Horsemeat scandal not in last furlong

How much has the scandal damaged consumer trust in supermarkets? Is the relationship salvageable? What is the long term impact on consumer choice? 

Horsemeat scandal not in last furlong

The full story of the horsemeat scandal and the subsequent emergence of widespread cross-contamination in meat products have yet to fully emerge.  Consumers have reacted angrily; switching to what they think are 'safe' products.  MPs are finger-pointing at the retailers and the big 4 are uniting to restore consumer faith.  However the story unfolds, it is clear that consumer attitudes and shopping patterns have and will change dramatically, possibly permanently. As consumer trust continues to nose-dive, we're left contemplating the impact on the retail landscape.  

Ready prepared meals is a massive sector in both retail and food service. Meal solutions and specifically chilled and frozen 'ready meals' are worth approximately £2 billion to the retail industry, with approximately 80% of that value coming from chilled meals.  The scandal has largely centred on frozen ready meals and to date, with cases of contamination in chilled products emerging more slowly.  However, many consumers are not making the distinction between chilled and frozen meals, choosing to abandon the category as a whole.  All the research (including what we're hearing from consumers and retailers) is pointing to a 50% decrease in the purchase of processed meals containing red meat in the last two weeks - but where is this spend going?

Consumers switching from processed meals to prime cuts

According to a recent poll, only 5% of consumers will turn their back on meat completely with around 20% claiming they will substitute ready meals with more 'fresh meat' - thus suggesting a big increase in "scratch" cooking: an already growing consumer cooking trend. The clear winners here are butchers. Of the big retailers, Morrison's was the first to step forward and claim relative immunity from the scandal due to its business model of owning or working directly with farms. As a result, sales at its fresh meat counter have jumped by almost 18% since the scandal broke - with emphasis on more expensive cuts.

A move away from budget meat

Around a third of consumers claim they will no longer buy from economy ranges or from brands linked to the scandal.  How this will impact the market is illustrated in the graph below: some consumers will spend more on premium and standard-plus ranges as well as look for verification of UK provenance.

However, trading up is only possible for those that can afford to do so.  Meat purchases make up 14% of the UK shopping basket and with food prices, in real-terms, at their highest levels since 2007, switching to more premium products is not a universal option. Inevitably, low-income consumers' will continue to shop amongst the economy ranges, ensuring that category sales in this area continue, even if depleted.

Ready Meals

Who's next in the firing line?

Clearly, the retailers have hard work ahead of them, and they've already started the job.  So far the government has taken the high ground and the first results are in from the FSA-instigated tests, with evidence of horsemeat DNA being found in school meals. Add this to an earlier report on contamination of hospital food products in Northern Ireland, and it feels like the heat is going to be turned up on public sector services, and in turn, the government and local authorities. And the latest discovery of contamination of Nestle processed meals in France and Italy demonstrates the international scale of the problem. And setting to one side the issue of horsemeat, Waitrose's withdrawal of its "beef" meatballs because traces of pork had been found is likely to ring all sorts of alarm bells amongst religious groups.

Whilst all this mud-slinging continues, it begs the question; who is listening to the consumer?   

Final thought - anticipating and responding to consumer concerns is key

Consumers are telling us they are outraged, they feel misguided by brands, neglected by the government, they want answers, action (labelling and legislation), and they want to make informed choices.  It's clear that whatever the outcome, anticipating consumer reactions will be key to winning back consumer confidence.

We'll keep monitoring this issue and will continue to share our findings with you.


Research and insight specialists to the food and drink sector