REPORT
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PAPA REPORT 2019
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Introduction
PAPA Report
Introduction It’s difficult to recall a year as challenging for business as the last 12 months have been. Brexit aside, we seem to face ever more pressures from government, both locally and nationally. Business rates; demands for calories to be cut; allergen labelling; bans on takeaways within 400 metres of schools – the list goes on. Yet, despite all these negatives, our industry continues to grow. Retail sales are up, delivery is booming and even pizza restaurants have managed to hold their own despite the depressing stories of High Street closures. This all goes to prove that our industry is adept at rising above the challenges. But it could be so much better if Government was to work more in partnership with industry to confront the challenges we all face – from obesity to waste management. Too often the huge pool of knowledge and experience within industry is ignored because of the mistrust that exists between government and business. Whether it is ignoring the commercial realities of supply and demand in setting obesity targets or castigating industry for packaging waste while ignoring fundamental failures in waste collection systems. All too often, businesses provide the perfect scapegoat for politicians. As a result, we are forever on the back foot. Over the last year, PAPA Management Committee has sought to change this by taking a more pro-active approach to dealing with all these issues. In this brief report we have sought to set out some of the work being done by the Association to represent the interests of our market. Given the pressures we face it
PAPA REPORT 2019
is important for all of us – whether retailers, restaurateurs, suppliers or manufacturers – to make sure that our collective voice is heard and not ignored. I would like to thank all our members for their continued support which is vital to our ability to effectively represent the sector.
Jim Winship Director The Pizza Pasta & Italian Food Association
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Foodservice Market Report
EATING IN AND OUT
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PAPA REPORT 2019
Foodservice Market Report
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ncreasing cost pressures, the Brexit factor and over expansion in the past have all come together to put increasing pressure on the restaurant/casual dining sector. As a result, many chains have had to look closely at their estates and cut out the underperforming sites that were marginal. The investment model is no longer about how quickly an estate can be expanded, but to focus on the profitability of individual sites, in a market where costs have been rising rapidly. In the last couple of years increases in business rates, the minimum wage, food inflation (driven by the weakening pound) and even the apprentice levy have come together at a time when consumer confidence has been dipping. According to available data, overall eating out frequency has fallen in the last year, although pizza outlets are reported to have been bucking this trend by increasing their share of the market, albeit by less than 1%. While spend is reported to be up by some 2%,
this fails to cover the multi faceted cost inflation that operators have faced, leaving the market decidedly flat. With consumers’ confidence under pressure, their expectations for a good experience when they do eat out have become more demanding, causing operators to look at ways they can enrich their customers’ experiences. At the same time, there has been an increasing shift away from eating out to having food delivered; which has caused many in the High Street to move into the delivery sector. But this is not without its challenges, not least in reconciling the demands of eat-in customers with the speedy delivery expectations of those ordering by phone or on-line. While this has been solved, in part, by delivery platforms such as Deliveroo and Uber Eats, this does not ease the kitchen pressures that arise. Revenue dilution is also an issue, exacerbated by the high commission rates charged by the platforms. This could worsen if any mergers in this sector receive C.M.A. approval.
13% 19%
15%
Frozen Retail Pizza
20% Chilled Retail Pizza
33%
Italian Restaurants
Pizza Restaurants
Home Delivery Pizza
PAPA REPORT 2019
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Foodservice Market Report
While those monitoring the sector generally remain confident that the casual dining sector will continue to enjoy growth, they warn that demand for delivery is set to soar and operators likely to see this share of their business become increasingly important – a fair warning for those not already in delivery to quickly embrace that option. PIZZA RESTAURANTS According to data from Kantar, operators in the pizza restaurant sector saw a 4% increase in spend in the 12 months to September 2019. Those chains doing particularly well and outperforming the sector were Ask, Frankie & Benny’s and Pizza Hut, all of which have seen spend increase substantially ahead of the overall market. Ask enjoyed a massive 38% increase in spend to reach £18.5 million. The weakest performers have been Bella Italia and Prezzo. It is interesting to note that Ask’s performance is also reflected in research by MCA which gives the chain a Net Promoter Score of over 50. The Net Promoter Score is a management tool that can be used to gauge the loyalty of a firm’s customer relationships. It serves as an alternative to traditional customer satisfaction research. Kantar also report that the independents enjoyed good growth over the period, generally outperforming the overall market on spend by almost 3%. Kantar estimate that the pizza restaurant sector is now worth almost £780 million.
