Frozen foods have experienced something of a renaissance in the UK. Kantar Worldpanel data reveals the category is seeing year-on-year growth of 13.8% and is now valued at £7.21bn.
Much of this upward swing can be attributed to changing consumer patterns that resulted from the COVID-19 pandemic. Throughout 2020, shoppers were making fewer trips with a higher basket spend and seeking out products that wouldn’t spoil.
Many in the category believe that this behaviour change will have sticking power. Indeed, research from Birds Eye shows that 40% of British families are more likely to buy frozen food today than they were before the pandemic. The survey of 2,023 parents this July by pollsters Censuswide highlighted significantly greater engagement in the category than before coronavirus hit the UK in 2020.
Asked why they were drawn to the freezer aisle, respondents cited factors including cost, convenience and reduced food waste.
“The stars have aligned for the category,” Birds Eye General Manager Steve Challouma told us. “There are latent benefits of frozen food that have always been there, sleeping - some of the macro trends like sustainability, food waste, great tasting convenient food, nutrition.
“External trends and factors in the market have had the impact of transforming frozen from a backup to something that is more of an active and positive choice."
The result is a more confident category where increased levels of innovation are creating a virtuous cycle of growth. “We’ve seen a far more confident category approach from manufacturers in the category, either investing in product quality [or] bringing in innovations, new products, that modernise the category so it becomes a more exciting and interesting place to shop,” Challouma observed.
A rising category is a good place to be. But the Birds Eye business in the UK – part of international frozen food specialist Nomad Foods – has shown net revenue growth that is significantly higher than the category. It has transformed from a business worth £315m and declining in 2016 to a business worth £700m and growing in 2020. How has this been achieved?
‘Hero products’ and a focus on the core
First and foremost, Challouma revealed that Birds Eye has mounted a concerted effort to raise the profile of what he terms ‘hero’ segments - fish fingers, chicken dippers and peas.
“Over the last few years, we have focused on the hero segments of the category. The ones that bring consumers through the door. Products that consumers will buy week in, week out. We want to ensure those products are as interesting and relevant as they always have been,” he told FoodNavigator. “They are the engine room of Birds Eye. They have delivered consecutive growth over the last 5 years.”
This is achieved through marketing at scale on both traditional and digital platforms. Consumer engagement activities are also important, the brand expert continued, pointing to the company’s current activity seeking out a ‘chief dipping officer’ for Chicken Dippers.
Innovation is another lever to gain traction in what might seem highly traditional segments. “On fish fingers, the best sellers are the classics. But we know fish fingers are a very nostalgic product, people remember them from their childhood, and they are a great way to get children to eat more fish. Adults love them as well, they become parents, serve them to their kids and rediscover them. They enjoy fish fingers in fish finger sandwiches. [To capitalise on this] we've had the fish finger sandwich awards, we've launched chunky fish fingers… Initiatives like that can be really incremental bringing new consumers to the category.”
Incremental innovation in plant-based
Fish fingers and chicken dippers might be Birds Eyes’ bread and butter, but the business is also leveraging innovation to increase the appeal of the category and its brands to a broader cross-section of consumers.
“We are always on the lookout to serve a broader range of needs building around our core to drive the number of occasions that feature our products,” Challouma explained.
The group’s Green Cuisine brand stands as case in point. New to the market just three years ago, the brand is now worth £19m and is the number three frozen plant-based brand with a market penetration of 9.5%.
Commenting on the rapid rise of Green Cuisine, Challouma attributed much of the brand’s success to its mainstream appeal. “It targets that need of flexitarians looking to eat a little less meat, making it very accessible and mainstream… The reassurance of the Birds Eye brand removes a lot of the barriers for many consumers. They recognise Birds Eye, they trust Birds Eyes' consistency, quality and value for money.”
The company has brought out plant-based alternatives to familiar family favourites and Challouma revealed the ‘most successful products have been core products’ – burgers and chicken-free. Fishless fingers were also recently rolled out.
