This document summarizes the impact of the 2013 horse meat scandal on the UK meat industry. It discusses how the complex and opaque meat supply chain led to a loss of traceability. The scandal significantly reduced meat sales and consumer trust at first. However, sales began recovering after a month as the government stated it was not a health risk. Retailers took a major hit to reputation and costs. The document recommends strategies like improved communications and digital branding to help rebuild consumer trust and support category recovery.

1. Copyright ©2012 The Nielsen Company. Confidential and proprietary.
By Patricio M. Hidalgo
The Silent Crises Broadcasted
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2. Copyright ©2012 The Nielsen Company. Confidential and proprietary.
Industry in Brief in the UK
Historically, the UK Meat reputation held high-standards of quality and trust. The
Supply Chain was simple and transparent:
Meet
Rancher Abattoir Retailers
Processor
Overtime, the rise of cost of food has put pressure on retailers and processors to
find cheap suppliers, not always praising quality.
Today, the UK Meat Supply Chain is complex:
Retailers
Meet
Rancher Abattoir Broker Wholesaler
Processor
Food Service
As a consequence, Meat processors and retailers lost traceability where the Meat
they purchase originated from.
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3. Copyright ©2012 The Nielsen Company. Confidential and proprietary.
Impact of Horse Meat in the Category
UK moved away from a traceable Supply Chain in search for
“Cheap Food.” Retailers and Manufacturers do not have
transparency the meat origin. This complex Supply Chain is
prone-risk.
Since the broadcasting of the crisis (Jan. 16, 2013), Meat
sales volume decreased by 54% (overtime) and 44% of
consumers felt misled by the labels. 1/3 of interviewed
consumers are less likely to purchase processed meat.
The UK government stated that “Horse Meat Scandal posts
no health risks” to avert a consumer confidence crises.
As a result, DNA testing are now required from the meat
processors and/or retailers, affecting margins on meat
ecosystem players.
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How about the Consumer?
The scandal of the Horse Meat generated an immediate consumer trust
damage and uncovered questions on Processed Meat quality standards.
As a result, sales declined in particularly on Frozen Meats, Beef Burgers and
Ready Meals and Pies. Consumers shifted to Frozen Fish (+2.7% YA), Poultry
(+7.3 % YA) and Poultry Burgers (+48.4%).
According to Richard Dodd, British Retail Consortium spokesman
(representing 85% of the UK Retail industry), stated: “ Our members tell us
that the issue is not having an impact. People are clear that it is not a health
issue, therefore not producing a change in consumer shopping habits (in the
long-term).”
From data, we can confirm that the negative trend in sales has reverted one
month after the news breaking. Positive sales are moving upward and no
major shifts on consumers behaviour overtime.
The short-term sales declined in some food lines, other categories have
benefitted, therefore, there is little net loss overall.
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2012 – 2013 Percentile E- Point of Sales Change
Frozen Meat (Beef, Prepared & Treaded Red Meat, Burgers)
Frozen Ready Meals
Frozen Pies & Sausage Rolls
20.0
10.0
0.0
-10.0
-20.0
-30.0
FROZEN BEEF
-40.0
FROZEN PREPARED TREATED RED MEAT
-50.0 FROZEN RED MEAT BURGERS
-60.0 FROZEN READY MEALS
∆12.01.2013 ∆ 26.01.13 ∆ 09.02.13 ∆23.02.13 ∆ 09.03.13 FROZEN PIES AND SAUSAGE ROLLS
∆ ∆ ∆ ∆ ∆ ∆ ∆ ∆
∆12.01. 19.01.1 26.01.1 02.02.1 09.02.1 16.02.1 ∆23.02. 02.03.1 09.03.1 16.03.1
2013 3 3 3 3 3 13 3 3 3
FROZEN BEEF -0.2 -6.6 -24.2 -34.4 -32.0 -38.3 -36.0 -34.4 -33.6 -29.6
FROZEN PREPARED TREATED RED MEAT 13.2 -5.3 -19.5 -22.8 -24.9 -34.9 -27.7 -26.4 -25.6 -26.3
FROZEN RED MEAT BURGERS 8.7 -18.2 -35.4 -37.9 -41.8 -53.1 -49.3 -47.4 -44.0 -45.5
FROZEN READY MEALS 0.2 0.3 -2.4 -5.7 -3.2 -13.5 -19.3 -19.3 -16.8 -11.9
5
FROZEN PIES AND SAUSAGE ROLLS 11.0 14.8 4.7 -3.6 0.8 -7.3 -4.3 0.2 3.6 5.5

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How about the Retailers?