Within this, Pizza Hut is reported to have outperformed the sector by over 1%. With delivery expected to continue growing ahead of all other sectors, and restaurants moving to get in on the act, the supermarkets are also looking at ways to embrace this area. A couple of years ago Sainsbury’s linked up with Zizzi in a trial offering deliveries through Deliveroo, although that appears to have proved unsuccessful as the store trial has since closed down. Similarly, Asda and Sainsbury’s have recently linked up with Just Eat and Uber Eats to offer their own-label pizzas as a delivery option. However, this is already a highly competitive market which makes it challenging for new entrants. Future success in all sectors will require a clearly defined offer, a perfect balance between price and quality, and consistent delivery of the promised offer. Most of the recent restaurant closures have resulted from a failure to meet those requirements.
ITALIAN RESTAURANTS By contrast, Kantar estimate that spend in Italian restaurants over the last year has dipped by almost 2%, bringing the market value down to £1.26 billion. In this sphere, Ask again does well in outperforming the market in spend by some 8%, as does Frankie & Benny’s which they report outperformed the sector by 6%. DELIVERY Not surprisingly, the area of greatest growth in the last year has been pizza delivery, which Kantar estimates has enjoyed over 13% growth in spend over the year to September 2019, bringing the value of the sector to £708 million. 6
PAPA REPORT 2019
Immigration
Immigration
T
he Association welcomes the Government’s decision to let EU citizens continue to come to the UK to work until at least 2021. Given the severe shortages in the UK labour market currently, this approach will help to alleviate some of the pressures which are particularly hitting the food sector. However, the uncertainties over the long term remain a deterrent for many who might otherwise have come to the UK. Pizza restaurants and takeaways are particularly struggling to persuade experienced pizzaiolos to work here. PAPA is continuing to lobby strongly for a more equitable long term solution. PAPA REPORT 2019
Current immigration policy requires workers coming to the UK from outside Europe to be earning over £30,000 and to be employed in certain key sectors. The Migration Advisory Committee is currently reviewing this for the Government and considering the case for an Australian-style points system. The Association has written to the Committee suggesting that a ‘going rate’ system should be adopted rather than setting unrealistic benchmark earnings as a minimum. This would provide a more flexible approach, enabling struggling sectors of the economy to be able to make a case for recruiting from outside the UK. 7
Retail Market Report
RETAIL PIZZA
SALES STORM AHEAD The retail pizza market has performed strongly with sales up by 5% in the last year to reach over £1.07 billion and with volume up 7% CHILLED The chilled retail pizza market has fared well, with sales up 3% in value (worth over £570 million) and 5% in volume, according to data from Kantar Worldpanel for the year to 19th September 2019. This growth has been driven to a large extent by promotional activity, hence the increase in value of sales being outstripped 8
by volume. Indeed, the average cost of a chilled pizza fell by 2% over the year and is now £2.18. The prepacked sector has done particularly well, with value sales up over 4% and volume by 5%. By contrast, the retail deli pizza sector has seen a decline both in value (-1.5%) and volume (-3.3%), due in part to a reduction in PAPA REPORT 2019
Retail Market Report
Tesco’s deli counters but also caused by a fall off in consumer demand. The deli sector is now estimated to be worth £108 million but nevertheless still accounts for almost 19% of chilled sales in value and 14% in volume. Within the overall chilled market, Marks & Spencer has performed particularly well in the last year with value sales up by over 22% and volume by over 34%. However, this is off a relatively low base as they currently hold less than 6% share of the market in volume. Marks & Spencer has been particularly active in driving sales in the last year through promotions, such as The Big Deal and Family Meal Deal. Lidl has similarly grown its share of the