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
CU
ST
OM
ER
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
DIS
TR
IBU
TIO
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
MA
RK
ET
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 that frozen food is less nutritious, with high sodium and
preservatives
The frozen pizza segment has been most affected by this shift, while healthier options such as frozen fruit, vegetables and
smaller snack sizes has seen an increased demand
CONSUMER EDUCATION
The frozen food industry has realized the need to educate
consumers on health benefits of frozen food to
maintain market share
Leading companies and industry associations have joined
forces to push marketing efforts
Companies are expected to continue focusing on marketing
efforts over the next five years
NEW PRODUCTS & REFORMULATIONS
Companies. are developing new healthier products
and/or reformulating current recipes to increase the level
of protein, use less sodium, preservatives, and trans fat,
and meet criteria to be organic and/or non GMO
Consumers are requesting healthy options beyond
simply sugar free and fat free
Ind
us
try A
cti
on
sIn
du
str
y C
ha
lle
ng
e
1 2
BUSINESS SWEDEN 16 AUGUST, 2018 10
SOURCE: EUROMONITOR, ORBIS
INCREASED DEMAND FOR CONVENIENCE HAS CAUSED THE INDUSTRY TO FOCUS ON RESTAURANT APPEAL
FROZEN FOOD COMPANIES SHOULD HIGHLIGHT THE CONVENIENCE AND QUALITY ASPECT OF THEIR PRODUCTS
TASTE & CONVENIENCE
Food delivery services are increasing in popularity amongst millennials, at the same time as rising disposable incomes will lead
to more frequent restaurant visits for the average U.S. consumer
This shift in consumer behavior negatively impacts the sale of frozen food
As consumers spend more time at work, they have less time to cook food at home
CONVINIENCE & RESTAURANT APPEAL
Increased restaurant visits and home delivers are
perceived as premium substitutes to frozen ready meals
To avoid a big revenue hit for frozen food companies,
frozen food companies have started developing ready
meals comparable to restaurant food to compete with
delivery services and restaurant visits
PRODUCTION INNOVATION
In order for frozen ready meals to compete with home
deliveries and restaurant meals, frozen food companies
have started improving their production process to allow
for higher quality in terms of increased flavor and less
preservatives used
Thus, opportunities for better freezing procedures that
maintains quality and flavor exist in the U.S.
Ind
us
try C
ha
lle
ng
eIn
du
str
y A
cti
on
s
3 4
BUSINESS SWEDEN 16 AUGUST, 2018 11
FROZEN READY MEALS VARY GREATLY IN PRICE AND NUTRITIONAL QUALITY
SOURCE: EUROMONITOR, COMPANY WEBSITES
0,00
5,00
10,00
15,00
20,00
25,00
U.S. PRICING – FROZEN READY MEALS
Brand
$/kg
HIGHER NUTRITIONAL VALUE IN READY MEALS ALLOWS FOR SIGNIFICANTLY HIGHER PRICING
Price Range per Kilo
$3,68 $23,68
Price Range per Pack
$1,24 $7,7
337 g 1,134 g
Highest Priced Ready Meals
Cederlane: $23,68/kg
Canadian company; wholesome
ready meals
PF Chang's Home Menu: $23,21/kg
Asian cuisine ready meals
Kashi: $17,63/kg
Healthy ready meals (grains,
vegetables, super seeds, roasted
veggies)
Cederlane PF Chang
Kashi
BanquetMichelina’s
Premium
meals
FROZEN FOOD PRICES ARE SLOWLY INCREASING
U.S. consumers are experiencing a rise in disposable income,
which in turn has increased the demand for healthier options
at higher retail prices
However, many of these consumers with a higher willingness
to spend will turn to fresh produce as compared to frozen
products
Ready meals have seen an average unit price increase of 2%
between 2012-2017
This boost has partly been due to increased pricing for
healthier frozen food options
The process of developing new healthier options and/or
reformulating existing recipes to be healthier has led to
increased R&D costs within the frozen food industry
As a result, the average profit margin for frozen food
companies decreased to 5% in 2017
However, new healthier product lines allows for higher
pricing, which has somewhat offset the rising R&D costs
Frozen food companies are expected to continue their
product innovation to launch more healthy options over
