Convenience Foods for the Hotel,

Restaurant, and Institutional Market

The Processor's View
Agricultural Economic Report No.344
Economic Research Service U.S. Department of Agriculture
 CONVENIENCE FOODS FOR THE HOTEL, RESTAURANT, AND INSTITUTIONAL MARKET:
THE PROCESSOR'S VIEW. By Harold R. Linstrom and N. Seigle, National
Economie Analysis Division, Economic Research Service, U.S. Department
of Agriculture. Agricultural Economic Report No. 344.

ABSTRACT

Foodservice operators are switching to convenience food products to

offset rising labor costs, increasing raw commodity prices, and a lack of
trained personnel, and to realize economies from new food technology.

A total of 138 surveyed firms reported over $1 billion in convenience food

sales to the hotel, restaurant, and institutional (HRI) market during 1973/74.
Over two-thirds of the companies had national sales distribution, nearly one-
fourth reported regional sales distribution, and only a few small companies
limited their distribution to local areas.

Frozen food products accounted for over two-thirds of the products

introduced and over 60 percent of the products discontinued during 1968-73.
Heat-and-serve and portion control items were seen as the largest growth areas
for convenience foods in the HRI market, but frozen foods are expected to gain
the greatest sales over the next few years.

KEY WORDS: Convenience foods; entrees; food processors; foodservice

operators; frozen foods

ACKNOWLEDGMENTS

The authors wish to thank the nearly 200 individuals who responded to the
mail questionnaire and to personal contacts by a U.S. Department of
Agriculture interviewing team. The cooperation and assistance received from
the many companies and manufacturers involved in the development of this study
is gratefully acknowledged.

Martin A. Blum and J. David Morrissy, Farmer Cooperative Service, U.S.

Department of Agriculture, assisted in data collection and contributed to the
analysis.

Washington, D.C. 20250 July 1976

ii
 CONTENTS

Page

iv
Summary

Introduction

\íhat is a Convenience Food? ^

2
Why Convenience Foods?

Importance of Technology
3
Sales Analysis

\flio Buys Convenience Foods?

New Ideas
Q
Products Introduced •

Products Discontinued

Substitutes and Analogs

A Look at the Future ^^

iii
 SUMMARY
A total of $!•! billion in convenience food sales to ^he hotel,
restaurant, and institutional (HRI) market was reported by 138 surveyed firms
during their most recent accounting year (1973/74)• The 12 largest surveyed
firms sold approximately $367 million to this market*

Over two-thirds of the firms responding distributed their convenience food

products nationally, nearly one-fourth reported regional sales distribution,
and only a few small companies limited distribution to local areas,

.. Slightly under half of the total surveyed firms sold primarily to the HRI
market. About 43 percent of items in their HRI product line were convenience
foods. These items accounted for 54 percent of the firms' dollar sales. Over
50 percent of the items produced by the larger food companies were convenience
food products.

Survey respondents most frequently cited vegetables, meats, and dairy

products as the principal ingredients used in convenience foods. Cereals,
fruits, and poultry followed in importance.

Heat-and-serve and portion control items were seen as the largest growth
areas for convenience foods in the HRI market. Among food forms (i.e.,
canned, dried, frozen), respondents expected frozen convenience products to
register the greatest sales increase over the next few years.

Firms reported that a total of 5,299 food items were introduced during
1968-73. Frozen products accounted for over two-thirds of the total items
introduced. Canned or packaged goods and dry-mixed products accounted for
most of the remainder.

Entrees were the largest group of convenience foods introduced in the 5-

year period, accounting for almost two-fifths of all convenience food items.
Nearly all the new entrees were frozen products requiring cooking or heating
before serving.

Cakes and pastries made up the second largest group of convenience foods
introduced. Over half these items were described as table-ready or thaw-and-
serve products, and 60 percent of these products were received by the
foodservice operator in frozen form.

Side dishes comprised the third largest group of convenience foods to be

introduced. More than two-thirds of the 300 side dishes introduced were heat-
and-serve or mix-and-serve products.

The items discontinued during the 5-year period amounted to about 20

percent of those introduced. Of the total discontinued products, about 28
percent were entrees, 7 percent were cakes and pastries, and only 1 percent
were side dishes.

iv
 CONVENIENCE FOODS FOR THE HOTEL, RESTAURAîiT,
AI^D INSTITUTIONAL MARICET: THE PROCESSOR'S VIEW

By

Harold R, Linstrom and N. Seiç>le, Agricultural Economists

National Economic Analysis Division
Economic Research Service

INTRODUCTION

Since World War II, there has been a rapid growth in the use of
convenience foods in home-prepared meals. Convenience foods are characterized
by frozen, canned, dry mixes, powdered, and freeze-dried products. Consumers,
familiar with these convenience foods, are becominj^ aware of their increasing
use by fast-food outlets, restaurants, and other foodservices. High costs of
labor and energy, equipment, food ingredients, and the lack of culinary skill
are reasons why food managers are attracted to the convenience food concept.

