Eye On Differentiation

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Eye On Differentiation

By Megan Pellegrini, - 02/02/2011

Retailers that can balance price, value and innovation will do well in the frozen and canned fruit and vegetable segments.

The last few years have seen I a tremendous amount of innovation within the frozen fruit and vegetable segment — with items such as steam-in-the-microwave veggie blends and blend-with-milk smoothies coming to mind. Canned fruit and vegetables, meanwhile, have focused mainly on value.

Store brands in both areas long have performed well against the national brands. And retailers that can balance price, value and investments in innovation likely will continue to do well in both categories

Store brands in both categories, however, lost some ground in 2010 following an enthusiastic 2009. Data from The Nielsen Co., New York, show that dollar sales for store brand canned fruit decreased 5.3 percent during the 52 weeks ending Oct. 30, 2010, while unit sales dropped 6.0 percent (food, drug and mass merchandise outlets, including Walmart). Dollar sales for store brand canned vegetables, meanwhile, increased a whopping 32.7 percent, while unit sales jumped 46.9 percent. Frozen fruit fared better than its canned counterparts, with store brand dollar sales increasing 7.2 percent and unit sales rising 7.9 percent. But store brand frozen veggies cooled off a little, posting a 1.6 percent dollar sales decline and a 1.8 percent unit sales increase.

Do consider adding innovative value-added items such as single-serve cups or standup pouches.

Heat up frozens

According to "Frozen Foods in the U.S., 3rd Edition," a January 2011 report from Rockville, Md.-based Packaged Facts, consumers are turning to frozen foods that offer health, wellness and nutritional benefits such as portion and calorie control; convenient preparation such as steam-in-the-bag technology; and alternative ingredients such as gluten-free formulations. As food marketers offer more health-and convenience-minded product innovations, the market research publisher projects that frozen food and beverage sales will increase 25 percent by 2015 to reach $70 billion.

Frozen fruit's recent strong growth has been driven by the latest smoothie trend (now the No. 1 use of frozen fruit); innovations with "new" fruit such as mangos, dark cherries and pineapple; and consumer understanding that frozen fruit is just as nutritious as its fresh alternatives, says Christine Herrera, vice president of marketing for Placentia, Calif.-based Sunrise Growers-Frozsun Foods.

"We're seeing retailers allocate more space for frozens as demand grows," she says.

In the frozen aisle, at least, national brands and store brands seem to complement each other in a positive way.

Peter Skolnick, president and owner of Imperial Frozen Foods, based in Monterey, Calif., adds that the national brands actually benefit store brands "by providing a marquee which draws the consumer to the category."

To that end, national brand equivalents are performing well in the frozen section.

"We have been able to increase sales through a simple formula: high quality and very competitive pricing," Skolnick says.

"Includes canned tomato products. **lncludes frozen potato products. Source: The Nielsen Co. Food, drug and mass merchandiser stores, including Walmart, for the 52 weeks ending Oct. 30, 2010 (prepackaged, UPC-coded products only).

Michael Jewett, director of sales for Warrenville, Ill.-based Harvest Food Group, agrees that retailers have focused on matching their products to national brand items over the last couple years.

"This trend continues today, with a mild interest in twists or changes to the national brand for slight differentiation," he says.

About five years ago, the introduction of microwavable and steamable vegetable pouches reinvigorated the frozen vegetable category, leading retailers to improve their packaging technology to keep pace.

"Single-serve microwaveable bag meals are getting more attention in the frozen category," Jewett says. "Retailers need to spend more time looking at value-added items rather than just the commodity offerings."

More retailers also are shifting to standup pouches because they merchandise better; sport a crisp, clean look; and are resealable to decrease freezer burn, Herrera says.

"Retailers that just remain with the traditional poly bag program are missing the boat," she notes. "It's like riding in a horse and buggy instead of a Ferrari. Standup pouches are a little more expensive, but the investment has paid off for those we've seen adopt them."

Don't forget that the national brand can offer "marquee value" that draws the customer to the category — and to store brands.

