PROGRESSIVE GROCER EXCLUSIVE ARTICLE: Not Frozen Out: National Brands vs. Private Label

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PROGRESSIVE GROCER EXCLUSIVE ARTICLE: Not Frozen Out: National Brands vs. Private Label

By D. Gail Fleenor - 10/29/2009
National-brand frozen food companies have been keeping an eye on the rearview mirror as private label sales have grown during the recession’s penny-pinching days. Store brands have made gains in several frozen categories. However, while tough times may have changed the shopping lists of some consumers, the times have not frozen out national brands, which continue to command 80 percent of frozen food sales.

In 2008, private label frozen foods represented one-fifth of total department sales of $29.4 billion (The Nielsen Company, 52 weeks ending Dec. 27, 2008). Over the past few years, statistics show store brands have increased their share in several frozen categories, including ice cream, desserts/fruits/toppings, juices, ice and, in particular, vegetables.

Grocers have followed private label sales increases with interest. “Categories where we have seen significant store-brand share growth include ice cream, vegetables, pizza, bread and dough products, toppings, and fruit,” says Chris Hardin, director of store brands for Tyler, Texas-based Brookshire Grocery Co. “Our store brands lead in volume in several categories, including fruit, ice cream and vegetables.”

“All private label categories are up, but ice cream is leading the charge,” notes Jack Wagner, center store frozen food business manager for Indianapolis-based Marsh Supermarkets. Private label has a significant share in frozen juice, potatoes and vegetables, whipped topping, and pasta, according to Rick Benner, frozen foods category manager for Grand Rapids, Mich.-based Spartan Stores. “There is strong growth in frozen potatoes and breakfast waffles — the major brands in both categories are experiencing growth as well,” he observes.

National brands continue to drive most frozen food categories. “Certainly, dinners/entrées, pizza, breakfast and frozen snacks are very much driven by national brands,” notes Spartan’s Benner. “Frozen pizza continues to be driven by Kraft, while frozen dinners and entrées are driven by Nestle and ConAgra,” says Marsh’s Wagner.

Growth of private label has caused some national brands to ramp up advertising or offer special deals to retailers. Other name-brand companies have decided instead to continue concentration on their own product lines. “Name-brand companies are definitely coming to the table with deeper deals in order to combat loss of share to store brands,” says Brookshire Grocery’s Hardin. “While we can’t divulge the actual deals, it is obvious that the growth of our own brands has created a healthy leverage with name brands.” Marsh’s Wagner concurs: “We have recently seen more aggressive, deeper deals from some brands, particularly in the ice cream category.” Spartan hasn’t seen national brands target the sales growth of private label brands, according to Benner.

Progressive Grocer asked frozen food manufacturers and industry experts for their perspective on how big brands and store brands are shaping the supermarket frozen food case today and what they think the future might hold.

On the National Front: Fruits and Vegetables
Dole may be the category leader in frozen fruit, but the company acknowledges that store brands grabbed roughly 70 percent of the category before the recession. To differentiate Dole from store-brand competition, the company has focused on its main attributes — quality and nutrition, notes Paul Panza, director of marketing for Westlake Village, Calif.-based Dole Packaged Foods, LLC. “We are very proud of the resources and very strict guidelines we have put in place with respect to the sourcing and packing of all of our frozen fruit items. We have won and proudly display the ChefsBest Certified Award on our package as a sign of our quality.”

Packaging is a big focus at Dole, with new standup pouches that are convenient and resealable for consumers, and help retailers with improved merchandising at shelf. The company is also promoting frozen fruit’s nutritiousness, versatility and usage, based on research. “As the branded leader in the category, we know that it is our responsibility to drive growth and penetration based on the fact that only 29 percent of households even buy frozen fruit, and those that do only buy three times a year,” Panza says.

Brands must remain relevant to consumers, Panza observes. For example, a large but declining percentage of category sales today cater to frozen fruit for dessert use only, he notes. While still a common usage, other uses of frozen fruit have grown more rapidly in recent years. An upcoming product from Dole, Ready Cut Fruit provides consumers with frozen fruit in forms that are “consumer friendly” for toppings and smoothies, the most common uses of frozen fruit. Consumers can purchase fruit in cuts that aren’t too large and come pre-washed, prepared and chopped with no sugar added. Varieties include sliced strawberries, sliced strawberries and bananas, and diced strawberries, peaches and bananas.

Another new Dole line, Wildly Nutritious Signature Blends, provides health benefits. “By offering the right package sizes, fruit cuts, blends and the right messaging, you can go a long way toward establishing a loyal following that isn’t swayed as easily by price alone,” Panza says.

Store brands have recently made big gains in the frozen vegetable category. Green Giant, a Betty Crocker company and General Mills subsidiary, continues to introduce new products in frozen vegetables. “Green Giant differentiates from store brands by focusing on the high-growth segment of steamable vegetables with sauce,” says Steve Finnie, marketing manager for the Minneapolis-based company. “This includes bringing out additional flavors of our popular Valley Fresh Steamers.” Green Giant’s Just for One vegetables, a single-serve line, now has Weight Watchers point endorsements, including zero points on its popular Broccoli and Cheese.

