Home Meal Replacement:

Home Meal Replacement:
A Home Run with Consumers
September 1999 -- Focus On: Perspectives

By: Joseph Cassano

This article is reprinted with permission from ACNielsen's Consumer Insight magazine, June 1999.

  It's as American as apple pie. Sometimes, it is apple pie. It's Home meal replacement (HMR), the newest trend to make an entrée on the food scene. Home meal replacement represents a millennium-era response to the age-old question, "What's for dinner?"

  On week nights, kitchen appliances are relegated to the status of warming ovens or disposal units. The shopping cart has gone virtual, with websites listing today's specials at the local grocery. Meal planning has more to do with the Rolodex than the recipe box. In 1967, it took two hours to cook dinner. Today's consumers want food that can be served in as little as five minutes.

A bigger pie for grocery

  Fast. Convenient. Tasty. Cost-effective. According to the food consulting firm Technomics, HMR sales will hit a yeasty $67 billion by the year 2001. With a projected annual growth rate of 8%, HMR represents an appetizing opportunity for supermarkets. Spicing up the appeal of HMR: gross margins ranging from 60% to 120% for prepared meals vs. ingredients.

As the inventory turns

  Naturally, a whole new breed of dining options comes with a whole new set of operating issues. HMR offerings are chilled, not frozen, requiring just-in-time manufacturing and delivery, with a short shelf life demanding date codes to guide consumers.

  From a distribution perspective, both the fresh supply chain and the cold supply chain impose different supply-chain requirements on the retailer. New merchandising issues arise as grocers learn to compete within an enlarged competitive set that encompasses restaurants and home delivery as well as alternative formats.

Cooking up menu options

  While definitions proliferate, ACNielsen describes HMR as "ready to eat, ready to heat or ready to assemble hot or cold meals or entrees prepared or packaged outside the home which are brought or delivered to the home." Those meals can range from the common, like pizza, chicken and Chinese food (the reigning Big Three of HMR), to the exotic, like lamb mulligan stew, creamy mushroom risotto and tomato/chipotle sauced chicken.

  At Big Y in Springfield, Mass., foodservice and catering sales manager Roland Asselin carefully carved out an HMR niche that he defines as "everyday wholesome food versus tablecloth dining." When Asselin joined the team charged with developing Big Y's fresh food concept, they adopted the motto "we don't sell food, we sell quality and service."

  At Big Y, the quality menu board features restaurant-style meat, vegetables and condiments, such as chickens that are 30% larger than retail or pizzas made from scratch. Big Y stepped into the kitchen with vendors to create its own line of side dishes, and takes great pride in the fact that no one can finish its classic signature grinder which features seven ounces of meat.

Who's dining in?

  When it comes to home meal replacement, everybody's doing it! According to a recent Roper Starch poll, fully 50% of Americans carry-in a meal at least once a week. In 1996, for the first time ever, restaurants sold more take-out meals than in-restaurant meals.

  Taking the HMR pulse of the households comprising ACNielsen's Homescan consumer panel yielded some interesting insights into the dining phenomena. For starters, 55% of responding households purchased a meal for at-home consumption several times a month.

  And fully one-quarter of all households reportedly dine in on take-out once a week, if not more often. These HMR loyalists generally have higher household incomes (over $50,000 per year) and represent larger households, with an employed female head of household younger than 44 years old.

The daily dinner dilemma

  Dinner is far and away the most popular HMR occasion, accounting for more than 80% of meals purchased for at-home consumption. Weekly meal planning may have been standard operating procedure in Ozzie and Harriet days, but 63% of today's time-deprived parents make their HMR decision just before mealtime.

  Convenience (50%) and type of food (31%) are the two factors that most influence the decision to purchase HMR products. Consumers prefer meals that are ready to eat (77%) versus ready to heat (20%) or ready to assemble (3%).

  As we sit at the cusp of a new century, the female head of household still retains primary responsibility for meal time (56%), even if it involves a trip to the store or restaurant rather than the kitchen. One in three households visits a quick serve restaurant to purchase HMR items. Roughly one in five households stops by a grocery store or pizza chain.

A tasty alternative (for a price)

  Two-thirds of consumers agree that the budding category of HMR meals is tasty. Almost 60% appear satisfied with the variety of HMR selections. On the nutrition front, an equal number of consumers believe that HMR offerings are nutritious or have no opinion about nutritional content. While 44% feel that HMR is a reasonably priced alternative to home cooking, 24% disagree.

The gap at grocery

  Seasoned veterans of the HMR cook-off have identified a gap at grocery. Grocery stores control a paltry 19% of the HMR juggernaut despite the fact that 10,000 consumers pass through their doors weekly. According to Supermarket News, 64% of shoppers never visit a supermarket just to buy prepared foods.

  Supermarkets looking to cash in on HMR's potential would do well to "try to understand consumer concerns and drivers-not just what they think about in the store, but all the factors," counsels Eileen Thompson, category information manager at Kraft Foods. "These include schedule pressures, convenience issues and other food options that consumers take into account when dinner time rolls around."

