Media Centre

Exclusive consumer research* for Music Industry, a new Market Review from market intelligence provider Key Note, reveals that music is described as a 'main hobby' (either playing, watching or building a collection) by almost one in five UK adults. Furthermore, a much higher proportion of the population say that they listen to music every day (79.5%), listen to it on the radio regularly (69.4%) or enjoy browsing in music shops (39.4%).
Perhaps surprisingly, Key Note's research found that 45.6% of homes contain a musical instrument (with just over a quarter of adults able to play one). Amateur involvement in music is strengthening as a result of the 'karaoke' culture created in pubs and clubs, peak-time talent shows and, most recently, a tranche of video games such as Guitar Hero, which offer the opportunity to play along with 'real bands'. At the professional level, live music is also doing well owing to improved venues, more efficient ticketing (online) and the fact that artists are keen to tour (and bands are eager to reunite) to make up for lost income on recordings.
In contrast to the amateur and live sectors, the recording industry - still the largest part of the music industry - has suffered as a result of a shift away from selling and buying music 'products' in the shape of CDs towards the distribution of recordings in electronic format, which has become a key trend in the industry. In the home, access to music has spread from the static hi-fi in the living room to the home computer and the mobile phone. However, illegal downloading is on the increase and Key Note forecasts that the recorded market will at least stabilise in value over the next 5 years (at around £1.15bn), although not regaining its previous heights.

The importance of music in consumer lifestyles is emphasised by the survey results which showed broadening access to music, driven by new technology and the expansion of the media. Relatively newer consumer involvements with music include watching 'pop star' competitions on television, such as The X Factor (50.2% of adults), listening to music on computers (44.8%) and downloading (31%). Young consumers are designing their own, purely personal music collections by downloading or sharing music rather than buying recordings in the conventional manner.
Over the next 5 years, both in the UK and globally, it is anticipated that more vigorous collection of licensing fees for performing music will be a key feature of the market, partly because the industry will need to make up a shortfall from lower sales of recordings.
The processes involved in recording music for commercial sale will continue to follow their traditional pattern, but it is distribution that is changing most dramatically. The major change is the downloading of tracks into personal collections, rather than the purchase of albums. Taken to its logical conclusion, this may benefit the recording industry by removing the necessity for an artist to have a dozen good songs to put together for an album. Recording and selling on a track-by-track basis would speed up the releasing process. Inevitably, future artists may have a short-term impact and be more 'disposable', however, it may be argued that this process has already begun with an increasing number of one- or two-hit wonders in the charts and the temporary fame of most talent-show winners.

The UK franchising market has proved to be fairly resilient during the recession. Covering almost every area of the economy, as well as being well represented in the UK, franchising is also relatively robust. While in its new Market Report, Franchising, Key Note estimates that the total value of the market fell in 2009, the market intelligence provider also reports that both the number of franchisors and the number of franchised units continued to rise. Given the depth of the economic downturn, some may consider this to be extraordinary.
According to figures from the British Franchise Association (BFA), the franchising market decreased in value in 2008 and Key Note calculates that it contracted further during 2009, with mean turnovers in that year falling by an average 8%. However, Key Note estimates that there was still a 2% rise in the number of franchisors in 2009, compared with a 3.8% increase in 2008. There appear to have been new entrants in every sector of the market. This is indicative, perhaps, of banks viewing franchising as a less risky proposition than many other types of new business venture. There has also been a growth in the number of people operating multi-franchises, i.e. owning franchises in several territories, with many new franchises being located in a territory adjoining their existing one.
Key Note's Report also points out that the profile of franchisees is changing. For example, the numbers of women and Asians taking up franchises in the UK is increasing*. In 1997, 88% of new franchisees were male, while in 2008 the figure had dropped to 66%. In other words, one in three new franchisees is a woman. Nearly a fifth of new franchisees are from Asian backgrounds and the majority of these are of Indian origin. This trend is also reflected in the nature of some of the newer franchises, such as those based around ethnic and oriental foods.

