the uk sandwich market presentation by jeffrey young allegra strategies 10am

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The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

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Page 1: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

The UK Sandwich MarketPresentation by

JEFFREY YOUNG

Allegra Strategies

10am

Page 2: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Allegra Strategies LimitedNo 1 Northumberland Avenue, Trafalgar Square, London WC2N 5BW, UK

Tel: +44(0)20 7691 8800 Fax: 44 (0)20 7691 8810 Email: [email protected] www.allegra.co.uk

Trends in the UK Sandwich Market

Presentation at The Taste Experience

British Sandwich Association

Jeffrey Young, Managing Director, Allegra Strategies Ltd

1 November 2007

Page 3: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 3

1. Background on Allegra Strategies

2. Consumer Food Mega-Trends

3. Market Landscape

4. Case Study: Branded Coffee Chain Segment

5. Future Sandwich Market Developments

6. Q&A

Page 4: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 4

• Leading UK research and strategy consulting firm focusing on Coffee and Foodservice, Retail and Consumer Lifestyle

• Mission to deliver outstanding quality information, assisting clients to better understand their competitive environment and to focus on customers, markets and innovation

• Publish Project Café series since August 1999, recognised as the definitive report on the UK and European branded coffee and sandwich chain markets

• Research projects: qualitative and quantitative customer insight programmes, competitive analysis, best practices and commercial due diligence for leading UK and global clients

• Project Café7 release May 2007. European Coffee Shop Market 2007 released October 2007

• In addition to bespoke research and strategy consulting to the coffee sector, Allegra also pioneers a series of definitive retail publications including:

- How Women Shop!™ 2007

- Ethical Consumer Trends UK – Clean Energy and Energy Efficiency 2007

- Ethical Brands – Implications for the Food sector

• In 2007, Allegra established an industry Think Tank - The Food Strategy Forum

• Senior Food & Beverage Executive Top of Mind Survey completed 30 October 2007

• Currently working on a new report: ‘Food on the Move’

• Leading UK research and strategy consulting firm focusing on Coffee and Foodservice, Retail and Consumer Lifestyle

• Mission to deliver outstanding quality information, assisting clients to better understand their competitive environment and to focus on customers, markets and innovation

• Publish Project Café series since August 1999, recognised as the definitive report on the UK and European branded coffee and sandwich chain markets

• Research projects: qualitative and quantitative customer insight programmes, competitive analysis, best practices and commercial due diligence for leading UK and global clients

• Project Café7 release May 2007. European Coffee Shop Market 2007 released October 2007

• In addition to bespoke research and strategy consulting to the coffee sector, Allegra also pioneers a series of definitive retail publications including:

- How Women Shop!™ 2007

- Ethical Consumer Trends UK – Clean Energy and Energy Efficiency 2007

- Ethical Brands – Implications for the Food sector

• In 2007, Allegra established an industry Think Tank - The Food Strategy Forum

• Senior Food & Beverage Executive Top of Mind Survey completed 30 October 2007

• Currently working on a new report: ‘Food on the Move’

ABOUT ALLEGRA STRATEGIES

Page 5: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 5

CLIENTS

Allegra Strategies provides research and consulting products and services to a wide variety of leading UK and global corporations. Our recent client list includes:

Page 6: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 6

1. Background on Allegra Strategies

2. Consumer Food Mega-Trends

3. Market Landscape

4. Case Study: Branded Coffee Chain Segment

5. Future Sandwich Market Developments

6. Q&A

Page 7: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 7

Allegra’s research and analysis over the past decade identifies 7 Mega-trends driving developments across the global food sector, with important consequences for the UK sandwich market.

1. Healthy Eating

2. Food-on-the-Move

3. Premiumisation / ‘Culture of Food’

4. Greater Variety and Choice

5. Expansion of Branded Chain Concepts

6. Growing Importance of ‘Experience’

7. Ethical Consumerism

Page 8: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

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• Societal concern with obesity in the UK

• Press and government programmes have stimulated a growing focus on healthy eating

• Greater awareness of nutrition

• Proactive efforts by leading supermarkets and foodservice chains

• Trends towards simpler, more natural, fresh foods and organic produce

• Dramatic reduction in trans fats

• Reduced additives and preservatives

GLOBAL FOOD MEGA-TREND - HEALTHY EATING

Page 9: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

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73.8%

6.3%

19.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Agree Strongly/Agree Neither Disagree Strongly/Disagree

Allegra’s national food buying behaviour consumer research identified a major trend towards healthy eating. Nearly three-quarters of UK consumers interviewed stated that they are more concerned with healthy eating than they were five years ago. 55% believe that they should be eating healthier still.

