AHDB UK Market Survey - 23 March 2012

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23 March 2012

AHDB UK Market Survey - 23 March 2012

Since 2009, consumers have been increasingly buying groceries that are promoted in order to reduce and manage their expenditure according to Kantar Worldpanel.

Changes in consumer shopping habits

Since 2009, consumers have been increasingly buying groceries that are promoted in order to reduce and manage their expenditure according to Kantar Worldpanel. Throughout 2010 and the first half of 2011, consumers were attracted to volume based promotions such as ‘two for £5’ or ‘buy one, get one free’. This sustained high volume of sales in the grocery market which resulted in expenditure increasing. In autumn 2011 the trend appeared to change, with consumers concerned about food waste and final checkout expenditure rather than volume based promotions. Consumers have increasingly purchased single items at full price.

This more recent behaviour trend has translated into the red meat retail market and had an impact on volume purchases in the latest three months. The number of red meat retail price promotions declined in the last quarter compared to the previous year. This resulted in volume purchases declining, especially on the more expensive cuts such as roasting joints, where many shoppers look for price reduction promotional activity. However, expenditure on red meat did increase as the fewer price reduction promotions, compared to last year, resulted in an increase in the average retail price on red meat products.

Sales of convenience items, including pizza and frozen chicken breasts have been the main benefactors of reduced red meat purchases. Frozen chicken breasts have appealed to consumer’s desire not to waste food, and have also benefitted from an increase in price promotional activity. As well as convenience motivations, pizzas and ready meals have also experienced increased price promotional activity in recent months. This has appealed to the new wave of shopper behaviour and has been the major driver behind their purchase gain from red meat.

Consumers have also changed other behaviours and appear to have adopted a ‘little and often approach’ when shopping. Recent IGD shopper track data, highlighted that consumers have been shopping for groceries more often, with those saying they shop three or more times a week rising from 39 per cent in December 2009 to 49 per cent in December 2011. An increasing number of consumers reported that they have also conducted their main shopping trip less often. Shoppers appear to have become more disciplined in planning their grocery shop with two thirds of consumers indicating that they planned the majority of their purchases before they enter the retailer; up from around half in 2008.

Price sensitivity remains the key driver of shopper behaviour and is likely to remain so during 2012. Consumer confidence, a prerequisite of consumer spending, remains at a historical low and combined with wage freezes, increased unemployment levels and rising utility bills it is likely that consumers will continue to adapt their shopping behaviour on order to maximise their household budgets.

Cattle market trends

Prices

As supplies remained tight, in week ended 17 March 2011 the prime deadweight cattle price averaged 338.9 p per kg, an increase of a penny compared to the previous week. The average price of R4L steers and R3 young bulls both increased a penny to 347.0p and 333.8p per kg respectively, while R4L heifers were at a similar price to the week earlier at 344.7p per kg. The -O4L cow price eased for the first time this year, down marginally to average 274.9p per kg.

In week ended 21 March prime cattle prices at GB auction markets also strengthened. Reports suggest that firm demand for quality cattle is being maintained with premium steers and heifers reaching up to 220p per kg. There was an increase of a penny in the average price of heifers, up to 193.3p per kg, and a three pence increase in the young bull price to average 182.6p per kg. This was tempered by a levelling in the average steer price at 188.7p per kg.

Trade

Exports of fresh and frozen beef in January 2012 totalled 8,300 tonnes. Largely as a result of an 11 per cent decline in production this was 20 per cent lower than in January 2011, however it still represented the second highest volume in January following the resumption of exports in 2006. There was a decline in shipments to all of the UK’s major trading partners with shipments down almost a quarter to other Member States. While fresh and chilled beef accounted for the majority of UK beef exports, shipments of frozen product increased on the year. Shipments to the new destinations of French Polynesia and Ghana were largely responsible for this. Despite the fall in volume, the export trade was worth a similar amount to that in January 2011, £28 million, as the average unit price increased over 20 per cent on the year.

Imports of fresh and frozen beef into the UK during January totalled 17,300 tonnes, eight per cent lower than in the same month last year. Shipments from Ireland declined four per cent to 12,000 tonnes, but still accounted for almost two thirds of the UK’s import requirements. Following the trend in 2011, imports from non- EU destinations declined and were less than half what they were in January 2010. The most notable decrease in imports were from Australia and Uruguay, both down around a quarter compared with January 2011. UK importers paid nine per cent more for beef on average in January 2012 and as a result the cost of beef imports totalled £65 million, the same as in January last year.

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