Executive Summary

Key Note estimates the UK market for food ingredients to have been worth £626m at manufacturers' selling prices (msp) in 1995, a 9.4% increase on 1991. In real terms, however, growth has been more elusive, with the market only rising by 1%.

The report focuses on the supply of flavourings and ingredients to food manufacturers. The major product groups are emulsifiers and stabilisers, flavours, yeast and enzymes, acidulants, colours and sweeteners.

The health of the ingredients industry is closely linked to that of the overall food industry. While people are eating more processed and convenience foods than ever before, the prices paid have remained low. The early 1990s was a time of recession, and since then, supermarkets have embarked on a price war which has squeezed manufacturers and their suppliers, including the food ingredients industry.

Factors influencing the wider food market have repercussions for the ingredients industry. The increasing number of working women, for example, has given a boost to convenience foods of all kinds, as women now have less time to shop and prepare meals for the family. Indeed, family-based households are in decline, with 27% of households now containing only one person; for these people too, convenience foods are simpler than cooking for one.

As part of its drive to reduce levels of heart disease, the Government has set out healthy-eating guidelines. Manufacturers have reacted by creating low-fat versions of standard ranges, or reducing the levels of salt and sugar in their food and drinks. Growth in prepared ethnic dishes has benefited the flavours market, while more healthy foods have used an increasing amount of intense sweeteners and cereal products as bulking agents and fat replacers.

During 1996, the industry will need to adapt to the impact of several European Directives which have been enacted in British law and which took affect from the start of the year. These Directives cover colours, sweeteners and other miscellaneous food additives. In each category, permitted lists have been drawn up, along with maximum levels allowed for use.

Future food trends are likely to see more health foods and vegetarian foods. Functional foods -- those with added ingredients to promote particular health benefits -- could be a major new market in the second half of the 1990s.

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