As ‘the only generalist brand in the category’ the group attracts a lower proportion of vegetarians and vegans than its rivals at around 60% of its Green Cuisine shoppers. This also means that the brand has been ‘very incremental to the category’, Challouma maintained, with around 80% of the volume additional quantity to the plant-based frozen segment.
“This is how we'll continue: make plant-based accessible, take away some of the pretension and make it feel normal.”
Nutrition and the ‘opportunity’ of HFSS regulations
Challouma believes that health and nutrition is an important trend underpinning Birds Eye’s momentum and predicts that the upcoming HFSS regulation in the UK – which will restrict marketing and promotion of unhealthy food – present the frozen food maker with an opportunity.
He stressed ‘people are getting’ that freezing food is ‘nature’s way of locking in the vitamins’ to items like vegetables and fish. But – for a company also known for its Chicken Dippers and Potato Waffles – this optimism around health might come as something of a surprise.
“In some of these areas there is a difference between perception and reality,” he suggested. Indeed, 80.5% of total UK net sales in 2020 were from Healthier Meal Choices/non-HFSS and 91.5% of total UKI Birds Eye brand net sales were non-HFSS, we were told. “That goes much broader than you think. The steps we take to make our portfolio nutritionally balanced over a long period of time have been nothing short of phenomenal.
"We see that as a competitive advantage that we have. Any legislation that's coming up will provide more opportunities than risks for a company like ours, even in some surprising areas.”
‘We'll go to all the different channels to hunt growth’
Looking to other growth opportunities, Challouma highlighted the importance of e-commerce, which he described as a ‘strategic’ sector for frozen food.
Even before the pandemic, online was forecast to grow as a channel by 43.8% by 2024, according to IGD. The onset of the pandemic saw a huge increase in the demand for online grocery shopping.
“It massively accelerated last year. While that slowed a little this year as things have normalised, it is still well over where it was ahead of the pandemic. Twenty percent or so of our sales already go through e-commerce,” the UK manager noted.
Birds Eye research found over half of frozen shoppers – 55% - prefer to buy online, meaning that the health of the business would benefit from ‘driving penetration’ in e-commerce. All indications on this front are positive, Challouma suggested.
“With some retailers, they achieved the kind of footfall online that they expected to achieve in 2027,” he said.
“That's not to say we ignore the other channels. Another channel that got a big boost during COVID was convenience. Channel dynamics are always shifting. What you need for a brand like us is a multichannel strategy. The core of the core is traditional supermarket, which will remain the foundation. The areas we'll need sub-strategy on are e-commerce, convenience, discounters, and even foodservice which is an opportunity where there is lots of room for us to grow. We'll go to all the different channels to hunt growth.”
On the hunt? The ongoing importance of M&A
Birds Eye has more than doubled its business over the last four years. Alongside innovation and market share growth, acquisitions have also played a key role.
The company took control of two well-known frozen brands – Goodfellas and Aunt Bessie’s – that exposed it to additional meal occasions within the frozen food space.
“Our strategy fundamentally is around growing our core business and then also identifying companies we can add to our portfolio. The key drivers of the doubling of the business were the success of Birds Eye and the addition of Aunt Bessie’s and Goodfellas, which introduced us to some categories we weren't present in – pizza and roast components.”
Challouma revealed he expects this approach to continue to shape Birds Eyes’ strategy in the coming years. “We'll always aim to grow the core business and the new businesses we've acquired in the same way. Then if we identify further brands for acquisition that could complement our portfolio, leverage our scale and apply our business model and approach to growing brands, we'll add them to the family if we can acquire them for the right price.”
So what does Birds Eye look for in potential acquisition targets?
“From a UK perspective, it would be brands that allow us to target incremental pockets of penetration in frozen and offer consumers a much bigger share of their plate.
“We would also look for brands where there is the opportunity to step-change consumer perceptions, where we think we can do a good job with our approach to supporting brands.”
With this recipe for success, Challouma is upbeat on the prospects for continued growth in the years to come. “Whether that will mean a doubling of the business who knows. Possibly. It depends how successful we are.”