CONSUMERS’ INCREASED CONCERNS ABOUT HEALTHY EATING [NATIONAL FOOD BUYING RESEARCH]Response to Prompt: I’m more concerned with healthy eating than I was 5 years ago.Percentage

Source: Allegra Strategies National Food Buying Behaviour Interviews and Analysis, 2006

Page 10: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

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• Also known as Convenience-led consumption, Dash-board Dining or Grab&Go

• Busier and more mobile lifestyles

• Consumers are eating more meals out-of-the- home

• Increasing snacking and grazing

• ‘Three meals a day’ is now an out-dated stereotype in much of Britain

• Takeaway food and beverages have risen substantially in the past decade and is now widespread

• Retailers, foodservice operators and food manufacturers have responded with a wide variety of convenience offers

GLOBAL FOOD MEGA-TREND – FOOD-ON-THE-MOVE

Page 11: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 11

Nearly two-thirds of UK consumers eat out-of-the-home at least once per week or approximately two meals per week on average.

This trend has grown substantially over the past decade with the introduction of more convenience offers and more mobile consumption habits.

EATING OUT-OF-THE-HOME [NATIONAL FOOD BUYING RESEARCH]How many times per week on average would you eat meals out-of-home?Percentage

Source: Allegra Strategies National Food Buying Behaviour Interviews and Analysis, 2006

9.1%

12.7%

10.7%

13.2%

19.5%

5.3%

6.8%

1.1%

3.4%

18.2%

0%

5%

10%

15%

20%

25%

7 times or more per

week

5 to less than 7 times

per week

3 to less than 5 times

per week

2 to 3 times per week

Once per week

2 to 3 times per month

Once a month

Once every two months

Once or less every

quarter

Very seldom/

don't normally eat

out

Page 12: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 12

A quarter of UK consumers under 35 stated that they eat many meals ‘on-the-move’, an important current and future market for sandwich players. Allegra’s national food sample reveals that younger consumers are more likely to eat unstructured meals.

Source: Allegra Strategies National Food Buying Behaviour Interviews and Analysis, 2006

EATING ON-THE-MOVE [NATIONAL FOOD BUYING RESEARCH]Response to Prompt: I eat many of my meals on-the-move.Percentage

26.3%

24.0%

18.8%

12.7%11.5%

3.0%

0%

5%

10%

15%

20%

25%

30%

18-24 25-34 35-44 45-54 55-64 65+

Page 13: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

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• Historically high relative wealth has increased discretionary income

• Growing demand for higher quality products and luxury treats, provides food players with opportunities to increase revenue

• A few examples:

- Growing popularity of deli concepts

- Rise of farmers markets

- Premium supermarket own-label

- Shift from instant to roast & ground coffee

- Premium niche brands, e.g. Kettle Crisps

• Rise of celebrity chefs and TV programmes e.g. Master Chef, Hell’s Kitchen, Jamie Oliver

GLOBAL FOOD MEGA-TREND - PREMIUMISATION / ‘CULTURE OF FOOD’

Page 14: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

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• Increased travel and exposure to different cultures is driving more open-mindedness

• Increased acceptance and enjoyment of a wider variety of food types and multi-cultural cuisines

• More demanding consumers expect a higher degree of choice and quality

• Wide variety of product formats and channels to market

• Variety in tastes is particularly evident from the diversity of supermarket shelves and restaurant menus of today

• 24-hour access to food purchases is potentially a contributor to obesity

GLOBAL FOOD MEGA-TREND - GREATER VARIETY AND CHOICE

                       

Page 15: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

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• A global trend to consolidation in retail and foodservice

• Branded chain foodservice concepts, e.g. Costa, Starbucks, Pret, Carluccio’s, Subway, La Tasca, Pizza Express have proliferated at the expense of independent operators

