees100-249 10 16.7250+ 10 16.7

Total 60 100.0

Source: UK Business: Activity, Size and Location 2009, National Statistics Crown copyright material is reproduced with the permission of theController of HMSO (and the Queens Printer for Scotland)

REGIONAL VARIATIONS IN THE MARKETPLACEThere are thousands of different types of potatoes grown around the world.Around 80 different varieties of potatoes are grown commercially in the UK inprincipal growing areas that include Yorkshire, Lincolnshire, Norfolk, the EastMidlands, Shropshire, Devon and Cornwall. Varieties commonly used in themanufacturing of crisps include Hermes, Saturna and Rosetta. According toNational Statistics 2009 UK Business: Activity, Size and Location report, thehighest concentration of companies involved in the processing and preservingof potatoes were to be found in Northern Ireland (33.3%) and the EastMidlands (16.7%).Peanuts are widely grown in India, the Peoples Republic of China (PRC), theUS, Argentina and West and South Africa. India also grows significant crops ofcashew nuts, while pistachios commonly come from Iran, the US and Turkey.As for consumption of savoury snacks, according to a NEMS Market Researchsurvey conducted in November 2009 (see Chapter 5 Brand Strategy),respondents living in the West Midlands proved to be the most avid regularbuyers of savoury snacks.



DISTRIBUTIONKey Note estimates that the major grocery multiples account for aroundtwo-thirds of the value of retail sales of potato crisps, snack nuts and otherbagged savoury snacks, while the ongoing recession has seen discounters, suchas Aldi and Lidl, taking market share from the more upmarket chains.A high level of discounting generally hinders potential growth in the value ofsales, but the snacks category does benefit from impulse buying, particularlywhen crisps, etc. are placed alongside sandwiches and other lunch items by thefront entrance of the store. Supermarkets are also encroaching on theconvenience market by opening smaller town-centre stores.A wide range of other outlets are important in the market as there is a highdegree of impulse buying. These include: confectioners, tobacconists andnewsagents (CTNs); kiosks; and garage forecourts. Such outlets frequentlycharge more than the supermarket chains for snack products.

HOW ROBUST IS THE MARKET?The recession may have increased demand for savoury snacks at the value endof the market, but the premium end survives well as consumers consider snacksan affordable treat. In fact, the market for savoury snacks is likely to benefitfrom a recession as people cut back on going out and begin entertaining athome more frequently, which may encourage them to purchase snack foodsfor sharing. Consumers may also indulge in comfort eating when times arehard, and begin making packed lunches for work or school, of which savourysnacks are often a part.However, certain measures such as an advertising ban on junk food tochildren and the restrictions on crisps and snacks in schools have had anadverse effect on demand for childrens snack products.

LEGISLATIONLegislation relating to the production and selling of foodstuffs aims to protecthuman life and health, and protect consumers interests, with due regard forthe protection of animal health and welfare, plant health and theenvironment. Principal legislation involving food production and processingincludes the Food Safety Act 1990, Food Safety Regulations 1995, the PriceMarking Order 1999 and the Food Labelling Regulations 1996. As well asadhering to the UKs own laws, food suppliers must conform to precise rulesat the European Community level.



KEY TRADE ASSOCIATIONSEuropean Snacks Association

The European Snacks Association (ESA) was founded in 1956 and is Europesonly trade organisation dedicated to the advancement of the savoury snacksindustry on behalf of its members at national, European and internationallevels. The ESAs official journal, The Snacks Magazine, is published quarterly,and the Association also organises SNACKEX Europes largest snacks tradeshow.

Snack Food AssociationFounded in 1937, the US-based Snack Food Association (SFA) is theinternational trade association of the snack food industry, representing morethan 400 companies worldwide involved in the manufacture and supply ofsnacks. The SFA also organises the SNAXPO exhibition.

Snack, Nut and Crisp Manufacturers AssociationBased in London, the Snack, Nut and Crisp Manufacturers Association(SNACMA) represents the interests of the savoury snack industry in the UK.Its members are responsible for more than 90% of all savoury snacks producedand sold, including branded and own-label products. The Association iscontrolled by a Board of Directors, comprising the Chief Executive Officers(CEOs) and Managing Directors (MDs) of each operating member company,which include Walkers, Kettle Crisps, Tayto, Procter & Gamble and UnitedBiscuits.

ADVISORY AND INFORMATION SERVICESThe Food Commission (UK) Ltd

The Food Commission (UK) Ltd is the UKs leading independent watchdogon food issues. The Commission has been campaigning for healthier and saferfood for more than 10 years, and is largely funded by public subscriptions anddonations.

