Manufacturers and retailers have been slashing prices and promoting hard to entice shoppers to the freezers. But is this just driving value out of the sector, asks Suzy Bashford

Dreams of a boom in frozen food have melted away over the past year. Value sales have risen just 1.6% over the past year [Kantar 52w/e 21 March], well below the previous year's impressive 6.7% growth.

Paradoxically, it is the industry's appeal to cash-strapped consumers that may be dragging down the value of the category because, if anything, it has encouraged suppliers to push their value-for-money credentials even harder, chiefly through heavy promotional activity.

To compound matters, fresh has staged something of a comeback with its own promotional onslaught, luring consumers away from frozen.

And the deep discounting has meant there has been less money available for NPD over the past year. There's a lot of talk of the need to push premium lines to inject value into the category, so why aren't they doing it?

Certainly something needs to be done, given the threat posed to category value by the current levels of promotions. A third of frozen food has been sold on deal during the past year [Kantar 52w/e April]. And Assosia data shows that the big four retailers ran 1,000 more promotions on frozen food this year than last year.

Birds Eye UK marketing director Ben Pearman is among those who believe the level of promotional activity is damaging.

"It's fair to say that the growth is not as good as we'd like it to be," he says. "Promotions are a significant contributor to that because they drive value out of the category. We're trying to drive sales in healthier product lines and remove some of the category myths that exist, but not all retailers and manufacturers are doing this. Price premiums backed by advertising are the way to get sustainable growth."

Not only are there too many promotions, says Daniel McGuigan, category management controller at Bernard Matthews Farms, they are also too deep.

"Asda's four ready meals for £3 is a very aggressive strategy and not sustainable," he says. "But until all the retailers move away from these types of promotions, you're going to get a reaction from other supermarkets, particularly Iceland."

Iceland's promotional strategy is cited by many in the industry as one of the main factors behind the downmarket image of frozen food in the UK. Iceland marketing director Nick Canning, however, believes the blame lies elsewhere.

"If anyone is bringing the value perception down, then it's the big four, not us," he says. "They are the ones doing the most promoting, giving away somewhere in the region of £20 for every £100 spent. For Iceland, that figure is only £5."

One of the sectors most affected by heavy discounting is ready meals. "It's been price- promoted to death," says British Frozen Food Federation (BFFF) director general Brian Young. "We have seen the widespread promotion of five meals for £4, and four for £3, which means that a meal is going from 80p on average to 75p. We're never going to get growth out of the market from those prices," he says.

Young warns the industry should take heed of what happened to Sara Lee's star product, the double chocolate gateau, in the 1980s. "It was nominally £1.99, but always on bogof. It went from big profits to big losses."

The problem for today's generation of manufacturers is that no one wants to go first in scaling back promotions. And some believe that promotions are a necessary part of the category. "Without them the sector might decline further," says Spar trading controller Robert Neal.

Especially now fresh is also upping the ante promotions-wise, partly to entice consumers away from frozen and back to chilled, which many expected to prove prohibitively expensive during the recession. And it's worked. Bargain-hunting shoppers have been lured away from frozen food by the offers in the chilled category, particularly in sectors such as ready meals, lamb and pork sectors that have all seen a decline in frozen sales [Kantar].

However, in areas where consumers are shopping for a value product, such as processed poultry products, frozen is holding its own with value sales up 7.7% [Kantar]. Turkey brand Bernard Matthews Farms cites its 'value-for-money' proposition as the main ingredient fuelling the brand's growth. Sales of its frozen poultry are up 7.9% in value to £11.5m [SymphonyIRI 52w/e 20 March].

Another knock-on effect of the extensive promotional activity is that manufacturers have less money to innovate. NPD has consequently stalled somewhat in recent months.

Dr Oetker's pizza brands have put in an impressive performance over the past year, with sales of Chicago Town up 12.4% to £91.7m and Dr Oetker up 15.8% to £44m [SymphonyIRI]. However, marketing manager Paula Wyatt admits NPD has "definitely been slower".

With budgets scaled back it has had to be savvier about how it spends money and has concentrated on advertising to support existing lines rather than bringing out new ones hence a 46.7% increase in advertising spend for Chicago Town [Billetts 52w/e 31 March]. "It is wrong to bring unsupported brands to market, and therefore our innovation pipeline is always aligned to our communications plans," she says.

However, the outlook for the next 12 months is much rosier, says Wyatt, who promises some "very exciting innovation" due at the end of this year and beginning of next.

