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Conflicting signals in Danish stores, as new products and discounting surge.

Conflicting Signals in Danish Stores, As New Products and Discounting Surge

Can too much of a good thing be bad? For several years now Denmark's grocery stores have been virtually bombarded by new product introductions. Retailers have complained of having too many options. Some say they've made space for a new product, realized sluggish sales, then discontinued the item only to have some customers complain when it was no longer in stock. A form of Darwinian selection will likely resolve the problem naturally in the near future, as it will be the strong (big) that survive.

On the producing end, mergers and takeovers have consolidated the Danish industry around just a few names. Meanwhile, the retail grocery business has been undergoing a period of transition, with the "discount store" acting as a wild card in the game. The word discount was assimilated into the Danish language during the past decade, but it bears a stigma of being synonomous with the word cheap and its connotations: low price and low quality. However, discount supermarkets have gained a firm foothold.

Winning Market Share

"Discount" retailers resemble cash 'n carry stores. Their merchandising style often consists of putting a pallet in place with a price sign hanging over it, instead of affixing individual price tags to packs. Bar coding handles the tally, except for one-time, odd lot items. In-store service is kept to a bare minimum, bordering on non-existent, and check-out lines tend to be long. But shoppers don't complain, as the stores offer 15-25% savings on average purchases.

In less than 15 years, discount stores have grown from zero to nearly 450 outlets at the end of 1989 - 24% more than in the previous year. The number of units is forecast to climb to 600 before reaching the saturation point, according to the trade magazine Levnedsmiddel bladet. They command just over 15% of the market for all grocery-household goods stores.

Ole Egebol, a buyer for Irma A/S (the country's third largest grocery chain), told Quick Frozen Foods International: "Unfortunately discount products have hit the frozen food sector, with a focus on bulk goods, one- or two-kilogram packages of vegetables and french fries. Sometimes there is a qualitative difference, sometimes there's a price adjustment. Irma is fully competitive to fight discounters. Price has been a determining factor for consumers during the past two years. It's a sorry development, but it ought to turn around at some point."

To be sure, Danish shoppers patronize discount stores to save money. The impact of television advertising, introduced three years ago, has spurred patronage of such outlets as Netto of the Dansk Supermarked group. Competitors have been forced into offering goods at discounted prices to maintain market share. The phenomenon has given producers an outlet for Grade B produce, which is often processed as private label products.

Dansk Supermarked, the country's number two retailer, runs Netto as well as Fotex and Bilka hypermarket chains and some smaller outlets. Erling Degn, of the frozen food division, offered another perspective. He said there was solid growth in most areas, pointing especially to ready meals, pastas and vegetables, but added that preferences were not strictly guided by trends.

"Consumers purchase what is offered," said Degn. "If some items are put on sale, or into an advertising campaign, that's what sells. Frozen products are chosen because they are convenient, not necessarily because they happen to be healthy." But he noted that quality plays a prime role: "If frozen products do not maintain standards of demand, they do not sell."

New ideas cut some inroads among Danes, but statistics for the past decade show steady rises in all areas. To get a clear picture of developments, one must turn the card around and examine old habits. While travel abroad and exposure to foreign food at home help to promote different ideas, time-tested eating habits dominate.

New ethnic cuisine has hit the market with some success, but it has been impossible for producers to meet a wide range of demands. Therefore, the consumer sees a line of products of different ethnic background based on a common theme.

Several years ago FDB introduced Spanish, Indian and other stir-fry dishes in a pour-and-heat bag that could be put back into the freezer if the entire contents were not used. Rice was the common component of each. Similar products have since appeared in other outlets.

"These trends we see start in the USA, come to Britain and then move to the Continent. But they cannot just be transferred into the framework of Danish consumer behavior," Egebol told QFFI. "There has to be a change in attitude with respect to eating habits. The trends we see in other parts of Europe have not broken through here. A number of producers have begun to market pasta dishes, something we've had in our selection for many years. We carry a line of ready meals, but we'll have to give it time before it really pays off."

Retail sales of frozen vegetables surged 38.8% in 1990, and the gains continued in the first half of the current year. The Council of Danish Frozen Food Industries attributes increased volume to the health consciousness wave that has more consumers choosing highfiber foods to improve their diets.

The reduction of excise taxes on microwave ovens in 1989 spurred sales of the appliances during the year, and though purchases increased in 1990, the rise was not as sharp. Retailers sold nearly 25% more ready meals last year, but high turnover of such convenience foods occurs mainly in urban areas.

One independent grocer situated in a high-rent rural district north of Copenhagen said: "We hear about how great ready meal sales are, about the increases and consumer appeal, but I don't see it. I have to say |no' to wholesalers, because I am forced to sell many of the items at a deep discount. My customers buy frozen vegetables, and maybe some bread and fish, so that's what I have to order."

Per Neve Sorensen, a frozen food buyer at FDB - which is by far the nation's leading retail concern - said: "There is growth in ready meals, but not the explosive growth many had expected. I see more activity in semi-processed products, vegetable mixes, stir-fry dishes or value-added products.

"We launched the stir-fry line six or seven years ago and it continues to be a successful seller. The reason ready meals have not done as well as expected is partially due to price, and because in Denmark we have an alternative to fast food - namely the open-face sandwich and the buffet table (akin to the Swedish smorgasbord). I think it's a combination of our tradition to eat cold food and the price of ready meals. Many people consider 25 kroner too much to pay for a meal, when they could eat an open-face sandwich on rye bread much cheaper."

Denmark has a very high percentage of single households, but approximately two-thirds are made up of younger people (often students) or pensioners. Both groups are acutely aware of their economies, though with marked differences in priorities. Many youths think nothing of spending 25 DKR for a hamburger (an outlay which could be rationalized as an entertainment expense), but would probably not pay that amount for a ready meal. As for pensioners on fixed incomes, they are usually thrifty.

"There's vigorous growth in the number of pasta dishes offered," said Sorensen. "In 1991 Buitoni launched a line (marketed by Nestle and sold through FDB) and Danish Prime (formerly Tulip) has introduced a series of pasta dishes. But the success of pasta is not due to health awareness, but mainly because it has found its place at the Danish table."

In the vegetable sector, more exotic ingredients such as corn, green cauliflower and red peppers, have been added to mixes. But peas and carrots are still consumed in great volume. There's strong growth in virtually all potato products, whether it's regular french fries, croquettes, or others.

Reports from producers, wholesalers, retailers, consumers and their organizations seem to conflict if one reads only the headlines. However, the body of the frozen food retail story in Denmark harmonizes all their ideas. New products do generate revenues for their sellers, as there is a large enough segment of the population willing to experiment. Microwave cooking of ready meals has not yet become a regular occurrence in most Danish households, but the fact that readymade dishes are offered gives consumers an option on days when they do not have the time or inclination to cook from scratch.

Where producers and retailers have achieved the greatest successes has been in the area of "semi-new" products, a variation on an older theme. But they still bank on time-tested standbys such as fish, meat, bread and vegetables.

PHOTO : Produced in Belgium for Irma A/S, this Cannelloni Bolognese dish is an example of the international cuisine available in Danish cabinets.
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Author:Ferro, Charles
Publication:Quick Frozen Foods International
Date:Oct 1, 1991
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