Is better for you better for your wallet?

In recent years, the frozen food aisle has seen a plethora of new, health-conscious products, such as steam-fresh veggies, revamped diet meals and even natural and organic options. But as the price of raw materials, corn, wheat and oils — to name only a few commodities — continues to rise, brand owners and contract manufacturers are struggling to keep their prices in check.

Last year, the mature $29.1-billion frozen processed food category did grow 4 percent, reported Chicago-based Euromonitor International, largely due to consumers’ decisions to still choose premium products despite rising prices. Indeed, new product innovations are enabling the once stodgy category to promote freshness, quality and convenience in the frozen aisle.

In 2006, both Birds Eye Foods Inc., Rochester, N.Y., and Minneapolis-based General Mills, for example, launched popular microwaveable steamer bags of frozen vegetables, allowing consumers to eat their vegetables without having to actually prepare them. These new introductions helped keep frozen processed vegetable sales high in 2007, improving more than 5 percent in fact, noted Euromonitor’s November 2007 U.S. Frozen Processed Food report.

The durable $1.2-billion frozen potato category gained the most ground with a 6 percent increase. Moms had many new kid-friendly options to choose from, such as the new, microwaveable Ore Ida Easy-Fries, which provide convenience (and a higher price tag).

Between the Lines

In addition to looking for innovative products, more than ever, consumers certainly are reading nutritional panels and ingredient statements on food products. As a result, the frozen food industry is responding with more clearly marked natural and no-preservatives-added items.

“It is now important for R&D teams to develop items that fit the needs of a more health-conscious consumer,” says Jeff Gehres, director of sales and product development at Request Foods Inc., a leading co-packer of custom entrees, side dishes and specialty items, based in Holland, Mich. “The consumer is constantly hearing about health issues on the television through the news, info commercials and all the various talk shows. It is important to develop items that are focused on a nation that is getting older and wants to live a longer, healthy life.”

To this end, manufacturers introduced more low-calorie frozen meals and sandwiches last year. Omaha, Neb.-based ConAgra Foods’ Healthy Choice and Weight Watchers Smart Ones brands added new varieties to their meals, and Nestle’s Lean Cuisine launched five entrees with double the usual amount of vegetables. Pleasanton, Calif.-based Safeway supermarket chain also included frozen foods and meals in its new Eating Right brand. In addition, Amy’s Kitchen Inc., Petaluma, Calif., added a new line of reduced-sodium foods to its natural and organic foods lineup.

Single-serve items that taste great, but still offer the consumer a healthy alternative, will continue to be on the top of R&D teams’ lists, says Gehres. Brand owners also can meet the needs of health-conscious consumers through natural, organic, no-preservatives-added, healthy, and mainstream functional foods.

“Organics have taken over everything, and are showing the biggest growth spurt in our industry,” says David Edelstein, director of sales for Mister Cookie Face, a producer of private label frozen novelties in the Northeast, based in Lakewood, N.J. “All natural and organic are still key buzzwords in our industry, along with antioxidants, cholesterol inhibitors and Activia. Products are healthy across the board as part of the ‘better for you’ trend.”

Mainstream functional foods also are becoming popular and showing significant growth potential, notes Shawn Dellevoet, director of business development for Toronto-based Morrison Lamothe, a frozen food manufacturer for quick-service, retail, private label and co-pack distribution channels in Canada and the United States. She says the addition of omega-3 oils or probiotics to products considered everyday foods, but not necessarily health foods, illustrates how this trend is playing out.

“Trends that we are also seeing are foods that are more natural — raised without hormones, etc. — local, artisan and unique,” she says.

Eating at Home, With a Twist

In the highly competitive frozen food aisle, clearly brands have to find their point of differentiation, either through interesting product attributes or brand licensing agreements, for example, or it is difficult to even get on the shelf, notes Edelstein. “Most brands are controlled by a monopoly of companies,” he says. “The entrepreneur spirit is gone and only exists in organics now.”

Many manufacturers have continued to roll out ethnic foods to tap into a growing Hispanic population and shoppers who want more interesting — and yes, spicy — meal choices.

“Ethnic foods continue to increase in popularity with a more diverse population, greater awareness of other foods and greater food-related adventurism,” says Dellevoet. “With the continued need for convenience, a greater array of ethnic foods is now being produced as frozen food entrees.”

According to Edelstein, certain categories still are experiencing 25 percent to 40 percent growth due to the Hispanic market. Retailers and manufacturers alike are interested in these shoppers because they eat at home more often (on average five times a week) and are in the store more often to buy fresher goods.

As the economy worsens, gas prices pass $3.50 a gallon and food prices increase, more consumers are opting to stay in for dinner, but still want the convenience of not having to actually cook — even when entertaining, says Dellevoet. “There is a growing trend for prepared foods to be eaten in the home,” she says, noting this would apply to individuals as well as families.

“It seems pretty obvious that consumers are looking to extend their dollar and save money where possible,” says Daniel Horan, vice president of sales and marketing, Golden County Foods, a co-packer of appetizers, entrees and sides for retail, foodservice and private label based in Plover, Wis. “We can see this in the strong sales pressure on fast-casual and casual-theme restaurants in foodservice. Grocery stores can supply some answers for these folks, too.”

The numbers show that supermarkets have been the beneficiaries of these trends. Frozen varieties of red meat, poultry and fish are generally pre-portioned and pre-seasoned, so they should continue to gain in popularity with adults looking for more meal solutions. In fact, Euromonitor forecasts that frozen processed red meat could grow 8 percent over its forecast period, due to increased options for the freezer case such as more organic varieties.

Frozen ready meals and pizzas also are expected to benefit from the continued addition of gourmet flavors, upscale, restaurant-quality ingredients, and all-natural and organic varieties — possibly up to 6 percent over the forecast period, notes Euromonitor.

During the past three years, single-serve and/or handheld options were the big trendsetters because they offer convenience, taste and variety. And they continue to appear in every product area that Double B Foods, for one, specializes in, notes Carl Spaeth, director of partnership manufacturing of Desoto, Texas-based Double B Foods, a manufacturer of hand-held frozen foods including sausage rolls/kolaches, empanadas and other dough-enrobed handheld products, as well as wrapped and rolled appetizers, dips and breakfast wraps.

The breakfast category, in particular, has benefited from new, mess-free options for children and adults, with continued growth expected to reach 4 percent next year.

Keeping Costs Down

Just as consumers strive to keep their expenses down, brand owners and manufacturers struggle with the significant price increases in raw materials, corn, wheat and oils, amongst other commodities.

“The price of dairy items, wheat and corn all increased substantially, and now we are seeing a jump in beef prices,” Gehres says. “Ethanol is having a direct impact on all these items. The government needs to get a better handle on what is happening with their programs favoring the use of ethanol.”

In addition to cost containment, risk management is playing a greater role in today’s era of high-profile product recalls. Ingredient traceability, food safety and overall product quality are critical for product reliability, says Dellevoet. “If there is a high level of trust, partnership, and communication between brand owner and contract manufacturer, as well as dependable processes in place,” she says, “there tend to be fewer issues overall.”

Active coordination between co-packer and marketer to mitigate risk remains crucial. Horan says, “This can be done through a number of methods but most usually through purchasing and production efficiency management.”