Frozen entree sales continue to cool

by Monica Watrous
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CHICAGO — Frozen entrees have lost steam over the past five years, as sales have stagnated or declined, according to research from Mintel International, Chicago. While some companies, such as H.J. Heinz Co., are reconsidering their strategy within the North American frozen food aisle, other companies, such as Nestle S.A. and ConAgra Foods, Inc., are accelerating efforts to reinvigorate the slumping segment.

Consumers have shifted away from frozen entrees in favor of fresher alternatives. In an October 2012 frozen foods report, Packaged Facts said 57% of U.S. adults cited a preference for fresh foods as a reason for not buying frozen foods in the previous three months.

“Frozen meals have a longstanding perception of being the TV dinner,” said Sarah Day LeVesque, a food and beverage analyst for Mintel. “The perception is still highly processed, not offering a full, balanced meal, or made with ingredients consumers don’t understand. Other products have come out that are convenient with a more nutritious perception, such as meal kits and refrigerated meals, which have a perception of being less processed and a little healthier for consumers.”

Nestle, Vevey, Switzerland, that leads sales in the category, responded to the trend this month with the introduction of Lean Cuisine Salad Additions entrees, which are microwave-steamed pouches of grilled chicken, vegetables and dressing that are added to lettuce in order to make a salad.

“We’re also working on a broad communication strategy … addressing perceptions about the relative healthiness of frozen against fresh, and hopefully that will also start to impact the categories positively as well,” said Roddy Child-Villiers, head of investor relations for Nestle, in an Oct. 18, 2012, call with financial analysts to discuss third-quarter earnings.

Omaha-based ConAgra Foods zeroed in on a different growth opportunity last year with its acquisition of the P.F. Chang’s frozen meals line from Unilever. Products promoting a well-established restaurant’s name boost the item’s credibility and offer consumers a sense of dining out, according to research from both Packaged Facts and Mintel.

“One indication of quality is finding a brand you recognize and trust,” Ms. Day LeVesque said. “Whether you eat at that restaurant or not, you think you can trust that brand when you see it in the grocery store. It gives consumers who are not eating out as much an opportunity to eat restaurant-style food at home.”

However, brand recognition isn’t a sure bet. Pittsburgh-based Heinz in February 2012 ended its T.G.I. Friday’s frozen single-serve entrees line just six months after its launch. The company also ceded its Boston Market license for frozen dinners and side dishes.

And, recently, Heinz acknowledged sales of its Weight Watchers Smart Ones frozen meals have been struggling.

In a Nov. 20, 2012, earnings call, Bill Johnson, chairman, president and chief executive officer for Heinz, said the company would shift its focus away from the product to more profitable areas, such as breakfast and snacks.

“I've been pretty consistent for almost four years saying I am not going to chase a declining market,” Mr. Johnson said. “If I put a lot of investment behind Smart Ones and I am chasing a declining market, there is just not going to be the return I want.”

He added, “I certainly don't want to imply that we are walking away from the business because we are not.”

So, how will food makers reclaim the cooled-off category?

With innovation, said Harry Balzer, chief industry analyst for the NPD Group.

“The thing Americans look for is, ‘what’s happening new in foods I like,’” Mr. Balzer said. “Frozen foods have a lot of good things going for it. How to stay contemporary in the market is the biggest challenge in the category.”

Companies such as Amy’s Kitchen, Inc., Petaluma, Calif., have leveraged a growing movement in gluten-free, organic and vegetarian eating with their frozen entree offerings.

Ethnic flavors are another top trend in frozen meal introductions, Ms. Day LeVesque said.

“Pad Thai, Vietnamese food and Indian frozen meals give consumers the opportunity to try different cuisines without investing money or time making them from scratch,” Ms. Day LeVesque said.

Bagged frozen meals also have gained popularity, possibly because they seem fresher than their classic tray counterparts, Ms. Day LeVesque suggested.

“Manufacturers are starting to understand in order to get consumers engaged in the category, they have to have new products and varieties coming on a regular basis,” she said.
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