the next five years leading up to 2022, resulting in maintained
higher R&D costs and slim profit margins
16 AUGUST, 2018BUSINESS SWEDEN 12
FROZEN READY MEALS HAVE SEEN MODEST PRICINGGROWTH OVER THE PAST FIVE YEARS
SOURCE: EUROMONITOR, ORBIS
SLOW PRICE INCREASES COMBINED WITH RISING R&D COSTS ARE KEEPING PROFITS FOR FROZEN FOOD LOW
FOCUS ON R&D IS GENERATING HIGHER COSTS
Executive Summary
U.S. Market Characteristics
European Market Characteristics
U.S. Distribution
Conclusions
BUSINESS SWEDEN 16 AUGUST, 2018 13
AGENDA
According to the National Food Agency’s guidelines, the
temperature should always be at -18°C (0°F) or below
The temperature can rise to -15C (5°F) for short time
spans throughout transportation, local distribution and
defrosting
The responsibility of temperature deviations and actions to
take is decided in the contract between involved parties. If
not, guidelines set by the National Food Agency apply
Based on FDA guidelines, frozen food should be maintained at
a reasonably steady temperature of 0°F (-18°C) or colder
During receipt or storage, if frozen food product
temperatures rise to over +10°F (- 12°C) or warmer, the
owner should be notified to request what actions to take
It is the distributors’ responsibility to follow these guidelines.
However, inspections have historically been rare in the
U.S., and some distribution companies have deviated from
regulations to cut costs
Manufacturers should therefore carefully review their
distributors food safety handling by requesting procedures
for docking, temperature monitoring and logging, inspection of
temperatures at different points of the supply chain, and
removal of perishable goods
16 AUGUST, 2018BUSINESS SWEDEN 14
THE TEMPERATURE OF FROZEN FOOD IN THE U.S. IS ALLOWED TO REACH HIGHER LEVELS THAN SWEDEN
SOURCE: NATIONAL FOOD AGENCY, AFFI, U.S. FOODS
-15°C
-18°C
-12°C
-18°C
FROZEN FOOD IN THE U.S. SHOULD BE DESIGNED TO HANDLE HIGHER TEMPERATURES
Sweden USA
BUSINESS SWEDEN 16 AUGUST, 2018 15
A COMPLETE SUPPLY CHAIN IN THE U.S. INVOLVES MORE PARTNERS AS COMPARED TO EUROPE
SOURCE: BUSINESS SWEDEN INTERVIEWS
U.S. Frozen Food Supply Chain
Europe’s Frozen Food Supply Chain
Distribution to retailerSales & MarketingImporting & Warehousing
Importer 3PL Sales Agency/Food Brokerage 3PLWholesale
Distributor
Distribution to retailerSales & MarketingWarehousing
Distributor
Pa
rtn
ers
Ne
ed
ed
Su
pp
ly
Ch
ain
Pa
rtn
ers
Ne
ed
ed
Su
pp
ly
Ch
ain
1 2 3 4
1
2-3 PARTNERS ARE NEEDED WHEN SELLING TO U.S. RETAILERS, WHILE ONE PARTNER IS STANDARD IN EUROPE
Function may be handled by another partner Function handled by described partner
Executive Summary
U.S. Market Characteristics
European Market Characteristics
U.S. Distribution
Conclusions
BUSINESS SWEDEN 16 AUGUST, 2018 16
AGENDA
THE FROZEN SUPPLY CHAIN DIFFERS DEPENDING THE MANUFACTURER’S SIZE AND PRODUCT DEMAND
BUSINESS SWEDEN 16 AUGUST, 2018 17
SOURCE: BUSINESS SWEDEN ANALYSIS AND INTERVIEWS
NEW ENTRANTS TYPICALLY RELY ON SEVERAL PARTNERS ALONG THE SUPPLY CHAIN
The typical supply chain for new
entrants consists of at least two
partners: one for sales and marketing,
and one for warehousing and
distribution
Sales agencies/food brokerages will
actively sell products to retailers as they
work on a commission, but do not offer
warehousing and transportation
Wholesale distributors purchase the
products from manufacturers and offer
warehousing and transportation, while
sales are passive and not product-
specific
Wholesale distributors typically rely
on the manufacturer to handle sales
and marketing
Large frozen food companies may have
internal distribution and sales
Distribution
to retailer
Sales &
Marketing
2 3Importing &
Warehousing
1
THE FROZEN FOOD SUPPLY CHAIN CAN BE DIVIDED INTO THREE PARTS
*Other partners along the supply chain can sometimes act as an importer
3PL
(Warehousing)
Fro
ze
n F
oo
d M
an
ufa
ctu
rer
Ma
jor
Reta
ilers
Food
Brokerage/
Sales
Agency
Imp
ort
er*
3PL
(Distribution)
Wholesale
Distributor
(Warehousing)
Internal Supply Chain
Wholesale
Distributor
(Distribution)
In-house
Sales Reps
BUSINESS SWEDEN 16 AUGUST, 2018 18
SEVERAL DISTRIBUTION PARTNERS ARE NEEDED FOR A COMPLETE SUPPLY CHAIN IN THE U.S.