• Significant growth in the quality mid-market

• Consumers shunning ‘greasy spoon’ outlets

• Despite a stated ‘emotional’ link to independent operators, UK consumers are gravitating to brands that they trust, associate with and aspire to

• Brands create a sense of ‘fashion’ and excitement

• Financial strength and operational excellence of branded operators provide distinct advantage

GLOBAL FOOD MEGA-TREND – EXPANSION OF BRANDED CONCEPTS

                                

 

Page 16: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 16

4.2

4.7

6.8

7.9

8.3

10.2

11.5

0 1 2 3 4 5 6 7 8 9 10 11 12

Jun '99

Nov '00

Mar '02

May '03

May '04

Nov'05

April '07

Number of Brands Recognised

Source: Allegra Strategies Coffee Shop Interviews & Analysis, April 2007

AVERAGE NUMBER OF MAJOR BRANDS RECOGNISED UK BRANDED COFFEE SHOP VISITORS, 1999 - 2007 [COFFEE SHOP INTERVIEWS]Response to Question: Which of the following coffee/sandwich shops brand do you know?Number of Brands

Year-on-Year change

Apr ‘07 +12.7%

Nov ‘05 +22.9%

May ‘04 + 5.1%

May ‘03 + 16.2%

Mar ‘02 + 44.7%

Nov ‘00 + 11.9%

Growing brand awareness is evident as consumers increasingly use foodservice chain concepts. Vibrant brands that connect to a broad but well-defined target audience are those that gain most customer recognition.

Page 17: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

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• High quality, themed store environments have become important tools to unlocking consumer spend

• Rise of ‘3rd space’ as a social venue – importance of a ‘my time’ space is not to be underestimated

• Sense of ‘urban casualness’ is encapsulated in the successful Starbucks, including the use of sofas, hand-written menu boards and themed graphics

• New McDonald’s stores now feature vibrant, café-like environments

• Supermarkets such as M&S and Waitrose are food-shopping

• Tastings, customer education and events

GLOBAL FOOD MEGA-TREND – IMPORTANCE OF CUSTOMER ‘EXPERIENCE’

Page 18: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

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• Ethical dimensions are increasing in consumer purchase decisions. Key areas include:

• Environmental impact / Food miles

• Fairtrade

• Local sourcing

• Organics

• Social responsibility

• Impetus has been driven by corporate activities and widespread media coverage

• Growing concern with climate change but also an important focus on food provenance, localness and reduced packaging

• Ethical positioning is a business imperative

GLOBAL FOOD MEGA-TREND – ETHICAL CONSUMERISM

Page 19: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 19

While, 9% of visitors expressed strong opinions in favour of Fairtrade coffee, a high 57% of visitors remain passively indifferent to ethical coffee purchases.

IMPORTANCE OF FAIRTRADE [COFFEE SHOP INTERVIEWS]Response to Prompt: It is important to me to order Fairtrade coffee whenever I can.*Percentage of Respondents

8.7%

34.2%

23.8%

28.3%

5.0%

0%

10%

20%

30%

40%

Agree Strongly Agree Neither Disagree Disagree Strongly

Note*: Scale 1 to 5; where 1 = Agree Strongly; 2 = Agree; 3 = Neither; 4 = Disagree; 5 = Disagree StronglySource: Allegra Strategies Coffee Shop Interviews & Analysis, April 2007

Page 20: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 20

1. Background on Allegra Strategies

2. Consumer Food Mega-Trends

3. Market Landscape

4. Case Study: Branded Coffee Chain Segment

5. Future Sandwich Market Developments

6. Q&A

Page 21: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 21

With its highly concentrated population of 60 million and increasingly brand-led, food-conscious consumers, the UK provides a fertile market for quality sandwich providers.