Key Note estimates that the number of franchised units (excluding dairy**) rose by 1.2% in 2009, to reach 35,015. Some of the new units will have been bought by existing franchisees wanting to expand by adding further units to their businesses. Food retailing and catering, fitness and health, and personal services are likely to be key growth sectors for the franchising market in the coming years. It is expected that franchises that offer specialist business services, especially those that promise improved profitability, will also enjoy growth in 2010. However, some sectors, such as property/home improvements, are likely to struggle, and the retailing sector will also remain challenging.
Key Note forecasts that the value of the UK franchising market will experience a marginal increase in turnover for 2010, with the number of franchised units and also the number of franchised systems continuing to grow ahead of turnover.

Who would have thought that Superman was ahead of his time in his penchant for wearing his underwear as outerwear? However, according to market intelligence provider Key Note in its new Lingerie Market Report, wearing underwear as outerwear has been a strong driver of the lingerie market and this trend is likely to increase.
Female icons - such as Madonna, Dita Von Teese and Lady GaGa - encourage boldness for both young and older women when it comes to using underwear. Key Note expects that, in future, designs are also likely to become even more risqué and erotic in their appeal to women, and this trend will become even more mainstream. The blurring between inner and outerwear will also increase, as items such as camisoles and vests take on a dual purpose and show more exciting innovation.
Key Note's Report found that the lingerie market has performed well over the review period (2005 to 2009), and has withstood the sharp declines experienced by many retail sectors during the recession. While the essential nature of purchasing underwear in no doubt contributed to this resilience, the industry has also benefited from many women viewing lingerie as a relatively inexpensive 'pick-me-up' at a time when the recession was impacting on other areas of spending. The total lingerie market (encompassing corsetry, lingerie and hosiery) reached a value of £2.8bn in 2009, representing a 16.1% increase since 2005.
The market is definitely looking upwards in terms of quality and sophistication; however, in the future, pricing will remain of key significance. The fact that online retailing for lingerie has proved successful will add to an extremely price-sensitive market. In 2009, vintage glamour was back in vogue - burlesque-style corsetry and pointed bras were reportedly flying off the shelves, and lace and silk were also highly sought after.

Innovation has been the key to success in the lingerie market, and enthusiasm for new bra designs, tights and stocking products, along with general technological development shows no sign of abating. New products, such as Scala Bio-Fir Anti-Cellulite pants* introduced by department store John Lewis in 2009, illustrate just how lucrative genuinely exciting products can be - particularly those that promise weight loss. Key Note believes there will be many more such innovative products developed over the forecast period (2010 to 2014).
Lingerie will continue to build a strong presence within the retail market, with the total market forecast to reach £3.35bn in 2014, representing growth of 15.3% compared with 2010. Key Note predicts that 2010 and beyond will bring its own trends in an increasingly exciting and competitive period for the lingerie market.

In 2009, the UK market for plastic packaging was worth an estimated £3.47bn, having been one of the most dynamic sectors of the UK packaging industry during the previous decade. In its new Packaging (Plastics) Market Report, market intelligence provider Key Note expects that the share of the overall packaging market taken by plastics will continue to increase well into the next decade, overtaking paper and board to become the largest sector.
A greater emphasis on the environmental impact of packaging has led to various initiatives by the industry to improve its 'green' credentials, as well as to comply with the numerous obligations placed upon it by recent government legislation. In most cases, this has led suppliers to increase the amount of recovered material used in the manufacture of their products, while simultaneously encouraging greater recycling. More than 60% of the packaging used by industry, commerce and households in the UK is not recovered and recycled, amounting to more than 6 million tonnes per year - a figure that has risen from around 3 million tonnes since the mid-1990s. The recovering and recycling targets for UK businesses in 2010 have already been set out; 74% of all packaging waste is to be recovered, and 70% recycled. As far as the plastics sector is concerned, the recovering and recycling target was raised by 2 percentage points, to 29%.
Levels of innovation within the market remain high, with many forms of plastic packaging becoming increasingly versatile, sophisticated and lightweight. A trend towards lighter packaging has been observed throughout the plastic-packaging industry. The British Plastics Federation (BPF) estimates that the UK's plastic packaging is up to 80% lighter today than it was 20 years ago. The appeal of lighter packaging products for plastic-packaging manufacturers is clear: not only does it result in a reduction in the amount of material used, but it can also help operators reduce the levels of energy required for the transportation of finished goods.

