From The Fall 2002 Issue of Natural Grocery Buyer

Frozen Dinners Go Natural and Organic

Amy's Kitchen pioneers a category and many followers benefit from double-digit growth

Grant Ferrier

Two of the food industry's biggest trends—convenience and natural or organic ingredients—combined to serve big growth in frozen dinner items and entrees. According to Nutrition Business Journal research, sales of natural and organic frozen entrees, including dinners, pies, pizzas, burritos and other prepared frozen items, have grown 10 percent to 14 percent annually since 1997. Consumer sales for the category totaled $380 million in 2001. Sales are split between the natural foods and grocery channel, with greater growth in supermarkets as these products gain freezer space.

Although the $380 million in sales has led to a number of new competitors on supermarket and natural foods retailer shelves, the figure represents less than 6 percent of the $6.5 billion frozen prepared foods market in the United States. According to most consumer surveys, 25 percent to 40 percent of the population (and considerably more in the coveted 25- to 45-year-old women segment) want to purchase more natural or organic foods, so it is little wonder that growth forecasts for natural and organic frozen entrees remain in the double digits. When the U.S. Department of Agriculture's organic seal arrives on supermarket shelves in October, the category will likely benefit from the attention and exposure. Perhaps, as the TV-dinner revolution helped set the tone for the '60s American lifestyle, the 21st century's organic food revolution will help characterize a new healthier lifestyle.

One man with this vision is Andy Berliner, the founder and president of Amy's Kitchen Inc., the leader in organic frozen prepared meals. The Berliners founded Amy's Kitchen, named for their daughter, in 1988. The Santa Rosa, Calif., company's first product was a vegetable potpie designed as an alternative to Swanson Turkey and Chicken Pot Pies. A keystone company in the organic industry, Amy's Kitchen had 19 of the top 20 best-selling natural/organic prepared frozen foods in both mass and natural retail channels in 2000, according to Berliner. Sales were $65 million in 2000, up 30 percent from the prior year, and NBJ estimates Amy's wholesale number will approach $85 million in 2001.

Amy's Kitchen has 60 SKUs of frozen prepared meals. Between mid-1999 and early 2001, it added four pasta sauces, eight soups, a broth and four canned chilies to its line of organic prepared meals. The prepared meals contain at least 70 percent organic ingredients, with all-organic vegetables, grains and fruits. The soups and sauces are 100 percent organic. Amy's also sells organic skillet meals and toaster pops.

Amy's leading items in the natural retail channel are Spinach Feta Pizza, Cheese Pizza, Vegetable Tofu Lasagna, Cheese Enchilada, Roasted Vegetable Pizza and Macaroni and Cheese. Berliner estimates Amy's had a presence in 37 percent of supermarkets nationally in mid-2001. "Overall, I'd say in the last few years a lot more supermarket space than in the past has been devoted to natural and organic prepared meals, with organic taking the largest portion," Berliner says.

According to the company's distributor data, Amy's Kitchen is the leading brand of frozen prepared organic/natural meals in the natural retail category, with 29 percent growth in 2000 and 41 percent dollar share, up from 39 percent in 1999. Berliner anticipates "maybe a few more years at 30 percent growth." Amy's faces competition from General Mills' Sedro-Woolley, Wash.-based Cascadian Farm division, which does the second largest volume in frozen prepared organic meals, and natural manufacturer Cedarlane Natural Foods Inc. based in Carson, Calif. Conventional companies, such as Mission Viejo, Calif.-based ConAgra Foods, which makes Healthy Choice and Advantage 10, are also competing in the category.

Both Amy's Kitchen and Cascadian Farm focus almost exclusively on the organic market, as does Sunrich Food Group's Hearty & Natural division, which makes organic soy burgers. However, natural frozen food manufacturers have also introduced organic items. For example, Cedarlane offers several meal items made with organic ingredients, plus organic chips, tortillas and pita bread. San Carlos, Calif.-based Imagine Foods sells Imagine Natural Stuffed Sandwiches, which have organic ingredients. Kellogg Co.'s Worthington Foods, a manufacturer of natural soy-based foods, offers the organic Natural Touch brand of frozen entrees. Celentano Food Products, based in Verona, N.J., also has items marketed as organic, as does Kraft Foods' Boca Burger.

Selling Soup
Organic soup sales are growing but are no threat to their conventional competition. Progresso and Campbell's lead the retail canned soup industry, which totals $3 billion. So, at total sales between $20 million and $25 million, organic soups are small potatoes. However, there are rumors that Campbell Soup Co., like all the large-scale food companies, is watching the small, but fast-growing, organic market closely.

Does the prospect of an organic version of Campbell's or Progresso worry organic marketers? Price undercutting by large corporations could hurt other competitors, but their entry could also help define and boost the organic soup category in supermarkets and get organic introduced to the mainstream soup aisle. At one Whole Foods Market, approximately 40 percent of the canned, aseptic and glass packaged soup section was devoted to organic soups, which sell for around $2 a can compared with $1.20 for naturals.

According to Robert L. Hunt, president of Dexter, Mich.-based ShariAnn's Organics Inc., which was acquired by organic brand consolidator Acirca Inc. in late 2001, the challenge is to get supermarkets to put organic soups on the main aisle rather than in health food sets. Organic soup sales are probably benefiting from the trend to view soup as a meal. Hunt believes the organic industry needs to consider "Campbell's-style advertising," albeit on a more modest scale. "It's time to turn into the Mrs. Butterworth's of organic. America is ready for that."

Sidebars:
Organic Frozen Entrees Sales Breakdown by Channel
Leading Organic Frozen Food Brands
Natural And Organic Frozen Prepared Food Sales
Leading Organic Soup Brands

Grant Ferrier is the editor of Nutrition Business Journal.