Europe's Growing Frozen Food Market
Surpasses 12 Million Ton Barrier
By J.J. PIERCE, QFFI Assistant Editor

Per capita consumption stands at over 22 kg, even counting countries in Eastern Europe
that are still developing consumer-based economies. Growth rates slow in Western and Northern Europe, except for Spain and Sweden. Prepared foods gain over commodities.

Frozen food consumption in Europe easily topped 12 million tons last year, counting not only poultry but the emerging market economies of Eastern Europe that have not figured before in Quick Frozen Foods International's Global Frozen Foods Almanac, which is published every October.

Although potato products and vegetables remain the top frozen categories by any count, with consumption of well over two million tons each, ready meals are inching up on fish and seafood for the number three spot, according to Food for Thought (FFT), Geneva, Switzerland, and frozen meats are coming on strong.

Among markets in Eastern Europe, according to FFT, the largest is Poland, at 257,700 tons. But that works out to a per capita consumption of only 6.7 kilograms excluding poultry, far behind the average of 29.1 kg for Western Europe. Hungary has the greatest per capita frozen food consumption in the region, at 10.3 kg. The highest rate for all of Europe is Denmark, at 43.5 kg without poultry and 52.8 kg with it.
With a lot of category numbers and even complete reports missing this year from affiliates of Brussels-based FAFPAS (Féderation des Associations de Fabricants des Produits Alimentaires Surgelés), it has been even harder than usual to get an accurate read on what is happening in Western Europe. But hope springs eternal.

Sources: FAFPAS, Food for Thought, but with poultry estimates by Quick Frozen Foods International where necessary. *QFFI estimates

Further analysis of national frozen food markets may be available by contacting FAFPAS members. Food for Thought offers, on a fee basis, detailed breakdowns of frozen food categories throughout Europe and elsewhere. Its Frozen Food Markets Report is accessible online at: www.fft-international.com/frozen/

Through a data exchange arrangement with Food for Thought, Quick Frozen Foods International can not only fill in the gaps left by FAFPAS, but extend the Almanac's coverage to the countries of Eastern Europe that will join the European Union before long, and to some nations in Western Europe that were never covered by FAFPAS.

There are uncertainties, of course. FFT figures don't always agree with those from FAFPAS covered by both, and - like a number of FAFPAS affiliates - FFT doesn't take frozen raw poultry into account. Counting poultry, consumption in the 13 countries traditionally covered by Quick Frozen Foods International reached 11.9 million tons. For 22 countries, but without poultry, FFT reckoned consumption for 2002 at a bit over 11.3 million.

With poultry, consumption would be approximately 12.5 million tons, or about 25 kilograms per capita for the 500.8 million people of all 22 countries.

A recent report by ACNielsen suggests that consumption of frozen poultry as well as meat is on the increase in Europe. But FAFPAS reports show declines in the two largest markets, the United Kingdom and Germany, and the French trade magazine MHR Viandes indicates that total poultry consumption declined in most European countries last year. The status of frozen poultry remains uncertain.

Still, there are some certainties, as well. The United Kingdom, Germany and France, in that order, have the three largest frozen food economies. Collectively, they account for 58.7% of the entire European market, according to FFT. Fourth-place Spain boasts only about half the average consumption of the Big Three, and Italy lags in per capita intake as well as absolute consumption.

While frozen food consumption is rising nearly everywhere, growth isn't strong except for a few countries like Spain (up 12%, according to some sources) and Sweden (up 6.6%, according to its Frozen Food Institute). The increase was only 0.9% for Finland and the United Kingdom, alike, 1.3% for Germany and 1.8% for Italy. FAFPAS even reported a three percent loss for the Netherlands.

Store Brands Gain Share

One trend, according to the Private Label Manufacturers Association (PLMA), is an increase in own label or store brand market share across Europe. That trend is doubtless encouraged by the impaired state of the European economy, which has consumers looking to save money, but the PLMA insists there's more to it.

"The role of the private label is no longer simply that of a cheaper alternative to A-brands," said Brian Sharoff, president of the trade organization. "Today, private label carries the corporate reputation of the retailer and, in so doing, requires greater attention to quality and packaging than ever before."

