Category Review: Frozen Meals -- Time for a Change

August 7, 2008
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A value proposition in line with current trends could be just the ticket to success.

Something funny is going on in grocery freezer cases across North America. Some frozen meals and entrées, it seems, have been getting a rather frosty reception from consumers.

Unit sales were down for many of these segments during the 52 weeks ending April 20, 2008, according to data from Information Resources Inc. (IRI), Chicago. IRI reported total category unit sale declines of 0.6 percent, 4.3 percent, 13.7 percent and 2.5 percent, respectively, for frozen breakfast food, frozen multi-serve dinners/entrées, frozen pot pies and frozen single-serve dinners/entrées (excluding Wal-Mart, club stores and c-stores). With a 4.4 percent jump in total category unit sales, frozen handheld entrées were the sole exception to the downward trend.

What’s going on?

It could be that consumers are beginning to reach for more refrigerated prepared offerings - although the latest “Prepared Meals” category review from Mintel International, Chicago, notes that only 10 percent of global launches of chilled prepared meals between October 2007 and March 2008 were in North America. Mintel does add, however, that the North American refrigerated segment has potential for growth, “given North American interest in more natural and quality ingredients.”

Whatever the reason for the slump, manufacturers and retailers who play close attention to consumer wants and needs will have an opportunity to win consumers back. And retailers just entering the frozen meals category couldn’t pick a better time - private label penetration is much lower than it is in many other segments, and a value proposition in line with current trends could be just the ticket to success.

Single-serve frozen dinners and entrées, in particular, have been “underserved” when it comes to private label, but that reality appears to be changing. In fact, IRI data reflect whopping 138.8 percent and 150 percent increases in private label dollar and unit sales, respectively, for this segment during the 52 weeks ending April 20, 2008 - proof that more retailers are getting into the single-serve game.

Give ‘Em What They Want

When it comes to frozen meal trends, convenience is a given - but a growing number of consumers also want that convenience presented in a better-for-you format.

“With obesity reaching epidemic proportions in North America, heads of families are looking for healthier options for the family and to give their children healthier eating habits,” says Aki Skoulakis, president of Montreal-based Skoulakis Foods Inc.

Increasingly, consumers are reading labels to glean nutritional information, notes Jeff Gehres, director of sales and product development for Request Foods, Holland, Mich. Single-serve meals that can be marketed as natural products appeal to these consumers, he adds.

Andy Horvath, senior vice president of sales for Vernon, Calif.-based Overhill Farms Inc., agrees, noting that single-serve frozen meals also help to meet the portion-control aspect of healthful eating.

And items that today’s consumers deem healthier aren’t necessarily low in fat, stresses Michael Pritchett, vice president of sales and marketing, USA for Cordon Bleu-Tomasso Inc., South Natick, Mass. (the company is headquartered in Quebec, Canada). Instead, they might have cleaner ingredient statements, as well as less of “undesirable” ingredients such as sodium.

Yet another major trend impacting the frozen meals arena is consumers’ hunger for ethnic fare. Although tried-and-true Italian specialties remain popular, North American consumers increasingly are willing to venture into “riskier” culinary territory.

“With the mass immigration [taking place in North America] comes mass variety of foods,” Skoulakis notes. “Whether you like a certain food or spice or not, chances are you will see it on a menu of a ‘mainstream’ restaurant, as they are all adjusting their menus for greater variety.”

When it comes to ethnic preferences in the frozen aisle, “Chinese and Mexican/Hispanic flavors continue to be very strong, Horvath says. “Consumers are attracted to flavorful foods, and are willing to step outside the very familiar to try Thai, Indian and other somewhat novel foods.”

Gehres agrees, broadening Chinese to Asian and adding Southwestern to the Mexican mix. And for his part, Pritchett adds Mediterranean to the field of ethnic offerings currently of high interest to consumers.

What’s more, the trends toward wholesome and ethnic are not necessarily mutually exclusive.

“We here at Skoulakis believe we have achieved both - healthy eating with a wide variety of flavors,” Skoulakis says.

Time To Shine

It’s an exciting time in the frozen case for purveyors of private label products. The frozen meals arena - long dominated by the national brands - is suddenly a destination for store brand innovation. Think Safeway’s Eating Right and O Organics - or Kroger’s Private Selection.

“I think what’s happened is the same trend that happened in other private label categories maybe two or three to four years ago has finally hit the frozen entrée side of the business,” Pritchett says. “Where the standard used to be national brand equivalent, people are now expecting their [private label] frozen entrées to be better than the national brand.”

The success of some retailer’s upscale private label brands has demonstrated that quality products are well accepted by consumers, regardless of whether they are national or store brands, Horvath says.

“Consumers all along the income spectrum, and of every family size, are gravitating to these products,” he adds. “There is special interest in single-serving packaging, both for busy families and to suit individual family member practices.”

Private label will constitute a major growth engine in the frozen food segment, Horvath continues, in part because the current economy is forcing consumers to be more value-conscious. But the high quality of today’s store brand frozen meals “has erased the earlier perception that buying a private label product meant a tradeoff of quality for price,” he adds.

The percentage of consumers choosing private label over the national brands continues to rise from year to year, Skoulakis says.

