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.
Despite the perception of over-processed frozen foods, there are examples of European retailers that specialize in frozen fare and “are all going concerns,” said Rob Gerlsbeck, editor of trade publication Canadian Grocer. They include Picard Surgelés SA in France.
To help change perceptions, M&M has hired new senior executives with deep food experience: CEO Andy O’Brien previously headed The WORKS Gourmet Burger Bistro and, before that, Kelsey’s Bar & Grill and Montana’s Cookhouse; Sam Florio, chief financial officer, was vice-president of finance and business planning at food-services specialist Cara Operations Ltd. and, before that, was at Mars Inc.
Within two years, once they stabilize M&M’s business, they plan to add more stores in Canada to help shore up the retailer’s $400-million-plus of annual sales, Mr. O’Brien said in an interview. The privately held business peaked in about 2008 with roughly $475-million of sales, but an unsuccessful U.S. expansion at the time under the MyMenu banner was among the factors that led to its troubles. In Canada, it grew too quickly and has since closed about 75 stores, he said.
Mr. O’Brien said he wants to cash in on M&M’s 3.5-million-strong loyal customer base by personalizing offers in e-mails as well as beefing up print, broadcast and digital advertising. He plans to make changes in the stores, including standing up the boxes of food so that shoppers can see their covers more clearly rather than laying them down in the frozen cases.
“Consumers have been educated to think that fresh is always fresher,“ Mr. O’Brien said. “It’s not always the case.”