In 1974, Americans spent over $147 billion for food. Nearly a third of
this amount was spent for food eaten away from home, and about one out of
three meals is now eaten away from home._l^/ By 1985, our food spending may be
evenly divided between home and away-from-home eating.

The use of convenience foods is expected to continue to increase as a

result of new technology, including the use of disposable packaging, new
package coatings and films, and the concept of portion control.

This report suggests a definition for convenience foods used in the

foodservice industry, discusses reasons for their growing importance, and
reports the results of a survey of firms manufacturing these foods for the
hotel, restaurant, and institutional (HRI) market.

A mail survey of 430 food processing firms selling to the HRI market was
conducted in 1973. Over 30 percent (138) of the companies returned completed
questionnaires, and another 28 firms were personally interviewed. The
interviews, designed to obtain trend and opinion information rather than
statistical data, were completed in 1974.

WHAT IS A CONVENIENCE FOOD?

Quite often different features come to mind when discussing convenience

foods. For years, the food industry has been seeking a common definition for
these products which could be used by manufacturers and consumers. Earlier
studies of convenience foods have used the following generic description:

y Marketing and Transportation Situation, Econ. Res. Serv,, U.S. Dept.

Agr., Aug. 1975, p. 26.
"foods which have services added to the basic inj^redients to reduce the amount
of preparation required in the home."2^/

Discussions with leaders in the food industry, social scientists, and USDA
market research experts led to the use of the following definition for
convenience foods for this report: "...fully or partially prepared dishes;
foods in which significant amounts of preparation time, culinary skills, and
energy inputs have been transferred from the kitchen of the foodservice
operator to the food processor and distributor." This definition prefaced the
mail survey and was used during personal interviews with members of the food
processing industry. Respondents were asked to limit their comments to
convenience products which had been introduced during 1968-73. By this
approach, discussion was limited to the more recent convenience foods and
excluded such staple convenience items as canned soup, sliced bread, and
frozen concentrated orange juice.

Respondents to the survey were given the opportunity to express their o^^n
ideas of a convenience food. The properties most frequently mentioned were
cost savings, time and labor reductions, heat-and-serve readiness, pre-
prepared and frozen foods, and elimination of professional cooks. The "value-
added" idea was frequently a part of the industry's definition. However,
respondents included one or more of the above features in their "value-added"
concept.

WHY CONVENIENCE FOODS?

The lifestyle of the American consumer is moving significantly toward one

with more leisure activities. And in spite of inflation, more income is being
spent on these activities. The daily three-meal schedule has changed because
population mobility has increased, eating patterns have become more
individualistic, and more time is used for leisure activities. Because people
are eating away from home more often, the traditional family gathering at the
dinner table has become less frequent. Social mobility has given rise to
fast-food operations, the steak and seafood restaurant, and other foodservice
establishments.

With proper planning and management, convenience items may reduce

purchasing time, storage facilities, and food costs. Convenience foods
require more freezer space but less preparation area. The market for
convenience foods in the HRI sector will continue to grow as long as the food
processors provide product variety with uniformity, and high quality items.
As one respondent to the survey stated, "It is not enough that the foodservice
industry simply be a provider of commodities; the industry of tomorrow must be
oriented to the idea that convenience is basic to food products."

2_/ Harp, Harry H. and Denis F. Dunham, Comparative Cost of Convenience

Foods and Home-Prepared Foods, ÍIRR-609, Econ. Res. Serv., U.S. Dept. Agr.,
Wash., D.C., June 1963, p. 3. Also, Harp, Harry H. and Marshall E. Miller,
Convenience Food; The Relationship Between Sales Volume and Factors
Influencing Demand, AER-81, Econ. Res. Serv., U.S. Dept. Agr. ,
Wash., D.C, Aug. 1965, p. 2.
 The preparedness level of convenience foods can vary greatly. Some raw
portion-controlled meats and vegetables require primary cooking, while other
foods require only browning. Some foods need only thawing, heating, or mixing
before serving, and others are ready to serve.

Convenience foods also come in many product forms. They can be fresh,
frozen, freeze-dried, or dehydrated. The quality of convenience foods ranges
from the le^st expensive to the highest quality gourmet items.

Some of the economic advantages of convenience foods as perceived by the

processors are: (1) labor-saving equipment; (2) timesaving methods and
equipment; and (3) reduced labor costs.

