Consumers are no longer just concerned about convenience. The key challenge facing frozen food manufacturers in Western Europe today is how to reposition their products as diet- and health-friendly. The low-carb trend is also making an impact as the massive frozen potato category slumps.
Over the past decade, consumers have been inundated with news about food-related health crises around the world, leaving them feeling insecure about the quality and safety of the food products they purchase. Moreover, changing lifestyles and work patterns, as well as rising levels of disposable income, have resulted in more diet- and health-conscious consumers, which has led to a greater demand for healthier foods in recent years.
Frozen poultry benefiting at the expense of frozen processed meat
According to global market analyst Euromonitor, one sector that has particularly suffered as a result of the food-related health scares is frozen processed red meat. The BSE and foot-and-mouth crises, which affected all Western European markets in recent years, accentuated consumer demand for healthier non-red meat alternatives.
In many markets, frozen processed poultry and, to a lesser extent, frozen processed fish and seafood, benefited most from this consumer preference. Frozen processed poultry registered strong growth in recent years, stimulated by its fulfilment of major consumer demands for healthier, premium products.
Euromonitor reports that in 1998-2003, frozen processed poultry retail value sales grew by 27% in Western Europe and 30% in Scandinavia. The sector is expected to increase its share in the future at the expense of frozen processed red meat, whose value sales growth in Western Europe over the same period was just 6%.
Reduced-calorie meals growing fast
In contrast to problems suffered by red meat, reduced-calorie frozen ready meals performed well in Western Europe, having previously been considered niche. This has been driven by manufacturers like Heinz and Nestlé tapping into the preoccupation with health and self-image.
Euromonitor has seen a notable shift towards ‘healthy eating’ among consumers in Western Europe, with ready meal manufacturers responding by launching carefully conceived brands targeting specific consumer groups. Among the favourite brands are Heinz’s Weight Watchers, on the market since the late 1990s and 1st Choice Unislim Ready Meals, introduced in April 2003, and Findus Feeling Great! Lean Cuisine, re-launched with four new variants in 2002.
Kraft is also keen to exploit this opportunity by focusing in 2004 on weight loss and healthy eating issues in line with changing consumer demands. Of total frozen ready meals, Euromonitor’s latest research found that the ‘healthy’ share in Western Europe increased significantly from 30% value in 2001 to 38% value in 2002.
Good prospects for frozen soup
Following on the health trend, the relatively new frozen soup sector has experienced immense growth over the last few years. According to Euromonitor, frozen soup has been, and continues to be the fastest growing sector in Western Europe with retail value sales growth of 40% in 1998-2003.
It is perceived as a healthy alternative and it benefits from a trendy image, storage advantage and convenience. However, it is a relatively new sector and still quite small. In fact, it is among the smallest in the industry, representing just 1% of total retail frozen foods in terms of value sales in Western Europe. This, in turn, indicates that the sector has large growth potential, and it is expected to continue to perform well in the short term.
Future not so bright for frozen potatoes
On the contrary, the frozen potatoes sector has not performed well recently. In Western Europe it experienced the lowest growth rates compared to other frozen food sectors in the industry and is expected to decline in the future. Euromonitor reports that value sales of frozen potatoes in Scandinavia have been deteriorating, as they are perceived as unhealthy. This commonly held attitude was reinforced when in 2002 Swedish scientists discovered for the first time that acrylamide, a synthetic substance used in the manufacture of plastics and dyes as well as to purify drinking water, is also present in potato products that have been subjected to high heat.
Further exacerbating the gloomy outlook for frozen potatoes is the increasing trend of the low-carb diet. The sector lost 1% of its retail value share of frozen foods in 2003 in Scandinavia, and Euromonitor expects it to slowly lose value share in the rest of Western Europe as well.
Health and diet trend eating into McCain’s profits
One company losing out on the low-carb frenzy is McCain, globally the biggest manufacturer of frozen potatoes. Its sales of frozen potatoes fell last year as a result of growing health awareness, notably about the adverse effects of fastfood consumption and associated health risks such as obesity.
However, the company’s troubles do not end there. In January it was reported that a French fry plant in France belonging to McCain was shut down as a result of discovering bacteria linked to Legionnaires’ disease in the cooling system.
The company is making efforts to revive flagging sales by focusing on product innovation. This includes making its fries crispier, introducing new shapes, implementing different types of seasoning and introducing microwaveable fries. Moreover, the company is attempting to diversify into the dessert segment in Europe using its potato brand.
Currently McCain is by far the biggest frozen potato player in Western Europe, with 26% retail value share. However, in Scandinavia, where the competitive environment is characterised by local and regional players, its profile is much lower.
EU tightens regulations
To bring back consumer confidence in food safety and quality, the EU is implementing various measures. A White Paper on Food Safety published by the European Commission in January 2000 drew together, for the first time, all aspects of food safety along the food chain, from hygiene provisions to animal health, welfare and phytosanitary requirements.
As a result the European Food Safety Authority (EFSA) was formed provisionally in Brussels in 2002. In 2003 the EFSA developed into a fully-fledged independent European agency and truly opened for business in May with the establishment of its Scientific Committee and Panels. Euromonitor expects this to have a large impact on food manufacturers in Western Europe, as it would put more pressure on the way food is handled along the whole food chain.
As the range of food available to consumers continues to widen, people are increasingly relying on labels when making decisions about products. In addition, many people require details of food ingredients for various health reasons. In this respect, the EU is reviewing its current legal framework. As a result, a new EU directive on labelling, introduced in January 2004, contains a much stricter definition of ‘meat’ and lays down specific rules for claims about meat content. Furthermore, by 2005 the EU plans to abolish the ‘25% rule’ of labelling, forcing manufacturers to include ingredients likely to cause allergies on the labels. This would also force nutrition and health claims on packaging to be more regulated.
Companies have already been hit by stricter views on labelling. Last month, for example, Heinz announced that it is to drop the ‘healthy eating’ claim from its products in the UK, following criticism by the Advertising Standards Authority. These products are said to contain more salt, sugar and fat than government standards allow.
Manufacturers must face up to the challenges
With new rules already in place and more expected to be implemented in the near future, food manufacturers in Western Europe are being challenged with tough regulations intended to benefit consumers. Euromonitor anticipates that labelling and packaging are going to be key in the short term, as manufacturers seek to add value to their products, differentiate their brands and stimulate customer trial and loyalty.
In addition to this, frozen food manufacturers must think of ways to reposition their products to match changing consumer trends towards healthier living and increased dieting, without the loss of convenience, good taste and diversity.
This article is an abstract from Euromonitor’s 2004 report on The World Market for Frozen Food.