2008 Processor of the Year: Open Season
September 12, 2008
What does leadership look like in the competitive world of frozen foods? Sometimes the answer comes from unlikely sources - such as hockey legend Wayne Gretzky, someone also known for his work in icy arenas.
“A good hockey player plays where the puck is,” he once noted. “A great hockey player plays where the puck is going to be.”
Just as hard work and forethought play into Gretzky’s point, perhaps this statement best describes recent achievements by Nestlé Prepared Foods Co.
Consumer insights led this Solon, Ohio, business (a unit of Nestlé USA) to develop and launch Stouffer’s Corner Bistro Panini in 2006. Research suggested that - although there was no other product like it on the market - consumers would grab for a casual, hand-held dinner entrée with a restaurant-inspired look and taste.
Fast forward to today. Tracking data from The Nielsen Co., New York, show that supermarket sales are down or flat across frozen meal and hand-held entrée categories (some Nestlé brands included). At the same time, Nestlé Prepared Foods and its competitors face unprecedented increases in commodity, ingredient and fuel costs. Economic concerns also have consumers clutching their pocketbooks.
So how did Nestlé Prepared Foods benefit by thinking ahead to where consumer taste trends were going? Nestlé’s frozen “casual meal” business - including panini, flatbreads and flatbread melts - now is growing by double digits and is a $200 million-plus sales contributor. These products - along with a host of other activities across Nestlé Prepared Foods’ various brands and businesses - have this long-time retail entrée leader continuing its forward march.
For the record, Nielsen tracking data show Nestlé Prepared Foods controls leading unit volume shares of the frozen entrée market (37 percent, including single- and multi-serve), frozen sandwiches (50 percent) and the refrigerated pasta category (80 percent). In its 2008 annual “Top 150 Food Processors” issue, Refrigerated & Frozen Foods estimated Nestlé USA’s net annual sales of prepared entrees - including retail and foodservice products - at $3.7 billion.
Meanwhile, just looking at the company’s performance during the past 12 to 18 months, it’s clear that Nestlé Prepared Foods is …
… Growing: Although Solon officials cannot disclose financial results, parent Nestlé S.A., Vevey, Switzerland, said its global “Prepared Dishes & Cooking Aids” business - of which Nestlé Prepared Foods is a majority part - recorded real internal growth of 3.2 percent with a 4 percent increase in organic sales during 2007. During the first half of 2008, Nestlé said this business posted real internal growth of 5.4 percent.
.… Investing in new products: Nestlé has introduced more than 43 new items across its Stouffer’s, Lean Cuisine and Hot Pockets/Lean Pockets lines. Notable new offerings include Stouffer’s Easy Express (multi-serve entrees in a new microwaveable paperboard tray), Lean Cuisine Seafood Selections (touting Omega-3 fatty acids) and Hot Pockets Panini sandwiches.
… Innovating in operations: A new “open innovation” program has Nestlé building a 54,000-square-foot bakery at its Jonesboro, Ark., plant to be operated by Nation Pizza Products, a contract manufacturer.
… Investing in its business: Nestlé is spending $60 million to add bakery and topping-packaging operations at its Jonesboro plant. The company also has expansions underway in Danville, Va., (refrigerated Buitoni pasta processing) and Mount Sterling, Ky. (distribution center).
Taking these activities and achievements into consideration, R&FF selected Nestlé Prepared Foods as the magazine’s 2007-08 “Processor of the Year.”
Providing a behind-the-scenes assessment is Prepared Foods President and CEO Angelo Iantosca.
“We believe that consistent brand growth goes hand-in-glove with consistent investment in the consumer, whether [it’s through] advertising or product innovation and renovation. Over many years, I don’t think that anyone has performed like we have, whether you’re talking about the debut of Lean Cuisine itself - one of the great innovations in the food industry and now a $1.5 billion brand - or Stouffer’s and Lean Cuisine Panini, a relatively new growth segment.”
Season of changeInterestingly enough, Nestlé Prepared Foods introduced Lean Cuisine in 1981 and Iantosca managed the brand from 1991 to 1995, before moving to other assignments including a stint in Switzerland at Nestlé’s global headquarters. That said, this 21-year company executive realizes just how much the food market has changed.
“Our business is certainly bigger than it was and the challenge of our size is that we need bigger growth drivers,” he says. “We’re much more focused on the consumer today but even that is more challenging because the market is more fragmented - whether you’re talking about media communication or responding to various nutritional issues.
“Likewise, the competitive environment is significantly more complex. Just one example is the explosion in restaurant take-out. In a parallel track, you also have supermarkets making more of statement either through the deli or their own [private label] brands. You also have contiguous [frozen retail] categories such as snack foods, vying for more of the consumer’s meal solution dollar.”
Not surprisingly, it’s easy to be distracted by such a fast-paced, shifting market. For that reason, Iantosca believes his job is to keep Nestlé Prepared Foods focused and fast.“We’re managing multiple innovation streams and striving always to deliver true incremental innovation at the right time,” he says. “That means we can’t always afford to wait to build a capital structure or a knowledge base. If you’re not agile, market opportunities will pass you by. That’s why we’re embracing ‘open innovation’ and our relationship with Nation Pizza is an example.
“We’re creating a framework for a more open exchange and sharing of knowledge that benefits both sides in the relationship.”
Iantosca talks about industry challenges on several levels. Close in, he argues that aggressive price-cutting activities typically do “not bode well for long-term [category] performance.”
On the contrary, he says, Nestlé, its customers and its direct competitors would be better served by investing in the consumer.
“This economic environment not only has affected our input and delivery costs but has heightened the consumer’s interest in value. It is important to make sure consumers understand that our prepared refrigerated and frozen products deliver excellent food and nutrition value along with great taste,” he says.