Food and Drink FederationThe Food and Drink Federation (FDF) promotes the food and drinkmanufacturing industrys views, and works to build consumer confidencein the food chain as a whole.



Food Standards AgencyThe Food Standards Agency (FSA), which became operational in April 2000,aims to keep professionals and the public fully informed about nutritionalissues and food hygiene, and to maintain public confidence in the foodindustry, from which it is independent. One of the Agencys initiatives is theoperation of a cooking bus, which travels to schools and holiday clubsthroughout the UK. On the bus, fully qualified teachers teach children abouthealthy eating and food safety, and children can join in cooking sessions.The concept was developed in partnership with Focus on Food, which wasformed to promote and strengthen the status of practical food education inprimary and secondary schools.



4. Competitor AnalysisTHE MARKETPLACE

The UK snack foods industry is highly concentrated and is dominated byPepsiCos Frito-Lay subsidiary, which owns Walkers Snack Foods Ltd in the UK.Procter & Gamble is another strong player, with its one snack brand of Pringlesgenerating annual revenues in excess of $1bn. However, there are numeroussmaller companies, such as Burts Potato Chips and Tyrrells Potato Chips, thathave established a firm position in the premium market, and hand-cookedupmarket products are pioneered and led by Kettle Chips.

MARKET LEADERSIntersnack LtdCompany Structure

Intersnack Ltd is a part of Germany-based Intersnack Knabber-Gebck GmbH,which has had a presence in the UK since 1990. In January 2007, Intersnackacquired Union Snack Ltd makers of the leading pretzel brand, Penn State for an undisclosed sum and, in November 2008, it was reported that thecompany was interested in buying a larger stake in Largo Food Exports (whichowns the Tayto name in the Republic of Ireland) to add to its existing holding.

Current and Future DevelopmentsIn addition to its leading Penn State brand, Intersnack supplies own-brandsnacks to Marks & Spencer, Sainsburys, Tesco and Waitrose, as well as toairlines and train companies. Its Pom-Bear extruded snack is popular for its lackof wheat, gluten, artificial colours, flavours and preservatives. In June 2009,Intersnack Knabber-Gebck acquired Percy Daltons Famous Peanut Co Ltd a Haverhill-based producer of nut, seed and dried fruit products.

Financial ResultsIn the year ending 31st December 2008, Intersnack Ltd increased its turnoverto 24.9m, compared with 22.8m in the previous year. However, a pre-tax lossof 565,000 was incurred in 2008, compared with a pre-tax profit of 668,000in 2007.

Snack Foods Competitor Analysis


Seabrook Crisps LtdCompany Structure

The family-owned business of Seabrook Crisps Ltd has been producing crispsin the north of England since 1945. The brand now outsells all others, exceptingWalkers, in this area of the country.

Current and Future DevelopmentsDespite the recession, Seabrook Crisps has reported ongoing record salesfigures, with volumes up by 66% following the addition of 5,000 nationalstockists (including 50 Waitrose stores in the south of England) and aninvestment of 4m in new production lines. The company employs more than100 people and is forecasting further growth throughout 2010, with annualsales expected to rise from 170 million bags to 233 million by October 2010. Thiswill be partly due to ASDAs decision to stock Seabrook brands in 292 of itsstores after finding that it was outperforming Walkers in some Yorkshirebranches.Seabrook Crisps has been the Official Crisp of the Yorkshire County Cricket Club(YCCC) since 2008. Seabrook has also benefited from a product placementcampaign, as the crisps are served in the public houses (pubs) in the ITV soapoperas Coronation Street and Emmerdale, exposing the brand to consumersoutside the north of England.

Financial ResultsIn the year ending 30th September 2008, Seabrook Crisps Ltd reported aturnover of 15.4m (compared with just under 13m in 2007) and a pre-taxprofit of 750,000 (compared with a pre-tax loss of 1.9m in the previous year).

Tayto (NI) LtdCompany Structure

Tayto (NI) Ltd is the long-established market leader in the snacks industry inNorthern Ireland. The family-owned business, which is based in Tandragee inCounty Armagh, was founded by Thomas Hutchinson in 1956. With its stringof recent acquisitions, Tayto is now among the largest crisp and snackmanufacturers in the UK.

