The rising cost of key raw materials has pushed the price of jams and honey unpalatably high, forcing cash-strapped and busy shoppers to turn their backs on pricey preserves in favour of cereals, says Sarah Butler
You'd expect jams and spreads to be enjoying the sweet taste of success at the moment, what with their back-to-basics appeal, comforting taste and relative value for money (compared with coffee shop breakfast options anyway). But just as pre-packed jam sandwiches appear to have come and gone in the supermarkets, so the category has struggled to capitalise on its recessionary potential.
Although value sales have risen 11.2% in the category and are up in every sector except curd, volumes are down 2.1% and the only sub-category to have bucked the trend is chocolate spread [TNS 52w/e 4 October 2009]. Brands are promising to deliver more NPD and targeted marketing this year and they'll need to if they are to reverse this worrying slump in sales.
As with so many categories, it's commodity-driven price rises that are chiefly to blame. The soaring costs of sugar and glass, coupled with the honeybee colony collapses, have pushed retail prices up 13.6% on average [TNS]. Honey has had a particularly bad year. After six years of steady growth and a volume increase of 7.7% in 2008, volume sales of honey fell 5.4% last year.
The bee crisis hit supplies hard in 2009, forcing producers to raise prices above levels many recession-hit consumers were prepared to pay. Honey suddenly stopped benefiting from the health agenda, which had prompted even jam brands such as Hartley's to reformulate lines by swapping sugar for honey.
The spreads market in general has also been fighting a long-term battle with changing consumer behaviour patterns as people switch to cereals rather than toast at breakfast, says David Atkinson, spreads category manager at Premier Foods. "A huge amount of money is spent every year persuading people to have cereal in the morning," he says. "It is about habit, with people wanting a quick bowl of cereal and to get out of the door as fast as they can."
Those consumers who are still buying spreads tend to plump for economy versions, which has played into the hands of own-label. Sales of own-label economy lines soared 51% in value, while own-label premium and organic fell 7.1% and 9.7% respectively [TNS]. Duerr's Jams reports that its value lines have seen good growth, with volume sales of its Moss Farm value range up more than 100% as shoppers cut their spending [IRI 31 October 2009].
"People have traded out of the top end, organic or healthy jam, which is generally more expensive, and into core and value," says sales director Richard Duerr.
Premium jams have been particularly hard hit by commodity-driven price rises because of their already high price points but mid-priced jams have also struggled even in the own-label arena.
There has been a sharp rise in the cost of fruit as growers struggle to absorb rising fertiliser costs, partly resulting from surges in oil prices in 2008, the knock-on effects of which are only being felt now.
The price of sweet spreads has also been driven up by a steady rise in the world price of their major ingredient sugar from about £190/tonne in October 2008 to just under £375/tonne last November. This was driven by supply shortages as heavy rains disrupted milling in Brazil the world's biggest producer of sugar, which has also been diverting increasing quantities of sugar cane to the production of biofuels.
To add insult to injury, the biggest consumer of sugar India experienced a dismal monsoon season, forcing it to import sugar to meet demand, when in an average year it is able to export.
As a result of all these factors, the price of jam in 2009 was about 12% higher than in 2008, according to Duerr. "Standard own-label jam saw some quite big increases in retail price at the back end of 2008," he says. "Prices were unsustainable at the level they were, and so it had to happen but it may have impacted sales," he says.
Another major contributor to price hikes, say suppliers, was a double-digit rise in the cost of glass. The weak pound has also hit jam and marmalade makers although not as badly as in 2008, as better harvests of fruits such as raspberries in the UK meant producers were able to import less.
With the emphasis on limiting price rises in this highly mature market, Premier Foods, owner of the Hartley's brand, pulled back on new product launches and focused on pushing down costs, says Atkinson.
The company further consolidated its position by withdrawing the Robertson's jam brand, which it acquired when it bought RHM. The jams were gradually removed from shelves over 2009, with the final mopping up to be completed early this year. Its Hartley's brand absorbed most of the lost Robertson's sales, boosting its own sales 12.6% rise by volume and 33.4% by value to £26.5m and extending its lead as the top-selling brand of jam [IRI 52w/e 31 October 2009].
A major focus for Premier in 2010 will be its Hartley's Squeezy range, which is packed in plastic rather than glass. Atkinson admits that at £1.6m, sales of the range, which launched last March, haven't been as good as Premier hoped and says the company is planning a major PR push this year in a bid to double the size of the brand.
Low-sugar spread maker Streamline Foods, says it is also looking at alternatives to glass in a bid to be more environmentally friendly as well as cutting costs.
However, the environmental goalposts could be about to change. Wrap targets, which aimed to achieve a reduction in packaging waste by 2010, measured waste by weight and so favoured lighter materials such as plastic, irrespective of their recyclability. Wrap has said that when it produces a new set of targets, expected later this year, they will not focus solely on weight.
