Pies are enjoying a second year of growth, driven by recession-induced nostalgia, clear ingredients labelling and heavy promotional activity. But is it sustainable in the long term? Nick Hughes and Alex Beckett report


While the government indulges in a spot of quantitative easing to weather the recession, food shoppers are taking a more pragmatic approach. They're eating more pies.

Total sales of meat pies, which includes hot pies, pasties, quiche, sausage rolls and Scotch eggs, have grown 3.3% in value in the past year to £912m and 2.5% in volume [TNS 52w/e 4 October 2009]. Not earth-shattering figures, but quietly impressive from a mature category that also grew 4.2% in value in 2008.

Two consecutive years of value growth above the rate of inflation gives weight to suppliers' claims that pies are benefiting from the economic downturn as consumers return to traditional, comfort foods they like and trust. Manufacturers have also been promoting heavily to make their pies as tempting as possible, and in doing so appear to be taking market share from other categories. However, the volumes sold on promotion can make it difficult for brands to charge full price.

That's not to say the resurgence of the pie is purely due to economical pricing. The repositioning of pies as wholesome meals full of British ingredients and no artificial additives has, anecdotally at least, inspired consumers to switch away from rival categories such as ready meals and pizza.

Some suppliers have gone so far as to suggest the increased focus on healthy eating has worked in favour of pie manufacturers. "The health agenda is a good thing, because it means consumers are looking at what's on pack and when they look at what's on pack they see there's nothing nasty," says James Osgood, marketing director of Peter's Food. Peter's, along with hot pie rivals Ginsters and Pukka Pies, has seen double-digit sales growth following successful efforts to highlight the quality and provenance of its ingredients.

The popularity of pies is having a halo effect on the smaller pasties category, which has enjoyed a 10.1% uplift in sales to £81.1m [TNS 52w/e 4 October 2009]. This has more than offset the decline in sales of Scotch eggs (down 3.8%) and the levelling off of sausage rolls (up 0.2%). The meat snacks market, meanwhile, which includes salami snacks, chicken snacks and bratwurst, has risen a striking 24.3% in value to £65.7m [TNS 52w/e 6 September 2009].

Yet despite the seemingly robust performance of the pies and meat snacks categories, questions remain as to whether the success is built on stable foundations. While volume sales of hot pies have risen 4.6%, value sales are up just 1.7% year-on-year [TNS 52w/e 4 October 2009]. "It is a heavily promoted area," says Asda's pre-packed pies buyer Joy McAleese. "Consumers demand value for money in this category."

Assosia data shows promotions increased 3% between November 2008 and October 2009; this in a category already renowned for heavy promotional activity (see box p56). This gung-ho approach to deals could be jeopardising the long-term health of the category, warn experts.

Wall's marketing manager Mark Brown is concerned that extensive promotions are encouraging shopping promiscuity. "Retailer strategies have varied from deep-cut gondola end promotions in the big four retailers to tactics to drive weight of purchase such as meal deals or themed multibuys in the likes of Marks & Spencer. The impact has been short-term gains in customer numbers, but inconsistent frequency, and more importantly, dilution of spend per trip."

Canned pies
The canned pies category, in particular, has seen sustained promotional activity as the two main players, Fray Bentos and Princes, look to steal share from chilled and frozen (see box p56).

David Osbourne, marketing manager at Premier Foods, admits Fray Bentos has done "some big promotions" this year, but insists the inevitable spikes from those promotions have been backed up by continued sales growth rather than peaks and troughs. "Our market share is up for the year, so we haven't seen consumers moving away from our product as a result of promotional activity ending," he says.

Princes' marketing director Neil Brownbill agrees there's consistent volume and value growth in the market. And while he admits the biggest dynamic is promotional sensitivity, it has served to draw new consumers into the brand. "What I think promotions have done is get people to buy canned pies instead of another meal alternative," he says. "It's representing good value for money. It's competing with other products, rather than straight brand switching, and taking share away from hot meat products such as ready meals, meatballs, hot dogs and stewed steak."

The figures support these assertions. The canned meats category, which includes canned pies, has grown by 8.9% [Nielsen 52w/e 8 August] this year. Sales of Fray Bentos increased 6.3% to £33.4m [Nielsen] and Princes' Brownbill claims household penetration for its pies has grown to 15% over the past 12 months. "I believe it's a combination of value for money and what I would class as comfort food," he says. "The current economic climate is one where consumers have gone back to traditional, nostalgic foods that they have trusted and liked over the years."

What's more, Osbourne suggests canned pies have taken sales away from their fresh and frozen counterparts. "Until the back end of 2008, the trend was for people to switch away from canned to fresh. Since then, people have been switching from fresh and frozen into canned pies and that trend has held up every month since."

Value for money is key, says Osbourne, but he highlights an even greater contributory factor. "With a canned pie, you know you're not going to have wastage. You're going to have a good-tasting pie long after you've bought it. With a fresh savoury pie and to a certain extent a frozen pie, there is always the possibility the customer forgets about it and has to throw it away."

However, if consumers are throwing away uneaten fresh pies, it hasn't stopped them buying them. Market leader Ginsters has grown sales 10.1% to £118.2m [Nielsen 52w/e 8 August] thanks in part to a concerted effort to push larger products. "We introduced new lattice pastries to encourage consumers and retailers to trade up to bigger size products," says Ginsters head of brand marketing Andy Valentine. "All the focus in-store in terms of shelf space and promotions had historically been on lower-priced individual pies, to the detriment of the sector."