Current and Future DevelopmentsIn January 2009, the Tayto group acquired Jonathan Crisp theStaffordshire-based supplier of hand-fried crisps for undisclosed terms.Jonathan Crisp is the trading name of Natural Crisps Ltd, and promotes itsproducts as crisps for snobs. The acquisition was described as a distresspurchase, and was completed in just 1 week. The deal was Taytos fourthacquisition in 3 years, following its purchases of Golden Wonder in 2006,Real Crisps in 2007 and Red Mill Snack Foods in 2008.

Competitor Analysis Snack Foods


Tayto plans to close its Red Mill snack foods factory in Wednesbury in theWest Midlands by the end of 2011, which will lead to the loss of 300 jobs.The closure is part of the companys plans to transfer production to its Corbysite, partly due to the loss of a lucrative contract to produce Procter & GamblesPringles Minis, which had been carried out by Tayto since its acquisition ofGolden Wonder. The long-term future of the Corby plant had been unclear;however, in October 2008, it was announced that further jobs were to becreated at the site.

Financial ResultsIn the 53-week period ending 5th July 2008, Tayto (NI) Ltd recorded a turnoverof 26.2m and a pre-tax profit of 371,000. This compared to a turnover of justunder 24m and a pre-tax loss of 143,000 in the preceding 52 weeks.

United Biscuits Topco LtdCompany Structure

United Biscuits was founded in 1948 and now employs approximately 8,500people worldwide. In October 2006, the company agreed a 1.6bn takeoverdeal with Paribas Affaires Industrielles (PAI) and US-based equity-investmentfirm Blackstone Group. (United Biscuits TopCo Ltd is the name of the companythat comprises the Board of the controlling shareholders of the United Biscuitsgroup.)

Current and Future DevelopmentsUnited Biscuits has 15 factories in the UK, France, Belgium and the Netherlands,and it also sells its products in North America, the Middle East, Africa andAustralia. The company has reported being adversely affected bya shift to private-label food products in the markets of Northern Europe.In its interim statement for the first half of 2009, United Biscuits reporteddouble-digit sales growth in its international markets, with particularly strongperformances being seen in West Africa, Australia and the Middle East.The company also acquired a manufacturing facility in India, in anticipation ofa market launch there; however, it is said to be considering plans to outsourceup to 125 of the 750 jobs at its Aintree factory to India.

Financial ResultsIn the 53-week period ending 3rd January 2009, United Biscuits Topco Ltdreported a turnover of just over 1.2bn, compared with 1.14bn in the previous52 weeks. The company suffered a pre-tax loss of 16.6m in 2008, comparedwith a loss of 11.2m in 2007.



Walkers Snack Foods LtdCompany Structure

Walkers Snack Foods Ltd traces its origins to a pork butchery business foundedin Leicester in the 1880s that diversified into making potato crisps when meatwas in short supply after the Second World War. Walkers merged with its rivalSmiths in 1979, before PepsiCo Inc of the US acquired both companies in 1989.Walkers is now the UKs leading manufacturer of savoury snacks, claiming a60% share of the market, with around 11 million people eating its productsthat are manufactured at 15 sites across the UK.

Current and Future DevelopmentsIn July 2009, Walkers Snack Foods announced the creation of 50 jobs at its crispsfactory in Leicester, following a 2m investment in new equipment. It has saidthat it is committed to continuing investment in its site in Beaumont Leys,Leicester, which is its largest UK site, employing nearly 2,000 people.Walkers Snack Foods has added its Builders Breakfast variant as a permanentflavour. The product, which is intended to taste like egg, sausage, bacon andbeans, won the public vote in the companys Do us a Flavour competition(see Marketing Activity section later in this chapter).

Financial ResultsIn the year ending 27th December 2008, Walkers Snack Foods Ltd reporteda turnover of 223.5m and a pre-tax profit of 31.1m. In the previous year,the company had a turnover of 196.9m and a pre-tax profit of just over 30m.

OUTSIDE SUPPLIERSRaw MaterialsPotatoes

Approximately four tonnes of potatoes are required to make one tonneof potato crisps, and, every year, UK farmers grow 6.5 million tonnes ofpotatoes, of which around 550,000 tonnes are used in the manufacture ofpotato crisps. Additionally, 150,000 tonnes of potatoes are imported for thispurpose from the rest of Europe, especially from Spain, France and Italy.The price and supply of potatoes is quickly affected by conditions outside ofthe industrys control, such as droughts or heatwaves. For example, the wetsummer of 2008 pushed potato prices up. Quality control and wastage are keyissues for potato industries across the five Northwest European Potato Grower(NEPG) countries. Despite lower yields in Germany, Belgium and Holland,overall production for 2009 is likely to be higher than in 2008.



