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THE BACKGROUND

When frozen foods first appeared in the UK, they revolutionised cooking; now many consumers view them as second-best to chilled products. Frozen ready meal sales fell by 13% in 2005 as consumers finally started to switch to a healthier diet incorporating fresh, less processed foods. Birds Eye owner Unilever is trying to turn around the sector's fortunes by overturning the perception that chilled foods are fresher and better quality, running a £21m ad campaign claiming that freshness is 'locked in' by the freezing process.

Frozen ready meals are in a funk that is unlikely to lift any time soon, as sales dipped 13% last year to £603m, according to Mintel.

Consumer perceptions are a major problem, and a major factor in this lies at the point of purchase. Supermarket freezer aisles are the least well laid-out, and claims of quality do not sit well with the endless multi-buy promotions.

Frozen foods are normally found in the final aisles of the supermarket, so many shoppers have bought all they want before they reach that part of the store. Shoppers also feel these aisles are colder and less welcoming, even though research suggests the temperature is the same as elsewhere.

Whereas most food categories are generating increased value at the premium end, frozen meals generally do not fall into that category. Brands that have tried to enter this end of the market, including Unilever's Enjoy! and Heinz's Main Street Bistro, have failed.

In other categories, organic foods have enjoyed strong growth, but here too, the frozen-foods market has seen very little expansion.

About one in six consumers bought a frozen meal in the six months to October 2005, according to TGI. Traditional British dishes were the most popular, with Italian, Indian and Chinese also faring well. Younger single men are the most likely purchasers, although healthier and vegetarian options are more likely to appeal to families and women.

Upmarket NPD

The biggest problem for manufacturers is that the consumers least likely to be drawn to frozen produce are in the key 15- to 37-year-old AB segment.

These consumers are most likely to be targeted with NPD, because if they are not drawn to the market, older, downmarket shoppers will constitute its core customers, jeopardising its long-term prospects.

One area in which there has been innovation is meals aimed at children.

These tend to be free from artificial additives and contain at least one serving of vegetables.

Birds Eye is the market leader here, but while owner Unilever has invested in promoting frozen food, it has put the brand up for sale. Last year was a poor one for Birds Eye, whose frozen-meal sales fell 13% despite a campaign promoting its products as free from artificial colours, flavours and preservatives.

Its range includes platter meals based on roast meat and vegetables, Pub Specials and SteamFresh. The latter can be microwaved from frozen, its point of difference being that the food is steamed rather than just reheated.

Pub Specials, launched last month, offer premium, gastropub-type meals.

Although Unilever expanded its SlimFast range into frozen meals in 2004, it subsequently withdrew them following a shake-up of the brand.

Heinz is the market's second-biggest manufacturer; it produces the Linda McCartney brand under licence and owns the Weight Watchers brand. In 2005 the latter range was updated with recipes including Beef Goulash and Moroccan Chicken with Couscous.

Oriental Express Frozen Foods has expanded its range to include Indian and British meals, while its China Light sub-brand offers healthier meals with lower fat and salt content. It launched a Scooby-Doo licensed range of children's meals in 2004, which it expanded with Sporty Meals in 2005.

The meals have a lower salt content and are free from artificial flavours, preservatives and colourings.

Smaller companies that are trying to make headway in this declining market include Cook, a chain of 18 frozen meal outlets in South-East England that also runs a national mail-order service.

Babylicious, which launched its frozen meals for babies in 2001, extended its offer last year with Kiddylicious, intended for children aged one and over. Also aimed at children, Miniscoff supplies frozen organic meals for one- to 12-year-olds, mostly through independent retailers, while Fresh Daisy's frozen organic foods for babies and young children are now stocked by several major multiples.

Looking to the future prospects of this market, Mintel says manufacturers are spending too much effort trying to win over the younger affluent consumers and should instead concentrate on shoppers who are more likely to buy frozen foods more often. It also warns of continuing pressure from the multiples, which appear to be squeezing out low-margin frozen foods. With consumers continuing to focus on dieting, opportunities lie in the 'better for you' sector.

Mintel predicts the market's value will fall by 4% at current prices to £579m by 2010, a 12% slide when inflation is taken into consideration.

FROZEN READY-MEAL MANUFACTURERS BY VALUE AND MARKET SHARE

2005 (est) 2001 01-05
pounds m % pounds m % % chng
1 Unilever 101 16 117 18 -13.7
2 Heinz 60 10 85 13 -29.1
3 Oriental Express 36 6 26 4 39.2
4 Findus 12 2 46 7 -73.8
Other brands 49 9 46 7 6.5
Own-label 344 57 332 51 3.5
Total 603 100 652 100 -7.5

Source: Mintel



FROZEN MEALS ADSPEND BY BRAND

Brand 2005 2004
1 Unilever product range 7,722,591 12,840
2 Unilever SteamFresh range 2,975,798 19,862
3 Birds Eye Curries 812,744 n/a
4 Unilever Nutrition Mission 644,325 399,057
5 Birds Eye Chicken Curry 264,339 n/a
6 Oriental Express meals range 82,665 10,815
7 Quorn Cottage Pie 47,338 5461
8 Birds Eye Kids' Meals range 21,404 19,160
9 Patak's frozen ready meals 12,021 22,989
10 Unilever ready-meals range 9445 10,430
11 Findus frozen-food range 9143 25,109
12 Bisto frozen-food range 3738 n/a

Source: Mintel



FROZEN MEALS PURCHASED IN PAST SIX MONTHS* BY TYPE

Meal type % of
adults
1 Any frozen ready meal 61
2 Traditional British 24
3 Italian 17
4 Indian 16
5 Chinese 13
6 Any healthy choice low-calorie,
low-fat ready meal 10
7 Vegetarian 8
8 Thai 3
Other ethnic cuisine
(eg Malaysian/Tex-Mex) 2

Source: BMRB/Mintel
*Research undertaken October-November 2005

ANALYST COMMENT - SANDY LIVINGSTONE DIRECTOR, ENLIGHTENMENT

Given the increasing demand for natural, preservative-free food, one would expect that frozen meals should be enjoying a premium-priced surge of popularity. But they are not - a fact that could simply be due to the fact that young shoppers consider them to be old-fashioned and, quite possibly, a bit naff.

The same proportion of the population believes that frozen is as nutritious as fresh food today as 20 years ago, but the under-35s are only half as likely as over-55s to hold the belief. These young adults are the parents of children who are being brought up in 'chilled-only' homes, giving it the potential to become a long-term trend.

Consumers who are more likely to be prepared to pay a premium for convenience, to be experimental in their food product purchasing and to be anti-GM and pro-free range are all more committed to chilled than they are to frozen foods. Shoppers who are 'most often' users of chilled are almost one-third more likely to check nutritional content than consumers who prefer the frozen option, the packaging of which often prevents direct display of contents.

The whole industry has been telling itself for years that frozen food in general is becoming 'unsexy', with the consequence that the retail freezer section has lost its mass-market status, dividing now between the everyday value and super-premium niches. The relative lack of innovation going into frozen meals has further contributed to the self-fulfilment of this prophesy.

There is a clear opportunity for frozen ready-meals of the right quality and a vacancy for a brand that is bold enough to question what appears to have become the 'chilled is best' orthodoxy.