Within the past couple of years, plastics has been the fastest-growing sector of the packaging industry, owing to technological developments, such as advances in material properties, as well as the material's lighter weight, its flexibility and its relatively low cost. This, in turn, has created new applications for these products across a range of industries. In 2008, global use of rigid plastics grew by 6.3%, a figure that fell slightly to 6.2% for flexible plastics.
Looking forward, Key Note expects a number of future trends will affect the packaging industry. Within the plastics sector, the emergence of products with strong environmental credentials is forecast to continue, in order to concur with ever more stringent legislation and rising consumer expectations. The further development of the UK own-label sector is also worthy of consideration, as is the way that growing demand in countries such as the People's Republic of China (PRC) and India is likely to shape requirements for packaging. Between 2005 and 2014, the value of the UK market for plastic packaging is forecast to increase by 21%, from £2.99bn to £3.62bn.

The rush to send contact-centre work offshore during the early 2000s backfired significantly because of the resulting miscommunications that made many callers dread having to telephone a contact centre. Communication is not just a matter of words but of words in a cultural and emotional context. However, new research* for Contact Centres, a new Market Assessment from market intelligence provider Key Note, appears to confirm that this is something offshoring companies fail to understand. The survey reveals that 86.8% of respondents claim they cannot always understand what staff in contact centres are saying to them. Conversely, just 13.2% say they can always understand contact-centre staff.
Key Note's research indicates that younger people understand contact-centre staff better than older people. This may lead organisations to believe that, as young people age, they will continue to be able to understand remote staff. However, factors such as hearing loss and stress may intervene. Nearly 49 people in every 50 want to speak to a real person when they telephone an organisation. To date, organisations have not done enough to switch from automated call handling to real people at the points at which callers become confused and/or annoyed.
Issues of poor customer service associated with call and contact centres have come to the fore as multinational companies have grown beyond the capacity of many national governments to regulate them. While contact centres are inevitable, at present many consumers regard them as a necessary evil. Modifications to increase comprehension, reduce waiting times and improve query and complaint resolution will improve public confidence in communications that do not take place in person. Resolving these issues - which is feasible with current technology - would improve the brand reputations of organisations that currently offer below-par customer service.

Some areas of customer service in contact centres require significant improvement; the amount of discontent regarding complaints is startling. Key Note's research also found that almost one person in every three (32.1%) who telephone an organisation with a complaint does not have it resolved to their satisfaction. Furthermore, the results do not suggest any particular demographic patterns; rather, there is a widespread feeling that complaint resolution leaves much to be desired.
The public can influence corporate activities. For example, the public's reluctance to accept unsolicited telephone calls has reversed the growth of telemarketing. Encouragingly, current trends in the contact-centre business reflect a real concern to improve the service provided to customers. These trends include: reverse offshoring; increasing the skill and autonomy of contact-centre staff, so that they can better resolve complex queries; and making greater use of automated response for simple communications. Tesco's expansion in contact-centre work signals a more hands-on approach by companies that are anxious to protect their brands. In the future, contact-centre specialists will work more as business partners than as autonomous or semi-autonomous contractors.

