Frozen processed food is a well established category in the Benelux. In 2013, the frozen processed food category accounted for just under EUR1.7 bn in total value sales which represents roughly a 5% share of the total sales of packaged food in this region. Compared to 2012, sales value for frozen processed food registered an increase of 1%. In terms of volume there was a minor decline in 2013.
The Benelux is often regarded as one single market, but there are major differences between the two biggest countries, The Netherlands and Belgium, which impact frozen processed food. The Netherlands and Belgium both have a well established and mature frozen processed food category, but when it comes to food culture, shopping behavior and retail environment there are differences which have a fundamental impact on the development of frozen processed food in these two countries.
Higher spending on frozen processed food by Belgians
Besides contrasting eating habits, there are also some important differences in shopping behavior. In Belgium, the share of frozen processed food in total food spending for instance is much higher than it is in the Netherlands. In 2013, the share in frozen processed food of total packaged food was 6.2%, while in the Netherlands this share was only 4.8%. In fact, the per capita spending on frozen processed food in the Netherlands is one of the lowest in Western Europe.
One major reason for the relatively low share of frozen processed food in total food spending in the Netherlands lies in the fact that the country is very densely populated and historically people tend to make frequent trips to their local supermarket. Because they shop more often rather than doing bulk buying, they are more likely to favor fresh over frozen food as its shelf life is less important. On the other hand, Belgians tend to do fewer, larger shops in discounters and hypermarkets and therefore buy frozen food, which lasts longer.
Contrasting distribution of frozen processed food
This difference in shopping behavior is illustrated by the data on distribution of frozen processed food. In the Netherlands supermarkets account for 84% of the distribution of frozen processed food. In Belgium, supermarkets only have a distribution share of 58%, while hypermarkets have a 15% share. In the Netherlands, they account for only 6% of total distribution. These shares suggest that Belgian consumers are more used to buying larger quantities of frozen processed food through hypermarkets, discounters and home shopping, while the Dutch tend to shop at their local supermarket and buy smaller quantities and less volume.
This difference is also visible when we compare the popularity of different pack sizes for frozen processed food
between Belgium and the Netherlands. For the Netherlands, frozen packaged food with a pack size larger than 500 grams accounted for close to 19% of volume sales of frozen processed food. Comparing this share of pack sizes larger than 500 grams with Belgium, there is a clear difference as these larger pack sizes account for more than 27% of volume sales.
Belgians and the Dutch share passion for chips and fried snacks
Despite the contrasting food cultures within the Benelux, between the Netherlands and Belgium there are a lot of similarities as well. In terms of food culture, there is one major similarity which has a major impact on the frozen food category in the Benelux. Both Belgium and the Netherlands have a fast food culture which favors French fries/chips paired with a fried meat or poultry snacks. Both countries consume this type of food and in Belgium this type of fast food is even considered to be an integral part of the Belgian culture.
In January 2014, the many fast food outlets which sell French fries and fried snacks also known to the Belgians as Frietkotten (Translation: chip shop) were officially recognized as part of Belgian cultural heritage by the Belgian ministry of Culture. This shows the fondness for this type of food and what role it plays in Belgian society. In the Netherlands, there is a similar popularity for chips and fried meat snacks.
As these foods are popular in both the Netherlands and Belgium, consumers in both countries also are frequently preparing this type of food at home. Many Belgian and Dutch consumers own a deep fat fryer and the vast majority will use the fryer to prepare frozen French fries/chips and frozen meat and poultry snacks. In Belgium, non-oven frozen potatoes, which is the category for frozen chips, account for 9% of total frozen processed food and in the Netherlands this percentage is even higher, with 12% of the total category value sales. In the Benelux region all products related to this type of food, meaning potato products and frozen processed meat and poultry, accounted for roughly 25% of total frozen processed food sales in 2013.
Private label leading the way
Another similarity between Dutch frozen processed food and the Belgian frozen processed food category is the strong position of private label products. In
Belgium in particular, the share for private label products is very high. In both countries private label has registered steady growth over the last three years and in the Netherlands private label held a strong 26% value market share of total frozen processed food in 2013. In Belgium, however, this share was even higher at 53% in 2013.
The low confidence in the economy is prompting both Dutch and Belgian consumers to be more price conscious. Consumers in the Benelux have become more price sensitive and are making price comparisons between branded and private label products. This shopping pattern encouraged the purchase of private label products due to strong price competition with local and international brands. Private label products also became more attractive as they offer acceptable quality and in many cases even are as innovative as branded products.
In Belgium, the leading private label brand is the range of premium supermarket chain Delhaize with a share of around 9%. This private label brand not only offers basic private label products such as frozen creamed spinach or frozen breaded fish, but also has a premium frozen processed food range which includes high end party food such as dim sum and shrimp croquettes.
