Put The Freeze On Takeout

In 2009, for the first time ever, more Americans ate frozen lasagna than indulged in a homemade version, according to a recent study from The NPD Group, a Port Washington, N.Y.-based market research firm. And why not? A frozen lasagna saves consumers the time and hassle spent shopping for and preparing the ingredients — and it even can cost less than a homemade version. (And restaurant meals currently cost three times as much as meals made at home, The NPD Group study points out.)

Today's frozen aisle definitely has more convenient, low-sodium and healthful entrée and meal options than in years past, and private label and national brand manufacturers alike are working overtime to duplicate a restaurant-quality taste. Retailers, therefore, have an opportunity to appeal to time-starved and cash-strapped consumers with a robust frozen meal and entrée program.

Data from The Nielsen Co., New York, show store brand prepared frozen foods posting 6.6 percent and 8.5 percent dollar and unit sales increases, respectively, during the 52 weeks ending Aug. 7 (food, drug and mass merchandiser outlets, including Walmart).

Store brand frozen seafood entrées well outperformed the total category — enjoying 36.6 percent and 28.5 percent dollar and unit sales gains, respectively. A number of other store brand sub-segments also posted strong growth, including pot pies (18.9 percent and 22.8 percent), Italian entrées (15.8 percent and 10.9 percent) and Oriental entrées (13.9 percent and 20.7 percent).

According to Mintel International, a global market research company, store brands could realize even stronger sales if they had a better reputation amongst shoppers. In its "Frozen Meals — US" September 2010 report, Mintel says that less than half of consumers (43 percent) agreed, and only 14 percent strongly agreed, that store brands taste as good as name brands. Because frozen meals have a relatively high price point — and quick-serve restaurants sell meals for about $5 — store brand frozen meals and entrées still are facing some resistance from consumers.

Do consider extending current store brand offerings so consumers are not forced to turn to the national brands for variety.

Price versus perception

This perception of sub-par quality is helped along by some retailers' reluctance to move out of the value and national-brand-equivalent tiers to more premium and super-premium lines.

"The last economic cycle somehow put in the minds of retailers that everything has to be about price," says Allan Kliger, president of Toronto-based Victory's Kitchen. "They are putting out a low-priced product but giving something up with quality, which will be a competitive issue as they compete with restaurants and national brands."

Kliger says his company's research shows consumers are pretty clear on what they expect to spend within a certain category.

"They don't expect to pay the same amount at retail as they do at restaurants, but they don't want a steal either," he says. "The retailer thinks if consumers can get their product at such a low price, they will buy it. But that's where we see the disconnect."

To offer a low-priced item, the private label manufacturer needs to keep manufacturing costs and production capability to a minimum, making product development capabilities less flexible, Kliger says. Higher-quality restaurant-equivalent products, in contrast, often involve smaller production runs and cost more.

"Retailers need to identify their niche: products that the market has ignored but consumers have demonstrated they want," he says.

Of course, many retailers are likely to disagree with Kliger's market assessment, and will continue to focus on value and national brand equivalents during this lousy economy.

"Budget-minded shoppers are more likely to buy at a reduced price when they compare the offering to the national brands," says Rhonda Rainwater, national account manager/ marketing for Food Source LP of McKinney, Texas. However, "store brands will need to extend the current offerings so consumers do not turn to national brands for variety."

Eliane Ouimet, marketing director for Cordon Bleu-Tomasso of Montreal, agrees, noting that the addition of more meal options will help grow the category.

"It is really important to analyze the category and evaluate what is missing or what products are not properly answering consumer demand," Ouimet says.

Don't ignore health and wellness trends such as sodium reductions when looking at store brand opportunities.

Embrace trends

Store brand manufacturers also are responding to consumer demands for healthier lower-sodium products.

"There has been a great deal of focus put on sodium in products," says Jeff Gehres, director of sales and product development for Holland, Mich.-based Request Foods Inc., noting that the removal of trans fats was the last grand industry initiative. "When developing new products and reviewing current items, our R&D team develops products that still taste great with less sodium."

Gehres says his company also has seen an increase in the number of customers wanting all-natural products.

"Consumers are more aware of the nutritionals and unhealthy ingredients, and they are expecting products without additives and with a low sodium level," Ouimet adds.

Rainwater agrees.

"Today's consumer wants to know what is in the meal they are preparing to eat, and they want to be able to read and understand the ingredient statement," she says. "Long, scientific-sounding ingredients are things of the past. A mother would much rather feed her family a meal that has a label she can understand instead of looking up every other ingredient on Wikipedia."

Rainwater also points out that servings for two or family-size servings (serving four to six people) are the best-selling sizes for store brands.

But Kliger says frozen meals are trending smaller, to single-serving and grab-and-go packaging.

