COLD COMFORT 2002-09-16

BARBARA MURRAY

The growing offerings in the frozen dinners and entrees segment, the largest within the frozen food category, continue to reflect the latest trends, which include growth in natural and organic arenas and changes in the ethnic market, according to a diverse group of retailers who spoke with SN.

SPINS, a San Francisco-based provider of business information and services to the health and wellness industry, reports that selected natural and organic brands of lunch and dinner frozen entrees sold in the natural channel saw dollar sales increase by 17.5% for the year ended Dec. 29, 2001, while declining very slightly -- by 0.6% -- in the mainstream. These entrees included lunch and dinners, frozen meat, poultry and seafood, as well as frozen and refrigerated soups.

For just lunch and dinner entrees, growth in the natural channel was nearly 15%, with a 4.6% increase in the mainstream channel, which SPINS tracks through a partnership with market research firm ACNielsen, Schaumburg, Ill.

"It may be that certain brands are experiencing significant growth but that overall, the category is still relatively undeveloped in the mainstream," said Christa Gardner, a spokeswoman for SPINS.

Gristede's, New York, which operates urban stores, does a lot of volume in entrees, according to Robert Euler, vice president for dairy and frozen. "A lot of people work late. They come in and want something quick," Euler said of customers.

"Organic stuff is growing, mostly the entrees, the dinners. Those are the bigger movers in our stores, but when we set up our stores, we give most of the room to Stouffer's, Weight Watchers and Healthy Choice," he said. Still, he added, Gristede's has increased its organic sections.

Scott Incardone, buyer for frozen dinners and entrees at Unified Western Grocers, Commerce, Calif., told SN the wholesaler is about to take on an entire frozen entree line, Amy's Kitchen, of Santa Rosa, Calif., which was held by a local distributor much smaller than UWG.

"Growth here in the natural and organic segment is into the double digits -- it's just going up and up and up. We definitely want to jump on this wagon. About a decade ago, you saw everybody getting into health food, but it just wasn't good tasting. Nowadays, the meals are absolutely incredible," Incardone said.

Nationwide, sales of the Amy's Kitchen brand reached $8.9 million for the year ended July 14, 2002, an increase of 11.6% compared with the previous year, according to Information Resources Inc., Chicago. Amy's Kitchen was ranked 10th in the IRI list, and its unit volume was up by 8.4%. ConAgra, maker of Healthy Choice, among other brands, was first with more than $362 million, an increase of 2.4%.

Other leading frozen dinner vendors, in order, were Pinnacle Food Products (Swanson's), Armour Swift-Eckrich, Nestle USA, Marie Callender's, private label, with $15 million in sales; Freezer Queen Foods, Aurora Foods and Don Miguel Mexican Foods. The three showing the greatest gains were Nestle, with a 28.9% increase in sales; private label, with 38%; and the aforementioned Amy's.

The market is also saturated with bowl meals, several retailers said, but Dan Mazur, senior vice president of Center Store programs for Topco Associates, Skokie, Ill., said all the competition hasn't stopped it from remaining a very hot category for a lot of Topco members. Because of this, the cooperative will introduce several rice bowl items in its new Dining In line that will launch next month.

"Uncle Ben's dominates the marketplace, but we feel we can produce a better product, and the same holds true for pot pies," said Mazur.

Private label ranks sixth among vendors of frozen dinners, but the genre remains tricky to pull off successfully. Topco is hoping to do that with Dining In, which will be composed of frozen and refrigerated meals and priced above the norm for private label. In frozen, there will probably be about eight entrees, Mazur said, each with a unique point of difference for the consumer. The line could approach 200 items, he said, including dry grocery, frozen and refrigerated items.

"We are not treating it as a private-label offering. We are positioning it as a brand with our members. We don't believe you need to have the traditional private-label retail spread that is out there, not for this type of quality," Mazur said.

