European Frozen Food Consumption
Inches up 3.3% to 11.7 Million Tons
By J.J. PIERCE QFFI Associate Editor

Health concerns spur growth in vegetables, poultry, fish and seafood, and low-calorie meals.

Frozen food consumption is still showing healthy gains in Europe. Tonnage for 2003, at 11,715,500 (excluding ice cream) was 3.3% ahead of 2002 for 22 countries, mostly members of the expanded European Union, surveyed by Food for Thought. But prices seem to have been soft.

Food for Thought, the Geneva, Switzerland-based food and drink research house, offers some startling surprises. The biggest may be that volume for ready meals hardly budged at 1,373,400 tons, while pizza was actually off slightly to 583,000. Yet frozen vegetables were up 7.5% to 2,610,900. Frozen potato products, at 2,850,500, were up 3.4%.

One category that Food for Thought doesn’t cover – poultry – may be the sleeping giant of the industry. In Germany, where poultry volume had been static or declining for years, there was a 2.6% increase last year to 315,000 tons. London-based Euromonitor International, another market research firm, says that frozen poultry is gaining in Western Europe because of its healthy image.

If frozen poultry consumption last year amounted to no more than 1.2 million tons, which seems a conservative estimate, overall consumption for Europe would be about 12.915 billion tons, and per capita consumption more than 26.1 kilograms, based on a population of about 494 million. Another category considered really hot by Euromonitor is frozen soups, which Food for Thought reported suffered a setback last year.

FAFPAS (Féderation des Associations de Fabricants des Produits Alimentaires Surgelés), which has long served as a clearinghouse for individual country reports, didn’t have any of them available at press time this year. Only the frozen food institutes of Germany and Italy, which have their country reports posted at their websites, made statistics generally available, offering greater detail and breakdowns of retail and catering consumption.

Apart from the lack of poultry figures, Food for Thought’s statistics don’t necessarily agree with industry country reports. The Istituto Alimenti Surgelati puts Italian consumption for last year at 736,855 tons, whereas Food for Thought figures it at 814,800 – with vegetables at 378,000 instead of 367,711, potatoes at 99,200 instead of 96,387, and so on. Statistics isn’t an exact science, even for relatively mature economies – and doubtless less so for emergent ones.

Fast Track, Slow Track

Growth as shown by Food for Thought tended to be slowest in the mature frozen food economies – just one percent to 2,703,500 million tons in the United Kingdom, for example, and only 0.1% to 1,529,000 in France. The fastest growth tended to be in the new consumer economies of Eastern Europe – Hungarian consumption soared 29.7% to 136,300 tons, and consumption rose 6.4% to 59,800 in the Czech Republic.

But there were some obvious exceptions. Frozen food actually lost ground in Romania and Slovakia, and also in the Western and Southern European countries of Portugal and Greece. Yet Food for Thought also recorded a 4.2% increase for Germany, to 2,553,600 tons; 8.3% for Spain, to 1,154,800 million, 8.7% for Sweden, to 386,300; and 4.8% for Italy, to 814,800.

Tonnage, at least, is easy to understand. Where things get really tricky is assessing the value of the European frozen food market. In current euros (this time including ice cream), it was 65.450 billion, up 1.5%. In current dollars, it was $72.881 billion – up 21.6%. But in constant dollars, the 2003 figure $60.867 billion again works out to a 1.5% increase. Either way, it seems that average prices for frozen food in Europe have declined. This is due, no doubt, to the price wars sparked by hard discount chains such as Aldi.

Even with the addition of nations in Eastern Europe with low per capita consumption, average consumption for all 22 countries last year was 23.7 kilograms a head. In the race for highest per capita consumption, Denmark at 44.9 kilograms came out ahead of Sweden at 44.5 – but the UK came out ahead of both of them at 45.3. Britain also held the lead for overall consumption against Germany – where, however, per capita consumption was just 30.7 kg.