• The UK is a hybrid between the US and Europe, combining a strong chain presence and convenience-driven behaviour, with the food and café culture of Europe

• Growing consumer ‘food culture’ has emerged over the past 5 years, e.g the success of Waitrose, M&S food, Taste the Difference, Finest and branded food chains such as Pret, EAT and Carluccio’s

• Café culture has risen exponentially over the past decade, with 47% of consumers visiting a coffee venue at least once per month. 67% of adult consumers eat out-of-the-home at least once per week

• UK out-of home Food & Beverage market is estimated at £37 billion

- Estimated 228 million daily meal occasions in the UK

- UK day-time convenience F&B market is estimated at £14bn and £3.3bn in London

- Sandwich market estimated at £3.5 - £3.7 billion

• Significant growth of the branded coffee/sandwich chain market, currently at £1.3bn. Forecast to reach a market size in excess of 6,500 units with total sales of £2.5bn within a decade

- Pret leads the branded food-focused coffee segment in sales and outlets, followed by EAT

• M&S, Sainsbury’s Local, Tesco Express, Boots and Greggs provide strong competition within the lunch time/sandwich market, as does fast-growing chain Subway, with 986 stores currently

Page 22: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 22

Source: ONS, Defra, Allegra Strategies Analysis, 2007

ESTIMATED ANNUAL TURNOVER – UK OUT-OF-HOME FOOD & BEVERAGE MARKET£ Billions

The UK out-of-home food and beverage market is estimated at £37 billion and is expected to grow at 1.6% per annum to 2010. Allegra estimates that the daytime on-the-move market at approximately £14 billion.

33.2 33.9 34.1 35.3 35.7 36.5 37.0 37.6 38.1 38.9

0

5

10

15

20

25

30

35

40

2001 2002 2003 2004 2005 2006 2007F 2008F 2009F 2010F

Compound Annual

Growth Rate2006 - 2010F

1.6%

Page 23: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 23

Note: Figures are for VAT registered businesses ONLY and numbers are start of year figures

Source: ONS Business Activity, Allegra Analysis, 2007

TOTAL NUMBER OF UK FOODSERVICE ENTERPRISES, 1996 – 2007ENo. of Businesses

Compound AnnualGrowth Rate

1996 – 2007E

Total Market 2.0%

Canteens & Catering 3.6%

Hotels -1.5%

Bars & Pubs 1.4%

Restaurants & Cafes 3.2%

The UK comprises approximately 130,000 Vat registered foodservice businesses with the total number of outlets estimated around 170,000.

Restaurants and cafés account for a growing 50% share.

45,195 45,900 47,325 48,435 49,840 51,495 52,815 54,400 56,975 59,330 62,005 63,750

44,385 43,925 43,690 43,690 44,020 44,850 46,355 47,39548,430

49,17550,755 51,500

12,110 11,645 11,410 11,195 11,030 10,95510,775

10,52510,405

10,25010,220 10,200

3,655 3,845 4,015 4,140 4,380 4,6204,850 5,065

5,2205,325

5,335 5,375

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

140,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007e

109,270 111,920114,795 117,385

124,080128,315

130,825

106,440 107,460

121,030

105,315105,345

Page 24: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 24

Source: Allegra Strategies Analysis, 2007

SELECTED UK SANDWICH/FOOD-TO-GO OPERATORS STORE NUMBERS, MAY 2007Number of Outlets

McDonald’s remains the largest foodservice chain in terms of number of outlets. However, this gap is narrowing with Subway soon to reach 1,000 UK outlets.

1,190

1,098

975

735

555 540

326 305

170 165 162 145 133 13265 44 29 18

702

0

200

400

600

800

1000

1200

1400

Mc

Donald's

Greggs Subway Tesco Expres

s

Boots Sand.

Costa Coffee

Starbucks

Sains-bury's Local

Caffè Nero

Caffè Ritazza

Bakers Oven

Pret A Manger

BB’s Coffee & Muffins

O'Brien's M&S Simpl

y Food

EAT Coffee Republic

Bagel Factory

Benugo

Page 25: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 25

A variety of players are present in the market, each targeting a specific niche. Allegra expects the main value growth for sandwich players to occur in the upper right-hand quartile.

