A slowdown in NPD and high promotional levels led to a “mundane year” for sausages and bacon, and suppliers now have their work cut out to maintain growth. Julia Glotz reports

Most manufacturers would be happy they had turned a 2.2% decline in volume sales into 3% value and volume growth in the midst of a downturn. Especially if they operate at the pricier end of the spectrum.

But not premium sausage makers. Despite stealing share from economy options in the most challenging of economic circumstances, they are in a remarkably sober mood. "It's been quite a mundane year," claims one, while another struggles to recall the last piece of NPD that really captured his imagination. Bacon producers are no more upbeat, some claiming the sub-category is "dull" on the NPD front and others complaining that it has had "the arse promoted out of it".

So just why has there been so little NPD and is the level of promotional activity really jeopardising the category's future?

On the face of it, the picture looks rosy. Premium sausages have clocked up sales of £245.5m over the past year and now account for 42.4% of the £579m sausage market by value and 37.2% by volume [Kantar Worldpanel 52w/e 5 September 2010], taking them ever-closer to parity with standard-tier sausages. Meanwhile, the total UK bacon market is now worth £1.24bn, up 2.5%, with volume up 3.6%.

But although national and regional players such as Porkinson (owned by Kerry Foods) and Newmarket-based Powters have invested in packaging revamps and new flavour variants, the overall level of NPD has tailed off dramatically over the past 12 months. It was bound to happen in the premium sausage sub-category given the sheer volume of new launches in 2008 to 2009, according to Andrew Keeble, MD of Debbie & Andrew's, the UK's bestselling premium sausage brand [Kantar].

Unfortunately, to compound matters, growth has started to taper off over the last quarter. In the 12 weeks to 6 September, value sales for fresh sausages were down 2.3% on the same period last year, to £127.9m, while volume was down 3.9% to 33.4 million kg [Kantar].

The dearth of NPD coupled with the deteriorating sales outlook has forced producers to reassess their product line-up and raised the prospect of consolidation, both in terms of the number of products and brands. Consequently, there is uncertainty around as companies look to rationalise and strengthen their portfolios either with a view to protecting themselves against takeover or putting themselves in the shop window. Debbie & Andrew's, for instance, is focusing on developing a core range, to which it adds seasonal limited-edition flavours to "freshen up" the category now and then.

That's not to say others aren't still pushing ahead with NPD. New flavours and variants are likely to play a role in maintaining interest in the category as we move into 2011, albeit with a more conservative stance than has been the case in previous years. According to Wilfred Emmanuel-Jones of The Black Farmer: "Consumers don't want too much interference with their sausages, and good, strong, traditional flavours still outstrip any possible variants."

The exception is chilli-based flavours, increasingly popular with consumers. The trend towards spice is not the sole preserve of the premium market, either. Kerry Foods, which features "everyday favourites" Richmond and Wall's in its sausage brand portfolio, is also keen to tap into the appetite for spicier flavours and believes its well-established brands would make ideal vehicles for trialling bolder flavours.

Standard-tier sausages such as Wall's and Richmond have held up well overall during the recession, posting 2.9% value growth to £291.6m in the past year, and a 0.9% increase in volume. It's a different story for value sausages, which have continued to post significant falls in both value (down 14.7%) and volume sales (down 12%) as consumers have started to care more about quality issues such as meat content.

As for maintaining growth, Kerry Foods marketing director Derek Williamson believes more can be done by highlighting new "eating occasions". For example, breakfast will be a major focus for Wall's over the coming months with plans to highlight breakfast scenarios in its packaging.

Away from specific flavours, Emmanuel-Jones is looking to gluten-free and Freedom Food welfare, but he is not confident that retailers will give him the shelf space he believes such NPD deserves.

About 50% of premium sausages were sold on promotion last year [Kantar], leaving many brands concerned about the scope for innovation and on the lookout for alternative outlets to multiples. "I'm a bit uneasy about discounting in the multiples," admits Grant Powter, MD of the eponymous company. "We will have to look at the independents in a closer way."

Concerns about heavy promotional activity and discounting are all too familiar to those in the bacon category, which, like sausages, is dominated by own label. Thirty-five per cent of volume sold in the past year was sold on promotion [Kantar] with x-for-y deals a mechanic that has become especially popular for rashers.

As a result, frequency of purchase has fallen from 15.3 trips per year last year to 14.8 trips this year. X-for-y deals are a common strategy in meat and poultry, says Kantar analyst Simon Parnell, but the longer expiry date for bacon raises question marks over the suitability of such mechanics.

"The challenge for bacon is the rate it's promoted at," agrees Williamson at Kerry Foods, which does a range of bacon under the Wall's brand as well as sausages. "It's become so heavily commoditised. Perhaps we, collectively as an industry, need to focus more on bringing NPD into it."

Pressure to discount, particularly from own label, is being matched by competition for shelf space from other brands. It's a story organic brand Helen Browning knows all too well its streaky bacon was recently delisted in about 100 Sainsbury's after the chain went with Jamie Oliver's pancetta instead.

Despite these competitive pressures, there is still appetite in some parts for new, premium bacon brands. Regional brand Dickson's, which recently secured listings for its premium sausages and bacon in 21 Asda stores, has had enquiries about a line of premium bacon with a local heritage theme, says MD Michael Dickson.

At the premium end of the market, there is also a fair amount of experimentation going on with smokes and cures (Jamie Oliver is looking at juniper and chestnut smokes, for instance), but the added value of these can be difficult to convey.

Premiumisation will continue (premium bacon currently accounts for 3% of the market), believes AHDB consumer insight manager Richard Cullen, but driven by thicker cuts and less shrinkage rather than new flavours.

"Everyone likes bacon as bacon. If you are going to get people to trade up and spend more, it really has to be a big differentiator." But the opportunity is there for bacon producers to grab and, if done well, some convincing NPD could drive premium up to a 5% market share over the next 12 months, he says.

Keeble at Debbie & Andrew's is also confident about the future. Next year will require some retrenchment and consolidation across the sausage category, but the trend for premium is here to stay. "The market will continue to premiumise, so it should be happy days for the survivors."

Focus On Bacon & Sausages