Analysis by Sarah Hardcastle The lunchbox takeaways market sits slap bang in the middle of the most dynamic and profitable arena in grocery today ­ fast, convenient food for the cash rich, time poor. Sales are booming not just on the back of traditional sarnies and pork pies. Quality, freshness and variety are key themes with many manufacturers getting out of the rut and being increasingly innovative. But the Brits could still do far better, as Scott Annan, director of Space Retail Consulting Group, says: "Nobody in the UK has really cracked this market in the way the US has by meeting consumers' total needs. "Worst at it are petrol station forecourts which should have the market, but have lost it to supermarkets where 75% of convenience purchases are made, despite this being a less convenient medium. "The major petrol retailers make the arrogant assumption they're doing it right but in our consumer research shoppers tell us the exact opposite. "A common mistake is to view convenience as a physical asset ­ a type of store ­ when in fact it is a service concept." And which retailers are getting it right? "One or two are doing a great job, providing a good product range, the right merchandising and fast service. "Tesco Metro is particularly notable, grouping food to go at the front of store and providing express checkouts. So too is Marks & Spencer with similar facilities." The devil is in the detail, says Annan. "What retailers should do is define what consumers want in the way of convenience meals and service right down to the last detail. "They should provide the full meal spectrum which must be fresh, ­ that almost goes without saying. "Give plenty of emphasis to healthy and organic food, areas growing ahead of other categories, and include innovative products with a thrill me' factor to drive sales. "Recognise that time is of the essence and design everything so customers can be in and out as quickly as possible. "This means packaging everything to go, grouping it together, locating it as near the entrance as possible and providing a fast checkout. "Don't forget the support bits ­ cutlery, napkins, reading matter ­ the UK is poor compared to the US at doing this. "Equipment and point of sale are important. A clear message and no clutter are the stated top two US consumer needs. Thrill me' pictures and part day merchandising also improve service and sales. In Japan Circle K and 7-Eleven change their snack areas three times a day, an approach worth adopting. So, too, is bundling items as a promotional package which is hugely successful in the US and also improves service and sales," says Annan. One of the stumbling blocks to developing a better, more comprehensive service, which has held back many small independent retailers, is the likelihood of the service element attracting VAT. "If you put in a microwave, and supply hot coffee and cutlery, Customs & Exise can deem it as restaurant service and hit you for VAT on it," says Kerry Foods' business development director Alastair Luke. "It makes the whole operation a lot more complicated, especially for small retailers and, as a result, many are cautious of going too far down this route." Improvements are happening in less controversial areas. Kerry Foods, which supplies the Millers Snacks brand, is introducing fresh snack pot salads and individual cream cakes to independent retailers to compete with the offer available from the multiples. "These products have a very short shelf life and typically aren't stocked by independents because there's no route to market. "Now they can have them because we do six day a week delivery," says Luke. Kerry's customers include Alldays and T&S Stores. Ginsters offers a similar delivery service. Sales and marketing director Peter Judge says daily distribution is critical to growing the market for fresh snack products and to maintain stock availability throughout longer trading hours. "Our researches show that if full availability isn't maintained and customers can't find the sandwich or salad they want immediately, they trade down to a confectionery bar and soft drink, with a reduced sale to the retailer." Ginsters has turned round the fortunes of the savoury pastry sector in the last year, revamping its Cornish pasty range with new packaging, flavour variants and mini snack packs, as well as product innovation in related areas. Judge says Ginsters' savoury pastry sales are up 23%, turning the sector's previous lacklustre performance into a 6% rise over the year. Its entire food on the go' range is now being stocked by Granada's motorway service station network. Like Ginsters, Pork Farm Bowyers sees innovation as the route to expanding the market and capturing sales. Its Pick & Mix miniature chilled savoury snacks, developed last year, are now being trialled by 15 Tesco stores. Feedback so far shows the range is being bought in addition to other savoury snacks ­ expanding the market, says the company. From a zero base five years ago, cheese snacks have rocketed to sales worth £80m [AC Nielsen], driven by the enormous demand for lunchbox products from parents and a continuing spate of product innovation. Marketing director Rosemary Tap of Bel UK, which makes Laughing Cow Cheez Dippers and Babybel, estimates growth this year will be 15%. Developments are thick and fast at the moment. Golden Vale is promoting impulse sales in the independent sector with its single pack Cheestrings, as well as adding a 12 pack for the multiples. St Ivel has just brought out Cheese Mates depicting Sesame Street characters and aimed at young children. And Kraft Jacobs Suchard has launched a fun pack for children consisting of a Dairylea Lunchables cracker, cheese and meat stacker sandwich kit, a Capri Sun orange drink and a chocolate treat based on a similar US concept. Marketing controller Doug McGowan says sales in the first 11 weeks "have beaten our best expectations". Kraft estimates the snacks market at £11bn and reckons cheese snacks have taken over from crisps, confectionery and soft drinks as the new impetus for growth in the category. Cornerstone of the lunchbox/takeaway market continues to be sandwiches, whose sales topped £3.6bn last year, according to Hazlewood Foods, the UK's largest manufacturer and leading supplier to the multiples. Penny Wood, marketing director of Hazlewood's sandwich and pizza division, says retail sales are increasingly being challenged by the spread of urban coffee and sandwich bars. "Innovation is the key to attracting and keeping customers. "That, and understanding and meeting their preferences," says Wood. "Men prefer simple fillings but big portions, so we do deep fill for them. Women want low fat so we've introduced Healthlines, three ranges which are calorie counted, good for you or free of certain ingredients, such as meat. Healthy sandwiches are a big growth area, as are exotic fillings, wraps, sub rolls and filled naan and pitta breads." Wood says flavoured breads are gaining in popularity. "We do Brunch for Boots, which is a baked bean bread with sausage and egg filling. We're also looking at different spreads, such as pesto and tapenade as an alternative to butter and mayonnaise, to provide more flavour." {{FOCUS SPECIALS }}