COVID changes the rules on innovation.
In normal times, product development specialists would rely heavily on sales data from the past year to help identify new opportunities for innovation. But what do you do with a year like 2020 when almost every product in the supermarket — particularly those in the frozen department — saw record growth not necessarily because they tapped into a hot trend or met a new need but simply because they were in stock? Add that to the fact that what consumers want during the pandemic and what they’re likely to want when they emerge from it will probably be very different, and it’s clear retailers and manufacturers need a new playbook.
“You can’t build the future looking at the last 52 weeks,” confirms Mike Urness, founder and managing partner of the Seurat Group, Norwalk, Conn. “Product developers need an understanding of the whys, not the whats (the data) to predict where categories are heading.”
“We can study consumer behaviors pre-COVID and during COVID, but with the understanding that everything has changed, from health and wellness priorities to palates to overall mobility,” adds Christine Brule, client insights principal at Chicago-based market research firm IRI (iriworldwide.com).
But that doesn’t necessarily mean product developers are starting at square one, says Urness, who believes many broad pre-COVID trends will rebound. However, they may manifest themselves differently, thanks to shifts in consumer values. For example, he says, while sustainability is likely to become important again, consumers now more focused on health and wellness may become more interested in, say, pesticide-free than reusable packaging. The definition of convenience continues to change as well, he adds. During the pandemic, big bags of frozen products were the epitome of convenience. But once consumers are more mobile, single-serve refrigerated items that can be eaten on the go are likely to make their lives easier.
‘Innovation will continue to be important, but the bar will be higher. Line extensions will have to bring something unique and relevant.’
2021 INNOVATION DRIVERS
So which trends do the experts believe will drive new frozen and refrigerated product development in the coming year, and how can retailers and manufacturers cash in? Read on:
1. TOGETHERNESS: After a year of social distancing, virtual celebrations and canceled events, consumers are likely to put a high value on even everyday get-togethers with friends and loved ones, according to the Seurat Group’s new report 2021: Planning for Post-Pandemic Growth. Retailers and manufacturers should consider relevant solutions for occasions that bring people together, says Urness, citing the backyard barbecue as an example. “There is room for many categories to participate in creating lasting memories with family and friends through the grilling occasion,” he explains. (Pictsweet’s new Vegetables for Grilling are one new innovation that fits the bill.)
2. HEALTH & WELLNESS: With 77% of consumers looking to lead a healthier life after the pandemic than before, “Interest in better-for-you products is here to stay,” says Andrew Moberly, director of category solutions at Stamford, Conn.-based Daymon. In 2020, he reports, “immunity boosting” and “fortified with vitamins and minerals” were two of the most popular health claims, appearing on products like smoothies, berries, salmon, mushrooms and broccoli. Given the ongoing threat from coronavirus, “I believe they’ll remain vital to consumers as they look for ways to proactively maintain their health.”
But according to the Seurat Group, today’s definition of healthy is much more personalized than before. Depending on what works best for the individual consumer, wellness can mean anything from “one step healthier” (no added sugar, immunity boosting, high protein) to “closer to nature” (organic, fresh, no artificial ingredients) to a full-blown “lifestyle change” (keto, paleo, vegan). Which attributes appear to resonate with today’s consumers?
In 2020, consumers listed “real” ingredients (milk, cheese, etc.) as the top “health- and production-related trait” they look for when buying frozen foods, according to the 2021 Power of Frozen in Retail report from the American Frozen Food Institute (AFFI) in conjunction with the Food Industry Association (FMI), both based in Arlington, Va. The remainder of the list (in descending order) includes: fresh frozen, no artificial ingredients (flavors or colors), better nutritional value (high in/low in), healthier ingredients, portion size variety, minimal processing, healthier preparation, made/grown/raised in the USA, a short ingredient list, vegetable content, type/quality of meat used, specialty attributes (organic, non-GMO, etc.), sustainably grown and vegetarian/vegan. But in terms of growth, package claims with the biggest gains in 2020 were not homogenized/pasteurized (but off of a small base), no/low/less sugar, no/no added antibiotics, non-GMO, vegan/vegetarian, no/no added hormones and no/low trans fat, highlighting some of the best opportunities for new product development going forward.
The report also underscored growing interest in plant-forward eating, with seven in 10 frozen food consumers looking for meals and entrees that contain more fruits and veggies. Plant-based meat alternatives and meals/entrees were especially popular among millennials, but blended meat and vegetable items have broader appeal, highlighting potential new product opportunities. In the refrigerated section, that could mean hybrid products that combine, say, dairy milk with almond or cashew milk.
‘Consumers’ No. 1 priority when shopping post-pandemic is product availability, so retailers will continue to focus on reducing out of stocks. In some cases, that will include reducing SKU counts to expand space for top-selling items.’
