Convenience and health trends to drive further growth in prepared salads

Prepared salads has been one of the best performing segments of the chilled processed food category in recent years. Global sales in this segment were worth almost US$9.3 billion in 2007, having grown by close to 150% during the preceding decade (CAGR of 10.7%).

Although Western Europe remains the largest regional market, with sales worth US$4.8 billion in 2007 (and the UK alone accounting for US$2 billion), the North American market is slowly gaining ground and was worth just over US$4 billion during the same year. Indeed, Euromonitor International predicts that percentage constant value growth in the North American prepared salads market will outstrip that of Western Europe by more than two to one over the 2007-2012 period.

Hitting the convenience and health and wellness sweet spots

The main factor behind this success is the appeal of the category in both convenience and health and wellness terms. With global obesity rates continuing to rise (growing from 13.8% to 15.6% during the 2002-2007 period, according to Euromonitor International data, and leading to an increased incidence of such obesity-related conditions as hypertension and diabetes, diet has become a public health issue, generating unprecedented levels of media coverage and, consequently, political debate. The World Health Organisation attributes approximately three million deaths a year from cardiovascular and other diseases to inadequate fruit and vegetable intake, making it a risk factor almost as deadly as tobacco use or unsafe sex.

Governments do much of the marketing legwork

It was only during the mid-1990s that dietary recommendations began to acknowledge the importance of fruit and vegetables, and the antioxidant vitamins they contain, in relation to the prevention of coronary heart disease. In parallel with the increasing recognition that fruit and vegetables protect against chronic disease, official reports setting out dietary recommendations began to quantify the desirable amount of fruit and vegetables that people should consume.

 

In the UK, for example, the government “recommends an intake of at least five portions of fruit or vegetables per person per day to help reduce the risk of some cancers, heart disease and many other chronic conditions,” while its Australian counterpart maintains that “adults need to eat at least two serves of fruit and five serves of veggies each day.” Meanwhile, the Canadian Cancer Society, the Heart and Stroke Foundation of Canada and the Canadian Produce Marketing Association have set the bar even higher with a joint campaign that advises Canadians to consume between five and 10 servings of fruit and vegetables daily.

According to the US government's 5aday.com campaign, a 25-year-old male who gets less than 30 minutes of daily exercise should eat two cups of fruit and three cups of vegetables. A US government campaign, Healthy People 2010, was started in 2000 and given a set of 10-year targets for improving the health of Americans that includes raising levels of fruit and vegetable consumption. However, half way through the campaign (in 2005), a study found that just 27% of adult Americans were eating vegetables at least three times a day.

Convenience a key selling point

Despite their health benefits, the two key drawbacks of fruit and vegetables from the viewpoint of consumers are that they are highly perishable and often require preparation before they can be consumed. Prepared salads overcome the second of these concerns by offering a product that is ready to eat, while techniques such as blanching (which inactivates degradative enzymes in the plant tissue) increase longevity. Resealable packaging and individually packaged ingredients have also helped in this regard, as such products have a longer shelf life and more reusability than “ready made” salads.

As consumer lifestyles accelerate, with average working hours, female labour force participation and commuting times all continuing to rise, the demand for prepared salads continues to grow. The importance of convenience to demand in this segment is particularly important in Italy, where sales of prepared salads have risen five-fold in the past decade and are now worth more than US$900 million, in spite of a relatively low obesity rate (9.7% in 2007) by Western standards.

Manufacturers bet that better quality ingredients will boost demand

Manufacturers are also helping to extend the market by increasingly marketing prepared salads as a meal solution for dinnertime, rather than as a lunch product. They are attempting to accomplish this by improving the quality of the meats and cheeses included in their salads and increasing the emphasis on the salad as a meal in itself, rather than a quick lunch or a side dish. Launched in early 2007, Sara Lee Corp's Hillshire Farms Entrée Salads is just one of the offerings attempting to broaden the market for prepared salads. Moreover, there is a solid body of evidence to suggest that higher-income households in the US consume more fruits and vegetables than their less well-off counterparts, which suggests that this segment is receptive to premiumisation.

Food safety concerns could boost sales

Such food processing techniques as blanching also kill the vegetative cells of pathogenic organisms present on the plant's surface, a major factor in a number of health scares relating to vegetables, particularly in the US, during recent years. This has created opportunities for manufacturers of prepared salads to market their offerings as safer than their home-prepared counterparts, which use “untreated” ingredients. This is potentially an important factor in a market environment where a premium is normally put on products that are “unprocessed” or “whole.”

Rising obesity rates will create new opportunities in Western Europe

While these factors should continue to ensure healthy growth in this segment in the US (where the obesity rate rose from 26.3% in 2002 to 30.7% in 2007), demand is also likely to mature in such Western European markets as Spain and Germany, where sales of prepared salads remain relatively modest. Rising obesity rates are again likely to be a major factor. With obesity rates climbing above 14% in Germany during 2007, Euromonitor International predicts that sales of prepared salads in this market will double, to US$472 million, over the 2007-2012 period.

Recession risk a dark cloud on the horizon

However, it should be noted that the market for prepared salads is vulnerable (in terms of the overall packaged food market) to an economic downturn. With consumer confidence already crumbling in the US and threatening to follow suit elsewhere, sales of prepared salads could suffer in the short term.

A highly discretionary purchase even at the best of times, an increasing number of consumers are likely to choose to make their own salads, rather than buying prepared ones, as their disposable income is squeezed by increased mortgage repayments and accelerating price inflation. Moreover, with the price of agricultural produce rising sharply, manufacturers may find their profit margins being squeezed as they struggle to pass on cost increases to increasingly parsimonious consumers.

Nonetheless, the medium-to-long-term outlook for sales in this category is vibrant, with developed market sales likely to rebound strongly as the so-called “obesity epidemic” worsens, and new opportunities likely to present themselves in developing economies as they increasingly adopt westernised diets and experience their concomitant health problems. 

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