'Healthy' foods, convenience products spur gains in Australian frozen sector.

`Healthy' Foods, Convenience Products Spur Gains in Australian Frozen Sector Overall tonnage expansion has resulted in many processors outgrowing on-premise warehouses. Swire's response: custom-tailored distribution centers to handle specialized needs.

The Australian frozen food industry has been enjoying mixed fortunes of late, with consumption in a number of product categories growing dramatically while others suffer nil or negative growth. A number of factors are responsible.

Firstly, the emphasis on blood cholesterol levels and publicity about foods which aid in its reduction and have positive effects on similar ill conditions has resulted in the definite growth of product lines that have a perceived "healthy" image. Consequently, business has been taken away from those that are seen as unhealthy. For example, butter sales are down by 15% while relatively new dairy blend products have racked up a growth rate of 77%.

A second area of expansion has been in the convenience foods segment, where dramatic increases have occurred. Examples are frozen meals rising by 62.1%, casserole bases by 29.8%, frozen pizzas up 15%, and frozen desserts advancing 4.7%. This is in comparison to individual frozen vegetable components, where negative growth has been seen over the last four years. Trends are highlighted in Table 1, which traces yearly changes in the rankings of each through a basket of 45 major grocery products, in addition to sales percentages.

Another category that has suffered at the supermarket due to the popularity of frozen meals is poultry which -- after experiencing growth of 20% from 1984-86 saw a decline in 1987 followed by a further slide of 3% in 1988. This market is currently estimated at worth some $170 million per year.

Convenience foods have posted gains because of the increase in the number of two-income families, which can be attributed to the country's high inflation rate (7.5%), together with lofty interest rates.

Another factor that has facilitated the growth of certain categories has been in the increased use offrozen food by the foodservice industry. With restaurants and takeaways now looking to this convenience, frozen poultry is in particularly high demand. While this improves the industry's market share, it also removes more of the consumption dollar away from supermarkets, with recent statistics showing that Australians now spend 23% of their food budgets on meal occasions outside the home. This change in consumption patterns is also reflected by last year's 7.5% supermarket growth rate, which compared unfavorably with a whopping 13% achieved by fast food outlets.

Table 2 highlights the annual changes in per capita consumption patterns, with the move from red meats to white meats in the years 1983-86 measured in kilograms. While there remains high demand for beef, growth patterns are clearly discerned in chicken and fish.

As far as the future is concerned, pace and change will increase in the frozen food industry because consumers and their demands shift more quickly these days. So does technology, and so must the food industry if it is to survive. Fewer new product retailing approaches or marketing ideas remain.

Being the largest operator of public refrigerated warehouses in Australia, the Swire Group is an important cog in this industry. It consists of 14 cold stores offering 20 million cubic feet of capacity in five capital cities and two major country towns -- constituting 19% of the 105 million cubic feet available. Some 4.0 million cubic feet have been added in the last two years, and a further 300,000 is on the drawing board for 1989.

Frigmobile, one of the operating companies, has been involved in the distribution of temperature controlled products for major food retailers and manufacturers for more than 25 years. It currently utilizes a fleet of 40 linehaul and 100 local delivery vehicles throughout the various metropolitan and rural areas of Australia.

With the trend by retailers in the last decade away from private warehouses and into public facilities, Swire is playing a more important role in FF marketing. Gone are the days when retailers operated uneconomical cold rooms and distribution vehicles. With the steady growth of FF, there has been a realization that effort and capital should be concentrated on marketing the product. Hence the evolution of the most significant part of the industry today: temperature control distribution centers.

Of Swire's operations, distribution centers boast some 4.5 million cubic feet dedicated exclusively to serving two major retailers. Purchasing, stock receival, storage, order selection and distribution functions are performed there for 240 supermarkets in four states. A total of 179,000 tonnes of product (or 23 million cartons) are turned over annually, equivalent to emptying and refilling of a 2.5 million cubic food warehouse every week. The number of frozen lines carried for these retailers average 700, with another 650 in chilled. This compares with 610 and 580, respectively, carried in each center two years ago.

The growth of FF consumption has forced manufacturers and processors to follow suit as they outgrow warehouses attached to plants. This has resulted in the Swire Group developing distribution centers to cater to such new clients, with much of the remaining 15.5 million cubic feet servicing manufacturers of ice cream, chicken, butter and margarine.

Other products handled for these clients on a smaller scale are frozen pies and sweets, Easter eggs, and small goods. In addition, non-food products are stocked in a number of warehouses. Turnover varies with product category, with stock turning 13 times per year on average.

Swire has also benefitted from the growth of the fast food market, with McDonald's being a major user of the Group's facilities at three locations. Specialized warehouses (frozen, chilled and dry goods), together with office facilities, have been erected and leased to customers.

In the area of warehouse layout and materials handling systems, in most instances Swire has remained with what has become a conventional 10 meter (33 ft.) height warehouse featuring a variety of drive in and double deep, and mobile racking systems for bulk stores, with the addition of one and two level selective, as dictated for retailer and manufacturer distribution centers.

The exception has been an efficient use of height by two of the Group's facilities sporting specially designed cranes with Rem car attachment. In addition to the benefit of lower building costs, the system has the added advantage of reducting reliance on labor, as well as providing a much faster storage and retrieval operation.

Swire has looked at the mechanization of retail distribution centers with a walk pick to belt system. However, the concept has not yet been incorporated as there has been insufficient evidence to show that gains in operating costs from such a system outweigh the increased capital cost.