Frozen meals

by Corporate Profiles
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Despite an essentially stagnant market for frozen meals, ConAgra Foods, Inc., Omaha, hopes to drive growth of its frozen business through its recent purchase of the P.F. Chang’s and Bertolli brands.

The ConAgra developments come at a time when the market has been flat to declining with nearly all dollar sales gains attributable to inflation or new products rather than growing consumer demand for existing products, according to Packaged Facts. Packaged Facts said the market for frozen dinners and entrees was at $6.1 billion in mass-market channels during the 52 weeks ended June 10, a decrease of 2.4% from the previous year. Packaged Facts said U.S. retail sales of all frozen foods (excluding ice cream, novelties, yogurt and beverages) at retail channels will reach $44 billion in 2012, up a slight 0.4% from the previous year and dragged down by decreases in frozen dinners/entrees and frozen pizza.

ConAgra acquired the P.F. Chang’s and Bertolli brands from Unilever North America in August for $265 million. The agreement included a license for the use of the Bertolli brand name on the frozen meals and the transfer of the Unilever license with P.F. Chang’s for the use of the P.F. Chang’s Home Menu brand. Gary Rodkin, chief executive officer for ConAgra, said the brands represent about $300 million in annual sales, and are brands targeted at a higher income segment. As a result, the brands will bring the company new eating occasions. To support the brands, ConAgra is investing $100 million to expand a plant in Arkansas to manufacture the meals.

In May, ConAgra also acquired Odom’s Tennessee Pride, a producer of frozen and refrigerated breakfast sandwiches and sausage with annual revenue of more than $190 million, giving the company more exposure in the breakfast space.

Mintel also offered views on the frozen food market in 2012. Mintel said pot pies are a fast-growing frozen product, rising by 8% in 2011 to $431 million in sales. Yet Mintel said the products have too small of a share to have a major impact on the category’s overall performance.

Single-serve frozen meals are the largest group of frozen meal products that have the greatest impact on the market’s performance, but in 2011 the segment only grew 1%. The growth was not enough to lift the entire category, and single-serve frozen meals are not expected to post significant gains in the near term. Multi-serve frozen meals declined 1% in 2011, according to Mintel.

“The frozen food industry has not been able to leverage consumers’ interest in convenience into sustained, meaningful growth,” Mintel said in a report on the frozen meal market. “This may be due in part to the perception that frozen meals are not particularly healthy. Only 38% of frozen meal users consider these products to be an easy way to get a healthy meal. However, generating significant and sustainable growth will likely require an emphasis on innovations that capture the imaginations of consumers, possibly in terms of new flavors, preparation methods, nutritional benefits, etc.”

Sodium levels, which major industry players still are working to gradually reduce, may affect the perception of healthfulness.

“Nestle’s commitment to healthier eating includes adjusting our sodium levels,” said Cindy Vallar, vice-president of marketing at Nestle Prepared Foods Co. “This is an initiative we’ve been working on steadily for years. Our goal moving forward is to continue to reduce sodium gradually while creating ever-more wholesome and delicious foods that contribute to healthier lifestyles. With this approach of stepwise, moderate reductions, Nestle has managed to avoid negative reactions as well as helping consumers gradually adapt their taste for salt, making their choices more likely to last.”

Ms. Vallar also said consumers say they like the quality, range of choices and convenience the company’s products offer, and Nestle’s goal is to deliver taste and nutrition in each product.

Frozen meals are facing competition for convenience from the increase in supermarket prepared meals, according to Mintel. After all, many supermarkets have stepped up efforts in their prepared meals to the point consumers no longer view quality to be an issue. Mintel said there is great convenience in grabbing an already-prepared main course and possible side dishes, and these offer freshness beyond what a frozen meal may offer.

In addition, more consumers are preparing meals at home from scratch, largely to save money. Packaged Facts said 35% of shoppers gave a preference for home-cooked foods as a main reason they had not recently purchased frozen foods.

Packaged Facts also said 57% of shoppers say a preference for fresh foods is the main reason they had not recently purchased frozen foods. To cater to this desire for freshness, manufacturers are increasingly citing research studies showing that frozen produce is as nutritious or even more nutritious than fresh produce.

Challenges aside, Nestle and ConAgra remain the top producers of frozen meals, but their frozen meal sales were down in 2011-12, according to Mintel. Overall, Mintel said Nestle has about a 34% market share and ConAgra has a 26% share.

During the year, Nestle introduced new Stouffer’s family varieties, Stouffer’s Farmers’ Harvest Steam meals, Hot Pockets brand Snackers, Lean Cuisine Culinary Chic offerings, and Lean Pockets Pretzel Bread Sandwiches.

Store brands do not appear to be cutting into share much. Mintel said value-based store brands only represent 3% of frozen meal sales, in part due to lack of innovation.

“We’re really not concerned too much about the store brand side of that because we’ve got such a strong frozen infrastructure, our scale and our productivity,” ConAgra’s Mr. Rodkin said in a conference call. “What we’ve been able to do in terms of driving costs down in terms of the way we produce product, we believe it would be very difficult to significantly undercut a brand like Banquet, so we really don’t believe that’s a significant issue.”

Other recently introduced ConAgra products include Healthy Choice and Marie Callender’s Bakes, Healthy Choice Greek Frozen Yogurt and Marie Callender’s single-serve cream pies. In addition, ConAgra is rolling out a new line of Healthy Choice Baked Entrees to appeal to the desire for classic comfort foods.