Other brands are also optimistic NPD levels will bounce back at the end of the year. WeightWatchers for Heinz (WWfH) says it plans to increase investment and bring out products that are "completely new to the category". Birds Eye, which has been relatively quiet since the launch of Bake to Perfection last year, also promises "more news" over the next few months, as do Young's and Findus, for the autumn.

NPD offers a way for brands to inject interest and fresh value both of which frozen is desperately in need of. That said, there have been a few notable innovations during the past 12 months. Perhaps unsurprisingly given the economic downturn, there hasn't been much out-and-out premium NPD. However, there were attempts to add value to the category by bringing out new format sizes, that would appeal to consumers wanting to control portion size.

Aunt Bessie's launched Midweek Mini Yorkshire Puddings, and Bite Size Yorkshire Puddings in October in a bid to increase frequency of purchase. Young's has expanded its Chip Shop range, with a new, smaller-sized variant for kids called Mini Fillets.

These launched in March and are available in packs of six (rsp: £3.49). Young's has also taken advantage of the consumer desire for healthier options, reducing the fat content of its Chip Shop range, sales of which have risen 5.4% during the past year to £60.3m [SymphonyIRI].

Some brands have been capitalising on the recessionary trend for consumers to retreat to comforting foods of their childhood that they know and trust.

In September, WWfH launched its Home Comforts range, a quintessentially British range, including favourites such as chicken & dumpling casserole and beef & red wine casserole. In January, Iceland also launched a casserole range, based on home-cooked flavours. The retailer says the selection of 10 casseroles (rsp: £4 each) is already one of its star lines.

Aunt Bessie's relaunched its hot dessert range in September, with revamped recipes for existing lines and three new puddings. It also introduced microwaveable packaging to make the desserts quicker and easier to prepare.

"The relaunch has had a positive impact on Aunt Bessie's overall hot pudding performance, which has contributed to the brand enjoying its highest-ever MAT value share of 23%," says Aunt Bessie's marketing director Clare Field.

The total Aunt Bessie's frozen desserts range is worth £12.6m, up 10.1% on last year [SymphonyIRI]. And since launch in September, Aunt Bessie's jam and syrup sponges have delivered £1.1m sales value. The launches were supported by consumer sampling in the multiples to drive initial trial, as well as online support and promotional activity.

And, of course, the World Cup has provided another invaluable NPD hook. Bernard Matthews Farms has created Footballers, frozen breaded turkey products in the shape of footballs, at a price point of £1.

Dr Oetker's Chicago Town Takeaway pizza launched a limited-edition line, which includes a Footie Feast pizza. The accompanying on-pack promotion offers the chance to win an inflatable football stadium or a city break to one of the world's most famous football and shopping destinations: Milan, Madrid or Barcelona.

"The World Cup is a key period to tap into the social aspects of watching sport that fit perfectly with pizza made for sharing," says Wyatt. "We see this as a key product for retailers to anchor activity around and we are expecting incremental sales growth."

The World Cup will only provide a temporary boost to sales. Looking ahead, some manufacturers believe the time is right to push ahead with more premium NPD.

Young's has added a sea salt and black pepper coating to its langoustine tails in a bid to attract affluent couples (rsp: £4.99, currently listed in Tesco). And McCain has launched Summer Wedges, "with a hint of shallot and lime", as well as Homebakes slices of potato in either a creamy cheese or garlic sauce.

They are also trying to drive long-term growth by addressing some of the merchandising issues that have constrained the category.

It can be difficult for brands to catch consumers' attention as they rush down the chilly freezer aisles. To make matters worse, freezers are hardly the ideal place to showcase products, with doors that are liable to get misted up. During the past year there have been concerted moves to address these issues.

Birds Eye has been trialling a block- merchandising strategy with Sainsbury's, where it displays all its frozen vegetable products together. It claims to have achieved a 62% boost in incremental sales through those stores although overall sales of its green vegetables have slumped 12.9% to £89m [SymphonyIRI].

"People are familiar with Birds Eye's natural, field-fresh proposition around our pea range. They are more trusting of our whole vegetable range if they see it next to our peas, for example," says Pearman, adding that there is scope to expand this strategy further across the category, grouping other products together to boost sales.

WWfH has launched a similar strategy with its Diet Destination, bringing together its frozen ready meals and frozen desserts sales of which have fallen 4.5% to £53.1m and 18.4% to £15.5m respectively [SymphonyIRI]. This move followed research showing that many dieters found it distracting to browse non-diet food.

