Many key markets are characterised
by maturity and saturation in terms of volume sales, with long-established markets
for pasta in Italy and noodles in Japan.

Competition from rival
ready meals is undermining demand for pasta products.

A trend towards traditional,
natural products and added-value ranges has been apparent, as manufacturers
attempt to gain advantage through niche marketing.

Markets are characterised
by polarisation, as private label penetration expands alongside advances in
premium quality pasta products.

There has been increasing
demand for authentic ethnic dishes and a willingness to trade up to premium
purchases.

The dried sector dominates
due to the products’ versatility, longer shelf life and low prices.

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Chilled products remain
a nascent growth sector in many markets, attracting higher unit prices and margins,
and offering considerable scope for development.

New product innovation
is focusing on new flavours, fillings and packaging.

Concentration and fragmentation
exist in equal measure as manufacturers focus on either pasta or noodles, although
umbrella branding is increasingly common.

Wider availability of pasta
and noodles in large-scale grocers has benefited the market significantly, with
products positioned alongside sauces to encourage multiple purchases.

Private label penetration
has reached a level in some markets where new product development is spurred
by private label manufacturers, as evinced in the UK, where private label sales
reached 47% of total value sales in 1999.

Pasta Products by Volume

The Italian market, at
1,315,000 tonnes in 1999, was the largest of the seven key markets for pasta
products, approaching 350,000 tonnes larger than the second-placed Japanese
markets. In terms of per capita consumption, the popularity of pasta products
in Italy was more evident still in 1999, when Italians consumed almost 23kg
per head, some three times that of Japanese consumers.

Only two of the seven key
markets recorded double-digit volume growth over the period 1995-1999, respectively
41% and 15% in the UK and Germany. The saturated nature of a number of pasta
products markets is reflected in the contraction in volume terms evident over
the review period, with consumption falling by some 14% in the US, and by 1.1%
in Italy.

For much of French society,
pasta is accepted as a basic foodstuff and eaten regularly. This is evident
from French consumer surveys that claim over 50% of all French households eat
pasta several times a week, with a further 37% eating the product at least once
a week. As in other Western nations, the French population has become increasingly
health conscious, and this has been taken advantage of by chilled pasta manufacturers,
which market their products as a healthier alternative to a traditional meal.
Furthermore, the increasing convenience of pasta, with many quick-cook varieties
entering the market, and the development of noodles also bolstered its marketability.

Growth in Germany over the
review period was underpinned by several factors. The most important of these
was the change in the way consumers in general perceived pasta products. Prior
to the review period, they were seen to be relatively cheap and unimportant
side-dishes. However, through the use of advertising and the efforts of industry
organisations, such as the Bundesverband der Deutschen Teigwarenindustrie eV
(German Pasta Association), manufacturers successfully marketed pasta products
as a central part of an average diet. In line with a general trend towards healthier
eating, such products gained from being marketed as having a high nutritional
value, and also being tasty and convenient. Pasta in particular found increased
appeal through the growth in the range of pasta sauces available.

Demand for pasta in Italy
fell over most of the review period, due to the saturated nature of the market
and competition from other types of food. The only exception to this trend was
in 1996 when, in an effort to compete more directly against private label, companies,
spearheaded by Barilla, cut the prices of their branded products. As a result,
volume sales recovered slightly in 1996, with consumers taking advantage of
the price war, but the erosion of value sales continued.

The Japanese pasta and
noodles market was characterised by opposing trends during the review period.
While retail volume sales of noodles fell from 1996 onwards, demand for pasta
rose throughout the review period. Pasta sales benefited from an Italian food
boom, which was fuelled by media interest in Italian cooking both at home and
in restaurants. As Italian food became more fashionable during the review period
manufacturers responded by launching new products, leading to a rise in pasta
sales.

The Spanish market for
pasta products peaked in volume terms in 1996, as manufacturers attempted to
find ways to limit the penetration of private label and sales of low-priced,
generic products. Some companies reduced the prices of their products in order
to stimulate demand. Other companies continued to follow trends set during the
initial part of the 1990s, introducing new premium varieties of pasta.

Factors such as the increasing
number of people travelling abroad, the plethora of food-oriented television
shows and the accessibility of Italian and other ethnic restaurants have all
given the UK consumer greater exposure to foreign foods. This has helped to
stimulate demand amongst consumers for greater authenticity of ingredients in
pasta products, driving strong volume growth of 41% over the review period.

