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WELCOME TO THE FROZEN FOOD AND CHILL CATEGORY DISCUSSION

WELCOME TO THE FROZEN FOOD AND CHILL CATEGORY DISCUSSION. Chill Frozen Breakout - Your Hosts. BRAD MCMINN CHIEF OF PERISHABLE STEVE PATTERSON CONAGRA. Do You Know?. What % of DeCA sales is Chill / Frozen?. ?. Chill / Frozen % Total DeCA Sales. 45% of DeCA Sales.

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WELCOME TO THE FROZEN FOOD AND CHILL CATEGORY DISCUSSION

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  1. WELCOME TO THE FROZEN FOOD AND CHILL CATEGORY DISCUSSION

  2. Chill Frozen Breakout - Your Hosts BRAD MCMINN CHIEF OF PERISHABLE STEVE PATTERSON CONAGRA

  3. Do You Know? What % of DeCA sales is Chill / Frozen? ?

  4. Chill / Frozen % Total DeCA Sales 45% of DeCA Sales

  5. Chill / Frozen Trends Dollars grew in all three segments last year! +3.38% +1.36% +8.9%

  6. Top Ten Chill / Frozen Categories TOTAL Store Rank Fresh produce is #1 in $s and units, both in DeCA and retail Rank is among all 553 store categories

  7. Perishables Offer Exceptional Patron Savings Perishables are key to delivering THE BENEFIT!

  8. Chill / Frozen Patron Savings Chill Frozen is a major contributor to DeCA Patron Savings

  9. DeCA Top 3 Dairy Segments (18.9%) (8.8%) +2.1% • Retail Market Top 3 • Milk (6.4%) • Cheese (7.0%) • Ref Juice (1.0%) • Latest 26wk 4/17/10 DeCA cheese unit sales are up 3.5% during same period

  10. DeCA Top 3 Prepacked Meat Segments (6.3%) (6.2%) (4.9%) • Retail Market Top 3 • Lunchmeat +0.8% • Sausage +1.9% • Bacon +1.5% • Latest 26wk 4/17/10 Lunchmeat is the largest segment in both retail and DeCA

  11. DeCA Top 3 Frozen Segments (3.5%) + 0.8% + 1.3% • Retail Market Top 3 • Prep Meals +0.2% • Pizza +4.7% • Ice Cream (5.4%) • Latest 26wk 4/17/10 Ice cream is a top segment in retail vs. seafood in DeCA

  12. DeCA Patron – Consumer Information

  13. Do You Know? What is the #1 “Draw” category ? ?

  14. What Categories Draw In Patrons? 6 of top 10 draw categories are perishables. Source: Shopper360, 4th Quarter 2009

  15. Commissary Patrons Like to Browse and Try New Foods, Beverages 39% of military patrons say they “like to try new foods” – compared with only 22% of all shoppers outside the gate. Patrons like variety – it is important to add new and innovative items– as they are looking to try out these new items Source: Shopper360, 4th Quarter 2009

  16. When It Comes to Health & Wellness, Patrons are Into “Keeping Fit” and Making Product Selections Based on Nutritional Benefits Compared to all shoppers, military patrons are more likely to know more about nutrition and pay close attention to nutritional product labels Patrons are tuned in to Health & Wellness. They care more about fitness and nutrition than the average consumer. Source: Shopper360, 4th Quarter 2009

  17. Category Growth Drivers Nutritional personal meals drive trips and basket size

  18. Frozen Vegetables Trends Purchase frequency continues to increase Source: Nielsen Channel Facts

  19. Frozen Meals has Largest 5-Year Volume Growth 5-Year Absolute Volume Growth (Millions) -$400MM -$200MM $0MM $200MM $400MM $600MM $800MM FPM $666MM FZ Vegetables $627MM FZ Meat/Poultry/Seafood $515MM FZ Potatoes $378MM FZ Desserts/Topping $364MM FZ Sand/Snack $246MM FZ Breakfast $214MM FZ Pizza $173MM FZ Baked Goods $136MM FZ Novelties $112MM Ice $19MM FZ Juice/Drinks -$106MM Ice Cream -$321MM Source: 2008 Nielsen custom database

  20. Dual income, no kids Empty-nesters Premium Meals for Two • Premium Meals for Two is a big and growing opportunity • Single, largest household type • Account for 1/3 of all households • Share the same meal 80% of the time • Are more likely to: • Frequent restaurants • Demand comparable quality at home +5%

  21. Perishable Promotions – Alex King, Fort Ord Proper planning Added savings with coupons Be fair and consistent with industry

  22. Perishable Promotions – Alex King, Fort Ord COOLERS • Install coolers for: Fast Movers/Perishable Promotions/Club Packs/Fire Sale items. • Claussen Pickles showed a 200% increase after installing this cooler! • Oscar Mayer Jumbo Wieners showed a 475% increase!!!!