Despite rapid growth rates, per capita consumption was only 13.5 kg in Hungary, 6.9 kg in Poland, and 5.8 kg in the Czech Republic. Yet the Hungarian rate was close to that for Italy, which at 14.2 still lagged behind the rest of the original EU countries. Spain, a later addition to what was then called the European Community, had more than double the Italian rate at 28.8 kg. Indeed, Spain has pulled ahead of France, where the rate was 25.7 kg.

Ice cream consumption for all 22 countries was up 5.7% to 3.4642 billion liters, with Germany at 671.5 million way ahead of Italy at 595 million and the UK at 461.5 million. But Italy is far ahead of Germany in per capita consumption, at 10.3 liters versus 8.1. Only, the Scandinavian countries have the highest rates: 14.2 for Sweden, 13.4 for Norway and 12.2 for Finland.

UK Puts Best Foot Forward

With the UK frozen food industry, largest in the EU, seemingly in the doldrums last year, the British Frozen Food Federation (BFFF) has been at pains to point out increasing signs that things have turned the corner since then.

“A recent survey by TNS Superpanel for the Grocer indicates the value of the frozen food market moving on by 1.3% overall, year on year, as at week ending March 28, 2004,” BFFF Chairman Alf Carr observed in a recent column published in The Bulletin and posted at its website, www.bfff.co.uk.
“Whilst this is far from spectacular growth, it is a better performance than that forecast by the ‘doom and gloom’ specialists, and it is interesting that all of the product sectors, except frozen desserts, made progress in the year,” Carr said, and continued:

“When we take into account the effect on the value of the market by deep discounts, bogofs [buy one, get one free] and general buying pressure, it is gratifying to see frozen fish increasing its value by 2.6%, meat products rising by 1.9%, savoury foods increasing by 1.4% and frozen vegetables increasing by 1.4%. It is hoped that the decline in the frozen desserts sector of 4.8% can be redressed and that some of the weaker players are now out of the marketplace.

“We know that Asda increased their business by 5.7% and that Morrisons and Farmfoods are making very significant progress. Tesco dominates the frozen food market with a 21.2% share, and Iceland enjoys second place with 14.9%. Asda enjoys 13.9% of the market; but the really interesting factor for the future is how Morrisons will increase sales in the previously Safeway stores, as they definitely will, bearing in mind that the current Morrisons/Safeway share of the market is 13%, putting it ahead of Sainsbury’s, who hold 11.4% of the market.

“If our industry can maintain progress in the sector during a year when we are constantly advised that consumers are still not fully aware of the benefits of frozen, then the marketplace has the potential to move back into serious growth once again if the products are backed by serious consumer promotion. The figures would also suggest that the problem of availability is beginning to be redressed by the multiples and their supply chain.”

The BFFF also cited a report by industry analysts at Plimsoll Publishing Ltd. stating that “the UK frozen foods industry is finally turning the corner.” The latest Plimsoll Portfolio Analysis – Frozen Foods reveals signs of sustainable improvement in the sector.

Some of the most interesting findings taken from the analysis include:

• 58 companies have seen sales increase by over 15%
• 83 companies have doubled profits

108 companies have halved their debts

These improvements are proof that the industry is no longer an excuse for poor company performance. David Pattison, senior analyst at Plimsoll Publishing, maintains:

“After the last few years of uncertainty, the UK frozen foods industry is experiencing a positive upswing. I am delighted that many companies are getting it right by addressing the issues that have constrained them for years. Profits are improving, sales are up and debt issues are being resolved.”

However, Pattison was quick to point out that not all firms are sharing in this success:

“Despite these recent improvements in the industry, there are still 106 companies with declining sales and 92 which are loss making. Our latest analysis shows that how successful you are in the industry has little to do with what you make or sell. It all comes down to how well the company is run!”

As for Food for Thought, it has the UK pegged as potato country – with a 3.1% gain, to 1.05 million tons, Brits were evidently consuming more chips than ever last year. Vegetables were up slightly to 407,000 tons, but pizza consumption was unchanged, fish and seafood were down slightly and ready meals and bakery products were off sharply.

