Europe’s food retail landscape is about to witness an “ice storm” with a marked shift coming towards frozen goods sold online, Rabobank analysts are predicting.
A Rabobank industry note, titled ‘Europe’s New Ice Age’, anticipates that in the coming decade, European consumers will gradually give supermarkets and hypermarkets the cold shoulder as they increasingly purchase food items online and at (hard) discount and convenience stores.
“We expect frozen food to thrive on the back of western European consumers’ changing channel preferences,” said Rabobank’s John David Roeg.
“We believe these changes in channel preferences — notably online — provide exciting growth opportunities for frozen food manufacturers. Following a period of recession-induced hibernation, frozen food producers can now gradually defrost their innovation pipelines while continuing to skate to a higher growth mode. The heating-up of a cash-generative industry should trigger industry, investor and private equity interest.”
The bank’s statistics suggests that newer retail channels, such as online grocery as well as (hard) discount and ‘rediscovered’ convenience stores, are increasingly eating away market share from ‘supers’ and ‘hypers’. It is predicting that the frozen food sector is well positioned to benefit from online grocery growth.
Rabobank has analysed three possible scenarios for frozen food growth until 2030. In the base case scenario, frozen food will over-index overall food growth by close to 50%. In an optimistic scenario, frozen food growth is double that of overall growth, at a CAGR of 5.0 percent to 5.2%.
Lastly, in a pessimistic scenario, frozen food growth would still be in line with overall food growth.
Mr Roeg adds: “It is important to bear in mind that many online grocery retailers are not yet focusing much on frozen foods, as they are still in the process of fine-tuning their supply chains and delivery processes in this relatively new channel. Once online grocery achieves more scale and online retailers further professionalise in terms of supply chain and delivery services, frozen foods are likely to benefit further.”
In a number of countries, frozen food sales have a lot of upside in either (hard) discount and/or convenience store channels, as these channels are still relatively immature, the Rabobank analyst notes.
“Unlike shopping in physical stores, browsing for frozen foods online does not need to wait until the end of the trip,” Mr Roeg states.
“The most convenient aspect of shopping for frozen products online is home delivery, as products are delivered in separate bags and can be instantly put into the freezer,” he adds. “Another viable option is store pickup or so-called click-and-collect. Pickup points are ideal for commuters returning from work, parents picking up kids from school or shoppers who want to avoid long queues at the weekend.”
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