Among the suppliers of potatoes to the UKs retail, catering and processingsectors is Greenvale AP, which has sites in the major potato growing areasof Shropshire, Berwickshire and Cambridgeshire. Another is QV Foods, whichis a wholly owned subsidiary of AH Worth & Co Ltd a family business basedin Lincolnshire. In February 2009, QV Foods took over the management of theCambridgeshire site of MBM Produce Ltd, and the remaining of the lattersbusiness went into administration in July 2009 (see Chapter 8 Current Issues).RS Cockerill (York) Ltd claims to be one of the UKs largest suppliers of potatoesto the processing industry, supplying in excess of 100,000 tonnes to crispmanufacturers each year, which equates to one in six packets of potato crispssold in the UK.

NutsPeanuts used in savoury snacks are primarily sourced from India and thePeoples Republic of China (PRC), which together account for more than halfof the worlds production. Other major peanut growing countries include theUS, Senegal, Sudan, Brazil, Argentina, South Africa, Malawi and Nigeria.Usually, snack peanuts are shelled, roasted (sometimes in oil), blanched andsalted. Iran, the US and Turkey are among the principal suppliers of pistachionuts, while cashews are native to Brazil, but are now produced in more than30 countries, including Vietnam, Nigeria and India. UK Snacks Ltd (trading asNageena) and Puyang Tianli Nuts Co Ltd are among the companies supplyingto the global snack nuts industry.

Corn and WheatThe French company Groupe Limagrain is one of the worlds leading producersof seeds, especially in Europe, where the group is the top producer of corn,wheat and other seeds. The company has also extended its reach by supplyingflour and other bakery ingredients through its subsidiary, Limagrain CralesIngrdients.For extruded products, ingredients are blended together and passed througha cooking extruder where they are cooked and formed into a dense pellet.Following extrusion, cooking and forming, the pellets are dried and distributedto a snack processor where they are expanded or puffed by immersion in hotoil or other heating methods. The snacks manufacturer then seasons, packs andsells the ready-to-eat snack to retailers.

Oils and FatsVegetable oils are almost always used for savoury snacks and are usuallyderived from soya, sunflower, rapeseed, groundnut and palm oil. SouthAmerican countries, Malaysia and Indonesia are among the regions exportingoils. New British Palm Oil has struck a 2-year deal to supply United Biscuits withpalm oil from sustainable sources. United Biscuits hopes to obtain all the oil ituses from sustainable sources by the end of 2011, and this new deal means thatit will be two-thirds of the way towards hitting that target by mid-2010.It is the first supply agreement signed for New Britains UK refinery in Liverpool,which is due to be completed in spring 2010.



Flavours and SeasoningsSeasonings are specially blended from a variety of ingredients to provide theflavours for savoury snacks, which are passed through a rotating flavour drumto be evenly sprinkled with salt or other flavours. Kerry Group PLC is a majorsupplier of flavourings, seasonings and coating systems to snackmanufacturers, and it operates manufacturing, sales and technical centresacross Europe, North and South America, Australia, New Zealand and Asia.It employs more than 20,000 people and supplies 15,000 food produsts, foodingredients and flavour products to customers in more than 140 countriesworldwide.Other suppliers include the Swiss Group Givaudan SA, which acquired the UKflavour and fragrance business of Quest International from ICI PLC in March2007, and Savoury Flavours Ltd, which acquired fellow UK flavouring companyImarco Food Ingredients in July 2007. The US company McCormick andCompany Inc was established in 1889 and supplies liquid, paste and powderflavourings. Its sales revenue in the year ending 30th November 2008 reached$3.18bn the first time it had topped $3bn, representing an increase of 8.9%compared with the previous year.

Snack Processing EquipmentSavoury snacks are fed from a conveyor belt into a hopper and automaticallyweighed into portions. They are then dropped into packets or other suchcontainers, which are then sealed.Suppliers of processing equipment to the snack foods industry includeBaker Perkins Ltd, FMC Food Tech (now part of the Chicago-based JBTCorporation), Flo-Mech Ltd and Extrusion-Link Ltd. In May 2008,Middlesex-based Wright Machinery Ltd merged with the US company PPMTechnologies, and the new company is known as PPM/Wright Machinery Ltd.Other suppliers of processing equipment to the savoury snacks industry includethe German Hastamat GmbH, Lalesse Extrusion BV of the Netherlands, and theUS Heat & Control Inc, which has a UK operation in West Lothian, Scotland.