UK SANDWICH/FOOD-TO-GO OPERATOR POSITIONING MAP

Source: Allegra Strategies Analysis 2007 -

+ ILLUSTRATIVE

-

Price

Quality Food Credentials

+

BB’s Coffee

& Muffins

Sainsbury’s Local

Starbucks

Caffè Ritazza

Costa

M&S Simply Food

Caffè Nero

EATSubway

Greggs

Bakers Oven

McDonald’s

Tesco Express

Benugo’s

Benjy’s(Defunct) Boots

PretWaitrose

Sandwiches

Page 26: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 26

Recent Allegra industry research identified Rising food costs as the single biggest challenge for UK food & beverage players and is currently a major concern for sandwich manufacturers and sandwich retailers.

Given intensifying competition and the need to differentiate means that Innovation/New Product Development is the second most important challenge currently.

TOP 5 CHALLENGES MENTIONED BY UK FOOD & BEVERAGE EXECUTIVES, OCT. 2007

Source: Allegra Strategies Analysis Food Strategies Forum Top of Mind Survey, Preliminary Data, October 2007-

RANKING KEY CHALLENGE

1 Rising food/ingredient costs

2 Innovation & new product development

3 Sustainability/Environment

4 Intense competition

5 Attracting & retaining staff

Page 27: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 27

1. Background on Allegra Strategies

2. Consumer Food Mega-Trends

3. Market Landscape

4. Case Study: Branded Coffee Chain Segment

5. Future Sandwich Market Developments

6. Q&A

Page 28: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 28

• Branded coffee shop market now totals 3,000 units, set to nearly double over the next decade

• Regional growth will account for the lion’s share of growth in outlets at circa 10% per annum

• London is still growing, forecast at 6-7% per annum for the next 3-4 years

• Branded segment turnover is valued at £1.3 billion in 2007 and to exceed £2.5 billion by 2017

• Top 3 coffee-focused players: Starbucks, Costa Coffee and Caffè Nero accounted for 1,400 units and each adding 40-60 outlets per year

• Branded food-focused players Pret A Manger and EAT have accelerated growth plans

• UK café culture is here to stay. The popularity of coffee bars continues to grow as a significant proportion of UK consumers make coffee shops part of their daily lives

• Coffee shops have become important venues not only to drink coffee and other beverages, but also to eat, relax, socialise and conduct business meetings

• Major branded chains Starbucks, Costa Coffee, Caffè Nero, Pret A Manger and M&S Cafés have set strong benchmarks on product variety, coffee quality and store environments

• Consumers now expect these features across a growing set of UK foodservice, leisure and shopping venues

• An increasingly important channel for sandwich manufacturers

• Branded coffee shop market now totals 3,000 units, set to nearly double over the next decade

• Regional growth will account for the lion’s share of growth in outlets at circa 10% per annum

• London is still growing, forecast at 6-7% per annum for the next 3-4 years

• Branded segment turnover is valued at £1.3 billion in 2007 and to exceed £2.5 billion by 2017

• Top 3 coffee-focused players: Starbucks, Costa Coffee and Caffè Nero accounted for 1,400 units and each adding 40-60 outlets per year

• Branded food-focused players Pret A Manger and EAT have accelerated growth plans

• UK café culture is here to stay. The popularity of coffee bars continues to grow as a significant proportion of UK consumers make coffee shops part of their daily lives

• Coffee shops have become important venues not only to drink coffee and other beverages, but also to eat, relax, socialise and conduct business meetings

• Major branded chains Starbucks, Costa Coffee, Caffè Nero, Pret A Manger and M&S Cafés have set strong benchmarks on product variety, coffee quality and store environments

• Consumers now expect these features across a growing set of UK foodservice, leisure and shopping venues

• An increasingly important channel for sandwich manufacturers

MARKET OVERVIEW

Page 29: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 29

371 590 7781,382 1,784 2,056 2,190 2,402 2,624 2,869 2,973 3,205 3,502 3,752 3,985

3,9004,000

4,100

4,2604,345

4,4534,587

4,7604,870

4,967 4,9925,041

5,0925,125

485503

518

714796

8971,160

1,2521,335 1,320

1,4051,484

1,565

5,158

1,651

522

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

Dec-97 Dec-98 Aug-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Apr-07 Dec-07F

Dec-08F

Dec-09F

Dec-10F

The UK branded coffee market has quadrupled since 1999 to reach an estimated 3,000 outlets a and accounting for 30% of the defined coffee shop market in 2007. Allegra predicts the branded market to grow by more than 8% to 2010 and ultimately to double within 10 years.

