APPIES & SNACKS TAKING A BIGGER BITE

Appetizers/snacks, benefiting from increased at-home eating and entertaining and more items suited for on-the-go snacking, is one frozen food category that is outperforming the department as a whole by a wide margin. And its sales are accelerating.
The category was up 8.7% to $202.4 million and 4.8% in unit sales to 60.6 million in U.S. supermarkets in the 12 weeks ending June 15, according to Information Resources, Inc., a Chicago-based market research firm. For the 52 weeks ending June 15, the category was ahead 5.6% to $961.5 million and 2.7% to 293.0 million units. This compared with dollar increases of 1.7% and 1.9%, respectively, and unit declines of 2.7% in the 12-week period and 2.2% in the 52-week period for the overall department.
The hottest items in the category are those that are more natural and healthy. “It’s what’s on everyone’s radar,” says Keith Chen, president of Toronto-based Culinary Destinations (416-201-0707).

VARIETY, CONVENIENCE

“When it comes to frozen snacks, consumers are looking for variety, convenience and premium offerings,” according to Mark Fleming, director-frozen snacks, Heinz North America (412-237-5700), Pittsburgh.
Frozen snacks are often considered a discretionary purchase. So in today’s down economy it presents a challenge for the category as it does for the food industry overall, says Fleming. “The good news is that consumers are still seeing the value in frozen snacks/appetizers; they are just being more selective.”
“Products have to taste good and be a good value because when people are spending $100 to fill up their gas tanks they are thinking a lot different than they were six months ago,” notes one observer.
“We are noticing increased popularity within the category for snacks-on-the-go. Consumers want products that are hand-held, easy to prepare, wholesome and nutritious,” says Jennifer Meetz, senior marketing manager of St. Simons Island, Ga.-based Rich Products Corp. (912-638-5000), maker of the Farm Rich brand. Mini stuffed panini and mini quesadilla slices will be debuting this fall from Farm Rich.
Ellen Meyer, president of Great American Appetizers (800-282-4834), Nampa, Idaho, believes that convenience and price are the driving factors of the category’s sales gains. “The entire category is on fire, especially main core items,” she says.
Retailers are looking to show value and price separation from national brands with a comprehensive private label program inclusive of frozen appetizers, according to Meyer. “The absolute best thing that retailers can do to increase frozen appetizer sales is to advertise for volume and merchandise for profit,” she says.
“Consumers are responding very positively to single-serve pizzas, which meets their lifestyle needs for snacks and mini-meals,” says Tom Bierbaum, director of marketing, pizza, snacks and single serve for Schwan’s Consumer Brands North America, Inc. (888-626-4337), Bloomington, Minn.

ETHNIC FOODS ARE HOT

Amy Ruegg, director of marketing for Schwan’s Asian Sensations line, points out that consumers are increasingly interested in augmenting their current purchases with ethnic foods that are new and different to provide an alternative to their meals. “This interest,” she says, “is driving ethnic foods to grow faster than most other food categories.”
Rising costs are affecting everyone. “I haven’t seen cost increases like this since the ‘70s. When fuel costs go up it affects everything from packaging to transportation to utilities. It’s the perfect storm hitting each of the components. Historically you will see a couple of ingredients go up in cost and a couple go down. But now we’ve seen them all turn straight up at the same time. That’s what has made it so dramatic this time,” says a vendor executive.
Also, higher worldwide demand for many ingredients, such as wheat, flour, bread, tortillas and ground beef, has contributed to price increases.
Rich’s Meetz says that the current economy has made consumers look to the value that larger pack sizes bring.
Appetizers/snacks is a crowded category and needs to be easier to shop, according to Heinz’s Fleming. “While we’re starting to see some retailers implement better programs with brand blocks and more promotions, we still feel there’s a challenge and an opportunity at the same time,” he says.
Fleming says that consumers often look to frozen snacks as a side dish in addition to a snack or appetizer. Heinz has responded with new T.G.I. Friday’s Loaded items.
Culinary Destinations’ Chen says that retailers need to understand that some items are not built for the long haul. “Retailers may want to have these products nevertheless, knowing that although they may have a three- or five-year shelf life, they add excitement to the category. There is a place for them, but strategically as a retailer you have to think about how and where I’m going to make this work for me.” And, he adds, “what works for one retailer may not necessarily work for others.”

TRY CINCO DE MAYO!

