Retail value sales of ready meals in the US slid 0.9% year-on-year to US$20.4bn in 2004. The decline was brought on by waning consumer interest in low-carbohydrate diets and many manufacturers found themselves having to deal with slow sales of their low-carb meal products. However, the ready meals sector is expected to recover from this setback, as Emily Woon, packaged food analyst at Euromonitor International, reports.
According to Euromonitor International’s latest research, the ready meals retail value sales in the US reached US$20.4bn in 2004, representing an unprecedented decline of 0.9% over the previous year. Retail volume sales registered about 2.7 million tonnes and a negative growth rate of 0.9% in 2004. Though the sector is highly mature and has very high levels of retail and household penetration, the decline was brought on prematurely by waning consumer interest in the low-carb diet phenomenon, which was one of the most celebrated national diets in US history. Many manufacturers and retailers have been caught in this fast dying trend and by the end of 2004, saw sales of their low-carb ready meal products coming to a standstill.
However, the ready meals sector is expected to recover from this temporary setback. Euromonitor International estimates that ready meals retail value sales are expected to register a compound annual growth rate (CAGR) of 2.6% between 2005-2010. This growth will be underpinned by the continued trend towards busier consumer lifestyles and consequent increasing demand for premium and convenience-oriented products.
Ready meals feed busy families
Busier consumer lifestyles, characterised by chronic over-scheduling of business and leisure activities, coupled with a growing proportion of women in the workforce and single households in the US, are among the crucial socio-cultural factors that have driven growth in the ready meals sector. According to Euromonitor International’s research, the number both of economically active women and single households in the US has increased by 4.7% and 9.2% respectively between 2000-2004. Ready meal products, which offer quick and easy preparation, minimal cleaning up, single-service sizes and portability, fit squarely into the schedule of cash-rich but time-poor consumers.
Further, contemporary American children are mimicking the busy lifestyles of their elders by engaging themselves in many after-school and weekend activities. As a result, children often eat at different times from their parents. Consequently, more parents are encouraging their children to eat ready meals instead of taking the time to cook another meal for their offspring. As a result, microwaveable ready meals have become an appealing option for US parents. In response, manufacturers have introduced several products in recent years such as Kraft Easy Mac and Lipton Inc’s Ragu Express dried ready meals, which are microwaveable and specifically targeted at children.
Low fat, healthier and fresher ready meals underpin growth
In the face of a mounting obesity epidemic, claiming more than 25% of the US population, the US consumers are becoming increasingly concerned with both their weight and overall health. There is still continued demand for ready meals that are designed to promote weight-loss. However, there is a growing desire for healthier and fresher products such as ready meals with lower fat content and fresher, less processed ingredients, over low carb products.
It is predicted that the chilled ready meals sector would reap the most benefit from this healthy eating trend in 2005, as consumers equate the chilled nature of the products with greater freshness and therefore of higher quality. Chilled ready meals are reported to taste better than other variants and they come closest to homemade quality. According to Euromonitor International’s forecasts, the chilled ready meals sector is projected to achieve robust retail value and volume growth of about 6.6% and 7.1% respectively in 2005.
This healthier eating trend is further exemplified by increased consumer demand for organic food. In response, many manufacturers added new varieties to its existing products. For example, Amy’s Kitchen Inc, one of the leading US manufacturers of organic and vegetarian frozen ready meals expanded its organic frozen meal line in mid 2004 to include Amy’s Frozen Breakfast Meal with variants such as Tofu Scramble and Tofu Rancheros. According to an Amy’s Kitchen spokesperson, the company has witnessed impressive and consistent annual growth in excess of 20% in recent years. Further, Amy’s Kitchen has broken free from the limited retail base of health food stores and has successfully positioned its brand of products in the mainstream supermarket.
More premium and ethnic products to satisfy increasingly sophisticated palates
Industry sources indicate American food standards and overall awareness have risen in recent years, especially through mass media. For example, Cable Television’s Food Network has increased consumer culinary knowledge courtesy of televised cooking masters such as Emeril Lagasse and Wolfgang Puck. The resultant heightened consumer demand for gourmet food has carried over into the ready meals sector, particularly among frozen and chilled products. In 2003 and 2004, several new premium ready meals were launched in the US retail outlets. For example, Topco Associates (a grocery cooperative) launched its restaurant-style Dining In line made with premium ingredients, such as certified Angus Beef, and Schwan Food Co introduced premium Schwan’s Select Frozen Dinner in gourmet varieties, including Orange Ginger Mahi Mahi and Elegant Rack of Pork.
The trend towards premium ready meal offerings also indicates greater consumer desire for differentiation among ready meal brands, particularly claiming restaurant quality. Moreover, the size of several restaurant-licensed ready meals allows them to feed a small family rather than an individual. The current and coming generation of parents lack the time and knowledge to cook, yet they are unwilling to relinquish the duty of feeding the family to pizza deliverymen and restaurants. According to Euromonitor International’s findings, such upscale ready meal products would very likely drive a future flood of packaged restaurant-style food for home consumption.
In addition, a growing immigrant population from South Asian, East Asian, and Latin American countries has further fuelled consumer interest in ethnic food. Chinese, Thai, Japanese, Indian and Mexican cuisine in particular has grown in popularity in recent years, as the influx of immigrants has resulted in an increase in the number and visibility of ethnic restaurants. The resultant effect is the growing sophistication of consumer palates and a consequent willingness to try new types of ethnic food from other countries.
Ethnic ready meals, particularly of the frozen variety, have represented one of the fastest growing segments of the US ready meals market. To capitalise on this growth, more mass-market frozen food manufacturers such as Nestlé USA Inc, ConAgra Foods Inc, and HJ Heinz Co are adding ethnic meals and flavours to their existing product lines to better compete against speciality manufacturers. In some cases, large food manufacturers launched completed new products; ConAgra Foods Inc launched a line of Mexican inspired chilled ready meals in 2003, under the Rosarita name.
Competition intensifies with expansion of private labels
Given the positive outlook of the overall ready meals market, manufacturers would inevitably expect to witness more retailers expanding into the ready meals market with more private label products and thus giving them a run for their money. This is largely due to retailer’s increased awareness that selling high quality goods can promote consumer loyalty, as consumers can only purchase the store brand items at the retailer, in addition to the higher margins offered by private label products. For example, supermarket chain Trader Joe’s continued to add new products such as Trader Joe’s Cornmeal Crust Pizza with variants such as Spinach, Kalamata, Feta Cheese & Red Bell Pepper, which are marketed as having “a unique crust that is wonderfully flaky and crispy”.
To find out more about Euromonitor’s Ready Meals in USA report, click here.