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The current market for frozen entrees has been steadily increasing and is quite strong; "Frozen dinners are well-positioned to continue as one of the fastest growing and most dynamic food categories in western Canada" (Ag Exporter, May 2000). However, sales of frozen meals in Canada trail frozen food sales in the United States. According to AC Nielsen, in 2001, frozen dinners, entrees and meat pies accounted for $924 million in grocery sales in Canada. This represents an increase of approximately 13% over the previous year's sales. In the United States, supermarket sales of frozen dinners and entrees exceeded $5.6 billion U.S., which represented the largest growth of the frozen food category with a 6% growth rate (American Frozen Food Institute).
The demand for frozen entrees is driven by the ever changing consumers and their lifestyle. Consumers are spending less time per day preparing meals at home, and their time-starved, fast-paced lifestyles have them searching for alternative meal solutions. Changes in demographics have also created a need for good tasting, affordable, healthy, yet convenient food.
The majority of frozen entrees are retailed through supermarkets and grocery stores. Other retailers include convenience stores, specialty stores, and warehouse clubs. The foodservice and hospitality industry also provides significant market opportunities for frozen entrees.
Frozen Entree Manufacturer
A prospective frozen entree manufacturer who is contemplating entering the market should consider the following issues.
Competition
The market for frozen entrees is very competitive. Not only is the market dominated by large multi-national food processors, but competition exists from various facets of the food industry. This competition comes from restaurants, in-store delis, grocery store meal centers, and from manufacturers of other convenience foods. Therefore, understanding the consumer, as well as, "new product innovation will be key to finding a distinct competitive advantage" (AgExporter, May 2000).
Consumer Demands
It is very important for the manufacturer to understand the needs and wants of the consumer in order to create a marketable product. There are various product attributes consumers consider before purchasing frozen entrees. These include the following factors:
Convenience
Consumers of frozen entrees are often strapped for time and are therefore looking for a quick and convenient meal solution. They often purchase frozen entrees with the intention of reducing shopping, preparation, cooking and clean up time. Therefore, consumers expect to be able to take the product from the freezer, heat it and serve it within a short amount of time. Preparation time, if any, and reheating time should be kept to a minimum.
Nutrition
Today there is an increasing trend towards healthy lifestyles. This has heightened the awareness of the nutritional value of the food we consume. Frozen prepared meals should provide the consumer with a healthy, nutritious meal. Therefore, providing clear nutritional information can be used as a selling point to the consumer.
Quality and Taste
Unfortunately for many years, frozen entrees were associated with being of poor quality and taste. The frozen food industry has since revamped the products of yesterday to meet the quality and taste standards of today. As a manufacturer, it is important for your product to uphold the high quality and good taste demands of the consumer.
Value
Consumers will not purchase your frozen entree product if they perceive they are not getting value for their dollar. It is also important that your product is priced competitively to compete with some of the larger multinational competitors.
Ease of use
It is important that a frozen entree product come with clear and concise preparation instructions, including accurate cooking time. You could have the best product in the world, but if the consumer cannot prepare it properly, what good is it to the consumer? In order to give the consumer choice and flexibility in terms of preparation, you should consider a product with dual ovenability, which means the product is mircowavable or can be oven-cooked.
Growth Trends
The introduction of new and innovative products, the extension of existing product lines, and improvements of existing products. Opportunities exist in terms of frozen ethnic dishes and frozen specialty meals.
Packaging
One of the major challenges facing manufacturers is product packaging. Ensuring the freshness and integrity of the product is important. The packaging should be inviting and should sell the quality of the product. However, consumers have shown interest in terms of actually seeing the product. Consumers have voiced concern that what they see on the package is not always representative of what they get (Food in Canada, May 2000). As a manufacturer, you must also take into consideration the needs of the foodservice industry. The sizes and portions of these commercial and institutional establishments will vary. It is important to be flexible and accommodating in order to gain their business.
Be sure to take a look at the frozen entrees available in the various retail outlets. Identify your competitors, determine your consumers and their needs, and differentiate your product.
Food Brokers
Food brokers provide various services by acting as the sales force of the manufacturer. Food brokers provide the marketing link between food manufacturers and distributors/wholesalers, retail outlets and foodservice clients.
The types of food brokers that represent frozen entrees consist of both retail and foodservice brokers. These food brokers will not carry products or product lines that compete with current ones. Food brokers who handle frozen entrees generally charge a commission of between 3% - 8%.
Brokers will prove to be most useful if you wish to distribute your product to chain supermarkets, other food stores, and foodservice operators. Brokers help to provide an essential link between manufacturers and distributors/wholesalers and/or retailers in order to get products into food stores and various retail outlets. Foodservice brokers tend to go straight to the foodservice operators to get the business, and then follow through to a distributor with the orders.
