The US retail market for prepared refrigerated food products is in the midst of new growth and innovation. New technologies and products are redefining convenience and value for the consumer. And these shifts portend significant change to the marketing opportunities and challenges facing this dynamic market, argues Casey Roberts.
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According to estimates in a published report from Food Spectrum, Retail Prepared Refrigerated Foods: The Market and Technologies, US supermarket sales of prepackaged and retail foodservice prepared refrigerated products totaled US$9.5bn in 2001, and are expected to exceed $12bn by the end of 2005. These estimates include products sold in US supermarket deli, meat and produce departments and include the following refrigerated products:
- Fully-prepared entrees and dinners, including branded and private label prepackaged products as well as bulk product sold from the full-service deli sections;
- Bulk and prepackaged prepared salads, such as macaroni salad, potato salad and cole-slaw;
- Value-added, ready-to-cook and ready-to-heat meats and poultry products that carry manufacturers’ brands as well as products ‘put up’ in store;
- Prepackaged, refrigerated pizza;
- Pasta;
- Sauces and gravies;
- Lunch kits; and
- Value-added produce, including bagged lettuce and salad greens, ‘dry’ bagged salads, as well as prepackaged, fresh-cut vegetables and fruit.
Market Opportunities
Overall, much of the growth in the prepared refrigerated foods market has been, and continues to be, attributed to new, ‘pre-prepared’ component products that significantly reduce meal preparation times. For years, US retailers and food manufacturers have tried to copy the successes enjoyed by restaurants by offering fully-prepared, heat-and-eat products. Now, new retail products offer unique points of difference in the form of component products that help American consumers prepare fresh, home-made meals in a fraction of the time.
Marinated ready-to-cook and fully prepared ready-to-heat beef and pork items, as well as breaded poultry products that are ready-to-cook are prime examples of component products that do some – but not all – of the work for the meal preparer. New refrigerated meal kits that contain protein, starch and vegetable components, all pre-seasoned and ready to cook, as well as precut and pre-washed vegetables, are further examples of how a new generation of ‘pre-prepared’ refrigerated foods can offer consumers convenience, while still making them proactive in the meal preparation process.
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By GlobalDataFood Spectrum expects that much of the growth in the prepared refrigerated foods market will be fuelled by new component products that significantly reduce meal preparation time. This new generation of refrigerated product offers unique points of difference relative to other retail food products because:
- they provide advantages that fully prepared items do not;
- refrigerated alternatives are often perceived by American consumers as superior to items found in supermarket grocery and frozen departments; and
- in some cases, there exists no direct competition within other supermarket departments.
Pre-prepared products can also redefine the attribute ‘fresh’. When consumers use refrigerated, component ingredients to prepare meals, ‘fresh’ then describes how the consumer uses and prepares the product, rather than when the product was processed or packaged.
Offering both convenience and flexibility, these new pre-prepared products offer advantages similar to those of bagged lettuce products, a category – that was virtually nonexistent ten years ago – which totalled an estimated $1.6bn at retail in 2001. Using this model, refrigerated food marketers can provide value similar to that of a sous chef in a restaurant kitchen. It’s the sous chef who does the grunt work, leaving the head chef to ‘create’ the meal. And what time-pressed consumer wouldn’t want a sous chef to do the grunt work for them so she can freshly prepare a multi-component meal in 15 minutes or less?
Shifts in supermarket department sales
Given that sales of these “new generation” products are likely to outpace those of fully prepared, heat-and-eat products, we expect a shift in where and how retail prepared refrigerated foods are sold. Supermarket deli departments have long been the bastion of prepared refrigerated foods in the United States. However, as new products introduced into produce and meat departments gain increasing penetration and consumer acceptance, the portion of retail sales sold from deli departments is likely to diminish.
Food Spectrum estimates that prepared refrigerated foods sold from supermarket deli departments (both full- and self-service sections) will account for 39% of total market sales in 2005, down from 42% in 2001. We further expect that produce department sales, fuelled by new value-added fruit and vegetable products, will account for 43% of sales of prepared refrigerated foods, up from 41% in 2001. Moreover, the new proliferation of value-added meat products and refrigerated meal kit products will fuel meat departments’ sales in the near term. It is expected that meat department sales will capture 18% of total market sales in 2005, up from 17% in 2001.