  23. Perishable Promotions – Alex King, Fort Ord DEDICATED END CAPS for CLUB PACKS! Eye-catching displays with Power Buy pricing equals sales increases! Hot Pocket sales increased 24% during this promotion.

  24. Do You Know? What was the #1 selling Chill / Frozen Club Pack? ?

  25. By the Way, DeCA Club Pack Sales Continue to Grow! Top 10 Chill / Frozen out of 281 TOTAL Club items

  26. Innovation – Delivering Category Sales

  27. 1/3 of Pizza Hut orders include breadsticks and dipping sauce +12% vs. year ago1 20% of all national pizza chain pizzas are ordered with breadsticks and dip1 Breadsticks and garlic bread are the most popular sides eaten with pizza2 Winning Patrons from Restaurants… Pizza and Breadsticks are on trend and are what Consumers are ordering at restaurants 1 Crest 2008; 2 Technomic, 2009;

  28. Winning Patrons from Restaurants… It’s not Delivery…It’s DiGiorno Introducing Pizza and Breadsticks • For the first time, consumers are able to get pizza, breadsticks, and dipping sauce conveniently packaged all together in the pizza case! • Three delivery-style combos featuring a full-size, unique hand-tossed style pizza • & full order of 8 breadsticks • Supreme Pizza with Garlic & Herb Breadsticks and Marinara Dipping Sauce • Pepperoni with Cheesy Breadsticks and Marinara Dipping Sauce • Four Cheese with Cheesy Breadsticks and Marinara Dipping Sauce Great Value $5.95

  29. Winning Patrons from Restaurants… Introducing STOUFFER’S® Corner Bistro™ Stuffed Melt & Soup! Timing:First arrival June 1st • Complete and satisfying meal in minutes! • Bakery fresh-tasting bread filled with premium meat & cheeses • Restaurant-inspired creamy soups filled with high-quality ingredients like real cream and vine-ripened tomatoes • 10 oz of food under 1000 mg of sodium

  30. Total Snacking Universe Accounts for $60B Retail and is Growing at +5.4% Cheese only represents $2.1B (or 3%) of total snacking • Although snacking is forecasted to increase, maintaining a healthy diet is still important to consumers • Average consumer eats more than 2 better-for-you snacks a day • Consumers are migrating to healthier snacks Portion control snacks are the fastest-growing segment within the snacking market structure

  31. Consumers View Cheese as a Tasty, Wholesome Food; However, Some Don’t Realize Its Potential as an Everyday Snack Option Lever a consumer-recognized trademark to accelerate snacking cheese growth Introducing . . . KRAFT 100 Calorie Packs Cheese Bites

  32. Reduced Sodium Claims are Among the Highest that Shoppers Look For % of shoppers looking for health claim on package Source: Food Marketing Institute’s “Grocery Shopping Trends 2008”. 32

  33. Sargento Is Capitalizing On Better-For-You Food Trends by Offering Six New 25% Reduced Sodium Cheeses… 33

  34. Do You Know? What does DHA stand for? ?

  35. What is DHA? • DHA is an important nutrient for brain, eye and heart health throughout life • DHA is found in the membrane of every cell in the body. • The only omega-3 to readily accumulate in important neural tissues • 97% of omega-3 in brain • 93% of omega-3 in retina • Limited food sources makes it difficult to get enough DHA in the diet. • DHA found in fatty fish (e.g., salmon, tuna) and organ meats • The average American consumes 60 to 80mg DHA per day or about half of the IOM recommendation of 160 mg DHA = Docosahexaenoic acid

  36. Horizon Success Through Innovation

  37. Chilled OJ Declines Driven by Shopper Concerns about Sugar and Calories Sugar is second largest driver of OJ loss 13MM HHs reduced their juice consumption due to sugar and calorie concerns, and that’s just from the OJ segment PepsiCo Confidential 37 Source: BCG Consumption survey July 2008

  38. Delivered breakthrough innovation Trop50 Addressed a Core Consumer and Category Need Recaptured lost OJ HHs Reduced & Lapsed OJ Buyers • Trop50 is bringing reduced OJ consumers back to the category And grew the category 9% of Trop50 sales were incremental to the OJ category Source: IRI GDMx New Product Tracker; IRI Panel Data 2009,updated P2 2010; Millward Brown Brand Health Data - Total U.S., YTD w/e P2 ’10; IRI household Panel Data, TUS All-Outlets, 52w/e 2/21/10 PepsiCo Confidential 38

