October 8, 2008

Northern Foods: Targeting the Foodservice Sector

Northern Foods has reported positive sales in the first half of 2008. The increase in sales has been attributed to the company's range of higher quality ready meals. The current economic uncertainty has created an opportunity for this range to target the foodservice outlet by appealing to value-conscious consumers. However, the company must ensure that the meals are positioned correctly.

Northern Foods has reported a 3.9% increase in sales in the first half of 2008, attributing the results in part to its range of higher quality ready meals. The current economic situation is significantly affecting consumer spending patterns. As a result, price is becoming a major factor influencing food and drink buying behavior. This is in contrast to previous trends that have had a significant influence on food and drink consumption habits, such as a desire for convenience and sensory appeal. In the last couple of years, for example, consumers have eaten away from home more frequently, but this trend is likely to decline in the short term. This creates an opportunity for the premium ready meal range to target consumers who want to sample premium food on a budget.

Datamonitor analysis revealed that, in 2007, the average UK consumer ate 104 evening meals away from the home. Of these occasions, approximately 93 took place in 'third places' such as foodservice outlets. These occasions were driven by trends such as a lack of time to cook and prepare a meal, and also the heightened desire to sample new and exotic food. However, as consumer confidence in spending declines, an opportunity has arisen for Northern Foods to directly target the foodservice sector with gourmet offerings that are less costly. The problem now facing the company is ensuring that the premium credentials of the range are promoted correctly.

Price will continue to have a more of an impact on grocery buying behavior in the short term, resulting in consumers trading up for premium items and bargain hunting for everyday items. If the premium credentials of its ready meals are under-promoted, Northern Foods will struggle to compete with foodservice outlets. If they are over-promoted, however, it runs the risk of cost-conscious consumers seeking out cheaper alternatives. The company must find an appropriate balance in order to maximize its profits.