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Truce coming in bloody price war that's shell-shocked FF front line? Dinner and entree manufacturers hope that a return to 'good taste' sensibilities will bring a return to good profitability for a category that has been discounted into disillusion.

Dinner and entree manufacturers hope that a return to "good taste" sensibilities will bring a return to good profitability for a category that has been discounted into disillusion.

Is good taste the recipe for revitalizing profits in the flat frozen entree and dinner categories? After several years of implementing fiercely competitive price-cutting strategies on the retail front, a number of leading manufacturers have decided to tell consumers that there is another reason for shopping the freezer case than just to snap up discounts that have almost become staples in recession-driven North American supermarkets.

"Taste will clearly be the battleground in the frozen frozen food wars" during the first part of 1993, declared Advertising Age in a recent report. It is estimated that as much as $100 million will be spent to accentuate the positive in new television commercials created for Stouffer Foods Corp., ConAgra's Healthy Choice and Kraft General Foods' Budget Gourmet.

Nestle's Solon, Ohio-based Stouffer unit was first to hit the air waves with a campaign intent on expanding the Lean Cuisine franchise beyond its traditional diet-and health-conscious customer niche. One spot focuses on fresh, wholesome ingredients used to make entrees. As the camera lens zooms in, the narrator informs: "We make mean Lean Cuisine ... wicked marinara ... fluffiest mashed potatoes this side of Idaho ... roasted chicken like you have never seen."

Claiming a 9.5% share of the $3.2 billion frozen entree category in the USA, Lean Cuisine outpaced all rivals with a 13.9% sales gain last year. That notwithstanding, Ed Marra, Stouffer's senior vice president of marketing, noted: "The category needs a bit of a boost. Of late, price has been a key driver, now's the time to start using advertising and consumer techniques to build the category again."

Timing, of course, is everything. But the question remains: Will the price-cutting weapon really be disarmed in 1993, or will its use continue to bloody corporate balance sheets?

How bruising was the battle fought by leading manufacturers within the frozen food department perimeters of the nation's retail stores? Just read the 1992 annual reports published by combatants.

Campbell North America, for example, recorded an impressive 19% increase in operating earnings, which hit $792.8 million. But while soups, spaghetti sauce and beverages bubbled, "earnings were lower in the intensively competitive frozen food business because of price wars and marketing expenses to launch several new products."

ConAgra Frozen Foods reported good gross margins and shares in fiscal '92, but earnings were down dramatically due to heavy spending to support rollouts (a whopping 111 new products were introduced, of which almost half had Healthy Choice labels) and price slashing in the freezer cabinet.

Management at the Omaha, Nebraska-headquartered outfit remind the trade that the first shots fired in the long price war were aimed squarely at the Healthy Choice range which quickly won consumer acceptance. "In the absence of a better idea, a better brand position, competitors resorted to price as a way to assault Healthy Choice," said James Tindall, president of ConAgra Prepared Foods Companies.

In spite of the pitched battles waged by makers of dinners and entrees during the past year, ConAgra claims to have held onto its leadership position in the frozen meal category. Overall, Healthy Choice volumes - including frozen meals, soups and dairy desserts - were up significantly.

The company's annual report concluded: "The frozen foods industry may or may not return soon to a normal competitive situation and more desirable margins. Our plans prepared us for either course and a related range of earnings improvement in fiscal 1993."

Lunchtime Opportunities

Meanwhile, Stouffer is coming out with a range of 24 low-priced meals formualted for lunchtime consumption. Selling for $1.89, the eight- to ten-ounce Lunch Express offerings - which will be marketed under both the Lean Cuisine label and standard "red box" format - will try to succeed where Kraft General Foods' Budget Gourmet Hot lunch failed after 18 months in the marketplace.

"In merchandising at least, Stouffer's tactic is similar to one chief rival ConAgra Frozen Foods took late [last] summer when it rolled out Quick Meals, a similarly priced sub-brand merchandised as part of its Healthy Choice line of frozen en-trees," noted Julie Liesse in the Dec. 7 issue of Advertising Age.

"The two rivals' move to lower-priced products is seen as a sign that both are trying to wean their brands of the heavy discounting that has ruled the frozen entrees category for more than a year," she added. "Both Quick Meals and Lunch Express are designed to be sold for under $2 - rather than being discounted for $2."

Stouffer's Ed Marra sees the development this way: "The category needs more unique concepts - and trade promotion's value is maxed out. What we've seen [in testing] is that the Lunch Express price is appropriate for the products and for the eating occasion. Consumers are not going to pay twice that amount for lunch."

Packed in a special paperboard box that can go straight from the freezer to the microwave oven, Lunch Express is designed to be convenient for office workers to prepare on the job. Among recipes offered are Teriyaki stir-fry and Mexican-style rice with chicken.

Stouffer's lunch products will be stocked alongside other like-branded items in the retail frozen food section. "Budget Gourmet tried to merchandise its product in the sandwich - which I call miscellaneous - area of the freezer case, and it didn't work," pointed out Marra.

Le Menu Blues

What's happening at Campbell Soup Co., whose once trend-setting Le Menu dinner line has suffered as many recession-racked consumers put aside their upscale tastes for down-home basics? The picture painted by Nielsen Marketing Research is not a rosy one: during the 52-week period ending Sept. 5, dollar volume plummeted 71% to $26 million, and share fell from 7.4% to 2.3%.

Kathleen McDonnell, senior vice president of prepared foods, minced no words about the brand's performance: "The fact of the matter is people are not willing to pay a premium price for what they see as not a premium product."

Noting that most of today's demand is for lower-priced comfort foods, she added, "We're being forced to benchmark our new [Le Menu] varieties, which are higher in quality, against Salisbury steak, which is tough to beat. We're being thrown out of the market by the consumer...

"The challenge we have is making it a viable business long term. If we have to spend a lot of money in order to generate usage by consumers . . . we have to rethink our strategy."

Nomi Ghez, an analyst with Goldman, Sachs & Co., thinks that Le Menu brand managers have been slow in reacting to changing consumer trends: "They were victim to the success of Healthy Choice, and Stouffer clearly responded. Campbell's reaction came relatively late, and the latest introduction [New American Cuisine] is more a shift into flavor varieties, which is difficult when all of their competitors are focusing on health concerns."

While Campbell's Le Menu label struggles, its front-running proletarian Swanson frozen dinner brand is way ahead of all the competition. Sales were up 3% to $295 million last year, which translated to an overwhelming 25.9% market share.
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Title Annotation:low-calorie frozen food market
Publication:Quick Frozen Foods International
Date:Jan 1, 1993
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