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Under attack from rival food systems, frozens pushed to wall, McGovern warns.

Under Attack From Rival Food Systems, Frozens Pushed to Wall, McGovern Warns

But opportunity knocks as hard challenges rear. Mastering market segmentation and high-tech delivery will lend FF marketers a hand. And global expansion offers rich hope, says Campbell CEO.

Declaring that the industry is "under fire," R. Gordon McGovern pulled no punches during his keynote address before the National Frozen Food convention in Chicago. "It is abundantly clear that the American public is greatly disappointed in its frozen food choices," he stated. "It is only a matter of months, or perhaps hours, before fresh or refrigerated, or aseptic or nitrogen-flushed products drive frozens to the wall. The wall being the perimeter wall of the outlet where much comes in frozen and goes out labeled something else."

The president and CEO of Campbell Soup Co., Camden, N.J., delivered a tough but honest assessment of the state of the U.S. frozen food industry. And coming from the head of a diversified, international food firm that annually sells more than $1 billion worth of frozens, his words were duly noted by most delegates in the capacity hall.

"One might imagine from the barrage of criticism that frozen food has reached the exalted state of airplane food," he joked. "Everybody knows by definition that airplane food is tasteless stuff. You eat it only because you have to -- it comes with the ticket. Frozen food, on the other hand, does not have a captive audience. There are a myriad of competing choices out there, and thousands of daily purchase decisions."

"On Target or On trial" was the theme of the Campbell chief's speech. As he explored much territory ranging from emerging global marketing trends to merchandising fundamentals, Quick Frozen Foods International offers the following digest of his remarks:

To the critic, frozen foods should deliver good value in a convenient package with the taste, aroma, texture and nutrition qualities of home-made or excellent restaurant fare.

What are the realistic expectations of frozens? The answer must came from looking at market segments and what they perceive as their requirements. It is no secret that North America has become compartmentalized and segmented, containing more singles households, more two-income families with working mothers, and more senior citizens. We have fewer large-size working class families and many more single parent families.

Some of these segments are growing significantly. Witness the aging of America and its tremendous impact on product requirements. Health consciousness has become a dominating theme all across the segments as are convenience, value, quality and food safety.

Frozen foods speak in ways to these markets, but the promise to deliver nutrition, quality, value, convenience and safety address basic perceived needs of large sectors of our population. The trick is how to do it, and how to do it better. Frozen foods are very much alive and very much in transition. And the fundamentals of any smart manufacturer's response are:

. Capture field-fresh taste by quick freezing at the time of appropriate ripeness.

. Deliver food free from spoilage and contamination

. Provide adequate menu variety

. Offer time-value in terms of choosing items, preparation and post-meal cleanup

. Deliver price value against the time constraints of on-the-rush, penny-minded consumers

. Guarantee consistency

It's clear that today most people prefer a limited number of eating choices. Their minds and palates do not want to consider 200 esoteric possibilities each night. Instead, they prefer to select a field boiled down to 15 basic presentations which can be garnished up and down the scale. So it should come as no surprise that the industry is settling out of a blizzard of new product explorations made during the past five to 10 years. Retailers didn't opt for much more space to inventory them, and consumers didn't opt for that much of a range. The economics dictate the solution. So we're all slowing down the new product introduction process to be sure we have winners. The cull-out process is swift and expensive. The frozen food industry has its work cut out.

Opportunities Abound

What are opportunities? Right up front it would appear market strategy would revolve around a limited set of core brand items which would be heavily supported both in the trade and to the consumer. The core is surrounded by a revolving door of short-cycle products -- much like the fashion industry. There will be a constant effort to upgrade the core products and to niche-innovate with the in and out items. This will be a regional game with major players working their brand strengths and local entrepreneurs working the innovative trench.

From a systems point of view a great deal can be done to be more efficient and thereby deliver better margins. A lot of this has to do with the arrival of the computer age and the advent of real biotechnological improvements in the field. We need a new concept of the frozen food flow chart. We need more efficient freezing, far more automation in line assembly, less energy consumption along the route, and significantly reduced overhead and indirect charges.