market by 28% in value and 16% in volume but again currently holds only 4% share of the overall market. Lidl has been particularly successful in driving premium sales. Of the larger players, Morrisons, the Coop and Aldi have seen the greatest year-onyear growth. Morrisons increased value sales by almost 12% and volume by over 13.5% in the year and holds around 10% of the chilled market in both volume and value. Aldi value sales were up by 9% and volume by almost 21%. In the deli sector, Morrisons has been particularly successful in driving both value and volume, while Sainsbury’s share has been in decline, although in more recent months there are signs of a recovery. Over the year, Sainsbury’s deli sales were down over 16% in value and over 30% in volume. In the convenience sector, the Co-op continued to maintain its remarkable year-onyear-year growth with sales up by almost 7% in value and 5% in volume. Looking in more depth at pre-packed product tiers: The premium tier, which accounts for almost 21% of the market in value, has seen over 15% growth in value in the year and over 17% in volume. The branded packaged market has seen a decline of almost 4% in sales during the last year, with volume sales down over 7%. The dietary/lifestyle category has seen significant increases in both value and volume PAPA REPORT 2019
Chilled £573m
Frozen £494m
sales in the last year, with value up over 80% and volume almost 90% This growth has been predominantly driven by Waitrose which has grown its share by over 170% in both value and volume within their tier. However, this sector only accounts for less than 1.5% of the overall pre-packed market in volume. FROZEN The frozen retail pizza market performed extremely well in the 12 months to September 2019, with value sales up 7% and volume by over 8%, suggesting that this is real gain rather than driven by promotional activity. Furthermore, this has been achieved at a time when the overall frozen grocery market saw a decline in the value of sales of almost 1.5%. Within the sector, the best performers were Tesco (up 8.5% in volume but only 5.2% in value), Iceland (+ 8.4% in volume and 7.8% in value), Aldi (+22.1% volume and 15.7% in value) and Lidl (+22.2% in volume and 21.3% in value). Tesco continues to dominate this market with over 25% share in value terms. Despite the growth in the market, the average price of a frozen pizza dropped by just over 1% to £1.46 over the year. 9
Obesity
THE CASE FOR BOLD CALORIE LABELLING IN TARGETING
OBESITY
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PAPA REPORT 2019
Obesity
A
ccording to national statistics, the percentage of the adult population classified as obese rose by over 11% between 2016 and 2017 to reach 29% of the adult population. In the same period, obesity was a factor in accounting for 711,000 hospital admissions. Despite the various targets being set by Public Health England to reduce fat, salt and sugar in retail and foodservice products in the battle against obesity, the problem is continuing to grow. For some time now, our Association has argued that the approach of setting targets is only part of a wider campaign needed to turn the tide, as real change can only be made if the public join the battle. It has also expressed concern that the setting of lots of different targets is becoming more and more confusing for people rather than encouraging them to eat more healthily. This year, faced with new proposals for setting targets to reduce calories, the Association suggested to Ministers that a stronger and clearer message is needed to persuade consumers to change their diets. Furthermore, we suggested that calories were the key as people could relate to them and reductions in calories would automatically tend to lead to cuts in the salt, fat and sugar content of products To further illustrate the point, we presented Ministers with a series of products labelled boldly with their calorie content and proposed that labelling legislation could be used to mandate that all products should be clearly and boldly labelled with their total calories. By prominently labelling calories in this way, consumers would instantly be able to compare one product with another and make healthier choices. Coupled with a single-minded campaign to promote calorie reduction as the key to good health, food producers and retailers could work with Government to promote changes in attitude with greater confidence. Businesses currently find targets extremely challenging as they cut across the economics of supply and demand by suggesting that suppliers PAPA REPORT 2019