Pukka-Pies recently introduced family pies into the market to capitalise on the trend for at-home eating. Sales into retail have more than doubled to £14.8m this year, a figure marketing and business development controller Peter Mayes also attributes to the introduction of a carton format and high levels of sponsorship support for the brand. Over the past 12 months, this has included signage across all football league grounds and sponsorship of ITV's Who Wants To Be A Millionaire. "Marketing activity has increased over the past year. It's key to differentiating the Pukka-Pies brand," he says.

Asda buyer McAleese cites Pukka and Ginsters as the star performing brands in the chilled category, although she adds that own label is still strongest in Asda. Her colleague John Wyatt, Asda's frozen meal solutions buyer, says own label also represents the largest share of the frozen pie category and has been in strong growth. However, inflation has been the key driver of value growth over the past year, he says, though he predicts this will flatten off.

Surprisingly, given the frozen category's 8.8% value growth [Nielsen 52w/e 8 August] Wyatt thinks branded players should up their game further by offering stronger deals in order to drive penetration into the category.

"There haven't really been any star performing brands up until now," he says. "In my view, some of the strongest brands are the regional brands such as Holland's, Pooles and Denby Dale."

Sales of Holland's pies have grown 20.2% [Nielsen 52w/e 8 August] in the past year but it's Northern Foods' other frozen pie brand, McDougalls Upper Crust, that has been the standout performer with sales up 44% to £15.4m.

Again, promotions have played a significant role in McDougalls' success. "We've upped our promotions by 27% over the past 12 months," says Andrea Anderson, McDougalls senior brand manager. "We've also widened our range and increased promotions to support new NPD. We launched mainstream individual pies and lattices in August to go head-to-head with a branded competitor. We think our pies offer better quality and have a more competitive everyday price."

McDougalls leapfrogged main rival Birds Eye to become number one in branded frozen pies after Birds Eye sales fell 13.2% to £14.8m. Birds Eye's promotional activity also fell as a result, claims Birds Eye, as a result of it switching its third-party supplier for frozen pies earlier this year.

Insight director Maria Manly reveals it sold 70% less volume on deal compared with the previous year because of the switchover period. "We completely de-escalated promotions and we knew we would go into sales decline," she says. "We switched supplier at the least seasonable time for pies the summer. However, in the past four weeks, sales have risen 7.6% because the new supplier has come on board."

Wyatt believes promotions will continue to bring value-driven consumers into the frozen category, but the premium end will have its work cut out to retain a presence on shelves. "Premium frozen brands haven't been very successful," he says. "The challenge for manufacturers is to use premium brands to increase quality perception and awareness of frozen pies. The image of frozen pies was damaged in the late 90s and early 2000s when quality was reduced on brands to allow bogof activity. Rebuilding this reputation and winning trust back is now key to growing this category."

Chilled
In the chilled aisle, there's better news for premium pies. Higgidy expects to enter The Sunday Times' Fast Track 100 list of fastest-growing companies and says sales will hit £5.6m this year, up from £3.6m in 2008.

Higgidy won listings in Waitrose in April and predicts that manufacturing output will more than double following completion of a new production plant in January. Yet, even at the premium end, promotional activity is an integral part of sales strategy. "Promotions are important," says commercial director Marc Campbell. "Being premium, we feel people need to try before they buy. We're confident that once they taste our products they'll be hooked."

Higgidy has also responded to consumer demand for a greater choice of portion sizes. In May, it reduced the size of its Skinny Pies after Trading Standards complained about the health implications of the word 'Skinny'. They were subsequently rebranded as Little Pies. "In one sense pies will never be healthy and people need to get over that," says Campbell. "However, we have been looking at portion control."

Campbell's view is shared by many others in the category. On the one hand there's a tacit admission that pies and pasties will never be overtly positioned as a healthy option, yet at the same time, there's a resolution to make them as permissible as possible by reformulating recipes in line with government targets.

"We've kept on working on the formula looking at bringing the Fray Bentos recipes in line with the FSA guidelines for salt and having no artificial ingredients in our pies so there are no HVOs and no trans fats," says Osbourne. "While we would never expect pie to be up there with fruit & veg and salads, people know what is in a pie and we're trying to make them as healthy as possible."

Osgood at Peter's Pies says pies may not have a great image, but that consumers are starting to acknowledge the improvements in quality made by suppliers such as Peter's. "If you look at our ingredients deck, it's been clean for a number of years and consumers are more and more aware of that."

Osgood adds that consumers are increasingly looking for British ingredients, a trend that has not escaped the attention of Ginsters. The brand relaunched its pies in the autumn with Union Jack-stamped packaging to highlight their regionally sourced ingredients, and increased marketing spend 10% to £6.5m, according to Valentine. "Continuing to reinforce our local ingredients message in our ads has definitely worked," he says.

The pie category has undoubtedly benefited from recession-induced comfort eating and is even managing to shake off some of its unhealthy image. But it still has work to do. Wholesome British ingredients are all very well, but until the pie category relinquishes its reliance on promotional activity, hopes for the long-term health of the category will remain pie in the sky.

Focus On Pies & Meat Snacks

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