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  • FROZEN FOOD IN THE U.S.

    September 2018

    TRENDS & OPPORTUNITIES

  •  Executive Summary

     U.S. Market Characteristics

     European Market Characteristics

     U.S. Distribution

     Conclusions

    BUSINESS SWEDEN 16 AUGUST, 2018 2

    AGENDA

  • BUSINESS SWEDEN 16 AUGUST 2018 3

    SWEDISH MANUFACTURERS WILL ENCOUNTER A FRAGMENTED MARKET WITH LOW GROWTH

    C U

    S T

    O M

    E R

    S

     Consumer preferences are changing. Younger urban millennials prefer

    quick delivery and restaurant food and frozen food manufacturers are

    reformulating to emulate this experience

     The industry has had to invest heavily in marketing and education in order

    to stem the tide of decreasing sales from consumer perceptions that

    frozen food is more unhealthy than fresh food

    D IS

    T R

    IB U

    T IO

    N

     Larger incumbent manufacturers largely handle distribution in house, while

    new entrants rely on at least two partners to distribute on the market

     As wholesalers don’t typically engage in sales activities, a broker is often

    needed in order to open sales opportunities with large retailers

     Importers and logistics providers may play an important role, but are

    a secondary priority in finding the right combination of distribution partners

    M A

    R K

    E T

     The market itself is dominated by smaller brands and smaller players,

    although there has been increased M&A activity in recent years

     Competition is tough as the market is facing slow growth and decreased

    sales in key segments like frozen pizza and frozen vegetables

     Frozen meals have seen modest pricing growth over the past ten years,

    with only a handful of brands having premium pricing power

    SOURCE: PHOTO PROVIDED BY MISSOURI PARTNERSHIP

  •  Executive Summary

     U.S. Market Characteristics

     European Market Characteristics

     U.S. Distribution

     Conclusions

    BUSINESS SWEDEN 16 AUGUST, 2018 4

    AGENDA

  • SLOW GROWTH IS EXPECTED, BUT CERTAIN SEGMENTS WILL BE LEFT BEHIND

    INDUSTRY TRENDS

     The frozen food market has been stagnant for several

    years, and has recently seen annual growth of about 1-

    2%; this slow growth is expected to continue

     Growth varies by segment; sales of frozen full meals

    have been steady or decreasing in recent years,

    whereas frozen vegetable sales have increased

     As frozen food manufacturers experiment with more

    healthful and flavorful options, consumption of frozen

    products is expected to increase, but consumption of

    seafood in general is expected to decrease slightly or

    level off

     The largest market segments are frozen prepared foods

    and entrees and frozen vegetables, which were valued

    at 12.5 BUSD and 9.9 BUSD, respectively, in 2017

     Major market drivers for growth include disposable

    income, health consciousness, price of inputs, and

    demand for convenient food options

    16 AUGUST, 2018BUSINESS SWEDEN 5

    FROZEN FOOD PRODUCTION IS VALUED AT 42.4 BUSD

    SOURCE: IBIS WORLD

    TOTAL MARKET SIZE AND SEGMENTS (2017)

    Other

    2.6%

    Frozen Fruit and

    Juice Concentrate

    8.3%

    Frozen Pizza

    18.6%

    Frozen Prepared Foods

    and Entrees

    29.5%

    Prepared Frozen

    Shellfish

    6.4%

    Prepared Frozen Fish

    11.3%

    Frozen Vegetables

    23.3%

    DESPITE THE INDUSTRY’S SIZE, FROZEN FISH AND SEAFOOD REPRESENT A SLIGHTLY SHRINKING PORTION OF THE TOTAL MARKET

  •  When looking at the frozen food industry as a whole,

    concentration is low, with nearly 75% of market revenue

    shared by either smaller and medium-sized companies

    or large companies with small frozen portfolios

     The other 25% is shared between four major food

    companies with many frozen offerings

     However, competition varies between segments

     The ready-made meal segment has somewhat low

    market concentration, while the frozen pizza segment

    features higher concentration

     Mergers and acquisitions are common within the

    frozen food industry, with a significant amount of

    market share going to a few major companies with

    diversified portfolios and a wide variety of brands

     M&A activity has increased in the past five years,

    allowing large companies to expand frozen offerings

    16 AUGUST, 2018BUSINESS SWEDEN 6

    SOURCE: IBIS WORLD, WASHINGTON POST

    M&A ACTIVITY HAS BEEN INCREASING WITHIN THE FROZEN FOOD INDUSTRY IN RECENT YEARS

    THE MARKET IS DEFINED BY A FEW MAJOR PLAYERS AND MANY SMALL-MEDIUM SIZED MANUFACTURERS

    Others (Small/medium companies & large

    companies with few frozen offerings)