can dictate to consumers what they buy. There is also a view that while taxes may have an influence in the short term, consumers soon adjust to them. There is also similar concern that reductions in portion sizes could be counter productive by encouraging some consumers to either buy larger products or supplement the difference by purchasing an add-on product. By using calorie labelling on packaging to encourage consumers to think when they are making choices in store, we believe that consumers will be encouraged to select healthier options. Demand for lower calorie products will, in turn, drive product development. If a similar approach was also applied to products sold by foodservice operations, the potential impact on consumer awareness could be significant. In the case of such outlets, typical values would be needed together with sufficient tolerances to allow for the variations that can occur in kitchens. While not everyone will agree with this approach, we have to accept that as food businesses we do have a responsibility and a role to play in helping to tackle obesity, which costs the UK economy billions every year. Our view is that we will all achieve more by working in harmony with the Government to persuade consumers to eat more healthily. 11
Allergens
Allergen Labelling
THE RISKS
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Allergens
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rom October 2021 all products prepacked for direct sale (PPDS) sold in foodservice environments will have to be labelled with a full list of ingredients, and any allergens highlighted. While, at first, this might seem like a logical move given the increasing number of people suffering from allergic reactions to certain ingredients, there are serious concerns that it could increase rather than reduce the risks. The worry is that by highlighting specific allergens on packs, consumers could be misled into believing they are safe in environments where there are high risks from cross-contamination. Given the number of product recalls registered with the Food Standards Agency involving mislabelling of manufactured products, there are very real concerns that in the pressured environment of some foodservice outlets more mistakes are likely to occur which could put some consumers at greater risk. While the legislation for this has been laid before Parliament, there is increasing confusion over how far the requirements will go after lawyers from the Food Standards Agency determined that the term ‘Prepacked for Direct Sale’ included virtually anything sold in packaging or prewrapped. They also argued that the term ‘self-service’ is not recognised in law.
PAPA REPORT 2019
Although the original intention was to capture products from self-service units in foodservice outlets that previously only needed a descriptor on them, this new interpretation potentially means that any products in packs would need labelling. This could include baguettes in bags in supermarkets, fresh pizzas that are prewrapped on deli counters and a plated salad with clingfilm cover in a selfservice cafeteria. Delivered pizzas could also be drawn into the requirements, although strictly they come under a different set of rules about delivered foods. As a result of strong lobbying by trade associations from across the industry, the Food Standard Agency has backed away from its original deadline for resolving these issues (originally 1st October) and agreed to consult further. Consequently, PAPA Director Jim Winship has been invited to join the FSA’s Industry Leaders panel to discuss the issues in November. There is also considerable concern over how this new requirement appears to have been driven politically with too little consideration given to the practical implications, despite strong concerns being raised by the industry. This has been further exacerbated by the rush to implement the legislation. No-one argues with the need for food businesses to be absolutely clear about allergen risks. The question is about how this can most safely be done.
