Growth in the &£3.5bn UK frozen-food market is on ice, prompting the likes of McCain and its main rivals Heinz and Birds Eye Wall’s to embark on a flurry of product innovation.
The UK frozen-food market declined in value by one per cent in the year ending January 2001, despite volume growth of one per cent, according to Information Resources. The ready-meals sector is showing growth in both value and volume.
The frozen-food heavyweights are desperate to inject new life into the sector by launching premium-priced products – aimed at “time-starved individuals looking for a quick meal” – in order to fend off competition from the chilled ready-meals sector.
The frozen-chip giant McCain has unveiled Rosti (MW last week) – the first of a long line of new products that it hopes will re-invigorate the frozen-food sector and appeal to the “no fuss, no hassle” generation. Sales at the Canadian food company have almost doubled since 1996 to $5.6bn (&£3.9bn) in 2000. Despite attempts to branch out into other food markets, 60 per cent of its global business remains in frozen chips.
McCain dominates the &£427.4m UK frozen potato market, with a 34.7 per cent share according to figures for 2000 from Birds Eye Wall’s. Birds Eye claims that the market has declined in value by four per cent year on year, partly due to a poor performance in the &£288.2m chip category (down eight per cent), which has been hit by price deflation. But the &£139.2m non-chips category, in which Birds Eye is the dominant brand (25.3 per cent) ahead of McCain (13 per cent), is showing annual growth of three per cent.
Figures from Taylor Nelson Sofres Superpanel, in contrast, suggest that expenditure on frozen chips grew by 1.2 per cent for the year ending August 19. There was a 13.3 per cent decline in expenditure on fry chips, but expenditure on oven chips was up 3.9 per cent and on micro chips, up by 9.9 per cent, presumably on the back of their healthier images. Here again the non-chips potato product market was shown to be in good health, with growth up 5.5 per cent year-on-year.
McCain’s objective with Rosti is to carve out a greater market share in higher-margin non-chip potato products. It already sells the likes of Home Roasts, a children’s product called Potato Smiles, and hash browns, but McCain believes Rosti will revolutionise the market and create a completely new sector.
McCain marketing director Julie Leivers says: “McCain believes Rosti will attract an entirely new market to the McCain brand, people who in the past have been reluctant to shop from the freezer cabinet.”
Whether Rosti – which is targeted at individuals rather than families – and the raft of other new products yet to be launched by McCain will become success stories remains to be seen. McCain, also known for its frozen pizzas, spends around &£30m a year on advertising, research and promotion and is confident Rosti won’t end up in the marketing dustbin.
One buyer says: “With the launch of the Rosti, McCain is hitting back. Consumers are far more sophisticated now – they travel more and as a result are more inclined to try new and exotic products.”
However, there is a need for caution. According to a report by Information Resources, new product development in frozen food is not as prevalent as in other markets, such as chilled foods, and also not as successful. In the past two years only one in seven new launches have managed to achieve success, deemed as sales of &£1m in the first year or a category value share of two per cent.
McCain is not alone in its innovation drive. Earlier this year Birds Eye launched Enjoy!, a range of upmarket frozen meals, pasta sauces and accompaniments, in a bid to develop premium-priced frozen products targeted at time-poor consumers.
A Heinz marketing executive has also revealed that his company has “a lot of new products in the pipeline specifically in the potato product line” which are in the latter stages of internal approval. He said they would fall under one brand, but declined to say whether they would use the existing Aunt Bessie, Harry Ramsden, Heinz or Ross brand names.
A mature or static market drives the need to develop new revenue streams through innovation. Part of that development is recognising changes in consumer attitudes and lifestyle.
But the frozen-food sector is not helped by the bland and hostile in-store environment, and the fact that consumers are liable to think chilled is healthier than frozen. Just one minute of a typical 55-minute shop is spent in the frozen-food aisle, according to Information Resources.
Birds Eye Wall’s trading director Neil Jones has been reported as saying: “Chilled is still perceived as fresher, better quality and containing fewer preservatives than frozen which is, of course, wrong.”
In order to try to get round these problems Birds Eye produced branded standalone freezers for its Enjoy! range. These are positioned away from the freezer aisles, and focus on the natural ingredients in Enjoy!.
As food habits change and consumers take to using pasta, rice, cous cous and noodles, McCain and its frozen-food rivals will have to become more innovative, not only in potato products but also in the field of frozen ready meals and their presentation.