Convenience Meals and Processed Meat
* Whole grains and vegetables are important.
* Refrigerated dinner sausage segment is expected to grow.
As the recession continued through 2010, and consumer confidence remained low, shoppers curtailed discretionary spending of all kinds, including eating out at restaurants as often as they would have liked. And, while consumers spent a good deal of time in the kitchen in 2010, as they did in 2009, it may come as a surprise that the $7.1 billion convenience meals market did not reap much of the benefit. Indeed, several factors contributed to lackluster performance in the sector, and Mintel expects that an improving economy will not help matters.
Meals Sectors in Decline
In the $5 billion frozen meals category, sales declined 3.5% during 2009-2010 in FDMx* outlets. (See chart "Frozen Concepts.") While performing better, the $2.1 billion shelf-stable meals/meal kits category was flat during the same period. After adjusting for inflation, the picture was worse with both categories.
In terms of leading companies, Nestlé and ConAgra have done a good job of keeping much of this business for themselves, with nearly two thirds of all frozen meals sales. Both companies benefit from a portfolio of diverse, well-established brands that appeal to a wide range of consumers seeking hearty portion sizes, lighter fare for weight management, and premium and value-based offerings. The two companies had contrasting years, however, in terms of sales performance. ConAgra grew sales of most of its larger brands during 2009-2010, while NestlÈ's were in decline. Working in ConAgra's favor is its value-based Banquet brand, well positioned in a down economy. Also, the company's innovative steaming meal preparation process has helped increase sales of Healthy Choice CafÈ Steamers.
Looking closer at the shelf-stable meals market, it is dominated by three companies, led by Kraft and its very successful (and recession-friendly) macaroni and cheese products. The number two company, ConAgra, was again successful in this sector (as with frozen meals), and Hormel Foods accounted for 17% of sales during 2009-2010, thanks to the success of its namesake prepared chili and its Mary Kitchen prepared dinners brand.
New Product Innovation
As monitored by Mintel's GNPD, all types of new convenience meal innovations have been in decline since 2008. This is not entirely surprising, since many manufacturers have cut back on innovations--due to costs of development, advertising, etc., in the challenging economic climate.
Beyond overt claims of convenience/ease-of-preparation, which are common to these kinds of products, marketers are increasingly speaking to product purity. Since 2005, the "no-additives/-preservatives" claim is the most common. Additionally, better-for-you claims, including low-/no-/reduced-fat, -calorie or -trans fat, all saw sizeable jumps in the past year, particularly in the frozen meals category.
Comparatively, "premium" and "organic" claims both saw sharper declines in 2009, no doubt fueled by the recession and manufacturers' expectations that consumer interest would be with value-oriented products. However, in terms of organic products, frozen food manufacturers may be missing out on an opportunity, as 71% of consumers say they would be willing to pay a bit more for these types of products (Mintel's custom consumer survey, July 2010).
Whole Grains and Vegetables Lead
Consumers of convenience meals say they are interested in seeing more of a variety of different product concepts, according to Mintel's custom consumer survey (July 2010).
Of 16 named concepts, 63% of consumers cite "whole-grain/higher-fiber versions," which leads the overall pack. From an ingredient perspective, many innovations in this sector are grain-based (e.g., pasta, bread, noodles, rice). Companies have capitalized on the continued popularity of whole grains, with new or reformulated products that carry front-of-package logo endorsements, such as from the Whole Grain Council, or their own easy-to-see icons that provide "grams-per-serving" indications.
"Versions with more vegetables" ranks third, behind "cheaper versions," and is favored by 62% of convenience meals consumers. While frozen meals often include vegetables, shelf-stable meals/kits typically do not, allowing consumers the flexibility to add their own. These two approaches appeal to the nuances consumers seek, depending on the eating occasion (convenience vs. control/flexibility). But, marketers should continue to emphasize vegetable content in packaging imagery, as well as claims, as this clearly resonates with shoppers.
Marketers should take note, however, that consumers will not expect to pay more for some of these concepts. In fact, interestingly, convenience meals consumers indicate they are more likely to pay a premium for concepts with whole grains, but not for those with more vegetables. Perhaps, this is because vegetables are perceived as an inexpensive addition, and consumers see whole grains as a premium option--one for which they are already accustomed to paying more (in the bread and pasta aisles), or for such products as General Mills' Fiber-One brand.
