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August 17, 2009
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Although convenience has taken a back seat to value in recent months, thanks to the lousy economy, it is still a critical element in the food purchase decisions of many busy consumers. And few other foodstuffs can dance the convenience quickstep better than frozen meals.

But these days, convenience attracts more attention when it’s also paired up with value. Perhaps that’s why private label frozen meals have been outperforming their national brand competition in terms of dollar and unit sales.

For example, data from Chicago-based Information Resources Inc. show impressive 20.7 percent and 17.8 percent dollar and unit sales gains, respectively, for private label single-serve frozen dinners and entrées during the 52 weeks ending May 17 (supermarkets, drugstores and mass merchandisers, excluding Walmart). In contrast, the overall single-serve dinners and entrées category realized 0.5 percent and 4.6 percent dollar and unit sales declines. In fact, private label outperformed the larger category in all but one frozen meal segment: multi-serve frozen dinners and entrées.

Still, private label’s dollar share remains low in the frozen meals arena. In non-breakfast frozen dinners/entrées, for example, private label dollar share is only 2.8 percent. And in frozen breakfast entrées and frozen breakfast handheld entrées, dollar share is only 6.5 percent and 1.4 percent, respectively.

But opportunities in store brand frozen meals abound, as value pricing sways cash-strapped consumers toward trial - and quality brings them back for more.

“We are seeing [a] high rate of interest and growth in all private label frozen segments in the U.S., where private label penetration is much lower than in Canada,” notes Rene Ouimet, chairman and CEO of Cordon Bleu Tomasso, Anjou, Quebec, Canada. “We believe that the approach taken by major U.S. retailers and [a] clear strategic vision on most of their programs are a sign that this will not be a short-term effort. There is a commitment from top management.”

Mike Daddieco, director of marketing for Oakwood, Ga.-based Wayne Farms - a producer of quality chicken products - also points to the rise in small households as an important growth factor here.

“There has been a 22 percent increase in the number of one-person households over the last 10 years in the U.S.,” he says. “This represents a tremendous opportunity for convenient frozen and refrigerated prepared meals. Who wants to cook for one?”

Flavors and Formats

Key to increasing private label penetration will be a focus on current flavor and format trends. And ethnic cuisine plays a big part in the flavor trends picture. “Consumers want ethnic cuisine at home,” Daddieco says.

He notes that sales of Italian and Mexican items are on the rise, and that Asian items have enjoyed recent double-digit growth. And while still a small base, Cajun items are growing at the fastest clip, he adds.

And chicken-based dinners and entrées mesh well with current ethnic trends. Daddieco says “Italian” items made with chicken now represent about a $460 million category, with chicken rigatoni-type products growing strong and chicken fettuccini-type items lagging behind.

But Canadian consumers are much more sophisticated in terms of ethnic flavor preferences than their U.S. counterparts, notes Allan Kliger, president of Toronto-based Victory’s Kitchen Ltd.

“U.S. retailers [are] asking us for things that we’ve been supplying to our Canadian customers for years,” he says. “That’s good. Some lead and some follow once product ideas have developed mainstream traction. The trend, though, most certainly [is] to deliver better-tasting, more diverse food solutions than ever before.”

In addition to ethnic flavors, consumers are gravitating toward restaurant-quality items, Kliger notes. Although U.S. and Canadian consumers are dining out less, they still want a high-quality dining experience at home, he adds. Retailers that are able to deliver on convenience and quality in the frozen meals arena will reap rewards here.

Going hand in hand with restaurant quality, Kliger says, is an emphasis on “healthy” - flavorful frozen dinners and entrées with cleaner ingredient statements, no trans fats and no preservatives.

“Consumers vote with their taste buds at the end of the day,” he stresses. “After all, if you go to a restaurant and don’t like your meal, you won’t go back. Same with retail now - better-tasting products will have much better long-term traction and growth, and the retailers who are doing well know this.”

