Frozen food in Germany continues to enjoy a good reputation amongst consumers and 2013 was a good year with sales growing by 3% in value terms – the fastest rate for the past four years. In a mature and quite saturated market, this development can be evaluated as a success story.
In 2013 alone, 37.6kg per person of frozen pizzas, ready meals and bread rolls were consumed by the Germans. Even the pressures of the excellent performance of chilled food and the horsemeat scandal at the beginning of 2013 couldn’t hamper the growth of frozen food, with categories such as frozen pizza, frozen fish and seafood, frozen ready meals and frozen desserts performing especially well.
Factors for success
There are several factors contributing to this success. As the largest frozen food market in Europe in both volume and value terms, German frozen food is characterized by a strong private label presence, a highly competitive landscape and therefore relatively low average unit prices. Moreover, frozen food appeals with its convenience as it is easy to handle when preparing food and practical to store. In times of growing single households and a rising number of working women, these convenience factors are very important as they save time and reduce stress.
However, one factor in particular can be identified as fuelling demand in 2013 throughout all the major frozen food categories: new product innovations. Domestic market players such as Dr.Oetker, Frosta AG or Coppenrath & Wiese have all been able to grow through innovations and therefore also positively impacted on the whole category. In addition, they all enjoy strong brand awareness in Germany and distinguish themselves through the high quality of their products.
However, not only domestic players but also international ones such as Iglo or Nestlé Wagner have been able to grab the consumers interest through constant introduction of new products, both in terms of real innovations but also in terms of line extensions and seasonal products for instance during the Easter or Christmas period. Furthermore, despite a 2% increase to almost EUR4 per Kg the average unit price remains one of the lowest in Europe which makes frozen food in Germany good value for money. In this regard, the German frozen food market still offers growth opportunities and continues to be very lucrative.
More than just pizza
In frozen food, strong innovations proved to be a real success factor and the dynamic development in the past two years in Germany can partially be attributed to the successful innovations across all major categories but particularly in frozen pizza. One recent example is the frozen “Pizzaburger” from Dr. Oetker, which is a combination of two popular products – pizza and burgers. It is the first product of its kind and since its launch has generated high sales figures. It is available in three different varieties and the unique selling point is its simple consumption without a plate or cutlery as well as the taste of pizza with the characteristics of a burger.
Apart from this innovative concept, limited editions have likewise become a popular measure in order to increase sales in the frozen pizza category. Dr.Oetkers main competitor Nestlé Wagner, for example, offered for a limited period the successful “Die Backfrische Saison-Genuss” asparagus-ham frozen pizza and has also launched a special edition of its Big Pizza brand called Burger Style. Furthermore, the company has also introduced lactose-free and organic pizzas such as the so called “Naturlust Vegetaria”. These innovations and the diversification show what is possible with frozen pizza. Accordingly, the category is one of the fastest growing in 2013, mainly driven by innovations, with a retail value growth of 3% and remains, with sales of EUR1.4bn the largest one in frozen food. In terms of the competitive environment, Dr. Oetker and Nestlé
Wagner clearly dominate the market and contend for the leadership in frozen pizza. In 2013, Dr.Oetker still holds the leading position with a 34% share of retail value sales just ahead of Nestlé Wagner which accounts for 33%.
Frozen ready meals grow
However, frozen pizza is not the only category which caught consumers’ attention through successful product innovations. Innovations proved a catalyst for growth for frozen ready meals which, despite the horsemeat scandal at the beginning of the year, grew by 4% in current value terms – faster than frozen pizza. Frozen ready meals along with frozen fish/seafood, also on 4% were the fastest growing categories in current value terms in 2013.
Consumers stayed well clear of frozen lasagne or cannelloni at the beginning of 2013 but the industry was able to compensate the losses over the second half of the year. Branded manufacturers, active on the German frozen ready meals market have intensified communication with consumers since the food scandal and in this regard transparency has become a must. Frosta AG is here a great example for establishing a credible brand and at the same time for successful new product innovations in frozen ready meals. The company’s brand strategy specifically focuses on “free from” labeling and promoting the purity of its products.
It renounces the use of additives and flavor enhancers for its frozen ready meals which is only possible with high quality ingredients. Frosta AG which leads frozen ready meals in Germany with a 26% share of retail value sales has been especially successful with new product innovations such as vegetarian frozen ready meals dishes. The range of vegetarian convenience food has been growing rapidly over previous years and Frosta has identified a market niche for vegetarian frozen ready meals. Thus, Frosta now offers ten dishes with the V-label of the German vegetarian association. In addition to vegetarian pasta dishes and lasagne, the company has also introduced an Asian inspired vegan dish called “Wok-Mango Curry”. Frosta is also here a forerunner as it now offers two vegan options, alongside its 10 vegetarian dishes – still very rare in German retail.
Furthermore, Frosta has recognized that the trend for regionally sourced products can also be used in frozen food. With the new “Rahmgemüse”(creamy vegetables) range Frosta aims to meet consumer desire for regional products as all vegetable ingredients are sourced in Germany.
Other examples of strong innovations in frozen ready meals come from Apetito Convenience GmbH & Co KG. The company has launched a new range of frozen ready meals called “Lunchbox”. It is available in five different varieties such as “Crazy Curry” or “Pasta Mama” and also vegetarian “Tomate Total”. This frozen ready meals product is made for the microwave. The brand focuses on the convenience concept as the lunchbox doesn’t need a hob, a plate or washing-up. All the consumer needs is a fork and a microwave which around 73% of the German population possesses. Apetito is the fourth largest branded manufacturer in frozen ready meals with a 4% retail value share and grew in 2013 largely through its successful new product innovations.