In the Netherlands, the situation is similar as grocery retailer Albert Heijn is the leading private label company with a share of close to 10%. This supermarket chain is also known as more up market and has both a basic range and a premium range of frozen processed food. The premium range includes, among others, Thai Wonton bites and artisanal seafood pizza.
Premium brands have dominant position
Although private label has a leading position in the Benelux, there are also companies which produce premium brands which have a major share of frozen processed food. Iglo Benelux is one of the biggest players in frozen processed food in both the Netherlands and Belgium. The company has a dominant share in both countries with a number one position in Belgium with a 16% value share in frozen processed food and the number two position in frozen processed food in the Netherlands with an 11% value share. In the Netherlands Oetker Gruppe is the leading company with a 19% share in 2013.
Iglo Benelux has a strong presence in frozen processed meat, frozen processed poultry, frozen processed vegetables, as well as frozen processed fish. However, in recent years the company did not meet its strategic goals in the Benelux. The company wanted to increase its market share, but in Belgium the company lost share and in the Netherlands the growth in share was minimal. There were several factors which contributed to this disappointing performance. In the Benelux, German discounters Lidl and Aldi have a strong presence and have seen high growth in 2013. In Belgium, the domestic discounter Colruyt is also a major force in food retail. As these discounters do not stock branded premium products, the increased share of discounters meant that there was increased competition from private label products for the premium brands in frozen processed food.
Another reason for the lower than expected growth was that a new strategy adopted a few years back, which focused on frozen chicken products did not work out as planned. Due to several scandals with chicken meat the strategy of Iglo to achieve growth through the development of the frozen chicken category did not work and in February 2014 Iglo Benelux announced a major change of strategy.
The new management of Iglo is shifting its focus towards frozen vegetables and frozen fish instead of chicken and meat. In fact the new marketing manager for the Netherlands for Iglo Benelux has admitted that the company plans to phase out the use of chicken in its products completely over the next few years (except for its frozen soup range). While chicken has a lot of issues attached to it frozen fish is a different story. All Iglo frozen fish products are certified by the Marine Stewardship Council. This is why Iglo is not as vulnerable to outside criticism for frozen processed fish and seafood. With the focus on frozen vegetables and frozen fish, Iglo wants to change its image and positioning. Iglo will emphasize the fact that frozen processed food products are ideal for the preparation of “real food”.
Fresh and chilled vegetables, fish, meat and poultry are seeing much higher levels of growth in the Benelux than frozen processed food. With this new promotional campaign, Iglo wants to educate consumers about the benefits of frozen processed food. The company expects that this will help them to gain new momentum and improve its ability to compete with fresh and chilled products. In the Netherlands, Oetker is the leading player in frozen processed food. While Iglo has a wide range of frozen products on offer, Oetker has a very focused approach to frozen processed food as it is only present in frozen pizza. In the Netherlands, frozen pizza is the largest category within frozen processed food, while in Belgium frozen pizza has a much smaller share.
In Belgium, frozen pizza accounts for roughly 12% of total frozen processed food while in the Netherlands close to 30% of the total value for frozen processed food is generated by frozen pizza. This once again illustrates that there are major differences in eating culture between the Netherlands and Belgium. In both countries Oetker is the dominant player in frozen pizza, but as frozen pizza is the largest category in frozen processed food in the Netherlands, Oetker is the leading player in the frozen processed food category.
Future development
Moving forward, frozen processed food in the Benelux is predicted to remain more or less stagnant until 2018. In terms of volume, the total frozen processed food is forecasted to see a very minor volume growth of less than 1%. In terms of value growth however the forecast is looking a better with a predicted 2% increase for the Benelux as a whole.
The Netherlands are expected to generate most growth as this country is still underdeveloped with regards to its spending on frozen processed food compared to Belgium and other Western European countries. The expected slow recovery of the economy in the Benelux is also a positive influence on the growth of this mature category as it will help branded players to compete with private label products, but private label will remain a threat to the development of premium brands, as distribution will shift further towards discounters and consumers will continue to be interested in value for money products despite the slow recovery of the economy.
Leading players Iglo and Oetker are expected to further invest in the development of their brand portfolio. The focus of Oetker and Iglo will be to compete with both private label ranges and fresh and chilled alternatives to frozen processed food.
The rapid growth of fresh and chilled alternatives to frozen processed food is expected to remain an issue as well as consumers will look for products which offer freshness, nutrition, convenience and authenticity.
Frozen pizza will be the category with the highest growth within total frozen processed food over the forecast period. During the review period frozen pizza registered strong double digit growth. Over the forecast period growth is still expected to be strong, but it is unlikely to match the growth rates of the review period. Oetker and private label frozen pizza will face strong competition from chilled fresh pizzas. Many consumers will view these chilled pizzas as more authentic and of higher quality and this difference in perception will limit growth of frozen pizza.