Faced with rising food prices, increasing wages, and a lack of skilled
personnel, the foodservice industry could reduce some costs and increase
efficiency by using convenience foods. The foodservice operator may pay a
little more for convenience items, but he is also obtaining benefits through
reduced needs for certain types of kitchen equipment, space, and labor. As a
result of the wide variety of convenience foods, the operator can augment the
menu and offer customers special diet foods, such as those low in cholesterol,
salt, carbohydrates, or high in protein.

IMPORTANCE OF TECHNOLOGY

New technologies have created new types of foods. The spray-drying

technique developed the instant powdered foods. Freeze-drying is used mainly
for highly specialized ingredients and products. This process has its widest
uses in soup mixes and camping foods. The newer methods of food drying have
virtually eliminated heat damage, off-color, off-flavor, and off-texture.

The development of modified starches mixed with fat and packaged in

flexible aluminum foil has made dry mixes available to the foodservice
industry. The instantizing process, along with the necessary packaging, has
created instant rice, milk, coffee, and cereals.

The packaging industry has contributed to convenience foods with the use
of foil cans, two-piece cans, pop-tops, portion-control trays, individual
serving packs, and many other packaging ideas. The canning industry
introduced asceptic canning, which led to a variety of new dairy products.
The chemical industry developed the polyethylene pouch that could be sealed to
withstand boiling water, launching the boil-in-the-bag concept. The use of
antioxidants and gas flushing was initiated to reduce fat rancidity and to
preserve food. Improved processing, storage, and distribution systems have
also helped secure a place for convenience foods in the foodservice industry.

SALES ANALYSIS

The 138 firms surveyed reported combined sales of convenience foods to the
HRI market in the latest accounting year, 1973/74, at over $1.1 billion. Over
35 percent of this amount was accounted for by the 12 largest firms.
 Annual average sales per food item, including all items offered in a
company's product line, were greatest among the largest firms—$520,000 per
item—and least among the smallest firms—$58,000 per item,^/ Slightly over
half the companies sold primarily to the HRI market, and over 40 percent of
their HRI product line was comprised of convenience food items.

In terms of annual institutional sales among the firms studied,

convenience items accounted for more than half of the HRI sales dollars. The
proportion was highest among the smaller firms, which also reported a high
proportion of HRI and convenience products in their overall product lines
(table 1). Smaller food processors tended to be more specialized in their
product offerings and HRI market segments. The product line for the larger
food conglomerates covered more of the household and institutional markets
with nonprepared products as well as convenience foods.

VmO BUYS CONVENIEÎÎCE FOODS?

About half of the surveyed food processors sold more than 50 percent of
their products to retail stores and the other half sold most of their products
to foodservice outlets. One-third of the companies also sold to the
industrial market (other food processors or food assemblers), but industrial
sales were no more than a fifth of the estimated annual sales of any firm.

Nearly 6 out of 10 firms sold the majority of their institutional

convenience food items through their OT^n sales staff. One-third of the
surveyed companies exclusively depended on brokers. Most of the remainder
distributed through a combination of brokers and company salesmen, or through
arrangements with brokers and distributors.

Table restaurants and cafeterias were the most frequently mentioned

customers in the restaurant category. Hotel and motel dining rooms were next,
followed by fast-food operations, then caterers and airlines.

Schools and colleges were the most frequently mentioned users of

convenience foods among institutions, trailed by hospitals, in-plant feeding
operations, correctional institutions, and the military.

Distribution Area

All of the large firms had national sales distribution of their

convenience food products. About 70 percent of the medium-sized firms also
reported national sales distribution. Overall, about one-fourth of the
companies reported a regional sales distribution area, and only a few of the
smaller companies limited their distribution to local areas (table 2). It
should be noted that national distribution, as reported by the respondents,
did not necessarily mean that their products v/ere found in all 50 States, but
meant they sold to a number of major metropolitan areas from coast to coast.

3/ Based on annual sales, firms were classified as small with sales under $2
miTlion, medium with sales from $2-250 million, and large with sales over
^250 million.
 Table 1—Sales analysis by size of firm 1/

Item ; Unit ; Small ] iledium ; Large ', Total

•

HRI items as'a percentage of

all items : Percent 90,9 63.1 35.2 48.3

Convenience food items as a

percentage of all items : do. : 87.5 42.8 5A.5 50.8

Convenience food items as a :

percentage of HRI items do. : 93.0 43.9 34.2 42.9

Average sales per item, all : 1,000 :

items : dollars: 58 224 520 385

Sales per convenience food

item do. : 53 293 499 404

Sales per HRI item : do. ; 48 106 120 108

Convenience food sales as a

percentage of HRI sales : Percent: 93.4 66.6 37.8 54.2

Sales of convenience foods in : 1,000 :

HRI market : dollars : 53,481 736,997 367,393 1,157,871

1/ Based on annual sales, firms were classified as small with sales under
$2 million, medium with sales from $2-250 million, and large with sales over
$250 million.