Belgium and Beyond

In a report issued earlier this year, Euromonitor gave an overview of the retail market in Belgium, which it put at 115,840 tons for 2003, up 2.5% from 112,990 in 2002. The most notable trends, the research firm said, were:

• Despite private label’s lead, major brands continue to add value
• Convenience, gastronomy and exoticism boost ready meals and pizza
• Healthy ingredients boost processed fish and vegetables
• Other frozen foods see more modest growth due to health concerns and competition from chilled and fresh foods

With 60-70% of households owning freezers, and a wide range of products to choose from, Belgium is a natural market for frozens, and market value increased 3.1% last year to 535.4 million euros. But growth was slow other than in processed vegetables, trendy pizzas and, to a lesser extent, ready meals. Frozen fish and poultry are posting modest gains.

Steam-cooked vegetables such as Unilever’s Iglo brand Sachets Vapeur and pre-cooked vegetables in sunflower oil with herbs and spices like Bonduelle Select, have revitalized the category. The success of organic products, and the trend towards healthy eating – which includes eating more vegetables – also helped grow the category, especially in the 40-49 age segment. Even poor weather conditions that push up prices haven’t hampered sales.

Bowl meals like Hot & Steamy have helped advance sales of frozen ready meals, and have inspired knock-offs. Pasta and vegetable-based ready meals are also gaining, and Iglo Today has come out with stir-fry wok meals and French specialties. Meat-based ready meals have made a comeback, after losing out to fish versions during the Mad Cow Disease scare. Poultry-based meals were never similarly impacted by the dioxin crisis.

Mixed Trends in Germany

Frozen food trends in Germany paralleled those in the rest of Europe as seen by Food for Thought, but with some obvious exceptions as reported by the Deutsches Tiefkühlinstitut (dti).

Potato products consumption, for example, posted a gain of only 0.2% to 359,282 tons, and french fries were actually down 1.2% to 253,909. That seems to be in line with the contention of Euromonitor (see page 95) that fries are a hard sell these days. Yet there was a 3.7% gain, to 104,373 tons, for potato products other than fries.

Ready meals – both complete and partial – lost ground last year, with complete meals off 4.1% to 131,700 tons. Yet pizza was up 4.6% to 185,353 tons. This goes against the continent-wide trend as seen by Food for Thought but dovetails with the Euromonitor analysis, as does a 1.7% increase, to 433,010 tons, in vegetables.

There was a strong gain in bakery products, up 2.6% to 513,063 tons, and nearly all of that gain was in dough and bread products – more than three quarters of them for the catering market in a country where retail sales still have the overall edge. Catering accounts for most of the poultry volume, but both retail and catering tonnage were up 2.6% to 142,750 and 173,250 tons. Meat and game lost almost the same amount of ground, off 2.5% to 228,432 tons.

Fish and seafood consumption was off 1.1% to 240,644 tons, but that had nothing to do with much-publicized concerns about contaminants in shrimp: the loss was entirely in saltwater fish portions; mollusks and shellfish actually gained. There were also gains in the relatively minor areas of cereal products and fruits and juices.

Although there was little change overall in frozen food consumption, there was a significant shift from retail to catering, with the latter up 0.6% to 1,389.528 tons and the former hardly nudging. Without poultry, retail volume actually slipped 0.2% to 1,326,901.

Arrivederci, Roma

Italy may be the birthplace of the pizza, but that doesn’t mean frozen pizza necessarily has clear sailing: it was actually down four percent last year to 45,174 tons, according to the Istituto Alimenti Surgelati.
Not that frozen pizza was ever the tail that wagged the dog in Italy, but last year it was eclipsed and surpassed by ready meals, which surged 21.1% to 51,056 tons to become the largest segment of the prepared foods category. Side dishes also showed a healthy 7.5% increase, to 20,727 tons.

Vegetables still account for nearly half of Italian frozen food volume, at 367,711 tons, but showed only a 0.5% increase. There was an increase of two percent in single vegetables, to 248,352, but blends were off slightly – and prepared vegetables were way down. Potato products were up 1.8% to 96,387 tons, and it was all due to fries – other products lost ground.

