ANALYSIS: Is there a future in frozen foods?

Clarence Birdseye is credited with inventing the quick freezing method, which produces the type of frozen foods that we know today. Almost 100 years ago, this was a real innovation and Birdseye introduced the first line of frozen foods in 1930 and the industry was born.

But in recent times frozen foods have fallen out of favour with consumers. Nestlé have made no secret their frozen meal brands are challenged. In its most recent set of results, the world’s largest food company blames poor sales of frozen foods, especially their Lean Cuisine brand for the slow start of the year in North America. This is despite 3.7% organic growth in the region for the first three months of the year.

Nestlé CEO, Paul Bulcke, said that "US consumers feel threatened by big, so they go for small brands, local, artisan, etc. But I feel over time that will sort itself out. We have to reconnect to get closer to the consumer again."

This is all coming amidst a changed consumer, who wants to eat healthier and is exercising more. This is why sports nutrition brands, such as Glanbia’s Optimum Nutrition is performing strongly. Opposite to this, frozen food is not perceived as healthy and presumed to be processed even though this may not be the case. Consumers are also now put off by the concept of dieting and brands such as Lean Cuisine are associated with this. Two years ago Nestlé offloaded its Jenny Craig weight loss brand.

As consumers’ tastes and attitudes are shifting, it is forcing many of the most recognized brands, from McDonald’s to Coca-Cola, to rethink their strategies. McDonald’s saw its US comparable sales decrease 2.2% in May as more people chose to eat in other perceived healthier restaurants.

With these trends towards health and fitness, it was surprising to see Aryzta last March announce that it had bought into is a specialty frozen food retailer. Although Picard is a well-established premium French food business, with a good track record and 19% share of the frozen category in France, the market has been confused by the move and shares have fallen by almost 40% since early March.

But it cannot be ignored that Aryzta has built a successful specialist frozen bakery model in France and frozen retailing may be a credible adjacent area of development in time.

According to Bord Bia, the global frozen prepared food industry is experiencing strong growth and is expected to reach sales of €142 billion by 2015. Significant growth is expected to come from emerging markets in Asia, Latin America and Eastern Europe. Rising incomes, changing lifestyles and interest in ethnic and international cuisine are seen as the key drivers of growth.

But there are challenges in markets where frozen food is established, and redefining the category will be key. Efforts to improve the perceived healthiness of frozen foods will need to continue, particularly as trends in health and wellness gather pace and retailers will also need to consider how to make shopping for frozen foods an exciting and enjoyable experience.