SOURCE: BUSINESS SWEDEN ANALYSIS AND INTERVIEWS, COMPANY WEBSITES
FROZEN FOOD COMPANIES EXPORTING TO THE U.S. NEED 2-3 PARTNERS FOR A COMPLETE SUPPLY CHAIN
Offering
Importing food to the U.S., submits prior
notice and handles customs
documentation
WHOLESALE
DISTRIBUTOR
IMPORTER
Importation Warehousing Distribution Marketing Sales
Conduct sales towards retailers in specific
geographies for a commission. They often
have strong retailer networks. Tends to be a
more expensive option compared to
wholesale distributors. Common for new
entrants as a starting point
x x x
LOGISTICS
PROVIDER
Offers food storage and distribution
solutions. Some offer importing services.
No sales or marketing
xx
x x
SALES
AGENCY/FOOD
BROKERAGE
Purchase products directly from the
manufacturer, and sell it at a mark-up to
retailers. They often carry a large catalogue of
SKU’s, and sales efforts are passive and
limited. Often require proven sales and brand
presence for new products
x x
BROKERS ARE IMPORTANT INITIAL PARTNERS
While large and well-established frozen food
manufacturers may have many capabilities in house,
newer manufacturers will typically need at least two
types of partners
1) Food brokers, or sales agencies, assist with
general sales and marketing toward retailers. Brokers
have wide networks and strong relationships with
certain grocery and specialty food store chains, and
may focus on a particular region
2) Logistics providers focus mainly on cold food
storage and transportation solutions between the
manufacturer and retailer, and may handle importing
Manufacturers also have the option to sell stock to
wholesale distributors, however these partners do not
engage actively in sales/marketing and generally
require demonstrated sales before they will take on a
new line
16 AUGUST, 2018BUSINESS SWEDEN 19
FOREIGN MANUFACTURERS NEW TO THE U.S.TYPICALLY USE AT LEAST TWO PARTNERS
SOURCE: BUSINESS SWEDEN INTERVIEWS, NATIONAL FROZEN & REFRIGERATED FOODS ASSOCIATION,
AFFI, OREGON STATE UNIVERSITY, FOOD INNOVATION CENTER
MANUFACTURERS SHOULD FIND A BROKER FIRST, AS SOME BROKERS OR RETAILERS HAVE PREFERRED LOGISTICS PROVIDERS
“At a minimum, a foreign or smaller company
will typically need to use a broker and some sort
of logistics provider. The company would use a
third party cold storage facility or shipping
company for distribution, while the broker is kind
of separate from that – their expertise is really
just selling the product into the store.”
- Julie Henderson, VP Communications, National
Frozen & Refrigerated Foods Association
“
”“The way to really grow your product in the U.S.
and to get it into the right food chains is to
leverage the relationships of a food broker.
Regionally first, then nationally.”
