Canned goods suppliers used to relish a recession in the same way confectionery suppliers delight in Christmas. Not any more.
This time last year, The Grocer’s Focus on Canned Goods reported that the market was faltering despite the downturn. Since then, the economy’s dipped for a second time - and canned goods have yet to reverse their decline. Volume sales have fallen for a second year, with a 4.2% increase in value sales driven largely by price inflation [Kantar Worldpanel 52 w/e 15 April 2012].
“During the 1992 recession, canned sales went up significantly, but I don’t recall that being the case in 2008 and I’m certainly not seeing it now,” says Steve Gogerty, chairman of Canned Food UK. “We’ve seen the industry flatlining over the past three to four years.”
So what’s changed and what are the brands doing to try and turn the category’s fortunes around?
Looking at the topline sales data, it’s easy to conclude that the canned goods market is in perpetual decline and price inflation is keeping value sales artificially in the black. Although many of the big brands are in value growth and of the 10 sub-categories worth more than £20m, all managed to grow value sales in the past year, only two sub-categories - ambient soup and canned desserts - achieved the parallel rise in volume sales signalling ‘meaningful’ growth.
“Suppliers are entering the market and making quite an impact with high-value products” Steve Gogerty, Canned Food UK
Upward pressure on retail prices has done little to slow the long-term shift away from ambient to fresh, chilled and frozen products. Rising canning costs haven’t helped - although these have recently started to fall back, according to Mintec analyst Robert Miles. “Steel prices have been tending to rise for most of the last few years, but the trends over the last six months or so have tended to be down.”
Some sub-categories, notably canned fruit and fish, have also been hit by sharp hikes in the cost of raw ingredients. John West reports that both salmon and tuna have recorded large price increases, and canned fruit market leader Del Monte attributes higher shelf prices to raw material shortages and rising costs, which combined to inflate prices by 8.8% in the past year.
Although it’s easy to draw the conclusion that the dichotomy between volume and value sales is purely down to price inflation, plenty of market experts believe this analysis ignores key market dynamics that cast value sales growth in a more positive light.
One such factor is a widespread move towards smaller can sizes, which, if it persists, “will continue to disturb the ratio between volume and value”, believes Gogerty. Spam, for example, has focused on getting new users into the category by using a 200g can to drive trial. “The 200g can really works well in the sense that it attracts new users, but it also gives Spam customers a lower entry price point,” says Hormel Foods customer business manager Jeff Zadow.
Another key dynamic is the ongoing influx of higher value products. These push up spend ahead of volume sales - and simultaneously help improve consumers’ quality perceptions of canned goods. “Twenty years ago the main canned foods people bought were sweetcorn, tuna and tomatoes,” says Gogerty. “Now suppliers are entering the market and making quite an impact with high-value products that just weren’t present five years ago, like coconut milk, stir-fry vegetables and pulses.”
“You can get taste and flavour profiles as good as - and in some cases better than - chilled” Yvonne Adam, Baxters Food Group
It’s noticeable that, despite the economic climate, not much canned goods innovation has been pitched at the budget end of the market. Most big-name suppliers have focused on higher value NPD. Take Heinz: at an rsp of 84p, its Five Beanz, launched last month, is 20% more expensive than original Heinz Beanz. And Heinz’s soup innovation has centred on plans for a revamp, in August 2012, of its Big Soup range, which sells at a significant premium to its standard soups.
As own label becomes more sophisticated, retailers, too, are increasingly entering the premium canned goods arena - witness Tesco’s Finest cherry tomatoes in rich tomato juice, retailing at 85p for 400g, and albacore tuna steak, retailing at £3.99 for 200g. The upper end of the market is also a more accommodating place for smaller suppliers to carve out positions, and brands such as The Reel Fish Co and Amy’s Kitchen, which recently launched a new range of hearty soups, have been doing so with great success.
Ambient soup, in fact, has been one of stars of the canned goods market in recent years following a period when it lost sales to chilled soup. Both Baxters and Heinz have grown value and volume sales [SymphonyIRI 52 w/e 12 May 2012]. “It’s been brilliant to see consumers come back into canned soup because they’re recognising you can get taste and flavour profiles as good as, and in some cases better than, chilled,” says Yvonne Adam, marketing director for Baxters Food Group.
The success of soup rests on a continuous pipeline of innovation and investment by brand leaders - something other sectors of the canned goods market might do well to imitate. Pop art icon Campbell’s Soup - which re-entered the market in January last year and has since garnered more than £20m in sales, according to the Campbell Soup Company - is due to extend its portfolio in August with the launch of a new range of ready-to-serve cans.
“Keeping the brand equity and imagery strong and modern is really important” Ed Culf, Green Giant
Baxters, meanwhile, returned to TV in 2011 for the first time in five years and is planning a major brand relaunch later this year involving five new soup flavours, a packaging revamp across its entire soups range and the enhancement of 14 existing recipes. The company points to its Stay Full soup range, launched in August 2011,as a key growth driver, with value sales poised to hit the £1m mark. “Our strongest growth is coming from our healthy range and our vegetarian range,” says Adam. “People are prepared to pay for something healthy and a little bit different.”
Adam believes other canned goods suppliers could learn from the success of soups. “It’s absolutely fundamental that we continue to invest,” she says. “We have to keep interest in the sector we are competing with other sectors and we are competing with other meal solutions so we have to have ‘new’ news and deliver great-tasting products.”
This sort of activity is vital in a category often accused of a lack of investment over the past few years, particularly in comparison with the frozen and chilled markets. To an extent, this is understandable given the market’s strong own-label presence - in some sectors, such as tomato products and tinned fruits and vegetables, own label accounts for more than half the market.
