Economy Fuels Convenience Foods Growth

ROCKVILLE, Md.While the rocky economy forced many consumers to scale back spending in 2009, the market for fresh convenience foods grew by 5% to reach sales of $22 million, according to a new report from market researcher Packaged Facts.

The Fresh Convenience Foods in the U.S. report predicts marketing and merchandising efforts to continue to prove successful over the short term, driving sales of fresh convenience foods up another 28% by 2014 to $29 billion.

During the height of the recession, fresh convenience food marketers and retailers spotted an opportunity. Seeing their main competition coming from the restaurant industry, many retailers began to compete more heavily on price without cutting back on the process of innovation in quality and convenience that had been underway for more than a decade. According to the report, these efforts proved successful, spurring a shift by many consumers from restaurant meals to prepared food purchased at retail outlets.

The report examines the U.S. market for fresh prepared convenience foods sold refrigerated or hot to consumers, through retail channels including supermarkets, supercenters, warehouse clubs, small food marts and delis, convenience stores and drugstores. The majority of sales continue to take place in supermarkets and grocery stores, which account for an estimated 68% share of 2009 retail dollar sales. Supercenters and mass merchandisers are the second most popular channel, ringing up 13% of sales, followed by natural/health food stores, warehouse clubs and convenience stores.

The big question of course is, can growth be sustained? Although the bruising recession that began in 2008 is technically over, its fallout seems certain to affect the economy for some time into the future, said Don Montuori, publisher of Packaged Facts. In the short term it seems likely that consumers will have less mad money jangling around in their pockets than they did in the past decade or two. This does not mean that supermarkets will have less money in their cash registers than they did in the past decade or two, but it does mean they will have to work harder for every dollar. Throughout the recent rough patch retailers have been able to incorporate a level of price competition into what was already a groundswell of innovation in the concept of fresh prepared foods. Its that interaction between innovation and price competition that has worked so far, and both sides of the equation must be maintained if the market is to continue growing.