Still reeling from the recession, the recruitment industry in the UK has a lot of ground to make up to return the market to where it was not just before the recession, but 5 years ago. In a new Market Report - Recruitment Agencies (Permanent) - market intelligence provider Key Note forecasts that the value of the permanent recruitment market will decline by a further 4.2% in the year ending March 2010, but that it will begin a gradual recovery thereafter.
The recruitment industry is now much smaller than it was before the recession, with fewer companies operating in the market; although, since September 2009, recruitment firms have noticed a slight improvement in market conditions, perhaps signalling the worst may be over. However, as at February 2010, it is still difficult to assess the extent to which the market will recover and the improvement, when it comes, is likely to be very gradual. Although the economy has started to grow in 2010, albeit by 0.1%, economists that Key Note has spoken with cautioned that a recovery is more likely to be sustained in the second half than in the first half of the year. Furthermore, based on previous recessions, growth in employment levels usually lags behind growth in the economy. This suggests that demand for new staff will not start to emerge strongly until the second half of 2010.
In the year ending March 2009, the value of the permanent recruitment market stood at £2.61bn, and the number of permanent placements made was 582,803. These figures represent a massive drop of 39% and 19.8%, respectively, compared with the previous 12 months. This slump has been devastating for recruitment firms, and every sector of the market has been impacted, with jobs in financial services, construction, property and retailing being particularly affected. Key Note predicts that the sectors of the market that are likely to show some reasonable improvement in 2010 include utilities, social care, financial services and technical/engineering. Of these, technical/engineering and social care are likely to be significant growth areas.

Overall, the immediate outlook for the permanent staff recruitment market is better than it was for 2009, but it remains weak. Key Note anticipates that the market will still be intensely competitive in 2010, and that total revenue will decline, before beginning a slow recovery to finish the forecast period (2010 to 2014) at £3.1bn. The market's value is not only dependent on the demand for new permanent staff, but also on the willingness of clients to use recruitment firms; therefore, it will also be under the influence of fee rates, which are unlikely to rise in 2010, and may even be squeezed further.
Many firms operating in the recruitment market have been hanging on during 2009 expecting an upturn by the end of the year or early in 2010. However, for some of these companies, the recovery will come much too late.

The refreshment automatic vending sector continues to have a poor image among health bodies who regard many of the drinks and foods sold in vending machines as being major contributors to the current high levels of obesity in the UK. In Automatic Vending, a new Market Report, market intelligence provider Key Note identify this image problem as being one of several barriers to growth for the automatic vending market.
As a result of the poor image that refreshment vending machines have acquired, a number of authorities have banned vending machines from locations such as hospitals and health centres. The British Heart Foundation has, for example, chosen the vending machine as a target as a cause of the current levels of obesity. Although the vending sector claims there is no evidence to support this assertion, the link may be difficult to break in the minds of the some consumers and this, in turn, is affecting the growth potential of the market.
There has been a steady reduction in the numbers of refreshment vending machines installed in the UK since 2005. According to the Automatic Vending Association (AVA), the number of machines in use in 2008 fell by 4.3% to 490,272 and was 6.3% below the total in 2005. The removal of non-profitable machines is partly responsible for the reduction. Key Note estimates that the numbers of machines in use declined further in 2009. Furthermore, the cigarettes and tobacco vending sector faces serious difficulties when the ban on the sale of cigarettes from vending machines comes into place in October 2001. (The Government's Health Bill 2009, which became law in November 2009, contains provisions which ban the sale of cigarettes from vending machines.) In overall terms, the number of vending machines installed in the UK also continues to fall.

The automatic vending market has also been affected by the recession in 2009. Vending companies which provided services to commercial customers such as banks and financial institutions have felt the effects of redundancies and company closures in these sectors. Key Note estimates that in 2009, sales of refreshments, cigarettes and other products through vending machines fell in value by 4% to around £1.94bn. Sales through refreshments machines are estimated to have accounted for over three-quarters (78.3%) of the total in 2009.
The UK economy is expected to return to growth in 2010 and the automatic vending markets for refreshments and other vended products are expected to benefit from this. However, Key Note argues that the projected rise in unemployment in the UK, a still generally weak economic environment, poor image and the absence of any major market growth segments within the vending sector suggest that the rate of growth for these sectors in 2010 will only be modest.