    74.7%

    42.4

    BUSD

    MARKET SHARES OF COMPETITORS

    (ALL SEGMENTS)

    5.2%

    5.8%

    6.6%

    7.7%

    OVERALL MARKET CONCENTRATION IS LOW

  • COMPETITION IS TOUGH

     Many major frozen food brands are owned by well-

    known corporations such as Nestle, KraftHeinz, and

    Kellogg’s

     Larger players with few frozen offerings have seen

    success on the market through the acquisition of

    additional frozen brands

     It can be difficult for newer, international manufacturers

    to establish themselves within the U.S. frozen food

    industry

     Newer players have seen success on the market by

    establishing a strong regional brand through the

    utilization of regional partners such as small specialty

    food retailers

     Newer players can also differentiate themselves by

    focusing on health and quality, rather than trying to

    compete on price

    16 AUGUST, 2018BUSINESS SWEDEN 7

    THREE MAIN TYPES OF FROZEN FOOD MANUFACTURERS COMPETE ON THE U.S. MARKET

    SOURCE: IBIS WORLD, BUSINESS SWEDEN ANALYSIS

    Large corporations have diversified portfolios with a wide variety

    of brands covering a variety of frozen food segments. These

    companies have wide distribution networks across the U.S.

    Examples include:

    Large Company, Large Portfolio

    Some large corporations feature a small variety of frozen food

    offerings, despite their size. These companies are still able to rely

    on wide national distribution networks.

    Examples include:

    Large Company, Small Portfolio

    Smaller companies feature more streamlined product portfolios

    within frozen foods, but smaller operations. These companies

    may operate off of strong regional networks.

    Examples include:

    Small-Medium Company

    COMPANIES FALLING WITHIN THE THIRD CATEGORY MAY VARY WIDELY IN SIZE, BUT FOCUS MAINLY ON FROZEN OFFERINGS

    1

    2

    3

  • 16 AUGUST, 2018BUSINESS SWEDEN 8

    FROZEN FOOD PLAYERS VARY WIDELY IN SIZE AND DIVERSITY OF PORTFOLIO

    SWEDISH MANUFACTURERS CAN LEVERAGE DIVERSE PRODUCT PORTFOLIOS TO COMPETE WITH COMPANIES LIKE CONAGRA

    SOURCE MRS. T’S, CONAGRA, IBIS WORLD

    MRS. T’S (ATEECO, INC.)

    Founded: 1952

    Headquarters: Shenandoah, PA

    Revenue: 58 MUSD

    Markets Served: Major metropolitan areas

    Company Facts

    Mrs. T’s entire offering consists of frozen pierogies of different

    flavors, styles, and portion sizes.

    Mrs. T’s frozen products fall within the meal or snack category, and

    the company highlights the versatility of the products within

    recipes, in addition to their convenience.

    Key Products and Offerings

    Mrs. T’s frozen products are available at major grocery store

    chains as well as specialty food stores.

    Products are available in major metropolitan areas, especially in

    the northeast.

    Sales Channels

    CONAGRA BRANDS INC.

    Founded: 1919

    Headquarters: Chicago, IL

    Revenue: 7.8 BUSD (2.8 BUSD frozen)

    Markets Served: Global

    Company Facts

    Conagra’s frozen food brands include Hebrew National hotdogs,

    Marie Callender’s frozen ready meals, and P.F. Chang’s frozen

    snacks.

    Frozen offerings are diverse and include ready meals, frozen

    meat products, vegetable products, and desserts.

    Key Products and Offerings

    Conagra offerings are available in major grocery store chains

    including Whole Foods and Harris Teeter, club stores, and via

    online retailers.

    Products are widely available across the U.S. as well as abroad.

    Sales Channels

  • BUSINESS SWEDEN 16 AUGUST, 2018 9

    SOURCE: EUROMONITOR, ORBIS

    CHANGES IN DEMAND HAVE PUSHED THE INDUSTRY TO RESPOND WITH EDUCATION AND NEW PRODUCTS

    DUE TO SHIFTING CONSUMER DEMAND, OPPORTUNITIES ARE GREATEST WITHIN HEALTH FOCUSED FROZEN FOOD PRODUCTS

    HEALTHY EATING INDEX IS RISING IN THE U.S.

     Total health expenditure among U.S. consumers increased at an annualized rate of 4.1% between the years 2012-2017,

    generating an inverse effect on frozen food sales

     Consumers are turning to fresh food due to the perceived idea t

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