Table 2—Sales distribution by size of firm, 138 companies 1/

Number of
Distribution ; Small \ Medium \ Large 1 Total
firms

Percent
Local 8 : 13 3 0 6
Regional 33 28 25 0 24
National 97 59 72 100 70
Total 138 100 100 100 100

1/ Based on annual sales, firms were classified as small with sales under
$2 million, medium with sales from $2-250 million, and large with sales over
$250 million.
 NEW IDEAS

Some new culinary ideas have been developed in response to the customer's
needs and suggestions* Generally, it is the final user who determines the
acceptability of a new idea and provides input for the processor's marketing
research. This study indicates that about 30 percent of the new ideas
originated outside of the firm. About 45 percent of these ideas were taken
from trade shows, meetings, and magazines, 25 percent were purchased from
other research firms, 18 percent were obtained through acquisitions, and about
10 percent were derived from Government research.

Respondents indicated that feedback for ideas was generally obtained from
the processor's sales force, brokers, and customers. The foodservice
operators usually give suggestions to the processor and the broker. The
processors also conduct in-house research before creating new ideas and
products. If a processor is under a division or a subsidiary of a large
company, it may often have difficulty in interesting the research and
development laboratory of the parent company in its ideas.

Imaginative presentations with gamishings, plating techniques, and food

combinations are advantages firms can use in introducing convenience foods.
By utilizing these ideas, the food industry can serve the HRI market with a
variety of interesting and tasty foods.

The foodservice buyer of convenience foods will generally try a new idea
if he can be assured a highly skilled chef is not required, time between
preparation and serving is reduced, food is savory, and a profit will be
realized. The foodservice industry must know the ethnic, geographic, and
demographic characteristics of each region in which they intend to introduce a
new product. Tlie food must be tailored to fit the final user.

Customers' Receptiveness to New Ideas

The foodservice industry is greatly concerned with which users will be the
most receptive to a new idea or product. Market research is being implemented
to determine the customers' receptiveness to change. New uses for existing
products, variations in packaging, or entirely new ideas and products, if
accepted, can cause significant shifts in the HRI market for convenience
foods.

Hospitals^ Schools^ Colleges

According to the survey, hospitals, schools, and colleges were the most
receptive to new ideas and products. These foodservice operators must hold
food costs within tight budgets and must vary menus for clients who eat all,
or nearly all, meals at the institution. The foodservice managers of these
operations place greater emphasis on the menu cycle and new trends than other
foodservice categories.

Schools and colleges seem somewhat more willing to experiment with new
products. By using unique foods, plating techniques, and efficient service,
they are able to attract more students to the dining hall. They need new
products and raust have great flexibility in menu planning to keep up with food
fads.

Hospitals and institutions are changing from the notion of the "Basic
Four" menu planning to the concept of the recommended dietary allowances.
They are looking for new ways to improve menu planning and cycling. Hospitals
and institutions need new ideas along modified diet lines such as low-sodium,
low-calorie, and low-fat foods. Because they must operate on strict budgets,
hospitals and institutions must find products and ideas which meet patient
acceptance.

Many institutions are now using catering services. The caterers provide
both tray and cafeteria service, and may often use the cafeteria as a testing
ground for new products. If a product is popular in the cafeteria, it may be
used in the patients' tray service.

Airlines

Foodservice on the airlines is mainly for passengers who would otherwise

not be able to eat because of flight schedulings. Host travelers now take
foodservice aboard planes for granted. The airlines are very receptive to new
ideas that are different and unique from those of their competitors. Airlines
are reluctant to do away with meals; therefore, they must develop appetizing
and tasty new dishes. Since most passengers prefer to eat on planes, meal
flights have increased over beverage-only flights.

Most airlines cannot afford to maintain their own inflight kitchens so

they depend on caterers. These caterers often supply one or more companies at
the same time by offering a line of items on a exclusive basis for a menu
cycle and then offering the items to another airline.