While some brands are focusing on their environmental impact, others are more concerned with the impact of price rises.
Volume sales of number two brand Bonne Maman have risen 5.5% [IRI 52w/e 31 October 2009]. Severine Brault, marketing manager, at brand owner Andros UK says that after pushing through price rises in 2007 and 2008, the company was able to keep the price static in 2009, helping the brand attract consumers put off by price rises by other brands.
Own label, which still outsells any individual brand in jam, benefited from consumers trading down from brands, with value sales up 16.9%. Volume sales increased by a more modest 0.2%, but still outperformed the overall category where volumes fell [IRI 52w/e 31 October 2009].
Honey
While own label held steady in jams, honey was a different matter, with volumes down 7.4% [IRI 52w/e 31 October 2009]. Leading brand Rowse picked up a good portion of those sales, increasing volume 8.7% on a value uplift of 23.8%. New Zealand honey also performed strongly thanks chiefly to Manuka honey's antiviral and antibacterial properties attributes that gained appeal in the year of swine flu, with volume sales more than doubling [IRI].
To tap into this trend, Duerr's, a newcomer to honey, is later this month launching antibacterial Chilean Tineo honey, which it is confident will rival Manuka in terms of health benefits.
Kirstie Jamieson, marketing manager of Rowse Honey, says that consumers are buying smaller jars of honey, partly in reaction to price rises. This is borne out by Rowse's figures, with volume growth faster when measured by unit up 11.1% compared with 8.7% when measured by kg [IRI].
The only spreads category to see an increase in volume was chocolate spreads up 9.9% [TNS]. It was boosted by a punchy advertising and promotional campaign by leading brand Nutella, which controls two thirds of the category's UK market and has been almost single-handedly responsible for the category's growth sales of the brand rose 33.5% to £19.35m and 19.3% in volume [IRI 52 w/e 31 October 2009]. Ferrero continues to reposition the brand as a breakfast regular rather than occasional treat and increase chocolate's share of the spreads market from its current tiny 8% in volume [TNS].
"In France, Nutella is the number one selling product, and in the UK we are where we were in France 15 years ago," says Levi Boorer, customer development controller for owner Ferrero. "We are not looking to steal market share from other spreads we want to grow the category."
The company has also been working hard to shake off its unhealthy image. Ferrero has been emphasising the hazelnut content of the spread and its low GI value as well as the fact there is no need to add butter or margarine both on-pack and in advertising. It also introduced front-of-pack GDAs in early 2009.
Marmite
The other big advertiser in the spreads category was Marmite, as it continued its two-year tie-up with Paddington Bear which will end in 2010 and broadened its presence with moves into crisps, nuts and other snacks. Although Marmite's volumes slipped nearly 8%, Mike Miller, sales controller at Unilever, insists this was the side effect of efforts to encourage consumers to switch from glass to higher-priced squeezy bottles, which contain slightly less product but added £1.25m in value to the brand in 2009. "We're very comfortable we are maintaining market share in spreads," he says.
At £38.1m, up 5.3% on last year, it remains by far the most valuable brand in the spreads category [IRI]. Although much of this year's focus has been on its snacking ranges, it has kept jars of spread looking fresh with humorous makeovers, such as the Horrid Henry cartoon illustrations. The brand will launch a new campaign in March and continue its push for more licensing deals that will extend its brand into tea-towels and gifting sets. It also plans to launch a new extra-strong variant later this year.
Peanut butter
The other spread that divides opinion although in this case into crunchy or smooth fans, rather than lovers and haters is peanut butter. Peanut butter experienced the sharpest value rise of any of the sub-categories, at 34.5%, as a result of an average 36.9% price rise, and volumes fell 1.7% as a result [TNS].
Behind the price rise was an increase in the price of peanuts, up from between £550-£700/tonne in early 2009 to £650-£800/tonne by the end of this year. Prices were pushed up by a 9% shrinkage in the size of the global crop as the US planted less and Argentina was hit by drought, coupled with increasing demand, especially from China.
Own label again lost ground here, with volumes down 7.4% [IRI] largely as a result of Tesco pulling its own-label peanut butter from shelves for five months following supply issues at the start of 2009.
Premier's Atkinson says its Sun-Pat brand benefited from Tesco's own-label issues, sales almost doubling since 2007 and volumes up 13.7% on last year. However, own label retains a 40% share of peanut butter and Atkinson says Sun-Pat's share is likely to fall back next year now that Tesco's issues have been rectified.
2009 has undoubtedly been a difficult year, with price rises compounded by recession. Manufacturers have been forced to lie low on the NPD front, but the outlook for 2010 is more optimistic with many talking of new things to come.