Save Mart's own label, Classic Cuisine by Sunny Select, has a 40-ounce frozen macaroni and cheese, and a lasagna in three sizes: 96-ounce, 40-ounce and 21-ounce, which are all "doing very, very well," according to Pat Brooks, director of frozens, dairy and deli for the Modesto, Calif.-based chain.

"They are some of our top-selling stockkeeping units, along with Stouffer's 96-ounce lasagna."

While Topco may be positioning its new pot pies as entrees, many retailers often consider pot pies more of a lunch item and say they are usually purchased by singles who don't have the time or inclination to cook a large meal. Marie Callender's is the premium brand, and Banquet, which ranks second, the least expensive.

To mark the start of fall, Marie Callender's has declared Sept. 23 to be American Pot Pie Day, and is planning to give away 10,000 of them that day in each of four cities: New York, Atlanta, Washington and Chicago. Marie Callender's pot pies are the market leader, but have suffered a decline of 5% in sales and 6% in units in the past year, the same as the segment as a whole. Stouffer's, private label and Pepperidge Farm are the only pot pie brands that are going up, according to IRI.

Euler of Gristede's and other retailers also observed that diet entrees are often used more as a microwaveable lunch option.

It's a huge category, at almost $6 billion in the food, mass and drug channels combined, for the year ended July 14, according to IRI. Included are frozen dinners, entrees, handheld non-breakfast entrees and pot pies. The supermarket channel had sales of $5.8 billion, very close to the total for all three channels combined, excluding Wal-Mart.

Euler noted that consumers seem to appreciate the vegetables included in the low-cal meals. "You're getting a lot in the packages as compared to before. It tastes good and it's healthy."

Most agree that the frozen entrees category is growing in ethnicity, yet Stouffer's has discontinued its Ortega line, which had been in test markets with dishes such as taquitos, tamales, and rice and beans. Stouffer's, owned by Nestle USA, Solon, Ohio, has decided to target Latinos, but with mainstream items like lasagna and meatloaf. The company plans a Spanish-language campaign that focuses on Stouffer's frozen meals. Although Stouffer's has some Latin entrees in its Lean Cuisine line, the company will focus on its mainstream dishes, such as lasagna, meatloaf, macaroni and cheese and stuffed peppers, in its efforts to reach out to Hispanics.

Through taste tests, supermarket sampling, television and billboard advertising, Stouffer's hopes to encourage acceptance of frozen meals among Hispanic women who increasingly fulfill multiple roles in their families and are pressed for time.

"We are seeing a lot of items using dual-language labeling in Spanish and English," Incardone noted, even though Stouffer's is not going that route.

Pat Brooks, of Save Mart, said frozen dinners in general were very strong in the April-June quarter, probably because shoppers "are doing a lot of things on the run" and appreciate convenience.

Save Mart's store remodels, which increased the size of the frozen food department, in some cases doubling the number of doors, accounts for the very strong growth the chain has shown in the dinner/entree segment.

With anywhere from 110 to 120 freezer doors, "We have selection and variety we did not have before," Brooks said. Claim Jumpers meals, modeled after the offerings at the West Coast casual dining chain, are doing well, he said, and Save Mart recently added the Michael Angelo brand of Italian meals, which are also doing well.

Starting in January, Save Mart's ads will devote more space to frozen and refrigerated items, Brooks added, because those departments are doing very well.

"Frozen dinners and entrees is our biggest category," said Dave Franz, merchandiser/buyer, frozen food and dairy, for Lofino's Food Stores, Dayton, Ohio, a recent Gold Penguin winner. "I think women bring them to work for lunch. That is the biggest use of them that I can see.

Travis Hubbard, frozens category manager for Harris Teeter, Matthews, N.C., said that frozen dinners and entrees is one of the fastest-growing segments. Instead of bowls, which have been overdone, he said, if he were a manufacturer, "I'd try to come out with the next great idea."

For Unified's Incardone, the future of frozen dinners and entrees seems limitless. According to a category review done by UWG, frozen entrees is about 12% of total sales, and growing. "In the frozen segment, it's got to be the leader."