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Waste
WE ALL HAVE A RESPONSIBILITY FOR WASTE AND THE ENVIRONMENT 14
PAPA REPORT 2019
Waste
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he environment and waste are key issues of our time and our Association is fully behind tackling these, but we need support from Government if we are to achieve real change. While our members are working to reduce the use of plastics – even the little spacers used in pizza delivery boxes – and food waste, much of the problem occurs at the end of the cycle when consumers come to throw packaging away. A major issue is that it is not easy for people to recognise the difference between packaging that is recyclable and that which is not. Many packaging systems are fully recyclable – provided that they get to the right waste streams and to the plants where they can be treated. A good example are single-use coffee cups which can be recycled if they get to one of two plants in the UK that can handle them. To address this, the Association has been calling for a national waste strategy with the aim of establishing a consistent and more straightforward approach to waste across the UK. We believe this needs to start with the waste collection services. Currently, each local authority has its own systems. While some ask consumers to separate paper, glass and plastics, others have one bin for all recyclables. This creates confusion from the outset. We would like to see one national waste collection approach with bins colour coded for the different waste streams. This would open the door for food and drink manufacturers to colour code packaging to the correct bin colours – making it really straightforward for consumers to know where to discard packs. Of course, this does not remove the obligation on retailers and manufacturers to do their bit for the environment. We believe strongly that we all have to work at this if we are to make a difference. In the case of pizza delivery boxes, for example, there is an issue with food and grease contaminating the board, which generally makes it difficult to recycle. By making sure that the food does not come into direct contact with the board, we can overcome this problem and, even if it does, we can do more to encourage
PAPA REPORT 2019
consumers to recycle those parts of boxes which are unaffected. Another area which we fully support is the development of bottle return schemes, although we have concerns about the approach being taken by Scotland where a scheme appears to be being rushed in for political reasons. The main fault with the Scottish scheme – which comes into effect in April next year – is that it requires every business selling drinks to charge a 20p deposit and repay the deposit on returns. Furthermore, they are obliged to accept any glass and plastic bottles returned to them, regardless of whether they originated from that business. The are several concerns about this, particularly for small food businesses. For a start, there are dangers in having glass in food preparation areas and many small operators do not have space for storing used bottles, some of which may be returned in an unhygienic state. There are also logistics and possible cash flow concerns. The Scottish Government has sought to offset some of these by saying that smaller businesses can make arrangements with larger neighbours to take their returns. A better solution for everyone is for Return Vending systems to be used but these take up space and are costly to install. We hope that when England and Wales adopt similar schemes, which is expected in the near future, they will give better consideration to the implications. We would like to see the focus around the installation of Return Vending systems at key points in the High Street and local neighbourhoods rather than the onus being placed on takeaways and retailers to accept any returns brought to them. Food waste is another area where we could all do better. The Waste & Resources Action Programme (WRAP UK) estimates that over 10 million tonnes of food is wasted in the UK annually, about 3 million tonnes of which is lost in the supply chain and the rest, over 7 million tonnes, within households. As an industry, we all need to work together and with organisations like WRAP to find ways of cutting food wastage which is difficult to defend morally. 15
PAPA Awards
How we judge the Awards
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PAPA REPORT 2019
PAPA Awards
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he Pizza Pasta & Italian Food Industry Awards, now in their 30th year, are both an occasion for everyone to get together annually and provide an important opportunity for recognising those that are helping to drive and shape our industry. Hence, we make great efforts to try and ensure that all the awards are judged fairly. Those involved in judging are carefully chosen for their knowledge and to ensure that their decisions are unbiased. Our aim is to acknowledge the very best, which is why we do not entirely rely on entries – indeed, in many categories all operators are considered. For example, in the retail and chain awards, independent data from Kantar, MCA and NPD/Crest is used to assess operators with a view to ensuring that those that are really driving the business are recognised. In the independent categories, too, we go to great lengths to find the best examples from our
PAPA REPORT 2019
industry. In addition to inviting nominations, our team trawl through on-line and media reviews to find those highlighted as the best. Furthermore, we have a team of industry judges on the road who, between them, visit each of those identified to ensure that they really are as good as the reviews say. It’s a long process that takes over six months to complete. The pizza and pasta competitions, held on the same day as the awards dinner, have also become a key feature of the awards, providing an opportunity for us to recognise the behindthe-scenes skills that help make this industry so innovative and successful. Pizza and pasta chefs from all over the country travel to London to take part in this event and to have their skills judged by some of the country’s top industry names, including celebrity chef Theo Randall. The competitions take place as part of the European Pizza & Pasta Show at Olympia.
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PAPA REPORT 2019
RESEARCH DATA We would like to thank the following for supplying data for both this Report and for judging The Pizza Pasta & Italian Food Industry Awards:
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