Research for Local Government Services, a new Market Review from market intelligence provider Key Note, reveals that emergency services (excluding the police) scored the highest rating of the local government services, with 67.3% of respondents considering the quality of service received as 'good'. At the other extreme was highways and transport (including parking provision), with only 32.8% of the respondents giving these services a positive rating. These results reflect an improvement since a similar survey was conducted in 2007, when emergency services were considered 'good' by 63.1% of respondents and highways and transport were given that rating by only 24%.
In overall terms, an average of 45.5% of the weighted sample of respondents rated the quality of local government services as 'good', with 43.8% considering them 'average' and just 10.7% rating them as 'bad'. Again, this represents a noticeable improvement compared with the 2007 survey, when the corresponding results were 41.9% for 'good', 43.4% for 'average' and 14.6% for 'bad'. There were a number of changes to the rankings of the other services between 2007 and 2009, although emergency services and education retained first and second places, with highways and transport remaining in bottom position.
With regard to the education services provided by local government, again, the opinion of women was more positive than that of men, with 58.4% of women compared with 47.2% of men saying the service was 'good', and 6.2% of men compared with 1% of women saying it was 'bad'.

Interestingly, the analysis of the survey results by region indicated that the level of dissatisfaction with the education service was highest in Greater London, where 43.4% of respondents rated the service as 'good'. Although only 31.6% of respondents ranked social services as 'good', this sector came third in rankings based on the combined 'good' and 'average' percentages, up from fifth in the 2007 survey. Significantly, in the analysis of responses by the presence of children in households, levels of satisfaction with social services were much lower than average among those households that contained children.
The performance of local authorities in their service delivery role has been an issue for many years, with consecutive UK governments implementing a number of measures aimed at increasing the efficiency of local government services. Following the publication in October 2006 of a government White Paper, 'Strong and Prosperous Communities', a new framework of local partnerships and agreements has now been established with local-authority performance being assessed through Comprehensive Area Assessments and National Indicators, with the Local Area Agreement seen by the Government as forming the centre of the new local performance framework.
For the future, the continuing effects of the recession and probable measures to be taken in its aftermath continue to cause concern, while the future success of the new local-authority performance measures is being questioned and there is likely to be renewed emphasis on the role of local authorities in tackling climate change at the local level.

The recession took its toll on the IT recruitment industry in the UK; in 2008 and 2009, it was subjected to extremely difficult trading conditions, experiencing a 14.1% decline in value over this period. In
IT Recruitment, a new Market Assessment, market intelligence provider Key Note discusses the possible impact that IT 'offshoring', and other trends, could have on the IT recruitment industry in the UK.
In order to reduce costs, many companies are taking part in, or at least considering, offshoring - a process that involves the relocation by a company of an aspect of its business to another country. The IT market in the UK is concerned that, if this trend was to become more widespread, it could lead to a situation where the UK no longer has the skills or the infrastructure to support technology business or large-scale technology departments.
According to a survey undertaken by the IT Job Board, 64% of the 300 companies questioned offshored some of their IT functions in the first half of 2009. The majority of organisations that had offshored in the first 6 months of 2009 had outsourced software development and programming, followed closely by administration and support roles. Senior and non-specialist roles appeared to be less affected by offshoring activities, largely owing to the fact that companies need to retain control of their IT function at a senior level of the business. The IT Job Board's research indicates just how considerable the pressure is for businesses to cut costs in order to compensate for lost revenues, suggesting that offshoring has contributed to the decline in IT jobs in the UK.

