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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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slide1

WELCOME TO THE

FROZEN FOOD

AND

CHILL CATEGORY DISCUSSION

slide2

Chill Frozen Breakout - Your Hosts

BRAD MCMINN

CHIEF OF PERISHABLE

STEVE PATTERSON

CONAGRA

slide3

Do You Know?

What % of DeCA sales is Chill / Frozen?

?

slide5

Chill / Frozen Trends

Dollars grew in all three segments last year!

+3.38%

+1.36%

+8.9%

top ten chill frozen categories total store rank
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

perishables offer exceptional patron savings
Perishables Offer Exceptional Patron Savings

Perishables are key to delivering THE BENEFIT!

chill frozen patron savings
Chill / Frozen Patron Savings

Chill Frozen is a major contributor to DeCA Patron Savings

slide9

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

slide10

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

slide11

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

slide13

Do You Know?

What is the #1 “Draw” category ?

?

what categories draw in patrons
What Categories Draw In Patrons?

6 of top 10 draw categories are perishables.

Source: Shopper360, 4th Quarter 2009

commissary patrons like to browse and try new foods beverages
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

slide16
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

slide17

Category Growth Drivers

Nutritional personal meals drive

trips and basket size

slide18

Frozen Vegetables Trends

Purchase frequency continues to increase

Source: Nielsen Channel Facts

slide19

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

slide20

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%

proper planning added savings with coupons be fair and consistent with industry

Perishable Promotions – Alex King, Fort Ord

Proper planning

Added savings with coupons

Be fair and consistent with industry

coolers

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!!!!
dedicated end caps for club packs

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.

slide24

Do You Know?

What was the #1 selling Chill / Frozen Club Pack?

?

slide25

By the Way, DeCA Club Pack Sales Continue to Grow!

Top 10 Chill / Frozen out of 281 TOTAL Club items

slide27
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;

slide28

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

slide29

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
total snacking universe accounts for 60b retail and is growing at 5 4
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

slide31
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

slide32

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

slide33
Sargento Is Capitalizing On Better-For-You Food Trends by Offering Six New 25% Reduced Sodium Cheeses…

33

slide34

Do You Know?

What does DHA stand for?

?

what is dha
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

slide37

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

slide38

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

2010 new items buitoni frozen
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

slide40

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…
slide42

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

slide43

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

deli trends
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

slide45

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

current market status

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

fresh meat marketing plans
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.
slide49

Do You Know?

Do Americans have less time today?

?