Natural Foods Merchandiser

Thinking inside the prepared foods box

Ethnic dishes, mac and cheese, soup cups, low-carb meals—these represent just a portion of the growing number of natural meal options that are both fast and tasty. But what makes some products perennial successes, while others fizzle and fade over time?

?I think it?s really simple,? says Bob Burke, principal of Natural Products Consulting in Andover, Mass. ?The floor-level requirement is having the proper ingredients that meet all the requirements of the natural channel—natural at minimum, and organic if possible. But taste is really what determines if a product is a huge or a modest success. Taste is the reason why product lines like Annie?s and Thai Kitchen have flourished and expanded beyond the natural channel. Their products taste really good.?

?At the end of the day, I think taste is of utmost importance,? agrees Sarah Bird, vice president of marketing for Napa, Calif.-based Homegrown Naturals, which owns both Annie?s and Fantastic Foods. ?There is a small fraction of people who are very committed to natural and organic and willing to make a trade-off in taste, but the real volume opportunity is to get to the mainstream consumer.? However, consumer loyalty isn?t built on taste alone. Once the yumminess factor is addressed, there are other ways to build brand loyalty, especially among naturals consumers who value socially and environmentally responsible business practices.

?Natural ingredients set these products apart from the mainstream, and taste is what makes them successful in terms of repeat purchases, but the added value of these products is social and environmental responsibility,? says Burke. ?That helps build loyalty and really resonates with consumers.?

?I think what?s magical about Annie?s is that it?s a brand with a conscience,? Bird says. ?For example, we?ve given out ?Be Green? bumper stickers and established a scholarship program for students studying the environment. We?re trying to make a difference beyond just selling mac and cheese.? The combination of great taste and brand loyalty has led to deeper penetration in the mainstream channel. Annie?s is now sold in 65 percent of mainstream markets.

However, it?s possible to have success with boxed or prepared foods without the benefit of fanatical consumer loyalty. One example is Fantastic Foods, which makes soup cups, international dishes and shelf-stable, ready-to-eat meals that can be heated in a microwave or on the stovetop. More recently, the company introduced its Fast Naturals Ready Meals, with three Asian flavor offerings, three comfort foods and five low-carb options. ?Fantastic Foods tends to attract consumers looking for a particular type of product, but doesn?t have the same level of brand loyalty,? Bird says. ?It?s a huge opportunity for us as a manufacturer to try to get the kind of fanaticism or sense of passion that Annie?s invokes.?

?Today, a soup-cup consumer may be unaware of other parts of the line,? Bird says. After experiencing a boom in the 1990s when the soup cup category took off, the brand has since moved away from that category. ?Consumers realized that the soup cup product category was not up to snuff and that there were other convenient, on-the-go food options,? she says.

One of the toughest decisions for manufacturers is deciding what category they should focus on. ?In terms of other categories, we?re continually wrestling with what?s the next frontier,? Bird says.

Burke sees two general approaches to launching a new, easy-to-prepare natural product line. A company can either make a natural version of a mainstream product, as Annie?s has successfully done, or launch a new category that has no mainstream counterpart. Each approach has pros and cons.

?Companies like Annie?s look at what are the large categories in mainstream groceries,? Burke says. ?They think, ?If we can do a natural alternative, all we need is a few percentage points and we?ve got a business.?? In a category like macaroni and cheese, which may represent as much as $1 billion in total annual sales, 3 percent or 4 percent of that market can be a significant number.

As Annie?s expanded its line, it created new products, such as pasta-based skillet meals and canned, organic pastas for kids, that are not too far afield from its initial mac and cheese success.

The second option is to create a category from scratch. Good examples of this approach include Annie Chung?s and Thai Kitchen, which are introducing Asian flavors that don?t have a significant mainstream presence. ?It?s a double-edged sword for companies like Thai Kitchen,? Burke says. ?On one hand, there?s less competition, and I think the market is fairly receptive to new products. Ethnic foods, especially Asian foods, have been growing in popularity for a while. Because it?s not a crowded field, there are easier points of entry. On the other hand, there is an educational challenge, getting people to try something new.?

Burke cautions against launching a ?me too? product, trying to capitalize on a trend, particularly when a company?s product is not substantially different than those already on shelves. The soup-cup boom and bust is a good example. ?There?s always a rush to market following a hot trend and then, invariably, there?s a shakeout,? Burke says.

Burke says it?s more difficult to launch products now than even a decade ago because of consolidation at all levels of the industry. But that hasn?t stopped companies from trying. Whether their products will stick around depends on consumer taste and corporate creativity. ?The biggest challenge when entering a crowded category,? Burke says, ?is doing something different.?

Mitchell Clute is a freelance writer in Crestone, Colo.

Natural Foods Merchandiser volume XXVI/number 9/p. 70, 74

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