Data from the PLMA's 2003 International Yearbook, compiled exclusively by ACNielsen, show that private label volume share in the United Kingdom stayed above the 40% level - the highest in Europe - with significant gains in several categories. The biggest increases, however, were made by retailers in Spain - advancing nearly three points to a record high of 27% volume share - and Germany, which advanced more than two points to 33% volume share.

In the "Top 20" product categories in the United Kingdom, frozen pastry products and fresh bread come third and fourth - behind fresh meat and ready meals - in terms of volume share. With a 62% volume share, the bakery sector as a whole lies in fifth place in terms of relative penetration, behind meat/fish/poultry, delicatessen, dairy, and fruit/vegetables - and fourth (60%) in terms of value.

Ice cream, a huge category that is not reported by FAFPAS, features prominently in FFT figures, and there are striking differences on consumption patterns from those for other frozen foods. Sure, Germany is on top, with 642,000 tons. But ranking second at 565,000 is Italy, which is further down the ladder in other frozen food but ahead of the United Kingdom and France in ice cream.

UNITED KINGDOM

Ready meals consumption in the UK was 325,000 tons last year, according to the United Kingdom Association of Frozen Food Producers (UKAFFP), the local FAFPAS affiliate. FFT put it at 297,000. The UKAFFP lumps in savory bakery with ready meals; which may account for part of the discrepancy.
According to Ready Meals in the UK, a Mintel Report from August 2002, the UK chilled ready meals sector is the most highly developed in Europe in terms of the range of products available and total sales.
Not surprisingly, Mintel observes that the market has been driven by consumer demand for convenience foods, an increase in freezer and microwave oven ownership, a rise in one and two-person households, and the virtual demise of families sitting down to eat together. We've heard it all before, and not just in Britain.

But there are other factors at work, too. Sales are dominated by the major supermarket chains, which accounted for two-thirds of transactions by value in 2001. That makes it easy for retailers to come up with their own brands. And as many as half of all new ready meal launches use international or ethnic recipes, reflecting the large immigrant population and its influence on the tastes of native Brits.

Still, not everything that seems trendy is actually a trend, Mintel reports. Low-fat and low-calorie items account for only a small percentage of new product developments - and most of these come from within existing well-known lines such as Weight Watchers from Heinz. Not that there isn't room for new products that focus on healthiness; it's just that they won't necessarily be low-fat/low-calorie. The emphasis is more on wholesome fresh ingredients.

Some 77% of households eat ready meals in the UK. Furthermore, 28% use them more than once a week, 26% once a week and 44% three times a month or less frequently. And 32% of households with children consume ready meals more than once a week; compared to 26% of households without children. People 15-19 years old are the heaviest consumers; senior citizens the lightest.

The frozen ready meals sector, which had been taking a back seat to chilled dishes in recent years, has been showing renewed growth since 1999, Mintel reports. In 2001, the market was 14% higher by value than in 1997. Frozen meals are perceived to be of lower quality and less healthy than chilled meals, the research firm says, and are commonly served to children. Complete ready meals dominate the sector at 80%, with partial meals that need other cooked items such as vegetables) making up the rest.

Here's a breakdown in types of frozen ready meals sold: International, 50%; Traditional, 28%; Fish-based, 12%; Healthy Recipe, 10%.

GERMANY

That the German frozen food market grew at all last year is significant, considering the poor state of the economy and aging population with one of the lowest birth rates in the world.

Frozen food sales were up 1.3% in tonnage terms, 2.9% without poultry, which always seems to be a drag on the market. Euro value was reckoned at 9.020 million by FAFPAS, 11.020 million by FFT - the latter excluding poultry but counting ice cream.

Discounting price inflation, which has been minor, the overall food market has been flat, and retailers often sell basic foods at a loss in hopes of making that up with sales of upscale and specialty foods. Meanwhile, discount chains like Aldi siphon more and more business away from traditional supermarkets.

The average German consumer can be characterized as relatively affluent and older. Increases in the number of working women and the number of single-person households, as well as the large immigrant population - some 7.3 million - are other notable demographic characteristics. More than a decade after reunification, the income gap between the 67 million people living in the states of western Germany and the 15 million in the former East Germany still exists.