With higher food and service costs, some airlines are expressing an
interest in appetizing, less expensive foods such as casseroles and cold
dishes. They are also interested in foods geared to the family,

In-Plant Operators

According to the survey, the successful in-plant food operator is

interested in maintaining quality and service while holding down cost. The
in-plant feeder generally uses a 4- to 6-week menu cycle, rotating popular
items with new ideas. To hold their customers, in-plant feeders add
flexibility and variety to the menu,

Fast-Food Operators

Fast-food operators generally have a limited menu using pre-prepared items

that require little garnishing, but which will result in an acceptable and
palatable meal. Sheer convenience remains a major selling point, but some
fast-food outlets now have salad bars and self-service tables. Others feature
hostess service and dining by candlelight. There are growing possibilities
for adding more variety to the fast-food segment of the foodservice industry.
Table Restaurants

The survey indicated the independent family and fine dining restaurants
also need new ideas. To attract families, food establishments must
continuously have new ideas, new ways of presenting old ideas, and good
quality. These restaurants generally have big kitchen facilities and a full-
course menu. The major problem facing this type of restaurant is the high
cost of labor. According to some food processors, labor turnover is estimated
at 60-75 percent annually. Therefore, consideration is being given to
increased use of convenience foods and automation in table restaurants.

miitary

Now that the Army is directed toward volunteer service, respondents

indicated that the military must have new foods and new ideas to attract young
people. Volunteers want the same food options they had as civilians. The
military has taken some measures to improve their foodservices. All types of
food, including food fads, have been introduced and incorporated in menu
planning. Respondents indicated that convenience foods have a promising
future in military feeding.

Correctional Institutions

According to the survey, correctional institutions formerly were not very

receptive to new food ideas. Since about 1970, the American Correctional Food
Service Association has sought to improve foodservice in correctional
institutions with the premise that well-fed inmates are more cooperative.
Many institutions are on a 30- to 50-day menu cycle, but most inmates eat all
meals at the institution, creating a need for new food products and ideas.

PRODUCTS INTRODUCED

Firms reported a total of 5,299 convenience food items introduced during

1968-73. Half of these products were either mix-and-serve or heat-and-serve.
Slightly over one-fourth required additional cooking and the remainder were
either thaw-and-serve or table ready. Frozen products accounted for over two-
thirds of the total items introduced; canned or packaged, and dry-mixed
products accounted for over 11 percent; and fresh and freeze-dried items
accounted for the remainder (table 3).

Food Categories

Nearly two-fifths of all convenience foods introduced during 1968-73 were

entrees (table 3). Most of these products were frozen, requiring cooking or
heating before serving.

Cakes and pastries were the second largest group of convenience foods
introduced. Over half of these items were either in the thaw-and-serve or
table-ready form. Sixty percent of the tptal items were frozen and 24 percent
were fresh.

8
 Table 3—Product categories introduced for 138 companies, 1963-73

: Total : Level of preparedness Product form

: food : Heat and : Table Dry, : Packaged
Food category Requires [ Fr eeze- Dry *
: items :
cooking ; serve, mix : ready, thaw dr ied : Frozen ' mix not : or Fresh
: or units : and serve : and serve mixed °. ^anned

: Number Percent £/
Hors d'oeuvres : 192 : 22 69 9 0 95 0 0 3 2
Salads : 77 : 7 0 94 0 7 0 7 48 39
Entrees : 2,037 : 32 68 1 0 94 0 0 5 0
Side dishes 300 : 20 70 10 2 50 4 0 42 2
Dinners 271 . 22 58 20 0 98 0 0 0 2
^ Breads and rolls 136 : 21 24 54 0 58 20 0 0 22
Cakes and pastries 376 : 23 19 57 0 61 15 1 0 24
Dessert pies : 193 : 45 24 31 0 54 19 0 4 23
Snacks 108 : 4 14 82 0 19 4 6 37 35
Sauces and gravies: 188 : 25 63 12 1 19 55 7 15 3
Condiments : 157 : 6 1 94 0 1 0 2 80 17
Bases and mixes : 254 : 30 64 6 0 4 87 2 6 0
Soups : 108 : 35 63 2 9 27 37 0 27 0
All other : 902 : 38 40 22 1 58 14 8 10 9
Total : 5,299 29 52 20 1 67 12 2 12 7
 The third largest segment were the side dishes. Over two-thirds of the
side dishes were heat-and-serve or mix-and-serve products, and one-fifth
required cooking. About 40 percent of the side dishes were either packaged or
canned, another 50 percent were frozen, and the remainder was divided among
freeze-dried, dry-mixed, and fresh.

Dinners were the fourth largest group of convenience foods to be

introduced over the 5-year period. Nearly 60 percent of these items were
heat-and-serve products and another 22 percent required cooking. Most of the
dinners were frozen items.

PRODUCTS DISCONTINUED

A total of 1,065 convenience food products were discontinued during 1968-

73. Two-fifths of these products were either heat-and-serve or mix-and-serve
items. About 38 percent required additional cooking and the remainder were
either table-ready or thaw-and-serve items. Over three-fifths of the total
number of discontinued convenience items were frozen products. Canned or
packaged products accounted for 19 percent of the discontinuances, dry mixes
accounted for 7 percent, and fresh, dry (not mixed), and freeze-dried products
accounted for the remainder (table 4).

