Are Smart Ones Still Smart Business?
HJ. Heinz is still committed to its frozen food products, including Smart Ones diet meals. But are f…HJ. Heinz is still committed to its frozen food products, including Smart Ones diet meals. But are frozen meals where the smart money is?
"Frozen meals are the most cyclical of the major food categories we compete in," said Arthur B. Winkleblack, chief financial officer of the Pittsburgh, Pennsylvania-based company. "Strong in good times and weak in recessionary times."
Sales of frozen meals fell in 2009 and 2010, and were believed to have grown just 0.6% to $7.9 billion in U.S. sales in 2011, according to a June report from Chicago research firm Mintel. Based on current prices, the firm projected that sales would drop again in 2012, and then grow slightly for the next four years.
Now, as the country works through a weak recovery, the industry is sorting through its options -- get out of the business or figure out what will get customers to open that freezer door again. Not only that, but Frozen products are also competing with quick service restaurants promoting value meals, as well as the
prepared meals section of the grocery store that has become a focus for supermarkets in recent years.
Earlier this year, Heinz top executive, William R. Johnson, complained that retailers are pushing shoppers to buy things like alcoholic beverages on the perimeters of their stores. "What's happening is consumers are walking in with a budget. By the time they get out of the perimeter, their budget is gone." Heinz is already streamlining its frozen operations, getting out of the pricey T.G.I. Friday's and Boston Market operations and closing several plants.
Mintel's research found the value vs. convenience equation isn't the only thing that shoppers are considering as they wander the grocery aisles. More than half of the respondents said they were trying to limit their intake of processed foods. Shoppers looking for "better for you" products were interested in high fiber, high protein and whole grain products, as well as watching sodium, the firm said. New Smart Ones products this year include Chicken Marsala and Sesame Noodles with Vegetables.
"As some Americans are looking to eat better, the frozen meal industry must make sure it offers products that are consistent with the pursuit of a healthy lifestyle," Mintel's report said. But the firm also sees some opportunities in single-serve meals for the growing number of one-person and two-person households,
snack products for aging baby boomers, and handheld (breakfast) segment items -- that last category showed nine percent sales growth last year.