Convenience Meals Come a Long Way
As a somewhat mature market, the "TV dinner" has evolved considerably. Ready to eat in just minutes (and sometimes just seconds), frozen meals come in all shapes and sizes, sometimes portable and "hands-free," stacking convenience upon convenience, for the truly impatient and time-strapped consumer.
Innovations now span across competing sectors, as well. No longer relegated to the freezer or the mac and cheese and canned spaghetti shelves, retailers market meal solutions in fresh/chilled prepared foods sections, too, including everything from side dishes to fully-cooked rotisserie chickens. One of the latest trends among some retailers, such as Safeway, includes private label/store brands of chilled meals packaged just like frozen dinners, but with decidedly upscale and "fresher" positioning.
Challenges Facing the Sector
According to Mintel's custom consumer survey (July 2010), convenience meals consumers eat shelf-stable and/or frozen meals about 23 times a month (per household). Usage is particularly high among Millennials (aged 18-34); however, the numbers trend downward, as age increases. Among various meal types, pasta-based and meat-based meals have lower usage levels across all age groups, as pasta is easy to prepare, and canned meat meals may suffer from a perceived quality issue.
Mintel believes the sector faces two primary challenges. Despite the recession, usage has not shifted much year over year. Marketers face an obvious challenge once the economy improves: how to retain consumers, as they start eating out again with greater frequency.
The fact is, items such as frozen meals are not considered great-tasting or all that healthy, even among users, but the items' convenience drives usage. Slight shifts in an improving economy will likely attract consumers to affordable, casual dining outlets. Already, foodservice purveyors have pushed value extensively, whether it is Chili's and Applebee's promoting combo deals, fast food outlets capitalizing with dollar and value menus, or pizza chains, such as Little Caesars and Domino's, that have marketed $5 price point items.
Ingredient costs could diminish the value proposition for convenience meals. According to the Bureau of Labor Statistics, the Consumer Price Index for all food rose significantly in 2008, with some products, including eggs, fats and oils, and bakery products, experiencing more than a 10% jump. While prices increased much more slowly in 2009 (up 1.8% over 2008), and the expectation is that increases in 2010-2011 will also be moderate, larger increases are expected with animal products, like meat, pork, fish and dairy--all key ingredients in complex convenience meal formulations.
As companies pass along price increases, convenience foods of all kinds stand to look much less appealing, due to a poorer value proposition. While private label/store brands can ease some of the sticker shock for consumers, these brands are not top-of-mind options in the convenience meals market. Indeed, store brands of frozen meals accounted for less than 5% of sales during 2009-2010 in FDMx (while private label, shelf-stable meals/kits accounted for roughly 10% of sales in the same period).
Frozen meals marketers will continue to seek out new ways to offer consumers more convenience and ease with these products, but it seems they may have pushed this about as far as it can go. The next dynamic stage of growth in the sector will likely come from other drivers, including co-packing and co-branding between restaurant and retail brands.
Notable brands that already compete in the space include Boston Market and T.G.I. Friday's, but there is ample room for more. By incentivizing restaurant patrons with coupons for the retail products, it could drive both retail and foodservice revenues.
Another growth opportunity involves the development of more ethnic/international flavors/varieties. Millenials and affluents (in households earning $75K+ annually), in particular, favor these types of foods. Increasingly, they are embracing "authentic" and often spicy foods from Indian and Asian cuisines. By targeting Millenials (who are typically heavier convenience meal users) with ethnically-infused options, marketers may keep them interested in the sector.
Unlike convenience meals, the $10.4 billion processed meat market (which Mintel segments into lunch meat, dinner sausage and frankfurters; and breakfast meats, including bacon and breakfast sausage) has performed well since 2007 in FDMx outlets. This is thanks, in part, to an increase in recession-driven consumer behavior, including "brown-bagging" lunches and preparing more meals at home.
However, upon closer examination, the two largest segments overall, sliced lunch meat and breakfast meats, had opposing growth trajectories since 2004. While sliced lunch meat performed well, growing 11% since 2004, the latter segment was down slightly (2%) during the same period in FDMx outlets.
The difference in performance is driven by consumer attitudes and behavior shifts with breakfast meats, in particular. For example, sluggish performance in the breakfast meats sector is primarily due to obesity concerns. Bacon and sausageótwo foods consumers know to be high in fat and less healthful overall--have likely experienced some reduction in usage. The increased popularity and usage of dinner sausage (which is made from a variety of meats and sold in a multitude of flavors) has likely cannibalized some sales of breakfast sausages.