*Note: Non-specialist segment excludes branded chains who have partnered with non-specialist playersSource: Allegra Strategies Industry Interviews and Analysis, 2007

TOTAL NUMBER OF UK COFFEE SHOP OUTLETS, BY TYPE, DEC 1997 - DEC 2010FNo. of Outlets

Compound AnnualGrowth Rate

Dec 2006 - Dec 2010F

Total Market 4.2%

Non-specialists 5.5% -Hotels -Supermarkets-Department/Book stores -Service Stations

Independent Operators 0.9%

Branded Chains 8.6%-Coffee Focused-Food-Focused

7,3057,674

8,746

9,171

8,322

9,651

10,07710,443

10,795

6,160

6,843

9,285

5,4005,093

4,756

Page 30: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 30

TOTAL NUMBER OF UK BRANDED COFFEE SHOP OUTLETS, BY SEGMENT, DEC. 2000 – DEC. 2010FNo. of Outlets

Source: Allegra Strategies Industry Interviews and Analysis, 2007

Coffee-focused segment, e.g. Starbucks, Costa Coffee and Caffè Nero is set to grow at 9% to 2010 vs. 8% for the food-focused segment, e.g. Pret and Eat.

Total BrandedChain Market 8.6%

Food-Focused 7.6%

Coffee-Focused 8.9%

Compound Annual Growth Rate

Dec 2006 - Dec 2010F

9141,226 1,395 1,527 1,708 1,878

2,1472,425

2,652 2,843 3,016

468

558635

663716

746

722

780

850910

969

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07F Dec-08F Dec-09F Dec-10F

1,382

1,784

2,0302,190

2,4242,624

2,869

3,205

3,752

3,985

3,502

Page 31: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

Page 31

• 24% of the UK adult population or approximately 11 million consumers visit coffee shop at least once per week. 47% of UK adults – 20 million individuals – visit at least once per month

• 76% tend to visit their favourite coffee shop vs. 74% in 2005, strengthening brand loyalty

• Location is the main factor influencing a consumer’s choice of a given coffee shop/sandwich shop, at 63% in 2007 vs. 67% in 2005

• Atmosphere has grown in importance as a key influencing factor for UK coffee shop visitors

• Sandwiches are purchased on a regular basis by 50% of coffee shop visitors

• Take-away is more important than in the past 12-18 months according to 38% of visitors

• Brand awareness of coffee and sandwich bar brands is high and growing

• Allegra’s national telephone sample indicated brand awareness of 10.9 brands on average across the UK, revealing how far branded chains have penetrated the UK consumer mindset

• Only 12% of adults UK rank an independent coffee shop as their favourite

• Pret A Manger leads in the food-focused segment with leadership in food quality and service

• Caffè Nero ranks highest among high street chains on overall key success factors

• 24% of the UK adult population or approximately 11 million consumers visit coffee shop at least once per week. 47% of UK adults – 20 million individuals – visit at least once per month

• 76% tend to visit their favourite coffee shop vs. 74% in 2005, strengthening brand loyalty

• Location is the main factor influencing a consumer’s choice of a given coffee shop/sandwich shop, at 63% in 2007 vs. 67% in 2005

• Atmosphere has grown in importance as a key influencing factor for UK coffee shop visitors

• Sandwiches are purchased on a regular basis by 50% of coffee shop visitors

• Take-away is more important than in the past 12-18 months according to 38% of visitors

• Brand awareness of coffee and sandwich bar brands is high and growing

• Allegra’s national telephone sample indicated brand awareness of 10.9 brands on average across the UK, revealing how far branded chains have penetrated the UK consumer mindset

• Only 12% of adults UK rank an independent coffee shop as their favourite

• Pret A Manger leads in the food-focused segment with leadership in food quality and service

• Caffè Nero ranks highest among high street chains on overall key success factors

COFFEE SHOP CONSUMER RESEARCH OVERVIEW

Page 32: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

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According to Allegra’s national telephone sample, 24% of the UK adult population, approximately 11 million individuals, visit coffee shops at least once per week.

47% of the adult population, more than 20 million consumers, visit coffee shops at least once per month.