On the National Front: Entrées, Pizza, Breakfast
ConAgra Foods depends upon its diverse product lineup, which reaches 69 percent of American households, to maintain freezer space, says John Plaso, VP, frozen foods business development for the Omaha, Neb.-based company. “We offer our Banquet line, which is No. 1 in the single-serve economy segment, for the value-minded consumer. Healthy Choice targets consumers looking for a great taste and positive nutrition. It’s the only frozen brand on the market that meets USDA specifications for the word ‘healthy’ in its name.” ConAgra’s Marie Callender line draws consumers seeking restaurant-quality meals at a more affordable price, he notes, and Kid Cuisine gives moms plenty of nutritional meal options.

“Going forward, we feel that there is a place in the frozen aisle for private label offerings and branded products. The recession has changed how people shop long-term, and consumers are more value-focused,” Plaso notes. “For both national and store brands, winning in the marketplace will be about delivering on consumer demands for taste and nutrition while maintaining a strong value proposition. We believe that we’ve found the ‘sweet spot’ between these elements that will drive growth.”

On the horizon for ConAgra: new flavors and SKUs in current lineups, in particular, Healthy Choice All Naturals and Marie Callender’s Pasta al Dente meals, which use the company’s two-tray SteamCooker technology. The company will continue to build on its “Frozen Transformation” initiative, which began a year ago with the goal of growing its four core frozen brands. ConAgra hopes to create demand that drives increased aisle and category traffic, and overall basket ring, Plaso says.

Like ConAgra, Kraft Pizza Co. is well positioned vs. private label through its offering of a range of pizza varieties and formats across different prices, according to Tim Cofer, president of the Glenview, Ill.-based company. “We differentiate our brands through continued investments in quality, innovation and marketing. We are always working with our culinary and marketing experts to find up-and-coming flavors and trends for our pizza products.”

Kraft Pizza Co. recently launched its new super-premium DiGiorno Ultimate Toppings pizza, which the company says rivals what consumers find at a local pizzeria. “Our DiGiorno Ultimate Pepperoni Pizza has 50 percent more pepperoni than the leading frozen pizza, and contains two layers of specialty cheese, and a pizzeria-style crust,” Cofer notes. The company entered the frozen sandwich category this year with DiGiorno and California Pizza Kitchen Flatbread Melts, personal-sized microwave meals that are ready in about three minutes. Kraft’s new DiGiorno Crispy Flatbread Pizzas, the company’s thinnest multi-serve pies, are topped with “Italian-inspired” ingredients and boast “restaurant quality,” he says.

Frozen breakfast foods start the morning for many consumers. Kellogg Co., the category leader, continues to focus on its own quality to differentiate its brand, according to Mike Morrissey, spokesman for the Battle Creek, Mich.-headquartered company. “We also continue to add new innovations to our lineups such as Eggo Bakeshop Twists. These offer more unique options and further strengthen our brand positioning.” Kellogg did not comment on any gains by private label frozen products, instead preferring to tout its own continued growth. “We offer leading products in strong frozen food categories, and delivered double-digit internal net sales growth during the second quarter,” Morrissey notes. New products and options are slated for Kellogg, but its spokesman declined further comment.

The Freezer’s Future
In its report on store-brand products, Chicago-based research firm Mintel expects private label foods overall to gain substantial market share in 2009 (8.1 percent vs. 2.6 percent for branded sales), and then return to a slower but still upward trend in growth.

A leading private label brand broker acknowledges that growth of store brands won’t continue at the same recession-sparked rate. “I do believe store brands will continue to grow in the frozen department as our country pulls itself out of this economic recession,” says Al Greenwood, frozen food director for Stamford, Conn.-based Daymon Worldwide. “Now, is it reasonable to believe private-brand frozen pizza, for example, will continue to grow at a 30 percent-plus clip? Probably not.”

Greenwood notes that data he has seen indicates that consumers are happy with the private-brand products they have turned to during the recession. “This is not surprising, as manufacturers have greatly improved the quality of their products, and were in a position to benefit from an economic downturn.” Retailers increasingly see private brands as an important competitive tool, which should lead to continuing growth, he observes. “Wall Street analysts are realizing more than ever that the strength of a retailer’s private brand has a strong relationship to the retailer’s earnings.”

Consumers who have had a positive experience with private label products may continue to use the items even after their confidence in the economy has been restored, according to one industry expert. “However, we’re projecting that shoppers will return to national brands in categories where they have a deeper emotional attachment or where they felt that store-brand products weren’t acceptable replacements for their favorite national brands,” says Mitch Blum, VP, strategy & planning for Boston-based Marketing Drive, a marketing agency with services including brand promotion.

Blum notes that, even with recent sales increases, private label penetration is still much lower in this country than in many others, which might indicate future room for growth. Name-brand products will continue to thrive in the United States, especially after the recession ends, he observes. “Advertising in support of national brands contributes to the perception that these big brands are of a higher quality than private label products, regardless of reality.”

While national frozen food manufacturers maintain a winning percentage in almost all categories currently, these companies aren’t resting on their laurels or ignoring the potential of store-brand growth. Dole’s Panza sums up the situation: “Simply throwing a brand name on a product isn’t going to win anybody over. Making sure you deliver the total package is essential to not only gaining new consumers, but also holding onto those you have today.”