  39. 2010 New Items - BUITONI® Frozen High Quality, All-Natural Ingredients • Use only the best ingredients • Maine lobster • Natural white meat chicken • Custom ricotta and • Imported pecorino Parmesan First arrival March 1, 2010

  40. Steamer Innovation has Delivered!! • $4.6M annually to the DeCA Prepared Meals category! • 13% of annual category sales to DeCA Prepared Meals category! • + 5% over US Foods Performance…. • Patrons are searching for healthy, premium, and convenient meals, and steamers deliver their needs…

  41. Steam-cooked in a pouch, then plated for a premium eating experience. 2010 LEANCUISINENew Items

  42. Frozen is Losing Share of Lunch Status quo is driving declines; innovation is driving growth In frozen single serve’s largest category, lunch entrees + handhelds dollar are driving sales declines. Fresh, closer-to-the-source innovation is what is driving growth at lunch occasions. Redefining Fresh Lunch SITUATION: IMPACT: WINNERS: Lunch Occasion Trends Category Dollar Sales Trends Total BFY Category BFY Entrees Total BFY Panini $325mm since launch $140mm since launch $40mm first 10 mo. IRI week ending 1-10-10 -14% -10% NPD NET In-Home Database Yrs Ending Feb 09 -52% Opportunity to innovate to grow the frozen lunch category IRI 52-week ending 1-10-10

  43. Consumers Want More From Lunch MORE FRESH: Fresh preparation, vibrant ingredients, contemporary taste MORE SIMPLICITY: Food that speaks for itself, fewer ingredients, shorter ingredient statements MORE TIME: Balance their desire to eat freshly prepared, flavorful food during a rushed occasion Redefining Fresh Lunch Cultural Food Trends Today Ideal 80s-90s Absence of Negatives 2000’s Functional Benefits Positive Nutrition Today Fresh Real Less Processed <5 minutes, one-step prep Opportunity to leverage ‘Fresh Simplicity’ to transform frozen lunch

  44. Deli Trends • Deli sales for DeCA FY 10 are up 1.62% over FY 09 • Bakery sales for DeCA FY 10 are up 2.03% over FY 09 • Deli/Bakery customer counts are up 2.82% while transaction amounts are up .79% • FY 10 deli sales account for $74,137,952 or 2.19% of total sales • FY 10 bakery sales account for $26,785,131 or .79% of total sales • FY 10 sushi sales account for $15,107,649.25 or .44% of sales • Overall deli/bakery/sushi are 3.42% of DeCA sales FY10 – Business Objects

  45. Deli Initiatives • Cross-merchandising initiatives • Allergen Label Project (generic) • Condensed supply and equipment list (cheaper items) • Review of all deli/bakery store layouts FY10 – Business Objects

  46. Retail beef and pork tonnage is down 6.8% January to April 2010 • DeCA beef and pork tonnage is down 3.6% January to April 2010 • Current market cost compared to last year: Beef + 19%, Pork + 28% • Currently Select grade pricing is nearly equal to Choice • DeCA CONUS Top 10 processed items: • 93%, 96% & 81% Ground Beef, Chuck Steak/Roast, Top Round, Top Loin Steak (Select), Rib-Eye Steak (Select), Top Sirloin Steak, Bone-in Center Cut Pork Chops and T-Bone Steak (Choice) • DeCA OCONUS (Far East) Top 10 processed items: • 93%, 81% Ground Beef, Rib-Eye Steak (Choice), Top Loin Steak (Choice), Pork Spareribs, Tenderloin Steak (Choice), T-Bone Steak (Choice), Boneless Pork Chops, 96% Ground Beef and Korean Style Beef Short Ribs. • DeCA OCONUS (Europe) • 93% Ground Beef, Rib-Eye Steak (Choice), Tenderloin Steak (Choice), T-Bone Steak (Choice), 81% Ground Beef, Porterhouse Steak (Choice), Pork Spareribs, Baby Back Spareribs, Top Sirloin Steak, Boneless Pork Chops Current Market Status

  47. Fresh Meat Trends

  48. Fresh Meat Marketing Plans • 23 Period fresh meat promotion “Get Centered On Savings” • Develop product image USDA Choice & targeted USDA Select (“Choice Meats for Select Customers”) • HMR test In Meat Department • (24 Week Test Period +8% in Dollars and +4% in Units) • Core merchandising based on individual store Top 20 processed items.

  49. Do You Know? Do Americans have less time today? ?

  50. Average # Hours per Day *2010 projected (NPD Estimate) Do Americans Have Less Time Today?

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