OVERVIEW OF THE UNITED KINGDOM MARKET November, 2000 CORIOLIS RESEARCH UK Market The nature of British consumers is undergoing fundamental changes – I. In the United Kingdom, a large number of demographic clichés are true – II. The UK is rapidly developing into a post-industrial economy – III. Meat and three vege are being replaced with Tandori chicken and mangoes – IV. Food retailing, especially by supermarkets, is highly competitive forcing the various chains to differentiate themselves by targeting specific customers Overview of the United Kingdom © Coriolis Research I - 1 UK Market There has been a fundamental shift in the characteristics of the UK consumer FUNDAMENTAL CHANGES IN THE CONSUMER 1950s 2000 Nuclear family Singles, Smaller households Young mothers Children later in life Women at home keeping house Women in the work force Food at home Restaurant/cafe culture Meat and three vegetables Vegetarians Pie and a pint Healthy living Industrial nation London-based service economy Rising middle class Rich getting richer Monoculture Multicultural Local Global Overview of the United Kingdom © Coriolis Research I - 2 UK Market I. In the United Kingdom, a large number of demographic clichés are true – The United Kingdom is a highly urbanised country centered around multicultural London – The United Kingdom has a low growth, rapidly aging population – The structure of households is changing Overview of the United Kingdom © Coriolis Research I - 3 UK Market The United Kingdom is a highly urbanised country centered around multicultural London – Almost 90% of the population live in urban areas – Over 30% of the population lives in Greater London and the South East – The cities are more multicultural than the rest of the country Overview of the United Kingdom © Coriolis Research I - 4 UK Market Almost 90% of the population live in urban areas URBANISATION (Population Millions; 1950-2000) Population CAGR (50-00) 59.1 0.3% 57.8 55.8 56.5 6.3 (0.5%) 52.5 6.4 50.8 6.5 6.4 7.6 Rural 8.1 51.4 52.7 0.4% 49.3 50.1 44.9 Urban 42.7 1950 1960 1970 1980 1990 2000 Source: FAO Overview of the United Kingdom © Coriolis Research I - 5 UK Market Over 30% of the population lives in Greater London and the South East REGIONAL POPULATIONS (Millions, 1998) Scotland 5.2 Northern Ireland 1.7 North 3.0 Yorkshire/ North West 5.3Humber 6.9 East Midlands 3.5 West Midlands East 2.3 2.7 5.3 Wales 7.6 5.0 10.3 London South East South West Source: UN Overview of the United Kingdom © Coriolis Research I - 6 UK Market The cities are more multicultural than the rest of the country ETHNIC GROUPS IN THE UK (1998) UNITED KINGDOM INNER LONDON Other Indian Other Black 2.1% 3.3% Indian 5.1% 1.6% 7.0% Black 13.5% White 74.4% White 93.0% Source: UK Office of National Statistics (ONS) Overview of the United Kingdom © Coriolis Research I - 7 UK Market The United Kingdom has a low growth, rapidly aging population – The UK has had very low population growth in the last 40 years – Young women have dramatically increased their participation in the labour force... leading to women having fewer children at an older age – Declining birth rates have led to a rapidly aging population, 15.7% of the population is over 65 years Overview of the United Kingdom © Coriolis Research I - 8 UK Market The UK has had very low population growth in the last 40 years SELECTED COUNTRIES POPULATION GROWTH RATES (Annual growth rate; 1961-1999) Malaysia 2.54% Brazil 2.15% India 2.10% New Zealand 1.21% USA 1.00% Japan 0.76% France 0.64% Finland 0.39% UK 0.29% Source: FAO Overview of the United Kingdom © Coriolis Research I - 9 UK Market Young women have dramatically increased their participation in the labour force... WOMEN IN THE LABOUR FORCE (% of all women; 1976-2000) % change 1976v00 65.4% Women all 5.1% 70.5% 51.3% Women 25-34 24.5% 75.8% 67.2% Women 35-44 9.9% 77.1% 66.8% Women 45-54 10.7% 77.5% 48.8% Women 55-59 4.5% 53.3% 27.2% Women 60-64 4.2% 31.4% 1976 4.6% Women 65 and over 1999 (1.0%) 3.6% Source: ONS Overview of the United Kingdom © Coriolis Research I - 10 UK Market ...leading to women having fewer children at an older age LIVE BIRTHS BY AGE OF MOTHER (per 1000 women in age group; 1999) Total Births 1981 362 130 1991 366 120 1997 345 107 105 89 87 89 75 70 39 33 32 28 30 22 5 5 7 Under 20 20-24 25-29 30-34 35-39 40 + Source: ONS Overview of the United Kingdom © Coriolis Research I - 11 UK Market Declining birth rates have led to a rapidly aging population, 15.7% of the population is over 65 years POPULATION BY AGE 14.0 (Millions; 1961-1998) 1961 12.4 12.1 1998 12.0 10.0 9.2 8.5 8.0 7.8 7.1 7.1 7.3 6.5 6.6 6.1 5.9 6.0 5.0 4.3 4.0 4.0 2.2 2.0 0.0 Under 16 16-24 25-34 35-44 45-54 55-64 65-74 75 and over Source: ONS Overview of the United Kingdom © Coriolis Research I - 12 UK Market The structure of households is changing – Nuclear families (couples with children) have fallen from 50% to less than 30% – The size of the average household is falling Overview of the United Kingdom © Coriolis Research I - 13 UK Market Nuclear families (couples with children) have fallen from 50% to less than 30% STRUCTURE OF UK