Given all that, market researchers were happy to see increased sales in all channels of the German frozen food trade last year. Growth was stronger among food retailers - including supermarket discounters and home delivery services - where sales went up by 3.1% in volume and five percent in value.

Among trendy products are bakery items - especially rolls and cakes - and other sweet goods. Sales in this segment increased by more than four percent last year, according to the German Frozen Food Institute (DTI). Pizza, baguettes and other snack items also did well, with sales up between four and eight percent. Ready-meals, a reliable growth category for many years, registered better than a five percent increase.

Sales of frozen meat and game in Germany has doubled in the last decade, the DTI notes. Total sales in 2002 were 224,031 tons, compared to 113,221 tons in 1992. That is an increase of 106.7% Catering used a much larger share of the frozen meat than retailing. More than three quarters of the 2002 total, 181,770 tons, was used by hotels, restaurants, company canteens, hospitals, schools and the like. Grocers, including the discount stores and the home delivery services, accounted for 52,261 tons last year.

The ice cream market, meanwhile, remained steady. According to a survey conducted by the Frankfurt-based market research institute AC Nielsen, German companies in this segment registered a 0.7% increase in turnover last year. About half of this was generated by the sale of family-size containers, while multipacks still accounted for more than a third of the turnover.

FRANCE

French frozen food consumption has been on a slow growth curve for several years now, and even before the recent heat wave and drought, export sales were hurting on account of changes in exchange rates. Now things may get worse, with France having to look to imports to make up for losses to the weather.

In other categories, meat consumption for 2002 was way down on account of lingering effects of the Mad Cow Disease and Foot and Mouth Disease scares. Poultry intake was up 13.1% in 2001, and may have increased again last year. But since overall poultry consumption for the country was off from 1.587 million to 1.529 million tons, this seems doubtful.

FFT puts frozen food consumption lower than FAFPAS, even with neither counting poultry. FAFPAS estimates combined consumption of bakery products and prepared foods at 635,000 tons; FFT at just 260,700 - on the other hand, FFT's 123,000 tons for convenience meats is more than twice the FAFPAS total for all meats.

In 2002, sales of the French frozen vegetable industry increased by seven percent to $409 million from $381 million in 2001, according to a report by Marie-Cecile Henard for the US Foreign Agricultural Service. The stronger euro versus the dollar made the increase greater, as in euros, the increase in sales was two percent - due mainly to larger sales on the domestic market, as exports declined.

French household purchases of frozen vegetables increased by two percent in volume and six percent in value from 2001. Exports, meanwhile, declined by five percent in quantity and value to 162,300 tons and $132.5 million, respectively. Reduced exports were mainly for frozen peas and sweet corn, which faced strong competition from Hungary, the United States and Thailand.

According to French Customs, Belgium is France's leading export market for frozen vegetables. But declared shipments traded between France and Belgium are often transfers among processing companies of the same group. A 30%-plus jump in French imports was accentuated by the stronger euro. Most of the increase resulted from higher shipments from Belgium, and again consisted of transfers among companies located both in France and Belgium.

SPAIN

Frozen food consumption in Spain last year was up nearly 12% to 1.082 million tons, according to AgMadrid, a research source cited in a report on the country's frozen food market by the FAS.
AgMadrid's figures don't match those of either FAFPAS or FFT - although, like both the other sources, they leave out poultry. They include 360,000 tons for seafood (versus 340,000 in 2001), 288,400 for vegetables (215,362), 314,780 for "precooked" foods - i.e., ready meals, pizza, bakery products, etc. - (306,000) and 117,100 for french fries (106,485).

Consumer surveys report that about half of all urban dwellers consume frozen products "regularly," Magdalena Escudero wrote in the FAS report, while 90% consume them at least once a month. Although four out of ten consumers believe that frozen products are less nutritious than fresh products, they and the rest keep buying them.

On average, 38% of Spanish households use frozen products one to three times per week and 13.5%, more than three times. About three-quarters of consumers say they buy frozen products because they lack the time to prepare meals. The demographic categories most likely to consume frozen foods include adult males, the age group from 18 to 30 and couples with children.