Do promote frozen fruit and vegetables year-round instead of just during the holidays and other special events.

Coexist, or go it alone?

Although store brands have duplicated innovations from the national brands, some retailers are starting to offer store brand-only selections of frozen fruit and vegetables.

"Retailers that only carry private label items have as successful a frozen fruit program as those with a mix of brands and private label," Herrera says.

She suggests that frozen national brand items cannot deliver a point of difference anymore when compared to store brands, and consumers realize this as well.

"One exception is Yoplait's Frozen Smoothie Mix product," Herrera notes. "But retailers are now adopting private label smoothie programs similar to Yoplait's."

On the other hand, some private label manufacturers believe a retailer's store brands benefit by being included among innovative national brand product introductions.

"[Once again,] the brand offers marquee value that draws the customer to the category," Skolnick says. "The customer tries the private label because of price then stays with private label because of quality and price."

In addition, the national brands can supplement the store brand lineup when it comes to slow-moving items.

"Why sell a private label SKU that only ships 10 cases a week?" Skolnick asks. "Let the brand have it."

Regardless of product assortment, Herrera notes that retailers need to promote frozen fruit and vegetables year-round, not just during the holidays or other high-usage occasions.

"There is a core frozen fruit consumer, so it's important to keep the category top of mind with other shoppers," she adds.

Herrera also points out that the frozen fruit segment is one of the healthiest categories in the freezer and is poised for future growth.

"Over the last 10 years, it's averaged 7 percent to 8 percent annual growth without a lot of promotions, like the pizza category does with price deals," she says. "So it's growing without marketing support or a push. Those retailers [that] do promote it will reap big benefits."

Don't forget about younger and ethnic consumers in communications centered on canned fruit and vegetables.

Canning value

The mature canned fruit segment has recaptured some consumer interest during the last few years as well. In a 2009 report, Mintel International, a global market researcher, notes that the canned/bottled fruit category increased 6.7 percent in 2008 because of new healthy and convenient products boasting no/low-sugar, natural/organic and/or enhanced (such as containing omega-3s) claims.

But innovations aside, Andy Dollarhide, director of sales and marketing for Costa Mesa, Calif.-based Vimpex International Corp., notes that overall demand for canned fruits and vegetables has been on a general overall decline because the products' main consumers are aged 55 and over. The trick for manufacturers, he says, is to find a way to connect with more younger and ethnic shoppers.

"The overall trend is to go really upscale or straight to value, so there has been a widening of tiers," Dollarhide says. "Here in L.A., we're seeing a big focus on value formats or Hispanic clientele picking up commodity sales."

Manufacturers are reaching out to new consumers with single-serve 4-ounce cups, easy-open tops and products with less salt and sugar, Dollarhide says.

As with the frozen manufacturers, some suppliers of store brand canned items point out that national brands bring positive attention and competition to the canned aisle.

"If national brands weren't as aggressive — dropping prices to 50 cents [or] 55 cents per unit recently — private label wouldn't be competing and growing as much as it is," says Bobby Ray, senior vice president of retail sales and marketing for Siloam Springs, Ark.-based Allens Inc. "There are a lot of aggressive promotions out there, and they are increasing sales."

He notes that store brands are getting deeper promotions than the national brands today — 7 cents more per unit as compared to last year, with national brands close behind at 6 cents per unit.

"However, despite low prices, a store brand shopper will always be a store brand shopper," he says. The category is growing because of factors other than price, he adds, such as innovation and line extensions.

A yet-unreleased study from the Washington, D.C.-based Food Marketing Institute points to true partnerships between retailers and store brand manufacturers as being critical to further success, Ray says.

"Many manufacturers surveyed say that retailers should share their innovation strategy and be willing to pay for it, and retailers want suppliers to focus on innovation and not just the production line," he says.

By meeting in the middle, both parties likely will be able to improve the price and value relationship of the finished product, he suggests.

'If national brands weren't as aggressive — dropping prices to 50 cents [or] 55 cents per unit recently — private label wouldn't be competing and growing as much as it is.'

The category is growing because of factors other than price.