Flavor-packed frozen handheld entrées also represent a private label growth opportunity outside traditional trayed meals, particularly for newly budget-conscious workers who are brown-bagging it at lunchtime more often than in the past. Newer product formats with widespread appeal here include panini, flatbreads and pocket sandwiches, Daddieco says.

New packaging formats also show promise in boosting store brand appeal.

“Frozen bag entrées continue to represent an interesting new market for private label programs,” Ouimet says. He notes that this market has evolved very quickly during the past three years on the national brand side. In private label however, many product offerings have been inferior or imported from Europe, making logistics highly complex.

“We have seen significant interest in brand-equivalent and brand-superior bagged frozen entrées over the past 12 months,” Ouimet adds.

On the flip side, the popularity of basic “meat and potato” or “meat and vegetable” frozen meals is on the decline, Daddieco notes, perhaps as a result of consumers’ desire for restaurant-type cuisine at home.

Even so, Gene Welka, president of Stillmore, Ga.-based Crider Inc., advises non-specialty or gourmet retailers not to stray too far outside the mainstream in terms of flavors for store brand frozen meals.

“You can’t push the envelope too hard in any one area because it’s still a function of turns and dollar sales,” he stresses. “Retailers want a higher dollar ring; they want to appeal to total family and they want to have value and taste.”

Crunch the Competition

Despite strong demand for value- and convenience-minded frozen meals, success here will require much more than getting the right flavors and formats into the freezercase. Competition - from the national brands and from other retailers’ store brand programs - is heating up.

“Everybody is trying to get everyone else’s buck,” Kliger stresses. “Club stores [want] more high-end retail products; traditional retailers are wanting more club pack formats; those who supply blue collar are wanting more ‘BMW-type’ consumers; and those who supply high-end are wanting some more value products. It’s such a competitive environment that everyone just wants to make sure they can retain and win over as many consumers as they can.”

Even the refrigerated cases represent a looming threat. “I believe refrigerated prepared meals will be boosted by new ‘fresh’ store formats that cater to these needs such as Fresh & Easy [Neighborhood Markets] and others,” Daddieco says.

But retailers can take steps to boost the appeal - and spur growth - of their own store brand frozen meals. First and foremost, Daddieco recommends that retailers treat their private labels as true brands.

“Adopt the thinking of national brand marketing, [don’t] just be the ‘national brand equivalent,’” he advises. “This means to differentiate not just on price, but by developing unique items, flavors, packaging, etc.”

Retailers should be aware of what is succeeding in the foodservice arena, Daddieco adds, bringing the best ideas in-house, but adding a “personal signature.”

Ouimet says a long-term vision also is key to future success in the frozen meals arena.

“Too often we see programs being launched without much support or thought about the next steps in the program lifecycle,” he says. “Typically, we would recommend launching the core items in ‘wave one,’ followed through with more value-added concepts such as more ethnic or international cuisine to create a broad range and variety within the program.”

Marketing support is critical, too, to the launch and post-launch process, Ouimet stresses.

And clever merchandising can be a helpful element here. Daddieco suggests that retailers cross-merchandise frozen meals with wines, breads and desserts under larger meal themes.

“In this economy especially, people are taking their restaurant business inside to the supermarket,” he says. “Be set up for the cuisine they are craving.”

Packaging, too, can work merchandising magic. Here, Kliger suggests partnering with a supplier that, like Victory’s Kitchen, boasts broad packaging capabilities, including retail test formats, bulk pouches for HMR, portion pouches, dipping cups and more.

Many smart retailers also are focusing on SKU rationalization, weeding out third- and fourth-tier national brands, Welka says, and sometimes even second-tier contenders. Although a lot of slotting money often is at risk here, it nevertheless is a move that lessens competition for store brand items.

Welka also advises partnering with suppliers that are not distracted by their own regional or national brand dealings.

“I don’t think you can be married to a brand and be committed to private label,” he says. “In our case, we’re solely focused on sustaining and maintaining the high-quality performance of our facilities, and focus solely on store brand products.” PLB

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