Women are more likely to consume vegetables, while men prefer pre-cooked and ready-to-eat products, as well as desserts. Younger people go for products that need less preparation while older people prefer vegetables and seafood items. Overall, the most popular products are pre-cooked (such as pizza, potatoes and croquettes) and ready-to-eat, followed by vegetables and seafood. Consumption of all frozen food is highest in the Sevilla, Zaragoza and Bilbao regions; pre-cooked items do best in Valencia and Madrid.

Spain has a strong export market in frozen vegetables; with production for 2002 pegged at 449,195 tons - a huge increase from 317,636 in 2001 - by ASEVEC, the Spanish Association of Prepared Foods. Exports for 2002 were 198,130 tons, up 39.4% from 142,835 tons the year before. Top five vegetables in terms of production were broccoli (81,941 tons), sweet peppers (52,233), green beans (59,394), peas (57,846) and spinach (32,700).

When it comes to fish and seafood, Spain has one of the highest consumption rates in the world - 32 kg per capita. Only 7.5 kg of that (four for fish, 3.5 for shellfish) is frozen, but that's still a lot. Consumption of frozen seafood at home increased by 11.6% in volume last year. The value of frozen seafood sales totaled around 1.60 billion euros.

Hake is the most popular non-prepared product (with 28.2% and 25.8% respectively), followed by prawns (16.3% and 28.2%) and shrimp (10.1% and 10.8). Plain or non-prepared frozen seafood represents 68% of total volume and 75% of total value. Among prepared seafood products, hake items account for 47% in both volume and value, squid for 30% and 23%, and surimi for 21% and 12.4%.
Precooked and ready-to-eat foods accounted for 138,095 tons at retail last year and 172,350 in the catering sector in 2001, according to the FAS report. Potato products were the largest segment, at 30,040 and 84,500 tons, followed by croquettes at 11,500 and 28,000. In retail sales only, hake-based dishes were second at 14,700 tons, followed by pasta (13,860), pizza (13,500) and rice dishes (11,600).

ITALY

Thanks in large part to its retailing system, Italy remains an anomaly, with a per capita frozen food consumption - 12.6 kg with poultry, 12.3 kg without - that is the lowest in Western Europe. Even Portugal does marginally better, according to Food for Thought.

That may change soon. Once dominated by mom-and-pop stores, the retail food business is increasingly shifting to supermarkets and even hypermarkets. According to Information Resources, Inc., 461 new medium to large stores (Italian law defines hypermarkets as those over 2,500 square meters) opened in 2001, to bring the total to about 7,000.

According to a report by Ismea-Nielsen on retail fish sales, the volume of frozen fish sold through supermarkets and hypermarkets increased in 2001, whereas that through traditional channels declined. Frozen packaged fish is already sold primarily through modern stores, but frozen unpackaged fish still goes mostly through traditional outlets.

Raw unpackaged fish sales nevertheless increased 21.1% at modern outlets in 2001, but were down 11.1% at traditional stores. Prepared unpackaged fish (a small segment) gained by 25.9% in the new channels, only six percent in the old. Prepared packaged fish was up 15.3% at newer and larger stores, but only 1.3% at smaller and older ones. Raw packaged fish were up only 2.6% in the new channels, but off 1.4% in the old.

Ismea Nielsen also offers a breakdown of tonnage and dollar value, going beyond that of the Italian Frozen Food Institute, for packaged versus unpackaged fish. As of 2001, the figures were 31,119 tons ($296 million) for raw and 24,104 tons ($198 million) for prepared packaged frozen fish. For unpackaged fish they were 34,330 tons ($198 million) for raw and 5,428 ($26 million) for prepared.
Outside chains like Carrefour, Auchan, Rewe and Spar have entered Italy, challenging such domestic players as Coop, Conad, Esselunga and Despar. Meanwhile, however, more Italians are eating out, and American-style fast food chains are gaining in popularity. Other trends that may impact on frozen foods range from increased ownership of microwave ovens to an increase in the number of women working outside of home - at 34%, the current rate is the lowest in Europe.

