SA’s ready-made meal rumble

The good old TV dinner has come a long way from the limited range of microwavable slop dished out in the 1950s.

Today it’s called a "ready meal", and actually looks and tastes like the vegetables and meats it professes to be. Take your pick from a chicken burrito bake at Woolworths (R134), quinoa-coated chicken fillets with roasted butternut (R169 at Checkers), or that old standby, lasagna, at R99 from Pick n Pay.

And local consumers are increasingly turning to these meals for dinner, rather than slaving in their kitchens at the end of a long day.

"If they are coming home at 6pm, they don’t really have time to cook," says Anthony Clark, Small Talk Daily research analyst.

He says retailers have put a lot of effort into developing ready meals priced at a point that middle-class consumers are comfortable with. 

The convenience food trend has resulted in consumer goods manufacturer and distributor Libstar launching 387 new private-label ready-meal products in the year to end-December for SA’s largest retail chains.

In2Food, which supplies Woolworths with ready meals, last month opened a new production facility about the size of three rugby fields in the OR Tambo special economic zone.

The FM visited the facility, which is impressive in its ambition. For one thing, it is the largest of its kind in the southern hemisphere, and it boasts the second-biggest carbon dioxide refrigeration plant in the world. At full production it will be able to turn out 2,000l of soup and 10,000 pancakes an hour.

Woolworths SA CEO Zyda Rylands says the R400m facility is designed to cement her company’s position in the ready-meal category — an increasingly competitive corner of the market, largely servicing affluent customers.

At this point, the importance of food to Woolworths cannot be overstated. Over the past three years it has been the weakest of the big retailers, with its share price tumbling 43% due to its bet on Australian retailer David Jones backfiring badly.

But even at home it is struggling. The retailer’s SA clothing and fashion sales fell 1.5% in financial 2018. By comparison, sales for its food division increased 8.4% in a difficult period.

"Overall, the food business achieved an operating profit growth of 9.6%, with the operating margin at 7.4%, 10 basis points better than last year," says its 2018 annual report.

This is why Woolworths is going big into food, and even bigger into servicing its wealthier clients.

Shoprite has also shown an appetite for the convenience food market, launching 104 new "convenience products" in financial 2018.

These include its dinner kits — the ingredients and instructions to make meals such as cauliflower cottage pie and Asian beef and sesame seed salad.

Moving into ready meals might be good business for retailers, but they are reluctant to say just how good. Clark points out that they give no details of the profit margin on the meals, which carry an average price tag of between R50 and R80.

And he points out that the retailers haven’t come close to looking at ready-made meals for working-class or poor consumers.

It’s not always an easy segment, as the meals have to be fresh and safe — an important consideration after the listeriosis outbreak in 2017/2018

Clark says that if a retailer could sell a nutritional ready meal for between R30 and R50, it would be well positioned to get a big slice of a large market. "There are about 4-million to 6-million people passing through taxi ranks every day. A retailer will achieve the holy grail if they can develop an affordable ready meal for them," he says.

Shoprite’s deli meals are aimed at this market, and last month it said it had sold more than 100-million of the R5 snacks since it launched the concept two years ago. These can be a chicken hotdog, a fried egg and tomato sandwich, or soup and vetkoek.

It’s an enterprising idea, but like Woolworths, Shoprite has had problems over the past year. Teething problems with a new technology system and distribution issues have contributed to a 27% plunge in its share price in the period.

Though ready meals might be the flavour of the month, it’s not always an easy segment, as they have to be fresh and safe — an important consideration after the listeriosis outbreak in 2017/2018.

Some consumers are now questioning how retailers keep food safe. For example, there have been persistent rumours that Woolworths preserves the freshness of its products by using a form of radiation. Rylands denies this: "Woolworths does not irradiate its food." Rather, she says, it is the diligence of the food safety teams that keeps the produce fresh.

As the battle for the convenience rand hots up, none of the retailers can afford to slip up on food safety.