There’s no way around it. Frozen prepared meals and entrées need to get healthy and generate more sales. And, perhaps the topic of health is just the right place to start.
Total retail sales of prepared meals and side dishes reached $9.9 billion in 2013, at current prices. The category declined 4% from 2008-13 as consumers prefer products with natural ingredients, and better-for-you claims. Within the category, refrigerated meals and side dishes improved their respective sales from 2008-13; however, their sales were not enough to offset sharp declines within the much larger frozen single-serve and multi-serve meal segments.
Mintel, a global market intelligence agency, expects category sales to decline another 5% from 2013-18, reaching $9.5 billion, at current prices. Manufacturers’ abilities to promote the convenience of these products, meet consumer preferences for more natural and nutritional products, and segment products based on consumer need—all could help contribute to future growth.
Single-serve frozen meals maintain the largest market share within the category at 53%, followed by multi-serve frozen meals, which represent 21.7% market share. Together, these segments declined 15% from 2011-13, reflecting the overall decline of the category.
The only two segments to experience sales increases over the past five years include the refrigerated segments. Refrigerated meals and refrigerated side dishes represent just 22% of the overall category, collectively, but experienced sales increases of 10.5% and 4.9%,
respectively, from 2011-13.
Frozen side dishes, which represent the smallest share of the market at 3.3%, declined nearly 8% from 2011-13, reaching sales of $325 million. The smaller format of many of these items lends themselves to snacking occasions, which could help the segment; however, these items still struggle to stand out against frozen meals that come pre-packaged with side dishes.
Sales within the prepared meals and side dishes category continue to be led by brands from Nestlé and ConAgra, though both companies experienced year-over-year sales declines. The largest declines stem from poor-performing diet brands Lean Cuisine and Healthy Choice. H.J. Heinz Co. also experienced strong sales declines in part from its diet brand, Weight Watchers Smart Ones. These diet brands attribute declines to high prices and a shortage of brand innovation.
Private label sales maintained 8.4% share of the market with sales of nearly $785 million in the 2014 review period. Private label sales declined 4.7% from 2013-14, though consumer perception of these products is quite positive. Amy’s Kitchen increased its sales nearly 13% from the 2013 review period to reach sales of $181.9 million. Its line of frozen handhelds and entrees appeals to consumer interest in natural and organic ingredients and no additives or preservatives.
Frozen meals have the highest household penetration rate with 73% of households indicating a purchase of single-serve or multi-serve frozen meals within the past six months. In comparison, slightly more than one third (35%) have purchased any type of refrigerated meals, and 48% have purchased any type of side dishes. The convenience of these items, and their versatility across meal occasions, are two reasons for their high household purchase, though there is room to improve their taste with better ingredients and quality.
Single-serve options are more popular among households, compared to multi-serve options, due in part to a decline in household size, as well as interest in single-serve options for controlling portion size and snacking. Compared to women, men are significantly more likely to have purchased refrigerated meals (41% of men, 31% of women), as well as frozen side dishes (39% of men, 35% of women). Past purchases of both prepared meals and side dishes tend to skew toward consumers aged 25-44.
These consumers report higher past purchase across all segments examined in this report, in part due to their busier lifestyles, an increase in young adults living at home, and a struggle for family meal time. This group also includes parents who may purchase prepared meals and side dishes for their children to prepare on their own, or for personal consumption if preparing multiple items for a particular meal occasion.
Convenience and ease of use are the top reasons buyers of prepared meals and side dishes make such purchases. Some 76% purchase prepared meals or sides because they are useful to have on hand when they don’t want to cook, while 72% indicate these products are quicker than preparing food from scratch.
Cost and taste factors are significantly more likely to be purchase motivators for men, compared to women. Nearly half of men (47%) indicate these items are cheaper than preparing food from scratch, compared to 40% of women, while 31% of men also indicate they prefer the taste of prepared meals and sides over items prepared from scratch, compared to 22% of women. Those aged 25-34 are most likely to be motivated by cost when purchasing prepared meals and side dishes. More than half (53%) purchase prepared meals and sides because they are cheaper than preparing food from scratch, and 58% purchase them because they are usually on sale.
Prepared meals and side dish purchasers most often consider reduced claims and added nutrition when buying these items. Some 40% of consumers who use prepared meals and side dishes consider products with reduced fat or calories and 38% look for all natural ingredients, a claim that has grown steadily from 2009-14.
Compared to older purchasers, younger purchasers, specifically those aged 18-44, are more likely to consider ingredient claims such as high protein and whole grain, as well as products for specific diets, including vegetarian, gluten- and dairy-free options.
Reduced claims—such as reduced fat, calories, or sodium—are more likely to be considered when purchasing frozen meals, versus refrigerated meals, and frozen or refrigerated side dishes. Frozen meal manufacturers should promote existing products that feature these claims, as well as ensure new product development aligns with consumer preferences for reduced claims. Although consumers are motivated by convenience when purchasing prepared meals and side dishes, products with better-for-you claims can make it easier for consumers aspiring to make better eating decisions.
The leading factors that would influence consumers to purchase more prepared meals and side dishes are natural ingredients (39%), and higher-quality or gourmet items (35%). Usability and value-related factors also are most important to consumers.
Women are significantly more likely than men to cite factors related to ingredients as motivators for increased purchase of prepared meals and side dishes. Some 43% of women indicate natural ingredients would influence them to purchase more of these items, compared to 34% of men, while 21% indicate a limited number of ingredients would be an influence, compared to 14% of men.
Consumers aged 18-24 are least likely to indicate higher quality or gourmet items would influence them to purchase more prepared meals and side dishes (27%). The higher price point of these items, combined with lower household income among younger consumers, indicates they are not willing to splurge on gourmet options. Among older consumers, who are less likely to purchase items in this category, storage is a top factor for greater purchase frequency. Some 40% of those aged 55-64, and 38% of those 65+, indicate easy storage in a refrigerator or freezer as a factor for purchasing more prepared meals and side dishes
Consumers who purchase prepared foods and side dishes feel strongest about health- and labeling-related statements. Some 86% of these consumers agree nutritional information should be clearly stated on product packaging, and 61% agree there should be more processing information, such as information about food preparation or ingredients.
While consumers do appear to have health concerns about prepared meals and sides, 81% agree single-serve frozen meals are an easy way to control portion size. Further, 71% agree diet-specific meals are suitable for those not on a diet, presenting an opportunity for additional promotion of these items among a general consumer base.
In general, consumers aged 25-44 are more interested in health- and ingredient-related factors. They also are more favorable toward store brands and place importance on cleaner product labels and environmentally friendly packaging.
Several segments benefit from a high household penetration, though there is opportunity to improve the nutrition and quality of products within the prepared meals and side dishes category. These items have high household usage because they are convenient and versatile, and should be promoted as such.
Consumers are most interested in natural ingredients, gourmet or high -quality items, and products with reduced claims so these should be top of mind when considering product innovation across segments. By appealing to these product preferences, manufacturers can make it easier and more convenient for consumers to make better eating choices.
Source: Prepared Meals and Side Dishes-US-May 2014
Amanda Topper is a food analyst at Mintel.