  Retailers looking for clues might be interested to learn that 35% of patrons purchasing HMR at grocery did so because it was convenient. Other important potential purchase influences remain underdeveloped, such as eye-appeal (17%), tasted a sample (3%), smelled good (2%) or packaging (1%).

More than what's on the table

  Kraft Foods opened the meal time aperture, extending its vision beyond just the product to include the process of getting dinner on the table, from planning to shopping through clean-up. One way Kraft Foods taps into the consumer mindset is through in-store and in-home shopper ethnographies. Consumers discuss how they feel about life in general, talk about their attitudes toward shopping, and allow cameras to observe food preparation.

  "The consumer value equation has become increasingly complex," noted Julie Zaideman, director of marketing information for marketing services at Kraft Foods. "Money is no longer the only denominator of value; time and energy have entered into the equation as well."

"Speed scratch" cooking emerges

  From this foundation, Kraft Foods chose to play in the easy-to-assemble segment of home meal replacement, sometimes called "speed scratch." Consumers concerned with food freshness or nutritional value prefer to participate minimally in food preparation by adding key ingredients such as chicken or beef to a dish.

  "To succeed at HMR, manufacturers will learn to marry the public's desire for home-cooked taste with its need for convenience," continued Zaideman. The result: products like Stove Top® Oven Classics Dinners. The package contains rice or stuffing, seasoning, liquid sauce and a crumb topping to finish off the dinner. Kraft partners with retailers, offering cents-off on their fresh chicken to complete the meal.

Shuffling the competitive deck

  In the HMR venue, the competitive deck has been exponentially enlarged and reshuffled. Regional commissaries such as North Center are emerging, making their foodservice presence known. Restaurants like the Olive Garden offer special 10 minute parking spaces for carry-out customers.

  Hybrid formats such as EatZi's and Foodinis employ 35 chefs and list as many as 70 fresh takeout items, diverting more than $250,000 each week from Dallas supermarkets. And non-traditional players eating into supermarket sales include gas convenience operations like Phillips 66 and Home Depot, now testing packaged meals near check-out.

Serving it up

  Presentation is everything. Restaurateurs have known this for decades; retailers are getting the message as well. HMR uses a different rule book than classic consumer packaged-goods marketing. Convenience, eye appeal and aroma all factor in to the selection equation.

  This could explain why Wegman's allocated 75,000 square feet of floor space in a new store to a giant food court with wood-fired brick ovens that bake fragrant breads around the clock. Ukrop's now assigns up to 60% of its store space to freshly prepared take-out foods, many prepared in front of customers.

  Co-branding also has bubbled up as a significant HMR trend. Redi-Cut Foods and Thomas J. Lipton Co. joined forces to launch a salad and pasta meal under the Wish-Bone label. Oscar Mayer® Taco Bell® Lunchable® lunch combinations blend two familiar brands. Tyson Gourmet Selections share the plate with Ore-Ida Potatoes or Uncle Ben's Rice.

The center solution

  There are almost as many names as there are retailers offering meal solution centers in-store. There's the Café IGA program, the A&P Grab & Go, Gardner's Quick Meal Corner, Hannaford Bros.' Meal Center and Kroger's Easy Meals in Minutes.

  Helping them along are savvy manufacturers serving up proprietary versions of the solution center concept. At the Kraft Food Solution Centers, consumers pick up products, coupons and leaflets with recipe tips. Borden's version, The Italian Corner, features Classico Sauces and Novita pastas in made-to-order or ready-to-heat versions.

  "Understanding your consumer niche is key to HMR success," notes Kraft's Thompson. She cites the example of a highly successful natural food store chain that provides all levels of meal preparation for their consumers. "Call it meeting the needs of the customer."

  Describing this winning format, Thompson continued, "There are all levels of preparedness available in the store. From a café for in-store dining, to deli foods, pre-packaged foods in the refrigerated case and healthy convenience foods, all the way down to the most natural, least refined ingredients such as organic basmati rice in bulk." The concept: make the same food available at the desired level of preparedness depending on a consumer's convenience need that night.

HMR's shelf life

  Is HMR a flash in the pan or a new way of satisfying basic consumer needs? Sara Lee projections show HMR accounting for as much as 80% of food industry growth by 2005. Findings by McKinsey & Co. support that premise from two perspectives. First, the fact that virtually all foods sales growth by the year 2005 will come from food service. Second, that by 2005 many Americans will never have cooked a meal from scratch.

  To guarantee a well nourished bottom line, companies will form alliances that leverage the respective strengths of experienced foodservice operators, refrigerated distributors and CPG marketers. More packaged-goods firms will diversify into the central kitchen and commissary businesses.

  Technological advances will lead to the subculture of the personal chef, where cooked-to-order meals placed by e-mail are waiting at the supermarket's drive-through window at the designated hour. Sophisticated palates will shift the menu upmarket, featuring more diverse, exotic fare of unparalleled quality. All in all, an appetizing outlook for those contemplating a long-term investment in the HMR phenomenon.

Joseph Cassano is a product manager at ACNielsen.

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