Focus On Jams, Preserves & Honey
You'd expect jams and spreads to be enjoying the sweet taste of success at the moment, what with their back-to-basics appeal, comforting taste and relative value for money (compared with coffee shop breakfast options anyway). But just as pre-packed jam sandwiches appear to have come and gone in the supermarkets, so the category has struggled to capitalise on its recessionary potential.
Although value sales have risen 11.2% in the category and are up in every sector except curd, volumes are down 2.1% and the only sub-category to have bucked the trend is chocolate spread [TNS 52w/e 4 October 2009]. Brands are promising to deliver more NPD and targeted marketing this year and they'll need to if they are to reverse this worrying slump in sales.
As with so many categories, it's commodity-driven price rises that are chiefly to blame. The soaring costs of sugar and glass, coupled with the honeybee colony collapses, have pushed retail prices up 13.6% on average [TNS]. Honey has had a particularly bad year. After six years of steady growth and a volume increase of 7.7% in 2008, volume sales of honey fell 5.4% last year.
The bee crisis hit supplies hard in 2009, forcing producers to raise prices above levels many recession-hit consumers were prepared to pay. Honey suddenly stopped benefiting from the health agenda, which had prompted even jam brands such as Hartley's to reformulate lines by swapping sugar for honey.
The spreads market in general has also been fighting a long-term battle with changing consumer behaviour patterns as people switch to cereals rather than toast at breakfast, says David Atkinson, spreads category manager at Premier Foods. "A huge amount of money is spent every year persuading people to have cereal in the morning," he says. "It is about habit, with people wanting a quick bowl of cereal and to get out of the door as fast as they can."
Those consumers who are still buying spreads tend to plump for economy versions, which has played into the hands of own-label. Sales of own-label economy lines soared 51% in value, while own-label premium and organic fell 7.1% and 9.7% respectively [TNS]. Duerr's Jams reports that its value lines have seen good growth, with volume sales of its Moss Farm value range up more than 100% as shoppers cut their spending [IRI 31 October 2009].
"People have traded out of the top end, organic or healthy jam, which is generally more expensive, and into core and value," says sales director Richard Duerr.
Premium jams have been particularly hard hit by commodity-driven price rises because of their already high price points but mid-priced jams have also struggled even in the own-label arena.
There has been a sharp rise in the cost of fruit as growers struggle to absorb rising fertiliser costs, partly resulting from surges in oil prices in 2008, the knock-on effects of which are only being felt now.
The price of sweet spreads has also been driven up by a steady rise in the world price of their major ingredient sugar from about £190/tonne in October 2008 to just under £375/tonne last November. This was driven by supply shortages as heavy rains disrupted milling in Brazil the world's biggest producer of sugar, which has also been diverting increasing quantities of sugar cane to the production of biofuels.
To add insult to injury, the biggest consumer of sugar India experienced a dismal monsoon season, forcing it to import sugar to meet demand, when in an average year it is able to export.
As a result of all these factors, the price of jam in 2009 was about 12% higher than in 2008, according to Duerr. "Standard own-label jam saw some quite big increases in retail price at the back end of 2008," he says. "Prices were unsustainable at the level they were, and so it had to happen but it may have impacted sales," he says.
Another major contributor to price hikes, say suppliers, was a double-digit rise in the cost of glass. The weak pound has also hit jam and marmalade makers although not as badly as in 2008, as better harvests of fruits such as raspberries in the UK meant producers were able to import less.
With the emphasis on limiting price rises in this highly mature market, Premier Foods, owner of the Hartley's brand, pulled back on new product launches and focused on pushing down costs, says Atkinson.
The company further consolidated its position by withdrawing the Robertson's jam brand, which it acquired when it bought RHM. The jams were gradually removed from shelves over 2009, with the final mopping up to be completed early this year. Its Hartley's brand absorbed most of the lost Robertson's sales, boosting its own sales 12.6% rise by volume and 33.4% by value to £26.5m and extending its lead as the top-selling brand of jam [IRI 52w/e 31 October 2009].
A major focus for Premier in 2010 will be its Hartley's Squeezy range, which is packed in plastic rather than glass. Atkinson admits that at £1.6m, sales of the range, which launched last March, haven't been as good as Premier hoped and says the company is planning a major PR push this year in a bid to double the size of the brand.
Low-sugar spread maker Streamline Foods, says it is also looking at alternatives to glass in a bid to be more environmentally friendly as well as cutting costs.
However, the environmental goalposts could be about to change. Wrap targets, which aimed to achieve a reduction in packaging waste by 2010, measured waste by weight and so favoured lighter materials such as plastic, irrespective of their recyclability. Wrap has said that when it produces a new set of targets, expected later this year, they will not focus solely on weight.