Finally, there has been a shift toward less-expensive store brands. Indeed, sales growth of private label breakfast meats outpaced the entire segment--a clear sign that consumers traded down to facilitate continued usage.
The Innovation Front
The healthier eating trend has also had an impact on innovation in the processed meat sector. Product launches including natural, uncured bacon or better-for-you variants, such as turkey bacon or lower-fat sausage, have helped to keep the breakfast meats category from declining further.
The same is true with frankfurters, which grew just 3% from 2004-2010. While the recession bolstered sales starting in 2007, consumers think of these highly processed products as low-cost meal options. However, the premiumization of the segment is very evident, with the launch of nitrate-free "Angus" varieties of beef franks (from Oscar Mayer Selects, for example), as well as turkey franks and all-natural offerings. To some extent, this segment has also seen some blurring lately, as premium frankfurters and dinner sausages come to market.
Convenience is a critical component of success in the processed meat sector, as well. Many of the latest innovations, particularly in the lunch meat segment, feature resealable packaging, such as press-to-close or slide zipper, as well as reusable plastic containers with closable lids. Indeed, even marketing serves to illustrate time-saving as a selling point, with "deli-style" products now available in thinly-shaved and thick-sliced varieties that lure consumers away from the deli counter by offering them products "without the wait."
Like the convenience meals sector, newer innovations (particularly dinner sausages) are attracting consumers with ethnically-infused, bold flavors, like jalapeÒo and spicy mango, which should also increase usage occasions. Some of these products are also pre-cooked, making them very easy to integrate into meal preparation.
Challenges Facing the Sector
The sector still faces many challenges. For one, price increases will deter usage. Breakfast meats, like bacon, are expected to go up in price. According to a survey conducted by the American Farm Bureau (as reported by the Wall Street Journal, January 2011), a pound of bacon in retail costs 44% more than it did a year ago.
Consumers are also seeking less-processed foods. While they love the taste of processed meats, they like the idea of products with fewer ingredients, even if they are not all that much healthier. Can the industry respond by taking a page from another indulgent food sector--ice cream? Haagen-Dazs has successfully marketed its "Five" line extension by enunciating purity and simplicity.
Selection in related sectors deters traffic here. Companies realize this, which is why brands like Jimmy Dean have thrived, by expanding into the breakfast entrÈes and sandwiches category. Furthermore, inexpensive foodservice offerings at virtually every turn keep consumers engaged. Ultimately, shoppers may be finding what they need elsewhere.
Many of the same challenges and opportunities face both the processed meats and convenience meals sectors. With the vast majority of households using processed meats, Mintel does expect the market to grow, though this will mostly be due to price increases annually. While some growth is anticipated, as consumers who enjoyed eating-in more often continue to do so even as the recession wanes, other concerns discussed earlier will slow growth. A bright spot falls largely with the dynamic, refrigerated dinner sausage segment, which Mintel believes will continue to grow sales. pf
For more information on this topic, type "meals," "meal centers," "convenience meals" or "prepared meats" into the search field at www.PreparedFoods.com.
Fruit Adds Novel Flavor to Favorites
Convenience meals attempted to offer a balanced meal, by emphasizing fruits and vegetables. For example, Healthy Choice launched one meal, Complete Meals Chicken Pesto Alfredo, which has chicken tenderloins in basil pesto Alfredo sauce with pasta and vegetables. For dessert, there is a cherry blueberry multigrain crisp, notes Mintel's GNPD.
Stampede Meat's Meals Made Easy Apple & Cranberry Stuffed Pork Loin Roast featured slow-oven-roasted boneless pork, stuffed with Granny Smith apples and cranberry stuffing.
Barber Foods introduced Premium Entrees Raw Stuffed Chicken Breasts, boneless chicken breasts with traditional stuffing, in varieties that included CrËme Brie, featuring a stuffing that is a blend of Cheddar, Brie and mozzarella cheeses, with sliced apples and cranberries.
For vegetarians, Quorn's meatless and Soy-free Cranberry & Goat Cheese Chick'n Cutlets offered a high-protein meal with a good source of fiber. The cutlets are made of mycoprotein (a type of fungi), topped with goat cheese, cranberries and breadcrumbs; the meal is microwaveable.