The future of frozen
March 18, 2014
by Eric Schroeder
BOULDER, Colo. — When Boulder Brands Inc. acquired 100 percent of the equity interests of Phil’s Fresh Foods LLC, owner of EVOL Foods, for $48 million this past December, Steve Hughes, chairman and CEO of Boulder, called the move “relatively small in size,” but with “significant potential.”
Three months later, Hughes is perhaps even more upbeat about the prospects for the maker of frozen convenience foods with a focus on pure and simple ingredients.
“As you may recall, I led the team that launched Healthy Choice in 1988, which was a disruptive move,” Hughes said during a Feb. 27 conference call with analysts. “I think there’s a potential opportunity of that scale now. Because what’s happened is, in January, Healthy Choice, Weight Watchers and Lean Cuisine were down 20 percent. The frozen category makes the spreads category look like a growth category. And the retailers are really, really fed up. They really believe that they need something new.”
That “something new” may be EVOL, he said. Hughes said about 40 percent of EVOL’s customer base is made up of millennials, a group he claims is “not going to buy Healthy Choice, Lean Cuisine and Weight Watchers.”
Currently, Boulder Brands has one major account for EVOL: Target Stores. The stores carry EVOL burritos and bowls and just recently added skillet meals. The skillet meals, advertised as all-natural “Meals for 2,” come in six varieties: Uncured Bacon Mac and Cheese, Thai Style Curry Chicken, Teriyaki Chicken, Grilled Chicken Parmesan, Chicken Tikka Masala, and Butternut Squash and Sage Ravioli.
“We have a fabulous proof of concept,” Hughes said. “Target is very pleased with the performance and the incrementality of bringing people back in.”
He continued, “I think that we have hit a tipping point in mainstream grocery where the consumers are fundamentally really asking: What the hell’s in my food?”
In acquiring EVOL, Hughes said Boulder found a match. He said both companies were being asked by retailers whether there were other opportunities to extend their brands in the frozen food aisle. Both brands are set to do battle with Amy’s Kitchen, a company Hughes said is “the only game in town in terms of what I would call ‘new age frozen.’”
By putting the Udi’s and EVOL brands together, he said Boulder has an exciting vision for the future that’s going to happen quickly on its frozen platform.
“It’s one of our core strategies for the next three years,” Hughes said. “Phil Anson [founder of EVOL] is going to lead it, and I just think we’re kind of in a unique time because when we launched Healthy Choice it took some convincing of customers about low-fat, low-sodium, low-cholesterol. Here, we’re getting called and asked — we’ve had Tesco, we’ve had major customers — three major customers basically come to us and say: We need 20 Udi’s items. Those are the same guys asking Phil Anson for 20 EVOL items.”
Hughes is excited about the management team at Boulder’s disposal. In addition to Hughes and Anson, the team includes Richard Dean Hollis, a Boulder board member and former head of the consumer packaged goods business at ConAgra Foods Inc., and Jim Leighton, chief operating officer of Boulder, who previously ran operations for Hollis at Con Agra.
“We, by good fortune, have probably as much expertise on frozen at the senior levels and at the board level of anybody in the industry,” Hughes said. “So, I think it’s going to be pretty exciting, and one that we can do in a way that’s measured. Because one of the beautiful things is: We’ve learned the hard way. When you’re selling something — when you have something that retailers want, you go in on very favorable terms relative to slotting and support. And what these retailers want right now in frozen is something new, the next new thing because the legacy brands are really on the wrong side of history.”