"This could be the tip of the iceberg in terms of making an impact and how the shopper shops the category," says WWfH UK marketing director Paul Sternlieb. "We've been thinking about this a lot with retailers and investing in research, so stay tuned. Manufacturers and retailers are likely to partner more on finding ways to have shelf impact, whether merchandising or physical changes or technology."

He adds that lessons can be learned from the way some foreign supermarkets and smaller UK brands display frozen food in a more attractive way, which positions frozen food as more premium. Two retailers that make their frozen food fixtures enjoyable to shop are Picard supermarket in France and the frozen retail business Cook in the UK.

Cook ensures the product is visible in the packaging, flying in the face of conventional wisdom that frozen food looks unappetising and should be hidden.

In its standalone stores it also works hard on ensuring the environment is fun to shop. "It's a long way from the usual depressing tramp down the frozen food aisle at a supermarket, with our shops evoking a farmhouse atmosphere, which underlines the handmade nature of our meals," says a spokesman for Cook.

Larger retailers, too, should give greater consideration to the store layout and merchandising tactics.

"We need to create an environment where there is more interest in the category at point of sale," says Findus and Young's managing director Mark Escolme. "In some parts of Europe, for instance, freezers are located all around the store. There will always be a role for pizza, potatoes and wedges in frozen, but looking ahead, we need to premiumise the category. We need to work together as an industry, embracing newcomers such as Cook, because we all have the same objective: to bring new users into the category."

Overcoming misconceptions
The perennial thorn in the side of the industry is the consumer's perception of frozen food as cheap, poor quality and unhealthy.

The industry is adamant this has to change and that a better job has to be done communicating that frozen food locks in nutrients at the time of freezing. Frozen suppliers point out that fresh often deteriorates in quality because it has been on shelf for days and in many cases food sold as fresh has in fact been frozen and then defrosted.

"There's this stigma attached to the freezing process, as if something is 'done' to products involving chemicals or other horrible things, which just isn't true," adds Tim Mudge, commercial manager at the Processed Vegetable Growers Association.

Perceptions are changing slowly largely thanks to high-profile campaigns to educate consumers, such as McCain's It's All Good and Birds Eye's Take A Fresh Look.

The PVGA's Yes Peas! campaign has helped turn a declining market into a rising one, with frozen pea consumption up 2.7% in the past year [Kantar]. Sainsbury's has also been pushing the benefits of frozen, distributing a brochure in stores educating consumers about how frozen food can make their lives easier.

Sainsbury's category manager for frozen food Andy Phelps says that success in the frozen sector hinges on having good consumer insight. "It's about making sure you understand the customer and where your product and customer fit," he says. "If the product fits with a customer need, it is always going to sell."

As a good example of this, he cites Sainsbury's own-label basic fruit berries mix, launched just over a year ago and outperforming expectations. Other sectors showing growth albeit modest in most cases include vegetables, potatoes, fish, pizza, frozen ethnic snacks and free-from product alternatives, he adds.

But some retailers remain pessimistic about the category's prospects. "I've been in this industry for years and I don't believe the health trend has had an impact. There's still this perception that frozen food is cheap and nasty," says Neal.

What is needed is a more radical, industry-wide marketing solution that will overhaul perceptions, argues John Frood, planning director of Iris, a leading integrated marketing agency. It's time the industry instigated a "movement", he says, and broadens its advertising horizons beyond TV.

"To create cultural momentum you need a cultural idea rooted in the big issues," he says. "You need to get consumers participating, so you drive conversations beyond the role that traditional advertising plays. Ultimately, people will begin to spread the word among their communities. And, let's face it, there is no more networked and viral a community than 'team mum'."

Frood has plenty of suggestions for how frozen could improve its appeal. "Create a branded content property using celebrity chef Heston Blumenthal, to see what he can invent with frozen food," he says. "Design an online programme, which rewards and incentivises mums and kids, for reducing waste and eating more healthily, such as days out and cinema tickets. Get supernanny to help.

"And use PR to launch high-profile stunts, which dramatise how much food is being wasted every week."

And those ideas are just for starters. Frozen food should be perfectly placed to take advantage of trends from the environmental push to cut food waste, through to desire for convenience foods and recession-induced belt tightening.

However, the value-for-money credentials of frozen have proved a double-edged sword, with the category devalued by incessant promotions.

As the economic gloom lifts, there are signs that the industry is trying to introduce more premium lines to frozen, many of which are already doing well. But premium lines won't add value to the category if they're always on bogof. The industry has to persuade consumers to pay full price for them.

Focus On Frozen Food