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Canada: M&M Meat Shopsí new owner bets frozen is fresherWednesday, July 30, 2014 > 10:24:25
(Globe & Mail)
The new owner of frozen-food retailer M&M Meat Shops Ltd. is making an unlikely bet on frozen fare in a fiercely competitive grocery market that is favouring fresh foods.
Private equity firm Searchlight Capital Partners LP of Toronto acquired M&M this week with the aim of investing millions of dollars into bolstering the business at the chain’s roughly 400 stores and reversing their sliding sales. M&M is Canada’s largest specialty frozen-food purveyor.
It intends to pitch M&M’s flash-frozen steaks and key-lime pies as being fresher than many of their fresh-food retail alternatives while trying to capitalize on mainstream supermarkets that have shrunk their frozen-food aisles, Erol Uzumeri, a founding partner of Searchlight, said in an interview. He added that part of the challenge will be educating consumers about the benefits of flash-frozen dishes, in which the food is frozen at their peak of freshness, resulting in them often being fresher than fresh fare that has been sitting on store shelves for many hours or days.
“We saw a real opportunity to revitalize the brand,” Mr. Uzumeri said Tuesday.
“The company has a very solid foundation. We want to build upon that and improve the business.”
M&M’s bet on flash-frozen fare comes as the grocery field experiences unprecedented growth in retail space – 3 per cent in the second quarter alone – amid rapid expansion by discount titans such as Wal-Mart Canada Corp.
Amid the pressures, conventional players are focusing more on fresh foods. Now M&M is moving to draw customers by pumping up its marketing and store-presentation initiatives.
“The task is huge,” said Kevin Grier, senior analyst at agri-food specialist George Morris Centre in Guelph, Ont. “They clearly need to reinvent their image because it hasn’t changed in years … It’s really stale.”
As well, even as mainstream grocers scale back their frozen-food offerings, they have improved the quality of their frozen fare, making it tougher for M&M to stand out, Mr. Grier said.
Still, industry data show that frozen-food sales are still gaining in Canada, although at a slower pace than those of fresh foods.
Among the categories that M&M participates in, such as meats and desserts, frozen-food sales are growing at a compound annual rate of 2.2 per cent compared with 3.4 per cent among fresh foods, according to data collected by Searchlight.
Between 2013 and 2016, sales in Canada’s overall $4.03-billion frozen-food market are expected to pick up at a compound annual rate of 2.7 per cent, about the same as in the previous four years, market researcher Datamonitor in Fairport, N.Y., has found.
“Growth rates aside, frozen food faces a somewhat cloudy future as younger consumers, in particular, gravitate toward fresher foods that are perceived to be more healthful,” said Tom Vierhile, innovation insights director at Datamonitor.