New Product Trends: Frozen Solid

From 1999-2004, increasing concerns with obesity and nutrition have changed the dynamics of the frozen meals market. Low-carb diets, including Atkins, South Beach and other high-protein diets have negatively influenced the demand for frozen meals containing potatoes, pasta or other starches. Consumers are demanding more information, and becoming more selective about their meal choices. As consumers prepare fewer meals at home, and the profitability of servicing these consumers is rising, increased competition for their dollars is being seen from in-store delis, restaurants, take-out and drive-thru venues.

The main players and their brands in the frozen meal market include Nestle USA's (Glendale, Calif.) Stouffer's and Lean Cuisine; ConAgra's (Omaha, Neb.) Healthy Choice, Marie Callender's and Banquet; Heinz North America's (Pittsburgh) Weight Watchers; Pinnacle Food Group's (Cherry Hills, N.J.) Swanson and Hungry-Man; and Luigino's (Duluth, Minn.) Michelina's and Budget Gourmet. The market is divided up approximately as follows: Nestle 35%, ConAgra 26%, Heinz 9%, Pinnacle 7% and Luigino's 5%. Private label contributes less than 3%, while smaller manufacturers comprise the remaining 15%.

Mintel International's (Chicago) “Frozen Meals” report details the important aspects driving the $7.9 billion (2004 estimated) frozen meal market.

Healthy Eating

Mintel observes consumers increasingly are being made aware of the prevalence of obesity and the ensuing health issues. As concerns with obesity are brought to the forefront and publicized by popular diets, TV talk shows, and numerous published articles, the demand for healthier new products continues to grow.

Frozen meal manufacturers have been successfully introducing frozen meals with a health-oriented focus; the success of the Lean Cuisine and Healthy Choice lines shows that introducing healthful meals allows current frozen meals users to switch to more-healthful selections, as well as motivates new users to try the category.

Mintel emphasizes that frozen meals will need to address and promote dietary and weight-loss concerns to meet the needs of health-oriented Americans. Growth opportunities exist for targeting specific health conditions like heart disease and diabetes, in addition to weight loss. ConAgra's Golden Cuisine line of products has started to test the acceptance for meals specifically targeted toward “the nutritional needs of seniors.” Nestle's Lean Cuisine has formed several health-related collaborations; partners include the Cleveland Clinic Heart Center's Preventive Cardiology Program, Weight Watchers (New York), and the Susan G. Komen Breast Cancer Foundation (Dallas). Mintel expects frozen meal manufacturers will continue to augment these types of efforts.

The past year has seen a plethora of low-carb products and information, touting the health benefits of maintaining a low-carb diet. New items have been introduced to address this change in consumer demand. ConAgra's Life Choice line of low-carb frozen meals is the first line of low-carb frozen meals from a major food company. In February 2004, Nestle launched its new low-carb Stouffer's Lean Cuisine entrees. In addition, Heinz' Smart Ones launched a new line of frozen entrees, Truth About Carbs, for calorie-conscious consumers seeking a balanced meal. The Truth About Carbs entrees are not marketed as low-carb, but rather as having a higher protein content. Although Truth About Carbs meals will appeal to people interested in low-carb diets, they also will draw in people who are interested in reducing their caloric intake and adopting an overall healthy eating program.

Although there is a strong demand for low-carb products, Mintel sees recent evidence that the low-carb craze is cooling. The market for low-carb frozen meals is expected to decline gradually over the coming year. Mintel estimates that over the next two to three years, it is likely that low-carb products will continue to be offered; however they, along with low-fat items, may become one part of the general weight-loss market.

Frozen meal manufacturers will have to be diligent in segmenting the marketplace in multiple sub-segments and, consequently, fine-tuning the brands and products in each segment. The weight-loss market will be addressed by two distinct types of products--low-fat and low-carb. Outside the weight-loss segments, greater opportunity will exist for products offering better taste and general wellness benefits.

Increased Competition

Eating “on the go” is part of the American way of life. Information Resources Inc. (Chicago) found that 46% of Americans eat most of their meals away from home or on the go. In consumers' minds, there are a myriad of appealing, mobile choices…and given the recent upswing in interest, these choices are expanding. In-store delis, restaurants and (to a lesser extent) convenience stores--also known as c-stores--all offer consumers alternatives to frozen meals.