While some brands are focusing on their environmental impact, others are more concerned with the impact of price rises.
Volume sales of number two brand Bonne Maman have risen 5.5% [IRI 52w/e 31 October 2009]. Severine Brault, marketing manager, at brand owner Andros UK says that after pushing through price rises in 2007 and 2008, the company was able to keep the price static in 2009, helping the brand attract consumers put off by price rises by other brands.
Own label, which still outsells any individual brand in jam, benefited from consumers trading down from brands, with value sales up 16.9%. Volume sales increased by a more modest 0.2%, but still outperformed the overall category where volumes fell [IRI 52w/e 31 October 2009].
Honey
While own label held steady in jams, honey was a different matter, with volumes down 7.4% [IRI 52w/e 31 October 2009]. Leading brand Rowse picked up a good portion of those sales, increasing volume 8.7% on a value uplift of 23.8%. New Zealand honey also performed strongly thanks chiefly to Manuka honey's antiviral and antibacterial properties attributes that gained appeal in the year of swine flu, with volume sales more than doubling [IRI].
To tap into this trend, Duerr's, a newcomer to honey, is later this month launching antibacterial Chilean Tineo honey, which it is confident will rival Manuka in terms of health benefits.
Kirstie Jamieson, marketing manager of Rowse Honey, says that consumers are buying smaller jars of honey, partly in reaction to price rises. This is borne out by Rowse's figures, with volume growth faster when measured by unit up 11.1% compared with 8.7% when measured by kg [IRI].
The only spreads category to see an increase in volume was chocolate spreads up 9.9% [TNS]. It was boosted by a punchy advertising and promotional campaign by leading brand Nutella, which controls two thirds of the category's UK market and has been almost single-handedly responsible for the category's growth sales of the brand rose 33.5% to £19.35m and 19.3% in volume [IRI 52 w/e 31 October 2009]. Ferrero continues to reposition the brand as a breakfast regular rather than occasional treat and increase chocolate's share of the spreads market from its current tiny 8% in volume [TNS].
"In France, Nutella is the number one selling product, and in the UK we are where we were in France 15 years ago," says Levi Boorer, customer development controller for owner Ferrero. "We are not looking to steal market share from other spreads we want to grow the category."
The company has also been working hard to shake off its unhealthy image. Ferrero has been emphasising the hazelnut content of the spread and its low GI value as well as the fact there is no need to add butter or margarine both on-pack and in advertising. It also introduced front-of-pack GDAs in early 2009.
Marmite
The other big advertiser in the spreads category was Marmite, as it continued its two-year tie-up with Paddington Bear which will end in 2010 and broadened its presence with moves into crisps, nuts and other snacks. Although Marmite's volumes slipped nearly 8%, Mike Miller, sales controller at Unilever, insists this was the side effect of efforts to encourage consumers to switch from glass to higher-priced squeezy bottles, which contain slightly less product but added £1.25m in value to the brand in 2009. "We're very comfortable we are maintaining market share in spreads," he says.
At £38.1m, up 5.3% on last year, it remains by far the most valuable brand in the spreads category [IRI]. Although much of this year's focus has been on its snacking ranges, it has kept jars of spread looking fresh with humorous makeovers, such as the Horrid Henry cartoon illustrations. The brand will launch a new campaign in March and continue its push for more licensing deals that will extend its brand into tea-towels and gifting sets. It also plans to launch a new extra-strong variant later this year.
Peanut butter
The other spread that divides opinion although in this case into crunchy or smooth fans, rather than lovers and haters is peanut butter. Peanut butter experienced the sharpest value rise of any of the sub-categories, at 34.5%, as a result of an average 36.9% price rise, and volumes fell 1.7% as a result [TNS].
Behind the price rise was an increase in the price of peanuts, up from between £550-£700/tonne in early 2009 to £650-£800/tonne by the end of this year. Prices were pushed up by a 9% shrinkage in the size of the global crop as the US planted less and Argentina was hit by drought, coupled with increasing demand, especially from China.
Own label again lost ground here, with volumes down 7.4% [IRI] largely as a result of Tesco pulling its own-label peanut butter from shelves for five months following supply issues at the start of 2009.
Premier's Atkinson says its Sun-Pat brand benefited from Tesco's own-label issues, sales almost doubling since 2007 and volumes up 13.7% on last year. However, own label retains a 40% share of peanut butter and Atkinson says Sun-Pat's share is likely to fall back next year now that Tesco's issues have been rectified.
2009 has undoubtedly been a difficult year, with price rises compounded by recession. Manufacturers have been forced to lie low on the NPD front, but the outlook for 2010 is more optimistic with many talking of new things to come.
Focus On Jams, Preserves & Honey
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