Plants are most likely to be regional, close to customers, with flexible lines and considerable tonnage flowing directly to the store. Such deliveries will very possibly be consolidated with shipments from several suppliers. We have to get inventory out of the system more quickly to better increase turns.

Frozen food manufacturers must put technology to work to increase returns on invested capital. While freezing in effect allows the reservoiring of products, this is a disaster from the point of view of cash flow. Retailers everywhere find themselves in leveraged buyout situations, where the all-important thing is cash. If we simplify product lines and concentrate on technological improvements in the total frozen food system we can give far more value, quality and advertising support.

More computerization will be keyed into the back door of the store as well as the front end. And direct communication links will be made to suppliers' docks. The individual will be the focus, as marketers stock against demographics. Deliveries will have to be made not in a span of months, weeks or days, but in a matter of hours. There are proto-types for that already, such as Marks and Spencer and McDonald's.

Advertising is a must to tell the frozen food story of nutrition, convenience and safety. Perhaps one of the most interesting aspects of the technical challenge is obtaining more profound molecular understanding of what happens in microwaving. We need that basic insight to be able to deliver against consumers' expectations.

Better Controls Needed

Downstream in distribution, the system requires better control of temperature cycling, which regional manufacturing and direct store delivery might well address. There also is a need for warm aisles, fogfree displays and shelving that doesn't scatter product upside down all over the case.

Industry openings to enlarge FF business opportunities are taking interesting turns as they match off against consumer changes. The ratio of food dollars earned from retail commodity purchases to be eaten at home is steadily declining. The mix was perhaps 80/20 before WW II. Today at-home consumption represents only a 60% share. And it may be closer to 50-50 by the year 2000.

Some of the counterflow to this trend will be fully prepared meals brought back to the home from supermarkets, or via home delivery. Frozens can play a vital role to both those trends. More perhaps by supplying frozen components to the middle of the supply chain -- be it foodservice, take-out and take-in.

Another developing retail phenomenon is the response to eating on the run or "grazing." More and more meals consist of small quantities eaten frequently. Today one meal a week is consumed in the automobile. With the oncoming advent of building microwave ovens into cars, real "meals on wheels" occasions may roll to three or four per week by 1995. Who knows, maybe a small freezer will be the next piece of standard auto equipment.

In a given market today there well may be two or three major retailers with a spectrum of store formats and sizes. Then a layer down are found independents and the elements of the route trade. Interspersed in the geography are convenience stores, speciality outlets and an array of feeding stations ranging from classical restaurants to fast food operations and takeout stands. The old gas station has gained prominence as a quick source of food for the grazing habits of consumers. All of these outlets are targets for frozen food penetration. And some of them have not received the attention they deserve.

Another key industry opportunity is the global interlock. The interest of Asian and European manufacturers and retailers in the U.S. market is matched by keen interests by Americans in FF opportunities overseas. Heinz took Ore Ida to Japan. Nestle' took Lean Cuisine to the United Kingdom. Campbell Soup recently bought Freshbake Foods in the U.K. with its No. 3 position, in the recognition of the growing trend toward convenience foods. Each company is leveraging its technology and marketing skills across the huge consumer triad of North America, Europe and the Pacific Rim.

Another piece of the international scene is the growing volume of frozen ingredients moving across borders. The world is trending more and more toward one global market. And frozens have great opportunities in that scenario.

PHOTO : R. Gordon McGovern, Campbell Soup President and CEO.
COPYRIGHT 1989 E.W. Williams Publications, Inc.
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Title Annotation:R. Gordon McGovern, president of Campbell Soup Co.
Publication:Quick Frozen Foods International
Date:Jan 1, 1989
Previous Article:Frozen food industry goes on 'trial' as 'conventional' jury hears evidence.
Next Article:Go-go introduction boom over at Campbell as company disciplines core brand strategy.

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