Falling consumer demand
for dried pasta in the US, combined with a consumer preference for eating outside
the home or purchasing home “meal solutions”, resulted in a fall in pasta products
retail sales. The pasta products industry was also encumbered with a sharp rise
in durum semolina prices over the period, due to crop disease. The subsequent
reduction in promotional spending by major pasta manufacturers was an indication
of the tight profit margins in the budget-orientated dried pasta products sector.
Other key factors influencing the decline in volume sales of pasta products
included the rise in popularity of protein diets, with consumers preferring
meat and fish products to carbohydrates such as pasta. However, the growth of
the American Asian population and the increasing number of non-Asians familiar
with noodles helped limit volume declines.

Volume Sales of Pasta
Products by Country 1995-1999

Source: Euromonitor Market
Direction

Pasta Products by Sector
– Volume and Value

Dried constituted the larger
sector of the pasta products market in volume terms in all seven key markets
in 1999, with shares ranging from 86% in the UK to 98% in both Spain and the
US.

Dried also constituted
the larger sector of the pasta products market in value terms in all seven key
markets, with shares ranging from 69% in Italy to 94% in both Japan and the
US in 1999. The chilled sector is more prominent in value terms due to the value-added
nature and higher average unit prices of chilled pasta and noodles.

Dried pasta products continue
to enjoy healthy demand, with their longer shelf life and lower pricing enabling
bulk purchases. The fact that packs can be resealed and stored for future use
without a significant loss in quality are the overriding factors in its favour.

Many factors contribute
to the Spanish preference for dried pasta, but undoubtedly the most important
one is price. Spanish consumers perceive pasta as a commodity product and as
such they expect to pay reasonably low retail prices. This, combined with the
fact that pasta is not a traditional Spanish dish, and is not well established
as a meal in its own right, lies behind the lack of interest in premium varieties.
Whereas for Italians chilled pasta means higher quality, for Spaniards it is
merely a more expensive product with no extra added-value besides its freshness,
which is still not a good enough reason for them to purchase the product on
a regular basis.

Innovation was most apparent
in the chilled sector, and particularly among private label products, in the
form of new product launches, with greater variety in shapes and flavours in
filled pastas. The speed with which chilled pasta products can be cooked was
a further boost to demand. Offers of larger packaging formats, often on promotion
at the same price as before, also sparked consumer interest.

The dried sector is dominated
by pasta products in most key markets, with the notable exception of Japan,
where traditional noodles, particularly instant formats, are the dominant type.
Whilst pasta outsells noodles in the UK in volume terms, the higher average
unit prices of the latter gave noodles the edge in value terms in 1999.

In Italy, the dried sector
segments between unfilled and filled products, with the former characterised
as a classic Italian food and taking the bulk of volume and value sales in 1999.
Unfilled sales have been underpinned by innovative new shapes and flavours.
Plain pasta was similarly sector leader in Spain, ahead of egg and spinach compuesta,
although the latter was characterised by greater innovation and novelty.

The relative underdevelopment
of the chilled sector contributes to the considerable differences in sector
segmentation throughout the seven key markets. In France and Germany, unfilled
or plain pasta dominates the chilled sector, ahead of stuffed or filled varieties.
By contrast, in Italy filled products overtook unfilled products in 1997, and
the higher average unit prices attracted by the former added to the subsector’s
lead. Chilled stuffed products also dominate sales in Spain due to effective
advertising, positioning the products as meals in their own right.

In Japan, chilled noodles
far outsell chilled pasta in both volume and value terms as they are used in
a wide range of relatively inexpensive traditional meals. Chilled pasta therefore

remains a niche product. Pasta, on the other hand, forms the leading subsector
in the chilled sector in the UK and the US, almost exclusively in the latter,
as noodles have yet to make inroads into the US market. Chilled pasta attracts
premium prices, justified by perceptions of quality and freshness. Furthermore,
the product offers high margins to manufacturers and retailers alike.

Volume Sales of Pasta
Products by Sector and by Country: % Analysis 1999

Source: Euromonitor Market
Direction
Note: Figures may not sum due to rounding

Pasta Products – Trends
to Watch

Rival foods such as ready
meals will continue to constrain sales of pasta products.

Tradition will continue
to play a significant role in this market, with long-established demand for
pasta in Italy and noodles in Japan.

Continued exposure to foreign
foods through travel and restaurants will drive volume and value sales in the
pasta products market.

An expansion of the consumer
base may be achieved by more specific targeting of user groups, such as teenagers
and young women.

Faced with stagnant volume
sales in many key markets, manufacturers will continue to develop added-value
products to grow market value.

The market is likely to
be characterised by further polarisation as rising private label penetration
contrasts with growing sales of premium quality brands.

Versatility, long shelf
life and low price should maintain the dominance of the dried format in the
pasta and noodles products market.

Relatively low penetration
offers chilled products the greater scope for expansion and development.

Trends towards healthy,
convenience foods should underpin demand for fresh pasta and noodles, where
these subsectors remain in their infancy.

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