After years of false starts and missed opportunities, are we finally entering a new ice age? Over the past 12 months, value growth of frozen foods has outstripped both ambient and fresh, as well as the grocery market as a whole [Kantar Worldpanel].
For a category which has been on a rollercoaster ride since the start of the recession, it’s welcome news. Austerity should have been advantageous to the low-cost, high-convenience frozen model - but an initial sales spike in mid-2008 was followed by a decline in 2010, casting doubt on the sector’s ability to deliver sustainable long-term growth. Manufacturers and retailers slashed prices and promoted heavily to entice even more consumers to buy frozen - and in doing so drove value out of the sector.
In the past year, however, frozen has bounced back. Price inflation began to push up sales in April 2011 - and this, coupled with a reduced reliance on volume-led promotions, has boosted value sales by 6.3% year-on-year [Kantar Worldpanel]. The slower growth of volume sales, up 1.4%, indicates that it’s not a straightforward case of the recession driving people to frozen - but purchase frequency is increasing [Kantar Worldpanel], and there are clearly opportunities for retailers and suppliers to capitalise on forays into the frozen aisle.
The challenge now for the sector is to ensure that it builds on its current momentum - and avoids the icebergs that caused it to flounder in the depth of the downturn.
“The recessionary shopper is important, so value for money will always be key” Simon Bloys, Plusfood
It won’t be easy in the wake of last week’s news that inflation in frozen is outstripping that of every other category, growing 6.4% month-on-month and 11% year-on-year (The Grocer, 2 June 2012, p17). Delivering sustainable - as opposed to inflation-driven - growth “is a key challenge for the industry”, admits Brian Young, director general of the British Frozen Food Federation. But he is bullish about the sector’s prospects. “I’m more encouraged than I have been for a very long time,” he says. “The average spend on frozen is increasing. We’re seeing that it’s possible for innovative products to come through that consumers are willing to pay more for.”
Young believes celebrity endorsements and strong advertising are helping boost the profile of frozen foods. The world’s first gourmet frozen food restaurant, N-Ice, opened as a pop-up in London last August and featured top chefs Simon Rimmer, Galton Blackiston and Atul Kochhar using frozen ingredients to showcase the category’s credentials. Not long after, Jamie Oliver was back on TV screens promoting his Young’s Seafood range. And, Young adds, Birds Eye’s Field Fresh campaign - highlighting the farming credentials and natural ingredients of its vegetable range - “has really helped spread the message” that consumers don’t have to sacrifice quality.
Tiger Tiger Dine In snack selections
Launching: June 2012
Manufacturer: Tiger Tiger
Ethnic foods supplier Tiger Tiger is launching a frozen range of pan-Asian products to meet growing consumer demand for interesting snack-style accompaniments. The snacks (rsp: from £1.50), which include spring rolls and samosas, are inspired by three global cuisines: Chinese, Thai and Indian. According to Tiger Tiger, the frozen ethnic snacks market has grown by 10.3% in value over the past two years, and the new range will enable consumers to enjoy restaurant-standard Asian snacks at home.
Launched: May 2012
Chixxs, a new chicken snack range, cooks from frozen in minutes and comes in three variants: American hot chilli wings, Indian masala goujons and pesto bites (all rsp: £2.49). “It will be a popular solution for impromptu dining, snacking with drinks and stylish party food,” says Vera Malhotra, UK marketing manager, Plusfood UK.
Amy’s Kitchen Light & Lean
Launched: April 2012
Manufacturer: Amy’s Kitchen
“We felt there was a market gap for calorie-controlled meals which are quick to make but taste great,” says Damien Threadgold, European commercial director at Amy’s Kitchen, of its new Light & Lean meals. The range has been launched into Tesco, in two variants: Italiano Bowl and Black Bean & Cheese Enchilada (rsp: £2.99).
Launched: March 2012
Manufacturer: R&R Ice Cream
R&R has joined forces with Yoomoo to introduce a take-home range of frozen yoghurts. The launch has been supported by a £2.4m campaign that kicked off in April, and promotional activity will take place over the summer. “We’re already seeing strong uptake,” says Charlotte Hambling, senior marketing manager at R&R Ice Cream.
For many years, frozen food has struggled against negative perceptions about its nutritional value in relation to fresh. But there’s a feeling in the industry that perceptions are starting to shift. Advertising and awareness campaigns are giving suppliers a means of “driving brand and category value without needing to compete or compromise on price or heavy promotion”, says Meg Patel, account director at branding agency Dragon Rouge.
Ad spend across the top 10 frozen brands has increased by 20% in the past year [Ebiquity], led by McCain, which almost doubled its investment to £3.8m. The company’s recent campaigns, celebrating the chip-making process from farm to fork, have emphasised the quality and care that go into McCain products. “In addition to the successful launch of Ready Baked Jackets, which have four green traffic lights, this has helped savvy consumers recognise the value of frozen food and reappraise their purchasing habits,” says Mark Hodge, head of brand at McCain Foods.