PackagingBristol-based Kliklok-Woodman is a leading international packagingmachinery supplier and a part of the US Klikwood Corporation. The businesstraces its origins to the 1940s when it worked closely with Herman Lay (founderof HW Lay Co [forerunner of Frito-Lay]) to develop the first automated potatochip packaging system. Other suppliers of packaging and weighing equipmentinclude Flo-Mech Ltd, Hastamat GmbH, PPM/Wright Machinery and BlueprintAutomation Ltd, which has a European headquarters in the Netherlands anda sales office in Lincolnshire.



MARKETING ACTIVITYMain Media Advertising Expenditure

According to Nielsen Media Research (NMR), main media advertising on allfood amounted to 507.4m in the year ending September 2009, compared with554.3m in the previous year. Expenditure on foodstuffs of relevance to thisreport accounted for 5.5% of this total and, at 27.7m, represented an increaseof 35.3% compared with the 20.5m seen in the previous year.NMR divides the savoury snack foods market into three categories, as specifiedin Table 4.1. In the year ending September 2009, the potato crisps and snackssector had by far the largest share of advertising expenditure (21.3m),followed by the crispbreads and crackers category, which spent 6.4m on itsadvertising over the same period. Advertising on dips and dipper snacks hada value of 51,000 in 2009, but this category recorded no above-the-line mainmedia advertising expenditure in the previous year.

Table 4.1: Main Media Advertising Expenditure on SavourySnacks (000), Years Ending September 2008 and 2009

2008 2009

Potato crisps and snacks 16,267 21,251Crispbreads and crackers 4,197 6,377Dips and dipper snacks - 51

Total 20,464 27,679

Source: Nielsen Media Research

Potato Crisps and SnacksPotato crisps and snacks is the category benefiting from the most main mediaadvertising expenditure, accounting for more than three-quarters (76.8%) ofthe total in the year ending September 2009. Market leader, Walkers, is by farthe biggest spender in this category, with its above-the-line spending aloneaccounting for 41% of the total expenditure. Other brands supported byadvertising budgets of significance were Pringles (3.2m), Phileas Fogg (1.9m)and KP (1.6m). The low level of sub-threshold spending reflects thedominance of the big-name brands in the category.



Table 4.2: Main Media Advertising Expenditure on Potato Crispsand Snacks (000), Year Ending September 2009

WalkersCrisps 4,110Red Sky Crisps 2,147Sensations 1,159Doritos Corn Chips and Dips 741Doritos 452Snack foods 114Total Walkers 8,723

PringlesCrisps 1,772Select range 1,379Total Pringles 3,151

Phileas Fogg snack product range 1,935

KPMcCoys 831Hula Hoops 797Total KP 1,628

Kettle Foods Kettle Chips 1,296Ryvita Limbos Range 1,159

McVitiesMini Cheddars 490Go Ahead! snack range 375Total McVities 865

Table continues...



Table 4.2: Main Media Advertising Expenditure on Potato Crispsand Snacks (000), Year Ending September 2009

...table continued

Quaker SnackAJacks 718Kraft Ritz Crackers 695Marmite Rice Cakes 536Spar Snacks 95Sub-threshold brands 450

Total 21,251


Crispbreads and CrackersMain media advertising expenditure on crispbreads and crackers stood at6.4m in the year ending September 2009, representing an increase of 51.9%compared with the previous year. Kelloggs was the biggest spender, with itsSpecial K Mini Breaks variety accounting for 47.3% of the total expenditure inthis category. The Ryvita Company a subsidiary of Associated British Foods(ABF) accounted for a further 39.4% of the total in 2009.

Table 4.3: Main Media Advertising Expenditure on Crispbreadsand Crackers (000), Year Ending September 2009

Kelloggs Special K Mini Breaks 3,014Ryvita Product Range 2,406Jacobs Cream Crackers 530Kallo Rice Cakes 142Ryvita Crispbread Range 106Sub-threshold brands 179

Total 6,377




Dips and Dipper SnacksJust 51,000 of sub-threshold spending was invested in the promotion of dipsand dipper snacks in the year ending September 2009, while none wasrecorded in the previous year.

Recent PromotionsUnited Biscuits

The newly relaunched premium snack brand Phileas Fogg was promoted bya 3m television campaign by United Biscuits in March/April 2009, which wasrepeated later in the year. In addition to this, retailers were supported byin-store activity for the brand.Another United Biscuits brand, Hula Hoops, was featured in a televisioncampai

snack foods 2010 keynote

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