Marketing challenges
As more and more value-added produce, meat, and poultry suppliers enter the market, they face significant challenges as they seek to reorient commodity products to branded, packaged foods. Marketers that understand the importance of a brand – and building the awareness and equity of a brand – will be those that maximise the opportunities within their respective categories. Coupons, sampling programmes, cross-promotions, media advertising and retailer slotting allowances, heretofore seldom used within the produce and meat departments, are among the tools successful marketers will be honing in the future.
Among the more mature product categories, notably, fully prepared entrees and prepared salads, none of the leading marketers have achieved a significant level of consumer brand awareness. As a result, leading suppliers maintain their competitive advantages in these categories primarily because they are well established companies that have firmly entrenched themselves in the markets and retail chains in which they compete. Although these companies might be well poised to take advantage of retail growth opportunities, they are by no means insulated from future competitive threats.
Conversely, there are a number of “big guns” currently competing in meat and produce that can leverage brand equity within and across product types. Brands from national marketers, including Kraft, Fresh Express, Dole, Del Monte, Ready Pac, Hormel and Lloyd’s, are among the current product leaders that have achieved significant penetration and consumer brand awareness.
This is not to say that new brands cannot succeed. But as established suppliers continue to expand operations and distribution, and with the opportunities that await new entrants, especially national processors with both deep pockets and high brand awareness, marketers with little brand equity will face increasingly high hurdles – and expenses – to achieve success.
Practical distribution and safety challenges
In addition to marketing requirements, there also exist significant process, packaging, and distribution challenges. Paramount among them is assuring food safety throughout the manufacturing and distribution chain. Value-added meat, poultry, and produce suppliers must assure best practices ‘from farm to fork’. Identifying and controlling the critical points that affect how the supply is grown, harvested or slaughtered, transported, processed, packaged, distributed, merchandised and stored at home must all factor into operations and quality assurance standards.
The age-old axiom regarding refrigerated foods holds true, whether a product is sold in the deli, meat or produce department: People buy fresh food with their eyes. Product appearance is the first indication a consumer has about the product’s quality. As a result, process and packaging technologies must assure that freshness is maintained throughout the time required for distribution, merchandising, and home storage. To accomplish these ends, suppliers must either bypass traditional distribution channels and develop just-in-time delivery systems to retail stores, or adopt packaging and process technologies that assure product shelf lives of 30 days or more.
Finally, value-added produce marketers face a unique challenge with regard to securing a year-round supply of product. Whether they’re buying strawberries in February or broccoli in July, consumers demand continuous product availability. Out-of-stocks can take a huge and sometimes irreversible toll on a product line’s success. And, not only do consumers expect the product to be on the shelf during any store visit, they also expect a level of consistency from value-added produce products commensurate with that they’ve come to enjoy from other branded, packaged foods.
About the Report
Retail Prepared Refrigerated Foods: The Market and Technologies, is published by Food Spectrum, in association with the Food Policy Institute at Rutgers University. Researched and written by industry professionals, this 280-page report provides an authoritative analysis of the products sold through supermarket deli, meat, and produce departments.
The report offers market size estimates, forecasts, shares of market held by major competitors as well as competitive profiles, and a comprehensive analysis of the qualitative trends affecting the market and each of its categories. Also provided are detailed discussions of the current and emerging process and packaging technologies driving new and established products.
Product categories covered in this new study include:
- Value-added, prepackaged produce;
- Prepared salads;
- Prepared entrées and dinners;
- Value-added meat and poultry products;
- Pizzas and pizza kits;
- Lunch kit products;
- Pasta; and
- Sauces and gravies
To find out more about this report, which is available for sale in the just-food.com research store, just click here.
Casey Roberts, Vice President, Market Research for Food Spectrum, can be contacted at croberts@foodspectrum.com.