“The options for private label, I believe, are endless, as every year we see better-quality products being produced by better-quality manufacturers,” he adds.

Reel Them In

Retailers that want to enter - or expand within - the store brand frozen meals category would be wise not only to develop quality products that meet current consumer trends, but also to support those products with the right packaging and targeted merchandising and promotion programs.

Going forward, retailers can expect a significant portion of their store brand growth to come from healthier-type products, says Request Foods’ Gehres. Specifically, single-serve natural and lean frozen meal items represent a growth opportunity for private label.

Skoulakis takes that advice a bit further.

“I truly believe that the area with the biggest growth opportunity in private label will be variety of flavors accompanied by nutritionally responsible manufacturing,” he says. “I think the days of 2- to 3-pound packages manufactured out of lower-quality raw products to reach a minimal price point are going the way of the dinosaur. … The manufacturers using quality raw products in a proper facility will increase their business substantially, and as their volumes go up, the price will approach the same cost to an end-user as a lower-quality manufacturer.”

Horvath, too, encourages retailers to source their private label products carefully to ensure the products deliver the maximum quality and portion size for a given price point.

“A satisfied customer is the best way to create equity in your store brand,” he stresses.

But Pritchett says success will hinge on the ability of manufacturers and retailers to work closely together “to develop the programs they need to be a point of difference.”

Pritchett points to the success of Trader Joe’s, Whole Foods and Safeway, all of which he says have done the right things to turn their frozen programs into destination products.

As for packaging, Skoulakis says retailers are beginning to demand better graphics, multi-color processes and more for their store brands - a promising trend that can only serve to improve product image within the freezer case.

“Instead of avoiding these demands, we welcome them,” he says. “We can only get stronger as a company through our clients, who in turn, get stronger through theirs.”

Horvath challenges retailers to merchandise their store brands aggressively.

“That includes displaying their store brands with equal prominence to national brands,” he says, “but it also means giving attention to package design, labeling and so on to enhance the delivery of quality and value.”

Pritchett notes that A&P on the East Coast has done a “wonderful job” in putting branded merchandising tools behind its store brand frozen offerings.

“They [also] used single-serve in the same recipe as the family-sized items, with the idea of using the single-serve as trial,” he says. “But much to their surprise, the single-serve is selling extremely well because of the convenience.

“If you were to go into an A&P store [and see] the signage, the point-of-purchase materials and everything else,” he adds, “it’s being treated like a branded program.” PLB

Asian Fare: Delving Deeper

Long a favorite of North American diners, Asian cuisine has netted a fan base in the frozen aisle as well. But frozen Asian fare no longer is limited to chow mein and other “traditional” American-Oriental dishes - product developers now are delving deeper into specific regions of Asian countries to develop frozen entrées and appetizers, notes Keith Chen, president of Toronto-based Culinary Destinations Ltd.

What used to be just generic “Indian” food or “Chinese” food, for example, has developed into Szechuan or southern Indian cuisine.

Consumers first taste the different regional fare at restaurants, Chen notes, and then are more willing to sample the frozen renditions.

“As the American consumers begin seeking those [regional] trends, it becomes more of an opportunity for retailers,” Chen says.

Dan Van Gompel, national sales manager for Day-Lee Foods Inc., Santa Fe Springs, Calif., points to Beijing Beef as one such potential retailer opportunity. He notes that Panda Express is pushing the dish “heavily” on the West Coast, and that it showed “great potential” in recent customer concept testing.

Flavors currently of interest in the Asian frozen meals sector include Mandarin Orange Chicken, Spicy Crispy Beef, Beef & Broccoli and Kung Pao Chicken, Gompel says. Egg rolls and potstickers continue to attract consumer interest as well.

Margaret Liang, director of sales and marketing for W.N. Foods, Hayward, Calif., says Chinese and Japanese cuisine still top the list of general Asian food favorites, but consumers look for new and exciting flavor spins as they become more culturally affluent and savvy.

“This is especially true when consumers are cutting down on their dining trips to local restaurants and are turning to their local supermarkets for flavors to ‘spice up’ their dinner tables,” she says.

Southeast Asian flavors such as Thai also are gaining momentum in consumer acceptance and market share, Liang adds.

“Flavor-wise, the combination of savory sauce with a fruity note seems to be a winning choice, as seen in orange chicken, pineapple teriyaki and other successful Asian products,” Liang says. “Sweet and mildly spicy flavor such as sweet Thai chili sauce is also another pleasant flavor combination that’s easy to be accepted and chosen by the mainstream household. Going into the winter/holiday season, warm and hearty foods such as coconut curry chicken will gain the spotlight at dinner parties.”

On the private label side, frozen Asian meals represent an underdeveloped category. Retailers that want to enter the marketplace with a store brand Asian line would be wise not only to meet general Asian food and flavor trends, but also the trend toward more quality, convenient, healthful products.

Liang notes that consumers increasingly are looking for natural, non- GMO and organic options. Retailers are advised to rely on trustworthy manufacturer-partners, better ingredients and more healthful formulations to differentiate their products - even if it means charging a higher price, she adds.

Speaking of healthful, Chen says Culinary Destinations is introducing new natural, better-for-you Asian items. Moreover, some new items are gluten-free.

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