HOUSEHOLDS Absolute Change (% of households) of Households 61v99 16.3 Million 18.6 Million 20.2 Million 22.4 Million 24.0 Million 7.7 M Single Household/ 16.2% Flatmates 22.0% 26.5% 29.4% 30.7% 14.5% Couple no Children 26.3% 27.0% 25.5% 27.5% Lone Parent 6.1% 29.7% 3.4% 7.0% 8.8% 9.8% 9.9% 3.8% Couple with Children 51.5% 44.0% 39.2% 33.3% 29.7% (21.8)% 1961 1971 1981 1991 1999 Source: ONS Overview of the United Kingdom © Coriolis Research I - 14 UK Market The size of the average household is falling POPULATION CHARACTERISTICS OVER TIME (1951-1996) POPULATION AND HOUSEHOLDS PEOPLE PER HOUSEHOLD (Millions) CAGR 1951-96 Population 3.4 57.14 0.3% 56.21 3.2 54.39 54.81 51.38 3.0 2.8 CAGR 48.93 1951-96 2.5 2.4 (0.7%) Households 1.1% 22.4 23.49 18.32 19.49 16.19 14.49 1951 1961 1971 1981 1991 1996 1951 1961 1971 1981 1991 1996 Source: ONS Overview of the United Kingdom © Coriolis Research I - 15 UK Market II. The UK is rapidly developing into a post-industrial economy – The economy is now based on services instead of manufacturing – The UK has a healthy middle class – However the class struggle remains Overview of the United Kingdom © Coriolis Research I - 16 UK Market The economy is now based on services instead of manufacturing – The UK has seen a decline in manufacturing employment and an increase in services – Services now account for more than two thirds of GDP - manufacturing and agriculture is less than 20% – Just under half of the population is employed or looking for work Overview of the United Kingdom © Coriolis Research I - 17 UK Market The UK has seen a decline in manufacturing employment and an increase in services EMPLOYMENT BY INDUSTRY (Millions; 1978 vs. 2000) 5.0 1978 Public Administration 5.9 2000 4.4 Distribution, Hospitality 5.5 2.5 Finance 4.5 6.8 Manufacturing 4.0 1.5 Transport, Communication 1.5 1.4 Construction 1.2 0.9 Other Services 1.2 0.4 Agriculture 0.3 0.7 Energy 0.2 Source: ONS Overview of the United Kingdom © Coriolis Research I - 18 UK Market Services now account for more than two thirds of GDP - manufacturing and agriculture is less than 20% GDP BY SECTOR (1997) Agriculture Manufacturing & 1.1% Construction 18.7% Government 11.3% Services 68.9% Source: CIA World Fact Book Overview of the United Kingdom © Coriolis Research I - 19 UK Market Just under half of the population is employed or looking for work EMPLOYMENT STATUS (Percent; 1998) Economically Inactive 13.2% Over 65 15.7% Employed 46.7% Under 16 21.3% Unemployed 3.0% TOTAL POPULATION = 59.1 Million Source: ONS Overview of the United Kingdom © Coriolis Research I - 20 UK Market The UK has a healthy middle class – Over 50% of households are defined as middle class – Real incomes are rising – Almost three quarters of households own their home Overview of the United Kingdom © Coriolis Research I - 21 UK Market Over 50% of households are defined as middle class HOUSEHOLDS BY SOCIAL CLASS1 (Households by income-defined social class; 1998) A Pensioners 7.1% 11.4% E2 12.1% B 25.8% 52.7% E1 10.0% D 6.7% C 26.9% 1. Gross weekly income by head of household, one or more earners A= £640+, B= £640-£330, C= £330-£160, D= under £160; Households without an earner E1= £160+, E2= Under £160; Pensioners Source: MAFF, National Food Survey Overview of the United Kingdom © Coriolis Research I - 22 UK Market Real incomes are rising REAL AVERAGE HOUSEHOLD DISPOSABLE INCOME (Pounds per week; 1988-1998) CAGR 88-98 £371 4.8% £343 £325 £307 £300 £298 £288 £280 £252 £258 £233 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Source: Family Expenditure Survey Overview of the United Kingdom © Coriolis Research I - 23 UK Market Almost three quarters of households own their home OWNERSHIP OF DWELLING (Percent of households; 1998) Council 20.0% Own Outright 28.3% Rented 8.5% 71.5% Own with Mortgage 43.2% TOTAL HOUSEHOLDS = 24 Million Source: ONS Overview of the United Kingdom © Coriolis Research I - 24 UK Market However the class struggle remains – The rich are getting richer must faster than the poor are getting richer – Regional differences remain; wealth and income is still concentrated around London and the south Overview of the United Kingdom © Coriolis Research I - 25 UK Market The rich are getting richer must faster than the poor are getting richer DISTRIBUTION OF REAL HOUSEHOLD DISPOSABLE INCOME (Pounds per week per capita; 1971-1997) Income 600 CAGR 71-97 90th Percentile 2.2% 500 400 75th Percentile 2.0% 300 Median 1.6% 200 25th Percentile 1.3% 10th Percentile 1.3% 100 0 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 Source: Institute for Fiscal Studies, 1999 Overview of the United Kingdom © Coriolis Research I - 26 UK Market Regional differences remain; wealth and income is still concentrated around London and the south UK INCOME DISTRIBUTION BY REGION (Household gross income; Pounds per week per capita; 1998) £350- 400 £401- 450 £451- 500 Scotland £501- 550 Northern Ireland North Yorkshire/ North West Humber East Midlands West Midlands East Wales London South East South West Source: ONS, Coriolis Analysis Overview of the United Kingdom © Coriolis Research I - 27 UK Market III.