23.5%

8.1%

15.5%

9.3%

43.6%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Once a week Once a fortnight Once a month Less than once a month Very rarely / never

FREQUENCY OF VISITS [CONSUMER TELEPHONE INTERVIEWS]Response to Question: In general, how often do you visit coffee shops? Percentage of Respondents

Source: Allegra Strategies Household Telephone Interviews & Analysis, April 2007

Source: Allegra Strategies Household Telephone Interviews and Analysis, April 2007

Page 33: The UK Sandwich Market Presentation by JEFFREY YOUNG Allegra Strategies 10am

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25% of coffee shop visitors frequently purchase food items within coffee bars.

A further 47% of customers occasionally make food purchases in coffee shops.

Only 16.5% of customers never buy food in coffee shops.

FREQUENCY OF FOOD PURCHASED IN COFFEE SHOPS [COFFEE SHOP INTERVIEWS]Response to Question: Do you normally purchase food with your drink in coffee shops? Percentage of Respondents

25.1%

11.2%

16.5%

47.3%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Often Sometimes Rarely Never

Source: Allegra Strategies Coffee Shop Interviews & Analysis, April 2007

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1. Background on Allegra Strategies

2. Consumer Food Mega-Trends

3. Market Landscape

4. Case Study: Branded Coffee Chain Segment

5. Future Sandwich Market Developments

6. Q&A

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Allegra’s national research highlights themes of healthy eating, local origin of products and exploring new tastes to be important on-going and future trends.Despite trends to premiumisation, value-for-money will continue to be important.

UK CONSUMERS’ EXPECTED FUTURE CONCERNS AND INTERESTS [NATIONAL FOOD BUYING RESEARCH]In the years to come, what will you be generally more focused on?Percentage

Note: Multiple responses; answers were prompted and randomised when askedSource: Allegra Strategies National Food Buying Behaviour Interviews and Analysis, 2006

69.8%

43.8%

34.1% 33.3%30.8%

21.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Healthy eating Greater value-for-money

Local origin of products Exploring new tastes Food safety Ethical consumption

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Allegra’s Food Strategy Forum has examined the corporate competencies required to lead in the rapidly evolving Food & Beverage sector.

Low Importance

Declining Importance

Rising Importance

High Importance

Brand Authenticity

Product Freshness

Customer Experience

Cost-efficiency

Customised Choice

Multi-reach

Premium Provenance

Talent Management

Collaborative Mindset

Capacity to Innovate

Flexible Operations

Price Competitiveness

Traditional Working Practices

Production Volumes

EMERGING FRONTIER OF CRITICAL CORPORATE COMPETENCIES

Pre-defined Production Runs

COMPETITIVE FRONTIER

ILLUSTRATIVE

Ethical Values

Service Excellence

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• Eating out more

• More informed

• More aware of ‘food culture’

• More demanding in terms of quality and service

• Busier and more mobile

• More informal

• More adventurous

• Variety-driven

• Complex set of value expectations

FUTURE CONSUMER BEHAVIOUR

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• Healthier

• Tasty and flavoursome

• Fresh and Natural

• Wider variety and more exotic fillings (incl. Ethnic)

• Artisanal breads

• Local provenance

• Premium

• Convenience

• Organics

• Smaller portions

• Priced to reflect segmentation

FUTURE PRODUCT DEVELOPMENTS

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• More diverse:

• Foodservice

• Traditional Retail and Convenience formats

• Widening set of non-food players

• Independent sandwich bars

• Workplace

• More sophisticated, more segmented

• Great emphasis on branded chain concepts

• Increased competition

• Sandwiches increasingly competing against other products for shelf space

• In the short-term, more cost-driven due to food price rises

FUTURE ROUTES TO MARKET

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• Innovative packaging

• Authentic

• Ethical

• Informative

• Honest

• Convenient

• Communicate a compelling story

• Deliver consumer 'Experience'

FUTURE WINNING BRAND CREDENTIALS

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1. Background on Allegra Strategies

2. Consumer Food Mega-Trends

3. Market Landscape

4. Case Study: Branded Coffee Chain Segment

5. Future Sandwich Market Developments

6. Q&A