In Canada, approximately 31% of the products moved through food distributors/wholesalers are sold by food brokers on a commission basis. (The Food Marketing and Distribution Sector in Canada). In the United States over 50% of all the food products sold in supermarkets are brokered (How to get your product into Supermarkets). In the United States acquiring the services of a broker is essential in the marketing and distribution to the foodservice industry (Overview of the Institutional Foodservice Market in the Pacific Northwest United States). Food brokers in the United States differ from those in Canada in terms of structure. In Canada, the structure of food brokerages tend to be regional (Western Canada, Ontario, Quebec and Atlantic); however this is evolving to more of a national structure due to consolidation in the food industry. In the United States, brokers tend to represent major metropolitan grocery markets.
Some key elements of a frozen entree manufacturer that a food broker would examine are profitability and potential, uniqueness of the product, advertising funds available to help market the product, experience and previous sales information/track record.
Distributors/Wholesalers
The main functions of a distributor/wholesaler include purchasing, transporting, assembling orders, warehousing and distributing. Most grocery distributor/wholesalers carry a variety of grocery products, however, some specialize in specific lines such as frozen foods. Foodservice distributors tend to carry a wide variety of food products including frozen entrees. Some foodservice distributors specialize solely in the distribtion of frozen products.
Retail
Since frozen entrees are not considered a direct store-to-store delivery product, these products are generally moved through distributor's/wholesaler's warehouses into the various retail outlets. However, it is the responsibility of the manufacturer's sales force or broker to convince the wholesalers/distributors and retailers to carry their product. Major grocery chains in Canada and the United States tend to operate both distribution/wholesale and foodservice divisions.
Foodservice
In the foodservice industry, new products tend to be pushed through the supply chain. The brokers or manufacturer's sales force tend to market food products to the foodservice operators and then follow through to the distributors with the orders. In both Canada and the U.S. there has been significant consolidation among foodservice distributors. Emphasis has moved from regional distribution to national distribution.
When expanding your market or entering unfamiliar territory, it is important to contact the appropriate distributors. They will be able to provide insight about market opportunities and related issues. Distributors develop relationships with the retailers and outlets they serve and understand their needs and concerns.
Retailers
The majority of frozen entrees are sold in grocery stores and to the foodservice industry. Other retailers of frozen entrees include specialty stores, convenience stores, drug stores, mass merchandisers and warehouse clubs.
Grocery Stores/Supermarkets
Since grocery stores remain the preferred location for food shopping, this is where the majority of frozen entrees are sold. Over the past twenty to thirty years, grocery stores have lost significant business to the restaurant industry. To combat this loss, these retailers have attempted to lure these customers back into the grocery aisles by providing Home Meal Replacement(HMR) alternatives. Frozen entrees provide the grocery stores with a lower-risk, low-cost HMR option. However, for manufacturers, getting into these retail outlets can be quite difficult. The slotting fees and marketing costs for a frozen entree product are quite significant because the competition is dominated by large multinational manufacturers.
Specialty Stores
Specialty stores serve niche markets and therefore carry a wide variety of products not found in conventional grocery stores. Their interest in frozen entrees generally consists of ethnic products, unique products, and higher end products. Specialty stores do not usually charge listing fees, however, their freezer space tends to be quite limited.
Convenience Stores/Drug Stores/Mass Merchandisers
Convenience stores, drug stores and mass merchandisers now provide consumers with the convenience of a one-stop shopping experience. It is for this reason that frozen entrees and other HMR options are now available in these types of retail outlets.
Warehouse Clubs
Warehouse clubs offer their members low prices on a wide range of food and non-food items including frozen entree products. The products carried by these retail outlets are mostly nationally branded and private label merchandise, and are sold in large quantities (i.e. multi-unit packages, institutional sizes). Warehouse club members include both individuals and businesses, and therefore serve a broad customer base. There are generally no slotting fees and the products that are sold change on a regular basis. In terms of food products, promotional demonstrations are often part of the marketing mix.
Foodservice/Hospitality
The foodservice/hospitality industry consists of restaurants, institutions and hotels. Increasingly, this industry is relying on frozen entrees in their everyday operations. Frozen entrees are used in this industry because of the reduced labour costs associated with food preparation, the ease of storage, product consistency, portion control, quality, and food safety issues. The main factor that influences a foodservice operator's decision to purchase a frozen entree product is price, other influential factors include product quality and service.
Additional information can be found at: Services for Agri-Processors
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