DENMARK

Assuming that frozen poultry consumption is still around 50,000 tons, Denmark remains the only country in Europe with a per capita consumption of frozen foods exceeding 50 kg. According to Food for Thought, it is one of ten countries with a billion-dollar frozen food economy - $1.224 billion. And that's not even counting ice cream.

This being the first year for including FFT statistics in the Almanac, it's impossible to say anything about frozen food growth rate or category trends. But a detailed report published in the July 2003 issue of QFFI indicates that it's been a tough year for the industry - especially for anyone trying to sell better quality products.

Not only that, but the Danish Retail Trade Association, which absorbed the Frozen Food Institute several years ago, predicts retail food sales will remain flat though 2010. However, the foodservice sector is said to be on the rebound. That may be reflected in future Food for Thought reports. But FFT figures, totaling 234,900 tons this year exclusive of poultry, aren't broken down by retail and catering.

SWEDEN

It's partly real and partly better reporting, that 6.6% gain in the Swedish frozen food market, as QFFI reported in July. Catering consumption, at 8.7%, showed a stronger increase than retail at 4.9%.
Some of the category trends, like a 267% increase in fish other than raw or breaded, were doubtless artifacts of better reporting, with more companies getting on board. But others, like a shift from vegetable mixes back to single vegetables, must have been more deep-seated. By sheer coincidence, there was also a strong shift towards single meals as opposed to multi meals in the prepared foods category.
Bakery products did especially well, although some of the 38.2% increase may be due to improved reporting, most of it has to be real. Fish was up 13.9% overall, and shellfish and molluscs - nearly all cooked - 9.5%. Frozen potato products were up 8.3%, but the category is diversifying - nearly all the increase was in products other than fries.

OTHER COUNTRIES

Ireland, it turns out, is in the upper ranks when it comes to per capita consumption: 42.2 kg, excluding poultry. Portugal is in the lower ranks, at 12.7. And Switzerland is right in the middle, at 21.5. Food for Thought data also covers Austria, Norway and Belgium, which have been tardy in reporting to FAFPAS or failed to report at all - not to mention Denmark.

Somehow, it isn't surprising that, at 72,400 tons, potato products account for nearly half of Ireland's total frozen food consumption of 160,300. It's much the same in Belgium, where potato products tonnage was 135,000 out of 310,600. In the Netherlands, however, consumers aren't so single minded: potato products there, at 105,600 tons, were less than a third of total consumption of 339,400, per FFT.
Frozen vegetables, potato products and fish and seafood are the big three categories for Greece and Portugal, but savory bakery items are big in Greece according to FAFPAS and ready meals in Portugal according to FFT. In fact, FFT has ready meals doing better in Portugal than in Switzerland, seemingly a more evolved frozen food market, but one in which potato products and vegetables are number one and number two.

EASTERN EUROPE

As the most populous country of Eastern Europe about to join the EU, Poland may be a test case. Although per capita consumption, excluding poultry, is only 6.7 kilograms per capita, that's an enormous increase from barely half a kilogram as recently as 1996.

During the Communist era, frozen fruits and vegetables were produced almost entirely for export by companies like Hortex, still the largest frozen food producer today after the rebirth of capitalism. Exports are still its mainstay; for the year ending in May, sales to Russia alone grew by 35%, reaching 23,000 tons valued at PLN 75 million (17 million euros).

According to the GUS, the Polish statistical office, production of frozen vegetables in 2001 reached 309,700 tons, up 16.9% from 264,900 in 2000. French fry production, presumably mostly frozen, jumped 17.4%, from 107,700 to 126,400 tons. Output of frozen saltwater fish in 2001 was 80,900 tons, up from 66,900.

Domestic consumption for 2002 was just 36,400 tons in frozen vegetables, 69,400 in fries and 53,400 in fish, according to FFT. Close to 90% of vegetable production is still for the export market. However, Hortex is trying to build up the domestic market as well; the company's web site features mpg commercials in Polish that target the Polish market.

Exports still drive the frozen food industry in other East European countries. Both Globus in Hungary (domestic consumption 10.3 kg per capita) and Mochovské Nrazírny in the Czech Republic (5.5 kg per capita) are promoting exports of their frozen fruits and vegetables to Western Europe.