-Camille, Associate, MPS Enterprises
“
”
BUSINESS SWEDEN 16 AUGUST, 2018 20
FOOD BROKERS VARY WIDELY IN SIZE, GEOGRAPHY, AND PORTFOLIO
SOURCE: BUSINESS SWEDEN INTERVIEWS, NATIONAL FROZEN & REFRIGERATED FOODS ASSOCIATION,
AFFI, OREGON STATE UNIVERSITY, FOOD INNOVATION CENTER
SMALL AND MEDIUM-SIZED BROKERS ARE THE BEST INITIAL FIT FOR NEW ENTRANTS TO THE U.S. MARKET
LARGE BROKERS
Geography: Large brokers tend to work nationwide, and
some also have connections in Canada
Portfolio: Portfolios tend to be large and diverse,
including a variety of retail products rather than just food
Network: Major national retail chains, club stores, as well
as regional grocery store chains and specialty food stores
Examples: Acosta Sales & Marketing, Impact Group
MEDIUM BROKERS
Geography: Medium-sized brokers will work regionally,
focusing on one coast or a few adjacent regions
Portfolio: Focus on food products, but may include a
variety of offerings including dry foods or confectionary
Network: Regional grocery store chains, specialty food
stores
Examples: MPS Enterprises, Empire Food Marketing
SMALL BROKERS
Geography: Small brokers will work mainly in one region,
such as the Northeast or the Midwest, or a few states
Portfolio: Focus will generally be more narrow, although
there may be offerings other than frozen
Network: Specialty food stores, as well as a selection of
regional grocery stores within the broker’s area
Examples: Douglas Sales, The Performance Group
“There are a few big, well-known brokerages that
are nationwide. More often, however, brokerages
tend to work in specific regions. Many retail
chains are only on one coast or another, so
brokers may only work with retailers on one
coast.”
- Julie Henderson, VP Communications, National Frozen
& Refrigerated Foods Association
“
”
Executive Summary
U.S. Market Characteristics
European Market Characteristics
U.S. Distribution
Conclusions
BUSINESS SWEDEN 16 AUGUST, 2018 21
AGENDA
BUSINESS SWEDEN 16 AUGUST 2018 22
SWEDISH MANUFACTURERS SHOULD CONSIDER LONG TERM OPTIONS IN THE U.S. FROZEN FOOD MARKET
Design appropriate customer offering: As the market is experiencing slow growth with regards to traditional
segments like frozen vegetables and ready meals, manufacturers should prepare to enter the market with an
offering focused on key growth segments, such as healthier options and restaurant quality meals
Product development: Companies may need to invest in further R&D in order to meet the tastes of the U.S.
market. In a crowded market, the right product-market fit will be crucial
Develop branded partnerships: Similar to the Jamie Oliver products, Swedish manufacturers have an
opportunity to develop a marquee line of products using a celebrity endorser in the U.S.
Market position and pricing: Some Swedish frozen food manufacturers will be unable to compete with mass
market products on price. Instead, these companies should aim to price themselves as a premium option
Work with a broker: There are appropriately sized brokers that can help manufacturers gain access to target
retailers. Brokers may also provide input on the ideal product offering to design for the U.S. market
Drive sales: Having a small sales operation could be very beneficial in working directly with key stakeholders
and partners here in the market. A large market requires a more serious investment
Develop
attractive offer
Long Term
Growth
Sales and
Distribution
SOURCE: BUSINESS SWEDEN ANALYSIS
Build out a local operation: Setting up a local entity and scaling the operation so it more closely resembles
the operations of large incumbent players is key for manufacturers wanting to see larger growth and increased
market share. A tepid strategy is likely to fail over the long term
Consider acquisitions: The market is showing signs of consolidation as M&A activity is increasing.
Considering the large amount of financial investment new manufacturers must make, an acquisition may be a
smarter move in order to gain immediate market share
Although the frozen food market has experienced stagnant growth, opportunities still exist for Swedish companies
within the following segments:
BUSINESS SWEDEN 16 AUGUST, 2018 23
OPPORTUNITIES EXISTS WITHIN THE HEALTHY AND PREMIUM FROZEN FOOD SEGMENT
SOURCE: BUSINESS SWEDEN ANALYSIS
Healthy Food Options
Vegan & Vegetarian Protein Restaurant Quality
Ready Meals
M&A
Acquisition by major U.S.
company
Clean Labels
Less preservatives, non GMO
Healthy Snack Food
Premium Frozen Food
Premium Ingredients
Grains, superfood
Improved production for
preserved flavor
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