“Branded manufacturers are not providing the right level of innovation and support” Andy Weston-Webb, Birds Eye Iglo
The message seems to be getting through. Frozen vegetables - a subset of prepared foods - were one of the category’s star performers in the past year, delivering growth of 7.4% [Kantar Worldpanel]. Indeed, frozen prepared foods as a whole significantly contributed to the sector’s growth, boosting value sales by 6.8% overall thanks to the performance of vegetables, potato products (up 10%) and pizzas (up 6%). Other categories performing well include frozen poultry & game, which delivered growth of 18.7% - albeit from a smaller base - thanks to an increase in purchase frequency. Frozen meat, meanwhile, has recovered after a catastrophic 2010/11, when values slumped 9%.
Last year’s decline in meat sales was blamed partly on excessive promotions in chilled meat luring shoppers away from frozen - but many also attributed the drop to a lack of brand leaders in the sub-category. This is a perennial problem for some areas of frozen, including meat - and in these areas it has been down to own label to propel growth.
Frozen foods break down barriers with online sales
The growth in online shopping is good news for frozen foods. The industry has spent years battling merchandising barriers, from freezer doors and cold aisles to frozen’s typical location at the furthest end of the supermarket. Now, though, online is allowing frozen to compete on a level playing field with ambient and fresh products.
“Online, the barriers we see in store are totally gone,” explains Dr Oetker marketing manager Paula Wyatt. “Consumers have time to browse, it’s not cold, and we’re allowed to explain a little more about what the products are - so we see that as a massive area of opportunity.”
It’s little surprise, then, that frozen over-indexes against the total grocery market in internet shopping and home delivery. Frozen represents 7% of grocery products purchased online [mySupermarket] compared with 6.6% in-store [SymphonyIRI] and is growing at a faster rate.
Naturally, there are differences within sub-categories. Meat and poultry perform strongly online because of the popularity of online ordering for large family shops. Ice cream, on the other hand, undertrades online. “This could be due to concerns about melting,” says SymphonyIRI business unit director Matt Lothian. “But I think it is due more to impulse purchases being less common online.”
By and large, frozen food is perfectly suited to the online environment, says Simon Baxter, marketing and innovation director at frozen food specialist Ardo UK. “Not only does it signal the end of standing in front of cold freezers, it means messages can be placed in front of consumers.”
“We have initiatives where we are encouraging shoppers with meal experiences,” says Andy Weston-Webb, MD UK & Ireland for Birds Eye Iglo. “These simple ideas transfer really well online. You can combine beyond frozen, make up meal deals across other parts of the store. Logistically that works much better than in an in-store environment.”
“Own label is taking larger share in some sub-categories - those where branded manufacturers are not providing the right level of innovation and support,” says Andy Weston-Webb, MD UK & Ireland, Birds Eye Iglo.
In fact, own label is responsible for the lion’s share of value growth across the category, posting a sales uplift of 9.7% - almost triple the 3.4% growth of branded. “Last year, branded and own label were split 50:50 in value share,” says Richard Anderson, Nielsen industry thought leader - frozen food. “This year it is split 52:48 in favour of own label.”
Own label products are becoming increasingly sophisticated, says Young, enabling them to close the gap with the brands. “Particularly in ice cream, the products don’t look like own label. They’re better products and are having a lot of energy put into them.”
Some sub-categories, such as ready meals, are proving hard for brands to break into because of the low price points, he adds - but in sub-categories with a strong branded presence, brands are continuing to add value.
Aunt Bessie’s is a case in point - its sales have leapt 18% in the past year [SymphonyIRI] on the back of strong innovation and advertising. The brand’s TV spot, featuring a pair of silver-haired sleuths spying on a family about to tuck into Homestyle Roast Potatoes, scooped the top spot in a Nielsen survey commissioned by The Grocer to find the most effective ads of 2011 (The Grocer, 17 December 2011). Products such as Yorkshire puddings designed to hold sausages and roast potatoes basted in duck fat have brought new shoppers to the category and made the transition from chilled one of trading up, not down, adds Aunt Bessie’s.
In fact, innovation has been coming thick and fast from many of the big branded players. Birds Eye, for instance, has recently partnered with Ranjit Boparan to manufacture a co-branded Harry Ramsden’s range (in a direct challenge to Young’s Chip Shop line). Weight Watchers from Heinz has added to its ‘Even More’ portfolio with a range of Steam and Serve meals, packaged in pouches to allowing microwave steaming from frozen (although that hasn’t been enough to prevent its value sales dipping by 3.7%). And the January launch of McCain’s Ready Baked Jacket Potatoes has begun “to revolutionise jacket potato eating”, according to Hodge, and contributed to a 7% rise in sales (see p44).
Baked potatoes starting to take off in the frozen section
The potato has been a staple of the frozen category for many years, but for the most part it has required processing - into chips, wedges or waffles - to make the humble spud a marketable frozen product.
That changed in 2007, when Bannisters’ Farm launched the first microwaveable frozen baked potatoes. And now McCain’s own version, launched in January this year, is set to take the microwaveable jacket spud to the next level.