Food Categories

Nearly one-third of all the discontinued products, numbering 297, were

entrees (table 4). Most of these were frozen and heat-and-serve or mix-and-
serve products.

The second largest category of discontinued items was the "all other"
category, totaling 277 items or 26 percent. The items in this category
included portion control meat products, ethnic foods, fruit toppings, coffee
and tea, cereals, and meat patties with soy (table 4). Nearly 175 meat items
consisting of meat rolls, specialty products, and portion control boxed cuts
were discontinued. All of these items were frozen and required cooking or
heating before serving.

Specialty and ethnic foods made up 48 items of the "all other" category.
Thirty-five items required cooking and 13 required heating before serving.
There were 27 frozen items and 10 items each of dried and packaged or canned
goods. Most of the frozen items were Chinese, Italian, Mexican, and European
dishes. The canned or packaged goods were primarily Southern-style vegetables
(table 5).

Frozen dinners were the third largest group to be discontinued. îiost of

these were heat-and-serve products.

Low Sales and Profits

The most consistent reason for discontinuing a product involved low sales
volume and low or insufficient profit. Some firms discontinued a product
because of low sales although it produced a high profit. All firms reported

10
 Table 4—Product categories discontinued for 138 companies, 1968-73

: Total Level of preparedness Product form

: food • Heat and : Table Dry, : Packaged
Food category Requires Freeze-
: items "serve, mix : ready, thaw : Frozen not : or Fresh
: or units \ cooking
' and serve : and serve dried
mixed : canned

: Number Percent 1/
Hors d'oeuvres : 16 25 75 0 0 88 0 0 12 0
Salads : IC 50 0 50 0 50 0 0 50 0
Entrees : 297 34 65 1 0 81 0 0 19 0
Side dishes 15 13 60 27 0 60 7 0 33 0
Dinners 92 3 97 0 0 100 0 0 0 0
Breads and rolls 34 0 47 53 0 82 0 0 0 18
Cakes and pastries 79 15 9 76 0 51 5 0 0 44
Dessert pies 52 15 29 56 0 58 2 0 0 40
Snacks 21 0 10 90 0 14 0 0 81 5
Sauces and gravies. 30 57 43 0 0 7 56 17 20 0
Condiments : 58 0 5 95 0 5 0 0 95 0
Bases and mixes : 38 : 92 8 0 0 0 84 3 13 0
Soups : 46 : 11 89 0 0 24 28 0 48 0
All other : 277 : 75 9 16 3 74 0 10 11 2
Total 1,065 : 38 40 22 1 64 7 3 19 6
V Percentages nay not add to 100 due to rounding.
 Table 5—Breakdown of discontinued products under the "all other'' category for 138 companies, 1968-73

Total Level of preparedness Product form

Products under food : Heat and : Table Dry, : Packaged
"all other" Requires tg^^ve, mix : ready, thaw Freeze- Frozen Dry, not : or Fresh
items
category cooking . g^¿ serve : and serve dried mix lixed : canned
or units

Number Percent

Meat, meat products 175 94 100

Specialty ethnic
foods 48 73 27 56 21

Toppings 20 100 100

Cookies and cakes 11 100 45 55

Meat patty products

with soy 8 100 100

Cereals 6 100 100

Spices 6 100 100

Pot pies 3 100 100

Total : 277 75 9 16 3 74 11
that they judged sales aind profits by a product's market position and
relationship to othfer products.

There are generally no absolute or foolproof new product marketing

techniques. Each new product must be custom built for the market target and
for the company's marketing and sales objectives. The test of new product
success is repeat sales and a reasonable profit.

Inadequate Research and Poor Technology

Inadequate marketing analysis and testing, poor timing, higher costs than
anticipated, competitive reaction, product oversaturation, and consumer whims
can lead to product failures.

Being first on the market with a new product does not assure success. The
first product may just be a novelty or satisfy momentary needs in the
marketplace and result in a short life. But these products can serve as a
guide to unfulfilled customer needs.

There have been some product failures because of technological problems.

There has been little standardization of package size or type. Some new
product failures were due to processing which affected shelf life. Several of
the surveyed firms discontinued canned salads because of the acid content
which attacked the can liners during long storage and produced undesirable
flavor and color changes.

Market strategy plays an important part in the success of a product. One

company introduced a line of soups that failed because the firm was not
experienced in marketing such a product. Another small company introduced
several frozen soups and found that it could not compete with a major supplier
of frozen and canned soups in either distribution or price.

Another factor in product failure is a limited sales and distribution

area. The availability of a product from another firm can limit the sales
especially when the competitor's product is less expensive.

