The rise of the ready-made meal market and cold storage in Australia
The pandemic has encouraged consumers, who had to stay and eat at home, to notice and utilise readymade meals (RMM’s) – will the tread impact real estate?
Everyone wants to come home to a warm and hearty home-cooked dinner. But having time to shop and prepare such a meal and the subsequent clean-up, often leave consumers wanting a no-fuss and fail-safe ready-made meal (RMM).
Historically, the global RMM market consisted of frozen meals. However, in recent years, precooked or pre-packaged meals have become healthier alternatives to junk food and a cheaper substitute to eating out. Currently, Asia–Pacific (APAC) accounts for 33% of the global RMM market. The region is predicted to record a compound annual growth rate (CAGR) of 5.4% from AUD $42.6 billion to AUD $55.0 billion by 2023. Similarly, the Australian market is expected to grow at a CAGR of 5.9% to AUD 1.6 billion by 2024 according to data and analytics company GlobalData.
Figure 1: Value of RMM market in Australia
Source: GlobalData & JLL Research
The industry had been growing significantly pre-COVID as a result of rapid urbanisation, higher employment and busier lifestyles. The pandemic accelerated the trend and encouraged consumers to stay and eat at home mandatorily. Online retailers such as Hellofresh, Youfoodz and Marley Spoon saw enormous demand for their products during COVID-19. HelloFresh recorded 103% (YoY) growth in order numbers and 74% (YoY) rise in active customers. While Marley Spoon recorded an increase in Australian revenue of 82% (compared to the previous corresponding period).
Traditional retailers (such as Coles, Woolworths and Aldi) have also been quick to offer similar products in their stores and have already began dedicating whole isles for fresh RMM products. Coles launched their unique RMM products (June 2020) in response to customer research, which found one in three do not have the time to cook from start to finish, and 52% are not interested in cooking at home. Furthermore, Woolworths announced its strategic partnership with meal kit provider, Marley Spoon, in 2019. The main goal was to grow the Marley Spoon and Dinnerly brands in Australia, as well as build operational synergies.
The re-alignment to consumer demands has seen major retailers such as Coles and Woolworths report elevated sales across their food divisions in 2020. This growth has also helped increase retail turnover in the food category by 10.5% (YoY), the strongest annual growth recorded since 1999. Spend in the food category is expected to remain elevated for some time as a portion of dine-out spending is re-directed to supermarket spending. The downside of this trend will be felt by cafés and restaurants, which are categorised as F&B outlets in retail centres.
However, increased emphasis being placed on RMM and online grocery ordering could see increased demand for cold storage industrial properties, over the short to medium term.
Given the relatively low level of supply, vacancy in cold storage has already reduced to less than 1.0%. The rising demand for food and the need for its preservation will increase the demand for temperature-controlled facilities. In addition, as supply chains get more complex, the likelihood for perishable products to be stored for longer durations will likely increase. Historically, cold storage capacity in Australia has been limited due to the cost and complexity of construction. Upfront investment is typically 2-3 times more than a dry warehouse and construction can take up to six months longer.
As individuals continue to be time-poor and cost-conscious, we anticipate the demand for RMMs will steadily grow. The evolution will help retailers who acknowledge changing consumer preferences and Industrial landlords with cold storage exposure.