The sandwich is the ultimate convenience food and a thriving manufacturing and retail industry has developed around it. Exhibiting strong and consistent growth of between 7 and 8% per annum, the UK commercial sandwiches market is now worth an estimated £3.3 billion with pre-packed products accounting for about 60% of the total.
With over 2 billion commercially produced sandwiches consumed each year, the UK boasts the highest per capita consumption in the world. Sandwiches are ideally suited to modern lifestyles and the growing trend towards snacking, eating on the hoof and for convenient, ready-to-eat food products. The growth in eating outside the home and of buying a sandwich to eat at work during the lunch break have further fuelled sandwich consumption, and about half of the population in Britain now buy sandwiches at least twice a week.
The average commercially prepared sandwich in Britain costs £1.51p and the price is rising as consumers show a willingness to trade-up and to try more exotic, and more expensive fillings, which in turn continues to drive overall market sales value ahead of volume growth. In addition to being more adventurous in taste regarding sandwich fillings, consumers are also demanding a greater choice of breads, reflecting the growing popularity of speciality breads within the total UK bread market. Over a hundred different varieties of commercially produced sandwiches are currently available, featuring different types of breads ranging from traditional white and brown sliced bread, rolls, wedges, bagels, baguettes, pittas and wraps.
Original Convenience Food
The sandwich has come a long way since being invented by the fourth Earl of Sandwich over two hundred years ago. Indeed, the sandwich was the original convenience food as it enabled the fourth Earl of Sandwich to continue to pursue his passion for gambling, without having to leave the gaming table to take meals. However, the development of the sandwich into a £3.3 billion commercial business has been a recent phenomenon in Britain.
Technological Revolution
New manufacturing and packaging technology has been crucial in the dramatic growth of the commercially prepared sandwiches market. Packaging innovation has and continues to aid sales through extending product shelf-life and providing greater convenience to the consumer. Extended shelf life has meant that sandwiches can be produced centrally and distributed over long distances to various retail outlets. Developments in manufacturing technology have improved the quality of mass produced sandwiches and facilitated large volume production at minimal unit costs.
Sandwich manufacturing is becoming increasingly automated, reducing staffing levels and consequently improving cost efficiency. Equally important, manufacturing technology has also aided new product development in terms of new fillings and the types of bread which can be incorporated into mass produced sandwiches.
Sandwiches now constitute the largest sector within the UK fast food market, well ahead of burgers, fish and chips and pizza. Sandwiches are readily accessible to consumers through a host of different outlets ranging from works canteens, to major multiple retailers, cafe and snack bars, convenience stores, garage forecourts, retail bakeries and pubs.
Retail Sandwich Market
The retail sandwich market in the UK was pioneered by Marks & Spencer, which is still the market leader although the other major multiples have been steadily making up lost ground. Having first introduced sandwiches at its Croydon store in 1980, Marks & Spencer sold its two billionth sandwich last year, and now carries over 80 different types of sandwiches within its portfolio. Other leading sandwich retailers include Sainsbury, Tesco, Boots, Safeway, Asda and Shell. The retail sandwich market is dominated by retailer own label products, which account for over 80% of sales, although manufacturers’ brands such as Ginsters (produced by Walkers Bridgate Bakery) have become more prominent and are often used to distinguish premium sandwiches from mainstream products.
Emergence of Sandwich Bars
A feature of the market has been the emergence of chains of specialist branded sandwich bars such as London-based Pret a Manger and O’Briens Irish Sandwich Bars in Ireland. Developing from a single outlet in London in 1986, Pret a Manger now has 90 stores in Britain and is moving overseas with planned openings in Amsterdam and Manhattan. Currently with 70 outlets, O’Briens Irish Sandwich Bars is also developing beyond its domestic market and plans to open 75 new branches this year, including 32 in the UK.
Industry Restructuring
Due to the relatively low barrier to entry, the UK pre-packed sandwiches industry is still highly fragmented with between 500 and 600 manufacturers, but the pace of consolidation is gaining momentum. Although many of the smaller players produce between 1,000 and 100,000 sandwiches a week and serve local or regional markets, the industry is starting to become more concentrated as the large-scale national manufacturers, armed with factories capable of making over a million sandwiches a week, look to accelerate growth through acquisition. The top six sandwich manufacturers account for about 40% of all pre-packed sandwiches, leaving ample scope for future acquisition activity.
Hazlewood Foods is the largest pre-packed sandwich manufacturer not only in the UK but globally. The company claims 24% of all sandwich sales through the major retailers, a market which it values at £580 million at rsp, and also 20% of the rapidly expanding garage forecourt sector, which is worth about £100 million. Hazlewood has been instrumental in consolidating the pre-packed sandwiches industry, acquiring Breadwinner, a leading sandwich supplier to the food service sector, for £14 million in 1998.
A number of major fresh sandwich producers have changed hands during the past twelve months. Henry Telfer, a major supplier of sandwiches to Marks & Spencer, is now part of Unigate, following the latter’s acquisition of Terranova Foods (formerly part of Hillsdown Holdings) early last year. Another large sandwich producer came under new ownership last October when Heinz acquired United Biscuits’ frozen and chilled foods business, including McVitie’s Prepared Foods which supplies sandwiches exclusively to Marks & Spencer. However, Heinz may opt to dispose of this business in the future, opening the way for a trade sale and further industry consolidation.
The most recent move to greater industry concentration was Northern Foods’ recent acquisition of a 40% stake in Solway Foods. Northern Foods already produced sandwiches for Marks & Spencer through its Gunstones Bakery subsidiary.
Other leading producers of fresh sandwiches include Prize Foods, Toft Foods, St Martin Food Products, a specialist in supplying in-flight caterers as well as the retail and food service sectors, and Harry Mason, which has developed a strong presence in London and the South of England, and is about to commence production in a new factory.
Outlook
The growth in the UK sandwiches market shows no sign of abating. Sandwiches are bought usually at lunch time but opportunities exist to extend usage as the modern trend towards snacking blurs the distinction between meal times. For example, Marcs & Spencer has introduced an all-day breakfast sandwich. Innovation is expected to continue to stimulate consumer interest, and the UK commercial sandwiches market is predicted to reach sales of about £5 billion over the next decade.
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