Although the entertaining seasons of Thanksgiving, Christmas, Super Bowl and Easter are huge merchandising opportunities, retailers should be looking to piggyback other times to increase sales, such as Cinco de Mayo, according to Chen. “This would show that a store is more aware of its consumers,” he says.
“There’s a whole global sense of food  as part of living a lifestyle. What retailers are now offering in the freezer aisles is a reflection of that,” says Chen.
Schwan’s Ruegg says consumer interest in ethnic foods will continue to increase based on data that shows that 44% of consumers who use individual frozen meals and 49% of those who use family-size frozen meals say they would like to see more ethnic food dishes in their frozen meal choices.
Ruegg says Asian Sensations is well suited for many usage occasions including snacks, entertaining and mealtime. Bierbaum points out that Red Baron Thin & Crispy Single-Serve pizzas are the fastest growing product in Schwan’s portfolio.
Ruegg says that there are two key consumer trends that Schwan’s is addressing with its Asian Sensations:
Consumers’ tastes are becoming increasingly adventurous.
Consumer interest in health and wellness continues to rise.
Asian Sensations now meet consumers’ health and wellness needs with no added MSG, no added preservatives and zero grams of transfat, according to Ruegg. Bierbaum points out that Red Baron Thin & Crispy Singles are less than 300 calories per pizza and appeal to consumers who want individually-sized pizzas.
New Red Baron Singles panini sandwiches meet consumers’ lifestyle needs for more convenience and on-the-go solutions, says Bierbaum.
The weak economy is slowing quick-serve restaurant trips with QSR Asian traffic losses among the most significant, according to Ruegg. “This creates an opportunity for our Asian Sensations snacks and mini-meals.” 

IT'S STILL EARLY

Ruegg believes that it will be many years before the category peaks because “we are in the early stages of the life cycle since Asian is just expanding into the mainstream.”
Bierbaum says that the weak housing market and high gas prices have significantly decreased traffic to quick-serve restaurants, with the most impacted segment being take-out pizza. “Pizza is still America’s favorite food and families can experience restaurant quality and style of pizza from the convenience of their freezer and for a lot less money than take-out,” he notes.
Ruegg and Bierbaum say that retailers are continuing to aggressively display frozen snacks and appetizers by bundling them together with consumer mega events and meal deals. Schwan’s is launching this month a promotion called “The Perfect Pair” that teams its Red Baron Singles products with Coca-Cola.
Farm Rich, which has great interest in the back-to-school market, has launched a “Fun Trek” sweepstakes that includes a chance to win a family trip to Hawaii.
Asian Sensations and Red Baron Singles also have extended and expanded its partnership with country music star Julie Roberts.
Bierbaum recommends cross-merchandising pizza with desserts and drinks or a bagged salad and soda to drive consumers to the frozen aisle instead of a Take & Bake or QSR option. Ruegg suggests merchandising Asian Sensations with a beverage or salad.

HORS D'OEUVRES & SNACKS: UPSCALE WITH ROOM TO GROW

Hors d’oeuvres and snacks skew upscale, and since they have relatively low household penetration, there’s still plenty of room to grow. We took a look at Homescan data from The Nielsen Company, and found that user households with incomes between $70,000 and $99,999 came in the highest income-wise, indexing at 119 and accounting for 18% of total category sales. Next highest were households with incomes above $100,000, indexing at 115 and accounting for 21% of volume.
But don’t rule out blue-collar workers — perhaps they make more money than you think. (Paid a plumbing bill lately?) By job type, blue collar workers indexed highest — at 134, making up 33% of all volume in the category. By comparison, professional/managerial types indexed at 110, and accounted for 30% of volume.
Household penetration is only 51.8%, so in-store demos seem like a wise idea to help raise awareness and grow the category. In 2007 (the year studied), only 21.5% of dollar sales were supported by a deal, and only 5.7% of sales were accompanied by a manufacturer coupon.
Users spend $18.56 annually on the category, buying items 3.6 times per year on average. Big families help: households with five or more members indexed at 184 and made up 20% of volume; households with three or four members indexed at 142, for 44% of all category sales. Families with teens indexed at 188, for 30% of volume; families with kids 6-12 indexed at 167, and accounted for 31% of volume.
There’s no big ethnic divide here: Asians index highest at 108, but account for only 3% of sales.
Caucasians come in next, indexing at 105, and making up 82% of sales. Hispanics index at 98 (10% of sales) and blacks index at 68 (8% of sales). — By Warren Thayer