The “Testing Regime” is being implemented and becoming the norm, with quarterly
reporting to the Food Standards UK Agency.
A new costs represent £1 – 1.8 Million per year to assure Meat quality
Due to the Horse Meat scandal, Tesco lost for the first time in history, 30% of its
market share (according to Interbrand) creating an reputation issue that will need to
be rebuilt overtime.
Data shows that overall Retailer KPI’s were affected in the short-term with declines
on:
• Expenditures (-43.6%)
• Sales Volume (-54%)
• Average of Purchase Weight (-11.7%) – a key performer indicator in FMCG shares
• Amongst others (Penetration -36.1%, Frequency – 8.8% and Trip Spent -3.2%)
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Our View for Beefy Burt’s
After one month of the news breaking, a positive trend can be seen on Frozen Burgers
(-49.3% end of Feb. to -45.5% mid-March).
However, Frozen Beef and Meat Burger categories are taking longer to show signs of
recovery on the last term (Beef end of Feb. -24.2% to mid-March -29.6% and Meat
Burgers -35.4% end of Feb to mid-March -45.5%).
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Recommendations
In order to address transparency, traceability and trust issues with both
consumers and costumers, I recommend:
• Trade Communications
• Consumer Communications
• Digital Brand Campaign – not an advertising message nor a theatrical
add featuring bucolic scenes, instead a genuine representation of the
sourcing of BB meat.
These tactics are effective in the short-term and will address the slow
down of Frozen Beef and Meat Burgers sales and turn it around.
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9. Copyright ©2012 The Nielsen Company. Confidential and proprietary.
2013 – 2012 FROZEN MEAT & MEALS – Vol. Sales
60,000,000
60,000,000
50,000,000
50,000,000
40,000,000
40,000,000
30,000,000
30,000,000
20,000,000 20,000,000
10,000,000 10,000,000
0
0 WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE
12.01.13 12.01.12 19.01.13 19.01.12 26.01.13 26.01.12 02.02.13 02.02.12 09.02.13 09.02.12 16.02.13 16.02.12 23.02.13 23.02.12 02.03.13 02.03.12 09.03.13 09.03.12 16.03.13 16.03.12
WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE WE
1 .1
2.01 3 1 .1
2.01 2 1 .1
9.01 3 1 .1
9.01 2 26.01 3 26.01 2 02.02.1 02.02.1 09.02.1 09.02.1 1
.1 .1 3 2 3 2 6.02.1 1
3 6.02.1 23.02.1 23.02.1 02.03.1 02.03.1 09.03.1 09.03.1 1
2 3 2 3 2 3 2 6.03.1 1
3 6.03.12
FROZEN BEEF FROZEN LAMB FROZEN PORK FROZEN SAUSAGES
FROZEN BEEF FROZEN LAMB
FROZEN PREPARED TREATED RED MEAT FROZEN RED MEAT BURGERSFROZEN PORK FRZ RED/PORK OFFAL STANDARD FROZENFROZEN FISH
SAUSAGES
FROZEN POULTRY FROZEN POULTRY BURGERS FROZEN MEAT FREE FROZEN PIZZA & BREAD 9
FROZEN PREPARED TREATED RED MEAT MEALS
FROZEN READY FROZEN RED MEAT BURGERS PIES AND SAUSAGEFRZ RED/PORK OFFAL STANDARD
FROZEN ROLLS FROZEN FISH