The frozen foods sector is set to increase its share of the growing European market for gluten-free foods in key markets such as the UK during the next few years. Although its share of the lactose-free category is more modest, demand in this sector is also projected to increase as consumers seek to incorporate ever healthier foods into their diets.
Much of the recent growth within the free from foods market is coming from consumers who, while not actually suffering from a diagnosed food allergy or intolerance, are keen to eat more healthily. In the UK, for example, it is estimated that 30% of the population now buys into the gluten and wheat-free market, a figure that rises to over 50% of households.
‘Free from’ consumers
Most of the growth within the market for free from foods is being driven by the gluten-free sector. Although the number of people within Western Europe who suffer from coeliac disease (i.e. experiencing an adverse effect to gluten) remains limited, it appears that increasing numbers are switching to gluten-free foods in order to improve their diets. Some of the more common adverse reactions to gluten include bloating, abdominal pain and diarrhoea.
According to the charity Coeliac UK, only 1% of the UK population suffers from coeliac disease, although it was suggested by researchers from the University of Nottingham in May 2014 that the number of diagnosed cases has risen four-fold during the last two decades, and up to 75% of those with the disease may currently be undiagnosed. Elsewhere in Western Europe, the German Coeliac Society (DZG) boasts more than 40,000 members, whilst up to half a million Italians are believed to be gluten-intolerant.
Lactose intolerance also affects significant numbers of people across Western Europe, a fact which has led to a growth in demand for dairy alternatives such as plant-based milks. According to data from the British Nutrition Foundation, up to 5% of the UK population suffer from lactose intolerance, which equates to around 3 million people. Elsewhere, it is thought that up to 14% of Germany’s population may be lactose-intolerant to some degree at least. This would represent a potential consumer base of around 12 million people for lactose-free foods.
The prevalence of lactose intolerance is rather more apparent further south in Europe. Data from the European Food Safety Authority (EFSA) suggests that over a third (34%) of the Spanish population suffers from lactose intolerance, or close to 15 million people. Meanwhile, an estimated 70% of people in Italy’s southern regions are thought to be lactose-intolerant to some degree. The perception that lactose intolerance is more common in warmer climates is illustrated by the fact that this figure drops to around 50% for Italy’s northern-based consumers.
Market size & trends
Annual sales of gluten-free foods are worth over EUR200m in both Italy and Germany, with the former close to the EUR250m mark. The large size of the Italian market can largely be attributed to strong demand for gluten-free pasta, as might be expected given the popularity of pasta in Italy. Together with bakery goods, the pasta sector accounts for around 75% of the Italian gluten-free foods market. Meanwhile, gluten and wheat-free foods are generally widespread throughout German retail and foodservice outlets, and form a notable feature of the own-label ranges of many supermarket groups. Recent growth has been especially apparent within the pasta and bread sectors.
With sales worth an estimated GBP170m in 2013, the gluten-free sector accounts for 46.6% of the UK’s market for free-from foods, with annual growth rates hovering over the 20% mark. By the end of 2014, the sector is forecast to have broken through the GBP200m barrier. Although bakery goods such as bread, biscuits and cakes continue to account for the majority of the UK market, the share taken by the frozen foods sector continues to increase. Examples include frozen pizza, sausage rolls and Yorkshire puddings, many of which have been brought out in response to the growing consumer demand for gluten-free convenience foods and meal solutions
Considerably smaller markets for gluten-free foods exist in Spain and France. In Spain, the gluten-free foods market was worth an estimated EUR55m in 2013, with volume sales worth just under 7,000 tonnes. However, sales have increased by over 50% within the last year in both cases, indicating significant market potential. With sales worth EUR16m, the frozen foods sector accounted for 29% of the Spanish gluten-free category in 2013, trailing only bakery goods (53%). Spanish sales of frozen gluten-free pizza reached EUR4m within the last year.
In 2013, gluten-free foods accounted for just 11% of the French market for dietetic foods, equivalent to sales worth EUR28m. However, the market did increase by almost a third during this time, with sales split fairly evenly between mainstream food retailers and more specialist health food stores. Bread and pasta account for over half of the French market for gluten-free foods, with the presence of frozen products remaining extremely modest.
The UK has Western Europe’s largest market for foods positioned on a lactose-free platform, worth an estimated GBP175m in 2013. This figure has increased by 30% from levels in 2010, and the sector accounts for almost half (48%) of the total UK market for free-from foods. Much of this growth can be attributed to the growing popularity of plant-based milks, as illustrated by the success of the Alpro brand (sales of which amounted to around GBP85m during 2013).
Although fresh and UHT milks account for the bulk of the UK market, growth has been observed within other categories such as yoghurt and chilled desserts, where dairy-free products are gaining in popularity.