In-store delis and fresh meat sections are stocking chilled prepared meals as a more-convenient and better-quality solution to frozen meals. According to the International Dairy-Deli-Bakery Association's (Madison, Wis.) 2004 “What's in Store” report, sales in supermarket in-store delis have increased steadily, from $10.5 billion in 1996 to $14 billion in 2002. Sales of hot entrees have reached $1.6 billion (11% of deli sales), while prepared chicken has reached $1.5 billion. In addition to prepared chicken, in-store delis are offering a greater variety of prepared entrees and side dishes. Traditional meat and poultry processors like Tyson Foods (Springdale, Ark.) are offering attractively packaged, heat-and-eat meals in the fresh meat and poultry sections.

The growth of carry-out and drive-thru business for casual/family restaurants is a strong indicator that consumers are finding alternative ways to get a hot meal on the table quickly. The National Restaurant Association (Washington) finds that half of casual/family restaurant operators said that takeout sales were up between 2001 and 2003. Popular destinations include Outback Steakhouse (Tampa, Fla.), Applebee's International (Overland Park, Kan.), and Chili's (Brinker International, Dallas).

Though many chains already offer most items from their menus for takeout, given the marked success of Outback and Applebee's takeout programs, Mintel expects that more chains will ramp up development of more efficient carryout services and advertise them more widely.

According to the National Association of Convenience Stores (Alexandria, Va.), 2003 was a very strong year for both frozen food sales and freshly-prepared/commissary sales. A larger number of c-store operators are turning to food sales for margins, and thus may begin to increase and improve their offerings. While c-store competition is not significant at this point, this may well be a “distribution channel to watch.”

With this intense competition from alternative channels, frozen meal manufacturers will need to find new ways to merchandise and price their offerings in order to provide a desirable alternative to consumers.

Changing Demographics

According to Mintel's exclusive consumer research, respondents from households with five or more members are notably more likely than others to eat frozen complete dinners or entrees once to twice a week. However, according to the U.S. Census Bureau (Washington), average household size is expected to continue shrinking through 2008. Given the current demographics of the frozen meal user, the census projection is expected to result in a decrease in frozen meal consumption. However, with renewed emphasis on product development and marketing efforts, manufacturers may be able to better address the needs of smaller households and reverse this trend.

After discussing further demographic results from the consumer research, Mintel's report predicts that more targeted brand and product offerings will be needed to address the divergent needs of demographic sub-segments. The price-conscious core consumer continues to value convenience, taste and ongoing variety. The aging consumer in a smaller household prefers higher quality, more nutritious, frozen meal options. And larger and ethnic households need greater authentic flavors and bold tastes in multiple packaging formats.

Notes Mintel, “Manufacturers of frozen foods have shown themselves to be adept at both anticipating and meeting consumer expectations for products that are healthful and convenient.” The highly competitive market will drive manufacturers to incorporate new technology into their products. The introduction of an innovative product will both typically create its own demand and generate greater revenue, since the new product is usually sold at a premium price, observes Mintel.

For more information on the report mentioned in this article, “Frozen Meals,” contact Mintel International Group Ltd.; 213 W. Institute Place, Suite 208; Chicago, IL 60610; phone: 312-932-0400.

Sidebar: Going Global

As women have entered the work force, less food is prepared from scratch at home, and opportunities for quality frozen meals grow.

This hardly is magazine-worthy news on the American lifestyle. However, this demographic shift is true in many emerging nations as well. In Hong Kong, 52.5% of women were in the labor force in 2002, according to a 2003 GAIN Report from the USDA Foreign Agricultural Service. Additionally, 58.5% of the work force is of age 25 to 44, a population that is “very receptive to new food varieties.”

U.K.- and Scandinavia-based Findus, a frozen meals company with self-reported sales of 800 million euros and a presence in 20 countries, launched Chicken & Bacon Lasagna in Hong Kong this year. The pasta, chicken and bacon product has a mushroom sauce with a “Bechamel Red Leicester” topping.

Targeting that younger Hong Kong audience, Kraft Foods (Kraft Pizza Company, Glenview, Ill.) introduced a Tombstone Pepperoni Pizza that is “100% real cheese and contains pork, chicken and beef.” Green Isle Foods (U.K.) appears to think an American nuance may be good for pizza sales in Hong Kong. It just introduced a “Deeply Delicious Pepperoni Perfecto” pizza under the Goodfella's brand.

Foods less familiar to Americans also are offered. Shandong Kaijia Foods Co. (China) introduced intriguing Aubergine Cakes in mid-2004 to mainland China. The eggplant-based product has a sesame meat and vegetable topping and is, of course, microwavable. Can lasagna and pizza be far behind?

--Claudia D. O'Donnell, Chief Editor