Coppenrath & Wiese drives growth in frozen bakery and desserts
Other highly innovative frozen food categories in Germany are frozen bakery and frozen desserts, which also saw a range of new product launches in 2013. The array of frozen bakery products in German freezers is vast and ranges from baguettes and rye buns to pretzel rolls. These products meet the highest quality standards as they are frozen immediately after baking, resulting in them having a refined taste after they are defrosted. German consumers appreciate their convenience as they can store frozen bakery products at home, eliminating the need to go to the bakers every day.
However, value growth of frozen bakery slowed down due to the rise of in-store bakeries and thus frozen bakery grew by only 1% in current value terms in 2013.
Frozen desserts on the other hand grew by 3% in current value terms in 2013 making it amongst the fastest growing categories in frozen food. Both categories are dominated by Conditorei Coppenrath & Wiese GmbH & Co KG, which likewise grew in 2013 through strong innovations and bespoke high quality products.
In frozen bakery, Coppenrath & Wiese leads the market with a retail value share of 14%, whereas in frozen desserts the company accounts for a 32% share of retail value sales. Particularly the high quality of its products, boasting the best natural ingredients, is very important to the company and all of its new product launches are premium labelled. Coppenrath & Wiese has been especially successful in 2013 with the new frozen desserts product innovation called “Kleine Augenblicke” (small moments). With this product the company has introduced a whole new product range and its slogan is less is more. As households in Germany are getting smaller and the number of single households is increasing, Coppenrath has identified the need for smaller portions. Besides “Kleine Augenblicke” another product from Coppenrath which has recently been launched and touches the same consumer needs is the small cake called “Süßer Zauber”. Portion size and convenience has in this regard become a very important selling point, not only in frozen desserts but across a wide range of frozen food categories.
Furthermore, German consumers demand high quality products that offer them added value and for that they are ready to pay a higher price. Based on Conditorei Coppenrath & Wiese’s success in 2012 and 2013, it would appear that premium products with a high convenience factor are popular amongst German consumers, not only in frozen desserts or bakery.
Currently, Conditorei Coppenrath & Wiese is up for sale after the death of the owner Aloys Coppenrath in March 2013. Dr. Oetker and Nestlé are being speculated as possible buyers and this example demonstrates the lucrativeness and dynamism of the whole frozen food market in Germany.
Private label – strong presence
Besides the innovations in branded products, private label frozen food is very popular. Fantasy brands such as Primana, Riggano or Vitasia are amongst many others and in terms of colours and graphics they often look deceptively similar to branded products.
This is best illustrated by the fact that Aldi Einkauf GmbH & Co oHG leads the German frozen food market overall with a 14% retail value share in 2013.
Contrary to other discounters such as Lidl, Netto or Penny, Aldi doesn’t sell any branded frozen food products in their stores but only their own private label. The range is wide and Aldi is present in almost every frozen food category. In frozen processed red meat Aldi ranks first with a retail value share of 27% whereas in all other major categories Aldi mostly ranks second or third behind the branded manufacturers. Its freezers are among the largest and the presentation of the products is very clear and concise. Furthermore, Aldi benefits from the fact that a large part of the German middle and lower classes traditionally buy Aldi frozen processed food products.
Overall, private label accounts for a retail value share of 36% with Rewe Markt GmbH being the third largest player on the German frozen food market with a share of 8% in retail value sales. In this regard, the average unit price of frozen food in Germany remains relatively low with EUR3.96 per Kg compared to other Western European countries, largely due to the strong presence of private label products.
Branded manufacturers are therefore forced to come up with innovations in terms of packaging, convenience or taste and support these with strong marketing campaigns, in order to compete in a market which has such a strong private label presence.
Future growth opportunities and threats
Despite the current growth trend and various positive factors in favor of frozen food, Euromonitor International expects the category to see an annual growth of less than 1% on average in constant value terms, over the 2014-2019 period. Reasons for this development are the already very high consumption of frozen food products and therefore a high market saturation. Additionally, chilled processed foods are forecasted to continue to rise and therefore cannibalize frozen food.
Nonetheless, as the number of single households is rising, standing at almost 16 million in 2013, and urbanization continues to grow, the trend towards convenience food is expected to continue to increase. The three largest categories in terms of current retail value sales: frozen pizza, frozen fish/seafood and frozen ready meals are all projected to post a CAGR of 1% over the next five years.
Further growth opportunities can be found in vegan or vegetarian products also, such as frozen meat substitutes. Being still a very small frozen food category in terms of volume and value sales, frozen meat substitutes however are expected to grow by a CAGR of 10% over the 2014-2019 period. A growing number of German consumers are ready to give up eating meat products, which is fostering this development, as are various meat production and animal husbandry scandals. However, frozen meat substitutes will remain a small niche as meat consumption amongst German consumers is very high. Company strategies over the forecast period are expected to focus on premiumization, premium ingredients, “free-from” and organic labelling and continue to launch innovative products such as seasonal or vegetarian versions.
Furthermore, marketing activities are expected to focus more on the internet, especially on social media, and brand advertisements and communication with consumers will also increase. The threats to frozen food products may come from the increasing trend amongst the younger German generations to choose home cooked fresh foods or chilled products. Manufacturers will therefore increasingly compete for the younger generations and customize their products and marketing activities accordingly, in order to improve the image of frozen food amongst this demographic. Overall, the German frozen food market still offers enough possibilities to generate additional turnover. Consumers will continue to be oriented towards convenience products but at the same time will demand high quality.