The company is now comparing the launch of its Ready Baked Jackets - which can be heated in a microwave in five minutes - with the roll-out of its seminal McCain Oven Chips in 1979. Sales of the new product have already hit £9m, and it is starting to “revolutionise jacket potato eating in the home”, according to Mark Hodge, head of brand at McCain Foods.
The launch of frozen jacket potatoes is indicative of the “healthy and natural NPD” that Hodge believes “has helped consumers recognise the value of frozen food and reappraise their purchasing habits”.
Many insist innovation of this kind is crucial if the frozen category is ever to be perceived as the nutritional equal of chilled foods - and McCain has picked up accolades from across the industry for its efforts.
“McCain’s Jackets have done a great job,” says Andy Weston-Webb, MD UK & Ireland for Birds Eye Iglo. “They’re a very simple solution to a consumer need and have been heavily advertised in the way a good brand should be.”
Given the arrival of the big guns, Bannisters’ Farm might have cause to worry - but co-founder Rob Bannister is confident many consumers will remain loyal to his family-owned brand.
“Historically, the frozen sector has been driven by big brands,” he says. “But the consumer is increasingly interested in supporting British and regional producers. Bannisters’ Farm is one of the very few brands to offer these emotional cues in the frozen category.”
Of the pizza brands, Dr Oetker managed to couple value growth of 9.8% with volume growth of 7% - an impressive feat considering volumes are lagging values across the category. Growth has been strongest at the premium end of Dr Oetker’s portfolio through products such as its Casa di Mama pizza, made with dough that bakes for the first time in consumers’ ovens - a process that chilled pizzas cannot yet replicate. Much of the brand’s communication has been devoted to building awareness around its product quality - for instance, offering consumers their money back if they disagree that Ristorante pizzas deliver ‘the ultimate pizzeria taste’.
“Awareness around Dr Oetker is only around 50%, so we’ve still got a massive job to do,” says marketing manager Paula Wyatt. Brands opting to educate consumers about the quality of frozen products are winning through, she maintains - but they are “fighting low quality, promotionally-driven products” that devalue the category.
“Consumers search for value, so simple prices are more important than big multibuys” Andy Weston-Webb, Birds Eye Iglo
Dr Oetker says it has built its promotional strategy on price cuts that lower the barrier to entry, rather than big discounts on the gondola end that don’t support quality perceptions. Its decision to cut featured space promotions for Chicago Town by 9% year-on-year [Assosia 12 m/e April 2012] has coincided in a 3.3% dip in value sales - but it’s not alone in starting to shift away from volume-led multibuys. “Consumers search for easy value, so simple price points are more important than big multibuys,” says Weston-Webb.
Half-price and save offers now account for 79% of frozen promotions compared with 60% last year [Assosia 12 m/e April 2012], and all the big five except Morrisons have cut the space allocated to frozen food promotions. This bodes well for frozen’s long-term health - but the risk remains that, as in 2010, promotional culture will return and jeopardise efforts to improve quality perceptions. “If the category were to be more and more promoted and the average price went down, that would be bad news in the long term,” says Young.
Frozen food is on the up, with 6.3% value growth outstripping fresh (4%) and ambient (5.7%). As a result, its share of total grocery, including drinks and fmcg products, has bounced back to 5.6% compared with 5.5% last year - and it makes up 7.6% of total food against 7.5% last year.
Price inflation caused by fewer, shallower promotions and rising commodity prices has been key, driving 5% of growth. However, a small amount (£51m) of the increase in value is attributable to shoppers visiting the frozen aisle more frequently.
The big four are being overtaken by smaller stores. Both Tesco and Asda are losing heavily to the discounters and Farmfoods, although Asda has also ceded over £4m to Tesco in the past year.
The temptation to promote will be all the greater in light of the inflationary pressures on the category. These should not be underestimated - stripping out the impact of promotions, prices in the big five have risen 8% on average over the past two years (or 7% if promotions are factored in). If prices continue on their upward trajectory, reinforcing the quality message will be more important than ever, says Simon Bloys, general manager UK and Ireland, Plusfood. “The recessionary shopper is important, so price and value for money will always be key, but there also needs to be a focus on the quality of products.”
This relies not only on suppliers doing their bit, but on retailers. Merchandising frozen food is notoriously difficult. There is literally a barrier between the shopper and the products, in the form of the freezer door, and the product itself is, obviously, cold - fine in the summer, but uncomfortable to handle on a cold winter day.
Weston-Webb believes “merchandising at the end of the aisle rather than the middle” makes a big difference, as shoppers are reluctant to spend much time in the chilly frozen aisle and often pick up whatever they spot as they move through the centre of the store with the main flow of traffic. “Making sure bigger categories like fish are at that end can produce significant returns.”
The good news is that retailers are waking up to the need for proper merchandising, says Wyatt. “We’re seeing tangible uplift in sales at retailers with front-facing merchandising. It’s a simple principle, but people like to be able to see the food.”
It’s a start. With specialist frozen retailers raking in stellar sales, there’s every incentive for the mults to go further still on merchandising - and help suppliers sustain the new ice age.