Flat French Market

Trends were erratic in other major countries. In France, where overall volume was nearly static, vegetables showed a 2.7% increase to 532,800 tons, according to Food for Thought, but potato products were down 0.1% to 430,000. There were declines in ready meals (1.3% to 125,700 tons), pastry products (3.8% to 85,700 tons) and pizza (3.6% to 39,900). Yet there was a 1.7% gain for convenience meats, to 125,100.

Sunny Sales in Spain

In neighboring Spain, volume in vegetables soared 33.1% to 296,200 tons, and that for potato products 10% to 122,100 tons, Food for Thought reported. Pizza was up 6.8% to 15,800 tons, yet ready meals took a 4.2% hit at 200,600. Fish and seafood, always strong performers in Spain, were up 2.9% to 342,000.

Dough Rises in Sweden

Bake-off, frozen bread and dough to be baked on premises at stores and restaurants, is the hottest thing going in Sweden, according to the Djupfrysnisbyran – up 12.8% to about 42,000 tons. Bake-off eclipsed other bakery products, up 6.9% to around 15,000 tons.

Overall volume set a new record, up 2.8% to 451,355 tons, including poultry. That works out to 51.4 kg per capita, which might be the highest in Europe. However, without poultry data for Denmark or the UK. it isn’t possible to tell. But poultry volume for Sweden was up 3.7% overall, the country’s frozen food institute said – and the increase was 14.1% on the foodservice side as opposed to just one percent for retail.

Fish volume was up 3.4%, but shellfish only 0.7%. Vegetables registered a two percent gain, potato products 2.7% and juices and fruits 1.1%. But meat tonnage was down four percent, and miscellaneous frozen products sank 8.2%.

Euromonitor Perspective

Euromonitor has its own take on the European market. Frozen pro-cessed poultry, it reported recently, has registered strong growth over the past few years, offering consumers just what they want – healthier, premium products.

Between 1998 and 2003, it said, frozen processed poultry retail value sales grew by 27% in Western Europe and 30% in Scandinavia, with most of the gain coming at the expense of frozen processed red meat, for which sales growth in Western Europe over the same period was just six per cent.

Health concerns have also fueled the growth of frozen reduced-calorie ready meals – previously something of a niche market, according to Euromonitor. This has been driven by manufacturers such as Heinz and Nestlé, which have tapped into the trend with brands like Weight Watchers, on the market since the late 1990s, 1st Choice Unislim Ready Meals, introduced in April 2003, and Findus Feeling Great! Lean Cuisine, re-launched with four new variants in 2002.

Of total frozen ready meals, Euromonitor’s latest research found that the ‘healthy’ share in Western Europe increased significantly from 30% of value in 2001 to 38% of value in 2002. Frozen soup has also seen a significant increase in sales as a result of this health trend, Euromonitor said, although its growth has come from a relatively low base. In fact, frozen soup has been, and continues to be, the fastest-growing sector in Western Europe, with retail value sales growth of 40% in 1998-2003.

This is primarily because it is perceived as a healthy alternative and it benefits from a trendy image, storage advantage and convenience. However, it is a relatively new sector and still quite small. In fact, it is among the smallest in the industry, representing just one per cent of total retail frozen foods in terms of value sales in Western Europe. This, in turn, indicates that the sector has large growth potential, and it is expected to continue to perform well in the short term.

Frozen potato products, on the other hand, have a more uncertain future, Euromonitor argues, due mainly to their less healthy image. This sector had the lowest growth rate of all frozen food categories in Western Europe over the last five years, and is expected to show further declines in the future.

Health conscious Scandinavians, in particular, have turned up their noses at frozen potato products, Euromonitor said – especially after Swedish scientists discovered for the first time that acrylamide is present in potato products that have been subjected to high heat.

Further clouding the outlook for frozen potatoes is the increasing trend towards low-carbohydrate dieting. The sector lost one per cent of its retail value share of frozen foods in 2003 in Scandinavia, and Euromonitor expects it to slowly lose value share in the rest of Western Europe as well.