Another of Western Europe’s leading markets is Spain, where lactose-free varieties have performed well within the liquid milk sector. In 2013, sales of milks positioned as lactose-free were worth EUR125m, whilst consumption amounted to nearly 105 million litres. The country also has a large market for soya milk – in 2013, sales were worth 140 million litres, equivalent to EUR115m in value terms. Although the soya sector accounts for over 80% of the Spanish market for plant-based milks, it is coming under increasing pressure from oat and rice varieties, sales of which are currently worth EUR18m and EUR5m respectively.
Elsewhere, the German market for lactose-free milk rose by 14% to EUR75m in 2013, and the sector continues to account for the bulk of the country’s dairy-free category. German sales of soya milk were worth an estimated 70 million litres in 2013, whilst the country also has an expanding market for soya-based chilled desserts and spreads Meanwhile, sales of lactose-free UHT milk in Italy are worth an estimated EUR93m at present, equivalent to almost 63 million litres in volume terms. However, the Italian market for soya milk remains small and under-developed, with consumption worth less than 1 litre per capita.
Major suppliers
From a supply perspective, there is evidence that the market for free-from foods is attracting the interest of several large food groups, and is no longer the exclusive preserve of specialist manufacturers. Food retailers are also tapping into the free-from trend – for example, Mintel data indicates that up to a fifth (20%) of global new product launches in the own-label sector carry a low or no-lactose claim at present, a figure which compares with 15% for gluten-free. The free-from market (and especially the gluten-free sector) is also attracting the interest of foodservice operators, of which Domino’s Pizza and Wagamama are two notable examples.
The world market for gluten-free foods is led by Dr Schär, which is headquartered in Italy’s South Tyrol region. In addition to its Italian base, the company also operates major production facilities in Germany, the UK, Spain and the US. The company offers a wide range of gluten-free foods, which appear under one of the following brands: Schär (which is present in Europe and the US), DS (which largely competes in the UK and Italian markets), Beiker (which accounts for a leading 44% of the Spanish market for gluten-free bread), Glutafin, Glutano, Trufree and Mevalia, the latter of which specialises in the low-protein foods sector.
Dr Schär accounts for up to 40% of the European market for gluten-free foods, a figure which compares with 45% in Italy and 32% in France. In the UK, the company accounts for a leading 33% of the gluten-free frozen foods category. Its range in this area continues to widen, and now includes products such as ready meals (e.g. Lasagne), meat-based pastry products (e.g. Sausage Rolls and Cornish Style Slices), pizza, quiche, desserts (e.g. Apple Crumble) and Yorkshire Puddings.
One company which has been particularly active in the UK gluten-free bakery products sector of late is Warburton’s. The company’s gluten-free is now marketed under the Newburn Bakehouse brand, which includes bakery goods such as bread, rolls, baguettes, wraps, muffins and crackers. In recent years, Warburton’s has invested more than GBP5m into the establishment of a dedicated gluten-free bakery in Newburn. The Newburn Bakehouse brand is now the second largest within the UK gluten-free bakery goods market, and was valued at nearly GBP9m as of the end of 2013.
The current leader of the UK gluten-free bakery goods market is Genius Foods, which was first established in 2007. In 2013, the company strengthened its position with the acquisition of bakeries in Bathgate and Hull, whilst the Genius gluten-free brand has recently been launched in overseas markets such as France, the Netherlands, the United Arab Emirates (UAE) and Australia. Genius accounts for a leading 48% of the UK market for pre-packaged gluten-free bread, with sales having increased by 2.8% to GBP13m within the last year. Genius has recently teamed up with Denby Dale to extend its range with gluten-free frozen pies, which are available in Steak and Chicken & Gravy varieties.
Another European company worthy of mention is the Swedish bakery company Almondy, which has additional offices in the UK and Germany. Almondy is especially strong within the European market for gluten-free cakes, and the company is licensed to use the Crossed Grain symbol for this purpose. During the first quarter of 2014, the company’s UK range was extended with two new gluten-free frozen desserts in partnership with Mondelez International. The new desserts were Cadbury Chocolate Mouuse & Almond Cake and Philadelphia Almond Layered Cheesecake.
Although activity levels have been slightly lower within the European market for frozen lactose-free products, some varieties have been launched of late. During the middle of 2013, US manufacturer Lifeway Foods brought out frozen kefir-based desserts in the UK, which were described as a cross between a yoghurt and a smoothie. The desserts were launched in flavours such as Vanilla, Mango and Strawberry. The same year, the German ice cream market witnessed the arrival of two new lactose-free tub products. These were launched by Schwarzwaldmilch in Bourbon Vanilla and Chocolate flavours.