Price Margins

There have been some discontinuances because of high ingredient costs and
unavailability of ingredients. A number of these instances occurred among
processors supplying school lunch programs. These firms noted that allowances
for the program have not, in some cases, kept up with the increases in the
prices of ingredients. Some of the suppliers to the school lunch program
stated that the price margins were not sufficient to supply the program with a
high-cost ingredient item.

13
 Ethnic Foods

Surveyed firms indicated that the ethnic food market is a limited one.
These foods are used mainly among the originating groups. The exceptions are
mainly pizza, spaghetti, lasagna, kosher-style pickles, hot dogs, and some
Chinese foods. Most people will try some form of ethnic food if it can be
related to their own food liabits or style. Also, within the school lunch
progt'am, there have been some discontinuances because the food may have been
too exotic.

SUBSTITUTES AND ANALOGS

Processors faced with rising prices, diminishing supplies, and new

technologies are using substitutes and analogs for more expensive products in
short supply, and for partial or complete replacements for other agricultural
products. In many foods, these ingredients are used as flavor intensifiers,
extenders, and to increase nutrition. The extenders are sometimes used as a
stabilizer. In other instances, extenders are used as fortifiers and protein
improvers.

Substitutes

The word substitute is used to indicate an exchange of one food product

for another. For example, some manufacturers are using whey to replace nonfat
dried milk. \^ey is a versatile protein ingredient that has freeze-thaw
stability, and bland flavor and aroma. Whey can be used in baked goods,
desserts, and dinners. One manufacturer mentioned using lecithin as a
substitute emulsifier for albumen.

A number of the surveyed firms have substituted com syrup for sugar. The
relative prices of sweeteners affect the proportions of sugar used. At the
time of this survey, even though the price of com syrup was increasing, the
increase was not as rapid as that for sugar.

Some firms reported using nondairy creamers instead of real cream. The
substitution was based on supply, price, and technology. These nondairy
products are available in emulsions, oil, soluble liquids, and powders. All
are relatively low cost, easily stored, and uniform in flavor. These products
can be used at high levels and impart the natural flavor of dairy products to
foods without developing off tastes.

Although cottonseed, corn, and other plant sources may be used in edible
foods, soy is presently the major source of vegetable protein. Utilization of
soybeans as a major food, or food ingredient, is a result of new technology,
changes in consumer attitudes, price, and market strategy. Soy and soy
products have largely moved from the specialty food sector to acceptance by
the general consumer. Soy products are fairly bland in flavor and easily
masked in most foods, or they can be flavored.

Textured soy vegetable proteins have the ability to absorb water and
retain juices when incorporated into meat. These vegetable proteins may also

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increase protein content of meat portions, reduce fat content, and simplify
the processing of meat patties«

Most of the firms interviewed stated that soy mixtures were here to stay
and they looked forward to increased market growth in these mixtures.

Analogs

Analogs simulate natural foods* Analog proteins can be fabricated to

taste, look, and have a texture similar to chunks of chicken, beef, bacon, and
ham« They may replace a portion of a natural product or they can be used in
its place.

Survey respondents feel that food technologists will continue to introduce

possibilities for substitutes and analogs from various raw material sources.
Growth in the use of substitutes and analogs by the foodservice industry will
probably be more rapid than at the retail level because of the sophisticated
managerial and technical services of the HRI segment, and the increasing need
for cost-limiting products.

A LOOK AT THE FUTURE

Only a few respondents said they expected a decline in the production of

any specific food forms or levels of preparedness between the survey period
and 1980 (tables 6 and 7). The greatest growth areas are expected in frozen
products which require some degree of heating before serving.

Portion-controlled foods are another grox^th area in the opinion of nearly

70 percent of the firms surveyed. Nearly 40 percent of the respondents also
expect an increase in the use of food components in convenience foods over the
next few years; that is, they look for increased use of pre-prepared
ingredient combinations or use of a convenience food within a convenience
food (table 7).

The reasons for expecting overall growth in the use of convenience foods
in the HRI market, as expressed by processors, include a reduction in the
expense connected with cooking from scratch, reduced labor costs by hiring
less skilled help, and quality control. With convenience foods, product and
meal variations are reduced. The customer will be served a product that has
the same taste and consistency every time.

The freeze-dried, dry-mixed, fresh, and canned forms most frequently

received a "remain the same" response. Little or no change in their
popularity is expected up to 1980.