Whether plant- or animal-based, protein is another in-demand attribute that’s likely to figure prominently in post-pandemic innovation, according to industry observers. Conagra’s new Healthy Choice Max Bowls with up to 34 grams of protein (coming in June) and Danone’s Silk Ultra Protein soymilk are just two of many examples.
3. SOCIETAL CARE: Consumers aren’t just worried about their health, they’re also concerned about the health of the planet. The pandemic combined with a steady stream of disasters linked to climate change is only raising their apprehension. As a result, industry observers expect growing demand for reusable, recyclable, refillable and compostable packaging; sustainably farmed or fished items; humanely meats and eggs, fair trade products, organic items and a whole host of other attributes.
IRI also reports growing interest in a related set of attributes around product origins — not just made in the USA, but artisanal, local, handmade and craft. Dollar sales of edible items with those claims grew between 14% and 17% in 2020, ranking them among the fastest-growing.
4. CONVENIENT HOME COOKING: Although the shift to home cooking was driven by the pandemic, 60% of consumers expect to still eat at home more in 2021 and beyond, says Moberly. “So shoppers will continue to look for quick and convenient solutions…that cut down on meal prep while providing flavorful health-driven options that alleviate meal boredom.”
“As pandemic fatigue has really set in, finding ways to make at-home meals easier has become more crucial,” confirms manager of demand sciences Tracy Kitanovski of Chicago-based Conagra, citing the popularity of “hacks” like Sheet Pan Meals, Stir Fry Veggies and Oven Roasters, all coming soon from Birds Eye.
Retailers and manufacturers should also consider products designed for time-saving on-trend kitchen appliances (air fryers, pressure cookers, etc.) that make home meal prep easier, says IRI in its new report, Innovation for a Post-Pandemic World. Fresh and frozen meal kits — even meal deals that combine components into a single display — can also make home cooking less stressful. And for those days when consumers would normally go out for dinner, any product that mimics a popular restaurant or takeout option is likely to be a hit (think pizza, wings and Chinese).
5. GLOBAL FLAVORS: “As the world becomes more connected, we expect to see continued growth in global flavors,” says Tricia White, VP of product development at Schwan’s Co., Marshall, Minn. In fact, she says, sales of frozen Asian foods were up 31% during the quarter ended Jan. 24, significantly higher than frozen foods as a whole. No surprise, since one in three consumers say Asian foods are what they’ve missed most from restaurants, adds White.
Consumers’ inability to travel during the pandemic is also spurring interest in ethnic fare that satisfies their sense of adventure in a different way. “Consumer palates have become more sophisticated,” continues IRI’s Brule. “People want bolder, more authentic flavors. For example, we’ve seen heat/spice show up in products across the store. And lately, possibly due to global wanderlust, there has been an emergence of more specific ethnic flavors.” As a result, “Mexican” is no longer enough for many consumers, who might prefer Oaxacan, Poblano or Yucatan fare.
6. INDULGENCE: “Hand in hand with the rise of personalized wellness, indulgence will become increasingly acceptable as consumers prioritize balance and happiness over strict regimens and endless sacrifice,” according to the Seurat Group. It’s no longer about “cheating,” it’s about being good to oneself, which also means more willingness to splurge on premium products.
However, post-pandemic indulgence probably won’t look the same way it did early in the crisis when consumers allowed themselves to pig out on comfort foods. More “permissible indulgence,” especially in support of dietary restrictions and lifestyle diets, is what consumers are after nowadays, reports IRI, which also expects to see smaller portions of indulgent treats. The ice cream category is filled with examples of such products from Häagen-Dazs’s new Heaven line of light ice cream pints to Yasso’s new chocolate-coated Greek frozen yogurt Poppables. But there are opportunities in every category, says Brule.
7. SNACKING: With both parents and kids home all day, the shift to all-day snacking accelerated during the pandemic, creating demand for products that can be consumed any time of day, says Moberly. From frozen appetizers to sous vide egg bites to smoothie bowls, anything that’s easy to prepare and versatile enough to act as a mini meal or between-meal snack is likely to resonate with modern consumers. Bonus points if it delivers on health and wellness or one of the other key growth drivers, too.
FROM PASSIVE TO PURPOSEFUL GROWTH
While it’s clear where opportunities for innovation lie post-pandemic, some retailers wonder whether innovation should even be a priority when many are still struggling simply keeping the shelves fully stocked. Urness has no doubt. While retailers and manufacturers may continue to ride the wave of passive growth fueled by pandemic-influenced behavioral changes for a bit longer, it won’t last forever. And changes can come faster than you think, making it paramount to get ahead of shifts in consumer behavior. As a result, he says, “Brands must purposefully find the next wave or risk being left behind.”
Susan Dunn, CEO of Atlanta-based Byzzer couldn’t agree more. “If you’re wondering when to innovate, the answer is always,” she says. Even in the middle of a pandemic. “If you have nothing new in the pipeline, you’ve created a problem for yourself and an opportunity for your competitors.” Whether retailers or manufacturers, “Up-and-comers will always jump in to identify needs, fill white space in the category and eventually steal share from bigger brands or chains.” Bottom line: this is no time to rest on your laurels.
