A PREMIUM ON TASTE

KAREN RAUGUST

The frozen aisle is starting to sizzle again, thanks to upscale entrees with healthful and exotic ingredients.

Innovation on the high end of the category is helping reverse recent sales declines. Empty-nest baby boomers, in particular, have embraced products with exotic flavors and healthful attributes in restaurant-style recipes. Boomers, many of whom were born around the time the original TV dinner came out, are looking for foods that combine good taste, high-quality ingredients and convenience, and they're willing to pay more for them.

"There are more dual incomes, and more people are working harder and working longer, which is putting a premium on convenience and speed of cooking," said Steve Smith, vice president of marketing at Sweetbay Supermarket, Tampa, Fla. "There's also been a lot of improvement in frozen-food quality. There's dramatically better product, and a lot more confidence from retailers and manufacturers that you can have a high-quality eating experience from frozen food."

Overall sales of frozen meals reached $5.77 billion in 2005, according to Mintel International Group, citing data from Information Resources Inc., which include sales in food, drug and mass channels outside of Wal-Mart. This represents a 2% increase in constant dollars (and 5% in current dollars) over 2004 - largely driven by innovation in the premium segment - and reverses a trend of annual sales declines since 2000.

The Bloom "lifestyle" format from Food Lion, Salisbury, N.C., is one retailer that has seen growth in upscale frozen fare, especially seafood, in recent years. "Competition in the upscale frozen seafood category has increased," said Karen Peterson, spokeswoman for Food Lion and Bloom stores.

"Traditional players now seem to be challenged by local or regional suppliers."

She cited Gorton's Seafood, the top-selling vendor in the frozen-food/seafood category, as one example of a company branching out into premium entrees; last year it introduced its Shrimp Temptations line of higher-end, restaurant-quality meals, a departure from its traditional breaded offerings.

The addition of frozens to premium private labels is another indication of the increased importance of higher-end frozen entrees. Giant Eagle includes frozen appetizers, soups and pastas - such as Spinach & Feta Ravioli with Artichoke Pesto - in its premium Market District line.

Albertsons' Essensia brand features premium ingredients such as select meats in its frozen items, while Safeway's Safeway Select Gourmet Club's Eating Right label incorporates high-end, healthful ingredients. Even Aldi, the limited-assortment format with its trademark low prices and bare-bones merchandising, added 10 frozen dinners, created by a Culinary Institute of America chef, to its Grandessa line last year.

Delhaize America subsidiary Hannaford Bros. introduced the On the Go Bistro line in 2003. It includes frozen items such as Black Bean Quesadillas and Seafood Lasagna and is carried by other Delhaize banners, including Sweetbay.

As Sweetbay converts its Kash n' Karry locations to the Sweetbay format, it is adding many On the Go Bistro SKUs. Smith said Sweetbay heavily promotes the brand through in-store signage, grand-opening mailers and sampling. It also cross-merchandises On the Go Bistro appetizers, entrees and desserts as a complete meal solution.

Jack Sjogren, case product manager for freezer and refrigerator manufacturer Hill Phoenix in Conyers, Ga., said he has seen retailers cross-merchandise premium natural foods by bringing together medium-temperature refrigerated cases, fresh organic product cases and freezers, all in the same aisle. Doing so makes a big statement for the entire natural selection, including frozen entrees.

Premium frozens also can be cross-merchandised with other products, said Howell Feig, director of sales at AHT Cooling Systems USA, Charleston, S.C. He said AHT's horizontal freezer cases can be paired with a vertical shelf for cross-merchandising with wine, desserts, breads, or chips and dip.

Better consumer education and a changing definition of "healthy" are driving sales in premium frozen products. "Consumers are more educated and more willing to try new flavors than ever before," said Christopher Haack, consumer marketing and research analyst for Mintel. "Gourmet is going mainstream."

Meanwhile, the definition of "healthy" is broader than in the past. "Consumers' perception of what healthful eating is, is changing," Haack said. "Healthful eating is not just about losing weight. Seafood and vegetables are healthful."