"The packaging can also be used with more meal combinations — [to sell] as part of a whole meal program," he says.

The key is for retailers to take a few risks: Don't be afraid to be trendy and tell customers what the next new hot product is, Kliger says.

He points to Loblaw of Canada and its innovative store brand program as an example of a leader in unique product introductions.

Build a strong foundation

Before developing any new products, however, retailers should perform a good evaluation of the category to determine what benefits those new products will bring to it, Ouimet says.

"The manufacturer is the category professional and can help position the store brand according to the banner strategy," Ouimet says. "It is also very important for a store brand to have a global brand strategy within the category; [for example], if the brand is really high-quality, it makes more sense if the quality level is equal within the segment."

Sean Smith, director of operations for Bristol, Ind.-based Hinsdale Farms, notes that a common misstep occurs when retailers change their product formula to try to match national brands, but the change fails to yield higher sales.

"Sometimes the national brand formula isn't want consumers want, but it performs well because of the manufacturer's distribution capabilities," he says. "The growth in private label over the last 10 years has proven that store brands can be better than national brands."

While some retailers have strong central control and can execute well across their divisions and regions, others need more promotional support from their local store managers, Kliger notes.

"These retailers may want a good private label program, but they fail if they have poor execution and can't get others to 'buy in," he says. In addition, he notes that retailers need to remember that new products take time to succeed, so they should focus on building a strong foundation for sustainable long-term profits.

"There is such a focus on delivering profits today," Kliger explains. "Retailers are initially excited about a new product to win new consumers or maintain their current customers by keeping them excited, but after the program rolls out, they forget they won't see results for months."

Create meal solutions

Don't be afraid to be "trendy" and tell customers what the next new hot product is.

As retailers continue to compete with restaurants, they are taking notice of common restaurant merchandising techniques, including offering a variety of meal combinations, Kliger says.

"We're seeing a lot of focus on retailers having more combinations and pairings of frozen meals with deli items, for example, to make [shoppers'] meals easier," he says.

Retailers can focus on consumers' need for a complete quick meal by suggesting pairings of store brand frozen entrées with a variety of store brand sides, Rainwater says.

"Weekly ads should highlight a different frozen entrée and suggest complementing store brand items for a quick 'homemade' meal approach," she says. "For example, a single coupon could promote a 38-ounce gourmet lasagna, frozen bread and bag of salad with dressing all for under $20."

Discounts such as "10 for $10" sales and "buy-one, get-one-free" promotions also remain popular with consumers, Smith says.

"We're also seeing cross-promotions of name brands with store brands, like Heinz ketchup with the store brand corn dogs," he says.

Creative merchandising and promotion promise to stir up excitement in a segment that's already posting impressive gains (at least on the entrée side). And Rainwater says store brand frozen meals and entrées are expected to enjoy strong continued growth over the next five years.

"Now is the time for retailers to position themselves in front of their consumers to ensure customer loyalty to their brand," Rainwater says. "They need to take advantage of the economic times and offer the consumers what they are demanding."

Do suggest pairings of store brand frozen entrées with a variety of store brand sides.

Rethink Asian Merchandising

Walmart now is merchandising its frozen Asian products in the same section, something the Bentonville, Ark.-based retailer and many other retailers have not attempted before — despite the fact that Italian, Hispanic and other ethnic products often are marketed together.

"If you go to the supermarket, Asian products are merchandised in different areas, so when they are promoted they don't quite get the same impact," says James Johns, business director and assistant vice president for Day-Lee Foods Inc. of Santa Fe Springs, Calif.

Johns suggests that when retailers run certain promotions (such as three frozen entrées for $5.99), they consider offering more than one type of brand and cuisine.

"For example, it doesn't have to be the usual three Lean Cuisines for $5.99, but retailers could also include the retailers' brands with the promotion," he says.

Peter Lee, director of sales for Astoria, N.Y.-based Water Lilies Food Inc., also believes retailers have an opportunity to teach consumers how to prepare Asian meals, whether that education is achieved through demos or "cookbook" magazines, using store brand meal components.

"In general, teaching consumers how to prepare certain products — more so with raw ingredients — would help promote the store brand," Lee says. "Sometimes they see an Asian ingredient or product, for example, which interests them, but they won't purchase it because they don't know how to prepare it."

Top 5 Markets for Frozen Meals & Entrées

1. Honolulu, Hawaii, Metro
2. Tulsa, Okla., Metro
3. Providence, New Bedford, Fall River, R.I., Metro
4. Buffalo, Niagara Falls, N.Y., Metro
5. Bakersfield, Calif., Metro

Regions with the largest percentage of people with a tendency to buy store brand frozen meals and entrées, reported by Core Based Statistical Areas (CBSA) defined by the U.S. Office of Management and Budget.

Source: Buxton Co., Fort Worth, Texas.