In fact, it may actually be the worst time to do nothing because consumer needs have changed so dramatically during the past year. Even after the pandemic ends, their lives won’t ever go back to the way they were, leaving consumers clamoring for products compatible with the new normal.
Another argument for introducing frozen innovation in particular now rather than later is because, due to the pandemic, more people than ever before are walking through the department looking for solutions, offering the kind of visibility frozen foods haven’t enjoyed in recent years, says Brule. “After a year of in-home meals, there’s still a captive audience looking for variety,” she explains. So retailers and manufacturers ought to give it to them.
‘Hand in hand with the rise of personalized wellness, indulgence will become increasingly acceptable as consumers prioritize balance and happiness over strict regimens and endless sacriﬁce.’
Actually, continues Colin Stewart, executive vp of business intelligence at Jacksonville, Fla.-based Acosta, there’s already been some tremendous innovation in frozen foods over the past five years, though many consumers have only recently discovered it. “The pandemic drove the trial that many brands needed…. Now that shoppers have tried and repeated using frozen products, many will continue to stick with them post-pandemic.”
Indeed, says Daymon’s Moberly, 50% of frozen food consumers say they plan to buy more frozen foods post-pandemic. “Retailers should take advantage of this trial to drive purchases across their portfolios.” By ramping up innovation now, he explains, they can build on that momentum and really lock in frozen shoppers.
One more piece of information retailers should consider when contemplating new innovation is the not insignificant number of direct-to-consumer (D2C) launches over the past year, says Brule. Whether that’s a response to retailer hesitation to add new items, consumer worries over in-store out of stocks or their reluctance to shop in stores at all, no one knows for sure. But if the practice becomes more common, retailers risk being cut out of the process.
INNOVATION LIKELY TO LAG IN 2021
Although 2020 saw 29% fewer edibles line extensions than the previous three years (on average), according to IRI, there probably will be fewer this year as well. “Consumers’ No. 1 priority when shopping post-pandemic is product availability, so retailers will continue to focus on reducing out of stocks,” says Stewart. “In some cases, that will include reducing SKU counts to expand space for top-selling items. Innovation will continue to be important,” he adds, “but the bar will be higher. Line extensions will have to bring something unique and relevant.”
Urness also predicts some pullback on innovation. Retailers focused on keeping shelves stocked are reluctant to add more complexity by bringing on unproven new items. And large manufacturers are quite happy to drive more velocity with fewer SKUs. It actually makes their job a lot easier. “There’s just not a lot of incentive for them to push new items when their business is already so strong,” he explains. As a result, post-pandemic innovation will probably be triggered by smaller challenger brands.
There are also opportunities for private label, says Moberly. Store brand frozen sales jumped 25.8% in 2020 while the department as a whole grew only 22.2%. But retailers have to continue to ramp up innovation or risk losing the gains achieved over the past year with increased trial. There’s no need to wait for national brands, says Moberly. “Private brands have permission to pioneer.” Store brands have a bit of an advantage, he adds, because they’re flexible enough and nimble enough to provide the differentiated solutions consumers are looking for. In addition, 82% of shoppers say private brands are a better value for the money, making them a good choice for those struggling with pandemic-related financial difficulties.
‘If you’re wondering when to innovate, the answer is always.’
But even store brands will have to work harder than before to justify a spot on the shelves, says Urness. “Manufacturers need to be very clear on the strategic role innovation plays. It needs to be grounded in consumer insights.” As a result, he adds, “Innovation that involves new ways of connecting with consumers, improving the shopping experience or going to market may ultimately become even more important than product innovation.” Part of that revolves around new ways to communicate with shoppers about new items.
While in-store displays able to grab the attention of shoppers rushing to get in and out are still very effective at promoting new products, digital is the big opportunity. Eight in 10 consumers say they expect to continue shopping online even after the pandemic, so it’s important to flesh out that opportunity. “Shoppers aren’t wandering stores looking for new products, but e-commerce platforms can drive a lot of discovery,” says Brule, who suggests promoting products within complementary or competing categories and making sure they pop up in searches. She also calls home delivery and click and collect underutilized ways to distribute free samples or coupons or otherwise promote new products.
What about sponsored free delivery or a display near the pick-up kiosk? asks Urness.
Retailers and manufacturers should also consider trial size packages and single-serve options that spur trial, says White.
In addition, says Stewart, “Utilizing promotions for building awareness of new items and providing meal inspiration is more effective in driving sales than just offering a discounted price.” IRI’s research confirms that new product trial driven by coupons from home and newspaper circulars has declined precipitously over just the last two years. Today, the top two influencers of new product trial are previous usage/trust in a particular brand and recipes.