Shoppers considering premium frozen meals are not just looking for low-calorie or low-fat foods, but for dishes with vegetables, high vitamin content, olive oil, or natural or organic ingredients, to name a few.

Analysts also see growth potential for frozen entrees that address specific health issues, such as diabetes, high cholesterol or heart disease.

The freezer case has long included brands positioned as premium, from Marie Callender's and Boston Market to Wolfgang Puck, Amy's and California Pizza Kitchen. What's new is that the market for better frozen products is growing, said Don Montuori, publisher of Packaged Facts, a Market Research report.

One successful new entry is Bertolli's Dinner for Two line of culinary-inspired, Italian skillet dinners featuring Bertolli olive oils and ingredients like portobello mushrooms and Pecorino Romano cheese. "Dinner for Two is targeted explicitly at baby boomers and particularly at empty-nest baby boomers," said Sheila McCusker, editor of the IRI publication Times and Trends. IRI ranked the product, with $88 million in first-year sales, among the top 10 new introductions of last year.

The heath attributes many frozen entrees tout also seem to have boomers in mind.

Other strong premium brands, according to Mintel, are NestlT's Stouffer's SPA Lean Cuisine line, with whole grains and vegetables in dishes such as Lemongrass Chicken; Asian and Mexican additions to Heinz's Weight Watchers Smart Ones roster; and Contessa Seafood's new convenience meals, such as Shrimp Primavera and Kung Pao Shrimp. Kraft Foods launched seven frozen South Beach Diet items in spring 2005, including Caprese Style Chicken with Broccoli and Cauliflower.

McCusker pointed out that there are 78 million baby boomers, and many are developing chronic health issues. At the same time, only 25% of boomers still have children at home, and that percentage is dwindling each year. Empty-nest boomers tend to eat out often, so premium frozen entrees is one way grocery chains can attract these shoppers.

Haack estimated that prices for gourmet frozen entrees average about $3.85 vs. $2.45 for frozen meals overall. But empty-nest boomers are less price conscious than families in their search for convenient, healthful dinners that taste good.

Packaged Facts has found that older boomers spend more on food they eat at home, particularly prepared items. Families are not only price conscious, but their tastes are more mainstream. "Let's face it, kids want Tater Tots," Montuori said.

While premium frozen meals have been a bright spot for many retailers, the segment faces challenges. First, it competes with other convenient, healthful alternatives, including restaurants and retailers' fresh and refrigerated prepared meals. Mintel's analysis shows that sales of refrigerated foods in food stores rose 29% in constant dollars since 2005 vs. an 11% drop in frozen meals over that period. One issue is that consumers have traditionally viewed frozen foods as less healthful than fresh or refrigerated products, although that perception is changing as quality improves.

Space is another challenge, as retailers are less willing to add costly freezer equipment than they are to reconfigure stores to expand the space dedicated to fresh foods.

Those limitations are one reason that products tend to compete with each other. Mintel found, for example, that sales of NestlT's Stouffer's Lean Cuisine CafT Classics declined 24% from 2003 to 2005, even as sales of its SPA Lean Cuisine grew. "There's not much loyalty in this market," Haack said. "Constant innovation is the name of the game."

Freezer-Friendly

Frozen entrees had been declining until recently

U.S. Sales of Frozen Meals at Current and Constant Prices, 2000-2005, In Millions

Year: $ Sales at current prices; index; % change; $ Sales at constant 2005 prices*; Index; % change

2000: 5,765; 100; -; 6,514; 100; -

2001: 5,739; 100; -0.5; 6,305; 97; -3.2

2002: 5,683; 99; -1.0; 6,146; 94; -2.5

2003: 5,585; 97; -1.7; 5,906; 91; -3.9

2004: 5,494; 95; -1.6; 5,659; 87; -4.2

2005: 5,770; 100; 5.0; 5,770; 89; 2.0

* Adjusted for inflation using the All Items CPI

SOURCE: Mintel, based on Information Resources Inc./SPINS data