That said, the same is also true of frozen - and in terms of selling itself, it is outdoing canned goods. Data from Ebiquity shows advertising spend across the top 10 canned brands totalled just £11m between March 2011 and 2012. The top 10 frozen food suppliers, on the other hand, invested £17m over the same period. It’s easy to see why canned goods’ share of voice is suffering.
“You haven’t got a lot of players who get behind their brands in this segment,” says Green Giant marketing director Ed Culf. “It is possible for canned to feel like an older category and keeping the brand equity and imagery strong and modern is really important so that people maintain a modern and vibrant perspective on the category. The big players that support their brands in this category play an essential role in that.”
“We’ve got to invest in the brands in the right way to ensure they’ve got longevity” Chris Wright, Princes
Fortunately for the health of the canned goods market, there are signs that those big players are ratcheting their spend back up. Category leader Heinz, for instance, has increased the ad spend on its beans and soups by 39% and 56%, respectively [Ebiquity 52 w/e 29 March 2012]. On the NPD front, in the past year alone it has rolled out Five Beanz added a new Moshi Monsters licensed brand to its Kids’ Pasta range launched limited-edition vintage labels for its Beanz and Spaghetti cans in honour of the Queen’s Diamond jubilee and introduced two new Special Edition flavours to its Classic Soup portfolio - Cream of Tomato with a Twist of Chilli and Cream of chicken with a Touch of Sage.
General Mills, meanwhile, has been supporting Green Giant in the past year with national TV advertising as well as experiential activity, which took the Giant out on the road to meet consumers. The brand piloted augmented reality technology in Manchester’s Trafford Centre last November, giving children the opportunity to interact with the 10-foot-tall Giant on a big screen.
Arguably the most significant investment in canned goods came last July when Princes Foods acquired Premier Foods’ canned operations in a £182m deal, taking on two canning facilities, three brands - Crosse & Blackwell, Smedley’s and Farrow’s - and licences to produce other branded canned goods, including Batchelors soups and Branston baked beans.
It is widely acknowledged among industry insiders that Premier had neglected the canning side of its business in recent years, choosing instead to focus its investment on its ‘power brands’, and Gogerty believes Princes’ acquisition will prove of huge benefit to the wider industry. “Premier Foods dominated the industry until last year and it was clear it had overreached itself,” he says. “Cash was being taken out of the industry and the category wasn’t given the attention it deserved. Princes is there for the long term and I think it’ll do the category a power of good.”
“As people become busier, the need for convenience becomes more important” Mark Critchley, John West
The Premier buyout expanded Princes’ portfolio significantly, allowing it to take the business into “new and exciting areas” such as soups, adds marketing director Chris Wright. The acquisition of two canning facilities in East Anglia also boosted Princes’ production capacity, helping the company expand its supply within the UK and forge new relationships with UK farmers.
Wright says it is imperative to the future success of canned goods that businesses such as Princes are prepared to invest long-term. “The market’s worth £2.3bn and it’s as important now as it was years ago, so to be able to invest in those brands in the right way, bring new products to the market and promote in the right way gives us a real opportunity,” he adds. “What we’ve got to do as a business is make sure we’ve got the right opportunity for our customers, the right proposition for our consumers and invest in the brands in the right way to ensure they’ve got longevity. That’s what we’re good at.”
From a marketing perspective, it’s vital that canned brands “scream the right credentials”, says Wright. “Products like Batchelors and Farrow’s peas have their niche in the marketplace, but one thing they’ve never talked about is the freshness of the product in the can and the fact that they’re one of your five-a-day. All those cues the frozen industry has had for many years we’re hoping, in our own way, to bring to the consumer.”
Princes is beginning to make good on its promise to invest in the category, with a series of heavyweight NPD and marketing initiatives already landing, most notably the relaunch of Crosse & Blackwell. For all its new business opportunities, one thing the company cannot afford to do is take its eye off the performance of its eponymous brand. Despite a strong innovation pipeline that includes Chicken Deli Fillers, a new canned mussels range and a range of ambient meals, volume sales of Princes branded foods have fallen by 12% in the past year [SymphonyIRI 52 w/e 12 May 2012].
In large part, it’s suffered from the ongoing rivalry with John West - the two brands have something approaching a duopoly in canned fish. Between 2010 and 2011, Princes took the lead in market share, but this year John West took it back by growing its value and volume sales 15% and 5% respectively [SymphonyIRI].
John West attributes its success to a focus on convenient NPD, typified by its introduction in 2009 of a ‘No Drain, Less Mess’ range. “As people become busier, the need for convenience becomes important - which is where brands can capitalise,” says Mark Critchley, John West interim head of marketing.
As ever, though, the importance of promotions should not be underestimated. Both John West and Princes grew their promotions year-on-year, but Princes’ 12% increase looks meagre compared with John West’s 32% uplift in deals [BrandView.co.uk 52 w/e 19 July 2012].
“Some 90% of the leading brands’ net-caught tuna is now sold on promotion,” says Angela Fitzpatrick, co-founder of The Reel Fish Co. She believes the future health of the category relies on a shift away from aggressive discounting that “continues to portray the product as a cheap food that is freely available”.
As canned goods manufacturers increasingly manoeuvre their messaging away from the cheap and cheerful stereotype, and the premium end of the market booms, addressing the promotional balance seems a sensible move. Canned goods have always carried a strong price perception, but shoppers are no longer turning to them in times of crisis. The challenge for the industry is to turn this into a positive and prove that, through continued innovation and investment, they don’t need a recession to make the good times roll.
Canned goods: Steeled for battle
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Canned goods are steeled for battle