The extent of the recession's impact on demand for IT workers is evident in the declining number of job advertisements for the industry. The number of job advertisements for permanent and contract IT workers, including those required by the financial sector - the largest market for IT staff - fell sharply, and advertisements for software developers and analysts - two of the main skill sectors for IT recruitment - were also significantly lower.
There are some tentative indicators that the IT jobs market is beginning to improve and that 2010 will see a return to growth. While increases in permanent and temporary placements for IT staff are encouraging, and suggest that the bottom of the economic cycle has been reached, the labour market remains tenuous. There are concerns that the recovery from this recession might be 'jobs light' as many employers have retained more staff during this recession than previously, meaning that businesses will be able to respond to increases in demand without hiring new employees.
Key Note forecasts that, in line with the expected improvement in the UK economy, the IT market will witness some growth in 2010. Thereafter, higher levels of annual growth are currently anticipated, although much will depend on the economic climate and the degree to which this stimulates demand for IT recruitment. Key Note forecasts that the market will grow by 5% to £4.27bn in 2010, and will increase by an overall 43.7% between 2010 and 2014 to reach a value of £6.14bn by the end of the forecast period.

2009 was a particularly difficult year for the food industry in general, as consumers looked to cut back on spending during the worst of the recession. The snack foods market has also been hard hit by huge rises in commodity costs for items such as potatoes, peanuts and sunflower oil. As a consequence, the market has witnessed several corporate casualties that competitors have been quick to snap up. According to market intelligence provider Key Note's Snack Foods Market Report Plus, this trend is likely to continue into 2010, as any recovery from the recession is expected to be gradual. Snack companies with access to sufficient revenue are likely to take advantage of distress purchases, leading to further consolidation in the industry.
Natural Crisps Ltd was close to administration when it was bought by Tayto Crisps of Northern Ireland in a 'distress deal' completed in a week over Christmas 2008. The deal was Tayto's fourth acquisition in 3 years, following its purchases of Golden Wonder in 2006, Real Crisps in 2007 and Red Mill Snack Foods in 2008. Germany's Intersnack purchased a 15% stake in Largo Foods (the owner of the Tayto brand in the Republic of Ireland), and is thought to be considering making more acquisitions in the UK market. Further consolidation in an industry dominated by Walkers Snack Foods seems probable in the future, especially as the recession continues and businesses struggle to survive.
Another industry trend which is discussed in Key Note's report is the continued response to health issues by manufacturers of snack foods in 2008/2009. Emphasis has been placed on the use of more 'natural' ingredients, as well as on baked, rather than fried, goods. 2008/2009 saw a sharp rise in retail prices as manufacturers could no longer absorb escalating commodity costs.

The resulting increase in the value of the market is not expected to be sustained at the same level in the immediate future, but contributory factors to market growth will include the developments made by manufacturers to reduce fat and salt levels through healthier raw materials and cooking processes, and the increase in snacking occasions, such as working lunches. However, despite the fact that most snacks foods are relatively low in nutritional value, consumption of them on a regular basis is very high among consumers.
Key Note's exclusive consumer research* reveals that the percentage of respondents who had bought none of the named brands regularly decreased between 2008 and 2009, while Walkers remained the most popular brand by far among respondents who did by brands regularly. Nevertheless, percentage penetration for the core Walkers brand was lower in 2009 compared with the previous year, as was percentage penetration of its premium Sensations brand. The arguable leader in the premium sector, Kettle Chips, saw its percentage penetration increase in 2009, but so too did supermarket own-brand varieties, indicating that the recession is indeed fuelling demand at both the premium and value ends of the market.
Manufacturers are expected to capitalise on the upcoming prime snacking occasions of the Football World Cup and the 2012 Olympic Games, and such positive factors should contribute to an increase in the market value of savoury snacks. Key Note forecasts that the market will grow in value by 3.6% to £2.48bn in 2010, with overall growth over the 5-year forecast period predicted to reach a retail sales value of £2.61bn by 2014. The potato crisps sector is forecast to achieve by far the highest level of growth over this period.