The predictions of food processors, coupled with the opinions of other

experts in the foodservice industry, point to continued growth of the HRI
market. Consumers spent $132 billion for U.S. farm foods in 1973. About 30
percent of those dollars were spent on food eaten away from home. Over the
years consumers have been spending increasing amounts in the away-from-home
market (table 8). Rising incomes and changing life styles (i.e., greater
mobility, leisure time, and more women in the workforce) are major components

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 Table 6—Estimated change in sales to 1980, by food forms, for 138 firms

Forms ' Increase \ Decrease Remain ' Total

• the same

Percent

Freeze-dried 9 0 91 100
Frozen : 83 0 17 100

Dry-mixed 19 1 80 100

Dry (not mixed) 11 2 87 100

Packaged or canned : 25 1 74 100

Fresh ; 14 3 83 100

Table 7—Estimated change in sales to 1980, by preparedness levels, for 138

firms

Level of : Remain :
\ Increase * Decrease Total
prepareness : the same :

Percent

Table ready : 50 0 50 100

Heat and serve : 74 1 25 100

Secondary heating : 36 0 64 100

Primary heating : 41 2 57 100

Portion control 1/ : 69 1 30 100

Food components 2^/ 38 3 59 100

Other characteristics 3/ : 8 0 92 100

1^/ Portion control refers to uniformly measured, and/or weighed, servings or

trays.
_2/ Food components refer to the manufacture or use of pre-prepared ingred-
ients or a convenience food within a convenience food.
V The other characteristics level includes, with unspecified levels of
preparedness, one-step preparation from package to serving, dispenser-ready,
ready-cooked meats, combinations of preparedness forms.

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 Table 8--Consum.er expenditures for at-home and away-from-home consumption by commodity group, 1963/64 and 1973/74

: Fruits : Grain
Meat : Poultry ; Dairy ; Bakery : Miscel- : Total
Year and market : and : mill
products ; products .' products ; products \ laneous
: vegetables . products

Million dollars

1963
At home 13,644 4,188 9,382 14,296 2,208 5,807 6,500 56,025
Away-from-hone 6,795 1,534 3,216 1,858 367 1.896 2,353 18,019
Public eating places 5,742 1,303 2,210 1,177 260 1,466 1,853 14,011
Institutions 1,053 231 1,006 681 107 430 500 4,008

Total 20,439 5,722 12,598 16,154 2,575 7,703 8,853 74,044

1964
At home 14,106 4,254 9,560 15,173 2,375 5,965 7,029 58,462
Away-from-home 7,312 1,618 3,378 1,911 405 2,015 2,402 19,041
Public eating places 6,184 1,373 2,319 1,222 286 1,557 1,898 14,839
Institutions 1,128 245 1,059 689 119 458 504 4,202

Total 21,418 5,872 12,938 17,084 2,780 7,980 9,431 77,503

1973
At home 24,944 6,906 13,834 24,255 3,342 9,100 11,274 93,655
Away-from-home 17,284 3,384 5,066 3,706 753 3,607 4,499 38,299
Public eating Dlaces 14,344 2,848 3,393 2,230 511 2,702 3,384 29,412
Institutions 2,940 536 1,673 1,476 242 904 1,114 8,885

Total 42,228 10,290 18,900 27,961 4,095 12,707 15,773 131,954

1974
At home 26,719 5,972 15,625 27,060 4,359 11,158 15,489 106,382
Away-from-home • 16,157 2,673 5,460 4,502 830 4,410 7,153 41,185
Public eating places : 12,963 1,975 3,825 3,223 533 3,670 6,068 32,257
Institutions 3,194 698 1,635 1,278 1,297 739 865 8,928

Total 42,876 8,645 21,085 31,562 5,189 15,568 22,642 147,567

Source: Marketing and Transportation Situation, Economic Research Service. U.S. Department of Agriculture, Washington, D.C..
August 1975:
of this phenomenon» A growing market, coupled with the cost squeeze placed on
foodservice operators by higher labor, energy, equipment, and food and
beverage prices, has moved even the most conventional of foodservice
establishments to purchase at least some forms of convenience food. As demand
rises, a new class of supplier, the fabricator, is emerging. "This supplier
delivers increasing quantities of food in prepared and semiprepared forms to
restaurants or institutions where the items are served to customers with
minimal labor input. Meats are being cut, wrapped, and boxed at the packing
plant and sent to the kitchen ready for cooking. The operator can buy steaks,
roasts, or hamburger as needed. Other restaurant or institutional operators
are going into the business of preparing main courses or complete meals in a
fashion analogous to the process used to prepare frozen TV dinners."4/
Furnishing complete meals or the main course in a form which requires^ only
heating before serving has become particularly important for foodservice
operators, such as airlines, school lunchrooms, and similar establishments.

Continued growth of the HRI market will mean continued growth in the
demand for convenience foods and in the need for suppliers who can provide
prepared and semiprepared foods in the forms, quantities, and packages that
will fit the food handling and preparation systems of the foodservice
operator.

hj The Food and Fiber System ~ How it Works> Agr. Info. Bui. 383,
Econ. Res. Serv., U.S. Dept. Agr., Wash., D.C., Mar. 1975, p. 34.

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